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3. Valley Bank Parking LotCity of Kalispell Charles A. Harball Office of City Attorney City Attorney 312 First Avenue East P.O. Box 1997 Kalispell, MT 59903-1997 MEMORANDUM TO: Mayor Pamela B. Kennedy and Kalispell City Council FROM: Charles Harball, City Attorney James H. Patrick, City Manager SUBJECT: Status of Negotiations with Valley Bank Tel 406.758.7708 Fax 406.758.7771 charball@kal1spell.com MEETING BATE: Monday, January 14, 2008 --- Work. session BACKGROUND: The City Manager has been in discussions with the executive staff of Valley Bank regarding a land exchange in which the bank would acquire the City's five lots on Main Street between 3rd and 4th Streets and the City would acquire five of the Bank's adjacent lots on First Avenue West. An appraisal of the properties has been obtained that has been approved by the Bank's Board of Directors. This appraisal is attached for Council's consideration. RECOMMENDATION: City staff is recommending that Council direct that negotiations continue on the fair land exchange to reach a result that would allow Valley Bank to construct its new facility on Main Street on the existing City parking lot and allow the City to obtain the land necessary to be able to eventually construct a multilevel parking facility on First Avenue West. Respectfully submitted, F' Charles a , City Attorney es H. Patrick, City Manager File # 07312 APPRAISAL INVOICE December 27, 2007 Prepared for: Valley Bank of Kalispell, MT P.O. Box 48 Kalispell, MT 59903 Land Appraisal & Analysis 1 Summary Report Properties Appraised: Kalispell original Townsite, Block 55, Lots 8- 12 [Part A] Kalispell original Townsite, Block 55, Lots 1 6-20 [Part B] Work Performed: Commercial Land Appraisal 1 Narrative Report: $3,000.00 Total amount due $3,000.00 Federal Tax I.D. # 01.-071.5978 Please make checks payable to: Frazier Appraisal Services, Inc. PO Box 45 Whitefish, MT 59937 COMMERCIAL LAND APPRAISAL & ANALYSIS SUMMARY REPORT FILE #07312 PROPERTY APPRAISED Kalispell Original Townsite, Block 55, Lots 8-12 [Part A] Kalispell Original Townsite, Block. 55, Lots 16-20 [Part B] PREPARED FOR: Valley Bank of Kalispell PO Box 48 Kalispell, MT 59903 PREPARED BY: William R. Frazier MT Certified General Appraiser #401 Frazier Appraisal Services, Inc. P.O. Box 451 Whitefish, MT 59937 PH: 406-862-3600 Fx: 406-862-3648 Effective Date of Appraisal: December 18, 2007 Date of Report: December 27, 2007 December 27, 2007 Valley Bank of Kalispell Po Box 48 Kalispell, MT 59903 Dear Representatives of Valley Bank, In accordance with your request, I have personally inspected and prepared an appraisal report and analysis of the real property known as: Kalispell original Townsite, Block 55, Lots 16-20 [Part A] Kalispell original Townsite, Block 55, Lots 8-1 2 [Part B ] The attached narrative, summary report contains the bases, data and analyses upon which the value estimates rely containing 38 pages including exhibits, is hereby submitted for your review. The appraisal assignment is to estimate the market value of the real estate, under the hypothetical condition that the properties identified above are vacant and ready for future development to their highest and best use. The appraisal problem, as discussed with my client, is to determine the fair market value of the two sites in conjunction with the potential for a trade of the properties between the City of Kalispell and Valley Bank of Kalispell. The purpose of this appraisal assignment is to estimate the market value of the real properties for potential trade negotiations. The assignment is a real estate appraisal issued in a Summary Report, which is in compliance with the Uniform Standards of Professional Appraisal Practice [USPAP]. The report presents a summary of my analysis and states the integral facts, reasoning and conclusions regarding the appraisal process to develop an opinion of market value. The effective date of appraisal is December 18, 2007 the date of viewing and photographs. The value estimate is subject to the attached assumptions and limiting conditions contained in the appraisal report. William R. Frazier, MT General Appraiser #401 inspected the property. I trust that the information provided is sufficient to accomplish its intended use. The opinion of market value assumes a marketing and exposure period of approximately one-year based on sales within the marketing area. A summary of my conclusions follows: As -Is Vacant Land MARKET VALUE ESTIMATE: Part A, Valley Bank Site: $280,000 Part B, City Main St. Site: $350,000 It has been a pleasure to assist you. If I may be of further service to you in the future, please let me know. Sincerely, William R. Frazier Montana General Appraiser #401 Frazier .Appraisal Services, Inc. — 2 TABLE OF CONTENTS COVERPAGE............................................................................................................................... 1 TRANSMITTALLETTER..►►........................................................................................................ 2 TABLEOF CONTENTS................................................................................................................ 3 CERTIFICATION.........................................................................................►................................ 4 ASSUMPTIONS AND LIMITING CONDITIONS►..................................................................... 5 STATEMENT OF COMPETENCE...........................................................►................................... 8 DEFINITION OF FAIR MARKET VALUE................................................................................. 8 PROPERTYRIGHTS APPRAISED.............................................................................................. 8 DEFINITION OF FEE SIMPLE TITLE........................................................................................ 9 PURPOSE AND INTENDED USE OF THE APPRAISAL.......................................................... 9 SCOPEOF WORK......................................................................................................................... 9 AREADATA...........................►................................................................................................... 11 PART A — VALLEY BANK LOTS............................................................................................. 15 EXECUTIVESUMMARY........................................................................►................................. 15 SUBJECTPHOTOS..................................................................................................................... 16 IDENTIFICATION OF THE PROPERTY.................................................................................. 17 LOCATION OF SUBJECT PROPERTY..................................................................................... 17 STATEMENT OF OWNERSHIP................................................................................................ 18 HISTORY AND USE OF THE SUBJECT.....►►.............................►....■.............................►.........• 18 ASSESSMENTAND TAXES..................................................................................................... 18 ZONING..........................................................................................................►............................ 18 SITEDATA.................................................................................................................................. 19 HIGHEST AND BEST USE........................................................................................................ 19 SALES COMPARISON APPROACH 1 LAND AS THOUGH VACANT ................................. 20 PART B — CITY OF KALISPELL LOTS............................►....................................................... 24 EXECUTIVESUMMARY.......................................................................................................... 24 SUBJECTPHOTOS...................................................................................................................... 25 IDENTIFICATION OF THE PROPERTIES............................................................................... 26 LOCATION OF SUBJECT PROPERTY......................................►.............................................. 26 STATEMENT OF OWNERSHIP................................................................................................ 27 ASSESSMENTAND TAXES..................................................................................................... 27 ZONING.......................................................►........................►.....►.......................►.......................■ 2 SITEDATA.................................................................................................................................. 28 HIGHEST AND BEST USE..........................................►............................................................. 28 SALES COMPARISON APPROACH 1 LAND AS THOUGH VACANT ................................. 30 FINAL RECONCILIATION: PARTS A & B........................................................►..................... 33 GRANT DEED LOTS 8-12, BLOCK 55..................................................................................... 34 ENGAGEMENTLETTER........................................................................................................... 35 PRIVACYNOTICE..................................................................................................................... 37 QUALIFICATIONS OF APPRAISER........................................................................................ 38 Frazier Appraisal Services, Inc. — 3 CERTIFICATION I certify that, to the best of my knowledge and belief: the statement 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 my personal, impartial, and unbiased professional analyses, opinions, and conclusions. I [We] have no present or prospective interest in the property that is the subject of this report and no personal interest with respect to the parties involved. I [We] have no Was, with respect to the property that is the subject of this report or to the parties involved with this assignment. my engagement in this assignment was not contingent upon developing or reporting predetermined results. my compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal. my analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice. Mr. Frazier and Ms. Tasa made a personal inspection of the property that is the subject of this report. I, William R. Frazier, MT Certified General Appraiser #401, have personally prepared all conclusions and opinions about the real estate that were set forth in the appraisal report. I have not authorized anyone to make a change to any item in the report; therefore, if an unauthorized change is made to the appraisal report, I will take no responsibility for it. Audra Tasa, an unlicensed appraisal trainee, assisted in the viewing, development and writing of the appraisal report. William R. Frazier, MT General Certified Appraiser 4401 is responsible for all the development and value conclusions regarding the appraisal assignment. William R. Frazier 1 Supervisor Montana General Certified Appraiser #401 Audra Tasa Appraisal Trainee #838Fi1e #07312 — Frazier Appraisal. Services, Inc. — 4 ASSUMPTIONS AND LIMITING CONDITIONS By this notice, all persons or firms reviewing, utilizing or relying on this report in any manner bind themselves to accept these assumptions and limiting conditions. Do not use this report if you do not so accept. These three pages are part of this appraisal report; they are a preface to any certification, definition, fact or analysis and are intended to establish as a matter of record that my function is to provide a present market value indication for the subject property based upon my observations as to the subj ect property and its associated real estate market. This appraisal report is an economic study to estimate value as is defined within. It is not an engineering, construction, legal or architectural study or survey and expertise in these areas, among others, is not implied. The appraisal process considers socio-economic conditions as they affect the property being appraised. This encompasses national, regional and local factors that affect the property either advantageously or disadvantageously. In arriving at a final value estimate the appraiser reviews all applicable approaches to value. The greatest weight is given to the approach or approaches that provide the most reliable information for the property being appraised. The appraiser's opinion of value is thus based upon the interpretation of facts developed from the marketplace, utilizing the appraiser's general knowledge and experience in processing and analyzing available data. 1 } USE OF REPORT: This appraisal is a package composed of multiple pages and parts. Other component parts of this appraisal report include but are not limited to maps, floor plan sketch, pictures and various explanatory addenda. This appraisal report is to be used only in its entirety and no part is to be used without the whole report. Possession of this report or any copy thereof does not carry with it the right of publication nor may it be used for other than its intended purpose. The physical report remains my property for use by the client; the fee is for the analytical services only and neither all nor any part of this appraisal report shall be disseminated to the general public by the use of advertising media., public relations, news, sales or other media for public communication without my prior written consent. 2) CONFIDENTIALITY: I will not divulge the material contents of this appraisal report, its analytical findings or conclusions to anyone not employed by my firm or give a copy of the report to anyone other than the client or his designee as specified in writing except as may be required by a court of law or other body with the power of subpoena. All conclusions and opinions concerning the analysis as set forth in this report were prepared by me and no change of any item in the report shall be made by anyone other than myself. I shalt bear no responsibility if any such unauthorized change is made. 3) CHANGES: Frazier Appraisal Services, Inc. as the appraisal firm, and I, as the undersigned appraiser, reserve the right to alter statements, analyses, conclusions or other value estimates in the report if facts become known to us that are pertinent to the appraisal process but that were unknown to us when the report was finished. 4) REGULATION COMPLIANCE: This appraisal is based on the premise that there has been full compliance with all applicable federal, state and local environmental regulations and laws unless otherwise stated. I also assume that all applicable zoning, building, use regulations and restrictions of all types have been complied with unless otherwise stated and that all required licenses, consents and permits from legislative or administrative authorities, local, state, federal and/or private entities or organizations have been or can be obtained or renewed for any use considered in the value estimate. 5) THE AMERICANS WITH DISABILITIES ACT (ADA): The ADA became effective January 26, 1993. I have not made a specific compliance survey of this property to determine whether or not it is in conformity with the various detailed requirements of the ADA. It is possible that a compliance survey of the property, together with a detailed analysis of the requirements of the ADA, could reveal that the property is not in compliance with one or more of the requirements of the act. If so, this fact could have a negative effect upon the value of the property. Since I have no direct evidence relating to this issue, I did not consider possible noncompliance with the requirements of ADA in estimating the value of the property. 6) TRADE SECRETS: This appraisal was prepared by and obtained from Frazier Appraisal Services, Inc. and signed by William R. Frazier, Montana Certified General Appraiser [#401 ]. It consists of "trade secrets and commercial or financial information" that is privileged and confidential and exempted from disclosure under 5 U.S.C. 552(b)(4). Notify me for any request to reproduce this appraisal in whole or in part. - Frazier Appraisal Services, Inc. 5 7) INFORMATION USED: No responsibility is assumed by myself for accuracy of information furnished by work of or work by others, the client, a designee or public records. I am not liable for such information or for the work of possible subcontractors. However, the comparable data relied upon in this report have been confirmed with one or more parties familiar with the transaction or from affidavit or other source thought to be reliable. All are considered appropriate for inclusion in this report to the best of my factual judgment and knowledge. An impractical and uneconomic expenditure of time would be required in attempting to furnish unimpeachable verification in all instances, particularly as to engineering and market related information. I suggest that the client consider independent verification as a prerequisite to any transactions involving sale, lease or other significant commitment of funds on the subject property. Any sketches, photos or other of the above -listed data., when included as part of this report are only for the purpose of assisting the reader in visualizing the subject property. Site plans are not surveys unless shown as being from separate surveyor. S} SOIL, LEGAL, ENGINEERING, STRUCTURAL, MECHANICAL NATURE OF HIDDEN COMPONENTS: The Appraiser or Firm has no responsibility for matters that are legal [either in character or nature] nor of any matters of an architectural, structural, mechanical or engineering nature. No opinion is rendered as to the title, which is presumed to be good and merchantable. The property has been appraised as though free and clear of all encumbrances unless otherwise stated in particular parts of the report. The legal description, as used, is assumed to be correct. To the best of my knowledge and beliefs, the statements of fact contained in this report are true and correct but no advice is given regarding mechanical equipment or structural integrity or adequacy or for matters concerning liens, title status or legal marketability. I have inspected, so far as is possible, by observation, the land. The appraisal is based on there being no hidden, unapparent or apparent conditions of the property site, subsoil, structures or toxic materials that would render it more or less valuable. I have no responsibility for any such conditions or for any expertise to discover them. 9) VALUE CHANGE OVER TIME: The estimated market value that is defined in this report is subject to change with market value changes over time. Value is highly related to exposure, time, promotional effort, terms, motivation and conditions surrounding the offering. The value estimate considers the productivity and relative attractiveness of the property physically and economically in the marketplace. In cases of appraisals involving the capitalization of income benefits, the estimate of market value or investment value or value in use is a reflection of such benefits and my interpretation of income and yields and other factors derived from general and specific client and market information. Such estimates are as of the date of the subject estimate of value and are thus subject to change as the market itself changes. Value is therefore naturally dynamic. 10) COMPONENT VALUES: Where the value of land and their improvements is shown separately, the value of each is segregated only as an aid to better estimate the value that it lends to the whole rather than the value of that particular item if it were by itself. The distribution of the total valuation in this report between land and improvements applies only under the existing program of utilization. The separate valuations for land and buildings must not be used in conjunction with any other appraisal and are invalid if so used. 11) INCLUSIONS: Furnishings, equipment, personal property or business operations except as specifically indicated and typically considered as part of the real estate, have been disregarded with only the real estate being considered in the value estimate unless otherwise specifically noted. 12) PROPOSED IMPROVEMENTS: Improvements proposed, if any, on or off site, as well as any repairs required, are considered, for purposes of this appraisal, to be completed in good and workmanlike manner according to information submitted and/or considered by myself. In cases of proposed construction, the appraisal is subject to change upon viewing of property after construction is completed. 13) MANAGEMENT: Responsible, prudent ownership and competent management are assumed for the property that is the subject of this report. 14) TOXIC MATERIALS: I have no knowledge concerning the presence or absence of toxic materials and/or urea -formaldehyde foam insulation in the existing improvements. If such is present the value of the property may be adversely affected and reappraisal, at additional cost, may be necessary to estimate the effects of such. The value estimated in my report is based on the assumption that the property is not Frazier Appraisal Services, Inc. negatively affected by the existence of hazardous substances or detrimental environmental conditions. I am not an expert in the identification of hazardous substances or detrimental environmental conditions. My routine viewing of and inquiries about the subject property did not develop any information that indicated any apparent significant hazardous substances or detrimental environmental conditions that would affect the property negatively. It is possible that tests and viewings made by a qualified hazardous substance and environmental expert would reveal the existence of hazardous materials and environmental conditions on or around the property that would negatively affect its value. 15 ) POST -COMPLETION TESTIMONY OR CONSULTATION: I am not required to give testimony or appear in court in any capacity by reason of this appraisal except under separate and special arrangement and at additional fee. The contract for appraisal, consultation or analytical service is fulfilled and the total fee is payable upon completion and shortly after delivery of the report. If testimony or deposition is required because of any subpoena the client shall be responsible for any additional time, fees or charges regardless of issuing party. 16) LIMIT OF LIABILITY: My liability, as undersigned appraiser, and Frazier Appraisal Services, Inc. as the appraisal firm, is limited to the client only and to the fee actually received by the firm. Further, there is no accountability, obligation, or liability to any third party. If this report is placed in the hands of anyone other than the client, the client shall make the other such third party aware of all limiting conditions and assumptions of the assignment and related discussions. I am in no way to be responsible for any cost incurred to discover or correct any deficiencies of any type present in the property --physically, financially or legally. In the case of limited partnerships or syndication offerings or stock offerings in real estate, the client agrees that in case of lawsuit (brought by lender, partner or part owner in any form of ownership, tenant or other party) any and all awards, settlements of any type in such suit, regardless of outcome, that the client will hold me completely harmless in such action. 17) EXHIBITS: The sketches, maps and illustrations in this report are included to assist the reader in visualizing the property and are not necessarily to scale. Various photos, if any, are included for the same purpose. Site plans are not surveys unless shown from a separate surveyor. 1 S) AUXILIARY AND RELATED STUDIES: No environmental or impact studies, special market study or analysis, highest and best use analysis study or feasibility study has been requested or made unless otherwise specified in an agreement for services in the report. 19) FEE STRUCTURE AND COMPENSATION: Neither the employment to make the appraisal nor the compensation for it is contingent upon the amount of valuation reported. The fee for this appraisal is for the service rendered and not for the time spent on the physical report. 20) PAYMENT OF FEE: Payment in full is due in a timely fashion after delivery of the report. Suitable time is allowed for review of the report as to accuracy and thoroughness. ACCEPTANCE OF, AND/OR USE OF THIS APPRAISAL REPORT BY CLIENT OR ANY THIRD PARTY CONSTITUTES ACCEPTANCE OF THE ABOVE CONDITIONS. - Frazier Appraisal Services, Inc. - 7 STATEMENT of COMPETENCE The Uniform Standards of Professional Appraisal Practice [USPAP] requires that appraisers entering into an appraisal agreement have the knowledge and experience to complete the assignment competently; or alternatively: 1) disclose the lack of knowledge and/or experience to the client before accepting the assignment; and 2) take all steps necessary or appropriate to complete the assignment competently; and 3) describe the lack of knowledge and/or experience and the steps taken to complete the assignment competently in the report.' William R. Frazier, Montana general licensed and certified appraiser has the educational requirements and experience to complete the assignment competently. DEFINITION of FAIR MARKET VALUE STATE of MONTANA Current fair market value. (MCA 70-30 -313) "Current fair market value is the price that would be agreed to by a willing and informed seller and buyer, taking into consideration, but not limited to, the following factors: (1) the highest and best reasonably available use and its value for such use, provided current use may not be presumed to be the highest and best use; (2) the machinery, equipment, and fixtures forming part of the real estate taken; and (3) any other relevant factors as to which evidence is offered." The economic or financial definition of Market Value is slightly different. It is utilized as the basis for financial transactions. The definition is from FIRREA. "The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby-- (1) buyer and seller are typically motivated; (2) both parties are well informed or well advised, and acting in what they consider their own best interests; (3) a reasonable time is allowed for exposure in the open market; (4) payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and (5) the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale."2 These definitions are intrinsic to the value conclusions set forth in the appraisal assignment. PROPERTY RIGHTS APPRAISED Property rights are typically assumed to be unencumbered, fee simple title. I have assumed no responsibility for the marketability of the title. The value conclusion assumes an encumbered fee simple title. I Appraisal Foundation, Uniform Standards of Professional Appraisal Practice, 1998 Edition, p. 5. 2 Title XI of Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA). Frazier Appraisal Services, Inc. — 8 DEFINITION OF FEE SIMPLE TITLE "A title that signifies ownership of all the rights in a parcel of real property subject only to limitations of the four powers of government. "3 These are eminent domain, escheat, police power and taxation. PURPOSE AND INTENDED USE OF THE APPRAISAL This appraisal is to develop an opinion of market value of the above cited subject real estate to U.S. cash terms in fee simple title. Ronald R. Rosenberg, representing Valley Bank of Kalispell, ordered the appraisal and is thereby my client. Based on our discussion of the appraisal assignment, the intended users of the appraisal are to include representatives of Valley Bank and the City of Kalispell. The intended use of the appraisal is for negotiating a potential trade of the two properties and/or establishing a basis for the potential trade. SCOPE OF WORK For each appraisal or consulting assignment, the appraiser must; 1) Identify the problem to be solved. The appraisal problem, as discussed with my client, is to provide an appraisal that determines the market value of the two defined tracts of land as though vacant and ready for development to their highest and best use as described in the body of the report. Any differences in the value conclusion of the two parcels will establish the basis for negotiating a potential trade of the two parcels. 2) Determine and perform the work necessa to develop a credible result. The scope of work is to recognize the specific conditions set forth in the definition of fair market value. These "conditions" require a specific knowledge of the subject property, knowledge of the real estate market and marketing area, an understanding of market behavior, conditions of sales and the subject's history, contracts and other sales history that can be reconciled to the general market conditions. The appraisal considers socio-economic conditions as they affect the property appraised. This encompasses the national, regional, local and all other external factors that affect the subject real property. A physical inspection of the property, neighborhood and local area is made as a basis for the analysis and application of the three recognized approaches to real property valuation; Sales Comparison Approach [SCA or Market], Cost and Income. In arriving at a value estimate, the appraiser reviews all approaches to value and applies those approaches that are applicable to the assignment. There are six valuation methodologies that can be utilized in land valuation. 1) Sales Comparison or Market Approach, which consists of adjusting comparable sales to the subject property. 2) Ground Rent Capitalization or Direct Capitalization; which is the leased fee interest in an income producing site. 3) Extraction Technique; which is estimating the site value of an improved property by subtracting the depreciated contributory value of the improvements. 4) Allocation; which is the application of the appropriate land to value ratio of improved properties, typically utilized in improved subdivisions where no vacant lots or "similar" lots are available for comparison. 5) Subdivision Development; which is based on the net present value of the projected income from the sale of lots after all expenses estimated for the development are extracted over the time necessary to sell the lots. 6) Land Residual Technique is similar to Extraction but from a cost or income perspective versus sales. All costs to improvements [hard, soft, profit, etc.] are deducted from value of an improved property. Similarly, income from an improved property is analyzed and all expenses for operation and the return attributable to 3 American Institute of Real Estate Appraisers, The Dictionary o, f Real Estate Appraisal, Second Edition, (Chicago: American Institute of Real Estate Appraisers, 1989), 120. - Frazier Appraisal Services, Inc. - 9 the other agents of production are deducted and the net income imputed to the land is capitalized to derive an estimate of value to the land. In this assignment, Sales, Extraction and Allocation methodologies are considered throughout the analysis. 3) Disclose the scope of work in the report. Preparation of this assignment included: ➢ viewing the subject property and defined neighborhood. ➢ a viewing of comparable sales [land and improved] within the Kalispell marketing area; ➢ gathering, confirming and analyzing sales and data applicable to the subject property; ➢ applying the valuation methodologies to arrive at an indication of value for the subject real estate and reconciling the data to present a reasonable opinion of market value for the subject real estate. To insure compliance with USPAP, I am including the following reporting requirements. 1) Client &Intended User: 2) Intended Use: 3) Identify the real estate: 4) Real Property Interest Appraised: 5) Purpose of Appraisal: 6) Effective date /Reporting date: 7) Scope of Work: 8) Assumptions /Limiting Conditions: 9) Appraisal procedures 10) Use of the real estate: 11) Include signed Certification Valley Bank of Kalispell and City of Kalispell Representatives. Negotiating a potential trade Included herein Fee Simple Market Value Estimates: Definition and Source: Included herein December 18, 2007 I December 27, 2007 Included above Included herein Included herein Included herein Included herein ➢ The following sources were contacted regarding information utilized in the process: Source NMAR 1 MLS Local Brokers/Agents Property owners, buyers, sellers Office Data Flathead County Clerk Flathead County Assessor Information Market Sales Data Market Sales Data Market Sales Data Subject and Sales Data Subject & comparable data Tax Records To develop the opinion of value, I performed the appraisal process, as defined in USPAP. This document is categorized as a Summary Report. In conclusion, the appraisal seeks to answer the following questions: (1) Does the As -Is value meet the criteria set forth as a reasonable determination of the highest and best use of the land? (2) When all market data is analyzed and reconciled, what is the market value of the property, As -Is, and is there a measurable value difference between the two defined properties that would require one or another party [owner] to pay a cash difference in order to equalize value for the potential trade. r-- Frazier Appraisal Services, Inc. — 10 AREA DATA Flathead Cow continues to be one of the fastest grower ccunties m Montana. Statew, i e population increased b 33,475 33% betuven � 1. � and. July. 13 � _ One third of #��56 counties have pc1mlations in excess of 10,E and of thus 19 most populated comties, only 14 show mcreases � emulation_ 33 of 56 counties, most . Eastem Nlontana, lost population b etiveen 1990 and 200- 'Qk4ule many counties M Eases Montma are experienctug declining population . during the pi t five yew Flathead County has been the second fastest grow co x M the sty, both percentage and numerical increases and is the .3 rd most plated, repmsenting ,a nt :9 percent of the state's toW populafo. Flathead County represmts 17.5 percent of the overall population mcrease m Montana since 1990 and 26 pent bet em 2000 and July of '02005. In other 171athead County absorbed more than one fow-th of the i reain population. of the EVTIRF STATE during the lastfive year period - Figure 1. Mona Counties Percent Population one, 2000 - 2005 — Frazier Appraisal Services, Inc. 1 I Table I -Montam Goimtles Population Tvm& in Counties, nth a Population over, 10,000 (LAsted ascending by 2005 estimated population) 2006 cem"s esfimate 2'M Census Numeri�]. Change 001-06 chang.e.. 010-05 1990 Census Numerical Chang, 90-ID,5i %change I.M-M6 MONTANA 9A67 9021,195 33,475: +3.7 .799 136605 +17.4% Yellowstone 136,691 129y352 7,339 +57 1131419 '2?12T2 +M5 Mis"a 100086 95,802, .... .. .... . . . . . . . . . . 4,284. +4_5 P, 78.-.,6,,a,7 .. ....... +27-2 Cascade n,569 80:.357 -788. -I'D 77,691 1,878 +,21.4 Gallafin 78210 I M379 +15,3 - 3 ... 50AS 27,� 747 +55�O LeWts and Clark. 58-449 5 16 2,733 +4_9 47-1-95 10,954 +23-059 Ravagi N,940 3-6,070 3870 +10 . 10 14,93-3 +.7 Silva Bow, .32: 34 6,114 -47 33 941 -959 -4j Lake 28.297 26,50.7 790 +6_8 21,041 Z.,256. +34-5 UrXXAR 19J93 18,837 356 +1_19 17,481 1,712 + 9-8 Hill 16304 I 161673 - 369 22'1 17,65-4- 35 0 -7,6 Pa(k 151968 15,6 :A 274 +13 14.L4,34 1.,4, +10,2 Gtacier 13552 13,247 305 +2-3 1 1j431 +11-8 BigHM 131149 1211671 478 +3,8 11 11812 +16,0 M �-Us 11551 1, 1,893 1 -34-21 .91R -419 JZM ........... *7 -Q2 -44 Custer 110,267 -11696 -4,29 - 3-7 11197 -430 +'� 3. 7 Jefferson 11,170 10,049 It.121 +-112 7'M 31231 +40-7 sanders 11,057 10,227 830 +8_1 8,669 2 ..1388 +2T5 Roosevett I, .10,524 1 10 -96. -0�9 10 31999 . I ----------475 -43 The three immici I pahties mi Flathead County are, also experiencing substantial groix-th.- All twee cities clonunm to expand into the real. areas. De-veAopment projects, dist are pLmumd within a reasonable, distance of the cities, oftm request to be annexed into the cite to recft%pe water and sewer senlice. which allows for higher density developments. This, explains why the population Mi real Flathead County Is not increasing at the same pace as the cifies- Tm July of 20052 36 percent of the population of Flathead County resided Vnitinn the three cities of KahspeR., 'Atefish and Columbia Falk. compared to 31 percent in 2000 and 32 percent in 1990. Table 2- Flathead County Riwal i-s. Urban Population Trm& 1990-2005 JUIV "'k� Census % Of 20W %� % Increase. % of % Increase ...... Estimate ........... . .... .......... .. Total ......... Census Total 00-05 ensm ... ... ..... Total. ... . ...... .. .. .......... ........ 90-05 10,4M . ......... . ... .. ................... . .... . ..... . .... ... Whdefish 7,067 8,5 5,032 6-6 +40A 4,368 7A -o-61-8 Columbia Fa ffs 4,440 5.3 3�645 4-9 +21-8 2.1921 4,9 -#-52L Total Urban PopAafion 291987 3&0 22,9W 307 +30.9 19T206 32.4 4-M-1 To R" 53,1185 64.O 511571 69.3 +11 40,r012 67-6 +32-9 Tel Flathead 83J72 100 74,471 100 -t-1 1.7 59,218 100: +40.5 County . ...... ... . . .. ....... ...... . ......... . . ........................ ........ .. ... ............... ... . ... ... . Q. Whfteftsh - Numerical kiaease of 2,035 since 2000 and: 2,699 since 1990 23.4% of total court Wde increase skxe 2000 and 11.3% since 1990 Columbia Falls - Numerical inaease of 795 since 20DO and 1,519 since 19W 9w1% of WW 2Lx� increase since 2000 and 6,3% since.19W Total Urban Pop utation - Numahcal increase of 7,087 since 20M and 10,781 sfte 1990 81. of total countywide hamase � 2000 and 45.0% since 1990 Total Rural Poptdation - Numerical inaease of 1 .614 sitice 2000 and 13.173: since 1990 18.5% of total countywide increase since 2M and 55.0% skice 1990 Totat Flathead County - Numerical increase of 8,701 since 2000 and 23,954 since 1990 100% of WWI countywide increase since 2000 and 100% since 1990 Sewce-, U. S- Cemm Mueau, 1990,20M Cemms" 2005 Cen= Evdmatei - Frazier Appraisal Services, Inc. - 12 Since, 2,o, fe i cease in the City* of spell's ration accounts for almost one-h ` of the overall iaacreaw Mi the county's population, and ovv r 7 pexcew smi ce 1990. The City of Mitefish accounts for over 23 perceW, and Columbia Falls, alert 9 percent, of the cede population i=ease since the 2000 Census. Since 2000, the pm in the unmicorpoted gofioas of the county accounts four IS . 5 percent of the total grown in the county. Fignre 3 demmstrates that the City of Kalispell population has been steely Mcreasing since the 1960's with_ h£ significant mc:reases spice 1990. F-ven though. vaal areas of the co ty are also expenenemg sipificam gw%lk the percentage Vixcr-ease is mum less than in the cities- kpia, this can be attributed to large areas being annexed mto the cities and developed for high amity named use and residential lousing wbe. These large annexations are occurring nwe so in Kalispell in Whitefish or Cola Falls. Figs 3.. Flathead Cotm#y Uban and Rural Population Trmds (ToW. Population) 1960 -oo WM~ --*-CdkffMa Faft -n-- t �tau�eay 40 160P 40P Or 4V Table 3. Specifed Owner Occ*ed hiedzau Home Vaties 1980-2005 lue r Census 11990 % increase 1980 1 1 1 -0 Whites 5128,5W $57,900 S42 +36% +1 ofun*�,a Fogs $100M 49. 9OD 34 7 + t 5 +101 t±Ligreen Rathead C S101,9DO 'l a $54800 42 $47,858 .- + 4 + +16 +96% � +54,3 ------ -------- L ----------- United States S.%71MO $419,600 $79,100 $55,135 +42 +51 +40D% Ndaa*,*We ftmU. Cams &jEaLif h 0 'fix DP- -a a-W DP-41; f-- Frazier Appraisal Services, Inc. — 13 Meditut home vahoe is not to be confused with inodiait homeprce_ Mediate value a%snmes that halfof homes have a value of less and half haire a x-alue of more_ Median hou value data is det : by the U,. _ Census Bureau at the fime of each Decennial Census, In Flathead Count'; 7005 man home. value has been esfimted byr the US— Censers 1.005 American Comity Sunre ACS _ Only o mer occupied hou is used to determmie me an vahw- Rental homing umts or group quw-tenare not uxAuded In the Census calculations of mean home values- Decenma,l Census is al-allable for places, such as stateslz c nties., cities and Census Designated Places (CDP), The American Con= ity Survey is only at -a Uble dmvn to the county level_ The ACS has some issues when compafing with Decenmal Census data_ The American Community Survey is a more mclnsi'um"verw. and uses ALL owner occupied its mn tabulating Nralue, oar costs, mortW�e status, and costs as a pernta of ion The Decennial Censors is based on a sampling of "died comer occupie�d7:! umt.s. Even thou tlffe are comparability iss€ m the follow xg table contains both the, Decennial Cem, us data: and the scan C ty Survey data- It is igiant to 1wep these issues in mmd m4mm looking at the foll:owmg table_ Although the numbers may not be 1.00 percent con rable. it is ob Aous that me&an home values in Flathead County we higher than national and sate .=alms and have contimjed to pease since 2000. Commercial Construction In the Pau, this repw has not inclu&d data on commercial constcti.on_ Sipe c MIMI acti-VitV has been rapidly iacreasmg and has a snbstantal inflimace on the fesidentLal consftucion acti-vity, this report will attempt to address the major projects that have occurred in the last mro to duve rears as well as projects that are undemray.. In early 21004's coustnxfion of the Home Depot m the Nlountam View llama #eta m the notthem pmt of the city aloe Highway _since Home Depot was consMxte , jor cu rl construction activity has occ€ nvd and continues in the nanhern part of the city along Highway 93 - Following the co truction of Home Depot... Target, Borders Books. Pier One Impcats, Fetco, an !HOP restaurant and several other Major retail businesses have been established M the Mountain V iew uAxhvistm on. the east side of Highway 93 at the junction ofWest Resenxe Dn"ve. Lowe;s and Castca in the Spring Frasrie Center development on the uvst ude of Higinvay 93 at the imcon: of Vest R►es-e Dti e also occurred in. late 2 5_ In. late: 2 5� the permit was i€mued for c€xnsb=tion of the Wells Faigo Ba* building in the -Spring Prane Center and consmrtion began. and was completed in 2006. Construction of a Sys coffee house was also colleted durmg 2:00just north of the new Fells Faso Bank. The pemA was issued w. late 2005 for a new fire station and was completed m 2006 on a site just yes of Como. In late 2006., carob=tion bed on the Holiday Inn E.Vms Just to the n thhwest of Lowes. major construction is may in the Hutton Ranch: Plazan. a 26 lot commercial subdiviuon south of Xfo=tai.n Vie ► Plaza and How Depot and north: of Flathead VaUey Commmity College- The Huftm Rah Plaza will likely see, constrmtion actixity for sevenl yean and is planned to inchide a hotel., titres and ar variety of retail busmesses and restaunntsTo date, its have been isswd and constucti.on is undue ay for a theatre,, two retail store shelf, an office shell, a restaurant and a bank.. Additional retail strictures and near health care fac€Wi€es continue to comphment the Kalispell Regional Nfedical Center area_ A 64,,1100 squafe foot eVm on. of the Iaispell Center MaU complex ix -as completed durmg 2006 with the addition to the mom and com-ention centre_ Thee-NaticnA Guard Annofy south of do%mto •n Kah-spel1 has been relocate to north of the cite_ The old armoty has been demolished and the Hilton warden Ian is under consrn ion. Ong. 2005 and 2006, In the Daley Field ski siOa south of Ro auen, a Mee Rilw Pizza re tanrant a lid store,, a ftuniture stwe and sho81 f€f offices have been or are under construction. esteem Buildmg Center has added additional retail and warehowe space, The pent was ism in2005 and wofk continues on. the new 199,000 sq=e foot Glacier High School on the southwest comer of West Resen're Ddve and Stillwaw RDa& Flathead Vafley Commuaity College. is wkhng . a: Child Developmeat Centff,,. an Occupadoml Trades buildmg and an Arts and Technolo,r building totalg. onrer 89.000 square feet_ T spell Hof High is also building a 9280 squme foot ca&4eria addition- 4 4 Data from Kalispell 2006 Construction, Subdivision and Annexation Report Frazier Appraisal. Services, Inc. — 14 PART A -- VALLEY BAND LOTS EXECUTIVE SUMMARY Property Appraised: Vacant Development Real Estate Lots 1 6-20, Block 55 [See Attached Site Map] Kalispell, MT 59901 Legal Description: Lots 16-20, Block 55, Kalispell original Townsite Section 18 - Township 2 8N - Range 21 w Client / Intended User: Valley Bank of Kalispell / City of Kalispell Intended Use: Establish a Value basis for potential trade negotiations Current Owner: Valley Bank of Kalispell Assessor Number: 75-0891276 [portion ofJ Geo Code: 07396618147130000 Census Tract Number: 30-029-0010 Site Data.: Five City Lots totaling 0.40 Acre. City services, natural gas and public utilities available. Zoning: B4 [Central Business] Compliant Property rights appraised: Fee Simple Highest and Best Use: As Improved Commercial Site Current Use: Vacant Land/ Parking Lot Improvements: Typical Paved Parking Lot Market Value Estimate Part A: $280,000 as of December 18, 2007 — Frazier Appraisal Services, Inc. — 15 SUBJECT PHOTOS ., ---] I - . .�. I . t .i . :. �n U T. ,. R 4] =.. \�....., .... .., . ..... .x..�c. ,--. \v" ... .. .\ ...... :e......,.,.,., ,:....... ... ,i... i::. ...' .....v� ... .. ....... l . ... `;; .. ....... i::.r..:: .:.. .. .�.-..�.weerd�b:�:ai?'li�%\:/."new-... .r,.,-. ,-.tiv3w.- ..... . . .. .. . .. ... Y! ........ . . . ..... . ... .... 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So a \ ' .. ..:......... ........ ^.:.': ' :- .... ..... ... .. ..,........ ,.. tn:......:.... ... .. ...... . ... : .. . . ,._ :. . ..... ...: ■ Forthwest 4! ;. . . ... \ .. .. ccy P1111. ,:. ..•:..... ............. Fr- :::-:;=i;:c . :;�e.: .. .. .. . '..:::� mi�ll\ :' .. . � . ., ` . . .,,,, i"M •` .. . .....: .. "2 .\ 5::::.. .:_::..._ y" . .. ...».:::: ' .. ^ >> � I ::.� :: 1-5'-',-tip n.`<.':;,..,: �Zg y. - :' aS` sn:. ' < \�„ ^fi "fit. _ .:.\"; >�;i" '1,� e. .... .. .' '..L:::-�:'. G:: fi :: >`e.- `, ':: r; y »;. • . �; . . ,y: ... ...>� a:, , Z j,.,...'...-' . �.�%... . .. ..:..: ... +,��11�:. r -` .. .... .. .. .. .... ... ...,. n .. ..... ...:::� -11 • �?: Y ��: ' ......... .. .. .:... .: ..:c: -.:'tc.. ?..C.lil� Show: Entrance from AR. 1 ....♦ ..... .... ... ... .... ....... / \ail" -': :'-y : \.-` C.:. \,. `. ......... o.:.:;:_ .:..%.:::::. ..:. ...::::::::.;:....: a. "\` \•/•.: \• ...... , .�'. v. T. i::: �..:., r� y c .i.,Zy .Fr 9.- \ n\. v .... \`::aS ..sue ,.\; .d.... .l. I a. t:. ?s ;;;::. Ills l `.:,» c . .... >S.: ^.:1. y. / », 4 I. \� ,.• \ . �\ u\ ,✓.,;' ti tip;. Cyr�.F; \ )r ti \. \: - ----- -- -- - ..\,..� - �.. �. 1. \. .:' - �.. a . .. ,z _: •, => a). . .. ................... .... ... .h....,:::::::::::.,.. :,\",..ti........ . ,. .. ... ....... .: .. a .... :' \:•: -. \ :' . - '�.—� 4 .. .. .. . .. ..: a .. :. ... .: .: �^ :.. .. :. . ...... .::::.� .:.::.:... .... ...... :...:'.': ..... .. ..::::. ... ..:... .... .... .... .... ..... .. ....... is ... ... ... ... ..... .. .. : ........ .. ....:... ... .. .. .....::.::.:..'.::.. /.: : `` %:. Frazier Appraisal Services, Inc. — 16 II]ENTIFICATION OF THE PROPERTY The subject property is identified as Lots 16-20, Block 55 of the Kalispell original Townsite, bordered by First Avenue West and Second Street West. The lots described are recognized as a portion of the parking lot belonging to Valley Bank of Kalispell. This property is located in the downtown Central Business District of Kalispell. LOCATION OF SUBJECT PROPERTY — Frazier Appraisal Services, Inc. — 17 STATEMENT OF OWNERSHIP The subject real property has recorded ownership to Valley Bank of Kalispell. The property was transferred from Hinsley and King via warranty Deed per Flathead County Recording [book/page] 609/472 dated December 28, 1976. HISTORY AND USE OF THE SUBJECT The subject real estate is a portion of the Valley Bank of Kalispell. The subject is currently utilized as a no -charge parking area for Valley Bank customers and employees. The subject is paved with landscaping separating the parking lot rows. DATE OF VALUATION The date of valuation, also known as the effective date of appraisal, is December 18, 2007 the official inspection of the subject real estate for this appraisal. ASSESSMENT AND TAKES ZONING The subject real estate is zoned B-4 as shown in the zoning map below. Frazier .appraisal Services, Inc. — 18 1) Size 2) Shape 3) Location 4) Frontage 5) Dimensions 6) Number of Access Roads 7) Access Rating 8) Visibility Rating 9) Road Improvements 10) Utilities SITE DATA 0.40 Acre or 17,500sf [five city lots] Rectangular 41 3rd Street west 1" Avenue West, public alley at East. 125' x 140' per survey Currently Three, 2nd Street west, I st Avenue west, and 3rd Street East Good Good Paved City Street, Public Alley Water City Water [available] Gas Northwestern Energy Electricity Flathead Electric Co-op Sanitary Sewer City sewer [available] Telephone 11) Easements/Right of Way 12) Encroachments 14) Topography 15) Drainage 16) Flood map zone and date 17) Census Tract 18) Environmental observations Underground fuel or storage tanks Hazardous materials stored on site Hazardous wastes or spills viewed Centurytel Typical Road and Utility None noted Level at road grade To Be Engineered Zone x: 30025-0005C: 9/30/92 30-029-0010 None known or noted None known or noted None known or noted 19) Other Comments: The subject's size and location make it desirable in the market. HIGHEST AND BEST USE Highest and best use is, 'That reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value. The four criteria the highest and best use must meet are legal permissibility, physical possibility, financial feasibility and maximum profitability."s The use determined from any analysis represents opinion. In addition, highest present value does not always have to be defined strictly in terms of money but, for the purposes of this report, it is that value that maximizes the owner's return on equity investment for an investment -type property. Highest and best use of the land resolves around the concept of development to its zoning potential. older texts defined highest and best use as "the use that will provide the greatest return to the land after the requirements of labor, capital and coordination have been satisfied."6 Two perspectives in each category must also be considered: "as though vacant" and "as improved". Dictionary, op cit, p. 149 f American Institute of Real Estate Appraisers, The Appraisal of Real Estate, 7th ed. (Chicago: American Institute of Real estate Appraisers, 1978), 43. — Frazier Appraisal Services, Inc. — 19 AS -VACANT: The land value is thus based on the premise of the Highest and Best Use of the property as though vacant. The four tests, which are considered in developing an opinion as to the Highest and Best Use of the property are legally permissible, physically possible, financially feasible and maximally productive. There are five general uses that are considered. These are residential, commercial, industrial, agricultural and recreational. Legally permissible: The property is currently designated with a B-4 Designation. This zone is restricted to the central, downtown Kalispell commercial marketplace; other uses [industrial, agricultural, etc.] are generally restricted from the zone.. Physically possible: The site is approximately 0.40-acre, rectangular in shape and has good exposure and vehicular access. City services and public utilities are available. The site is physically able to be developed to its zoning potential. Financial feasibility: Analysis of supply, demand and location are needed to identify those uses that are financially feasible and ultimately that use which is maximally productive. Commercial use is the conforming use that appears to be the most financially feasible. Maximally productive: Commercial use appears to be that use which would be maximally productive. Conclusion: The subject's highest and best use as vacant is as a commercial site. AS -IMPROVED: It is beyond the scope of the appraisal assignment to determine the "ideal" improvement for the subject real estate. SALES COMPARISON APPROACH / LAND AS THOUGH VACANT There are numerous valuation methodologies to arrive at a value conclusion for vacant land; these include sales comparison analysis, extraction, allocation, income capitalization, land residual technique and subdivision analysis. In this assignment, the sales comparison approach to value is considered but due to the lack of B-4 zoned vacant land sales, little weight is applied to the methodology. It is typical for downtown areas to be built -out with little or no vacant land available for construction. Some local towns are currently witnessing the demolition of existing buildings for new construction; however this is not yet common to the Kalispell area. Therefore, the sales included in the summary below are considered as a basis for further valuation models. Kalispell Commercial Lot Sales ,. . Al at�d�' ............ ; ;-xs............... . . s�.. .. ........ . �sfnl 1 1/19/2007 $176,000 Wa 0.25 $16.16 B-2 541 2 7/9/2007 $2501000 _#4,Apple 8th Avenue 0.49 $11.71 B-3 31 3 10/12/2007 $4455,000 145 Commons Loo 0.74 $13.81 H-1 149 4 12/10/2007 $105,000 E. Washin on 0.17 $14.18 B-3 145 *The average unit price of the sales is $13.96/sf rounded to $14/sf. The first, obvious fact is that none of the sales are located within the central business district and none have the B-4 zoning. These recent sales bracket the subject site in land size area and have a relatively tight range in unit price from $13.81/sf to 16.16/sf. Sale #1 is located northwest of the subject, in an area of Kalispell that is further away from the downtown Central business district. The site is located off Meridian Road which is considered a main arteriole running north /south on the west side of Kalispell. The site is smaller than the subject and has inferior zoning, and visibility. The location is considered inferior to the subject due to a lower traffic Frazier Appraisal Services, Inc. — 20 count and mixed use in this area. This sale was listed on 7/27/2005 for $155,512 and sold on 1 /19/2007 for $ 176,000 in a cash transaction with a marketing period of 541 days. Sale #2 is included for its recent date of sale and similar site size. This sale is considered inferior to the subject based on its zoning and distance from the downtown central business district. This sale was listed on 6/8/2007 for $290,000. The property sold on 7/9/2007 for $250,000 in a 14% discounted cash transaction with a marketing period of 31 days. Sale #3 is located north of the subject near the Kalispell Regional Hospital in the Buffalo Commons development. This area is developing with a wide spectrum of commercial uses including professional offices, retail, service, and medical related facilities. This site is larger than the subject site but on -site parking is required. It is considered to have good access and visibility from Highway 93. This sale was listed on 5/ 16/2007 for $499,000 and sold on 1011. 2/2007 for $445,000 reflecting an 11 % discount with a marketing period of 149 days. Sale #4 is located north east of the subject near Highway 2. This site is smaller than the subject and is considered inferior in zoning. This property was listed on 7/18/2007 for $109,000. The property sold on 12/10/2007 for $105,000 in a 4% discounted cash transaction with a marketing period of 145 days. The location map of these sales illustrates their physical differences to the subject. While all are viable building sites, they have little direct correlation to the subject site. Therefore, other valuation models are considered in the analysis. Location Map of Commercial Land Sales mm — Frazier Appraisal Services, Inc. — 21 Land valuation: Allocation The allocation technique in appraisal methodology is described by the Appraisal of Real Estate, Twelfth Edition from the Appraisal Institute as "Either sales of improved properties and the prices paid are allocated between the land and improvements, or comparable sites under development are analyzed and the costs of the finished properties are allocated between the land and improvements. Allocation can be used in two ways: to establish a typical ratio of land to total value [LTV], which may be applicable to the property being appraised, or to isolate the value contribution of either the land or the building from the sale for use in comparison analysis." The Twelfth Edition also states "Allocation is useful when transactional data on comparable sites in the immediate area is not available." Since there are no "good" direct comparable land sales for the subject site and there are improved sales available for analysis, the Allocation technique is a weighted methodology in the overall analysis. To begin the allocation technique, I considered seven recent commercial office construction projects throughout Flathead County to establish a reasonable land to value ratio. Flathead County Commercial "office" Construction Summary .......... .... �� 1 . . .. ............ ......... ........... CtiSF . .... . SMM.- tunt ................ �s ....... . ... .... ......... ..... . .. ... ... . ... .. .. ... .......... .. . 1/19/2007 $377,339 6,053 $15476,053 $243.85 $180,770 $25034,162 $336.06 18.55% 3/27/2007 $801000 1,722 $300,000 $174.22 $1221)006 $502,006 $291.52 15.94% 5/22/2007 $102,000 2,245 $4879614 $217.20 $209000 $609,614 $271.54 16.73% 6/8/2007 $1111000 2,059 $476,098 $231.23 $311)140 $618,238 $300.26 17.95% 6/7/2007 $801000 1,722 $259000 $150.93 $20,000 $359,900 $209.00 22.23% 9/4/2007 $535,000 51200 $6129668 $117.82 $535,000 $116821)668 $323.59 31.79% 8/31 /2007 $310,000 3,144 $576,682 $183.42 $67,000 1 $953,682 $303.33__l 32.51 % ___] *The average LTV [Land to Value ratio] from the group is 22%. Therefore I am going to apply the extraction method to the first group of sales listed above. These are improved sites, and I have applied a 22% land to value ratio to arrive at an extracted value to the land measured in $lsf. The next step in the analysis is to consider improved sales from the subject "neighborhood" defined as those commercial sales within the Kalispell central business district with B-4 zoning and specifically those sales located on I" Avenue [East and West]. A summary of recent sales follows. Kalispell Improved Sales Summary .::I� ;:... �c drs,� - _. ��"t ................... .. ........ . ........ ..... .. ... .. ................. ......... Land 1 6/16/2006 $275,000 128 1st Ave E 11,984 $603,500 31,700 $16.35 2 9/29/2006 $19225,000 140 1 st Ave E 27,610 $26%500 17,500 $15.40 3 2/26/2007 $357,000 345 1 st Ave E 91600 $789540 73100 $11.06 4 3/ 16/2007 $5101000 24 1st Ave W 111)400 $1121)200 7,100 $15.80 5 7/31 /2007 1 $5151000 L411 1st Ave W 8,300 1 $113,300 14,200 $7.98 *The average unit price to the B-4 land allocation is $13.321sf, but if Sale #5 is excluded, the average is $14.65 relatively consistent with the vacant land sales from the previous section. See following comments. Sale #1 is located northeast of the subject on First Avenue East. This sale was included for its similar downtown location and its similar zoning. The site size is smaller than the subject, but reflects potential for future development of the individual subject lots. This sale was listed on 3/10/2006 for $350,000 and sold on 6/16/2006 for $275,000 in a 2 1 % discounted cash transaction with a marketing period of 98 days. Frazier Appraisal Services, Inc. - 22 Sale #2 is located in the immediate area of Sale # I on First Avenue East. This sale is included for similar site size, location and utility. This sale reflects the use of a singular building maximizing the five city lots. This sale was listed on 10/21 /2005 for $1,600,000 and sold on 9/29/2006 for $1,225,000 reflecting a 23% discount with a marketing period of 343 days. Sale #3 is located east of the subject on First Avenue East. This site is located on a highly visible corner within the downtown area. This sale is similar to the subject in utility and downtown location. The site is smaller than the subject, but again reflects the utility of improvements to one or more of the subject lots. This sale was listed on 6/9/2006 for $398,000 and sold on 2/26/2007 for $357,000 in a 10% discounted transaction with a marketing period of 262 days. Sale #4 is a slightly smaller site located across the street from the subject. The site is located in the middle of the block, similar to the subject site. This sale was listed on 1/10/2007 for $548,000 and sold on 311.612007 for $510,000, reflecting a 7% discount with a relatively short marketing period of 65 days. Sale #5 is located on a smaller lot size, but is similar in downtown location and utility. This site is located on a highly trafficked corner with good visibility and access. This sale was listed on 5/23/2007 for $515,000 and sold on 7/31/2007 for $480,000 in a 7% discounted cash transaction. It was disclosed by the listing agent that there was a time factor for the sale of this property, which could reflect a "quick sale" when compared to the other property sales located within the downtown marketing area, and the relatively short marketing period of 69 days. Sale #5 is the location of the old Salvation Army property at the corner of 1't Ave. W. and Fourth Street. In this case, the typical allocation does not produce a "consistent" unit price to the land, primarily due to the functional utility of the old building on the site. In this case, it is clear that a greater percentage [higher than 22%] should be allocated to the land because the contributory value of the building is significantly less than the other, more typical buildings utilized above. In a particular case like this one would expect a 40% [+/-] land to value ratio, which if applied to this particular sale would yield a unit price to the land at $14.511sf, which is well within the range of the other sales. CONCLUSION: It is clear that the downtown Kalispell area is primarily "built-up", and is reflected in the lack of comparable vacant land sales. The vacant sites remaining are generally parking lots utilized by businesses within the downtown area where customer parking is limited. It is recognized that four of the five comparable lots are smaller, which supports the fact that sales of similar zoning, site size and location are limited, and the search parameters for similar properties must be expanded. Even when the search was broadened, similar vacant lot sales were not available therefore I applied the allocation technique and analyzed improved sales as a reasonable approach to land values. From the two data sets of sales [improved and un-improved], we can conclude that the appropriate unit price for the subject property should be greater than the unimproved sites [averaging $141sf] because of their perimeter locations and inferior zoning. The improved downtown sites reflect a range of $ 81sf [rounded] to $161sf [rounded] but three of the five improved sales produce unit prices to the land between $15.501sf and $16.351sf. It appears reasonable, appropriate unit price [$/sq to the subject should be at $161sf. Therefore, based on the improved sales a value of $161sf is applied to the subject area of 17,500 to arrive at an estimated value of $280,000. Frazier Appraisal Services, Inc. - 23 PART B — CITY OF KALISPELL LOTS EXECUTIVE SUMMARY Property Appraised: Vacant Development Real Estate 8-12, Block 55 [See Attached Site Map] Kalispell, MT 59901 Legal Description: Lots 8-12, Block 55, Kalispell Original Townsite Section 18 - Township 2 8N -- Range 21 W Client / Intended User: Valley Bank of Kalispell / City of Kalispell Intended Use: Establish a value basis for potential trade negotiations Current Owner: City of Kalispell Assessor Number: 75-EO00406 [portion ofl Geo Code: 07396618147080000 Census Tract Number: 30-029-0010 Site Data: Five City Lots totaling 0.40 Acre. City services, natural gas and public utilities available. Zoning: B-4 [Central Business] Compliant Property rights appraised: Fee Simple Highest and Best Use: As Improved Commercial Site Current Use: Vacant Land/ Fee Parking Lot Improvements: Pavement, Vacant Land VALUE INDICATION AS -IS Market Value Estimate: $350,000 as of December 18, 2007 — Frazier Appraisal Services, Inc. — 24 ::t:��:::; .........:... .,; vim•. ; ^ r _ %Wa j p SUBJECTPHOTOS Show: Faciny Northeast .Show: FaciIli Southwest Show: Man Street — Frazier Appraisal Services, Inc. r-- 25 IDENTIFICATION OF THE PROPERTIES The subject property is identified as Lots 8.12 within Block 55 of the Kalispell Original Townsite, bordered by Main Street [U.S. Highway 93] and Third Street East. The lots described are recognized as the parking lot belonging to the City of Kalispell. This property is located in the downtown Central Business District of Kalispell. The site is currently utilized as a "fee parking lot". LOCATION OF SUBJECT PROPERTY A ......:...:.. ............ .. ...:.:..:..:....... - ... ... . .1 $ ems. •�` r :. : : :''.�.•�,:�"'�. "i'"' �3N.f `.mot. :• b Y ~ t sk t � g. x a .. .. e.s�'. .. .,. ., . ...<-�. .. ........... .. §� s a. s ,4 .... / 5 �oyo l ....: y�P 5 ! y ...<::.:a' .. .. ... .. ..: ;. .. 5 r "S Pam. s� ��S'' .y y-.��} �i„•? L' � 'r � ,y� 5q 5,✓ C ..,j `�` `-2'rY iriY.�•VI S KS { .. .: .: .: r . ............... .. ........................... :......... :..; .......: :::.:........'.. x ... . x.: ': 31 e. z� yy s: ..... ........ . mom,:...... N " a cZ S3F i,, ; i .v. :. - ... .: , ;. X. S ..... .... .... .. .. . ........ .:.. .. .......... .:.'::.': . ................. ... ....� .. .................. .... .... i& ..... .... .... . ... :...... 2 _ {� 1 �K .: qC} ::. to " fi df �" .:.. sc al s Frazier Appraisal Services, Inc. 26 STATEMENT OF OWNERSHIP The subject real estate has recorded ownership to the City of Kalispell. The property was transferred from Valley Bank via Grant Deed per Flathead County Recording # 199913914300 dated 5119199. ASSESSMENT AND TAXES The Department of Revenue (DOR) assessor number for the tracts identified as the subject real estate in Flathead County and the 2006 taxes are summarized below. The taxes include all special taxes and fees. ��` 75-EO00406 Exempt Status *The subject site is currently tax-exempt. ZONING The subject real estate is zoned B-4 as shown in the zoning map below. — Frazier Appraisal Services, Inc. — 27 1) Size 2)Shape 3) Location 4) Frontage 5) Dimensions 6) Number of Access Roads 7) Access Rating 8) Visibility Rating 9) Road Improvements 10) Utilities Water Gas Electricity Sanitary Sewer Telephone l 1) Easements/Right of Way 12) Encroachments 14) Topography 15) Drainage 16) Flood map zone and date 17) Census Tract 18) Environmental observations Underground fuel or storage tanks Hazardous materials stored on site ITF DATA 0.40 Acre or 17,500sf Rectangular 202 Main Street Main Street 13 �d Street East 125' x 140' , see attached survey Two, 3 d Street East, and 2nd Street East Good Good Paved City/State City Water [available] Northwestern Energy Flathead Electric Co-op City sewer [available] Centurytel U.S. Highway 93 Row and Utility None noted Level at road grade To Be Engineered Zone x: 30025-0005C: 9/30/92 30-029-0010 None known or noted Done known or noted Hazardous wastes or spills viewed None known or noted 19) other Comments: There is a Deed Restriction stating the buy-back agreement between the two intended users of the appraisal [City of Kalispell 1 Valley Bank of Kalispell]. See attached deed. The subject's size and location make it desirable in the market. MGHEST AND BEST USE Highest and best use is, "That reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value. The four criteria the highest and best use must meet are legal permissibility, physical possibility, financial feasibility and maximum profitability. "a The use determined from any analysis represents opinion. In addition, highest present value does not always have to be defined strictly in terms of money but, for the purposes of this report, it is that value that maximizes the owner's return on equity investment for an investment -type property. Highest and best use of the land resolves around the concept of development to its zoning potential. older texts defined highest and best use as "the use that will provide the greatest return to the land after the requirements of labor, capital and coordination have been satisf ed."8 Two perspectives in each category must also be considered: "as though vacant" and "as improved". Dictionary, op cit, p. 149 8 American Institute of Real Estate Appraisers, The Appraisal of Real Estate, 7th ed. (Chicago: American Institute of Real estate Appraisers, 1978), 48. — Frazier Appraisal Services, Inc. N 28 AS -VACANT! The land value is thus based on the premise of the Highest and Best Use of the property as though vacant. The four tests, which are considered in developing are opinion as to the Highest and Best Use of the property are legally permissible, physically possible, financially feasible and maximally productive. There are five general uses that are considered. These are residential, commercial, industrial, agricultural and recreational. Legally permissible: The property is currently designated with a B-4 Designation. This zone is common in the downtown Kalispell, commercial marketplace; other uses [industrial, agricultural, etc.] are generally restricted from the zone. Physically possible: The site is approximately 0.40-acre, rectangular in shape and has good exposure and vehicular access. City services and public utilities are available. The site is physically able to be developed to its zoning potential. Financial feasibility: Analysis of supply, demand and location are needed to identify those uses that are financially feasible and ultimately that use which is maximally productive. Commercial use is visible in the local marketing area and is the fastest growing market segment that appears to be the most financially feasible. .Maximally productive: Commercial use appears to be that use which would be maximally productive. Conclusion: The subject's highest and best use as vacant is as a commercial site. AS -IMPROVED: It is beyond the scope of the appraisal assignment to determine the' ideal' improvement for the subject real estate. Frazier Appraisal Services, Inc. r-- 29 SALES COMPARISON APPROACH / LAND AS THOUGH VACANT There are numerous valuation methodologies to arr4. ive at a value conclusion for vacant land; these include sales comparison analysis, extraction, allocation, income capitalization, land residual technique and subdivision analysis. In this assignment, the sales comparison approach to value is considered, but due to the lack of B-4 zoned vacant land sales little weight is applied to the methodology. It is typical for downtown areas to be built --out with little or no vacant land available for construction. Some local towns are currently witnessing the demolition of existing buildings for new construction; however this is not yet common to the Kalispell area. Therefore, the sales included in the summary below are considered as a basis for further valuation models. Kalispell Commercial Lot Sales ... ........... ....... . . ...... .. .... . . .... �t:�st`� . ........................... . .... . . .... . .... . ................ ........................................... . ..... ................ ... . 1 1 /19/2007 $1761,000 #4 A le Way 0.25 $16.16 B-2 541 2 7/9/2007 $2501P0 8th Avenue 0.49 $11.71 B-3 31 3 10/12/2007 $445100 145 Commons Loop 0.74 $1.3.81 H-1 149 4 12/10/2007 $1051000 E. Washington 0.17 $14.18 B-3 145 *The average unit price of the sales is $13.96/sf rounded to $14/sf. The first, obvious fact is that none of the sales are located within the central business district and none have the B-4 zoning. These recent sales bracket the subject site in land size area and have a relatively tight range in unit price from $13.81 /sf to 16.16/sf. Sale #1 is located northwest of the subject, in an area of Kalispell that is further away from the downtown Central business district. The site is located off Meridian Road which is considered a main arteriole running north /south on the west side of Kalispell. The site is smaller than the subject and has inferior zoning, and visibility. The location is considered inferior to the subject due to a lower traffic count and mixed use in this area. This sale was listed on 7/27/2005 for $155,512 and sold on 1/19/2007 for $176,000 in a cash transaction with a marketing period of 541 days. Sale #2 is included for its recent date of sale and similar site size. This sale is considered inferior to the subject based on its zoning and distance from the downtown central business district. This sale was listed on 6/8/2007 for $290,000. The property sold on 7/9/2007 for $250,000 in a 14% discounted cash transaction with a marketing period of 31 days. Sale #3 is located north of the subject near the Kalispell Regional Hospital in the Buffalo Commons development. This area is developing with a wide spectrum of commercial uses including professional offices, retail, service and medical related facilities. This site is larger than the subject site but parking is required on -site. It is considered to have good access and visibility from Highway 93. This sale was listed on 5/ 16/2007 for $499,000 and sold on l 0/ 12/2007 for $445,000 reflecting an 11 % discount with a marketing period of 149 days. Sale #4 is located north east of the subject near Highway 2. This site is smaller than the subject and is considered inferior in zoning. This property was listed on 7/18/2007 for $109,000. The property sold on 12/10/2007 for $105,000 in a 4% discounted cash transaction with a marketing period of 145 days. The location map of these sales illustrates their physical differences to the subject. while all are viable building sites, they have little direct correlation to the subject site. Therefore, other valuation models are considered in the analysis. — Frazier Appraisal Services, Inc. — 30 Location Map of Commercial Land Sales Land Valuation: Allocation The allocation technique in appraisal methodology is described by the Appraisal of Real Estate, Twelfth Edition from the Appraisal Institute as "Either sales of improved properties and the prices paid are allocated between the land and improvements, or comparable sites under development are analyzed and the costs of the finished properties are allocated between the land and improvements. Allocation can be used in two ways: to establish a typical ratio of land to total value [LTV], which may be applicable to the property being appraised, or to isolate the value contribution of either the land or the building from the sale for use in comparison analysis." The Twelfth Edition also states "Allocation is useful when transactional data on comparable sites in the immediate area is not available." Since there are no "good" direct comparable land sales for the subject site and there are improved sales available for analysis, the Allocation technique is a weighted methodology in the overall analysis. To begin the allocation technique, I considered seven recent commercial office construction projects throughout Flathead County to establish a reasonable land to value ratio. — Frazier Appraisal Services, Inc. — 31 Flathead County Commercial "Office" Construction Summary fie' - : ; ,: = s :�` t r �.... t s .........S �. 1 / 19/2007 $3775339 6,053 $1,476,053 $243.85 $1805770 $2,0341162 $336.06 18.55% 3/27/2007 $809000 11,722 $3001,000 $174.22 $122,006 $502,006 $291.52 15.94% 5/22/2007 $102,000 23245 $487,6I4 $217.20 $201000 $609,614 $271.54 16.73% 6/8/2007 $1115000 25,059 $476,098 $231.23 $3111.40 $618,238 $300.26 17.95% 6/7/2007 $80,000 1,722 $2591900 $150.93 $20,000 $359,900 $209.00 22.23% 9/4/2007 $5351P0 55200 $6121668 $117.82 $535,000 $116829668 $323.59 31.79% 8/31 /2007 $3101000 31,144 $576,682 $183.42 $673,000 $953,682 $303.33 32.51 % *The average LTV [Land to Value ratio] from the group is 22 % . Therefore I am going to apply the extraction method to the first group of sales listed below. These are improved sites, and I have applied a 22% land to value ratio to arrive at an extracted value to the land measured in $Isf. The next step in the analysis is to consider improved sales from the subject "neighborhood" defined as those commercial sales within the Kalispell central business district with B-4 zoning and specifically those sales located on Main Street. A summary of recent sales follows. le :.,.:.: ��d t1ee,��............ .�u6t % . . . .. .......... F, : 1 4/17/2006 $4005000 11 Main St 215,280 $88,000 71?000 $12.57 2 6/30/2006 $470,000 424 S Main St 4,500 $103,400 3,500 $29.54 *3 111.212007 $5801000 3141318 S Main St 71622 $127,600 7,000 $18.53 4 10/8/2007 $2301N0 332 Main St 21000 $501,600 31500 $14.46 *3 is the combination sale of two properties. Sale #1 is located north of the subject. The site is larger than most downtown city lots. This sale is included for its similar zoning, and downtown location. This sale was listed on 9/15/2005 for $498,000 and sold on 4/17/2006 for $400,000 in a 20% discounted transaction with a marketing period of 214 days. Sale #2 is located in the immediate area of the subject on Main Street. The site size is smaller, but reflects the highest unit price [$/sfl of the comparable sales. It is common in the market place for smaller sites to reflect a higher unit price when directly compared with larger sites, assuming no other factors of value. This sale is somewhat non -typical because the building was completely renovated prior to the sale. Therefore, in this instance, the building could contribute a greater percentage of value, than "typical" when directly compared with other recent sales along Main Street. This sale was listed on 5/4/2006 for $490,000 and sold on 6/30/2006 for $470,000 in a 4% discounted transaction with a marketing period of 57 days. Sale #3 is a smaller site located in the immediate area of the subject. This is a sale of two properties that were sold as a combined sale. The property with the address of 314 Main Street was listed for $398,000 and the 318 Main Street property was listed for $360,000. These properties were both listed on 8/10/2006. The properties were sold due to financial issues ensued by the seller, which could be reflected in the higher than normal discounted sales price for the properties. This combination was sold for $580,000 in a 23% discounted cash transaction. The marketing period for the properties was 155 days. Sale #4 is included for its close proximity to the subject and recent date of sale. The site size is smaller than the subject, but is similar in location and utility. This sale was listed on 6/12/2007 for $230,000 and sold on 10/812007 for the list price of $230,000 with a marketing period of 118 days. Frazier Appraisal Services, Inc. - 32 CONCLUSION: It is clear that the downtown Kalispell area is primarily "built-up" and is reflected in the lack of comparable vacant land sales. The vacant sites remaining are generally parking lots utilized by businesses within the downtown area where customer parking is limited. It is recognized that all the comparable lots are smaller, which supports the fact that sales of similar zoning, site size and location are limited, and the search parameters for similar properties must be expanded. Even when the search was broadened similar sales were not available therefore I applied the allocation technique from improved sales. From the two data sets of sales [improved and un-improved], we can conclude that the appropriate unit price for the subject property should be reasonably greater than that produced by the un-improved sales [averaging $141sf] because of their perimeter locations and inferior zoning. The improved downtown sites reflect a range of $131sf [rounded] to $30/sf [rounded], with most allocated sites ranging below $201sf. Improved Sale #2 produces the greatest allocated unit price to the land but it is also the "superior" building of the group such that the contributory value of the improvements may be greater than "typical" in this sub - neighborhood. Therefore, I am weighting Sale #3 as the most applicable to the assignment because the assemblage of two improved properties appears to satisfy the best example of market trends because one building is renovated and the other is older so the two, together should "equalize" the overall impact of the improvements on the sale price. Since the subject site is a corner location versus Sale #3's "interior" lots, I am adjusting the unit price from Sale #3 slightly upward by 10% to $201sf when the adjusted unit price of $201sf is applied to the subject's area of 17,500 the value indication for the subject site is estimated at $350,000. FINAL RECONCILIATION: PARTS A & B The Kalispell downtown business zone, B--4 is primarily improved with few vacant lots and fewer lot sales available for analysis. Therefore, sales comparison analysis is not a weighted methodology in this assignment. Allocation technique [and to a lesser extent] extraction analysis utilizes improved sales and land to value ratios to establish an appropriate unit price applicable to the downtown lots identified in the assignment. There are a few differences in the sites that are noted but difficult to measure; 1) the City site is a high visibility corner location compared with the Valley Bank site, which is an interior location; 2) considering redevelopment of the sites, the City site would require greater planning and oversight due to the existence of a neighboring, older building and U.S. Highway 93 right-of-way versus the Valley Bank site, which appears to be the "easier" site for construction of a new building. 3) the relatively new application of impact fees could have an impact regarding the type and use of a new building constructed on the sites. While these could be meaningful differences, the data for application of a numerical adjustment is virtually impossible to calculate. These factors and the sales data and analysis produce a difference in the two sites with the Valley Bank site estimated at $280,000 and the City site valued at $350,000. Both value indications appear reasonable when compared with the recent sale prices of other development sites around the Kalispell marketing area. The difference in the market value estimates is $70,000. This too appears to be a reasonable measure of the differences in the two sites, which equates to approximately 25% increase from the Valley Bank site to the City site. That is to say there is a 25% difference in the Valley Bank interior site on Pt Avenue West when directly compared with the City's Main Street high -visibility exposure and corner location. Frazier Appraisal Services, Inc. N 33 GRANT DEED LOTS 8-12 BLOCK 55 ILA V.� 7XY T,"K 07 KAL? 6P-4LL# a StAtA PAn ;tx rvraret:or, in monside~ration of tlnt6 Dclla.r atc) tAhex Va.-L'u3tic. coneileriLtzoae this recftip- r)� wh--ch Is hereby 201Mcwlydge dt gralats 0 t1:* CITY OF' 1ChL:SPE1:,.r a mun is ip&L Crcat aeo thn f � l 1 �winq ri obsscribod real property i -i the Co=ty u ' Flathead.. S Y4 � c of Montana: � Z��t� Y �r 1�, 11� 1:�, � . rtir, k �,.►�it �Lla��ll pr1�i"t��. Townmi fix acccj:-Jl Eq to the romp or pla- i•hArr--of <ua Gila �- Aud of roof rd it t ho office of tho C".1erk =d Recerner of `3i7S=T '10 tCrAs and j�f-(��`7� ::L�w.�.}d. l�u{.v�}!+� '� Pi4- wy 7Walrl Agreoffon': da-.ed Way CI and 1'- ' Rdwaxd �. Xnigrt and Cditi$ C. XnLght= ofal_e y R- Twi aixi , C:�arlee Li. Gamed Pmd Alicia D. .0.1mLmd, reccxdrd October 4, -922 in Rcrwk 165, gage 339' ra.-..n dm cf ~`u SrJHC^ To luia#.xcc,:s:"Uaart cifw9 ahem nn r#kr-t ifiQ;HL6 of suryy Nd' 3790. TO Y7- AND TO -10LD :.hA sd...i.d premimas.. with thex 1pPt1Y'teMarcf%*c 17aty Uva said Grarte�d, :.t: heir a -d a s signs forever. e� Colrer a-nt % dui Rutty i ct ionm -itr ee shy, :i* pr arty oonveycd heraby wn l y tior -he pu-- p s Q o± cperat:Lnq and 7rAi.:_Ad1.,&inCr a surface parti.q facility fDr a pericd of #-on *10; nears vi"L 3uct.eed.ing the exa:-4trti r-ori of t1r..1s Gr-ii-rt Deed. Zz the cven"- Grant&r c m*v9s zz separate or rrm i nt a ir_ t:-v marking lot, Grantor.. At ita optiu:if may docl.a er t;►.e~ a3t ate too. -mine -tied and may repo -chm ". t" jp.:c: pssrty fO'f *c meted Vei 3'i xty Timauxard zollara 2. Iit the t+�rniaatlun of :he tm (10: }+nor. -!� claSiYUKLOd In pa gro.ph 1, 3upra,r the Vrantz to C+ran"Wor t h e npt i ont it r a ps=ricd cZ twn (2] years., tQ LWPUZChaue said ' property t.nr a a" to be dete=1 :e~d by a qual i f f ed a';PzPra 1jser agrcad ti her the Gra -cr and �;r'arltce. ZN w7'TNXE-w w 11F' 0E' G r a . tur has came4t th; a deed t .-.) J:o* exsv►cr.i ed, aufJ to be giV is its cc rparatc ricer by yU Vtcal Prr,,G:.:IQ=L arm attestraci. A: Xx'l tx !Ct %4ptddk■da %VQ.wjOr =WWAltr41- WVd Frazier Appraisal Services, Inc. — 34 ENGAGEMENT LETTER VA L L E Y B A N K OF KALtSPeLL r M' November 28, 2007 ' William Frazier Appraisal PO Box 451 t Whitefish , Mf 59937 1 RE. First Ave West, Kalispell; MT ` Lots 16, 17, 18, 19 and 20, Block 55, Kalispell Of.gnal, Flathcad County And Main Street and 3rd Street West Lots 8, 9, 10, 11. and 12, Blink 55, Kali spcH Original, Flathead County C c�'►�(fff��'�y��, Ryr+ gill. F the purpose of this letter is to confer 'your resent wavenadon vAth our office concerning the above -ref+ enced'property. Valley batik of Kalispell i.9 requesting you to complete a null Native All Approaches comme' rcial appraisal. lt` assistantq are utilized in wmpleting'any p of the report I would apprcciatc a copy of heir qualifications and extort of their involvement in (lie a.ignilient. YOUT responsibility as p ncipal appraiser, .or co-appraisar, is required: Pl t�i e note eonfbrmanee to our requivements n. your report and/or the Leftr of Transmittal. r` Various items have en prodded that may o `(may not he of assistance to you in this assiLmment, Please. -verify for accuracy any of. this data you may chose to use. r Based oti our telophonc conversation, you stated that you . waul d be ahic . tv 'p ovide Valley Tank of Kalispell with an appraisal by fee fir completing this k 1i T1Gnleas quoted to be $3,000.00. Please prom od with the przoject- up011 reeelpt of this letter, t Frazier Appraisal Services, Inc. — 35 Please sign the copy of this letter provided herein to acknowledge your receipt and acceptance of this assignment. I welcome any questions. or comments you may have. I can he reached at (406) 752- 7375. 4 ' Sincerely �. Rory R. Rosenherg 'resident RRRa I Y. The undo signed -hereby acknowledges and accepts this assignment as described' above, • By: Date: Frazier Appraisal Services, Inc. — 36 PRIVACY NOTICE Pursuant to the Gramm-Leach-Billey Act of 1999, effective July 1, 2001, Appraisers, along with all providers of personal financial services are now required by federal law to inform their clients of the policies of the firm with regard to the privacy of client nonpublic personal information. As professionals, we understand that your privacy is very important to you and are pleased to provide you with this information. Imes of Nonpublic Personal Information We Collect In the course of performing appraisals, we may collect what is known as "nonpublic personal information" about you. This information is used to facilitate the services that we provide to you and may include the information provided to us by you directly or received by us from others with your authorization. Parties to Whom We Disclose Information We do not disclose any nonpublic personal information obtained in the course of our engagement with our clients to nonaffiliated third parties except as necessary or as required by law. By way of example, a necessary disclosure would be to our employees, and in certain situations, to unrelated third party consultants who need to know that information to assist us in providing appraisal services to you. All of our employees and any third party consultants we employ are informed that any information they see as part of an appraisal assignment is to be maintained in strict confidence within the firm. A disclosure required by law would be a disclosure by us that is ordered by a court of competent jurisdiction with regard to a legal action to which you are a party. Confidentiality and Security We will retain records relating to professional services that we have provided to you for a reasonable time so that we are better able to assist you with your needs. In order to protect your nonpublic personal information from unauthorized access by third parties, we maintain physical, electronic and procedural safeguards that comply with our professional standards to insure the security and integrity of your information. Please feel free to call us at any time if you have any questions about the confidentiality of the information that you provide to us. Frazier Appraisal Services, Inc. — 37 UALIFICATIONS OF APPRAISER NAME: William R. Frazier d.b.a. Frazier Appraisal Services, Inc. Established January 1998, Incorporated Jury 2002 BUSINESS ADDRESS 6475 Hwy 93 South, Suite #51 Whitefish, MT 59937 Phone: (406) 862-3600, FAX: (406) 862-3648 MAILING ADDRESS P.O. Box 451, Whitefish, MT 59937 UNIVERSITY EDUCATION Bachelor of Science; Secondary Education; Language Arts, 1975 [Dean's Honor Roll] University of Missouri, Columbia, MO SPECIALIZED EDUCATION Don E. McBurney Real Estate Appraisal Training Program: 2192 to 12/97 Whitefish, MT. Staff Appraiser: Residential & Commercial Appraisal Appraisal Institute Real Estate Appraisal Principles Spokane, WA, October 1993 Standards of Professional Practice (Part A) Kalispell, MT, September 1993 Code of Professional Ethics (S P P, Part B) Kalispell, MT, September 1993 Standards of Professional Practice (Part C) Bozeman, MT, January 1998 Appraisal Reporting of Complex Residential Properties Helena, MT, April 1993 Appraisal Procedures Post Falls, ID, October 1994 Discounted Cash Flow Analysis Billings, MT, April 1995 Subdivision Analysis Billings, MT, April 1995 Comprehensive Appraisal Seminar Boise, ID, February 1999 Subdivision Valuation Seminar. Butte, MT, September 200E Appraising from Plans and Specifications Seminar, Butte, MT, September 2006 MT Dept of Health & Environmental Science Managing Hazardous Waste in the Small Business, Kalispell, MT, January 1994 Bureau of Business & Economic Research Economic Outlook Seminar, February 1996-2006 National Association of Independent Fee Appraisers Income Property Appraising 2.1 Kalispell, MT, January 1994 Techniques in Yield Capitalization 2.2 Kalispell, MT, May 1994 Corporation For The Northern Rockies Conservation Easements Seminar, Kalispell, MT, October 2001 Northwest Montana Association of Realtors Investment Real Estate, Kalispell, MT, October 2001 McKissock Data Systems Appraisal School Uniform Standards of Professional Appraisal Practice, Missoula, MT, February 2002, 2005, Kalispell, MT 02107 Appraising the Oddball: Nonconforming & Difficult Properties, Missoula, MT, February 2002 Appraiser Liability, Missoula.., MT, February 2002 Residential Construction, Missoula, MT, March 2003 Does My Report Comply with USPAP, Missoula, MT March 2003 Appraising REO and Foreclosure Properties, Kalispell, MT January 2007 The Beckman Company The Technical Inspection of Real Estate, Kalispell, MT August 2004 REFERENCES: ......... STAIV Of �T David Dittman, President, First Interstate Bank P.O. Box 1001, Whitefish, MT 59937 aamw d : l� a Phone: (406) 863-8888 James Trout, President, Mountain West Bank At 601 Spokane Avenue, Whitefish, MT 59937 Phone: (406) 863-2265 y Doug Johnson, Officer, Whitefish Credit Union . 300 Baker Avenue, Whitefish, MT 59937 3 Phone: (406) 862-3525 =y * — Frazier Appraisal Services, Inc. — 38