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Home My WebLink About20112020.tiff (itp CLERK TO THE BOARD PHONE (970) AX: (915, Ext.352 4226 FAX: (970) 3 STREET 1150 O STREET P. O. BOX 758 GREELEY, COLORADO 80632 wilpe COLORADO August 26, 2011 SUN MOUNTAIN REALTY LLC 140 COMMERCE DR BERTHOUD, CO 80513 RE: THE BOARD OF EQUALIZATION, 2011, WELD COUNTY, COLORADO - STIPULATE PETITIONER'S APPEAL AND AFFIRM ASSESSOR'S VALUE DESCRIPTION OF PROPERTY: ACCOUNT #: R7533799 PARCEL #: 106103407001 - JOH 2125GCRA L1 BLK1 1-25 GATEWAY CENTER#2 REP A 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 $4,340,549 $3,745,000 2011-2020 CC. Ps-7-( ik s- AS0079 SUN MOUNTAIN REALTY LLC - R7533799 Page 2 If you have questions or need additional information, please do not hesitate to contact me at (970) 336-7215, Extension 4226. Very truly yours, \J Esther E. Gesick Deputy Clerk to the Board cc: Christopher Woodruff, Assessor 2011-2020 AS0079 Jul-25-2011 10:5Tam Fram-($UN MOUNTAIN) +9705322208 T-024 P.001/002 F-699 t1 CI 11 w 7-6`1.33 AS- cc LOLA, 17`difiC 2011 COUNTY BOARD OF EQUALIZATION WELD COUNTY ASSESSOR'S ACCOUNT NUMBER R7533799 STIPULATION (As To Tax Year 2011 Actual Value) RE PETITION OF • NAME: Sun Mountain Realty LLC ADDRESS: 140 Commerce Rd Johnstown. CO 80534 • Petitioner(s), Sun Mountain Realty 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: L1 BLK1 1-25 GATEWAY CENTER #2 REP A 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 2011. Land $ 435.594 Improvements$ 4,611.556 Total $ 5,047.150 4. After further review and negotiation, the petitioner(s) and Weld County Assessor agree to the following actual value for the subject property. Land 5 435 594 Improvements5 3,309.406 Total $ 3,745,000 2011-2020 r Jul-25-2011 10:5Tam From—ISUN MOUNTAIN) +9705322208 T-024 P 002/002 F-699 5. The valuations, as established above, shall be binding only with respect to tax year 2011.. 6. Brief narrative as to why the reduction was made: Value was adjusted 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 hearing scheduled before the Weld County Board of Equalization on n/a at n/a be vacated; or, a hearing has not yet been scheduled before the Board of Equalization x (check if appropriate). DAT D is 18° day of July, 2011. 4 Petitioner(s) or Attor ey Petitioner(s) or Attorney Address: Address: ILK 1 CA. Vfl v-e. i _r it4 ,t (47 TV c l3 Telephone: (.3:1D) c L 'I 1bcr X3° Telephone: Y f Co y Asses.:c or i 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 R7533799 2011 0568 JOH 2I25GCRA L1 BLK1 1-25 GATEWAY CENTER#2 REP A x 140 COMMERCE RD, JOHNSTOWN z SUN MOUNTAIN REALTY LLC 140 COMMERCE DR y BERTHOUD,CO 80513 r w 0. O G a ASSESSOR'S VALUATION PROPERTY CLASSIFICATION ACTUAL VALUE PRIOR TO ACTUAL VALUE AFTER REVIEW REVIEW INDUSTRIAL 5,047,150 4,340,549 TOTAL $5,047,150 $4,340,549 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: CM03 -After review of your property, we have made adjustments. This was done because of additional information obtained, or provided thru the appeal process. 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. RECEIVED 15-DPT-AR PR 207-08/11 JUL 15 2011 R7533799 10412 WELD COUNTY ASSESSOR GREELEY, COLORADO 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 deliv a-sepyQf.bQth sides of this for to: Weld County Board of Equalization 915 10th Street, P.O. Box 758 Greeley, CO 80632 xt, 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 ro ert and on or before July 20 for personal property— after such date, your rig t to appea is ost. 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 busin sus days following The date of thecision. The County Board of Equalization must conclude hearings and render decisions DV uqus , § 39-8-107(2), C.R.S. If you COnot 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 &meals by September 12,$, 39-2-12b(1)(e), G. . . 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.gov/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.) $ $,145, coo 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 tailed po f0A125 appraisal, etc S ,j lest, int alp ot.Pl-Olt. (ha...411 . l ATTESTATION I, the undert igned owner or agent' of the property identified above, affirm that the statements contained her a d any attachments hereto are true and complete. / IS (..1l° ) S�Z-2.10cif � 7/It /tD?! Signature Telephone Number Date rl ' Attach letter of authorization signed by property owner. Donna Bechler From: Courtney Anaya Sent: Friday, July 15, 2011 2:58 PM To: Donna Bechler Subject: OBOE appeal Attachments: R7533799-Sun Mountain Realty LLC.zip Hi Donna, Attached in a appeal that was just dropped off in our office. It was a pretty big file, so I put it into a zip file. Hopefully, it will go through © I will send the original in the mail. Thanks! Courtney U -SIM/ MOWLITAIN 140 C „ '_R('4 'ni;F 3t'dil-.'UI . CC 00.513 P 9/C 53? ' 05 F 9 "47.91 n . 00.5UI/MOJIJ . IN0C3C)R.' JM July 15, 2011 Weld County Board of Equalization 915 10'" Street P.O. Box 758 Greeley, CO 80632 To Whom It May Concern, The building and land owned by Sun Mountain Realty, LLC, located at 140 Commerce Drive, Berthoud CO 80513 (Account R7533799), Weld County has been valued as follows for the past several years: 2007/2008 = $3,463,360 2009/2010 = $3,463,360 Our parcel size is 10 acres and in each of these four years the land was valued by the County at $435,594 and the building improvements were valued at $3,027,766. With the building square feet of 100,943, this equates to an assessed value of $34.31 per square foot. On 5/1 /11 , I received the 2011 Notice of Valuation. On this NOV, the assessor valued our property at $5,047, 150 as of 6/30/10—an increase of $1 ,583,790 or nearly 46% and up to $50.00 per square foot. Knowing that we are in a down economy, and that commercial real estate values in the county are down during the assessment period, I was shocked by this increase. Coupled with the mill levy increase for 2011 , I estimated that this NOV increase would add over $50,000 to my company's annual Real Estate Tax bill. I immediately called Wade Melies, the Property Appraiser, and scheduled an appointment with him to appeal the valuation. I met with Mr. Melies on 5/3/11 at the County Assessor's office. At this meeting, Mr. Melies presented two comparable property sales within the legal assessment period: • Comp #1 presented by Mr. Melies was Account R6926398, a property located at 9586 1-25 East Frontage Road in Longmont. Mr. Melies stated that this property was similar to our property at Sun Mountain Realty, LLC, and that it sold 12/23/09 for $10,037,500, or $79.51 per square foot. He referenced a previous sale of this property on 11/28/05 for $7,350,000, or $58.22 per square foot. The 2009 sale indicated a 36% increase over the previous sale in 2005, and Mr. Melies stated, "this proves that the commercial real estate market in the county is up". He initially stated that this, coupled with the higher sale price per square foot, was his part of his justification for raising our property valuation for 201 1 . ■ Comp #2 presented by Mr. Melies was Account R0158001 , a property located at 4120 Specialty Place (I believe also in Longmont). Mr. Melies stated that this property was similar to our property at Sun Mountain Realty, LLC, and that it sold 12/11/09 for $7,595,000, or $58.73 per square foot. He then referenced a 5/29/07 sale of this same property for $7,200,000, or $55.68 per square foot. The 2009 sale indicated about a 6% increase over the previous sale in 2007, and again Mr. Melies indicated that this illustrated that commercial property values were up in the county, and the higher price per square foot and again justified this for our increase. At this, I asked Mr. Melies why our property increased 46% and these properties increased sa e over sale 36% and 6% respectively. I also challenged both of these comps as superior in construction (masonry versus our metal) and in location. Mr. Melies agreed that both of these comps were "not apples to apples" with our property, and were in superior locations to our rural location. As I challenged this, he produced a photocopy page (I had provided him during an appeal in 2009) from an appraisal our firm had done in 2008 for bank financing. During this discussion, he asked me several times "what was your appraisal value?". He said he found this page in our file and that it stated that our property should be valued at $50.00 per square foot. I immediately referenced that this valuation was for bank financing, and that it was outside of the legal assessment time window and could not be used. He stated to me, "I made a mistake on your 2009/2010 valuation and I am correcting that now with your higher 2011 valuation." I expressed that I did not think that this was legal for him to do, and that I would research this and do everything I possible could to appeal and correct his valuation, up to and including a new third party appraisal. This ended the meeting 5/3/11 . I completed my own research on the comps that Mr. Melies provided, and other sale comps in the County during the legal assessment time range. I set another meeting time with Mr. Melies to present my findings. We met again on 5/17/11 at the County Assessor's office. My presentation included: • A discussion of his Comp #1 . After further review, the "Comparable Sale" report that Mr. Melies presented to me at our first meeting indicated that this building, Account R6926398, had been completely remodeled in 2008 for a solar manufacturer. At learning this, Mr. Melies invited me to his cubicle to pull up the relevant information about this comp. The information on his computer screen indicated that over $4,000,000 in improvements were made to this building in 2008, between the first sale in 2005 and the comparable sale in 2009. I stated that this clearly explained the 36% increase in sale price between the two sales—the remodeling increased the value not the market. I also presented to Mr. Melies that the land value for this property was valued by the County in the 2011 NOV at over $130K per acre, versus our $43K per acre. I also stated that this building was full masonry, two story and this construction would be at a much higher price per square foot that our metal building. I stated that with all of this evidence, this was not a reasonable comp to justify our property value increase. ■ A discussion of his Comp #2. After further research, I learned that this property sits on over 30 acres. The land value for this property was valued by the County in the 2011 NOV at over $90K per acre, versus our $43K per acre. I stated that this combined with the more than triple land size versus our land size, and the 2 story masonry construction would add significant dollars per square foot to the property versus our property. This would explain a sale price at $58 per square foot versus our historical valuations of $34 per square foot. • I presented several other comparable sales that I found in the County, during the lega assessment time range (see Exhibit A). These are all metal frame buildings like ours, and of generally similar size and land size. These all sold for between $24 and $29 per square foot. I made my own adjustments for location and land values, and presented adjusted valuations for these properties at between $22 and $31 per square foot. • I then presented a copy of the "Parcel Valuation" for Account R7537399 located in the same industrial park as our property (see Exhibit B). This building is metal frame, very similar size to our building, and sits on just over 13 acres versus our 10 acres. Mr Melies valued this property at $3,090,000 or $30.00 per square foot in his 2011 NOV, versus our $50.00 per square foot, 46% increase. He valued the land value for this property at exactly equal to our land valuation. I know that this is not a sale comp, but when I presented this to Mr. Melies he stated that this building was different than ours, lower quality HVAC, with one end of the building open and secured only by a chain. I stated that the business in this building was a customer of ours and that we had been in the building numerous times. It is not open on one end, and it is very similar to our building in construction. I asked why he would value this property in our same industria park at $30.00 per square foot, yet value ours at $50.00 per square foot. I showed him a sale of this building in 2005 for $2,425,000 that justified the $30.00 per square foot valuation that it had received from the County for several years. He stated that "maybe I made a mistake on valuing this property, and that I should increase it." • I then presented Mr. Melies with a copy of our costs of construction for the building, about $3M, not including the land (see Exhibit C). I suggested this as a "cost" approach to valuation, and stated that construction costs are down during the legal assessment time range due to the down economy. After all of these challenges, Mr. Melies stated, "I admit, I used your previous appraisal, at least partly to justify my valuation increase". He stated that "I valued all metal frame buildings at about $50 per square foot." I stated again that I found three comps which sold during the assessment time range at between $24 and $29 per square foot, and that were valued by the County at between $24 and $30 per square foot in the 2011 NOV. I stated that I felt what he was doing to us with the increase in valuation was not legal, that his increase is not based on sale comps, income or cost and using our old third party appraisal from 2008 is outside of the legal assessment time range. The commercial real estate market in the County is down since this appraisal, and the cost of construction is down as well. I again stated that I would continue to fight this including obtaining a new third party appraisal if necessary to defend our business. This ended the meeting. I received the final NOV from Mr. Melies on about 7/1 /11 . He reduced his valuation of our property from $5,047, 150 to $4,340,549. The 4,340,549 is still an $877, 189 increase over the 2009/2010 valuation, an increase of over 25%. The $4,340,549 valuation is $43.00 per square foot. I obtained a third party appraisal (see attached}, with a valuation as of 6/30/10, the legal assessment date. This appraisal came in at $3,745,000, or $37. 10 per square foot. I respectfully request that our 2001 valuation be adjusted to this number. Thank you, V4,tittt- Ed Wright Chief Financial Officer Sun Mountain Realty, LLC a§# ! \\2 g P84, 2s13 \\\ ul laid.; ! 288 8 q } \ §ot � !!! !) 1324. : 2 2. q} / «: ! *AN 40V !:5 / � \ q\ Y,/ }! ;&® § i \\\ \ 2 • q| ! aa- ! / ; ; • ,w 8 \ / t in } g; § r ; ; ( \ ! \ \\/ j Cu /w ! \ ill 6:j .9872) }) Identify Results Page 1 of 1 Parcel Valuation Account#: R7537399 Parcel#: 106103411002 Owners Name&Address: Property Address: WINDING BAY INVESTMENTS LLC Street: 390 MOUNTAIN VIEW RD JOHNSTOWN 350 PARK AVENUE City:JOHNSTOWN 24 FLOOR NEW YORK, NY 100226022 Business/Complex: STERLING INDUSTIES INC Legal Description JOH 3I25GCRA L2 BLK2 1-25 GATEWAY CENTER #3 REP A Land Value $582,340 Land Assessed Value $168,880 Imor. Value $2,507,660 Imor. Assessed Value $727,220 Total Value $3,090,000 Total Assessed Value $896,100 Tax Area: Bordering County: Township Range Section Ouart. Sec. Subdivison Name Block# Lot# 04 - 68 - 03 - 4 I-25 GATEWAY CENTER FG #3 RPLT A- 2 - 2 Land Subtotal: Square Feet:582340 Sale Price Sale Date Deed Type Reception # $2,425,000 11/8/2005 WD 3338921 MS+ http://maps2.merrick.com/Website/Weld/setSgl.asp?cmd=QUERY&DET=Parcel&pi... 7/15/201 1 Sun Mountain Realty, LLC Fixed Assets and Depreciation -2011 Book and Tax Asset Detail Date Placed In Service Cost Basis Land LAND -TAX BASIS IS $98.50 10/15/98 98.50 LAND- BRETT WALTON 12/30/99 10,769.21 LAND- DINA WALTON 12/30/99 10,769.21 LAND-TAL WALTON 12/30/99 10,769.21 Land Improvements ASPHALT PARKING LOT 10/15/98 64,615.25 WATER/SEWER SYSTEMS 10/15/98 38,769.33 SIDEWALKS 11/15/98 3,100.00 LANDSCAPING 12/15/98 20,804.35 BLACKTOP 11/15/00 60,000.00 LOGS FOR ENTRY 3/15/01 5,815.87 BLACKTOP 5/15/01 14,662.60 SPRINKLER SYSTEM (LANDSCAPE) 9/15/03 13,950.00 Handicap Stalls in Parking Lot 10/31/06 937.37 Landscaping, Building Expansion Phase 3 10/31/06 25,829.81 Sitework for Dust Collection System 12/31/06 18,828.88 Building, Leasehold Improvements BUILDING 10/15/98 724,099.68 BUILDING -TAL WALTON 12/30/99 1,731.32 BUILDING - DINA WALTON 12/30/99 1,731.33 BUILDING - BRETT WALTON 12/30/99 1,731.32 BUILDING 11/15/00 560,832.47 BUILDING IMPROVEMENTS- EXTERIOR 11/15/03 9,127.00 NEW OFFICE 2/15/04 44,374.80 Building Expansion, Phase 3 (200'x 190') 10/31/06 1,115,653.12 Concrete Work for Expansion 3/31/07 6,767.76 Furniture and Fixtures: CABLING FOR PHONE SYSTEM 10/15/98 2,101.20 ELECTRICAL WIRING -MACHINERY 10/15/98 20,573.95 SHOWROOM LIGHTING AND CARPETING 10/15/98 5,837.29 AIR MAKE-UP SYSTEM 12/15/00 230,426.00 SMOKE VENTS 3/15/01 3,447.11 Grand Total 3,028,153.94 kLs* a An Appraisal of: la Ls. Sun Mountain Doors - - 140 Commerce Road Johnstown, Colorado _ • Prepared for: Prepared by: Mr. Edward Wright Shannon & Associates Sun Mountain LLC Donald J. Shannon MA I, SRA 140 Commerce Drive Leon Cluff Associate Berthoud, Colorado 80513 EIN: 84- 1570364 Effective Date: June 30, 2010 File # 3146 Report Date: July 8, 2011 1 July 8, 2011 Mr. Edward Wright t Sun Mountain LLC 140 Commerce Drive Berthoud, Colorado 80513 Re: Real Estate Appraisal Sun Mountain Doors 140 Commerce Road, Johnstown, Weld County, Colorado, -- IFile Name: 3146 Dear Mr. Wright: At your request, we are transmitting a summary appraisal report detailing the results of our analysis of the real property referenced above. The purpose of this inspection and analysis is to develop an estimate of the Retrospective market value of the subject site in Fee Simple interest as of June 30, 2010. Two copies of this appraisal are provided for your use. The original report and all photographs ' used within are maintained in the appraisers' file. You or your assignee may purchase additional copies, if required. The appraisal was conducted in conformance with the Uniform Standards of Professional ' Appraisal Practice (USPAP) promulgated by the Appraisal Standards Board of the Appraisal Foundation, the Code of Professional Ethics of the Appraisal Institute, FIRREA Title XI, 12 CFR Part 323 (FDIC), and 12 CFR Part 34 (RTC). It is subject to the Assumptions and Limiting Conditions and Certification of Value, a part of the report. The appraisal should not be relied on unless these conditions are accepted. The appraisers have not been influenced by any parties in their value conclusions, and have no financial interest in the property. An Executive Summary is presented beginning on page 4. Respectfully Submitted, Shannon & Associates 1121 Donald J. Sha n, MAI, SRA eon Cluff, Associate Colorado-CG01313438 Colorado-C640034227 I I Table of Contents ITable of Contents 3 Executive Summary 4 I Certification Statement 6 Limiting Conditions and Assumptions 7 Scope of Work 9 I Subject Area 12 Property Description 17 Assessment and Taxes 31 I Zoning 32 Northern Colorado Market Conditions 33 Highest and Best Use 35 I Physical Considerations 35 Legal Political Considerations 35 Economic Feasibility 35 I Highest and Best Use as Vacant 35 Highest and Best Use as Improved 35 Approaches to Value 36 I The Cost Approach 38 Land Value Estimate 38 Comparable Land Sale Summary 46 I Value of the Improvements 48 Calculator Method 48 Entrepreneurial Incentive 49 I Cost Approach Value Estimate 50 Sales Comparison Approach 51 Comparables 51 Sales Comparables Map 55 IComparable Sale Adjustments 56 Sales Comparison Approach Conclusion 60 Income Approach 61 IDirect Capitalization Approach 61 Comparable Lease Survey 67 Vacancy, Collection Loss, and Operating Expenses 69 I Overall Capitalization Rate 69 Final Reconciliation 73 Value Conclusion 73 I Addendum Qualifications IEngagement Letter City and Regional Data I ISHANNON & ASSOCIATES Table of Contents Page 3 Heal Estate Appraisers & Consultants Executive Summary GENERAL Subject: Sun Mountain Doors 140 Commerce Road, Johnstown, • Weld County, Colorado Property Type The building is a steel frame structure and the main floor contains 100,943 square feet of which 3,680 square feet is showroom and office. The mezzanine provides an additional 2,552 square feet of office space. The mezzanine does not include any plumbing. The lot size is 435,594 square feet. Owner: Sun Mountain Realty LLC Legal Description: JOH 2I25GCRA LI BLK1 1-25 GATEWAY CENTER#2 REP A Parcel Number: 106103407001 Date of Value: June 30, 2010 Date of Report: July 8, 2011 Intended Use: To assist the Client and intended users in establishing a value for property tax purposes. Intended User(s): Sun Mountain Realty, LLC. Problem to be Solved To estimate the retrospective market value of the subject property as of June 30, 2010.. Property Rights: Fee Simple Assessed Value: Assessor's Actual Value: • Improvement: $4,611,556 • Land: $435,594 • Total Assessor's Actual Value: $5,047,150 Assessed Value: • Total Assessed Value: $1,463,670 • Improvement: $1,337,350 • Land: $126,320 SHANNON & ASSOCIATES Executive Summary Page 4 Real Estate Appraisers & Consultants Taxes: 2010 Taxes Payable in 2011: ' • Taxes: $92,007 2011 Taxes Payable in 2012 based on current assessment: • Taxes: $134,082. Sale History: Current owners had building built and the property has not been sold. ' Listing History: The property is not listed for sale. ' Competency Clause: Please refer to our resumes in the addendum. Statement of We have not performed any appraisal related services for this property Previous Services in the last three years. PROPERTY ' Land Area: The land area is 435,594 square feet, or 10.00 acres. Mayo, INC has leased 1.71 acres, or 74,488 square feet of the site. The usable land area for the subject improvements is 361,106 square feet Improvements . The gross building area is 100,943 square feet. The building is configured with 3,680 square feet of office and showroom area. There ' is an additional 2,552 square feet of mezzanine office area. Zoning: Johnstown 'Gateway District' This district is intended to identify and preserve land at an interstate highway interchange for light industrial and commercial uses and to ' provide for the orderly grouping of light industrial and commercial operations in an appropriate setting. It is the further intent of this ' district to establish such regulatory controls as to reasonably assume a harmonious relationship between the industrial and commercial uses and the community. (Ord. 526, 1996) Highest and Best Use The Highest and Best Use as vacant is development with a light of the Site: industrial building for uses such as manufacturing, warehouse and research and development. Highest and Best Use A Highest and Best Use as Improved is the existing use as light ' as Improved: industrial manufacturing with retail showroom and office space. VALUE INDICATIONS: SEE RECONCILIATION SECTION SHANNON & ASSOCIATES Executive Summary Page 5 Real Estate Appraisers & Consultants Certification Statement We certify that to the best of our knowledge and belief: • 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, impartial, and unbiased professional analyses, opinions, conclusions and recommendations. • No change of any item in this appraisal report shall be made by anyone other than those who signed this report, and we shall have no responsibility for any such unauthorized change. • We have no present or prospective interest in the property that is the subject of this report and we have no personal interest with respect to the parties involved. • We have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment. • 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 value 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 has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice (USPAP) and the Certification Standard of the Appraisal Institute. • We have made a personal inspection of both interior and exterior of the property that is the subject of this report. We have also inspected the exterior of each of the comparables in this report. • No one provided significant real property appraisal assistance to the persons signing this certification. • None of the appraisers or staff of Shannon & Associates, the preparers of this report, has been sued by a regulatory agency or financial institution for fraud or negligence involving an appraisal report. • We have not performed a previous appraisal involving the subject property within the three years prior to this assignment. • The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. • As of the date of this report, Donald J. Shannon, MAI, SRA and Leon Cluff, Associate have completed the continuing education program of the Appraisal Institute. Donald J. Shann , MAI, SRA Leon Cluff, Associate Col orado-CG01313438 Colorado-CG40034227 SHANNON & ASSOCIATES Certification Statement Pages Real Estate Appraisers & Consultants Limiting Conditions and Assumptions Acceptance of and/or use of this report constitutes acceptance of the following limiting conditions and assumptions; these can only be modified by written documents executed by both ' parties. This appraisal is to be used only for the purpose stated. While distribution of this appraisal in its entirety is at the discretion of the client, individual sections shall not be distributed; this report is intended to be used in whole and not in part. No part of this appraisal, its value estimates or the identity of the firm or the appraiser(s) may be communicated to the public through advertising, public relations, media sales, or other media. All files, work papers and documents developed in connection with this assignment are the property of Shannon & Associates. Information, estimates and opinions are verified where ' possible, but cannot be guaranteed. Plans provided are intended to assist the client in visualizing the property; no other use of these plans is intended or permitted. ' No hidden or unapparent conditions of the property, subsoil or structure, which would make the property more or less valuable, were discovered by the appraiser(s) or made known to the appraiser(s). No responsibility is assumed for such conditions or engineering necessary to ' discover them. Unless otherwise stated, this appraisal assumes there is no existence of hazardous materials or conditions, in any form, on or near the subject property. ' Unless otherwise state in this report, the existence of hazardous substances, including without limitation asbestos, polychlorinated biphenyl, petroleum leakage, or agricultural chemicals, ' which may or may not be present on the property, was not called to the attention of the appraiser nor did the appraiser become aware of such during the appraiser's inspection. The appraiser has no knowledge of the existence of such materials on or in the property unless otherwise stated. ' The appraiser, however, is not qualified to test for such substances. The presence of such hazardous substances may affect the value of the property. The value opinion developed is ' predicated on the assumption that no such hazardous substances exist on or in the property or in such proximity thereto, which would cause a loss in value. No responsibility is assumed for any such hazardous substances, or for any expertise or knowledge required to discover them. Unless stated in this report, the property is assumed to be outside of areas where flood hazard insurance is mandatory. Maps used by public and private agencies to determine these areas are ' limited with respect to accuracy. Due diligence has been exercised in interpreting these maps, but no responsibility is assumed for misinterpretation. Good title, free of liens, encumbrances and special assessments is assumed. No responsibility is assumed for matters of a legal nature. SHANNON & ASSOCIATES Limiting Conditions and Assumptions Page 7 Real Estate Appraisers & Consultants Necessary licenses, permits, consents, legislative or administrative authority from any local, state or Federal government or private entity are assumed to be in place or reasonably obtainable. It is assumed there is no zoning violation, encroachment, easement or other restrictions which would affect the subject property, unless otherwise stated. The appraiser(s) are not required to give testimony in Court in connection with this appraisal. If the appraisers are subpoenaed pursuant to a court order, the client agrees to pay the appraiser(s) Shannon & Associates' regular per diem rate plus expenses. Appraisals are based on the data available at the time the assignment is completed. Amendments/modifications to appraisals based on new information made available after the appraisal was completed will be made, as soon as reasonably possible, for an additional fee. Americans with Disabilities Act(ADA) of 1990 A civil rights act passed by Congress guaranteeing individuals with disabilities equal opportunity in public accommodations, employment, transportation, government services, and telecommunications. Statutory deadlines become effective on various dates between 1990 and 1997. Shannon & Associates has not made a determination regarding the subject's ADA compliance or non-compliance. Non-compliance could have a negative impact on value; however this has not been considered or analyzed in this appraisal. SHANNON & ASSOCIATES Limiting Conditions and Assumptions Page 8 Real Estate Appraisers & Consultants Scope of Work 1 According to the Uniform Standards of Professional Appraisal Practice, it is the appraiser's responsibility to develop and report a scope of work that results in credible conclusions that are ' appropriate for the appraisal problem and intended user(s). Therefore, the appraiser must identify and consider: ' • the client and intended users; • the intended use of the report; ' • the type and definition of value; • the effective date of value; ' • assignment conditions; • typical client expectations; and • typical appraisal work by peers for similar assignments The purpose of this appraisal is to estimate Market Value of the subject as of June 30, 2010, the end of 18 month window for Weld County Assessment. FIRREA of 1989 and Title 12 CFR Part 34 define "Market Value" 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. SHANNON & ASSOCIATES Scope of Work Page Real Estate Appraisers & Consultants SCOPE OF WORK Report Type: This is a Summary Report as defined by Uniform Standards of Professional Appraisal Practice under Standards Rule 2-2(B). This format provides a summary of the appraisal process, subject and market data and valuation analyses. Property Identification: The subject has been identified by the address, legal description and the assessors'parcel number. Legal Description: JOH 2I25GCRA L1 BLK1 1-25 GATEWAY CENTER#2 REP A Weld County Parcel Number: 106103407001 Problem to be Solved To estimate the retrospective market value of the subject property as of June 30, 2010. Intended User Sun Mountain Realty, LLC Intended Use To assist the Client and intended users in establishing a value for property tax purposes. Inspection: A complete inspection of the subject property was made by Donald J. Shannon and Leon Cluff with Mr. Edward Wright on June 1, 201 I. Market Area and Analysis of A complete analysis of market conditions has been Market Conditions: made. The appraisers maintain a comprehensive database for this market area and have reviewed the market for additional sales and listings relevant to this analysis. Highest and Best Use Analysis: A complete as vacant and as improved highest and best use analysis for the subject has been made. Physically possible, legally permissible and financially feasible uses were considered, and the maximally productive use was concluded. SHANNON & ASSOCIATES Scope of Work Page 10 Real Estate Appraisers & Consultants Valuation Analyses Cost Approach: A cost approach was considered and was developed ' because there is adequate data to develop a land value and the depreciation accrued to the improvements can be reasonably measured. ' Sales Comparison Approach: A sales approach was considered and was developed because there is adequate data to develop a value estimate and this approach reflects market behavior for this property type. The analysis of this report will utilize sales prices per square foot. Income Approach: An income approach was developed as the property is subject to a long term lease and comparable leases are available to check the validity of the subject lease. Approaches Used Cost, Sales and Income Approaches Hypothetical Conditions: There are no hypothetical conditions for this appraisal. ' Extraordinary Assumptions: There are no Extraordinary Assumptions for this appraisal. 1 1 1 1 SHANNON & ASSOCIATES Scope of Work Page tt Real Estate Appraisers & Consultants Subject Area The subject property is located three blocks west of the interstate 25 and East State Highway 60, about three miles west of Johnstown, Colorado. Given the location of the subject, we believe the subject is influenced by the Interstate 25 Corridor market conditions in Loveland, Fort Collins and Longmont area. An analysis describing market conditions in the overall Northern Colorado, in terms of population, employment and other pertinent market conditions is in the Addendum of this report. ,„., Bellvu o *Laporte o Black Hollow 400r Mountain View Junction o nnarrt f ` °• x� < CR-t32 ♦ et, �. Fort Collins 1 Arrtwhaad , a .; I' H , , i. Ca r :, . \`',..* { • t .; Horsetodh t ,-. Tara ° Severance Humcho 0 Heights _. Trilby ;₹` 4 ,Kerns °T wa Te� Masonviie C°Corner Redmond r- "` -s o ndsor • 1.,tr Bracewell, Farr me 5 ;.+" , Boyd C O L O kill,y- �.,91 • � i. Keum -- W 10th ` Greg .On� � ' ` ° 0" Kings Qr�� „ Hardman Subject Elm° L a 0 Campion Ka t lei Iwe II Johnstown Welty Buda Clark Milliken *bent Berthoud .or o Thorn') Bunyan r Gilcrest Lit►te Walker W,aCat Hoodoo Highland LaI a ° e 0 SAS y ` Lyons H�ghian0 Mesd° et ro Morey C:owanda 4• Platteville • Hygiene ;6$ °- -° Maddox .. uc.� Mocce 7 ' gmont -- ' *Hanley m tri one Dominion o Pleas nt Vow Ridge Vdimar °S. Ar �` o •°Firestone ' RI Niwot / Idaho Creek a SHANNON & ASSOCIATES Subject Neighborhood Page 12 Real [state Appraisers & Consultants Location: ' The subject neighborhood is primarily defined as the developing area located one mile on either side of Interstate 25 from State Highway 119 at Longmont in Weld County on the south to State Highway 14 (Mulberry Road) in Fort Collins on the north. ' The subject neighborhood is approximately 30 miles long in a north/south direction and one mile wide in an east/west direction and focuses primarily on new industrial park development on ' either side of Interstate 25. While the boundaries of the subject neighborhood appear broad, we believe this area best reflects areas that compete with the subject property. Zoning: ' Zoning within the subject neighborhood consists of a mix of agriculture, residential, commercial and industrial zoning districts. A review of land use along Interstate 25 in the subject neighborhood shows that residential, commercial, and industrial developments are occurring; ' however, the commercial and industrial developments tend to be focused more on the areas surrounding Interstate 25 exits with the residential development occurring around the peripheries ' of these areas. As it relates to the subject development, according to the Town of Johnstown, the Gateway Center has its own zoning district called the Gateway District, which permits commercial and industrial development. Most types of industrial/warehouse developments are permitted, including manufacturing and distribution facilities. The Industrial zoning is very broad, allowing ' any of the uses permitted in the Tourist, Business, or Commercial zoning, except for single family and multi-family residences. It will also allow any industrial or manufacturing operation, provided dust, fumes, odor, smoke, vapor, moisture, and vibrations are effectively maintained within the boundaries of the industrial district. Based on a review of other industrial parks in the subject neighborhood, similar type commercial and industrial developments are permitted. ' Flood Zone Based on confirmations with Weld County, portions of the subject neighborhood are located ' within flood hazard areas; however, according to the Town of Johnstown, the subject subdivision is not located in a flood hazard area. ' Access There is easy access to the subject neighborhood from Interstate 25 and the exits providing access to the individual business parks and municipalities with locations on either side of ' Interstate 25. Utilities ' All public utilities are available to the subject neighborhood including water, sewer, gas, electricity, and telephone. Summary ' In summary, the subject is in a mixed-use neighborhood with convenient access to Interstate 25. The current national economic slowdown has affected the local economy as demand has decreased, causing increased vacancies and lower lease rates. SHANNON & ASSOCIATES Subject Neighborhood Page 13 Real Estate Appraisers & Consultants Zoning Map „ cs-- .I , ; Zone Districts � i JT_Town Limits --as1 _____ ZONE DISTRICTS \ JTZone IS CB GATEWAY LCR 18 •HAPiMA ST. - GC HA \.un..urs.n \1%j \..u....f..0 MI - rrrrru ru• .. •UUUS!Qii:iiiiiii�� T 0 PUD • =:r: , `t In PUD B - - 1 PUD-Gateway tip,11 PUD-JC 4 LCft 14 , i LCR R 5 - PUD-M 5 (1") i iL,„1,tien 1.1 PUD-MU arenaip "I PUD-R , ,I 3 ' >IT > SF1 /!/ i///i% It ' CR SF-2 Subject .- WCR 48 ________ `_— -.trade•s, CO�IYVY 6o t% % d -t II r In :.: WCR 46 W x —Th\ W r F- E SHANNON & ASSOCIATES Subject Neighborhood Page 14 Real Estate Appraisers & Consultants I Subject Neighborhood Photographs I J r air . - Truck stop about two r ,_ II • miles north of subject subdivision on Interstate 25. I I I .I '� -. savor Viewing south on „ r. - Interstate 25 Frontage Road about one mile north of subject showing. • I _ _ h It , T� .. ;. : .j -� ' , r _ Viewing north from Plaillrilliii Interstate 25 interchange with Colorado State Highway 60 with showing *_'_J '..: convenience store and service station in subject subdivision. L' r I I SHANNON & ASSOCIATES Subject Neighborhood Page 15 Real Estate Appraisers & Consultants Subject Neighborhood Photographs I-25 • GATEWAY CENTER wirs ` ' I-25 Gateway Center LA OMR ON= vacant lot sales sign. T.M 6n r ks, : � �yr, .�.r •t ..rot A - ta" #. Xt� Viewing west from east • �n , . A 1. M , -1 , ! side of subdivision near ~`' • ! the convience store _. showing the subject in the _co ha • background. site • .. ► ,ICE. a��w,�� ,.. Viewing of vacant land and improvements near subject. SHANNON & ASSOCIATES Subject Neighborhood Page 16 Real Estate Appraisers & Consultants Property Description ' The following description is based on our property inspection, assessment records, and Weld County maps. SITE Location: The subject is located at 140 Commerce Drive, three blocks west of Interstate 25. Current Use Industrial, manufacturing with retail showroom and office space. Site Size: The site size is 435,594 square feet, or 10.00 acres. Mayo, INC has leased 1.71 acres, or 74,488 square feet of the site. The usable land area for the subject improvements is 361,106 square feet. Shape: The site is mostly rectangular. Frontage: Commerce Drive Access The subject property has average access. Access is from Commerce Drive three blocks east of Interstate 25 interchange with Colorado State Highway 60. Visibility: There is good visibility from the business park's internal street and some visibility from Weld County Road 48. Limited visibility from Interstate 25. Topography: The subject has level topography at grade. ' Soil Conditions: The soil conditions observed at the subject appear to be typical of the region and adequate to support development. Utilities: All public utilities are at the site. Site Improvements: Sprinkled landscaping in front of building consisting of grass, ' shrubs, trees and gravel. SHANNON & ASSOCIATES Property Description Page 17 Real Estate Appraisers & Consultants Flood Zone: The subject is not in a flood zone. Surrounding Uses Uses surrounding the subject property primarily include single/multi-tenant and owner-occupied manufacturing, distribution and office/warehouse buildings in a business/industrial park known as I25 Gateway Center. Directly west of the subject is vacant agricultural land. Light industrial metal buildings are located to the east and north of the subject. GENERAL-SUN Mountain LLC Building Identification: Sun Mountain LLC Building Description: The building is a steel frame structure and the main floor contains 100,943 square feet of which 3,680 square feet is showroom and office. The mezzanine provides an additional 2,552 square feet of office space. The mezzanine does not include any plumbing. Marshall & Swift Class S, Metal Frame Building Class: Construction Quality: Good Year Built: 2000 with 38,000 square foot addition in 2006 Effective Age: The effective age is 10 years. Remaining Useful Life: 30 years. Condition: Good SHANNON & ASSOCIATES Property Description Page is Real Estate Appraisers & Consultants FOUNDATION,FRAME &EXTERIOR-SUN Mountain LLC Foundation: Poured concrete footings and poured concrete slab foundation. Exterior: The majority of the building's exterior is metal. The main entrance on the southeast corner is split face concrete block. Windows: Double pane fixed style in aluminum frames. Doors: The main entry area to the subject is located on the east side of the improvements. Access is via singlewide wood door. Interior ' pedestrian doors in the office area as well as the doors providing access to the warehouse area are solid core wood in oak frames. There are eight exterior pedestrian doors: three on the west side, two on the east side, one on the north side and two on the south side. ' There are a total of ten overhead doors ranging from 8' x 10' to 20' x 14', seven of which are dock-high with dock levelers and aprons. Five dock-high overhead doors are along the south side of the ' building and two are along the west side of the improvements. The remaining three overhead doors are drive-in doors: one along the ' south side of the building and two on the west side of the building Roof/Cover: Gable design with Metal roof 1 SHANNON & ASSOCIATES Property Description Page 19 Real Estate Appraisers R Consultants INTERIOR-SUN Mountain LLC Floor Cover: The showroom and restrooms are polished concrete. The office area is carpeted. Warehouse and manufacturing area is concrete. Walls: Painted drywall in the office area. Lighting: Interior lighting in the office/retail showroom areas consists of flush mounted 4-tube, 4-foot florescent light fixtures. Interior shop lighting consists of 16" diameter halogen lighting and 8-foot, 2-tube fluorescent fixtures. Mercury vapor exterior lights are located on the south and east side of the subject property Office/Showroom Area Finish in the office/retail areas is consistent throughout and contains exposed concrete floors, painted drywall walls and acoustic tiled ceilings with flush mounted fluorescent light fixtures Warehouse The warehouse is large open area with vinyl backed insulation in the ceiling and walls. There are eight foot metal panels on the interior of the walls to protect the insulation.. MECHANICAL SYSTEMS-SUN Mountain LLC HVAC: HVAC include "Co-Ray-Vac" heating in the manufacturing area. The office area has a combination gas forced air, heating and air conditioning system Electrical: 120/230V Plumbing Condition: The subject property has a men's and a women's restroom in the office area and in the break room. Two additional restrooms are in the central portion of the manufacturing area. Heavy duty wet fire sprinkler systems extend throughout the warehouse portion of the building. Summary The building consists of a 62,943 square foot good quality metal building constructed in 2000 with 38,000 square foot addition in 2006 for a total main floor area of 100,943 square feet. In addition there is 2,552 square feet of functional mezzanine office space. It is configured as a light industrial manufacturing facility. The subject has a very convenient location less than a '// mile west of Interstate 25, with close proximity to Loveland, Fort Collins and Longmont. Interstate Highway 25, located a third of a mile east has a full interchange. It would be very functional for many different users SHANNON & ASSOCIATES Property Description Page 20 Real Estate Appraisers & Consultants I I Parcel Map li ill' j �: \ \\%\ \ \\ , \ -mow1 \\\Y'\\� \ .- \ \\\ LONGS RD \`'\\\�\ , \ \ \�, \\ \ \ \ \I \ � \ `'\. \\ s `� \\'. \\ \ \ \ \\ \\, \\,,, , ..\\ \\\N‘ ' < ' \ \ \ 7e ' \\-- \\n\\.\\� NN.,`\ . `�\ N : ., \\„..,\ Z:\:\... \ \•,\. } � : �\ \ \\ :. %., \ ' . \\\.\ \‘:\\\ \ \ \ \\:\ P . C1/4-\\ � 4 • \ N, N. \ \ 11.\\N\ N\ I . - -. - .. 'N \\.\:\•\\ .:::\\ss: \ \ \\\\\\ ':\ .\\ \ \\\\\: . . , -..\\‘„\\* . — . \'`.. \ \\\‘'''s \ .\ \\\ \ I \\%\‘‘k,\ \ \\\ — .. \ .• \-. \ \ N\ \\ \ R ;\ . ,., -, . \\,, \ . 0e,,, , ..N- .is. - %. \ > \'• \ ; ,; \ ` Nol4141. S\TOWN \ ,I \ .a' . 4 . CR 48 \ . . I \ \\ \\. \\ \ ` • , . .\\k. \ 1 , ,..., .. : , N , ,. ... \\\ \ \ „ „ ., \ \ ,„ 1 \\T„ \ \\.c \ \„,\ ..\ \ ., ,..:: io \. . :\,: 1 L-\\*\\ \\ \` \ \.,, \\\\ \ \ .re, .. \ `44 \ MSS \ \ \ \\\\ C\ \\C:\::..\-\ -fr: IllSHANNON & ASSOCIATES Property Description Page 21 Real Estate Appraisers & Consultants Subject Photographs View from Commerce _ h� Drive showing southern I portion of the east side of 2 building. This portion of lam- building is finished with split face concrete block. IND Office portion of adt at i ItI I � J 1 i V building showing y landscaping and main 0 y building entrance. . - i �` '2jv� 2 • - t�v 4}L,a. •Fl yam'.. otia Ft'� '�♦ - fly h.y- 'w •+ .' �!- / Cl �,ti�. � _ �42vLish ,. , A) YAP, t. "TAT w I. , •,,4-..4.‘4I/• '� 4 . . - ,l : . , t. vs. 4 .la r ii . ., , Landscaping on the northern portion of the ., east side of building. inillinlinst_k_ SHANNON & ASSOCIATES Property Description Page 22 Real Estate Appraisers & Consultants I I Subject Photographs C. -\\14\ 1 North side of building with asphalt driveway providing access to the :. rear (west) portion of the site. Viewing south on the �;. or west side of building ,,, showing asphalt ,. , .4 - ter.: - , ; i"''� -� driveway. The west " r - <^ -'.rte. r - portion of the site is 4, leased to the owners of . _ .. the adjacent properties _ )::= r on the north and south `' t6, boundary of the subject. View of west side of - 4T a �- • � ry}, _ ^y, building (northern ITL portion). I AO ISHANNON & ASSOCIATES Property Description Page 23 Real Estate Appraisers & Consultants Subject Photographs o _ . • �,* -t View of the central etie. portion of the west side 1 �. ,_,. .:\ . in ; '1 . •. �1. of the building showing ,a I -. two dock height doors and 14 foot drive in A \ - overhead door. 4.,_ . .� �y--i _ 4 I . 4 I View of the south portion , . _ I r.j .: `'I 14,, \— �ti of the west side of the 4 Ass ammo SR , building. y l .; _ .fit II • South side of building Q`\ 111$ 1 - showing overhead doors - 4 and dock height doors. ilk SHANNON & ASSOCIATES Property Description Page 24 Real Estate Appraisers & Consultants I I Subject Photographs I I a;22c. I 11113-4 iun _ , 1 sr Five dock height doors and , „,gri : , . _ . a� one 14 foot drive in t q+ overhead doors on south ' • side of building. In - ' —.— ; ! _ ? • 4 V , Y a Show room with polished iconcrete floors. -___.,-.. .-s-- • ist * * air * - ( " S I IS --AIM" I4 Showroom with vaulted i S Illi 4 lira ceiling and recessed 0 florescent lighting. a I se s. so iv lig SP. I t _ SHANNON & ASSOCIATES Property Description Page 25 Real Estate Appraisers & Consultants Subject Photographs laillialli, , . 1 Hall providing access to restrooms and office / ` • area. i 11 ee . , ,, ,. r . ____ _ a Three piece restroom. a1r Illi It'll-I Polished concrete floors. Y I 41.11111111 SHANNON & ASSOCIATES Property Description Page 26 Real Estate Appraisers & Consultants I I Subject Photographs I -woe ---- : 7 I , Allillialitills. VI . . la pis is. ;.;,. I i I _ c - Typical main level office. ,-.' , IY i' •1Al . . - alb, w_ a 1 *.' illi Mezzanine office space. II There is no plumbing in ak mezzanine area. t , . - . - I t‘laellagr•••••••••••••••nolia Mezzanine conference room with window ' `` - . N. overlooking the I - er- production area. I I SHANNON & ASSOCIATES Property Description Page 27 Real Estate Appraisers & Consultants Subject Photographs __ , ---______ "I. -AO eil . • - ooll r = �`"' View of south wall in _ ti M , ' k• '1 I manufacturing area _ 1 it ---- '--4 y� '� ' ' I ' jl ' P showing the overhead , Jilt [ y ---- � ' :;r • = i Corayvac heat system L�l �J ;w and the eight foot panels I IL Ill . s- • ,.4. it,h,_ / on walls. iii I �. —— •� 1if 7T • w — ►,;E 7/----- /' 4 �.. Overhead lighting, wet lit '_ `•� in ' -. Ilk - = -� - a sprinkler system and dust i -- collection ductwork. , i . _ - I ; °' k 1- d' L. 1 ( 1 IL� I i (] ' T A '7 . Sart ' \ id t. I! —'�''n *-U ITZ! e 4 , :J F; Viewing north showing %.-', f the open assembly and 1 - r '--n. _ storage area. - . . . r N I r wr . ...S - 1 - -- : ._ .. F _ SHANNON & ASSOCIATES Property Description Page 28 Real Estate Appraisers & Consultants I I Subject Photographs I __ __ s.-"Nimik i - iliP. . I -.,,as , iftf-..:.. „,r _ I I I : rte' 1 "e ' est wp „ , _ -- Small enclosed rooms - its_ . . ., it S ____„ `• .1�. 1 , . , , le , . .. owlt l , . ... . _ i. . _ _ ii-'_'' - . . I ," 1 .: . . I t • el 4 r T--.1 _. 1 p . - •'ft.% f 4 I i .1-1iR - g, Two restrooms in I ` manufacturing area. r li _....e , . . ___ _ . . . . allin litiT , t1 + ''1 '' I h , i Two piece restroom. I t , - r . 1111IX. A . .. , _ .._. t SHANNON & ASSOCIATES Property Description Page 29 Real Estate Appraisers & Consultants SUBJECT LEASE Building Lease Landlord Sun Mountain Realty, LLC Tenant Sun Mountain, INC Current Lease Start Date March 2009 Lease End Date February 28, 2019 Annual Lease Rate $372,000 Tenant Pays all utilities, taxes and insurance. This is a NNN lease. Subject Square Footage 100,943 main floor square feet Lease Rate per Square Foot $3.67 per square foot (NNN) Ground Lease Landlord Sun Mountain Realty, LLC Tenant Mayo, INC Term Start Date July 1, 2007 Lease End Date Month to Month Annual Lease Rate $30,000 ($2,500 per month) Landlord pays property taxes. Land Area 1.71 acres or 74,488 square feet Lease Rate per Square Foot $0.40 per square foot SHANNON & ASSOCIATES Property Description Page 30 Real Estate Appraisers & Consultants Assessment and Taxes REAL ESTATE ASSESSMENT AND TAXES Taxing Authority Weld County Assessor Assessment Year 2010 Assessed Value: Assessor's Actual Value: • Improvement: $4,611,556 • Land: $435,594 • Total Assessor's Actual Value: $5,047,150 ' Assessed Value: • Improvement: $1,337,350 • Land: $126,320 • Total Assessed Value: $1,463,670 ' Taxes: 2010 Taxes Payable in 2011: • Taxes: $92,007 2011 Taxes Payable in 2012 based on current assessment: • Taxes: $134,082. 1 1 1 SHANNON & ASSOCIATES Assessment & zoning Page st Real Estate Appraisers & Consultants Zoning LAND USE CONTROLS Zoning Code Johnstown 'Gateway District' Zoning Description This district is intended to identify and preserve land at an interstate highway interchange for light industrial and commercial uses and to provide for the orderly grouping of light industrial and commercial operations in an appropriate setting. It is the further intent of this district to establish such regulatory controls as to reasonably assume a harmonious relationship between the industrial and commercial uses and the community. (Ord. 526, 1996) SHANNON & ASSOCIATES Assessment & Zoning Page 32 Real Estate Appraisers & Consultants I I Northern Colorado Market Conditions IThe decline of commercial sales began in late 2007 and early 2008. Typical marketing time was six months to a year prior to the current economic down turn. The following charts include data ' from the competing markets in Northern Colorado. This chart shows the drastic decline in the dollar volume and number of sales for all improved ' commercial properties in the market area. The sales through 2009 and 2010 indicate the market at the lowest level, but further decline is not evident. The average number of quarterly sales in 2009 is 23 and the average for 2010 is 29. This is a positive trend but is still significantly lower than 50 plus sales per quarter in the peak years. ' All Commercial Improved Sales 5180 120 I $160 100 $140 w $120 80 2 ' 2. . 5100 IF- f.0 `o >° $80 a ' E c $60 40 ' $40 0 20 I S$0 hid ! 1 I 0 ail O a a O a a O Old O O a O O Cr O 0000000c I 2005 2006 i 2007 2008 2009 2010 Dollar Volume tClumber of Sales Cata Soulre,Costar I Ill SHANNON & ASSOCIATES Northern Colorado Market Conditions Page 33 Real Estate Appraisers & Consultants The following chart shows the current supply of different commercial property types and vacant land. The sales indicated on the chart are the sum of four quarters ending Quarter 4, 2010. The number of listings is a snapshot taken on January 18, 2011 . As shown on the chart, there is a 4.6 year supply of industrial property on the market in the subject market area of Johnstown, Loveland, Fort Collins and Greeley. This supply is calculated by dividing 182 listings by 40 sales in the last year. Commercial Property Supply 3000 -- 100 -- - � v i I E z 10 - 1 Office Industrial Retail Land Sales (4 Quarters)' 29 40 43 8 Number of listings' ' 1 245 182 140 800 l_ 1 Supply (Years) I _ 8.4 4.6 3.3 100 Ending Quarter a, 2010 • Sales(4 Quarters)' ■ Number of Listings' ' S Supply (Years) * *January 15, 2011 Data Source: CoStar The current market of improved commercial sales is slow and a combination of lower sales prices and increased marketing time has occurred since mid-year 2007. SHANNON & ASSOCIATES Northern Colorado Market Conditions Page 34 Real Estate Appraisers & Consultants Highest and Best Use Highest and best use is defined as: ' The reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value.' Inherent in this definition is that the use must be physically possible, legally permissible, financially feasible, and maximally productive. These criteria are usually considered ' sequentially and each parcel will be considered separately. Physical Considerations ' • Site topography, infrastructure and location are appropriate for the development of most any use allowed by zoning. • All public utilities (water, sewer, electric, natural gas, and telephone) are in-place to the subject site. • Flood hazard or environmental hazard does not impact the property. There are no other physical constraints that limit the site's highest and best use, as vacant. • The subject has good access to Interstate 25 and the surrounding Northern Colorado communities of Loveland, Longmont, Fort Collins and Denver. ' Legal/Political Considerations • The subject property is currently zoned Johnstown 'Gateway District'. The current use of ' light industrial manufacturing facility with showroom is a legal use of the site. • The property is not negatively impacted by utility easements, flood hazard, or environmental hazard (see Assumptions and Limiting Conditions). Economic Feasibility ' • The subject is a 100,943 square foot metal building configured as a manufacturing facility and as it relates to maximal productivity, the current use is an economic and feasible use of the site. • In addition, there is a 2,552 square foot mezzanine office may have use for some purchasers. The mezzanine does not contain any plumbing. ' Highest and Best Use as Vacant The Highest and Best Use as vacant is development with a light industrial building for uses such ' as manufacturing, warehouse and research and development. Highest and Best Use as Improved A Highest and Best Use as Improved is the existing use as light industrial manufacturing with retail showroom and office space. ' The Appraisal of Real Estate 12'"Ed.,2001,page 305. SHANNON & ASSOCIATES I lghest and Best Use Page 35 Real Estate Appraisers & Consultants Approaches to Value Professional Appraisal Practice customarily includes the Cost, Income, and Sales Comparison Approaches to Value to develop a final value estimate. The Cost Approach The Cost Approach involves estimating the current reproduction or replacement cost of improvements and subtracting the depreciation from all causes, as of the date of the appraisal. The estimated value of the land is then added to the depreciated cost of the improvements. The land value is developed through comparing recent sales of similar vacant parcels to the subject site, "as vacant" and available to be put to its Highest and Best Use. The estimates of replacement costs are based on the various services and knowledge of the local market. The Income Approach The Income Approach to Value converts a stream of net income into an indication of value by use of a Capitalization Rate (Direct Capitalization) or a Discount Rate (Yield Capitalization, i.e., Discounted Cash Flow Analysis). The estimate of economic rent, defined as rent a property would demand if it were available for lease as of the date of the appraisal, is used to develop the potential gross annual income. In the Income and Expense Statement, deductions are made for operating expenses, vacancy and collection losses to derive a Net Operating Income. Through analysis of comparable sales and/or examination of the financial market, a Capitalization Rate is calculated. Net Income divided by the Capitalization Rate indicates value by the Income Approach. Sales Comparison Approach One of the best indications of the "Market Value" of a property is the Sales Comparison Approach found by comparing recent sales of other similar properties to the subject and is defined as: "A comparative approach to value that considers the sales of similar or substitute properties and related market data and establishes a value estimate by processes involving comparison. In general, a property being valued (a subject property) is compared with sales of similar properties that have been transacted in the open market. Listings and offerings may also be considered. A general way of estimating a value indication for personal property or an ownership interest in personal property, using one or more methods that compare the subject to similar properties or to ownership interests in similar properties. This approach to the valuation of personal property is dependent upon the Valuer's market knowledge and experience as well as recorded data on comparable items."2 2 Appraisal Institute,The Dictionary of Real Estate Appraisal,5th ed.(Chicago:Appraisal Institute,2010] SHANNON & ASSOCIATES Approaches to Value Page 36 Real Estate Appraisers & Consultants The use of one or more of these techniques may be determined by the quantity or quality of data available. In some instances, depending upon the type of property under appraisement or the purpose of the appraisal, one or two of the approaches may carry more weight or may furnish a ' more reliable indication of value than the others. In other instances, because of use, age, design, obsolescence or inadequacy of data, one may be accorded little weight in a correlation of the approaches into a final value estimate. Exhibits are used in each approach to describe sales data ' and justify required adjustments. For vacant land, when good comparables are available, the Sales Comparison Approach provides ' the most reliable estimate of value. Final Reconciliation ' The appraisal process concludes with the Final Reconciliation of the values derived from the approaches applied for a single estimate of market value. Different properties require different means of analysis and therefore one approach may be more reliable than the others. Analyses Applied ' A cost analysis was developed because there is adequate data to develop a land value and the depreciation accrued to the improvements can be reasonably measured. A sales comparison analysis was developed because there is adequate data to develop a value estimate and this approach reflects market behavior for this property type. The analysis of this report will utilize sales prices per square foot. ' An income analysis was developed as the property is subject to a long term lease and comparable leases are available to check the validity of the subject lease. 1 SHANNON & ASSOCIATES Approaches to Value Page 37 Real Estate Appraisers K Consultants The Cost Approach Our inspection of the subject demonstrated that the subject was constructed using modern materials, methods and construction techniques It shows no evidence of non curable functional obsolescence, although not all potential users would need the addition of the mezzanine office space. The first step in the cost approach is to estimate the value of the land as approved with all development requirements met and all off-site development costs included. The costs of landscaping and site development are added at a later point in the cost approach along with the reproduction cost of the building. Land Value Estimate To estimate market value of the subject sites, a survey was made of land sales and offerings in the subject and competing neighborhoods. Details of each sale are presented in the individual descriptions on the following pages. The sales are cash equivalent, arms-length transactions. The comparable land sales map identifies the location of each in relation to the subject site. Following the detail pages and the location map is an adjustment table and discussion of methodology employed in adjusting the comparables to develop an indication of value for subject site. SHANNON & ASSOCIATES Cost Approach Page 38 Real Estate Appraisers & Consultants I I Land Comparable 1 ii I i . I Il li I. 1 I. ,‘\ . • . ll \\\*\ \,s • `\C\.:\ . N . - \ : . , i II.. : ,,,\::\:‘ \:\\ S. \\\.N '... ' ' \ \‘:k\\ - . i • \\‘. , :` ry h. 001.0111 \` , \ _ ' • . ' : \\ 1 • • `\ \\\ I ‘..\ ' ' N i \ N \r \\ - \\ N.\\N\:,<-\\ - .\\:\ , i � � � . k ' 'JOHNSTOWN -. . -\N. ,,\ \\, 4 ' !ii:. \\� LPN MAX RD `\\\\ \..\&, \ . A • . , . Transaction ID 459 Date 6/20/09 Address Gateway Drive Price $340,000 I City Johnstown Land SF Unit Price $3.48 State Colorado Property Rights Grantor GC Industries INC Verification Source David Mayo, buyer and Weld I County Records Grantee David & Juanita Mayo Confirmed By Leon Cluff Legal Description Joh 4125GC L1 BIk2 1-25 IGatew ay Center FG#4 Ill Site Acres 2.2 Land SF 97,574 11 Road Frontage Gatew ay Drive and 1-25 I Notes This site fronts the Interstate 25 frontage road and there is good visibility from Interstate 25. The zoning for this site is Johnstown RD-Gatew ay which includes light industrial and commercial. I SHANNON & ASSOCIATES Cost Approach Page 39 Real Estate Appraisers & Consultants Land Comparable 2 A .1. • V‘tSce\SSAV:. ;' . . . ,‘ 1 : kb N ‘ k - , • 1\4\ - -- • rs - -a-4\a \•\ - - - - - \ - .. .,. - ; \ t . k . . k klbs k , \ %S: \-7 , \ k , ti tk et N'' k 4 kk )LN . v:4,% .,% ,''‘ N : • . \.: : k . N \ *, ‘,,\,, Sc\ k; % : '''' - .- . .• -O ' . ' ' 43/4 \\*, ), .• 1\4k, N. ` ,k '4:4":* ' kt" I k" k‘• 's.1/4 , ,%, k . .4 J.HNST•WN • pi . ., „: s\k- ••• • ‘ , , a 4., at orNe. § 1, 44 sk\\\\S Iiii%, KS; 4 tt: k4 C. rs\ \S: \ \iNsisi. : \e ' Nei ' l'ik.*:: :1 - h ?" kiN. i . 11 ' \ CL N. Nb.„ .1/4 ,z,„., b. . „: ,\,,,, -....\\1/4%\t ,\„\\ii. \ , . s, , t‘:%t N Ji... .. .1/4. k\%1‘. iii k 0; ° it w k.,‘ tr* . .,,,,. .,1/4*.. . �R\ ? •mac, c `t\ ..- �:�� r�,:- t 14 + % •Viii:N\.\\\*.z.‘;, �- :!k �140,e•NT! It kk lip w Transaction , ID 461 Date 1/4/11 Address Gateway Drive Price $189,600 City Johnstown Land SF Unit Price $5.00 State Colorado Property Rights Grantor 125 Gateway Center LLC Verification Source Scott Smith, buyer and Weld County Records Grantee Smith Acres LLC Confirmed By Leon Cluff Legal Description Joh 4125GC L3 BIk1 1-25 Gateway Center FG#4 Site Acres 0.9 Land SF 37,922 Road Frontage Gateway Drive Notes This site is at the intersection of Gateway Drive and Center Court adjacent to the Loaf 'N Jug convience store and service station at the entry to the Gateway Subdivision. The zoning for this site is Johnstow n PUD-Gatew ay which includes light industrial and commercial. This site was purchased by the ow ner of the Loaf'N Jug and is an arms length transaction the buyer Scott Smith paid the listing price for the vacant lot because it is an assemblage of the adjacent site. SHANNON & ASSOCIATES Cost Approach Page `1'0 Real Estate Appraisers & Consultants I I Land Comparable 3 assimisionsis * \ \ \\KW\ \\\ (;; \ • ••• \..\\\-\\1 NIA 1/4". • < \\‘‘... .3 \ � ,� Subject \ t: LGATEWAY CM \ t .N % ."`777__ • JOHNSTOWN 3 '�' `44, \%. „, .\. ,ii_ . .. \.: % a , I ' - Ne , . yr •......a.lA ... I \ \\\ \ % ' • \ \ \ N \\:::\ 4 ,'\C\1/4\4 \ \\\ \ :\_\ 4\k.‘ k \ \ N . \ \ \ .\ -ef ' I Transaction ID 462 Date 6/3/03 Address Commerce Drive Price $355,000 City Johnstown Land SF Unit Price $1 .33 State Colorado Property Rights Grantor Western LLC Verification Source Weld County Records I Grantee Custom On Site Builders LLC Confirmed By Leon Cluff Legal Description I Site I Acres 6. 1 Land SF 266,728 Road Frontage Commerce Drive I I Notes This site is adjacent to the subject site and not visible from Interstate 25. This is an older sale in 2003 at $1 .33 per square foot.At that time sites w ith visibility from Interstate 25 sold fro $4.32 to $4.58 per square foot. I I SHANNON & ASSOCIATES Cost Approach Page 41 Real Estate Appraisers & Consultants Land Sales Map Comp 1 SO as 2 a sir5 • 252 Subject Comp 2 o * 15 /boy, Ct t Loon Rcad 48 a County Road 48 L Comp 3 252 • SHANNON & ASSOCIATES Cost Approach Page 42 Real Estate Appraisers & Consultants Property Rights Conveyed ' All of the comparable sales are confirmed as transfers of the fee simple estate; therefore, no adjustments for property rights were necessary. t Financing Terms All of the sales involved cash or terms equal to cash. No adjustments were necessary. Conditions of Sale All of the sales are confirmed arm's-length market transactions with no special conditions, motivations, or undue stimulus affecting the sales price. No adjustments were needed. ' Economic Adjustments From about 2002 until August 2007, the Northern Colorado commercial market was ' experiencing a vibrant growth cycle including several new developments, increasing rents, decreasing capitalization rates, and increasing land and improved values. It is hard to quantify the significance of the growth and decline of the commercial markets; the market condition ' adjustments are based primarily on anecdotal evidence from brokers and also on the negative disparity between listing prices and actual sale prices. Sales prior to August of 2007 were ' adjusted upward 15% per year as this was during the vibrant growth period. After August of 2007 the market for vacant land declined and based on our research we applied a downward adjustment of 20% per year for sales through December of 2009. There has been no appreciation ' or deprecaiation for sales from 2010 through midyear 2011. The following market adjustments are required. Overall Market ' Comparable Sale Sales Price Market Adjusted Date PSF Adjustment Sales PSF Comparable 1 June 20, 2009 $3.48 -11.2% $3.09 Comparable 2 January 4, 2011 $5.00 0% $5.00 Comparable 3 June 3, 2003 $1.33 4.5% $1.39 1 SHANNON & ASSOCIATES Cost Approach Page 43 Heal Estate Appraisers & Consultants Physical Analysis All of the land sales are in the same subdivision as the subject site. There are very few land sales since 2007. Comparable 3 is an older sale, June of 2003, but is the only sale of similar size and location within the subdivision that is similar to the subject. The following map shows the comparable sales used and additional sales used to extract the location adjustment within the subdivision: I • comp i , IN . 11/4,1 ti : 04 *r ` \\X - \\ \c ‘s _ _211_4k (1,,N.i. • _ . \:\ \\\\\\. ..>\,,r‘ % . \ \\\ ' -\'' ''\\ \‘\:-\\\\• \ \‘ \;\ ti� - i i14711/410`\ ' 1 \ \ . LONG$PEAK RD ` - \\ �-.. 7� y . ,� `- � ` _IN Illi _ kIN - iI )t. " \ 144‘1\ \ 4 ' ,;e11 "%iiiiii \\ 1.). •7 - . tI 1 :( et 1%-e• " - ' . .‘. N\ Stt\ ' i . t ...i. ' \, . \\.\\•)kk \ •,,, -;1 . NN \ \ I - ` a IPE\ •\\-- `\ 03. \\`\r t \\L�•{ ly ,. • _ ` t 1-. ye .. • 'i 444ii\- NV*...., likiii‘ttitiNN•\*Ns 53.9_ SF d` r} { �OHNSTOWN `_ 3.208 *r. „\!' Location 3 i V, Location 4 ;. `' --- - _ . � ;t Ill �{ .. ,i .. ., S4 '7SF "a 2 S4 Mr a ;x v�• k ,. .♦ ;mot ' Ass Subject °` 4 ,i,;4.4. �,• II . GATEWAY C67 \\\\ 's:4 ^ ? . i S T ".- �;i .Ri , S oe \ t : ' 1,4 1 ktS.,. . ,_ . .y�� '� _ { Y• --._ 6a�, �yk: 55.04.' SF '� • \ ' _`:: .omp _ , ,ts..,:iii ,,, % .... . u 4.4,...„, ...!„„Dr,_. . .y,,, , ,. , t ,,,,,,•,,, •1 i A 4 tN • S133 'SF 1. , � may» _ ‘lit � S t lif b'3 2003 ! a ,,,,...41 N tSt e:: ,. \ Syr 4...k k a e :41 Ii }) t‘csit&• it1/4LA t, 1\i, N\stNAg .. . , -.:4.\ As shown above, Comparables 1 and 2 are located in a superior location with visibility from Interstate 25 and are on the primary access road into the subdivision. Four older sales are shown in the central part of the subdivision and labeled Location 1 , 2, 3 and 4. The following table shows the analysis of the location adjustment only. I SHANNON & ASSOCIATES Cost Approach Page 44 Real Estate Appraisers & Consultants Sales Date/Adjustment to Location Adjustment Location ' Sales PSF 12/2007 @ 15%/year (Refenced to $4.58/SF) 1 $3.85 3/2007 (11%) $4.27 -7% 2 $1.57 2/2004 (71%) $2.73 -40% 3 $4.27 6/2007 (7%) $4.57 0% 4 $4.58 12/2007 (0%) $4.58 Reference The subject site is located on Commerce Drive and there is not a direct connection any of the ' other streets in the subdivision. A downward location adjustment of 40% is appropriate for sales with visibility from Interstate 25. The comparable sales and their corresponding physical attributes are compared and discussed below: ' Location/Access Subject Located about 1/3 mile west of Interstate 25 in the Gateway Center subdivision. Comparable 1 Located in the Gateway Center subdivision and this -40% property has frontage (no access) on Interstate 25 Frontage road. A significant downward adjustment ' is completed for superior location. There have been very few land sales of finished industrial lots ready ' to build. Comparable 2 Located in the Gateway Center subdivision and this -45% property has frontage (no access) on Interstate 25 ' Frontage road. This comparable is also adjacent to the convenience store and service station. A ' significant downward adjustment is completed for superior location. Comparable 3 Located adjacent to the subject site and no 0% adjustment is completed. SHANNON & ASSOCIATES Cost Approach Page 1e Real Estate Appraisers & Consultants I I Land SF I Subject The usable subject site is 361,106 square feet. Comparable 1 Comparable 1 is 97,574 square feet requiring a -20% downward adjustment for smaller size. Comparable 2 Comparable 2 is 37,922 square feet requiring a -30% I downward adjustment for smaller size. Comparable 3 Comparable 3 is 266,728 square feet requiring a -10% downward adjustment for smaller size. Comparable Land Sale Summary As shown in the lad sale grid that follows, sfter economic and physical adjustments, the indicated price per square foot is $1.24 to $1.25. Land Analysis Grid Comp 1 Comp 2 Comp 3 Address 140 Commerce Road Gateway Drive Gateway Drive Commerce Drive City Johnstown Johnstown Johnstown Johnstown State Colorado Colorado Colorado Colorado Date 3/24/2010 6/20/2009 1/4/2011 6/3/2003 Price N/A $340,000 $189,600 $355,000 Land SF 435,594 97,574 37,922 266,728 Land SF Unit Price N/A $3.48 $5.00 $1.33 Transaction Adjustments Property Rights Fee Semple 0 0.0% 0 0.0% 0 0.0% Financing Conventional 0 0.0% 0 0.0% 0 0.0% Conditions of Sale Cash 0 0.0% 0 0.0% 0.0% Expenditures After Sale $0.00 $0.00 $0.00 Adjusted Land SF Unit Price $3.48 $5.00 $1.33 Market Trends Through 8/1/07 15.0% 0.0% 0.0% 79.0% Adjusted Land SF Unit Price $3.48 $5.00 $2.38 Subsequent Trends Ending 12/31/09 -20.0% -11.2% 0.0% -41.7% Adjusted Land SF Unit Price $3.09 $5.00 $1.39 Location/Access Average Superior Superior Average %Adjustment -40% -45% 0% Land SF 435,594 97,574 37,922 266,728 Adjustment -20% -30% -10% Adjusted Land SF Unit Price $1.24 $1.25 $1.25 Physical Net Adjustments -60.0% -75.0% -10.0% SHANNON & ASSOCIATES Cost Approach Page 46 Real Estate Appraisers & Consultants The subject is most similar comparable 3 but this comparable is an older sale. Comparables 1 and 2 are more recent sales and all comparables were adjusted for location, size and time of sale. The indicated per square foot price of the subject is $1.25, for a total site value of$451,383 for the 361,106 square foot site occupied by the building. ' Comparable Land Sale Estimated Value Comparable Land Sale Estimated Value Land Square Feet Price per Square Foot Indicated Land Value(Rounded) ' 361,106 $1.25 $451,400 Four Hundred Fifty One Thousand Four Hundred Dollars i 1 SHANNON & ASSOCIATES Cost Approach Page Real Estate Appraisers & Consultants 47 Value of the Improvements There are several generally accepted methods of estimating improvement replacement costs: Quantity Survey, Calculator Method, Segregated Cost or Unit-in-Place, and Comparative Analysis. The Quantity Survey Method is the most comprehensive and most accurate way of estimating replacement cost for many real estate projects. It is the method used by contractors in determining the quantity and quality of each type of material used, estimating labor hours required, and applying unit costs of the material and labor, in addition to all other direct and indirect costs. Marshall Valuation Service provides three methods of estimating replacement cost, the Calculator Method, Segregated Cost or Unit-In-Place Method, and Comparative Cost Indexes. The Calculator Method utilizes average square meter, square foot, or cubic foot costs for typical buildings in a variety of categories. These unit values are then multiplied by the building area to estimate value. The Unit-in-Place Method, also known as the Segregated Cost Method, is based on the unit prices of various building components. Component costs are assembled to estimate the entire cost of the improvements. The Comparative Method is utilized by comparing costs of recently constructed, similar buildings to the appraised property after converting them to a common unit of comparison such as the price per square foot, and updating the original figure to today's costs by using published indexes and multipliers. For this analysis, the Calculator Method per square foot, utilizing the Marshall Valuation Service adjusted for local variables will be utilized. Calculator Method The Marshall Valuation Service has five classifications of construction. Class A is structural steel columns and beams, Class B is reinforced concrete, Class C is masonry or concrete load bearing walls, Class D is frame construction and Class S is for metal buildings. The existing subject building is a Class S building. For quality finish, Marshall Valuation has four categories for each construction type: low cost, average, good, and excellent. The building is of Good quality as described in the Marshall Valuation Service. The Marshall Valuation Cost Service was utilized and is included at the end of this section. The cost estimate has been adjusted to reflect "multipliers" for the subject's size-shape ratio, story height, location modifier, and current cost update. Site improvements include parking, landscaping and lighting. SHANNON & ASSOCIATES Cost Approach Page 48 Heal Estate Appraisers & Consultants I I Entrepreneurial Incentive IEntrepreneurial incentive (e.g., developer's profit) is the incentive for the owner/investor to participate in the real estate. It is the developer's reward for undertaking the risk of constructing I a project. Returns range depending on size, project type, and market acceptance. In analyzing the property's replacement cost, we conclude a typical profit to be 8.0%. ' Marshall &Swift Cost Source: Marshall& Swift #14: Garages, Industrials, Lofts,Warehouses I No. of Stories Multiplier: 1.000 Local Multiplier: 0.950 Current Multiplier: 1.133 Cost Multiplier: 1.010 Perimeter Multiplier: 0.868 Combined Multipliers: 0.980 I Building Improvements Item Unit Type Cost Quantity Multiplier Total Building Sq. Ft. $38.64 100,943 0.980 $3,822,429 I *Mezzanie Sq. Ft. $20.00 2,552 0.865 $44,148 Sprinkler System Sq. Ft. $1.50 100,943 0.980 $148,386 Total Building Improvement Costs $4,014,963 $4,014,963 I *Height/Story Multiplier not applicable for Mezzanine Site Improvements Item Cost Quantity Total Asphalt Paving $2.00 82,000 $164,000 I Fencing $20.00 380 $7,600 Landscaping $4.00 10,000 $40,000 Total Site Improvement Costs $211,600 Subtotal: Building&Site Costs $4,226,563 ITotal Costs Developer's Profit 8.0% $338,125 Total Cost $4,564,688 I Depreciation Sun Mountain LLC Component Eff. Age Life Percent Amount I Physical Depreciation: Building 10 40 25% ($1,084,040) Total Depreciation ($1,084,040) Depreciated Value of Improvements $3,480,648 I Land Value Land Value $451,400 Total Value Cost Approach Value Indication $3,932,048 I Rounded $3,932,000 Price per SF Gross Building Area $38.95 I I I SHANNON & ASSOCIATES Cost Approach Page 49 Heal Estate Appraisers & Consultants Cost Approach Value Estimate Based on the Marshall & Swift Valuation Cost Service Estimator, the estimated cost for the subject is $3,932,000 which includes land, building improvements, site improvements and all obsolescence deductions. Cost Approach Summary Site Improvements (Depreciated Value) $3,480,648 Land Value $451,400 Overall Value (Rounded) $3,932,000 Three Million Nine Hundred Thirty Two Thousand Dollars • SHANNON & ASSOCIATES Cost Approach Page 50 Real Estate Appraisers & Consultants Sales Comparison Approach The Sales Comparison Approach is based on the premise that a buyer would pay no more for a specific property than the cost of obtaining a property with the same quality, utility, and ' perceived benefits of ownership. It is based on the principles of supply and demand, balance, substitution and externalities. The following steps describe the applied process of the Sales Comparison Approach. • The market in which the subject property competes is investigated; comparable sales, ' contracts for sale and current offerings are reviewed. • The most pertinent data is further analyzed and the details of the transaction are analyzed. • The most meaningful unit of comparison for the subject property is determined. ' • Each comparable sale is analyzed and where appropriate, adjusted to equate with the subject property. • The value indication of each comparable sale is analyzed and the data reconciled for a final indication of value via the Sales Comparison Approach. ' Comparables ' We have researched sales of light industrial properties in the market area. There are three properties that are most comparable, and are documented on the following pages followed by a location map and analysis grid. All sales have been researched through numerous sources, inspected and verified by a party to the transaction. SHANNON & ASSOCIATES Sales Comparison Page 51 Real Estate Appraisers & Consultants Comparable 1 r • - q ry` •. ; ~ f i •` f 1r � 15: .•1 • i_ %OF it. f.I. tt 1 • I , .• . U^ ilk . i rn Cy T• -1- , - --. i es':r I _.l_ 1 I .c ',..,--4' .. •1- 'f - - °ire meets- me` •-- - ' a • it . t- • Transaction Name UQM Building Date 12/11/09 Address 4120 Specialty PI Price $7,595,000 City Longmont GBA Unit Price $58.74 State CO Grantor Holden Properties Parcel ID 1313140058001 Grantee UQM Properties Legal Description DCCPUDAM L2 BLK2 DEL Verification Source Steve Fletcher, Listing CAMINO CENTER PUD AMD Broker; Weld County L2 BLK2 Records and CoStar Site Acres 30 Land to Building Ratio 10 to 1 Improvements Property Type Industrial GBA 129,304 Level of Finish 25,000 SF Nice office Finish; Year Built 2000 Polished concrete floors Notes Very nice office finish. Located about one block east of Interstate 25 Frontage Road. SHANNON & ASSOCIATES Saks Comparison Page 52 Real Estate Appraisers & Consultants I I Comparable 2 • •Iliebe. " . .:- -;LT y anii 1. I _. , 4 Ak _. - . _ i— — -... — 1 . --a---r‘illital . • II Transaction Name Fabricated Metal Products Date 1/26/10 Address 2401 2nd Ave Price $2,300,000 I City Greeley GBA Unit Price $21 .52 State CO Grantor JDJ Investments Parcel ID 96117412001 Grantee JBS USA LLC I Legal Description L1 Greeley IND PK RPLT 2 Verification Source Mark Bradley, Realtec Listing Broker; Weld County Assessor Office, CoStar Site Acres 13 Land to Building Ratio 5.3 to 1 Improvements I Property Type Industrial GBA 106,873 Level of Finish 10% Office in average Year Built Three Buildings : 1966, 1970 condition and 1973 I Notes Configuration includes three buildings. Building 1 was built for light industrial manufacturing in 1966 and contains 96, 164 square feet. Building 2 w as built in 1973 and is a 4,626 square foot office. Building 3 is a 6,048 square foot warehouse built in 1970. There is about 10% office space with the majority of the space on the second level of building 1 . I I ISHANNON & ASSOCIATES Sales Comparison Page 53 Real Estate Appraisers & Consultants Comparable 3 . 14 . Y a- N v ' 111111111011ja Transaction Name Bach Composite Colorado Date 9/10/09 Address 1011 E. 14th Street Price $2,600,000 City Fort Lupton GBA Unit Price $32.69 State Colorado Grantor Rader Properties LLC Parcel ID 1 .30932E+11 Grantee Bach Composite Colorado Legal Description Lengthy Description Verification Source Hans Norgaard, Owner Representative; Weld County Records and Costar Site Acres 15 Land to Building Ratio 8.2 to 1 Improvements Property Type Industrial GBA 79,530 Level of Finish 6.4 % average office finish. Year Built 1973, 1997 Notes Two metal buildings of 75,015 SF and 4,515 SF. The larger building was built in 1973, has 5, 100 SF office space and is currently being remodeled by new ow ner. The 4,515 SF building has a wall height of 22 feet. SHANNON & ASSOCIATES Sales Comparison Page 54 Real Estate Appraisers & Consultants I I Sales Comparables Map mlora®tooth v Tuper +elgshts Trilby oKerns I le o orT� _;1 r Redmond Windsor ,Lucerne • M fh Bracewell Aldo Farmers Ctovo�r�y f o 0 t; p 1 - . - 4 r k J Boyd_ C O L O R A D O lr ec. LB*e ; r � a -t V 1 10th St t� ' eley . „ Ke`:rn llsit� I Girder Comp 2 V Kersey* 4 4. i, • Kings Cot I L Etna r °' % Hardman41, __ Auburn ir �; :. 1. Elmo La Salfe �� Subject U Johnstawrs I Campion , ' Kai s • Welty o Buda dark Milliken °Dent Haman Berthoud iik ! o I vat - � Runyan "Peckham Little fb4prnQ ° Gilcres o Walker W+Wcat H�htand Lake Houston 4 " ""' '_ " ' . J Hig O O i 1 '- Mead 4* iI±3L Platteville IllMorey as Go�wanda ç ,Maddux � ,i� aO OAraiMo Moore II ci..ongmant 416. - _ . - Comp 1 ose :one ►pion P' Vol lmar c� Aristocrat On1 0 o I o o firestone b Ranchettes Idaho Creek Plumbs *Frederick Comp 3 I Gooding. . a :,Iacono' ton T.- flak - _ son ct ST Canfield , t Eri oe per ' St *aim• Y 28t S o Yattenberp :evi I )e Rd tl .Ø Lochbuies_.nru b . - o Ton I SHANNON & ASSOCIATES Sales Comparison Page 55 Real Estate Appraisers & Consultants Comparable Sale Adjustments Property Rights Conveyed All of the comparable sales are confirmed as transfers of the fee simple estate; therefore, no adjustments for property rights were necessary. Financing Terms All of the sales involved cash or terms equal to cash. No adjustments were necessary. Conditions of Sale All of the sales are confirmed arm's-length market transactions with no special conditions, motivations, or undue stimulus affecting the sales price. No adjustments were needed. Market Conditions From about 2002 until August 2007, the Northern Colorado commercial market was experiencing a vibrant growth cycle including several new developments, increasing rents, decreasing capitalization rates, and increasing land and improved values. Current conversations with several commercial brokers active in this market and other indicators such as, increasing capitalization rates and lulls in sales activity all indicate zero appreciation or negative growth from about midyear 2007. It is hard to quantify the significance of the growth and decline of the commercial markets; the market condition adjustments are based primarily on anecdotal evidence from brokers and also on the negative disparity between listing prices and actual sale prices and records in our company files. Based on our research we apply a -15.0% annual adjustment of all sales prior to December 31, 2009. The market has been flat since the end of 2009 and no adjustments are made after December 31, 2009 Market Market trends through Adjusted Comparable Sale Date Sales PSF June 30, 2010 Sales PSF Comparable 1 December 11, 2009 $58.74 -0.9% $58.22 Comparable 2 January 26, 2010 $21.52 0.0% $21.52 Comparable 3 September 10, 2009 $32.69 -4.9% $31.10 I I I SHANNON & ASSOCIATES Sales Comparison Page 56 Real Estate Appraisers & Consultants I I The following sales comparison grid shows the overall adjustments of the comparable properties. I Sales Analysis Grid Comp1 Comp2 Comp3 Address 140 Commerce Road 4120 Specialty PI 2401 2nd Ave 1011 E. 14th Street ICity Johnstown Longmont Greeley Fort Lupton State Colorado CO CO Colorado Date 6/30/2010 12/11/2009 1/26/2010 9/10/2009 I Price N/A $7,595,000 $2,300,000 $2,600,000 0.0% 0.0% 0.0% GBA 100,943 129,304 106,873 79,530 GBA Unit Price $58.74 $21.52 $32.69 I Transaction Adjustments Roperty Fights Fee Sirrple 0 0.0% Fee Sinple 0.0% Fee Simple 0.0 Financing Conventional 0 0.0% 0 0i0//on .0% 0 0.0% Conditions of Sale Cash 0 0.0% 0 0.0% 0 0.0% Expenditures After Sale $0 $0 $0 I Adjusted GBA Unit Price $58.74 $21.52 $32.69 Annual Market Trends Through 12/31/09 -15.0% -0.9% 0.0% -4.9% Market Adjusted GBA Unit Price $58.22 $21.52 $31.10 Subsequent Trends Endng 6/30/10 0.0% 0.0% 0.0% 0.0% I Adjusted GBA Unit Price $58.22 $21.52 $31.10 Location/Visibility Average Superior Inferior Inferior %Adjustment -20% 25% 20% GBA 100,943 129,304 106,873 79,530 I Adjustment 5% 0% -5% Year Built 2000 with 38,000 2000 Three Buildings: 1966, 1970 1973, 1997 square foot addition in and 1973 %Adjustment 0% 30% 10% Level of Finish 4%average office plus 25,000 SF Nice office 10%Office in average 6.4%average office finish. 2,552 square feet Finish; Polished concrete condition mezzanine office. floors ' %Adjustment -18% 0% 0% Land to Building Ratio 3.58 to 1 10 to 1 5.3 to 1 8.2 to 1 %Adjustment -5% 0% -5% I Adjusted GBA Unit Price $36.09 $33.36 $37.32 Net Physical Adjustments -38% 55% 20% Note: I I I I I ISHANNON & ASSOCIATES Sales Comparison Page 57 Real Estate Appraisers & Consultants • Physical Adjustment Analysis The comparable sales and their corresponding physical attributes are compared and discussed below: All of the comparable sales are located in Fort Collins as there are no sales of similar use in Windsor. Location/Visibility Adjustment Subject Located about 1/3 mile west of Interstate 25 in the I Gateway Center subdivision. Comparable 1 Located in near Highway 119 (Longmont Exit) and -20% Interstate 25. A downward adjustment was completed for the superior location. Comparable 2 Located on 2n° Avenue in Greeley near the U.S. 25% Highway 85 Bypass route. An upward adjustment was completed due to inferior access and location. I Comparable 3 Located in northeast Fort Lupton and an upward 20% adjustment was completed for inferior location. I GBA Adjustment Subject The subject building area is 100,943 square feet. I Comparable 1 Comparable 1 building area is 129,304 requiring an 5% upward adjustment as larger buildings typically sell I for less per square foot. Comparable 2 Comparable 2 building area is 106,873 requiring no 0% I adjustment. Comparable 3 Comparable 3 building area is 79,530 requiring a -5% I downward adjustment because smaller buildings typically sell for more per square foot. I I I SHANNON & ASSOCIATES Sales Comparison Page 58 Real Estate Appraisers & Consultants Year Built Adjustment Subject The subject building was built in 2000 with 38,000 square foot addition in 2006. Comparable 1 Built in 2000 and no adjustment completed. 0% Comparable 2 Three Buildings: 1966, 1970 and 1973 and an 30% upward adjustment is required. Comparable 3 Built in 1973, 1997 and an upward adjustment is 10% required. Level of Finish Adjustment ' Subject The subject contains 4% average office plus 2,552 square feet mezzanine office.. ' Comparable 1 Comparable 1 containsl9% or 25,000 SF Nice -18% office Finish; Polished concrete floors. This adjustment is base on $50 per square foot of the 15% additional office space and a small adjustment ' for the superior warehouse/manufacturing area with polished concrete for high tech operations. Comparable 2 10% Office in average condition and no adjustment 0% required. Comparable 3 6.4 % average office finish. No adjustment required. 0% Land to Building Ratio Adjustment Subject The subject contains 3.58 to 1. ' Comparable 1 10 to 1 land to building ratio and a downward -5% adjustment is required for larger site size. Comparable 2 5.3 to 1 and no adjustment required. 0% Comparable 3 8.2 to 1 land to building ratio and a downward -5% ' adjustment is required for larger site size. 1 ISHANNON & ASSOCIATES Sales Comparison Page 59 Real Estate Appraisers & Consultants Sales Comparison Approach Conclusion The comparable properties developed a range of value per square foot of $33.36 to $37.32. Comparable 3 required the smallest net adjustment and is given the most weight indicating a price per square foot of$36.00, or a total value of$3,633,948. I Sales Comparison As Is Market Value Indicated Value per Square Foot: $36.00 Subject Size: 100,943 Indicated Value: $3,633,948 Sales Comparison Indicated Value (Rounded) $3,634,000 Three Million Six Hundred Thirty Four Thousand Dollars I I I I I SHANNON & ASSOCIATES Sales Comparison Page so I Real Estate Appraisers & Consultants 1 Income Approach ' The income approach analyzes the investment characteristics of an income producing property and the benefits received by the owner of such a property. This approach can be processed via a direct capitalization technique or a discounted cash flow analysis. For the subject property the direct capitalization approach is the most appropriate. Direct Capitalization Approach ' The income capitalization approach develops indications of value based on the anticipated income. Rent, vacancy, operating expenses, and capitalization rates are needed to estimate value by the income capitalization approach. The projected income and expenses for the subject ' property are based on information from the subject and from properties of similar age, size, and condition. The market and actual information is used to develop an estimate of how much ' income the subject property can produce. A capitalization rate is then applied to the net operating income to develop an indicated value of the subject property. ' The income capitalization approach involves following steps. • Research and analyze market leases; • Estimate Fair Market(economic) Rent for the subject property; • Estimate expenses to calculate the Net Operating Income; • Develop market capitalization rate; • Divide the net operating income by the capitalization rate for an indication of value for the subject. Subject The subject is a leased industrial manufacturing facility located at 140 Commerce Road. SHANNON & ASSOCIATES Income Comparison Page 61 Real Estate Appraisers & Consultants Lease Comparable 1 cat. 41441111C. — i 40.1 wr•• `` fir- Ar- -Its �_ _ . . . - .- e -c.!*'ter. j(, n i w a • sere I ' V Transaction ID 300 Start Date 11 /1 /10 Address 120 NE Frontage Road Current Rent $4.14 City Fort Coffins Terms NNN State Colorado Term Month to Month Lessor KCNJJ LLC SF Leased 20,000 Lessee Otter Products Verification Travis Ackerman, Tenant Representative Building Property Type Industrial Finish Level Light Industrial, 6% Office GBA 133,657 Year Built 1977; Remodeled 1993 Land to Building Ratio 4.6 to 1 Notes Large industrial manufacturing building located on Interstate 25 Northeast Frontage Road about 1 /4 mile north of East Mulberry Street. SHANNON & ASSOCIATES Income Comparison Page 62 Real Estate Appraisers & Consultants I I Lease Comparable 2 - : is . T A o f! - Y • e -}� I I Transaction ID 301 Start Date 11 /1 /10 Address 2950 Colorful Avenue Current Rent $4.85 I City Longmont Terms NNN State Colorado Term 2 Year w ith option Lessor Not Disclosed SF Leased 37,000 l Lessee Not Disclosed Verification John Weston, Landlord Representative Building I Property Type Industrial Finish Level Flex/R&D 50% Office GBA 117,517 Year Built 1997 Land to Building Ratio 3.9 to 1 I Notes Flex/R&D building located three miles west of Interstate 25. Two year lease w ith option. Lease rate in year tw o is $5.40 PS F. I I I I 1 SHANNON & ASSOCIATES Income Comparison Page 63 Deal Estate Appraisers & Consultants Lease Comparable 3 i OM r t I: b ILISigia;ipippeljaaa r M Transaction ID 302 Start Date 5/3/10 Address 8101 1-25 SW Frontage Road Current Rent $5.00 City Fort Collins Terms NNN State Colorado Term Month to Month Lessor DFG Properties LLC SF Leased 22,343 Lessee Custom Blending Verification Dan Eckles Landlord Representative Building Property Type Industrial Finish Level Warehouse Only GBA 39,960 Year Built 1989; Remodeled 2010 Land to Building Ratio 4.0 to 1 Notes Building has multiple tenants . This lease is for warehouse space only . This is the "Gardner Signs" building about 1/2 mile south of Highw ay 392. SHANNON & ASSOCIATES Income Comparison Page 64 Real Estate Appraisers & Consultants I 1 Lease Comparable 4 y • V -� MI „k 4 -I ` __ tt • Lr ' 4...". C '�,1, .ohs:;,t`S At, i-: •1.r illy - .Z. rs 1• seat- - I Transaction ID 303 Start Date 5/27/10 Address 4430 Innovation Drive Current Rent $5.25 I City Fort Collins Terms NNN State Colorado Term 4 Years Lessor Merritt Professional SF Leased 48,000 Lessee Advanced Energy Verification Jason Ells , Landlord Representative Building I Property Type Industrial Finish Level 25% Office GBA 91 ,674 Year Built 1980; Remodeled 1994 Land to Building Ratio 2.7 to 1 I Notes This lease is for an electronics manufacturing and the industrial space has higher quality finish . The lease term is four years and is flat for years 1 and 2. Year 3 lease rate is $5.75 and Year 4 is $6.25. I I I I SHANNON & ASSOCIATES Income Comparison Page 65 Real Estate Appraisers & Consultants Lease Comparables Map beNvu: *Laporte Terry 'I c Lake • �, r . R Mountain vwW Comp 1 • y , _ A' "i144 co' O 14 CR-82 i. I( , Fort Collins • t Q t t R Kw w; . sr) Comp 4 , t t Tirmeth Hur►cd, �,,•, • *Sever aru `,- Tuba Horsotooto el C�k • Heights Fos. ens Trilby 3 Cott ut' ° - Masonvois 3 0 • ' R. , .. . . . Cyst+ *Welcher i Comp 3 r i. •` - �` L•..r- - 1 1 � - Far►rnu e , - , •* •. . sus '.ip •: - ►, Boyd s` ''' 3a lake �. Lake st W 10th St W 10th 5 H,gr .-� Lyre/and . ( _ Ketun •----- 9 Gies '5 Thom Pson -oveland ,.-f ' Bry Bra nig Boe.7eckerS 34 34 -.Lek o ings Corror \I% t9 1 ", 1 pato Man ' 4 - 4';1 e • CarirCampion • Lake eared letuntosal Rosenus we*m � '� 4 • S, Subject ,Ca -L,,e_/1 :Ina Dent Reservoir S WaItyo Pusuam• ball •--^Milliken' • • to i f Berthoy e1 d Lnvt ThoP I 3 • a�Gj�N� �. •'�Ypn r v • , an r IT l j I. V OS) t► , • i Walks • lai wildcat if . .Y w pousiOn Highland L k• I •M� e 140 I • ea" W EL O r 3• t M� �-- UM N/, ; rti r Salta Highway 66 E Co-88 .ri°"""'� N r} t7r141fnOf1� Comp 2 . 2 lame► I IoM SHANNON & ASSOCIATES Income Comparison Page 66 Real Estate Appraisers & Consultants I I Comparable Lease Survey I Lease Analysis Grid Comp 1 Comp 2 Comp 3 Comp 4 Address 140 Commerce Road 120 NE Frontage Road 2950 Colorful Avenue 8101 1-25 SW Frontage 4430 Innovation Drive City Johnstown Fort Collins Longmont Fort Collins Fort Collins State Colorado Colorado Colorado Colorado Colorado Lessee Otter Products Not Disclosed Custom Blending Advanced Energy I Date 3/11/2010 6/26/2011 6/28/2011 6/28/2011 6/28/2011 Current $4.14 $4.85 $N $5.25 Terms Terms NNN NNN NNNNN NNN Term Month to Month 2 Year with option Month to Month 4 Years I SF Leased 100,943 20,000 37,000 22,343 48,000 Transaction Adjustments Condhons of Lease Normal 0% Normal 0% Normal 0% Normal 0% Expenses Similar 0% Similar 0% Similar 0% Sirrilar 0% I Adjusted Rent $4.14 $4.85 $5.00 $5.25 Trends/Year 0.0% 0.0% 0.0% 0.0% 0.0% AdjustedMarket Rent $4.14 $4.85 $5.00 $5.25 Location Superior Similar Superior Good %Adjustment -5% 0% -5% 0% I Year Built 2000 with 38,000 square foot 1977;Remodeled 1993 1997 1989;Remodeled 2010 1980;Remodeled 1994 addition in 2006 %Adjustment 0% 5% 0% 0% SF Leased 100,943 20,000 37,000 22,343 48,000 I %Adjustment -10% -5% -10% Ware -5% 25% Finish Level 4%average office plus 2,552 Light Industrial,6% Flex/R&D 50%Office Warehouse Only Office square feet mezzanine office. Office I %Adjustment 0% -20% 5% -20% Land to Building Ratio 3.58 to 1 4.6 to 1 3.9 to 1 4.0 to 1 2.7 to 1 Adjustment 0% 0% 0% 0% Adjusted Rent $3.52 $3.88 $4.50 $3.94 ' Net Physical Adjustments -15.0% -20.0% -10.0% -25.0% I I I I I I ISHANNON & ASSOCIATES Income Comparison Page 67 Real Estate Appraisers & Consultants Comparable 1 is located at 120 NE Frontage Road in Fort Collins: • Downward adjustment of 5% superior location near the interchange of Interstate 25 and State Highway 34. • Downward adjustment of 10% for smaller leased area as smaller areas typical lease for more per square foot. The overall net physical adjustment was -15% indicating an adjusted lease rate of $3.52 per I square foot. Comparable 2 is located on the cast side of Longmont three miles west of Interstate 25. I • An upward adjustment of 5% was completed for year of construction. • Downward adjustment 5% for smaller leased area as smaller areas typical lease for more I per square foot • Downward adjustment of 20% for the larger office area leased and the Flex/R&D structure of the leased space. The overall net physical adjustment was -20% indicating an adjusted lease rate of$3.88 per square foot. Comparable 3 is located at 8101 SW Frontage Road in Fort Collins: • Downward adjustment of 5% for superior location with visibility from Interstate 25. • Downward adjustment of 10% for smaller leased area as smaller areas typical lease for more per square foot • Upward adjustment of 5% for warehouse only, no office area included. The overall net physical adjustment was -10% indicating an adjusted lease rate of $4.50 per I square foot. Comparable 4 is located at 4430 Innovation Drive in Fort Collins: I • Downward adjustment of 5% for smaller leased area as smaller areas typical lease for more per square foot I • Downward adjustment of 20% for 25% office space and finished production area. The overall net physical adjustment was -25% indicating an adjusted lease rate of $3.94 per I square foot. I Summary: The market lease rates range from $3.52 to $4.50 per square foot. The subject's NNN lease rate is $3.67 per square foot and is supported by the market lease rates. I SHANNON & ASSOCIATES Income Comparison Page ss Real Estate Appraisers & Consultants Vacancy, Collection Loss, and Operating Expenses ' Vacancy and Collection Loss In general, an analysis of the industrial space in the Loveland/Fort Collins area indicates an ' overall vacancy of 4.3% in Fort Collins to 19% in Loveland. A vacancy rate of 5% will be applied to the subject's potential gross income because of the subject's existing leases which expires in 2019. Overall Capitalization Rate ' An overall capitalization rate (capitalization rate) is used to convert net income into value. The rate reflects the relationship between 1 year's net operating income and the corresponding value. Capitalization rates were derived from two sources including: • Investor surveys • Band of Investment Analysis National and Regional Surveys National Data for capitalization and discount rates are found in ' the Korpacz survey and regional rates are found in the Burbach and Associates Survey. The results of the rate survey in the region are shown as follows. ' National and Regional Surveys, Stabilized Capitalization Rate Low High Average Korpacz(National) ' Warehouse-4th Quarter 2010 6.0% 12.0% 8.0% Burbach &Associates (Regional Industrial -Winter 2010/2011 7.0% 10.0% 9.1% The indicated capitalization rates for industrial buildings range from 6.0% to 12.0% with an average of 9.1%: 1 ' SHANNON & ASSOCIATES Income Comparison Page 69 Real Estate Appraisers & Consultants Band of Investment This method employs the most probable mortgage requirements for the subject property coupled with the cash flow (Equity Dividend Rate) requirements associated with an investor's equity position. Permanent financing for industrial properties includes interest rates ranging from 6% to 7%, loan-to-value ratios ranging from 60% to 70%, amortization periods ranging from 15 to 25 years, typically 20 years. Acceptable returns on the equity position for this type of property currently range from 7.0 to 8.0%. For this analysis, the assumptions for the subject property are as follows: 6.5% mortgage rate • 70% Loan to Value (i.e., 30% down payment) • 20 year amortization • 8.0% return on equity. Using the above mortgage parameters shown on the previous page, the estimated capitalization rate for the subject property, via the Band of Investment Method is shown in the following chart. The mortgage constant is the amount required to repay the principal plus interest within the term of the mortgage: Capitalization Rate Calculations I I Capitalization Rate Variables Mortgage Interest Rate 6.50% Loan Term (Years) 20 Loan To Value Ratio 70% Debt Coverage Ratio 1.25 Equity Dividend Rate 8.00% Band of Investment Analysis Mortgage Constant Loan Ratio Contributions 0.089468776 x 70.% = 6.26% Equity Dividend Rate Equity Ratio 8.00% x 30.% = 2.40% Band of Investment Capitalization Rate 8.66% I I I SHANNON & ASSOCIATES Income Comparison Page 70 Real Estate Appraisers & Consultants Conclusion (Capitalization Rate Analysis) The Burbach and Associates indicated capitalization rates for the Denver area range is 7.0% to 10% and the Korpacz National Survey rates range from 6.00% to 12%. The Band of Investment ' technique develops an overall rate of 8.5%. Considering the condition, location, and the age of the property, we applied a capitalization rate of 9.0% in the income pro forma analysis. Income and Expense Summary ' Income: Potential Gross Annual Income Market Lease $3.68 $/SF ' Building SF 100,943 $371,470 Less Vacancy&Collection Losses @5% ($18,573.51) Effectise Gross Annual Income: $352,897 Expenses: Management @3% (S10,587) Reserves @ 3% ($10,587) $21,17 Total Expenses: _ ($21,174) ESTIMATED NET OPERATING INCOME (NOI) $331,723 ' Direct Cap Income Approach Value NOI $331,723 Cap Rate 9.0% ' Value (Rounded) $3,686,000 SHANNON & ASSOCIATES Income Comparison Page 71 i I Heal Estate Appraisers & Consultants Ground Lease Contributory Value The subject property contains the following Ground lease: Ground Lease Landlord Sun Mountain Realty, LLC Tenant Mayo, INC Term Start Date July 1, 2007 I Lease End Date Month to Month Annual Lease Rate $30,000 ($2,500 per month) Landlord pays property taxes. I Land Square Footage: 1.71 acres 74,488 square feet or 74,488 SF Lease Rate per Square Foot $0.40 per square foot Estimated Taxes Paid by Total Site Size: 435,594 SF Landlord Ground Lease Area: 74,488 SF I % Leased: 17.1% Total Taxes (2010): $92,007 Taxes subject to Ground Lease: $15,733 Estimated Annual Income $30,000 less taxes of$15,733 =$14,267 Estimated CAP Rate 15%: Month to Month Lease, High Risk. Estimated Value of Lease $95,000 (Rounded); $14,267/15% I I I SHANNON & ASSOCIATES Ground Lease Page 72 Real Estate Appraisers & Consultants' Final Reconciliation ' The process of reconciliation involves the analysis of each approach to value. The quantity and quality of data available, the significance of each approach as it relates to market behavior and defensibility of each approach are considered and weighed. The following table shows the indicated value by each approach. Approaches to Value Cost Approach $3,932,000 ' Sales Comparison $3,634,000 Income Approach $3,686,000 ' Based on our knowledge of the local market, most large industrial facilities in the subject market area are owner occupied but the subject is leased with eight years left on the term. As a result of the soft economy, higher unemployment and limited demand for industrial properties, the Cost ' Approach is the least reliable of the three indicators of value. The sales comparison and income approaches differ by 1.4 % and the most weight is given to these approaches indicating Market Value of the subject building and it's site as of June 30, 2010 of$3,650,000. There is a ground lease with a contributory value of $95,000 and the final value conclusion includes the contributory value of the ground lease. tValue Conclusion Based on the data and analyses developed in this appraisal, we have reconciled to the following value conclusion(s), as of June 30, 2010, subject to the Limiting Conditions and Assumptions of this appraisal. Reconciled Value(s): Premise: Market Value as of June 30, 2010 Interest: Fee Simple Value Conclusion Building and it's site: $3,650,000 Leased Land Value $95,000 Total Estimated Value $3,745,000 Three Million Seven Hundred Forty Five Thousand Dollars Respectfully Submitted, ' Shannon & Associates Donald J. S on, MAI, SRA Leon Cluff, Associate Colorado-CG0 1 313438 Colorado-CG40034227 SHANNON & ASSOCIATES Reconciliation Page 73 Real Estate Appraisers & Consultants 1 Addendum 1 1 Qualifications I I I I I I I ' SHANNON & ASSOCIATES Real Estate Appraisers & Consultants Donald J. Shannon, MAI, SRA ' Professional & Appraisal Institute Affiliations Appraisal Institute SRA and MAI Member, International Right of Way Association Member I Colorado Certified General Appraiser# CG01313438 Wyoming Certified General Appraiser No. WY-78 I Appraisal Institute Past or Present Committees or Offices: Colorado Chapter: Admissions, Director, Secretary-Treasurer, Vice President, President Region II: Review & Counseling Committee, Candidates Guidance Chair, Regional Representative, Regional Director, Regional Chair INational: Candidates Guidance Chair, Teaching Faculty, and National Director Education I Bachelor of Science in Marketing & Economics from University of Missouri Over 200 technical real estate appraisal courses and seminars including: • Discounted Cash Flow Analysis • Fair Lending I • Market Analysis • Business Valuation • Investment Analysis • Reviewing Appraisals • Subdivision Analysis • Appraisal of Leaseholds I • Uniform Standards of Professional Practice • Appraisal of Partial Interest • Feasibility Analysis and Highest & Best Use • Appraisal Consulting • Mortgage Fraud • Standards for Federal Acquisitions (Yellow Book) I • Eminent Domain • Green Building Certificate Program • Distressed Commercial Real Estate (Colorado State University) • Livestock Ranches • Valuing Green Buildings —Appraisal Institute IAppraisal Practice Owner/Manager of Shannon & Associates, Real Estate Appraisers and Consultants Independent real estate appraiser since 1971 completing a wide variety of appraisal assignments Iincluding: • Office Buildings • Health Clubs • Development Land • Motels & Hotels Golf Courses Subdivisions • Shopping Centers • • Multi-Family • Eminent Domain • Industrial Buildings • Education Facilities • Conservation Easements I • Warehouse Buildings • Mobile Home/R.V Parks Leaseholds and Partial • Medical & Surgical Centers • Farms & Ranches Interest • Hospitals • Guest Ranches • Feasibility Analysis I • Event Centers Appraisal Reviews Real Estate Counseling • Single & Multi-Tenant Retail • • Mountain Resorts • Qualified Litigation Support • Self-Storage • Rural Tracts • Solar Building I Specialized in Passive Solar homes in the early 1980s and built a solar home in 1985.Owns and manages various apartments, office buildings, shopping center and a service station. 1986 appraisal and subsequent court testimony in the LaPlatta Electric v. Cummris case before the Colorado Supreme Court Iresulted in a major policy change in condemnation law. ' SHANNON & ASSOCIATES 215 W Oak Street, Suite 501, Fort Collins, CO 80521 ' Real Estate Appraisers & Consultants Phone: (970) 482-1010 Don@shannonmai.com Donald J. Shannon, MAI, SRA i i STATE OF COLORADO Department of Regulatory Agencies Division of Real Estate Active PRINTED ON SECURE PAPER Cert Gen Appraiser 1313438 a •I \"\I/7Dec312012 Number Iss �: Expires I DONALD JOSEPH S 0 V ' FORT COLLINS. CO :i.2 -,16. -�. r. - , Program Administrator Licensee Signature • O;e r-o.r, PPc Onuarr.Pr PePLnusonPePePePerom Paancroomrol.lcPeP'�ePPPlu' ePPrJODI e arcylZMfelBITZUZI-7frJr Z PePcPr.PP c_21P3_10E dirrinPL.P1r IME1 .0PPc.'2l0 N STATE OF WYOMING NON TRANSFERABLE eel tt Number 78 N 00 1os s I CERTIFIED REAL ESTATE APPRAISER PERMIT k 5 Issued:09105/2009 �S.,'DONALD J.SHANNON = ti I CERTIFIED GENERAL APPRAISER Expires:09/04J20I 1 5 AS PROVIDED FOR BY THE LAWS OMING. r . A BY THE WYOMING CERTIFIED ATE APPRAISER BOARD WITNESS MY 1 7 ? }' THE OFFICIALSEAL AT CHEYENNE. 7y WYOMING. 1 SHANNON a ASSOCIATES `5I I S WEST OAK STREET,STE.501 � I 5 PF.COLLINS,CO 80521 /.. aI �, Taotoa Hog Ex 4�Groprcfopr?ograecrourrbrorcuaPcrcP-3 E•Lro puoror.�PPt-sergrwrak c'.Pu'@roaroranPuorwoPcP'?P iclim^eknlcPuclordP7r.lvor -goroznaVPi7%Iarancr-Pr'lusq I I SHANNON & ASSOCIATESI 215 W Oak Stre et, Suite 501, Fort Collins, CO 8O521 Real Estate Appraisers & Consultants Phone: (970) 482-1010 Don@shannonmai.com I Leon F. Cluff ' Professional License Colorado Certified General Appraiser#CG40034227 IEducation Colorado State University, Fort Collins, CO, Bachelor of Science ' Post Graduate Engineering, Computer Science & Statistics Appraisal Related Education ' Appraisal Institute Education • General Appraiser Income Approach/ Part 1 I • Real Estate Finance, Statistics, and Valuation Modeling • Residential Sales Comparison and Income Approaches • GIS: The Building Case Study ' • Introduction to GIS Applications for Real Estate Appraisal • Appraising Manufactured Housing • Internet Search Strategies for R.E. Appraisers I • FHA and the Appraisal Process • General Demonstration Appraisal Report Writing Seminar • Transient Oriented Development in Denver I • Business Practices and Ethics Other Appraisal Education 1 • Basic Appraisal Principles & Procedures • USPAP Course, 15-hour • Transportation and Growth in Colorado, W. West Foster, MAI • Education Seminar, Alan Hummel, Stuart Leach • Using Software for Sketches, Randall Garrett IAppraisal Practice Independent real estate appraiser since 2003 completing the following types of appraisal Iassignments: Developmental Land Rural Tracts Self Storage Facilities I Multi-Family Condominiums Industrial Hotels Office Retail Automotive Service Stations IAssociation Memberships Appraisal Institute, Associate Member INorthern Colorado Association of Real Estate Appraisers ' I SHANNON & ASSOCIATES 215 W Oak Street, Suite 501, Fort Collins, CO 80521 ' Real Estate Appraisers & Consultants Phone: (970) 482-1010 Leon@leoncluff.com Leon F. Cluff STATE OF COLORADO Department of Regulatory Agencies Division of Real Estate Active PRINTED ON SECURE PAPER Cert Gen Appraiser, a 400 227 I\ Jai 1 201TD ec 31 ,12 tuber I:sue pat(' xpire LEON F CL FF LOVELAND CO 80538 i it 7O-- _ Ojai Program Administrator Licensee Signature ISHANNON & ASSOCIATES 215 W Oak Street, Suite 501, Fort Collins, CO 80521 Real Estate Appraisers & Consultants Phone: (970) 482-1010 Leon@leoncluff.com Addendum Engagement Letter I I I I I I I SHANNON & ASSOCIATES Real Estate :appraisers & Consultants APPRAISAL AGREEMENT DATE OF AGREEMENT May 27, 2011 PARTIES TO AGREEMENT CLIENT NAME Mr. Edward Wright APPRAISER NAME Donald J. Shannon ' CLIENT COMPANY Sun Mountain Realty, LLC APPRAISER COMPANY Shannon&Associates ADDRESS 140 Commerce Dr. ADDRESS 215 W.Oak St., Suite 501 CITY,STATE,ZIP Berthoud, CO 80513 CITY,STATE,ZIP Fort Collins, CO 80521 ' PHONE 970-532-2105 PHONE 970-482-1010 FAX/EMAI[JCELL FAX 970-221.4444 The Client hereby engages the Appraiser to complete the following appraisal assignment: ' PROPERTY IDENTIFICATION Sun Mountain Doors, 140 Commerce Dr., Johnstown, CO ' PROPERTY TYPE Industrial building with approximately 102,000 sq ft. ' INTEREST VALUED Fee Simple ' INTENDED USER(S) Sun Mountain Realty, LLC ' INTENDED USE To assist the Client and intended users in establishing a value for property tax purposes. 1 TYPE OF VALUE ' Market Value as defined by the appraisal requirements pursuant to FIRREA. HYPOTHETICAL CONDITIONS/EXTRAORDINARY ASSUMPTIONS None anticipated t SHANNON & ASSOCIATES Page 1 of 10 Real Estate Appraisers & Consultants 1 SCOPE OF WORK Site Visit The Appraiser shall make an interior and exterior inspection of the subject property. Client or Client's designated agent shall be present at the time of inspection. Client shall make all reasonable effort to provide access in a timely manner to the Appraiser for inspection, and Appraiser shall make all reasonable effort not to unduly disturb the business(s) currently using the subject property, if any. Valuation Approaches The appraisal shall use the Sales Comparison, Cost, and Income Approaches to Value, as appropriate, to develop a credible opinion of value. Report Format The appraisal report shall be prepared in a Summary Narrative format. Delivery Date 30 days from receiving the signed Appraisal Agreement and the retainer. Delivery Method The appraisal report shall be delivered to the Client by US Mail and email. Number of Copies The Appraiser shall provide the Client with three copies of the appraisal report. Payment to Appraiser The total fee for this appraisal assignment is $3,500. A retainer of$2,000 is required to begin work on this assignment. The remaining amount of $1,500 shall be due upon delivery of the completed appraisal report to the Client. Proposed Improvements If the property appraised consists of proposed improvements, Client shall provide to the Appraiser all plans, specifications, and documentation sufficient to identify the extent and character of the proposed improvements. Properties Under/Contract for Sale If the property is currently under contract for sale, the Client shall provide to appraiser a copy of said contract including all addenda. REQUIRED INFORMATION FOR ASSIGNMENT Client shall provide to Appraiser the following information necessary for the completion of this assignment, if available: • Preliminary title report or title policy • Agreements of Sale or Options to Buy(current and/or during the last three years) SHANNON & ASSOCIATES Page 2 of 10 Real Estate Appraisers & Consultants ' • Prior/current marketing information • Legal Description of the property • Site plan or survey ' • Plans and specifications for all improvements • Square footage breakdown for overall building, individual units/bays, and common ' areas. • Personal property inventory if applicable to appraisal and available. ' • Environment audits and studies disclosing any wetlands, hazardous wastes or other environmental conditions • Date of completion, detail phasing and or staging plan for any proposed ' improvements • Detailed line item construction costs ' • Construction cost to date and costs to complete • Detailed rent roll and copies of leases. Please identify any tenants who have initiated ' discussions to renew, terminate or renegotiate/modify their lease(s), or who have give notice to terminate. Proposed terms for any re-negotiations should be revealed. • Provide letters of intent to lease or any outstanding lease proposals that have a ' reasonable likelihood of being finalized into executed leases. • Contact information for leasing agent and/or management company ' • Leasing brochures and/or any marketing materials, if available. CONFIDENTIALITY ' Appraiser shall not provide a copy of the written appraisal report to or disclose the results of the appraisal prepared in accordance with this Agreement with any party other than the ' Client, without the Client's written authorization, except as stipulated in the confidentiality section of the ethics rule of the Uniform Standards of Appraisal Professional Appraisal Practice. ' CHANGES TO THE AGREEMENT ' Any changes to the assignment as outlined in this agreement must be made in writing and signed by the Client and the Appraiser. Changes will be subject to an additional fee which shall be specified in the written agreement. CANCELATION ' Client may cancel this Agreement at any time prior to the Appraiser's delivery of the Appraisal Report upon written notification to the Appraiser. Client shall pay Appraiser for work completed on assignment prior to Appraiser's receipt of written cancelation notice. ' No THIRD PARTY BENEFICIARIES ' SHANNON & ASSOCIATES Page 3 of 10 Real Estate Appraisers & Consultants i Nothing in this Agreement shall create a contractual relationship between the appraiser or the I Client and any third party, or any cause of action in favor of any third party. This Agreement shall not be construed to render any person or entity a third party beneficiary of this Agreement, including but not limited to, any third parties identified herein. USE OF EMPLOYEES OR INDEPENDENT CONTRACTORS I Appraiser may use employees or independent contractors at Appraiser's discretion to complete the assignment. Notwithstanding, the Appraiser shall inspect the subject property and sign the written appraisal report and take full responsibility for the services provided as a result of this Agreement. TESTIMONY AT COURT OR OTHER PROCEEDINGS I Unless otherwise stated in this Agreement, Client agrees that Appraiser's assignment pursuant to this Agreement shall not include the Appraiser's participation in or preparation I for, whether voluntarily or subject to subpoena, any oral or written discovery, sworn testimony in a judicial, arbitration or administrative proceeding, or attendance at any judicial, I arbitration, or administrative proceeding relating to this assignment. APPRAISER INDEPENDENCE I Appraiser cannot and shall not agree to provide an opinion of value that is contingent on a predetermined amount. Appraiser cannot guarantee the outcome of the assignment in advance. Appraiser cannot insure that the opinion of value developed as a result of this assignment will serve to facilitate any specific objective by the Client or others or to advance any particular cause. Appraiser's opinion of value will be developed competently and with independence, impartiality and objectivity. EXPIRATION OF AGREEMENT I This agreement is valid only if signed by both Appraiser and Client within 10 days of the Date of Agreement specified. I GOVERNING LAW AND JURISDICTION The interpretation and enforcement of this Agreement shall be governed by the laws of the I State of Colorado in which the Appraiser's principal place of business is located. I I I SHANNON & ASSOCIATES Page 4 of 10 I Real Estate Appraisers & Consultants I 1 ' Client hereby agrees to engage and the Appraiser agrees to perform the services specified herein. Client agrees to furnish the information requested and pay the compensation described. The ' undersigned hereby understands, accepts and agrees to the attached Conditions, Assumptions and Limiting Conditions, and Certification which are herewith made part of this Appraisal Agreement. Appraiser Client I < � W it Signature MAT-- ' Donald J. Shannon 421, Printed Name Printed Name May27, 2011 5143f/ Date Date 1 1 1 1 1 1 1 ' SHANNON & ASSOCIATES Page 5 of 10 Real Estate Appraisers& Consultants APPRAISAL CONDITIONS 1. STANDARDS. The written report to be furnished by the Appraiser shall be addressed to the Client and shall comply with the professional and ethical standards of the American Institute of Real Estate Appraisers. 2. DEFINITION OF MARKET VALUE. The following or equivalent shall be the definition of market value in the final report: "The most probable price in cash, terms equivalent to cash, or in other precisely revealed terms for which the appraised property will sell in a competitive market under all conditions requisite to a fair sale, with the buyer and seller each acting prudently, knowledgeable, and for self-interest, and assuming that neither is under undue duress." 3. AUTHORIZATION AND DATA TO BE FURNISHED. Client authorizes the Appraiser to inspect the Property and agrees to furnish Appraiser with all pertinent data,which Appraiser requests in connection with the Property. Client, if not owner of the Property, warrants that owner, or occupant,has been notified of this assignment and will be•cooperative with the Appraiser unless otherwise noted herein. If special legal instructions are to be considered by Appraiser,the same are set forth above or are attached hereto and made a part hereof. The applicable statues or case law, which forms the basis for such instruction, shall be included herein or separately furnished to Appraiser. 4. COMPENSATION. Appraiser acknowledges receipt of the Retainer,the same to be credited against any and all amounts due Appraiser upon completion of this assignment. If the balance of compensation is to be paid by single payment, the same shall be available upon, or prior to, delivery of report. If the balance is to be payable on a periodic basis, the same shall be paid on submission of periodic statements, with final payment due upon,or prior to,delivery of the report. If compensation is to be paid on a periodic basis,Appraiser shall keep an accurate time record and furnish the same to client upon request. Appraiser's compensation is in no event contingent upon and shall in no event bear any relationship to the valuation to be reported. 5. COMPLETION TIME. Appraiser shall make all efforts to complete the report by the Delivery Date. The Delivery Date pertains solely to the report to be given to the Client and does not relate to any services pertaining to litigation. Completion time is specifically contingent upon Client supplying Appraiser with the items listed in this Appraisal Agreement. Any delay in providing these items shall extend the Delivery Date accordingly. 6. EXPENSES. If the property is outside Appraiser's normal operating area (Northern Colorado and Southern Wyoming), Client shall pay all reasonable business expenses incurred, including travel expenses, extraordinary job costs and reasonable subsistence costs. Said expenses shall be paid on submission of itemized statements therefore. 7. CANCELLATION. Client may at any time prior to the completion of Appraiser's services cancel this agreement by written notice to Appraiser. In such event client shall pay to Appraiser/Consultant, on presentation of a statement of work, compensation for all services rendered to the date of cancellation, together with all costs advanced in connection with said report prior to receipt of said notice. 8. ADDITIONAL REPORT COPIES. If the Client desires additional copies of the report, the same shall be furnished on payment of the$250 fee for additional copies. SHANNON & ASSOCIATES Page 6 of 10 Real Estate Appraisers & Consultants ' 9. LITIGATION. Litigation for the purpose of this agreement shall refer to all judicial, administrative and legislative proceedings and hearings, including pre-trial depositions, in which Appraiser may be required to testify, voluntarily or involuntarily, in relation to the above described property and appraisal services being ' rendered on account of this agreement. Appraiser shall participate in such proceedings and give such testimony providing client of the dates and times furnishes him with reasonable notice thereof. Appraiser shall be paid for the time or times of such testimony and for the time for the preparation for such testimony on an hourly basis. The terms of these litigation services will be set forth in a written agreement between Client and Appraiser prior to the performance of any services related to litigation. In addition, Appraiser shall be ' paid all reasonable expenses relating to the Litigation and the preparation for the same which takes place outside the Appraiser's normal operating area(Northern Colorado and Southern Wyoming). Client shall pay such expenses upon receipt of statements for the same, and said statements shall to include an itemization of ' expenses on Client's request and to be submitted at intervals of not less than one month. 10. COLLECTION. All statements for fees and expenses shall be due within 30 days of the completion of the work by the Appraiser and the forwarding of a statement to the Client for said fees and expenses. Should ' payment in full of the amount due,as reflected on the Appraiser's/statement not be received within 30 days of the mailing of such statement,Client's account shall be deemed to be delinquent from date of billing. A late payment fee of 1.5% per month, or an ANNUAL PERCENTAGE RATE of 18%, with a $20.00 per month minimum, will be charged on all delinquent accounts. Should it be necessary for Appraiser to commence legal proceedings to the collection of the client's delinquent account,client agrees to submit to the jurisdiction of the Colorado Courts and Client agrees to pay Appraiser the actual costs of collection, plus reasonable ' attorney's fees incurred in connection with said collection proceedings. In addition, if Client is in default in payment of Appraiser's account, client agrees that Appraiser shall be entitled to a mechanic's lien upon the property made the subject of the appraisal. Such lien to be made,evidenced and enforced in the same manner ' as a mechanic's lien,all as provided in Article 22,Title 38,Colorado Revised Statutes. 11. CONTINGENT AND LIMITING CONDITIONS OF THE REPORT. Any and all findings, predictions, ' assumptions,conclusions and the like contained in the report shall be Appraiser's professional opinion and are not assurances that future events or circumstances set forth therein will necessarily occur. Appraiser shall retain ownership of all reports and all original documentation, field notes, memoranda, data and the like ' made/assembled in and about the preparation of the report. No one other than Client may rely on or utilize the report without Appraiser's express written consent. 12. ENTITY. If the property to be appraised is owned or is hereafter acquired by an entity or combination of ' persons in which Client owns an interest; Client represents to Appraiser that Client has the authority to sign this agreement on behalf of such entity or persons. In the event that the Client signing this Appraisal Agreement is a partnership, corporation or any entity other than a sole proprietorship, the person signing for each entity specifically accepts sole personal responsibility for the charges contracted for it same should not be made by said entity. 13. The limit of liability shall be no more than the remuneration received. 1 ' SHANNON & ASSOCIATES Page 7 of 10 Real Estate Appraisers & Consultants Assumptions and Limiting Conditions The market value estimate provided in this appraisal report is subject to the following assumptions and limiting conditions and to other such specific and limiting conditions as may be set forth by the Appraiser/s in this report. I. The appraisal report to which this Appraisal Agreement pertains is intended to comply with the reporting requirements set forth under Standard Rule 2-2(b) of the Uniform Standards of Professional Practice for a Summary Appraisal Report. As such, it may not include full discussions of the data, reasoning, and analyses that were used in the appraisal process to develop the appraisers' opinion of value. Supporting documentation concerning the data, reasoning, and analyses is retained in the appraiser's file. The information contained in this report is specific to the needs of the client and for the intended use stated in this report. The Appraiser is not responsible for the unauthorized use of the report. 2. No responsibility is assumed for legal or title considerations. Title to the property is assumed to be good and marketable unless otherwise stated and documented by the Client and provided to the Appraiser. 3. The property shall be appraised free and clear of any or all liens and encumbrances unless otherwise stated and documented by the Client and provided to the Appraiser. 4. Responsible ownership and competent management are assumed unless otherwise stated and documented by the Client and provided to the Appraiser. 5. All engineering is assumed to be correct. Any plot plans and illustrative material that will be included in the report are included only to assist the reader in visualizing the property. The Appraiser has made no survey of the property. 6. It is assumed that there are no hidden or unapparent conditions of the property, subsoil, or structures that render it more or less valuable. No responsibility is assumed for such conditions or for arranging engineering studies that may be required to discover them. 7. It is assumed that there is full compliance with all applicable federal, state, and local environmental regulations and laws unless otherwise stated and documented by the Client and provided to the Appraiser. 8. It is assumed that all applicable zoning and use regulations and restrictions have been complied with, unless a nonconformity has been stated, defined and considered by the Client and provided to the Appraiser. 90. It is assumed that all required licenses, certificates of occupancy or other legislative or administrative authority from any local, state, or national government, or private entity or organization have been or can be obtained or renewed for any use on which the value estimates to be included in the appraisal report are based. 10. 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 otherwise stated and documented by the Client and provided to the Appraiser. 11. The Appraiser is not required to give testimony, appear in court, or give further consultation because of having made the appraisal with reference to the property in question, unless arrangements are made and compensation agreed upon in writing by Client and Appraiser. 12. Any distribution of the valuation in the appraisal report between land and improvements applies only under the existing program of utilization. The separate valuations for land and building must not be used in SHANNON & ASSOCIATES Page 8 of 10 Real Estate Appraisers & Consultants ' conjunction with any other appraisal and are invalid if so used. 13. The Appraiser is not qualified to detect hazardous waste and/or toxic materials. My 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. The Appraiser has no ' knowledge of the existence of such materials on or in the property; however, they are not qualified to detect such substances. The presence of potentially hazardous materials may affect the value of the property. The value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for any such conditions,or for any expertise or engineering knowledge required to discover them. The Client is urged to retain an expert in this field,if desired. 14. Unless otherwise stated in the Appraisal Agreement, the subject property is being appraised without a specific compliance survey having been conducted to determine if the property is or is not in conformance ' with the requirements of the Americans with Disabilities Act. The presence of architectural and communication barriers that are structural in nature and would restrict access by disabled individuals may adversely affect the property's value, marketability, and/or utility. 15. Possession of the appraisal report or a copy to which this Appraisal Agreement pertains does not imply right of publication nor use for any purpose by any other than the Client, without the written consent of the ' Appraiser.The Client shall indemnify the Appraiser against third party law suits. 16. Neither all nor any part of the contents of the appraisal report shall be conveyed to the public through advertising, public relations, news, sales or any other media, without the written consent and approval of Appraiser,particularly as to the valuation conclusions, the identity of the Appraiser, or any references to the Appraisal Institute. ' 17. On all appraisals subject to satisfactory completion, repairs, or alterations, the appraisal report and value conclusion are contingent upon completion of the improvements in a good workmanlike manner and a completion inspection by the Appraiser. ' 18. Satisfactory road maintenance agreements, condominium declarations, and other pertinent agreements are assumed to be recorded. 19. The Appraiser assumes that financing, as may be discussed in the report, is available for potential ' purchasers. 20. It should be understood that an appraisal report provides an Opinion of Value, based upon the data available to the Appraiser,not a guarantee or warranty of value. 1 1 SHANNON & ASSOCIATES Page 9 of 10 Real Estate Appraisers & Consultants 1 Certification The Appraiser certifies that to the best of his knowledge and belief 1. The Appraiser has no unreported present or prospective interest in the property that is the subject of this Appraisal Agreement. Further, the Appraiser has no personal interest or bias with respect to the subject matter or the parties involved. 2. The Appraiser has_or has notvided services pertaining to the property within the last three years. 3. The Appraiser will personally inspect the property, both inside and out,and make an exterior inspection of all comparable sales in the appraisal report to which this Appraisal Agreement pertains. To the best of the Appraiser's knowledge and belief, all statements of fact and information to be included in the appraisal report are true and correct, and the Appraiser will not knowingly withhold any significant information, subject to the stated assumptions and limiting conditions. 4. The appraisal report analyses,opinions,and conclusions will be developed,and the appraisal report will be prepared in conformity with the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute, which includes the Uniform Standards of Professional Appraisal Practice. 5. The use of the appraisal report will be subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. 6. All conclusions and opinions concerning the real estate set forth in the appraisal report, to which this Appraisal Agreement pertains,will be prepared by the Appraiser whose signature appears on this appraisal report, unless indicated as "Review Appraiser". No change of any item in the appraisal report shall be made by anyone other than the Appraiser, and the Appraiser shall have no responsibility for any such unauthorized change. 7. The Appraiser's compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event. Furthermore, the appraisal assignment was not based on a requested minimum valuation,a specific valuation,or the approval of a loan. 8. The analyses, opinions, and conclusions to be included in the appraisal report are limited only by the reported Assumptions and Limiting Conditions and will be the Appraiser's personal,unbiased professional analyses,opinions,and conclusions. 9. No one will provide significant professional assistance to the Appraiser signing the report (If there are exceptions,the name of each individual providing significant professional assistance will be stated.) 10. As of the date of this agreement, Donald J. Shannon, MAI, SRA has completed the continuing education program of the Appraisal Institute. 11. None of the appraisers or staff of Shannon and Associates, the preparers of this report, have been sued by a regulatory agency or financial institution for fraud or negligence involving an appraisal report. Donald J. Sham ,MAI, SRA Date Colorado-CG01313438: 12/31/2012, Wyoming-WY-78: 9/4/2011 SHANNON & ASSOCIATES Page 10 of 10 Real Estate Appraisers & Consultants Addendum City and Regional Data I I I I I I I ' SHANNON & ASSOCIATES Real Estate Appraisers & Consultants I I Northern Colorado Regional Analysis The subject is influenced by market conditions in the Northern Colorado area, which includes Larimer and Weld Counties. The major cities within the region are Fort Collins, Loveland, IGreeley and Windsor. The area is listed as the Fort Collins/Loveland Metropolitan Statistical Area (MSA) by the federal government for ranking and statistical analysis purposes. Data was Igathered from numerous sources and is updated through the 3rd quarter of 2010 where possible. I Location The Fort Collins/Loveland and Greeley MSA's are located in north central Colorado, east of the Rocky Mountains. The City of Fort Collins is the business and economic hub for the region. IThe area has easy access to the central and southern portions of the state as well as the recreational opportunities available in the Rocky Mountains. t-c„- l • -- `Uf01�me&EiemenA f8 Y i Bair! .._tint `I LI s, _ &Carpenter �`_ ---�,.�-1--�.? tQ its s s ea i li e11 l»s ii ai s a� s la1 IS a sx+•tiliri�a. T ,� ■ - ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ -r� ■; LI ■ ■ ■ ■ ■ ■ IN Ill II . ii t is hi ■ ■ ■ (a. e • • • ..% IN Ill • • II NI ' 5lerling�l t ,.: 1 coalmo � � a• . —t 3i:i:a:.:a:s:.:a . ?VI ■ ■ ■ ■t i ■ >` yea I _' ■ ■ ■ ■ ■ ■ _ erin % • ■ ■i ■ ■ "' ) rr 7 � ■ ■ ■ I I00 1 _ ` — tti It J " I �. 7.-'_I, �., •-• Park,~ �' t oot , { �1 �`,, `, �ollt amen r , f � V�. ! furtluV'Oq ' °� 1. r� KremtgllS' ' - UI• Springs ,i . cc •'— ` 7►11tlAai ''r0_�ecl!lrllcy__ _ °'`' (1 rip .n----' I' P�grsnelb _� ( olds E 1 aae TA • I WooCoeM— SS \.•t St e� ', h 'r ✓ on L: • ___ T Fraser �" i r ~4 Ilal• r r - 4_-: .'. Bennett : ., , : .:_S� audns -) J aasyeee fa Aston eclat ` a..�l►Iti. e OS Bye . . O ir-• Evergieent.,-rote _ . .2Bs,•' 87 , Deer Trail i Mlnium .• o�l�e ,M•M;Nrne Z t i • C l. --- Gilpin �� -_ Park 1} Krt ;t3reckanntfae if ... /° 1 . .• �8uffalbCreak f } �Fran¢tos. , , cmcfoc�—�) ii 4 �. f • 1. . „_:% mi \�-,u' 4alma1 ' is - -��_ 0 6 12 18 24 30 :'"-t.. LeadudM t 4 \ e' k 1 MN(90 E)Farplav f -r.• I `.- , �, c P- Data Zoom 7-4 I SHANNON & ASSOCIATES Northern Colorado Regional Analysis Page 1 Real Estate Appraisers & Consultants (November 2010) State Population Colorado's population has been steadily increasing over the past fifteen years. Growing from a total of 3,653,910 residents in 1994 to an estimated 5,026,916 residents as of December 31, 2009. In addition to the state growth, the population in Northern Colorado has also increased over the last ten years and is likely to continue to grow. According to the U.S. Census (July 2001), Colorado ranked third in population growth over the past ten years with a 2.7% annual growth rate. In the same time frame Fort Collins/Loveland MSA was ranked as the 15th fastest growing metro area in the United States with a 3.51% annual growth rate, while the Denver CMSA ranked as the 23rd fastest growing area in the United States with a 3.04% annual growth rate. Northern Colorado Population Northern Colorado is widely recognized on a national level due to recent publicity. Like the rest of the state, it has seen significant growth since the early 1990s. "Newcomers" are being encouraged to move to the area by recent magazine articles that promote Northern Colorado. • Fort Collins/Loveland ranked #1 Place to Reinvent Your Life by AARP, February 2010. • Fort Collins ranked 19`h in the 30 Strongest Housing Markets in the U.S. by Business Week, August 2009. • Loveland recognized as one of the Top 10 Places to Live by US News and World Report, June 2009. • Fort Collins ranked Number 1 Place to Live and Work for Young Professionals (City Population 100,000-200,000) by Next Generation Consulting, June 2009. • Fort Collins Senior Center ranked as one of the Top 12 Senior Centers in the Country by the National Council on Aging and the National Institute for Senior Centers, June 2009. • One of the Best Places to Raise Your Kids, Business Week, November 2008. • 2nd Best Place to Live(Fort Collins), Money Magazine, August 2008. The Colorado Department of Local Affairs State Demographer has predicted a population increase from approximately 300,000 residents in Weld and Larimer County in 1990 to over 900,000 by 2030. Employment is also projected to increase from approximately 150,000 workers to 480,000 workers in the same timeframe. The following charts provide a visual explanation of the projected growth in the North Front Range. SHANNON & ASSOCIATES Northern Colorado Regional Analysis Page 2 Real Estate Appraisers & Consultants (November 2010) I I 2005 Household & Employment Density I _f • i ' _ • Legend • 1'IPOI Bn,rri101 • hirespented ARM • a • yi / a $6I a .hcdd• it • 100 E,*ttrn • r r ' , ' 0 i 2 f } --i , 11 N . a a a i ti • • ,�• a • • kit I I.hJb. .4. 18-a.erls tp. *dig I . • • • • t.I, la 1, *ill ger ii- • • elm a • -1a•,fai6t 1.; Nirrititt _..__ .\ • • • spillit 4 'hi: 45 • r • f • • rd■ � NOM_ �I I • lhrr•�!• • • ' •ili • + Nit • + • , a' •' • • • 0 • * . �` / 1 t { • • • ii• .* ,• _ r • N • - • 41_ 1 ...... • a•• 4 it.4 It I8 • i t • • • t •• I • • to,. is I • 1 t Fee 0 lett I • • St 14 1 • act -.4 0 ••t • . . I 7r • ' le. . a 1• ii, , * . 4. I• • • a et. \ • Ln I • it • J• • u �••r It I %se gals • • • ill i • �♦ a• • Sj • r • • • • • I4 ill ■ • at //ii 4 • .III I I SHANNON & ASSOCIATES Northern Colorado Regional Analysis Page 3 Real Estate Appraisers & Consultants (November 201 0) 2030 Projected Household & Employment Density Legend pilla` • • • , • •{a,•,rc„a teriondire I • K • • l • q�>E,•cR_r:, r r • _ , • -_„- '. • ril �� ♦ • a 1 a 4 ' • ) • A . • • Mr • Is,* • • • ••� t • • •.• • in tint . t4 •• ' • • '►• • 4 . • • . • • •I • • ►• • ' a • ♦. •• .• ' •. •� • } f • • • •• • 0• • ' • • .iell M • • / 1 • • • ,/�, • ••• ' 11� L• + ra ~ • - •1 lie • • • 1 • • • • 41 •' ,,� • • • • ft •.♦ • .. w • • • • • • 1 , +. . •� ••�• Si • •I•• --- il IP • •• • •►. • ••a • • • •• • • • ♦ • Si, le • % • Is Os i • • f • • •. t ti• • • • •• • •• • • •• • •• /• • • • • • ♦ • • • l• - • • • • • a •f • ♦•I • r . ♦ • T i L SJ 1 • • • • •\ .� • •/. • •r• • • • �tJ• •'. a • •• • • le: ,t • P / •I f . i • • • •Orr : i •l t 116 • . 6 - - " - oad,...... • •• ido, ♦ • " • 4 • • • • • $ . • 1 44,• •, 4 • r '� r' r ' L -fit ti s 4f , • t7 i ++ • _ t.r • l •I • r,♦ •t F • r• 6 Is 'IC 4 • • f try •� �S r•, i • • • y • • •• ' : • � � �l!►,L� . • • t; • • • • ► • A • • /• • • • •• • , • i • . . • • •• •• • 1 r • • • • •• • • • , r I I. • •• • g•rgloat,.+ • • f • • ,••i, • `w r „salt*. & ♦ • 4 I ., • ti , •t1�r11� �� • . • R • V • • • k r Ceemairai ' ' 4 •.0.1.14001 Ilif , • ♦ 1 • oils • , � • •• • • • '• •�,• •►, .• is.• i 4 I , • fa +.iell I • if SHANNON & ASSOCIATES Northern Colorado Regional Analysis Page 4 Real Estate Appraisers & Consultants (November 2010) I I The following table provides population estimates and projections for Larimer and Weld ICounties from 1998 through 2009: ' Population by County 350,000 I 300,000 250,000 200,000 - II 150,000 -- - 100,000 - — ---. - --- -_.-- -- 50,000 I 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 ' Source:ESRI Site Analysis ..Lari me r onm •WeId I Household Data The total number of households in Larimer and Weld Counties has grown steadily from 1999 through 2008 according to the ESRI forecast. The total number of households has grown from I158,244 in 1999 to 201,753 in 2008. This represents an average increase of 2% per year. Households in the middle-income bracket between $50,000 and $100,000 dollars a year showed Ivery steady growth, while households with income levels below $50,000 and above $100,000 showed some fluctuation over the nine-year period. Please see the chart below for more detailed ' information. I Number of Households by Income Level 100,000 --- — --—-_,_._— ---_- 90,000 _- __—_._. --___- _. I 80,000 - - - -- - `---- - 70,000 • - _.... "- — ■ -Tim 60,000 --- . II , ' 40,000 I - _ 40,000 . I e - II , ■ ■ 30,000 1 -20,000 - - - I 10,000 ' -_ - o 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 ISource:ESRI Site Analysis ■$0-$50,000 0$50,000-$100,000 U$100,000-over 1 SHANNON & ASSOCIATES Northern Colorado Regional Analysis Page 5 IReal Estate Appraisers &Consultants (November 2010) I I Employment The Bureau of Labor and Statistics indicates national employment experienced a gradual upward trend beginning in 2002. The State of Colorado as a whole saw total jobs decline from 2000 through 2003. However, that trend reversed in 2004, and the state experienced gradual, 1 consistent job growth from 2004 through 2006. The Fort Collins/Loveland MSA outperformed 1 the state over the same time period with a steady increase in total number of employed in each year from 1996 through 2005. Overall employment in Northern Colorado has increased by 55% since 1991. In October 2008 I Mr. Martin Shields (Regional Economist at Colorado State University) predicted that employers would add 2.2% new jobs in Northern Colorado in 2009 in spite of the national economic downturn. This 2.2% increase translated to a prediction of 4,000 new jobs. By comparison, the State of Colorado's employment has climbed only 0.3% since 2001. After the national economy experienced a sharp decline in the fall of 2008, CSU Professor Martin Shields and his colleague David Keyser issued revised employment forecasts in January 2009 that projected regional job totals will only grow a minimal 0.1 percent in 2009, translating into approximately 230 new jobs. This is down from the 4,000 new jobs they initially forecasted for 2009 in October 2008. Using the job/housing ratio of 0.64 new single-family homes per job, leads to an estimated demand of 147 new homes in Larimer and Weld Counties. I "While we knew the national recession would affect Northern Colorado, our earlier numbers did not anticipate the sheer magnitude of the problems that have emerged over an incredibly short time," said Shields in a press release in January 2009. "If there's a bright side, it's that the region is doing significantly better than most other places." The Colorado State University research is substantiated by the Northern Colorado Economic Development Corporation, who surveyed existing employers that have between 10 and 50 employees. This survey projects that they will create an additional 155 new jobs in the next I three years. Larger employers such as New Belgium Brewing, Anheuser-Busch, Woodward Governor, Agilent Technologies, and Hewlett Packard did not release their hiring plans. Recent articles in local newspapers, such as the Fort Collins Coloradoan, have revealed that Agilent Technologies and Hewlett Packard are in fact reducing their local workforces. In 2008, a Danish company (Vestas) built a wind turbine factory in Windsor. The company cited I the highly educated Northern Colorado workforce as a primary draw to the area. However, the I I SHANNON & ASSOCIATES Northern Colorado Regional Analysis Page 6 Real Estate Appraisers & Consultants (November 2010) 1 original projection of creating 400 to 500 new jobs was overly optimistic, and with the economic ' downturn, Vestas instigated a hiring freeze and is shifted many of its employees to part-time. Other related news is that Colorado has just created a "Colorado Center for Biorefining and Biofuels" to conduct "world-class" research to develop new biofuels and bio-refining technologies. Partners include Colorado State University, The University of Colorado, Colorado School of Mines, and the National Renewable Energy Laboratory. Funding comes from Conoco, Phillips, Chevron, Dow Chemical, Shell Oil, and other smaller companies. Colorado State University was awarded 9.2 million dollars by the Department of Energy for alternative technology research in 2009. The campus now has 80 faculty members from eight colleges working on energy research. Overall, Northern Colorado has not been immune from the downturn in the national economy. However, the area's highly educated work force, steadier housing market, and focus on green living and design continue to attract large and small employers to the area. This trend will help Northern Colorado's economy remain competitive relative to the rest of the country during the present economic decline. ' Unemployment The Bureau of Labor and Statistics indicated that national unemployment experienced a steady decline from a high of 6.3% in June of 2003 and to 5.5% in June of 2008. However as the tnational economy declined through the second half of 2008, the unemployment rate rose steadily reaching 6.7% by December 2008 and continuing to climb to 10.2% in December 2009. In the first month of 2010, the unemployment rate began to fall and was 9.7%. ' Overall unemployment in the State of Colorado has followed the national trends, with unemployment climbing from 2.5% in January of 2001 to a high of 6.3% in April of 2003. Following this peak, the unemployment rate consistently declined from 2004 through 2007. The unemployment rate held steady at 4.7% for the first six months of 2008, but reflecting the national economic downturn in the later months of the year, rose to 5.8% by December 2008. As ' of December 2009, the unemployment rate had risen to 7.5%. The following tables illustrate the state and local trends in total employment and unemployment. 1 SHANNON & ASSOCIATES Northern Colorado Regional Analysis Pagel Real Estate Appraisers & Consultants (November 2010) I I Colorado 3,000,000 Employment and Unemployment _ 12% 2,500000 --- — 2,000,000 — — -- — — -- — 8% 1,500,000 -- '— - — -- --- -- 6% 1,000,000 -- -- -- - __- -__ — -_-- -- - — - 4% 500,000 — — ------ — 0 2% 0%2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source:Colorado Department of Labor&Employment ❑Employed •Unemployment Rate Unemployment in Northern Colorado, specifically the Fort Collins/Loveland MSA, has remained I consistently below the state and national averages over the last decade. However, the region has suffered from the national economic downturn, causing the unemployment rate to climb to a new high of 6.1% in 2009. Fort Collins/Loveland MSA Employment and Unemployment 8% 150,000 - — -- --, —._— — 6% �r 100,000 — _. _— --_ 50,000 - - — -, 2% 0 -"--- : i rte-- rd.._--- r- __- .-.t..--._ i 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source:Colorado Department of Labor&employment UEmployed Unemployment Rate ■■ I I I SHANNON & ASSOCIATES Northern Colorado Regional Analysis Page 8 Real Estate Appraisers & Consultants (November 2010) 1 Major Employers in Northern Colorado Northern Colorado is home to a variety of large employers in numerous business sectors. These companies are drawn to the area due to the highly educated population base. Some of the largest employers are detailed below. Major Larimer& Weld County Employers Emulo No. Employees Colorado State University 6,249 Poudre Valley Health System 4,206 Banner Health 4,200 Poudre School District R1 3,546 Hensel Phelps Construction Co. 2,907 Weld County School District 6 2,357 Thompson School District R2J 2,113 Larimer County 1,640 ' University of Northern Colorado 1,600 State Farm Insurance 1,310 Columbine Health Systems 1,250 Data obtained fictm the Northern Colorado Business Report Book of Lisfs'010 Currently in Larimer County, the occupation distribution is: • 64.6% in white collar jobs • 16.1 % in service jobs • 19.3% in blue collar jobs These percentages are reflected in the main large business industries (20+ employees),which consist of the education, medical, and retail (restaurant) sectors as detailed in the table on the following page. In Weld County, the occupation distribution is: • 55.2% in white collar jobs • 17.0%in service jobs ' • 27.8% in blue collar jobs ' SHANNON & ASSOCIATES Northern Colorado Regional Analysis Page 9 IReal Estate Appraisers & Consultants (November 2010) I I These percentages are reflected in the main large business industries (20+ employees), which consist of heavy construction, education, retail (restaurant), and medical sectors as detailed in the table below. I Major Business Sector Employers by County Larimer County Weld County No.of Percentage of No. of Percentage of Em loyees Em loved Employees Employed Agriculture, Forestry, Fishing, Hunting 1,567 1.1 3,365 3.8 Construction 3,691 8.7 9,299 10.5 I Manufacturing 13,103 9.2 7,528 8.5 Wholesale Trade 3,418 2.4 3,100 3.5 Retail Trade 17,945 12.6 10,185 _ 11.5 Transportation/Warehousing 3,988 2.8 3,808 4.3 I Finance/Insurance 4,558 3.2 3,631 4.1 Real Estate/Rental/Leasing 3,418 2.4 1,948 2.2 Professional, Scientific, 3,097 7.3 3,188 3.6 Technical Services Administrative, Support, 1 4,985 3.5 2,834 3.2 Waste Management Educational Services 17,518 12.3 8,945 10.1 Health Care/Social Services 15,524 10.9 10,362 11.7 Arts/Entertainment/Recreation 4,130 2.9 1,8.6. 0 2.1 Accommodation/Food 12,818 9.0 6,731 7.6 Services Other Services 6,551 4.6 4,339 4.9 Public Administration 5,697 4.0 4,251 4.8 As evidenced in the table above, the retail trade, education, and health care industries are the major employers Larimer County, accounting for 35.8% of the total employees. In Weld County, the health care, retail trade, and construction industries account for 33.7% of the total employees. Regionally, the top five industries are retail trade, educational services, health care, construction and manufacturing accounting for 53.1% of the employees in Northern Colorado. SHANNON & ASSOCIATES Northern Colorado Regional Analysis Page 10 Real Estate Appraisers & Consultants (November 2010) I The national economic downturn has specifically impacted employment in the retail, service and construction industries as people adopt more conservative spending habits and a wait-and-see attitude toward buying and selling real estate. Weld County has been particularly impacted as the retail, service and construction trades, which are bearing the brunt of the economic decline, comprise a significant portion of the employment market. This has resulted in a high number of residential foreclosures, as many find themselves unemployed and unable to pay their mortgages. Larimer County has fared better as it is home to the majority of Northern Colorado's large employers, which has aided in keeping funds flowing between the various business sectors. 2009 reflected low consumer confidence, reduced spending, and increasing unemployment. ' These trends will continue to negatively impact the retail, service and construction sectors in Northern Colorado in 2010, until consumer confidence improves and spending increases. ' Northern Colorado Economic Development Corporation The Northern Colorado Economic Development Corporation is dedicated to advancing Northern Colorado by retaining talented workers and jobs, marketing Northern Colorado to potential employers looking to relocate or expand, and identifying emerging business and growth opportunities. In 2005, the NCEDC established a goal to create 9,175 new jobs and 170 new businesses in the area by 2010. This effort required an estimated $5,000,000 raised from ' government entities and area businesses. To date, the NCEDC's efforts have aided in bringing 5,777 new jobs to Northern Colorado since 2005. • 1 1 SHANNON & ASSOCIATES Northern Colorado Regional Analysis Page 11 Real Estate Appraisers & Consultants (November 2010) I 1 Residential Land and Development Residential development reflected a period of growth in the early 2000s. However, the latter half of the decade was marked by sharply declining sales as shown in the following graph depicting quarterly sales from IRES Multiple Listing Service and the 4 quarter roving average. Vacant Residential Land Sales Larimerand Weld Counties 400 350 r 300 250 200 150 - _— _ — _. I— 100 _. - —_ -" - _ II H � I o (bl nk) Qtrl Qtr2 Qtr3 Qtr4 i Qtrl 1 Qtr2 I Qtr3 1 Qtr4 Qtrl i Qtr2 I Qtr3 Qtr4 Qtrl Qtr2 Qtr3 Qtr4 Qtr1 I I 4/2/2006 2006 2007 2008 2009 2010 As demand decreased, listing and sale prices steadily dropped beginning in 2007. The average I days on the market between listing and sale steadily increased, with a roving average of approximately 330 days over the last 4 quarters. Based on the current number of listings (2,386 according to IRES Multiple Listing Service) and the average absorption rate from the last 4 quarters, it is estimated that the market has a 25 year supply of residential land. Residential Land Sales $250,000 r 450 400 $200,000 - -- 1 350 300 I $150,000 - - _. _ r 250 � L 200 I "Sir 50 $so,oao - - - -- -- -- — - F- - - loo 50 Qtrl Qtr2 Qtr3 Qtr4 I Qtr1 Qtr2 Qtr3 Qtr4 Qtrl Qtr2 Qtr3 111114 I Qtrl Qtr2 Qtr3 Qtr4 Qtrl I 2006 2007 200E i 2009 1 20101 L --'Average of DOM SAverage ofsoldPrice SAverage of Price SHANNON & ASSOCIATES Northern Colorado Regional Analysis Page 12 Real Estate Appraisers & Consultants (November 2010) I I New residential construction trends followed the residential land sales over the last ten years. IAfter peaking in 2004, building permits plummeted an average of 30% in 2005. This decline was prevalent for all types of residential properties including single-family, attached single- , family and multi-family dwellings, as shown in the following graphs. Data was obtained from the cities' planning departments. ' Single Family Building Permits I 900 ' 800 700 " 600 E 500 ' lill 48 400 ..,_.<....._...,�_�», .��...._...sr....-... 300 ' • 200 . , I 100 ` , , 0 + 2004 2005 2006 2007 2008 2009 2010 to date I ■Fo tcollinsI 892 677 432 363 250 141 12 o _.— is 1 hiL Ind I 731 653 385 225 122 36 14 OG ley 706 565 315 152 60 46 12 -Windsor 411 451 331 I 224 119 49 0 I Attached Single Family Building Permits I 160 " 140 '''I 0 el - �� 00 ' 6 ' 40 ', i 'lb Ill 20 0 e- 2003 2004 2005 2006 2007 2008 2009 201010 date 151 95 58 26 45 14 13 0 ' ■Fort Collins _ _..__.7 i II 4L1 Loveland 146 157 114 67 67 31 4 4 ISHANNON & ASSOCIATES Northern Colorado Regional Analysis Page 13 1 Real Estate Appraisers & Consultants (November 2010) I I Multi-Family Building Permits 00 90 % 80 I 70 ■■t E 50 I • ® i . s 30 20 Ie p . : ! �. �. . E 2003 2004 2005 2006 I 2007 2008 I 2009 2010to date •FortCollins 92 63 44 24 24 37 4 1 1ILoveland 19 35 16 15 0 4 0 0 YGreeley 79 72 100 I 27 n 3 0 0 6Iw indsm I. S 6 6 o o p Housing The Northern Colorado housing market reflected a strong period of growth during the early I 2000s. With many types of financing available, buyers flocked to the market in record numbers driving sales and sale prices up. However with the economic downturn in 2007, this trend I reversed resulting in a sharp decreases in sales and sale prices from 2008 to 2009. MULTIPLE LISTING SERVICE DATA SINGLE-FAMILY CONDOMINIUM/TOWNHOME W NHOME YEAR NUMBER OF MEDIAN SALE ANNUAL PRICE NUMBER OF MEDIAN SALE ANNUAL PRICE UNITS SOLD PRICE CHANGE UNITS SOLD PRICE CHANGE 2000 7,865 $184,713 -6.5% 1,442 $143,826 21.3% 2001 8,869 $202,206 9.5% 1,527 $161,495 12.0% 2002 7,177 $203,450 0.7% 1,691 $166,075 5.5% 2003 8,640 $215,000 4.8% 1,609 $160,075 -2.3% 2004 9,182 $226,500 5.3% 1,389 $173,756 7.5% 2005 9,238 $233,575 3.5% 1,653 $179,520 3.5% 2006 8,481 $246,080 5.0% 1,487 $179,225 -0.25% 2007 8,143 $241,875 -2.0% 1,391 $179,657 -1.0% 2008 7,328 $240,225 -1.8% 1,152 $173,601 -4.0% 2009 6,901 $205,375 -17.0% 1,133 $162,500 -6.0% Sources: :RES Multiple Listing Service. The housing market nationwide reflected the same distress, and as a result, President Obama I signed an economic stimulus in 2009 giving first time homebuyers a tax credit of up to $8,000 if they purchased by November 30, 2009. This stimulus was later expanded to include current homeowners and the deadline was extended to April 30, 2010. SHANNON & ASSOCIATES Northern Colorado Regional Analysis Page 14 Real Estate Appraisers & Consultants (November 2010) I 1 Apartments The apartment market struggled with high vacancy rates in the mid 2000s, when potential renters chose to take advantage of multiple financing opportunities and become homeowners. However t with the economic downturn in 2007, financing rules and regulations changed making purchasing more difficult. As a result, the vacancy rate has steadily declined and the rental rates have gradually increased to new highs for last decade. Apartment Vacancy Rates 15.0% \1o.oio ' 5.0% _rone ' 0.0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source:Colorado Multifamily Housing ' IDFORT COLLINS/LOVELAND GREELEY Vacancy&Rent Survey ' Average Rental Rates $1,000 ' $800 $600 --- ' $400 --"-""- $200 ___ ' $0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 ' Source:Colorado Multifamily Housing FORT COLLINS/LOVELAND GREELEY Vacancy&Rent Survey 1 ISHANNON & ASSOCIATES Northern Colorado Regional Analysis Page 15 Real Estate Appraisers & Consultants (November 2010) I Commercial Land and Development I Northern Colorado, like the rest of the United States, experienced a real estate boom in the early to mid 2000s. Commercial land became a hot commodity and a variety of new developments were started in high traffic/demand areas. These high demand areas included the intersection of I Interstate 25 and Highway 34 in Loveland, East Harmony Road near Interstate 25 in Fort Collins, Highway 34 west of Greeley, and southern Windsor. The real estate boom resulted in I increased land value, and land long used for agricultural purposes was rezoned and prepared for development. However over the last 5 years, demand has steadily declined resulting in fewer I sales and falling prices as shown in the graph below. Commercial Land Sales $80 0 $1045 $60 0 3s 0 = 30 g 540 25 i 3. I s I 0 20 8 E 0 $20 10 $10 . II 50 o O im e .. I e I 1� ; O o O o a ra tl o ; o 0 o O o O o 6 2005 2006 2007 2008 2009 I 4atasouru:0ccur _Joollar Volume Number of Sales . .4 per.Moo.Avg (Number of 5alesf New building permits were filed with the local municipalities at record rates, peaking in 2003 and 2004. However in 2005, building permit requests began declining, averaging an 11% decrease from the previous year. This became a trend over the consecutive 4 years. Data was obtained from the cities' planning departments. Commercial Building Permits 70 I 00 E I40 z30 .,_. _. .. . _........ 20 I 2004 _7009 I 2006 2007 2008 2009 1201010 date IM.FortCrsilIPIS I 64 rr 51 39 I 55 48 I 12 I 0 JLoveland 44 46 00 29 l 16 17 0 WureelsY 50 36 36 33 9 10 0 I:Windsor 23 23 34 12 29 I 8 l 2 SHANNON & ASSOCIATES Northern Colorado Regional Analysis Page 16 I Real Estate Appraisers & Consultants (November 2010) I Office Market INorthern Colorado's office market is currently overbuilt as a result of the real estate boom in the early 2000s. This excessive supply has resulted in increased vacancies and declining rental rates, ' a trend that is expected to continue as the market absorbs the vacant space. IOffice Market Vacancy Rates 25.0% I 20.0% I15.0% _ -- ---. -- _.. -- - __ _..._. -- ' lo.o% IkricI I , I I 0.0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source:Realtec Commerd al Real Estate •Fort Collins VGreeley H Loveland Services Annual MarketRe port I Average Class "A" Office Lease Rates I $30.00 $25.00 I $20.00 I - $15.00 I � $10.00 I II I I I;, ;d .I ..' ::: i II I I I IIIII II II III I I 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 ' Source:Realtec Commercial Real Estate FORT COLLINS VGREELEY WLOVELAND Services Annual Market Report ISHANNON & ASSOCIATES Northern Colorado Regional Analysis Page 17 1 Real Estate Appraisers & Consultants (November 2010) I Office building sales have also been declining. This is the result both of oversupply and new l lending requirements imposed by banks beginning in 2007 with the economic downturn. Sales and prices have sharply declined over the last 6 quarters as a result. Office Building Sales $45 35 $40 l30 535 { E 530 25 N $15 ,•�� 20 ,1" I E 520 - y o y zR Sl5 ',, I 6 530 $5 ' -5 I 0 5 5 5 5 5 5 5 5 5 (5 5 5 5 5 5 5 5 5 5 5 ' 2005 2006 2007 2008 I 2009 I oaosorre Costar --I Dollar Volume Number of Sales �A per.Moo.Avg.(Number of Sales) Retail Market I Northern Colorado's retail market has experienced the same growth as the other market sectors. However, the oversupply of space was not reflected in the vacancy rates until 2007, I corresponding with the national economic downturn. With the decline in the economy, the retail industry downsized, which coupled with the new retail space in the market, resulted in a sharp increase in vacancy over the last two years. Retail lease rates have generally increased over the last decade resulting from the influx of new, high quality space. However, lease rates will likely decrease over the next few years until the oversupply is absorbed. Retail Vacancy Rates 16.0% 14.0% 12.0% 10.0% 60% 4.0% 2.0% - , a.a% I l I 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source'.Realtec Commercial Real Estate Servicesnnnual Market Report •Fort Collins 11Greeley 6I Love land SHANNON & ASSOCIATES Northern Colorado Regional Analysis Page 18 I Real Estate Appraisers & Consultants (November 2010) I I 1 Average Prime Retail Rents $30.00 -- I $25.00 $20.00 111111 I I $15.00 fat I :I 1 I1r1 . ii $ 1III I I $0.00 Iiii III . I IIIHIH 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 ISource:ReaVtecCommercial Real Estate U FORT C0LLINS OGREELEY 64L0VELAND Services Annual Market Re port I sales have also been declining. This is the result both of oversupply and new Retail building a g pp Y I lending requirements imposed by banks beginning in 2007 with the economic downturn. Sales steadily declined over the last 8 quarters, as have sale prices, culminating in a dramatic reduction in prices in 2009.. I , Retail Building Sales I $90 SO $80 45 I • 40 $70 1 i • 35 560 n - 30 0 c $so V j • 25 `5 i 3 $ ' f - 20E I 9 $30 • E ( s 15 Z A 520 ri . • 10 i I 1 510 ! I I 5 I, So Lo - , .y ry m a n m v ' .y r M d .� ry m a ti 7'. v b `. b b b t a a I b h b b b cr cr ra d - a o o d a a t ; c u c a l d a o d I i 2005 2006 2007 2008 2009 Data Source:CoStar ,_2Dollar Volume Number of Sales �4 per.Mov.Avg.(Number of Sales) I . ISHANNON & ASSOCIATES Northern Colorado Regional Analysis Page 19 Real Estate Appraisers &Consultants (November 2010) I i Industrial Market The real estate boom of the early 2000s created an oversupply of industrial space, resulting in a steady increase in vacancy rates and corresponding lower lease rates over the last five years. Greeley was particularly hard hit, with significantly more supply than demand, resulting in very low lease rates. The vacancy rates and average lease rates for the warehouse and R&D building are as follows: Industrial Vacancy Rates I 12.0% -- - - 10.0% - - - 8.0% 6.0% I a.0% I I. 2.0% 1 ! 0.0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 I Source:Realtec Commercial Real Estate Services Annual Market Report II Fort Collins OGreeley 4 Loveland I Average Industrial Warehouse Rents I $14.00 - 4. $12.00 -- - --- --- $10.00 -- ---- - -.. $8.00 I I Hu , ' I ' , $6.00 $a.00 �11I L I { ,. I1■■>' I `' I PI ' $2.00I' l 11 I 11 [ I �I $000 IIIIIII I II I II I 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 ' Source:Realtec Commercial Real Estate Services Annual Market Report EFORT COLLINS HGREELEY sJLOVELAND SHANNON & ASSOCIATES Northern Colorado Regional Analysis Page 20 ' Real Estate Appraisers & Consultants (November 2010) I I IAverage Industrial R&D Rents $14.00 I $12.00 I $10.00 $6O0 I IJI II _ $4.00 Ia I I III I I I ill I $2.00 III II II III I II II I II $0.00 I2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source:Realtec Commercial Real Estate ' ServicesAnnual Market Report ■FORT COLLINS SCREELEY NLOVELAND I Industrial building sales have also been declining. This is the result both of oversupply and new lending requirements imposed by banks beginning in 2007 with the economic downturn. Sales have fluctuated up and down, but the overall trend shows a steady decline. Prices have gradually Ideclined over the last five years, with the most notable reduction occurring in 2009. IIndustrial Building Sales D 40 I A 3s 5 0 j 20 25 w a is ( 20 E '.. 15 Z 0 i a to a ala o a a a cilia ci I Ti. a o o a o as OO 2005 2006 2007 I 2008 2009 Data Source Costar JDollar Volume e.Number of Sales �4 per.Mov.Avg.(Number of Sales) I ' SHANNON & ASSOCIATES Northern Colorado Regional Analysis Page 21 1 Real Estate Appraisers & Consultants (November 2010) I New and Ongoing Development Projects The majority of new development in the Northern Colorado Area is occurring in and around the intersection of Highway 34 and Interstate 25 in Loveland. This area is home to multiple new developments but is dominated by three major activity centers Centerra, Crossroads and 2534; I details about each area are listed below. Centerra I Centerra is a 3,000-acre master planned, multi-use development located along Highway 34 on both sides of Interstate 25, in the eastern edge of Loveland. This community is being developed by McWhinney Enterprises, whose 25-year master plan for the area includes commercial, office and residential development as well as educational facilities, infrastructure development and I open space. The following areas are included within Centerra: • The Promenade Shops at Centerra I The Promenade Shops at Centerra is a retail and entertainment center with over 700,000 square feet of space and the capacity for 85 stores. This project was completed in early I 2006. Major tenants include Foley's, Barnes & Nobel, Dick's Sporting Goods, Lens Crafters, MetroLux Theatre, and Victoria's Secret. I • The Marketplace at Centerra I The Marketplace at Centerra is a retail shopping center that currently contains over 260,000 square feet of space and an additional 240,000 square feet of space was completed in late 2007. A few of the major tenants include Target, Marshall's, Ross, Bed I Bath& Beyond, Panera Bread, Mimi's Cafe, Johnny Carino's, Chili's, and PetSmart. • Medical Center of the Rockies Poudre Valley Health Systems has completed construction of the Medical Center of the Rockies, a large medical complex located south of Crossroads Boulevard on the west side of Interstate 25 and east of Rocky Mountain Avenue in Loveland. This approximately 500,000 square-foot, 135-bed regional hospital includes a Level II Regional Trauma I Center. Phase I of the Medical Center of the Rockies has 400,000 square feet, plus 100,000 square feet of medical office,joined to the hospital via 2nd floor walkways. The I hospital opened in February 2007. I SHANNON & ASSOCIATES Northern Colorado Regional Analysis Page 22 Real Estate Appraisers & Consultants (November 2010) I • Heska Located just northwest of this regional trauma center, Heska just moved into its national headquarters. Heska sells advanced veterinary diagnostic and specialty products. The 60,000 square foot facility houses approximately 150 workers and opened July 22, 2005. • Motorplex at Centerra The Motorplex at Centerra is an 80-acre auto dealership complex located at the southwest corner of Interstate 25 and Crossroads Boulevard. This auto park will contain 18 to 24 dealerships when completed. Co's BMW was the first to move in December 2005 and has completed an $8 million, 35,000 square foot dealership on eight acres in the northeast ' corner of the motorplex. Four additional dealerships representing eight top automotive nameplates joined the Motorplex at Centerra during of 2006. ' • Five Rivers Cattle Company The world largest cattle feed company recently moved into a 32,000 square-foot flex office building at 3855 Precision Drive in the Centerra development just south of the Motorplex. Leasing 9,000 square feet, the company moved its 27 employees to Loveland ' to combine its Greeley and Boulder corporate sites. 2534 Activity Center 2534 is a 542-acre master planned, multi-use community located at the southeast corner of the intersection of Highway 34 and Interstate 25. This community is being planned and marketed by Chrisland, Inc. The area is slated to contain multiple office, retail and residential units that will complement the existing development in the neighborhood. • Rehabilitation Hospital The Northern Colorado Rehabilitation Hospital features specialized rehabilitation care for patients healing from stroke, major surgery or head and spinal cord injuries. The facility is comprised of approximately 48,000 square feet and contains 40-beds. The hospital is ' reported to provide about 120 professional jobs and new dollars to the region. ' • The Plaza This high quality 600,000 square foot commercial mixed-use plaza will contain approximately 500,000 square feet of retail space and 100,000 square feet of office space. One of the major retailers who have committed to the area is Ethan Allen, who purchased 1.84-acre site within the development and has built a 20,000 square foot store on the site. SHANNON & ASSOCIATES Northern Colorado Regional Analysis Page 23 Real Estate Appraisers & Consultants (November 2010) • High Rise at 2534 Everitt MacMillan Development Inc. has built a four-story office building within the 2534 development. Tenants include Bank of Colorado, LBN Insurance Agency and Burns Marketing and Communications. This new building is a 43,500-square foot class A office space. • Thompson Crossing The Thompson Crossing Development is a single-family home project being implemented by Northern Colorado Builder Hartford Homes. The development is slatted to have 115 homes ranging in price from $300,000 to $1.2 million. The development is I located slightly southeast of the intersection of Interstate 25 and Highway 34, south of The Plaza at 2534. Crossroads Area I The Crossroads area includes the northeastern portion of the neighborhood on either side of I Crossroads Boulevard. This area is being developed by multiple developers and includes several different projects in various stages of competition. The following areas are included within the I Crossroads activity center: • The Ranch/Larimer County Fairgrounds I Larimer County completed a new fairground and events center project on the west side of Larimer County Road 5 in 2003. This development includes the Budweiser Events Center, a 374,000 square foot multi-use arena with 7,200 seats. This arena is home to a minor league hockey team, a national women's basketball team, concerts, conferences, shows and the Larimer County fair. This events center consistently ranks in the Top 20 Venues worldwide when compared to a category of venues with a seating capacity of 5,001 to 10,000 (based on total gross profits and attendance for events during the period of 11/15/03 — 10/15/07). In addition to the events center the area also has five additional buildings including a large indoor I livestock pavilion, and several other smaller meeting center facilities. • Hotel Project at Crossroads John Q. Hammonds built a hotel/conference center that is located just to the southwest of the Larimer County Fairgrounds Complex. This $60,000,000 Embassy Suites, which opened in the Spring of 2009, has 263 hotel rooms (in eight stories) and an 80,000 square SHANNON & ASSOCIATES Northern Colorado Regional Analysis Page 24 ' Real Estate Appraisers & Consultants (November 2010) feet convention space. Larimer County has leased 9.2 acres to John Q. Hammonds for this project. It will generate significant additional patronage to the immediate area. ' • Crossroads Business Park The Crossroad Business Park contains multiple office, industrial and retail users. Users ' include a hardware/feed store, an electronics manufacturing plant, 3 motels, a gas station/convenience store/car wash, a Mexican restaurant, a fast food restaurant, a Budweiser beer distribution warehouse, a lighting fixture store, a carpet/flooring store, ' medical, and other office buildings. Additional developments under construction in the park reportedly include a pet spa and resort facility, a bank and a liquor store. • Eagle Crossing ' The Eagle Crossing commercial business park contains approximately 200 acres of land that is being developed and marketed by the Water Valley Land Company. These acres are located in the northeast corner of the intersection of Interstate 25 and Crossroads ' Boulevard, directly adjacent to The Ranch development area, within Crossroads. The master plan for Eagle Crossing includes a mix of retail, office and hospitality uses 1 aligned with the surrounding developments. ' • Kness Addition The Resurrection Fellowship, which is one of the largest churches in Northern Colorado, is located on the southeast corner of Crossroads Boulevard and County Road 5. It ' contains approximately 80 acres zoned Developing Business and Developing Resource. The remainder of the subdivision is zoned Industrial. Current industrial uses include a Wal-Mart Distribution Center, with over 1,100,000 square feet of warehouse space, heavy equipment storage, and recreational vehicle storage. ' • Ward Industrial Park This was the original development in the Crossroads area. Early development was industrial, trucking and warehousing due to its excellent access to Interstate 25. The newest addition to the industrial park is a CAT Equipment sales and service center. Additional Development ' Outside of the Interstate 25/Highway 34-area several projects are currently in progress. These projects include: ' SHANNON & ASSOCIATES Northern Colorado Regional Analysis Page 25 Real Estate Appraisers & Consultants (November 2010) I • The $100 Million Front Range Village shopping center along Harmony Road near Interstate 25 that is anchored by a Super Target and includes national retailers Lowe's I Home Improvement, Toys R Us, Babies R Us, Staples and DSW Shoes. The center contains over 800,000 square feet and ground breaking took place on Tuesday March 6th, 2007. Walgreen's Pharmacy, United Western Bank and McAllister's Deli have all signed on to the 75,000 square foot portion of the development known as Pads at Harmony. The Project was completed in August of 2008. • An $80 million dollar addition to the Center for Disease Control building located in west Fort Collins. This lab is for infectious disease and bio-terrorism studies. • Owens Corning glass manufacturing has constructed a new $119 million dollar facility in I Windsor. The plant employs approximately 150 workers who primarily supply the Fort I Collins Budweiser plant with glass bottles. • Plans were announced to build an $83 million ethanol plant on 40 acres in Weld County, I just south of Evans. Ethanol is typically blended with gasoline to lower hydrocarbon emissions. At full production, this plant is expected to employ at least 50 workers. • Vestas Wind Systems of Denmark is building a plant near Windsor, Colorado that will provide at least 500 high-paying jobs. The development of the new wind turbine plant I includes a 180,000 square foot building that is currently being developed by the world leader in wind turbine production. • Heskel Corporation is building a plant near Windsor, Colorado that will provide 100 new jobs initially and an additional 100 at build out. The 100,000 square foot plant will manufacture composites used in the development of wind turbine blades and is scheduled for completion in the second half of 2009. Located at 31815 Great Western Drive, Heskel is just miles from its largest customer, Vestas Wind Systems. • Poudre Health Systems is building a new 66,000 square foot medical fitness center that will anchor the Mariana Health Campus in the Water Valley development in Windsor, Colorado. The $16 million project will be home to doctors' offices, physical fitness providers and other health-care services. The ground breaking occurred on February 12, 2010, and the majority of construction is expected to be completed by October 2010. SHANNON & ASSOCIATES Northern Colorado Regional Analysis Page 26 ' Real Estate Appraisers & Consultants (November 2010) Summary Northern Colorado has experienced a decade of solid growth in terms of population, employment, and new business opportunities. However, the real estate market has been over ' developed, resulting in high vacancy rates and lower lease rates. This trend is expected to continue until the existing oversupply is absorbed, which depending on the market sector will take 4 to 36 years. 1000 _ Commercial Property Supply 100 - - -. -- -.__.---- -_-- 0 `w a E i 10 I 1 _ Office Industrial Retail Land Number of Listings"` 237 1 Supply(Years 11 30 42 22 Sales)4 Quarters)* 21 181 153 793 Su p ) 6 4 36 ' *Ending Quarter 4,2009 ■Sales(4 Quarters)' NINumber of Listings"" . upply(Years) ""March 18,2010 JS The area has also been impacted by the national economic downturn resulting in the highest unemployment rate the area has seen in the last decade, although it still remains well below the state and national averages. This trend will continue for the foreseeable future. SHANNON & ASSOCIATES Northern Colorado Regional Analysis Page 27 Real Estate Appraisers & Consultants (November 2010) Hello