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1275 US Highway 2 West (Gateway Cinema)S UMMA R Y A PPRA ISAL REPORT OF: A 3.126 ACRE SITE IMPROVED WITH A MOVIE THEATER AT 1275 US HGIHWAY 2 WEST KALISPELL, MONTANA PREPARED FOR: Mr. Charles A. Harball, City Attorney City of Kalispell 201 V Avenue East Kalispell, Montana 59901 Flathead County Economic Development Authority MARKET VALUES AS OF: December 19, 2011 Elliott M. Clark, MAI Clark Real Estate Appraisal 6477 US Highway 93 South, Suite 509 VVhitefish, Montana 59937 Clark Real Estate Appraisal, Inc. 6477 US Highway 93 South, Suite 509 Whitefish, Montana 59937 December 27, 2011 Mr. Charles A. Harball, City Attorney City of Kalispell 201 1"Avenue East Kalispell, Montana 59901 Re: 3.126 Acre Site Improved with a Movie Theater at 1275 US Highway 2 West, Kalispell, Montana Dear Mr. Harball: In compliance with your request, Elliott M. Clam., MAI made a visual inspection of the above referenced property on December 19, 2011. Applicable information regarding zoning was reviewed and trends in real estate activity in the area was researched and analyzed. This visual inspection, review and analysis were made in order to prepare the attached summary appraisal report. The subject property is in an area of significant hood hazard and likely allowable uses are relatively limited. It is my understanding that the clients may use this appraisal report to allocate a value to the subject property for a potential land swap. For this reason it was necessary to determine the impact on value due to the location in flood hazard area. Consequently two opinions of value are included in this report. Section 1 includes the opinion of value based upon the Hypothetical Condition that the subject property is not located in a flood hazard area. Section. 2 includes the opinion of value for the subject property in as is condition. Both values were developed to assist the clients in making decisions about the subject property. There are three approaches to value in the appraisal of real property. They are the Cost, Sales Comparison and Income Approaches. All three approaches and their applicability will be discussed in greater detail in the Scope of the Appraisal section of this report. The value of the fee simple interests in the subject property are estimated in this report. These estimates were made after thorough study of available market data and other data felt to be pertinent to this appraisal. The attached summary appraisal report exhibits the factual data found and reasoning used in forming my opinions of value. The estimates of value are based on the assumptions that all necessary governmental approvals have been obtained and will be maintained and that the property owners will exhibit sound management and sales practices. Telephone (406) 862-8151 • www.clarkappraisal.us o FAX (406) 862-8394 Clark Real Es[a1e Appraisal (11-129e) (12/19/2011) Mr. Harball December 27, 2011 Page 2 I was not provided with soil studies for the subject property. Due to the subject location within the floodway it is likely that the soils are not capable of supporting construction similar to that in the neighborhood without unusual soil preparation. I am unaware of the presence of any hazardous material, groundwater contamination, or toxic materials that may be on or in the subject property. Should any of these conditions be present, the values stated in this report could be affected. I certify that, to the best of my knowledge and belief, the statements and opinions contained in this appraisal report are full true and correct. I certify that I have no interest in the subject property and that neither the employment to make this appraisal nor the compensation is contingent upon the value estimates of the property. This appraisal assignment was not made nor was the appraisal rendered on the basis of requested minimum valuations or specific valuations. This appraisal is subject to the attached Certification of Appraisal and Statement of Limiting Conditions. I further certify that this appraisal was made in conformity with the requirements of the Code of Professional Ethics of the Appraisal Institute and the Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation (USPAP). Respectfully submitted, T-��O-Hc oi'� - U�k Elliott M. Clark, MAI Montana Certified General Appraiser #683 I1-129e Telephone (406) 862-8151 O www.clarkappraisal.us 0 FAX (406) 862-8394 Clark Real Estate Appraisal (I I.129e) (12/19001 t) SUMMARY OF SALIENT DATA AND CONCLUSIONS.................................................................6 CERTIFICATION OF APPRAISAL................................................................................................... 7 GENERAL ASSUMPTIONS AND LIMITING CONDITIONS.........................................................8 SCOPE OF THE APPRAISAL...........................................................................................................10 IDENTIFICATION OF THE SUBJECT PROPERTY.....................................................................12 DATEOF INSPECTION....................................................................................................................12 EFFECTIVE DATE OF MARKET VALUE.....................................................................................12 PROPERTY RIGHTS APPRAISED..................................................................................................12 PURPOSE OF THE APPRAISAL......................................................................................................13 DEFINITION OF MARKET VALUE................................................................................................13 INTENDED USE OF THE APPRAISAL............................................................................................13 HISTORY OF SUBJECT PROPERTY & STATEMENT OF OWNERSHIP..................................14 NATIONAL ECONOMIC DATA......................................................................................................15 STATE ECONOMIC DATA..............................................................................................................16 COUNTYECONOMIC DATA..........................................................................................................18 KALISPELL ECONOMIC DATA.....................................................................................................22 PROPERTY DESCRIPTION.............................................................................................................27 A. GENERAL SITE DESCRIPTION.................................................................................................................27 B. ACCESS .............................. ........................................................................................................................3I C. ZONING......................................................................................................................................................32 D. IMPROVEMENTS......................................................................................................................................33 E. EASEMENTS, BUFFERS AND RESTRICTIONS........................................................................................33 F. TOPOGRAPHY, VEGETATION, WETLANDS, SOILS, DRAINAGE AND ENVIRONMENTAL CONSIDERATIONS........................................................................................................................................34 G. UTILITIES...................................................................................................................................................35 H. PUBLIC SAFETYAND SERVICES............................................................................................................35 I. SITE SUITABILITY......................................................................................................................................35 BUILDING SKETCH.........................................................................................................................37 SUBJECTPHOTOGRAPHS..............................................................................................................38 ASSESSMENT/PROPERTY TAXES.................................................................................................46 SUBJECT MARKET ANALYSIS......................................................................................................47 HIGHESTAND BEST USE................................................................................................................51 THE APPRAISAL PROCESS............................................................................................................54 SECTIONi....................................................................................................................... SALES COMPARISON APPROACH..........................................................................•.................... 56 RECONCILIATION OF VALUE INDICATIONS............................................................................67 SECTION2.........................................................................................................................................68 SALES COMPARISON APPROACH............................................................................................... 69 INCOME APPROACH.......................................................................................................................72 RECONCILIATION OF VALUE INDICATIONS............................................................................ 75 MARKETING TIME.......................................................................................................................... 76 QUALIFICATIONS OF THE APPRAISER......................................................................................77 Clark Real Estate Appraisal( S 1-129e) (12/l9l241 l) 4 ADDENDUM..................................................................................................... APPRAISER'S LICENSE........................................................................................... ENGAGEMENT" LETTER.. .......... .............. — .......................................................... — SUBJECTDEED........................................................................................................ Clark Real Estaic Appraisal (11-129e) (12119/2€1 1) IDENTIFICATION OF CLIENT/INTENDED USE Client/Intended User City of Kalispell & flathead County Economic Development Authority Purpose/Intended Use Estimate Market Value/Potential Land Swap Property Owner Kalispell Theatres, LLC SUBJECT PROPERTY Property Address Site Size Description of Improvements Assessor Number Census Tract Flood Zone Zoning HIGHEST AND REST USE(S) 1275 US Highway 2 West, Kalispell, Montana 3.126 Acres or 136,169 Square Feet Movie Theater Building & Parking Area 0017600 30-029-0009.00 Zone AO (Map Panel 30029C1805G- Dated September 28, 2007) B-2, General Business Property as if Vacant Parking Lot or Other Allowable Uses in Flood Plain Property as Improved Demolition of Existing Building & Use as a Parking Lot or Other Allowable Uses in Flood Plain DATES, VALUE CONCLUSION(S) AND ASSIGNMENT CONDITION(S) Report Date December 27, 2011 Inspection Date December 19, 2011 Effective Date of Value December 19, 2011 Property Rights Appraised Fee Simple Estimates of Market Value Fee Simple Interest $510,000 (Based upon Referenced Hypothetical Condition) Fee Simple Interest $205,000 (As Is) Extraordinary Assumption(s) None Hypothetical Condition(s) See Scope of the Appraisal MARKETING TIME The appraised values are based upon a 12 month or less marketing time. Estimated marketing time is addressed in detail in the Subject Market Analysis portion of this report. APPRAISER INFORMATION Appraiser Elliott M. Clark, MAI Clark Real Estate Appraisal( I 1-129e) (12119/201 1) 6 I certify that, to the best of my 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 the appraiser's unbiased professional analyses, opinions, and conclusions. - Elliott M. Clary, MAI has no present or prospective interest in the property that is the subject of this report, nor any personal interest or bias with respect to the parties involved. - The 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 opinions, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal. The analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics and the Uniform Standards of Professional Appraisal Practice of The Appraisal Institute. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. Elliott M. Clark, MAI made a personal inspection of the subject property. - As of the date of the report, Elliott M. Clark, MAI has completed the requirements of the continuing education program of the Appraisal Institute. - The appraiser has not performed a service relative to the subject property (appraisal or otherwise) in the three years prior to the engagement to prepare this report. �SL V I'V. 141 0 December27 2011 Elliott M. Clark, MAI Date Montana Certified General Appraiser # 683 Expires March 31, 2012 Clark Real Estate Appraisal (t 1-129e) (12/1MOI 1) 7 The appraisal is subject to the following conditions and to such other specific and limiting conditions as are set forth in the appraisal report. 1. The legal description(s) from the most recently recorded deed(s) or plat(s) are assumed to be correct. The appraiser assumes no responsibility for matters legal in character, nor does she render any opinion as to title, which is assumed to be marketable. All existing liens, encumbrances and assessments have been disregarded and the property is appraised, as though free and clear, under responsible ownership and competent management. 3. Any sketches in this report indicate approximate dimensions and are included to assist the reader in visualizing the property. The appraiser has not made a survey, engineering studies or soil and analysis of the property and assumes no responsibility in connection with such matters or for engineering, which might be required to discover such factors. 4. Unless otherwise noted herein, it is assumed that there are no encroachments, zoning or restriction violations existing in the subject property. 5. Information, estimates and opinions contained in this report are obtained from sources considered reliable and believed to be true and correct; however, no liability for them can be assumed by the appraiser. 6. The appraiser is not required to give testimony or attendance in court by reason of this appraisal, with reference to the property in question, unless arrangements have been made previously therefore. 7. The division of the land and improvements (if applicable) as valued herein is applicable only under the program of utilization shown. These separate valuations are invalidated by any other application. On all appraisals, subject to satisfactory completion, repairs or alterations, the appraisal report and value conclusion(s) are contingent upon completion of the improvements in a workmanlike manner. 8. Disclosure of the contents of this appraisal report is governed by the By -Laws and Regulations of the Appraisal Institute. Except as hereinafter provided, the party for whom this appraisal report was prepared may distribute copies of this report, in its entirety, to such third parties as may be selected by the party for whom this appraisal report was prepared; however, selected portions of this appraisal report shall not be given to third parties without prior written consent of the signatory of this appraisal report. Further, neither all nor any part of this appraisal report shall be disseminated to the general public by the use of advertising media, public relations media, sales media or other media for public communication without the prior written consent of the signatory of this appraisal report. Clark Real Estate Appraisal (i 1-129e) (12/19/2011) 9. The Americans with Disabilities Act (ADA) became effective January 26, 1992. The appraiser has not made a specific compliance survey and analysis of this property to determine whether or not it is in conformity with the various detailed requirements of the ADA. It is possible that a compliance survey of the property together with a detailed analysis of the requirements of the ADA could reveal that the property is not in compliance with one or more of the requirements of the act, if so, this fact could have a negative effect upon the value of the property. Since the appraisers have no direct evidence relating to this issue, we did not consider possible noncompliance with the requirements of ADA in estimating the value of the property. 10. This appraisal assignment was not made nor was the appraisal rendered on the basis of a requested :minimum valuations, specific valuations, or amounts, which would result in approval of a loan. 11. The appraiser is not a building inspector and this report is not a building inspection. Any obvious defects are noted; however, this report is not to be relied upon for detection of unseen defects. 12. This appraisal report was prepared for the client who is the only intended use. The analysis and conclusions included in the report are based upon a specific Scope of Work determined by the client and the appraiser and are not valid for any other purpose or for any other user. Clark Real Esla[e Appraisal (t 1-129e) (12/I Rf201 l) 9 The subject property consists of a 3.126 acre site improved with a vacant movie theater building and associated parking lot at 1275 US Highway 2 West in the city limits of Kalispell, in Flathead County, Montana. I was asked to estimate the market value of the subject for possible land swap purposes. The majority of the subject property is in an area of significant flood hazard and there are limited development options. In order to understand the impact on value of the subject location it was necessary to provide the value of the subject property based upon the Hypothetical Condition that the property was not located in the flood hazard area. For this reason, two values are estimated in this report. A narrative appraisal report for the subject property has been prepared. Information about the subject property has been collected and analyzed in this report. The scope of the appraisal requires compliance with the Uniform Standards of Professional Appraisal Practice promulgated by the Appraisal Standards Board of the Appraisal Foundation and the Guide Notes to the Standards of Professional Appraisal Practice adopted by the Appraisal Institute. The standards contain binding requirements and specific guidelines that deal with the procedures to be followed in developing an appraisal, analysis, or opinion. The Uniform Standards set the requirements to communicate the appraiser's analyses, opinions and conclusions in a manner that will be meaningful and not misleading in the marketplace. Hypothetical Condition The value for the subject property included in Section i of this report is based upon the Hypothetical Condition that the subject property is not located in a flood hazard area. Extraordinary Assumption None Scope of Property Viewing Elliott M. CIark, MAI viewed the subject property on December 19, 2011. Scope of Research The history of ownership, historical uses and current intended uses were researched via Flathead County Records and the area Multiple Listing Service. Area trends in development were researched based upon information from the Flathead County Planning and Zoning Department and the City of Kalispell Planning Department; inspections of surrounding properties by the appraiser; interviews with area developers, property owners and property managers; and research regarding current and projected demographics in the immediate and greater subject market area. Comparable market data was obtained through a combination of public record and area realtors, developers and property owners. All comparable data was verified with a party involved in the transaction. Ciark Real Estate Appraisal (I 1-129a) (12/ 19/201 1) 10 Highest & Best Use My opinions of the highest and best uses for the subject property were developed using the research collected relative to the subject property, area development trends and demographics. The information collected is considered comprehensive and provided a credible basis for a carefully considered analysis. The appraisal process presented was based upon the highest and best use conclusions for the subject property. Appraisal Process The initial portions of this appraisal report include descriptions of the subject property and information about market conditions. The final portions of this report are divided into two sections. Section I includes the analysis and valuation for the subject property based upon the Hypothetical Condition that the subject property is not located in a flood hazard area. Section 2 includes the analysis and valuation for the subject in As Is condition. Section 1 There are three recognized approaches in the valuation of real property. They are: the Cost Approach, the Sales Comparison and Income Approaches. The Sales Comparison Approach provides the most credible indication of value for vacant land or land as if vacant when there are comparable sales available. Based upon my analysis there were sufficient comparables and sufficient additional market data available to prepare a credible Sales Comparison Analysis for the subject site as if vacant and based upon the referenced Hypothetical Condition. The Cost and Income Approaches were not considered applicable for the valuation of the subject property based upon the referenced Hypothetical Condition. Section 2 The Sales Comparison and Income Approaches were developed for determination of value for the subject property in As Is condition. Conclusion The appraiser lacks the knowledge and experience with respect to the detection and measurement of hazardous substances, unstable soils, or freshwater wetlands. Therefore, this assignment does not cover the presence or absence of such substances as discussed in the Limiting Conditions section of this report. However, any visual or obviously known problems affecting the property will be reported and their impact on the value will be discussed. Individuals and offices contacted in order to complete this appraisal include the following: • City of Kalispell Planning Department • Flathead County Planning & Zoning Office ® Montana Department of Revenue; ® Various Other Departments of Flathead County; a Various Area Real Estate Agents, Real Estate Appraisers, Property Managers, Property Owners, Tenants and Builders Clark Real Estale Appraisal(] 1-129e)(12119I20t t) I1 i7 #I►Y Y 1 yr Cl�[iJ�[#� �iI:Y .1 �Y1 :. �#TITI li,�''t#7'� �.�I 1i1�1 The subject property is located at 1275 US Highway 2 West in the city limits of Kalispell, in Flathead County, Montana. The assessor number is included in the Summary of Salient Data and Conclusions portion of this report. The current legal description for the subject property is Lot 2 of the Amended Plat of a Portion of Gateway West Addition No. 34, City of Kalispell, and Flathead County, Montana. December 19, 2011 1 # , December 19, 2011 The values indicated in this report are for the fee simple interests in the subject property. The fee simple interest is full, complete, and unencumbered ownership subject only to the governmental rights of taxation, police power, eminent domain and escheat. This is the greatest right and title, which an individual can hold in real property. Clark Realistale Appraisal (ll-129c)(12/19 2011) 12 The purpose of this appraisal is to estimate the market value of the fee simple interests in the subject property, based upon the referenced Hypothetical Condition and in As Is Condition, as of December 19, 2011. Market value is defined in the following manner: "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, knowledgeably and assuming the price is not affected by undue stimulus. "I Implicit in this definition is the consummation of a sale as of a specified date and the passim 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 each acting in what he considers his own best interest; (3) a reasonable time is allowed for exposure in the open market; (4) payment is made in terms of cash in US 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. It is understood that the intended use of this appraisal is for a potential land swap. This report was prepared for the City of Kalispell and Flathead County Economic Development Authority, the clients, and is their exclusive property. No third parties can rely upon this report without the express written consent from both the appraiser and the clients. Office of the Comptroller of the Curren - Comptroller's Manual for National [tanks, March 1990, 12CrR, parts 34. Clark Real Gsiate Appraisal (11-129e) (12119 201 1) 13 1:1�.`ll°ICl7.Li��:1.�xl7tli.:T�7'�'T.11- ►1 ! ►�Tl11 =�l.�:l Ownership History The subject property is owned by Kalispell Theatres, LLC The property most recently transferred from Anderson Theatre Company to Kalispell Theaters, LLC via a Warranty Deed recorded on May 5, 2000. This deed is recorded as Document #200012613520 at the Flathead County Clerk and Recorder's Office. The purchase is not known by the appraiser. A copy of the most recently recorded deed is included in the Addendum of this report. Use History According to the records of the Montana Department of Revenue, the subject movie theater building was constructed in 1976 with additions and/or renovations in 1984. It is my understanding that the subject property was utilized as a movie theater until 2008. The theater has been vacant since 2008. According to Mr. Wade Elder with the City of Kalispell the subject building has been recently utilized for training exercises for the City of Kalispell Fire Department. Marketing History The subject property was available for sale on the area Multiple Listing Service from November 10, 2008 through November 7, 2010 for $1,500,000. The list period totaled 727 days. The listings states that the "seller will place a deed restriction against movie theater use." The subject property is not currently listed for sale on the area Multiple Listing Service. Clark Real Estate Appraisal (I 1-129c) (1211912011) 14 The National Bureau of Economic Research or NBER (a private group of leading economists charged with dating the start and end of national economic downturns) announced September 20, 2010 that the recession ended in .Tune of 2009. This decision was based upon analyses of changes in real Gross Domestic Product (GDP) and Gross Domestic Income (GDI). The committee forecasted an annual economic growth of 2.6% in 2010 and 2011. (Source: National Bureau of Economic Research website: htt://www-nber.org/cycles) Real GDP increased 1.3% in the second quarter of 2011 after increasing 0.4% in the first quarter. The growth was attributed to slowdown on imports, increased federal government spending and increases in business investments. However, there was a slowdown in consumer spending. (Source: US Bureau of Economic Analysis) After a period of somewhat stabilized trade, the financial markets are again volatile after the announcement on August 5, 2011 by Standard and Poor's regarding a downgrade for the United States long-term AAA credit rating to AA+. The downgrade reportedly reflects Standard and Poor's view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than they envisioned when they assigned a negative outlook to the rating on April 18, 2011. The national unemployment remains relatively high. Without substantial job creation, it is unlikely that the economy will stabilize in the near future. The economic health of the United States is guarded. Clark Real Estate Appraisal ( 11- € 29e) (12/ 19/2011 ) 15 STATE ECONOMIC DATA Montana is the 441" most populous state in the US. The preliminary 2010 Census data estimates a population of 989,415 for 2010 indicating a percentage of change of 9.7% from 2000 to 2010. By 2015 the population for the State of Montana is projected to be 1,030,229. (US Bureau of the Census, ESRI forecasts for 2015) The chart below depicts the historical trend in per capita personal income on the national and state level, $S0,00 E 3 u 3 a Per Capita Personal income i I i I i I � ' I i 2001 2002 2003 2004 2005 2005 2007 2009 2009 2020 Period (Quarters) US Per Capita Personal income -;—MT Per Capita Personal income Sources: Alantaro➢eporiment o)Cahar&lMustry RerearchandAnalysls Bureau, ✓a7wUort MapurMe pRpared hyThe.lpprakaflrrstlM[e Clark Real Estale Appraisal (I I- 129e) (12/ 192 011) 16 The national and state unemployment rates for the past ten years are providers on the chart below. Unemployment Rates 12,00 0 , 10,OD% ........ ...... ..... _ ...._.. _... rs 0.00% 2001 2002 2003 2004 2005 2006 2007 2005 2009 2010 Period (Quarters) tJ5 Montana Sources: Moat—NX,t—tofL&b F lnd.0 try Rev—h—dAnot1us bureau, Valuafiwr Mogozinepmpwed bytheApprosallnsb'hite The long term outlook for the state is for continued growth as economic activity accelerates in most areas of the state. Clark Real Estate Appraisal (I I.129e) ( M14/2011) 17 COUNTY ECONOMIC DATA The subject property is located in Flathead County. The general area is known as the Flathead Valley. The Flathead Valley is surrounded by various ranges of the Rocky Mountains. The three incorporated cities in Flathead County are Kalispell, the county seat, Whitefish and Columbia Falls. There are also unincorporated communities in the county which include; Evergreen, Bigfork, Lakeside, Somers, Hungry Horse and Martin City. Geographical Information FIathead County is located in northwest Montana and is 5,098 square miles in size. Approximately 94% of this area is national or state forest land, designated wilderness, agricultural or timberland. Flathead Lake is a significant geographical feature of the Flathead Valley. Glacier National Park is located in the Flathead Valley area. It is a major area tourist attraction. Additional attractions include; Bob Marshall Wilderness, Hungry Horse Dana, Whitefish Mountain Resort, Blacktail Mountain Resort, Whitefish Lake and numerous golf courses. There are many area lakes and rivers that provide year round recreation for residents and visitors. Population According to 2010 Census estimates Flathead County is now the third most populous county in the state. The population of the county was estimated to be 90,928 which is a 22.1 % increase from 2000. Income The median annual household income was estimated to be $45,258 according to the 2005-2009 American Community Survey. The chart on the following page depicts the per capita personal income for the county compared with the state and national numbers. Clark Real Estate Appraisal (I 1-129e) (12119M] I) 19 Per Capita Personal income $50,000 e a S25.000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Period (Quarters) US Per Capita Personal Income MT Per Capita Personal Income Flathead County Per Capita Personal income Sowtes: h<,on raw f7aparanenr ojt b�&Indrrsrry Research o dA—ly-ft—Valvnam A9n+Jaane prepuedhythekapnlsallns(tfuie Employment The retail trade industry represents approximately 15% of employment in Flathead County. Approximately 13% of the workforce is employed in the accommodation and food services industries and the healthcare and social assistance industries represents 12% of employment in Flathead County. Some of the largest private employers in Flathead County include; Northwest Healthcare (Kalispell Regional Medical Center), Plum Creek Timber Company, Teletech, Allied Materials (formerly Semitool) and BNSF Railway. Unemployment Update The unemployment rates for the past 10 years for Flathead County are provided on the chart below along with the national and state unemployment rates. Unemployment Rates 14.00% d C e C o � m w 8.00% .. a 0. '.. 0.401A ... ? - 2001 2002 2003 2004 2005 2006 2007 2009 2009 2010 Period (Quarters) ^^ us Montana --r-flathead Sources: M-Isno Oeo.ranenr Owba&lade vy Research andMafysisBuevv, M-dm Mogoanepreperedbyihekppoiaal lnsa'Nfe The preliminary unemployment rate for June 2011 for Flathead County is 11.4% which is substantially higher than the preliminary unemployment rate of 7.8% for the state of Montana. Clark steal Estate Appraisal (1 1-129e) (12/19 2611) 19 Construction & Development Building permits issued for residential construction of all types in the three municipalities of Flathead County in 2009 compared to the prior eight years are illustrated on the following table. The number of residential building permits began decreasing in all three cities in 2007. e � Kalispell es 143 oo 278 ee 193 oa., 480 It 378 a€. 349 le 242 sa; 186 oa• 103 s a 92 _ ts• a s -11% whitefish 85 179 149 142 292 131 80 35 14 21 50% Columbia Falls 10 23 so 99 81 97 59 60 6 6 0% Total 238 480 392 721 751 577 381 281 123 i 119 -3% There were reportedly 251 new lots in subdivisions awarded final approval in 2008 in Flathead County. This is down approximately 64% from the 699 approved in 2007. There were 420 new lots in subdivisions awarded final approval in 2006 and 512 new lots in subdivisions awarded final approval in 2005 in Flathead County. The five year high for Flathead County was 824 lots in 2004- There are additional subdivisions with final plat approval in the municipal areas of Flathead County. Supply and demand of residential properties are not in balance in Flathead County. The oversupply of residential properties combined with increasing unemployment in Flathead County has resulted in foreclosures and price decreases for many area residential properties. Retail/Offlce/Warehouse Major shopping is located primarily in Kalispell which includes big box stores and smaller shopping centers. There is commercial office space throughout the Flathead Valley. There have been several new multi -tenant office buildings constructed over the past few years. Many older commercial buildings have been renovated and/or replaced with new buildings. There has been increased development of warehouse and office warehouse space in the past few years concentrated south of Kalispell along US Highway 93 and northeast of Kalispell along US Highway 2. There are older warehouse buildings throughout each of the municipalities. New commercial construction has slowed dramatically in recent months compared to prior years. Vacancy rates for retail, office and office/warebouse properties have increased throughout the valley over the last year. Education & Healthcare There are elementary, middle and high schools servicing various areas of Flathead County. Flathead Valley Community College, a two-year college, is located on US Highway 93 in Kalispell. There are two primary hospitals located in the Flathead Valley. Kalispell Regional Medical Center is a 174 bed hospital located on the medical campus in Kalispell. North Valley Hospital is a 31 bed hospital located in Whitefish. Clark Real Estate Appraisal (l 1- [ 29e) (12/ ] 9201 l) 20 Tourism The nonresident travel industry accounts for approximately 7% of the state of Montana's total employment. There were 10.67 million visitors to the State of Montana in 2007 which represents a 20% increase since 1997. Glacier National Park and Yellowstone National Park are the top attractions to Montana. Glacier National Park experienced 2.2 million visitors in 2010 and was the Park's busiest year since 1983. This indicates an increase of approximately 14% from 2009. (Source: The Daily Interlake Newspaper December 2010) Linkages & Transportation Various state highways connect the three Flathead County cities. US Highway 93 is considered the most significant corridor in the Flathead Valley. All cities are within an easy commute of each other. The Canadian border is within a one to two hour drive from most portions of Flathead County. There is a port of entry just north of Flathead County in Eureka, Montana and another border crossing at the line dividing GIacier National Park of the United States and Waterton National Park of Canada. Glacier Park International Airport is serviced by Delta Airlines, Allegiant Air, Horizon Airlines and United Airlines. There is a train depot in Whitefish that is a stop for Amtrak. The Burlington Northern Santa Fe Railroad freight trains run through Whitefish, Columbia Falls and Kalispell. City and Communities The table below provides a summary ofthe larger cities and communities in Flathead County. County Economic Data Conclusion Attractions such as Glacier National Park, Flathead Lake and Whitefish Mountain Ski Resort will continue to be a draw for second home buyers, nonresident travelers and Montana residents to the Flathead Valley. The short term outlook for the area is guarded and will likely remain so for the next few years due to the higher unemployment rates and weak housing market in Flathead County. The long terra outlook for the area is positive due to the abundance of natural resources and the potential to diversify the employment. Clark Real Estate Appraisal (11-124c) (12/1MOI 1) 21 KALISPELL ECONOMIC DATA The subject property is located in the northwest portion of the city limits of Kalispell. The city of Kalispell is the county seat for Flathead County and it is the major economic and business center for the area Services available in Kalispell include a thriving medical center and an expanding community college. Population & Income Based on the 2010 Census the population of the city of Kalispell was 19,927 compared with 14,223 in 2000 which indicates a 40% increase in 10 years. The average household income was estimated to be $48,360 in 2008. This is lower than the estimated average household income for Flathead County of $52,474. Employment Approximately 47.3% of the employed population in Kalispell is in service type industries, 15.7% is in retail trade, 8.1% is in construction, 6.5% is in finance/insurance./real estate and 5.1% is in public administration. The remaining employment categories in Kalispell are; agriculture/mining, manufacturing, wholesale trade, transportation/utilities and information. Each of these categories includes 5% or less of the employed population. Linkages &Transportation US Highway 93 runs north to south through the city of Kalispell and is labeled as the "Main Street" of the central business district. US Highway 93 provides access to Flathead Lake to the south of Kalispell and Whitefish to the north of Kalispell. There is a by-pass for US Highway 93 that is west of the city. The southern portion is complete and the northern portion is slated for completion in 2012. US Highway 2 is an east to west arterial road through Kalispell and provides access to Columbia Falls and Glacier National Park. There is some public transportation in Kalispell. There is a municipal airport in Kalispell which can accommodate small airplanes. Commercial Real Estate Properties improved with medical and/or general offices and retail spaces are located throughout the Kalispell area Most of the growth in the past 4 years has been concentrated in the area north of Kalispell on US Highway 93 at Reserve Drive. This area has become the retail hub for the greater Flathead Valley area with the development of 3 neighborhood shopping centers. Additionally, the expansion of US Highway 93 to 4 lanes on the southern portion of Kalispell helped spur commercial development in that area over the past 4 years. There is a relatively large supply of vacant commercial sites and improved commercial properties available for sale in Kalispell. Vacancy rates in most commercial sectors for improved properties are high in comparison to recent years. Clark Real Estate Appraisal (11-129e) (12/192011) 22 Based on the research of Clary Real Estate Appraisal, there have been 233 commercial building permits issued in the city of Kalispell since 2000. The rate of commercial new construction was relatively steady from 2000 through 2007 and dropped significantly beginning in 2008. Commercial construction permits issued from 2000 through 2010 in Kalispell are indicated on the table below. TYPE 2000 2001 2002 2003 20U4 2005 2006 2007 MOO 2009 2010 TOTAL %Change 2009-2010: Offices, Banks, R&0 and Professionaf 16 10 2 11 8 9 9 5 4 0 1 75 100% Retail, Wholesale, Dining & Personal Care 10 8 8 7 16 6 5 14 3 3 5 86 67% Mixed Use 0 0 0 o 0 1 0 0 0 0 0 1 09a Motels, Hotefs and RV Parks 1 1 0 0 0 5 1 1 01 0 0 9 0°l0 Hospitals, Other Institutions 0 0 0 0 1 3 1 2 0 ol 0 7 0% Industrial, Manufacturingand Transportation 6 5 5 5 2 5 2 0 0 1 0 31 -100% Religious Buildings 0 1 1 0 0 0 0 0 0 0 0 2 0% Public Buildings & Projects 0 0 i 2 0 5 1 5 1 3 4 22 33% TOTALS 33 25 17 25 27 34 20 27 8 7 10 233 43% Source: Construction Monitor& City of Kali spe I 1; 2007-2010, City of Ka I! spe I I The chart provided depicts the inferred demand based upon historical sales activity for commercial properties in the Kalispell market since 2001. The source for this data is the Northwest Montana Multiple Listing Service (MLS). The sale volume for improved commercial properties has averaged approximately 30 sales per year since 2001 with sales activity peaking in 2004 with a total of 40 sales. Based upon our analysis of current market conditions there is an oversupply of improved commercial properties available for sale in the Kalispell area. The current inventory of properties available for sale represents more than a 3 year supply based upon the trend in the number of annual sales from the past 10 years. ,x001 061 1001, ,SOS hell 1001 1000 100% y010 Sales of Improved Commercial Properties —Sales of Vacant Commercial Properties The number of sales for all types of vacant commercial properties has averaged approximately 15 sales per year over the past 10 years. There were only 2 sales in 2010 which is the Iowest level since 2001. Additionally, there is an abundance of vacant commercial sites available for sale suggesting more than a 5 year supply based upon the trend analysis since 2001. On average, the active listings for commercial properties have been available for sale beyond the typical marketing time from recent prior years. Recent sales information indicates continued downward pressure on lease rates and sales prices. Clark Real Estate Appraisal( I 1-129e) (12/14/201€ ) 23 Residential Development & Absorption There were numerous new residential subdivisions developed in various portions of the city limits but concentrated in the areas west and north of Kalispell over the past several years creating an oversupply of residential parcels. The current economic conditions have resulted in stalled lot sales in residential developments and have worsened the imbalance of supply and demand. The annual volume of new parcels created in Kalispell over the past ten years is included on the table below. 2006 2002 2002 ,'2003 2004 2005 2006 2007 ..2008 .2009 2010 TOTAt` TOTAL OF NEW LOTS 41 86 121 245 510 419 582 319 252 240 0 2815 ACRES IN NEW LOTS 17.4 22.3 48.7 125.1 135.4 110,0 3041 100,0 209.2 109.0 0 1182 ACRES IN OPEN SPACE N/A N/A N/A N/A N/A N/A 34.1 6.08 26.56 11.7 0 78 AVEAGE LOT SIZE INCLUDING OPEN SPACE 0.42 0.26 0.40 0.51 0.27 0,26 0.52 0.31 0.83 0.45 0.00 Source: CityofKalispell In 2010, for the first time since 1973 when this information was reported by the City of Kalispell, there were no new lots created. Also, there are over 890 vacant lots that were created since 2004 (this number does not include vacant lots created prior to 2004). In addition, there are 967 single family residential lots and over 350 multi -family lots that have preliminary plat approval in Kalispell at the end of 2010, (Source: Kalispell Construction, Subdivision and Annexation Report date January 11, 2011). Demand has remained low in 201.0 and it not predicted to change significantly in the next few years. For this reason there is projected to be an abundant supply of subdivision lots for the foreseeable future in Kalispell. The chart provided illustrates the trend in residential parcels sales over the past 10 years in the Kalispell market. The statistics are based upon information from MLS and include single family and multifamily lots up to 1 acre in size in the Kalispell market. The number of sales for residential sites has averaged approximately 110 lots per year since 2000. As the data indicates the peak in the market occurred in 2004 and 2005. The sales volume for 2009 was the lowest level in the past 10 years with 2010 only a slight improvement (17 sales in 2010 versus 15 sales in 2009). Additionally, there is an abundance of residential sites GREATER KALISPELL AREA HISTORICAL SALES ANALYSIS-RESIDENTAIL LAND SALES RESIDENTIAL & MULTIFAMILY VACANT SITES UP TO 1 ACRE IN SIZE SAURM M ULTIPLE LISTING SERVICE 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Total Number of Sales available for sale in the Kalispell market area that have been listed beyond the typical historical marketing time based upon the trend analysis. CIgrk Real Estate Appraisal (I I-129e) (l2119/2011) 24 The table below depicts residential construction by type based upon construction permits in the city of Kalispell for the past I I years. TYPE 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 TOTAL %Change 2009-2010 SFR'- SingleFanrllyResidential 97 106 135 110 192 233 170 146 78 46 50 1363 9% DLIP- Duplex 28 36 36 14 34 25 23 14 21 S 3 238 -63% TH-Townhouse 0 0 0 54 127 86 128 67 54 16 10 542 -389b Mf- Multifamily 21 Oi 103 12 130 34 29 95 33 33 29 518 -12% MH- Manufactured/Mobile Hume 1 1 4 3 1 0 0 0 0 0 0 10 0% TOTALS 147 143 278 193 480 378 349 322 186 203 92 2671 -11% Included TH Priorto2002; Source: City of Kafsspell Construction of single family residences in Kalispell increased relatively steadily from 2000 through 2005 and then began a decline through 2009, increasing only slightly in 2010. The number of new lots created has exceeded the number of building permits issued until 2010 when no new lots were created. This also indicates an oversupply of residential lots. Absorption of new residential lots has become a problem and this problem will likely continue into the foreseeable feature due to potential increases in competition as economic conditions improve. The historical sales activity for finished residential units in the Kalispell market area is provided on the following chart. The data is based upon information collected from MLS for sales of finished single family residences, condominiums and townhouses located on a 1 acre or less site. The sales volume for single family KAUSPELLMARKEf AR EA H ISTO RICALSALES ANALYSIS- IMPROVED RESIDENTIAL PROPERTIES residences was the SOURCE: MULTIPLE LISTING SERVICE Criteria: Lot Size Less than 0.50 Acre lowest in the past ... .. .... .... .... ... .. .. ? 450 400 decade. On average, 350 the marketing time for 300 250 single family 2� residences has IS0 continued to increase '°° 50 since 2005. The - - statistics from the ZcAL ,1dp1 vo Iva` ZOOS 1p66 vo, vo Teo 201O Sake of SF Res[d-- Q S.Iesof co.doSl —homes 2010 sales indicates an average sales price lower than recent years (2006-2009). The current supply of single family residences available for sale on MLS indicates less than a I year supply based upon the 10 year average number of sales. However, there are indications of a "shadow inventory" which are homes in or close to foreclosure and also include homes that owners want to sell but are waiting to put on the market when it improves. Sales of condominium or townhouse units represent a relatively low percentage of the overall residential market. There were 56 sales in 2010 which is slightly less than the 10 year average of 63 sales per year. The inventory for condominium and townhouse units available for sale represents an approximately 1.2 year supply. This segment of the market is likely to also have a shadow inventory. Ciark Real EsiateAppraisal (I1-129e)(12/192011) 25 Conclusion The general market for commercial properties in the area is considered guarded due to the local economic situation and the relatively large supply of available inventory. Sales of commercial properties have slowed down over the past 2 to 3 years and vacancies have increased in most sectors of the commercial real estate market. There is likely to be limited economic growth in the immediate future as population increases at a much slower pace than exhibited from 2006- 2008. There is an oversupply of residential lots in greater Kalispell area. It will take some time for the existing supply to be absorbed. Additionally, new residential construction has slowed and will not likely increase until general market conditions improve. Future growth and expansion for the greater Kalispell area is considered likely in the long term. Kalispell Area Map 6112.2 w1 �,Vjw' S 2 Gl$ ECrtcr T. F -�,.'::- 4 I fi T I'{ '�r� �i �"'W..3 .>✓ 1 Subject Property f i Cla& Real Eslale Appraisal (11-12%) (12/E9/2011) 26 PROPERTY DESCRIPTION LOCATION 1275 US Highway 2 West, City of Kalispell, Montana ACCESS Vehicular access via Adjacent Gateway West Mall Property EASEMENTS See Discussion ENCROACHMENTS None Evident FLWD ZONE Flood Zone AO FEMA Map Number 30029C 1805G Map Dated September 28, 2007 ZONING -2, General Business TOPOGRAPHY Partially Level with Wetland Areas IMPRO VENXENi S See Discussion UTI[iITIES See Discussion A. GENERAL SITE DESCRIPTION The subject site consists of one legal parcel identified as Lot 2 of the Amended Plat of a Portion of Gateway West Addition No. 34, City of Kalispell, and Flathead County, Montana.. The subject subdivision plat was recorded in 1983. The site has an irregular shape. The lot dimensions are 420.00 feet along the east side property line, 360.00 feet along the north side property line, 299.87 feet along the west side property line, and 225.07 feet and 161.51 feet along the south side property lines. ect Plat Clark Real Estale Appraisal (] 1-129e) (12/192QI 1) 27 Enlarged Vier of Subject from Plat e� M- "'ZI R �4 6�+, Yd[" 5. 6 K FE of o 400& 40t�� gg ppyy Clark Real Estate Appraisal (11-129e) (12i 192011) 29 View of Subject Portion of Flathead County GIS Map F _I L _ E+ yE Aerial View of Subject Property from Flathead County GIS Map Clark Real Estate Appraisal (I1-129e) (12l192011) 29 Zoomed in Aerial View — ESRI Mapping Zoomed Out Aerial View — ESRJ Mapping Clark Real Estate Appraisal (11-129e) ( 12119/2011) 30 B. ACCESS The subject property has vehicular access via an easement across the mall property to the east. The mall property has a driveway from US Highway 2 West south of the subject property. The mall property has additional vehicular access from financial Drive and Glenwood Drive as well. An exhibit depicting this access easement is below; Eabertient, i`.xiiifitt A rtnrleiw)C, Se¢ltut7 1" T"8N Y2? , PNI, MF F'la�ficad l�o�t:�i;k, '111f?kariu ta T - z.f < 4 1.tl7 M f .eE.� Y w'1 EPrfro fi 5„+.� ry T . _:c9C 1�.Cyi.iSiw%.3 YJP+S ''+ha ay�itti>` _ (kh # [ I" �tt+a . c.ryiai 6t iik';s 1 0.'.- I Y' Y, 11 q � Clark Real FsWe Appraisal (11-129e) (12/19,2011) 31 C. ZONING The subject property is in the B-2, General Business Zoning District. The intent of this district is; "A district which provides for a variety of sales and service establishments to serve both the residents of the area and the traveling public. This district depends on the proximity to major streets and arterials and should be located in business corridors or in islands. This zoning district would typically be found in areas designated as commercial and urban mixed use on the Kalispell Growth Policy Future Land Use Map. " Permitted uses in this zoning district include; athletic club, assembly — light, auctions, auto parking — surface, auto (RV, boats, motorcycles) sales and/or repair, auto rental, limo, shuttle (taxi) services, auto service station, bakery, banks and financial institutions, barber and beauty services, bed and breakfast, bus station, car wash, auto detailing shop, catering establishments, church, community center, day care - home (12 or fewer), dwelling - single family, food bank, funeral homes and crematoriums, greenhouses, nursery centers and landscaping materials, home occupations, hotel, motel, HVAC/electrical/plumbing, sales/service, janitor services, laboratories, tech research, development and testing, laundromats or dry cleaners, libraries, museums and similar cultural facilities, lumberibuilding material sales (with outdoor display/storage), media (newspaper, radio, TV), media, towers and facilities, microbreweries, office - professional/governmental, medical (with limited overnight stay), pack and ship shops, parks, photographic studio, police and fire stations, print and copy shops, post office, recreation area, indoor, rental service stores and yards, repair shops — appliance, clothing/electronics, restaurants, retail business, safe houses, schools — commercial, small engine sales, service and repair, tattoo parlor, theaters, and veterinary clinic - small animals There minimum lot area in the B-2, General Business District is 7,000 square feet. The minimum lot width is 70 feet. The yard setbacks are 15 feet along the front and side corner, 5 feet along the sides, and 10 feet along the rear. The maximum building height is 40 feet. There is no maximum permitted lot coverage area. Off street parking is required in this zoning district and varies according to use. The subject property may conform to current zoning requirements; however, the location of the property in a flood hazard area results in a limited number of allowable uses. This is addressed in a subsequent portion of this report. An area zoning map which includes the subject property is included on the following page. Clark Steal Estate Appraisal (I 1-129c) (12/1912011) 32 D. IMPROVEMENTS The subject property is improved with a movie theater building with 6 individual theaters. The building totals approximately 22,988 square feet and was reportedly constructed in 1976 with additions and/or renovations in 1984. The building is of concrete block construction. According to recorded documents, there are 139 parking spaces in an asphalt paved parking lot located to the east and north of the subject building. There are street lights in the parking lot area. The building is best described as a special use type property. It was constructed for utilization as a multi-plex type movie theater. A large capital expenditure would be required to alter the subject property for any other use. The subject building is in overall fair condition. According to Mr. P.J. Sorensen with the City of Kalispell Planning Department, there are limitations on allowable alterations to the subject building due to the location in a flood hazard area. The seller may place a deed restriction on the property prohibiting use of the building as a movie theater. A sketch of the perimeter of the subject building is included at the end of this section of this report. E. EASEMENTS, BUFFERS AND RESTRICTIONS 1 located recorded easements that impact the subject property. Many of the easements located involve utilities. There is a Grant of Perpetual Access Easement recorded as Document # 200012613510. This easement outlines the access to the subject property across the adjacent mall site. Clark Real Estate Appraisal (I1-129e) (12d9r2011) 33 There is also a Reciprocal Easement Agreement for Parking recorded as Document # 200012613500. This easement states that the subject property owner has access to an additional 250 parking spaces Iocated along the mall site. The subject property owner also must pay a 16.6% share of the annual parking lot maintenance for the hall property. I was not provided with the details regarding this mandatory parking lot maintenance expense. I have not determined any affect on value of the subject property due to this requirement. If the charges are significant, the value of the subject property could be adversely impacted. The subject property is located within a "floodway" and in a "flood plain". Floodway is defined by FEMA below; A "Regulatory Floodway" means the channel of a river or other watercourse and the adjacent land areas that must be reserved in order to discharge the base flood without cumulatively increasing the water surface elevation more than a designated height. Communities must regulate development in these floodways to ensure that there are no increases in upstream flood elevations. For streams and other watercourses where FEMA has provided Base Flood Elevations (BFFs), but no floodway has been designated, the community must reviewfloodplain development on a case -by -case basis to ensure that increases in water surface elevations do not occur, or identify the need to adopt a floodway if adequate information is available. According to Mr. P. J. Sorensen potential property uses are very limited in a floodway. There can be no fill in a floodway. No structures are allowed to be constructed in a floodway. Parking lots and parks or open air type facilities are allowable uses. Two valuations are included in this report in order to determine any impact on value due to location in the flood hazard area. These valuations are made in two separate sections of this report. Section I includes the opinion of value based upon the hypothetical condition that the subject property is not in a flood hazard area. Section 2 includes the opinion of value for the subject property as is. Both values were developed to assist the clients in making decisions about the subject property. F. TOPOGRAPHY, VEGETATION, WETLANDS, SOILS, DRAINAGE AND ENVIRONMENTAL CONSIDERATIONS The subject property includes level areas and wetland areas. As noted above significant portions of the subject property are located in the floodway and flood plain. According to the Federal Emergency Management Agency Flood Zone Map the subject property is located predominantly in Zone AO. Zone AO is an area of significant flood hazard. This is shown on flood map 30029 1805G dated September 28, 2007. A copy of a portion of this map is included in this section of this report. I have not been provided with an environmental audit for the subject property and assume there are no toxic materials or groundwater contamination of the property. Should any of these conditions be present, the value estimate included in this report may be affected. I assume that drainage has been adequately engineered for the site and improvements I have not been provided with a soil study for the subject site. Clark Real Estate Appraisal (I 1-129e) (12/19/201 I) 34 G. UTILITIES The subject site has access to electricity, natural gas, telephone, cable television and internet service. There is also access to a municipal water and sewer system. H. PUBLIC SAFETY AND SERVICES Police, fire protection, and other services are provided by the City of Kalispell. I. SITE SUITABILITY The subject site has an irregular shape. There is some visibility from US Highway 2 West but no direct highway access. Highway access is via an casement across the adjacent mall property. Although, the site has adequate size and shape for many commercial uses the location in the floodway and flood plain severely limit potential development of the subject site as if vacant. Specific subject site suitability is addressed further in the Subject Market Analysis portion of this report. The existing improvements predate flood mapping for the area. According to Mr. P. J. Sorensen with the City of Kalispell Planning Department, there would be numerous requirements for any proposed alterations to the subject building. Additional property exhibits are included on the following pages. Clark Real F_state Appraisal (I 1-129e) (12I1912011) 35 FLOOD MAP C 1! 9-M l >•mraft ! COf wwftR M rim RSQnIQ ftv*c*d t* U.8- P00% MwIWn *0-[ 32 .667K7S, GUX9R mid MM I - Clark Real (state Appraisal (11-129e) (1119/2011) 36 s� 7 .' a. . i J 9J1 t7' AREA CALCULATIONS SUMMARY BUILDING AREA BREAI{C OWN Dade [)esariptian Net Slze Nft Tmrais i4re kduvm aibbat.45 CL3.1. 3'_rst __mor 2.29E®.2 2280E.2 _�rcY F_cc i ss_n Y 2a.n d2&.: 59.9 r 35.fl ?^15.Q :,9 x 47.9i 5E4.0 9.9 Y_9 639.0 e.a i3s.q �O➢9.q !'T.a s 2ffi9_0 3215_a _c.o tsa.a cs-q.a 57 x ts�.a LZ-13.0 _a.2 Nat BUILDING Area froundedl 22M 15 !terns (rounded) 229H Clark Beal Estate Appraisal (I 1-129e) (12/19/2011) 37 SUBJECT PHOTOGRAPHS Subject Building Front South Lobby & Concession ,Area Bathroom South Lobby Looking North Mechanical Closet Clark Real Estate Appraisal (11-129e) (12/19/2011) 38 ADDITIONAL PHOTOGRAPHS Bathroom Projection Room Theater 1 Projection Room Electrical Panel Theater 2 Clark steal Estate Appraisal (11-129e) (12/19/2011) 39 ADDITIONAL PHOTOGRAPHS North Lobby Concession Kitchen Area Employee Bathroom North Concession Area Theater 3 Bathroom Clark Real Estate Appraisal(] 1-129e) (12/1912011) 40 ADDITIONAL PHOTOGRAPHS Office Storage/Projection Room Water Damage in Ceiling Theater 4 Projection Room Water Damage in Ceiling Clark Real Eslate Appraisal (1 I-129e) (12119/2011) 41 ADDITIONAL PHOTOGRAPHS Missing Drywall in Bathroom Front of Building Looking Northwest North Side of Building Southeast Corner of Building Front of Building Looking Southwest Parking Area to North of Building Clark Real Estate Appraisal (I 1-129e) (12/19/2011) 42 ADDITIONAL PHOTOGRAPHS Parking in Front of Building Northwest Corner of Building Wetlands at Southeast Corner of Building Parking inRear of Building Building Rear Broken Window above North Exit Doors Clark Real Estate Appraisal (I1-129e)(12/1912011) 43 ADDITIONAL PHOTOGRAPHS Broken Can Lights on North Side of Building Missing Soffit and Broken Lighting Missing Soffit Panels Broken Window above Rear Exit Doors Water Damaged Soffit Pigeon Nest above Soffit Clark Real Estate Appraisal (I1-129e) (12/19/2011) 44 ADDITIONAL PHOTOGRAPHS Access Right -of -Way Looking North Gateway West Mail to East of Subject Access Right -of -Way Looking South Subject Property from Access Right -of -Way Looking NW Clark Real Estate Appraisal (11-129e) (12/19/2011) 45 Real property taxes in Flathead County are based upon the fair market value of each property. Real property in Flathead County was re -appraised for tax purposes in 2009. The 2009 fair market values are being incrementally phased in each year until 2014. The real estate tax is based upon a percentage of fair market value (identified as the taxable value) for tax year 2011. The 2011 taxes are due in two installments. The first was due in November of 2011 and the second is due in May of 2012. According to the Montana Department of Revenue the tax bill for November 2011 has been paid. The tax mill levy is applied to the taxable value and any special taxes and fees are added. 1 have calculated the 2011 real property taxes for the subject property. My calculations are included on the table below; Real Property Tax Calculations - 2011 Assessor # 0017600 Estimated Market Value (for Tax Purposes) $823,139.00 Taxable Value (2.72% of Market Value) $22,389.38 2011 Mill Levy 0.686440 Base Tax Estimate $15,368.97 Plus 2011 Special Taxes & Fees $4,601.26 Total Tax Estimate $19,970.23 Costs for county services are constantly increasing. Real property taxes for the subject property will likely increase in the future. Clark Real estate Appraisal (11-129e) (121t912011) 46 Subject Productivity Analysis General ProperProperU Descri Lion: The subject property is a 3.126 acre site improved with a movie theater and associated paved parking lot suitable for approximately 139 vehicles. The movie theater building is vacant and has been for the past three years. The building is considered to be in overall fair condition. The property has been listed as available for sale or lease. There appears to have been little interest in the subject building from area market participants based upon the listing history. Due to the overall condition of the subject building, the special use type of construction, and the location of the building in a floodway and flood plain it is unlikely that the building contributes any value to the subject property. For this reason, the subject market analysis is based upon the subject property as vacant land. Area Land Use Trends: The subject property is adjacent to a 16.48 acre site improved with a privately owned portion of the Gateway West Shopping Center. This portion of the Gateway West Shopping Center building totals approximately 140,766 square feet. An approximately 63,101 square foot portion of the shopping center building on a 1.45 acre site is owned jointly by the City of Kalispell and Flathead County Economic Development Authority. Gateway West Shopping Center has not been fully occupied for a number of years. The City of Kalispell purchased the portion of the mall indicated above in 2000. This portion of the mall was purchased to house an office for a telecommunications company known as Stream International. This area of the mall is occupied by a telecommunications company known as TeleTeeh. The original tenant did not remain in the facility. The portion of the mall not owned and occupied by the City of Kalispell and Flathead County Economic Development Authority is being leased for use as a campus for area nonprofit agencies. The food court area is being operated by a local chef. Other area improvements include two multi -tenant office buildings, vacant commercial sites, a 1.795 acre site improved with an asphalt paved parking lot, and a 0.86 acre site improved with a free-standing retail building constructed in 2006. Potential Users of Subject Property Potential purchasers of the subject property in as is condition would have limited development options due to the subject location in the floodway and flood plain. It is possible that the subject property could be developed if it were altered sufficiently to mitigate the flood hazard. According to Mr. P. J. Sorensen with the City of Kalispell Planning Department any alteration to the portions of the property in the floodway area may not be allowable. Additionally purchasing the property based upon potential fill or alteration would include substantial risk. Potential users for the subject property in as is condition would be investors willing to take on the risk associated with developing the property or investors interested in the monetary return associated with a development of the property as a parking lot. In either case it is assumed that the building would require demolition. There is additional risk associated with this. Claris Real Eslate Appraisal (] 1-]29e) (12114J201 1) 47 Potential purchasers of the subject property based upon the Hypothetical Condition that the subject property is not in a floodway or flood zone would be investors and or developers interested in a relatively large sized site in a commercial zoning district of the City of Kalispell. Demand Analysis There is not sufficient market data available to quantify demand for the subject property in as is condition; however, ownership of the subject property in as is condition includes considerable risk. The demand for the subject property based upon the Hypothetical Condition that it is not located in the floodway or flood plain would be similar to that for other commercial sites with proximity to the central business district of Kalispell. Historical demand can shed light on future demand. I have prepared a historical demand analysis for vacant commercial sites in business zoning districts only in the greater Kalispell area using the area Multiple Listing Service (MLS). Not all properties transfer through this service; however, it provides the only succinct source of price data due to the non -disclosure status of the State of Montana. Data from the area MLS does provide a good indication of general trends. The table below represents the Inferred Demand which is the historical demand for sirnilar properties in prior years. Kalispell Commerical Site Sales Business Zoning Dlstricts Only Source. Multiple Listing Service Year #of Sales Median Price/SF Median Site SF Average Percentage Sale to List Price Average DOM 2002 12 $7.75 20,038 96% 419 2003 10 $5.00 26,136 84% 571 2004 9 $6.99 20,038 91% 414 2005 10 $7,01 35,501 95% 339 2006 8 $10.62 23,522 98% 209 2007 7 $13.45 21,344 93% 200 2008 2 $9.31 34,195 81% 193 2009 0 - - - - 2010 1 $8.78 23,348 64% 668 2011 1 $4.17 44,170 46% 682 Averages 6 There has been an historical demand for vacant sites in business zoning districts in the greater Kalispell area over the past 10 years. The sales volume for such sites for the decade peaked in 2002 with 12 sales. The median price per square foot peaked in 2007 at $13.45/SF. The sales volume has declined dramatically since 2007. The average annual demand for vacant sites in Clark Real Fstate Appraisal (11-129e) (12/1W2011) 48 business zoning districts in the area is indicated to be 6 per year. Based upon the average annual sales volume for the decade, there is an approximate 3 year inventory available of such properties. No recent sales of vacant commercial sites in a floodway in the subject market were located. There is a relatively large supply of vacant commercial sites not located in floodways available for sale. Due to the extent of competition, properties with known characteristics that increase risk are less marketable. Forecast of Competitive Supply As stated there is an approximate 3 year supply of sites similar to the subject property available for sale. Interaction of Supply and Demand The current available supply exceeds demand noted in prior years. Properties are starting to be sold; however, purchasers still expect bargains. There will likely be downward price pressure for the active listings in the future. Forecast of Capture Rate Based upon my analysis demand may be returning for properties such as the subject; however, prices are relatively low compared to prior years and recent marketing times have exceeded 1 year. Based upon my analysis of supply and demand, a competitive price would be required in order for the subject property to sell within 1 year or less. The values indicated in this report for the subject property are considered competitive. If the subject property was priced competitively and actively marketed at the appraised values, the marketing tines would not likely exceed 12 months. Analysis of Changes in Market Conditions Based upon my research, there were few recent sales of vacant commercial sites in the subject market area to use as direct comparables in the sales comparison analysis for the subject. Therefore, it was necessary to expand the search to include sales that closed prior to 2011. Due to the time lapse and the current economic climate, adjustments were made for changes in market conditions from the date of sale of the comparable data to the effective date of this report. These adjustments for changes in market conditions are based on paired sales or sale/relist analyses. The tables on the following page depict relevant market data supporting the need for market conditions adjustments. Clark Real Estate Appraisal (1 1-129a) (12119201 t) 49 �� • o aa• Address City Sale Year Sales Price Year List Price Gross Annual % Change 217 2nd St W Whitefish Woved 2007 $565,000 2011 $460,000 -4.65% 110 Westview Park Race Kalispell Vacant 2006 $165,000 2011 $155,000 -121 % 1730 MT FYghw ay 35 Kalispell Vacant 2007 $325.000 2011 $279,000 -2.83% 1335 US FW y 93 Kalispell Vacant 2W6 $155,000 2011 $128,500 -3.42% 120 Westvlew Park Race Kalispell Vacant 2005 $175,000 2011 $140,000 -3.33% 1005 Baker Ave Whitefish kmroved 2007 $2,162,500 2011 $1,600,000 -6.50% The first table presented depicts sales and re -sales of commercial (vacant & improved) properties in the greater Flathead Valley. The second table depicting sales and active listings suggests an annual decline as much as 6.5% over the past 5 to 6 years based upon re -listings for previously sold properties. Additionally, it is likely the active listings will sell for an amount at or below current list price due to continued downward price pressure in the market because of low demand and oversupply. Based upon the paired sales and sale/re-list analyses, downward market conditions adjustments of 5% per year for sales that closed between 2006 and 2009 are reasonable and necessary. Clark Rea I Fstate Appraisal (I 14 29e) (12) 39,r201 1) 50 fi. . The four basic economic principles of supply and demand, substitution, balance and conformity are considered to be the basic tools of analyzing the relationship between economic trends and an appraisal. Market forces create market value. For this reason, the analysis of highest and best use is very important. When the purpose of an appraisal is to estimate market value, a highest and best use analysis identifies the most profitable, competitive use to which a property can be used. According to The Appraisal of Real Estate - Thirteenth Edition by the Appraisal institute, Highest and Best Use is defined as follows: "Highest and best use is the reasonably probable and legal use of vacant land or an improved property that is legally permissible, physically possible, appropriately supported, and financially feasible and that results in the highest value." The analysis for Highest and Best Use considers first the reasonably probable uses of a site that can be legally undertaken. The final Highest and Best Use determination is based on the following four criteria: ■ Legally Permissible: The availability of land for a particular use in terms of existing regulations and restrictions, deed restrictions, lease encumbrances, or any other legally binding codes, restrictions, regulations, or interests. ■ Physically Possible: The physical adaptability of the site for a particular use. Financially Feasible: All uses that are legally permissible and physically possible that are likely to produce an income, or return, equal or greater than the amount needed to satisfy operating expenses, financial obligations, and capital amortization are considered to be financially feasible. in Maximally Productive: Of the financially feasible uses, the use that produces the highest net return or the highest present worth. It is important to recognize the possibility that the Highest and Best Use of the land could differ from the Highest and Best Use of the property. This occurs when a site has existing improvements and the Highest and Best Use of the land differs from the current use. Often, the current property use will continue until the value of the land, under its Highest and Best Use, less existing improvement demolition costs, exceeds the total value of the property in its present use. The Highest and Best Use analyses and conclusions are included on the following page. Clark Real Estale Appraisal (11-129e)(12IL9r201 1) 51 BASED UPON HYPOTHETICAL CONDITION ASVACANT Legally Perin issible The subject property is in the B-2, General Business zoning district of the City of Kalispell. There are a wide variety of legally permissible uses for the subject site as if vacant based upon the Hypothetical Condition referenced. The allowable uses are included in the Zoning portion of the Property Description portion of this report. Physically Possible The subject site at 3.126 acres is a relatively large commercial site for the area. There is vehicular access to the site via the adjacent shopping center property. There is adequate area for many types of commercial improvements. Services such as electricity, telephone, natural gas, water and sewer are either connected to the subject property or are available in the immediate area. Financially Feasible As discussed in the Subject Market Analysis portion of this report, the most significant area property is the Gateway West Mall. The mall has not been fully occupied by retail tenants for a number of years. The majority of the mall is being utilized as a campus for area nonprofit agencies with the remainder occupied by Teletech. There are two multi -tenant office buildings and several vacant commercial sites located north of the subject property. There is a free standing retail building located southeast of the subject property. The subject has access to US Highway 2 West via an easement across the adjacent mall site. The subject property has limited visibility from the highway. A commercial use that does not require a large amount of visibility from or frontage along a significant area traffic artery would be financially feasible. The market for most commercial properties is not in balance in the Kalispell area. For these reasons, the current financially feasible use for the subject site as if vacant is to hold for commercial use when residual demand is identified. Maximally Productive Based upon this analysis of the legally permissible, physically possible and financially feasible uses of the subject site as if vacant and based on the referenced Hypothetical Condition, the maximally productive highest and best use of the subject site as if vacant is to hold for future commercial use. AS IMPROVED The subject property is improved with an older multi -plea type movie theater building and associated parking. The building is not considered to contribute value to the subject property. A large capital improvement would be required to alter the subject property for any other use_ Alteration costs required for most uses would far exceed demolition costs. For this reason, the highest and best use as improved is for eventual demolition of the subject building. The building does not appear suitable for an interim use. Clark Real Estate Appraisal (11-129e) ( 12/19/2 011) 52 I have estimated demolition costs using a national cost estimating service. This estimate is below; Estimated Demolition Costs for Subject Building Source: Marshall Valuation Service Section 66, rage 11 - Building Demolition for a Class "C" Building Subject Building SF Demolition Costs/SF Total intimated Demolition Cost 22,988 $4A8 $102,986 The Marshall Valuation Service includes the verbiage below; "Costs presented are average costs of removal per square foot of total building floor area including loading and hauling, but not dump fees. It is also assumed the materials have no salvage value. Costs for removal vary greatly depending on the size and complexity of the jab and extent of'contamination regarding hazardous materials. Due to the number of variables involved, we would suggest that, wherever possible, survey bid or contract costs be obtained. " Based upon this information 1 recommend that a demolition cost estimate be obtained prior to making decisions regarding the subject property. AS IS ASVACANT T Legally Permissible Due to the subject location in the floodway and flood zone legally permissible uses are very limited. Use of the subject property as a parking lot is one of the only legally permissible uses. Physically Possible It is not necessary to address physically possible uses as the legally permissible uses are so limited. Financially Feasible It is not necessary to address financially feasible uses as the legally permissible uses are so limited. Maximally Productive Use of the subject property as a parking lot is considered to be the most likely highest and best use. There may be potential purchasers that are willing to purchase the property in spite of the risk associated with any potential development of the property. AS IMPROVED It is unlikely that the subject building can be substantially altered due to the location in the floodway. There are no likely market participants who require such a special use type building. Additionally the building is in overall fair condition. For these reasons demolition of the building 1s likely. Clark Real Estate Appraisal (i 1-129e) (12/ 19 201 1) 53 In the foregoing sections of this report, I have examined and discussed the subject property. To arrive at estimates of market value for the subject property, it is necessary to collect and analyze all available data in the market, which might tend to indicate the values of the property. The subject property must be compared to similar properties that can be constructed, purchased, or from which a similar monetary return may be received. APPROACHES IN THE VALUATION OF REAL PROPERTY The three recognized approaches in the valuation of real property are Sales Comparison, Cost Approach and Income Capitalization. According to The Appraisal of Real Estate - Thirteenth Edition by the Appraisal Institute, the approaches are defined as follows: Cost Approach A set of procedures through which a value indication is derived for the fee simple interest in a property by estimating the current cost to construct a reproduction of (or replacement for) the existing structure, including an entrepreneurial incentive; deducting depreciation from the total cost; and adding the estimated land value. Adjustments may then be made to the indicated fee simple value of the subject property to reflect the value of the property interest being appraised. Sales Comparison Approach The process of deriving a value conclusion for the subject property by comparing similar properties that have recently sold; identifying appropriate units of comparison and making adjustments to the sales prices (or unit prices) of the comparables based on the relevant, market - derived elements of comparison. The Sales Comparison Approach may be used to value improved properties, vacant land or land being considered as though vacant when an adequate supply of comparables sales is available. Income Capitalization Approach An appraiser analyzes a property's capacity to generate future benefits and capitalizes the income into an indication of present value. The principal of anticipation is fundamental to the approach. Techniques and procedures from this approach are used to analyze comparable sales data and to measure obsolescence in the Cost Approach. Each of the three approaches to value requires data collection from the market and each are governed equally by the principle of substitution. This principle holds "when several similar or commensurate commodities, goods or services are available, the one with the lowest price will attract the greatest demand and widest distribution". (Source: The Appraisal of Real Estate — Thirteenth Edition by the Appraisal Institute) Section 1 of this report includes the analysis and estimate of value for the subject property based upon the Hypothetical Condition that the property is not located in the floodway or in a flood zone. The Sales Comparison Approach is developed in Section 1. Section 2 of this report provides the value estimate for the subject property in as is condition. The Sales Comparison and Income Approaches were developed and reconciled in this section of the report. Clark Real Estate Appraisal( I1-129e) (12I19i2011) 54 SECTION I (Based upon Hypothetical Condition that the Property is not in the Floodway or a Flood Plain) Clark Real Estate Appraisal (1 1-124e) (12,' M201 1) 55 SALES COMPARISON APPROACH We located 4 closed sales and 2 active listings of vacant commercial sites that are similar enough in location and utility to prepare a credible Sales Comparison Analysis for the subject property as if vacant based upon the Hypothetical Condition that it is not located in a floodway or flood plain. The unit of comparison selected is the price per square foot. This is the unit of comparison used by most market participants for purchases of similar sites. Land Corn parables Land Sale # Address City Sale Date Sales Price List Price Square Feet Price/SF 1 2034 US Highway 2 E Kalispell Oct-11 $184,000 44,170 $4.17 2 101 Westvlew Park Place Kalispell Dec-10 $205,000 23,348 $8.78 3 1121 US Highway 2 W Kar�spell Jul-05 $225,000 37,479 $6.00 4 1355 U5 Flighway 2 W Kalispell Sep-06 $155,000 17,424 $8.90 Active 1 110 & 120 Financial Drive Kalispell NIA 1 $400,000 1 162,9141 $2.46 Active 2 1305 US hfighway 2 W Kalispell NIA $350,000 130,6801 $2.68 A complete description of each sale is included in the comparable land sale write-ups provided in this section of this report. A map depicting the locations of the comparables relative to the subject property is below; Clark Real Estate Appraisal (1 I-129e) ( 12/19/201I) 56 LAND SALE 1 - COMPARABLE SALE INFORMATION _...._ .__.._. _' Location 2034 US Highway 2 East WSW& Kalispell, Montana County Flathead A ssessor Number 0656100 Geocode 07396604318060000 Zoning B-3, Community Business Site Sire: Acres 1.01� Square Feet 44,170 Gross or Net Gross Date ofSale October28, 2011 Sales Price $184, 000 Less Cost of improvements $0 Sates Price Adjusted $184,000 MLS # 294322 ANALYSIS OF SALE . Price per Acre $182,178 Price per Square Foot $4.17 Price per Front Foot $1,373 TRANSFER INFORMATION Grantor John Preston King, Gary Steven King & Shannon Patrick Nalty Grantee Bert E. Amlund Family Limited Partnership Type of Instrument Warrant Deed Document 01100023308 Marketing Time 682 Lays on Market FlnancingrCondltions Cash/Market Verified By/Phone # Shannon Nalty, Agent/(406) 249- 4028 Legal Description Tract 3BE also known as Parcel A of Certificate of Survey #16944, Flathead County, Montana Intended Use/Comments This property was listed from 9/18/2007 to 1211512009 with an original list price of $463,783 that was towered to $417,958 during the listing period. It was re -listed on 12/15/2009 for $399,500. The price was lowered to $298,146 on Secfion/To-wnshlp4Range 4-28-21 ------ PROPERTY DETAILS Access US Highway 2 E Traffic Count 22140 Topography Level at Highway Grade Lot Dimensions Various Shape Irre ular Rectan le Highest & Best Use Commercial Use Flood Plain No Improvements None Frontage (Feet) - 1.3 �- _ Value of Improvements NIA View Commercial Properties Utilities Electricity, gas, telephone, Evergreen sewer &water Miscellaneous Report File # 11-o93ec Clark Real Fstate Appraisal (I i-129c) ( 12/19/201t) 57 LAND SALE 2 COMPARABLE SALE INFORMATION '= nor � 17 � ' 3 "> : ; Ie 2g 8 i 1� L 1 3� j f' Location 101 Westview Park Place CJty/State Kalispell, Montana County Flathead AssessorNumber 500352 0739660 Geocade Geocode 0739660631715pppp Zoning B-2, General Business Site Size: Acres 0.54 Square Feet 23,348 Grote or Net Gross hate of Sale December 30, 2010 Sales Price $205,000 ,Less Cost of Improvementsl $p Sales Price Adjusted 1$205,000 MLS # 1286830 ANALYSIS OF SALE Price per Acre $382,463 Price per Square Foot 1 $8.78 Price per Front Foot $1,708 TRANSFER INFORMATION GrantorT mm HFAM LLC Grantee__ Gregory D. Eller Type oilnstrument Warranl+yDeed Document# _ 1000030551 Marketing Time 682 Days on Market FinancinglConditions Conventional/Markel Verified By/Phone # Rich Thomas, Agent (406) 862- 2333 Legal Description Lot 2A of ResubdKision of Lots 2 and 3 of Westview Business Center, City of Kalispell, Flathead County, Montana Intended tlselComments Hold for future construction of a dental office building. SectionlTownship/Range 6-28-21 PROPERTY DETAILS Access Meridian Road Traffic Count Unkown Topography Level at Street Grade with Upward Slope Lot Dimensions Various Shape Irregular Highest & Best Use Commercial Use Flood Plain No Improvements None Frontage (Feet) 120 Value of Improvements NIA View lCommercial Properties Utilities Access to Municipal Services Miscellaneous Report File # 11,051 b Clark Real Estate Appraisal (t 1-129e) (12/ 19/201 i) 58 LAND SALE 3 COMPARABLE SALE INFORMATION _......� elf \ rye Y • dw ��� _ , Location 1121 US Highway 2 West City/State Kalispell, Montana County Flathead AssessorNumher 0500460 Geocode 07396512407150000 Zoning B-3, Community Business Site Size: Acres 0.86 Square Feet 37,479 Gross or Net Gross Date of Sale July 5, 2005 Sales Price $225,000 Less Cost of Improvements $0 Sales Price Adjusted $225,000 MLS # 247860 ANALYSIS OF SALE ; Price per Acre 1$261,628 Price per Square Foot $6.00 Price per Front Foot $1,160 TRANSFER INFORMATION Grantor ACG - Kalispell Investors, LLC Grantee Robert L. Ross & Kay L. Ross Type of Instrument Warranty Deed Document # 200518716060 Marketing Time 201 Days on Market Financing/Conditions l5o entionallMarket Verified Sy/Phone # Ted Schlegel, Agent Legal Description Lot 2 of Gateway West Subdivision Unit 2, Flathead County, Montana Intended Use Hold for future use or re -sale - Section/Township/Range 12-28 22 PROPERTY DETAILS . ACce55 Via Access Easen-ent fram Higtnca 2 W Traffic Count 16,490 Topography Level Lot Dimensions Various Shape Triangular Highest & Best Use Commercial Use Flood Plain No Improvements None Frontage (Feet) 194 Commercial Properties Value of Improvements NIA View Utilities jAccess to all Municipal SeNces Miscellaneous Appraisers Estirmte Report File # 08-020e & 08-097el Clark Real Estate Appraisal (1 1-129e) (12/ 19i201 1) 59 LANK SALE 4 COMPARABLE SALE INFORMATION _- j jlr _... —.�j ' x - F. `�--� Loca#on 1335 US Highway 2 West City/state Kalispell, Montana County Flathead Assessor Number 0977405 Geocode _ 07396512402090000 Zoning B3, Community Business Site Size: Acres 0.40 Square Feet 17,424 Gross or Net Gross Date of Sale September 18, 2006 Sales Price $155,000 Less Cost of Improvemen W $0 Sales Price Adjusted $155,000 ML5 # 262886 ANALYSIS OF SALE" Price perAcre $387,500 Price per Square Foot $8.90 Price per Front Foot N/A TRANSFER INFORMATION : Grantor Lloyd S. Barrie & Travis J. Steindorf Grantee Theodore Willich, III Type ofinstrument Warranty Deed Document# 200626110430 Marketing Timem m T ___ 38mm_mpays on Market____'__ Financing/Conditions Cash/Market Verified By/Phone Al Lloyd S. Barrie, Granteet(406) 257 8921 Legal Description Lot 7 of ResubdNision of Lots 1 and 3 of Gibson Addition No. 41, Flathead County, Montana Intended Use Future commerical use. This property was listed on the area MLS from September 2010 to September 2011. The original list price in 2010 and 2011 was $148,000. The price was lowered to $128,500. This listing expired on September 30, 2011, Section7Township/Range PROPERTY DETAILS Access Easement from US Highway 2 W W Traffic Count NIA - not on main mad Topo raphy Level Lot Dimensions 113' X 154' Shape Rectangular Highest & Best Use Commercial Use Flood Plain No Improvements None Frontage fFeeo NIA Value of Improvements NIA View Commercial Properties Utilities jAccess to all Munici al Services Miscellaneous Report File # 08-047e1 & 11-128e Clark Real Estate Appraisal (l 1-129e)(12119120 t 1) 60 ACTIVE LISTING I COMPARABLE LISTING INFORMATION . � I ` 1 .. �E l 2 �� .. .. <'3 . _ 5 Location 110 & 120 Financial Dries City/State Kalispell, Montana Courr V Flathead Assessor Alumlaer 0501971 & 0501972 Geocode 07396512411100000 & 07936512411150000 Zoning B-2, General Business Site Size., Acres 3,74 SquareFeet 162,914 Gross or Net Gross Date of Sale NIA'''- ACTIVELISTING List Price j$400.000 Less Cost of knprovements $0 List Price Adjusted 1$400,000 MLS # 1277160 ANALYSIS OF SALE ' Price per Acre IS106,952 Price per Square Foot $2.46 Price per Front Foot $3.419 TRANSFER INFORMATION Grantor Cascade Professional Park, LLC Grantee NIA LISTING:.. Type of Instrument NIA -ACTIVE: LISTING Document # NIA;- ACTIVE LISTING.. -- Marketing Time —_ --- Original List Date 211812008__ Financing7Condftions _ NIA.: ACTIVE LISTING Verified By/Phone # Fred Ricketts, Listing Agent (406) 751-5600 Legal Description Lots 4 & 5 of the Amended Plat of Lot 1 of the Amended Plat of a Portion of Gateway West Addition N. 34, City of Kalispell, Flathead County, Montana Intended Use/Comments This property is tieing marketed for commercial use. Section/TownshiptRange 12-28-22 PROPERTY DETAILS. Access Financial Drive Traffic Count Unknown Topography _ Some Level Area with Substantial Wetland Areas Lot Dimensions Various Shape Irregular Highest & Best Use Commercial Use Flood Plain Yes Improvements None Frontage (Feefj 117 Value of Improvements NIA View lCommercial Properties Utilities jAccess to Municipal Services Miscellaneous Report File # 11-128ec Claris Real Estate Appraisal (I1-129c) (12/I9/201 I) 61 ACTIVE LISTING 2 COMPARABLE LISTING INFORMATION �I _ j l / r / If Location 1305 US HiQhway 2 West Ci vstate Kalis II, Moniana Coun Flathead Assessor Number 0557055 Geocode 7396512402290000 Zonin a-2, General Business Site Size: Acres 3.00 Square Feet 130,680 Gross orNef Gross Date of Sale NIA '-ACTIVE LISTING , List Price $350,000 Less Cost of lm rovements` $0 List Price Adjusted $350,000 MLS # 1277160 ANALYSIS OF SALE Prue per Acre 1$116,667 Price per Square Foot $2.68 Price per Front Foot _ $1,224 TRANSFER INFORMATION Grantor Hubert J. Turner Grantee NI ACTIVE LISTING Type of Instrument -- - PHA -.ACTIVE LISTING Document # NIA - ACTIVE FISTING _ Marketing Time �T List Date 711112011 Financing/Conditions NIA ACTIVE LISTING:—Verified Sy/Phone # Matt Waatti, Listing Agent (406) 755 8485 Legal Description Lot A of the Amended Subdivision Plat of Lot 2 of Gibson Addition No. 41, City of Kalispell, Flathead County, Montana Intended UwlComments This property is being marketed for commercial use. It was listed for sale from March 2010 to September 2010 for $525,000 and from December 2010 to May 2011 for $399,000. The current listing states that the 'seller has an approved engineeered plan to fill and bring out of flood plain at sellers expense." Section/Township/l7ange 12-28-22 PROPERTY DETAILS US Hi hway 2 West Traffic Count Unknown _Access Topography Some Level Area with Substantial Wetland Areas Lot Dimensfons Various __.___ Shape Irregular Highest S Best Use Commercial Use Flood Plain Yes Improvements none From ffeeQ 286 Value of hnprovements NIA View Commercial Properties Utilities Access to Municipal Services Miscellaneous Report File # 11.128ec Clark Real Estate Appraisal (I I -129c) (12! 19J20 t 1 ) 62 Sales Comparison Analysis Grid for Subject Site as if Vacant Adjustments have been made to these sales for differences between the sales and this subject site. These adjustments are noted on the spreadsheet below; 1275 US HIGHWAY 2 WEST CITY OF KALISPELL, MONTANA DESCRIPTION SUI3J T SALE1 SALE2 SALE3 SALE4 ACTIVE ACTtVE2 EX3,MFICATX)N 203a US Hijv,0y2 E VVVeSIAftP ar% P I 10USHIJwy2W Z35US14k y2W 1U&13]F1rrancfa10r 'W5USHIgWy2w CITY Kall ml K36SP29 K3115M K316PN K2 IS ON KaIlSOM SALES PRICE S184,000 $205.000 $225,000 $155,D00 $400,000 $350.000 ADJUSTNENI FOR LIST PRCE -S40,000 -$35.000 ADJUSTMENT FOR IMPROVEMENTS BUYER FXPBNCITURFS DEMOLITION ENVIRONNETITAL OTHER L83ALIZON 4G ADJUSTED PRICE $1&5.000 $205,000 $225,000 $155.000 $360,000 $315,000 PROPERTY R[GHTS Fee 8"le Fee S'rple Fee SAVIe Fee Simple Fee Srsple Fee Ssnpie Fee Simple PROPERTY FIGHTS ADJUSTMENT ACUUSlEDPR)CE $184,Ii00 $205,000 $225,000 $1SS.000 $360,000 $315.000 FINANCING Market Market Market Market Market Markel Market FINANCING ADJtISTMENT AWLISTEDPRr-E $184,000 $205,000 $225,000 $155,000 $360.000 $315,000 CONDITIONS OFSALE ALUUSTMENT Market Market Market wrkel Markel Market Market ADJUSTMENT ALUUSTEDPRCE $18A,000 $205.000 $225.000 5155.000 $360,000 $315.000 DATEOFSALE 10/28/11 12/30/10 07/05/05 09118106 RGTNE ACTIVE: MARKETOGNIDITIONIS FACTOR 1.06 1.00 1.06 Ole 1.007 1.00 ADJUSTIEDPRCE $184,000 $205,000 $225,000 $114,275 $360,000 $315,000 ZOPING EL2 R-3 . 112 B-2 6 2 8.2 1 Z SITESIZESCIUAREFLT' i3G180 44,170.` 23348 :: 37,479 .:17,424 182,94.4 130,680 ADJUSTMSALES PRICE: PER SF $8.78 $6,00 $Fi.56 ffi2.21 $2.41 ADJUSTMENTFOR LOCATION 1.00 1.00 1.00 1.00 1.00 1.00 SHAPE 1.00 1.00 1.00 1,00 1.00 1.00 TOPOGRAPHY 1.00 1.00 1.00 1.00 2.00 2.00 FRONTAGE 1.00 1.00 1.00 1.00 1.00 1.00 ZOMNGICOVENANTs 1.00 1.00 1.00 1.00 1.00 1.00 AOCESS 1.00 1.00 1.09 1.00 1.00 1.00 UTLI TES 1.00 1.00 1.00 1.00 1.00 1,00 SIZE 0.80 0.70 0.80 0.70 1.00 1.00 TOTAL A DJUSTNENT 0.80 0.70 0.80 0.70 2.00 2.00 ADJUSTED PMCE PER SF $3.33 $6.15 $4.80 $4.59 $4.42 $4.82 Clark Real Blate Appraisal (11-129e) (12;IW2011) 63 The unit of comparison selected is the price per square foot. Discussion of Adjustments Adjustment for List Price: Active Listings 1 and 2 are not closed sales. Similar properties typically sell for prices lower than list prices. Please refer to the Subject Market Analysis portion of this report for support for this conclusion. Downward adjustments of 10% for Active Listings 1 and 2 in this category are considered reasonable and appropriate. Buyer Expenditures: There were no buyer expenditures noted for any of the comparable sales so no adjustment was necessary in this category. Property Rights: The ownership interest in this report for the subject property and for all of the land comparables is the fee simple interest consequently no adjustments were necessary in this category. Financing: All sales were cash or cash equivalent; therefore, no adjustments were necessary in this category. Conditions of Sale: All sales were arms length (or at market) and no adjustments were necessary. Market Conditions: Land Sales 1 and 2 closed in 2011 and 2010 respectively. Land Sale 3 closed in 2005 prior to the onset of the real estate bubble for such properties in the subject market area. The market conditions when these sales closed were similar enough to current market conditions that no adjustment was necessary. A downward adjustment of 5% per year was made in this category to Land Sale 4. This downward adjustment percentage was discussed in the Subject Market Analysis portion of this report. Location: The locations of the comparables are similar enough that no adjustment is necessary in this category. Shape: The subject and comparables all have shapes that are suitable for commercial development. No adjustments were considered necessary for shape. Topography: The value indicated in this section of this report is based on the Hypothetical Condition that the subject property is not in the floodway or in a flood plain. Land Sales 1, 2, 3 and 4 are not in floodway or flood plain areas and no adjustment was necessary in this category. Active Listings 1 and 2 are both located in the floodway and in flood plain areas. There are two sites available for sale at 91 and 95 Financial Drive. These sites are in the same development as Active Listing 1 but are not located in the floodway or in a flood plain. These properties are available for sale for $8.48/SF and $10.08/SF respectively. Both lots are priced substantially higher than the active listings used as comparables in this analysis. Based upon the indications from the closed sales and other area active listings, the two active listings required 100% upward adjustments in this category due to location in the floodway and flood plain. Claris Real Eslate Appraisal (I 1-129e) (12! 19/201 1) 64 Frontage: The subject property does not have frontage along a major thoroughfare and some of the comparable sales have highway frontage. There is little current market evidence available on which to base a credible adjustment for lack of highway frontage. For this reason, no adjustment was made. Zoning/Covenants: The subject and all of the comparables are in business zoning districts for Flathead County. No adjustment was necessary for zoning. The subject property is subject to a parking agreement with the adjacent mall property. This agreement requires that the subject property owner pay a pro-rata share of the costs to maintain the mall parking lot. I was not provided with the details of this expense and assume that it is reasonable. No adjustment was made for this expense; however, this expense could negatively impact the value of the subject property if it is excessive or unreasonable. Access: Access to and from the subject and the comparable sales are similar enough that no adjustment was considered necessary. Utilities: The subject property and comparables all have similar access to all necessary utilities. No adjustment is necessary in this category. Size: All of the closed sales used in this analysis are smaller than the subject property. Based upon my analysis size adjustments were necessary for all of the closed sales but not for the active listings. As noted in the Subject Market Analysis portion of this report there are currently 20 active listings of vacant commercial sites in business zoning districts in the Kalispell area. The prices per square foot for these active listings were placed on a power curve type trend line. This trend line illustrates the general list price variance relative to size. This graph and trend line is below; ZONINGACTIVE LISTINGS BUSINESS OF x POWER $. i 1 �. ����� • `� 4 1 ! :�" """ter=r✓� I awwr..r""r'..r..���� $12.00""""'""�`.�..�tic....rr.w�rw�wSefiesl 1 r 1 wrwr:,wwwra+.wa.wcr.ww.w....aw.eawre....ee Crr�wr�r���rrr�rr�re� 'r i # 1` - - - ...r �.-.r .e..ae a.err rr.r ■.ir�.er.. rrr wrir. 1 r •"••"ear;; as a�•iwaaw�waa..a.eaa.ewaawew a��� .:r...�...»......:...:r a r r .`.a. $ 1 1 1 i 100000 200000 Square Feet "Two of the Active Listing were in Flood Plain Areas and were Adjusted Upward for this Characteristic Clark Real Estate Appraisal (l1-129e)(12/M2011) 65 By graphing the list prices it is clear that market participants who wish to sell properties similar to the subject have the perception that prices vary according to site size. The size adjustments made to the closed comparables sales were based upon this analysis of this trend line. Reconciliation of Sales Comparison Approach for Subject Site as if Vacant The closed sales provide adjusted indications of $3.33, $6.15, $4.80, and $4.59 per square foot respectively. The lowest indication is from the most recently closed sale. The average of all of the indications from the closed sales is approximately $4.75 per square foot. The adjusted indications for the two active listings at $4.42 and $4.82 per square foot provide good indications of what the subject property is likely not worth. Active Listing 1 has been marketed for sale since early 2008. Active Listing 2 has been available for sale since March of 2010. A market value between the indications provided by Active Listing 1 and Active Listing 2 at $4.50 per square foot for the subject site is reasonable and well supported. It is my opinion that there is little market for the subject building and most market participants would demolish the subject building immediately after purchase. For this reason, the site value must reflect consideration for building demolition costs. This cost was estimated to b approximately $103,000 in the Highest and Best Use section of this report. The calculations for the site value with demolition costs are below; 136,169 Square Feet X $4.50/Square Foot $612,761 Less Building Demolition Costs $103,000 Value Indication $509,761 Rounded To $510,000 This value opinion is based upon the Hypothetical Condition that the subject property is not located in the floodway or the flood plain. Clark Real Estate Appraisal (11-129e) (12l191201 1) 66 The value indications for the fee simple interest in the subject property based upon the Hypothetical Condition referenced are indicated below; Fee Simple Interest Cost A roach Not Developed Sales;Com arison A° roach....:$510,000 Tneame Ca titliziti6litA00roach : Not Developed Cost Approach The subject property is improved with an older theater facility and related asphalt paved parking area. The improvements contribute little value to the property. For this reason, the Cost Approach was not applicable for determination of value for the subject property based upon the Hypothetical Condition that the subject property was not located in the floodway or the flood plain. Sales Comparison Approach The Sales Comparison Approach was developed using the best and most recent comparables available. The sales and listings utilized provide insight into the actions of market participants relative to purchases of similar vacant commercial sites. Additionally this was only the approach developed in this section of this report_ For this .reason, this approach is accorded all weight. Income Approach The Income Approach is not considered applicable since the improvements contribute little value to the subject property. Conclusion The Sales Comparison was the only approach developed in this section of this report. This approach is typically considered the most appropriate analysis for vacant land or land as if vacant. After carefully considering all the factors influencing the subject property, it is my conclusion that the value of the fee simple interest in the subject real property, based upon the Hypothetical Condition that the subject property is not located in the floodway or flood plain, as of December 19, 2011, is: $510,000 Clark Rea I Estate Appraisal (1 1-129e) (1219I201 p 67 Section 2 (As is — Property Located in Floodway and Flood Plain) Oark Real Estate Appraisai (11-129e) (12/19('2011) 58 Sales Comparison Analysis Grid for Subject Site as if Vacant The same eomparables used in Section I were considered appropriate to determine the value of the subject property in as is condition. The adjustments vary somewhat. The Sales Comparison Analysis grid is below; COMPARA�iESALESANALYSIS2T�TEASIFVACANT81iiF[Ot1�1R1AZAA 1275I1S HIGHWAY 2 WEST CITY OF KALISPELL, MONTANA DESCRIPTION SUBJECT SALE SALE2 SALE3 SALE4 ACTWEI ACTNE2 fiFICATiON 2034 U5 H19wAy2E '01WeswTaWark Pl IVIUS H Wj mV2W -B35U5H19rM&Y2W 'M8127FktnCI31©r 130505HI91w2W CITY QkpeX Kaispel€ Ka%pea Kai'SDO Kallspo KalSlxa SALES PRICE $184,000 $205,000 $225,000 $155,000 $400,000 $350,000 ADIIISTNI ff FOR LIST FRICE -$40,OG0 -$35,000 AUJUS71VIENT FOR INIPROVEMENTS BUYER D(F>=twucs OB OLMON EMIRONMENTAL OT# m LEGALIZOmW AWUSI'EOPRICF $184,000 $205,000 $225,000 $155.000 $360,000 $3151000 PROPERTY RiGFITS Fee SkTvle Fee Sarple Fee SOVte Fee Simple Fee Simple Fee Sitrple Fee Slagle PROPERTY RIGHTS ACUUSTM DU ADJUSTEDPRCE $184.000 $205,000 $225,000 $155,000 $360,000 $315,000 FINANCING Market Market Market Wket Markel Market Market F1NAWING ADJUSTM3,1 T ADIt1ST®PRICE $184.000 $205,000 $225,000 $155,000 $360,000 $315,000 COIDITIONSOFSALEADJUSTMafi" Market Market Market Market Market Market Market ADJUSTMENT ADIUSTEDPRICE $184,000 $205,000 $225.000 $155.000 $350.000 $315,000 OATEOFSALE 10/28/11 12130110 07/05105 09/18/06 ACTIVE: ACTIVE. M4R+1(ET COJ DM14S FACTOR 1.00E 1.00E 1.00 0.74E 1.00E 1.06 ADJUSTEDPRICE $184.000 $205,000 $225.000 $114,275 $360.000 $315.000 ZONING.N 2 1 -3 ' F32 13�2 8 2 2 8-2 SITESIZBSQUAREFEET' 136169 44,170; 23,848. :. :::37,479 jr: 17,424 162,914 >130,680 ADIUSTEL3SALES Ff E PER 5F $8.78 56.E S&56 . $221 $2,41 ADUSTMENT FOR LOCATION 1.00 1,00 1.00 1.00 1.00 1.00 SHAPE 1.00 1.00 1.00 1.00 1.00 1.00 TOPOGRAPFIY 0.50 0.50 0.50 0.50 1.00 1.00 FRONTAGE 1.00 1.00 1.00 1.00 1.00 1.00 ZON KWOOVE1 ANTS 1.00 1.00 1.00 1.00 1.00 1.00 ACCESS 1.00 1.00 1.W 1.00 1.00 1.00 UTL.TI S 1.00 1.00 1.00 1.00 1,00 1.00 SIZE 0.80 0.70 0.80 0.70 1,00 1.00 TOTAL AWUSTMEI'4T" 0.40 0.35 0.40 0.35 1.00 1.00 ADJUSTED PRICE PER SF $1.07 $3.07 $2.40 $2,30 $2.21 $2.41 Clark Real Estate Appraisal (11-129e) (12/19/2011) 69 The unit of comparison selected is the price per square foot. Discussion of Adjustments Adjushnent.for List Price: Active Listings 1 and 2 are not closed sales. Similar properties typically sell for prices lower than list prices. Please refer to the Subject Market Analysis portion of this report for support for this conclusion. Downward adjustments of 10% for Active Listings 1 and 2 in this category are considered reasonable and appropriate. Buyer Expenditures: There were no buyer expenditures noted for any of the comparable sales so no adjustment was necessary in this category. Property Rights: The ownership interest in this report for the subject property and for all of the land comparables is the fee simple interest consequently no adjustments were necessary in this category. Financing: All sales were cash or cash equivalent; therefore, no adjustments were necessary in this category. Conditions of Sale: All sales were arms length (or at market) and no adjustments were necessary. Market Conditions: Land Sales 1 and 2 closed in 2011 and 2010 respectively. Land Sale 3 closed in 2005 prior to the onset of the real estate bubble for such properties in the subject market area. The market conditions when these sales closed were similar enough to current market conditions that no adjustment was necessary. A downward adjustment of 5% per year was made in this category to Land Sale 4. This downward adjustment percentage was discussed in the Subject Market Analysis portion of this report. Location: The locations of the comparables are similar enough that no adjustment is necessary in this category. Shape: The subject and comparables all have shapes that are suitable for commercial development. No adjustments were considered necessary for shape. Topography: This section of the report addresses the value of the subject in as is condition. The subject property is located in a floodway and in a flood plain. Sales 1, 2, 3 and 4 are not in floodway or flood plain areas and downward adjustments were required for these sales. Active Listings 1 and 2 are both located in the floodway and in flood plain areas. Based upon the indications from the active listings, the closed sales required downward adjustments of50%. Frontage: The subject property does not have frontage along a major thoroughfare and some of the comparable sales have highway frontage. There is little current market evidence available on which to base a credible adjustment for lack of highway frontage. For this reason, no adjustment was made. Clark Real BMW Appraisal( I 1-129e) (12/19:201 1) 70 Zoning/Covenants: The subject and all of the comparables are in business zoning districts for Flathead County. No adjustment was necessary for zoning. The subject property is subject to a parking agreement with the adjacent mall property. This agreement requires that the subject property owner pay a pro-rata share of the costs to maintain the mall parking lot. I was not provided with the details of this expense and assume that it is reasonable. No adjustment was made for this expense; however, this expense could negatively impact the value of the subject property if it is excessive or unreasonable. Access: Access to and from the subject and the comparable sales are similar enough that no adjustment was considered necessary. Utilities: The subject property and comparables all have similar access to all necessary utilities. No adjustment is necessary in this category. Size: Size: The same size adjustments utilized in Section I were considered appropriate for this analysis. Reconciliation of ,Sales Comparison Approach for Subject Site as if Vacant The closed sales provide adjusted indications of $1.67, $3.07, $2.40, and $2.30 per square foot respectively. The lowest indication is from the most recently closed sale. The average of all of the indications from the closed sales is $2.36 per square foot. The adjusted indications for the two active listings at $2.21 and $2.41 per square foot provide good indications of what the subject property is likely not worth. A market value between the indications provided by Active Listing 1 and Active Listing 2 at $2.25 per square foot for the subject site is reasonable and well supported. It is my opinion that there is little market for the subject building and most market participants would demolish the subject building immediately after purchase. For this reason, the site value must reflect consideration for building demolition costs. This cost was estimated to b approximately $103,000 in the Highest and Best Use section of this report. The calculations for the site value with demolition costs are below; 136,169 Square .Feet X $2.25/Square Foot $306,380 Less Building Demolition Costs $103,000 As Is Value Indication $203,380 Rounded To $205,000 Clark Real [state Appraisal (I 1-129c) (12/ 11)001 1) 71 The analysis and resulting opinion of value included in this section of this report is based upon the subject property in as is condition. One of the only allowable uses that could generate income is a as a parking lot. Additionally, the City of Kalispell has estimated that the subject property could accommodate 255 parking spaces. There are a number of parking lots in the city limits of Kalispell that include spaces that are available for lease on a monthly basis. The parking lots identified are included on the table below, Parking Lot Comparable Rental Rates Lot Name Location City {Monthly Parking late Center Court NE Corner of 2nd Street & 2nd Avenue W Kalispell $20.00 Eagles 1stAvenue W Kalispell $30.00 Central School 2nd Avenue E Kalispell $20.00 Keno SE Corner of 2nd Street & 2nd Avenue W Kalispell $20.00 Valley Bank SW Corner of Main Street & 3rd Street Kalispell $30.00 Methodist NE Corner of 3rd Street & 3rd Avenue E Kalispell $15.00 Skyline 2nd Avenue W Kalispell $13.00 O'Neil Lot Main Street Kalispell $20.00 Mountain Valley 1st Avenue E Kalispell $20.00 Northeast 1st Street INE I Kalispell $15.00 County Lot Corner of 10th Street W & Main Street Kalispell $20.00 These lots are all located on or within a few blocks of Main Street In the central business district of Kalispell. There is limited off street parking in and around the central business district of Kalispell. Additionally there is little vacant land in and around the central business district of Kalispell for development of new parking lots. There is vacant land near the subject property. There are 4 commercial sites totaling approximately 7.50 acres available for sale in the immediate subject area. Since there is abundant vacant commercial land available for sale in the immediate subject area that could be utilized for parking, it is my opinion that the subject parking spaces would command monthly rates at the low end of the comparable lots. A monthly per space rental rate of$13.00 is considered reasonable and appropriate for the subject parking spaces. VACANCY AND COLLECTION LOSS A vacancy and collection loss rate of 5% is considered reasonable for the subject parking lot. EXPENSES The estimated market lease rates for the subject parking spaces are based upon the landlord paying expenses associated with property ownership. These expenses are detailed in the following paragraphs. MANAGEMENT It is necessary to include management as an expense. Based upon discussions with knowledgeable property managers and owners, approximately 5% of the effective gross income as a management fee is reasonable and appropriate. Clark Real EstateAppraisal (11-129e) (12119f-) O H) 72 REAL ESTATE TAXES Real estate taxes for the subject property for 2011 are $19,970.23. The tax bill is based upon the existing improvements. If the improvements were demolished and the subject property was utilized as a 255 space parking lot the real estate taxes would likely be substantially less than $19,970.23. We have estimated a tax load of approximately $5,500 for this analysis. MAINTENANCE/REPAIRS An annual maintenance expense of approximately $7,500 was estimated based upon potential parking lot resurfacing every 12 years and other annual maintenance and repair costs. OVERALL CAPITALIZATION RATE Overall capitalization rates for various property categories derived from national investors' surveys prepared by RealtyRates.com for the second quarter of 2011 are included on the table below; »911 791 Qt8 9.76 Ills 9411) 9.54 1.50 ll.85 ill; s1-,2 -0.07 WQtr. 991 )9 721k 0 Y.a7 12 9.74 3: 1117 39 991) 35 9,53 6 %W T3 1155 c Im 5, 11_�,, ..1 Y.PI 2418 8.89 4 i2iZ 5 367 15 9M 12 "1 155 22 3-54 iG 9.54 25 It 12 10,7 -11 $121 of w0 D 4di Gv. 661 llu 945 :�44 IrJ114 944 947 j.z 116.4 R51) 11A 3.32 NO 8d5 0 Q17 f7= 947 t5 g0 W 1553 .7 9?3 # 5.n 2.4 5,20 20 1172 15 0V) #7 tfJ* ; 5.87 zoo 8.77 4 V0 29 937 -1p y. 2 -14 11.05 S6 9.32 .5 $03 .16 *09 -11 1t 57 -23 Y173 20 1S 21 -7E 574 :007 11SF -45 117x .21 9:2 (s 9.t52 -A IW.48 ,>$ 977 T6 975 A; 91K -t2 t186 44 117 -3S an -2w� 3.75 Z"X 3+i 12 1193 47 w.1; 15 977 A tort 2P •)5) 41 V. S U., 3U 1124 !A 1911�1 27 M13 9, U.W 205 914 14 114C 90 IDO lC 9.42 .0 W? q -2t 9:�2 0 9.45 C 9.0_ K III.DB 5 19.04 13 1141 -a,v 9.77 2lb41 9011 51 IOU 21,, 1p-i4 17 47; 13 Z71 32 Sol .i3 9.40 .4 fife -19 hill I' 99t -13 11T6 9.75 cdri ti.b 2 10N .12 0 br y59 Jy 114J 64 151 .11 944 t 'f_65 •1S 11I $ tjf < d5 r?64 i 5A4 '.00L 321 .4} 0 U 1; 8?2 9 126 EI im 31• 442 -0 545 3, d23 42 PW 3 k{V .t2 0 ,177 392 2Um 951 64 145« 1„ 10.x1 1140 91;1 K 1967 11 1�7az Vg 9.7$ -35 5.1:5 -3: R111 47 ft$ 17 U.n 1Q2r) �WR 6.97 9l9 9.41 955 Y,89 9" $0D 1U.38 34.64 14.55 1244 $I 100 FW dlrr wiyhMd �iN�1! ��)< '1�r� eu?n �1 Rv. ... iej{ry43.i11 RR�7tI`aes.ew� The weighted composite overall capitalization rate for the period is indicated to be 10.07%. An overall capitalization rate of 10.00% is considered to be a reasonable return expectation for an investor interested in purchasing the subject parking lot. A reconstructed operating statement for the subject parking lot is included on the following page. {lark Real Fstme Appraisal (I 1-129e) ( t211912011) 73 RECONSTRUCTED OPERATING STATEMENT FOR 255 SPACE PARKING LOT AT 1275 US HIGHWAY 2 WEST KALISPELL, MONTANA Monthly Rental #t Months 255 Parking Spaces @ $131Month Each $3,315 12 $39,780 POTENTIAL GROSS INCOME $39,780 INCOME A5 A % OF POTENTIAL GROSS INCOME 100.00% $39,780 Less Vacancy & Collection Loss 5.00% $1,9B9 TOTAL EFFECTIVE GROSS INCOME 95.00% $37,791 LESS EXPENSES EXPENSES AS A % OF EFF GROSS INOOME ESTIMATED EXPENSES Managernent 5.0% $1,890 Real Estate Taxes 14.6% $5,500 Maintenance/Repairs 19.8% $7,500 TOTAL ESTIMATED EXPENSES 39.4% $14,890 NET OPERATING INCOME 60.6% $22,901 $22,901 CAP@10.00% $229,010 INCOME APPROACH INDICATION ROUNDED TO ......... $2301000 INCOME APPROACH CONCLUSION The value indicated by the Income Approach in this section of this report is considered to represent the market value of for the subject property if it were developed for use as a 255 space parking lot. The subject property is currently improved with 139 parking spaces and an obsolete building. In order to detenr>ine the as is value, the costs to demolish the building and to construct the additional 116 parking spaces must be considered. The calculations are below; Value Indicated Income Approach $229,010 Less Building Demolition Costs $103,000 Less Costs to Construct 116 Additional Parking Spaces @$1,000 per space $116,000 As Is Value Indication $ 10,010 Rounded To $ 10,000 Clark Real Eslate Appraisal (I1-129e) (12/19/2011) 74 The value indications for the fee simple interest in the subject property in as is condition are indicated below; Leased Fee Interest Cost Approach Not Developed sales :Comparison Approach $205,000 Income Ca AtalizatconApproach.... $ 10,000 Cost Approach This approach was not considered applicable for determination of the as is value for the subject property since the existing improvements do not contribute substantial value to the subject property. Sales Comparison Approach The Sales Comparison Approach was developed using the best and most recent comparables available. The sales and listings utilized provide insight into the actions of market participants relative to purchases of similar vacant commercial sites. This approach is accorded significant weight. Income Approach The Income Approach was developed using a scenario of developing the subject property as a 255 space parking lot. This scenario is based upon numerous variables that were estimated by the appraiser. Due to the assumptions necessary in this analysis, this approach is accorded little weight. This approach does provide a Sensitivity Analysis for development of the subject property as a 255 space parking lot; however, one scenario may not accurately represent the actions of the majority of market participants relative to purchasing decisions about the subject property Conclusion The Sales Comparison Approach provides the most credible basis for estimation of value for the subject property in as is condition and is accorded all weight. After carefully considering all the factors influencing the subject property, it is tiny conclusion that the value of the subject real property in as is condition, as of December 19, 2011, is: $205,000 Clark Real EslateAppraisal(I1-129e)(12!i92011) 75 A detailed supply and demand analysis is presented in the Subject Market Analysis section of this report. Based upon careful analysis, it is my opinion that a marketing time of no greater than 12 months would be appropriate if the subject property was marketed at the prices indicated in this appraisal. Clark Real Estate Appraisal (11-129e) (12t19t2011) 76 PROFESSIONAL DESIGNATIONS MAI — Member Appraisal Institute (2004) FORMAL EDUCATION College of Charleston, Charleston, SC Bachelor of Science — Geology (1985) REAL ESTATE EDUCATION Appraisal Institute 1990 - Basic Valuation. Procedures 1990 - Real Estate Principles 1992 - Capitalization Theory and Technique 1994 - Advanced Income Capitalization 2001 - Highest and Best Use and Market Analysis 2001 - Advanced Sales Comparison and Cost Approaches 2002 - Standards of Professional Practice, Part A 2002 - Standards of Professional Practice, Part B 2002 - Report Writing and Valuation Analysis 2002 - Advanced Applications 2003 - Comprehensive Exam 2003 - Separating Real & Personal Property from Intangible Business Assets 2004 - Demonstration Appraisal 2006 - 7 Hour National USPAP Update Course 2006 - Business Practices and Ethics 2008 - 7 Hour National USPAP Update Course 2010 - 7 Hour National USPAP Update Course Institute of Financial Education 1985 - Real Estate Law 1 1986 - Real Estate Law 11 IAAO 1991 - Standards of Practice and Professional Ethics Citadel Evening College 1993 - Residential Appraisal Reports Using URAR Form William_ H. Sharp & Associates 1995 - The Home Inspection Trident Technical College 1997 - Uniform Standards of Appraisal Clark Real Estate Appraisal( I 1-129e) (12/ 192011 } 77 Historic Preservation Consulting 1998 - Appraising Historic Property The Beekman Company 2004 - The Technical Inspection of Real Estate WORK EXPERIENCE 2003 - Present Clark Real Estate Appraisal — Owner/Commercial Real Estate Appraiser 1995 - 2003 Sass, Herrin & Associates, Inc. — Commercial Real Estate Appraiser 1990 - 1995 Charleston County Assessor's Office — Sr. Staff Real Estate Appraiser 1986 - 1989 First Sun Capital Corporation - Mortgage Loan Officer 1985 - 1986 First National Bank of Atlanta - Mortgage Loan Processor 1984 - 1985 South Carolina Federal Savings Bank - Mortgage Loan Processor STATE LICENSES/CERTIFICATIONS Montana State Certified General Real Estate Appraiser - 683 APPRAISAL SEMINARS ATTENDED 2000 — JT&T Seminars: Financial Calculator HP-12C 2000 — Appraisal Institute: Highest and Best Use Applications 2004 — Appraisal Institute: Evaluating Commercial Construction 2005 — Appraisal Institute: Scope of Work: Expanding Your Range of Services 2006 — Appraisal Institute: Subdivision Valuation 2006 — Appraisal Institute: Appraising from Blueprints and Specifications 2006 — Appraisal Institute: Uniform Appraisal Standards for Federal Land Acquisitions 2007 — Appraisal Institute: Analyzing Commercial Lease Clauses 2007 — Appraisal Institute: Condominiums, Co-ops, and PUDs 2008 — Appraisal Institute: Spotlight on USPAP 2008 — Appraisal Institute: Quality Assurance in Residential Appraisals: Risky Appraisals = Risky Loans 2008 — Appraisal Institute: Office Building Valuation: A Contemporary Perspective 2009 — Appraisal Institute: Appraisal Curriculum Overview (2-Day General) 2010 — Appraisal Institute: Hotel Appraising ---- New Techniques for Today's Uncertain Times 2010 — Appraisal Institute: The Discounted Cash Flow Model: Concepts, Issues & Applications 2011 — Appraisal Institute: Understanding & Using Investor Surveys Effectively 2011 — Appraisal Institute. Advanced Spreadsheet Modeling; for Valuation Applications PARTIAL LIST OF CLIENTS Glacier Bank Rocky Mountain Bank First Interstate Bank Wells Fargo Bank State of Montana Department of Natural Resources Montana Department of Transportation Glacier Park International Airport United Stated Department of Interior Clark Real Estate Appraisal (I 1-129e) (12/19/2011) 78 Clark steal Estate Appraisal (I I-129e) (12/19/2011) 79 APPRAISER'S LICENSE STATE OF MONTANA Department of Labor aiid IndiAstry �C- A E :PPP A'-', EP, 1,1EN'TOR Bowd o? Real Estate Appfascr,5 0;;*,snSk; 4: W ACIND M C " A F k, K P E A" EST A7 E �,17 �3,7�417 Clark Real Estate Appraisal (I I- 129c) (121190-011) so ENGAGEMENT LETTER ha Amublit-m-21--il UUS AGRNEMENI'��, -n-i-�,Aku;�'d cw�7,Y-A kv,,; WN 291 my of MOW=. X! K ind bmww"?,tE CiTy Am b as A an OakA vr,,mq3,, AvInApm mQwdwA-i f'. f S07 booby pi�wl",'4 11 tom' agz Coy M. m"W"E0aj ""ads It, F 1500 SAND FRT 1p w Emu Imp; Wam. l"I 4,0, by anywum Awr m, �m:,�t �fiz CKI wd wx soon "w"w"e mw zo :Q,:!t on qww�pw $*&.mow a OTI rad raq IVA KC CPU MY CjW evyl Ice Ln TwNkw i ww"aw hod &W &Y" tymmmg 00 cmw%,evj;h 0 me Too W chy"r J M,::�",+,-,j�w 'RO.e V"'. 74 NICA, fvL f-x i of 1-h,R_c V, ;x, "., � t-,� !, , 1AW mo to loss "m Mum, bi'.1 awl Oak hwalEtale Appraisal 0 JA290(VINnol 1) 81 n-OW.Ax Ova al M&7 5"_' lrdk"m.,..Jy w�"J' kix"5.7 ('tty ap wo Qixnn1wxwU wn dwarx. kno, -wy t"y In trim0<1. Y� 11 N" "0 wlatoc- &.yam a0a V"Wao so A M= Slay A0 Y'Ak A Unal 0. M0� 4 NZASAME W dais w " Au AWNWM T dw tm. by sms par! a! Ax Opt= ran,a UdakwNsg any sad wun shAlu,'M own ==0 W" U , PMR1 Mk Asumm M4 am was brWA, umi W w to MAI f xMil by -Iueii aw&,! Ow 00A jF A On= not L C WON A, A of cc Loins W owylm on ufj':J� All �Q; VOW& poTanl by Ont MuTv: 4 ynkin to MrAOFujon) 010',-r 19> Ar Loy 0% Mv show."! Q�1'1 Kkax, zappow pualw"; on, a WWW won momwo-o CIA FWW Es W App%M 0 14 2%) (0101011) 82 ,,I AM, R- A f I a «ill Ik U�k. j4el, M,,6rour-, 'It, A �I A Clark Real Estate Appraisal (I 1,129c) (12/19/2011) 83 I vv rs 1" C Oark Real Estate Appraisal (I 1-129c) (12/ 19/201 1) 84 %Kv4Lc*vj Wownsy wspyogs, any &wot Wd photon ,- Pno ! "f -� MATHEAV COUKTY GIS �91-11 tomman �glli 2-P mund A- I A 2 Y: 212, Y, T 2 i ct C!� sty ElTv YX S T AUD NO 33 AM. NE F -Ni 074 Q- KAU6506- �Ml FQ BOX 107 K&USRKL MT WMANT-) ----- --- - -- ---- 2 ,WkM LX41,�Wt -i"A I AEA Fos 0"bul. KA. ch"Wr zomeg Canny Z.Wvq Us, A&Wgw Zoug 4WEnU 2wAS QQ-b�MWW P.H. Z"14,14IR NV� Oak Real Estate AppWsA 0 14 29e) (Un 91M 1) 85 Cj ly 15 F F L L aATFI�WOVVES7 1 CAL EL 1, THE. AT RIES, KA!J5PPEU MT Z N KA, I SPI 3- "A T EO; R TJW, VV A �Aw sc�hwl FMIK-11$t� SfINITMI-� av M, RIM I'll-, cam.Vy lvlliov Clark Real Estate Appraisal (I 1-129c) (12/ 190-01 1) 86 41 SUBJECT DEED (Page 1 of 5) �-r IIAAVs a %z� u-� � ",j: TMs 41 , ti, 10ILN, LIJ, t1w "'7 -Qv A 1"I 1 w.:.d t I< I rs 7md :,ter cz !W,eAI!5 I&A rya 1,7 1 Um L—�,ruy Clark Real Estate Appraisal (I 1-129c) (12/19/2011) 87 (Page 2 of 5) zouol-26 IS5,40 ZM-1j"-j! s.F:.i;c. "'— If , 5-LL Clark Real Blate Appraisal ( I I- 129c) (12/19,2011) 88 (Page 3 of 5) &, 7=ta'•.. ,r :: 'a st:,B is . -. ,, ._a 7.^_ -e 9'�'tv.-"�- ,_s<. , pr=Wm"v .mpg tt KKN ws L"i WM. Aw"..h' _1I Wy Lf Am N.;3 nAn.- zvYcAt.. . n ,..h a .. 1 at•: i:: «Cd-�.�1a. ts£i 3 .. '2'K 5�C e, e4 �rtr:r `9r'r� i c-d , C^• -P�f» ci Clark Real Estate Appraisal (I I-I29e) (12/19/2011) 89 (Page 4 of S) a„. :,i� raw��xtrt; g:s.� c3�.c. �,c.-A.. -wl=s� a-<;3 %�1;•. �B:.feM No" -� ,5_ ..n A- �^-.€ a.. .... r-sF�2. fsPS�u:,3- E,.iYs:'TO , �t �•}P.- `e-p:'_➢-in 4P: k-1 FF34 Ei:a 1. Y'e.'. ce:.Dlt:ra `- 5.£�� c _.. ��"e'X !•.;h'. .- ::'=1.% own 1; �? "`as t'§."� :�R:�V=.§.13`�E: �G.'ll:'.iTh .i..6 E•-. igPiY �".. 3- . ' ..r.-._..sr_ WK erg- k " i4Lr M14" M 10i:_."'sm � g q, e Y .':«.. 1l"u- 7lIi t:t.:" f. r_1« �117' il ✓"a F"_;.: f Clark Rcat Btalc Appraisal (I 1-129e) ( 12/I9 201 1) 90 (Page 5 of 5) T„ u P'-. �rvM TF—I;^=. +-. a'a� zap _ .a 7 "tic �-. s�9I, '.i sarrr:�e € '?.x} _ �r:a'._ a^-. °':r€�` .Fs 0 wide.;µ'. .^�,_Wr,„�,. is -oll =14", €_ iceCOMM ma Ov law in n z' mf— M i' s; ;^r $ rr„i'. A" 3:-rs „'i' #'e a€=_:, F WX at— eva Aw>... W aa.,r,.=i .�.3 ''7.a 7yi um -u9otn. WMIUM 401 wool 9-1 ..e:`®E:d, �..�..n,..� 3's` E it t' Clark Real Estate Appraisal (I I-129e) (12/19/2011) 91