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Real Estate Navarre Florida document sample
91.59-ACRE VACANT PARCEL (Proposed Shores of Santa Rosa Community Development District) SOUTH SIDE OF U.S. HIGHWAY 98 NAVARRE, FLORIDA PART ONE: INTRODUCTION ii A SELF-CONTAINED APPRAISAL REPORT TITLE PAGE PROPERTY 91.59-Acre Vacant Parcel (The Shores of Santa Rosa Community Development District) LOCATION South Side of U.S. Highway 98 Navarre, Florida DATE OF VALUE DATE OF REPORT March 23, 2009 March 25, 2009 PREPARED FOR JMC Capital Partners, LLC 3131 North 70th Street, Suite 1054 Scottsdale, Arizona 85251 Fruitticher Lowery Appraisal Group, Inc. 3000 Langley Avenue, Suite 402 Pensacola, Florida 32504 iii March 25, 2009 JMC Capital Partners, LLC 3131 North 70th Street, Suite 1054 Scottsdale, Arizona 85251 Attn: Mr. Christopher P. Neary, Director of Commercial Lending Letter of Transmittal RE: A Self-Contained Appraisal Report of the 91.59-Acres of vacant land located along the south right-of-way of U.S. Highway 98 referred to as the Shores of Santa Rosa Community Development District in Navarre, Florida. Dear Mr. Neary: At your request, an inspection has been made of the above referenced property for the purpose of estimating the current market value of the fee simple interest. In compliance with the "Uniform Standards of Professional Appraisal Practice", this letter of transmittal is followed by an appraisal reported in a self-contained format in which all applicable approaches to value are used and with the value conclusion reflecting all known information about the subject property, current and projected market conditions and other available data. This report contains to the fullest extent possible and practical, explanations of the data, reasoning and analysis used to develop the opinion of value. It also includes thorough descriptions of the subject property, the property's locale, the market for the property type and our opinion of highest and best use. Market value will be defined in the appraisal report, but basically assumes a willing buyer and seller, both knowledgeable of the subject real estate market and with the valuation at the property's highest and best use. Along with this value estimate, current economic conditions indicate both the marketing period and exposure period to be within about one year. iv Mr. Christopher P. Neary March 25, 2009 Page Two The subject property contains approximately 91.59-acres of vacant land located along the south right-of-way of U.S. Highway 98 and extending south to the Santa Rosa Sound. The property contains approximately 855 feet of frontage along U.S. Highway 98 and approximately 833 feet of frontage along the Santa Rosa Sound. The property is zoned "PUD", Planned Unit Development with a master plan reflecting a total of 825 residential dwelling units and 49,000 square feet of commercial space. The property contains approximately 23.79 acres of jurisdictional wetlands, but reportedly mitigation has been completed and wetland crossings have been approved. This attached appraisal is based upon extraordinary assumptions. An extraordinary assumption is an assumption that presumes as fact otherwise uncertain information about physical, legal or economic characteristics of the subject property; or about conditions external to the property, such as market conditions or trends; or about the integrity of data used in an analysis. The extraordinary assumptions of this analysis include the assumption that the subject property can be physically and legally developed with the 825 residential units and 49,000 square feet of commercial space as reportedly approved through the "PUD" zoning and the community development district. It is assumed that the development of the property will begin and economic conditions will support the beginning of the development prior to the expiration of the permits and development order. The value is also based upon the assumption that the information provided by others used in the attached was truthful. The sales confirmations were based upon interviews with buyers and sellers within the market and the information provided by those interviewed is assumed to be correct. Also, the information provided by the buyer/seller of the subject property and by the employees of Santa Rosa County is assumed to be correct. Should any of these assumptions be found to be incorrect, the value reported within this appraisal assignment could be altered. Subject to the above and the limiting conditions and certification as set forth herein, it is our opinion that the current market value of the fee simple estate as of the last date of inspection, March 23, 2009, was: TWENTY MILLION DOLLARS $20,000,000 I hereby certify we have no interest, present or contemplated, in the appraised property. This appraisal has been prepared utilizing all of the requirements set forth as Standards for Real Estate Appraisals as established for federally related transactions and the State of Florida. The v Mr. Christopher P. Neary March 25, 2009 Page Two appraisal conforms to the Uniform Standards of Professional Appraisal Practice (USPAP). The fee for this appraisal was not based on a minimum value nor was the assignment undertaken based on a pre-determined value or guaranteed loan amount. I appreciate the opportunity of doing this work for you and your client. After your review, should you have questions, please call. Respectfully submitted, Digitally signed by Rodger K. Lowery, Rodger K. MAI DN: CN = Rodger K. Lowery, MAI, C = US, O = Fruitticher-Lowery Lowery, MAI Appraisal Group, Inc. Date: 2009.03.26 13:59:26 -05'00' Rodger K. Lowery, MAI State-Certified General Real Estate Appraiser #RZ1922 vi TABLE OF CONTENTS PART ONE: INTRODUCTION................................................................................................. II TITLE PAGE ............................................................................................................................. III LETTER OF TRANSMITTAL ........................................................................................................... IV TABLE OF CONTENTS .......................................................................................................... VII SUMMARY OF SALIENT FACTS AND CONCLUSIONS ..................................................... 2 SCOPE OF WORK ..................................................................................................................... 5 PROPERTY RIGHTS APPRAISED .......................................................................................... 6 PURPOSE OF APPRAISAL....................................................................................................... 6 USE OF APPRAISAL................................................................................................................. 6 DATE OF VALUE AND OF PROPERTY INSPECTIONS....................................................... 6 MARKET VALUE DEFINITION AND IMPLICATIONS ....................................................... 7 IDENTIFICATION OF THE PROPERTY................................................................................. 8 HISTORY OF THE PROPERTY................................................................................................ 9 PART TWO: DESCRIPTIONS, ANALYSIS AND VALUE CONCLUSIONS ................... 10 GENERAL AREA DATA ........................................................................................................ 12 NEIGHBORHOOD ANALYSIS.............................................................................................. 22 TAXES AND ASSESSMENT ANALYSIS ............................................................................. 27 LAND USE PLANNING, ZONING, CONCURRENCY......................................................... 28 PUBLIC AND PRIVATE RESTRICTIONS ............................................................................ 29 ENVIRONMENTAL CONCERNS.......................................................................................... 29 PHOTOGRAPHS ..................................................................................................................... 32 SITE DESCRIPTION ................................................................................................................ 35 HIGHEST AND BEST USE ..................................................................................................... 38 EXPOSURE TIME ................................................................................................................... 44 MARKETING TIME ................................................................................................................ 45 THE VALUATION PROCESS ................................................................................................ 46 SALES COMPARISON APPROACH ..................................................................................... 47 PART THREE: CERTIFICATIONS AND ADDENDA......................................................... 82 CERTIFICATION .................................................................................................................... 83 ASSUMPTIONS AND LIMITING CONDITIONS ................................................................. 84 POLICY STATEMENT OF THE APPRAISAL INSTITUTE ................................................. 86 QUALIFICATIONS AS AN APPRAISER .................................................................................. 87 ADDENDUM ........................................................................................................................... 90 vii SUBJECT PHOTOGRAPH 1 SUMMARY OF SALIENT FACTS AND CONCLUSIONS CLIENT: JMC Capital Partners, LLC INTENDED USER: JMC Capital Partners, LLC, Rosemary Sound, LLC and Navarre Beach Holdings, LLC USE OF APPRAISAL: This appraisal is being prepared for use by our client, JMC Capital Partners, LLC for their internal financing decisions. OWNERSHIP: The property is currently owned by Rosemary Sound, LLC and Navarre Beach Holdings, LLC. JFK Holdings, LLC reportedly purchased 91% interest in the two ownership entities in 2008 and is the managing partner for both. PROPERTY LOCATION: The property is located along the south right-of-way of just west of Smuggler's Cove Subdivision in the Navarre area of South Santa Rosa County, Florida. SITE DESCRIPTION: The subject property contains approximately 91.59-acres of land with approximately 23.79 acres of jurisdictional wetlands. The parcel contains approximately 855 linear feet of frontage along U.S. Highway 98 and approximately 833 feet of frontage along the shoreline of the Santa Rosa Sound. Mitigation has reportedly been completed for the crossing and development of a small portion of the wetlands. IMPROVEMENTS: The site is currently vacant and wooded. ZONING: "PUD", Planned Unit Development planned for the development of up to 825 residential units with a marina and a mixture of commercial uses. ENVIRONMENTAL: As stated, the subject contains approximately 23.79-acres of wetlands. A portion of the wetlands have been mitigated for a crossing allowing access to the remaining uplands. HIGHEST AND BEST USE: The highest and best use of the site "as-vacant" is the proposed mixed-use planned unit development with 2 marina. 3 SUMMARY OF SALIENT FACTS AND CONCLUSIONS (Cont'd) DATE OF VALUE: The current market value date is the date of the last inspection, which was March 23, 2009. ASSESSED VALUE: $4,037,233 PROPERTY TAX: $60,398.22 Due by March 31st, 2009 for 2008 $86,566.67 Delinquent for 2007 FINAL "AS-IS"VALUE OPINION: $20,000,000 4 SCOPE OF WORK In an effort to meet your requirements as well as conforming to the Uniform Standards of Professional Appraisal Practice (USPAP), a visual inspection was made of the subject land. Notes were taken of the property for the description write-ups found within this report. In addition to the physical inspection, research was conducted on a regional and neighborhood basis in an effort to identify trends and factors, which have an effect on area property values. Once these trends and factors were identified, a highest and best use analysis was conducted. Upon determination of the land's highest and best use, similar land sales were researched for use in the sales comparison approach to value. The land sales were extracted from the public records information, confirmed with one of the parties to the sale, and then written up in detail in the sales comparison approach to value. Adjustments were made for various differences and the sales indicated a range of value indications. Appropriate weight was given to each sale for a final value opinion. As this is the appraisal of vacant land, the income and cost approaches were eliminated from consideration. With no buildings of value being considered, the income and cost approaches would not be applicable and no reasonable appraiser would utilize them in the appraisal of vacant land. As no reasonable appraiser would utilize these two approaches, their elimination has no negative effect on the value opinion. The client and intended user of this appraisal is JMC Capital Partners, LLC. The intended use is by the client and intended user for internal financing decisions. The type of opinion being appraised is that of the Fee Simple Estate with the effective date, the last date of inspection, being March 23, 2009. 5 PROPERTY RIGHTS APPRAISED The property rights appraised are those of a fee simple estate. "Fee simple estate" has been defined as: "Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat."1 PURPOSE OF APPRAISAL The purpose of this appraisal is to arrive at a supportable estimate of the market value of the subject property. The objective of this report is to present the data and reasoning used to form this opinion of value. USE OF APPRAISAL This appraisal is being prepared for use by our client, JMC Capital Partners, LLC for internal financing decisions. DATE OF VALUE AND OF PROPERTY INSPECTIONS The property was last inspected on March 23, 2009, which is also the current date of value. This report was signed on March 25, 2009. 1 Appraisal Institute, The Dictionary of Real Estate Appraisal, 4th Edition. (Chicago, Illinois: Appraisal Institute, 2002), pg. 113. 6 MARKET VALUE DEFINITION AND IMPLICATIONS The definition of market value as currently stated in the most recent editions of The Appraisal of Real Estate is as follows: "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: A. buyer and seller are typically motivated; B. both parties are well informed or well advised and each acting in what they considers their own best interest; C. a reasonable time is allowed for exposure in the open market; D. payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; E. 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 2 Appraisal Institute, The Appraisal of Real Estate, 12th Edition. (Chicago, Illinois: Appraisal Institute, 2001), pg. 23. 7 IDENTIFICATION OF THE PROPERTY PROPERTY LOCATION: The property is located along the south right-of- way of U.S. Highway 98, just west of Smuggler's Cove subdivision in the Navarre area of South Santa Rosa County, Florida. CURRENT OWNER OF RECORD: The property is currently under the ownership of Rosemary Sound, LLC and Navarre Beach Holdings, LLC who are selling the property to your client JFK Holdings, LLC. TYPE OF OWNERSHIP: Fee Simple PHYSICAL: The subject property contains 91.59-acres, with approximately 23.79 acres of jurisdictional wetlands. The property contains approximately 855 feet of frontage along the south right-of-way of U.S. Highway 98 and approximately 833 feet of frontage along the Santa Rosa Sound. The property is zoned "PUD", Planned Unit Development with a plan for 825 residential units with approximately 49,000 square feet of commercial use. LEGAL DESCRIPTION: 8 HISTORY OF THE PROPERTY Navarre Beach Holdings, LLC owns approximately ten acres of the subject being the original commercial portion of the property along U.S. Highway 98. Navarre Beach Holdings had purchased this portion of the property from Soundview Properties on February 10, 2005 for a recorded price of $500,000. Approximately 80-acres of the property was purchased by Rosemary Sound, LLC from Soundview Properties on August 4th and 12th, 2004 for a reported price of $2,997,200. The remaining portions of the property were reportedly purchased by Rosemary Sound, LLC from Mitchell Homes on October 4, 2006 for $49,200. On December 19th, 2005, a petition to establish a community development district was submitted and it appears that it was approved as the Shores of Santa Rosa Community Development District allowing for the issuance of bonds for the construction of infrastructure and amenities with these bonds paid back through a special assessment. The property has since been rezoned to "PUD", Planned Unit Development allowing for the development of 825 residential units and approximately 49,000 square feet of commercial space with a marina accessed from the Santa Rosa Sound. The property has been under contract by JFK Holdings, LLC for several months. According to the unsigned documents provided to me for this appraisal, JFK Holdings will purchase 91% of the interest in Rosemary Sound, LLC and Navarre Beach Holdings, LLC for a purchase price of $8,000,000. This appears to be very favorable to the buyer and is reportedly based upon the sellers desire to get out of the development of the property. I have no knowledge of any other transactions within the past three years. It is noted that I was not provided with a title policy and assume that clear title will be transferred on the property. The prior sales information was provided through Metro Market Trends and is assumed to be correct. 9 PART TWO: DESCRIPTIONS, ANALYSIS AND VALUE CONCLUSIONS 10 GENERAL AREA LOCATION MAP 11 GENERAL AREA DATA There are four basic interrelated forces that influence the value of a property: Social/population trends, economic changes and adjustments, governmental controls and regulations and physical or environmental changes. These forces are considered in every phase of the evaluation and valuation process but are best discussed in the General Area Data and Neighborhood Data sections of the report. The subject's general area is considered to be the Pensacola Metropolitan Statistical Area, which includes the City of Pensacola and the nearby communities of Cantonment, Pace, Milton, and Gulf Breeze, and Navarre located in Escambia and Santa Rosa Counties. The interrelated forces influencing this general area, as listed above, follow: SOCIAL/POPULATION Among the more important factors that should be considered in a market study are the area population trends and the factors that affect the expected future population. The information obtained for the subject's market area of the Pensacola Metropolitan Statistical Area (PMSA), which consists of Escambia and Santa Rosa counties, was obtained from the United States Census Bureau. The Pensacola MSA has a year 2008 population estimate of 466,136, based on projections by ESRI and quoted by the STDB (Site to do Business), which is up from the 2000 Census count of 412,153. This average increase per year of 1.6% is expected to continue into the future with current estimates for the year 2013 being 504,782. The average household size is 2.48 people per residence and there are a total of 177,554 households with a median income for 2008 that was estimated to be $47,417. Some of the motivation behind the area population growth is the increasing size of the area military bases. The United States Government has been downsizing and closing military bases all over the world as well as within this country. Rather than being downsized, the Pensacola area bases have been realizing net gains as departments and personnel from closed bases are being relocated to this area. In May of 2008, the NAS Pensacola website stated there were more than 16,000 military personnel and 7,400 civilians working in the Escambia and Santa Rosa County areas. 12 GENERAL AREA DATA (Cont'd.) An additional explanation behind the Pensacola area growth is the location in the "Sunbelt" along the Gulf Coast of Florida. The sugar white beaches and clear waters of the Gulf of Mexico attract thousands of visitors every year. Realizing the area benefits (year-round sunshine, warm temperatures, no snow), many of these visitors choose to make Pensacola their permanent home. Tourism in Northwest Florida took a heavy hit in September of 2004 when Hurricane Ivan hit the Gulf Coast, and then again in 2005 when Hurricane Dennis hit. Even though the resulting loss of hotel rooms and condominium units was devastating, they have since been replaced or refurbished for the most part, and based on bed-tax figures for 2007, business has rebounded sharply. Bed tax figures that had reported increases up through the 2004-2005 season, dropped by 11.9% during the 2005-2006 season following the storms. The following seasons each reported increases between 4%-6% as hotel and condominium units were being added back into the rental pool, and by the end of 2007 the annual report from the Florida Department of Revenue revealed that bed-tax collections were up 4.6% over the previous year and had exceeded their best pre-storm figure by 3.5%. The most recent figures for the 2008 fiscal year indicate Escambia and Santa Rosa County bed taxes increased 5% over the 2007 numbers. Source: Haas Center for Business Research and Economic Development 13 GENERAL AREA DATA (Cont'd.) Considering the previously mentioned population growth estimates, the population increase for the Pensacola MSA over the next five years is expected to be 38,646 people. This represents an increase of 16,215 households broken down as follows: 64.1% owner occupied, 24% Renter occupied, and 12% Vacant. This vacancy rate may be somewhat misleading as many of the coastal homes and condos are vacation homes that are only seasonally occupied. The condominium market is currently made up largely of absentee owners. Looking at a list of owners from a typical development such as the Emerald Isle Condominium shows owners from Indiana, Louisiana, Florida, Virginia, Georgia, Washington, Tennessee, Arkansas, Alabama and Mississippi, to name a few. As the condominium market is made up of such a large segment of the United States population, local single family housing occupancy statistics would have little impact on condominium prices. The real estate market, however, has been sluggish both on a local and national level recently, which has impacted second home-condominiums purchases and consequently prices have decreased since their peaks that were realized between 2005 and 2006. ECONOMIC CHANGE AND ADJUSTMENTS In addition to considering the area's population and expected increases, a commercial study should also consider area economics. Even if the population continues to increase, the new population must be able to afford the area goods and services; therefore, it becomes necessary to look at the economic conditions and the projected economic future. According to the Florida Research and Economic Database, area unemployment rates are indicated to be 4.5% in Escambia County and 4.2% in Santa Rosa County while the national average is 5.2% (as of March 2008). The annual income per capita reported for Escambia County was $28,371 (2005), which is similar to Santa Rosa County at $27,897 (2005). 14 GENERAL AREA DATA (Cont'd.) The services sector is the primary employer in the Pensacola MSA at 40.1% in Escambia County and 34.5% in Santa Rosa County, as reported by Woods and Poole Economics, 2007. The retail trade is the secondary source of employment with 15.4% of the workforce in Escambia County and 20.2% in Santa Rosa. Area tourism is a component of both the services sector and the retail trade. In addition to the top two area job sources, the largest area private businesses are considered to be very stable. Some of the top area major employers in the Pensacola MSA include Baptist Health Care (3,500), Sacred Heart Health Systems (4,100), University of West Florida (2,400), Lakeview Center (1,500), Gulf Power Company (1,400), Solutia Inc. (1,300), West Florida Regional Medical Center (1,300), Navy Federal Credit Union (1,200), Pensacola Christian College (1,078), West Corporation (800), Medical Center Clinic (725), International Paper (600), Santa Rosa Medical Center (573), Wayne Dalton Corp. (500), and Pensacola News Journal (520). As previously mentioned, due to the presence of the three area military bases, a large portion of the Pensacola work force is employed by the U.S. Navy, including civilian personnel. Woods and Poole Economics , 2007, reported that in Escambia County, 9.4% of the total workforce was employed by the military, and 4% of the workforce in Santa Rosa County. Navy personnel who live off base, in addition to their regular salary, are given monthly housing allowances. The cost of living in the area is also one of the lowest in the country. National studies, which rate American cities for their desirability, commonly rate Pensacola's MSA near the top of the pack due to the low cost of living and high quality of life. In conclusion, the Pensacola MSA is considered to have a strong economic base, which is expanding. Tourism is a large factor in the economic success of the area and in spite of recent hurricane related setbacks, recovery efforts have proven successful with growth being shown beyond pre-storm figures. As the government deems Pensacola to be an ideal training ground for Naval and Air Force personnel, the area military bases are considered to have a solid future. 15 GENERAL AREA DATA (Cont'd.) GOVERNMENTAL CONTROLS AND REGULATIONS A general area analysis of a growing area would not be complete without considering the area's government and its outlook on future expansion. If the local government is anti-growth, laws can be enacted which would stifle development and population growth. On the other hand, if the government is pro-growth, taxes, zoning, agencies and personnel can be used by the government to promote new businesses' development creating a larger economic base and additional population growth, which would support the existing and planned development of income producing properties. The Pensacola MSA governing bodies are considered to be pro-growth organizations. The Escambia County government is a five man Board of Commissioners elected every four years by their district. They appoint a County Administrator who oversees the county budget and operations. Pensacola has a City Council - Manager government with 10 council members elected to two-year terms. They, in turn, appoint a City Manager. The Mayor, who moderates the council meetings and serves in an ambassadorial role, is also elected by the Council. The city and county currently have zoning ordinances in effect covering the southern region of the county. The county also has a state required Future Land Use Plan which is designed to ensure organized growth over its 20 year life. This plan is reviewed every five years to ensure that it is keeping up with area needs. The plan can also be petitioned for changes. The major topics handled in the plan include: Consistency, environmental and threatened and endangered species, land use approval on site plans, concurrency and permitting. General revenues are raised through an ad valorem tax system. The Escambia County Appraisers Office assesses the property at "just value" which is percentage of market value typically ranging from about 40% to 80% of market value depending upon the date the property was last assessed. The current millage rates are as follows: Escambia County is 16.467 mills, the City of 16 GENERAL AREA DATA (Cont'd.) Pensacola is 20.38 mills, and Pensacola Downtown area is 22.38 mills. Santa Rosa County is 13.2633 mills, the City of Gulf Breeze is 14.8153 mills and Milton is 16.0133 mills as per each county's taxing authority. The area property taxes are among the lowest in the state, which makes it more affordable for new business development. The City of Pensacola has established a Community Redevelopment Administration (CRA), which is responsible for improving the look of the city. The CRA receives a portion of the taxes collected in the downtown district and utilizes these funds for infrastructure improvements (streets, sewer lines, water lines, parks, etc.). By upgrading the look of the city, the appeal also increases attracting additional business development and tourist dollars increasing the economic and population base. The county and city governments also work closely with private businesses in efforts to attract additional business to the area. The government's development of such structures as the Civic Center, the Saenger Theater, and the new Creative Arts Center aid in drawing convention business to the area. Over the past several years, convention traffic has increased at a rate of about 30% per year bringing new visitors to the area who aid in strengthening the area's economic base. The economic base is also strengthened by the government's development of industrial parks in which the land is sold to "clean air" industries at very low rates in return for the creation of additional area jobs expanding the economic and population base. In conclusion, the local governmental agencies are considered to aid in the development of the Pensacola MSA. Zoning, along with the Future Land Use Plan, is used to insure organized, homogeneous growth, which adds to the area's appeal. The low taxes and affordable real estate are also enticing factors for future prospective businesses. The government's willingness to aid in the development of the economic base also creates a stronger population base. 17 GENERAL AREA DATA (Cont'd.) LOCATION AND PHYSICAL FACTORS The location and physical factors of the area are considered to be important, as they are a major impetus in the relocation of Navy personnel, as well as the growth of new businesses and the civilian population. Available land, good weather, water and recreational aspects are all factors considered by a potential future resident of the area. If these factors are congenial, they will aid in the growth and stability of the area. Escambia County has a land area of approximately 661 square miles and an additional water area of 100 square miles. The altitude ranges from sea level to 120 feet above sea level. The eastern boundary of the county is the Escambia River and Escambia Bay. The western boundary is the Perdido River and Perdido Bay. Neither river is a navigable waterway to the extent of contributing to the economy. Santa Rosa County adjoins Escambia County to the east and has a similar size and physical characteristics. Escambia and Santa Rosa Counties are located in the extreme northwestern portion of the state, being in what is called the "Panhandle" of Florida. Geographically, this MSA is located approximately 230 miles east of New Orleans, Louisiana; 250 miles south of Birmingham, Alabama; 350 miles southwest of Atlanta, Georgia; and 375 miles east of Jacksonville, Florida. The City of Pensacola covers approximately 23 square miles of land in the southeastern part of Escambia County and the smaller cities of Gulf Breeze, Milton and Pace are bedroom communities for Pensacola. The annual mean temperature is 69 degrees with an average rainfall of 62 to 87 inches. The sun shines approximately 343 days of the year making Pensacola part of the "Sun Belt" of the United States. The "Sun Belt" states, especially Florida, have been growing in population faster than other areas of the United States in recent years. One of the probable reasons for continuous growth of the Pensacola MSA is its accessibility. Pensacola is served by four major highways, which provide access to the north, east and west. U.S. 90 (which runs from the East Coast of Florida to Texas), Interstate 10 (which runs from the Atlantic Ocean to the Pacific Ocean), U.S. 98 (which runs from the East Coast of Florida 18 GENERAL AREA DATA (Cont'd.) to Mississippi) and U.S. 29 (which runs from Pensacola to Washington, D.C.). The Interstate spur I- 110, which is currently under improvement expanding from three lanes to six, connects with Interstate 10 just west of Davis Highway and runs to downtown Pensacola's Business District, connecting with U.S. Highway 98. Pensacola's Municipal Airport, with the recent completion of a $30 million modernization, provides air transportation to all parts of the country. The Escambia County Transit System operates bus lines throughout the metropolitan area and Greyhound Bus Lines provides inter-city bus transportation. The natural deep water harbor of Pensacola Bay, along with the large expanse of protected waters and the Gulf of Mexico, create an ideal training area for the U.S. Navy. These waterways also add to the area's economy through the Pensacola's Municipal Port Facilities handling cargo shipments to and from all parts of the world. Rail service also aids in the support of the port facilities with spurs running to the docks. While the southern and eastern most areas of Pensacola are nearly fully developed and are blocked from additional growth by the bays and Gulf of Mexico, there is plenty of developable land in the general area. The western and northern land areas of Escambia County and the Pace and Gulf Breeze areas of Santa Rosa County are the locations of current development and have proven to be popular among the new residents coming to the area. There is plenty of available land remaining for future growth for years to come. Overall, the area's physical characteristics are considered a real asset for the general area of Pensacola. There is plenty of available land for additional business and residential development. The beaches and waterways create ideal recreational facilities for newcomers. The moderate temperatures and year-round sunshine also entice a large number of new businesses to the area, which aid in creating a larger population. South Florida has had problems in past years with dwindling drinking water supplies; however, the Pensacola area has an abundance of drinking water adding to its future development potential. 19 GENERAL AREA DATA (Cont'd.) GENERAL AREA DATA CONCLUSION The Pensacola MSA's general area is considered to have a steady future. The increasing population is creating a demand for housing and rental properties, which is expected to continue over the next five years. With the expanding Navy and Air Force bases and tourist industry aided by governmental support of private industry expansion, past growth trends are expected to continue. Further, the tourist populations are increasing and the latest information indicates the 2008 tourist population increased 5% over the 2007 numbers. These residential and tourist population increases will create more demand for commercial support properties and with the subject property being found at the major intersection in Navarre, it is posed to take good advantage of the area's future needs. 20 NEIGHBORHOOD LOCATION MAP 21 NEIGHBORHOOD ANALYSIS A neighborhood is defined in The Dictionary of Real Estate Appraisal, Fourth Edition 2002 as: "A group of complimentary land uses; a congruous grouping of inhabitants, buildings, or business enterprises."3 Neighborhood boundaries are defined because properties within neighborhoods tend to be similar in characteristics with regard to land use, desirability, and are affected by similar physical, economic, governmental and social forces. Using the map on the preceding page, the subject neighborhood is defined as the Navarre area of Santa Rosa County. This community is bordered to the south by Santa Rosa Sound, to the north by East Bay, to the west by the Avalon Bridge/Hwy 281 and to the east by the Santa Rosa County/Okaloosa County line. The main east/west arterial is Navarre Parkway/Highway 98, which connects the Navarre area to Gulf Breeze and Pensacola heading west and Fort Walton Beach heading east. The main north/south arterials are Highway 87, which connects Navarre to I-10 approximately 19 miles to the north, and the Avalon Bridge/Highway 281 which also connects East Gulf Breeze to I-10 approximately 12 miles to the north. The Navarre central business district is centered around the Highway 98 and Highway 87 intersection making the subject parcel one of the most desirable commercial properties in Navarre. The Gulf Breeze central business district is approximately 16 miles west of the subject property. Fort Walton Beach is approximately 10 miles east. In order to better identify the make up of this community, I obtained a market profile report offering statistical information within a five-mile radius. In 2008 there were reportedly 23,527 residents living in this area (2.7 residents per household) and over the past seven years the population has been increasing at an annual rate of 6.17%. The annual growth rate over the next five years is expected to be slightly more than 4% or about 1,058 new residents per year. With an average household size of 2.7 people, there will be a need for about 392 new homes per year for the next five years. The median age is 39.8 indicating a largely young, work force age population. 3 The Appraisal Institute, The Dictionary of Real Estate Appraisal, 4th ed. (Chicago, Illinois: Appraisal Institute, 2002), pg. 193. 22 NEIGHBORHOOD DATA (Cont'd.) About 6% of the population is employed by the armed forces and the remaining employed population is a part of the civilian labor force. Total employment is divided as being 63.4% white collar, 16.7% service industry, and 19.8% blue collar. The indicated unemployment rate is 5%, which is in line with the unemployment rates being realized by Florida as a whole. The median household income for the area is $57,774, which is slightly above the U.S. average of $53,154. The subject neighborhood has experienced rapid residential and commercial growth within the past decade, slowing within the past few years as housing sales became sluggish. In the western portion of the neighborhood is the Holley by the Sea development, which offers a large range of homes and home sites along with amenities including a common beach, common swimming, and tennis club. The Hidden Creek Golf and Country Club, one of the regions finer golf courses, is also located within the Holley by the Sea project. Holley by the Sea is by far the largest single development in the area but there are numerous single family residential subdivisions found to the east and west of the subject property, with Commercial developments found primarily along Highway 98. The residential market in the area of East Gulf Breeze and Navarre has been sluggish since 2006 as seen in the following chart. Prices have been lowered, and properties are experiencing longer marketing times. Due to the decline of recent home, condominium and attached housing sales, many developers and owners of large tracts of land are either selling their properties or holding them until supplies are absorbed and prices increase to a point that development is financially feasible again. 23 NEIGHBORHOOD DATA (Cont'd.) Multiple Listing Service Pensacola - Residential Market Data Since 2005 Average Type Housing Date Area Units Sold Sold Price % Change Gulf Breeze 2005 Attached 45 $226,959 and Navarre Gulf Breeze 2006 Attached 46 $217,284 -4% and Navarre 2007 Gulf Breeze Attached 29 $233,553 +7% and Navarre Gulf Breeze 2008 Attached 25 $226,606 -3% and Navarre Gulf Breeze Active Listings MLS Attached 71 Listings $373,816 N/A and Navarre Date Area Type Housing Units Sold Price Range Gulf Breeze 2005 Detached 946 $311,770 and Navarre Gulf Breeze 2006 Detached 724 $287,619 -8% and Navarre Gulf Breeze 2007 Detached 692 $269,533 -6% and Navarre Gulf Breeze 2008 Detached 641 $262,894 -2% and Navarre Gulf Breeze Active Detached 664 Listings $389,874 N/A and Navarre Date Area Type Housing Units Sold Price Range Gulf Breeze 2005 Condos 40 $327,410 and Navarre Gulf Breeze 2006 Condos 28 $233,125 -29% and Navarre Gulf Breeze 2007 Condos 30 $215,911 -7% and Navarre Gulf Breeze 2008 Condos 25 $302,780 +40% and Navarre Gulf Breeze Active Condos 108 Listings $401,780 N/A and Navarre 24 NEIGHBORHOOD DATA (Cont'd.) The overall "Attached Housing" and "Condominium" markets in the Gulf Breeze and Navarre area are oversupplied. Using the sales from 2008 as a model for absorption, the existing supply of attached single family units will last just under three years and detached single family homes will last just over one year. There is enough supply of condos to last just over four years. The single family market has a little brighter outlook than does the attached market and condo market. Currently there are a total of 664 homes for sale in the Navarre/Gulf Breeze area (per Pensacola MLS) with an average price of $389,874 and a median price of $257,000. The 2008 sales totaled 641 indicating there is just over a 12 month supply of homes available for sale. The homes that sold had an indicated average days on the market of 162 or just over 5 months. Economists state that once the inventories drop to below a 9 month supply, new construction is necessary. With this in mind, new single family construction appears to be ready for new homes in the spring/summer of 2009. As stated, the "Town Center" of Navarre is found at the intersection of Highway 98 and Highway 87 and extends about ½ mile east and west. It includes several strip shopping centers, the largest of which are the Publix Grocery Center to the west of Highway 87 and the Winn Dixie Grocery Center to the east of Highway 87. The commercial vacancy rate in the area had been less than 5% prior to 2007, but is now increasing, as several retail businesses have closed and space is sitting vacant. There are several fast-food restaurants along Highway 98 in the Navarre Town Center area, (McDonalds, Taco Bell, Kentucky Fried Chicken, Waffle House), and several dine-in restaurants (Rick's Crab Shack, Cancun Mexican Grill.), along with free-standing retail shops, offices and gas stations. A new outpatient medical facility and several doctor's offices are also located along this corridor. 25 NEIGHBORHOOD DATA (Cont'd.) In the long term, the neighborhood is expected to maintain past growth trends and the Navarre Beaches are expected to continue to draw tourists to the area. The rapid growth that was expected before 2006 may have slowed, but when the current supply of homes and condominiums is absorbed, development is expected to resume once again. One factor that will help area absorption rates are the 6,000 new personnel expected at the Eglin Air Force Base by the year 2010. These new personnel will largely live off base and the surrounding communities of Navarre, Freeport, Niceville, Fort Walton and Crestview are set to take advantage of this population growth, as most currently have oversupplies of housing in anticipation of the growth. With the population growth there will be additional demand for commercial support facilities and demand for new commercial properties will once again start to take place. 26 TAXES AND ASSESSMENT ANALYSIS The subject property is currently assessed by the Santa Rosa County Property Appraiser's Office under four parcel numbers. The parcel number, assessment, taxes and whether the taxes are current is outlined in the following chart. Parcel Number Assessment Taxes Current/Owed 28-2S-27-0000-00600-0000 $1,911,127 $28,591.03 $69,088.37 28-2S-27-0000-01700-0000 $1,647,667 $24,649.59 $61,458.72 28-2S-27-0000-01801-0000 $102,326 $1,530.83 $3,651.11 21-2S-27-0000-02402-0000 $376,113 $5,626.77 $12,766.69 Totals $4,037,233 $60,398.22 $146,964.89 As noted above, the taxes for the 2007 and 2008 tax years have not been paid and are currently due. The assessed value and associated taxes are considered to be very reasonable and would have no negative effect on the property value or marketability. It should be noted, however, that a sale of the property or completion of a proposed development would trigger a re-assessment of the property and the assessed values and taxes would be expected to increase. 27 LAND USE PLANNING, ZONING, CONCURRENCY On April 27, 2006, the Santa Rosa County Board of County Commissioners approved a request for rezoning/large scale future land use amendment changing the portion of the property previously zoned "R-1" Single Family Residential to "PUD", Planned Unit Development and changing the future land use map from Single Family Residential to Medium Density Residential. This includes approximately 67.19-acres of the Rosemary Sound Overlay District. The Shores of Santa Rosa Community Development District encompasses the entire 91.59-acres of the subject property and will include the development of the infrastructure and amenities for 825 residential units and approximately 49,000 square feet of commercial space. A development order was issued in 2006 and was extended July 11, 2008 through July 13, 2009. 28 PUBLIC AND PRIVATE RESTRICTIONS Public restrictions as to "use" are discussed within the preceding zoning section. As previously discussed, the property will be developed through a community development district with restriction to use included within the covenants and restrictions for the development. I have not been provided with these documents and assume these to be no more restrictive than the typical mixed- use development in the subject's area. I was not provided with a title search for the property and assume there to be no plat, deed or other private restrictions on the property. Should other deed restrictions be present, the value of the property could be adversely affected. ENVIRONMENTAL CONCERNS As stated, the subject property contains approximately 23.79-acres of jurisdictional wetlands of which less than one acre will be impacted. The current owners have purchased other wetlands for mitigation purposes and a wetlands disturbance permit was issued in May 2006. The remaining wetlands will be conserved in their natural state. As the remaining land is vacant, there is no logical reason for other environmental concerns. No evidence of surface soil stain was noted on the property and it is assumed that no environmental contamination exists. The above is a very important assumption and limiting condition to the appraisal. From the inspections, we observed no evidence of hazardous substances "obvious to the untrained person" and received no communication "through a reasonably reliable person" indicating possible contamination. 29 SURVEY 30 PROPOSED SITE PLAN 31 PHOTOGRAPHS View of Subject Property View of Missy Road down the center of the Subject 32 PHOTOGRAPHS View of U.S. Highway 98 Facing East View of U.S. Highway 98 Facing West 33 PHOTOGRAPHS Aerial 34 SITE DESCRIPTION For better visualization of this narration, please refer to the preceding survey, master plan drawing, photographs and aerial. AREA: The subject property contains 91.59 acres, with approximately 67.8 acres of uplands and approximately 23.79 acres of jurisdictional wetland areas. The property contains approximately 855 feet of frontage along the south right-of-way of U.S. Highway 98 and approximately 833 feet of frontage along Santa Rosa Sound. SHAPE: The property is rectangular in shape and the utility for the upland areas is considered to be good. DIMENSIONS: According to the survey provided the dimensions for the property are as follows: 854.76' (along Highway 98) x 2,254.61' x 308.07' x 1,832.53' x 832.55' (along Santa Rosa Sound) x 475.95' x 132.06' x 3,496.47'. INGRESS/EGRESS: As shown on the site survey, the property is accessed from U.S. Highway 98, a main arterial with a median crossing in front of the property. Ingress and egress for the property are considered to be good. TOPOGRAPHY: The site is primarily level with no irregular topographical features noted other than the wetland areas. FLOOD DATA: According to FEMA Flood Insurance Rate Map # 120274 0353, dated January 19, 2000, the subject site is located in flood zone "X", areas determined to be outside the 500-year floodplain, flood zone "AE", (El. 9 and 10) base flood elevations determined and flood zone "VE", (El. 10, 11 and 12), coastal flood with velocity hazard (wave action), base flood elevations determined. The flood zones are not depicted on the survey on the previous page, but is included on the more detailed pages of the survey included within the addendum of this report. DRAINAGE: The site appeared to be well drained with no standing water noted. The appraiser did not walk the entire property and wetlands are noted as covering approximately 23.79 acres. 35 SITE DESCRIPTION (Cont'd) DRAINAGE: (Cont'd.) According to Department of Environmental Protection permit #57-0229107-001-DF, a portion of the wetlands will be crossed and filled to access the uplands in the southern half of the property. This permit expires May 31, 2011. SOIL COMPOSITION: The soil within this region is sandy in composition and is conducive to residential and commercial development as evidenced by other similar projects found on nearby properties with similar soil types. UTILITIES ON SITE: All public and private utilities are available. Water and sewer will be provided by the South Santa Rosa Utilities and the Midway Water Company. Electricity is provided by Gulf Power Company with AT&T provided phone service and Medicom providing cable service. The impact fees for the utilities will average approximately $5,510 per dwelling unit and the road impact fees will average approximately $1,280 per unit. The impact fees for the planned development assuming 825 dwelling units will total approximately $5,601,750. SITE IMPROVEMENTS: The site is currently vacant and ready to be developed to its highest and best use. EASEMENTS: There were no easements or encroachments noted on the survey. The survey provided was relied upon by the appraiser to be correct. The appraiser is not a land surveyor and assumes the survey provided is accurate. RESTRICTIONS: The only known restrictions are on the use or crossing of the wetlands and the uses permitted in the development order for the planned unit development as well as the covenants and restrictions for the proposed development. While there may be other restriction that would have been noted through a title search of the property, I was not provided with a title search and assume that no other restrictions apply to the property. 36 SITE DESCRIPTION (Cont'd) CONCLUSION OF CONFORMITY: The property is located along the south right-of-way of U.S. Highway 98, just west of Smuggler's Cove subdivision in the Navarre area of South Santa Rosa County. U.S. Highway 98 is a major arterial connecting Navarre to Pensacola to the west and Fort Walton Beach to the east. The property to the north is currently vacant as is the parcel directly to the west of the subject. The Smuggler's Cove development is located adjacent east of the subject. The Santa Rosa Sound borders the south property line. Highway 98 (Navarre Parkway) is improved with a variety of commercial and residential uses. The subject proposed improvements appear to conform to current zoning and mix well with other area buildings. 37 HIGHEST AND BEST USE A brief definition of the term "highest and best use" would be: "The reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value. The four criteria the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum productivity."4 Implied within this definition is recognition of the contribution of that specific use to community environment or to community development goals in addition to wealth maximization. Also implied is that the determination of highest and best use results from the appraiser's judgment and analytical skills, i.e., that the use determined represents an opinion, not a fact. The Highest and Best Use section of this report is the pivotal point in the appraisal process. All previous data is used to test the four criteria of: (1) legally permitted, (2) physically possible, (3) economically feasible, and (4) maximally productive. LAND AS THOUGH VACANT Legally Permissible - All legally permissible uses should be analyzed when considering a site's highest and best use. The subject is zoned "PUD", Planned Unit Development allowing for the development of up to 825 residential units and 49,000 square feet of commercial uses. The property has been incorporated in to a community development district known as the Shores of Santa Rosa that allows for the district to issue bonds for the development of the infrastructure and amenities for the planned unit development. Each property owner within the district will be assessed annually for the repayment of the bonds. The planned use is assumed to be a legally permissible use of the land given the current zoning. 4 Appraisal Institute, The Dictionary of Real Estate Appraisal, 4th ed. (Chicago, Illinois: Appraisal Institute, 2002), pg. 135. 38 39 HIGHEST AND BEST USE (Cont'd) Physically Possible - Of the legally permissible adaptations of the site, those physically possible uses require consideration and analysis. The size and location of the parcel are important aspects of value. The property includes a total land area of 91.59-acres, of which approximately 23.79-acres are jurisdictional wetlands with the remainder being uplands. The property contains approximately 855 feet of frontage along U.S. Highway 98 and approximately 833 feet of frontage along the shoreline of Santa Rosa Sound. A DEP permit has been issued allowing for a small portion of the wetlands to be filled for a crossing allowing access to the majority of the uplands. I have been provided with a master plan drawing indicating the total density of 825 residential units and 49,000 square feet of commercial use. However, while the property is zoned "PUD", Planned Unit Development and the master plan has been submitted, I do not have on file any records indicating that all setbacks within the PUD meet with the zoning requirements. It is specifically assumed that the planned development with 825 residential units is physically possible based upon the master plan submitted. Financial Feasibility - Of the legally permissible and physically possible adaptations of the site, only those uses which are financially feasible should be considered. As described, the subject site is located along a main arterial, which is surrounded by commercial, single- family and multi-family uses. The site is large enough for single-family or multi-family uses. However, given the site is vacant, development of the site as a mixed-use planned unit development with a mixture of commercial, single-family and multi-family residential uses, would allow a higher return to a developer for the costs incurred versus subdividing the parcel into single family lots. Further, considering the site has been approved as a community development district known as the Shores of Santa Rosa allowing for the issuance of bonds for the development of the infrastructure and allowing for a special assessment on the developed property for the repayment of the bonds, the planned development of a mixture of 825 residential units with approximately 49,000 square feet of commercial uses and a marina would be a financially feasible use once the housing market stabilizes. 40 HIGHEST AND BEST USE (Cont'd) As discussed within this report and as reported on the national news, the housing and financial markets have been in a crisis for nearly a year now. The credit markets have tightened and the over supply of existing housing has created downward pressure on residential prices. Housing prices in the Pensacola MSA area have declined by as much as 30% to 40% in areas and sales have been slow. The Federal Reserve has dropped key interest rates over the past year to assist in stabilizing the market and have recently taken over the largest secondary mortgage market in Fannie Mae and Freddie Mac. The homebuilders have been reducing prices and now are down to minimal profit on existing homes. Sales are beginning to occur and it is my opinion that the housing market should stabilize within the next year and a normal appreciation for homes and real estate should begin in 2010. Considering all of this, the only feasible option for the subject property would be to hold the property for future development in 2010 or soon thereafter. This should allow for the absorption of the oversupply of homes within the subject's market and create a demand for the subject's planned development. Maximally Productive - The financially feasible use, which results in the greatest return to the land, is the one that is considered to be the highest and best use of the land. The surrounding neighborhood has been developed with a variety of commercial and residential properties along U.S. Highway 98, including retail stores, banks, restaurants and offices with residential neighborhoods radiating away from the main thoroughfares. The greater density offered by a residential development would tend to generate a greater return for the land. The subject property is planned for a mixed-use development containing a total 825 residential units and 49,000 square feet of commercial space. The property is located along the banks of the Santa Rosa Sound and includes a proposed marina. A Community Development District known as the Shores of Santa Rosa has been established allowing for the issuance of bonds for the development of the infrastructure and amenities and allowing for special assessment on the developed property for the repayment of the bonds. However, given the current housing market and the crisis within the financial markets, beginning to develop the property within the next year would be 41 very risky. It could 42 HIGHEST AND BEST USE (Cont'd) be that the development would succeed, but allowing additional time for the market to stabilize and allow for the absorption of the current housing market inventory would be advisable. The highest and best use of the property is the development of the proposed master plan, but in the future when the market demands reduce the risk of the project. It is my opinion that this should occur within the next two years. AS IMPROVED The subject land is currently vacant and available to be developed to its highest and best use as vacant. 43 EXPOSURE TIME A brief definition of the term "exposure time" would be: "The estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based upon an analysis of past events assuming a competitive and open market."5 Based on the sales found within this report and conversations with local market participants, the subject's exposure time is estimated to be from one to two years. This exposure time assumes the sale to have been handled by a knowledgeable real estate broker familiar with the subject real estate market. 5 Appraisal Institute, The Dictionary of Real Estate Appraisal, 4th ed. (Chicago, Illinois: Appraisal Institute, 2002), pg. 105. 44 MARKETING TIME A brief definition of the term "marketing time" would be: "The time it takes an interest in real property to sell on the market subsequent to the date of an appraisal."6 Based on the sales found within this report, current listings and conversations with local market participants, the subject's marketing time is estimated to be from one to two years. This marketing time assumes the sale to be handled by a knowledgeable real estate broker familiar with the subject real estate market. It also assumes aggressive real estate sales tactics and readily available contacts active in the subject real estate market. The subject's marketing time is considered to be reflective of the exposure time as little change is expected in the market. 6 Appraisal Institute, The Dictionary of Real Estate Appraisal, 4th ed. (Chicago, Illinois: Appraisal Institute, 2002), pg. 175. 45 THE VALUATION PROCESS There are three (3) commonly accepted approaches to value: The Cost Approach, Income Approach, and Sales Comparison Approach. All three utilize market-derived information and are "market driven" approaches, as will be shown in the analysis. The Cost Approach is a summation of land value and improvement value. The land is valued as though vacant and available for its highest and best use. The improvement is valued by first estimating the reproduction costs new from which all forms of depreciation are deducted. Depreciation can be both from deterioration and obsolescence. Obsolescence is further categorized as functional or external. The analysis of obsolescence, based on the highest and best use analysis, accounts for deductions necessary if the improvement is not adequate for the site. The steps for the Income approach are to first estimate an economic rent for the subject. This analysis is made even if the property is owner occupied. From the gross potential income there is first deducted allowance for vacancy and collection loss with further deductions then made for the expenses applicable to the type of property being valued. This net operating income is then capitalized into an indication of value through the use of an appropriate capitalization rate. The Sales Comparison Approach is an estimation of the property value by comparison with recent sales of similar or competitive properties extracted from the subject's market. The "market", rather than being the immediate proximity to the subject, is considered that area, local, regional or even national, that would be considered by a prospective buyer of the subject property. These approaches do not make value. They are merely tools in the hands of the appraiser who must carefully weigh each value indication, give appropriate weight to the approach and reconcile into a final value conclusion. Given that for the purpose of this report this property is being considered vacant, no reasonable appraiser would apply the cost or income approach to value. 46 SALES COMPARISON APPROACH The sales comparison approach involves direct comparisons to the subject property of similar properties that have sold in the marketplace. The approach consists of searching the market for sales, qualifying the sales prices and terms with one of the participants in the sale, comparing the sales to the subject property for differences, adjusting the sales for those differences and formulating an opinion of value from the adjusted value indications. The improved sales, which are utilized, will be compared on a cost per unit basis depending on the "typical" unit used by market participants. The market derived adjustments follow a specific, logical order so as not to skew the results. The adjustments listed in order include: Property rights, financing, condition of sale, date of sale or market conditions, location and various physical adjustments, which can be considered together. While an adjustment for each may not be required, they are considered, resulting in a comparable unit of measure. The units of comparison may be physical, such as dollars per square foot of area, or they may be economic, such as gross rent multipliers. These units of comparison yield a pattern, which is reconciled and converted to a value indication for the subject via the sales comparison approach. 47 LAND VALUATION 48 COMPARABLE LAND SALE #1 File Residential Land (Acreage) R.E. Zone 9 Location This property is located along the south side of U.S. Highway 98, just west of Joybrook Lane in the Navarre area of South Santa Rosa County, Florida. Date June 13, 2008 Reference O.R. Book 2863, Page 314, Santa Rosa County, Florida Grantor Soundhaven Development Group, LLC Grantee Soundhaven, LLC Legal Lengthy legal being a portion of Sections 23 and 26, Township 2S, Range 27 West, Santa Rosa County, Florida (Property I.D. being 23-2S-27-0000- 02900-0000, 21-2S-27-0000-00109-0000 and 26-2S-27-0000-01400- 0000). Sales Price $3,150,877 Rights Transferred Fee Simple Financing Purchased the mortgage in the amount of $3,150,877 from Beach Community Bank Condition of Sale Arms Length Transaction Dimensions This property offers 268 feet of frontage along the Santa Rosa Sound and approximately 266 feet of frontage along U.S. Highway 98. 266.5' x 2,202.45' x 268.29' x 2,193.46' Zoning 3.35-Acres HCD – Highway Commercial District 10.14-Acres R-2, Medium Density Residential Utilities Available All public and private utilities were available. Size (Square Foot) 587,722 SF Price/Square Foot $5.36/SF Size (Acre) 13.49 Acres Price/Acre $233,571/Acre Size (Front Foot) 268 FF Price/Front Foot $11,757/FF Density 101 Units Price/Unit $31,197/Unit Confirmation Rodger Lowery, MAI confirmed this information with John Kelly in March 2009. Comments This is a rectangular shaped parcel with good utility that offers approximately 268 feet of frontage along the Santa Rosa Sound. The property had preliminary approval and wetland mitigation completed for a 92-unit project. The buyer revised the site plan and increased the density to 101-units being a mixture of townhouse and condos. The property was previously purchased by the seller in December 2004 from Kane Investments for $3,400,000. Kane Investments purchased the property in February 2004 for $1,650,000. Soundhaven, LLC is owned by JFK Holdings, LLC which essentially purchased the mortgage and foreclosed on the property from Soundhaven Development Group. 49 50 COMPARABLE LAND SALE #2 File Residential Land (Acreage) 15 R.E. Zone 9 Location This property is located on the north side of Highway 98 across from Joybrook Road in the Navarre area of the Gulf Breeze Peninsula in Santa Rosa County, Florida. Date February 11, 2008 Reference O.R. Book 2805 Page 887 Grantor Navarre Villas, LLC Grantee Titan Ventures Management Corporation Legal Lengthy legal being a portion of Section 24, Township 2S, Range 27 West, Santa Rosa County, Florida (Property I.D. a portion of #24-2S-27- 0000-00101-0000). Sales Price $7,000,000 Rights Transferred Fee Simple Financing Cash Condition of Sale Arms Length Transaction Dimensions This property offers 1,231 feet of frontage along Highway 98 and has an average depth of 635 feet. Zoning HCD – Highway Commercial District Utilities Available All public and private utilities were available. Size (Square Foot) 781,902 SF Price/Square Foot $8.95/SF Size (Acre) 17.95 Acres Price/Acre $389,972/Acre Size (Front Foot) 1,231 FF Price/Front Foot $5,686/FF Confirmation Lee Benton confirmed this information with Rodger Lowery, grantor (850-982-9032), on 3/4/08. Comments This is a rectangular shaped parcel with good utility that offers 1,231 feet of frontage along the north side of Highway 98. At the time of sale, the land was level and cleared with no wetlands. No development plans were known. The grantor purchased the property in June of 2005 for $4,900,000 (O.R. 2468/1722) indicating a monthly appreciation of 1.3% and an annual appreciation of 15.6%. 51 52 COMPARABLE LAND SALE #3 File Residential Land R.E. Zone 15 Location East side of Indian Trail Drive, Destin, Florida. Date January 26, 2007 Reference O.R. Book 2762, Page 3939 Grantor Okaloosa Walton College Foundation, Inc. Grantee Titan Development, LLC. Legal Lengthy legal retained in appraisers' files; also identified as Okaloosa County Parcel Number 00-2S-22-0000-0003-0010. Sales Price $8,100,000 Rights Transferred Fee Simple Financing This sale will be financed with a conventional loan with terms considered to be similar to a cash sale. Condition of Sale Arms Length Transaction Dimensions Numerous dimensions, with a total of 1,786 feet of frontage along Choctawhatchee Bay and Indian Bayou Zoning It was reported that the future land use designation is "BE", Bay Estates Utilities Available Electricity and Telephone are available. Size (Square Foot) 554,083 SF Price/Square Foot $14.61/SF Size (Gross Acres) 12.72 Acres Price/Gross Acre $636,792/Gross Acre Size (Net Acres) 11.22 Acres Price/Net Acre $721,925/Net Acre Size (DU) 14 D.U.s Price/DU $578,571/DU Confirmation Lisa Compton confirmed this information during the course of appraising the property and with public records in January 2008. Comments This site includes a 1.5 acre pond and is encumbered by the Mattie & Coleman Kelly & Family mausoleum, which must be maintained in perpetuity according to the deed issued to the current owners. The buyers plan to enhance the mausoleum with a reflecting pond, manicured landscape, park and parking area for the Kelly family to visit. At the time of sale this site was improved with a 6,669 square foot single family residence, a 1,350 square foot utility building and a 244 square foot mausoleum, which were constructed in 1963. With the exception of the mausoleum, these improvements have reached the end of their economic lives and contribute no value to the site. The buyers plan to develop the site to a 14-lot residential subdivision to be known as the Estates at Indian Point. Five of the planned lots will include frontage on the bay, and 9 will have frontage along the bayou. 53 54 COMPARABLE LAND SALE #4 File Residential Land R.E. Zone 15 Location The property is located at the north end of Old Ferry Road, found north of Highway 98 in South Walton County, Florida. Date Four transactions between 3/10/06 and 5/2/06. Reference OR Book/Pages 2711/2233, 2716/179, 2716/193, and 2717/2084 Grantor Joyce & Askew Knight, Alie Forester, Thomas & Pamela Russell, and Beatrice F. Reynolds, Trustee Grantee Aquarian Development V, LLC Legal Lengthy legal being a portion of Section 36, Township 2 South, Range 19 West, Walton County, Florida. Sales Price Four transactions totaling $6,975,000 Rights Transferred Fee Simple Financing This sale was financed with a conventional loan with terms considered to be similar to a cash sale. Condition of Sale Arms Length Transaction Dimensions Numerous dimensions with 1,700 feet of water frontage along Peach Creek. Zoning Neighborhood Planning Area/Infill Utilities Available All public and private utilities were available. Size (Square Foot) 609,840 SF Price/Square Foot $11.44/SF Size (Acre) 14 Acres Price/Acre $498,214/Acre Size (DU) 27 D.U.s Price/Acre $258,333/DU Confirmation Lisa Compton confirmed this information with Onno Horn, a representative of the buyer (850.622.1850) and Walton County Public Records on 4/2/07 and 12/4/07. Comments This property has an irregular shape with 1,700 feet of frontage along Peach Creek, which has a depth of 5' in the vicinity of this property. This site is located on Old Ferry Road, a clay road. Ingress and egress are considered to be good. This site contains a total of 6.54 acres of jurisdictional wetlands. The buyers of the property plan to develop the site with a 27 lot subdivision with typical lot sizes of 60' x 130', but would not disclose their anticipated prices. 55 56 COMPARABLE LAND SALE #5 File Land R.E. Zone 20 Location This property is located on the south side of Highway 20 and the west side of Highway 331 in Freeport, Florida Date April 4, 2006 Reference O.R. Book 2714 Page 1955 Grantor Freeport Venture Partners, et.al. Grantee Lagrange Landing Development, Inc. Legal Lengthy legal in Section 15, Township 1 South, Range 19 West, Walton County, Florida (Tax I.D. #15-1S-19 – 2300-0036-0000 & 23-1S-19- 2300-0001-0032) Sales Price $17,000,000 Rights Transferred Fee Simple Financing This was indicated to be a cash sale. Condition of Sale Arms Length Transaction Dimensions Numerous Zoning "C-1" General Commercial H&B Use: Residential Development. Utilities Available All public and private utilities are available. Size (Acre) 104 Acres Price/Acre $163,462/Acre Size (DU) 260 D.U. Price/DU $65,385/DU Confirmation Tom Fruitticher, MAI confirmed this information with Jonathan Roberts, Broker for the buyer (850-699-2846) in March of 2008. Comments This is an irregular shaped property that offers access frontage along the south side of Highway 20 and along the west side of Highway 331 within the City limits of Freeport, Florida. The land also includes frontage along Lagrange Creek; however, most of the creek frontage is surrounded by wetlands and can not be seen. There are two upland strips that provide access to the creek. While the land is zoned for a commercial use, it has very little high traffic road frontage and the buyers purchased the property to develop a two phase residential community that will include a total of 260 home sites. As of the writing of this report, the first phase of this development was complete and 34 of the residential lots have closed. Since the 2006 closings of the residential lots, 5 have been re-listed for sale at prices that are 20% to 28% lower than the original purchase price, indicating the market has declined since the highs seen in 2006. 57 Sale 3 Site & Aerial 58 COMPARABLE LAND SALE #6 File Residential R.E. Zone Walton County, Florida Location Located along the east end of East Hodge Road with extensive frontage along Choctawhatchee Bay and Churchill Bayou in Walton County, Florida. Date September 21, 2005 Reference O.R. Book 2692, Page 3712, Walton County, Florida Grantor Main Pass, LLC Grantee Sembera Holdings, LLC Legal Lengthy legal description on file with the appraiser. Sales Price $25,109,600 Rights Transferred Fee Simple Financing Conventional financing with Colonial Bank in the amount of $20,000,000. Condition of Sale Arms-Length Transaction Dimensions Numerous Zoning "NPA/Infill", Neighborhood Planning/Infill Utilities Available All public and private utilities were available. Size (Square Foot) 1,810,354 SF Price/Square Foot $13.87/SF Size (Acre) 41.56 Acres Price/Acre $604,177/Acre Units 102 Units Price/Unit $246,173/DU Confirmation Confirmed through an appraisal of the property in March 2008. Comments This sale represents the purchase of a slightly irregular shaped parcel located along the east end of East Hodge Road with extensive frontage along Choctawhatchee Bay and Churchill Bayou. The property contains approximately 4.52-acres of wetlands that have been placed in to a conservation easement to offset wetland impacts for an access road. The owners obtained a final development order and plan to list the lots with prices ranging from $550,000 to $750,000 for interior lots and $750,000 to $2,000,000 for the water front lots. 59 60 COMPARABLE LAND SALE #7 File Waterfront Land R.E. Zone Bon Secour Location Located along County Road 4 (Bon Secour Avenue), just west of the planned Bon Secour Village property in Gulf Shores, Alabama Date September 12, 2006 Reference Recording reference #100845 Grantor Coastal Resort Properties, L.P and United Properties Group, LLC Grantee Gulf Shores Waterway Development, LLC Legal Lengthy legal description being a portion of Section 7, Township 9 South, Range 4 East in Baldwin County, Alabama. Sales Price $25,000,000 ($18,750,000 for 75% ownership with the Seller retaining 25% ownership.) Rights Transferred Fee Simple. Financing This sale was cash sale to seller. Condition of Sale Arms Length Transactions Dimensions 2,000.14' x 1,058.46' x 335.67' x 60' x 400.08' x 11.24' x 2,162' (Intracoastal Waterway) 1,112.28' Zoning "BTB-3", Tourist Business, High Density allowing up to 30 dwelling units per acre with a maximum height of 20 floors above five levels of parking. Utilities Available All public and private utilities were available. Size (Square Foot) 2,222,721 SF Price/Square Foot $11.25/SF Size (Acre) 51.03 Acres Price/Acre $489,940/Ac Size (Front Foot) 2,162 FF Price/Front Foot $11,563/FF Size (D.U.) 1,531 DU Price/D.U. $16,329/DU Confirmation Roger Lowery, MAI confirmed this information with Paul Kirkland, a representative for Jim Mattei, the seller. Comments This site was purchased for the development of the Waterdance project. This project is currently being approved as a "PUD", Planned Unit Development. The property contains approximately 20 acres of wetlands, which adversely affect the development. The property adjoins the east end of the Oyster Bay Dredge Disposal Area. 61 62 COMPARABLE LAND SALE #8 File Waterfront Land R.E. Zone Bon Secour Location Located along County Road 6, just south of Henderson Lane in Gulf Shores, Alabama. Date July 25, 2006 Reference Recording reference #991205 as well as contract and appraisal of the property. Grantor Celestial Enterprises, Inc. (Larry and Amy Thompson-Green and James and Sandra Ivy) Grantee Jay Anthony, LLC Legal Lengthy legal description on file with the appraiser. Property is located in Section 1, Township 9 South, Range 3 East in Baldwin County, Alabama. Sales Price $4,800,000 Rights Transferred Fee Simple. Financing This sale was financed with a conventional loan in the amount of $3,840,000 with First Cherokee State Bank with terms considered to be similar to a cash sale. Condition of Sale Arms Length Transactions Dimensions 298.29' x 1,665.32' x 331' on the water x 1,550.54' Zoning The property was zoned "R-1", Single-Family Residential at the time of the contract with preliminary approval for "BTL/PUD", Tourist Lodging/Planned Unit Development at closing. Utilities Available All public and private utilities were available. Size (Square Feet) 490,050 SF Price/Square Foot $9.79/SF Size (Acre) 11.25 Acres Price/Acre $426,667/Acre Size (Front Foot) 331 FF Price/Front Foot $14,502/FF Size (D.U.) 122 DU Price/D.U. $39,344/DU Confirmation Confirmed during the course of appraising the property in July 2006. Comments This site was purchased for condominium development containing 122 units. The parcel contained approximately 5.9-acres of jurisdictional wetlands, however the proposed development will not adversely affect these areas. 63 64 COMPARABLE LAND SALE #9 File Waterfront Land R.E. Zone Bon Secour, Alabama Location Located along Estella Davis Lane with access to County Road 6 on Plash Island in Gulf Shores, Alabama. Date July 28, 2005 Reference Recording Reference #912538 through 912540, Baldwin County, Alabama Grantor Charter Landing, Inc., Mark B. Reed and Head Companies, LLC Grantee Plash Island One, LLC Legal Lengthy legal description on file with the appraiser. Sales Price $16,000,000 Rights Transferred Fee Simple Financing Conventional financing in the amount of $9,600,000 with Bank of Pensacola and $3,200,000 with First Commercial Bank indicating a total loan-to-price of 80%. Condition of Sale Arms Length Transaction Dimensions Irregular with 347' along Bon Secour River with extensive frontage along an interior canal. Zoning "BTL/PUD", Tourist Lodging/Planned Unit Development allowing for 300 residential condominium units Utilities Available All public and private utilities were available. Size (Square Foot) 1,011,028 SF Price/Square Foot $15.83/SF Size (Acre) 23.21 Acres Price/Acre $689,358/Acre Size (Front Foot) 347 FF Price/Front Foot $46,110/FF Size (D.U.) 300 DU Price/D.U. $53,333/DU Confirmation Confirmed by Rodger Lowery, MAI with Andy Yarborough, member of development group on July 17, 2006. Comments This is the assemblage of seven parcels located just west of the bridge on to Plash Island with frontage along the Bon Secour River. The purchaser had obtained preliminary approval by the City of Gulf Shores for the development of the Five Waters Condominiums consisting of 300 residential condominiums and 144 boat slips. This parcel included a long canal that extended westward through the southern portion of the property. This water frontage is not included in the above analysis. 65 66 COMPARABLE ACTIVE LISTING #1 File Waterfront Land R.E. Zone Gulf Shores, Alabama Location Floyd Plash Lane in Gulf Shores, Alabama. Reference Baldwin County MLS #117274 Broker Ken Montgomery, Charter Landing, Inc. List Price $12,000,000 Rights Transferred Fee Simple Size 18 Acres with approximately 3,000 feet of frontage along Bon Secour River Zoning Platted for 400 residential condominiums and 177 boat slips Utilities Available All public and private utilities were available. Size (Acre) 18 Acres Price/Acre $666,667/Acre Size (D.U.) 400 DU Price/D.U. $30,000/DU Comments This is a planned unit development with a total of 400 residential condominiums and 177 boat slips to be located along the Bon Secour River on Plash Island. The proposed development has approval with environmental and wetlands surveys completed. This property had been listed for $21,995,000 or $54,988 per unit. The listing price was reduced in late 2008. 67 COMPARABLE ACTIVE LISTING #2 File Waterfront Land R.E. Zone Gulf Shores, Alabama Location Located along the north side of Fort Morgan Road, approximately ten miles west of Highway 59 in Gulf Shores, Alabama. Reference Baldwin County MLS #145392 Broker Jay Jennings of Pendulum Properties, LLC List Price $18,000,000 Rights Transferred Fee Simple Size 24 Acres with approximately 2,000 feet of frontage along Mobile Bay and Collins Bayou with similar frontage along Fort Morgan Road Zoning Zoned "BTL-FM" allowing for 360 units with a mixed-use allowing for 72 boat slips. Current zoning allows for 15 dwelling units per acre with 10 habitable floors, above one commercial floor above three levels of parking. Utilities Available All public and private utilities were available. Size (Acre) 24 Acres Price/Acre $750,000/Acre Size (D.U.) 360 DU Price/D.U. $50,000/DU Comments This is a parcel of land located along Fort Morgan Road approximately ten miles west of Highway 59. The list of permits in hand include ADEM & Corps of Engineer permit through 2010, site plan submittal and architectural drawings. 68 COMPARABLE ACTIVE LISTING #3 File Waterfront Land R.E. Zone Navarre, Florida Location Located along the south side of U.S. Highway 98, west of Joybrook Lane and adjacent west of the Sound Haven development in Navarre, Florida. Reference Pensacola MLS #366427 Broker Patricia Williamson, Exit Realty NFI Seller The Estate of W.F. Price List Price $2,500,000 Rights Transferred Fee Simple Size 10.3 Acres with approximately 200-0feet of frontage along the Santa Rosa Sound Zoning R-2, Medium Density Residential up to 10 dwelling units per acre Utilities Available All public and private utilities were available. Size (Acre) 10.3 Acres Price/Acre $242,719/Acre Size (D.U.) 103 DU Price/D.U. $24,272/DU Comments This is a vacant parcel of land containing approximately 4-acres of wetlands with the remainder being uplands. No plans or development study has been completed for this property. The property was recently listed for sale (3/9/2009). 69 70 COMPARABLE ACTIVE LISTING #4 File Waterfront Land R.E. Zone Navarre, Florida Location Located South of U.S. Highway 98 at the end of Joybrook Road in Navarre, Florida Reference Pensacola MLS #350732 Broker Patricia Williamson, Exit Realty, NFI Seller Edith H. Robison Irrevocable Trust List Price $3,800,000 Rights Transferred Fee Simple Size 12.50 Acres with approximately 320-feet of frontage along the Santa Rosa Sound Zoning R-2, Medium Density Residential Utilities Available All public and private utilities were available. Size (Acre) 12.5 Acres Price/Acre $245,632/Acre Density 125 Units Price/Unit $30,400/Unit Comments This property has not frontage along Highway 98 but is accessed via Joybrook Road. The owners had a wetlands delineation performed that indicated approximately 5-acres of wetlands with the remaining 7.5-acres being uplands. No development studies or plans are included in the listing price 71 72 LAND VALUE ANALYSIS Comp Location Price Date Size Units $/Acre $/DU (Ac.) Sale #1 Navarre, Fl. $3,150,877 6/13,2008 13.49 Ac. 101 DU $233,571/Ac $31,197/DU . Sale #2 Navarre, Fl. 7,000,000 2/11/2008 17.95 Ac. 180 DU 389,972/Ac. 38,889/DU Sale #3 Destin, Fl. 8,100,000 1/26/2007 12.72 Ac. 14 DU 636,792/Ac. 578,571/DU Sale #4 Walton 6,975,000 3-5/2006 14 Ac. 27 DU 498,214/Ac. 258,333/DU County, Fl. Sale #5 Freeport, Fl. 17,000,000 4/4/2006 104 Ac. 260 DU 163,462/Ac 65,385/DU Sale #6 Walton 25,109,600 9/21/2005 41.56 Ac. 102 DU 604,177/Ac 246,173/DU County, Fl. Sale #7 Gulf 25,000,000 9/12/2006 51.03 Ac. 1,531 DU 489,940/Ac. 16,329/DU Shores, Al. Sale #8 Gulf 4,800,000 7/25/2006 11.25 Ac. 122 DU 426,667/Ac 39,344/DU Shores, Al. Sale #9 Gulf 16,000,000 7/28/2005 23.21 Ac. 300 DU 689,358/Ac. 53,333/DU Shores, Al. Listing #1 Gulf 12,000,000 Current 18 Ac. 400 DU 666,667/Ac 30,000/DU Shores, Al. Listing #2 Gulf 18,000,000 Current 24 Ac. 360 DU 750,000/Ac. 50,000/DU Shores, Al. Listing #3 Navarre, Fl. 2,500,000 Current 10.3 Ac. 103 DU 242,719/Ac. 24,272/DU Listing #4 Navarre, Fl. 3,800,000 Current 12.5 Ac. 125 DU 245,632/Ac. 30,400/DU Review The subject property contains approximately 91.59-acres of land containing approximately 855 feet of frontage along the south right-of-way of U.S. Highway 98 and approximately 833 feet of frontage along the Santa Rosa Sound. The property is zoned "PUD", Planned Unit Development for the Rosemary Sound development consisting of 825 residential units and 49,000 square feet of commercial space. The property has approximately 23.79-acres of jurisdictional wetlands and includes a DEP permit to fill a small portion of the wetlands for road crossings to allow access to the southern uplands. The property is incorporated in to a community development district known as the Shores of Santa Rosa Community Development District allowing for the issuance of bonds for the construction of the infrastructure and 73 74 LAND VALUE ANALYSIS (Cont'd.) amenities and creating a special assessment district to collect assessments for the repayment of the bonds. Given the inclusion of the approved community development district as well as the existing development order and the DEP permit for the crossing of the wetlands, this is a very unique opportunity for a property that is essentially ready to be developed. Due to the uniqueness of the property and the entitlements, locating comparable land sales within the past year was limited. This is further complicated by the recent financial crisis gripping the nation's economy whereby development land purchases have been limited. Of the nine land sales located within the region, two occurred in 2008 and one in 2007 with four occurring in 2006 and two in 2005. I have also included four listings with two located in Navarre, Florida and two located in Gulf Shores, Alabama. The nine sales reflect a price range from $3,150,877 to $25,109,600 or $163,462 to $689,358 per acre. The listings reflect a price range from $2,500,000 to $18,000,000 or $242,719 to $750,000 per acre. The price per dwelling unit for the nine sales reflects a much wider range from $16,329 to $578,571 per unit with the listings reflecting a range from $24,272 to $50,000 per unit. Considering this, the price per acre will be used in the following analysis. The adjustments that were considered for the land sales and listings are as follows. PROPERTY RIGHTS SOLD – The property rights being considered are those of the fee simple interest. The property rights transferred in the comparable sales were also those of the fee simple interest. As the interests sold are similar to the interest being appraised, no property rights adjustments are considered to be necessary. FINANCING - The comparable properties also sold for cash or terms considered similar to a cash sale requiring no financing adjustments. CONDITIONS OF SALE - All of the sales were arms-length transactions requiring no conditions of sale adjustments. MARKET CONDITIONS ADJUSTMENT – The sale dates are between July 2005 and February 2008. The market for development land hit a peak in the subject's area in late 75 LAND VALUE ANALYSIS (Cont'd.) 2005/early 2006 with the majority of waterfront development land having decreased in value since early 2006. In the following chart I have outlined the sales activity for residential detached, residential attached and condominiums in the Navarre area since 2005. This chart indicates the price decreases over the past few years. NAVARRE SALES ACTIVITY COMPARISON Property Year # of Sales Average Medium % Change % Change Type Sales Price Sales Price Avg. Price Med. Price Residential 2009 168 ** $216,580 $209,200 -8% - 2008 +1% - 2008 Detached -8% - 2007 -3% - 2007 -19% - 2006 -14% - 2006 -23% - 2005 -20% - 2005 2008 281 $235,499 $207,000 0% - 2007 -4% - 2007 -12% - 2006 -15% - 2006 -17% - 2005 -20% - 2005 2007 312 $235,708 $215,000 -12% - 2006 -12% - 2006 -17% 2005 -17% 2005 2006 292 $266,815 $243,812 -6% - 2005 -6% - 2005 2005 381 $282,628 $260,000 --- --- Current 235 $354,293 $239,900 --- --- Listings Residential 2009 0 0 0 0 0 Attached 2008 13 $303,023 $169,900 -7% - 2007 -48% - 2007 +9% - 2006 -23% - 2006 -6% - 2005 -48% - 2005 2007 13 $326,769 $329,000 +18% - 2006 +50% - 2006 +1% - 2005 +1% 2005 2006 19 $277,383 $220,000 -14% - 2005 -32% - 2005 2005 13 $322,915 $325,000 --- --- Current 46 $438,346 $298,817 --- --- Listings Condominiums 2009 *** 2 $118,450 $105,950 --- --- 2008 16 $365,131 $372,500 -4% - 2007 -8% - 2007 -34% - 2006 -23% - 2006 -34% - 2005 -38% - 2005 2007 6 $380,983 $402,500 -31% - 2006 -17% - 2006 -31% - 2005 -33% - 2005 2006 6 $552,667 $486,500 0 – 2005 -19% - 2005 2005 12 $551,708 $597,500 --- --- Current 84 $469,490 $454,500 --- --- Listings 76 LAND VALUE ANALYSIS (Cont'd.) As noted in the previous chart, the 2009 detached residential sales reflect an average price decrease from 2008 of 8% and 8% down from 2007 but reflect a decrease of 19% since 2006 prices and 23% since 2005 prices. With no residential attached sales having occurred in 2009, the 2008 prices reflect a decrease of 7% over the 2007 prices, a 9% increase over the 2006 prices and a 6% decrease over the 2005 prices. Similar to the residential attached sales, there is limited data for condominium sales in 2009. However, the 2008 sales reflect a 4% decrease over the 2007 prices and a 34% decrease over the 2006 and 2005 prices. Considering the data provided, I have reconciled a downward market conditions adjustment of 8% for sales occurring in 2008 and 2007, a downward market conditions adjustment of 20% for sales occurring in 2006 and a downward market conditions adjustment of 25% for sales occurring in 2005. Also, the four listings are adjusted downward 10% to reflect a possible sales price compared to the current listing price. Applying these adjustments indicates adjusted prices of $214,885/acre for sale one, $358,774/acre for sale two, $585,849/acre for sale three, $398,571/acre for sale four, $130,770/acre for sale five, $453,133/acre for sale six, $391,952/acre for sale seven, $341,334/acre for sale eight and $517,019/acre for sale nine. The four listings reflect adjusted prices of $600,000/acre for listing one, $675,000/acre for listing two, $218,447/acre for listing three and $221,069/acre for listing four. LOCATION ADJUSTMENT – The subject property is located in a good location in close proximity to a growing metro area and has extensive water frontage along deep water. The location compares as similar to sale one and listings three and four and superior to sales two and five, but inferior to the other comparables. In comparison with the subject and using a direct sales analysis between sales five and six, I have applied a downward location adjustment of 40% to sale six with an upward location adjustment of 50% to sale five. Using this same analysis, an upward adjustment of 15% is applied to sale two due to its lack of 77 LAND VALUE ANALYSIS (Cont'd.) waterfront with a downward location adjustment of 40% to sale three and a downward adjustment of 20% to sale four. Applying these adjustments indicates a location adjusted price of $412,590/acre for sale two, $351,509/acre for sale three, $318,857/acre for sale four, $196,155/acre for sale five and $271,880/acre for sale six. The remaining sales and listings one and two require downward location adjustments of 10% for their slightly superior locations in the Gulf Shores market. These adjustments are reflected in the following adjustment chart and indicate an adjusted price of $352,757/acre for sale seven, $307,201/acre for sale eight, $456,317/acre for sale nine, $540,000/acre for listing one and $607,500/acre for listing two. PHYSICAL CHARACTERISTIC ADJUSTMENTS – All of the sales offer similar physical characteristics to the subject property, with the exception of size. SIZE ADJUSTMENT – The thirteen comparable sales and listings range from 10.3 acres up to 104 acres bracketing the subject's 91.59 acres. Typically as the size of a property decreases, the price per unit or acre increases. This is evident in the comparables. Using a direct comparison between the adjusted sales three and four ranging from 12.72 to 14 acres with sale five indicating 104 acres, a downward adjustment of approximately 35% is applied to sales three and four to compare to the size of sale five and the subject. A similar downward adjustment of 35% is applied to sales one, two and eight and listings one, three and four. In comparing sales six and seven being 41.56-acres and 51.03-acres to sale five, a downward adjustment of 25% is applied to sales six and seven. With sale nine and listing two having a size between the other sales, a downward adjustment of 30% is applied to these two comparables. Applying the size adjustments indicates a size adjusted price of $139,675/acre for sale one, $268,184/acre for sale two, $228,481/acre for sale three, $207,257/acre for sale four, $196,155/acre for sale five, $203,916/acre for sale six, $264,568/acre for sale seven, $199,681/acre for sale eight, $325,722/acre for sale nine, $351,000/acre for listing one, $425,250/acre for listing two, $150,930/acre for listing three and $263,250/acre for listing 78 four. 79 LAND VALUE ANALYSIS (Cont'd.) With no other adjustments required, the above indicated adjustments are summarized in the following adjustment grid: Adjustment Chart Comp Price/Acre Mkt. Adj. $/Ac Location Adj. Size Adj. $/Ac. Cond. $/Ac. Adj. Sale #1 $ 233,571 -8% $214,885 -0- $214,885 -35% $139,675 Sale #2 389,972 -8% 358,774 +15% 412,590 -35% 268,184 Sale #3 636,792 -8% 585,849 -40% 351,509 -35% 228,481 Sale #4 498,214 -20% 398,571 -20% 318,857 -35% 207,257 Sale #5 163,462 -20% 130,770 +50% 196,155 -0- 196,155 Sale #6 604,177 -25% 453,133 -40% 271,880 -25% 203,916 Sale #7 489,940 -20% 391,952 -10% 352,757 -25% 264,568 Sale #8 426,667 -20% 341,334 -10% 307,201 -35% 199,681 Sale #9 689,358 -25% 517,019 -10% 465,317 -30% 325,722 Listing #1 666,667 -10% 600,000 -10% 540,000 -35% 351,000 Listing #2 750,000 -10% 675,000 -10% 607,500 -30% 425,250 Listing #3 242,719 -10% 218,447 -0- 232,200 -35% 150,930 Listing #4 245,632 -10% 221,069 -0- 405,000 -35% 263,250 VALUE RECONCILIATION After adjustments, the comparable sales indicate an adjusted range from $139,675 to $325,722 per acre, averaging $225,960/acre. Excluding the high and low end of the range, the sales reflect an adjusted range from $196,155 to $268,184 per acre with an average of $224,035/acre. The four listings reflect a range from $150,930 to $425,250 per acre averaging $297,608 per acre. In reconciling the subject's value via the comparable sales, I have analyzed the gross and net adjustments for each sale. Sales one, two and five reflect the lowest percentage of net adjustments with sales one reflecting an adjusted value of $139,675/acre and net adjustments of 43% (43% gross adjustments), sale two reflecting an adjusted price of $268,184/acre with 80 LAND VALUE ANALYSIS (Cont'd.) net adjustments of 28% (58% gross adjustments) and sale five reflecting an adjusted price of $196,155/acre with net adjustment of 30% (gross adjustments of 70%). The remaining sales reflect net and gross adjustment range from 60% to 90%. With the exception being sale one, which involved a pre-foreclosure condition, given the adjustment percentage to the comparable sales I place most weight on sales two and five and listings four and five reflecting a combined average of $219,630/acre in reconciling the subject's current market value at $220,000 per acre. Applying this to the subject's 91.59-acres indicates a current as-is market value of $20,149,800. Subtracting the property taxes currently due for the 2007 tax year in the amount of $86,567 indicates a value of $20,063,233, rounded to $20,000,000. LAND VALUE OPINION $20,000,000 81 PART THREE: CERTIFICATIONS AND ADDENDA 82 CERTIFICATION We certify that, to the best of our knowledge and belief: 1. The statements of fact contained in this report are true and correct. 2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are our personal, unbiased professional analyses, opinions, and conclusions. 3. We have no present or prospective interest in the property that is the subject of this report and we have no personal interest or bias with respect to the parties involved. 4. Our compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event. 5. This appraisal was not based on a requested minimum valuation, a specific valuation, or the approval of a loan. 6. Our analyses, opinions, and conclusions were developed, and this report has been prepared in conformity with the Uniform Standards of Professional Appraisal Practice. 7. We have made a personal inspection of the property that is the subject of this report. 8. No one provided significant professional assistance to the persons signing this report. 9. The reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute. 10. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. 11. As of the date of this report we have completed the requirements of the continuing education program of the Appraisal Institute. 12. The subject of this appraisal report is identified as the Shores of Santa Rosa Community Development District encompassing approximately 91.59-acres of land located along the south right-of-way of U.S. Highway 98 in Navarre, Florida. The estimated "as-is" value of the real estate, as of March 23, 2009, was $20,000,000. Digitally signed by Rodger K. Lowery, Rodger K. MAI DN: CN = Rodger K. Lowery, MAI, C = US, O = Fruitticher-Lowery Appraisal Lowery, MAI Group, Inc. ____________________________ Date: 2009.03.26 13:59:47 -05'00' Rodger K. Lowery, MAI State-Certified General Real Estate Appraiser #RZ1922 83 ASSUMPTIONS AND LIMITING CONDITIONS 1. No responsibility is assumed for legal or title considerations. Title to the property is assumed to be good and marketable unless otherwise stated in this report. 2. The property is appraised free and clear of any or all liens and encumbrances unless otherwise stated in this report. 3. Responsible ownership and competent property management are assumed unless otherwise stated in this report. 4. The information furnished by others is believed to be reliable. However, no warranty is given for its accuracy. 5. All engineering is assumed to be correct. Any plot plans and illustrative material in this report are included only to assist the reader in visualizing the property. 6. It is assumed that there are no hidden or unapparent conditions of the property, subsoil, or structures that render it more or less valuable. No responsibility is assumed for such conditions or for arranging for engineering studies that may be required to discover them. 7. It is assumed that there is full compliance with all applicable federal, state, and local environmental regulations and laws unless otherwise stated in this report. 8. It is assumed that all applicable zoning and use regulations and restrictions have been complied with, unless a nonconformity has been stated, defined, and considered in this appraisal report. 9. It is assumed that all required licenses, certificates of occupancy or other legislative or administrative authority from any local, state, or national governmental or private entity or organization have been or can be obtained or renewed for any use on which the value estimates contained in this report are based. 10. Any sketch in this report may show approximate dimensions and is included to assist the reader in visualizing the property. Maps and exhibits found in this report are provided for reader reference purposes only. No guarantee as to accuracy is expressed or implied unless otherwise stated in this report. No survey has been made for the purpose of this report. 11. It is assumed that the utilization of the land and improvements is within the boundaries or property lines of the property described and that there is no encroachment or trespass unless otherwise stated in this report. 12. The appraisers are not qualified to detect hazardous waste and/or toxic materials. Any comment by the appraisers that might suggest the possibility of the presence of such substances should not be taken as confirmation of the presence of hazardous waste and/or toxic materials. Such determination would require investigation by a qualified expert in the field of environmental assessment. The presence of substances such as asbestos, urea-formaldehyde foam insulation or other potentially hazardous materials may affect the value of the property. The appraisers' value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value unless otherwise stated in this report. No responsibility is assumed for any environmental conditions, or for any expertise or engineering knowledge required to discover them. The appraisers' descriptions and resulting comments are the result of the routine observations made during the appraisal process. 84 ASSUMPTIONS AND LIMITING CONDITIONS (Cont'd.) 13. Unless otherwise stated in this report, the subject property is appraised without a specific compliance survey having been conducted to determine if the property is or is not in conformance with the requirements of the Americans with Disabilities Act. The presence of architectural and communications barriers that are structural in nature that would restrict access by disabled individuals may adversely affect the property's value, marketability, or utility. 14. Any proposed improvements are assumed to be completed in a good workmanlike manner in accordance with the submitted plans and specifications. 15. The distribution, if any, of the total valuation in this report between land and improvements applies only under the stated program of utilization. The separate allocations of land and buildings must not be used in conjunction with any other appraisal and are invalid if so used. 16. Possession of this report, or a copy thereof, does not carry with it the right of publication. It may not be used for any purpose by any person other than the party to whom it is addressed without the written consent of the appraisers, and in any event only with proper written qualification and only in its entirety. 17. Neither all nor any part of the contents of this report (especially any conclusions as to value, the identity of the appraisers, or the firm with which the appraisers are connected) shall be disseminated to the public through advertising, public relations, news sales, or other media without prior written consent and approval of the appraisers. 85 POLICY STATEMENT OF THE APPRAISAL INSTITUTE 1. It is improper to base a conclusion or opinion of value upon the premise that the racial, ethnic or religious homogeneity of the inhabitants of an area or of a property is necessary for maximum value. 2. Racial, religious, and ethnic factors are deemed unreliable predictors of value trends or price variance. 3. It is improper to base a conclusion or opinion of value or a conclusion with respect to neighborhood trends upon stereotyped or biased presumptions relating to the effective age or remaining life of the property being appraised or the life expectancy of the neighborhood in which it is located. 86 QUALIFICATIONS AS AN APPRAISER RODGER K. LOWERY, MAI EDUCATION Bachelor of Science Degree - 1991 Florida State University Tallahassee, Florida Core Courses - Real Estate Major Real Estate Feasibility Analysis, Real Estate Market Analysis, Real Estate Finance, Real Estate Appraisal, Legal Environment of Real Estate, Commercial Bank Administration, Urban Planning and Growth Management, Comprehensive Planning Appraisal Institute Courses: 110: Appraisal Principles - 1994 120: Appraisal Procedures - 1994 310: Basic Income Capitalization - 1993 410/420: Standards of Professional Practice – 1992 430: Standards of Professional Practice Part C - 1999 510: Advanced Income Capitalization – 1993 520: Highest and Best Use and Market Analysis - 2000 530: Advanced Sales Comparison and Cost Approaches - 1998 540: Report Writing and Valuation Analysis - 1994 550: Advanced Applications - 1994 Appraisal Institute Seminars Reassigning, Readdressing and Reappraising – 2005, Florida Core Law Update – 2008, National USPAP Update Course – 2008, Supervisor/Trainee Roles and Relationships – 2008, Data Confirmation and Verification Methods – 2001, Scope of Work and Business Practices and Ethics – 2005, Effective Report Writing – 2003, Intro. To GIS Appl. For Real Estate – 2006, Analyzing Operating Expenses - 2006 APPRAISAL EXPERIENCE 5/97 – Present Residential and Commercial Real Estate Appraiser, Fruitticher-Lowery Appraisal Group (Owner/Appraiser). Performing commercial and residential real estate appraisals, reviews and consultations. Specializing in the Northwest Florida and South Alabama markets. 87 APPRAISAL EXPERIENCE (Cont'd.) 6/95 - 4/97 Residential and Commercial Real Estate Appraiser, RKL Appraisal Services, Inc. (President). Performing commercial and residential real estate appraisals, reviews and consultations. Specializing in the Northwest Florida and South Alabama markets. 6/95 - 9/96 Commercial Real Estate Appraiser, Laureate Realty Services, Inc. (Formerly Camp and Company), Mobile, Alabama. Income analysis and appraisal of neighborhood, community and regional shopping centers, malls, multi-tenant office buildings, apartments and hotels. Properties located in the southeast region, primarily Florida, Alabama, Mississippi and Louisiana. 9/92 - 5/95 Residential and Commercial Real Estate Appraiser, M. Eugene Presley and Associates. Commercial and residential fee appraiser. Responsibilities include the valuation of commercial properties, vacant commercial land, large acreage tracts, and environmentally sensitive properties. Numerous eminent domain appraisals, specifically including the Burgess Road and Airport Boulevard DOT projects. Eminent domain appraisals performed for the property owners. 12/91 - 9/92 Commercial Real Estate Appraiser, Marshall Appraisals, Inc. Associate appraiser. Responsibilities include the valuation of office buildings, banks, hotels, and other large commercial properties throughout Florida. 4/91 - 12/91 Research Assistant, State of Florida, Office of the Auditor General, Division of Real Estate. Responsibilities include the review of State of Florida county appraisal files audited by the Department of Revenue, as well as the review and confirmation of data within privately contracted appraisals performed for the Department of Natural Resources. Expert Witness Experience First Circuit Court, Santa Rosa County Escambia County Circuit Court Santa Rosa County Commission Okaloosa County Commission 88 PROFESSIONAL LICENSES/AFFILIATIONS Member, Appraisal Institute, Member #11029 State-Certified General Real Estate Appraiser, State of Florida, License #RZ 0001922 State-Certified General Real Property Appraiser, State of Alabama, License #G00445 Real Estate Broker, State of Florida, License # BK0573361; FLAG Realty, Inc. Real Estate Broker, State of Alabama, License #065378 (Reciprocal Brokers License) Developer – FLAG Leasing, Inc. and FLAG Realty, Inc. Member - Pensacola Association of Realtors, Florida Association of Realtors and the National Association of Realtors Past Member - Home Builders Association of West Florida Past Member – City of Pensacola Zoning Board of Adjustments Member – Leadership Escambia And Pensacola (LEAP) Class of 2001 Past Member – American Diabetes Association of Northwest Florida, Board of Directors Past Member – Fiesta of Five Flags, Board of Governors Past Member – WSRE Planned Giving Council, Board of Directors Past Member - Pensacola Chamber of Commerce Relocation Committee CLIENTS The Guardian Life Insurance Company Nationwide Insurance Company Allmerica Financial Business Men's Assurance Company Column Financial Sun Life Assurance Company Lehman Brothers Laureate Realty Services Saad Development Group Wade Ward Properties Jim Brown, Inc. Goleta National Bank Peoples First Community Bank Merrill Land Company First National Bank of Florida MembersFirst Credit Union of Florida First American Bank of Pensacola Compass Bank Southtrust Bank SunTrust Bank Regions Bank Whitney Bank AmSouth Bank of Florida AmSouth Bank of Alabama Pen Air Federal Credit Union Peoples First Community Bank 89 ADDENDUM 90 91 92 93 94