APPRAISAL SOURCE, LLC AN APPRAISAL OF - Premiere Estates …€¦ · APPRAISAL SOURCE, LLC AN...

APPRAISAL SOURCE, LLC

AN APPRAISAL OF:

Talisman Farm -819.797 Acres 300 Talisman Circle Road

Grasonville, Queen Anne’s County, Maryland 21638

EFFECTIVE DATE:

March 10, 2014

REPORT DATE:

March 24, 2014

PREPARED BY:

Bruce H. Davis, Jr., SRA Priscilla B. Morris

PREPARED FOR:

CNB Attn: Susan Wright

109 N. Commerce Street Centreville, Maryland 21617


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Appraisal Source, LLC PO Box 1664

Easton, Maryland 21601 Voice 410-745-2201 / FAX 410-745-2209

E-Mail [email protected] March 24, 2014 CNB Attn: Susan Wright 109 N. Commerce Street Centreville, Maryland 21617 Re: Talisman Farm, 819.797 +/- Acres, 300 Talisman Circle Road, Grasonville, Queen Anne’s County, Maryland 21638 Dear Ms. Wright: In response to your request for an appraisal of the above captioned property the following is presented in conformance with the 2014-2015 Edition of the Uniform Standards of Professional Appraisal Practice, applicable federal regulatory requirements, and the requirements of CNB. The report is presented in a summary format; as such, in accordance with USPAP Standard 2-2 the presentation of data and depth of discussion is limited to the requirements of the client. The subject property consists of 819.797+/- acres of CS-zoned land on both sides of Perry’s Corner Road south of Cabin Creek Road near Grasonville in southwest Queen Anne’s County, Maryland east of Kent Narrows. It is in census tract 8106.00 and more specifically identified as:

Currently 190 tillable acres are in grain rotation and an additional 140 acres in CREP programs to improve wildlife and water quality characteristics. The property has more than four miles of shoreline and is 40% forested. Approximately 610 acres are under perpetual conservation easement held jointly by Eastern Shore Land Conservancy and Maryland Environmental Trust. Forested property outside of the easement may be considered for minor subdivision. Highest and best use of the property is continued use as a waterfront farm estate.

Address Account # Map/Grid/Parcel Zoning Size (AC)300 Talisman Circle Road 05-010225 65/17/0005 CS, Critical Area RCA 819.797

Total Acreage 819.797

Property Identification


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The property is improved with a brick manor house of excellent building quality but fair condition, a guesthouse, six dependency dwelling houses (five with water views), riding stable, and agricultural accessory buildings. Site improvements such as private airfield, pool, and tennis court (all of which are in need of repairs or replacement). Wetlands restoration and vegetative buffers represent significant site improvements enhancing conservation, wildlife, and hunting potential. Extraordinary assumptions are applied as follows:

• The extraordinary assumption is applied that current tenancies on farm houses, guest house and barn and tillable acreage are short-term in nature, either month to month, or less than one year.

• The extraordinary assumption is applied that no forest stewardship or any other conservation or preservation agreement encumbers the forested acreage (Parcel A2, 209± acres) on the east side of Perry’s Corner Road.

• The extraordinary assumption is applied that no adverse environmental impacts are present on the site due to underground tanks or past or present agricultural or aviation uses.

The purpose of this appraisal is to provide the subject’s fee simple as is market value. Therefore, in our opinion the as is fee simple market value, as of March 10, 2014 is $ 9,500,000. Any separation of the signature pages from the balance of the report invalidates the conclusion. Respectfully submitted,

Bruce H. Davis, Jr., SRA Priscilla B. Morris President Associate Maryland Certified General Appraiser Maryland Trainee Appraiser #12106 (Expiration 06/10/2015) #30924 (Expiration 07/13/2015)


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TABLE OF CONTENTS

SCOPE OF WORK: ...................................................................................................................................................... 6

TYPE OF REPORT: ...................................................................................................................................................... 6

EXTRAORDINARY ASSUMPTIONS AND HYPOTHETICAL LIMITING CONDITIONS: .................................. 7

GENERAL ASSUMPTIONS AND LIMITING CONDITIONS: ................................................................................. 7

PURPOSE OF APPRAISAL: ........................................................................................................................................ 8

PROPERTY RIGHTS APPRAISED: ............................................................................................................................ 8

DATE OF VALUE OPINION: ..................................................................................................................................... 9

INTENDED USE/INTENDED USER: ......................................................................................................................... 9

DEFINITION OF VALUE: ........................................................................................................................................... 9

IDENTIFICATION OF THE PROPERTY: ................................................................................................................ 10

SITE DESCRIPTION: ................................................................................................................................................. 11

NEIGHBORHOOD ANALYSIS: ............................................................................................................................... 24

IMPROVEMENTS DESCRIPTION: .......................................................................................................................... 28

TAXES AND ASSESSMENT: ................................................................................................................................... 37

REGIONAL DATA: .................................................................................................................................................... 38

ZONING ANALYSIS: ................................................................................................................................................ 40

MARKETABILITY STUDY: ..................................................................................................................................... 45

HIGHEST AND BEST USE: ...................................................................................................................................... 51

SALES COMPARISON APPROACH: ....................................................................................................................... 54

CERTIFICATION OF VALUE: ................................................................................................................................. 63


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Addenda: Qualifications of the Appraisers Letter of Engagement


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SCOPE OF WORK:

Scope of work is defined as: The amount and type of information researched and the analysis applied in an assignment. Scope of work includes, but is not limited to, the following:

• The degree to which the property is inspected or identified; • The extent of research into physical or economic factors that could affect the property; • The extent of data research; and • The type and extent of analysis applied to arrive at opinions or conclusions.

Per the client’s instructions we have provided an appraisal report providing the subject’s market value as is. The information regarding the subject was derived from the property inspection, information provided by the property owner representation, and public records. As the subject is located within the Queen Anne’s County waterfront agricultural submarket, this submarket was investigated along with the waterfront agricultural land market in surrounding Mid-Shore counties. Information taken into account included market data, comparable sales, and investment parameters. Sources used to collect and verify data included public records, developers, sale/lease agents and brokers, parties involved in transactions, public officials and various published data pertinent to the subject’s real estate market. A marketability study was completed to identify key factors that influence value. A highest and best use analysis was completed to identify the most profitable use to which the subject can be put. The sales comparison approach has been utilized to estimate the market value with emphasis placed on large waterfront estate farms in conservation preservation programs with older manor houses and related dependencies. The income capitalization is not recognized by market participants in decision making; as such, it is not applied. Typically, large farms include older residential structures and agricultural buildings which are included in the land price. The cost approach cannot be reliably applied due to the age and condition of the improvements. The cost approach can also be circular, employing elements of sales comparison. Exclusion of the income capitalization and cost approaches as valuation techniques does not reduce the credibility of the value opinion.

TYPE OF REPORT:

Appraisal Report. In accordance with USPAP Standard Rule 2-2 the presentation of data and depth of discussion is limited to the requirements of the client.


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EXTRAORDINARY ASSUMPTIONS AND HYPOTHETICAL LIMITING CONDITIONS:

The extraordinary assumption is applied that current tenancies on farm houses, guest house and barn and tillable acreage are short-term in nature, either month to month, or less than one year.

The extraordinary assumption is applied that no forest stewardship or any other conservation or preservation agreement encumbers the forested acreage (Parcel A2, 209± acres) on the east side of Perry’s Corner Road.

The extraordinary assumption is applied that no adverse environmental impacts are present on the site due to underground tanks or past or present agricultural or aviation uses.

GENERAL ASSUMPTIONS AND LIMITING CONDITIONS:

No responsibility is assumed for the legal description provided or for matters pertaining to legal or title considerations. Title to the property is assumed to be good and marketable unless otherwise stated.

The property is appraised free and clear of any or all liens or encumbrances unless otherwise stated. Responsible ownership and competent property management are assumed. The information furnished by others is believed to be reliable, but no warranty is given for its accuracy. All engineering studies are assumed to be correct. The plot plans and illustrative material in this report are

included only to help the reader visualize the property. 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 obtaining the engineering studies that may be required to discover them.

It is assumed that the property is in full compliance with all applicable federal, state, and local environmental regulations and laws unless the lack of compliance is stated, described, and considered in the appraisal report.

It is assumed that the property conforms to all applicable zoning and use regulations and restrictions unless nonconformity has been identified, described, and considered in the appraisal report.

It is assumed that all required licenses, certificates of occupancy, consents, and 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 opinion of value contained in this report is based.

It is assumed that the use of the land and improvements is confined within the boundaries or property lines of the subject described and that there is no encroachment or trespass unless noted in the report.

Unless otherwise stated in this report, the existence of hazardous materials, which may or may not be present on the property, was not observed. We have no knowledge of the existence of such materials on or in the property; however, we are not qualified to detect such substances. The presence of substances such as asbestos, urea formaldehyde foam insulation and other potentially hazardous materials may affect the value of the property. The value estimated 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 such conditions or for any expertise or engineering knowledge required discovering them. The intended user is urged to retain an expert in this field, if desired.

Any allocation of the total value estimated in this report between the land and the improvements applies only under the stated program of utilization. The separate values allocated to the land and buildings must not be used in conjunction with any other appraisal and are invalid if so used.

Possession of this report, or a copy thereof, does not carry with it the right of publication. We, by reason of this appraisal, am not required to give further consultation or testimony or to be in attendance

in court with reference to the property in question unless arrangements have been previously made. Neither all nor any part of the contents of this report (especially any conclusions as to value, the identity of the

appraisers, or the firm with which the appraisers are connected) shall be disseminated to the public through advertising, public relations, news, sales, or other media without the prior written consent and approval of the appraisers.


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Any opinions of value provided in the report apply to the entire property and any prorating or division of the total into fractional interests will invalidate the opinion of value, unless such prorating or division of interests has been set forth in the report.

If only preliminary plans and specifications were available for use in the preparation of this appraisal; the analysis is subject to a review of the final plans and specifications when available and arrangements have been previously made.

We assume that the user of this report has been provided with copies of available building plans and all leases and amendments, if any, that encumbers the property.

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

The Americans with Disabilities Act (ADA) became effective January 26th, 1992. We have not made a specific compliance survey or analysis of the property to determine whether or not it is in conformity with the various detailed requirements of ADA. It is possible that a compliance survey of the property and a detailed analysis of the requirements of the ADA would reveal that the property is not in compliance with one or more of the requirements of the act. If so, this fact could have a negative impact upon the value of the property. Since I have no direct evidence relating to this issue, possible noncompliance with the requirements of ADA was not considered in estimating the value of the property.

No legal description or survey was furnished, so the appraiser used a tax plat to ascertain the physical dimensions and acreage of the property. Should a survey prove this information to be inaccurate, it may be necessary for this appraisal to be adjusted.

PURPOSE OF APPRAISAL:

Provide as is market value opinion.

PROPERTY RIGHTS APPRAISED:

Fee simple estate, which is defined as “absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat.” 1

The extraordinary assumption is applied that current tenancies on farm houses, guest house and barn and tillable acreage are short-term in nature, either month to month, or less than one year. Therefore, there is no impact on the fee simple ownership bundle of rights given short-term nature of leases.

Part of the subject property acreage is under a perpetual conservation easement held by The Eastern Shore Land Conservancy (ESLC) and Maryland Environmental Trust (MET) and long-term Cost-Share “CREP” agreements with the Maryland Department of the Environment (MDE), all of which are deed recorded and run with the land. Easements are more particularly described in the Site Description section of this report.

1 Appraisal Institute, The Dictionary of Real Estate Appraisal, 5th Ed. (Chicago: Appraisal Institute, 2010)


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DATE OF VALUE OPINION:

March 10, 2014 is the effective date of the value opinion and is the date of the most comprehensive inspection. The report date is March 24, 2014.

INTENDED USE/INTENDED USER:

The intended use is to aid in, or support, decisions related to encumbering the subject property for the benefit of the bank. It is also intended to be utilized for purchase price negotiations. The only intended user is Centreville National Bank.

DEFINITION OF VALUE:

Market value: “The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1) Buyer and seller are typically motivated; 2) Both parties are well informed or well advised, and acting in what they consider their best

interests; 3) A reasonable time is allowed for exposure in the open market; 4) Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements

comparable thereto; and 5) The price represents the normal consideration for the property sold unaffected by special

or creative financing or sales concessions granted by anyone associated with the sale. Exposure Time 1) The time a property remains on the market. 2) 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 on an analysis of past events assuming a competitive and open market. Exposure time is always presumed to occur prior to the effective date of the appraisal. The overall concept of reasonable exposure encompasses not only adequate, sufficient and reasonable time but also adequate, sufficient and reasonable effort. Exposure time is different for various types of real estate and value ranges and under various market conditions. 2

2 Appraisal Institute, The Dictionary of Real Estate Appraisal, 5th Ed., (Chicago: Appraisal Institute, 2010)


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IDENTIFICATION OF THE PROPERTY:

Property Name - Talisman Farm Property Type - Agricultural Waterfront Estate. Identification - 05-010225

Legal Description - "819.79 ACRES S/W SIDE PERRY CORNER

RD W/PERRY COR" Census Tract - 8106.00 Current Ownership - Cabin Creek Farm LLC Prior Sales - The property last conveyed to Cabin Creek

Farm LLC on February 26, 2010, for $7,750,000 from Joseph E. Johns, personal representative of the estate of Arthur H. Kudner Jr. and from Philip E.L. Dietz, Jr. and John F. Hall, Trustees pursuant to a foreclosure against Talisman East Enterprises LLC, with the Kudner estate receiving $3,501,730 and the balance to the court appointed trustees under the foreclosure. The property previously transferred on October 6, 2006 from Joseph E. Johns, personal representative of the estate of Arthur H. Kudner Jr. to Talisman East Enterprises LLC for $17,750,000 including the subject and other property totaling 1500± acres. The subject property was previously held i by Arthur H. Kudner Jr. since he inherited it from his father’s estate December 10, 1965 (QACLR: C.W.C. 20/154).

Pending Sale Price - N/A

Address Account # Map/Grid/Parcel Zoning Size (AC)300 Talisman Circle Road 05-010225 65/17/0005 CS, Critical Area RCA 819.797

Total Acreage 819.797

Property Identification


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Other Contracts, Options, Listings - The property is currently listed for $10,900,000.

It has been multi-listed at that price for 642 days. The total days on the market is 916 days.

SITE DESCRIPTION:

Site information is derived from public records and site inspection from public records. Location - The subject property is part of the Grasonville,

Maryland postal district in the 21638 zip code. It is located south of main village of Grasonville, west of Kent Island, and east of Bryantown. The subject is located on the south side of Perry’s Corner Road, within one mile of U.S Route 50/301 the primary arteries of the Delmarva Peninsula which connect Philadelphia, Easton, Atlantic beaches, Annapolis, Baltimore and Washington. The subject is 2.5 miles southeast of Kent Narrows and is immediately southwest of the 510 acre Chesapeake Bay Environmental Center. It is seven miles south southeast of the Chesapeake Bay Bridge, 30 miles Southeast of Thurgood Marshall Baltimore-Washington International Airport, 55 miles from Reagan International Airport and within 90 miles of both Dulles International and Philadelphia International airports. By water, the subject is centrally located off the Chesapeake Bay. It fronts on Prospect Bay at Eastern Bay near the prime sailing grounds of Wye River, Miles River, and Chester River, all of which hub at Kent Narrows. The subject property has several miles of shoreline beginning and Cabin Creek and extending southward along Eastern Bay, wholly incorporating Hoghole Creek and a small island at the mouth Hoghole Creek. Jenkins Creek, referred to in deeds and easements is the southern branch of Hoghole Creek.

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Parcel Description - A-1: Main Parcel 608.221 Acres

A-2: Forested area west of Perry’s Corner Road 209.059 Acres A-3: 2.358 Acres S/S Cabin Creek Road at Public Landing 2.358 Acres A-4: Island at mouth of Hoghole Creek 0.159 Acres Total Area: 819.797 Acres Data from McCrone’s Boundary Survey on the Lands of the Estate of Arthur H Kudner Jr. dated April 2006.

Access - Access is superior given proximity to Kent

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Main Entrance views: 0.45 miles from gates to Main House

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Topography - The site is level with creek and open bay

waterfrontage defining the property.


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Soils- Queen Anne’s County Soil Maps Version 5 and Soil Data Version 9, December 13, 2013 identify predominant soil types as a mixture of moderately well drained Hammonton and Pineyneck loam types and poorly drained Corsica and Othello soils along with wetlands and water in the lowland in the non-tillable acreage. (USDA). Tillable acreage is in use for grain production. Wet soils in wooded area show as DNR-designated wetlands. Restoration of wetland and installation of buffers by Chesapeake Wildlife Heritage is designed to work with the underlying soil types to best advantage, balancing grain production, Bay water quality and wildlife interests.

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Given the scale of the property spanning two flood maps and the age of the maps, a prudent buyer should engage a qualified land engineer for specific flood hazard information. Flood zone hazard areas are typical for waterfront farms.

Environmental Hazards - None noted.

The extraordinary assumption is applied that no adverse environmental impacts are present on the site due to underground tanks or past or present agricultural or aviation uses.

Utilities - Electric and telephone available to site. No

public water or sewer. Lack of public water and sewer is typical.

Easements / Encroachments - In addition to typical utility and rights of way

easements, the property is protected by a perpetual conservation easement recorded on the Queen Anne’s County land record at Libor 650, folio 953 to 971. The Easement is dated December 18, 1998, granted by Arthur H. Kudner Jr. to Eastern Shore Land Conservancy (ESLC) And Maryland Environmental Trust (MET). The easement prohibits further subdivision or breaking up of parcels covered by the easement which are: A-1, A-3 and A-4. Commercial activity other than agriculture or silviculture or horticulture are generally prohibited. Commercial recreational activity is prohibited except for a de minimus amount. No new principal dwellings are allowed beyond the current manor house, the existing guesthouse, and the six additional accessory dwelling houses. Existing dwelling houses cannot be expanded or relocated without agreement of both easement holders. Accessory structures serving the seven principal residences (e.g.


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garage, well house, swimming pool and pier) or serving the agricultural, horticultural, forestry and naturalistic uses of the property. If it holders require 90 days’ notice for any instruction or alteration of access to new construction. Existing accessory structures may be maintained. Easement requires maintenance of vegetative buffers of at least 50 feet width along Prospect Bay, cabin Creek, Hoghole Creek, and Jenkins Cove. Additional requirements consistent with best conservation management practices are delineated in the easement, such as invasive management and limitation of pesticides and herbicides within the buffer zone. Division of the property and more than the four existing parcels of land for any purpose is prohibited. In addition, the parcels which together constitute the property shall remain in common ownership. NOTE: Despite the preceding sentence Parcel A-2 is not covered by the property description of the easement which covers approximately 650 acres (of which 40± acres no longer exist due to erosion and/or inaccurate boundary description prior to the April 2006 boundary survey with specific metes and bounds performed by McCrone.) See easement map following this section. A 40 acre area not depicted on the easement map (in the northeast quadrant of parcel A-1) is remainder land from a transfer of two development rights by Arthur Kudner Jr. to the Queen Anne’s County commissioners on March 25, 1996 (525/148-157). These 40 acres can be used for open space or agricultural uses only. No development rights other than the existing dwellings remain on the parcels covered by the easement or the 40-acre remainder parcel from the TDR conveyance.


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A map depicting the ESLC/ MET conservation easement area follows:

Conservation Easement area: Entirety of parcels A-1, A-3 & A-4. Parcels require common ownership.

In addition to the conservation easement, long-term cost-sharing (CREP) agreements with the Maryland Department of Agriculture are in place and filed on the land record, summarized as follows :

• Two grassed waterway agreements expiring fourth-quarter 2021 and first quarter 2022.

• A CP-21 Riparian Herbaceous Cover Agreement expiring first quarter 2021.

• Seven CP-23 Water Restoration Agreements expiring between the fourth quarter of 2026 in the third quarter of 2027.

The CREP agreements are implemented and managed by Chesapeake Wildlife Heritage (CWH). Their purpose is to restore traditional wetlands and agricultural buffers on the property, to enhance the vegetative and wildlife ecosystem, and to reduce environmental impacts from remaining crop acreage.


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The extraordinary assumption is applied that no forest stewardship or any other conservation or preservation agreement encumbers the forested acreage (Parcel A2, 209± acres) on the east side of Perry’s Corner Road.

Detrimental Influences - None noted nor known. Site Improvements - Site is improved with:

• Manor entranceway: painted brick pilasters flanked by decorative serpentine brick walls.

• 1.55+ miles of unpaved lanes in average to good condition.

• A steel truss entrance bridge, 20’x 45’ assumed to be in passable condition. (G.V.W. restrictions unknown).

• Multiple accessory buildings described under improvements section.

• Fenced waterside tennis court; court surface in poor condition.

• 1300 square-foot pool in poor condition. • Private family burial ground. • Over 3 acres of fenced riding areas. • Wooden arbor. • Fenced vegetable garden. • Hoop house. • Extensive buffer strips and restored

wetlands. • A private airfield, currently not in use.

Runway on Bay side has eroded as can be seen on 2011 Aerial View vs. older Topo Map View following:


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Conclusion - There are no impediments noted or known that

may adversely impact utilization of the subject.

NEIGHBORHOOD ANALYSIS:

Boundaries – The subject property is part of the Grasonville, Maryland postal district in the 21638 zip code. Its neighborhood includes the water-oriented western part of Queen Anne’s County including Kent Island. It is located south of the unincorporated town of Grasonville, west of Kent Island, and east of Bryantown on Wye River. The neighborhood is bounded on the west by Chesapeake Bay, on the north by Chester River, on the east By US Route 50, and by Wye River to the south. By water, the subject is centrally located on Chesapeake Bay. It fronts on Prospect Bay at Eastern Bay near the prime sailing grounds of


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Wye River, Miles River, and Chester River, all of which Kent Narrows is the regional epicenter drawing boaters from Philadelphia, Wilmington, Baltimore, and Washington DC.

Land Uses - Land uses are predominantly agricultural and

low density residential facing waterways. Commercial activity is clustered along US Route 50/301 with limited industrial and institutional land use located on Kent Island with the exception of Chesapeake College on the neighborhood’s Eastern border. Medium density residential uses are primarily clustered in the incorporated towns and in older developed areas on sewer on Kent Island. Some conversion of agricultural land to small clustered subdivision projects has occurred in the past ten years, with one project adjoining parcel A2 to the North. The 2012 “Septics Bill” (which restricts subdivision potential in areas where septic systems are required) is anticipated to slow cluster subdivision in CS zoning outside of priority funding areas for sewer. Lots outside of cluster development and villages range in size from 2 to 300+ acres.


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A high percentage of property is under private or public land or agricultural preservation as shown by the colored areas on the following aerial map:

The quadrant of the neighborhood from Wye River to Kent Narrows is typified by large waterfront estates. The historic context for such estates goes back to the first settlement of the Maryland colony. Kent Island was established as an outpost for the Virginia colony. Lord Baltimore granted large land grants east of Kent Island to defend the Maryland territory and to establish Catholic outposts on the Eastern Shore. To this end, he granted Peter Sayer (Catholic) a very large grant of forest between Wye River in what is now Kent Narrows. Talisman Farm and the surrounding large private estates of the upper Wye region are part of Sayer’s original grant. The size of Peter Sayer’s original holdings directly influence the continued existence of numerous very large estates within the highly desirable sailing grounds near Kent Narrows. Much of Sayer’s Forest remains forested including subject Parcel A-2. The community character is water-oriented rural agricultural.

Supporting Facilities - Schools, including public K-12 Chesapeake Community College, Wye River Upper School, a new Anne Arundel Medical Center facility at Route 18 and US Route 50, places of worship,


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and public recreational facilities are proximate in the neighborhood. Police and fire protection is adequate. Proximity to marina, restaurant, recreation, walking/bike trail and hunting is above average. Queen Anne’s County has 21 public landings and 2,902 acres of public parks.

Typical Property Condition - Properties range in condition from fair to good

depending on age. Most properties are than 10 to more than 50 years old in the immediate neighborhood.

Predominant Occupancy - Predominantly single-family owner-occupied

with some tenant occupied in CS and AG zones. Rental tenure is higher in the villages and incorporated towns. In the delineated subject neighborhood, 14.3% of households are occupied by renters, expected to decline three basis points in the next five years. Vacant housing is currently 11.6%, and owner tenure is 73.8%, of total housing units.

Demographic Characteristics - The subject neighborhood includes a

population of 28,499 persons in 2013, projected to grow to 29,857 persons by 2018. As of 2013, 8,072 families currently occupy 11,003 households. By 2018, 11,542 households are projected for the area. Average household size is 2.59. Median age is 44.8, predicted to decline to 45.8 by 2018. Median household income in 2013 is $88,036, forecast to grow to $102,138 by 2018. The neighborhood is typified by high net worth households as demonstrated by the disparity between median net worth ($310,133) and average net worth ($1,042,835). In the subject’s delineated neighborhood, 39.2% of all households hold net worth over $500,000. (ESRI data.)


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IMPROVEMENTS DESCRIPTION:

Improvement information is derived from public records, interior inspection of manor and guest house and exterior inspection of dwelling dependencies and accessory structures by Bruce H. Davis, Jr. and Priscilla B. Morris. Product - Waterfront estate with manor house with

enclosed, unheated porch, large central double fireplace, attached three-car garage, guest house and six dependency dwellings. Accessory stable, airplane hangar, shop, and agricultural support structures.

Size - Gross Living Area:

Manor House 7,146 SFGuest House 2,460 SF216 Talisman Circle 1,392 SFVacant Talisman Circle 892 SF201 Talisman Circle 1,128 SFBryan Farm 1,836 SF1000 Perry’s Corner Rd 2,230 SFTotal Living Space 17,814 SF

The demographics are driven by the number of large waterfront estates. Queen Anne’s County has 414 miles of shoreline predominantly in net districts of the western part of the county and on Kent Island.

Growth Rate - Stable increasing population. Evidence of Declining Occupancy - None. Prevalent Market Trend - Toward continued development of vacant or

underutilized sites where opportunities for water and sewer exist. .

Life Stage of Neighborhood - Stability.


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Main House Front/Rear

Main House South Wing/ Hyphen/Center Block/Hyphen/ North Wing

Attached Garage


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Guest House Front / Rear

Tenant House/Driveway


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Tenant Houses

Year Built / Effective Age - Main House: 1934 / 25 years. Accessory

buildings – year built not available but estimate range 40-75 years.

Condition - Main House exterior condition is average to

fair; interior condition is fair to poor, showing signs of long vacancy including as significant plaster failure. House has been winterized, but is in need of significant rehabilitation. The Main House consists of a three-bay two-story centerblock with hyphens and 1 ½ story bedroom wings. The entire central structure is improved with a two-story entrance portico with columns. The portico is brick with hexagonal pavers. Some settlement evident under the northernmost column. A flagstone enclosed porch (unheated) addresses the waterfront side of the house facing the pool. Decorative iron railing provides second-story walkout on porch roof.

Remaining Economic Life - 30 + years. Foundation - Brick. Frame / Siding - Brick.


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Windows - Double-hung wood windows. Interior Build-Out - The house interior incorporates Adams style

paneling in the foyer, chandeliers in the foyer and banquet room, highly ornate artisan level plaster and stone work at mantles throughout the entertaining and banquet areas. The banquet room is distinguished by its scale and level of finish, despite current condition defects. Glass and mirrored French doors further enlarge the setting and flow. The scale is complemented by details such as the wide stair with heavily ornate carved newell, classical railing and balusters, and artisan quality paneling. A curved and paneled library and curved dining room continued to high level of paneling and finish, as does the atrium and door to the first floor master bedroom wing which includes double master suites. The kitchen and pantry include carpenter built wood shelving and c. 1970s fixtures. Upper story bedrooms and dressing rooms carry a high level of decorative trim but need refinishing. Eight bathrooms range in condition from refurbished to needing repair. Basement largely dry. One story brick guesthouse with large patio facing pool is an average interior and exterior condition.

APPRAI

ISAL SOUR

Architectural

RCE, LLC

Details: Paneled C

Banquet Room / T

St

Curved Library/Do

Typical plaster con

tair and Detail

oor to Master Suite

ndition issue

es/ Rounded Slate

Library and Dininng Roofs

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34

Typical Dining Room/ Bar

Kitchen

Butler’s Pantry/ Garage


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Typical Bedroom Master /Upper Story Small

Typical Bathroom Refurbished/Older

Roof Cover - Slate at Main House. Metal and composition

shingle at accessory buildings. Plumbing - Appears adequate. Private well and septic. Heat and Air Conditioning - Hot water radiator heat in Main House. New

heat ducts for master suites. No central air. Electrical - Appears adequate where new; some panels

need replacement. Home inspection suggested prior to use.

Parking - Adequate. Three-car attached garage in

average to fair condition with rooms above garage included in living space.

Fencing - Extensive fencing for riding area in good

condition.


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Building Efficiency - Below average for market. Upgrades needed to wiring, mechanical systems, kitchen, and some baths.

Functional Adequacy - Below average as is with potential for above

average functionality due to high quality construction grade and high-end woodwork.

Conclusion: The subject’s primary dwelling

improvements are of excellent intrinsic quality but require upgrades and rehabilitation or replacement prior to occupancy in the main house. The guest house is functionally adequate and in average condition. The dependency dwellings are in ongoing rehabilitation and range in condition from fair to good where newly renovated.

Accessory Buildings: Stable/ Shop

Accessory Buildings: Stable/ Shop


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TAXES AND ASSESSMENT:

Tax Identification / Assessment - 05-010225

Prospective Changes in Tax Rates - None. Comparable Assessments - Surveyed data for comparable properties

indicate the tax burden is reasonable (note that land assessment reflects preferential agricultural use) given the location and physical characteristics of the subject property; however, the assessment is well below the market value opinion. A prudent purchaser should anticipate an increase in the assessment and tax burden subsequent to purchase even with preferential value for continued agricultural use applied.

Address Account # Land Building Total Phase-In Value Taxes300 Talisaman Circle Road 01-010225 $1,801,500 $1,604,900 $3,406,400 $3,251,067 $31,180.98

Total $1,801,500 $1,604,900 $3,406,400 $3,251,067 $31,180.98

2013-2014 Assessment and Taxes


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REGIONAL DATA:

The subject property is located in the Maryland Mid-Shore region, encompassing Talbot, Dorchester, Queen Anne’s, Caroline and Kent counties. A map presenting the subject property relative to the broader market is presented below.

The following table presents historic and projected, population, household growth and employment growth forecasts (source: Maryland Department of Planning, Planning Data Services as of September, 2011).


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County 2000 2005 % Change/Year 2010 % Change/Year 2015 % Change/Year 2020 % Change/Year 2025 % Change/Year

Talbot 33,812 35,550 1.01% 36,700 0.64% 38,300 0.86% 39,800 0.77% 41,000 0.60%

Dorchester 30,674 31,050 0.24% 32,250 0.76% 34,050 1.09% 35,700 0.95% 37,050 0.75%

Queen Anne's 40,563 44,950 2.08% 48,650 1.59% 51,950 1.32% 55,650 1.39% 58,900 1.14%

Kent 19,197 19,700 0.52% 20,300 0.60% 21,300 0.97% 22,200 0.83% 22,900 0.62%

Caroline 29,772 31,350 1.04% 33,500 1.34% 35,900 1.39% 38,300 1.30% 40,800 1.27%

Total 154,018 162,600 1.09% 171,400 1.06% 181,500 1.15% 191,650 1.09% 200,650 0.92%

Historic Population Changes and Population Forecasts

ProjectedHistoric (using 2010 Census updates )

County 2000 2005 % Change/Year 2010 % Change/Year 2015 % Change/Year 2020 % Change/Year 2025 % Change/Year

Talbot 14,307 15,600 1.75% 16,125 0.66% 16,975 1.03% 17,700 0.84% 18,325 0.70%

Dorchester 12,706 13,075 0.57% 13,425 0.53% 14,400 1.41% 15,125 0.99% 15,800 0.88%

Queen Anne's 15,315 17,125 2.26% 18,500 1.56% 20,025 1.60% 21,825 1.74% 23,300 1.32%

Kent 7,666 8,050 0.98% 8,350 0.73% 8,875 1.23% 9,425 1.21% 9,875 0.94%

Caroline 11,097 11,700 1.06% 12,475 1.29% 13,475 1.55% 14,500 1.48% 15,625 1.51%

Total 61,091 65,550 1.42% 68,875 0.99% 73,750 1.38% 78,575 1.28% 82,925 1.08%

Historic Household Changes and Household Forecasts

ProjectedHistoric (using 2010 Census updates)

County 2000 ACS 2006-2008 % Change/Year 2010 % Change/Year 2015 % Change/Year 2020 % Change/Year 2025 % Change/Year

Talbot 16,789 18,890 2.39% 19,230 0.36% 19,880 0.67% 20,250 0.37% 20,390 0.14%

Dorchester 15,144 17,440 2.86% 17,240 -0.23% 17,900 0.75% 18,370 0.52% 18,750 0.41%

Queen Anne's 21,849 25,960 3.51% 26,630 0.51% 28,220 1.17% 29,910 1.17% 31,140 0.81%

Kent 9,733 11,280 2.99% 11,250 -0.05% 11,690 0.77% 11,910 0.37% 12,040 0.22%

Caroline 15,045 17,830 3.46% 17,730 -0.11% 18,780 1.16% 19,790 1.05% 20,920 1.12%

Total 78,560 91,400 3.07% 92,080 0.15% 96,470 0.94% 100,230 0.77% 103,240 0.59%

Historic Employment and Employment Forecasts

Historic (using 2010 Census updates) Projected


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The Bureau of Labor Statistics indicates the current unemployment rate for Queen Anne's County, Maryland was 5.4% in November 2013, down 2 basis points from the prior year and 12 basis points ahead of the national average of 6.6% and 6 basis points ahead of the state average of 6.0. Queen Anne's County is part of the Baltimore –Towson Metropolitan Statistical Area (MSA) with 6.3% unemployment reported for January 2014. The Delmarva Region is adequately served by most relevant major modes of transportation. The area region includes various private and public airports, capable of accommodating commercial, private and corporate aircraft. Major air service is provided by Baltimore-Washington International Airport, a 1.5-hour drive from most points on the Mid and Upper Eastern Shore, while Philadelphia International Airport serves the region’s northernmost points. Salisbury Airport also provides commercial commuter flights for those living on the Lower Shore. Sea transport facilities are available in Baltimore and Port of Wilmington, while rail transport is nearest in Wilmington, Delaware and New Carrollton, Maryland, also the furthest eastern point of access to the Washington D.C. Metro Rail System. Local bus service is provided in most major towns throughout the region. Aside from county-operated elementary and high schools, the Delmarva Region is served by a number of facilities for advanced education, including Salisbury University, University of Maryland Eastern Shore, Washington College, Warwick Community College, Cecil Community College, and Chesapeake Community College. Overall the subject region should see long-term growth in regards to population, employment, housing and commercial development during for forecast period.

ZONING ANALYSIS:

Type - CS-Countryside, Critical Area RCA. The Countryside (CS) District is intended to preserve and protect the rural and agricultural areas of the County that generally lie within the Chesapeake Bay Critical Area and contain extremely sensitive natural resources. Residential densities and design standards shall ensure resource protection and preservation of open space, farmettes, and very low density residential uses or small single-family cluster developments with significant associated open space.

Historical Overlays - Subject property is not listed in the Maryland

Inventory of Historic Places (MdIHP). As such, improvements are not eligible for historic rehabilitation tax credits. However, property history and quality of the improvements suggest the property would be eligible for listing in


41

MdIHP after a survey. Listing does not convey any preservation qualifications on the property or prevent demolition but is a threshold condition of qualification for rehabilitation tax credits.

Permitted Uses - Agriculture; aquaculture 1-2 ponds ≤ five acres on

any single lot (conditional use could allow more); bed and breakfast, forestry, stables, effluent disposal, family day care, home occupations, group homes for 5 or less persons, assisted living up to 16 persons, kennels, replacement or temporary worker single-wide manufactured homes, nurseries, outdoor recreation, public service. Permitted residential uses: large lot subdivision (1:20 density), major and minor multifamily, major and minor single family cluster, single family residential, and sliding scale subdivision (1 lot per 100 acres).

Development Standards - DENSITY/INTENSITY REQUIREMENTS

Maximum Residential Density -Single family cluster: 0.125 acre or 1 per 8 AC with cluster subdivision and 85% open space. -Multifamily: 0.20 -Large lot subdivision: equal to total site area divided by minimum large lot area 1:20 acres. -Sliding scale subdivision: 1 new lot up to first 100 acres then one new lot for each additional 100 acres Maximum Non-Residential Floor Area Ratio -Agricultural support: .35 -Rural country clubs: .05 -All other: .12 DIMENSIONAL/BULK REQUIREMENTS Residential Uses Minimum open space ratio -Single-Family cluster: .85 -Non-contiguous development: .85 Minimum site area -Single family cluster: 10 acres -Multifamily: 10 acres Minimum lot area -Single family cluster: 20,000 SF -Large lot subdivision: 20 acres -Sliding scale subdivision: 20,000 SF Minimum set backs Single Family Cluster -Front: 50’


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-Side: 50’/100’ total -Rear: 50’ Large Lot Subdivision -Front: 50’ -Side: (min/total): 50’/100’ -Rear: 50’ Sliding scale subdivision (equal or <20 acres) -Front: 40’ -Side: 20’ -Rear: 50’ Sliding scale subdivision (>20 acres) -Front: 50’ -Side: 20’ -Rear: 50’ Maximum Building Height -Single or multifamily cluster: per design guidelines -Large lot subdivision: 40’ -Sliding scale subdivision: 40’ Minimum Lot Width -Single family cluster: 130’ -Large lot subdivision: 500’ -Sliding scale subdivision: 130’ Minimum Lot Frontage -Single family cluster: 35’ -Large lot subdivision: 35’ -Sliding scale subdivision: 35’ NON-RESIDENTIAL USES Maximum Impervious Surface Ratio -Rural country clubs: .15 -All other: .30 Minimum Lot Frontage -35 feet Minimum Setbacks -Front: 35’ -US Routes 50/301: 100’ -Arterial: 75’ -Side and rear: 10’ Maximum Building Height -On lot agricultural: 135’ -Commercial: 135’ -Telecommunications: 200’ -All other: 45’ Minimum Site Area -Campgrounds: 25 acres -Major extraction/disposal: 75 acres -Organic fertilizer storage/transfer: 300 acres -Private airports: 200 acres -Shooting clubs: 100 acres

Analysis - Under the terms of the perpetual conservation

easement on the subject property, parcels A-1, A-


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3, and A-4 cannot be sold separately or further subdivided. Note: The small 2.358 acre waterfront Parcel A-3 of the subject property west of Cabin Creek Road at the public landing appears to be in NC zoning - a higher density designation - and it is designated for sewer service by the county. Density benefits from such zoning are moot under the terms of the perpetual conservation easement on the subject property. Parcel A-2, the 209.059 acre forest on the east side of Perry’s Corner Road, is outside of the Critical Area, except for a small portion of the southwest corner.

The extraordinary assumption is applied that no forest stewardship or any other conservation or preservation agreement encumbers the forested acreage (Parcel A2, 209± acres) on the east side of Perry’s Corner Road. Therefore, A-2 is the only part of the subject property eligible for subdivision. Permissible subdivision mechanisms are dictated by priority funding area designations for sewer. A small portion of the property shows as Priority Funding Area (PFA) Comment Area on state planning maps. The Queen Anne’s County Planning Office affirms that parcel A-2 is outside the PFA. Subdivision is further impacted by the Sustainable Growth and Agricultural Preservation Act of 2012, commonly known as the “Septics Bill”. This bill requires land to be designated in growth priority tiers. Although Queen Anne’s County has not yet adopted the state’s tier system, countryside zoning is considered a conservation and preservation area. Therefore, the only allowable subdivision is a minor subdivision and other mechanisms such as cluster development or large lot subdivision are not applicable.

Minor subdivision of the subject property would yield a maximum of seven lots including the donor


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lot: five under the standard minor subdivision mechanism and two under the sliding scale minor subdivision technique. Note: it is possible that there are development rights existing on parcel A-2 that could be sold under transfer of development rights agreement. According to the Queen Anne’s County planning office, a large lot subdivision would yield 1du per 20 acres with no deed-restricted open space requirements. A cluster subdivision capacity could be estimated at 1 du/8 acres, clustered with 15% of the parcel in buildable area and 85% of the parcel in deed restricted open space. Calculations are further limited by physical conditions of the site, i.e. ability to “perc.” Noting that some of the site acreage is on Perry’s Corner Road (metes and bounds go to the centerline), a large lot subdivision would yield a maximum of 10 lots and a cluster subdivision would yield perhaps up to 25 development rights, assuming roads and percs could be optimized on the ground. Calculation of potential transferable development rights (TDRs) would require the services of a qualified land engineer and a positive determination from the Queen Anne’s County Planning Officer as well as an analysis of the impact of the impact of the 2012 “Septics Bill” on the TDR program.

Conformance - The property appears to be a legally conforming

use. Possibility of Zoning Change - None.


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MARKETABILITY STUDY:

Property Type - Waterfront farm estate. Competitive Rating - The following table presents a competitive

rating of the subject, comparing it to market competition. The procedure results in a weighted comparison score.

Competitive Rating Matrix

Market Standard Factors Inferior Typical Superior Site Tillable Area X Topography X Waterfront Characteristics X Access X Visibility X Proximity to Support Facilities X Building Construction Quality X Design and Exterior Appearance X Size X Condition and Effective Age X Obsolescence X Quality of Tenant Finish X Management and Tenancy Management X Quality of Tenancy X Subject Number of Items 2 8 4 Category Score 1 3 5 Times Category Score 2 24 20 Total Subject Score 46 Typical Score 42

Interpretation of Rating - The subject’s site characteristics are superior for waterfront farm estates in Queen Anne’s County and the broader Mid-Shore market area. The property offers a unique combination of large acreage, privacy and accessibility. While tillage and soil quality is low-average, waterfront and conservation characteristics are high. Restoration of wetlands and habitat enhances conservation values. The broad waterfront bay views and sandy stretches of beach in combination with the creek penetrations on the property creates superior, multivariate views. Location on the


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south of Kent Narrows is desirable for prevailing summer breezes. Distance from town centers and regional shopping is superior at 5 to 20 minutes’ drive time. Access is enhanced by proximity to Kent Narrows and to international airports as well as the existence of an on-site private airfield. Construction quality of the Manor house, brick with slate roof and compatible brick guesthouse is superior. Setting of the primary improvements is superior, given long lane with bridge, entrance circle, and broad bay views. The house includes superior early 20th century period design elements in the detailing, woodwork, and paneling. Some design features are simply dated. Condition of the Manor house is inferior. Obsolescence of mechanical systems, kitchen, and some of the baths is present. The main house and its amenities (excluding newly renovated stable) require rehabilitation, if not replacement. Management and tenancy is average to above average. Maintenance of dependency dwellings is ongoing with some renovations complete and others underway. Accessory buildings are also in a mixed state ranging between recent renovation and deterioration. The subject’s overall rating is superior relative to competition.

Location Analysis Market Area - Western Queen Anne’s County, Maryland

waterfront farm estate market. Linkages - Employee Housing

The subject’s Western Queen Anne’s County, Maryland location is primarily in agricultural and low density residential use. Recreational uses are high given proximity to water and hunting. Medium density residential use is present in the villages and parts of Kent Island.


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Surrounding areas are primarily oriented to agricultural and single-family uses. The area is largely rural in character. Proximity to the towns of Grasonville, Queenstown and Stevensville provide access to housing, educational, and recreational facilities. Proximity to the Chesapeake Bay Bridge provides access to regional shopping. Commute periods range from 5 to 30 minutes. High local housing prices tend to place some constraints on hiring.

Management/Employee Housing

The management and employee housing stock are primarily located in the surrounding area. ESRI data reports median home values are $327,416 in the subject neighborhood delineation and forecast at $442,662 median value in five years. Since January 1, 2014, 64 residential properties have conveyed at a range of less than $100K to 1,999K, averaging $367,771. There are 380 active listings in the subject neighborhood ranging from less than $100K to $10,900K (the subject property), of which 30, or 7.8%, are distressed or bank owned. In the subject neighborhood, 77% of listings are waterfront properties. Average age is 28 years. For-rent product is limited. Expansion of housing stock is occurring but constrained by lack of public water/sewer.

Proximity to Clients

Proximity to clients is superior given location near U.S. Route 50/301 and 20 minute drive time to Annapolis, Maryland.

Transportation

Proximity to U.S. 50/301 is 5 minutes. Automobile is the primary means of transportation. Mass transportation options are limited. The area is served by two public airports on Kent Island and 11 private airports,


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of which some serve farm and charter needs. Drive time to Thurgood Marshall/ BWI airport is 30 minutes. Proximity to Kent Narrows provides access to all major Mid-Chesapeake waterways from Chester River to Choptank River on the eastern side and from Patapsco to West River on the western side.

Land Use Considerations - Reputation

Queen Anne’s County is considered to be a stable and increasingly desirable community within the Baltimore-Towson Metropolitan Statistical Area. Surrounding areas are primarily oriented to agricultural uses but land uses are changing to single-family detached dwellings near town and village centers where adequate infrastructure is present for new home development. Demand for single-family houses on water and septic is steady, but oriented to higher-end houses where waterfront characteristics or proximity to the Bay Bridge is the primary factor. The county remains a desirable farming community due to availability of larger tracts of land than surrounding counties. Average farm size is 350 acres. Approximately 30% of county land is in some form of conservation easement.

Direction and Rate of Growth - The area is rural in character. New

development is largely limited to nearby towns, further constrained by lack of public water/sewer facilities. The eastern part of the county is characterized by upland farms, while the western part of the county is typified by creeks and necks within the Critical Area and has a waterfront orientation. Kent Island is steadily growing due to proximity to the Chesapeake bay Bridge and the Western Shore employment markets. Demand for land in proximity to town centers is growing.

Node Location Rating - The subject is within a secondary market,

albeit part of a Metropolitan statistical area due to the residential density of Kent Island. Population and household growth is forecast


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at modest levels. The overall rating of the node is a residential growth candidate is moderate, largely due to the outlying nature of the market--trailing suburban areas of Washington DC, Baltimore, and Annapolis where most employment exists.

Sub-Area Analysis - The analysis of the subject’s location within

the subarea is usually site-specific. The subject is situated within the Queen Anne’s County waterfront farm estate submarket within the Mid-Shore. Surrounding competitive markets include the waterfront –and especially the neck district areas of Talbot County, Dorchester County, Kent County, and eastern Anne Arundel County. The subject is identified as being located in the Queen Anne’s County waterfront farm estate submarket. Relative to competitive surrounding waterfront estate markets, Western Queen Anne’s County’s submarket is superior due to the combination of large acreage estates affording privacy near the Route 50/301 interstate system, Bay Bridge, and Kent Narrows affording superior automotive, air, water accessibility. Combination of hunting and prime sailing grounds near urban areas with high privacy enhances marketability. A map of the subarea is presented below.


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Market of Property Users/Supply & Demand Given the potential use of the subject property, we will identify the market for the defined use (or more than one market if the property has alternative uses). The subject is a large waterfront farm estate site suitable for a variety of agricultural uses, including crop acreage, silviculture, horticulture as well as private recreational uses such as aviation, riding, hunting, and conservation. Demand will be drawn from the national market of first and second or third home estate buyers interested in waterfront and conservation characteristics. Size, privacy and accessibility impact marketability of such estates. The availability of large acreage sites is decreasing as some large farms have been subdivided for the 20-acre waterfront estate mid-market or the planned cluster development market if proximate to towns with water and sewer. As a broad bracket, agricultural land prices in Queen Anne’s County generally range from $4,000/acre to $12,000/acre, with variation dependent on soils, tillable area, development rights, use and the presence of waterfront. Wet woodland is generally at the low end of the range, although good hunting properties can range higher. Privacy, accessibility, and views drive the large waterfront farm estate market. In the subject market area, the subject’s accessible location, miles of unspoiled shoreline and multivariate water views, location oriented to prevailing summer breezes, high conservation values and above average estate size are positive marketability factors. The subject is 820± acres, of which 190 acres are tilled and an additional 140 acres are enrolled in Conservation Resource Enhancement Programs (CREP) designed to enhance riparian areas and wetlands. Over three acres are fenced riding areas and 10 acres are devoted to dwelling houses and supporting accessory structures. The 209± acres of forested land outside of the conservation easement on the east side of Perry’s Corner Road has potential for minor subdivision, although it’s utility in maintaining the privacy and open space setting of the estate enhances marketability to the


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large farm estate market. The property located within a mile of a mile of the region's primary artery, U.S. Route 50/301. The property is enhanced by, but limited to, its guesthouse and six dependencies, five of which have water views. The dependencies are suitable for use as accessory dwellings for a family compound and/or farm employee and management housing. The subject property is the only property listed in its neighborhood over 300 acres in size. Four other residential waterfront farm properties are offered between 100 and 300 acres, with prices ranging from $16,000 per acre to $28,000 per acre. In the larger five-county area, 32 properties in excess of the hundred acres are listed, ranging in price from less than $1 million to $20 million. Price per acre ranges from $2,200 to $61,660. The median listing price is $14,670 per acre. Only eight properties are larger than 300 acres. During the past decade, MRIS records 18 sales of waterfront residential properties in excess of 300 acres in the five-county submarket area. Marketing time (when recorded) was less than a year. Properties ranged in price sold from less than $2 million-$17 million. The average price to list was 82% and the median price to list was 87%. The average price per acre sold was $10,408 and median price per acre sold was $7,476.

HIGHEST AND BEST USE:

Highest and best use may be defined as:

“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.” 3

The appraisal requires analysis of property’s highest and best use as vacant and as improved. The highest and best use as vacant is defined as:

“Among all reasonable, alternative uses, the use that yields the highest present land value after payments are made for labor, capital, and entrepreneurial coordination.” The use of a property based on the assumption that the parcel of land is vacant or can be made vacant by demolishing any improvements.4

The highest and best use as improved is defined as:

“The use that should be made of a property as it exists. An existing improvement should be renovated or retained so long as it continues to contribute to the total market value of the property, or until the return from a new improvement would more than offset the cost of demolishing the existing building and constructing a new one.”5

The highest and best use, both as vacant and as improved, must meet four tests:

3 Appraisal Institute, The Dictionary of Real Estate Appraisal, 5th Ed., (Chicago: Appraisal Institute, 2010) 4 Ibid, 305. 5 Appraisal Institute, The Appraisal of Real Estate, 14th ed. (Chicago: Appraisal Institute, 2010), 305.


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1) Physically possible 2) Legally permissible 3) Financially feasible 4) Maximally productive

As If Vacant Physically Possible - No known physical impediments to utilization

of the site. Legally Permissible - The subject’s zoning supports agricultural and

low density residential uses. The perpetual conservation easement permits development with up to 8 dwelling units but no subdivision west of Perry’s Corner Road. The long-term CREP agreements permit agricultural uses alongside conservation best practices on portions of the tillable acreage. Forestry and/or minor subdivision of the forested acreage are legally permissible.

Financially Feasible - Waterfront farm estate use is financially

feasible as demonstrated by the sales analysis approach.

Maximally Productive - Waterfront farm estate in agricultural,

conservation, and recreational uses is maximally productive.

As Improved Physically Possible - The subject property is currently improved

with a manor house, dwelling dependencies, riding stable, tennis court, private airfield, swimming pool and agricultural outbuildings necessary for a large waterfront farm estate.

Legally Permissible - The subject’s zoning supports agricultural and

low density residential uses. The perpetual conservation easement permits development with up to 8 dwelling units but no subdivision west of Perry’s Corner Road. The long-term CREP agreements permit agricultural uses alongside conservation best practices on portions of the tillable acreage. Forestry and/or


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minor subdivision of the forested acreage are legally permissible.

Financially Feasible - Waterfront farm estate use is financially

feasible as demonstrated by the sales analysis approach.

Maximally Productive - The subject property benefits from an unusual

combination of privacy only possible with large acreage and proximity to recreational amenities, three Metropolitan areas, the interstate system, and international airports. Given proximity to US Route 50, the forested acreage of parcel A2 enhances the privacy of the estate with add appeal for private hunting use. Waterfront farm estate in agricultural, conservation, and recreational uses is maximally productive, with renovation and/or replacement of large manor house required.


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SALES COMPARISON APPROACH:

The sales comparison approach is “the process of deriving a value indication for the subject property by comparing market information for similar properties with the property being appraised, identifying appropriate units of comparison, and making qualitative comparisons with or quantitative adjustments to the sale prices (or unit prices, as appropriate) of the comparable properties based on relevant, market-derived, elements of comparison.”6 The sales comparison approach relies upon the principle of substitution; that is, the value of a property is set by the price paid for a substitute property. Supply and demand characteristics guide pricing. The forces of supply and demand move toward balance or equilibrium and imbalances may impact pricing. Externalities, both positive and negative forces outside property, also influence value. These market forces dictate a property’s most profitable and highest and best use. The steps7 involved in the sales comparison approach are:

1) Research transaction data. 2) Verify transaction data. 3) Select relevant units of comparison. 4) Determine how the comparables differ from the subject and adjust their prices for differences

in various elements of comparison. 5) Reconcile multiple value indications into a single value or range of values.

The scope the comparable sale search included sales, contracts, offers, refusals and listings of competitive properties, in this case – agricultural properties in the subject and competitive markets. Each was verified, to the extent possible, using public records, published data sources, and parties participating in the transaction.

6 Appraisal Institute, The Dictionary of Real Estate Appraisal, 5th ed. (Chicago: Appraisal Institute, 2010). 7 Appraisal Institute, The Appraisal of Real Estate, 14th ed. (Chicago: Appraisal Institute, 2010), 381-382.


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Comparable Sale #1

Location: 22776 Bozman-Neavitt Road, Talbot County, MD 21612 Identification: District/Account #: 02-081466 Site Data: Size: 948.80 acres Percent Tillable: 50 % Excess or Surplus Land: None. Topography: Flat Available Utilities: Electric/telephone Zoning: RC Current Use: Agricultural. Intended Use: Agricultural. Sale Data Grantor: Reinecke Fucks Inc. Grantee: Keith R. and Susan E. Leverton Sale Date: October 11, 2012 Consideration: $10,500,000 Rights Conveyed: Fee Simple Terms of Sale: Cash equivalent $/Acre: $11,067 Verification: MRIS/Public Records/Knowledgeable third party. Comments: Arm’s length corporate transfer of large farm in operated by Audubon Society as a

wildlife preserve with nine miles of shoreline on broad Creek. Property was sold when holding corporation for donor could no longer fund operations from invested capital. Purchase included contemplation of retirement of 44 remaining development rights, demonstrated by transfer of development rights to state subsequent to purchase. Property improved with c. 1940 manor house with slate roof, guest house, and six dwelling dependencies totaling 15,295 square feet. Improvements needed investment at time of sale. One house was planned for use by Wounded Warriors veterans group.


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Comparable Sale #2

Location: 831 Fairhaven Road, Tracy’s Landing, Anne Arundel County, Maryland 20779 Identification: District/Account #: 08-000-00898800; 08-000-00900211; 08-000-00900212; 08-000-

00638750; 08-000-00254805; 08-000-90002563; 08-000-90231495; 08-000-90231494.

Site Data: Size: 311.25 acres Percent Tillable: N/A. Excess or Surplus Land: None. Topography: Steep rise from MHW; high

bluffs at 100 feet. Available Utilities: Electric/telephone Zoning: OS. Current Use: Forested. Intended Use: Agricultural conservation. Sale Data Grantor: Nature Conservancy Grantee: Old Colony Cove LLC Sale Date: April 18, 2012 Consideration: $2,025,000 Rights Conveyed: Fee Simple Terms of Sale: Cash equivalent $/Acre: $6,506 Verification: MRIS/Public Records. Comments: Old Colony Cove Farm, includes historic c. 1825 brick manor home on high bluff

overlooking Chesapeake Bay at Herring Bay due west of Sherwood in Talbot County. Property included three primary and five accessory residences, and six barns. Improvements all in need of repair. Very restrictive easements held on the property by Maryland Historical Trust, Maryland Environmental Trust, and Scenic Rivers Trust. Transaction was subject to several life estate tenancies. Property currently has a failed well (subsequent to sale).

APPRAI

Compa

Location Identifica Site DataSize: Percent TExcess orTopograpAvailableZoning: Current UIntended Sale Data

Verificati Commen

ISAL SOUR

rable Sale #

:

ation:

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60

A map presenting the comparable sales in relationship to the subject is presented below:

Quantitative analysis is applied to the comparables to derive the market value of the subject. The comparables are adjusted on the basis of property rights conveyed, financing terms, conditions of sale, expenditures immediately after purchase, market conditions, location, physical characteristics, economic characteristics, use, and non-realty components.

Property Rights Conveyed - Comparable #2 conveyed with two life estate tenancies on secondary dwelling houses, requiring modest positive adjustment. No other adjustments required.

Financing Terms - All transactions were cash or equivalent. No adjustments required. Conditions of Sale - No other adjustments required. Expenditures After Purchase - No adjustments required Market Conditions – While the large waterfront farm estate is generally stable,

Comparables #4 and #5 occurred at the peak of the real estate market and require negative adjustment for time factor. No other adjustments are required for market conditions.

Location – Recognizing the importance of accessibility in the waterfront farm estate market, particularly to large airports and Metropolitan areas, Comparables #1, #2, #4, and #5 each require positive adjustment for distance from Chesapeake Bay Bridge, DC/Baltimore region, and also from Kent Narrows which is important for water accessibility. No other location adjustments are required.

Physical Characteristics –Comparable #2 requires positive adjustment for condition/age of improvements. Comparable #3 (prior sale of the subject property) requires positive adjustment for repairs to site and improvements since the most recent sale. Comparables #4 and #5 were unimproved, requiring positive adjustment for level of improvements. No other adjustments are identified as required for physical characteristics.

Economic Characteristics – Comparable # 2 requires positive adjustment for more stringent deed restricted easement terms. Comparables #4 and #5 conveyed without


61

easement requiring negative adjustment. No other adjustments are required in this category.

Use – Comparable #4 requires positive adjustment for use as tillable grain property (note that this adjustment may also be applied under physical characteristics, but for purposes of analysis is included in use category). No other adjustments are required.

Non-Realty Components - No adjustments are required.

In addition to the comparable sales, two smaller-easement encumbered property sales with similar characteristics and the current listing of a very large estate were examined. 9784 Tilghman Island Road, McDaniel sold for $10,220 per acre on August 29, 2013. The property is a 176.62 acre farm with broad bay views, 45% tillable acreage, and a high level of privacy facing Eastern Bay from Broad Cove (across Eastern Bay from the subject property). Property is in conservation easement and as improved by a 4-bedroom brick c.1800 brick dwelling house with pool, specialty orchard and accessory farm buildings. Property had been in a long-held tenure with improvements due for maintenance. Relative to the subject property, a positive location adjustment for proximity to the Bay Bridge and urban areas would be required. 200 Brown’s Branch Farm Lane, Church Hill conveyed on March 30, 2009 for $12,000 per acre. The property is turning 217.78 acres, largely upland with 70% tillable, the head of Southeast

Comparable Sale #1 #2 #3 #4 #5

Unit Price/SF $11,067 $6,506 $9,454 $15,109 $21,616Property Rights Conveyed 0% 0% 0% 0% 0%Adjusted Sale Price $11,067 $6,506 $9,454 $15,109 $21,616Financing Terms 0% 0% 0% 0% 0%Adjusted Sale Price $11,067 $6,506 $9,454 $15,109 $21,616Conditions of Sale 0% 5% 0% 0% 0%Adjusted Sale Price $11,067 $6,831 $9,454 $15,109 $21,616Expenditures After Purchase 0% 0% 0% 0% 0%Adjusted Sale Price $11,067 $6,831 $9,454 $15,109 $21,616Market Conditions 0% 0% 0% -30% -30%Adjusted Sale Price $11,067 $6,831 $9,454 $10,576 $15,131Location 10% 10% 0% 5% 5%Physical Characteristics 0% 20% 10% 15% 15%Economic Characteristics 0% 20% 0% -30% -30%Use 0% 0% 0% 20% 0%Non-Realty Components 0% 0% 0% 0% 0%Sub-Total Adjustments 10% 50% 10% 10% -10%Adjusted Sale Price $12,173 $10,247 $10,399 $11,634 $13,618

Median $11,634 Average $11,614


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Creek. It is improved with a four bedroom c. 1800 frame dwelling house and accessory agricultural buildings. Property is in conservation easement. Relative to the subject, tillable acreage is superior, waterfront characteristics are inferior, and a positive location adjustment for proximity to the Bay Bridge and urban areas would be required. The active listing of 6500 acre Tudor Farms at 3675 Decoursey Bridge Road in lower Dorchester County also merits discussion. It was listed in 2010 for $30 million, and is currently listed for $20 million. The age and condition of improvements - including large Manor house, guesthouses, stable with indoor riding area, indoor tennis barn, dependency dwellings, and 20 miles of trails is unique and far superior to the subject property. However, distance from urban areas (and accessibility factor) is inferior in the land/waterfront characteristics are far inferior due to location on wetlands. More than half of the acreage is wetlands with 18% tillable. At least half of the acreage is in conservation easement. Due to the size and unique characteristics of the property, the magnitude of per acre adjustments is difficult to estimate. The subject property is most similar to Comparable Sales #1 and #3. Based upon the comparable sale data, the market value of the subject is estimated to be $11,600/acre (819.797 acres). Therefore, the indicated market value of the fee simple as of March 10, 2014 is $9,509,645, or, rounded, $9,500,000. Marketing period is the period of time necessary to sell the subject from the date of value to a selling point sometime in the future. Based upon market surveys and marketing periods of comparable sales, we conclude a marketing period of less than 12 months. Exposure time, or the time the property is on the market prior to the value conclusion, is also estimated to be less than 12 months, assuming that the property was marketed at, or near, the estimated market value.


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CERTIFICATION OF VALUE:

We certify that, to the best of our knowledge and belief: The statements of fact contained in this report are true and correct. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting

conditions and is my personal, impartial, and unbiased professional analyses, opinions, and conclusions. We have no present or prospective interest in the property that is the subject of this report and no personal

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

assignment. Our engagement in this assignment was not contingent upon developing or reporting predetermined results. Our compensation for completing this assignment is not contingent upon the development or reporting of a

predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal.

Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the 2014-2015 edition of the Uniform Standards of Professional Appraisal Practice.

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

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

We have made a personal inspection of the property that is the subject of this report, including interior inspection of manor house and guest house and exterior inspection of accessory structures and dependencies.

No other person(s) provided professional assistance. We have not appraised nor provided consulting services related to the subject property within the three years

prior to acceptance of this assignment. As of the date of this report, Bruce Davis has completed the continuing education program requirements for

Designated Members of the Appraisal Institute. Therefore, the as is leased fee market value of the subject properties as of March 10, 2014 is $9,500,000. Respectfully submitted,

Bruce H. Davis, Jr., SRA Priscilla B. Morris President Associate Maryland Certified General Appraiser Maryland Trainee Appraiser #12106 (Expiration 06/10/2015) #30924 (Expiration 07/13/2015)


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Addenda:


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Qualifications Bruce H. Davis, Jr., SRA

Professional Experience

Appraisal Source, LLC, Easton, MD and Washington, D.C. January 2004 to present President Residential, commercial, agricultural real estate valuation and consulting. Geographic coverage in Northern Virginia; Washington, D.C; Suburban Maryland; Baltimore region and Maryland/Delaware Eastern Shore.

A sampling of major appraisal and consulting assignments completed for institutions, attorneys, owners and governmental agencies include: Gallery Place (Washington, D.C.); State Department (Washington, D.C.), VA Headquarters (Washington, D.C.), Clydes Restaurants (D.C. region), Justison Landing (Wilmington, DE), 1330 Belmont Street, NW/Belmont Vista (Washington, D.C.), 1601 Connecticut Avenue, NW/Caravel Building (Washington, D.C.), Fishers Range Farm (Easton, MD), Environmental Concern (St. Michaels, MD), Central Parke at Charles (Waldorf, MD), Aidan Montessori School (Washington, D.C.), 2109 10th Street (Washington, D.C.), Hyatt Residences (Cambridge, MD), Sunset Harbor (Bethany Beach, DE), Homestead Manor Assisted Living (Denton, MD), Mears Yacht Haven Marina (Oxford, MD), Lippincott Marina (Grasonville, MD), Good Counsel High School (Silver Spring, MD), Christina Landing (Wilmington, DE), Aspen Hill Shopping Center (Silver Spring, MD), Capitol Quarter (Washington, D.C.).

Chaney & Associates, Inc., Potomac, MD November 1997 to March 2009 Senior Associate Valuation, valuation review, consulting, staff management in mid-Atlantic commercial appraisal services/consulting firm.

Burke-Lennhoff Appraisal Group, Gaithersburg, MD May 1995 to October 1997 Associate Valuation and consulting in mid-Atlantic commercial real estate appraisal services/consulting firm. J. Lee Donnelly & Son, Inc., Chevy Chase, MD October 1986 to May 1995 Staff Appraiser Valuation of residential real estate in Washington, D.C. region.

Education University of Arizona - Tucson, AZ Bachelor of Science - Finance and Real Estate, May 1986 Extensive continuing education in residential and commercial property valuation License Maryland Certified General #12106 Delaware Certified General #0000521 Washington, DC Certified General GA11632 Virginia Certified General 4001-015256


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Qualified Expert Witness Jurisdictions Caroline County, MD Dorchester County, MD Talbot County, MD Washington, D.C.


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Qualifications Priscilla B. Morris, MBA

Professional Experience

Appraisal Source, LLC, Easton, MD July 2009 to present Licensed Appraiser Trainee Commercial, agricultural and large estate valuation, and consulting support. Geographic coverage in Maryland/Delaware Eastern Shore. Self-Employed, Easton, MD. January 2000 to March 2009 Consultant Business planning, marketing, land record and historical research, community development, Partial client list: Town of Easton, MD; Talbot County, MD; ESHI Heritage Area, Twin Lights Publishing, Inc., Living Naturally, LLC, United Natural Foods, Inc.

United Natural Foods, Inc. (Nasdaq: UNFI) Dayville, CT April 1994 to December 1999 Retail Operations Manager, Natural Retail Group Division Operations director for East Coast retail supermarket chain. Store site development and remodeling. Oversight of 400 employees; $30 Million in sales. Railway Market, Inc., Easton, MD February 1979 to April 1994 President Eastern Shore’s largest natural food supermarket. Sold to Natural Retail Group, in 1994.

Education Appraisal Institute:

• General Appraiser Report Writing and Case Studies 30 hours • Advanced income Capitalization 40 hours • General Appraiser Income Approach/Part2 30 hours • General Appraiser Income Approach/Part1 30 hours • General Appraiser Sales Comparison Approach 30 hours • General Appraiser Site valuation and Cost Approach 30 hours • Business Practices and Ethics 8 hours • General Appraiser Highest and Best Use 30 hours • Real Estate Finance Statistics and Valuation Modeling 30 hours • 15-Hour National USPAP Course 15 hours • Basic Appraisal Procedures 30 hours • Basic Appraisal Principles 30 hours Total Appraisal Education Hours 333 hours

University of Maryland University College – Adelphi, MD Master of Business Administration, August, 2008 Master of Science in Management-Financial Management August, 2007 Life Member, Honor Society of Phi Kappa Phi License Maryland Appraiser Trainee # 30924, expires July 13, 2015. Candidate for Appraisal Institute Designation.

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