Summary Appraisal Report of Proposed River Club Subdivision 413.442 Gross Acres (Approved Plan for 377 Single-Family Lots) North and South Side of Bob White Lane Suffolk, VA 23435

Prepared by

AXIAL ADVISORY GROUP, LLC REAL ESTATE VALUATION AND CONSULTING

656 Independence Parkway, Suite 220 Chesapeake, VA 23320 757-410-1222, Fax 757-410-2956

Prepared for

Mr. Mathew Sherman Cygnus Capital, Inc. 50 Old Ivy Road., Suite 150 Atlanta, GA 30342

Date of “As Is” Value March 31, 2012

Date of Report April 16, 2012

April 16, 2012

Mr. Mathew Sherman Cygnus Capital, Inc. 50 Old Ivy Rd., Suite 150 Atlanta, GA 30342

Reference: Summary Appraisal Report Proposed River Club Subdivision Land 413.442 Gross Acres (Approved Plan for 377 Single-Family Lots) North and South Side of Bob White Lane Suffolk, VA 23435 AAG File # 12-084A

Dear Mr. Sherman:

At your request, we have visited the above referenced property and have gathered and analyzed all relevant market data for the purpose of estimating the fee simple interests. The report to follow has been prepared in accordance with the guidelines set forth by the Appraisal Institute, the Appraisal Foundation. This letter does not in itself constitute a complete appraisal, but rather the reader is directed to the balance of the attached text.

The subject property is a proposed 377 single-family lot residential subdivision to be known as River Club. The development is proposed for a cluster improvement on 413.442 acres located on the north and south side of Bob White Lane, south of Deanes Branch and east of Bennett’s Creek. Approximately 62.85 acres are considered wetlands while another 59.02 acres are located within the Chesapeake Bay Preservation Resource Preservation Area resulting in 291.572 net acres of developable land (of which another 84.57 acres will be used for open space). According to the approved Preliminary Master Plan, the proposed lots will range in size from 7,150 to 54,646 square feet and average 13,922 square feet. The proposed development is located in the growing Bennett’s Creek area of Suffolk, Virginia.

According to officials with the City of Suffolk Planning Department, the Preliminary Subdivision Plan was approved in October 2004 with a Conditional Use Permit. This approval allows for a cluster development with 124% bonus density (377 lots – overall density of 1.29 lots/units per net acre). According to documents on file with the City, this approved plan is valid through July 2014. The allowable lots permitted, per the underlying zoning in place, is 305 lots (1.05 logs/units per net acre).

Based on the analysis as contained in this report, the concluded value is as follows:

Value Premise Property Rights Appraised Valuation Date Value Estimate Market As Is Fee Simple March 31, 2012 $7,200,000

The above value conclusions are subject to specific development plans provided to the appraisers. Should these plans significantly deviate, we reserve the right to amend this report. Thank you for this opportunity to be of service. If we can be of any further assistance, please contact us.

Respectfully submitted,

AXIAL ADVISORY GROUP, LLC Real Estate Valuation and Consulting

By: Diana L. Ernst By: Lawrence J. Colorito, Jr., MAI, MRICS Associate Principal Virginia State License #4001 011485 Virginia State License #4001-002033

656 INDEPENDENCE PARKWAY, SUITE 220 • CHESAPEAKE, VA 23320 757-410-1222 • FAX 757-410-2956 • WWW.AXIALADVISORY.COM Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

TABLE OF CONTENTS

Part One - Introduction Page Title Page Letter of Transmittal Table of Contents Certification ...... i Subject Property Photograph ...... iii Summary of Important Facts and Conclusions ...... iv

Part Two - Premises of the Appraisal Assumptions and Limiting Conditions ...... 1 Extraordinary Assumptions and Hypothetical Conditions ...... 3 Purpose of the Appraisal ...... 3 Intended Use and User of the Appraisal ...... 3 Date of Site Visit ...... 3 Date of Value ...... 3 Scope of Work ...... 4 Definitions and Terms ...... 4 Property Rights Appraised ...... 4 Type of Appraisal ...... 4

Part Three - Presentation of Data Identification of the Property ...... 5 Ownership and History of the Property ...... 5 Regional Summary ...... 6 Neighborhood Summary ...... 9 Census Tract ...... 11 Real Estate Assessment and Taxes ...... 11 Zoning and Other Restrictions ...... 12 Property Description ...... 13 Supply and Demand Summary ...... 16

Part Four - Analysis of Data and Conclusions Highest and Best Use ...... 22 The Valuation Process ...... 23 Sales Comparison Approach (Site Value) ...... 24 Reconciliation ...... 26 Marketing and Exposure Periods ...... 26

Addenda

Qualifications Zoning Maps Letter of Engagement Flood Map Legal Descriptions/Original Deed/Loan Sale Documents ALTA/ACSM Title Survey Regional Map Preliminary Subdivision Plats Neighborhood Map Proposed Lot Summary Borough Map Land Sales and Map Aerial Photograph Glossary of Terms Tax Maps

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CERTIFICATION

We certify that, to the best of our knowledge and belief:

1. The statements of fact contained in this report are true and correct.

2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and our personal, impartial, and unbiased professional analyses, opinions, and conclusions.

3. We have no present or prospective interest in the property that is the subject of this report and no personal interest or bias with respect to the parties involved.

4. We have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment.

5. Our engagement in this assignment was not contingent upon developing or reporting pre-determined results.

6. 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, the attainment of a stipulated result or the occurrence of a subsequent event directly related to the intended use of this appraisal.

7. Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice as well as the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute.

8. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives.

9. As of the date of this report, Lawrence J. Colorito, Jr., MAI, MRICS has completed the continuing education program of the Appraisal Institute.

10. As of the date of this report, Diana L. Ernst has completed the Standards and Ethics Education Requirement of the Appraisal Institute for Associate Members.

11. Lawrence J. Colorito, Jr., MAI, MRICS and Diana L. Ernst have personally visited the property that is the subject of this report.

12. No one provided significant professional assistance to the persons signing this report. Other members of the staff of Axial Advisory Group, LLC have also assisted in obtaining and processing portions of the data used.

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

14. The undersigned hereby certifies 1) that this appraisal conforms to the Uniform Standards of Professional Appraisal Practice issued by the Appraisal Standards Board of the Appraisal recovery and Enforcement Act of 1989, 12 USC 3310, 3331-3351, and to the regulations of the Federal Reserve System, 12 CFR Parts 208 and 225 and 2) the undersigned holds the requisite license issued by the Virginia Real Estate Appraiser Board to be able to perform this appraisal in compliance with Virginia law and regulation.

15. Axial Advisory Group has appraised this property or a portion thereof in the last 3 years.

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CERTIFICATION (continued)

Based on the analysis as contained in this report, the concluded value is as follows:

Value Premise Property Rights Appraised Valuation Date Value Estimate Market As Is Fee Simple March 31, 2012 $7,200,000

The above value conclusion is subject to specific development plans provided to the appraisers. Should the provided plans significantly deviate, we reserve the right to amend this report.

Thank you for this opportunity to be of service. If we can be of any further assistance, please contact us.

Respectfully submitted,

AXIAL ADVISORY GROUP, LLC Real Estate Valuation and Consulting

By: Lawrence J. Colorito, Jr., MAI, MRICS By: Diana L. Ernst Principal Associate Virginia State License #4001-002033 Virginia State License #4001 011485

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SUBJECT PROPERTY PHOTOGRAPH

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SUMMARY OF IMPORTANT FACTS AND CONCLUSIONS

Name: Proposed River Club Subdivision Land

Location: Northern and southern line of Bob White Lane, along the eastern banks of Bennett’s Creek and southern banks of Deanes Branch, south of U.S. Route 17 and west of Shoulders Hill Road in the Bennett’s Creek area.

Address: 413.442 Gross Acres Planned for 377 Single-Family Lots North and South Side of Bob White Lane Suffolk, VA 23435

AAG File #: 12-084A Date of Value: March 31, 2012 Date of Property Visit: March 31, 2012 Date of Report: April 16, 2012

Appraisal Report Format: Summary Report

Property Rights Appraised: Fee Simple Estate

Tax Parcel #s: 12*23 (Account 302082000) and 12*25 (Account 302081000)

Ownership: Riverclub, LLC (L.M. Sandler and Sons) per the City of Suffolk records. According to the client, the property was transferred via foreclosure sale on March 8, 2012. The current owner is an entity of Cygnus Capital. Details of the sale are not known.

Current Aggregate Real Estate Taxes: $113,192.17???

Zoning: RL, Residential Low Density District and RR, Rural Residential District

Highest and Best Use: As vacant: Hold in speculation for future residential development

Estimated Marketing and Exposure Time: 12 to 24 months

Subdivision & Property Overview: L.M. Sandler and Sons acquired the property in June 2004 (Contract dated September 2002). Sandler proposed to develop the site with 377 single-family residential lots in a cluster development. The gross acreage is 413.442 acres and developable acreage (net of wetlands and buffers) is 291.572 acres. Proposed lots will range from 7,150 to 54,646 square feet and average 13,922 square feet. There is approximately 34.045 acres located along the southern line of Bob White Lane with the remainder of the site on the northern side. The site also has frontage along the eastern banks of Bennett’s Creek and the southern banks of Deanes Branch. There are approximately 62.85 acres of wetlands and 59.02 acres designated at RPA buffers. An additional 84.57 acres of open space areas are planned.

According to officials with the City of Suffolk Planning Department, the Preliminary Subdivision Plan was approved in October 2004 with a Conditional Use Permit. This approval allows for a cluster development with 124% bonus density (377 lots – overall density of 1.29 lots/units per net acre). According to documents on file with the City, this approved plan is valid through July 2014. The allowable lots

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permitted, per the underlying zoning in place, is 305 lots (1.05 logs/units per net acre).

Residential Market Summary: Since the 3rd quarter of 2008, demand for residential development land was weakened and residential prices have fallen in response to the unstable economy. Pockets in the region are seeing activity, especially developments in Virginia Beach and Chesapeake with “affordable” pricing and those that are well located. The subject land is located in an area targeted for continued growth and is proximate to Downtown Suffolk. Developments in Suffolk have generally had below average overall absorption during the unstable housing market and increased fuel costs. The subject site has average access to roadways, employment centers, military installations and services. Population is expected to continue to increase over the next five years, which should bode well for the subject. The trends in the market are uncertain presently. Upside is forecast over the long term, but near term demand is not considered strong.

Value Conclusion:

Value Premise Property Rights Appraised Valuation Date Value Estimate Market As Is Fee Simple March 31, 2012 $7,200,000

The above value conclusions are subject to specific development plans provided to the appraisers. Should these plans significantly deviate, we reserve the right to amend this report.

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PART TWO – PREMISES OF THE APPRAISAL

ASSUMPTIONS AND LIMITING CONDITIONS

General Assumptions

1. The owner of record is assumed to have a free and clear fee simple title with no encumbrances that cannot be cleared through normal channels.

2. The information on which this appraisal is based has been obtained from sources normally used by Axial Advisory Group, LLC and is considered to be reliable, but is in no sense guaranteed.

3. The information furnished by others is believed to be reliable. No warranty is given for its accuracy.

4. Axial Advisory Group, LLC reserves the right to alter its opinion of value on the basis of information withheld or not discovered in the normal course of a diligent investigation.

5. The appraisers assume no responsibility for the legal description or matters of a legal nature affecting the property or the title thereto. The appraisers do not render any opinion as to title, which is assumed to be good and marketable.

6. Responsible ownership and competent property management are assumed.

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

8. It is assumed that all applicable zoning and use regulations and restrictions have been complied with, unless a non-conformity has been stated, defined and considered in the appraisal report.

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

10. The appraisers are not required to give testimony or appear in court because of having made this appraisal with reference to the property in question, unless arrangements have been previously made therefore. The fee charged for this appraisal does not include payment for court testimony or for further consultation.

11. No opinion of an engineering nature is intentionally expressed or implied and no responsibility is assumed for matters of this nature.

12. No survey was made especially for this appraisal. Property lines, area, etc., of record or otherwise provided, are assumed to be correct.

13. No engineering survey has been made by the appraisers. Except as specifically stated, size and area were taken from sources considered reliable and no encroachment of real property improvements is assumed to exist.

14. Maps, plats and exhibits are for illustration only as an aid in visualizing matters discussed within the report. They should not be considered as surveys or relied upon for any other purpose.

15. It is assumed that there are no hidden or unapparent conditions of the property, subsoil or structures that render it more or less valuable. No responsibility is assumed for such conditions or for arranging for engineering studies that may be required to discover them.

16. No opinion is expressed as to the value of subsurface oil, gas or mineral rights. The property is not subject to surface entry for the exploration or removal of such materials except as is expressly stated.

17. Disclosure of the contents of the appraisal is governed by the Bylaws and Regulations of the professional organizations with which Axial Advisory Group, LLC is affiliated.

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18. Acceptance of and/or use of this report constitutes acceptance of these assumptions and limiting conditions.

19. This report is intended to comply with the Code of Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute. It is further intended to comply with the Uniform Standards of Professional Appraisal Practice (USPAP) and the guidelines set forth by the Financial Institution's Reform, Recovery and Enforcement Act of 1989 (FIRREA).

Limiting Conditions

1. Possession of this report, or a copy, does not carry with it the right of publication.

2. This is a summary appraisal report, and only a summary of our research, analysis, and conclusions are presented herein. This report is intended to comply with the reporting requirements set forth under Standard Rule 2 of the Uniform Standards of Professional Appraisal Practice for a summary appraisal report. As such, most sections of this report present only summary discussions of the data, reasoning, and analysis used. Supporting documentation concerning the data, reasoning, and analysis is contained in our file. The depth of discussion contained in this report is specific to the needs of the client and for the intended use stated above. We are not responsible for unauthorized use of this report.

3. Neither all nor any part of the contents of this report (especially any conclusions as to value, identity of the appraisers or firm with which they are connected or any reference to the Appraisal Institute or the MAI or SRA designations) shall be disseminated to the public through the advertising media or any other public means of communication without the prior written consent and approval of Axial Advisory Group, LLC and the signatories of the report. Acceptance of and/or use of this report constitutes acceptance of these restrictions.

4. The distribution, if any, of the total valuation in this report between land and improvements applies only under the stated program of utilization. The separate allocations for land and buildings must not be used in conjunction with any other appraisal and are invalid if so used.

5. The forecasts, projections or operating estimates contained herein are based upon current market conditions, anticipated short term supply and demand factors and a continued stable economy. These forecasts are, therefore, subject to changes in future conditions.

6. Load bearing capacity of subsoil is assumed to be adequate for the present utilization, but no borings or engineering studies have been made especially for this appraisal and the value conclusion could be affected by such information.

7. The appraisers have not been supplied with occupancy permits. No responsibility or representation is assumed or made for any costs associated with obtaining same or for any deficiencies discovered before or after they are obtained.

8. The parties who visited the subject property found no obvious evidence of structural deficiencies except as stated in this report; however, no responsibility for hidden defects or conformity to specific governmental requirements, such as fire, building and safety or occupancy codes, can be assumed without provision of specific professional or governmental inspections.

9. No termite inspection report was made available. The parties who visited the subject property found no significant evidence of termite damage or infestation.

10. Unless otherwise stated in this report, the appraisers make no representation or warranties as to the adequacy or condition of appliances, electrical systems, plumbing and heating, air conditioning, presence of insulation, adequacy or condition of structural systems or any other subsystem within the property. The appraisers assume no responsibility for any costs incurred to discover or correct any deficiencies present in the property.

11. Unless otherwise stated, no consideration in the valuation process has been given to mineral deposits (oil, gas, coal, gravel, etc.) or timber, if any, that may be found on the subject.

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12. Unless otherwise stated in this report, the existence of hazardous material, which may or may not be present on the property, was not observed by the appraisers. The appraisers have no knowledge of the existence of such materials on or in the property. The appraisers are not qualified to detect such substances. The presence of substances such as asbestos, urea-formaldehyde foam insulation or other potentially hazardous materials may affect the value of the property. The value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for any such conditions or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, if desired.

13. Unless otherwise stated, this report has not considered the impact of the Americans with Disabilities Act (ADA) on the subject with respect to general compliance and renovation costs. Should a report be provided which indicates a required renovation, we reserve the right to amend this report.

14. The appraisers have prepared this report in compliance with the Competency Provision explicitly detailed in the Uniform Standards of Professional Appraisal Practice (USPAP). The appraisers are fully experienced in the appraisal of this product type (see Qualifications).

15. The market conditions from which any prospective value opinion is estimated is based on available factual data and intended to reflect current expectations and perceptions of market participants. The appraiser(s) cannot be held responsible for any unforeseen events that alter market conditions prior to the effective date of the appraisal.

16. No timber or crop values are estimated.

EXTRAORDINARY ASSUMPTIONS AND HYPOTHETICAL CONDITIONS

The value conclusions are subject to specific development plans and budgets provided to the appraisers from the client. Should these plans significantly deviate, we reserve the right to amend this report.

PURPOSE OF THE APPRAISAL

The purpose of this appraisal is to describe the data and analysis that lead to logical and supportable estimates of market and liquidation values in the subject property as of the effective valuation date.

INTENDED USE AND INTENDED USER OF THE APPRAISAL

The intended use of this appraisal is to assist Cygnus Capital and ownership in matters relating to The City of Hampton real estate tax assessments. Mr. Christopher Swann of Cygnus Capital and ownership are the intended users. No other uses or users are intended by the appraisers.

DATE OF SITE VISIT

The subject property site was visited on a few occasions, the most recent occurring on March 31, 2012.

DATE OF VALUE

The date of value is as of March 31, 2012.

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SCOPE OF WORK

The scope of this appraisal assignment is to conduct the investigations necessary to gather sufficient data from which an opinion of value can be derived.

A visit of the property and its neighborhood was conducted to determine the physical features and condition of the subject and the environment in which it is located. A search of municipal records has been completed to ascertain the current and historical assessment and ownership data regarding the property. Contacts were made with other municipal authorities (public works and utilities, zoning administration, planning, and the like) to determine compliance or noncompliance to local, state and federal regulations.

Properties similar to the subject were explored throughout the market area to determine existing and proposed inventory, supply and demand and marketability of properties within the subject classification. A thorough research effort was conducted to extract market data to be used in the application of the traditional approaches to value. Several area residential brokers and other builders were interviewed.

The most pertinent of this data has been reported and every effort was made to verify the authenticity of this information from public records and personal interviews. To the best of our ability, the research, analysis and interpretation of the information in the marketplace was completed in accordance with sound appraisal principles and the opinions and conclusions of value are considered to be reasonable and reliable.

The subject is a proposed residential development to contain 377 single-family lots on 413.442 gross acres. Although the property has preliminary subdivision approval, there are no plans to develop the property at the present time and the market does not justify near term development. The applicable approach is the sales comparison (raw land sales) approach. Typically if an owner/developer has plans to develop a site with a cost budget and/or the market is strong enough to justify immediate development with a quantifiable development plan, a modified income approach (subdivision or development approach) would also be utilized to conclude the market value. The approach employed is considered appropriate for the intended use of the report. Furthermore, the methodology employed is considered appropriate for the appraisal problem the client is seeking to solve.

DEFINITIONS AND TERMS

See “Glossary of Terms” in the Addenda of this report.

PROPERTY RIGHTS APPRAISED

The purpose of this appraisal is to describe the data and analysis that lead to logical and supportable estimate of market value as of the effective valuation date.

TYPE OF REPORT

This is a summary appraisal report, and only a summary of our research, analysis, and conclusions are presented herein. This report is intended to comply with the reporting requirements set forth under Standard Rule 2 of the Uniform Standards of Professional Appraisal Practice for a summary appraisal report. As such, most sections of this report present only summary discussions of the data, reasoning, and analysis used. Supporting documentation concerning the data, reasoning, and analysis is contained in our file. The depth of discussion contained in this report is specific to the needs of the client and for the intended use stated above. We are not responsible for unauthorized use of this report.

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PART THREE – PRESENTATION OF DATA

IDENTIFICATION OF THE PROPERTY

Name: Proposed River Club Subdivision Land

Address: 413.442 Gross Acres, Bob White Lane Suffolk, VA 23435

Location: Northern and southern line of Bob White Lane, along the eastern banks of Bennett’s Creek and southern banks of Deanes Branch, south of U.S. Route 17 and west of Shoulders Hill Road in the Bennett’s Creek area.

Legal: See Addenda

Tax Parcel #s: 12*23 (Account 302082000) and 12*25 (Account 302081000)

OWNERSHIP AND HISTORY OF THE PROPERTY

Owner of Record: River Club, LLC (L.M. Sandler and Sons) per the City of Suffolk records.

According to the client, the property was transferred via foreclosure sale on March 8, 2012. The current owner is an entity of Cygnus Capital. Details of the sale are not known.

Grantor of Prior Sale: Charles V. McPhillips, William C. Hagan, II, William A. Prince, Donald F. Price and Edward V. Power as trustees of The James Barry Robinson Home of Boys Trust

Last Known Transfer Dates: No arm’s length transfers in prior three years

Under Contract/Listed For Sale: Not that the appraisers are aware of.

Comments/History: The original contract price was $7,120,000 when L.M. Sandler and Sons acquired the subject property.

L.M. Sandler and Sons acquired the property in June 2004 (Contract dated September 2002). Sandler proposed to develop the site with 377 single-family residential lots in a cluster development. The gross acreage is 413.442 acres and developable acreage (net of wetlands and buffers) is 291.572 acres. Proposed lots will range from 7,150 to 54,646 square feet and average 13,922 square feet. There is approximately 34.045 acres located along the southern line of Bob White Lane with the remainder of the site on the northern side. The site also has frontage along the eastern banks of Bennett’s Creek and the southern banks of Deanes Branch. There are approximately 62.85 acres of wetlands and 59.02 acres designated at RPA buffers. An additional 84.57 acres of open space areas are planned.

According to officials with the City of Suffolk Planning Department, the Preliminary Subdivision Plan was approved in October 2004 with a Conditional Use Permit. This approval allows for a cluster development with 124% bonus density (377 lots – overall density of 1.29 lots/units per net acre). According to documents on file with the City, this approved plan is valid through July 2014. The allowable lots permitted, per the underlying zoning in place, is 305 lots (1.05 logs/units per net acre).

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REGIONAL SUMMARY

The subject is located in what is commonly referred to as Hampton Roads. The Hampton Roads area is part of the Norfolk-Virginia Beach-Newport News Metropolitan Statistical Area (MSA). The MSA is the 31st largest in the United States and the largest between Washington D.C. and Atlanta, Georgia. It consists of 17 Virginia cities and counties and one county in North Carolina. These municipalities are identified as Chesapeake, Franklin, Gloucester County, Hampton, Isle of Wight County, James City County, Mathews County, Newport News, Norfolk, Poquoson, Portsmouth, Southampton County, Suffolk, Surry County, Virginia Beach, Williamsburg, York County and Currituck County (NC). It is anticipated that Camden County and Elizabeth City, both in North Carolina, will be added after the Census in 2010.

The MSA is divided into northern and southern sections by the Hampton Roads harbor and the James River. The northern section is known as the Peninsula; while the southern section is locally referred to as the Southside. The Southside has a total area of 2,247 square miles and the Peninsula has a total of 699 square miles. When combined with Currituck County, the MSA encompasses 3,208 square miles (4,477 square miles including water area).

Cities and counties in the MSA were initially formed around the Hampton Roads harbor, which is at the mouth of the Chesapeake Bay. It is the world's largest ice-free harbor and the second busiest port on the East Coast of the United States. Consequently, the region has developed into one of the more predominant shipping centers in the world. Hampton Roads boasts the world's largest U.S. Naval Base and the country's largest concentration of shipyards.

Population in the MSA approximates 1.7 million. The largest municipality is Virginia Beach with about 437,000 residents. Chesapeake and Norfolk each have between 223,600 and 237,000 residents while the cities of Hampton and Newport News have about 147,000 and 182,000 residents, respectively. The remaining cities and counties are somewhat smaller. Population is projected to increase 0.21% annually over the next several years.

Unemployment rates are consistently below U.S. averages and have historically hovered near the state average. As of July of 2011 the MSA’s unemployment is at 7.0% while the state is at 6.2% and nationally, the rate is at 9.3%. The median household income for the MSA is $56,479 and the median household income for the state is $61,347. In 2015, it is expected that median household income will be $63,881.

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The Hampton Roads area is at the eastern terminus of Interstate 64 which provides access to the state capital, Richmond, and points west. U.S. Routes 60, 460, and 58 are important east-west highways providing access to other areas within Virginia and to Interstates 95 and 85, the primary north-south linkages. The major north-south highways include U.S. Route 17 and U.S. Route 13. Many interconnecting primary state highways supplement these major routes. The James River Bridge, the Hampton Roads Bridge-Tunnel (Interstate 64) and the Monitor- Merrimac Memorial Bridge Tunnel (Interstate 664) provide access from the Southside to the Peninsula and vice versa. Currently, the state legislature has funded a study for a fourth crossing. Construction would not begin for another 3 to 5 years and is estimated to take 7 to 10 years to complete.

Traditionally, shipbuilding/repair, port activities, and tourism have been the dominant industries. However, the high concentration of military personnel seems to drive the economy. Major military installations include the Norfolk Naval Base, Little Creek Amphibious Base, the Naval Air Station-Oceana, Naval Weapons Station-Yorktown, Langley Air Force Base, United States Coast Guard Reserve Training Center-Yorktown, Fort Eustis, and Fort Monroe. During the summer 2005, the BRAC Commission (the Base Realignment and Closure Commission) decided to close Fort Monroe and move 2,300 of its jobs to Fort Eustis. Fort Monroe is scheduled to close in 2011 and various committees are being formed to study how to utilize the property.

In October of 2009, International Paper Company (IP) announced their decision to close the paper mill outside of Franklin, Virginia, in early 2010. This closing eliminated about 1,100 jobs. The City of Franklin is a predominantly rural portion of the MSA and the repercussion from this announcement continues to be felt throughout the region especially in the southwestern portion where Franklin is located; however, given the sheer size of the region’s employment base, the overall economy appears capable of absorbing the blow without a tremendous downturn. The recent announcement of the Pentagon’s possible decision to disestablish the Joint Forces Command (JFCOM) has caught many by surprise. One of the military’s 10 combatant commands, JFCOM trains troops from all services to work together for specific missions. Its headquarters are at Norfolk Naval Station, and it has a command center in northern Suffolk. JFCOM’s command center in Suffolk’s Lake View Technology Park off College Drive contains 640,000 square feet and houses JFCOM’s modeling and simulation operations, a fledgling technology that uses high-powered computers to simulate combat for training purposes and for command and control operations. JFCOM employs nearly 6,000, many of them civilian contractors. Virginia Governor Bob McDonnell has estimated that the JFCOM closing would cost Virginia 10,000 jobs, directly and indirectly. The decision to close JFCOM has not yet been finalized. The impact of disestablishment remains to be seen, but clearly this decision will create substantial job loss in associated businesses such as suppliers and contractors.

It is projected that the Region will weather the current recession better relative to the rest of the nation. Its diverse economic structure is a key factor. Unemployment rates are up, but are within the state’s average rate which has the lowest percentage of the largest 13 states and is well below the national rate. Job growth has moderated, but there continues to be growth with companies announcing expansions and/or locating in the area. The housing market has slowed and median pricing is down, but there continues to be development and sales of homes. In a recent article, Forbes.com ranked the Virginia Beach-Norfolk-Newport News, VA-NC MSA as the sixth best metro area in the county to ride out the recession (based on foreclosures/homes under water, median home equity, job growth, unemployment rate and median income).

According to Moody’s Economy.com, the Hampton Roads Region (Virginia Beach-Norfolk-Newport News, VA- NC MSA) had fallen into recession in January 2009. As of February 2009, 97% of the MSAs in the nation were “In Recession”. Moody’s Economy.com classifies the current economic status using four categories: “In Recession”, “At Risk”, “Recovery”, or “Expansion”. The evaluation of recession status is based on a six month test of either contraction or expansion. Moody’s announced the Hampton Roads MSA to be “Moderating to Recovery” in March of 2010 and continues to evaluate the MSA under the same category in 2011.

Market participants generally acknowledge when the market is moving away from its peak when 1) returns are not as high; 2) vacancy rates are up and 3) rental rates are declining. Signs that the Hampton Roads market is in its recessionary phase are self-evident given that all of the above factors are occurring. Most agree that it is very difficult to determine the bottom of the real estate cycle. Generally speaking bottoms of cycles are generally murky and tend to flounder a bit before moving to the recovery phase. In any case, most aspects of the real estate market are being affected, which will likely continue through the remainder of 2011 and most likely into 2012.

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The Norfolk-Virginia Beach-Newport News Metropolitan Area will continue to be one of the more significant and dominant metropolitan areas throughout the Commonwealth of Virginia and is the dominant metropolitan areas in the southern portion of the state. The physical features of the region offer a positive environment for residents and businesses alike. Cultural, social, recreational, and educational opportunities are readily available to the influx of new households into the region. New and existing are also supported by an excellent network of transportation routes, the physical features bolstering the tourist industry, and one of the largest and most aggressive port facilities in the world. The Mid-Atlantic location should continue to attract residents and businesses to this region.

Critics of the Hampton Roads marketplace point to the fact that the economy is too heavily dependent upon government and military spending. In the past, this dependence has created “boom and bust” years depending largely upon the region's capture of defense dollars. This reliance has long been recognized as a weakness of the region, and in an effort to minimize this reliance on defense spending, the region has diversified substantially. In fact, several new industries have chosen Hampton Roads over the past several years. The emergence of the port into one of the most important shipping centers on the East Coast and the aforementioned job growth illustrate the quality of life in the region and the caliber of the work force. The Hampton Roads region is expected to grow, albeit at a moderate pace, and to continue to gain in importance as a significant metropolitan area in Virginia and on the Eastern Seaboard.

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NEIGHBORHOOD SUMMARY

This section will focus on the market area surrounding the subject and describe its general characteristics. The subject is located along the eastern banks of Bennetts Creek and southern banks of Deanes Branch, south of US Route 17 and west of Shoulders Hill Road in the Bennett’s Creek Area on the southern and northern sides of Bob White Lane. Suffolk is a rapidly growing, independent, incorporated city. It has the largest land size of any city in the region. Its population according to the 2010 Census was estimated at 84,585 (U.S. Census Bureau, Census 2010 Summary). This represented a 32.84% increase from 2000. The subject is part of an emerging, suburban area. Median household income is $63,544 (average is $72,222). There are approximately 34,490 housing units with approximately 65% of the housing units being owner-occupied (median home value is $196,212; average home value is $231,676).

Suffolk is an independent, incorporated city located in southwestern Hampton Roads. It is bound by Isle of Wight County and the James River to the north, Portsmouth and Chesapeake to the east, North Carolina to the south, and Isle of Wight to the west. The north and northeastern portion of the City is suburban. The central portion is the original town center. The remainder of the city is predominantly rural.

The subject is located in northeastern Suffolk. The boundaries of the neighborhood are generally considered to be as follows.

• The Hampton Roads Harbor to the north • The Western Branch of the Nansemond River to the west • Chesapeake/Portsmouth boundary lines to the east • Portsmouth Boulevard to the south

The neighborhood can best be described as an emerging suburb in the growth stage of its life-cycle. Development is low to medium-density. There is a large amount of land that remains undeveloped. The terrain is basically level and public utilities are available to most parcels. Soil hydration and load-bearing capacity are believed to be adequate to support most forms of commercial development based on the surrounding land uses.

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The City of Suffolk has jurisdiction over most municipal functions. It assesses real estate and collects taxes. It also establishes a master plan and zones property. The subject neighborhood includes an appropriate mix of residential and commercial zoning. Fundamentally, the City is promoting controlled growth in its emerging suburban areas and limiting growth in rural areas.

The neighborhood is well connected to the rest of the region. U.S. Route 17 is a major east/west thoroughfare through the area, although in other areas the road runs north/south. Route 17 connects with the James River Bridge (to Hampton/Newport News/Williamsburg) to the north and downtown Suffolk to the south. Interstate 664 is a major north/south artery. The opening of I-664 and the Monitor-Merrimac Bridge-Tunnel (western part of the area’s beltway) in the early 1990’s opened the area to suburban development. Other major transportation routes in the subject neighborhood include Shoulders Hill Road (Route 626) and Pughsville Road (Route 659). Access is considered good in the vicinity. Social and cultural activities are available throughout the neighborhood. The area is accessible from other portions of Hampton Roads and continues to grow. Various road upgrades have been finished in the neighborhood and others are planned as the need arises. There is no commuter rail service, but public bus service is provided by HRT. Norfolk International Airport is 20 to 30 miles to the east and Newport News/Williamsburg Airport is about 30 miles to the north.

Demographics within a 1, 3, and 5 mile radius of the subject property are summarized below.

1 Mile: 3 Miles: 5 Miles: 2010 Demographics: Total Population 2,346 17,817 55,086 Total Households 772 6,385 19,908 Owner Occupied Housing Units 724 5,063 15,242 Renter Occupied Housing Units 48 1,322 4,666 Median Household Income Average Household Income Per Capita Income

2011 Demographics: Total Population 2,409 17,817 55,636 Total Households 792 6,471 20,108 Owner Occupied Housing Units 738 5,027 15,108 Renter Occupied Housing Units 54 1,444 5,001 Median Household Income $81,975 $61,155 $76,237 Average Household Income $96,690 $75,814 $88,207 Per Capita Income $31,307 $27,638 $32,071

2016 Census Demographics: Total Population 2,637 18,817 58,293 Total Households 851 6,833 21,122 Owner Occupied Housing Units 794 5,291 15,974 Renter Occupied Housing Units 56 1,543 5,138 Median Household Income $90,778 $73,567 $76,237 Average Household Income $109,937 $84,064 $88,207 Per Capita Income $35,058 $30,626 $32,071

Current year data is 2010, 5 year projected data is for the year 2016.

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The neighborhood’s land uses basically consist of commercial along the main roadways and residential along secondary side streets. Bennett’s Creek Crossing, a Farm Fresh anchored shopping center, opened during the 4th quarter of 2006 at the southwest corner of Shoulders Hill Road and U.S. Route 17 with Walgreens and Bank of Suffolk outparcels. The immediate area has seen a great deal of development recently with the emergence of the Harbourview Planned Development. Harbourview is a PUD that includes residential (attached housing such as condominiums as well as single-family development), a championship caliber golf course called The Riverfront, retail commercial uses, office, industrial and a medical complex with an emergency center. With respect to residential, there is a mix of price points. Most of the dwellings were completed in the last 10 years. Within the neighborhood there are reportedly 15 approved/proposed/developing residential subdivisions with over 2,000 housing units. Curb appeal and pride of ownership are generally above average in all residential developments.

The neighborhood is still growing and land is available. The subject is immediately surrounded by newly developed residential, retail commercial uses, as well as vacant land. No negative influences stemming from location were noted during our property visit.

In summary, the subject is located in an emerging suburban area. The neighborhood is in the growth stage of its life cycle. The proposed project will be compatible with the surroundings. No adverse influences should result from the location.

CENSUS TRACT

According to maps provided by the United States Bureau of the Census, the subject property is within Census Tract #0752.00.

REAL ESTATE ASSESSMENT AND TAXES

Tax Jurisdiction: City of Suffolk

Tax Parcel #: 12*23 (Account 302082000) and 12*25 (Account 302081000)

Tax Rate per $100 of Value: $0.97; According to the proposed 2012/2013 City budget, the tax rate will remain the same.

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Equalization Rate: 100%

Reassessment: Annual

Assessment and Taxes – 2011/2012

Tax Parcel Land Improvements Total Tax Rate Taxes Penalties Interest 12*23 $8,193,500 $0 $8,193,500 $0.97 $79,476.95 $3,973.85 $1,821.27 12*25 $4,245,200 $0 $4,245,200 $0.97 $41,178.44 $2,062.06 $945.07 Total $12,438,700 $0 $12,438,700 $0.97 $120,655.39 $6,035.91 $2,766.34

Assessment and Taxes – 2012/2013

Tax Parcel Land Improvements Total Tax Rate Taxes 12*23 $7,783,800 $0 $7,783,800 $0.97 $75,502.86 12*25 $4,033,000 $0 $4,033,000 $0.97 $39,120.10 Total $11,816,800 $0 $11,816,800 $0.97 $114,622.96 Source; City of Suffolk Real Estate Assessor

According to the Suffolk Treasurer’s office, taxes are in arrears since the December 5, 2011 payment. Total owed, including penalties and interest, as of April 13, 2012 is $69,161.39. If the property transfers, delinquent taxes will be due. This report assumes that all delinquent taxes paid.

Assessments and taxes are slated to be reduced by approximately 5.0% from the 2011/2012 tax year. According to the City, the site is currently assessed as raw land with approvals in place or at $39,993.90 per approved lot ($31,344.30 per approved lot for 2012/2013 tax year). As future subdivision/development of the individual lots/units occurs, an individual per lot/unit assessment will be applied.

ZONING AND OTHER RESTRICTIONS

Zoning Authority: City of Suffolk

Subject Zoning: RR, Rural Residential RL, Residential Low Density

Purpose: The Rural Residential District encourages the continuation of low-density rural use of non-prime agricultural lands and provides a buffer between agricultural lands and urbanizing areas.

The Residential Low Density District provides areas for low density single- family uses which provides a buffer between A, RR, RE and the more intensive residential zoning district classifications.

Permitted Uses: Primarily single-family residential and residential subdivisions.

RR District Regulations RL District Regulations Minimum Lot Size: 1 acre 30,000 square feet Maximum Density: 1 lot/acre 1.5 lots/acre Minimum Front Setback: 45 feet 35 feet Minimum Rear Setback: 30 feet 30 feet

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Minimum Side Yard: 20 feet 15 feet Minimum Lot Width: 200 feet 100 feet Minimum Frontage: 150 feet 80 feet Maximum Building Height: 45 feet 45 feet Zoning Change: Not likely Not likely

The subject property is zoned RR, Rural Residential and RL, Rural Low-Density by the City of Suffolk. The subject appears to be a legal and conforming use based in the city’s Cluster Development regulations. According to officials with the City of Suffolk Planning Department, the Preliminary Subdivision Plan was approved in October 2004 with a Conditional Use Permit. This approval allows for a cluster development with 124% bonus density (377 lots – overall density of 1.29 lots/units per net acre). According to documents on file with the City, this approved plan is valid through July 2014. The allowable lots permitted, per the underlying zoning in place, is 305 lots (1.05 logs/units per net acre).

The Conditional Use Permit was granted with certain conditions imposed. The owner/developer is required to pay a portion of the costs for off-site road improvements to Shoulders Hill Road and Bob White Lane. Additionally, $265,000 in cash proffers are required to be paid to the City for schools.

The subject is affected by the Chesapeake Bay Preservation Act. Portions of the parcel are designated as being in the Resource Protection Area (RPA). A bays cape buffer zone along all wetland areas is required and included in the developer’s Conceptual Development Plan. Any of the wetlands that will be disturbed during construction will be replanted according to Chesapeake Bay Preservation guidelines.

We know of no other public or private restrictions which would materially affect value. We are not legal experts. If additional information specific to the subject is necessary, it is recommended that a qualified attorney and/or the municipality be contacted.

PROPERTY DESCRIPTION

Information was taken from municipal records, supplied surveys and site plans, our own property visit, and/or through an interview with ownership. The following describes the subject property.

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Description of Site

Address: 413.442 Gross Acres, Bob White Lane Suffolk, VA 23435 Location: Northern and southern line of Bob White Lane, along the eastern banks of Bennett’s Creek and southern banks of Deanes Branch, south of U.S. Route 17 and west of Shoulders Hill Road in the Bennett’s Creek area. Subdivision Overview: L.M. Sandler and Sons acquired the property in June 2004 (Contract dated September 2002). Sandler proposed to develop the site with 377 single-family residential lots in a cluster development. The gross acreage is 413.442 acres and developable acreage (net of wetlands and buffers) is 291.572 acres. Proposed lots will range from 7,150 to 54,646 square feet and average 13,922 square feet. There is approximately 34.045 acres located along the southern line of Bob White Lane with the remainder of the site on the northern side. The site also has frontage along the eastern banks of Bennett’s Creek and the southern banks of Deanes Branch. There are approximately 62.85 acres of wetlands and 59.02 acres designated at RPA buffers. An additional 84.57 acres of open space areas are planned.

According to officials with the City of Suffolk Planning Department, the Preliminary Subdivision Plan was approved in October 2004 with a Conditional Use Permit. This approval allows for a cluster development with 124% bonus density (377 lots – density of 1.29 lots/units per net acre). According to documents on file with the City, this approved plan is valid through July 2014. The allowable lots permitted, per the underlying zoning in place, is 305 lots (1.05 lots/units per net acre).

During site development, public water and sewer will be extended to the site and available while all other public utilities (electricity and natural gas) are currently available. The streets will reportedly be publicly dedicated rights-of-way. Amenities: Frontage along the banks of Bennett’s Creek and Deanes Branch. The proposed development will have areas of open space and six (6) Bumps. Proposed Lot Summary: See Addenda Topography: Generally at street grade with level to uneven terrain. Portions of the northern site have been previously cultivated agricultural land and other areas are wooded. The site on the Southside of Bob White Lane has uneven terrain and is heavily wooded. Drainage: Appears adequate. There are drainage ditches along both sides of Bob White Lane. Utilities: All utilities are/will be available/extended to the site during site development. Easements: Typical Encroachments: None noted Frontage: Subject site has frontage along the northern and southern lines of Bob White Lane. Also has frontage along Bennett’s Creek and Deanes Branch. Visibility/Accessibility: Average within the subject neighborhood Shape: Irregular Site Improvements: None Special Flood Hazard Zone: According to Flood Map Panel #5101560130D, the subject site is in Zone X, areas outside the 100- and 500-year floodplain; Zone X (shaded), areas of 500-year flood or 100-year flood with average depths of less than 1 foot; and Zone AE, areas with

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the base flood elevation determined. Map effective November 16, 2011.

Flood maps are not site specific. We are not qualified to confirm the location of the subject property in relation to flood hazard areas based on the FEMA Flood Insurance Rate Maps or other surveying techniques. It is recommended that the client obtain a confirmation of the subject’s flood zone classification from a licensed surveyor. Seismic Zone: We are not qualified to confirm the location of the subject property in relation to seismic hazards. It is recommended that the client obtain confirmation from the appropriate professional. Soils: A soil report has not been provided. We are not qualified to confirm the adequacy of the subject soils. In the absence of such a report, the soil bearing capacity is assumed to be adequate. Environmental Issues: A Phase I Environmental Report has been provided by New Millennium Environmental, Inc. (dated October 31, 2002) for the northern portion of the site. The following was revealed during the survey:

• The site appears to have a history of agricultural use. No apparent indications of hazardous substance contamination that might pose a significant threat to human health or the environment were noted. However, there is a potential for pesticide and/or heavy metal contamination and is common in soils at former agricultural areas. With no evidence of chemical storage or mismanagement, further investigation is not warranted. • There was some solid waste dumping near site structures and the tree lines during the survey. The dumping did not appear to pose a threat. • Three ASTs were observed to be on site. The tanks are believed to have been used for agricultural purposes. Virginia law requires closure per applicable regulations. A letter dated March 25, 2003 from LandMark Design Group indicates that the DEQ requested additional sampling during the closure of the tanks. All sampling undertaken indicated that any contamination was below detection limits.

It should also be noted that the site has frontage along Bennett’s Creek and Deanes Branch. Approximately 62.85 acres of wetlands and 59.02 acres of RPA Buffer areas are indicated. A bayscape buffer zone along all wetland areas is required and included in the developer’s Conceptual Development Plan. Any of the wetlands that will be disturbed during construction will be replanted according to Chesapeake Bay Preservation guidelines.

This report assumes no environmental contamination.

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SUPPLY AND DEMAND SUMMARY

An analysis of the residential market is discussed in this section of the report. First, an overall discussion of the national residential market is provided, followed by a discussion of the general market area. The subject is located in the City of Portsmouth which has been highlighted in the charts to follow. Information was taken from the 2012 Hampton Roads Retail, Office, & Residential Market Survey published by the Old Dominion University E.V. Williams Center for Real Estate and Economic Development (ODU-CREED), Source Inc., Residential Databank, RealtyTrac.com, REIN and various market participants.

The national residential market continued to disappoint through 2011. Even as short term interest rates have fallen to historic lows, financing is extremely hard to obtain. Inventories continued to increase and average marketing times are longer in many markets.

According to a Housing Intelligence article dated February 24, 2012, nationally, the economy is showing signs of improvement. Unemployment appears to be decreasing with initial jobless claims at the lowest level since March 2008. The concerns of Europe’s economic struggles are subsiding with the second Greek bail-out put in place alleviating the major concerns of a default. This can be seen as the stock market has been trading above 13,000 numerous times in recent days, which is a level that has not been seen before the recession in 2008. However, caution is advised as energy prices are on the rise and could significantly impact the positive signs that have been seen lately.

Another indication of national recovery is the 20% down payment rule for qualified residential mortgages drowning in opposition. According to an article written in June of 2011 on HousingWire.com, 240 members of Congress have signed letters advocating a reduction of the current down payment qualification. Many believe that the 20% qualification would only add to the problem, rather than help with an economic recovery.

According to Residential Databank Inc., the overall average closing price of a new construction home in Hampton Roads is $309,238 as of the year-end 2011. This is a decline of 3.40% from one year ago. The average price of a new construction, single family detached home in Hampton Roads was $345,368, which is a decrease of 3.6% from the year-end 2010. The average closing price of a multi-story condominium unit was $261,194, 6.0% decline from one year ago after a 28.6% decline at year-end 2010 from 2009. This decline was due in large part to less expensive product being offered and to aggressive price reductions and alternative marketing strategies. The average closing price of a multi-plex condominium unit was $216,140. This is a decrease of 5.7% from a year ago. The average closing price for a new construction townhome or duplex was $250,440 at year-end 2011, which is a 6.5% decrease from one year ago. Existing home average sales prices declined approximately 5% to $194.900 in 2011. This follows prior declines in 2010 and 2009 of 1% and 5% respectively.

The following table summarizes the median value/pricing for all housing per municipality as of month-end February 2012, according to Zillow.com.

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% Change % Change Municipality Median Price 12 Month Change Month to Month Quarter to Quarter Chesapeake $264,900 2.1% 6.0% 6.2% Franklin $164,900 3.1% -2.9% -10.8% Hampton $169,900 6.3% 1.7% -2.9% Isle of Wight County $229,900 -0.4% -6.2% -18.9% Gloucester County $244,900 -2.0% -2.0% -8.2% James City County $325,000 0.0% 0.0% 2.6% Newport News $165,000 2.5% 0.0% -7.8% Norfolk $177,900 3.0% 3.3% -1.1% Poquoson $310,000 -4.6% -7.5% -13.9% Portsmouth $136,900 1.5% -2.1% -6.9% Smithfield $218,000 0.0% -11.0% -27.3% Suffolk $224,900 4.6% 2.3% -7.5% Southampton County $149,900 0.0% 0.0% -10.5% Surry County $155,000 3.3% 3.4% -8.0% Virginia Beach $248,000 1.2% 3.8% -0.2% Williamsburg $329,000 0.3% 0.3% 3.8% Windsor $231,000 0.0% -3.7% -7.6% York County $299,900 0.3% 0.0% -2.9% Currituck County $379,900 1.3% 1.3% 11.1% MSA $221,900 1.1% 1.3% -1.4% Virginia $228,000 1.4% 0.0% 0.9% US $182,500 1.4% -0.2% -1.8% Source: Zillow.com (as of February 29, 2012)

The number of homes in foreclosure in Hampton Roads continued to fall through 2011 to the lowest levels since 2007, but the number has risen in the first two months of 2012. Much of the reduction during 2011 was due to delays in processing foreclosures due to many of the country’s larger banks and mortgage companies having to suspend proceedings for a period. The government has recently filed a $25 billion settlement with the five largest mortgage lenders. The settlement was over the industry's alleged foreclosure abuses. Although the numbers fell, foreclosures were a drag on the new construction market during 2011 as potential new home buyers succumbed to the “good” deals distressed sales prices brought. Foreclosures are projected to be less of a factor during 2012, but short sales will be a big factor as more owners who are ready to sell will find themselves with under water mortgage balances.

Although foreclosure filings are up month over month in January and February 2012 (up 12% in February from January), they are down from a year ago (19% from those reported in February 2011). Local experts forecast that the number of foreclosures may be up for the short term as there is now a properly functioning foreclosure process with the recent settlement filing. These experts also believe the numbers will remain below those from 2011. Nationwide, foreclosure activity was down slightly from January 2012 and down 8% from a year ago.

In Hampton Roads, the market has also slowed but not as much as in some first tier cities. Locally, the “for sale” market struggles has improved the “for rent” market; however, the rental costs have had upward pressure with the high rental occupancies thus making home ownership an attractive option again. Inventories of attached and detached homes continued to decline in 2011. According to Residential Databank 4Q 2011, “In 2012 foreclosures will be less of a factor as inventories continue to draw down, but short sales will be a big factor as more and more owners who are ready to sell find themselves trapped in homes with underwater mortgage balances.” Market participants will remain cautious in the near term until a clear sign of a sustainable economic recovery is apparent with a robust growth in employment and when gas prices are not at all time highs.

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Local analysts and real estate experts project that recovery will continue to be quicker in Hampton Roads than in other markets. The Hampton Roads economy remained relatively stable when compared to the nation and property in this region was under-valued for many years. Inventories on attached and detached new homes virtually disappeared during 2011. The high-rise condominium market saw a significant increase in sales due to aggressive price reductions and alternative marketing strategies.

The inventory of new homes (all market segments) is below a four month supply while the inventory of existing (resale) homes is at approximately 7.5 month supply. The average time on the market for an existing home rose slightly to 101 days in 2011. The average price for new construction homes in Hampton Roads during 2011 was $309,238, a decline from 2010 of 3.37%. On the Southside, the average closing price of new construction homes was $319,357, down 3.16% from 2010. The average closing price on the Peninsula was down 3.33% to $287,311.

The more affordable dwellings ($175,000 up to $400,000) should continue to do the best for the short term and have lower inventories available. Homes in this range sustained a moderate sales pace over the past year and new developments came on-line and are planned. Currently, the most sought after price range in the market is the “affordable” market or those units base priced below $350,000.

There are currently twelve active-adult (age 55 and over) communities in the Hampton Roads region. Eight are on the Southside and four on the Peninsula in 2011 versus only one community in 2002. It appears that this market segment has stabilized in the past two years. During 2011 there were 172 closings in the communities with an average sales price of $352,054 for detached units (89) and $289,895 for attached units (83).

The market segment hardest hit with the housing downturn is the multi-story elevator served condominium developments. In the Hampton Roads area there are 15 new construction multi-story condominium projects. During 2011 there were 83 closings. As of year-end 2011 there is reportedly 208 built new units available. Based on a similar closing pace of 2011, it would take approximately 30 months to sell these remaining units. The closing pace of 2011 was increased due to developers drastically reducing prices and using alternative marketing techniques (auction at The Residences at the Westin in Virginia Beach).

The affluent buyer appears to be returning to the marketplace as well. There have been 108 closings in the region’s high-end developments (over $500,000) for an increase of 16.3% over the same time period in 2010.

The local residential market has slowed considerably since the end of the last boom market. The chart to follow summarizes the new construction trends for the past 10 years. Permits peaked in 2005, closings in 2004 and average sales price in 2006.

10-Year New Construction Summary – Hampton Roads

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Permits 6,700 6,978 7,274 7,854 7,359 5,035 3,393 2,911 3,100 2,811 Closings 5,097 4,841 5,466 5,128 4,864 4,135 3,318 2,775 2,417 2,350 Avg. Price $215,151 $244,113 $295,114 $363,818 $395,928 $387,116 $361,496 $321,711 $320,040 $309,238 Source: 2012 Hampton Roads Real Estate Market Review

The number of permits issued is down 64.2% from the peak and down 9.3% from the same quarter in 2010. The Peninsula is down 8.8% from 2010 while the Southside is down 9.6% from 2010. The hardest hit areas in the region are York/Poquoson, Southampton County/Franklin and Isle of Wight County where permitting is down 29.1%, 30.4% and 31.4%, respectively, from the same quarter in 2010. Chesapeake recorded the highest number of permits issued with 653, followed by Virginia Beach with 538 and James City County with 351. Overall, closings are down 57% from the peak and 2.8% from 2010. The average closing price of new construction is near that of 2004 at $309,238. This is down approximately 3.4% from 2010 and $21.9% from the peak.

The following table summarizes new construction permitting, closings and average sales price in Hampton Roads by housing type at year-end 2011. The second table summarizes new construction permitting, closings and average sales price by municipality.

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New Construction by Product Type Summary – Year-End 2011

% ∆ % ∆ Average % ∆ Permits Closings From 2010 From 2010 Sales Price From 2010 Southside Detached 1,370 -3.3% 1061 -0.1% $354,537 -2.7% Multistory 42 -53.3% 125 5.0% $266,293 -8.4% Multiplex 140 -27.1% 159 -9.7% $202,874 -5.0% Townhouse/Duplex 269 -14.6% 263 -22.6% $273,072 -7.5% Subtotal Southside 1,821 -9.6% 1,608 -5.1% $319,357 -3.2% Peninsula Detached 674 -3.6% 448 7.4% $323,654 -5.6% Multistory 63 90.9% 35 40.0% $242,984 12.0% Multiplex 20 -63.0% 39 -31.6% $270,223 -2.7% Townhouse/Duplex 233 -22.3% 220 -1.3% $223,385 -1.1% Subtotal Peninsula 990 -8.8% 742 2.8% $287,311 -3.3% Total/Average 2,811 -9.3% 2,350 -2.8% $309,238 -3.4% Source: Residential Databank, Market Report – Hampton Roads Residential New Construction, Fourth Quarter 2011

As can be seen in the following table, total closings, permits and average sales prices in 2011 were down as a whole approximately 2.8%, 9.3% and 3.4% when compared to 2010.

New Construction by Municipality – Year-End 2011

% ∆ % ∆ Average % ∆ Permits Closings From 2010 From 2010 Sales Price From 2010 Southside Chesapeake 653 -9.6% 576 5.7% $298,111 -3.9% Southampton Co./Franklin 32 -30.4% 9 -43.8% $214,861 -4.8% Isle of Wight County 83 -31.4% 63 -33.7% $299,641 -5.6% Norfolk 210 24.1% 150 -9.1% $291,322 -11.7% Portsmouth 46 -25.8% 52 15.6% $190,488 -3.0% Suffolk 259 -14.5% 218 -19.9% $296,328 -1.8% Virginia Beach 538 -8.3% 540 -3.1% $375,554 -0.7% Subtotal Southside 1,821 -9.6% 1,608 -5.1% $319,357 -3.2% Peninsula Gloucester County 105 -3.7% 37 0.0% $238,463 -8.2% Hampton 168 16.7% 130 23.8% $260,309 -1.9% James City County 351 -25.0% 325 -2.7% $327,752 4.2% Newport News 226 23.5% 143 45.9% $221,525 6.2% Williamsburg 35 2.9% 33 50.0% $256,770 -8.9% York County/Poquoson 105 -29.1% 74 -41.3% $322,304 -10.6% Subtotal Peninsula 990 -8.8% 742 2.8% $287,311 -3.3% Total/Average 2,811 -9.3% 2,350 -2.8% $309,238 -3.4% Source: Residential Databank, Market Report – Hampton Roads Residential New Construction, Fourth Quarter 2011

The following table summarizes closings in the Hampton Roads market for new construction in 2010 and 2011. Closings declined for five consecutive years (2006-2011)

The table that follows summarizes new single-family home closings for subdivisions located in Suffolk for 2010 2011.

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2010 and 2011New Home Closings Suffolk Single-Family Subdivisions

2010 – Year End 2011 – Year End Subdivision City # Sold Units/Month Avg. Unit Price # Sold Units/Month Avg. Unit Price Bellharbour Woods S 9 0.75 $317,959 7 0.58 $315,431 Bob White Landing S 14 1.17 $411,064 9 0.75 $419,857 Brewers Meadow S 17 1.42 $309,753 7 0.58 $296,118 Bridlewood Estates S N/A N/A N/A 2 0.17 $446,719 Gables at Riverfront* S N/A N/A N/A 4 0.33 $346,534 Governor’s Pointe S 3 0.25 $510,833 1 0.08 $579,600 Hampton Roads Crossing* S 6 0.50 $260,077 2 0.17 $228,598 Harbour Breeze Estates S 27 2.25 $285,791 31 2.58 $267,006 Hillpoint Farm – Fairways Cross S 12 1.00 $287,043 4 0.33 $256,550 Hillpoint Meadows S 10 0.83 $301,800 6 0.50 $275,413 Kings Fork Farm* S 18 1.50 $280,018 10 0.83 $260,009 Nelms Ridge S 6 0.50 $255,683 5 0.42 $248,840 Parkside at Bennett’s Creek S 27 2.25 $329,380 20 1.67 $349,730 Pitchkettle Fams S 5 0.42 $615,042 5 0.42 $497,450 Quaker Neck Estates S N/A N/A N/A 2 0.17 $367,900 Riverfront at Harbour View** S 6 0.50 $639,171 9 0.75 $696,424 Saddlebrook Estates S 3 0.25 $381,467 7 0.58 $347,870 Source: Residential Databank – Monthly Housing ReportS=Suffolk *Single-Family Detached Condominium Units **Site of Fall Homerama 2011

Absorption in the above subdivisions has ranged from 0.08 to 2.58 units per month in 2011. The average is approximately 0.64 sales per month. The subject site is proximate and contiguous to Bob White Landing and Quaker Neck Estates. Bob White Landing sold 9 homes with an average closing price of $419,957 (average closing price up slightly from 2010 by 2.13%). Quaker Neck Estates sold 2 homes with an average closing price of $367,900, which is down significantly from prior years when homes closed at $500,000+. Other new single-family subdivisions in the subject’s vicinity include Belleharbour Woods, Harbour Breeze Estates and Parkside at Bennett’s Creek.

Appreciation for the short-term in Hampton Roads municipalities is projected to be relatively stable. In the luxury, high-end market, prices are even projected to decline more through the end of 2011. Recovery for the high-end market in Hampton Roads is not anticipated until 2013 according to local experts. Modest increases are projected in the future. Builders with a current inventory of homes have been offering incentives (closing cost assistance, free- upgrades, etc.). These incentives seem to be slowing or going away, especially within the affordable market. Builders with an inventory of lots in the higher-end developments have also put many of those back on the market with pricing below what they paid during the “boom” years. There appears to be a shortage of lots for affordable developments. Developers that had planned to also build the finished homes in certain developments are now being approached by other area builders that have a shortage of lots. Various brokers and developers were contacted and the following summarizes some of the reasons why absorption and appreciation is down in the area. The high-end market or developments located in outlying Hampton Roads municipalities will not likely see a significant upturn until 2013. The affordable market is estimated to stay relatively steady.

• Housing market as a whole remains slow • Continued fluctuation/uncertainty with the stock market • Unemployment rates remaining relatively high • Fear – lack of consumer confidence • Uncertainty • Increasing energy prices • Competition is strong • Difficulty remains in securing mortgage financing

20 Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

Although there are several developments approved or developing, many have been put on hold by the developers for a year or two, with some indicating possibly up to five years or more. Other developers have put the land back on the market with approvals in place. Some builders that have an inventory of lots that were planned for homes have put them back on the market to sell to other builders. In previous years, builders would takedown entire subdivisions of lots at one time. Since 2007, the takedowns appear to be smaller in number of lots each and are spread out over a longer period. During 2008 and 2009, lot takedowns at high-end developments in the marketplace generally ranged below one lot/unit per month with affordable developments generally taking down 1 to 2 lots per month.

The subject is proposed to be developed with 377 single-family lots and will be known as River Club. According to officials with the City of Suffolk Planning Department, the Preliminary Subdivision Plan was approved in October 2004 with a Conditional Use Permit. This approval allows for a cluster development with 124% bonus density (377 lots – density of 1.29 lots/units per net acre). According to documents on file with the City, this approved plan is valid through July 2014. The allowable lots permitted, per the underlying zoning in place, is 305 lots (1.05 lots/units per net acre).

The property is located in Northern Suffolk, which has experienced rapid growth over recent years. This subdivision was originally conceived to be an upscale housing development. Based on current market conditions, the subject would most likely be developed similar to Parkside at Bennett’s Creek, which is in the more affordable price range. It is proximate to employment centers, shopping, major thoroughfares and entertainment.

Conclusion

Since the 3rd quarter of 2008, demand for residential development land was weakened and residential prices have fallen in response to the unstable economy. Pockets in the region are seeing activity, especially developments in Virginia Beach and Chesapeake with “affordable” pricing and those that are well located. The subject land is located in an area targeted for continued growth and is proximate to Downtown Suffolk. Developments in Suffolk have generally had below average overall absorption during the unstable housing market and with the increased fuel costs. The subject site has average access to roadways, employment centers, military installations and services. Population is expected to continue to increase over the next five years, which should bode well for the subject. The trends in the market are uncertain presently. Upside is forecast over the long term, but near term demand is not considered strong.

21 Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

PART FOUR – ANALYSIS OF DATA AND CONCLUSIONS

HIGHEST AND BEST USE SUMMARY

The concept of highest and best use is the foundation upon which value is based. The highest and best use of the property essentially represents its optimum use.

Highest and best use may be defined as follows:

“The reasonably probable and legal use of vacant land or an improved property that is physically possible, appropriately supported and financially feasible and that results in the highest value.”

Source: The Appraisal of Real Estate, Thirteenth Edition, Appraisal Institute, 2008; Pages 277- 278.

The highest and best use of the property is analyzed first, as though vacant, and secondly, as improved. The subject is the remaining collateral to the developing New Port at Victory development in Portsmouth. The highest and best use of the subject is analyzed only as vacant. The highest and best use of any property must be 1) legally permissible, 2) physically possible, 3) financially feasible, and 4) maximally productive.

Legally Permissible

The site is zoned RR and RL by the City of Suffolk. The subdivision is planned to be developed single-family detached units in cluster form. Within the zoning and other restrictions section, we have detailed the requirements of these districts. Essentially, single-family residential homes are the primary uses.

Physically Possible

The subject site is proposed for and has been approved for the development of 377 single-family lots on approximately 291.572 acres net of wetlands and RPA buffer. It is of acceptable size and shape. The site has adequate frontage, access, drainage and topography allowing for development. The physical components of the site do not appear to place any significant limitations upon development.

Financially Feasible

All uses that meet the previous two criteria that produce a positive return are considered to be financially feasible. The location and physical characteristics of the site dictate future development with residential use. As detailed in the Supply/Demand section of the report, the residential market had been strong through 2006 and as the national housing market fell, the Hampton Roads Region remained relatively stable for a time, but then it also suffered a downturn, although not as bad as the national market. There are several subdivisions under construction and more proposed. Many of the subdivisions have had to lower pricing in order to maintain sales and compete. Given the unstable economy and other factors discussed in the Supply and Demand Analysis, such an endeavor as the subject should be held in speculation pending market improvement.

Maximally Productive

The use that produces the highest land value is considered to be maximally productive. The maximally productive use also generates the highest return on invested capital. Based on the previous criteria, residential development is considered to be maximally productive use, but the site would be held in speculation until the market warranted.

Conclusion

Hold for future residential development.

22 Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

THE VALUATION PROCESS

The three recognized approaches to value are the Cost Approach, Sales Comparison Approach and the Income Capitalization Approach. For each applicable approach, the data, the analysis and the reasoning leading to the final value conclusion are presented. The concepts of each are briefly described below.

Cost Approach

The cost approach is based on the principle of substitution, which states that an informed buyer would pay no more for a property than the cost to construct a substitute property with equivalent utility. In the cost approach, the value of the property is estimated by adding the value of the underlying site to the depreciated value of the improvements. The current cost to construct the improvements is obtained from recognized cost manuals, cost estimators, builders and contractors. Depreciation is measured through market research and the application of specific procedures, most notably the age/life method.

Sales Comparison Approach

The sales comparison approach is also based on the principle of substitution, but also the concepts of anticipation and change. These concepts are tied to supply and demand, balance and any positive or negative external forces. The value of a property is derived through a comparison of similar properties, which are reduced to a common unit of comparison. Adjustments are made to comparable properties for differences based on various elements of comparison. Elements of comparison are: 1) Property rights conveyed, 2) Financing, 3) Conditions of sale (motivation), 4) Expenditures made after sale, 5) Market conditions, 6) Location, 7) Physical characteristics, 8) Economic characteristics, 9) Use and 10) Non-realty components of value. The most applicable elements of comparison are then selected and reconciled to arrive at a value conclusion.

Income Capitalization Approach

The income capitalization approach is based on the principle of anticipation or the assumption that value is created by the expectation of benefits to be derived in the future. In the approach, the property’s income stream plus reversion are capitalized into a value. The two methods of income capitalization are 1) Direct capitalization and 2) Yield capitalization (Discounted Cash Flow Analysis). In direct capitalization, a single year’s income expectancy is converted into value by either dividing the income estimate by an appropriate rate or by multiplying the income estimate by an appropriate factor. Yield capitalization is a methodology that converts future benefits into present value through discounting each future benefit by an appropriate yield rate.

Reconciliation

The final step in the valuation process is reconciliation. In reconciliation, the accuracy and reliability of each utilized approach is measured. Reconciliation places the most weight on the best approach to arrive at a meaningful and defensible final value conclusion.

Approaches Applicable to the Subject

The subject is a proposed residential development to contain 377 single-family lots on 413.442 gross acres. Although the property has preliminary subdivision approval, there are no plans to develop the property at the present time and the market does not justify near term development. The applicable approach is the sales comparison (raw land sales) approach. Typically if an owner/developer has plans to develop a site with a cost budget and/or the market is strong enough to justify immediate development with a quantifiable development plan, a modified income approach (subdivision or development approach) would also be utilized to conclude the market value. The approach employed is considered appropriate for the intended use of the report. Furthermore, the methodology employed is considered appropriate for the appraisal problem the client is seeking to solve.

23 Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

SALES COMPARISON APPROACH (SITE VALUE)

The principles of anticipation, change, supply/demand, substitution, and balance all can influence land value. Although several procedures are used to value land, the preferred method of estimating land value is via the sales comparison approach. To apply this method, sales of similar parcels of land are analyzed, compared, and adjusted to provide a value indication for the subject property.

The elements of comparison to be considered are 1) property rights conveyed, 2) financing, 3) conditions of sale [motivation], 4) market conditions, 5) location, and 6) physical characteristics. The chart below summarizes the comparable raw land sales selected to compare to the subject. The appropriate unit of comparison is the price per unit. The following will present the reasoning behind our conclusions and result in a value estimate for the subject.

Residential Land Sale Summary

Sale Acres Square Price/ Sale Location Price Zone # Lots Density Date (Useable) Feet Unit Riverlake Subdivision 1 12/11 $1,959,250 9.435 410,989 R-7.5 42 4.45 $46,649 Virginia Beach, VA Jordan Hall 2 9/11 $3,400,000 42.476 1,850,255 R-15s 90 2.12 $37,778 Chesapeake, VA Centerville Commons A-1/ 3 7/11 $1,821,440 34.340 1,495,850 101 2.94 $18,034 Chesapeake, VA R-15S Village Bend Subdivision 4 12/10 $5,100,000 32.582 1,419,272 R-7.5 101 3.10 $50,495 Virginia Beach, VA Indian River Meadows 5 2/10 $2,340,000 14.659 638,546 R-10 42 2.87 $55,714 Virginia Beach, VA

The sales above are the most recent transfers located in Hampton Roads. The transactions took place between February 2010 and December 2011. Before adjustments, the sales prices were approximately $18,034 to $55,714 per proposed unit.

Sandler proposed to develop the site with 377 single-family residential lots in a cluster development. The gross acreage is 413.442 acres and developable acreage (net of wetlands and buffers) is 291.572 acres. Proposed lots will range from 7,150 to 54,646 square feet and average 13,922 square feet. There is approximately 34.045 acres located along the southern line of Bob White Lane with the remainder of the site on the northern side. The site also has frontage along the eastern banks of Bennett’s Creek and the southern banks of Deanes Branch. There are approximately 62.85 acres of wetlands and 59.02 acres designated at RPA buffers. An additional 84.57 acres of open space areas are planned.

According to officials with the City of Suffolk Planning Department, the Preliminary Subdivision Plan was approved in October 2004 with a Conditional Use Permit. This approval allows for a cluster development with 124% bonus density (377 lots – density of 1.29 lots/units per net acre). According to documents on file with the City, this approved plan is valid through July 2014. The allowable lots permitted, per the underlying zoning in place, is 305 lots (1.05 lots/units per net acre).

Details of the sales are in the Addenda. Each adjustment has been supported to the best extent possible, but in some instances paired sales and/or market data was not available. In such cases, subjective adjustments have been made. No adjustments were necessary for property rights, financing, or conditions of sale. Where applicable, the sales were adjusted for market conditions, location, size, utility and minimum lot size. The chart below will discuss the appropriate adjustments made.

24 Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

Land Sales Comparison

Sale 1 2 3 4 5 Date 12/11 9/11 7/11 12/10 12/10 Price $1,959,250 $3,400,000 $1,821,440 $5,100,000 $2,340,000 Acres 9.44 42.48 34.34 32.58 14.66 Zone R-7.5 R-15s A-1/R-15S R-7.5 R-10 Dwelling Units Proposed 42 90 101 101 42 Denisty 4.45 2.12 2.94 3.10 2.87 $/Lot $46,649 $37,778 $18,034 $50,495 $55,714 Adjustments Property Rights Fee Simple Fee Simple Fee Simple Fee Simple Fee Simple Financing Cash to Seller Cash to Seller Cash to Seller Cash to Seller Cash to Seller Conditions of Sale Arm's Length Arm's Length Arm's Length Arm's Length Arm's Length Adjusted $/Lot $46,649 $37,778 $18,034 $50,495 $55,714 Market Conditions Adjustment 0% 0% 0% 0% 0% Adjusted $/Lot $46,649 $37,778 $18,034 $50,495 $55,714 Other Assumptions Location -25% -20% -20% -25% -25% Development Size -25% -20% -20% -20% -25% Density/Minimum Lot Size 5% 5% 5% 5% 5% Zoning 0% 0% 15% 0% 0% Utility -15% -10% 15% -20% -20% Net Adjustment -60% -45% -5% -60% -65% Adjusted $/Lot $18,660 $20,778 $17,132 $20,198 $19,500

The indicated price per proposed lot range is $17,132 to $20,778. The mean is $19,254 per lot. No market conditions adjustments were made since all of the sales have occurred during similar state of the economy and are relatively recent. Size adjustments have been made based on economies of scale. No adjustments were necessary for zoning since all of the sales were zoned residential with the exception of Sale 3 which was zoned agriculture and residential. The subject parcel does have preliminary approvals in place (good through July 2014 per City of Suffolk). We have made adjustments accordingly for utility based on the amount of utilities available to each sale and approvals in place for development. All of the sales have been considered in reconciliation. We estimate $20,000 per approved lot. The calculation is as follows.

377 units x $19,000 per unit = $7,163,000 Rounded = $7,200,000

“As Is” Value by Sales Comparison Approach = $7,200,000

25 Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

RECONCILIATION

Each approach is a comparative analysis of the data in the marketplace which is significant and applicable to the use of the respective approach. The accuracy and reliability of each approach is dependent upon the quality and quantity of the market data available, the type of property being appraised and the definition of market value.

The subject property is raw land that has been approved for residential development. At this time, ownership is does not have any immediate plans to develop the property. Therefore, the Sales Comparison Approach is the applicable approach and can be well supported.

Based on the analysis as contained in this report, the concluded value is as follows:

Value Premise Property Rights Appraised Valuation Date Value Estimate Market As Is Fee Simple March 31, 2012 $7,200,000

The above value conclusions are subject to specific development plans provided to the appraisers. Should these plans significantly deviate, we reserve the right to amend this report.

MARKETING AND EXPOSURE PERIODS

Exposure time is defined in the Uniform Standards of Professional Appraisal Practice (USPAP), Statement of Appraisal Standards No. 6 (SMT-6) as follows:

The estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based upon an analysis of past events assuming a competitive and open market.

Marketing time is prospective. USPAP defines marketing time in Advisory Opinion 7 (AO-7) as follows:

…the amount of time it might take to sell a real or personal property interest at the concluded market value level during the period immediately after the effective date of an appraisal.

The market has softened and with it demand for residential development land. Financing is difficult to obtain which limits the pool of willing buyers. Under more stabilized market conditions, the a property may need to be marketed for up to 12 months to be sold assuming it were correctly priced. However, under current market conditions these times are extended. We estimate 12 to 24 months.

Conclusion

12 to 24 months

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ADDENDA

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

QUALIFICATIONS

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

QUALIFICATIONS Lawrence J. Colorito, Jr., MAI, MRICS Principal, Axial Advisory Group, LLC

Employment • February 2002 to present – Principal, Axial Advisory Group, LLC in Hampton Roads, Virginia • March 1995 to February 2002 - Vice President/Real Estate Appraiser with Anthony J. Oddo & Associates, Inc. in Yorktown, Virginia and Northern Virginia • August 1990 to March 1995 – Appraiser with Dominion Realty Advisors, Inc., Newport News, Norfolk and Northern Virginia • June 1988 to August 1990 – Appraiser with Krauser, Welsh, Sorich and Cirz, Inc., in Morristown, NJ

Appraised or consulted on various forms of real estate in approximately 20 states since 1988, including office, retail, industrial, multi- family, subdivisions and vacant land. Featured assignments include Class A urban and suburban office buildings, regional malls, and major mixed use projects.

Professional Affiliations • Member Appraisal Institute (MAI); Certification #10765 - Hampton Roads Chapter Education Chairman, 1997 and 1998 - Hampton Roads Chapter Vice President, 1999 - Hampton Roads Chapter President, 2000 - Hampton Roads Chapter Regional Representative, 1999-2001 - Young Advisory Council (YAC) participant, 1997 - 1999 - Leadership Development & Advisory Council (LDAC - formerly YAC) Discussion Leader, 2000 - LDAC Vice Chair, 2001 - LDAC Chair 2002 - Seminars Subcommittee, 2000-2001 - Seminars Subcommittee Vice Chair, 2002 - Regional V Chair, 2005 - National Board of Directors, 2003-2005 - Governance Restructure Project Team, 2003-2004 - National Strategic Planning Committee Chair, 2006 - Education Trust Fund Board, 2007- • Certified General Real Estate Appraiser in the Commonwealth of Virginia - #4001-002033 • Certified General Real Estate Appraiser in the State of Maryland - #10849 • Certified General Real Estate Appraiser in the District of Columbia - #GA10440 • Certified General Real Estate Appraiser in State of North Carolina - #A4887 • Member-Old Dominion University Center for Real Estate & Economic Development (ODU-CREED) • Member-Hampton Roads Association of Commercial Real Estate (HRACRE) - Programs Committee Chair, 2005 - Board of Directors, 2006- - Secretary/Treasurer, 2008-2009 - President Elect, 2010 - President, 2011 • Member-Urban Land Institute (ULI) • Member-Royal Institution of Chartered Surveyors (MRICS)

Education • Penn State University, Bachelor of Science in Finance, 1984-1988 • New York University, 1988-1990 • Old Dominion University, 1996-97 • Various other real estate related courses & seminars, 1988-present

Appraisal Institute Education • Attended and successfully completed all courses necessary for the MAI designation by the Appraisal Institute, including a demonstration report and comprehensive examination, 1989 - 1994 • Various courses & seminars, 1995 - present

Clientele Local, state and federal agencies, city and county governments and housing authorities, regional and national banking and financial institutions, insurance companies, local and national corporations, accountants, attorneys, developers, investors and private individuals.

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

QUALIFICATIONS Diana L. Ernst Associate Axial Advisory Group, LLC

Employment

• August 2003 to present – Associate, Axial Advisory Group, LLC in Hampton Roads, Virginia • June 1997 to July 2003 – Associate with Anthony J. Oddo & Associates, Inc. in Yorktown, Virginia and Northern Virginia • April 1993 to March 1997 – Associate with Real Estate Division for Crestar Bank Eastern Region, Virginia

Education

• Bachelor of Science Degree in Business from Eastern Illinois University, 1991.

Professional Affiliations

• Associate Member, Appraisal Institute, Member #306683 • Member, Commercial Real Estate Women (CREW) Hampton Roads Chapter • Certified General Real Estate Appraiser in the Commonwealth of Virginia - #4001-011485 • Certified General Real Estate Appraiser in State of North Carolina - #A6516

Appraisal Institute Education

• Real Estate Appraisal Principles, Tidewater Community College, 1993 • Course 120 - Appraisal Procedures, Appraisal Institute - Chicago, 1996 • Course 1410 - Standards of Professional Practice - Part A, Appraisal Institute - Chicago, 1999 • Course 1420 - Standards of Professional Practice - Part B, Appraisal Institute - Chicago, 1999 • Course 410 – National Uniform Standards of Professional Appraisal Practice (USPAP) – Chicago, 2005 • Course 420 – Business Practices and Ethics, Appraisal Institute – Norfolk, 2005 • Qualifying Course for Licensure, Computaught – Chesapeake, 2005 • Course 310 – Basic Income Capitalization, Appraisal Institute – Richmond, 2006 • Course 320 – General Applications, Appraisal Institute – Chicago, 2006 • Course 330 – Apartment Appraisal, Appraisal Institute – Chicago, 2006 • Course 510 – Advanced Income Capitalization, Appraisal Institute – Greensboro, 2007 • General Market Analysis and Highest & Best Use – Chicago, 2008 • Advanced Sales Comparison and Cost Approaches – Linthicum, MD, 2010 • Advanced Applications – Greensboro, NC, 2011 • Various Seminars 1997 - present

Experience

Real estate consultant concentrating on property valuations and evaluations. Duties and responsibilities include market and economic research for appraisal and consultation assignments involving office, retail and industrial buildings, apartment and condominium complexes, special use properties, vacant land including commercial and residential.

Clientele

Local, state and federal agencies, city and county governments and housing authorities, local and national corporations, insurance companies, regional and national banking and financial institutions, accountants, attorneys, developers, investors and private individuals.

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

LETTER OF ENGAGEMENT

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

LEGAL DESCRIPTIONS/ORIGINAL DEED/LOAN SALE DOCUMENTS

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

REGIONAL MAP

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

NEIGHBORHOOD MAP

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

BOROUGH MAP

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

AERIAL PHOTOGRAPH

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

TAX PARCEL 12*23

TAX PARCEL 12*25

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

ZONING MAPS

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

FLOOD MAP

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

ALTA/ACSM TITLE SURVEY

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

PRELIMINARY SUBDIVISION PLATS

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

PROPOSED LOT SUMMARY

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

Proposed Lots/Size - Per Preliminary Subdivision Plats

Lot Size Lot Size Lot Size Lot Size 1 16,146 50 16,798 99 12,696 148 16,533 2 13,269 51 18,214 100 13,743 149 13,272 3 13,757 52 17,295 101 21,106 150 10,801 4 15,675 53 21,776 102 18,430 151 17,769 5 14,480 54 46,680 103 13,061 152 12,928 6 17,725 55 16,857 104 12,607 153 11,912 7 18,067 56 16,873 105 12,422 154 15,613 8 17,016 57 21,874 106 13,829 155 11,808 9 16,160 58 23,724 107 10,795 156 12,379 10 15,117 59 30,613 108 10,795 157 12,228 11 19,985 60 24,004 109 10,795 158 16,332 12 15,086 61 37,097 110 10,795 159 14,231 13 14,055 62 23,196 111 10,795 160 16,166 14 33,810 63 14,625 112 10,793 161 12,262 15 30,042 64 17,891 113 14,348 162 13,675 16 31,500 65 30,794 114 13,423 163 13,364 17 24,577 66 18,572 115 11,569 164 13,148 18 19,602 67 21,140 116 11,777 165 13,148 19 21,100 68 12,500 117 11,733 166 13,765 20 38,195 69 18,042 118 13,825 167 10,800 21 19,658 70 28,674 119 15,630 168 10,796 22 19,740 71 24,079 120 10,795 169 12,458 23 17,179 72 14,972 121 10,795 170 14,546 24 18,757 73 18,195 122 10,795 171 10,402 25 32,604 74 19,918 123 10,795 172 9,803 26 21,394 75 18,928 124 10,795 173 9,750 27 17,390 76 18,258 125 10,795 174 9,750 28 18,063 77 11,218 126 17,825 175 9,750 29 18,444 78 10,800 127 13,528 176 9,702 30 17,298 79 12,055 128 11,569 177 10,014 31 16,672 80 12,215 129 11,733 178 12,401 32 16,162 81 12,215 130 11,733 179 10,390 33 18,571 82 12,215 131 13,825 180 11,190 34 25,004 83 10,994 132 13,425 181 11,370 35 20,821 84 11,218 133 11,608 182 9,702 36 15,842 85 14,963 134 11,608 183 9,702 37 25,866 86 14,961 135 11,694 184 9,750 38 37,052 87 14,763 136 13,056 185 9,750 39 37,161 88 14,646 137 15,194 186 9,750 40 26,040 89 14,821 138 10,961 187 9,750 41 22,180 90 15,092 139 15,007 188 11,232 42 19,619 91 12,890 140 16,688 189 14,612 43 16,344 92 12,404 141 19,064 190 11,368 44 17,445 93 12,434 142 16,934 191 11,800 45 23,945 94 17,691 143 11,233 192 16,945 46 15,531 95 16,341 144 10,825 193 13,636 47 28,366 96 12,439 145 16,193 194 12,621 48 37,573 97 14,600 146 31,274 195 10,945 49 19,051 98 14,674 147 35,572 196 10,727

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Lot Size Lot Size Lot Size (SF) Lot Size (SF) 197 7,150 246 9,757 295 9,600 344 9,306 198 11,346 247 11,171 296 11,072 345 12,272 199 8,999 248 11,037 297 11,253 346 8,409 200 7,838 249 9,750 298 11,186 347 8,550 201 8,219 250 10,892 299 9,321 348 10,812 202 9,677 251 11,110 300 8,393 349 9,033 203 9,679 252 10,877 301 8,479 350 8,687 204 9,953 253 9,750 302 8,979 351 9,113 205 11,755 254 10,903 303 9,909 352 9,318 206 8,426 255 12,212 304 11,474 353 8,396 207 9,005 256 16,459 305 11,987 354 8,908 208 8,803 257 18,802 306 9,804 355 8,606 209 9,468 258 16,463 307 10,755 356 14,556 210 8,838 259 15,117 308 11,787 357 10,509 211 10,029 260 13,881 309 10,245 358 11,586 212 9,830 261 11,689 310 8,998 359 14,269 213 9,062 262 12,177 311 9,614 360 15,188 214 16,263 263 15,309 312 10,103 361 20,383 215 19,294 264 23,583 313 9,453 362 20,048 216 20,918 265 14,537 314 8,627 363 21,541 217 12,050 266 10,502 315 10,817 364 13,482 218 30,228 267 11,610 316 16,516 365 16,332 219 18,756 268 19,518 317 16,104 366 16,818 220 17,408 269 12,193 318 19,245 367 24,625 221 16,105 270 11,008 319 9,750 368 22,783 222 20,566 271 10,550 320 9,750 369 16,097 223 17,930 272 10,609 321 10,805 370 16,233 224 26,861 273 10,734 322 11,753 371 14,574 225 19,728 274 9,445 323 13,731 372 14,000 226 16,083 275 9,658 324 15,311 373 14,855 227 16,756 276 9,654 325 11,586 374 14,091 228 16,793 277 9,797 326 10,246 375 14,371 229 54,646 278 10,991 327 13,197 376 15,327 230 22,945 279 18,472 328 13,200 377 17,048 231 20,220 280 11,571 329 13,200 232 18,518 281 11,465 330 13,196 233 17,053 282 11,511 331 13,190 234 16,398 283 11,638 332 10,235 235 17,074 284 10,673 333 10,318 236 15,279 285 12,219 334 14,247 237 15,370 286 12,610 335 12,136 238 16,821 287 10,694 336 11,653 239 20,675 288 10,555 337 10,861 240 16,893 289 11,211 338 10,133 241 13,441 290 11,536 339 13,023 242 22,285 291 10,178 340 11,104 243 19,424 292 10,963 341 7,800 244 12,150 293 13,010 342 7,800 245 12,302 294 15,878 343 8,862 Avg. Lot Size = 13,922

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LAND SALES AND MAP

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LAND SALES MAP

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Land Sale No. 1

Property Identification Record ID 4219 Property Type Subdivision, Single-family Property Name Proposed Riverlake Subdivision Address Terminus of Flax Mill Drive & Eastern line of Indian River Road , Virginia Beach, Virginia 23456 Tax ID 1474-25-2700, 6755, 4827, & 1474-36-1009 Reference ANB

Sale Data Grantor See Comments Grantee Geo I, LLC Sale Date December, 2011 1st parcel (12/2006) 2nd - 10/2011 Property Rights Fee Simple Conditions of Sale Assemblage (See Comments) Financing Cash to Seller Instrument # See Comments Verification Grantee, Public Records & Reliable Third Party Associated with the deal

Sale Price $1,939,250 Cash Equivalent $1,939,250 Upward Adjustment $20,000 Demolition cost Adjusted Price $1,959,250

Land Data Zoning R-7.5, Residential Medium Density Topography Generally Level Utilities All Available Shape Irregular Flood Info Zone X Density 4.45 dwelling units per acre

Land Size Information Gross Land Size 9.435 Acres or 410,989 SF Planned Units 42 Front Footage Indian River Road

Indicators Sale Price/Gross Acre $207,658 Adjusted Sale Price/Gross SF $4.77 Adjusted Sale Price/Planned Units $46,649 Adjusted

Remarks This is the assemblage of three contiguous tax parcels that total 9.435 acres. One of the tax parcels was purchased in December 2006 with the remaining two parcels under contract with the intent of developing with a 42-lot, single-family subdivision by Geo I, LLC. The proposed development is located along the eastern line of Indian River Road between Archdale Drive and Elbow Road. Proposed lots will range is size between approximately 3,600 and 15,000 square feet (not included areas within easements with an average of 5,600 square feet. Approved zoning as of March 2011 is R-7.5 with a Workforce Housing Overlay District. One of the tax parcels is currently improved with a older residential dwelling that is planned to be razed during site development at the cost of the developer. The developer estimated a cost to raze at $20,000.

Geo I, LLC has the two tax parcels under contract for $899,250. Closing is anticipated to occur between June 15 and July 15, 2011. Estimated costs to develop the entire site are $750,000 ($18,293 per lot). The homes are

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planned to be built in groups of eight, with seven being resold to the City as part of their workforce housing program. The Workforce Housing program will allow purchasers that meet certain criteria and work in Virginia Beach to purchase a home at a reduced amount through the City. The homes will essentially be constructed and deeded just like the other homes in the development with the City of Virginia Beach purchasing them from the developer at a 25% discount and then selling them to the purchaser. The homes are proposed to have 3 and 4 bedrooms, range in square footage from 2,216 to 2,497 and in price from $269,900 to $289,900. The complete package of interior upgrades will be an additional $10,000. This parcel closed in October 2011 and is recorded in Instrument #20111103001441840.

GPIN # 1474-25-2700-0000 or 4488 Indian River Road with 1.547 acres is being transferred from Donald K. Piland and Bootsie Loraine Terry for $299,250. There was an original contract to purchase dated February 22, 2010 for $315,000 but was amended on October 6, 2010 for the current contract price of $299,250. It appears the contract price was lowered due to the City of Virginia Beach requiring .46 acres to be dedicated as a park which affected density. In the contract it also states that the Grantee shall deed to Grantor one of the subdivided lots, of Grantee's choosing, from the subdivision of the property which is estimated to cost the developer $65,750. Additionally, within 30 days after the lot transfer, Grantor shall select a building plan from the plans approved by the City of Virginia Beach. Grantor shall pay for all necessary licenses, building permits, water and sewer taps, sewer service and site plans. The Grantee agreed to construct the home to framing stage and install the roof at a estimated cost of $50,000. The Grantor will then finish out construction at his own expense. This parcel closed in December 2011 and is recorded in Instrument #20111222001314400.

A portion of GPIN # 1474-25-6755-0000 totaling 2.6626 acres is being transferred by George W. Keller and Kate W. Keller for $600,000. There was an original contract to purchase dated March 18, 2010 for $630,000 that was subsequently amended on October 6, 2010 to the current contract price of $600,000. It appears the contract price was lowered due to the City of Virginia Beach requiring .46 acres of the total proposed development to be used as a park.

GPIN #1474-25-4827-0000 containing 5.2262 acres is already owned by the Grantee and was purchased in December 2006 for the consideration of $1,040,000. When all 3 tax parcels are combined they total 9.435 acres that are proposed for 41 single-family lots (not including the free lot given as part of the contract of GPIN #1474- 25-2700-0000) indicating a density of 4.35 units per acre. When the 2006 and current contracts are combined a total purchase price for the proposed Riverlake Subdivision is indicated to be $1,959,250 with a total 41 lots ($47,787 per lot).

The site is already developed with municipal water and sewer. Site development commenced during the first quarter of 2012.

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Land Sale No. 2

Property Identification Record ID 4347 Property Type Subdivision, Single-family Property Name Jordan Hall Subdivision Land Address W/S Johnstown Road at Hanbury Road, Chesapeake, Virginia 23322 Location Great Bridge Planning Area Tax ID 0590000000310 and 0590000000880 Reference DLE

Sale Data Grantor Billie Jo Hall and Melody Hall Culbreth Grantee Jordon Hall Investors, LP Sale Date September, 2011 Contract 2nd Q 2011 Deed Book/Page 8496/322 Property Rights Fee Simple Conditions of Sale Arm's Length Financing Cash to seller Sale History Grantors acquired by Will in 2008 Verification Reliable third party and public records

Sale Price $3,400,000

Land Data Zoning R-15s, Residential District Topography Generally level; Currently cultivated land Utilities All necessary along Johnstown Road Shape Irregular Flood Info Zone X Density 2.12 Lots per acre

Land Size Information Gross Land Size 42.476 Acres or 1,850,255 SF Planned Units 90 Front Footage Johnstown Road (western line)

Indicators Sale Price/Gross Acre $80,045 Sale Price/Gross SF $1.84 Sale Price/Planned Units $37,778

Remarks This is the transfer of two contiguous tax parcels that total +/-42.476 acres along the western line of Johnstown Road at the western terminus of Hanbury Road in the Great Bridge area of Chesapeake. The site is irregular in shape and generally at street grade. At the time of contract, the land was cultivated. Grantors acquired the property via Will is 2008.

The proposal is to develop the site with a single-family subdivision in a cluster configuration that will be known as Jordan Hall. Lots are proposed to range in size from 7,528 square feet to 21,285 square feet. The majority of the lots will range from 8,000 to 10,000 square feet. The approved preliminary subdivision plan illustrates 83 lots situated along four interior streets accessed from Johnstown Road. Seven of the lots will be at the property's western boundary and will be accessed via Dickens Place, from the adjoining Bridgewood neighborhood. Amenities will include tow lakes (BMPs) and large conservation area.

According to the Chesapeake Real Estate Assessor's Office, Parcel 0590000000310 contains approximately 17.676

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acres and is land only. Parcel 0590000000880 contains approximately 24.80 acres and there were improvements that are slated to be razed during development that offer no value.

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Land Sale No. 3

Property Identification Record ID 4221 Property Type Subdivision, Single-family Property Name Centerville Commons Subdivision Address Northeast corner of Centerville Turnpike and Elbow Road, Chesapeake, Virginia 23320 Location Greenbrier Extended Area Tax ID See Remarks Reference DLE

Sale Data Grantor See Remarks Grantee Centerville 40, LLC Sale Date See Remarks - Contracts February, March, June, July 2010 Deed Book/Page See Remarks Property Rights Fee Simple Conditions of Sale Arm's Length Financing Cash Equivalent Sale History No arm's length transfers in prior three years Verification Grantee and public records

Sale Price $1,681,440

Land Data Zoning A-1 and R-15S, Agricultural and Residential Topography Generally level Utilities All public available from R/W Shape Irregular Density 2.33 du/acre gross; 2.94 du/acre net

Land Size Information Gross Land Size 43.281 Acres or 1,885,320 SF Useable Land Size 34.340 Acres or 1,495,850 SF , Developable Unusable Land Size 8.940 Acres or 389,426 SF , Southeastern Parkway Planned Units 101 Front Footage Centerville Turnpike and Elbow Road

Indicators Sale Price/Gross Acre $38,849 Sale Price/Gross SF $0.89 Sale Price/Useable Acre $48,964 Sale Price/Useable SF $1.12 Sale Price/Planned Units $16,648

Remarks This is the assemblage of two tax parcels and portions of two other tax parcels for the development of an "affordable" single-family subdivision in the Greenbrier extended area of Chesapeake. The subdivision is to be developed north of Elbow Road and east of Centerville Turnpike. The site is proximate to the future Chesapeake school(s) site. The consideration reported is for raw land only, without any approvals.

Home Associates of Virginia (HAV) is planning to start infrastructure development in August 2011 with construction of the first homes to begin in February 2012. 101 single-family lots are proposed and will range from 8,000 to 41,996 square feet and average 11,080 square feet. Development costs are projected at $46,441 per proposed lot. The site will have two BMPs (1.673 acres and 2.73 acres) and a pump station on-site. The

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developers are also required to extend the public water line from Butts Station Road along Centerville Turnpike to the property (estimated cost is $918,000). Approximately 8.94 acres of the gross acreage are reserved for the future Southeastern Expressway right-of-way.

HAV is proposing to develop the finished homes along with a couple of preferred builders. Lots will be priced at $95,000 each and base pricing for the finished homes is projected to start at $299,000 and average $340,000. There will be a minimum of eight home elevations/models provided and single-story homes must be at least 1,800 square feet and two-story homes must be at least 2,200 square feet. All homes will have an attached two-car garage.

Since the contracts were written, rezoning to R-8 has been approved (February 2011), as well as the overall master concept plan (November 2010). According to City officials, a preliminary overall subdivision plan along with proposed proffer statement (R(C)-10-07 with cash proffers of $3,123.51 per proposed lot) has been submitted for review and are scheduled to be voted on during April 2011. Officials with the City granted the approvals. The water line extension from Butts Station Road to the property was completed during the 1st and 2nd quarters of 2012. Site development began in the 2nd quarter of 2012.

The total consideration is $1,821,440 and includes the cost of assignment of the contracts. All of parcels were put under contract to Robert W. Horton. Robert W. Horton then assigned the contracts to Centerville 40, LLC (HAV) for a fee of $160,000.

Tax Parcel 0380000000360 with 20.211 acres was put under contract in February 2010 for $808,440 from Milton McPhersona and W. Stanley Jennings to Robert W. Horton. Closing on this parcel occurred in July 2011 as recorded in Deed Book 8445, Page 103.

Tax Parcel 0380000000371 with approximately 21 acres (+/-21.814 acres) was put under contract in March and May 2010 from T.C. Davis to Robert Horton. This transaction closed in March 2011 for $525,000 as recorded in Deed Book 8354, Page 588.

In June 2010, a 24,710 square foot portion of Tax Parcel 0380000000400 was put under contract for $138,000 from Hugh Samuel Miller, IV and Rebecca Jo Miller to Robert W. Horton. This transaction closed during the last week of June 2011 and is recorded in Deed Book 8425, Page 672.

In July 2010 a 25,600 portion of Tax Parcel 0380000000410 was put under contract between Julius W. Osmundson, et als to Robert W. Horton for $50,000. This transaction closed in June 2011 and is recorded in Deed Book 8432, Page 100.

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Land Sale No. 4

Property Identification Record ID 4218 Property Type Subdivision, Single-family Property Name Village Bend Subdivision Address Southern Line of Dam Neck Road East of Southcross Drive, Virginia Beach, Virginia 23456 Location Landstown Area Tax ID 1484-16-7638 Reference DLE

Sale Data Grantor Elva Y. Beiler Land Trust & The Mennonite Foundation, Inc. Grantee Village Bend, LLC Sale Date December, 2010 Contract April 2010; Amended June 2010 Recorded Plat 20100413000338560 Property Rights Fee Simple Conditions of Sale Arm's Length Financing Cash Equivalent; DOT with Monarch - Principal Amount $5,454,000 Sale History No arm's length transfers in prior three years Instrument # 20101217001332250 Verification Reliable third party and public records

Sale Price $5,100,000

Land Data Zoning R-7.5, Residential Topography Generally Level; at time of sale land 1/2 cultivated and 1/2 wooded Utilities All public utilities available Shape Generally rectangular Flood Info Zone X, Areas outside flood plain Density 3.10 units/lots per acre

Land Size Information Gross Land Size 32.582 Acres or 1,419,272 SF Planned Units 101 Front Footage Dam Neck Road

Indicators Sale Price/Gross Acre $156,528 Sale Price/Gross SF $3.59 Sale Price/Planned Units $50,495

Remarks This is the sale of a parcel located along the southern line of Dam Neck Road across from New Castle Elementary School in Virginia Beach. The subdivision abuts land owned by the City of Virginia Beach for parks and recreation and is proximate to the Virginia Beach Amphitheater, newly developing Sentara Princess Anne hospital, developing Landstown Commons shopping center, Virginia Beach Sportsplex and Fieldhouse, etc. The site is not impacted by wetlands or regulations of the Chesapeake Bay Preservation Area ordinance; nor is the site located in a designated zone for accident potential or noise levels associated with Oceana Naval Air Station.

HineCrosby and Bishard Development Group are planning a 101 lot single-family development that will have homes in the affordable range. The land was rezoned from AG-1 and R-15 in 2008 to R-7.5, requiring a minimum lot size of 7,500 square feet. The subdivision will have a central pocket park and lake. Homes will reportedly range from 2,000 to 2,400 square feet. Per a recorded proffer agreement, the pocket park will include

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approximately $60,000 in playground equipment; a 25 foot buffer will be established along the western property line; developer to pay $30,000 to the City's parks program prior to final subdivision plan approval, etc.

The original contract was dated April 6, 2010 and stipulated a selling price of $5,500,000. An addendum to the contract, dated June 28, 2010, reduced the purchase price to $5,100,000. The property transferred with preliminary approvals in place, re-zoning completed and Proffer, Restrictions and Covenants agreement recorded.

Reportedly, Franciscus Homes originally planned to develop the site and proposed a development in 2008 for 106 single-family lots and 150 tenplex units. The City denied this plan.

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Land Sale No. 5

Property Identification Record ID 4114 Property Type Subdivision, Single-family Property Name Indian River Meadows Address 4017-4105 Indian River Road, Virginia Beach, Virginia 23456 Location Glenwood Area Tax ID See Remarks

Sale Data Grantor See Remarks Grantee Pace Homes Sale Date February, 2010; Original contract 1st Q 2008 at $72,000/Planned Unit Property Rights Fee Simple Conditions of Sale Arm's Length Financing Cash Equivalent to Seller Sale History No arm's length transfers in prior three years. Instrument # 20100226000186790 Verification Reliable third party and public records

Sale Price $2,340,000

Land Data Zoning Residential, R-10 Conditional Topography Generally level Utilities All necessary available along Indian River Road Shape Generally rectangular to slightly irregular Flood Info Zone X (area to be developed) Density 2.87 units/AC developable; 1.75 units/AC gross

Land Size Information Gross Land Size 24.016 Acres or 1,046,146 SF Useable Land Size 14.659 Acres or 638,563 SF , Developable for Lots Unusable Land Size 6.890 Acres or 300,141 SF , Southeastern Exp.R/W Useable Land Size 2.467 Acres or 107,441 SF , Va Bch Dedication Planned Units 42 Front Footage 960 ft Indian River Road

Indicators Sale Price/Gross Acre $97,434 Sale Price/Gross SF $2.24 Sale Price/Useable Acre $159,625 Sale Price/Useable SF $3.66 Sale Price/Planned Units $55,714

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Remarks Six adjacent tax parcels were assembled and marketed together. The land is located across Indian River Road from Hillcrest Farms subdivision. Grantors include D&G enterprises (Parcel 1 with 1.5655 acres - GPIN #10474-62- 4932), Bobby K. and Cecilia Thomas and Jenifer A. and Daniel J. Felix (Parcel 2 with 2.808 acres - GPIN #1474- 63-3000), Jacob J. and Sara M. Hershberger (Parcels 3 with 1.9718 acres & Parcel 4 with 1.7932 acres - GPIN #1474-63-1180 and 1474-52-8973), John W. and Betty M. Soose, Trustees of the Soose Family Joint Declaration of Trust (Parcel 5 with 2.9068 acres - GPIN #1474-63-0302), and Donald W. and Faye E. Price (Parcel 6 with 3.6141 acres - GPIN #1474-53-8412). The grantors went through the process of getting the assembled tract rezoned from R-15 to R-10 Conditional in May 2008. As a rezoning proffer, the residue parcel to the south was dedicated to the City of Virginia Beach (2.4665 acres of wetlands/floodplain area). A 6.8903 acre portion of the assembled tract is bisected by the proposed Southeastern Expressway.

Ainslie Widener (Southern Virginia Beach Properties, LLC), the original contract purchaser, got all of the subdivision plans approved. In 2008 the contract price was based on $72,000 per developable lot, Pace Construction (Richard Duncan) plans to build the finished homes and base pricing is projected to range from $350,000 to $400,000. First homes are projected to be completed during the first quarter of 2011.

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GLOSSARY OF TERMS

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GLOSSARY OF TERMS assessed value Assessed value applies in ad valorem full service lease A lease in which rent covers all taxation and refers to the value of a property operating expenses. Typically, full service leases according to the tax rolls. Assessed value may not are combined with an expense stop, the expense conform to market value, but it is usually level covered by the contract lease payment. calculated in relation to a market value base.† Increases in expenses above the expense stop level are passed through to the tenant and are know as aggregate of retail values The sum of the appraised expense pass-throughs. values of the individual units in a subdivision, as if all of the units were completed and available for going concern value Going concern value is the retail sale, as of the date of the appraisal…Also value of a proven property operation. It includes called gross retail value. † the incremental value associated with the business concern, which is distinct from the value of the cash equivalency The procedure in which the sale real estate only. Going concern value includes an prices of comparable properties sold with atypical intangible enhancement of the value of an financing are adjusted to reflect typical market operating business enterprise which is produced by terms. the assemblage of the land, building, labor, equipment, and marketing operation. This process condominium A multi-unit structure or property in creates an economically viable business that is which persons hold fee simple title to individual expected to continue. Going concern value refers units and an undivided interest in common areas. to the total value of a property, including both real property and intangible personal property condominium ownership A form of fee ownership attributed to the business value.† of separate units or portions of multiunit buildings that provides for formal filing and recording of an gross building area (GBA) The sum of all areas at undivided interest in real property. each floor as measured to the exterior walls. effective rent 1) The rental rate net of financial insurable value Insurable Value is based on the concessions such as periods of no rent during a replacement and/or reproduction cost of physical lease term; may be calculated on a discounted items that are subject to loss from hazards. basis, reflecting the time value of money, or on a Insurable value is that portion of the value of an simple, straight-line basis. 2) The economic rent asset or asset group that is acknowledged or paid by the lessee when normalized to account for recognized under the provisions of an applicable financial concessions, such as escalation clauses, loss insurance policy. This value is often con- and other factors. Contract, or normal, rents must trolled by state law and varies from state to state. † be converted to effective rents to form a consistent basis of comparison between comparables.‡ investment value Investment value is the value of an investment to a particular investor based on his fee simple estate Absolute ownership or her investment requirements. In contrast to unencumbered by any other interest or estate, market value, investment value is value to an subject only to the limitations imposed by the individual, not value in the marketplace. governmental powers of taxation, eminent domain, Investment value reflects the subjective relation- police power, and escheat. ‡ ship between a particular investor and a given investment. When measured in dollars, investment floor area ratio (FAR) The relationship between the value is the price an investor would pay for an above-ground floor area of a building, as described investment in light of its perceived capacity to by the building code, and the area of the plot on satisfy his or her desires, needs, or investment which it stands; in planning and zoning, often goals. To estimate investment value, specific expressed as a decimal, e.g., a ratio of 2.0 indicates investment criteria must be known. Criteria to that the permissible floor area of a building is evaluate a real estate investment are not twice the total land area; also called building-to- necessarily set down by the individual investor; land ratio. ‡ they may be established by an expert on real estate and its value, that is, an appraiser. †

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

leased fee See leased fee estate. market value Market value is one of the central concepts of the appraisal practice. Market value is leased fee estate An ownership interest held by a differentiated from other types of value in that it is landlord with the right of use and occupancy created by the collective patterns of the market. conveyed by lease to others. The rights of the Market value means the most probable price which lessor (the leased fee owner) and the leased fee are a property should bring in a competitive and open specified by contract terms contained within the market under all conditions requisite to a fair sale, lease. ‡ the buyer and seller each acting prudently and knowledgeably, and assuming the price is not leasehold See leasehold estate. 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 leasehold estate The interest held by the lessee (the buyer under conditions whereby: 1) A reasonable tenant or renter) through a lease conveying the time is allowed for exposure in the open market; 2) rights of use and occupancy for a stated term under ‡ Both parties are well informed or well advised, certain conditions. and acting in what they consider their own best interests; 3) Buyer and seller are typically liquidation value The most probable price that a motivated; 4) Payment is made in terms of cash in specified interest in real property is likely to bring U.S. dollars or in terms of financial arrangements under all of the following conditions. 1) comparable thereto; and 5) The price represents consummation of a sale will occur within a the normal consideration for the property sold severely limited future marketing period specified unaffected by special or created financing or sales by the client. 2) the actual market conditions concessions granted by anyone associated with the currently prevailing are those to which the sale.§ appraised property interest is subject. 3) the buyer is acting prudently and knowledgably. 4) the seller marketing period The time it takes an interest in is under extreme compulsion to sell. 5) the buyer is real property to sell on the market subsequent to typically motivated. 6) the buyer is acting in what the date of an appraisal. ‡ he or she considers his or her best interest. 7) a limited marketing effort and time will be allowed net lease Lease in which all or some of the operating for the completion of a sale. 8) payment will be expenses are paid directly by the tenant. The made in U.S. dollars or in terms of financial landlord never takes possession of the expense arrangements comparable thereto. 9) the price payment. In a Triple Net Lease all operating represents the normal consideration for the expenses are the responsibility of the tenant, property sold, unaffected by special or creative including property taxes, insurance, interior financing or sales concessions granted by anyone maintenance, and other miscellaneous expenses. associated with the sale. ‡ However, management fees and exterior main- tenance are often the responsibility of the lessor in market value “as if complete” on the appraisal a triple net lease. A modified net lease is one in date Market value “as if complete” on the which some expenses are paid separately by the appraisal date is an estimate of the market value of tenant and some are included in the rent. a property with all construction, conversion, or rehabilitation hypothetically completed, or under net rentable area (NRA) 1) The area on which rent other specified hypothetical conditions as of the is computed. 2) The Rentable Area of a floor shall date of the appraisal. With regard to properties be computed by measuring to the inside finished wherein anticipated market conditions indicate that surface of the dominant portion of the permanent stabilized occupancy is not likely as of the date of outer building walls, excluding any major vertical completion, this estimate of value should reflect penetrations of the floor. No deductions shall be the market value of the property as if complete and made for columns and projections necessary to the prepared for occupancy by tenants. building. Include space such as mechanical room, janitorial room, restrooms, and lobby of the floor.# market value “as is” on the appraisal date Market value “as is” on the appraisal date is an estimate of prospective future value “upon completion of the market value of a property in the condition construction” Prospective future value “upon observed upon inspection and as it physically and completion of construction” is the prospective legally exists without hypothetical conditions, value of a property on the future date that assumptions, or qualifications as of the date of construction is completed, based upon market appraisal. conditions forecast to exist, as of that completion

Addenda Proposed River Club Subdivision Land AXIAL ADVISORY GROUP, LLC Suffolk, VA 23435

date. The value estimate at this stage is stated in is computed by measuring to the finished surface current dollars unless otherwise indicated. of the office side of corridor and other permanent walls, to the center of partitions that separate the prospective future value “upon reaching stabilized office from adjoining usable areas, and to the occupancy” Prospective future value “upon inside finished surface of the dominant portion of reaching stabilized occupancy” is the prospective the permanent outer building walls. Excludes value of a property at a future point in time when areas such as mechanical rooms, janitorial room, all improvements have been physically constructed restrooms, lobby, and any major vertical and the property has been leased to its optimum penetrations of a multi-tenant floor.# level of long-term occupancy. The value estimate at this stage is stated in current dollars unless use value Use value is a concept based on the otherwise indicated. productivity of an economic good. Use value is the value a specific property has for a specific use. reasonable exposure time The estimated length of Use value focuses on the value the real estate time the property interest being appraised would contributes to the enterprise of which it is a part, have been offered on the market prior to the without regard to the property’s highest and best hypothetical consummation of a sale at market use or the monetary amount that might be realized value on the effective date of the appraisal; a upon its sale. † retrospective estimate based upon an analysis of past events assuming a competitive and open market.††

† shell space Space which has not had any interior The Appraisal of Real Estate, Twelfth Edition, Appraisal finishing installed, including even basic Institute, 2001. improvements such as ceilings and interior walls, ‡ The Dictionary of Real Estate Appraisal, Fourth Edition, as well as partitions, floor coverings, wall 2002. coverings, etc. § The Office of the Comptroller of the Currency, 12 CFR usable area 1) The area actually used by individual Part 34, Subpart C, ♣34.42(f), August 24, 1990. This tenants. 2) The Usable Area of an office building definition is compatible with the definition of market value is computed by measuring to the finished surface contained in The Dictionary of Real Estate Appraisal, of the office side of corridor and other permanent Third Edition, and the Uniform Standards of Professional walls, to the center of partitions that separate the Appraisal Practice adopted by the Appraisal Standards office from adjoining usable areas, and to the Board of The Appraisal Foundation, 1992 edition. This definition is also compatible with the OTS, RTC, FDIC, inside finished surface of the dominant portion of NCUA, and the Board of Governors of the Federal Reserve the permanent outer building walls. Excludes System definition of market value. areas such as mechanical rooms, janitorial room, restrooms, lobby, and any major vertical # 1990 BOMA Experience Exchange Report, Income/ penetrations of a multi-tenant floor.# Expense Analysis for Office Buildings (Building Owners and Managers Association, 1990). use value Use value is a concept based on the †† productivity of an economic good. Use value is Statement on Appraisal Standard No. 6, Appraisal the value a specific property has for a specific use. Standards Board of The Appraisal Foundation, September 19, 1992. Use value focuses on the value the real estate contributes to the enterprise of which it is a part, without regard to the property’s highest and best use or the monetary amount that might be realized upon its sale. † shell space Space which has not had any interior finishing installed, including even basic improvements such as ceilings and interior walls, as well as partitions, floor coverings, wall coverings, etc. usable area 1) The area actually used by individual tenants. 2) The Usable Area of an office building

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