APPRAISAL OF THE LIQUIDATION VALUE Mt. Ashland Ski Area For City of Ashland, Oregon OCTOBER 26 2006 AN ORDERLY LIQUIDATION VALUE APPRAISAL OF THE PROPERTY AT THE MT ASHLAND SKI AREA ASHLAND, OREGON OCTOBER 26, 2006 i 511 W 22nd Ave. Post Falls, ID 83854 (208) 457-1148 (208) 699-3817 Cell (866) 233-1947 Fax TED FARWELL MAI www.winterstar.us [email protected] January 3, 2007 Mr. Lee Tuneberg City of Ashland Ashland OR Re: Appraisal – Orderly Liquidation Value of Mt. Ashland Ski Area Properties Dear Mr. Tuneberg; I have prepared an orderly liquidation value appraisal of the Mt. Ashland Ski Area properties in Jackson County, Oregon as requested and authorized by the City of Ashland by form contract dated October 4, 2006. The purpose of this appraisal is to estimate the orderly liquidation value of the Mt. Ashland Ski Area properties, as they existed on October 26, 2006. The properties are entirely located on a 1,180-acre USFS land use permit. This valuation is dated October 26, 2006. The attached report of 47 pages describes the properties and the appraisal process. CERTIFICATION I certify that, to the best of my knowledge and belief: The statements of fact contained in this report are true and correct. The report analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are my personal, unbiased professional analyses, opinions, and conclusions. I have no present or prospective interest in the property that is the subject of this report, and I have no personal interest or bias with respect to the parties involved. My compensation is not contingent on an action or event resulting from the analyses, opinions, or conclusions in, or the use of, this report. The appraisal assignment was not based upon a requested minimum valuation, a specific valuation, or approval of any proposed financing. My analyses, opinions and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice. I have made a personal inspection of the property that is the subject of this i ii report. Mr. Dan Pahl CEA, Mr. John Ellis PE, Mr. Craig Loup and Mr. Ken Olmstead provided significant property appraisal assistance to the person signing this certification. As of the date of this report I have completed the requirements of the continuing education program of the Appraisal Institute. I have a unique combination of MT ASHLAND SKI AREA professional expertise and experience Orderly Liquidation Value of Property supporting my competency to conduct 26-Oct-06 such a special appraisal assignment. I Orderly have been a consultant to the North Liquidation American ski industry for forty-five years. Asset Value I have designed, built, and operated ski Five Ski Lifts $152,000 Rolling Stock $190,000 areas. In addition, I am a professional Inventories $105,000 appraiser and have prepared some 120- Generators (4) $24,000 ski area appraisals over the past 27 Waste Water Treatment $40,000 years. My detailed resume is attached. Portable Buildings (5) $11,500 Furniture & Fixtures and $150,200 It is my opinion that the orderly Maintenance Equipment liquidation value of the Mt. Ashland Ski TOTAL Liquidation Value $672,700 Area properties, as described in the Estimated cost to remove attached report and “as is” on October Ski Lifts ($921,500) 26, 2006 is: Buildings ($243,000) NET TOTAL ($491,800) $ 672,700: SIX HUNDRED & SEVENTY TWO THOUSAND, SEVEN HUNDRED DOLLARS The estimate of the major costs to remove the four ski lifts is $921,500. The estimate to remove the buildings is $243,000. Total removal costs are projected at $1,164,500. This leaves a deficit of $491,800. Sincerely Ted Farwell MAI State Certified General Real Estate Appraiser, State of Oregon Temporary Permit Number –TNR1447 Certified General Appraiser #CGA 722 Certified General Appraiser #CGO 1313626 State of Idaho State of Colorado ii iii APPRAISER CERTIFICATION I certify that, to the best of my 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 is my personal, impartial and unbiased professional analyses opinions and conclusions. I have no present or prospective interest in the property that is the subject of this report, and I have no personal interest or bias with respect to the parties involved. My engagement in this assignment was not contingent upon developing or reporting predetermined results. My compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal. My analyses, opinions and conclusions were developed, and this report has been prepared in conformity with the Uniform Standards of Professional Appraisal Practice. I have taken the mandatory Uniform Standards of Professional Appraisal Practice class, and thereby have been USPAP certified by the American Society of Appraisers per their re-education program. I am also a member in good standing with AMEA (Association of Machinery & Equipment Appraisers). I have made a physical inspection of all the assets listed and from that inspection, I have formulated an opinion of value that is the subject of this report. No one provided significant Professional assistance to the person signing this report. iii 1 SECTION I MT. ASHLAND ORDERLY LIQUIDATION VALUE APPRAISAL PREFACE EXECUTIVE SUMMARY This is an orderly liquidation value appraisal of the Mt. Ashland ski area property. A. CLIENT & USER OF THE REPORT: Mr. Lee Tuneberg City of Ashland Ashland, OR B. DATE OF THE APPRAISAL: October 26, 2006 C. DATE OF THE REPORT: January 3, 2007 D. DEFINITION OF ORDERLY LIQUIDATION VALUE: A professional opinion of the estimated most probable price expressed in terms of currency which the subject equipment could typically realize at a privately negotiated sale, properly advertised and professionally managed, by a seller obligated to sell over an extended period of time, usually within six to twelve months, as of the effective date of the appraisal report. Further, the ability of the asset group to draw sufficient prospective buyers to insure competitive offers is considered. All assets are to be sold on a piecemeal basis 'as is' with purchasers responsible for removal of assets at their own risk and expense. Any deletions or additions to the total assets appraised could change the psychological and/or monetary appeal necessary to gain the value indicated. E. DEFINITION OF EXTERNAL OBSOLESCENCE: Used facilities and equipment suffer both physical deterioration and functional obsolesce. They may also suffer a decrease in market value due to external obsolesce. The Appraisal of Real Estate twelfth edition describes External Obsolesce as: A temporary or permanent impairment of the utility or salability of an improvement or property due to negative influences outside of the property. (i.e. market conditions) MT ASHLANDPROPERTY LIQUIDATION VALUE APPRAISAL WINTERSTAR VALUATIONS, INC. OCTOBER 26, 2006 2 F. PURPOSE OF THE APPRAISAL: The purpose of this appraisal is to estimate the orderly liquidation value of the Mt. Ashland ski area properties herein described, as they exist on October 26, 2006. This estimate is in support of the terms of the Mt. Ashland Ski Area Lease where the lessee is required to maintain a “Minimum Liquidation Value” for the leased property. G. SCOPE OF THIS APPRAISAL: The scope of this appraisal is to inspect the property, consider market characteristics and trends, collect and analyze pertinent data, and develop a conclusion about the property’s liquidation value. The nature of this assignment precludes use of either the income or cost approaches to value. Sales comparison is the primary approach used. The specific methodology of data collection and analysis, verification and valuation is detailed within this report. Winterstar Valuations, Inc. has put together a team of experts to inspect and evaluate the existing assets to determine the most probable liquidation value if sold on the date of inspection, and removed. Our procedure is to first identify all of the assets with potential value upon ski area closure, next to inspect each piece of equipment for its condition and finally prepare an estimate of its value in place prior to removal. In the case of assets that require significant costs to remove (ie: ski lifts - buildings) we have estimated such removal costs. We anticipate that the major items will be the ski lifts, the grooming and other vehicles, the rental skis, snowboards, the wastewater treatment plant and the 275K generators. We anticipate that small items such as furniture, fixtures, tools, computers, office equipment, etc. would be offered in bulk or at auction. Where items are routinely offered in used equipment sales outlets, and a used value can be supported, the item was evaluated. No capitalized costs for planning and/or environmental studies have any liquidation value. The balance of this report is divided into three sections. Section II discusses the potential liquidation of the five ski lifts. It includes a chairlift removal cost estimate. Section III discusses the potential liquidation value of the rolling stock. Section IV discusses the potential liquidation value of the balance of the properties. It includes an estimate of the costs to remove the buildings. MT ASHLANDPROPERTY LIQUIDATION VALUE APPRAISAL WINTERSTAR VALUATIONS, INC. OCTOBER 26, 2006 3 G. SUMMARY OF FACTS AND CONCLUSIONS: 1. The five ski lifts have an orderly liquidation value of …………….$152,000 2. The rolling stock has an orderly liquidation value of…………….. $189,700 3.