Seven Parcels of Undeveloped Land Watt Road and Hickory Creek Road Knox Co

Palmer Group 2832 N. Peach Hollow Circle Pearland, Texas 77584

SEVEN PARCELS OF UNDEVELOPED LAND

WATT ROAD AND HICKORY CREEK ROAD

KNOX CO. AND LOUDON CO., TENNESSEE

October, 2005

www.WattRoad.com Office 713-828-1751 Fax 832-201-0337 Palmer Group 2832 N. Peach Hollow Circle Pearland, Texas 77584

SEVEN PARCELS OF UNDEVELOPED LAND WATT ROAD AND HICKORY CREEK ROAD KNOX CO. AND LOUDON CO., TENNESSEE

IDENTIFICATION OF THE SEVEN PROPERTIES

Tax Land Deed Tract Identification Area (Ac.) Owner Ref. Zoning 1 141/067.01 1.11 Palmer Properties, L.P. 2166/44 CA (Knox County) 2 141/068 9.94 Palmer Properties, L.P. 2166/52 CB (Knox County) 3 151/001.02 4.62 Palmer Properties, L.P. 2166/48 CB (Knox County) 4 007/012.00 1.30 Palmer Leased Properties 233/664 C-2 (Loudon County) 5 007/013.00 1.06 Palmer Leased Properties 233/664 R-1* (Loudon County) 6 007/014.00 16.70 Palmer Properties, L.P. 217/731 R-1* (Loudon County) 7 007/016.00 8.10 Palmer Properties, L.P. 233/628 C-2 (Loudon County)

The seven vacant land parcels are located south of the Interstate 40/75 & Watt Road Interchange. Three of the parcels are located in Knox County, Tennessee, and each of the parcels features access and frontage to Watt Road. Watt Road is the primary north-south thoroughfare to this interchange area and it provides easy access to Kingston Pike (Highway 70) to the south. Kingston Pike is the primary east/west thoroughfare for west Knoxville and serves as the center for retail, office, and commercial development for the west county sector.

The remaining four parcels are all located west of the Knox County parcels in Loudon County, Tennessee. Three of these parcels feature frontage and access via Hickory Creek Road. The remaining parcel is situated between one of the Loudon County tracts and one of the Knox County tracts, but is isolated from any direct road frontage or access.

Hickory Creek Road is a rural, two-lane asphalt paved road with a low traffic volume. It runs in a northeast-southwest from Watt Road to Highway 321 in Lenoir City, Tennessee, some 6.5 miles southwest of the subject area. Highway 321 serves as the primary commercial corridor of Lenoir City.

The neighborhood is bisected in an east-west direction by Interstate 40/75, providing convenient access to Lenoir City and the downtown Knoxville area, as well as the east and north Knox County sectors. Interstate 40/75 splits into I-40 east and I-75 north in the downtown area. Interstate 40/75 had a daily traffic volume of approximately 137,000 vehicles per day through the subject neighborhood in 2002.

www.WattRoad.com Office 713-828-1751 Fax 832-201-0337 Palmer Group 2832 N. Peach Hollow Circle Pearland, Texas 77584

DEVELOPMENT AND LAND USE

Development along the Watt Road interchange is predominately targeted toward the transient nature of this location, primarily truck transportation. Three of the four quadrants surrounding the interchange are improved with truck stop service plazas that encompass fuel sales, restaurants, showers, drivers’ lounges, truck parking, etc. Additionally, there are some newer commercial and light industrial facilities within the southwest quadrant of this interchange. Steep topography and limited availability of utilities has precluded large-scale development of the northwest quadrant of this interchange, but a truck oil change facility, a truck wash facility, and some light industrial and commercial uses do reside in this quadrant, as well.

Land uses north of the interstate are primarily rural residential, with recent land sales occurring that are indicative of future residential development. Suburban residential development is the primary land use south of the subject both along Watt Road and Kingston Pike.

The community surrounding the Watt Road/Kingston Pike interchange is known as the Dixie Lee Junction area. The junction is formed by the merger of U.S. Highway 11 and U.S. Highway 70 generally between Lenoir City and Farragut. In past years the area was sparsely developed, however, expanding growth from the West Knoxville and Farragut areas is apparent and both commercial and residential development of this area is on the rise. The Avalon development is a recently developed upscale single-family and condominium golf course community located in Loudon County along U.S. Highway 70 approximately one mile west of Dixie Lee Junction.

www.WattRoad.com Office 713-828-1751 Fax 832-201-0337 Palmer Group 2832 N. Peach Hollow Circle Pearland, Texas 77584

DESCRIPTION OF TRACT 1 ~ KNOX COUNTY PARCEL 141-067.01 Watt Road at Hickory Creek Road. Approximately 1.1 acres, 48,000 sq. ft. There is no excess or unusable land area. The site is irregular in shape.

Topography of the site is generally cleared and level and at road grade.

Water, electricity, phone, and natural gas utilities are available to the property in adequate quality and quantity to service the highest and best use of the site. Sewer is available approximately 300 ft. away.

For sewer services, the sewerage would have to flow into a pump station located on the north side of Petro Truckstop and be pumped up the hill(south) to a gravity line.

FLOOD PLAIN Community Panel No. 475433-0165B Date 05/16/83 Flood Zone Zone C – Subject is not located within any 100 or 500-year floodplains. CA – General Business Zone. This classification is designed for general retail business and services.

www.WattRoad.com Office 713-828-1751 Fax 832-201-0337 Palmer Group 2832 N. Peach Hollow Circle Pearland, Texas 77584

DESCRIPTION OF TRACT 2 ~ KNOX COUNTY PARCEL 141-068 Along east side of Watt Road. Approximately 9.9 acres, 433,000 sq. ft. There is no excess or unusable land area. The site is irregular in shape.

Topography of the site is generally heavily wooded and rolling to steep terrain, with most of the parcel situated above road grade. Overall, the topography of this site and the presence of the power line easement are factors that could affect the economic feasibility of the site’s development.

For sewer services, the sewerage would have to flow into a pump station located on the north side of Petro Truckstop and be pumped up the hill(south) to a gravity line.

FLOOD PLAIN Community Panel No . 475433-0165B Date 05/16/83 Flood Zone Zone C – Subject is not located within any 100 or 500-year floodplains. CB – Business and Manufacturing Zone. This classification permits a wide range of business uses that attract large volumes of vehicular traffic.

www.WattRoad.com Office 713-828-1751 Fax 832-201-0337 Palmer Group 2832 N. Peach Hollow Circle Pearland, Texas 77584

DESCRIPTION OF TRACT 3 ~ KNOX COUNTY PARCEL 141-067.01 Along the west side of Watt Road. Approximately 4.6 acres, 200,000 sq. ft. There is no excess or unusable land area. The site is irregular in shape.

Topography of the site is gently rolling and wooded. The site is at road grade at the northern portion of the tract, and rises to approximately 20 ft. above road grade at the southern boundary.

For sewer services, the sewerage would have to flow into a pump station located on the north side of Petro Truckstop and be pumped up the hill(south) to a gravity line.

In addition to this site’s vacant Watt Road frontage, it also has extensive frontage along Old Watt Road, an unpaved road that encircles the remaining sides of this parcel. The appraisers believe this road has been closed and the right-of-way may be available for purchase, which would enable the property owner to have contiguous ownership with the adjacent tract to the west, Loudon County parcel 007-016.00. The power line easement may affect this site’s development to its highest and best use.

FLOOD PLAIN Community Panel No . 475433-0165B Date 05/16/83 Flood Zone Zone C – Subject is not located within any 100 or 500-year floodplains. ZONING Zoning District CB – Business and Manufacturing Zone. This classification permits a wide range of business uses that attract large volumes of vehicular traffic.

www.WattRoad.com Office 713-828-1751 Fax 832-201-0337 Palmer Group 2832 N. Peach Hollow Circle Pearland, Texas 77584

DESCRIPTION OF TRACT 4 ~ LOUDON COUNTY PARCEL 007-012.00 14224 Hickory Creek Road. Approximately 1.3 acres, 57,000 sq. ft. There is no excess or unusable land area. The site is irregular in shape.

Topography of the site is level to gently rolling and at road grade along Hickory Creek Road.

Water, electricity, and phone utilities are available to the property in adequate quality and quantity to service the highest and best use of the site. Natural Gas & Sewer utilities are not available to the site.

This site contains an old residence that contributed no value to the property. Overall, there are no known factors which are considered to prevent the site from development to its highest and best use, as if vacant, or adverse to the existing use of the site.

FLOOD PLAIN Community Panel No. 470107-0050B Zone C – Subject is not located within any 100 or 500-year floodplains. C-2 – General Commercial District. This classification is designed for general retail business and services.

www.WattRoad.com Office 713-828-1751 Fax 832-201-0337 Palmer Group 2832 N. Peach Hollow Circle Pearland, Texas 77584

DESCRIPTION OF TRACT 5 ~ LOUDON COUNTY PARCEL 007-013.00 Hickory Creek Road. Approximately 1.1 acre, 46,000 sq. ft.

There is no excess or unusable land area.

The site is irregular in shape.

Topography of the site is level to gently rolling and at road grade.

FLOOD PLAIN Community Panel No. 470107-005B Date 08/03/92 Zone C – Subject is not located within any 100 or 500-year floodplains. R-1 – Suburban Residential District. This classification is designed for low density single and multi-family dwellings .

www.WattRoad.com Office 713-828-1751 Fax 832-201-0337 Palmer Group 2832 N. Peach Hollow Circle Pearland, Texas 77584

DESCRIPTION OF TRACT 6 ~ LOUDON COUNTY PARCEL 007-014.00 Hickory Creek Road. Approximately 16.7 acres, 727,000 sq. ft. There is no excess or unusable land area. The site is irregular in shape.

Topography of the site is generally heavily wooded with rolling to steep terrain, and most of the parcel situated above road grade.

The power line easement is situated toward the southern portion of the parcel along the ridgeline above the steepest portion of the site’s topography. This power line easement may affect the site’s development to its highest and best use.

FLOOD PLAIN Community Panel No . 470107-0050B Zone C – Subject is not located within any 100 or 500-year floodplains. R-1 – Suburban Residential District. This classification is designed for low density single and multi-family dwellings.

www.WattRoad.com Office 713-828-1751 Fax 832-201-0337 Palmer Group 2832 N. Peach Hollow Circle Pearland, Texas 77584

DESCRIPTION OF TRACT 7 ~ LOUDON COUNTY PARCEL 007-016.00 Old Watt Road south of Travel America Truck Stop Approximately 8.1 acres, 353,000 sq. ft. There is no excess or unusable land area.

The site is generally rectangular in shape.

Topography of the site is wooded and rolling to steep grade.

Current lack of access to this parcel adversely affects the functional utility of the site. As discussed in the Tract 3 , purchasing the Old Watt Road right-of-way could yield more versatility to this site via access from Watt Road.

FLOOD PLAIN Community Panel No . 470107-0050B Date 08/03/92 Zone C – Subject is not located within any 100 or 500-year floodplains. C-2 – General Commercial District. This classification is designed for general retail business and services.

www.WattRoad.com Office 713-828-1751 Fax 832-201-0337 Palmer Group 2832 N. Peach Hollow Circle Pearland, Texas 77584

Topography Maps

www.WattRoad.com Office 713-828-1751 Fax 832-201-0337 Palmer Group 2832 N. Peach Hollow Circle Pearland, Texas 77584

Knox County and Loudon County Zoning Classifications

Knox County MPC Zoning Information

www.WattRoad.com Office 713-828-1751 Fax 832-201-0337 Palmer Group 2832 N. Peach Hollow Circle Pearland, Texas 77584

Loudon County MPC Zoning Information

5.045. C-2 General Commercial District

1. General Description The C-2, General Commercial district is a general commercial and business district located at specific sites customarily along certain arterials and major collector roads with adequate utilities on property physically suitable for such uses and where business uses shall not conflict with adjacent residential and agriculture uses of land. Special emphasis is placed on the physical design of such developments in order to promote the unique scale and character of the community and to protect and enrich the unique qualities of these uses to insure compatibility with the community.

2. Permitted uses The expanding nature of commercial and business uses prevents identifying all permitted uses which would customarily be located in the district. The following uses and their accessory uses, in addition to being permitted, shall guide other uses not specifically identified which are of a similar nature.

• Retail • Office • Convenience stores • Churches and Places of Worship • Educational Facilities • Professional services • Lodging & restaurants • Repair services except vehicle or equipment repair • Wholesale business • Automotive & marine sales • Agriculture related sales • Nursery and garden sales • Day Care Centers • Funeral Homes • Medical Facilities • Financial services • Veterinary services

3. Uses Permitted as a Special Exception The following uses and their related accessory uses may be permitted as a special exception. The decision to allow such uses will depend on the infrastructure necessary to accommodate such uses within the area and compatibility of adjacent uses and zones. In approving such uses the Board may impose reasonable conditions and restrictions in addition to the

www.WattRoad.com Office 713-828-1751 Fax 832-201-0337 Palmer Group 2832 N. Peach Hollow Circle Pearland, Texas 77584

requirements established in this resolution to insure the health, safety, general welfare and physical appearance of the community.

• Mobile homes sales lots • Taverns • Automotive repair services (body and engine repair) • Storage Warehouse (except industrial storage) • Transfer or storage terminal • Trucking terminals • Wrecker Services • Amusement facilities • Stadiums and Coliseums • Implement and machinery sales and services

4. Uses Prohibited • All other uses except those specifically permitted or of a similar nature, or permitted as a special exception • Sexually Oriented Adult Businesses

5. Dimensional Regulations All structures within the district shall comply with the following requirements except as provided in Article 6:

• Front Yard: The front yard setback shall not be less than thirty (30) feet.

• Rear Yard: The rear yard setback shall not be less than twenty (20) feet, except where vehicular access will be provided to the rear of the lot, in which case a minimum rear setback of thirty (30) feet shall be required

• Side Yard: The side yard setback shall not be less than twenty (20) feet

• Land Area: No lot shall be used for commercial purposes unless said lot has a minimum lot area of not less than 20,000 square feet, provided said lot is served by public water and an approved sanitary disposal system. Where public water is not available, the minimum land area shall not be less than three (3) acres. Multiple structures may be permitted on a single lot provided that all applicable area and space requirements have been complied with and provided all buildings comply with the Southern Building Code Congress standards for connecting structures.

www.WattRoad.com Office 713-828-1751 Fax 832-201-0337 Palmer Group 2832 N. Peach Hollow Circle Pearland, Texas 77584

• Lot Width: No lot shall be less than one hundred (100) feet wide at the building setback.

6. Height Requirement : No building shall exceed three stories or forty (40) feet in height, except as provided for in Article 6, section 6.030.

7. Lot Area Coverage There is no maximum lot area coverage within the district.

8. Parking The number of parking spaces shall be determined by standards in section 4.010 of this Resolution. All parking areas and drives shall be paved with sufficient base, binder and surface to adequately accommodate the anticipated traffic type and volumes. The periphery of all parking areas and entrances shall be curbed with a minimum of 6 inches of extruded concrete curbing or similar material. Parking and storage areas shall maintain a minimum of five (5) feet at each side and rear property lines. These areas shall be permanently maintained as a buffer/landscaped area.

9. Exterior Storage and Loading Areas Exterior storage of materials, equipment, or damaged automobiles or parts shall not be permitted unless approved by the Board of Zoning Appeals. Any storage area permitted shall be landscaped or screened utilizing appropriate building materials. Loading areas shall be screened utilizing appropriate building materials, landscaping or earthen berms. Exterior solid waste disposal containers shall be enclosed.

10. Signs In addition to section 4.090, the following provisions apply to the use of sign structures on any commercially zoned property. Signs shall be considered, in the C-2 district, as accessory structures incidental to the permitted use or use permitted as a special exception. The content of sign(s) shall not be regulated only the physical characteristics of the sign structure. One free standing structure, not to exceed twenty (20) feet in height, is permitted not to exceed 120 square feet in area per sign face; two minor sign structures, customarily intended for directional purposes, are permitted not to exceed three (3) feet in height and not exceeding four (4) square feet in area per structure. Signs attached to the wall of the primary structure (s) shall be

www.WattRoad.com Office 713-828-1751 Fax 832-201-0337 Palmer Group 2832 N. Peach Hollow Circle Pearland, Texas 77584

permitted. The total area for such signs shall be calculated based on the length of the building facade facing the primary road. Wall signs shall not exceed 1 square foot per lineal foot of building facade and shall not be located above the building eves.

11. Conflicts If a conflict exists between this amendment and any existing or future amendment, the more stringent requirement shall prevail.

www.WattRoad.com Office 713-828-1751 Fax 832-201-0337 Palmer Group 2832 N. Peach Hollow Circle Pearland, Texas 77584

5.043. R-1 Suburban Residential District

A. District Description

The R-1, Suburban-Residential District, is intended to provide areas which are suitable for low-density single and multiple-family residential development. This district is particularly suitable for areas adjacent or near urban areas, where an adequate public water supply or public wastewater service is available. The principle uses of land range from single-family to multi-family apartment uses. The following regulations shall apply in the R-1 Suburban Residential District as defined on the Zoning Map of Loudon County, Tennessee:

B. Uses Permitted

In the R-1, Suburban-Residential District, the following uses and their accessory uses are permitted:

1. Detached single-family dwellings.

2. Rooming and boarding houses.

3. Prefabricated dwelling.

4. Mobile home.

5. Customary home occupation as regulated in Article 4, Section 4.040.

6. Duplexes.

www.WattRoad.com Office 713-828-1751 Fax 832-201-0337 Palmer Group 2832 N. Peach Hollow Circle Pearland, Texas 77584

C. Uses Permitted as Special Exceptions :

In the R-1, Suburban-Residential District, the following uses and their accessory uses may be permitted as special exceptions after review and approval in accordance with Article 7, Section 7.060.

1. Churches and other places of assembly.

2. Educational institutions.

3. Public and private recreation facilities.

4. Utility facilities necessary for the provision of public services.

5. Planned unit developments as regulated in Article 4, Section 4.080.

6. Mobile home parks, subject to the provisions of Article 4, Section 4.100.

7. Cemeteries subject to the provisions of Article 5, Section 4.120.

8. Government buildings and community centers.

9. Multi-family dwellings. In order to provide for the orderly development of multi-family housing in areas conducive to such development the following specifications and guidelines shall be followed in granting a special exception:

Multi-family dwellings shall be:

a. located adjacent to arterials and/or collector roads;

b. served by public utility water and an approved wastewater treatment facility (i.e., septic system or public wastewater system);

c. located near areas of intense urban activity and necessary community facilities;

d. designed to provide permanent open and recreational space for residents;

www.WattRoad.com Office 713-828-1751 Fax 832-201-0337 Palmer Group 2832 N. Peach Hollow Circle Pearland, Texas 77584

e. designed to meet the area requirements as stated in Subsection 4. Land Area;

f. located in areas where the use will not conflict with the character of the surrounding area.

Approval of an apartment complex consists of a two stage process, a preliminary approval for a site selection and a final approval consisting of a site design. A site plan shall be submitted with the following information:

a. The site location of the proposed use/structure including a location map and the scale of such a map.

b. Drainage system plan to include but not limited to the location of enclosed storm sewers and appurtenances, open channels, and swales on property lines and/or back lot lines, and contour lines at five (5) foot intervals.

c. Size and dimensions of the proposed building(s) and a drawing of all setbacks.

d. Parking area design, number of parking spaces, and design of those spaces.

e. Location of any signage and the dimensions of such sign(s) which will advertise the use of the buildings.

f. Location and design of all entrances and exits onto a public road.

10. Daycare Centers – To serve up to 12 clients with no more than two (2) employees. (Approved by County Commission 10/6/03)

D. Uses Prohibited :

In the R-1, Suburban-Residential District, all uses except those uses specifically permitted or permitted upon approval as a special exception by the Board are prohibited.

E. Dimensional Regulations :

All uses permitted in the R-1, Suburban-Residential District, shall comply with the following requirements except as provided in Article 6:

www.WattRoad.com Office 713-828-1751 Fax 832-201-0337 Palmer Group 2832 N. Peach Hollow Circle Pearland, Texas 77584

1. Front Yard : The minimum of the front yard shall be thirty (30) feet.

2. Rear Yard : The minimum depth of the rear yard shall be twenty-five (25) feet for the principal structure and fifteen (15) feet for any permitted accessory structure.

3. Side Yard : The side yard shall be a minimum of fifteen (15) feet for one and two-story structures, plus five (5) additional feet of side yard for each additional story over two.

4. Land Area : No lot or parcel of land shall be reduced in size to provide separate lots or building sites of less than 20,000 square feet in area. Where there is an existing lot of record of less than 20,000 square feet, at the time of adoption of this Resolution, this lot may be utilized for the construction of one single-family dwelling, providing the lot in question has a public water supply and providing that said lot of record is not less than 7,500 square feet in area.

On lots or parcels of land where multiple-family dwellings are constructed, the following area requirements and definitions shall apply except as regulated in Article 4, Section 4.080, (planned unit developments):

Number of With Public With Public Water Dwelling Water and but without Units Sanitary Sewers Public Wastewater

1 20,000 sq. ft. 20,000 sq. ft. 2 25,000 sq. ft. 30,000 sq. ft. 3 30,000 sq. ft. 35,000 sq. ft. 4 35,000 sq. ft. 40,000 sq. ft.

More than 3,500 sq. ft. for Not permitted unless 4 units each unit over 4 on-site treatment units (i.e., package plants) are used, 30,000

www.WattRoad.com Office 713-828-1751 Fax 832-201-0337 Palmer Group 2832 N. Peach Hollow Circle Pearland, Texas 77584

sq. ft. for each unit over 4

Dwelling, Attached - A dwelling with one or more party walls, or one party wall in the case of a dwelling at the end of a group of attached dwellings. Dwelling, Multiple-Family - Two or more attached dwelling units. *The Board of Zoning Appeals may increase the lot size requirement if a soils analysis or percolation tests as required by the Loudon County Sanitarian indicate a potential problem with subsurface sewage disposal.

F. Cluster Development Option

Purpose: The cluster development option is established to encourage clustering of residential development promoting more creative design options based on the size, shape, natural resources of a site; constraints which have direct implications for development. The primary purpose of the option is to maintain open space, preservation of natural environmental features and enhance design which may not be practical under traditional development standards. This option shall not apply within the 1st and 4th civil districts up to the Tennessee River and Little Tennessee River which are primarily rural in character.

www.WattRoad.com Office 713-828-1751 Fax 832-201-0337 Palmer Group 2832 N. Peach Hollow Circle Pearland, Texas 77584

Objectives:

* Maintain the same density standards of the district * Promote connection to public sewage systems to reduce environmental impacts * Reduce construction and maintenance costs (public and private) * Enhance opportunities for creative design * Encourage design which utilizes open space as part of the development

Requirements: The following general requirements are established for developments utilizing the cluster development option:

* Minimum lot area shall not be less than 15,000 sq. ft. * Required connection to public sewage system. * Establishment of association/entity to supervise and maintain open space. * Open space shall be integrated throughout the development, including sensitive environmental areas and identified as part of the subdivision approval process. * Minimum setback requirements: front-25 feet, side-15 feet, rear-20 feet. * Minimum lot width at the building setback line shall not be less than 100 feet. * Paved sidewalks, not less than 4 feet in width and located not less than 6 feet from the edge of the roadway. * Density shall be based on the total developable land area less 20% for infrastructure. The total number of lots or density shall be determined based on a 20,000 sq. ft. scenario.

1. Maximum Lot Coverage : On any lot or parcel of land, the area occupied by all buildings including accessory buildings may not exceed forty (40) percent of the total area of such lot or parcel or the buildable area of said lot as defined by the front, side, and rear yard setbacks, whichever is less.

2. Lot Width : No lot shall be less than one hundred (100) feet wide at the building setback line.

3. Height Requirement : No building shall exceed three (3) stories or thirty-five

www.WattRoad.com Office 713-828-1751 Fax 832-201-0337 Palmer Group 2832 N. Peach Hollow Circle Pearland, Texas 77584

(35) feet in height, except as provided in Article 6, Section 6.030.

4. Parking Space Requirement : As regulated in Article 4, Section 4.010.

www.WattRoad.com Office 713-828-1751 Fax 832-201-0337 Palmer Group 2832 N. Peach Hollow Circle Pearland, Texas 77584

Economic Conditions in the Market Area

Property values in the vicinity of a subject property are influenced by numerous factors to include social, economic, governmental, and environmental forces. The manor or degree to which these factors influence property values is often consistent with a geographic area. This area of influence is known as the market area within which the subject property is located.

The identification of a market area begins with the subject property and proceeds outward, to include all relevant actual and potential influences on the property’s value that can be attributed to its location. The geographical limits of the market area extend far enough to encompass all influences that the market perceives as affecting the value of the subject property.

Analysis of the market area in which a particular property is located is important due to the fact that the various economic, social, political, and physical forces which affect the market area also directly influence the individual properties within it. Market area analysis also provides a framework, or context, in which the opinion of property value is developed.

TENNESSEE ECONOMY

Situated in the upper portion of the Southeastern United States, Tennessee is typical of Southeastern States and other centrally located states in the Eastern US. While once agriculturally based, the primary economic base shifted to manufacturing in the mid 20 th century and is in process of shifting from manufacturing to a service based economy.

Tennessee features four recognized MSA’s, a few micro statistical areas, and several rural counties which feature a primary reliance upon agricultural and manufacturing jobs. The recognized MSA’s are Nashville, Memphis, Knoxville, and Chattanooga.

Like many Southeastern States, Tennessee features an adequate and available labor force at relatively low costs and with only limited union affiliation. In addition, Tennessee does not have a state income tax which attracts some to the area. Along with the entire region, the Tennessee economy is expected to grow at a steady rate over the next decade due partially to an abundance of available land and a fairly priced labor force.

ECONOMIC TRENDS IN TENNESSEE

As reported in Economic Report to the Governor - 2005 by the University of Tennessee’s Center for Business and Economic Research (http://cber.bus.utk.edu/tefslist.htm), the Tennessee economy showed positive growth in 2004 with more expected in 2005. In particular, job growth was positive and personal income grew in 2004.

With regard to recent increases in the unemployment rate for Tennessee (primarily in 2001), the jobless rate has stabilized and is showing a likelihood of improvement. While

www.WattRoad.com Office 713-828-1751 Fax 832-201-0337 Palmer Group 2832 N. Peach Hollow Circle Pearland, Texas 77584

employment grew in 2004 with continued growth expected in 2005, the growth does not cross all sectors. Of particular mention is the change in the number of manufacturing jobs. Following significant declines in 2001 and 2002, the rate loss in manufacturing jobs slowed in 2003 but a loss was recorded nonetheless. Significant increases in service sector jobs made for job growth in the state on an overall basis.

Throughout most this decade, the rate of migration has been more than double the national average. As a result, the population of the MSA showed moderate growth between 1990 and 2000 with a 17 percent increase in the population. The highest growth rates are found in Blount, Loudon, and Sevier counties.

In Blount County, the large population increase is a result of an aggressive industrial recruitment campaign, which has resulted in the addition of numerous industrial and manufacturing jobs to the county.

Population growth in Loudon County is a result of several different factors. Loudon County also has an active industrial recruitment campaign, which has resulted in the location of many new manufacturing plants to include John Deere, Honda, and Kimberly- Clark. In addition, westward expansion of Knoxville’s suburbs has pushed into the eastern portion of Loudon County. Finally, the presence of Tellico Lake and the resort communities of Tellico Village and Rarity Bay have added many new residents to the area.

Sevier County’s population growth is almost entirely due to the booming tourism market in Gatlinburg and Pigeon Forge created by the Smoky Mountains National Park.

The following table summarizes population estimates for the Knoxville MSA.

KNOXVILLE MSA POPULATION TRENDS AND PROJECTIONS Average Projected Census Estimate 1990-2000 Annual 2005 Annual County 1980 1990 2000 Growth Growth Projection Growth Anderson 67,346 68,250 71,330 5% 0.5% 74,276 0.8% Blount 77,770 85,969 105,823 23% 2.3% 109,817 0.8% Knox 319,694 335,749 382,032 14% 1.4% 389,865 0.4% Loudon 28,553 31,255 39,086 25% 2.5% 42,336 1.7% Sevier 41,418 51,043 71,170 39% 3.9% 74,157 0.8% Union 11,707 13,694 17,808 30% 3.0% 18,551 0.8% Total MSA 546,488 585,960 687,249 17% 1.7% 709,002 0.6% Source: East Tennessee Development District; UT Center for Business & Economic Research

As shown in the table above, the largest population gains were in Sevier County which grew by 39% between 1990 and 2000. Blount, Loudon, and Union Counties also showed strong growth trends in the range from 2%-3% per year.

For the period from 2000 to 2010, the population of the MSA is projected to increase moderately at around 1.6% per year. The largest population gains are expected in Loudon, Sevier, and Union counties which are projected ton increase in the range from 2.7%-3.0% per year. The remaining

www.WattRoad.com Office 713-828-1751 Fax 832-201-0337 Palmer Group 2832 N. Peach Hollow Circle Pearland, Texas 77584 counties of Anderson, Blount, and Knox are also expected to increase in population, albeit, at a lower rate in the range from 1.2%-1.8% per year.

As these data demonstrate, there has been a solid trend of increasing population throughout the MSA over the past decade with moderate growth projected to continue well into the foreseeable future.

www.WattRoad.com Office 713-828-1751 Fax 832-201-0337 Palmer Group 2832 N. Peach Hollow Circle Pearland, Texas 77584

KNOXVILLE AREA PROXIMITY

The Knoxville MSA has strong transportation systems, enhancing the areas overall economic position. The Knoxville MSA is intersected by three of the nation’s busiest interstates: I-40, which extends from North Carolina to California, I-75, which stretches from the Canadian border to south Florida; and I-85, which starts in upper New York State and extends south to Knoxville. As a result of the area’s proximity to the interstate highway system, just over two-thirds of the nations population lives within a day's drive of the region.

Secondary Interstate arteries include Interstate 640 and Interstate 140. Interstate 640 connects to I-40 in west Knox County, crosses north Knox County with an interchange with I-75, and connects again with I-40 in east Knox County thus serving as a downtown bypass. I-140 (a/k/a Pellissippi Parkway) extends from Oak Ridge in Anderson County to Alcoa and Maryville in Blount County, intersecting with interstate 40 in west Knoxville.

In addition, eight federal highways and 16 state highways serve the area. This extensive network of highways allows companies to locate in lower-cost rural communities without sacrificing ease of access.

In addition to excellent highway transportation, the area offers convenient rail networks. CSX and Norfolk Southern railroads serve the area. The Knoxville MSA is at the junction of the major east/west and north/south Norfolk Southern Railway System lines. Norfolk Southern provides access to markets throughout the southeastern, central, and Midwestern U.S. markets and the southern Canadian provinces. CSX provides access to the southeastern, central, and northeastern U.S. markets and southern Canada. Direct one- line service is available to most large and small cities in the Southeast.

The Knoxville metropolitan area lies at the headwaters of the Tennessee River system of waterways. The river is part of the Interconnected Inland Water System, which links Knoxville with 21 states, the Mississippi River, the Gulf of Mexico, and the Great Lakes. This system of year-round navigable water provides low-cost, efficient transportation. Three active river terminals handle barge shipments in Knoxville. These terminals specialize in bulk shipments such as petroleum, pulpwood, gravel, grain, chemicals, and coal.

Commercial airline service is available at McGhee-Tyson Airport near Knoxville. The airport has two 9,000 feet parallel runways and services 11 commercial airlines. Passengers using McGhee Tyson Airport are linked to 12 non-stop destinations, totaling approximately 100 flights per day. Passenger traffic totaled almost 1.5 million in 1997. Almost 35,000 tons of air-freight were handled last year through the airport's Air Cargo Complex. A $48.6 million terminal expansion and renovation project was completed in 1999.

www.WattRoad.com Office 713-828-1751 Fax 832-201-0337 Palmer Group 2832 N. Peach Hollow Circle Pearland, Texas 77584

KNOXVILLE DIVERSIFIED ECONOMY

The economy of the Knoxville MSA is relatively diversified with no one sector accounting for more than one-third of total employment. The area's primary employment forces include a mixture of executive and professional jobs, health services, wholesale and retail trade, durable goods manufacture, scientific and technological research and development, banking and insurance, education, and government. One of the leading technological centers in the southeast, The Knoxville MSA is home to the University of Tennessee, the Department of Energy's Oak Ridge research facilities, and the Tennessee Valley Authority (TVA).

The Knoxville metropolitan area’s total employment averaged 376,614 in 2004. The economy of Knoxville and the surrounding MSA is diversified among the manufacturing, trade, service, and government sectors. The service and trade sectors are the largest employment sectors for the area at 27.2% and 26.4% respectively. This is followed by the government sector at 17.1 % and manufacturing at 15.4%. The distribution of non- agricultural employment in the Knoxville MSA is shown in the table to the right.

The large proportion of employment in the service and trade sectors is due to several different factors. Knoxville is an important health care center serving the entire East Tennessee Valley area, which contributes, to the high level of service sector employment. In addition, the presence of the Department of Energy's Oak Ridge facilities has created numerous spin-off technology firms specializing in finding commercial applications of government-funded research and technology programs.

Tourism is also very important to the Knoxville area, which contributes to the high level of employment in the trade sector. In 2002, travel expenditures in the MSA were $1.97 billion resulting in travel-generated employment in excess of 29,000 people. Major tourist attractions in the area include The Great Smoky Mountains National Park and the surrounding resort towns of Gatlinburg and Pigeon Forge; the Dollywood Theme Park, the Big South Fork National River and Recreation Area, and the Cherokee National Forest.

www.WattRoad.com Office 713-828-1751 Fax 832-201-0337 Palmer Group 2832 N. Peach Hollow Circle Pearland, Texas 77584

COST OF LIVING

The Cost of Living Index, published by the American Chamber of Commerce Researchers Association (ACCRA), measures relative price levels for consumer goods and services in participating areas. The average of all participating municipalities equals 100 with the comparative indexes read as a percentage of the national measure.

Knoxville’s composite cost of living is 7.9% lower than the national average and is the lowest of similarly sized southern cities. Similarly, the overall cost of housing in the Knoxville area is 14.5% lower than the national average and is also the lowest of the competitive metropolitan areas cited.

The low cost of housing is an attractive location advantage. The median price of all homes sold in the Knoxville area was $110,800 compared to the national median of $139,100. The affordable cost of living in the area and competitive per capita income levels provide a good quality of life for area residents.

The graph below shows the cost of living comparison for Knoxville and competitive metropolitan areas.

Overall, the area offers hundreds of thousands of acres of parks and recreational space that presents tremendous recreational opportunities to both local residents and visitors.

Knoxville is centrally located within the Tennessee River Valley, varying from 30 to 60 miles wide, between the Cumberland Mountains to the northwest and the Appalachian Mountains to the south. This broad riverside environment contributes to a moderate, four- season climate, with an average annual temperature of 60° F. Annual precipitation is in the range from 45-50 inches of rainfall and an average of 12 inches of snow. Extended periods of extremely hot or cold weather are very rare. Winter is short, with cold weather throughout December and January, which usually breaks in February. The mean number of days between frost dates is 215.

The topography of Knox County features a series of sub-parallel ridges and valleys with relief normally ranging from 180' to 400'. Elevations throughout the county range from 740' at the Clinch River to 2,128' on top of House Mountain. East Knox County is bisected by the Holston and French Broad Rivers, which converge to form the Tennessee River four miles east of downtown Knoxville. The Tennessee River bisects the central portion of the county and forms the southern boundary of the west county sector.

Knoxville (and the Knoxville MSA) is a stable area with an increasing population, a strong economic base, and a healthy mix of private and public facilities.

www.WattRoad.com Office 713-828-1751 Fax 832-201-0337 Palmer Group 2832 N. Peach Hollow Circle Pearland, Texas 77584

Knoxville is a vital area for transportation, business, and tourism for a trade area of some two million people. Knoxville and the immediate area are well positioned for future growth, the foundation of which is based on the area's favorable business climate, good transportation and communication systems, skilled workforce, abundant natural resources, and good quality of life.

As long as economic conditions do not change, these trends are expected to continue in the near future.

www.WattRoad.com Office 713-828-1751 Fax 832-201-0337 Palmer Group 2832 N. Peach Hollow Circle Pearland, Texas 77584

KNOXVILLE MSA EMPLOYMENT TRENDS (2003)

The government sector is also very important to the region. The presence of the University of Tennessee, Pellissippi State Technical Community College, the Tennessee Valley Authority, and the Department of Energy's Oak Ridge facilities contribute to the high level of government employment. The dependence on government employment is typically viewed as unhealthy economically. However, the presence of UT and the Department of Energy's Oak Ridge facilities has led to the expansion of high tech firms that are attracted by the region's skilled labor force and technological resources.

The Knoxville MSA has a strong manufacturing sector, which includes Alcoa Aluminum, Clayton Homes, Denso Manufacturing, Kimberly-Clark, and Sea Ray Boats. Manufacturing employment makes up 15.4%% of the MSA's non-farm employment, which mirrors manufacturing levels nationwide. Manufacturing within the area is concentrated in durable and non-durable goods, and consumer products. The area produces a diverse array of products to include furniture, auto parts, manufactured homes, boats, and household appliances.

Manufacturers are drawn to the area because of its central location, good transportation system, low-wage workforce, low-cost, abundant land and resources, and superior quality of life. Land costs in both urban and rural areas are very reasonable. Industrial development corporations throughout the area are very active in the development of new industrial parks. Throughout Knox and the surrounding counties, there are over 40 industrial parks with over 7,000 acres of available property. The Tennessee Valley's low cost water and electricity rates help to keep production costs down which companies find very attractive.

www.WattRoad.com Office 713-828-1751 Fax 832-201-0337 Palmer Group 2832 N. Peach Hollow Circle Pearland, Texas 77584

KNOXVILLE INCOME TRENDS

The diversified economy with respect to manufacturing, trade, government, and service industries provides a stable foundation for the Knoxville area. The following table summarizes employment trends for the Knoxville MSA.

Knox County's per capita incomes are above state averages, and are competitive with national averages. For the remainder of the counties in the MSA, per capita incomes generally mirror statewide trends with the exception of Union county which still lags significantly. During the period from 1998 to 2002 per capita incomes in the MSA rose 16.2% compared to 15.1 % for the State of Tennessee and 15.0% for the nation as a whole. The table below summarizes per capita income levels for the MSA as compared to state and national levels.

For 2001 the average unemployment rate for the Knoxville MSA was 3.3%. Among the individual counties, Knox County had the lowest unemployment rate at 2.5% while Sevier County had the highest rate at 5.9%. Unemployment rates in Sevier County typically vary significantly throughout the year due to the seasonal nature of the tourism industry. Blount, Loudon, and Anderson Counties all had unemployment rates in the 3.5% to 4.0% range which is considered very good by most standards. Both Knox County and the MSA have maintained unemployment rates that are among the lowest in the state and are significantly lower than national averages.

www.WattRoad.com Office 713-828-1751 Fax 832-201-0337 Palmer Group 2832 N. Peach Hollow Circle Pearland, Texas 77584

MAJOR EMPLOYERS

The Knoxville MSA is home to numerous national and international employers. The overall diversity of the local economy is reflected in the largest employers, which include healthcare, education, manufacturing, services, and government. The table below summarizes significant area employers.

MAJOR KNOXVILLE MSA EMPLOYERS Company Industry Employees University of Tennessee State University 9,317 Knox County Schools Local Government 8,104 Covenant Health System Healthcare 8,000 Y-12 National Security Complex Nuclear Weapons 4,600 Oak Ridge National Laboratory Scientific Research & Development 4, 200 St. Mary's Health System Healthcare 3,606 UT Medical Center Healthcare 3, 225 City of Knoxville Local Government 2, 820 Clayton Homes Manufactured Housing 2,500 Knox County Local Government 2,500 State of Tennessee State Government 2,401 Baptist Health System Healthcare 2, 347 Alcoa Aluminum Primary Aluminum 2,300 Dollywood Entertainment 2,150 Denso Manufacturing Tennessee Automotive Parts 2,100 Wal-Mart Stores National Retailer 2,091 The Kroger Company Retail Grocer 1,650 Blount Memorial Hospital Healthcare 1,650 Tennessee Valley Authority Regional Utility 1, 578 Sea Ray Boats Manufacture of Pleasure Boats 1,450 DeRoyal Industries Medical Supplies 1,433 East Tenn. Children's Hospital Healthcare 1, 347 McDonald's Restaurants Retail Restaurant 1,300 First Tennessee Bank Financial Services 1,236 Knoxville Utilities Board Utility Provider 1,072 Source: Knox Area Chamber Partnership

The Knoxville MSA is the third largest commercial center in Tennessee. Its geographic location and transportation linkages make the area readily accessible to a major share of the U.S. population and marketplace. As evidence, the Knoxville MSA is home to headquarters facilities for a significant number of regional and national corporations.

www.WattRoad.com Office 713-828-1751 Fax 832-201-0337 Palmer Group 2832 N. Peach Hollow Circle Pearland, Texas 77584

GOVERNMENT ORGANIZATION AND SERVICES

Government for the Knoxville area is divided among Knox County, the City of Knoxville, and the Town of Farragut. Knox County government consists of a county executive and a 19 member county commission representing each civil district in the county. Knoxville's city government is a mayor-council system. The mayor is the chief administrator over all city services and has authority over nine elected council members. An elected mayor and a five-person board of aldermen govern the Town of Farragut.

The city and county governments have historically worked together for the benefit of the metropolitan area. Over the past decade, there have been several proposals to change to a metro form of government in order to consolidate the city and county and avoid costly duplication and overlapping of services. However, the proposals failed to gain support of both city and county residents in a referendum and were defeated. The issue continues to come up periodically and is expected to one day be adopted.

The county government is responsible for numerous countywide services. Principal among these is the countywide school system and health department, which serve all the residents of Knox County and its incorporated municipalities.

Police protection within the city of Knoxville is provided by a police force of over 300 city officers. The Knox County Sheriff's Department, with approximately 150 officers, has primary jurisdiction over the unincorporated portions of Knox County as well as the town of Farragut. The entire metropolitan area is served by a 911 emergency dispatch system.

Approximately 369 fire fighters serve the city from 19 fire halls. The City of Knoxville enjoys a Class-3 fire rating. Tennessee Rural Metro, a privately owned subscription fire service, and several volunteer fire departments provide fire protection in Knox County, outside the city. Fire ratings in the county range from Class-6 to Class-9.

The Knoxville/Knox County Metropolitan Planning Commission (MPC) administers planning and zoning for both Knox County and the City of Knoxville. Although the city and county both have independent zoning ordinances, the two entities are governed by a single comprehensive master plan that outlines future growth and development plans. The town of Farragut administers its own zoning ordinance and planning through the Farragut Planning Office.

www.WattRoad.com Office 713-828-1751 Fax 832-201-0337 Palmer Group 2832 N. Peach Hollow Circle Pearland, Texas 77584

UTILITIES AND INFRASTRUCTURE

The Knoxville Utilities Board (KUB) distributes Tennessee Valley Authority generated electric power to the metropolitan area. TVA has the largest power generation capacity in the nation totaling approximately 31 million kilowatts. TVA's power generation capacity is diversified among hydroelectric, coal-fired, and nuclear plants. TVA's capacity and diversification has resulted in one of the most efficient and lowest cost production in the nation.

Natural gas is supplied to the area by East Tennessee Natural Gas, which operates the Tennessee Gas Pipeline. Both KUB and the Lenoir City Utilities Board (LCUB) provide gas distribution in the metro area.

The area's extensive network of lakes and streams provides abundant water for the area. Over 170,050 acres or 226 square miles of water surround the area, which is more than sufficient to meet all demands for domestic, commercial, and agricultural use. The region's utility districts currently have an excess capacity of 92 million gallons per day in combined treatment plants. Seven utility districts supply county water service. The majority of water systems in the area are interconnected enduring adequate water supply throughout the entire region.

Knoxville Wastewater Control provides sewer service in the city. In the county four of the seven utility districts also supply wastewater treatment service. Because of the extraordinary growth in West Knox County over the last ten years, most of the facilities are in the process of updating their wastewater treatment capacity.

www.WattRoad.com Office 713-828-1751 Fax 832-201-0337 Palmer Group 2832 N. Peach Hollow Circle Pearland, Texas 77584

EDUCATION

Public education within Knox County is provided by the Knox County Board of Education, a division of Knox County Government. The board operates 84 schools, including 50 elementary, 14 middle, and 12 high schools, plus two Early Childhood Development Centers, two vocational schools, and four special education centers. Total enrollment was 51,507 during the 2000 school year. The Knox County Board of Education’s budget for 2002 is $261 million reflecting a per pupil expenditure of $5,067. Additional education resources include 52 private/parochial schools, serving 6,700 students.

Post-secondary education is available at several public and private institutions in the metropolitan area. The largest of these is the University of Tennessee, the fifteenth largest State University in the country. The main campus of the University of Tennessee, with an enrollment of approximately 26,000, is recognized as one of the nation's major research universities. The university offers 110 undergraduate and 146 graduate degree programs. The main campus of the University of Tennessee is located adjacent to downtown Knoxville and serves to anchor the CBD. The employment opportunities generated by the university are a major factor in the economy of Knox County, not only in direct employment but indirect employment in many related technical and service businesses that support the institution.

The Pellissippi State Technical Community College serves the Knoxville area. Pellissippi State is a fully accredited public two-year college. The college offers both career/technical degrees and college transfer programs. Pellissippi State operates four campuses throughout the Knoxville MSA and has a current enrollment in excess of 8,200 students.

Private post-secondary institutions in the metropolitan area include Carson-Newman College, Maryville College, Johnson Bible College, and Knoxville College. There are also several nursing, trade, and technical schools locally.

www.WattRoad.com Office 713-828-1751 Fax 832-201-0337 Palmer Group 2832 N. Peach Hollow Circle Pearland, Texas 77584

HEALTH CARE

Knoxville is a regional health care center for a trade area of some two million people in east Tennessee, southeast Kentucky, and western North Carolina.

Knoxville’s five general hospitals offer 2,100 beds for in-patient care, and many specialized services are afforded by the size of the network. Specialized treatment centers include East Tennessee Children’s Hospital, Patricia Neal Rehabilitation Center, Thompson Cancer Survival Center, and the Baptist Heart Institute.

The Knox County Health Department also serves county residents. Mental health care is provided by two private in-patient facilities, two community centers, and several other private and social service agencies.

In total, more than 1,300 physicians, 240 dentists, and 5,200 registered nurses meet the health care needs of the residents of Knoxville, Knox County, and the surrounding communities.

www.WattRoad.com Office 713-828-1751 Fax 832-201-0337 Palmer Group 2832 N. Peach Hollow Circle Pearland, Texas 77584