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BARRETT APPRAISAL SERVICES, LLC

Commercial Appraisal Summary Report

New Hot Springs Retail Center 44.927 Acre Commercial Subdivision

Truth or Consequences Sierra County, New Mexico

March 2011

Prepared for: First Savings Bank

Truth or Consequences, NM

Prepared by G. Vincent Barrett, MAI

NM Certification No. 000506-G

BAS, LLC

Approximate Area of Commercial Subdivision

Approx Area Wal-Mart Site

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April 4, 2011 Mr. Erik VanPelt Appraisal Review Officer First Savings Bank 723 New York Ave Truth or Consequences, NM 88301 Letter of Transmittal RE: 44.927 Commercial Subdivision located in Truth or Consequences Sierra County , NM Dear Mr. VanPelt:

At your request, Barrett Appraisal Services, LLC has completed an appraisal and arrived at an estimated market value for the platted and approved commercial subdivision, i.e., New Hot Springs Retail Center that is located on the SEC of I-25 and Date Street within the City limits of Truth or Consequences, NM. The subject contains approximately 44.927 acres. The property is accessed from Date Street.

The objective of this appraisal is to estimate the current bulk lot market value of the remaining acreage within the subdivision. The 44.92 acre site is currently under the ownership of Ashbaugh Construction Co. Inc. as recorded in WD Book 102 pg 1659-1660 recorded 17 December 2004 and WD Bk 106 pg 130-134 recorded 20 April 2006 and WD book 94 pages 2659 in the Clerk’s Office of Sierra County, NM. The original subdivision involved a total of 65 +- acres, the subject subdivision being a remaining portion of that total.

The value determined, i.e., bulk sale value, in the course of the analysis is based on the existing condition that the subject commercial parcels are undeveloped lots as originally proposed, zoned and platted and that the bulk sale value represents the current wholesale or bulk value of the entire inventory in a single sale.

The attached complete narrative appraisal report describes the data, methodology and reasoning used in the analysis. The analysis is subject to the assumptions and limiting conditions detailed in the report. The assumptions and limiting conditions should be carefully reviewed as they may affect the conclusions drawn and the final estimate of market value.

The research and analysis indicates the following market value of the subject property.

Effective Date: March 28, 2011

Market Value: $5,247,000

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This is a summary report, which is intended to comply with the reporting requirements set forth

under Standards Rule 2 of the Uniform Standards of Professional Appraisal Practice. As such, it may

only present descriptive discussions of the data, reasoning, and analyses that were used in the appraisal

process to develop the appraiser’s opinion of value. Where not presented directly in the report, then

supporting documentation concerning the data, reasoning, and analyses is retained in the appraiser’s file.

The depth of discussion contained in this report is specific to the needs of the client and for the intended

use as stated herein. The appraiser is not responsible for unauthorized use of this report.

In preparing the report, the conduct of the appraiser and all research associates has been governed by the professional standards and code of ethics of the Appraisal Institute and the Appraisal Foundation. My compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the attainment of a loan, the amount of the value estimate, the attainment of stipulated result or the occurrence of a subsequent event. Nor is the appraiser involved in the collection of loans on behalf of the client.

The analysis contained in this appraisal may be based upon hypothetical assumptions, and estimates that are subject to uncertainty and variation. These estimates may be based on data obtained in interviews with third parties or documents obtained from third parties, and such data may not always be completely reliable. In addition, the analysis makes assumptions as to the future behavior of consumers, and the general economy, which are highly uncertain by their nature. It may be that some assumptions will not materialize and that unanticipated events may occur which will cause actual achieved results to differ from the analysis contained in this report, and these differences may be material. Therefore, while the analysis was conscientiously prepared on the basis of prudent research of the available data no warranty can be made of any kind that the projected results will, in fact, be achieved. Additionally, Barrett Appraisal Services, LLC has not been engaged to evaluate the effectiveness of management/marketing, and is not responsible for future management/marketing efforts and actions upon which actual results may depend.

We did not ascertain the legal, engineering, and regulatory requirements that may be applicable to the property, including zoning certification and other state and local government regulations, permits and licenses. No effort has been made to determine the possible effect on the property of present or future federal, state or local legislation, including any environmental or ecological matters or interpretations thereof. With respect to market demand analysis, our work did not include analysis of the potential impact of any unanticipated rise or decline in local or general economic conditions.

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It is the opinion of the appraiser, based on the assumptions employed in the investment parameters for the subject, that the value conclusion represents a market value achievable within one year's exposure on the open market. No responsibility for any event, condition, or circumstance affecting the market that may take place subsequent to the last day of our fieldwork, i.e., March 28, 2011.

The appraiser has satisfied all competency requirements of USPAP and the Appraisal Institute and states that he is qualified to conduct the appraisal assignment. All FIRREA and USPAP research and reporting guidelines have been meet.

This letter is invalid as an opinion of value if detached from the report, which contains the text, exhibits, and addenda. Barrett Appraisal Services, LLC appreciates the opportunity to be of service to you. Should you or any other authorized user of this appraisal have further questions arising from the report, they will be welcomed.

Barrett Appraisal Services, LLC

G. Vincent Barrett, Ph.D, MAI, NM General Certification #00506-G

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TABLE OF CONTENTS Number Page

TABLE OF CONTENTS ......................................................................................................................... V!

EXECUTIVE SUMMARY .................................................................................................................... VI!

SECTION I - PREFACE .......................................................................................................................... 2!

SECTION II - INTRODUCTION.......................................................................................................... 16!

SECTION III GENERAL AREA ANALYSIS ................................................................................... 24!

SECTION IV SITE DATA ................................................................................................................... 39!

SECTION V SUBJECT MARKET POSITION................................................................................. 44!

SECTION VI - VALUATION ................................................................................................................ 53!

SECTION VIII CERTIFICATION ...................................................................................................... 72!List of Tables

TABLE 3-1 20 LARGEST CITIES IN NEW MEXICO ................................................... ERROR! BOOKMARK NOT DEFINED.!TABLE 3-2 NM COUNTY’S POPULATION 2000-2009 .............................................. ERROR! BOOKMARK NOT DEFINED.!TABLE 3-3 MEDIAN INCOMES U.S. 2010 .................................................................. ERROR! BOOKMARK NOT DEFINED.!TABLE 4-1 SUBJECT PROPERTY FULL AND TAXABLE VALUE 2011................................................................................... 40!TABLE 4-2 THE NEW HOT SPRINGS RETAIL CENTER ESTIMATED DEVELOPMENT COST ................................................ 41!TABLE 5-1 HISTORIC SIERRA COUNTY POPULATION ........................................................................................................... 45!TABLE 5-2 HOUSING SALES 2002-- 2010 ................................................................................................................................ 49!TABLE 5-3 TOTAL REAL PROPERTY SALES SIERRA COUNTY 2002 -2010 .......................................................................... 49!TABLE 5-4 BANK DEPOSITS BY BANK- SIERRA COUNTY, NM 6/30/00 TO 6/30/10 ............................................................ 50!TABLE 6-1 LAND SALE RANKING ANALYSIS GRID ............................................................................................................. 61!TABLE 6-2 RANKING ANALYSIS ........................................................................................................................................... 61!TABLE 6-3 DISCOUNTED CASH FLOW INPUTS ...................................................................................................................... 65!TABLE 6-3 DISCOUNTED CASH FLOW BULK SALE VALUE 41.578 ACRES ......................................................................... 66

List of Figures

FIGURE 1-1 REGIONAL LOCATION MAP 3!

FIGURE 1-2 CITY LOCATION .................................................................................................................................................... 3!FIGURE 1-3 NEIGHBORHOOD MAP ......................................................................................................................................... 4 Figure 1-4 Illustrative Site Plan 5 FIGURE 1-5 SUBJECT PLAT ....................................................................................................................................................... 6!FIGURE 1-6 FLOOD ZONE MAP ................................................................................................................................................. 7!FIGURE 1-7 AERIAL PHOTO ..................................................................................................................................................... 8!FIGURE 1-8 PHOTOS OF SUBJECT SITE ................................................................................................................................... 9!

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EXECUTIVE SUMMARY

Appraisal Assignment: Determine the current bulk lot market value of 44.927 acres that are contained within the existing New Hot Springs Retail Center commercial subdivision located in Sierra County within the SEC of the intersection of Date Street and I-25.

Client: Mr. Erik VanPelt

Appraisal Review Officer First Savings Bank 723 New York Ave Truth or Consequences, NM 88301

Intended Use: For the client to use in the mortgage loan review process.

Intended User: The intended user of this report is the above client and no others. This appraisal is not to be relied upon by any other third parties for any purpose, whatsoever. No third parties are authorized to rely upon this report for any reason without the express written consent of the appraiser. A third party being defined as anyone but the client. The above client is an experienced user of appraisals and is considered the responsible party for payment of the appraisal fee.

Ownership Interest: Fee Simple

Appraiser Interest: The appraiser has no current, past or future anticipated interest in the subject property.

Improvements: The subject is an existing platted, commercial subdivision with Phases 1through 5. Access roads are in with all utilities to the lots.

Locational Data: The subject property is located within the City limits of Truth or Consequences, Sierra County, NM within the SEC of the Intersection of Date Street and I-25.

Highest & Best Use: The highest and best use analysis indicates that the highest and best use is as developed as the location of a commercial subdivision.

Zoning: The subject is within the zoning jurisdiction Truth or Consequences and is zoned C-1 general commercial.

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Valuation Method: The valuation method used is the estimation of per acre values using the sales comparison approach leading to the formulation of a Discounted Cash Flow Model that assumes a bulk sale.

Market Value Estimates 1. Bulk Sale Market Value $5,247,000 2. Bulk Sale Market Value, per acre basis $126,186 3. Bulk Sale Market Value, per Sq. Ft. $2.89

Section I §

Preface

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SECTION I - PREFACE The preface to the report contains the various maps and photographs that relate to the property

and its environment. They should be reviewed prior to the reading of this report. They will be referenced by figure number where appropriate throughout the narrative part of the appraisal. Detailed maps and other figures are contained in the body of the report where necessary for clarification or illustrative explanation.

Figure Subject Page 1-1 Regional Location 3 1-2 Relative Location 3 1-3 Neighborhood Location 4 1-4 Illustrative Site Plan 5 1-5 Plat Map 6 1-6 Flood Zone 7 1-7 Aerial Photo 8 1-8 Photos of Subject 9

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FIGURE 1-1 REGIONAL LOCATION MAP

FIGURE 1-2 RELATIVE CITY LOCATION

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FIGURE 1-3 NEIGHBORHOOD MAP

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FIGURE 1-4 ILLUSTRATIVE SITE PLAN

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FIGURE 1-5 PLAT MAP

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FIGURE 1-6 FLOOD ZONE MAP PANEL 350073-0005C 7/16/1996

Area of Subject

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FIGURE 1-7 AERIAL PHOTO

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FIGURE 1-8 PHOTOS OF SUBJECT SITE

1. Entrance Street to subdivision from Date Street

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2. Entrance to Buck Greer St from H.R. Ashbaugh Dr.

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3. View East along H.R. Ashbaugh Drive .

4. View west along Proposed Road between Block 5 on left and Blk 6 on Rt.

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5. View east between Block 5 and 6 towards Wal-Mart. Note Elevation.

6. View NE of Cul-De-Sac area with Blk 4 Lot 1 on right.

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7. View SW from SWC of Phase 5 26 acre tract.

8. VIEW SOUTH FROM PHASE 3 TOWARDS PHASE 5 ON HIGHER ELEVATION.

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9. VIEW EAST FROM PHASE 3 TOWARDS WAL-MART

10. VIEW NORTH FROM SWC OF PHASE 5, A 26 ACRE TRACT

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11. View east from Phase 4 towards Wal-Mart

12. View South from Phase 3 sign visible on SWC of Phase 5

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Section II §

Introduction

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SECTION II - INTRODUCTION 1. IDENTIFICATION OF THE SUBJECT PROPERTY

The subject of this report is the 44.927 remaining acres of the New Hot Springs commercial subdivision. The subject original acreage was 65.208 of which 20.281 acres have been sold or are under contract to be sold. The County records show that 10 parcels have been platted into Blocks and lots ranging in size from .45 acres to 2.491 acres. Two of the smaller lots are for utility and access only. Two larger parcels of 8.81 acres and 26.93 acres are not yet subdivided. The general area of the subject is on the east side of Interstate 25 and west of Date Street (I-25 Business Loop) at exit 79 which is the intersection of I-25 and Date Street in Truth or Consequences, Sierra County, NM. The following Table 2-1 illustrates the subject lots and parcels.

TABLE 2-1 SUBJECT LOTS & PARCELS

"#$!% &'()* +*,-!./ 01-!2,3) 4)516 $78)!#9: $78)!;<= #2!2,:!.(9 >?>@A BCDDC@@CD>DCD "6E!>!4,F!D C:GH >AI=CD@ #2!2,:!.(9 >?>?> BCDDC@@>DC>>B "6E!B!4,F!>J# C:A? GDI=?A? #2!2,:!.(9 >?>?D BCDDC@@>B=>C> "6E!B!4,F!DJ# C:?B B=I>HHA #2!2,:!.(9 >?A?> BCDDC@@>=C>BD "6E!G!4,F!> C:HBG DBID=>> #2!2,:!.(9 >?A?@ BCDDC@@>HA>>A "6E!G!4,F!D C:HBG DBID=>>C #2!2,:!.(9 >?A?? BCDDC@@>HA>CH "6E!G!4,F!B C:HBG DBID=>D #2!2,:!.(9 >?A?A BCDDC@@>H?CAD "6E!G!4,F!G C:HBG DBID=>B #2!2,:!.(9 >?AAC BCDDC@@>G@C=? "6E!G!4,F!H >:?AD ?DIG>=G #2!2,:!.(9 >?AA> BCDDC@@>D>C=A "6E!G!4,F!= D:GA> >C?IHC?H #2!2,:!.(9 >?AAD BCDDC@@C?HC@G "6E!G!4,F!@ C:GC? >@I@@D>D #2!2,:!.(9 >=H?H BCDDC@@>GG>@D $DIKLGI$D?IM>B$I!NGO ?:?> B?BI@=G>> #2!2,:!.(9 >?CC? BCDDC@@>CCDBH $D?IM>B$I!NGO D=:AB >I>@BIC@>

M,F16; GG:AD@ >IAH@ICDC 2. ZONING

The subject is within the City limits of Truth or Consequences and zoned C-1 Commercial. The subdivision is encumbered with Covenants, Restrictions and Conditions. The commercial Covenants, Restrictions and Conditions are in place to accommodate appropriate commercial development and to maximize the commercial developmental values.

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3. LEGAL IDENTIFICATION

The subject subdivision site contains a total of approximately 44.92 acres and is legally identified by metes and bounds as contained on the warrantee deed which is contained in the Addenda. Each lot is identified by the block and lot number within the subdivision as illustrated above. The subject tract lies within the Section 28, Township 13 south, Range 4 west, NMPM. 4. HISTORY OF OWNERSHIP

The subject acreage is currently under the ownership of Ashbaugh Construction Co. Inc. as recorded in WD Book 102 pg 1659-1660 recorded 17 December 2004 and WD Bk 106 pg 130-134 recorded 20 April 2006 and WD book 94 pages 2659 in the Clerk’s Office of Sierra County, NM.

5. PURPOSE AND SCOPE OF WORK THE APPRAISAL

The purpose of the appraisal process is the valuation of the remaining 44.927 acres of the New Hot Springs commercial subdivision. The intent of this appraisal is to determine the current market value of the subject property in its “as is” condition, which is as improved with some public roads and all trunk utility infrastructure and as subdivided in accordance with the platted and recorded master plan.

The scope of work of the appraisal is to analyze the physical, economic and legal dimensions of the subject parcels and then to conduct an analysis of the supply and demand sides of comparable properties. One purpose of which is to find those sales of comparable property that will best reflect the characteristics of the subject. Those sales chosen, as the most representative will be analyzed and their sale prices adjusted so that they reflect the physical, legal and economic conditions of the subject parcels.

The subdivision will require a complete subdivision development analysis including an absorption study and discounted cash flow model. 6. DEFINITION OF MARKET VALUE

Market Value The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer whereby:

• Buyer and Seller are typically motivated. • Both parties are well informed or well advised, and each acting in what he considers

his own best interest.

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• A reasonable time is allowed for exposure in the open market. • Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements

comparable thereto; and • The price represents the normal consideration for the property sold unaffected by

special or creative financing or sales concessions granted by anyone associated with the sale.

Source: Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA), Federal Register, Vol. 55, no. 163 August 22, 1990 Pg. 34228 and 34229

7. PROPERTY RIGHTS APPRAISED

The property right appraised is the market value of the fee simple ownership. 8. EFFECTIVE DATE OF APPRAISAL AND DATE OF REPORT

The effective date of this appraisal is March 28, 2011. The date of the report is April 4, 2011. 9. COMPETENCY TO PERFORM

The appraiser involved in this assignment has past experience in appraising this property type and in addition is actively engaged in appraisal work in the geographical area of the subject property. All steps necessary to acquire adequate data on this area for similar properties has been taken, resulting in adequate knowledge of the property type and location to meet the competency requirements of USPAP. 10. EXPOSURE TIME AS DEVELOPED

Exposure time is assumed to be 12 months. Exposure time is 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 opinion based on an analysis of past events assuming a competitive and open market. 11. ASSUMPTIONS AND LIMITING CONDITIONS

This appraisal is made subject to the following assumptions and limiting conditions:

• It is assumed that all lot release agreements or release clauses have been agreed to by the developer/owners and any lending institution that may hold a mortage or have other financing arrangements regarding the subject property.

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• The valuation of the subject property is based, in part, on the conceptual specific land use plan put forth by Ashbaugh Construction Co., Inc. It is further assumed that all governmental approvals have been granted to allow such a plan. I reserve the right to alter the conclusion of the estimated values contained in this report in the event that any change in the development costs occur or there is a change in the specific land use plan as to the number of units/lots or acreage or change in any one of the zoned/defined land uses.

• The appraiser has examined the available flood maps that are provided by the Federal Emergency Management Agency (or other data sources) and has noted in the appraisal report whether the subject site is located in an identified Special Flood Hazard Area. Because the appraiser is not a surveyor, he or she makes no guarantees, express or implied regarding the determination.

• The valuation is based on the approval of the final subdivision development plat as may be submitted to and approved by the relevant Planning Department prior to recording.

• Improvements are assumed to be completed as defined in any structures building specifications that may be provided, a copy of which may be located in the Addenda of this report. Improvements are assumed to be designed and constructed using appropriate market standards.

• New Mexico is non-public disclosure State and as such the comparable sales data used in the analysis are believed to be reasonably correct. Where certain holes in the data cannot be filled from available documents or confirmed by grantee or grantor then it may be necessary to extrapolate certain figures. The appraiser makes no guarantees, express or implied regarding the exactness of the data so obtained. The data so obtained is used solely to assist the appraiser in forming an opinion of value and more or less weight may be given to any comparable data.

• The appraiser is not a licensed real property inspector. This report should not be relied upon to disclose any conditions present in the subject property. The appraisal report does not guarantee that the property is free of defects. A professional property inspection is recommended, if this is of concern to the client.

• No responsibility is assumed for matters that are legal in nature, nor is any opinion of title rendered. The appraiser is not qualified to conduct a title search or land survey and is not responsible for flaws in the title or any interests that may exist in the subject that have not been specifically identified and provided to him.

• No survey of the property has been made by the appraiser. No responsibility is assumed in connection with such matters. Sketches in this report may not be to scale and are included only to assist the reader in visualizing the property.

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• Barrett Appraisal Services, LLC is unaware of any cross easements or any covenants, conditions or restrictions impacting the subject property. We assume adequate ingress and egress to the property and we assume any reasonable sale of the property would not be inhibited by any covenants, conditions, or restrictions.

• Liens against the property, if any, have been disregarded, and the property is appraised as though free and clear, under responsible ownership and competent management. Any rights or interest claimed by any grantees under existing contracts for sale are disregarded.

• Information furnished by others and contained in this report is so noted and is believed to be reliable, but no responsibility is assumed for its accuracy.

• No responsibility is assumed for the accuracy of diagrams, sketches, or maps included in this report. These are for illustrative purposes only and provided solely for the purpose of assisting the reader to visualize the subject property being appraised.

• It is assumed that there are no hidden or unapparent conditions of the property, subsoil, or structures which would 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.

• It is assumed that there is full compliance with all applicable federal, state, and local environmental regulations and laws unless noncompliance is stated, defined, and considered in the appraisal report.

• It is assumed that all applicable zoning use regulations and restrictions have been complied with, unless nonconformity has been stated, defined, and considered in the appraisal report.

• It is assumed that all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state or national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimate contained in this report is based.

• It is assumed that the utilization of the land and improvements is within the boundaries of the property lines of the property described and that there is no encroachment or trespass unless noted in the report. Land area calculations derived from recorded documents are considered correct.

• Any distribution of the value in this report between land and improvements applies only under the stated program of utilization. The separate valuations for land and improvements must not be used in conjunction with any other appraisal and are invalid if so used.

• The appraisal of any interest less than the whole fee simple estate relates only to the fractional interest defined. The value of such a fractional interest plus the value of all

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other fractional interests may or may not equal the value of the entire fee simple estate considered as a whole.

• The liability of Barrett Appraisal Services, LLC and employees and affiliated independent contractors is limited to the client only and to the fee actually received by the appraiser for this appraisal. ‘Further, there is no accountability, obligation, or liability to any third party.

• The Contract for appraisal, consultation or analytical service is fulfilled, and the total fee is payable upon the completion of the report. The Appraiser or those assisting in the preparation of the report will not be asked or required to give testimony in court or hearings because of having made the appraisal, in full or in part, nor engage in post appraisal consultation with client or third parties, except under separate and special arrangements, and at additional fees. If testimony or deposition is required because of any subpoena, the client shall be responsible for any additional time, fees, and charges regardless of the issuing party.

• 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 appraiser, and in any event only with proper written qualification and only in its entirety.

• Neither all, nor any part of the contents of this report shall be disseminated to the public through advertising, public relations, news, sales, or other media without the prior written consent and approval of the appraiser.

• Unless otherwise stated in this report, the existence of hazardous substances, including without limitation asbestos, polychlorinated biphenyl's, petroleum leakage, or agricultural chemicals, which may or may not be present on the property, or other environmental conditions, were not called to the attention of the appraiser, nor did I become aware of such during my inspection. The appraiser has no knowledge of the existence of such materials on or in the property unless otherwise stated. The appraiser is not qualified to test such substances or conditions. The presence of such substances, such as asbestos, urea formaldehyde foam insulation, or other hazardous substances or environmental conditions, may effect the value of the property. The value estimated is predicted on the assumption that there is no such condition on or in the property or in such proximity there-to that it would cause a loss in value. No responsibility is assumed for any such conditions, nor for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, if desired.

• The Americans with Disabilities Act ("ADA") became effective January 26, 1992. We have not made a specific compliance survey and analysis of this property to determine

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whether or not it is in conformity with the various detailed requirements of the ADA. It is possible that a compliance survey of the property, together with a detailed analysis of the requirements of the ADA, could reveal that the property is not in compliance with one or more of the requirements of the Act. If so, this fact could have a negative effect upon the value of the property. Since we have no direct evidence relating to this issue, we did not consider possible compliance with the requirements of ADA in estimating the value of the property.

The following Section III presents the general population, economic and real estate market

conditions impacting the subject site.

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Section III §

General Area Analysis

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SECTION III GENERAL AREA ANALYSIS

The general area analysis is provided to the reader so that they may have a clearer understanding of the socio/ economic environment within which the subject property must operate. Although in some cases much of the analysis may not appear to be linked directly to the subject, there is always an indirect linkage through the aggregated larger social and economic influences in the community that should be of interest as well as helpful to the reader.

The subject property is located just north of the downtown commercial business district of Truth or Consequences, NM in an area locally known as the north business district. The site is in the SEC of the intersection of North Date Street and I-25. The commercial districts in T or C run the length of Main Street/Broadway and Date Streets north and south through T or C and for approximately three miles east west along Third Street. The City of Truth or Consequences is the County seat and dominant market area in Sierra County, NM. Truth or Consequences is estimated to have a current population of approximately 8,500.

Sierra County is largely a low density county with approximately 12,500 in population. Truth or Consequences is the County seat and largest nearby City with an estimated current population of approximately 8,500. The economy of the County depends largely on agriculture and tourism at Elephant Butte Lake State Park three miles east of Truth or Consequences. The City is approximately 80 miles northeast of the dominant trade area, Las Cruces, which is to the south in Dona Ana County. The City of Las Cruces forms the principal regional trade area and provides the economic base of the region.

Elephant Butte, NM adjoins Truth or Consequences, New Mexico on the northeast boundary of T or C. Truth or Consequences is bisected from north to south by I-25. The City of Truth or Consequences is geographically positioned near the center of Sierra County and is the county seat. The New Mexico/Texas Border is approximately 120 miles south of the city. Also located in Sierra County are the small rural communities of Garfield, Derry, Arrey, Hillsboro, Kingston, Las Palomas, Williamsburg, Engle, Cuchillo, Hermosa, Winston, Chloride, Placita and Monticello. Located along the eastern portion of Sierra County is the White Sands Missile Range and Military Reservation.

Elephant Butte is currently one of the newest cities in New Mexico with a year round population of approximately 1,500. During weekend holidays the population will swell to 100,000 +- with the visitors to Elephant Butte State Park and Lake.

Truth or Consequences was originally named “Hot Springs”. In 1950, NBC television and radio

producer Ralph Edwards requested a name change from Hot Springs to the name of his nationally recognized “Truth or Consequences” radio program. The entire downtown area of Truth or Consequences is located over a supply of hot mineral water, which is available at the surface through

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wells or pools. Temperatures range from 98 to 115 degrees. In the early 1880’s, businesses arose around these mineral hot springs, which were locally considered medicinal for both mental and physical healing. In addition to the several minerals within these waters, there is a small percentage of radium, which is considered by many as one of the most healing elements known. Even though a small percentage, the radium content is reportedly much higher than average.

Elephant Butte Lake is the largest lake within the State. This reservoir was primarily constructed during four-year time frame (1912 – 1916) for irrigation purposes for surrounding farms and ranches. Elephant Butte Reservoir heads a large network of dams, rivers and irrigation canals built to store and carry water to approximately 115,000 acres of land, extending 200 miles along the Rio Grande from the reservoir in Socorro County, through Sierra and Dona Ana Counties in New Mexico, as well as El Paso County Texas. The project area reportedly extends from 100 miles northwest to 40 miles southeast of the City of El Paso, with 88,000 acres of land in New Mexico and 67,000 acres in Texas.

In addition to the recreational amenities of Elephant Butte Lake, Caballo Lake State Park also offers numerous aspects of outdoor recreation, and is located roughly 14 miles south of Truth or Consequences. The park also hosts a reservoir with its original design capacity of 42,831 acre-feet of water. It is one of a series of reservoirs created to control the erratic flow of the Rio Grande.

There are 8,880 acres of irrigated farmland and approximately 146 ranches with livestock in Sierra County. The County has over a million and a half acres of grazing land, which is divided up among both large ranches and modest spreads. Chile has become the major crop for farmers in Sierra County. With this increase in crop production, processing plants have been developed in the Rio Grande Valley near Truth or Consequences.

1. POPULATION

The city of Truth or Consequences is approximately 60% Anglo, 39% Hispanic and 1% other ethnic groups. The ethnic mix gives the city a rich cultural heritage. Spanish and English are both spoken as Truth or Consequences is a bilingual community.

At the heart of all demand is population. Sierra County experienced an approximate 33.9% growth rate between census years 1990 and 2000, New Mexico as a whole experienced a growth rate of 20.1% percent for the same period. Estimated 2000 population for the county was estimated to be 13,270. City population of Truth or Consequences for census year 2000 was 7,289. Located directly south of T or C is Williamsburg with a 2000 census population of 527. The following Table 3-1 indicates the T or C /Sierra County relative ranking in terms of population within the state. Table 3-2 illustrates the population estimates for Sierra County 1970-2010.

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TABLE 3-1 20 LARGEST CITIES IN NEW MEXICO

City 2000 Population

1990 Population

1980 Population

% Growth

1980-1990

1990/2000 Growth

RateAlbuquerque 448,607 384,736 332,920 15.56% 16.6%Las Cruces 74,267 62,176 46,999 32.29% 19.4%Santa Fe 62,203 55,859 49,299 13.31% 11.4%Roswell 45,293 44,654 39,676 12.55% 1.4%Farmington 37,844 33,997 32,677 4.04% 11.3%Rio Rancho 51,765 32,505 9,985 225.54% 59.3%Clovis 32,667 30,954 31,194 -0.77% 5.5%Hobbs 28,657 29,115 29,187 -0.25% -1.6%Alamogordo 35,582 27,596 24,024 14.87% 28.9%Carlsbad 25,625 24,952 25,496 -2.13% 2.7%Gallup 20,209 19,154 18,167 5.43% 5.5%Las Vegas 14,565 14,753 14,322 3.01% -1.3%Deming 14,116 10,970 9,964 10.10% 28.7%Sunland Park 13,309 8,179 4,313 89.64% 62.7%Portales 11,131 10,690 9,940 7.55% 4.1%Silver City 10,545 10,683 10,474 2.00% -1.3%Artesia 10,692 10,610 10,385 2.17% 0.8%Los Lunas 10,034 6,013 4,369 37.63% 66.9%Lovington 9,471 9,322 9,727 -4.16% 1.6%Socorro 8,877 8,159 4,313 89.17% 8.8%Grants 8,806 8,626 11,439 -24.59% 2.1%Espanola 9,688 8,389 7,296 14.98% 15.5%T or C 7,289 6,221 5,412 14.95% 17.2%Total 983,953 852,092 736,166 0.15747264 15.5%

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TABLE 3-2 NM COUNTY’S POPULATION AND HOUSING 1970-2010

Although the population is continuing to expand, the age distribution within the overall population figures is changing and the median age is increasing. The changing age composition of the population structure will have an effect on housing and commercial demand, but it is uncertain at this time what that effect will be. The fastest growing age component of the population is the 45-75 age group. This age group historically has not been the prime home purchasing market, but may foster a need for retirement units. 3. ECONOMY-INCOME AND EMPLOYMENT

Located on I-25 and the edge of Elephant Butte Lake the economy of Truth or Consequences has historically been tied to tourism, transportation and agriculture. Employment figures for the town of Truth or Consequences are reported as part of Sierra County. Based upon January 2011 employment figures that were released by the New Mexico Department of Labor, nonagricultural employment for the county has remained stable with current employment of 6,060 persons while unemployment for Sierra County is approximately 6.3%, which is below the 2010 figure of 7.3%. Statewide New Mexico unemployment for the period is approximately 7.1%, down from 7.9% for the same period in 2010. Sierra County currently has one of the lowest unemployment rates of any county in New Mexico.

The following Table 3-3 indicates the relative slow rate of employment growth in Sierra County from 2000 thru projected 2011.

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Table 3-3 Annual Average Employment 2000-2011 Sierra County

.

P)1*!/)9:

41Q,*!R,*9) LS-6,TS)(F U()S- N1F)

VW M,F1641Q,*!R,*9)

DC>> HI?HD HIG@H B@@ =:GGX J>:DCXDC>C HIADB HIHHH B=? =:D>X JC:HCXDCCA HIAHB HI=G> B>D H:DGX C:?BXDCC? HIACG HI==B DG> G:C?X =:>AXDCC@ HIH=C HIB@? >?D B:D@X B:CDXDCC= HIBA@ HI>=D DBH G:BHX JC:HCXDCCH HIGDG HI>B> DAB H:GCX >:>=XDCCG HIB=D HICG? B>G H:?=X C:=DXDCCB HIBDA HICB> DA? H:HAX JC:G>XDCCD HIBH> HIC=B D?? H:B?X JC:HGXDCC> HIB?C HI>D= DHG G:@DX >:=>XDCCC HIDAH HIC=C DBH G:GGX

During the summer months the population within the T or C and Elephant Butte market area

increases dramatically due to the recreational attraction of Elephant Butte Lake. On the primary holidays such as the 4th of July and Labor days the population will increase to more than 100,000 persons. The annual attendance approaches 1.8 million.

Although the nature of the economic base of the community tends to protect it somewhat from down swings in the national economy, there is a cost. Table 3-4 indicates the median income of the 50 US States. New Mexico ranks in the lower 25% but also ranks third among states with the fastest per-capita income growth over the previous five years and first among southwestern states.

The community, as a result of the generally low household income as a whole is price sensitive. This in turn leads to price competition in all sectors of the local economy. The result is a lower than average cost of living in the community. This lower cost of living including housing, commercial services and property taxes is seen as an attraction to those planning on moving from other parts of the country.

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Table 3-4 Median Incomes U.S. 2010

United States 50,740Alabama 40,554Alaska 64,333Arizona 49,889Arkansas 38,134California 59,948Colorado 55,212Connecticut 65,967Delaware 54,610District of Columbia 54,317Florida 47,804Georgia 49,136Hawaii 63,746Idaho 46,253Illinois 54,124Indiana 47,448Iowa 47,292Kansas 47,451Kentucky 40,267Louisiana 40,926Maine 45,888Maryland 68,080Massachusetts 62,365Michigan 47,950Minnesota 55,802Mississippi 36,338Missouri 45,114Montana 43,531Nebraska 47,085Nevada 55,062New Hampshire 62,369New Jersey 67,035New Mexico 41,452New York 53,514North Carolina 44,670North Dakota 43,753Ohio 46,597Oklahoma 41,567Oregon 48,730Pennsylvania 48,576Rhode Island 53,568South Carolina 43,329South Dakota 43,424Tennessee 42,367Texas 47,548Utah 55,109Vermont 49,907Virginia 59,562Washington 55,591West Virginia 37,060Wisconsin 50,578Wyoming 51,731Puerto Rico 17,741

State Median income

Source: U.S. Bureau of Economic Analysis

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5. CLIMATE The climate of Truth or Consequences is semi-arid which provides for very mild winters and hot,

dry summers. Truth or Consequences has an average daily high/low temperature of 74° and 46° degrees and an average rainfall of 12.0 inches annually. Mild climate is a major appealing factor to many retired citizens of the community and others that may be contemplating moving to the area. 6. GOVERNMENT

The governments of Elephant, Truth or Consequences and Sierra County are similar to most communities in New Mexico. The Cities of Elephant Butte and Truth or Consequences have a mayoral form of government with a City Council. The five member City Council is elected as is the mayor. The County is run by an elected county commission consisting of three members. 7. UTILITIES

Following is a list of utility suppliers to the residents of Sierra County. Electricity City of T or C/ Sierra Electric Coop Natural Gas Gas Company of New Mexico Water City of Truth or Consequences/GarfieldWater Assoc./ Lakeshore/National Utility Company/ Rincon Water Sewers City of Truth or Consequences & Elephant Butte Telephone Windstream, Verizon Sanitation City of Truth or Consequences

8. HOUSING Housing is relatively affordable in the community. Housing as compiled from the 2010 Census

included 8,356 dwelling units. The median value of an existing single family home is approximately $130,000. Conversations with city personal indicate a reasonably active commercial building market with several new projects having been completed during 2005-2013 and several new projects currently under construction. 9. SCHOOLS

The Truth or Consequences Public School System 2012 enrollment was approaching 2,000 students. The Truth or Consequences School System consists of.

A) One high school B) One middle school C) Two elementary schools

Also located Truth or Consequences Western New Mexico University distant learning center, which offers several college credit courses per semester. Located within commuting distance in Las Cruces New Mexico is New Mexico State University.

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10. TRANSPORTATION Transportation in and out of Truth or Consequences is good with Interstate 25 (north-south) at its

center. Greyhound Bus Lines provides passenger service to and from Truth or Consequences. The nearest major commercial air service available to Truth or Consequences is located in El Paso, TX approximately 120 miles south and Albuquerque approximately 130 miles north. Currently no local public transit system is available to Truth or Consequences residents. 11. MEDICAL FACILITIES

Located within the community of Truth or Consequences is Sierra Vista hospital with 43 beds, emergency room and skilled nursing unit. Also located in the community is the Ben Archer Health Center, Sierra Health Care Center nursing home with 110 beds and the New Mexico Veterans Home with 170 beds. The nearest regional hospitals are located in Las Cruces, NM approximately 80 miles south and Albuquerque which is approximately 140 miles north. 12. RECREATION

Truth or Consequences municipality provided sports facilities include baseball and softball fields, basketball courts, and picnic areas. Located just east of the city is Elephant Butte Lake State Park with over 1.6 million visitors in 2012. Other travel destinations located within a one hour drive of the city are Caballo Lake and Percha Dam State Parks, Gila National Forest and Bosque Del Apache National Wildlife Refuge. 13. CHURCHES

All major denominations are available to serve the religious preferences of the community. 14. MORTGAGE MARKET FACTORS

Located within the city are four banks and one savings bank. The local lending institutions have sufficient deposits to handle the level and nature of growth predicted for the area. Existing local lenders are considered to be in good financial shape. One reason is the diversified nature of the local commercial loan portfolio.

In the Truth or Consequences market area, most business tend to be small and locally owned. These small, locally owned businesses are entrepreneurial responses to the increasing population and its varied demands. These small businesses do not require a great deal of space. Hence, there are numerous small commercial buildings for retail and office space. The underlying loans are individually relatively small and the total is well diversified.

The local mortgage market for residential as well as commercial and other type of loans until recently has been rather isolated from the volatility in the national and international markets. However, local lenders have been forced, as a result of competition and liquidity requirements, to become more integrated with secondary market operations. Local lenders are now adept at pooling mortgages for resale in the secondary markets and using pools of residential and commercial mortgages for the

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collateralization of securities sold in the capital markets. As a result of this activity, local interest rates move with the same volatility as they do in the national and international capital markets. 15. NEW COMMUNITY DEVELOPMENTS

The New Mexico Spaceport America

In 2006 two studies commissioned by the New Mexico Economic Development Department reported their findings. The reports were similar in their observations and projections. One of those studies conducted by the Arrowhead Center at New Mexico State University reported that by the fifth year of operation, the spaceport would sustain close to $1 billion in new revenues creating approximately $350 million in new payroll and generating over 4,970 new jobs. For Sierra County this provides dramatic growth potential. Truth or Consequences/Elephant butte is the metropolitan area closest to the Spaceport and despite the smaller community size, and a reasonably estimate is that 40% of the holders of new jobs would choose to live in Sierra County because of the nearness to the job site and recreational amenities available. Based on an estimated total of 4,970 new jobs by 2015 this percentage would equate to approximately 1,988 new jobs in Sierra County. Given an historic employment to population ratio of 2.6 this would result in a population increase of 5,168 m/l due to the Spaceport alone. Forty percent of the new jobs related to building and road construction, i.e., (992) could similarly add 2,579 additional persons during the 2012/2015 period.

Super Wal-Mart In December 2005 Wal-Mart announced plans to construct a Super Store near Exit 79 on I-25 in

Truth or Consequences. This represented a $30 million, 110,000 square foot facility, construction project. The facility is now in operation and has added over 300 new jobs (Est. 780 increase in population) and significantly increased GRT.

Hot Springs Land Development The Hot Springs Land Development, LLC is expected to bring economic development to New

Mexico and Sierra County through the combined economic strength of Spaceport America support industries, auto racing, business aviation, national security and associated R & D activities along with residential development. HSLD has identified a logistical opportunity to create a permanent industrial complex to include shops, garages, parts warehouses and tracks for testing and education to support all races west of the Mississippi as well as support and supply facilities for the developing Spaceport America. Currently nearly 7,388 acres, or about 12 square miles bracketing Interstate 25 have been assembled for the express purpose of the HSLD PUD. The appraiser estimates of employment in the development will be on the order of 2,500 with a population of 16,000 +_ in the next 25-30 years. The necessary land swaps and leases between the State, BLM and the County have been completed and development could be expected to begin in mid to late 2014.

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Sierra Del Rio Resort and other Developments Sierra Del Rio Resort is being developed on over 1,049 acres of land in Elephant Butte. An 18-

hole championship golf course intended by the development company to be “the premier golf experience in New Mexico”. Lots range in prices from $47,000 to $250,000. Approximately 120 lots have been sold. Approximately 75% of the buyers are from out of the area. At the present time approximately a dozen homes have been started surrounding the operating golf course.

Sierra Vista Hospital Replacement Facility Project The Hospital Board and community leaders are actively working towards the funding of a new

$28,000,000 hospital facility that will replace the existing facility on a 15 to 20 acre site. Construction on the new emergency facility and physical plant began March 24, 2013.

Truth or Consequences Community Golf Course Expansion and other Developments • The City of Truth or Consequences is currently planning for the expansion of its nine-

hole community course to 18 holes. • There are several small retail/office centers in the planning process. • An expanding art community is rejuvenating the downtown area of Truth or

Consequences. • Lake levels although low are continuing to bring in more recreational visitors and

permanent residents that are attracted to the lake. • The County airport is scheduled for expansion. • New Hot Springs Retail Center the location of Wal-Mart is also the location of a newly

developed Holiday Inn Express and site of the 6,000 sf Spaceport Welcome Center to begin construction in mid 2013..

• A copper mine is in the process of opening near Hillsboro with an initial investment in excess of $300,000,000. Operational in late 2013.

• An alge/biofuel plant is being developed for $250,000,000 over the next several years near Spaceport America.

• A new motel is being discussed for construction that is to be leased by Virgin Galatic for its space clients.

• The 6,000 sf Spaceport Welcome Center located in T or C is to begin construction in 2013.

There is clear evidence that the new developments are having an effect on the market place and generating effective demand for the subject. The City of Truth of Consequences is a gateway city for the States $210M Spaceport and Virgin Galactic space tourism operation. At the time of this report, the Governor, while in T or C, signed the informed Consent Legislation into Law. This widely anticipated legislation is already creating opportunities for both commercial and residential expansion in the area as a result of Spaceport America’s need for supply chain contractors who do not currently have a presence

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in the area. In addition to this it has been confirmed that the near term construction of two major employers in the area as outlined above will require housing and support business structures for professional engineers and high end technical personnel. These companies include the Copper Flat Mine and an alternative Bio Fuel production plant and refinery in Sierra County. These two companies alone will provide an additional 250 + high net technical and engineering jobs in Sierra County in the immediate future.

Changing Real Estate Market Demand The housing demand and supply in Sierra County appeared to be in reasonable balance during the

period 01/01/02 through 01/01/04. However, from 2004 through 2009 the market shifted upward. The Sierra County Multiple Listing Service (of which this appraiser is a member) indicated total residential sales during 1/1/2002-12/31/2006 of 994 out of which 523 were site built, 432 manufactured housing and 39, one to four family. The median price of all sf site built sales in 2002 was $62,356, by the end of 2008 this figure has risen to $133,505. In 2009 the figure dropped to $130,027 but jumped in 2011 to $165,000. The following Table 3-5 illustrates the changes in total sales as well as residential sales. Brokers have reported that the drop in single-family sales in 2006-2008 was not due to demand but rather the lack of supply on the market that was available to sell. However, 2009 also saw a drop in demand which has continued thru 2011. The average days on market in 2008 of the typical single-family site built dwelling unit was 138 days down from 216 in 2002. For 2009 the figure was 180 DOM. The year 2010 saw a further decline in the real estate market sales as did 2011. The actual number of sales projected for 2011 is only 19% of the total sales in 2006.

TABLE 3-5 HOUSING SALES 2002-- 2011

Year

Total # ofall MLSSales

Total #Residential Sales

SF SiteBuilt Dwelling

Mfg Housing

multi family

Avg SalePrice SiteBuilt

% Change inAvg Price

2011* 76 40 19 21 0 $165,000 23.57%2010 87 66 31 35 0 $133,531 2.69%2009 141 118 60 57 1 $130,027 -2.61%2008 210 162 92 66 4 $133,505 19.91%2007 276 203 114 81 7 $111,334 2.39%2006 400 104 104 103 10 $108,733 -7.74%2005 342 243 135 101 7 $117,860 18.09%2004 225 187 107 75 5 $99,808 34.56%2003 212 174 102 69 3 $74,175 18.95%

*Estimated Although it is impossible to determine with a great deal of specificity at this time as to what the

newly developing economic environment in Sierra County will bring in terms of population and income growth it is speculated that growth will occur at a rate not historically seen in Sierra County. This impending growth rate can be seen in the surge of real sales in the last few years leading up to 2006. As the overall economy slumped in 2007-2011 so did real estate sales. Based on data through December

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2010 real estate sales were nearly 41% below 2009. However, the year 2011 is projected by BAS to have an increase of 14.97 % largely due to an increase in commercial/industrial $ volume of sales.

TABLE 3-6 TOTAL REAL PROPERTY $ SALES SIERRA COUNTY 2002 -2011

2011 2010 2009 2008 2007 2006 2005 2004 2003 2002

Residential $4,990,619 $7,392,673 $12,337,900 $22,687,287 $21,377,713 $18,045,670 $20,320,780 $12,271,650 $11,801,051 $8,177,000Land $697,300 $944,900 $1,356,500 $3,571,706 $4,628,750 $6,619,148 $3,187,010 $771,040 $788,400 $903,625Comm-Ind $4,168,450 $235,500 $580,000 $1,200,000 $2,811,900 $6,215,552 $2,138,250 $981,500 $1,559,000 $1,437,100Multi-Family $0 $0 $240,000 $465,000 $376,200 $1,629,000 $366,000 $886,000 $390,000 $1,417,500

Total Sales $9,856,369 $8,573,073 $14,514,400 $27,923,993 $29,194,563 $32,509,370 $26,012,040 $14,910,190 $14,538,451 $11,935,225% <> 14.97% -40.93% -48.02% -4.35% -10.20% 24.98% 74.46% 2.56% 21.81%

The following Table 3-7 illustrates the deposit base of the County’s banks and provides another

indicator of the community’s economic growth. It can be seen that the total deposit base has fluctuated over the last ten years from between $80,598,000+- to $97,274,000 +- with an average of approximately $88,462,000. Although there are variations, there is a slow but discernible upward growth of approximately 1.35% per year.

TABLE 3-7 DEPOSITS BY BANK- SIERRA COUNTY, NM 6/30/00 TO 6/30/11

Deposits/Bank NameBank of theSouthwest

(State National) toCompass First Savings Citizens Bank Total % Change

Deposits 6/30/2011 EST $51,637,000 $23,539,000 $21,818,000 $12,133,000 $109,127,000 -1.89%

Percentage 47.32% 21.57% 19.99% 11.12% 100.00%

Deposits 6/30/2010 $51,113,000 $25,216,000 $22,567,000 $12,329,000 $111,225,000 15.29%

Percentage 45.95% 22.67% 20.29% 11.08% 100.00%Deposits 6/30/2009* $42,525,000 $27,500,000 $18,768,000 $7,682,000 $96,475,000 -0.82%

Percentage 44.08% 28.50% 19.45% 7.96% 100.00%Deposits 6/30/2008 $39,717,000 $38,421,000 $19,136,000 $97,274,000 9.73%

Percentage 40.83% 39.50% 19.67% 100.00%Deposits 6/30/2007 $39,587,000 $31,249,000 $17,811,000 $88,647,000 -6.62%

Percentage 44.66% 35.25% 20.09% 100.00%Deposits 6/30/2006 $42,615,000 $33,609,000 $18,705,000 $94,929,000 7.97%

Percentage 44.89% 35.40% 19.70% 100.00%Deposits 6/30/2005 $39,731,000 $32,565,000 $15,626,000 $87,922,000 4.58%

Percentage 45.19% 37.04% 17.77% 100.00%Deposits 6/30/2004 $39,288,000 $30,421,000 $14,366,000 $84,075,000 0.90%

Percentage 46.73% 36.18% 17.09% 100.00%Deposits 6/30/2003 $39,629,000 $29,008,000 $14,685,000 $83,322,000 3.38%

Percentage 47.56% 34.81% 17.62% 100.00%Deposits 6/30/2002 $38,465,000 $29,035,000 $13,098,000 $80,598,000 -5.29%

Percentage 47.72% 36.02% 16.25% 100.00%Deposits 6/30/2001 $41,833,000 $30,146,000 $13,117,000 $85,096,000 -1.38%

Percentage 49.16% 35.43% 15.41% 100.00%Deposits 6/30/2000 $40,849,000 $31,558,000 $13,877,000 $86,284,000

Percentage 47.34% 36.57% 16.08% 100.00%Average $ $42,249,083 $30,188,917 $16,964,500 $2,922,182 $92,081,167Average % 45.88% 32.79% 18.42% 3.17% 100.00% 2.35%* Bought by Compass

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It is the appraiser’s opinion, based on the known developments mentioned above and the current

expected expansion, as well as a review of Chamber of Commerce inquiries, gross receipts tax, lodgers tax, utility connections, bank deposits, and other indices, that the historic population annual growth rate seen above will move from current levels up to a reasonable estimate of 3% during the period 2011 to 2020 and 4% from 2020 to 2030. This rate is also less than but consistent with a recent study conducted by SMPC Architects for the Sierra Vista Hospital Replacement Facility Project. The following Table 3-7 reflects these projections.

Table 3-8 1980-2030 Sierra County Pop. Projections at 3% to 4% 2011- 2030

Year Population Total Annual AnnualProjection Household Household Population

Formations Formations Increase1980 8,454 3,0191981 8,589 3,068 48 1351982 8,727 3,117 49 1371983 8,866 3,166 50 1401984 9,008 3,217 51 1421985 9,152 3,269 51 1441986 9,298 3,321 52 1461987 9,447 3,374 53 1491988 9,598 3,428 54 1511989 9,751 3,483 55 1531990 9,907 3,538 56 1561991 10,003 3,705 35 951992 10,099 3,740 36 961993 10,196 3,776 36 971994 10,294 3,813 36 981995 10,393 3,849 37 991996 10,493 3,886 37 1001997 10,594 3,924 37 1011998 10,696 3,961 38 1021999 10,799 4,000 38 1032000 10,903 4,038 38 1042001 11,008 4,077 39 1052002 11,114 4,116 39 1062003 11,220 4,156 40 1072004 11,328 4,196 40 1082005 11,437 4,236 40 1092006 11,547 4,277 41 1102007 11,658 4,663 44 1112008 11,771 4,708 45 1122009 11,884 4,754 45 1132010 11,998 4,799 46 1142011 12,358 4,943 144 3602012 12,729 5,092 148 3712013 13,111 5,244 153 3822014 13,504 5,402 157 3932015 13,909 5,564 162 4052016 14,326 5,731 167 4172017 14,756 5,903 172 4302018 15,199 6,080 177 4432019 15,655 6,262 182 4562020 16,125 6,450 188 4702021 16,770 6,708 258 6452022 17,440 6,976 268 6712023 18,138 7,255 279 6982024 18,863 7,545 290 7262025 19,618 7,847 302 7552026 20,403 8,161 314 7852027 21,219 8,488 326 8162028 22,068 8,827 340 8492029 22,950 9,180 353 8832030 23,868 9,547 367 918

Rate of Growth 1.01599 to 1990Rate of Growth 1.00962 to 2010Rate of Growth 1.03 2011--2020Rate of Growth 1.04 2021-2030

HH Size 2.8 to 1990HH Size 2.7 to 2006HH Size 2.5 2007 to 2030

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The above Table although general in structure indicates that in Sierra County proper, during the period 2011 through 2030 annual household formations could increase from 144 in 2011 to 367 in 2030. Each household formation will require an additional dwelling unit of some type to be added to the Sierra County housing stock. The impact on the subject should be that the subject should maintain its competitive position within the land/lot market as there does not appear to be any negative external factors within the real estate market that would impact its locational attributes, nor are there any new development that would impact on its competitive position.

However, there is another employment/population scenario that is based on very likely and known conditions that are scheduled to develop within the next 6-18 months and that is the final development of the Spaceport and its welcome center in T or C, the opening of Copper Flat Mine, the initial phases of the Bio Fuel Plant, the new emergency room and physical plant at Sierra Vista Hospital as well as related developments. Table 3-9 below illustrate the potential impact on employment and population within the County as these commercial developments come on line. The associated population projections are based on an historic employment to population ratio of .42 which is also what it was in the 2010 census. It is unknown if this ratio will hold at the margin but is likely to be consistent with long run projections. New housing requirements are based on a household size of 2.75 persons. Bear in mind that the high point in historic employment in the county was in July of 2010 with an labor force of 6,256 and total employment of 5,885 according to NMD of Workforce Solutions-Economic Research and Analysis.

TABLE 3-9 SIERRA COUNTY FUTURE EMPLOYMENT/POPULATION PROJECTIONS TO 2020

$,Y*9)ZP)1* DC>G DC>H DC>= DC>@ DC>? DC>A DCDC2,--)*!R61F!07() HC >CC >HC HC C C C"7,!RY)6 HC >CC >HC DH C C C$-19)-,*F!#S)*791![!N)61F)3!.(3Y;F*7); HC >CC >=C DCC DHC BCC BHC\)16F]!1(3!N)61F)3 >C >C >C >C >D >D >D&F])*!$)*^79); >C >C >C >C >D >D >D_,^)*(S)(F H H H H H H H&F])*!.(3Y;F*716!$)9F,*;.(9*)1;)!7(!LS-6,TS)(F >@H BDH G?H BCC D@A BDA B@A+*,`)9F)3!LS-6,TS)(Fa/)9!DCCC!HGC?b HH?B HAC? =BAB ==AB =A@D @BC> @=?C#((Y16!+)*9)(F15)!2]1(5) >:CCX H:?DX ?:D>X G:=AX G:>@X G:@DX H:>AXL;F7SF)3!+,-Y61F7,(!a:GD!)S-Z-,-b >BIDAB >GIC=@ >HIDD> >HIAB= >=I=CC >@IB?B >?ID?=+)*9)(F15)!2]1(5) H:?DX ?:D>X G:=AX G:>@X G:@DX H:>AX!"#$%&'()*+$,"-')."/"*0($12345$667 889 88: 84; 8<= 8<8 82< 8>:

The following Section IV presents details of the subject site.

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Section IV §

Site Data

39

SECTION IV SITE DATA 1. SITE DESCRIPTION

The subject is located in the northern business district of Truth or Consequences in the SEC of the intersection of Nth Date Street and I-25. The site is irregular with elevation variations of 15’ more or less in some areas. The entire property is within the City limits of Truth or Consequences. The Wal-Mart site which was part of the original tract adjoins the subject on the immediate east. The development is broken into five phases. Phases 1 thru 4 are on the north end of the tract while Phase 5, a 26 +- acre tract, is on the south side of the area and sits approximately 12 to 15 feet higher in elevation. The north portion of the subdivision is platted and approved and broken into Blocks and Lots. 2. TOPOGRAPHY AND SOILS

The subject in its natural state is made up almost entirely of high mesa desert grazing lands with sparse vegetation and six to eight inches of rain fall per year. The animal unit grazing allotment is typically 6 to 7.2 per section (640 acres). The undulating and shifting elevation of the topography of the site is common to the region and surrounding land uses. The region is generally undulating to steep slopes with mild rock outcroppings and generally sloping towards the east and south into natural arroyos that ultimately wind their way to the Rio Grande to the east. The soil is typical for the area and should pose no problem for future improvements. Discussions with the US Soil Conservation Service indicates that no comprehensive soil survey of Sierra County has been made. 3. DRAINAGE FEATURES AND FLOOD ZONE

The area drains naturally to the east and south into undeveloped natural drainage areas extending through natural arroyos to the Rio Grande. However, the developer has equipped the subdivision with a fully functioning underground storm water system that drains the entire area. The drainage appears to be adequate and poses no problems to further development. The site is not in a FEMA hazardous flood zone. See the flood map in the preface. 4. UTILITIES AND ACCESS

The area is within the City limits of Truth or Consequences and is serviced with City power, via overhead power lines and underground through the subdivision. Power is underground to the lots. Sewer will be by City sewer. Water is provided by City water. Gas is provided by New Mexico Gas Company.

Current access to the site is via Date Street to H.R. Ashbaugh Drive. The regional access is easily available from I-25 Exit 79 to the immediate north.

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5. SETBACKS AND EASEMENTS There are no unusual setbacks, easements or encroachments on the deeded acres noted on the plat

at the County Assessors Office, nor were any observed. However, there are utility easements as well as covenants and deed restrictions put in place to maintain the quality and architectural styles and values of the area. 6. SURROUNDING IMPROVEMENTS

The surrounding land uses to the SE and east side of the subject are all commercial activities consisting of three motels as well as restaurant and auto fueling stations. To the SE of the site is a high school and public golf course. To the north across I-25 and the immediate south is vacant land. There are no negative external factors resulting from the immediately surrounding land uses. 7. PROPERTY TAXES

The following Table 4-1 is a breakdown of the subject property’s assessed and market values for the subject land as determined by the Sierra County Assessor’s office for the 2011 tax year.

TABLE 4-1 SUBJECT PROPERTY FULL AND TAXABLE VALUE 2011

&'()* +*,-!./ 4)516 $78)!#9: $78)!;< "E!+5#;;);;,*c;!RY66!d16Y)

M1e1Q6)!d16Y)

L;F M1eDC>>

#2!2,:!.(9 >?>@A "6E!>!4,F!D C:GH >AI=CD K\$N2 f=BIABA fD>IB>B fHDC#2!2,:!.(9 >?>?> "6E!B!4,F!>J# C:A? GDI=?A K\$N2 f>B@IGA= fGHI?BD f>I>>?#2!2,:!.(9 >?>?D "6E!B!4,F!DJ# C:?B B=I>HH K\$N2 f>>=I@H> fB?IA>@ fAGA#2!2,:!.(9 >?A?> "6E!G!4,F!> C:HBG DBID=> K\$N2 f@GIG@H fDGI?DH f=C=#2!2,:!.(9 >?A?@ "6E!G!4,F!D C:HBG DBID=> AG!!D=HA f@GI=>A fDGI?@B f=C@#2!2,:!.(9 >?A?? "6E!G!4,F!B C:HBG DBID=> K\$N2 f@GIGAA fDGI?BB f=C=#2!2,:!.(9 >?A?A "6E!G!4,F!G C:HBG DBID=> AG!!D=HA f@GIGCC fDGI?CC f=CH#2!2,:!.(9 >?AAC "6E!G!4,F!H >:?AD ?DIG>= AG!!D=HA fD=BI@C= f?@IACD fDI>GG#2!2,:!.(9 >?AA> "6E!G!4,F!= D:GA> >C?IHC? AG!!D=HA fBG@IDG> f>>HI@G@ fDI?DB#2!2,:!.(9 >?AAD "6E!G!4,F!@ C:GC? >@I@@D AG!!D=HA fD?IGBG fAIG@? fDB>#2!2,:!.(9 >=H?H $DIKLGI$D?IM>B$I!NGO ?:?> B?BI@=G >CD!>=HA f=HGIHHH fD>?I>?H fHIBDD#2!2,:!.(9 >?CC? $D?IM>B$I!NGO D=:AB >I>@BIC@> >C=!>BC fG>>IA@? f>B@IBD= fBIBHC

GG:AD@ >IAH@ICDC f>IA>CI>>H f=B=I@CH f>?I??>

These taxes are reasonable and in line with other commercial properties and undeveloped land in the same area. All the taxes are current.

8. IMPROVEMENT ANALYSIS

Paved access roads have been constructed, power, gas, sewer and water are to each lot line and immediately available to the larger tracts. A drainage plan is in place and an underground storm water system is on site.

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9. REVIEW OF DEVELOPMENT PLAN AND DEVELOPMENT COST The development/engineering plans were not made available to this appraiser nor were the

detailed development plans. The analysis is based on the preliminary plat sketches, and discussions with the current developer and on site inspection. Although no engineering plans were provided to the appraiser the developer has provided estimated development cost.

The subdivision appraised is considered to be a low density commercial subdivision restricted to largely commercial/retail development. There are a total of 44.927 acres available. Power is underground to the lot. The access streets are paved. Electrical service is provided by the City of T or C. who will own and maintain the power infrastructure. Gas will be provided by New Mexico gas company a PRC regulated utility company. Sewer service will be provided by the City of T or C. Phone service infrastructure is installed. Cable TV is available. Water will be provided by the City of T or C. The lots are generally at street level.

TABLE 4-2 THE NEW HOT SPRINGS RETAIL CENTER ESTIMATED DEVELOPMENT COST

The total cost estimate to date is $2,500,000 excluding land cost or $37,938 per acre for the

original 65 +- acres within the subdivision. The estimated cost has been compared against actual construction costs for other reasonably similar developments located within the region and is considered by this appraiser to be reasonable given the low density and topo characteristics. The cost estimates do not include, to the appraiser’s knowledge, any off site cost. Required lot improvements by individual lot owners at the time of construction may include but not limited to dirt work, roads, riprap and other embankment controls.

NHSRC Cost EstimatesDirt Work $275,000Road SWPP $165,000Power $375,000Sewer $525,000Storm Water $650,000Water $256,000Soft Cost $185,000Misc $35,000Total Cost $2,466,000Cost Per Acre $37,938

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12. ENVIRONMENTAL CONSIDERATIONS The appraiser has made a personal inspection of the site and did not uncover any apparent signs

of hazardous materials. Hazardous materials may or may not be present on the site, but the appraiser is not qualified to detect such substances. The presence of substances such as asbestos, urea formaldehyde foam insulation, leaking oil or gas tanks, or other potentially hazardous materials may effect the value of the property. The value estimate is predicted on the assumption that there is no such material on or in the property that would cause a loss of value. No responsibility is assumed for any such conditions or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, if desired.

The following Section V discusses the market environment of the subject and its relative position

within the commercial land market within the County and T or C as well as the potential absorption of the subject.

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Section V §

Market Position

44

SECTION V SUBJECT MARKET POSITION 1. SIERRA COUNTY POPULATION GROWTH

The following Table 5-1 indicates the historic population growth of Sierra County. The 1980, 1990, 2000 and 2010 figures are based on census data. For an indication of what type of growth Sierra county could normally expect over the next 20 years, it is helpful to look at Table 5-1, which reflects a breakdown of the County’s growth over the past 30 years.

Sierra County has experienced moderate but steady population increases over the past 90 years and even though the last decade has seen little to no growth in real terms there is no reason to believe that this general upward trend will not continue over the next 20 years. An area’s population history not only shows past growth rates, but it is also a reasonable indicator of whether or not an area will continue experiencing population increases and at what approximate rate. As Table 5-1 indicates, Sierra County would normally be expected to continue experiencing moderate and steady population increases over the next 20 years. Although the Table demonstrates there is an established and consistent upward trend between 1980 and 2009, it does not account for seasonal visitors in the form of: 1) winter visitors, or “snowbirds” who claim residency elsewhere but spend the six coldest months of the year living in single family dwellings or trailers within Sierra County; and 2) over 1,800,000 visitors to Elephant Butte Lake and Caballo Lake State Parks.

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TABLE 5-1 HISTORIC SIERRA COUNTY POPULATION

Year

Sierra CountyPopulation Projection

78041980 8,4541981 8,5901982 8,7281983 8,8681984 9,0101985 9,1551986 9,3011987 9,4511988 9,6021989 9,7571990 9,9131991 10,2071992 10,5101993 10,8211994 11,1421995 11,4721996 11,8121997 12,1621998 12,5231999 12,8942000 13,2762001 13,2762002 13,2762003 13,2762004 13,2772005 13,2772006 13,2772007 13,2772008 13,2772009 13,2772010 13,277

INPUTS

Growth Rate80/90 (1.605%) 101.605%Growth Rat 90/00 (2.964%) 102.964%Growth rate 2000-2010 (0.005%) 100.001%

Census Pop.1980 8,454Census Pop.1990 9,912Census Pop. 2000 13,276

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However, Sierra County’s future population growth is expected to be much more significant than that indicated by Table 5-1. Current proposed and actual economic, recreational and residential developments, are taking place within the County that will significantly impact the future direction and population growth of Sierra County.

NEW COMMUNITY DEVELOPMENTS

The New Mexico Spaceport America In 2006 two studies commissioned by the New Mexico Economic Development

Department reported their findings. The reports were similar in their observations and projections. One of those studies conducted by the Arrowhead Center at New Mexico State University reported that by the fifth year of operation, the spaceport would sustain close to $1 billion in new revenues creating approximately $350 million in new payroll and generating over 4,970 new jobs. For Sierra County this provides dramatic growth potential. Truth or Consequences/Elephant butte is the metropolitan area closest to the Spaceport and despite the smaller community size, and a reasonably estimate is that 40% of the holders of new jobs would choose to live in Sierra County because of the nearness to the job site and recreational amenities available. Based on an estimated total of 4,970 new jobs by 2015 this percentage would equate to approximately 1,988 new jobs in Sierra County. Given an historic employment to population ratio of 2.6 this would result in a population increase of 5,168 m/l due to the Spaceport alone. Forty percent of the new jobs related to building and road construction, i.e., (992) could similarly add 2,579 additional persons during the 2010/2012 period.

Despite the current economic slowdown, Spaceport America, 35 miles south of T or C in Sierra County, is nearing completion of the runway and the main hanger/offices for its first tenant Virgin Galactic. Virgin Galactic will be concentrating on the aspect of space tourism and horizontal launches. It is anticipated that the company and its planes will be on site in approximately 12 months or less with the ensuing demand for labor and housing units and retail/office services. It is also anticipated by market participants that other space related companies will follow. The vertical launch potential of Spaceport America also has a big potential for the attraction of military and private satellite development and launching firms. Anecdotal evidence provided to this appraiser by local Realtors is that numerous companies are now beginning to show serious interest in the area including on site visits.

Virgin Galactic is on track to be the world’s first commercial space cruise line with the development of its VSS Enterprise and Mothership VMS Eve. The testing of these vehicles is scheduled to continue through 2011 prior to commercial operations at Spaceport America.

Super Wal-Mart

In December 2005 Wal-Mart announced plans to construct a Super Store near Exit 79 on I-25 in Truth or Consequences. This represents a $30 million, 110,000 square foot facility and construction project. The facility

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located in the same commercial subdivision that is the subject is now in operation and has added over 300 new jobs (Est. 780 increase in population) and dramatically increased GRT.

Hot Springs Land Development LLC

Hot Springs Land Development, LLC is expected to bring economic development to New Mexico and Sierra County through the combined economic strength of Spaceport America support industries, auto racing, business aviation, national security and associated R & D activities along with residential development. HSLD has identified a “ logistical opportunity” to create a permanent industrial complex to include shops, garages, parts warehouses and tracks for testing and education to support all races west of the Mississippi as well as support and supply facilities for the developing Spaceport America. Currently nearly 10,000 acres, or about 13 square miles bracketing Interstate 25 have been assembled for the express purpose of the HSLD PUD. Nearly 8,000 acres of the proposed development have been annexed by the City of Truth or Consequences. The appraiser estimates of employment in the development will be on the order of 2,500 with a population of 16,000 +_ in the next 15-20 years. Although the necessary land swaps and leases between the State, BLM and the County have been completed over two years ago the development has been stalled by the economic down turn and numerous local law suits that have been held recently by the court to have no merit. There are no utilities to the site at this time and it is expected that the development would not be expected to begin until mid to late 2012 or 2013.

Illustrative Development Plan for HSLD

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Sierra Del Rio Resort Sierra Del Rio Resort is being developed on over 1,049 acres of land in Elephant Butte. An 18-

hole championship golf course intended by the development company to be “the premier golf experience in New Mexico”. Lots range in prices from $47,000 to $250,000. Approximately 120 lots have been made sold. Approximately 75% of the buyers are from out of the area. At the present time approximately two dozen homes have been completed surrounding the operating golf course with prices ranging from $370,000 to $1,500,000.

Sierra Vista Hospital Replacement Facility Project The Hospital Board and community leaders are actively working towards the funding of a new

$20,000,000 hospital facility that will replace the existing facility on a 15 to 20 acre site that has already been purchased. The probability is high that this new development will occur in late 2012 to early 2013.

VA Health Services Health Net Federal Services, under a government contract is completing arrangements to open a

veterans health service operation in a newly completed 6,000 sf retail/office facility on E. 3rd Street which is the primary road to Spaceport America . The opening is expected in the third quarter of 2011.

Truth or Consequences Community Golf Course Expansion and other Developments

• The City of Truth or Consequences is currently planning for the expansion of its nine-hole community course to 18 holes.

• There are several retail/office centers in the planning process. • An expanding art community is rejuvenating the downtown area of Truth or

Consequences. • Lake levels have risen and are continuing to rise bringing in more recreational

visitors and permanent residents that are attracted to the lake. • The County airport is scheduled for expansion. • A 178 acre residential subdivision is currently on the drawing boards located to

the immediate west of the subject on the west side of I-25. There is clear evidence that the new developments are having an effect on the market place and

generating effective demand for the subject.

2. CHANGING REAL ESTATE MARKET DEMAND The housing demand and supply in Sierra County appeared to be in reasonable balance during the

period 01/01/02 through 01/01/04. However, from 2004 through 2009 the market shifted upward. The Sierra County Multiple Listing Service (of which this appraiser is a member) indicated total residential sales during 1/1/2002-12/31/2006 of 994 out of which 523 were site built, 432 manufactured housing

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and 39, one to four family. The median price of all sf site built sales in 2002 was $62,356, by the end of 2008 this figure has risen to $133,505. In 2009 the figure dropped to $130,027. The following Table 3-4 illustrates the trend in total sales as well as residential sales. Brokers have reported that the drop in single-family sales in 2006-2008 was not due to demand but rather the lack of supply on the market that was available to sell. However, 2009 also saw a drop in demand. The average days on market in 2008 of the typical single-family site built dwelling unit was 138 days down from 216 in 2002. For 2009 the figure was 180 DOM. The year 2010 saw a further decline in the real estate market

TABLE 5-2 HOUSING SALES 2002-- 2010

YearTotal of allMLS Sales

Total Residential Sales

SF SiteBuilt Dwelling

Mfg Housing

multi family

Avg SalePrice SiteBuilt

% Change inAvg Price

2010 87 66 31 35 0 $133,531 2.69%2009 141 118 60 57 1 $130,027 -2.61%2008 210 162 92 66 4 $133,505 19.91%2007 276 203 114 81 7 $111,334 2.39%2006 400 104 104 103 10 $108,733 -7.74%2005 342 243 135 101 7 $117,860 18.09%2004 225 187 107 75 5 $99,808 34.56%2003 212 174 102 69 3 $74,175 18.95%2002 206 151 67 68 16 $62,356

As the overall economy slumped in 2007-2009 so did real estate sales. Based on data through

December 2010 the total of all real estate sales were nearly 41% below 2009 while 2009 was 48% below that of 2008.

TABLE 5-3 TOTAL REAL PROPERTY SALES SIERRA COUNTY 2002 -2010

2010 2009 2008 2007 2006 2005 2004 2003 2002

Residential $7,392,673 $12,337,900 $22,687,287 $21,377,713 $18,045,670 $20,320,780 $12,271,650 $11,801,051 $8,177,000Land $944,900 $1,356,500 $3,571,706 $4,628,750 $6,619,148 $3,187,010 $771,040 $788,400 $903,625Comm-Ind $235,500 $580,000 $1,200,000 $2,811,900 $6,215,552 $2,138,250 $981,500 $1,559,000 $1,437,100Multi-Family $0 $240,000 $465,000 $376,200 $1,629,000 $366,000 $886,000 $390,000 $1,417,500

Total Sales $8,573,073 $14,514,400 $27,923,993 $29,194,563 $32,509,370 $26,012,040 $14,910,190 $14,538,451 $11,935,225% <> -40.93% -48.02% -4.35% -10.20% 24.98% 74.46% 2.56% 21.81%

The following Table 5-4 illustrates the deposit base of the County’s banks and provides another

indicator of the community’s slowed economic growth. It can be seen that the total deposit base has fluctuated over the last ten years from between $80,598,000+- to $111,225,000 +- with an average of approximately $90,531,000. Although there are variations, there is a slow but discernible upward growth of approximately 2.77% per year.

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TABLE 5-4 BANK DEPOSITS BY BANK- SIERRA COUNTY, NM 6/30/00 TO 6/30/10

Deposits/Bank NameBank of theSouthwest

(State National) toCompass First Savings Citizens Bank Total % Change

Deposits 6/30/2010* $51,113,000 $25,216,000 $22,567,000 $12,329,000 $111,225,000 15.29%

Percentage 52.98% 26.14% 23.39% 12.78% 115.29%

Deposits 6/30/2009* $42,525,000 $27,500,000 $18,768,000 $7,682,000 $96,475,000 -0.82%

Percentage 44.08% 28.50% 19.45% 7.96% 100.00%

Deposits 6/30/2008 $39,717,000 $38,421,000 $19,136,000 $97,274,000 9.73%

Percentage 40.83% 39.50% 19.67% 100.00%

Deposits 6/30/2007 $39,587,000 $31,249,000 $17,811,000 $88,647,000 -6.62%

Percentage 44.66% 35.25% 20.09% 100.00%

Deposits 6/30/2006 $42,615,000 $33,609,000 $18,705,000 $94,929,000 7.97%

Percentage 44.89% 35.40% 19.70% 100.00%

Deposits 6/30/2005 $39,731,000 $32,565,000 $15,626,000 $87,922,000 4.58%

Percentage 45.19% 37.04% 17.77% 100.00%

Deposits 6/30/2004 $39,288,000 $30,421,000 $14,366,000 $84,075,000 0.90%

Percentage 46.73% 36.18% 17.09% 100.00%

Deposits 6/30/2003 $39,629,000 $29,008,000 $14,685,000 $83,322,000 3.38%

Percentage 47.56% 34.81% 17.62% 100.00%

Deposits 6/30/2002 $38,465,000 $29,035,000 $13,098,000 $80,598,000 -5.29%

Percentage 47.72% 36.02% 16.25% 100.00%

Deposits 6/30/2001 $41,833,000 $30,146,000 $13,117,000 $85,096,000 -1.38%

Percentage 49.16% 35.43% 15.41% 100.00%

Deposits 6/30/2000 $40,849,000 $31,558,000 $13,877,000 $86,284,000

Percentage 47.34% 36.57% 16.08% 100.00%

Average $ $41,395,636 $30,793,455 $16,523,273 $90,531,545 2.77%Average % 45.73% 34.01% 18.25% 100.00%* Bought by Compass

It is the appraiser’s studied opinion that historic demographics and other related data do not

present an accurate picture of the current facets of ongoing economic development in the County. Although it is impossible to determine with a great deal of specificity at this time as to what the newly developing economic environment in Sierra County will bring in terms of population and income growth it is undeniable that growth will occur at a rate not historically seen in Sierra County. This impending growth rate can be seen in the surge of real sales in the last few years leading up to 2006/2007 before the national economy turned dramatically down. It is also the appraiser’s opinion, based on the known developments mentioned above and the current expected expansion, as well as a review of Chamber of Commerce inquiries, gross receipts tax, lodgers tax, utility connections, bank deposits, and other indices, that the historic population’s annual growth rate seen above will move from historic levels up to a reasonable estimate of 3% per year during the period 2011 to 2020 and 4% from 2020 to 2030.

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Absorption of the subject Commercial Subdivision The impact on the subject of the above illustrated developments should be that the subject should

maintain its competitive position within the commercial land market as there does not appear to be any negative external factors within the real estate market that would impact its locational attributes.

At the current time there is relatively little competition for the subject in terms of well located commercial land that has all of the locational advantages and utility availability that the subject has. The only competition are the few commercial in-fill sites along the major corridors of Broadway and Date Streets and 3rd Street on the way to Spaceport America. When Hot Springs Land Development begins its development of the 8,000 +- acres around the airport the first phases will likely take two years to bring on line and will likely be residential along with an RV park of some sort and an industrial park in a second phase. Thus the subject is in a good position to attract any big box retail as well as those business that typically form around a Wal-Mart development.

The subject was approved and opened for sales in 2007. To date there have been two sales and one that is currently under contract with an option on a forth parcel as listed in the table below.

+Y*9]1;)* 4)516$78)!#9*); $78)!;< g,(7(5 /1F)

L<<)9F7^)!$16)!+*79) f!-;<

O16S1*F "6E!>!4,F!> >=:>> @C>I@HD 2> $,63ZDCC@ f>I?HCICCC fD:=G2*,';,( "6E!D!4,F!> >:=? @BI>?> 2> $,63ZDCC@ fHHDI>DB f@:HGhY);F!/)^)6,-S)(F![2,(;F!2,: "6E!G!4,F!= D:GA> >C?IHC? 2> U2ZDC>> f=CCICCC fH:HBhY);F!/)^)6,-S)(F![2,(;F!2,: "6E!G!4,F!H >:?AD ?DIG>= 2D &-F7,(JJ>DZDC>B fHCCICCC f=:C@M,F16 DD:>@

Based on the above data excluding the “option” the actual sales since 2007 including the under

contract parcel due to close July 2011 total 20.28 acres for an average of approximately 5.07 acres per year. Discussions with the developer indicate that he is in serious discussions with potential buyers on two other parcels.

Although it is not possible to determine which parcel may be sold in what order it is reasonable to conclude from the above discussions of the newly developing economic climate in the County that the likely absorption on average of the subdivision over the long run would be on the order of 4 to 5 acres per year. The appraiser estimates that this is a reasonably conservative estimate.

The following Section VI presents the valuation of the subject remaining acres of the commercial subdivision.

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Section VI §

Valuation

53

SECTION VI - VALUATION The following Section VI develops the reasoning and methodology utilized in arriving at a

determination of highest and best use and a valuation conclusion for the subject commercial parcels. 1. HIGHEST AND BEST USE

Highest and best use of land is defined as "The reasonably probable and legal use of vacant land or an improved property which is physically possible, appropriately supported, financially feasible, and that results in the highest value." (The Appraisal of Real Estate, Tenth Edition, 1992.) In order to estimate the highest and best use, there are essentially four points of analysis. These are as follows:

I. Physically Possible Use of the Site - What uses are physically possible, given the size, shape, and topography and location of the site?

II. Legally Permissible Uses of the Site - among the physically possible uses, what uses

are legally allowed given the zoning, easements, and deed restrictions? III. Financially Feasible Uses of the Site - among the uses, which are physically possible

and legally permissible? What uses would provide a reasonable residual net return to the land?

IV. Most Productive Use of the Site - among the financially feasible uses, which use

would result in the greatest net return to the land?

PHYSICALLY POSSIBLE USES Constraints imposed on the possible use of the property relate to the physical aspects of the site

itself. The size, shape, topography, and physical location influence ultimate development. The physical aspects of the property would allow a multitude of possible uses. Given the physical location of the property and its proximity to Date Street and I-25 as well as nearby residential subdivisions, only commercial uses are physically possible.

LEGALLY PERMISSIBLE USES Legal restrictions as they apply to the subject are the common restrictions of utility easements,

public zoning ordinances, and deed restrictions. The subject site is an existing platted commercial subdivision. Restrictions prohibit mobile home, industrial, commercial or residential uses.

All lots are encumbered with deed restrictions and protective covenants. The main thrust of the restrictions and covenants is to provide a legal framework for the preservation, maintenance, and control of the character of the development. The restrictions and covenants are beneficial in protecting the

54

development character and future property values for a commercial subdivision. The restrictions are assumed to be in conformity with the sites existing zoning and development plan. The possible permissible uses for the subject tract are retail/commercial. Therefore, the only physically and legally possible use of the sites is as a commercial subdivision. Note that the appraiser was not provided with any deed restrictions and/or covenants that may be put in place.

FINANCIALLY FEASIBLE

The only use which is physically possible and legally permissible is a commercial/retail development. The following financial analysis in this section indicates that the development is financially feasible. Therefore, the highest and best use of the subject site is as developed.

MOST PRODUCTIVE USE OF THE SITE

The most productive use of the site, based on the above analysis and the value estimates generated in the DCF model that follows is as a commercial development. Therefore, the highest and best use of the site is as developed. 2. VALUATION METHODOLOGY

The subject is valued according to the determined highest and best use as a commercial subdivision. Comparable sales analysis is employed in the determination of the retail market value of the commercial lots on a sf basis. The analysis uses the average lot sale / contract prices of available recent commercial lot sales within the subject neighborhood but outside of the subject subdivision. The average psf retail value serves as the base retail sale price used in a Discounted Cash Flow Model to estimate the current "bulk sale" market value of the subject. The typical subdivision commercial lot is estimated to fall within a range of .50 to 5.00 acres. The DCF model considers absorption, taxes, marketing expenses, and investor overhead. 3. COMPARABLE SALES ANALYSIS

The Sales Comparison or Market Approach is based upon the principle of substitution. The process produces an estimate of value of the property by comparing it with similar properties of the same type, class, and location that have sold recently or are currently offered for sale in the same or competing areas. The process of comparison involves judgment concerning their similarities with respect to several factors such as location, physical condition, terms of sale, and conditions of the subject property. The comparable sales are compared to the subject property and ranked as equal, superior or inferior to the subject. Adjustments are then made to the sale prices for differences between comparables. The value range as indicated by the final adjusted sale price, is then correlated into a final indicated value for the subject property. The dollar sale price per square foot is used as unit of comparison.

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A search of the current commercial land sales in the area, that are outside of the subject commercial subdivision, turned up several representative comparables that are appropriate and that are used in the analysis. The following is a descriptive list of the comparables used in the analysis. Figure 6-1 illustrates the location of the comparables and Table 6-2 demonstrates adjustments to their prices.

FIGURE 6-1 LAND SALE COMPARABLES LOCATION MAP

COMPARABLE LAND SALE # 1 1920 N DATE STREET T OR C Date of Sale: August 2009 Recording: Sierra County Grantor: Neudecker Grantee: Citizens Bank Agent: NA Sale Price: $750,000/ $14.50 psf//Additional development cost demolition $28,000, Size: 1.187 Ac./ 51,724 SF Terms: Cash Zoning: C1 Location: NWC of Date Street and New School Road Comments: Level site of Dairy Queen and Car wash purchased for land only. Demolition and dirt work

required. Flood zone: X Utilities: Power , Water, Sewer to site. Intended Use: Bank development Confirmed By: Grantee

COMPARABLE LAND SALE # 2 CBD AUSTIN STREET Date of Sale: 8/20/2009 Recording: MLS 20104741 Grantor: Grinsted Grantee: NA Agent: Susan Lowe Sale Price: $96,000/ $12.96 psf// Size: .17 Ac./7,405 SF Terms: Cash Zoning: C1 Legal Description: blk 8 lot 27, 28, e2 of lot 29 Palomas Hotsprings

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Location: Austin between Foch and Daniel. South side of Austin middle of block. Comments: Commercial Small lot level all utilities Flood zone: X Utilities: Power , Water, Sewer to site. Intended Use: Parking or commercial development Confirmed By: MLS 20104741/ agent

COMPARABLE LAND SALE # 3 1203 DATE ST, T OR C Active Listing: 3/2010 Source: MLS 20105150 Grantor: JANOS Revocable Trust Grantee: NA List Price: $275,000, $ 9.01 psf Size: .70 Ac./ 30492 sq. ft. Terms: Cash to Seller Zoning: C-1 Legal Description: Lots 6-7 Block 18 Country Club Heights Location: SEC Date and Barton Comments: Level all utilities Intended Use: Commercial-Development. Confirmed By: MLS 20105150 COMPARABLE LAND SALE # 4 500 DATE ST, T OR C Listing: 3/2010 Source: MLS 20107879 Grantor: Lockhart Grantee: NA List Price: $45,000, $ 7.94 psf Size: .13 Ac./ 5662 sq. ft. Terms: Cash to Seller Zoning: C-1 Legal Description: W 96’ of Lots 4-57 Block 41 Original Townsite Location: %00 blk Date West side of Street Comments: Level all utilities Intended Use: Commercial-Development. Confirmed By: MLS 20107879 / C-21 A. Freeman COMPARABLE LAND SALE # 5 NWC 3RD AND DATE , T OR C Listing: 2/2007 Source: Grantee Grantor: NA Grantee: Anderson Sale Price: $250,000, $ 5.98 psf Size: .9599Ac./ 41,816 sq. ft. Terms: Cash to Seller Zoning: C-1 Legal Description: Lots 11-12 Block 63 La Vista Addition Location: East Side of Date Street, Signaled intersection Comments: Level all utilities Intended Use: Commercial-Mfg home sales Confirmed By: Grantee COMPARABLE LAND SALE # 6 I-25 HUBBLE , T OR C Listing: 20105335 Source: MLS 20105335 Grantor: Rogers Grantee: NA List Price: $1,500,000, $ 5.74 psf Size: 6.0Ac./ 261,360 sq. ft. Terms: Cash to Seller Zoning: C-1 Legal Description: Tract 4 Just east of Water tank at I-25 Exit 79 Location: Near I-25 and Date St.West of Signaled intersection Comments: Hilly Topo Driveway to City Street near City golf Course. Intended Use: Commercial- Confirmed By: Grantee

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COMPARABLE LAND SALE # 7 905 DATE STREET, T OR C Date of Sale: 6/2009 Recording: Sierra County Grantor: Lockhart Grantee:NA Sale Price: $264,023, $5.27 psf, plus demolation cost of $15,000 Effective sale price for land only is est at $279,023 or $5.57 sf. Size: Approximately 50,000 sf Terms: Cash to seller Zoning: C-1 Legal Description: Lots 5 & 6 Block 12 Country Club Heights Location: East Side of Date Street Site of Old Sonic. Comments: Interior, level parcel w/all utilities available on site. Located in Zone X (outside 500 yr.

flood zone) The buyer demolished the old Sonic and the purchase was for the land only. The intended use is for an retail auto parts facility.

Intended Use: Commercial Development Confirmed By: C-21 D. Hogan 505 894 6611 COMPARABLE LAND SALE # 8 1502 DATE ST T OR C Date of Sale: February 2008 Recording: Sierra County Grantor: Blake Chanslor Revocable Trust Grantee: NAPA Agent: NA Sale Price: $179,000/ $3.25 psf Size: 1.262 Ac./ 54,973 SF Terms: Cash to Seller Zoning: C1 Legal Description: Length Metes Bounds Location: 1502 Date St T or C Comments: Flood zone X. Cobby topography with large drainage area on north line. Estimated cost of

dirt work and box culvert is $100,000 for an effective sale price of a buildable site of $5.08 sf. Power , Water, Sewer to site.

Intended Use: Commercial development Confirmed By: BAS Contract Review

ELEMENTS OF COMPARISON

The nine common elements of comparison which are considered in the sales comparison analysis in Table 6-1 are as follows:

• Real Property Rights Conveyed • Financing Terms • Conditions of Sale • Market Conditions • Location • Physical Characteristics • Economic Characteristics • Intended Use • Non-Realty Components of Value

Under ideal circumstances, each adjustment would be supported by a paired set analysis; i.e. two comparables being exactly the same except for one variable which would then account for the difference in sale price. However, adequate paired sets seldom exist, even in the simple residential market. The more complex the property the less likely it is that any type of paired set analysis would produce reasonable or reliable results.

Therefore, in the absence of reliable paired set analysis qualitative adjustments may be employed. Qualitative adjustments are used to adjust the sales price of any given comparable sale so it will more

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accurately reflect the market value of the subject property. A qualitative adjustment is used on elements of comparison that differ between the subject and the comparable sale. The use of qualitative adjustments is also expected to narrow the range between the sale prices of the comparables and the resultant range of the final adjusted sale prices. If a comparable has a superior characteristic relative to the subject, it is adjusted downward i.e., a negative adjustment. The reason being that if it were superior in this one characteristic, it would have logically sold for more than could be expected of the subject property. An inferior rating would warrant an upward adjustment following the same logic.

The determination of the rating specific qualitative adjustment used is largely the result of four factors; the result of any quantitative analysis that can be made from the data available, the experience of the appraiser, the judgment of the appraiser and the test of reasonableness. In the final analysis, do the adjustments make sense? Are they reasonable? Do they lead to a logical and reasoned conclusion for the final estimate of market value.

Thus the relative comparison analysis, using a ranking process, is where an appraiser studies the relationships indicated by market data without recourse to quantification. The normal approach for the appraiser to follow is to analyze comparable sales in order to determine whether their characteristics are inferior, superior or equal to those of the subject property. The process is similar to paired set analysis without the quantitative analysis. Ranking analysis arrays properties according to their degree of similarity to the subject. The application of qualitative adjustments involves separating the comparables into those that are superior overall and those that are inferior overall. Ideally, the ranking of the prices of these two groups brackets the probable value range of the subject. The analysis leads the appraiser to conclude a single value indication for the subject property.

The transactions that are used in the following analysis are believed to be the best representative comparables. The following factors are considered in the qualitative analysis.

Real Property Rights Conveyed The real property interest conveyed is Fee Simple for all comparables.

Financing Terms All comparables used in the analysis were sold for cash or other market equivalent condition.

Thus no adjustment is warranted. Conditions of Sale

This element of comparison relates to the nature of the parties to the transaction and their relationship. Where sales are not believed to be totally arms length or otherwise influenced transactions, they may require adjustment for this variable.

Market Conditions An adjustment for market conditions is used to show market price trends over time. Although

the generally stable market conditions since 2000 do not reflect conclusive evidence of precise price increases over time, BAS' in house file data does provide some evidence for a positive time adjustment.

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Locational Characteristics All comparables are within the same general market area as the subject, with similar locational

characteristics. However, locational adjustments are necessary for selected comparables. UTILITIES

Not all comparables are equal with respect to the cost of the provision of utilities, which are fully available to the subject site. Therefore, adjustments for utilities are required.

ACCESS All comparables have similar but not equal access to Broadway or Date Street, the main

thoroughfare of T or C. TOPOGRAPHY

Topography is an important factor in a community with steep bluffs and hillside developments. There are differences in topography that may affect the cost of development and may be adjusted for.

Frontage All of the comparables have substantial frontages, as does the subject, on a major thoroughfare.

Therefore, no positive or negative adjustment is appropriate for the subject. Flood Zone

The subject appears to be located in a Zone X areas outside the 500 year flood plain. Some of the FEMA maps are unclear and if this is of concern to the reader then an elevation study should be requested. Although some flood zone classifications may exert a negative influence on a sites value, in general it is not as immediately apparent as is the impact of size. All flood zone classifications are equal to the subject and no adjustment is required.

Size The general trend in this market area is that within rangers as the size of the land tract increases,

the price per SF declines. Although is not unusual to have a size factor offset by location or other considerations.

Comparable #1 is the sale of a 1.19 acre parcel located at 1920 Nth Date St. The comparable consisted of two lots with a DQ on one and an older car wash on the other. Citizens bank purchased the property for $750,000 for the land only. The purchase price and demolition give an effective sale price of $778,000 or $15.09 sf. The site is rated as over all superior to the subject due to the very visible location on Date Street and proximity to the signaled intersection. Thus the net rating is superior due primarily to the location and the overall adjustment is negative.

Comparable #2 is the sale of a .1722 acre parcel located in the middle of the block on Austin within the CBD of T or C. The comparable consisted of one lot with no improvements. The purchase price was $96,000 or $9.47 sf. The site is rated as over all superior to the subject due to the smaller size and the purchase by the adjoining land owner. Thus the net rating is superior due primarily to the smaller size and CBD location and the overall adjustment is negative.

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Comparable #3 is the sale of a .69 acre parcel located at SEC of Barton and Date Street. The comparable is a current listing consisting of one lot with no improvements. The list purchase price is $275,000 or $9.17 sf. The site is rated as over all superior to the subject due to the location and listing status. Thus the net rating is superior and the overall adjustment is negative.

Comparable #4 is the sale of a .13 ac parcel located in the 500 Block of Date Street. The comparable is a current listing consisting of one lot with no improvements. The list price is $45,000 or $7.81 sf. The site is rated as over all superior to the subject due to the smaller size and listing status. Thus the net rating is superior and the overall adjustment is negative.

Comparable #5 is the recent sale of a commercially zoned .9599 acre site on the NWC of Date Street and 3rd Street which is one of the two signaled intersections in Truth or Consequences. The site is level and at street grade. The site was purchased by the lessee as part of the lease agreement. The comparable is considered generally superior due to the corner location at a signaled intersection but this is offset to a degree by the date of sale and influenced nature of the sale. The net adjustment to the sale price psf of $5.98 psf is slight negative.

Comparable #6 is a current listing of a commercially zoned 6.00 acre site on the West of Date Street near and north of the Wal-Mart site near the Date Street Intersection with I-25, near one of the two signaled intersections in Truth or Consequences. The site is hilly with a driveway to Date Street. The site is listed for $1,500,000. The comparable is considered generally superior due to the listing status but this is offset by the larger average size and the net adjustment to the sale price psf of $5.74 psf is nil.

Comparable #7 is the recent sale of a commercially zoned 1.15 acre site one lot north of the NEC of Marr and Date St. The site was sold for $264,023 with an addition $15,000 estimated for demolition. The site was the former location of the old Sonic drive in The site is sloped to the east and above street grade. The site was purchased for the land only and the old Sonic has been demolished. The comparable is considered generally inferior to the subject due to the interior lot location and required demo. The intended use is for a auto parts store. The net adjustment to the sale price psf of $5.57 psf is positive.

Comparable #8 is the sale of a 54,973 sf parcel located at 1502 Date Street. The comparable was sold for $179,000 or $3.25 psf. The site is very cobby with an arroyo along the north line. The site will require considerable dirt work and a box culvert in the arroyo. The cost of which is estimated at $100,000 bringing the effective sale price to $289,000 or $5.08 psf. The location is also considered inferior to the subject. Thus the overall net rating is somewhat inferior and the overall adjustment is positive.

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TABLE 6-1 LAND SALE RANKING ANALYSIS GRID

TABLE 6-2 RANKING ANALYSIS

Comparable SF Size $ psf Rating Overall Net Adj

1 51,706 $15.09 Superior Negative2 7,501 $9.47 Superior Negative3 30,000 $9.17 Superior Negative4 5,759 $7.81 Superior Negative5 41,813 $5.98 Inferior Positive

Subject 43,560 $5.75 Equal Equal6 261,360 $5.74 Inferior Positive7 50,094 $5.57 Inferior Positive8 54,973 $5.08 Inferior Positive

ITEM Subject COMP NO. 1 COMP NO. 2 COMP NO. 3 COMP NO. 4 COMP NO. 5 COMP NO. 6 COMP NO. 7 COMP NO. 8Address

SEC Date I-25 1920 Nth date St Austin Street 1203 Date St500 Block DateStreet

NWC 3rd and DateSt. 1-25 & Hubble 905 Nth Date 1502 Date Street

Source Grantor 20104741 20105150 20107879 Grantee 20105335 Grantee GranteeProximity to Sub 2miles NW 3/4 mile south 1 mile NW 2 blocks NW 2 blocks west 1.5 miles NW 3/4 mile NW 1.25 miles NWSales Price NA $750,000 $96,000 $275,000 $45,000 $250,000 $1,500,000 $264,023 $179,000

Adj Sale Price $778,000 $71,000 $275,000 $45,000 $250,000 $1,500,000 $279,023 $279,000Price per Ac NA $655,434 $412,311 $399,303 $340,393 $260,444 $250,000 $242,629 $221,078Price psf $15.05 $9.47 $9.17 $7.81 $5.98 $5.74 $5.57 $5.08Conditions ofSale Normal Influenced Normal Normal Influenced Normal Normal NormalAdjustment No Adj Negative No Adj No Adj Positive No Adj No Adj No AdjData Source Coldwell Banker MLS 20104741 Ciodwell Banker Howell Asso Grantee/Anderson Coldwell Banker Grantee-O'Riely's Grantee-NAPA

DESCRIPTION DESCRIPTION DESCRIPTION DESCRIPTION DESCRIPTION DESCRIPTION DESCRIPTION DESCRIPTION DESCRIPTION Date of Sale/List 8/1/2009 9/1/2009 1/5/2009 7/6/2009 2/1/2007 1/12/2009 6/1/2009 6/2/2007Adjustment No Adj No Adj List-Negative List-Negative Positive List-Negative No Adj positiveSize Acres 1 1.19 0.1722 0.69 0.13 0.96 6.00 1.15 1.26Size SF 43,560 51,706 7,501 30,000 5,759 41,813 261,360 50,094 54,973Adjustment Lg/Inf/Pos Sm/sup/neg Lg/Inf/Pos Sm/sup/neg Lg/Inf/Pos Lg/Inf/Pos Lg/Inf/Pos Lg/Inf/PosLocation Good Superior Superior Superior Similar Superior Inferior Superior SuperiorAdjustment Negative Negative Negative No Adj Negative Positive Negative NegativeSite/View City similar similar similar similar similar similar similar similarAdjustment No Adj No Adj No Adj No Adj No Adj No Adj No Adj No AdjTopo level Similar Superior Similar Similar Similar inferior inferior inferiorAdjustment No Adj Negative No Adj Negative Negative Positive Positive PositiveUtilities/water All on Site superior similar Similar Similar Similar inferior inferior inferiorAdjustment negative No Adj No Adj No Adj No Adj Positive Positive PositiveIrrigated none similar similar similar similar similar similar similar similarAdjustment No Adj No Adj No Adj No Adj No Adj No Adj No Adj No AdjFlood Zone FEMA Zone X similar Inferior similar similar similar similar similar inferiorAdjustment No Adj Positive No Adj No Adj No Adj No Adj No Adj positiveImprovements Rds Utilities Demo Inferior Inferior Inferior Inferior Inferior inferior inferiorAdjustment No Adj Positive negative negative negative negative positive positiveEasements Normal similar Similar similar similar similar similar similar similarAdjustment No Adj No Adj No Adj No Adj No Adj No Adj No Adj No AdjAccess Good Superior Inferior Similar Similar Similar Inferior Similar SimilarAdjustment Negative Negative No Adj No Adj No Adj Positive No Adj No AdjUtility of Use Good Similar Similar Similar Inferior Similar Superior Similar SimilarAdjustment No Adj No Adj No Adj Positive No Adj Negative No Adj No AdjNet Rating Superior Superior Superior Superior Inferior Inferior Inferior InferiorNet Adj. Negative Negative Negative Negative Positive Positive Positive PositiveInd. Value of Subject <$15.09 <9.47 <$9.16 <$7.81 >5.98 ><$5.74 >$5.57 >$5.08

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The above analysis indicates that the subject given a typical lot size of .50 to 5 acres and location should fall between comparable five and six the mean value of which is approximately $5.86 psf. However it is the appraiser’s opinion that the subject would fall closer to comparable number six say $5.75 psf.

PROJECTED ABSORPTION RATE The projected absorption rate for the subject remaining acres is estimated to be 4 to 5 acres per

year on average. The actual remaining acres remaining and available for sale is 41.578, The 2.491 acres under contract are assumed to be sold as agreed. In addition Block 1 lot 2 which is a .45 acre parcel and Block 4 Lot 7 a .408 acre parcel are reserved for access and utilities. The remaining 41.578 acres if absorbed at 4.5 acres per year presents a 9.24 year sell out period. For purposes of this analysis the absorption period will be rounded to 9 years and the absorption rate is 4.619 acres per year. The absorption rate summary analysis is contained above. The analysis and projections were based on the projected continued population growth in the area, the competitive environment and the subject site's relative market position with respect to effective demand. The specific absorption rate utilized in the DCF model that follows results in a projected sell out period of 9 years from the effective date of the appraisal. Since it cannot be predicted when any particular parcel or future subdivide lot will be sold the overall actual average 4.619 acres per year of the 41.578 acres will be used in the analysis. The following items are components of the input to the DCF model.

ESTIMATES OF MARKETING EXPENSES AND CLOSING COSTS

The estimated marketing and closing costs on the subject site are estimated to be on the order of 6.5% per acre sold. This would include a negotiated sales commission and other related closing costs.

Average Retail Sales Price per acre $250,470 % of GrossMarketing Expense $12,524 5.00%Title Policy $2,505 1.00%Closing $1,252 0.50%Total $16,281 6.50%

ESTIMATES OF REAL ESTATE TAX

Property taxes are based on 2011 mill rates for commercial property located within the Sierra County and the assessed value assigned to similar developed/unimproved lots contained in the subject neighborhood. Average annual property tax is estimated at $454.11 on average for each acre that is held by the developer. Any discounts that may be negotiated with the County are not considered in this analysis.

INVESTOR OVERHEAD Investor overhead is calculated as a percentage of gross sales revenues. Given the size of the

development, and the current sales contract on site sales personnel may not considered necessary

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however, certain overhead costs are included to compensate the developer for competent management, office assistance and cover office overhead. This is an essential element in the proper management of the investment in subdivision lots. In some cases the investor may also take over the role of management. Nevertheless, the time involved and expenses incurred must be accounted for. Therefore, 3% of gross has been assigned to cover investor overhead.

DEVELOPER OR ENTREPRENEURIAL PROFIT Developer profit is the reward that may be achievable in the development process. This is

sometimes referred to as the return on the management skills and effort required in the land planning and development process. Without this reward very little in the way of land development would be achievable. In some cash flows this item is not included as a cost component but is included in the overall discount rate. However, it is used here as a component of the cost of development. This rate is typically 5% to 12% and is market driven. The rate used for purposed of this analysis is 10%.

DISCOUNT RATE

In the discounted cash flow model that follows, the hypothetical assumption that the present value of the subject lots is estimated as if full development has taken place and the lots are ready for the improvements to be constructed with no additional on site or off site charges to be incurred except certain holding costs. This approach requires the development of an appropriate market determined discount rate to be used to convert the future net revenue cash flows to present value. The present value is the estimated market value that an investor would pay for all of the developed lots and the discount rate is the return on the investment to the investor.

Three approaches are discussed below and utilized in this analysis to determine an appropriate rate: (1) analysis of comparable bulk lot sales, (2) interviews with local market participants, (3) surveys.

The development of market-based rates may be accomplished in several ways. One method is to extract the rate from comparable transactions in the local market area. This method is the preferred method where the data is available. In order for this method to produce reliable results, a sufficient number of sales comparables must be available along with the details of acquisition cost, equity participation, loan amounts, interest charges, carrying costs, cash flows and past or anticipated resale prices. Each of these transactions must be for properties similar to the subject property. While this is the preferred method it is dependent upon a sufficient number of appropriate sales and the availability of the related data. A second method is a local survey of market participants. In the absence of appropriate market transactions from which the yield rates may be extracted, a poll of those considered to be participating experts in the market place is a legitimate secondary method. A third method is the use of regional or national surveys conducted on a wider scale of market participants.

The following narrative is an explanation of how the appropriate discount rates were extracted from the market for use in this appraisal.

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BULK LOT SALES Six previous local bulk lot sales were analyzed in an attempt to extract an appropriate discount

rate. Although the sales were of residential lots they do assist the appraiser in forming an opinion as to the appropriate discount rate. The results of the analysis are summarized below. The details of the bulk sales are maintained in the appraiser’s files.

The following Table summarizes the findings extracted from the six bulk lot sale transactions:

Transaction No. Yield Rate

Discount % off of Retail Sellout Amount

Absorption Period (yr.)

1. 23.36% 44.00% 5 2. 17.31% 36.00% 5 3. 12.60% 20.00% 3 4. 19.64% 16.00% 1 5. 20.35% 28.00% 3 6 16.00% 24.00% 1.25

Averages 18.21% 28.0% 3.04

The resulting average IRR is 18.21% with a resulting undiscounted average bulk discount factor of 28.0% with a 3.04 year discount period.

MARKET PARTICIPANT INTERVIEWS

A second approach accepted for determining an appropriate discount rate is to interview local selected market participants. Several selected companies and individuals were surveyed in an effort to obtain an appropriate equity yield rate to be used in the unleveraged average rate. The organization and individuals within those organizations surveyed are considered to be among the most knowledgeable market participants in the local area. The range of responses was from 8% to 20%. The average was 12%1.

REGIONAL SURVEY The Real Estate Investment Survey, Rocky Mountain Region, 2010 indicates that an average

yield rate on similar undeveloped residential land development is approximately 13.25%. The higher rates tended to include entrepreneurial profit in the actual discount rate whereas the lower rates tended to include entrepreneurial profit as an operating expense.

DISCOUNT RATE SUMMARY Summarizing the above discount rate analysis, the results indicate the following:

Bulk Lot 12.6% - 23.36% 18.21%Market Participants 8% - 20% 12.00%Regional Survey 11%-22% 14.80%

1 Barrett Appraisal Services, LLC conducts polls of market participants relative to rates of return on various classes of property. .

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The above data indicates that an average unleveraged rate would likely be between 8% and 14% a rather large range. The higher rates are indicative of the risks inherent in the development of raw land and bringing that raw land into a fully developed stage and then selling off the lots over the actual absorption period which is the case under analysis. However, the subject is developed platted subdivision that is essential is ready to build state. Therefore the yield rate used should be on the low to mid part of the range bearing in mind that 10% of the gross revenues has been allocated to developer profit considered in the expenses associated with the project. Also the subject site is in a tested area with good market acceptance, and an expanding population with prior sales. An investor would not expect any unusual market risks associated with buying developed lots, therefore, an unleveraged 12% discount factor is utilized in the DCF model that follows. 4. BULK LOT VALUE BY DISCOUNTED CASH FLOW ANALYSIS

The indicated value of the 41.578 acre commercial subdivision in its completed state of development, ready for construction, is shown in the discounted cash flow statement in Table 6-4. The inputs utilized in generating the discounted cash flow model have been extracted from the above analysis and are summarized below in Table 6-3.

TABLE 6-3 DISCOUNTED CASH FLOW INPUTS

Total Acres For Sale 41.578Lot Sales: 4.619 acres per yearSell out Period: 9 yearsAverage Retail Priced SF $5.75 psf

An Average acre $250,470Marketing and Closing Costs: 6.5% of GrossAnnual Property Tax Annual (Per Acre) $454.11Investor Overhead: 3% of GrossDiscount Rate: 12% per yr.Development Cost Exc Land $2,466,000

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TABLE 6-4 DISCOUNTED CASH FLOW BULK SALE VALUE 41.578 ACRES

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5. SUMMARY OF BULK ACRE SALE OF 41.578 ACRE COMMERCIAL SUBDIVISION

The indicated market value of the 41.578 acres appraised, as a bulk sale is $5,247,000 or $126,186 per acre on average. This represents a bulk discount rate off the gross retail sell out amount of 53.51%. This is consistent with the bulk discount rates analyzed above, considering a projected 9 year sell out from the effective date of the appraisal. The gross sell out amount is shown in Table 6-4 to be $11,285,334.

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Section VII

Reconciliation

69

SECTION VII RECONCILIATION

1. MARKET VALUE NEW HOT SPRINGS RETAIL CENTER The Bulk Lot Market Value of the subject remaining 41.578 within the commercial subdivision was based on substantial data gathered from all available sources. The highest and best use analysis indicated that the commercial subdivision is the best physically, legally, financially and productive fit use for the site. A discounted cash flow model was utilized in the market value estimate of the 41.578 subject acres within the subdivision. The inputs to the cash flow, i.e. were all well founded and based on market evidence which is presented in the report.

• Absorption Rate • Average Priced Lot • Marketing and Closing Expense • Investor Overhead • Annual Property Taxes • Development Costs • Discount Rate • Entrepreneurial Profit

An analysis of the competitive environment, population movement and effective demand led to the development of an absorption rate that conforms with the known limitations of population, income, and employment within the constraints of supply and demand for competitive commercial subdivision lots. The acre value estimates were substantiated by reviewing and adjusting the lot sales of several competitive commercial lots, all located within the subject neighborhood. The rate for marketing expenses and developer overhead and profit was extracted from an analysis of the cost of existing sales and discussions with market participants. The discount factor used was supported by market evidence as well as a survey of informed market participants.

Therefore, the analysis of the available data and the appropriate derivation of the input data to the DCF models have been accomplished by generally accepted research techniques and are believed to be reliable indicators of current market activity. The use of the DCF model incorporating the required inputs satisfies the definition of "market value" as detailed in the introduction to this report.

The final indicated bulk lot market value of the subject 41.578 acres is $5,247,000

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3. MARKETING TIME

The marketing time for the subject property bulk sale is estimated to be less than 12 months from the time the subdivision is on the market. Absorption rates experienced by recent commercial sales and the current new developments in the community would lead to a marketing time within 12 months. Therefore, it could reasonably be expected that an investor/developer would purchase the site within a 12 month period (assuming appropriate marketing and management) after it was put on the market in order to take advantage of the future demand for commercial lots.

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Section VIII §

Certification

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SECTION VIII CERTIFICATION This is to certify that effective March 28, 2011 the estimated market value of the respective property, that

is the subject of this report, is as follows: 1) To the best of our knowledge and belief, the statements of fact contained in this report are true

and correct.

2) The reported analysis, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are the personal, unbiased professional analysis, opinions and conclusions of the undersigned appraisers.

3) The appraiser has no present or prospective interest in the property that is the subject of this report and no personal interest with respect to the parties involved.

4) The undersigned appraisers have no present or prospective interest in the property that is the subject of this report nor a personal interest or bias with respect to the parties involved with this assignment.

5) Compensation is not contingent on any action or event resulting from the analyses, opinions, or conclusions in, or the use of, this report.

6) The appraiser’s compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction of value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result or the occurrance of a subsequent event that is directly related to the intended use of this appraisal.

7) The appraisal assignment was not based on a requested minimum valuation, a specific valuation or approval of a loan.

8) To the best of our knowledge and belief, the reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute.

9) The use of this report is subject to the requirement of the Appraisal Institute relating to review by its duly authorized representatives.

10) As of the effective date of this report, Dr. G. Vincent Barrett, MAI, has completed the requirements of the continuing education program of the Appraisal Institute.

11) The appraiser’s analysis, opinions, and conclusions are developed, and this report has been prepared in conformity with the Uniform Standards of Professional Appraisal Practice.

12) Dr. G. Vincent Barrett has made personal inspections of the property that is the subject of this report.

13) This appraisal was prepared by the undersigned appraiser with no other professional assistance. 14) The appraiser has not conducted an appraisal of this property at any time in the past nor acted in

any other capacity regarding the subject property.

Barrett Appraisal Services, LLC

Dr. G. Vincent Barrett, MAI NM Certified Appraiser No. 000506-G

Component ValueBulk Lot Sale 44.927 $5,247,000Bulk Lot Value per acre $126,186

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Addenda

ITEM PAGE A. Letter of Engagement ........................................................................................................... 70

B. Legal & Tax Documentation ................................................................................................ 73

E. Appraiser Qualifications ....................................................................................................... 81

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Letter of Engagement

75

76

77

78

Legal &

Tax Documentation

79

80

81

82

83

84

85

86

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87

Appraiser Qualifications

88