AREA DATA
Loudon, Tennessee is located in the eastern region of Tennessee, almost in the center of the eastern United States, equally distant from the Atlantic Coast, the Mississippi River, the Gulf of Mexico and the Great Lakes. Loudon is located in Monroe County and lies 45 miles from Knoxville and 65 miles from Chattanooga.

The government is a Mayor-Commissioners system. Loudon has a planning commission and industrial development corporation; and, zoning regulations apply to all developments within the city. The City of Loudon’s population as of the 2000 Census was 4,288 with Loudon County having a population of 37,240.

Loudon is located within 2 miles of Interstate 75 and is served by U. S. Highway 11 and State Highway 72. Freight service is provided by 11 freight companies with the nearest port facility being in Vonore on the Little Tennessee. General aviation service is available in Knoxville at McGhee Tyson Airport, 30 miles away. McGhee Tyson has 110 daily flights which provide air service to the Continental United States, Hawaii, Alaska, and Europe.

The major sources of income for the Loudon area are manufacturing, wholesale and retail trade. As of 2004 the labor force numbered 19,194 with 743 unemployed for an unemployment rate of 3.8 percent. Blair Bend and Loudon Industrial Parks are located on U. S. Hwy. 11 and 3 miles from Interstate 75. Some of the larger employers in Loudon County are Malibu Boats, A. E. Staley, Kimberly Clark, Maremont Corporation, Purdy Brothers, Monterey Mushrooms, Tennessee Packaging Co., and Viskase Company. The unemployment rate for Loudon County for 2004 averaged approximately 4.5% and is currently 4.3%.

Loudon is served by one hospital with 50 beds, 5 clinics and 2 nursing homes providing 190 beds. Presently 34 doctors and 6 dentists practice in the Loudon area.

Recreational needs are met by several parks, a swimming pool, nearby TVA Lakes, Tellico lake and Watts Bar Lake, The Great Smoky Mountains National Park, Cherokee National Forest, Fort Loudon Historical Park, The Lost Sea and nearby Niota, Tennessee, which has a golf course and country club available.

Loudon has two elementary schools, one middle/junior high school, one senior high school and one private school. Nearby Madisonville provides educational opportunities of higher learning at a technology center and Hiawasee Jr. College. In Knoxville, 45 miles away, one can receive a higher education degree at Pellissippi State Community College and the University of Tennessee. Roane State College is located in Kingston, Tennessee.

Loudon’s future looks to be stable as the demand for housing continues to increase and the local economy is expanding. Tennessee National is developing a residential community on Matlock Bend which will have approximately 1,400 residences when completed. The subject property is in an area favorably affected by the economic growth and expansion in East Tennessee. It is estimated that the economic base will continue to expand and will have a positive impact on real property values in the area.

Knoxville, Tennessee is located almost in the center of the eastern United States, equally distant from the Atlantic Coast, the Mississippi River, the Gulf of Mexico, and the Great Lakes. The city lies in the fertile Tennessee Valley situated between the Cumberland Mountains on the west and the Great Smoky Mountains on the east. Located 38 miles south of the Kentucky border, 25 miles west of the North Carolina border, and 75 miles north of the Georgia state line, Knoxville is virtually in the center of East Tennessee. Knoxville's strategic location, combined with its abundant resources, has made it one of the leading centers of manufacturing, education and tourism in the South.

Knoxville's city government is a mayor-council system. The mayor is the chief administrator over all city services, and presides over the elected council members. Knox County Government consists of a county executive and a nineteen member county commission, representing each civil district in the county.

The intersection of Interstate 40/75 has helped to establish Knoxville as a leading commerce, tourist and convention center. Interstate 40, running east-west, and Interstate 75, running north-south, route a major portion of the eastern United States traffic through the Knoxville area. The large volume of traffic has caused good growth for the Knoxville economy. Due to the 1982 World's Fair, over $225 million was spent in reworking the interstate systems along with completing the 1/640 bypass which is the northern belt loop around the City of Knoxville. Construction has been recently completed on the Henley Street Tunnel to provide better access to the central business district. Construction is also now completed on the extension of the Pellissippi Parkway which will link the Knoxville Metropolitan Airport in Alcoa to West Knoxville and Oak Ridge. Knoxville is additionally served by six U. S. Highways and ten State Routes which provide good access to other parts of the county and state.

Knoxville is served by 11 airlines with over 100 daily flights scheduled and two railroad systems. Seaboard Systems and Norfolk Southern railway carriers operate 34 freight trains daily. Sixty five regular route, common carrier motor truck lines with terminals in addition to 22 local moving companies are found in Knoxville. The major bus line, Greyhound Bus Line, provides inter-city public transportation and intra-city services are provided by Knoxville Transit Corporation. The Tennessee River provides direct barge shipping access to the Gulf of Mexico by the Tennessee Tombigbee Waterway and to the Great Lakes by the Wand Waterway System.

Knoxville and Knox County have an approximate population of 365,000 and the Knoxville Standard Metropolitan Statistical Area which includes Knox, Anderson, Blount, Union, Grainger, Jefferson and Sevier Counties has an estimated population of approximately 625,000.

The areas of Knoxville experiencing the greatest growth are the northwest and southwest sectors while the county is experiencing steady growth in the north, northwest and southwest sectors. Other areas have remained stable. Based on past trends, Knoxville is growing in population, commerce, employment and as a resort and educational center. The local economy is stable, as evidenced by steady increase in income and real wage levels with low unemployment rates. This stability is due to a strong, diversified economic base. Due to this diversified economic base, Knox County has continually experienced unemployment rates below those of the State of Tennessee and the nation as a whole. The unemployment rate for Knox County for 2004 averaged approximately 2.5 percent and is currently 2.9%. The residential housing market has been growing over the past three years, evidenced by a modest increase in housing prices and rental rates.

The major sources of income for the Knoxville area are manufacturing, wholesale and retail trade, education, government services and tourism. Because Metropolitan Knoxville had a broad industrial base, the diversification has helped stabilize employment and income during periods of economic recessions. The largest employers are Martin Marietta Energy Systems, the University of Tennessee at Knoxville, Tennessee Valley Authority, Aluminum Company of America and Norfolk-Southern Railway System.

The major sources of income in the Knoxville area and the percentage employed by the industry are as follows:
 

Due to the diversified economic base, Knox County has experienced unemployment rates generally below those of MSA and the State of Tennessee and is currently 2.9%. A broad industrial base with 80% of the industries employing fewer than 100 people has stabilized employment during recessionary periods.

The National Planning Association predicts that Metropolitan Knoxville employment will increase over the next 25 years at an annual rate of 1.3%.

Construction in the area has been on the increase since 1991. Residential building permits issued since 1990 amount for 92% of all building permits averaging approximately 3,000 units annually. Residential building activity has seen a modest decline in 1996 to 1998 from record levels in 1995, but is considered an active market in equilibrium. The majority of this building activity is taking place outside the corporate limits, particularly in the north and west areas of Knox County.

Multifamily development has peaked in 1997 with approximately 4,000 units having been constructed since 1990. In early 1997, vacancy for multi-family units leveled out at 12% to 15%. Since then, however, the demand has begun to absorb the current oversupply of apartment units and vacancies are currently approximately 10%.

Industrial growth and development for Knox County has been moderate. Most of the development in the past several years has been existing plant expansions. The high technology corridor is presently being expanded in the Pellissippi Parkway area of West Knox County which connects Knoxville to Oak Ridge. Most of the new industrial development has occurred in surrounding counties of MSA where larger industrial sites are available.

Commercial development over the past 5 years or so has occurred at a rapid rate. West Knoxville and West Knox County have experienced the majority of the growth particularly in the areas of Kingston Pike and Interstate 40. Eight shopping centers have been developed along Kingston Pike with a total investment of over $200 million within the last five years including the recent development of the former Deane Hill Country Club property. North Knox County has seen extensive commercial growth and East Town Mall, with 1,000,000 square feet opened in 1984. In Knox County there are approximately 125 shopping centers containing approximately ten million square feet. Commercial building activity has been expanding in the last ten years and is generally reflective of the expanding demand for retail and office space in the Knoxville market. The suburban office inventory totals approximately seven million square feet and the current overall vacancy in office space in the suburban Knoxville market is approximately 6%.

Downtown Knoxville is experiencing a surge in its growth with several building projects and renovations taking place. There has been a revitalization of the Gay Street and the Market Square Mall areas and work is in progress on the Waterfront Development Project. There are several newer office developments including Centre Square with 200,000 square feet, the Federal Office Building with 100,000 square feet and the new Federal Court building, consisting of 280,000 square feet has been renovated with work completed in 1998. Current office inventory in the Central Business District totals approximately four and one-half million square feet. The vacancy rate for non-government multi-tenant buildings is approximately 15%.

Knoxville's future looks to be stable as the demand for housing, commercial and office space is absorbing what was once an oversupply, and new developments are underway. The subject property is in an area favorably affected by the economic growth and expansion in Knox County. Personal income has increased and unemployment rate remains below the state and national unemployment rate averages. During the past several years, the Knoxville economy has experienced strong, steady growth. It is estimated that the economic base will continue to grow and have a positive impact on property values in the area.

NEIGHBORHOOD ANALYSIS
The subject property is located in Loudon County in a section which is generally known as Beals Chapel. The neighborhood is bounded on the south, east and west by Ft. Loudon Lake and on the north by Dunn Ridge. This neighborhood is predominantly an agricultural and rural residential area. There is significant residential development along the Ft. Loudon Lake waterfront.

This neighborhood is an established area of residential development with numerous undeveloped properties. The residential buildings are typically in average to good condition and are generally good quality construction resulting in an overall neighborhood with few deteriorating encroachments. Residences in the area are 5 to 40 years old and generally well maintained. The neighborhood is considered an upper middle income area and a desirable place to live. The trend is one of stability with development of vacant land parcels.

The neighborhood is served by general shopping districts along Kingston Pike and Campbell Station Road in Knox County and along Highway 321 in Lenoir City, Tennessee. Travel distance to shopping districts is approximately 15 miles. Access to I-40 via Campbell Station Road affords a good transportation route to Downtown Knoxville and other area services and facilities. The neighborhood has electric and water utility services available.

In general, this neighborhood is an established and stable area and has become a significant area of residential development. This neighborhood and the surrounding area are substantially developed, and no significant change is anticipated in the character or viability of the area.

IDENTIFICATION OF SUBJECT PROPERTY
The subject property (all five estate lots) is located on Beals Chapel Road in Loudon County, Tennessee. It is designated on Loudon County CLT Map 28 as a portion of Parcel 71. The subject property consists of a five-lot residential subdivision with a total land area of 9.66 acres as shown on Exhibit A.

DESCRIPTION OF IMPROVEMENTS
The subject property is improved with a stone entry gatehouse with an iron gate, a private joint permanent easement roadway, containing approximately 1.01 acres and approximately 1,318 feet of rock seawall.

SITE ANALYSIS
The following site descriptions are based on property inspection of the subject properties and data in the public records. A boundary survey of the subject property was available to the Appraiser. The subject property consists of a five-lot residential subdivision situated in Loudon County, Tennessee as shown on Exhibit A. The subject site is located south and west of Beals Chapel Road. The parcel is irregularly shaped. The site slopes predominantly to the southeast and appears to be adequately drained with no known unstable soil conditions. The topography of the site is level, sloping gently to Ft. Loudon Lake and on grade with Beals Chapel Road. The subdivision lots of the subject property have lakefront access to Ft. Loudon Lake and excellent waterfront views. The subject property above the 820-foot contour elevation is not within a flood zone as shown by FEMA Map No. 470107-0125B, dated August 3, 1982. That portion of the subject property below the 820-foot contour elevation is subject to a TVA flowage easement. No other easements or encroachments were observed which would significantly affect this property’s value or adaptability for its highest and best use. Public utility available to this property is electricity. All five lots have been approved to utilize septic fields for wastewater. Water service will be by a proposed public water line which will be constructed by Mr. Koenig. Access is from Beals Chapel Road.