APPRAISAL OF REAL PROPERTY
Transcription
APPRAISAL OF REAL PROPERTY
APPRAISAL OF REAL PROPERTY Deerhurst Resort – Development Lands 1235 Deerhurst Drive Huntsville, Ontario P1H 2E8 Prepared For: Skyline International Developments Inc. 800 – 90 Eglinton Avenue East Toronto, Ontario M4P 2A5 Prepared By: Cushman & Wakefield Ltd. Valuation & Advisory 33 Yonge Street, Suite 1000 Toronto, ON M5E 1S9 C&W File ID: 14-445-900040 CONFIDENTIAL Cushman & Wakefield Ltd. 33 Yonge St., Suite 1000 Toronto, ON M5E 1S9 (416) 862 0611 Tel (416) 359 2613 Fax www.cushmanwakefield.com May 12, 2014 Mr. Vadim Shub Chief Financial Officer Skyline International Developments Inc. 800 – 90 Eglinton Avenue East Toronto, Ontario M4P 2A5 Re: Appraisal of Real Property In a Narrative Appraisal Report Deerhurst Resort – Development Lands 1235 Deerhurst Drive Huntsville, Ontario P1H 2E8 C&W File ID: 14-445-900040 Dear Mr. Shub: In fulfillment of our agreement as outlined in the Letter of Engagement, we are pleased to transmit our appraisal of the above-captioned property in a narrative report. The effective date of value is March 31, 2014. This appraisal report has been prepared in accordance with our interpretation of your institution’s guidelines and the Canadian Uniform Standards of Professional Appraisal Practice (CUSPAP) as adopted by the Appraisal Institute of Canada. It is understood that the intended use of this report is for: a) In order to substantiate the value of the assets for financial reporting in compliance with IFRS requirements; b) Assistance in the decision making process relating to financing, accounting and / or auditing matters; c) To support Skyline’s auditors; d) For regulatory compliance; e) For financing purposes; and f) in conformity with the requirements of IFRS 13 and IAS 40. The undersigned acknowledges that enclosed appraisal, may be used by Vadim Shub of Skyline International Development Inc., Mishorim Development Group Ltd. And Schwartz Levitsky Feldman LLP Gai, Goffer, Yanev, Guilman, Udem and Co., as part of their audit procedure, and as such, we give our consent that the said appraisal may be attached to any report and / or prospectus which, pursuant to the laws and regulations of the State of Israel, must be publically filed with said financial statements. The purpose of this report is to assist the client in the decision making process relating to financial accounting and or auditing matters, including reporting the value of the subject properties in accordance with IFRS and financing purposes. Our mandate is to provide an opinion of current market value of the ‘development lands’. These lands are comprised of different parcels, with different attributes and characteristics. We have, therefore, appraised the lands in different components: the waterfront lands, the non-waterfront lands, the unsold residential development lots and the waterfront lands for condominium development. Our previous appraisal for the subject property was effective for December 31, 2013. This valuation is an update from the December 31, 2013 appraisal report. Since this time, the Client has submitted a complete planning application to the Town and Region with regards to the Village Centre component of the lands. Consequently, this area is the only component that has seen an increase in value. CUSHMAN & WAKEFIELD LTD. SKYLINE INTERNATIONAL DEVELOPMENTS INC. MR. VADIM SHUB MAY 12, 2014 PAGE 2 MARKET VALUE AS IS – WATERFRONT LANDS Based on the agreed to Scope of Work, and as a result of our analysis, we have developed an opinion that the value of the Fee Simple estate of the approximately 77.04 acres of excess lands associated with the Deerhurst Resort (commonly referred to as the ‘Lakeside Golf Course Lands, Crozier and Contact, Callacott / Lindsay / Turnbull Stable Lands’), subject to the assumptions and limiting conditions, certifications, extraordinary and hypothetical conditions, if any, and definitions, March 31, 2014, is: TWO MILLION SEVEN HUNDRED THOUSAND DOLLARS $2,700,000 or $35,000 (rounded) per acre MARKET VALUE AS IS – NON-WATERFRONT LANDS Based on the agreed to Scope of Work, and as a result of our analysis, we have developed an opinion that the value of the Fee Simple estate of the approximately 360.58 acres of excess lands associated with the Deerhurst Resort (lands comprised of 193.99 acres of excess land referred to as the ‘Running Bear and Nissan Lands’, 21.25 acres of future commercial land situated within the Running Bear and Nissan Land Area, 100.01 acres referred to as the ‘Deerhurst Highlands Lands1’ and 38.02 acres referred to as Deerhurst Highlands 2 and the 11.31 acres referred to as the ‘Turnbull Lands’, subject to the assumptions and limiting conditions, certifications, extraordinary and hypothetical conditions, if any, and definitions, on March 31, 2014 is: FIVE MILLION FIVE HUNDRED AND SEVENTY THOUSAND DOLLARS $5,570,000 $7,000 per acre for Excess Lands (339.33 acres) & $150,000 per acre for Commercial Lands (21.25 acres) MARKET VALUE AS IS – UNSOLD RESIDENTIAL DEVELOPMENT LOTS Based on the agreed to Scope of Work, and as a result of our analysis, we have developed an opinion that the value of the Fee Simple estate of the 71 un-sold development lots associated with the Deerhurst Resort, subject to the assumptions and limiting conditions, certifications, extraordinary and hypothetical conditions, if any, and definitions, on March 31, 2014, is: ELEVEN MILLION ONE HUNDRED EIGHTY-FIVE THOUSAND DOLLARS $11,185,000 or $158,000 (rounded) per lot The opinions of value include the land and any associated services. CUSHMAN & WAKEFIELD LTD. SKYLINE INTERNATIONAL DEVELOPMENTS INC. MR. VADIM SHUB MAY 12, 2014 PAGE 3 MARKET VALUE AS IS – WATERFRONT LANDS FOR CONDOMINIUM DEVELOPMENT Based on the agreed to Scope of Work, and as a result of our analysis, we have developed an opinion that the value of the Fee Simple estate of the approximately 8.60 acres of lands - of which 173 residential condominium units can be developed - associated with the Deerhurst Resort (lands that are part of a larger parcel located on a peninsula, in the southeastern sector of the property, and which currently bear several underutilized or vacant buildings), subject to the assumptions and limiting conditions, certifications, extraordinary and hypothetical conditions, if any, and definitions, on March 31, 2014, is: SEVEN MILLION THREE HUNDRED AND FIFTY THOUSAND DOLLARS $7,350,000 or $42,500 per developable condominium unit The opinions of value include the land and any associated services. MARKET VALUE AS IS – DEERHURST SANCTUARY/WOODLAND HEIGHTS Based on the agreed to Scope of Work, and as a result of our analysis, we have developed an opinion that the value of the Fee Simple estate of the approximately 30 un-sold lots associated with the Deerhurst Resort subject to the assumptions and limiting conditions, certifications, extraordinary and hypothetical conditions, if any, and definitions, on March 31,2014, is: FOUR MILLION TWO HUNDRED AND NINETY THOUSAND DOLLARS $4,290,000 or $143,000 per lot MARKET VALUE AS IS – DEERHURST RESORT VILLAGE CENTRE In the September 31, 2013 report, the Deerhurst Resort Village Centre Lands were considered rural lands and valued as such. At that time the owners had applied to Town officials to rezone the said the lands (referred to as Resort Village Centre lands – 51.3 acres) to permit a mixed-use residential and commercial development consisting of 791 residential units and 46,758 square feet of commercial space. On November 29, 2013, the owners applied for approval of a plan of subdivision regarding the Village Centre lands. In that submission, extensive studies (planning, environmental, traffic, servicing, geotechnical) were submitted. However, as of December 31, 2013, the application was deemed incomplete and required further preparation to complete the application. Consequently, the value of the Village Centre Lands, in the December 31, 2013 report, reflected that the lands are in transition and are no longer considered “rural lands” and likely to be approved for a mixed use commercial residential development as proposed, however have still not received acknowledgment from the Town or Region. The said lands were previously valued in the September 2013 report at $6,600 per acre reflecting their rural zoning and size. Similar to the waterfront land component, the Village Centre lands have excellent views of the water. In December 2013 to reflect the reduced size of the parcel, the site plan application process and potential approval, CUSHMAN & WAKEFIELD LTD. SKYLINE INTERNATIONAL DEVELOPMENTS INC. MR. VADIM SHUB MAY 12, 2014 PAGE 4 the lands have been valued at $35,000 per acre. Since December 31, 2013, Skyline and its consultants have met with staff at the Town of Huntsville and The District of Muskoka to review planning applications, held a public open House at Deerhurst, revised a submission of the Official Plan Amendment., responded to questions from the Peninsula Lake Association, received planning approval for the Road allowance closing near Canal Road and deemed to have a complete application by the Town of Huntsville Director of Planning and Sustainability. On March 20, 2014, the application was considered “complete” but there are still outstanding issues that need to resolved such as what the Village Centre will look like, the mix of uses ( be it permanent or tourist accommodation), servicing issues, urban design issues, and the protection of environmentally sensitive areas. The approval process depends on how timely Skyline can address the above issues. Chris Marshall, Director of Planning and Sustainability indicated that subject to the above conditions being met approval is to be expected in less than six months. However, as of March 31 2014, the said lands had not yet received approval. We understand that they have been received favorably by the Town and the Region on March 20, 2014. Therefore, a higher rate is anticipated based on the future development potential and support from the Town and Region. Although not yet approved, the Village Centre Area of the Subject property is envisioned for a mixed-use residential and commercial development. The development is envisioned for 791 residential units and approximately 46,758 square feet of commercial gross floor area (equates to approximately 4.29 acres of commercial land required for said development). However, based on the planning status as of March 31, 2014 and based on the agreed to Scope of Work, and as a result of our analysis, we have developed an opinion that the value of the Fee Simple estate of the 47.13 acres associated with the Deerhurst Resort subject to the assumptions and limiting conditions, certifications, extraordinary and hypothetical conditions, if any, and definitions, on March 31, 2014, was: SIX MILLION NINE HUNDRED AND FIFTY THOUSAND DOLLARS $6,950,000 The analysis contained in this appraisal is based upon assumptions and estimates that are subject to uncertainty and variation. These estimates are often based on data obtained in interviews with third parties, and such data are not always completely reliable. In addition, we make assumptions as to the future behavior of consumers and the general economy, which are highly uncertain. However, it is inevitable that some assumptions will not materialize and unanticipated events may occur that will cause actual achieved operating results to differ from the financial analyses contained in this report and these differences may be material. Therefore, while our analysis was conscientiously prepared on the basis of our experience and the data available, we make no warranty that the conclusions presented will, in fact, be achieved. Additionally, we have not been engaged to evaluate the effectiveness of management and we are not responsible for future marketing efforts and other management actions upon which actual results may depend. We did not ascertain the legal, engineering, and regulatory requirements applicable to the property, including zoning and other provincial and local government regulations, permits and licenses. No effort has been made to determine the possible impact on the property of present or future federal, provincial or local legislation, including any environmental or ecological matters or interpretations thereof. With respect to the demand analysis, our work did not include analysis of the potential impact of any significant rise or decline in local or general economic conditions. SKYLINE INTERNATIONAL DEVELOPMENTS INC. MR. VADIM SHUB MAY 12, 2014 PAGE 5 CUSHMAN & WAKEFIELD LTD. We believe, based on the assumptions employed, as well as our selection of investment parameters for the subject, that the value conclusions represent market prices achievable within 8 to 12 months exposure prior to the date of value. We take no responsibility for any events, conditions, or circumstances affecting the market that exists subsequent to the last day of our fieldwork, March 31, 2014. The value opinion in this report is qualified by certain assumptions, limiting conditions, certifications, and definitions. We particularly call your attention to the extraordinary assumptions and hypothetical conditions listed below. The property was inspected on March 29, 2014. EXTRAORDINARY ASSUMPTIONS For a definition of Extraordinary Assumptions please see the Glossary of Terms & Definitions. This appraisal does not employ any extraordinary assumptions. HYPOTHETICAL CONDITIONS For a definition of Hypothetical Conditions please see the Glossary of Terms & Definitions. This appraisal does not employ any hypothetical conditions. This letter is invalid as an opinion of value if detached from the report, which contains the text, exhibits, and Addenda. Respectfully submitted, CUSHMAN & WAKEFIELD LTD. Chris Vardon, AACI Vice President Valuation & Advisory [email protected] Phone Office 416.359.2505 Fax 416.359.2602 DEERHURST RESORT – DEVELOPMENT LANDS TABLE OF CONTENTS TABLE OF CONTENTS EXECUTIVE SUMMARY ----------------------------------------------------------------------------------------------------------------------------------------- I TERMS OF REFERENCE --------------------------------------------------------------------------------------------------------------------------------------- 1 MARKET ANALYSIS --------------------------------------------------------------------------------------------------------------------------------------------- 5 PROPERTY OVERVIEW -------------------------------------------------------------------------------------------------------------------------------------- 18 DEERHURST SANCTUARY SITE PLAN-------------------------------------------------------------------------------------------------------------- 25 HIGHEST AND BEST USE ----------------------------------------------------------------------------------------------------------------------------------- 29 PROPERTY VALUATION ------------------------------------------------------------------------------------------------------------------------------------- 31 RECONCILIATION AND FINAL VALUE OPINION ---------------------------------------------------------------------------------------------- 70 ADDENDA CONTENTS --------------------------------------------------------------------------------------------------------------------------------------- 71 ASSUMPTIONS AND LIMITING CONDITIONS -------------------------------------------------------------------------------------------------- 72 CERTIFICATION OF APPRAISAL ----------------------------------------------------------------------------------------------------------------------- 75 GLOSSARY OF TERMS & DEFINITIONS ----------------------------------------------------------------------------------------------------------- 77 SUBJECT PROPERTY PHOTOGRAPHS ------------------------------------------------------------------------------------------------------------- 81 SUMMARY OF CHANGES IN APPRAISAL FROM DECEMBER 2013 ------------------------------------------------------------- 82 DEERHURST RESORT – DEVELOPMENT LANDS EXECUTIVE SUMMARY REGIONAL MAP EXECUTIVE SUMMARY I DEERHURST RESORT – DEVELOPMENT LANDS LOCAL AREA MAP EXECUTIVE SUMMARY II DEERHURST RESORT – DEVELOPMENT LANDS MAP OF SUBJECT LANDS EXECUTIVE SUMMARY III DEERHURST RESORT – DEVELOPMENT LANDS EXECUTIVE SUMMARY IV DEERHURST RESORT – DEVELOPMENT LANDS EXECUTIVE SUMMARY V DEERHURST RESORT – DEVELOPMENT LANDS TERMS OF REFERENCE 1 TERMS OF REFERENCE PURPOSE AND INTENDED USE OF THE APPRAISAL The purpose of this appraisal is to estimate the current market value of the fee simple estate of the development lands associated with the Deerhurst Resort. The intended user is Skyline International Development Inc.,), Mishorim Development Group Ltd. Schwartz Levitsky Feldman LLP, Gai, Goffer, Yanev, Guilman, Udem and Co., as part of their audit procedure. The subject lands include a mix of non-waterfront lands comprising of the 498.40 acres located to the north of Highway 60 known as the Running Bear and Nissan Lands as well as the Turnbull Lands and the Deerhurst Highlands Lands. The waterfront development lands (77.04 acres) comprise of three parcels known as the Crozier and Contant Lands (55.95 gross acres / 11 net developable acres) and the Lakeside Golf Course Lands (48.23 net acres) and Callacott/Lindsay/Turnbull Stable Lands (64.94 net acres) less 51.26 acres of Resort Village lands - Driving Range, Plateau, West Riverfront. To the northwest of the subject, there are 71 unsold residential development lots (each ranging from 0.31 acre to 0.94 acre in size). Additionally, there are 8.60 acres of waterfront lands for condominium development, which are part of a larger parcel located on a peninsula in the southeastern part of the property. We understand that the current improvements of a lodge, terrace, and cottages, currently being vacant or underutilized, are planned to be demolished. In addition, Woodland Heights, now known as Deerhurst Sanctuary comprises 32 estate residential lots was acquired in August 2012 will be valued. Of the initial 32 lots, 2 have recently sold in mid-2013; resulting in the valuation of the remaining 30 residential lots. The Deerhurst Resort Village Centre lands comprise four parcels totalling 51.26 net acres. There is a current zoning amendment and official plan amendment application (December 2, 2013) before the Town of Huntsville for 639 residential accommodation units, 8 townhomes and 144 hotel suites for a total of 791 units reflecting a density of 15.43 units per acre. The Village Centre will also include 46,758 square feet of potential retail space. The purpose of this report is to assist the client in the decision making process relating to financial accounting and or auditing matters, including reporting the value of the subject properties in accordance with IFRS and financing purposes DEFINITION OF MARKET VALUE For the purposes of this valuation, market value is defined as: The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of the specific date and the passing of title from seller to buyer under conditions whereby: • Buyer and seller are typically motivated; • Both parties are well informed or well advised, and acting in what they consider to be in their best interests; • A reasonable time is allowed for exposure in the open market; DEERHURST RESORT – DEVELOPMENT LANDS TERMS OF REFERENCE 2 • Payment is made in terms of cash in Canadian Dollars or in 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. REASONABLE EXPOSURE TIME ESTIMATE Exposure time is always presumed to precede the effective date of the appraisal. It may be defined as: "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. It is a retrospective estimate based upon an analysis of past events assuming a competitive and open market." Reasonable exposure time is always presumed to precede the effective date of the appraisal. The estimates of value reported in this Appraisal are based on an exposure time of about approximately 8 to 12 months. EFFECTIVE VALUATION DATE The effective date of this valuation is March 31, 2014. DATE OF INSPECTION The subject properties were inspected by Chris Vardon on March 29, 2014. INTENDED USER The intended user of this report is Vadim Shub of Skyline International Development and Mishorim Development Group Ltd. And Schwartz Levitsky Feldman LLP Gai, Goffer, Yanev, Guilman, Udem and Co. as part of their audit procedure. DATE OF THE REPORT April 16, 2014 DEERHURST RESORT – DEVELOPMENT LANDS TERMS OF REFERENCE 3 REPORTING STANDARDS The valuation analysis and the appraisal conveying the estimates of value have been prepared to comply with Appraisal Standard Rules and Appraisal Standard Comments of the Canadian Uniform Standards of Professional Appraisal Practice. As such, the report is in conformity with IFRS 13 and IAS 40, and includes the discussion of appropriate data, reasoning, and analyses that were used in the appraisal process to develop the opinion of value. Additional supporting documentation concerning the data, reasoning, and analyses used 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 uses stated. The appraiser is not responsible for unauthorized use of this report. ASSUMPTIONS AND LIMITING CONDITIONS Certain assumptions and limiting conditions have been made with respect to the appraisal of the subject sites. These are included in the latter part of this report. EXTRAORDINARY LIMITING CONDITIONS An Extraordinary Limiting Condition refers to a necessary modification or exclusion of an Appraisal Institute Standard Rule. Such special circumstances include the inability to complete a property inspection, the purposeful exclusion of relevant valuation technique, etc. • A physical inspection of the comparable sales used in our analysis was not completed. EXTRAORDINARY ASSUMPTIONS & HYPOTHETICAL CONDITIONS An Extraordinary Limiting Condition refers to a necessary modification or exclusion of an Appraisal Institute Standard Rule. Such special circumstances include the inability to complete a property inspection, the purposeful exclusion of a relevant valuation technique, etc. • If not noted by third party sources, topographical constraints were considered to be typical of the general area. • If not noted by third party sources, site access was considered to be generally typical for properties in that general area. • All properties were valued as if vacant – improvements, if any, were not included in this analysis. • If not noted, the overall utility of the site is considered typical for other such properties in the area. Note: Given the class of properties under valuation, site specific features may have a significant impact upon property value. DEERHURST RESORT – DEVELOPMENT LANDS • TERMS OF REFERENCE 4 It is assumed that no environmental contamination exists on the surface or in the soil of the subject property. The subject’s estimated value is predicated on the assumption that there is no such material on, in, under, or adjacent to the property that would cause a loss in value. SCOPE OF THE REPORT During the course of preparing this valuation: • Property-specific information such as relevant land use controls was assembled and analyzed for the subject property, surrounding area and comparable sales. • Aerial photographs were reviewed with regard to lake frontage and possible signs of site access. • Pertinent economic data and market data were assembled, analyzed and concluded with a discussion of overall economic trends. • Recent property sales and current offerings within the subject’s market area were researched from various data sources including MLS and Geowarehouse. • Appraisal methodologies and procedures were reviewed for their applicability in the analysis and processing of the collected market data into an indication of market value for the subject property, as at the effective date of appraisal. Additional 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 uses stated. DEERHURST RESORT – DEVELOPMENT LANDS MARKET ANALYSIS 5 MARKET ANALYSIS INTRODUCTION The short and long-term value of real estate is influenced by a variety of factors and forces that interact within a given region. Regional analysis serves to identify those forces that affect property value and the role they play within the region. The four primary forces that influence real property value include environmental characteristics, governmental forces, social factors, and economic trends. These forces determine the supply and demand for real property which, in turn, affects market value. The intent of the regional analysis is to review all relevant historical and projected demographic data to determine whether the subject market area and neighbourhood are likely to experience economic growth, stability, or decline in the future. These trends are correlated based on their propensity to reflect demand variations. The subject property is located within the District Municipality of Muskoka, which includes the Town of Huntsville. An overview of demographic, economic characteristics and trends follow. DEERHURST RESORT – DEVELOPMENT LANDS MARKET ANALYSIS 6 CANADA - ECONOMIC OVERVIEW T HE C ANADIAN E CONOMY With a population of 34.8 million and an annual population growth rate estimated at 1.1 percent, the Canadian economy is the 8th largest in the world. Geographically, Canada is the second largest country in the world at almost 10.0 million km2 (or 3.9 million square miles) and has the longest coastline and longest border with another country, the United States. Known to be rich in natural resources, Canada has vast stores of iron ore, nickel, zinc, copper, gold, lead, diamonds, silver, coal, petroleum, natural gas, and is a leading producer of hydropower. Notably, with 180.0 billion barrels of proven oil reserves, Canada has the second largest reserve in the world, next to Saudi Arabia. O VERALL T RENDS Canada’s economy rebounded in July, growing at 0.6 percent, the fastest monthly pace in two years. The recovery was primarily driven by improvements in the construction, manufacturing and energy sectors, according to Statistics Canada. Strong economic growth in July is set to raise the annualized GDP growth rate to 2.0 percent in the third quarter of 2013, up from 1.7 percent in the second quarter. Housing markets also strengthened in the third quarter, and consumer and business confidence picked up. While exports of consumer goods posted solid gains, exports of motor vehicles and parts were losing strength. Moreover, the recent U.S. government shutdown may have a negative impact on the Canadian economy in the near term. CANADIAN ECONOMIC INDICATORS 2013 f Real GDP 1.6% Unemployment 7.1% Employment Growth 1.2% Retail Sales Y/Y Change 2.3% Growth Employment in Canada was up 1.2 percent in September 2013 compared with 12 months ago. Employment gains were led by the Housing Starts 185 construction (+6.5 percent), natural resources (+4.7 percent), and (000’s) professional, scientific and technical services (+4.0 percent) industries. On the other hand, the manufacturing and public administration industries posted year-over-year losses of 4.1 and 3.6 percent, respectively. Next, the housing market rebounded in September, driven by a surge in multifamily starts. Total housing starts in Canada were trending at 194,000 units in September on an annualized basis, up by 5.3 percent over August. Lastly, the latest retail sales stats showed a 2.7 percent year-over-year increase in August. TD Economics expect the annualized retail sales growth rate to trend at 2.3 percent in the third quarter, slightly below the 3.8 percent annualized rate recorded in the second quarter. F UTURE C ONSIDERATIONS The recent U.S. government shutdown is expected to have a knock-on effect on the Canadian economy in the near term. Accordingly, a downgrade in the U.S. economic outlook will likely translate into weaker export gains than previously expected. BMO Nesbitt Burns project “modest upward revisions” in late 2014 and early 2015. On the other hand, resurgence in consumer spending and residential investment sets the overall economic growth on par with the previous forecast – at 1.6 percent. TD Economics expect a moderate improvement in the exports sector starting in 2014 with growing momentum in 2015. DEERHURST RESORT – DEVELOPMENT LANDS MARKET ANALYSIS Real GDP Comparison Canada Housing Starts 6% 250 4% 200 2% 150 0% 100 -2% Canada 7 USA (000’s) 50 -4% 0 2003 2005 2007 2009 2011 2013f 2003 Source: Statistics Canada *Forecasts – BMO Capital Markets 2005 2007 2009 2011 2013f Source: Conference Board of Canada *Forecasts – BMO Capital Markets • Real GDP in Canada is likely to maintain its slow growth pace from last year growing 1.6 percent in 2013, before improving to 2.2 percent in 2014. According to TD Economics, net exports were a drag on the overall economic growth in the second quarter, and could continue to weigh on growth in the third quarter. • Exports of motor vehicles and parts were losing strength over the first half of 2013, as investment from south of border remained weak. The Canadian auto sector faced several headwinds including growing vehicle manufacturing in Mexico. • According to BMO Capital Markets, housing starts in Canada averaged 191,000 units (annualized rate) in the third quarter of 2013, on par with the 190,000 units in the second quarter but significantly higher than the 175,000 units in the first quarter. The gain is consistent with increasing sales of existing homes, which have trended higher since February 2013. • BMO Capital Markets forecast Canadian housing starts to soften to 186,000 units in the last quarter of 2013, leading to an annual average rate of 185,000 units in 2013, down 14.0 percent over the peak time in 2012. Labour Market – Employment & Unemployment Rate 3% Employment Growth Unemployment Rate Retail Sales Growth 10% 8% 2% 8% 1% 6% 0% 4% -1% 2% 0% 0% -2% 6% 4% -2% 2003 2005 2007 2009 Source: Statistics Canada *Forecasts – BMO Capital Markets 2011 2% 2013f -4% 2003 2005 2007 2009 2011 2013f Source: Statistics Canada *Forecasts – TD Economics • • About 12,000 new jobs were created in September, • Retail sales in Canada rose 0.2 percent in August, with the unemployment rate edging down to a 5the fourth monthly gain in the past five months, year low at 6.9 percent. BMO Capital Markets according to TD Economics. On a year-over-year expect employment growth in Canada to average basis, retail sales were up 2.7 percent in August. 1.2 percent in 2013 while slightly improve to 1.3 • The rebound in consumer spending can be partly percent in 2014. attributed to the resurgence in the housing market. The unemployment rate is forecast to average 7.1 However, with housing activity likely to subside by percent in 2013, and further drop to 6.8 percent in the end of the year, along with modest job creation 2014. and elevated debt levels, TD Economics forecast a 2.6 percent annual average growth rate for 2013, a slight improvement from 2.5 percent in 2012. DEERHURST RESORT – DEVELOPMENT LANDS MARKET ANALYSIS 8 THE ONTARIO ECONOMY Ontario is the most populous province in Canada, with a population of 13.5 million in 2013, and accounting for roughly 38.5 percent of the national total. The Conference Board of Canada forecasts that the population in Ontario will continue to grow, reaching 14.4 million by 2018. While roughly 77.0 percent of Ontario’s GDP is generated by service sectors, the province is also Canada's leading manufacturing centre. The top five manufacturing industries include: transportation equipment, metal products, food processing, chemical & by-products, and electrical & electronic products. Ontario is home to the Toronto Stock Exchange - the largest stock exchange in Canada, the third largest in North America and the seventh largest in the world by market capitalization. Toronto, with a population of 6.0 million in 2013, passed Chicago to become the fourth most populous city in North America. O VERALL T RENDS Ontario experienced two years of subpar growth during 2012 and 2013 at 1.3 percent and 1.4 percent, respectively. The Ontario government is dealing with one of the biggest challenges among other Canadian provinces with more than an $11.0 million deficit. It is expected to balance the books by 2017-2018. Ontario’s labour market is undergoing a shift from full time to part time jobs. According to a report issued in March 2014 by the Canadian Centre for Policy Alternatives, part time jobs in Ontario rose by 25.0 percent while full time jobs increased only by 16.0 percent. Further, involuntary part time work has risen 43.0 percent since 2000 and that number accounts for 32.0 percent of the total part time workers in 2013. Ontario housing market is a bit sluggish since the past few years. According to Canada Mortgage and Housing Corporation, single detached housing starts in Ontario in March 2014 are down by 24.0 percent on a year-over-year basis. Modest job growth, a better supplied resale market, and high levels of apartment units under construction were among the major factors causing the lower housing activity so far this year. Retail sales in Ontario rose only by 1.8 percent in 2013, and have been dampened by slow income growth and high levels of household debt. F UTURE C ONSIDERATIONS Since the U.S. market accounts for nearly 80.0 percent of Ontario’s total merchandise exports, demand from south of the border is critical to economic growth in Ontario. Therefore, in the next two years, Ontario is set to benefit from a weaker Canadian dollar, and strong economic growth in the United States. The machinery, chemical and primary metal manufacturing industries are expected to reap the most export gains under these economic conditions. The potential execution of the Ring of Fire project – a massive Chromite mining development project in Northern Ontario - will have major effects on Ontario economy including job creation, infrastructure developments, and government revenue. It is estimated that in the short term (the first ten years) the Ring of Fire will generate up to $9.4 billion in GDP, and $2.0 billion in government revenue. Execution of the project will, however, depend on rights of the First Nations in that territory, environmental assessments, and lack of adequate infrastructure in the North. DEERHURST RESORT – DEVELOPMENT LANDS MARKET ANALYSIS Real GDP Comparison 9 Ontario Housing Starts Year-to-Year Change 90 4% (000’s) 75 2% 60 45 0% 30 -2% Canada Ontario 15 0 -4% 2003 2005 2007 2009 2011 2013f 2015f 2003 2005 • Ontario’s GDP growth is expected to stay on par with the national average during 2014 and 2015 at 2.3 percent and 2.5 percent, respectively. • In 2013, Ontario auto industry recorded a significant 3.4 percent drop in output. TD Economics projects further decline in output over the 2014-2015 period, and auto assembly industry will continue to lose the market share to lower cost regions in the U.S. and Mexico. Economic recovery in U.S. auto sales will support auto producers in Ontario, and in addition the phasing out of an assembly line at GM Oshawa will offset part of the projected output decrease. 6% 3% 9% 4% 2% 8% 3% 1% 7% 2% 0% 6% -1% 5% -2% 4% -2% -3% 3% -3% 2009 2013 2015f Ontario Retail Sales Growth 10% 2007 2011 • The downward trend in housing starts in Ontario is evidenced by the projected 55,000 units for 2014 compared to 60,700 units in 2013. 4% 2005 2009 • Total housing starts in Ontario are down by 4.0 percent during the first quarter of 2014. The biggest drop in starts came from single-detached homes at 16.0 percent decrease. Employment & Unemployment Rate - Ontario 2003 2007 Source: Statistics Canada *Forecasts – BMO Capital Markets Source: Statistics Canada *Forecasts – BMO Capital Markets 2011 2013 2015f Source: Statistics Canada *Forecasts – BMO Capital Markets • After cutting down 290,000 jobs throughout the past thirteen years, the manufacturing sector now accounts for only 11.0 percent of the overall job market in Ontario as of year-end 2013. • Overall job growth in Ontario is expected grow at 0.7 percent by the end of 2014, only half of the rate posted in 2013. Job growth will pick up again in 2015, pushing the unemployment rate to 7.0 percent, the lowest since 2012. (% Change) 5% 1% 0% -1% 2003 2005 2007 2009 2011 2013 2015f Source: Statistics Canada *Forecasts – TD Economics • TD Economics expects retail sales in Ontario to grow at 3.1 percent and 4.1 percent in 2014 and 2015, respectively. Projected economic growth in Ontario should increase confidence and encourage consumers to spend more. • The weakening Canadian dollar will discourage Canadians from cross boarder shopping and will tend to spend that extra money in Canada. DEERHURST RESORT – DEVELOPMENT LANDS THE DISTRICT OF MARKET ANALYSIS 10 MUSKOKA The District Municipality of Muskoka was established by Provincial legislation and commenced operations on January 1, 1971. Muskoka comprises of the following six area municipalities: • Town of Bracebridge • Town of Huntsville • Township of Georgian Bay • Township of Lake of Bays • Town of Gravenhurst • Township of Muskoka Lakes Muskoka is located just two hours north of Toronto and has been a vacation area of choice in Ontario for well over 100 years. The District of Muskoka covers an area of approximately 3,890 square kilometers that extends northerly from Lake Simcoe to the District of Parry Sound, and easterly from Georgian Bay to Algonquin Provincial Park. A CCESS Access to the heart of Muskoka is gained via Highway 11, linking the region with Barrie and Toronto in the south and North Bay in the north. The recently expanded Highway 400 and Highway 69 provide links to the scenic Georgian Bay area within the District. Both highways also provide access to Barrie and Toronto in the south and Sudbury in the north. A series of District roads link the urban centres to the communities and any lakes and resorts. Muskoka has its own full-service airport and the Pearson International Airport in Toronto is 120 minutes by car or 45 minutes by air. The subject property is favourably located off the intersection of Highway 60 and Deerhurst Highlands Drive and roughly 240 km from Toronto. Highway 60: Highway 60 is a provincially maintained west-east highway in Ontario. Travelling west to east it begins at Highway 11 in Huntsville and ends at Highway 17 in Renfrew. The section between Highway 35 and Highway 41 is part of the Algonquin Trail Tourist Route. The subject is accessed off Highway 60 at Deerhurst Highlands Drive. DEERHURST RESORT – DEVELOPMENT LANDS MARKET ANALYSIS 11 M USKOKA ’ S E MPLOYMENT L ANDS Employment in Muskoka is supported by a number of different land types, in both urban and rural settings. The District’s urban-centred municipalities have employment concentrated in downtown core and suburban commercial nodes, and in industrial areas. Employment in the rural Townships is more varied and dispersed, linked more directly to the natural resource base than with access to a labour pool, customers and built infrastructure. Given the importance of tourism, recreation and cottaging to all the District’s municipalities, it is evident that a substantial proportion of employment occurs in waterfront resorts, and at such tourist and recreation facilities or support infrastructure as attractions, golf courses and marinas. Similarly, the importance of construction and its weighting to smaller employers indicates the role of contractors’ yards or shops in both urban and rural areas. The designated employment land supply is described in terms of gross and net land areas, where gross refers to total designated area or the sum of individual parcel total areas. Net vacant land areas are defined by excluding lands subject to environmental constraints from gross vacant parcel areas. Occupied land areas are calculated as the difference between total designated land areas and gross vacant lands. The following summary characterizes the employment land inventories for each municipality. B RACEBRIDGE Bracebridge has the District’s largest supply of designated and vacant employment lands. Supply is divided among seven employment nodes, with the Ecclestone Industrial Area comprising 912 acres of designated employment land. The E.P. Lee/Robert Dollar Drive Business Area contains 224 acres of designated employment land; the remaining five small-to-medium business areas range from 25 acres to 99 acres. There are roughly 358 acres of vacant employment land, concentrated in the Ecclestone Industrial Area (68%, 245 acres), the South Bracebridge Business Area (43 acres), and the E.P. Lee/Robert Dollar Drive Business Area (40 acres). G EORGIAN B AY The employment land inventory in Georgian Bay is primarily concentrated within the village of Mactier (88 acres), with significantly smaller designated areas within Honey Harbour (7.1 acres) and Port Severn (3.2 acres). Among the three villages, only Mactier contains vacant designated employment lands with 28 acres adjacent to Stewart Lake. The need for employment area expansions will be considered in the District of Muskoka’s growth strategy. G RAVENHURST Gravenhurst’s employment land inventory is split among three employment areas: the Airport Industrial Area (584 acres), the Gravenhurst Business Area (166 acres), and the smaller Commercial Area (73 acres). The Airport Industrial Area contains a moderate proportion of designated net vacant employment land in the Town with 16 acres (17%). The centrally located Gravenhurst Business Area is significantly less built-out, containing 77 acres of net vacant employment land (80%); the smaller Commercial Area contains only 2.7 acres (3%) of such land. H UNTSVILLE Huntsville is host to the District’s next largest employment lands supply, totaling roughly 910 acres. Three areas comprise the majority of Huntsville’s inventory: the Bickley Drive Light Industrial Area (275 acres), the Muskoka Commerce Park (233 acres), and the Special Policy Industrial Area (176 acres). The South of Williamsport DEERHURST RESORT – DEVELOPMENT LANDS MARKET ANALYSIS 12 Industrial Area is also noteworthy in size, with 232.5 acres of designated employment lands, 156 acres of which is net vacant area and presents a clear opportunity to accommodate future growth. Among the main three designated employment districts, the centrally located Muskoka Commerce Park contains the most net vacant land with 160 acres, followed by the Special Policy Industrial Area with 65 acres, and the Bickley Drive Light Industrial with 58 acres. Net Vacant Employment Land in Huntsville totals 293 acres. L AKE OF B AYS Designated Employment Lands in Lake of Bays are contained within the four small villages of Baysville, Dorset, Dwight and Hillside. Baysville and Dorset are the largest with 26 acres and 25 acres of total designated Employment Lands, respectively. Among the four villages, only Baysville contains vacant designated Employment Lands, with 20 acres. Again, the need for expansions of these areas will be considered in the District of Muskoka’s growth strategy. M USKOKA L A KES The villages of Bala and Port Carling are home to the Township’s designated employment lands, each with its own Industrial Area. Designated employment land in the Bala Industrial Area totals 110 acres, with Port Carling having 18 acres. With 66 acres of net vacant employment land, Bala contains 91% of Muskoka Lakes’ vacant designated employment lands. S UMMARY OF THE R EGIONA L L OCA TION The District of Muskoka covers a significant area within the Province of Ontario, with unparalleled bodies of water that have broad appeal for many recreational opportunities and uses. The District was situated within a reasonable traveling distance to the Greater Golden Horseshoe Region (GGHR), a significant area representing approximately 66% of Ontario’s 13.4 million people. The wealth of natural resources and close proximity to the GGHR has enabled this area to maintain its status as the premier cottage destination in Ontario for the past century. It is expected that the District of Muskoka will continue to experience an increase in its regional population, with the continued migration of residents and visitors from urban areas to the north. POPULATION According to the 2012 Financial Post, the permanent population in the District consisted of approximately 62,200 people which is up 4.25% from 2006 figures. The change in population since the 2001 Census represents an 8.4% growth in the permanent population during the five-year period. During same period, the Ontario and Canada populations grew by 6.6% and 5.4%, respectively. Historical details for the permanent population are depicted below. Historical data were not available for the seasonal population. DEERHURST RESORT – DEVELOPMENT LANDS MUNICIPALITY MARKET ANALYSIS 13 PERMANENT PERMANENT POPULATION PERMANENT SEASONAL LAND AREA POPULATION POPULATION DWELLINGS DWELLINGS 2001 2006 % CHANGE 2001 2001 KM2 Bracebridge 13,751 15,652 13.8% 6,231 2,334 617.42 Georgian Bay 1,991 2,340 17.5% 1,018 3,501 535.48 Gravenhurst 10,899 11,046 1.3% 4,425 3,810 517.99 Huntsville 17,338 18,280 5.4% 7,190 2,501 703.23 Lake of Bays 2,900 3,570 23.1% 1,540 2,798 671.46 Muskoka Lakes 6,042 6,467 7.0% 2,679 6,532 781.55 District of Muskoka 53,106 57,563 8.4% 23,151 21,483 3,890.24 Source: Statistics Canada, Census 2001, 2006, District of Muskoka Assessment Information Revised March 2007 The chart below compares permanent population with seasonal population for all Muskoka municipalities. As demonstrated, Muskoka Lakes, Lake of Bays and Georgian Bay had a much greater seasonal population. MUNICIPALITY Bracebridge Georgian Bay Gravenhurst Huntsville Lake of Bays Muskoka Lakes District of Muskoka MUSKOKA POPULATION ESTIMATED PERMANENT SEASONAL RESIDENCE POPULATION 15,652 2,340 11,046 18,280 3,570 6,467 57,355 7,065 14,684 10,930 6,227 11,439 24,946 75,291 TOTAL POPULATION 22,717 17,024 21,976 24,507 15,009 31,413 132,646 * Muskoka – Demographics Profile (2006 Census) The District’s Growth Strategy has projected permanent population for the District covering up to 2031, shown below. The projected increase of 22,485 people by 2031 compared to 2006 represents a 1.5% yearly growth. Georgian Bay is projected to lead growth (2.4% yearly increase) followed by Bracebridge (1.8%). DEERHURST RESORT – DEVELOPMENT LANDS MARKET ANALYSIS 14 PERMANENT POPULATION PROJECTION 2006 (ACTUAL) 2011 2016 2021 2026 2031 Bracebridge 16,309 17,412 18,762 2,0335 22,080 23,785 Georgian Bay 2,438 2,617 3,064 3,391 3,729 3,903 Gravenhurst 11,510 11,805 12,108 12,721 13,325 14,615 Huntsville 19,048 20,302 21,818 23,533 25,192 26,416 Lake of Bays 3,720 3,852 4,053 4,335 4,414 4,482 Muskoka Lakes 6,739 7,169 7,719 8,452 8,800 9,048 District of Muskoka 59,980 63,372 63,372 72,984 77,755 82,465 MUNICIPALITY Source: Muskoka Growth Strategy, Phase 1 (2008) LABOUR FORCE In December 2008, employment in the Muskoka-Kawartha's Economic Region increased by 6,100 since December 2007. Employment expanded at a faster rate than the population, increasing the employment rate by 1.6% to 57.7%. Unemployment decreased from 12,200 to 9,300, reducing the unemployment rate from 6.5% to 4.9%, well below the provincial rate of 6.4% at the time. Labour Force by Industry Sector in Muskoka 1% 15% Tourism and Service 43% 16% Public Sector Manufacturing Trades Natural Resources Muskoka’s economy includes an active tourism and service 25% sector, a growing public service sector, several international manufacturing firms, and a significant forestry and extraction industry. Traditionally, Muskoka is thought of as a tourist destination with a large component of the population being seasonal residents with cottages on the many lakes and rivers. While the tourism and service industries are important to the local economy, Muskoka’s economy has expanded into different sectors. A four season economy has attracted new investments and a growing, trained, and educated workforce (Statistics Canada, 2001). DEERHURST RESORT – DEVELOPMENT LANDS MARKET ANALYSIS 15 MAJOR EMPLOYERS The following tables list the major employers in Huntsville and the rest of the District of Muskoka: EMPLOYER SECTOR Deerhurst Resort Accommodation & Food Services Huntsville District Memorial Hospital Education & Health Services Trillium Lakelands District School Board Education & Health Services Panolam Industries Manufacturing Tembec Forest Products Manufacturing Kimberly-Clark Manufacturing Robinson’s Independent Grocer Food Services Source: Town of Huntsville (May 2011) C O T T A G E M A R K E T O V E R V I E W - J A N U A R Y T O D E C E M B E R 2013 During the first quarter of 2013, both sales and inventory were off by 20 per cent. Market conditions improved in the second quarter, with continued improvement throughout the summer months. At the end of the year, annual results were similar to the results achieved in 2012. By December inventory levels were almost identical to 2012. In 2013, 9630 listings were processed by the local Association, a mere 0.5 per cent less than the 9,687 listings processed in 2012. By year end, 797 properties had been reported sold, a decline of 2.5 per cent compared to 818 that were reported sold in 2012 for the entire region (Muskoka, Haliburton and Orillia). The Lake of Bays area saw 51 sales sold in 2013 versus 47 sales in 2012. There was no noticeable price increase on the Muskoka Lakes in 2013 but urban centres saw price increases approaching 8-10 per cent according to Chestnut Park Real Estate. Urban area demand is primarily out of necessity, while purchasing a cottage or recreational property is discretionary. For the year 2014, there is expected to be more moderate increases in both prices and sales volume. Canada’s economy has not fully recovered and all indications are that growth will be sporadic and modest. DEERHURST RESORT – DEVELOPMENT LANDS MARKET ANALYSIS 16 DEERHURST RESORT – DEVELOPMENT LANDS MARKET ANALYSIS 17 CONCLUSION The subject local market area benefits from its close proximity and access to major source markets such as Toronto, Barrie and Ottawa, along with its proximity to Highway 60 and Algonquin National Park. The District of Muskoka and the Town of Huntsville remain economically vibrant and continue to attract both visitors and seasonal residents that are willing to pay premium prices for quality real estate. DEERHURST RESORT – DEVELOPMENT LANDS PROPERTY OVERVIEW 18 PROPERTY OVERVIEW ADDRESS/ LOCATION W ATERFRONT L ANDS Lakeside Golf Course Lands (48.23 gross / net acres): 401 Canal Road, Huntsville, ON Crozier & Contant Lands (55.95 gross acres / 11 net acres): Along Canal Road, Huntsville, ON. Approximately 44.95 acres is considered non-developable due an Official Plan designation of Environmental Protection. Callacott/Lindsay/ Turnbull Stable: (64.94 gross / net acres) South side of Deerhurst Drive, east of Canal Road. Total Waterfront lands: 128.30 net developable acres Less Resort Village lands Less Driving Range: 14.06 acres Less Plateau: 22.07 acres Less West Riverfront: 11.00 acres Less Commercial Village: 4.13 acres Remaining Waterfront lands: 77.04 net developable acres N ON -W ATERFRONT L ANDS Running Bear & Nissan Lands (215.24 gross acres): 1180 Highway 60, Huntsville, ON. Within this area of the non-waterfront lands, approximately 193.99 acre is deemed excess lands; while approximately 21.25 net acres is zoned for commercial uses. Deerhurst Highlands Lands 1 (100.01 net acres): 233 Cookson Bay Crescent, Huntsville, ON Deerhurst Highlands Lands 2 (38.02 net acres): n/a Approximately 138.03 acres located throughout the Deerhurst Highlands Lands are being used for golf course uses, therefore are not included within this valuation. Turnbull Lands (11.31 acres): 412 Canal Road, Huntsville, ON Total non- waterfront lands: 364.58 net acres Less Golf Club: 4.20 acres Remaining Non Waterfront lands: 360.58 acres - 339.33 acres of excess lands and 21.25 acres of commercially zoned lands. 95 R ESIDENTIAL D EVELOPMENT L OTS / 71 L OT S U NSOLD A total of 41.34 acres along Deerhurst Highlands Drive, St. Andrews Circle, Glen Eagle Court, and St. Georges Court in Huntsville, ON. Discussions with the Client, indicate that 24 residential lots have been purchased within this development, leaving 71 residential lots unsold. DEERHURST RESORT – DEVELOPMENT LANDS PROPERTY OVERVIEW 19 W ATERFRONT L ANDS FOR C ONDOMINIUM D EVELOPMENT A total of 8.60 acres along Peninsula Lake Point Road in Huntsville, ON. R ESORT V ILLAGE CENT RE A total of 51.33 acres made up of four parcels. Plateau- 22.07 acres-Located on the east side of Canal Road between the 5th hole of Deerhurst Lakeside golf Course and abuts the Muskoka River/ Canal to the south and presently occupied by the Deerhurst horse stables. West Riverfront- 11.0 acres- Located on the west side of Canal Road between the 5th hole of the Deerhurst Highlands Golf club and the Muskoka River/Canal. Driving range- 14.06 acres-Located between Deerhurst Drive and Sunset Bay. Golf Club - 4.20 acres- Located north of Canal Road at the intersection of Canal Road and Deerhurst Highlands Road. LAND USE ANALYSIS Land use in Ontario may be controlled or directed by provincial restrictions through legislation such as the Planning Act, the Planning and Development Act, etc. Land use is also controlled by municipal restrictions such as Official Plans and Zoning By-Laws and/or other restrictive By-Laws. O FFICIAL P LAN The subject lands are located within the Hidden Valley Settlement Area and the subject lands are located within Special Policy Area 1 (SP1) Special Policy Area 2 (SPA2) and Special Policy Area 3 (SPA3). Section 2.5 of the Official Plan sets out the growth strategy for the Town of Huntsville stating: Hidden Valley will continue to develop as a resort commercial and recreational residential destination. Z ONING Zoning for the subject lands is provided under Zoning By-Law 2008-66P by the Town of Huntsville. There appears to be no conflict between the current use of the property and the current Zoning By-Law. The original zoning of the Deerhurst lands dates back to the early 1980’s when a comprehensive development plan for the resort was created. Zoning categories were created for Deerhurst Resort with standards and permitted uses specific to the development plan. DEERHURST RESORT – DEVELOPMENT LANDS PROPERTY OVERVIEW 20 PROPOSED DEERHURST VILLAGE CENTRE DEVELOPMENT LANDS The zoning By-law 2008-66P zones the subject lands O3 Open Space Golf Course and O3 Open Space Golf Course with certain exception of the Golf Course lands a rezoning is required to permit the Village Centre development. It is proposed to use the existing C4-Tourist Commercial zone with certain exceptions as required. The C4 zone permits buildings with a maximum height of 11 meters (approx. 3 storeys). The development plan proposes buildings that range from 2 to 5 stories in height and site specific exceptions are required. On April 3, 2012, the owners had a public design meeting with residents and Town officials to receive feedback regarding their development intentions. On September 18, 2012, further feedback was received after a public open house. On April 3, 2013, the owners and their consultants met with staff at the Town of Huntsville and the District of Muskoka to refine the development proposal. On December 2, 2013, a zoning and official plan amendment was submitted for a total of 639 residential accommodation units, 8 townhomes, and 144 hotel suites for a total of 791 units reflecting a density of 15.4 units per acre. In addition, there is 46,758 square feet of retail being proposed. On January 30, 2014, the owners met with staff and held a public open house forum and gain more feedback prior to the Statutory Public Meeting which is expected to be the Town has a complete application. The proposed uses are permitted by the District of Muskoka and the Town of Huntsville Official Plan without amendment. The expansion is occurring within an established settlement area on full municipal services. DEERHURST RESORT – DEVELOPMENT LANDS PROPERTY OVERVIEW 21 SITE DESCRIPTION GENERAL DES CRIP TION (WATERFRONT AND NON-WATERFRONT LANDS ) Configuration: Irregularly shaped Frontage: Approximately 13,000 feet of water frontage Site Area: Waterfront Lands: 77.04 net developable acres Non-Waterfront Lands: 339.33 acres of excess lands 21.25 acres of commercially zoned lands Easements: An authoritative report of title was not provided or reviewed. To the appraiser's knowledge, there are no easements, encroachments or restrictions that would adversely affect the utilization of the site. However, a title search is recommended for final determination of any such adverse conditions. Services: All services are available within the Resort lands Access: Access is provided via Canal Road and Deerhurst Drive Landscaping: Significant landscaping due to association with Deerhurst Resort operations Floodplain/ Wetlands: Portions of the subject lands are within a known floodplain, We were not given a Wetlands survey to review. If subsequent engineering data reveal the presence of regulated wetlands, it could materially affect property value. We recommend a wetlands survey by a professional engineer with expertise in this field. Environmental: We observed no evidence of toxic or hazardous substances during our inspection of the site. However, we are not trained to perform technical environmental inspections and recommend the hiring of a professional engineer with expertise in this field Summary The subject lands enjoy waterfront views (77.04 acres) and standard views (360 acres), and provide very good utility and access overall. The various parts are improved with a golf course, driving course, barn, airstrip runway, small ancillary use buildings, and a variety of other uses. All public utilities are available. DEERHURST RESORT – DEVELOPMENT LANDS PROPERTY OVERVIEW 22 GENERAL DES CRIP TION (95 RES IDENTIAL DEVELOP MENT LOTS / 71 UNS OLD) Configuration: Irregularly shaped Frontage: Approximately 8,352 feet of frontage Site Area: 41.34 total acres / 28.99 acres unsold No. of Lots Sold: Discussions with the Client indicate that 24 lots have sold within this development area - leaving 71 residential lots remaining. Easements: An authoritative report of title was not provided or reviewed. To the appraiser's knowledge, there are no easements, encroachments or restrictions that would adversely affect the utilization of the site. However, a title search is recommended for final determination of any such adverse conditions. Services: All services are available within the Resort lands. Access: Access is provided via Deerhurst Highlands Drive. Floodplain/ Wetlands: Portions of the subject lands are within a known floodplain, We were not given a Wetlands survey to review. If subsequent engineering data reveal the presence of regulated wetlands, it could materially affect property value. We recommend a wetlands survey by a professional engineer with expertise in this field. Environmental: We observed no evidence of toxic or hazardous substances during our inspection of the site. However, we are not trained to perform technical environmental inspections and recommend the hiring of a professional engineer with expertise in this field. Summary The subject lots enjoy standard views (40 lots) and golf views (55 lots), and provide very good utility and good access overall. They range from 0.31 to 0.94 acre in size, and are all fully serviced. DEERHURST RESORT – DEVELOPMENT LANDS PROPERTY OVERVIEW 23 GENERAL DES CRIP TION (WATERFRONT LANDS FOR CONDOMINIUM DEVELOP MENT) Configuration: Irregularly shaped Frontage: Approximately 663 feet of water frontage Site Area: 8.60 acres Easements: An authoritative report of title was not provided or reviewed. To the appraiser's knowledge, there are no easements, encroachments or restrictions that would adversely affect the utilization of the site. However, a title search is recommended for final determination of any such adverse conditions. Services: All services are available within the Resort lands. Access: Access is provided via Peninsula Lake Point Road. Landscaping: Significant landscaping due to association with Deerhurst Resort operations. Floodplain/ Wetlands: Portions of the subject lands are within a known floodplain, We were not given a Wetlands survey to review. If subsequent engineering data reveal the presence of regulated wetlands, it could materially affect property value. We recommend a wetlands survey by a professional engineer with expertise in this field. Environmental: We observed no evidence of toxic or hazardous substances during our inspection of the site. However, we are not trained to perform technical environmental inspections and recommend the hiring of a professional engineer with expertise in this field. Summary The subject lands enjoy extensive prime waterfront views and provide very good utility and access overall. Currently improved with a lodge, terrace, and cottages, they are being underutilized or unused. Management plans to demolish these improvements and build 172 condominium units (consisting of Phase1 of 82 units and Phase 2 of 90 units in a single building of 5 storeys). The zoning allows up to 173 units but the site plan application is based on 172. DEERHURST RESORT – DEVELOPMENT LANDS PROPERTY OVERVIEW 24 GENERAL DES CRIP TION (DEERHURS T S ANCTUARY) ( FORMERLY WOODLAND HEIGHTS ) Configuration: Rectangular shaped Lots (32) No. of Lots Sold: Discussions with the Client indicate that 2 lots have sold within the Sanctuary. Lot No.’s 13 and 25 both sold in mid2013 for a total price of $175,000 and $250,000, respectively. Consequently, there are 30 lots that remain unsold. Frontage: 198 to 325 feet frontage Site Area: 72.8 acres ( aggregate total) Easements: An authoritative report of title was not provided or reviewed. To the appraiser's knowledge, there are no easements, encroachments or restrictions that would adversely affect the utilization of the site. However, a title search is recommended for final determination of any such adverse conditions. Services: Rural services are available within the lands Access: Access is provided via North Portage Road Landscaping: Significant landscaping due to association with Deerhurst Resort operations Floodplain/ Wetlands: Portions of the subject lands are near a nature sanctuary. We were not given a Wetlands survey to review. If subsequent engineering data reveal the presence of regulated wetlands, it could materially affect property value. We recommend a wetlands survey by a professional engineer with expertise in this field. Environmental: We observed no evidence of toxic or hazardous substances during our inspection of the site. However, we are not trained to perform technical environmental inspections and recommend the hiring of a professional engineer with expertise in this field History The 32 lots were acquired by Skyline Executive Acquisitions Inc. for $3,900,000 dated August 16, 2012 from Woodland Alliance Inc. as described in Pin # 480991120. Summary The subject comprises 32 estate residential lots - 30 of which remain unsold - in a quiet nature sanctuary environment. DEERHURST RESORT – DEVELOPMENT LANDS DEERHURST SANCTUARY SITE PLAN DEERHURST SANCTUARY SITE PLAN 25 DEERHURST RESORT – DEVELOPMENT LANDS DEERHURST SANCTUARY SITE PLAN 26 GENERAL DES CRIP TION RES ORT VILLAGE CENTRE Configuration: Irregular shape Frontage: 1,302 feet frontage Site Area: Plateau- 22.07 acres West River Front- 11.0 acres Driving Range- 14.06 acres Golf Club- 4.20 acres 51.3 acres (total net developable acres) Easements: An authoritative report of title was not provided or reviewed. To the appraiser's knowledge, there are no easements, encroachments or restrictions that would adversely affect the utilization of the site. However, a title search is recommended for final determination of any such adverse conditions. Services: There is an existing 300 mm municipal water main on Canal Road and Deerhurst Drive that currently services Deerhurst Resort and Hidden Valley area. A network of 150 mm water mains will provide potable and water distribution within the Village Centre development. It is anticipated that initial phases of the Village Centre can be developed without the need for additional water storage. A network of standalone sanitary sewers and force mains will service the development. Access: Access is provided via Canal Road. Landscaping: Significant landscaping due to association with Deerhurst Resort operations Floodplain/ Wetlands: None Environmental: We observed no evidence of toxic or hazardous substances during our inspection of the site. However, we are not trained to perform technical environmental inspections and recommend the hiring of a professional engineer with expertise in this field History A rezoning amendment and official plan amendment and a plan of subdivision was submitted to the Town of Huntsville and the District of Muskoka on December 2, 2013. The application conforms to the Official Plan. As of March 20,2014, the application was deemed complete subject to some minor issues. Therefore, the future development is considered to be in the nearing the approval stage. Summary The subject is proposing 791 residential units reflecting a density of 15.43 units per acre. In addition, 46,758 square feet of retail space is proposed. DEERHURST RESORT – DEVELOPMENT LANDS SITE PLAN - VILLAGE CENTRE DEERHURST SANCTUARY SITE PLAN 27 DEERHURST RESORT – DEVELOPMENT LANDS DEVELOPMENT OVERVIEW - VILLAGE CENTRE DEERHURST SANCTUARY SITE PLAN 28 DEERHURST RESORT – DEVELOPMENT LANDS HIGHEST AND BEST USE 29 HIGHEST AND BEST USE INTRODUCTION The principal of the “Highest and Best Use” of a property is fundamental to the concept of market value. Highest and best use is defined by the Appraisal Institute of Canada 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 four criteria the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum profitability.” PHYSICALLY POSSIBLE The pertinent physical factors affecting the highest and best use of the subject site fall under two categories: site characteristics and location characteristics. The site characteristics include size, dimensions, topography, soil conditions, and the availability of adequate utilities. Location factors include access to transportation, availability of labor and materials, proximity to markets, the impact of the surrounding neighborhood, and conditions of the market within which the property will operate. The subject’s physical features and site configuration would support a rural residential and/or recreational use. The 32 lot subdivision is ready for development. LEGALLY PERMISSIBLE Legal factors influencing the highest and best use of the subject site are primarily related to governmental restrictions in the form of official plan regulations and zoning by-laws. The subject site is currently designated as a Settlement Area in the zoning by-law. This designation would permit a range of residential and recreational uses. The 8.60 acre parcel received site plan approval in 2013. In the Q3 2013 report, a portion of the subject property was considered rural lands and valued as such. At that time the owners had applied to Town officials to rezone the said the lands (referred to as Resort Village Centre lands -51.3 acres) to permit a residential commercial development consisting of 791 residential units and 46,758 square feet of commercial space. The Resort Village Centre Lands (51.33 acres) have a zoning amendment and official plan amendment before the Town and the Region of Muskoka. The application conforms to the official plan. The proposal does not have approval and therefore is not a legal and permitted use. However, the feedback from the town and rate payers group has been favorable. The application is expected to receive approval and is expected to be less than a year. DEERHURST RESORT – DEVELOPMENT LANDS HIGHEST AND BEST USE 30 The commercial component could be ground floor retail space below the residential or injunction with the hotel component. For valuation purposes, we have assumed that the commercial component would be stand alone and have a site coverage of 25% resulting in an site area of 4.29 acres. The value of the Village Centre Lands in the Q4-2013 report reflected that the lands are in transition and are no longer considered “rural lands” but likely to be approved for a mixed use commercial residential development as proposed. In the Q1-2014 report, the lands are still in transition and have submitted a complete application and received favorable feedback from the Town and the Region planning officials. FINANCIALLY FEASIBLE Of the permitted and conditional uses, a rural residential and/or recreational use would support a financially viable use. MAXIMALLY PRODUCTIVE The final determination in the highest and best use analysis is the maximally productive use of the site. Based upon immediate area uses, it is reasonable to conclude that a residential and/or recreational use would support a maximally productive use for the Subject Property. HIGHEST AND BEST USE CONCLUSION The highest and best use of the site as though vacant is considered to be that of a residential and/or recreational use. As improved, the subject has a number of recreational type improvements such as stables that do not contribute to the overall value of the property. The said lands have greater utility to be redeveloped for residential use. The highest and best use is to be developed with residential and/ or recreation use. DEERHURST RESORT – DEVELOPMENT LANDS PROPERTY VALUATION 31 PROPERTY VALUATION VALUATION APPROACHES The market value of the subject property is contingent upon a number of factors such as location, replacement cost, physical condition and utility of the improvements, the market climate and general economic conditions. In the valuation process, these factors are incorporated into several approaches to value. The selection of the relevant methodology depends on the characteristics of the real estate being analyzed. Traditionally, the three most common approaches to the valuation of real property are: • The Cost Approach to value is based on the economic principle of substitution, which states that the value of a property should not be more than the amount by which one can develop (by purchase of a site and construction of a building without undue delay) a property of equal desirability and utility. • The Direct Comparison Approach considers the cost of acquiring equally desirable and valuable substitute properties, indicated by transactions of comparable properties, within the market area. The characteristics of the sale properties are compared to the subject property on the basis of time and such features as location, size and quality of improvements, design features and income generating potential of the property. • The Income Approach to value is used to estimate real estate value based on property income generating capabilities using the Direct Capitalization Method or the Discounted Cash Flow method. There are two traditional methods to income valuations. • Direct Capitalization Method - division of a required yield (inverse of a required income multiple) into Net Operating Income to yield a value. • Discounted Cash Flow Method is a method that accounts for the anticipated growth or decline in income over the term of a prescribed holding period. S ELECTION O F V ALUATION A PPROA CHES The subject properties are being valued as vacant rural residential/recreational lands located in the Deerhurst Resort, in the Town of Huntsville and the Regional District Municipality of Muskoka. The Direct Comparison Approach is considered the most reasonable methodology in this instance as it best represents a potential purchaser’s decision making process. Both the Income Approach and Cost Approach are not considered applicable in this instance and thereby not developed in this report. DEERHURST RESORT – DEVELOPMENT LANDS PROPERTY VALUATION DIRECT COMPARISON APPROACH – WATERFRONT 32 LANDS I NTRODUCT ION The Direct Comparison Approach is based on the principle of substitution, which maintains that a prudent purchaser would not pay more for a property than the cost to purchase a suitable alternative property which exhibits similar physical characteristics, tenancy, location, etc. Within this approach, the property being valued is compared to properties that have sold recently or are currently listed and are considered to be relatively similar to the subject property. Typically, a unit of comparison is used to facilitate the analysis. In the case of properties similar to the subject, the sale price per acre is the most commonly used unit of comparison. S UBJECT L ANDS Waterfront lands within the subject property consist of approximately 77.04 acres comprised of 11 net acres of the Crozier and Constant Lands, 64.94 net acres of Callacott / Lindsay / Turnbull Stable Lands and 48.23 net acres of the Lakeside Golf Course Lands. The total is 124.17 acres but approximately 47.13 acres are deducted from this total area for the future Resort Village Centre lands. At present, the lands are improved with a variety of small ancillary use buildings, golf course and a variety of other uses. We have assumed that the lands are vacant for the purpose of this appraisal. S ELECTION OF C OMPA RA BLE S ALES As one sale is not necessarily indicative of market value, an appraiser examines a number of market transactions. When properly reconciled, trends emerge, leading to the estimate of market value of the lands being appraised. To that end, the sales selected are considered to be similar to the subject and deemed to provide the most reliable evidence of value. A search of comparable sales yielded 6 sales which were considered to be similar to the subject lands. The sale prices ranged from $525,000 to $2,150,000. When converted to price per acre, the prices ranged from $13,333 per acre to $97,500 per acre. SUMMARY OF LAND SALES No. Subject S1 S2 S3 S4 S5 S6 Address Waterfront lands 3617 South Portage Road 1086 North Deer Lake Road 1076 Lake of Bay Lane 85 Vernon Beach Road Williamsport Road 673 & 683 Gryffin Lodge Road City & Province Sale Date Sale Price Size (Acre) Price per Acre Huntsville, ON 121.99 Huntsville, ON May-08 $600,000 24.62 $24,370 Huntsville, ON July/1/08 $800,000 38.30 $20,888 Huntsville, ON Sep-08 $2,150,000 72.24 $29,762 Huntsville, ON Jun-08 $525,000 34.99 $15,004 Huntsville, ON Jan-13 $800,000 60.00 $13,333 Huntsville, ON Aug-13 $1,813,500 18.60 $97,500 SUMMARY OF LAND SALES ADJUSTMENTS No. Address Sale Date Price per Acre Time % Location % Size % Other % Total % Adjustment Comparability Adjusted Sale Price Subject Waterfront lands (77.04 ac) S1 3617 South Portage Road, Huntsville S2 1086 North Deer Lake Road, Huntsville May-08 S3 1076 Lake of Bay Lane, Huntsville Sep-08 S4 85 Vernon Beach Road, Huntsville Jun-08 S5 Williamsport Road, Huntsville S6 673 & 683 Gryffin Lodge Road, Huntsville Jul-08 $24,370 Upward 11.0% Upward $20,888 Upward 11.0% Upward $29,762 Upward 10.0% Upward 5.0% Downward -10.0% Nil 0.0% 6.0% Inferior $25,833 5.0% Downward -10.0% Nil 0.0% 6.0% Inferior $22,141 $34,226 5.0% Downward 0.0% Nil 0.0% 15.0% Inferior 5.0% Downward -10.0% Nil 0.0% 6.0% Inferior $15,905 Jan-13 $15,004 Upward 11.0% Upward $13,333 Upward 2.0% upward 5.0% Downward 0.0% Nil 0.0% 7.0% Inferior $14,267 Aug-13 $97,500 Upward 5.0% Downward -28.0% Superior $70,200 2.0% Upward -10.0% Downward -25.0% DEERHURST RESORT – DEVELOPMENT LANDS PROPERTY VALUATION 33 A DJUSTMENT C RITERIA In valuing the subject lands, a comparison was made to each of the index sales. The bases for comparison included consideration of the following items: MARKET CONDITIONS Where the market is changing, it may be necessary to adjust prices to reflect the time difference between the date of the sale of a comparable land and the date of valuation. The sales included in this analysis occurred between May 2008 to August 2013. Our sales indicated a range of between $15,004 and $97,500 per acre. Index No. 6 which indicated the highest rate per acre is improved with an existing 21 room resort with an existing building of 17,000 square feet. If we eliminate this sale due to the improvements, our range tightens to $13,333 to $29,762 per acre. We have adjusted our sales upwards based on a 2.05% annual increase based on the rate of inflation. PROPERTY RIGHTS CONVEYED When real property rights are sold, they may be the sole subject of the contract or the contract may include other rights. In the sales comparison analysis, it is pertinent that the property rights of the comparable sales be similar to the property rights of the subject lands. All the sales considered were fee simple transfers, thus no adjustments were necessary. FINANCING TERMS The transaction price of one land may differ from that of a similar land due to different financing arrangements. Financing arrangements may include existing mortgages at favourable interest rates or paying cash to a lender so that a mortgage with a below-market interest rate could be offered. To the best of our knowledge, all of the sales used in this analysis were accomplished with cash or market-oriented financing. Therefore, no adjustments were required. CONDITIONS OF SALE Adjustments for conditions of sale usually reflect the motivations of the purchaser and vendor. In some cases, the conditions of sale significantly affect transaction prices. Sales that reflect unusual situations require an appropriate adjustment for motivation or sale condition. For example, power-of-sale conditions involve a certain degree of urgency on the part of the lender - leading to a somewhat lower sale price than what would otherwise be expected. All the sales considered were normal market transactions with no undue motivation, thus no adjustments were necessary. SIZE The sales range in size from 18 acres to 73 acres. The Subject property comprises a net developable area of approximately 77.04 acres. The appropriate size adjustment has been undertaken. All of the comparables refer to the net developable land. LOCATION An adjustment for location within a market area may be required when the locational characteristics of a comparable land are different from those of the subject lands. Excessive locational differences may disqualify a property from being used as a comparable. Although no location is inherently desirable or undesirable, the market recognizes that one location is better than, similar to, or worse than another. Any locational adjustments were based on both regional and neighbourhood location. DEERHURST RESORT – DEVELOPMENT LANDS PROPERTY VALUATION 34 ACCESS Overall ease of access to the site was also considered. This included both regional and immediate area access off local roads and such. OTHER In some cases, other variables will have an impact on the price of a land transaction. Examples include soil or slope conditions, restrictive zoning, easements, wetlands and external influences. In our analysis of the comparables, we found that no unusual conditions existed at the time of sale. The sales (except for Index No.6) are zoned for one single family residential dwelling and have inferior development potential compared to the subject. Index No. 3 is to be improved with two dwellings (existing one is to be demolished) and improved with a sleeping cabin, tennis court and boathouse. Index No. 6 is improved with an existing 21 room resort and requires a downward adjustment for the improvements. NOTE: The Appraisal Institute of Canada recommends the use of "paired sales analysis" in the derivation of adjustments. This involves locating two very similar sales that sell in a similar time period. If the two sales differ in only one key feature, then the difference in sale price can be used as the "market indicator" for the adjustment for that feature. In practice, this concept usually only applies to newer homes in the subdivision. Rural, commercial and industrial properties tend to be unique, and therefore in practice it is not usually possible to find paired sales to derive adjustments. In the absence of paired sales, it is the appraisers' experience and judgment (based on observation) which is used for adjustments. S ALES A NA LYSIS A descriptive analysis of the sales is outlined below. COMPARABLE SALE 1 This 24.62 acre parcel has approximately 398 feet of water frontage along the Lake of Bays. The property transferred in May 2008 for a total consideration of $600,000 or $24,370 per acre. COMPARABLE SALE 2 This 38.30 acre parcel enjoys excellent frontage (approximately 3,325 feet) along the Divine Lake. The property transferred in July 2008 for a total consideration of $800,000 or $20,888 per acre. COMPARABLE SALE 3 Featuring significant water frontage along the Lake of Bays, this 72.24 acre property sold in September 2008 for a total consideration of $2,150,000 or $29,762 per acre. COMPARABLE SALE 4 This 34.99 acre parcel is located on Vernon Beach Road. The property features approximately 276 feet of frontage along Lake Vernon and was transferred for a total consideration of $525,000 or $15,004 per acre. DEERHURST RESORT – DEVELOPMENT LANDS PROPERTY VALUATION 35 COMPARABLE SALE 5 This 60 acre parcel is on Little Arrowhead Lake and is surrounded by 240 acres of hardwood forest. The site has year round access. The survey indicates 37 waterfront lots but for planning purposes is considered one lot. COMPARABLE SALE 6 This 18 acre parcel is located on Mary Lake and features approximately 1,510 feet of frontage. The property is known as Gryffin Lodge Resort with 21 rooms, an existing building of 17,000 square feet and four guest buildings. CONCLUSION The comparable sales sold for between $13,333 per acre and $29,762 per acre (if we disregard No. 6) – an average of $20,671 per acre. After adjustments, the sales range in price from $14,267 to $34,226 (removing No. 6), with an average rate of $22,474. In addition to the above sales, we aware of a 6.3 acre site at 1841 District Road 118 West on Lake Muskoka that sold In August 2013 for $1,398,000 or $221,202 per acre. Touchstone on Lake Muskoka Inc. sold to Villas of Lake Muskoka Ltd. The vacant site was acquired for development of a fractional ownership condominium resort. This sale was not included in our comparable sales given the size of the parcel. However, it does indicate the waterfront premium that is paid for waterfront resort land. W ATERFRONT L AND C OMPONENT In arriving at our conclusion, we note that the subject has significantly more water frontage, unique access to a variety of services from Deerhurst Resort, and significant landscaping from the Resort operations. Consequently, we can anticipate a 50% to 60% premium higher than the average of the comparable transactions. Therefore, a rate of $33,711 to $35,958 per acre was indicated. Our range is significantly less than the Lake Muskoka sale at $221,202 per acre which is to be expected given the large size adjustment and the superior zoning at the time of sale. It is our opinion that the current market value of the Waterfront Lands via the Direct Comparison Approach, as at March 31, 2014 was: 77.04 acres @ $35,000 per acre = $2,696,400 Rounded to $2,700,000 TWO MILLION SEVEN HUNDRED THOUSAND DOLLARS V ILLAGE C ENT RE C OMPONENT On November 29, 2013, the owners applied for approval of a plan of subdivision regarding the Village Centre lands. In that submission, extensive studies (planning, environmental, traffic, servicing, geotechnical) were submitted. Although the application was in compliance with the Official Plan, as of December 2013, the application was deemed incomplete. As of March 31, 2014, the application was considered complete with some outstanding issues to be resolved) and under consideration from the Town and the Region. Therefore, the value of the Village Centre Lands in the December 2013 report reflected that the lands were in transition and are no longer considered “rural lands” but likely to be approved for a mixed use commercial residential development as proposed. The said lands were previously valued in the September-2013 report at $6,600 per acre reflecting their rural zoning and size. The Village Centre lands have excellent views of the water DEERHURST RESORT – DEVELOPMENT LANDS PROPERTY VALUATION 36 and were valued at $35,000 per acre in December 2013 to reflect the reduced size of the parcel, the site plan application process and potential approval. The said lands have yet to be approved but have been received favorably by the Town and the Region. As of March 20, 2014, the Town of Huntsville had declared the submission to be a complete application (with some outstanding issues to be resolved regarding design, unit mix, servicing issues, and environment issues) from the Director of Planning and Sustainability. PROPOSED RESORT VILLAGE CENTRE LANDS Since the Highest and Best Use of the Subject property is for a future mixed-use residential and commercial development, we have analyzed sales purchased for a similar residential and retail / commercial use within the immediate and surrounding areas. Since there were a limited number of transactions within the Huntsville area, we have expanded our search area. We have focused our search on areas throughout the Kawartha Lakes Region and Muskoka Region and similar small communities throughout Ontario. Throughout the report we have stated that the Subject site, under the existing Official Plan and Zoning By-Law, has the potential to be developed with 791 residential units (on the 47.04 acre residential component) and approximately 46,758 square feet of commercial gross floor area (on 4.29 acre commercial component based on 25% coverage). For this approach the sales have been analyzed on the following basis: Residential Lands: Price Per Buildable Unit Commercial Lands: Price Per Acre of Land Consideration has also been given to the size of the development, the location of the real estate and the planning policy in place. METHODOLOGY In estimating the market value of the Subject property we have utilized the Direct Comparison Approach to value. We have undertaken the following approach: -i- Using the Direct Comparison Approach, concluded at a current market value estimate for the 47.04 acre residential land (townhouse, hotel and residential accommodation) component of the Subject property. -ii- Using the Direct Comparison Approach, concluded at a current market value estimate for the 4.29 acre commercial component of the Subject property; and, A summary of the relevant sales we have researched is presented in the tables on the following pages: -I- R ESIDENTIAL C OMPONENT : 47.1 A CRES As previously mentioned, the Subject property has a current proposal before the Town to be developed with a maximum of 791 residential units and reflects a density of 15.42 units per acre. The proposal has not yet been approved by Town or the Region. However, the owners have been very active in the public process and the initial feedback has been positive. DEERHURST RESORT – DEVELOPMENT LANDS PROPERTY VALUATION 37 The absorption of these units is the key to the success of this development. On the positive side, Deerhurst Summit Lodges sold out 120 units in two days of refurbished condominium units. The attractive feature of these units were the low prices and the ability to put the units back in the rental pool. The proposed development lands will have the benefit of enjoying all the amenities of the Deerhurst resort. On the cautious side, an average of 50 sales per year have occurred for the last four years on Lake of Bays with the majority selling for less than $800,000. Similar sales figures are for the Huntsville Lakes (Peninsula, Fairy, Vernon) with an average of 39 sales per year over the last four years. Sales at the Treetops residential development outside the Deerhurst resort have been slow. Condominium units range in size from 1,023 square feet to 1,592 square feet and priced from $279,900. Occupancy is expected in 2015. DEERHURST RESORT – DEVELOPMENT LANDS PROPERTY VALUATION 38 C ONDOMINIUM & R ESIDENT IAL C OMPONENT Comparable Condominium & Residential Land Transactions Index No. 1 2 Address 94 Francis Street City Fenelon Falls 18 Logie Street Lindsay 3 Adelaide Street North Kawartha Lakes 4 Kawartha 45 Victoria Avenue South Lakes 5 Kawartha Lakes 84 Adelaide Street S Date of Sale Sale Price Site Area (Net Acres) No. of Units Units Per Acre Motivation $ / Acre $ / Buildable Unit Purchaser 8-Mar-12 $555,000 1.200 24 20.00 Condominium Development $462,500 $23,125 1802367 Ontario Inc. At the time of sale was vacant land. Purchaser has since built 24 unit condominium building (Lock 34). Services were available at the time of sale. 3.20 Condominium Development Monty Homes Inc. Large, vacant mixed-use site - not serviced. Site is approved for 116 unit residential building and has approximately 3.0 acres of retail lands. Previously sold in Sept 2010 under Power of Sale for $2,200,000. n/a Retirement Residential Development 50.00 Affordable Housing Development 21.74 Retirement Residential Development 19-Dec-11 31-Mar-11 30-Jul-09 $1,750,000 $820,000 36.300 2.800 2.000 $1,350,000 5.750 Minimum $555,000 1.200 Maximum $2,900,000 Average $1,475,000 Subject: Resort Village Centre, 3-Mar-09 $2,900,000 Huntsville * Total site are is 51.33 acres less 4.29 acres for commercial land based on 25% coverage. 116 n/a 100 $625,000 $410,000 $25,000 n/a Serviced, ready to develop residential land. Purchaser intends to build a seniors residence on Lindsay Seniors Residences the site. However, re-zoning will be required before Inc. development can begin (currently zoned for low and medium density residential uses). $8,200 Vacant residential land within established area of Lindsay. At the time of the sale, the property was Community Care Village serviced and available for development. Purchaser Housing Kawartha Lakes Inc. has since built a 100 unit affordable housing development. $234,783 $10,800 3.20 $79,890 $8,200 36.300 50.00 $625,000 $25,000 9.610 23.73 $362,434 $16,781 47.13 125 $79,890 791 16.78 Hotel & Residential Development Comment Serviced, ready to develop residential land. Purchaser intends to build a 4-storey, 125 unit Lindsay Retirement Home GP retirement residence on the lands. Development has Ltd. yet to commence and a time frame remains unknown. DEERHURST RESORT – DEVELOPMENT LANDS PROPERTY VALUATION SALES SUMMARY for the Apartment / Residential Component of the Mixed-Use Development, Huntsville ON Subject Land Sale No. 1 Land Sale No. 2 Land Sale No. 3 Land Sale No. 4 Land Sale No. 5 Address Resort Village Centre, 94 Francis Street 18 Logie Street Adelaide Street North 45 Victoria Avenue South 84 Adelaide Street S City Sale Date Huntsville n/a Fenelon Falls 08-Mar-12 Lindsay 19-Dec-11 Kawartha Lakes 31-Mar-11 Kawartha Lakes 30-Jul-09 Kawartha Lakes 03-Mar-09 Sale Price Land Area (Acres) n/a 47.132 $555,000 1.200 $2,900,000 36.300 $1,750,000 2.800 $820,000 2.000 $1,350,000 5.750 No. of Units Units Per Acre 791 16.78 24 20.00 116 3.20 n/a n/a 100 50.00 125 21.74 Unadjusted Price Per Acre of Land $462,500 $79,890 $625,000 $410,000 $234,783 Unadjusted Price Per Buildable Unit $23,125 $25,000 n/a $8,200 $10,800 ADJUSTMENT GRID Property Rights Conveyed Financing Terms Conditions of Sale Time/Market Conditions Appraisal Date: Compound Annual Growth Rate: Fee Simple Market Similar Fee Simple Market Similar Fee Simple Superior Similar Fee Simple Market Similar Fee Simple Market Similar Inferior 4.30% $24,119 Inferior 4.70% $26,175 Inferior 6.30% n/a Inferior 9.90% $9,012 Inferior 10.90% $11,977 Location Similar Similar Superior Similar Similar Adjustment Land Area (Acres) 0% Superior 0% Superior -10% Superior 0% Superior 0% Superior Adjustment Site Utility -10% Similar -10% Similar -10% Similar -10% Similar -10% Similar 0% Superior -30% Superior -5% -45.0% $13,266 0% Superior -20% Inferior 5% -25.0% $19,631 0% Similar 0% Similar 0% -20.0% n/a 0% Superior -20% Superior -15% -45.0% $4,956 0% Superior -20% Superior -5% -35.0% $7,785 Mar-14 2.05% Percent Adjustment Time/Market Adjusted Price/$ per Buildable Unit Adjustment Type / Scale of Development Adjustment Achievable Density / Development Potential Adjustment %age Change Adjusted Rate / Unit 39 DEERHURST RESORT – DEVELOPMENT LANDS COMPARABLE SALES MAP PROPERTY VALUATION 40 DEERHURST RESORT – DEVELOPMENT LANDS ANALYSIS OF PROPERTY VALUATION 41 COMPARABLE SALES Since no two properties are completely alike, adjustments must be made to compensate for differences between the comparable sales and the Subject property. The major elements of comparison for an analysis of the Subject type of property include: • Date of Sale - changes in market conditions since the sale • Property rights conveyed • Financial terms of the transaction • Conditions or motivations surrounding the sale • Location of the real estate • Size of site area (Acres) • Site utility • Frontage / Visibility • Type of Development • Achievable Density / Development Potential Downward adjustments will be made to those comparables considered superior to the Subject. Conversely, upward adjustment will be made to those comparables considered to be inferior. Where the market is changing, it may be necessary to adjust prices to reflect the time difference between the date of sale of a comparable property and the date of valuation. In consideration of the financial market economy, all real estate asset classes realized some sort of stress in late 2008. In 2009, we saw very little market activity. Market conditions have improved through 2010 until 2014. Residential sales activity recorded through the MLS system of Muskoka Haliburton Orillia - The Lakelands Association of Realtors numbered 204 units in March 2014. This was up 19 per cent from March 2013. Sales of cottage properties rose 18 per cent from a year earlier to 39 units in March 2014. While year over year increases for March 2014 look about the same, residential sales surged over 200 units in the month of March for just the fourth time in history, while cottage sales were still running below the historical average for the month. The 77 per cent month over month increase of residential transactions from February was the largest on record. This likely reflects at least in part the release of some pent up demand following a harsh winter. The median price for residential property sales was a record $225,000 in March 2014, up 13 per cent from a year earlier. The median price for cottage sales was $385,000 in March 2014, a decline of eight per cent compared to March 2013. The dollar value of all residential sales was $48.9 million, an increase of 35 per cent on a year over year basis and the highest level of this month on record. The total value of cottage sales was $15.4 million which is up 20 per cent from a year earlier. In addition, we have examined sales and re-sales within the Deerhurst Resort Summit Lodges as well as sales and re-sales in the Greater Toronto area of vacant land. DEERHURST RESORT – DEVELOPMENT LANDS PROPERTY VALUATION 42 Market Condition Adjustment Table Address Current Use Resale Date Resale Price Sale Date Sale Price Price Difference No of Months % Monthly Change % Annual 55-206 Deerhurst Drive, Huntsville condo 30-May-14 $136,000 4-Apr-12 $164,900 -$28,900 25 -0.70% -8.41% 51-304 Deerhurst Drive, Huntsville condo 16-Sep-13 $151,000 5-Aug-11 $172,900 -$21,900 25 -0.51% -6.08% 52-106 Deerhurst Drive, Huntsville condo 31-Mar-14 $179,900 8-Feb-12 $199,900 -$20,000 25 -0.40% -4.80% vacant high demsity residential land 16-Dec-13 $1,160,000 5-May-11 $950,000 $210,000 31 0.71% 8.56% Automotive 5-Nov-13 $8,185,000 15-Apr-11 $4,950,000 $3,235,000 31 2.11% 25.30% Vacant Commercial Land 15-Jan-14 $4,918,000 30-Aug-12 $3,975,000 $943,000 17 1.40% 16.75% Commercial Building 28-Dec-13 $2,550,000 23-Mar-10 $1,125,508 $1,424,492 45 2.81% 33.75% Single Family Dwelling 30-Jan-14 $5,250,000 14-Sep-10 $2,900,000 $2,350,000 40 2.03% 24.31% 17210 Leslie Street, Newmarket 7079 Yonge St, Markham 365 Hood Rd, Markham 693 Davis Drive, Newmarket 9064/9084/9100/9110 Woodbine Ave, Markham Minimum: -$28,900 17 -0.70% -8.41% Maximum: $3,235,000 45 2.81% 33.75% Average: $1,011,462 30 0.93% 11.17% Time Adjustment Analysis Language As shown within the above paired sales analysis chart, the transactions range in time adjustment from -70% to 2.81% per month, with an average rate of approximately 0.93% per month increase, equating to an approximately 11.54% increase per annum. The first thee comparables refer to residential condominiums at the Deerhust Resort. The first two are sales and resales which suggest an annual decline of between 6.08% to 8.41 per cent. Index No.3 originally sold for $199,900 and currently back on the market for $20,000 less suggesting a minimal decine of 4.80 percent. When the sales are analyzed on a vacant land transaction basis only - which would be the most comparable transactions for the purpose of this analysis - a range from 0.71% to 1.40% per month increase is evident. Although the property at 693 Davis Drive is envisioned for a future development use, the price difference is primarily due to the land use of the site - not the passing of time. The original Agreement of Purchase & Sale was contracted on July 5th, 2012. However, both the vendor and purchaser agreed not to close the deal until the purchaser obtainted traction with the Town of Newmarket for re-development of the site. Consequently, although included within the chart, this comparable is not a good indication of a time adjustment. The best comparable transaction to analyze is 17210 Leslie Street, Newmarket. This property initially transacted in May 2011 for a price of $950,000. In December 2013 the site transacted again, selling for $1,160,000. During this time, no planning approvals or site improvements had been made - indicating that the property had remained the same from the prior sale. The transaction occurred 31 months subsequent to the original sale date and sold for $210,000 more than the original price. This increase equates to a time adjustment of approximately 0.71% per month, or 8.56% per annum. DEERHURST RESORT – DEVELOPMENT LANDS PROPERTY VALUATION 43 The market supported evidence illustrates that prices have declined in the immediate Deerhust area for residential recreational condominiums. Market evidence also suggests that the majority of the activity is for residential properties and not for recreational properties. In addition land prices for commercial land and residential land appear to be strong indicating an annual increase of 8.56% in a superior market. Recognizing that commercial and residential lands have been appreciating at a greater rate due to a combination of scarcity, speculation and favourable interest rates but also aware of the decline of recreational residential prices in the immediate area, we have utilized a conservative time adjustment rate of 2.05% similar to the Consumer Price Index. Therefore, consistent with the Greater Toronto Area and Inflation Rate, we have applied a 2.05% per year annual growth rate to each comparable for the purpose of this report. ANALYSIS Sale Date • Where the market is changing, it may be necessary to adjust prices to reflect the time difference between the date of sale of a comparable property and the date of valuation. In consideration of the financial market economy, all real estate asset classes realized some sort of stress in late 2008. In 2009, we saw very little market activity. Market conditions have improved through 2010 until 2014. For the purpose of this appraisal report, our time adjustment has been made as follows: • Unlike Toronto and large urban areas, recreational waterfront did not see a noticeable increase in average sale prices. Urban area demand is primarily out of necessity, while purchasing a cottage is discretionary. • By year-end the Haliburton Highlands saw sales increase by six percent compared to 2013, from 237 last year to 251 this year. Lake of Bays was virtually unchanged in 2013. In 2012, 91 recreational properties were reported sold, and a similar amount sold in 2013. • In the Lake of Bays area, waterfront properties did not see a noticeable increase in average sale prices. The sales have been inflated at the rate of inflation of 2.05% annually. Property Rights Conveyed • When real property rights are sold, they may be the sole subject of the contract or the contract may include other rights. In the sales comparison analysis, it is pertinent that the property rights of the comparable sale be similar to the property rights of the Subject property. All the sales considered were fee simple transfers, therefore no adjustments were deemed necessary. Financing Terms • The transaction price of one property may differ from that of a similar property due to different financing arrangements. For example, more favourable financing might include a VTB (Vendor Take Back) mortgage at a lower than market interest rate, which tends to have a positive influence on the price. • Index No. 3: Condo & Residential Component included VTB’s at below market rates – therefore are considered superior. The remaining comparable sales researched were acquired on either an “all cash” basis - without market based financing or contained a VTB that was at market rates. Therefore, no adjustments were required. DEERHURST RESORT – DEVELOPMENT LANDS Conditions of Sale PROPERTY VALUATION 44 • Adjustments for conditions of sale usually reflect the motivations of the purchaser and vendor. In some cases the conditions of sale significantly affect transaction prices. Sales that reflect unusual situations require an appropriate adjustment for motivation or sale condition. For example, power-of-sale conditions involve a certain degree of urgency on part of the lender - leading to a somewhat lower sale price than what would otherwise be expected. On the other hand, transactions to create a land assembly may result in higher motivation by the buyer which often leads to a higher sale price than would be expected. • All indicated sales are considered “arms length” and by typical motivated vendor(s) and purchaser(s). As a result, no adjustments were necessary for the conditions of sale. Location • An adjustment for location within a market area may be required when the locational characteristics of a comparable property are different from those of the Subject property. Excessive locational differences may disqualify a property from use as a comparable. Although no location is inherently desirable or undesirable, the market recognizes that one location is better than, similar to, or worse than another. Locational adjustments were based on both geographic and neighbourhood location. Public transportation, proximity to amenities and the surrounding area have all been factored into our final adjustment. Site Area (Acres) • The price per acre of site area is expected to vary with the size of the site. Generally the price per acre decreases as size increases where all other features are similar. This is typically referred to as diminishing marginal utility. Site Utility • A site’s utility is determined by its size, shape, accessibility and future development potential. Larger and rectangular sites have higher site utility than smaller irregular sites; therefore adjustments must be made to account for differences in site utility. Frontage / Visibility • The Subject property contains good frontage along Canal Road. However, the location is somewhat remote from the Town of Huntsville although located within a resort destination setting. Comparables located along main arterials are considered superior to the Subject lands. Type / Scale of Development • The residential component is comprised of town home, residential/ accommodation units and hotel residential development. If a comparable has a greater scale or type of development (i.e. commercial uses also permitted) the sale is considered superior to the residential component on the Subject lands. The appropriate adjustments have been made to the comparables. Achievable Density Potential • The Subject property is achieving units per acre (UPA) rate of approximately 16.82 UPA Properties containing a lower density are considered inferior. / Development DEERHURST RESORT – DEVELOPMENT LANDS PROPERTY VALUATION 45 C OMPARABLE S A LES A NA LYSIS – R ESIDENTIAL C OMPONENT -ii- Residential Component: 47.13 Acres We have researched five comparable transactions acquired for a future higher density, or condominium / residential development use. The transactions range in time adjusted prices from $9,012 per buildable unit to $26,175 per buildable unit, with an average rate of approximately $17,821 per buildable unit. The high end of the range is highlighted by Index Sale No. 2, priced at a time adjusted rate of $26,175 per buildable unit and an unadjusted rate of $79,890 per acre. This comparable, is located within the Kawartha Lakes area – however, is considered to be situated in a superior location in Lindsay. The site is similar in scale, at 36.30 acres, and because of this has significantly superior future development potential. Approximately 3.00 acres of the site is situated within an area designated for commercial development. Consequently, primarily due to the superior location of the comparable, a lower rate per buildable unit is anticipated for the Subject property. The low end of the range is highlighted by Index No. 4, priced at a time adjusted rate of $9,012 per buildable unit. This comparable, similar to the Subject lands, is located within the Kawartha Lakes area – however, is considered to be situated in an inferior location in Lindsay – primarily due to the poor quality of the surrounding uses and lack of amenities within the immediate area. The site is small in scale and contains a superior density per acre than the Subject property (50.00 units per acre). However, the site received approval for an affordable housing developing, an inferior development type when compared to the Subject property. Therefore, based primarily on the inferior location and affordable housing development characteristic, a higher rate per buildable unit is expected for the Subject site. The best comparables are highlighted by Index Sale No.’s 1 and 5, priced at time adjusted rates of $24,119 and $11,997 per buildable unit, respectively. Index No. 1 is the only comparable that is considered similar in terms of location – with the site being located within the Village of Fenelon Falls. However, the site is small in scale, at 1.20 acres, and received planning approval for a small 24 unit condominium project – a superior characteristic based on the diminishing marginal utility principal. Consequently, this comparable sets the upper limit to value based on its small scale and approvals in place– however, a lower rate per buildable unit is anticipated based on the small scale of the comparable. Index No. 5 is able to provide a reasonable perspective of value for the t residential component of the Subject property mixed-use development. This comparable is situated within a superior area of Lindsay, where new residential development is evident. The comparable is similar to the Subject property in terms of site utility, type of development and frontage / visibility. However, the site is considered inferior in terms of achievable density, based on the lower developable units per acre. Consequently, after all adjustments have been made, we can anticipate a similar rate per buildable unit for the residential component of the Subject property’s mixed-use development. Residential Component – 791 Units The subject does not yet have approval for its proposal but feedback from the Town has been favorable. The submission of 791 units is massive in scale in relation to the comparables and therefore a discount is expected to take into account the risk associated with the approval process and the absorption period. As indicated our sales indicated a range of $9,012 to $26,175 per buildable unit after time adjustments. After all other adjustments our range was from $4,956 to $19,631 per buildable unit with an average of $11,409 per buildable unit. The subject is substantially larger in scale then all the comparables and not yet fully approved and therefore would expect the unit rate to be 30% to 50% below the average adjusted indicated rate. The majority of the DEERHURST RESORT – DEVELOPMENT LANDS PROPERTY VALUATION 46 adjustment would be attributed to the scale of the development say 25-35%. The subject is expected to receive approval in less than six months and the conditions to such approval are considered minor in nature with an adjustment of approximately 5 to 15%. After analyzing all of the market data, we believe that the residential component of the residential lands within the Resort Village mixed-use development area will reasonably command market values in the range of $6,000 per buildable unit to $8,000 per buildable unit. We have chosen the mid-point of the range, or $7,000 per buildable unit as our market value estimate for the 791 unit residential development. The three different unit mixes is likely to change depending on demand and therefore a blended rate was concluded. $7,000 per buildable unit x 791 buildable units = $ 5,537,000 Rounded to $5,550,000 This market value estimate equates to approximately $116,922 per acre of land – well below the average rate per acre of the comparable transactions (approximately $$C362,435 per acre of land). However, this is above Index No. 2 which is slightly smaller in size and lower density compared to the subject. In addition, the subject has not been granted zoning approval. M ARKET V A LUE C ONCLUSION - R ESIDENTIA L C OMPONENT Total Value for the Residential Component of the Mixed-Use Development: $5,500,000 -II- C OMMERCIA L C OMPONENT : 4.29 A CRES The Subject property has applied for 46,758 square feet of retail development space. While we recognize that 18,083 square feet will be built in conjunction with the hotel component, we have valued the commercial component as free standing space. Assuming 25% site coverage, a site area of 4.29 acres would be required. -III- H IGHWAY C OMMERCIA L L AND A NA LYSIS : 21.25 A CRES Since the Highest and Best Use of this area of the Subject property (21.25 acres) is for future highway commercial development, we have analyzed sales purchased for a similar commercial use within the immediate and surrounding areas. Since there were a limited number of transactions within the Huntsville area, we have expanded our search area. We have focused our search on areas throughout the Kawartha Lakes Region and Muskoka Region and similar small communities throughout Ontario. METHODOLOGY In estimating the market value of the Subject property we have utilized the Direct Comparison Approach to value. We have undertaken the following approach: -i- Using the Direct Comparison Approach, concluded at a current market value estimate for the 4.29 acre Village Centre Commercial Component and the 21.25 acre highway commercial component of the Subject property. A summary of the relevant sales we have researched is presented in the tables on the following pages: DEERHURST RESORT – DEVELOPMENT LANDS PROPERTY VALUATION 47 V ILLAGE C ENT RE R ETAIL L ANDS : 4.29 A CRES & H IGHW AY R ETA IL / C OMMERCIAL C OMPONENT : 21.25 A CRES Comparable Retail / Commercial Land Transactions Index No. Address City Date of Sale Sale Price Site Area (Net Acres) Motivation 4.900 Retail Development Retail Plaza $ / Acre Purchaser Comments Comparable Retail / Commercial Land Transactions - Small Commercial Lands 1 449 Kent Street W Lindsay 11-Jul-13 $1,456,000 $297,143 Vacant retail / commercial land at southern boundary of Lindsay commercial node. Purchaser intends to Lindbrook Developments Inc. develop the land with a 6 building, 50,036 square foot retail plaza. Development time frame is deemed midterm. 2 50 Howland Drive Huntsville 30-Apr-12 $325,000 1.160 Retail / Industrial Development $280,172 Valtech Inc. Industrial commercial land located in Muskoka Commerce Park. Site benefits by being adjacent to Motel 6 and across the street from Walmart. The parcel is zoned M2 which allows many retail uses including restaurants, hotels, motor vehicle dealerships, home improvement centres, or offices. Site allows a maximum of 26,000 square feet of building. 3 1 Bickley County Drive Huntsville 15-Jun-11 $1,300,000 3.950 Retail Development $329,114 350634 Ontario Limited 3.95 acre parcel currently improved with an 11,500 square foot automobile dealership. Serviced at site boundary. Plazacorp Investments Ltd. Located at the outskirts of Wasaga Beach and is currently zoned for a continuation of the existing rural uses. We understand that the purchaser intends to develop the site with a 40,000 square foot retail plaza and potentially town house units located at the rear of the property. Monteith Holdings Inc. Vacant 9.46 acre site purchased for the development of a retail plaza. The site is located in Collingwood within a primarily industrial area. The site has the planning designations in place to permit a variety of commercial uses, including furniture stores, home improvement centres, equipment sales and service uses. The site comprises an irregular, triangular configuration and contains frontage along Highway No. 26. Comparable Retail / Commercial Land Transactions - Large Commercial Lands 4 5 River Road W 201 Macdonald Road Wasaga Beach Collingwood 17-Jan-13 31-Dec-11 $1,500,000 $1,500,000 9.25 9.46 Retail / Commercial Development Retail / Commercial Development $162,162 $158,562 Minimum $325,000 1.160 $158,562 Maximum $1,500,000 9.460 $329,114 Average $1,216,200 5.744 $245,431 Resort Village Centre & Subject: Huntsville Non-Waterfront Lands 21.25 Retail Development DEERHURST RESORT – DEVELOPMENT LANDS PROPERTY VALUATION COMPARABLE SALES MAP 5 2 4 48 DEERHURST RESORT – DEVELOPMENT LANDS ANALYSIS OF PROPERTY VALUATION 49 COMPARABLE SALES Since no two properties are completely alike, adjustments must be made to compensate for differences between the comparable sales and the Subject property. The major elements of comparison for an analysis of the Subject type of property include: • Date of Sale - changes in market conditions since the sale • Property rights conveyed • Financial terms of the transaction • Conditions or motivations surrounding the sale • Location of the real estate • Size of site area (Acres) • Site utility • Frontage / Visibility • Development Potential / Land Use Policy Downward adjustments will be made to those comparables considered superior to the Subject. Conversely, upward adjustment will be made to those comparables considered to be inferior. In this regard a summary of the relevant details is presented in the following table: ANALYSIS Sale Date • Where the market is changing, it may be necessary to adjust prices to reflect the time difference between the date of sale of a comparable property and the date of valuation. In consideration of the financial market economy, all real estate asset classes realized some sort of stress in late 2008. In 2009, we saw very little market activity. Market conditions have improved through 2010 until 2014. For the purpose of this appraisal report, our time adjustment has been made as follows: • Where the market is changing, it may be necessary to adjust prices to reflect the time difference between the date of sale of a comparable property and the date of valuation. In consideration of the financial market economy, all real estate asset classes realized some sort of stress in late 2008. In 2009, we saw very little market activity. Market conditions have improved through 2010 until 2013. Since it is difficult to apply a time adjustment for vacant commercial lands – primarily due to the significantly differing features of each property – we have examined the inflation rate throughout the Greater Toronto Area as well as the Ottawa Area. The CPI (Consumer Price Index) for the GTA has risen approximately 8.2% since 2009, resulting in an average growth rate of approximately 2.05% per year. While the CPI for the Ottawa area has risen approximately 8% since 2009, resulting in a 2.00% growth rate per year. Therefore, consistent with the Greater Toronto Area and Inflation Rate, we have applied a 2.05% per year annual growth rate to each comparable for the purpose of this report. DEERHURST RESORT – DEVELOPMENT LANDS PROPERTY VALUATION 50 Property Rights Conveyed • When real property rights are sold, they may be the sole subject of the contract or the contract may include other rights. In the sales comparison analysis, it is pertinent that the property rights of the comparable sale be similar to the property rights of the Subject property. All the sales considered were fee simple transfers, therefore no adjustments were deemed necessary. Financing Terms • The transaction price of one property may differ from that of a similar property due to different financing arrangements. For example, more favourable financing might include a VTB (Vendor Take Back) mortgage at a lower than market interest rate, which tends to have a positive influence on the price. • All of the comparable sales researched were acquired on either an “all cash” basis - without market based financing or contained a VTB that was at market rates. Therefore, no adjustments were required. • Adjustments for conditions of sale usually reflect the motivations of the purchaser and vendor. In some cases the conditions of sale significantly affect transaction prices. Sales that reflect unusual situations require an appropriate adjustment for motivation or sale condition. For example, power-of-sale conditions involve a certain degree of urgency on part of the lender - leading to a somewhat lower sale price than what would otherwise be expected. On the other hand, transactions to create a land assembly may result in higher motivation by the buyer which often leads to a higher sale price than would be expected. • All indicated sales are considered “arms length” and by typical motivated vendor(s) and purchaser(s). As a result, no adjustments were necessary for the conditions of sale. Location • An adjustment for location within a market area may be required when the locational characteristics of a comparable property are different from those of the Subject property. Excessive locational differences may disqualify a property from use as a comparable. Although no location is inherently desirable or undesirable, the market recognizes that one location is better than, similar to, or worse than another. Locational adjustments were based on both geographic and neighbourhood location. Public transportation, proximity to amenities and the surrounding area have all been factored into our final adjustment. Site Area (Acres) • The price per acre of site area is expected to vary with the size of the site. Generally the price per acre decreases as size increases where all other features are similar. This is typically referred to as diminishing marginal utility. Site Utility • A site’s utility is determined by its size, shape, accessibility and future development potential. Larger and rectangular sites have higher site utility than smaller irregular sites; therefore adjustments must be made to account for differences in site utility. Frontage / Visibility • The Subject property is somewhat removed from the Town of Huntsville retail strip. . Index No. 4 is considered to have superior frontage / visibility based on the superior retail location. Development Potential • The Subject property has the potential to be developed with highway commercial uses. Comparables that have a greater development potential are considered superior to the Subject site. Land Use Policy • The Subject site has applied for future retail / commercial development. All of the comparables were designated and zoned for retail uses, therefore considered superior. Conditions of Sale DEERHURST RESORT – DEVELOPMENT LANDS PROPERTY VALUATION The following table outlines the adjustments applied to each comparable commercial land sale: SALES SUMMARY for: Comparable Retail / Commercial Land Transactions Small Land Parcels for Village Centre Large Land Parcels for Highway Commercial Subject Land Sale No. 1 Land Sale No. 2 No.3 offer Land Sale No. 4 Land Sale No. 5 Address Resort Village Centre & Highway Commercial Lands 449 Kent Street W 50 Drive HWY 60, River Road W 201 Macdonald Road City Huntsville Sale Date n/a Lindsay Huntsville Huntsville Wasaga Beach Collingwood Sale Price n/a $1,456,000 $325,000 $11,050,000 $1,500,000 $1,500,000 Land Area (Acres) 4.29 / 21.25 4.900 1.160 3.000 9.250 9.460 $297,143 $280,172 $350,000 $162,162 $158,562 Fee Simple Fee Simple Fee Simple Fee Simple Fee Simple Comparable Retail Land Transactions Unadjusted Price Per Acre of Land 11-Jul-13 Howland 30-Apr-12 Mar.2014 17-Jan-13 31-Dec-11 ADJUSTMENT GRID Property Rights Conveyed Financing Terms Market Market Market Market Market 51 DEERHURST RESORT – DEVELOPMENT LANDS Conditions of Sale Time/Market Conditions Appraisal Date: Compound Annual Growth Rate: Percent Adjustment Land Area (Acres) Site Utility Frontage / Visibility Development Potential Similar Similar Similar Similar Similar Inferior Inferior $350,000 2.5% Inferior $291,379 0.0% Inferior $301,600 4.0% Similar $166,216 4.7% $166,015 Similar Similar Similar Similar Similar Similar Similar Similar Similar Similar Mar-14 2.05% Time/Market Adjusted Price/$ per Acre of Land Location PROPERTY VALUATION 1.5% Similar Similar Land Use Policy Similar Overall Comparability Similar Similar Similar Similar Similar 10% $320,517 Similar Similar Similar -10% $315,000 -10% Similar Similar Similar $149,594 -10% Similar Similar Similar 149,413 52 DEERHURST RESORT – DEVELOPMENT LANDS PROPERTY VALUATION 53 C OMPARABLE S A LES A NA LYSIS – V ILLA GE C ENT RE R ETA IL C OMPONENT We have researched five comparable transactions acquired for a future retail / commercial development use. Three of the comparable transactions are small in scale (1 - 5 acres), while two of the comparables are larger in scale (5+ acres). The small scale commercial land transactions range in time adjusted prices from $291,379 per acre to $$350,000 per acre, with an average rate of approximately $314,000 per acre; while the larger scale commercial land transactions range in time adjusted prices from $166,015 per acre to $166,216 per acre, with an average rate of approximately $166,116 per acre The smaller comparables are outlined by Index No.’s 1, 2 and 3 – priced at a time adjusted rate of $301,600, $291,379 and $348,203 $350,000 per acre, respectively. These lands are able to provide a reasonable perspective of value for small, unserviced commercial lands situated within rural areas. The lands located within the Huntsville marketplace are considered to be superior from a locational perspective – primarily based on the close proximity to the Highway No. 11. . Index No. 1 is able to provide a reasonable perspective of value for the Subject lands – based primarily on the recent time of sale and the location. The site is considered similar in terms of scale, site utility and frontage / visibility. Index No.3 is a current listing of a 4.0 acre parcel of which 3.0 acres is useable on the north side of Highway 60, one kilometer east of the Town of Huntsville. The site is zoned C3-EX and MU3 which allows a wide range of uses. There is a conditional offer (in March 2014) for $350,000 per useable acre. The purchaser has secured one commercial tenant and the deal is believed to be conditional upon securing additional tenants. This represents a good comparable to the subject, however since the transaction has zoning approval, we can anticipate achieving a lower rate per acre. M ARKET V A LUE C ONCLUSION - R ETA IL / C OMMERCIAL C OMPONENT Consequently, after analyzing all of the market data and in discussions with numerous industry professionals, we believe the Subject property will reasonably command market values in the range of $300,000 per acre of land to $350,000 per acre of land. We have chosen the mid-point of the range, or $325,000 per acre of land as our market value estimate for the 4.29 acre retail / commercial component of the mixed-use development on the Subject property. Our indicated value falls outside our indicated range of sales which are historical. Greater weight was placed on the current offer after discussions with the listing agent. No adjustment is required for scale due to the size of the parcel which would be in demand. A slight downward adjustment is required for the subject site not having zoning approval. Therefore, our market value estimate for the 4.29 acre retail / commercial component of the Subject lands is as follows: 4.29 Acres of Commercial Lands x $325,000 Per Acre = $ 1,400,000 (Rounded) M ARKET V A LUE C ONCLUSION - R ESIDENTIA L C OMPONENT Total Value for the Residential Component of the Mixed-Use Development: Total $6,950,000 $5,550,000 DEERHURST RESORT – DEVELOPMENT LANDS PROPERTY VALUATION 54 C OMPARABLE S A LES A NA LYSIS – H IGHWA Y C OMMERCIA L R ETA IL C OMPONENT The larger comparables are outlined by Index No.’s 4 and 5 – priced at a time adjusted rate of $166,015 and $166,216 per acre, respectively. Index No. 4 is located at the outskirts of Wasaga Beach and is currently zoned for a continuation of the existing rural uses. We understand that the purchaser intends to develop the site with a 40,000 square foot retail plaza and potentially town house units located at the rear of the property. Index No.4 was acquired by Plazacorp Investments who are proposing a mixed retail residential development with 40,000 square feet of retail and 75-80 townhouses - a superior future development characteristic. Index No. 5 - located at 201 Macdonald Road, is a vacant 9.46 acre site purchased for the development of a retail plaza. The site is located in Collingwood. The site has the planning designations in place to permit a variety of commercial uses, including furniture stores, home improvement centres, equipment sales and service uses, similar to the Subject lands. The site comprises an irregular, triangular configuration and contains frontage along Highway No. 26, also a similar characteristic. This property is are able to provide a reasonable perspective of value for the larger commercial lands on the Subject. However, based on the larger site size (21.25 acres), a lower rate per acre is logically anticipated. Consequently, after analyzing all of the market data and in discussions with numerous industry professionals, we believe the 21.25 acre commercial component of the Subject property will reasonably command market values in the range of $125,000 per acre of land to $175,000 per acre of land. We have chosen the mid-point of the range, or $150,000 per acre of land as our market value estimate for the 21.25 acre retail / commercial component of the mixed-use development on the Subject property. Therefore, our market value estimate for the 21.25 acre retail / commercial component of the Non-Waterfront commercial component of the Subject lands is as follows: 21.25 Acres of Commercial Lands x $150,000 Per Acre = $ 3,190,000 (Rounded) DEERHURST RESORT – DEVELOPMENT LANDS PROPERTY VALUATION DIRECT COMPARISON APPROACH – NON-WATERFRONT 55 LANDS I NTRODUCT ION The Direct Comparison Approach is based on the Principle of Substitution which maintains that a prudent purchaser would not pay more for a property than the cost to purchase a suitable alternative property which exhibits similar physical characteristics, tenancy, location, etc. Within this approach, the property being valued is compared to properties that have sold recently or are currently listed and are considered to be relatively similar to the subject property. Typically, a unit of comparison is used to facilitate the analysis. In the case of properties similar to the subject, the sale price per acre is the most commonly used unit of comparison. S UBJECT L ANDS The non-waterfront lands include two distinct types of parcels. The first includes all the lands identified as the Running Bear and Nissan Lands. This 215.24 gross acre parcel is located to the north of Highway 60 and is currently improved with a barn, driving course, and airstrip runway. Portions of this land house marshes. Approximately 21.25 acres of this parcel is zoned for future commercial uses, leaving the remaining 193.99 acres as excess lands. The second component of the non-waterfront lands consists of approximately 100.01 acres of the Deerhurst Highlands Lands and 38.02 acres of the Crozier and Contant Lands. Therefore, the total acreage of the non-waterfront lands is 360.58 acres - 339.33 acres deemed excess lands and 21.25 acres envisioned for future commercial uses. The 21.25 acres of commercial lands will be analyzed in the commercial land section of the report - on Page 62. S ELECTION OF C OMPA RA BLE S ALES As one sale is not necessarily indicative of market value, an appraiser examines a number of market transactions. When properly reconciled, trends emerge, leading to the estimate of market value of the lands being appraised. To that end, the sales selected are considered to be similar to the subject and deemed to provide the most reliable evidence of value. A search of comparable sales yielded 5 sales and one current listing which were considered to be similar to the subject lands. The sale prices ranged from $500,000 to $2,200,000, with an average of $670,600. When converted to price per acre, the prices ranged from $2,791 per acre to $22,000 per acre – an average of $8,631 per acre. SUMMARY OF LAND SALES - NON-WATERFRONT LANDS Property Rights Conveyed Sale Date Site Utility Public Utilities S Subject Lands 340.58 Fair/Excellent All Available 1 848 CLEARWATER LAKE ROAD, 1086 N DEER LAKE ROAD, Huntsville, ON 225 MUSKOKA ROAD 10, Huntsville, ON 112.81 Excellent All Available Fee Simple Jul-08 $778,000 $6,897 88.21 Good All Available Fee Simple Jul-08 $575,000 $6,519 SKYHILLS ROAD, CONC 5, PART LOTS 4 & 5, Huntsville, ON 10 HIBBERD LANE, Huntsville, ON 179.17 Excellent All Available Fee Simple Jan-09 $500,000 $2,791 66.83 Good All Available Fee Simple Oct-09 $600,000 $8,978 5 200 YONGE STREET SOUTH 100.00 Good All available Fee Simple Sep-11 $2,200,000 $22,000 6 3876 S Portage Road, 110.78 Good none Fee simple Jul-13 $510,000 $4,604 No. 2 3 4 Location Size (Acres) Sale Price $/Acre STATISTICS Low 35.00 High 179.17 97.00 Average Compiled by Cushman & Wak efield Ltd. Jul-08 Sep-11 Jul-09 $500,000 $2,791 $2,200,000 $22,000 $670,600 $8,631 DEERHURST RESORT – DEVELOPMENT LANDS PROPERTY VALUATION 56 SUMMARY OF LAND SALES ADJUSTMENTS No. Address Sale Date Sale Price Price per Acre Time % Location % Size % Other % Total % Comparability Adjusted Adjustment Sale Price S Subject Lands (340.58 ac) 1 848 Clearwater Lake Road, 1086 N Deer Lake Road, Huntsville Jul-08 $ 778,000 $6,897 Upward 11.00% Upward 5.00% Downward -15.00% Nil 0.00% 1.00% Similar $6,966 2 225 Muskoka Road 10, Huntsville Jul-08 $ 575,000 $6,519 Upward 11.00% Upward 5.00% Downward -15.00% Nil 0.00% 1.00% Similar $6,584 3 Skyhills Road, Conc 5, Parts Lots 4 & 5, Huntsville Jan-09 $ 500,000 $2,791 Upward 10.00% Upward 5.00% Downward -15.00% Upward 15.00% 15.00% Inferior $3,210 4 10 Hibberd Lane, Huntsville Oct-09 $ 600,000 $8,978 Upward 8.00% Upward 5.00% Downward -15.00% Nil 0.00% -2.00% Superior $8,798 5 200 Yonge Street South, Huntsville Sep-11 $ 2,200,000 $22,000 Upward 4.20% Nil -25.80% Superior $16,324 Jul-13 $ 510,000 $4,604 Upward 1.00% Upward 6.00% Inferior $4,880 6 3876 S Portage Road, Huntsville 0.00% Downward -15.00% Downward -15.00% 5.00% Downward -15.00% Upward 15.00% A DJUSTMENT C RITERIA In valuing the subject site, a comparison was made to each of the index sales. The bases for comparison included consideration of the following items: MARKET CONDITIONS Where the market is changing, it may be necessary to adjust prices to reflect the time difference between the date of the sale of a comparable land and the date of valuation. The sales included in this analysis occurred between July 2008 and July 2013. We have adjusted 2% per annum to reflect general inflation. PROPERTY RIGHTS CONVEYED When real property rights are sold, they may be the sole subject of the contract or the contract may include other rights. In the sales comparison analysis, it is pertinent that the property rights of the comparable sale be similar to the property rights of the subject lands. All the sales considered were fee simple transfers, thus no adjustments were necessary. FINANCING TERMS The transaction price of one property may differ from that of a similar property due to different financing arrangements. Financing arrangements may include existing mortgages at favourable interest rates or paying cash to a lender so that a mortgage with a below-market interest rate could be offered. To the best of our knowledge, all of the sales used in this analysis were accomplished with cash or market-oriented financing. Therefore, no adjustments were required. CONDITIONS OF SALE Adjustments for conditions of sale usually reflect the motivations of the purchaser and vendor. In some cases, the conditions of sale significantly affect transaction prices. Sales that reflect unusual situations require an appropriate adjustment for motivation or sale condition. For example, power-of-sale conditions involve a certain degree of urgency on the part of the lender - leading to a somewhat lower sale price than what would otherwise be expected. All the sales considered were normal market transactions with no undue motivation, thus no adjustments were necessary. LOCATION An adjustment for location within a market area may be required when the locational characteristics of a comparable land are different from those of the subject property. Excessive locational differences may disqualify a land from being used as a comparable. Although no location is inherently desirable or undesirable, the market recognizes that one location is better than, similar to, or worse than another. Any locational adjustments were based on both regional and neighbourhood location. DEERHURST RESORT – DEVELOPMENT LANDS PROPERTY VALUATION 57 ACCESS Overall ease of access to the site was also considered. This included both regional and immediate area access off local roads and such. OTHER In some cases, other variables will have an impact on the price of a land transaction. Examples include soil or slope conditions, restrictive zoning, easements, wetlands and external influences. Each of the comparables had similar development potential as the subject. NOTE: The Appraisal Institute of Canada recommends the use of "paired sales analysis" in the derivation of adjustments. This involves locating two very similar sales that sell in a similar time period. If the two sales differ in only one key feature, then the difference in sale price can be used as the "market indicator" for the adjustment for that feature. In practice, this concept usually only applies to newer homes in the subdivision. Rural, commercial and industrial properties tend to be unique, and therefore in practice it is not usually possible to find paired sales to derive adjustments. In the absence of paired sales, it is the appraisers' experience and judgment (based on observation) which is used for adjustments. S ALES A NA LYSIS A descriptive analysis of the sales is outlined below: COMPARABLE SALE 1 This 112.81 acre parcel was transferred for a total consideration of $778,000 or $6,897 per acre in July 2008. The property was sold to Clearwater Lake Holdings Inc by Wigmog Inn Ltd. COMPARABLE SALE 2 This 88.21 acre parcel was sold in July 2008 for a total consideration of $575,000 or $6,519 per acre. It was transferred to All Ontario Recycling Inc from 1454085 Ontario Inc. COMPARABLE SALE 3 This 179.17 acre parcel was sold in January 2009 for a total consideration of $500,000 or $2,791 per acre. The parcel is the largest within the sales analyzed and was sold for the lowest price per acre. COMPARABLE SALE 4 Sold in October 2009, this parcel includes 66.83 acres and was sold for a total consideration of $600,000 or $8,978 per acre. It was transferred to Huntsville Haven Inc. COMPARABLE SALE 5 This 100 acre parcel is located five minutes from town adjacent to Rock Ridge Recreation Park. The site is located within the Urban Boundary and is currently un-serviced. The developer must connect with Town services at its own cost. The sale price reflected a rate of $22,000 per acre. COMPARABLE SALE 6 This 110 acre parcel that sold for $510,000 or $4,604 per acre. The site was sold by a developer to another developer but has no services available. DEERHURST RESORT – DEVELOPMENT LANDS PROPERTY VALUATION 58 C ONCLUSION After adjustments, the sales range in price from $3,210 to $16,324 per acre, with an average rate of $7,794 per acre. The best comparable transactions are Index No.’s 1 and 2, priced at adjusted rates of $6,966 and $6,584 per acre, respectively. The subject is larger than all of the comparables and therefore, would expect a value near the lower end of our average range. It is our opinion that the current market value of the Excess Non-Waterfront Lands via the Direct Comparison Approach, as at March 31, 2013 was: 339.33 acres @ $7,000 per acre = $2,375,310 Rounded to $2,380,000 TWO MILLION THREE HUNDRED AND EIGHTY THOUSAND DOLLARS DIRECT COMPARISON APPROACH - UNSOLD RESIDENTIAL DEVELOPMENT LOTS We utilized the Sales Comparison Approach to develop an opinion of value for the 95 residential land lots located at the resort. Discussions with the Client, indicate that 24 lots within the development have sold, therefore for the purpose of this analysis, we have only analyzed the remaining 71 residential lots. The subject lots are all fully serviced. We examined current offerings and analyzed prices buyers have recently paid for comparable lots. The subject lots range in size from 0.31 acre to 0.94 acre, and range in frontage offered from approximately 22.01 feet to 260.76 feet. All comparables utilized were sold between October 2011 and July 2012. Of the total 95 lots, 43 are located within an internal private road with limited views of the golf course and are considered less desirable than those offering direct golf course views, of which there are 52 lots. 17 of these 52 golf course view lots are considered large lots with over 0.50 acre per lot, while the remaining 35 lots are considered standard golf view lots. Below is a breakdown of our classification of the remaining lot inventory: REMAINING LOTS LOT DESCRIPTION Standard Large (with Golf View) Standard (with Golf View) COUNT 39 8 24 The most widely used and market-oriented unit of comparison for properties with characteristics similar to those of the subject is price per lot. All transactions used in this analysis are based on the most appropriate method used in the local market. The major elements of comparison used to value the subject site include the property rights conveyed, the financial terms incorporated into the transaction, the conditions or motivations surrounding the sale, changes in market conditions since the sale, the location of the real estate, its utility and the physical characteristics of the property. The subject lots and their dimensions are detailed on the following pages. DEERHURST RESORT – DEVELOPMENT LANDS MAP OF LOTS PROPERTY VALUATION 59 DEERHURST RESORT – DEVELOPMENT LANDS SUMMARY OF PROPERTY VALUATION LOT SALES Lot # 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 Lot Dec. 2012 $179,900 $179,900 $179,900 $179,900 $179,900 $182,900 $186,900 $189,900 $189,900 $189,900 $189,900 $189,900 $189,900 $189,900 $189,900 $191,900 $194,900 $195,900 $191,900 $189,900 $186,900 $186,900 $179,900 $184,900 $199,900 $211,900 $204,900 $199,900 $189,900 $179,900 $179,900 $189,900 $189,900 $184,900 $179,900 $179,900 $184,900 $184,900 Dimensions Acres Sales Price Sales Date 86' x 133' 187' x 153' 194' x 83' 202' x 83' 201' x 84' 189' x 84' 169' x 91' 195' x 79' 219' x 79' 207' x 79' 216' x 83' 238' x 83' 239' x 85' 214' x 96' 174' x 92' 193' x 75' 232' x 71' 282' x 68' 315' x 68' 250' x 68' 189' x 68' 194' x 68' 192' x 71' 177 x 78' 224' x 64' 360' x 61' 355' x 67' 231' x 56' 180' x 58' 163' x 55' 192' x 58' 224' x 196' 0.336 0.498 0.345 0.362 0.359 0.338 0.323 0.399 0.456 0.428 0.456 0.411 0.449 0.499 0.321 0.351 0.42 0.588 0.683 0.503 0.363 0.373 0.341 0.316 0.458 0.942 0.934 0.642 0.445 0.485 0.504 0.69 117' 138' 307' 310' 0.368 0.358 0.621 $552,900.00 2012-07-07 0.563 $552,900.00 2011-12-06 x 138' x 113' x 117' x 99' $552,900.00 $190,000.00 $565,900.00 $179,900.00 2012-07-31 2013-08-22 2012-02-21 2013-06-02 $184,900.00 $189,900.00 $549,900.00 $189,900.00 $173,164.00 $189,900.00 $549,900.00 2011-11-10 2012-07-14 2012-06-14 2012-03-31 2011-11-06 2011-12-06 2012-12-13 $189,900.00 $194,900.00 $190,900.00 $581,900.00 $555,900.00 $673,740.00 2011-11-20 2013-05-18 2011-11-10 2012-08-05 2011-10-27 2012-12-10 $199,900.00 $211,900.00 $194,655.00 $179,900.00 2011-12-06 2011-11-09 2011-11-19 2011-11-17 $529,900.00 2011-12-07 60 DEERHURST RESORT – DEVELOPMENT LANDS PROPERTY VALUATION 61 C ONCLUSION After a thorough analysis, the comparable lot sales within the subject development reflect unit values ranging from $173,164 to $211,900 per lot. The average of the last six sales in 2012 and 2013 was $190,283. The superior lot views are selling compared to the remaining lots. In addition to the sales within the subject, we are aware of five listing on MLS that are premium golf course lots (41, 55, 67, 71 and 78 Club House Drive on the Deerhurst Highlands course that are asking between $219,000 to $245,000. These are listings and a downward adjustment is required to reflect the eventual sale price. We are aware of an older sale (October 2010) at 71 Club House drive that sold for $165,000. The building site is above the roadway with a view of the pond between the 9th and 18th fairway. Adjusting upwards for time, a value of $180,000 for a large golf course view appears reasonable. We have grouped lots according to their salient features to arrive at an applicable value point for each of the three lot types. Further, we have taken into account the phased development and the time frame associated with each phase of development. We concluded that the indicated value by the Sales Comparison Approach for the 71 remaining, un-sold residential subject lots is as follows: LOT DESCRIPTION VALUE CONCLUSION PER LOT COUNT INDICATED VALUE Standard $135,000 39 $5,265,000 Large Golf View $200,000 8 $1,600,000 Standard Golf view $180,000 24 $4,320,000 71 $11,185,000 Average Per Lot $157,535 Total ELEVEN MILLION ONE HUNDRED EIGHTY-FIVE THOUSAND DOLLARS $11,185,000 or $158,000 (rounded) per lot DEERHURST RESORT – DEVELOPMENT LANDS PROPERTY VALUATION 62 DIRECT COMPARISON APPROACH – WATERFRONT LANDS FOR CONDOMINIUM DEVELOPMENT I NTRODUCT ION The Direct Comparison Approach is based on the Principle of Substitution which maintains that a prudent purchaser would not pay more for a property than the cost to purchase a suitable alternative property which exhibits similar physical characteristics, tenancy, location, etc. Within this approach, the property being valued is compared to properties that have sold recently or are currently listed and are considered to be relatively similar to the subject property. Typically, a unit of comparison is used to facilitate the analysis. In the case of properties similar to the subject, the sale price per unit is the most commonly used unit of comparison. S UBJECT L ANDS The subject lands are 8.60 acres in size and have 663.45 feet of water frontage. Located along Peninsula Lake Point Road on the southeast of Deerhurst Resort, they are currently improved with a lodge, terrace, and cottages. We understand that management plans to demolish the current improvements and build 171 condominium units, which are to be divided into two buildings with Building 1 at 54 units in 3 storeys and Building 2 at 117 units in 4 storeys. For the purpose of this approach, we have assumed that the lands are at a vacant and ready to be developed state. S ELECTION OF C OMPA RA BLE S ALES As one sale is not necessarily indicative of market value, an appraiser examines a number of market transactions. When properly reconciled, trends emerge, leading to the estimate of market value of the lands being appraised. To that end, the sales selected are considered to be similar to the subject and deemed to provide the most reliable evidence of value. Our research yielded 3 historical sales and 1 current listings within subject’s area and surrounding areas which were considered to be similar to the subject lands. We note that listings of this type tend to be sold at 10% to 20% lower than their listing prices. The listings have been on the market for over a year with very little interest in the cottage market. There is a limited number of comparable sales for this type of asset within the marketplace. The map on the next page depicts the subject lands, followed by a table listing comparable sales: DEERHURST RESORT – DEVELOPMENT LANDS SURVEY - LAKESIDE LODGE LANDS (8.60 ACRES) PROPERTY VALUATION 63 DEERHURST RESORT – DEVELOPMENT LANDS No. Address City & Province PROPERTY VALUATION Sale Date Sale Price Size (Acre) 8.60 SUMMARY OF LAND SALES Proposed Density Price per Unit Price per Acre Comments Units (Units/Acre) 173 20.12 Zoned DC1-2 (hotel/residential). Improved with a lodge, terrace, and cottages. 49 7.16 $18,367 $131,579 Zoned R4. Obtained exception R4-0454 (minimum elevation for opening is 286m). Approved for 5 buildings. Subject 1235 Deerhurst Drive Huntsville, ON S1 Huntsville, ON Sep-11 $900,000 6.84 S2 Pt Lot 20 Con 2 Chaffey Pts 1, 4, 6, 12-15, 35R11082 20498-50 Hwy 26 Blue Mountains, ON May-11 $1,100,000 9.10 N/A N/A N/A S3 111 Blue Mountain Drive Blue Mountains, ON Sep-08 $7,160,000 36.44 N/A N/A N/A S4 500 Ontario Street Collingwood, ON Feb-14 $1,125,000 1.69 50 29.59 $22,500 S5 18 Logie Street Lindsay, ON Dec-11 $2,900,000 36.30 116 3.20 $25,000 S6 151 Marina Park Avenue; 650 Vindin Street; 586 Victoria Street Midland, ON Jun-12 $4,000,000 17.55 319 18.18 $12,539 1.69 36.44 17.99 49 319 134 3.20 29.59 14.53 $12,539 $25,000 $19,602 STATISTICS Low High Average Compiled by Cushman & Wak efield Ltd. 64 $120,879 Flat, level tablelands; not serviced; improved with 2 houses; for development of detached single family homes. $196,487 Gently sloping lands; not serviced; plan includes 16 waterfront lots, residential condominium, seniors home, retail, restaurants and office; waterfront quality is limited for recreation. $665,680 Zoned DR-6 (development residential zone permitting townhouses and apartments, among others - density to be determined during preconsultation meeting); 2010 taxes were $16,983. $79,890 Large, vacant mixed-use site - not serviced. Site is approved for 116 unit residential building and has approximately 3.0 acres of retail lands. Previously sold in Sept 2010 under Power of Sale for $2,200,000. $227,920 Power of sale conditions. Improved with 53 condominium units in a 4storey building (55% complete) on 2.24 acres. Additional land of 15.31 acres approved for 266 condominium units, or 158 condominium units & 107 low rise townhomes. $79,890 $665,680 $237,073 SUMMARY OF LAND SALES ADJUSTMENTS No. Address Subject 1235 Deerhurst Drive, Huntsville(3.47 ac) Pt Lot 20 Con 2 Chaffey Pts 1, 4, 6, 12-15, S1 35R-11082, Huntsville 20498-50 Hwy 26, Blue Mountains S2 Sale Date Sale Price Price Per Unit Price per Acre Time % Location % Size % Other % Total % Comparability Adjustment Adjusted Sale Price / Unit Sep-11 $900,000 $18,367 $131,579 Upward 4.10% Upward 25.00% Nil 0.00% Upward 20.00% 49.10% Inferior $27,385 May-11 $1,100,000 n/a $120,879 Upward 5.00% Nil 0.00% Upward 5.00% Nil 0.00% 10.00% Inferior n/a 0.00% upwards 5.00% Nil 0.00% 15.00% Inferior n/a S3 111 Blue Mountain Drive, Blue Mountains Sep-08 $7,160,000 n/a $196,487 Upward 10.00% Nil S4 500 Ontario Street, Collingwood Feb-14 $1,125,000 $22,500 $665,680 Similar 0.00% Upward 25.00% Downward -5.00% Upward 15.00% 35.00% Inferior $30,375 S5 18 Logie Street, Lindsay 151 Marina Park Avenue; 650 Vindin Street; 586 Victoria Street, Midland Dec-11 $2,900,000 $25,000 $79,890 Upward 4.00% Upward 25.00% Upward 25.00% Upward 15.00% 69.00% Inferior $42,250 Jun-12 $4,000,000 $12,539 $227,920 Upward 3.00% Nil 0.00% Upwards 5.00% Upward 25.00% 33.00% Inferior $16,677 S6 DEERHURST RESORT – DEVELOPMENT LANDS PROPERTY VALUATION 65 S ALES A ND L ISTINGS A NALYSIS A descriptive analysis of the sales and listings is outlined below. COMPARABLE SALE 1 This 6.84 acre parcel with 49 proposed units, located in Huntsville, ON, was transferred for a total consideration of $900,000 or $18,367 per unit in September 2011. It is zoned R4 and has been approved for the construction of 5 buildings. COMPARABLE SALE 2 The 9.10 acre parcel in Blue Mountains, ON, was sold in May 2011 for $1,100,000. Improved with 2 houses and without service, it is planned for the development of detached single family homes. COMPARABLE SALE 3 This 36.44 acre parcel in Blue Mountains, ON, was sold for a total consideration of $7,160,000 in September 2008. The development plan for this non serviced parcel includes 16 waterfront lots, condominium, seniors home, retail, restaurants, and/or office. It has a waterfront quality that is limited for recreational purposes. COMPARABLE SALE 4 Listed since October 2010, this 1.69 acre parcel in Collingwood, ON, was priced at $1,750,000. It has a zoning of DR-6 that allowed up to 50 condominium units. The site recently sold in February 2014 (after our effective date for $1,125,000). The site is zoned for 50 condominium units. The site is currently an animal clinic and will temporary converted to a medical office. According to the listing agent the site will be redeveloped in three to five years. The sale price reflects a 36% per cent decrease from the listing price. The sale price reflects a rate of $22,500 per unit. The property has a view of Georgian Bay but also near a major highway. The subject is superior to this comparable given its proximity to the waterfront and noise from the highway. COMPARABLE SALE 5 Large, vacant mixed-use site - not serviced. Site is approved for 116 unit residential building and has approximately 3.0 acres of retail lands. Previously sold in Sept 2010 under Power of Sale for $2,200,000. Based on the scale and type of development this comparable is able to provide a reasonable perspective of value for the subject. However, based on the superior location within Deerhurst and along the waterfront and the significantly smaller site size, a higher rate per buildable unit is anticipated. COMPARABLE SALE 6 This 3-parcel 17.55 acre comparable with 319 proposed units in Midland, ON, has recently sold for $4,000,000 or $12,539 per unit. It is improved with 53 condominium units in a 4-storey building (55% complete). There has an approval for a potential addition of 266 units in the form of condominium units or 158 condominium units and 107 low rise townhomes. DEERHURST RESORT – DEVELOPMENT LANDS PROPERTY VALUATION 66 C ONCLUSION The comparable sales range between an adjusted price of $16,667 per unit and $42,250 per unit – an average of $29,172 per unit. Our comparables also indicated a range of between $79,890 and $665,680 per acre – average of approximately $238,000 per acre. The subject reflected a density of 20.12 units per acre, which is at the high end of all of the comparables, a superior development attribute. Based on the time of sale, location and type of development envisioned, Comparables S4 and S5 are the best comparables for the subject. These comparables, after adjustments, equate to approximately $30,375 per buildable unit and $42,250 per buildable unit, respectively. In terms of the Subject development, the condominium will be directly on the waterfront and contain excellent views of Peninsula Lake, an attractive feature for a condominium development. Consequently, we believe the subject will command a rate within the range of $40,000 per unit to $45,000 per unit for the waterfront condominium development. Consequently, we have chosen the mid-point of the range, or a rate of $42,500 per unit. It is our opinion that the current market value of the Waterfront Lands for Condominium Development via the Direct Comparison Approach, as at March 31, 2014 was: 173 @ $42,500 per unit = $7,352,500 Rounded to $7,350,000 SEVEN MILLION THREE HUNDRED AND FIFTY THOUSAND DOLLARS $7,350,000 or $42,500 per developable condominium unit *The zoning allows up to 173 units. The site plan application is based on 171 united. Our analysis is based on the maximum allowed under the zoning bylaw. The above value reflects a rate of approximately $855,000 per acre. This per acre rate is consistent with Index No. S4. Although the comparable is small in scale, the development time frame is approximately 3 to 5 years away from being developed. The adjusted per acre rate for this comparable is approximately $900,000 - based on the similar adjustments previously undertaken. Logically, we can anticipate achieving a lower rate per acre based on the larger scale of the subject site. GENERAL DES CRIP TION (DEERHURS T S ANCTUARY) ( FORMERLY WOODLAND HEIGHTS ) Configuration: Rectangular shaped Lots (32) Frontage: 198’ to 325 feet frontage Site Area: 72.8 acres ( aggregate total) The subject property was acquired for $3,900,000 on August 16, 2012 for $3,900,000. The developer has under duress at the time and represented an opportunity for the purchaser (Skyline). The challenge of the project was its isolation. Local agents had difficulty attracting purchasers to its location away from Town amenities. The acquisition by Skyline is expected to have a positive effect on values as lot purchasers will have access to the Deerhurst amenities. Enclosed are comparable lots sales and listings in the subdivision. DEERHURST RESORT – DEVELOPMENT LANDS PROPERTY VALUATION The following is a list of the price list of the Woodland Heights and comparable sales within the subdivision: CHART OF SALES – WOODLAND HEIGHTS INDEX NO. DATE SOLD ADDRESS/LOT & PLAN CONSIDERATION LOT SIZE (ACRES) 1 08/28/09 52 Deerfoot Trail Lot 12 Plan 683 $115,000 1.32 2 05/11/10 4 Deerfoot Trail Lot 1 Plan M683 $357,500 2.80 3 06/02/10 115 Deerfoot Trail Lot 7 Plan 699 $148,571 2.92 4 05/02/11 112 Deerfoot Trail Lot 44 Plan M699 $135,000 1.37 5 09/30/11 72 Deerfoot Trail Lot 4 Plan M692 $105,000 3.75 6 03/16/12 43 Deerfoot Trail Lot 30 Plan 683 $123,543 1.33 7 04/23/12 156 Deerfoot Trail Lot 22 Plan M699 $130,000 2.129 L1 Current listing $163,229 1.50 L2 Current listing $145,707 1.32 L3 Current listing 99 Deerfoot Trail Lot 3 150 Deerfoot Trail Lot 23, Phase 3 151 Deerfoot Trail 2.30 L4 Current listing 15 Old Hemlock Trail L5 Current listing 18 Royal Oak Crescent L6 Current listing 27 Royal Oak Crescent L7 Current listing 39 Royal Oak Crescent Lot 39 Plan 699 L8 Current listing 42 Royal Oak Crescent Lot 46 $129,000 $375,000 View over Fairy lake $153,085 $349,000 Lake views $279,000 Drilled well in place and wiring 288 days on mkt $162,307 1.72 2.33 1.59 2.31 2.54 67 DEERHURST RESORT – DEVELOPMENT LANDS PROPERTY VALUATION 68 Our sales within the Woodland Heights subdivision ranged from $105,000 to $357,500 for lots ranging in size from 1.32 to 3.75 acres. The lots with view of the Fairy Lake command a premium and sell near the upper part of the range. Below is the price list of the Lots in the Deerhurst Sanctuary since the August acquisition. Discussions with the Client, indicate that two of the lots (Lot No.’s 13 and 25) have sold within 2013. The lots sold for $175,000 and $250,000, respectively. The following is a list of the price list of the Deerhurst Sanctuary: DEERHURST RESORT – DEVELOPMENT LANDS PROPERTY VALUATION 69 Recognizing that the subject now falls under the Deerhurst banner, the value has increased within the subdivision. The subdivision has a large upside but there will be significant marketing and commission costs to achieve a sell out. The sell out period could be longer than three years. Our most recent comparable sales range from $175,000 to $250,000 per lot. These sales are able to provide a good indication of the market value for the Subject lands. However, based on the anticipated long-term sell out period and the cost associated with holding the lots, a lower price per lot is anticipated. Based on the recent comparable sales, a market rate of $200,000 per lot has been selected. Based on a 4 to 5 year sell out period and an assumed 10% discount rate, the resulting present market value of the remaining lots is as follows: Sanctuary Residential Lots Known Information Present Value ($) / Lot Number of Remaining Residential Lots Inflation Rate Discount Rate Development Time Frame Year 1 Year 2 Year 3 Year 4 Year 5 $200,000 30 2.05% 10% Discounted Value $5,566,364 $5,164,067 $4,790,846 $4,444,599 $4,123,375 Low End $137,446 High End $148,153 Taking into account the sell-out period, the lots range in price from approximately $137,000 to $149,000 per lot. Based on the location of the residential lots within the Deerhurst banner and taking into account the estimated development time frame, the indicated value reflects a rate of approximately $143,000 per lot which appears reasonable based on the comparable sales. FOUR MILLION TWO HUNDRED AND NINETY THOUSAND DOLLARS $4,290,000, or $143,000 per lot DEERHURST RESORT – DEVELOPMENT LANDS RECONCILIATION AND FINAL VALUE OPINION 70 RECONCILIATION AND FINAL VALUE OPINION Based on the analysis contained herein, the total value of the various lands associated with the Deerhurst Resort as at March 31, 2014 was: AREA VALUE PER (ACRE/LOT/UNIT) ACRE/LOT/UNIT Lakeside Golf Course Lands 48.23 $35,000 $1,690,000 Remaining Lands 28.81 $35,000 $1,010,000 LAND PARCEL TOTAL VALUE WATERFRONT LANDS Total ( rounded) $2,700,000 NON-WATERFRONT LANDS Excess Lands 339.33 $7,000 $2,380,000 Commercial Component 21.25 $150,000 $3,190,000 Total $5,570,000 UNSOLD RESIDENTIAL DEVELOPMENT LOTS Various 71 $158,000 $11,185,000 WATERFRONT LANDS FOR RESIDENTIAL DEVELOPMENT Various 173 $42,500 $7,350,000 30 $143,000 $4,290,000 $7,000 $5,550,000 $325,000 $1,400,000 DEERHURST SANCTUARY LANDS Various Lots RESORT VILLAGE LANDS 791 Resort Village Total 4.29 ac. $6,950,000 DEERHURST RESORT – DEVELOPMENT LANDS ADDENDA CONTENTS ADDENDA CONTENTS ADDENDUM A: ASSUMPTIONS AND LIMITING CONDITIONS ADDENDUM B: CERTIFICATION OF APPRAISAL ADDENDUM C: GLOSSARY OF TERMS & DEFINITIONS ADDENDUM D: SUBJECT PROPERTY PHOTOGRAPHS ADDENDUM E: SUMMARY OF CHANGES COMPARED TO DECEMBER 31, 2013 71 Assumption ns and Limiting Conditions DEERHURST RESORT – DEVELOPMENT LANDS ASSUMPTIONS AND LIMITING CONDITIONS 72 ASSUMPTIONS AND LIMITING CONDITIONS "Report" means the appraisal or consulting report and conclusions stated therein, to which these Assumptions and Limiting Conditions are annexed. "Property" means the subject of the Report. "C&W" means Cushman & Wakefield, Inc. or its subsidiary that issued the Report. "Appraiser(s)" means the employee(s) of C&W who prepared and signed the Report. The Report has been made subject to the following assumptions and limiting conditions: • • • • • • No opinion is intended to be expressed and no responsibility is assumed for the legal description or for any matters that are legal in nature or require legal expertise or specialized knowledge beyond that of a real estate appraiser. Title to the Property is assumed to be good and marketable and the Property is assumed to be free and clear of all liens unless otherwise stated. No survey of the Property was undertaken. The information contained in the Report or upon which the Report is based has been gathered from sources the Appraiser assumes to be reliable and accurate. The owner of the Property may have provided some of such information. Neither the Appraiser nor C&W shall be responsible for the accuracy or completeness of such information, including the correctness of estimates, opinions, dimensions, sketches, exhibits and factual matters. Any authorized user of the Report is obligated to bring to the attention of C&W any inaccuracies or errors that it believes are contained in the Report. The opinions are only as of the date stated in the Report. Changes since that date in external and market factors or in the Property itself can significantly affect the conclusions. The Report is to be used in whole and not in part. No part of the Report shall be used in conjunction with any other analyses. Publication of the Report or any portion thereof without the prior written consent of C&W is prohibited. Reference to the Appraisal Institute or to the MAI designation is prohibited. Except as may be otherwise stated in the letter of engagement, the Report may not be used by any person(s) other than the party(ies) to whom it is addressed or for purposes other than that for which it was prepared. No part of the Report shall be conveyed to the public through advertising, or used in any sales, promotion, offering or SEC material without C&W's prior written consent. Any authorized user(s) of this Report who provides a copy to, or permits reliance thereon by, any person or entity not authorized by C&W in writing to use or rely thereon, hereby agrees to indemnify and hold C&W, its affiliates and their respective shareholders, directors, officers and employees, harmless from and against all damages, expenses, claims and costs, including attorneys' fees, incurred in investigating and defending any claim arising from or in any way connected to the use of, or reliance upon, the Report by any such unauthorized person(s) or entity(ies). Except as may be otherwise stated in the letter of engagement, the Appraiser shall not be required to give testimony in any court or administrative proceeding relating to the Property or the Appraisal. The Report assumes (a) responsible ownership and competent management of the Property; (b) there are no hidden or unapparent conditions of the Property, subsoil or structures that render the Property more or less valuable (no responsibility is assumed for such conditions or for arranging for engineering studies that may be required to discover them); (c) full compliance with all applicable federal, state and local zoning and environmental regulations and laws, unless noncompliance is stated, defined and considered in the Report; and (d) all required licenses, certificates of occupancy and other governmental consents have been or can be obtained and renewed for any use on which the value opinion contained in the Report is based. DEERHURST RESORT – DEVELOPMENT LANDS • • • • • • • • • ASSUMPTIONS AND LIMITING CONDITIONS 73 The physical condition of the improvements considered by the Report is based on visual inspection by the Appraiser or other person identified in the Report. C&W assumes no responsibility for the soundness of structural members or for the condition of mechanical equipment, plumbing or electrical components. The forecasted potential gross income referred to in the Report may be based on lease summaries provided by the owner or third parties. The Report assumes no responsibility for the authenticity or completeness of lease information provided by others. C&W recommends that legal advice be obtained regarding the interpretation of lease provisions and the contractual rights of parties. The forecasts of income and expenses are not predictions of the future. Rather, they are the Appraiser's best opinions of current market thinking on future income and expenses. The Appraiser and C&W make no warranty or representation that these forecasts will materialize. The real estate market is constantly fluctuating and changing. It is not the Appraiser's task to predict or in any way warrant the conditions of a future real estate market; the Appraiser can only reflect what the investment community, as of the date of the Report, envisages for the future in terms of rental rates, expenses, and supply and demand. Unless otherwise stated in the Report, the existence of potentially hazardous or toxic materials that may have been used in the construction or maintenance of the improvements or may be located at or about the Property was not considered in arriving at the opinion of value. These materials (such as formaldehyde foam insulation, asbestos insulation and other potentially hazardous materials) may adversely affect the value of the Property. The Appraisers are not qualified to detect such substances. C&W recommends that an environmental expert be employed to determine the impact of these matters on the opinion of value. If the Report is submitted to a lender or investor with the prior approval of C&W, such party should consider this Report as only one factor together with its independent investment considerations and underwriting criteria, in its overall investment decision. Such lender or investor is specifically cautioned to understand all Extraordinary Assumptions and Hypothetical Conditions and the Assumptions and Limiting Conditions incorporated in this Report. In the event of a claim against C&W or its affiliates or their respective officers or employees or the Appraisers in connection with or in any way relating to this Report or this engagement, the maximum damages recoverable shall be the amount of the monies actually collected by C&W or its affiliates for this Report and under no circumstances shall any claim for consequential damages be made. If the Report is referred to or included in any offering material or prospectus, the Report shall be deemed referred to or included for informational purposes only and C&W, its employees and the Appraiser have no liability to such recipients. C&W disclaims any and all liability to any party other than the party that retained C&W to prepare the Report. Any estimate of insurable value, if included within the agreed upon scope of work and presented within this report, is based upon figures derived from a national cost estimating service and is developed consistent with industry practices. However, actual local and regional construction costs may vary significantly from our estimate and individual insurance policies and underwriters have varied specifications, exclusions, and noninsurable items. As such, we strongly recommend that the Client obtain estimates from professionals experienced in establishing insurance coverage for replacing any structure. This analysis should not be relied upon to determine insurance coverage. Furthermore, we make no warranties regarding the accuracy of this estimate. By use of this Report each party that uses this Report agrees to be bound by all of the Assumptions and Limiting Conditions, Hypothetical Conditions and Extraordinary Assumptions stated herein. DEERHURST RESORT – DEVELOPMENT LANDS • ASSUMPTIONS AND LIMITING CONDITIONS 74 Our financial analyses are based on estimates and assumptions which were developed in connection with this appraisal engagement. It is, however, inevitable that some assumptions will not materialize and that unanticipated events may occur which will cause actual achieved operating results to differ from the financial analyses contained in this report, and these differences may be material. It should be further noted that we are not responsible for the effectiveness of future management and marketing efforts upon which the projected results contained in this report may depend. Certification n of Appraisal DEERHURST RESORT – DEVELOPMENT LANDS CERTIFICATION OF APPRAISAL 75 CERTIFICATION OF APPRAISAL We certify that, to the best of our knowledge and belief: • The statements of fact contained in this report are true and correct. • The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are our personal, impartial, and unbiased professional analyses, opinions, and conclusions. • We have no present or prospective interest in the property that is the subject of this report, and no personal interest with respect to the parties involved. • We have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment. • Our engagement in this assignment was not contingent upon developing or reporting predetermined results. • Our compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal. • 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 & Standards of Professional Appraisal Practice of the Appraisal Institute, which include the Uniform Standards of Professional Appraisal Practice. • Michael Kaukonen provided significant professional assistance to the appraiser who authored the appraisal. • The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. Chris Vardon made a personal inspection of the properties that are the subject of this report on March 29, 2014. • As of the date of this report, Chris Vardon, AACI, P.App has completed the continuing education program of the Appraisal Institute of Canada. • The undersigned state certified appraiser has met the requirements of the board that allow this report to be regarded as a certified appraisal. DEERHURST RESORT – DEVELOPMENT LANDS CERTIFICATION OF APPRAISAL 76 Based on the analysis contained herein, the total value of the various lands associated with the Deerhurst Resort as at March 31, 2013 was: AREA VALUE PER (ACRE/LOT/UNIT) ACRE/LOT/UNIT Lakeside Golf Course Lands 48.23 $35,000 $1,690,000 Remaining Lands 28.81 $35,000 $1,010,000 LAND PARCEL TOTAL VALUE WATERFRONT LANDS Total ( rounded) $2,700,000 NON-WATERFRONT LANDS Excess Lands 339.33 $7,000 $2,380,000 Commercial Component 21.25 $150,000 $3,190,000 Total $5,570,000 UNSOLD RESIDENTIAL DEVELOPMENT LOTS Various 71 $158,000 $11,185,000 WATERFRONT LANDS FOR RESIDENTIAL DEVELOPMENT Various 173 $42,500 $7,350,000 30 $143,000 $4,290,000 DEERHURST SANCTUARY LANDS Various Lots RESORT VILLAGE LANDS Resort Village Total 51.26 acres $6,950,000 51.3 acres April 16, 2014 Chris Vardon, AACI Vice President Valuation & Advisory [email protected] Phone Office 416.359.2505 Fax 416.359.2602 Date Glossary of Terms and Definitions DEERHURST RESORT – DEVELOPMENT LANDS GLOSSARY OF TERMS & DEFINITIONS 77 GLOSSARY OF TERMS & DEFINITIONS The following definitions of pertinent terms are taken from The Dictionary of Real Estate Appraisal, Fourth Edition (2002), published by the Appraisal Institute, Chicago, IL, as well as other sources. A CCRUED D EPRECIAT ION 1. In appraisal, a loss in property value from any cause; the difference between the reproduction or replacement cost of an improvement on the effective date of the appraisal and the market value of the improvement on the same date. 2. In regard to improvements, depreciation encompasses both deterioration and obsolescence. 3. In accounting, an allowance made against the loss in value of an asset for a defined purpose and computed using a specific method. B AND OF I NVESTMENT A NALYSIS A technique in which the capitalization rates attributable to components of capital investment are weighted and computed to derive a weighted average rate attributable to the total investment. C ASH E QUIVALENCE A price expressed in terms of cash, as distinguished from a price expressed totally or partly in terms of the face amounts of notes or other securities that cannot be sold at their face amounts. Calculating the cash-equivalent price requires an appraiser to compare transactions involving atypical financing to transactions involving comparable properties financed at typical market terms. E LLWOOD F ORMULA Yield capitalization method that provides a formulaic solution for developing a capitalization rate for various combinations of equity yields and mortgage terms. The formula is applicable only to properties with stable or stabilized income streams and properties with income streams expected to change according to the J- or K-factor pattern. E XPOSURE T IME The length of time the property being appraised would have been offered on the market prior to the hypothetical consummation of a sale at the market value on the effective date of the appraisal. Exposure time is presumed to precede the effective date of the appraisal. The reasonable exposure period is a function of price, time and use. It is not an isolated opinion of time alone. Exposure time is different for various types of property and under various market conditions. It is a retrospective opinion based on an analysis of past events, assuming a competitive and open market. It assumes not only adequate, sufficient and reasonable time but adequate, sufficient and a reasonable marketing effort. Exposure time and conclusion of value are therefore interrelated. E XTRAORDINA RY A SSUMPTIONS An extraordinary assumption is “an assumption, directly related to a specific assignment, which, if found to be false, could alter the appraiser’s opinions or conclusions. Extraordinary assumptions presume as fact otherwise DEERHURST RESORT – DEVELOPMENT LANDS GLOSSARY OF TERMS & DEFINITIONS 78 uncertain information about physical, legal or economic characteristics of the subject property; or about conditions external to the property, such as market conditions or trends; or about the integrity of data used in an analysis.” F EE S IMPLE E ST AT E Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat. G OING C ONCERN An operating business enterprise that is expected to continue. H YPOTHETICAL C ONDITIONS A hypothetical condition is “that which is contrary to what exists but is supposed for the purpose of analysis. Hypothetical conditions assume conditions contrary to known facts about physical, legal, or economic characteristics of the subject property; or about conditions external to the property, such as market conditions or trends; or about the integrity of data used in an analysis.” I NSURABLE V ALUE • The value of an asset or asset group that is covered by an insurance policy; can be estimated by deducting costs of noninsurable items (e.g., land value) from market value. • Value used by insurance companies as the basis for insurance. Often considered to be replacement or reproduction cost plus allowances for debris removal or demolition less deterioration and noninsurable items. Sometimes cash value or market value, but often entirely a cost concept. (Marshall & Swift LP) L EASED F EE I NTEREST An ownership interest held by a landlord with the rights of use and occupancy conveyed by lease to others. The rights of the lessor (the leased fee owner) and the lessee are specified by contract terms contained within the lease. L EASEHOLD I NT EREST The interest held by the lessee (the tenant or renter) through a lease transferring the rights of use and occupancy for a stated term under certain conditions. LIQUIDATION VALUE Liquidation value is the likely price of an asset when it is allowed insufficient time to sell on the open market, thereby reducing its exposure to potential buyers. Liquidation value is typically lower than fair market value. Unlike cash or securities, certain illiquid assets, like real estate, often require a period of several months in order to obtain their fair market value in a sale, and will generally sell for a significantly lower price if a sale is forced to occur in a shorter time period. Liquidation value may be either the result of a forced liquidation or an orderly liquidation. Either value assumes that the sale is consummated by a seller who is compelled to sell and assumes an exposure period which is less than normal for the market. DEERHURST RESORT – DEVELOPMENT LANDS GLOSSARY OF TERMS & DEFINITIONS 79 Liquidation value is likely to bring under all of the following conditions: • Consummation of a sale will occur within a severely limited future marketing period specified by the client. • The actual market conditions currently prevailing are those to which the appraised property interest is subject. • The buyer is acting prudently and knowledgeably. • The seller is under extreme compulsion to sell. • The buyer is typically motivated. • The buyer is acting in what he or she considers his or her best interest. • A limited marketing effort and time will be allowed for the completion of a sale. • Payment will be made in cash in Canadian dollars or in terms of financial arrangements comparable thereto. • 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 M ARKET R ENT The most probable rent that a property should bring in a competitive and open market reflecting all conditions and restrictions of the specified lease agreement including term, rental adjustment and revaluation, permitted uses, use restrictions, and expense obligations; the lessee and lessor each acting prudently and knowledgeably, and assuming consummation of a lease contract as of a specified date and the passing of the leasehold from lessor to lessee under conditions whereby: Lessee and lessor are typically motivated. Both parties are well informed or well advised, and acting in what they consider their best interests. A reasonable time is allowed for exposure in the open market. The rent payment is made in terms of cash in Canadian dollars, and is expressed as an amount per time period consistent with the payment schedule of the lease contract. The rental amount represents the normal consideration for the property lease unaffected by special fees or concessions granted by anyone associated with the transaction. M ARKET V A LUE The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: Buyer and seller are typically motivated; Both parties are well informed or well advised, and acting in what they consider their best interests; DEERHURST RESORT – DEVELOPMENT LANDS GLOSSARY OF TERMS & DEFINITIONS 80 A reasonable time is allowed for exposure in the open market; Payment is made in terms of cash in Canadian 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. (12 C.F.R. Part 34.42(g) Federal Register 34696, August 24, 1990, as amended at 57 Federal Register 12202, April 9, 1992; 59 Federal Register 29499, June 7, 1994) M ORTGAGE -E QUITY A NA LYSIS Capitalization and investment analysis procedures that recognize how mortgage terms and equity requirements affect the value of income-producing property. P ROSPECTIVE V A LUE O PINION A forecast of the value expected at a specified future date. A prospective value opinion is most frequently sought in connection with real estate projects that are proposed, under construction, or under conversion to a new use, or that have not achieved sellout or a stabilized level of long-term occupancy at the time the appraisal report is written. P ROSPECTIVE V A LUE U PON R EACHING S TABILIZED O CCUPANCY The value of a property as of a point in time when all improvements have been physically constructed and the property has been leased to its optimum level of long-term occupancy. At such point, all capital outlays for tenant improvements, leasing commissions, marketing costs and other carrying charges are assumed to have been incurred. V ALUE A S I S The value of specific ownership rights to an identified parcel of real estate as of the effective date of the appraisal. It relates to what physically exists and is legally permissible and excludes all assumptions concerning hypothetical market conditions or possible rezoning. Subject Property Photographs DEERHURST RESORT – DEVELOPMENT LANDS SUMMARY OF CHANGES SUBJECT PROPERTY PHOTOGRAPHS Deerhurst Golf Course Waterfront lands and view Waterfront lands Peninsula Lake Lakeside Lodge Lakeside Lodge Waterfront 81 Summary of o Changes Compared to December 31, 3 2013 DEERHURST RESORT – DEVELOPMENT LANDS SUMMARY OF CHANGES 82 SUMMARY OF CHANGES IN APPRAISAL FROM DECEMBER 2013 TO MARCH 2014 On January 30, 2014, Skyline representatives met with staff at the Town of Huntsville and the District of Muskoka to review the “incomplete planning application”. Based on that feedback a number of subsequent reports were submitted on March 6, 2014 and including a functional servicing and storm water management report, a geotechnical investigation, Stage 1-2 Archeological assessment, preliminary traffic impact study, a water quality study and environmental impact assessment. In addition, a public open house was held at Deerhurst on January 30, 2014. On March 5, 2014, Skyline submitted a revised Official Plan Amendment. In addition, Skyline responded to questions from the Peninsula Lakes Association. One week later, the Town of Huntsville’s planning committee approved the Road allowance closing near Canal Road. On March 20, 2014, The Town’s Director of Planning and Sustainability declared the Skyline submission a “Complete Application” subject to some minor issues. In addition, the Town and Region have reacted favorably to the submission. While, the application has not granted final approval and not yet considered a legal and permitted use, such approval is expected to be less than six months away. Any investor or purchaser would recognize that final approval is forth coming and as a result has resulted in significant increase in land values.