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APPRAISAL
Community Facilities District No. 03-01
(Truckee Donner Public Utility District)
Truckee, California
PREPARED FOR
Mr. Larry Rolapp
Fieldman, Rolapp & Associates
2100 Main Street, Suite 210
Irvine, California 92614
PREPARED By
Christopher T. Donaldson, MAI, CCIM
Brown, Chudleigh, Schuler, Donaldson and Associates
1500 E. Kearns Boulevard, Suite E-303
Park City, Utah 84060
BROWN, CHUDLEIGH, SCHULER, DONALDSON AND ASSOCIATES
REAL ESTATE APPRAISALS-MARKET STUDIES
LAWRENCE E.BROWN,MAI,CRE(1942-1990)
WALTER H.CHUDLEIGH,III,MAI
GREGORYS.SCHULER
CHRISTOPHER T.DONALDSON,MAI,CCIM '..
WILLIAM J.KRANSTOVER
DEAN A.MYERS
D.TYLER DUSTMAN
WAYNETURNER
PETER A.CHUDLEIGH
JESSICA STEVENS
KYLE BAMFORD
November 3, 2003
Mr. Larry Rolapp
Fieldman, Rolapp & Associates
2100 Main Street, Suite 210
Irvine, CA 92614
Reference: Appraisal of the Community Facilities District No. 03-01 (Truckee Donner Public
Utility District), Truckee, California. Our File No. 346.
Dear Mr. Rolapp:
In response to your request we have personally examined and appraised the
Mello-Roos Community Facilities District(CFD) No. 03-01, Truckee Donner PUD, on which the
CFD will levy special taxes, located in Truckee, California. The purpose of this appraisal is to
set forth our opinion relative to the market value of the fee simple interest in the single-family
lots and fractional ownership units located within the CFD and subject to a continuing lien for
the CFD special tax and special assessment liens. This project is referred to as the Old
Greenwood development. It is our understanding that the intended use of this appraisal is for
bond financing purposes and that the intended users are the parties related to issuing and
purchasing the bonds.
This appraisal has been prepared subject to the Uniform Standards of
Professional Appraisal Practice (USPAP); and the Financial Institution's Reform, Recovery,
and Enforcement Act of 1989 (FIRREA), Chapter 12 Code of Federal Regulations Part 34
(12CFR34). In addition, the appraisal has been prepared subject to the Code of Professional
Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute. This
appraisal is also intended to comply with the California Debt Advisory Commission (CDAC)
guidelines published in 1994.
MOUNTAIN STATES OFFICE.1500 E.KEARNS.SUITE E-303.PARK CITY.UTAH 84060.(436)649-0238
NORTHWEST OFFICE.50 SW PINE STREET.SUITE 400.PORTLAND,OREGON 97204.(503)274-0211
NORTHEAST OFFICE 24 GLENWOOD AVENUE N0.8.NORWALK.CONNECTICUT 06854.(203)8574124
WESTERN REGIONAL OFFICE:744 CARDLEY AVENUE,SUITE 100.MEDFORD,OREGON 97504-6124.(541)772_8566.FACSIMILE(541)7730314
The subject of this appraisal is the specific portions of the Mello-Roos Community
Facilities District (CFD) No. 03-01, on which the CFD will levy special taxes. The value
conclusions stated herein assume completion of the CFD improvements as of the current date
of value, November 1, 2003.
There are extraordinary assumptions inherent in the value conclusion stated
herein, which are as follows:
• Our analysis assumes completion of all CFD and private improvements
necessary for development of the proposed project will be completed in a timely
and workmanlike manner per the specifications and descriptions provided by the
developer.
• Our analysis assumes that the Truckee Donner Public Utilities District bonds are
issued per the terms and specifications outlined in the CFD report.
• The taxable property created within the boundaries of the Truckee Donner PUD
Community Facilities District is integrated into a master-planned development,
which includes substantial amenities that are not taxable. It is noted that the
values stated herein are achievable only with the inclusion of the non-taxable
golf course and common amenities being constructed concurrently with the
taxable property.
• The cost of the amenities, including the golf course, to be constructed within the
district boundaries is to be shared with a related entity of the developer (Tahoe
Club Company), which will offer these amenities to other projects off-site from
the district. Our analysis has allocated the amenity cost attributable to the
subject's taxable property and specifically assumes that the cost contributions
will be made by the developer's related entities to ensure completion of all
proposed amenities.
• The Tahoe Club Company, a related entity of the developer, has committed to a
$5,000,000 payment to purchase the land which contains the amenities on-site
comprised of approximately 325 acres. This payment is scheduled to take place
in June 2004 and is incorporated into our analysis. It is reasonable to assume
this payment is made given the substantial investment in the golf course and
amenities already made by Tahoe Club Company on this land.
• The value of the fractional interest units stated herein assumes the subject
finalizes an agreement with some type of internal exchange network to facilitate
greater marketability of the property.
• The report, analysis and conclusions stated herein rely heavily upon information
provided by others, including the district, the developers and other consultants
involved in the project. The reliability of our conclusions is directly related to the
accuracy and reasonableness of the information we have been provided.
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• Our analysis specifically assumes final plat maps will be granted for the various
land areas to be platted with individual units.
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As of the date of value, 86 of the 99 saleable single-family lots were reported to
be under binding contract to purchase. The values stated herein specifically
assume these are valid contracts and will close by year-end 2003. j
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Based upon the studies and examinations made, it is our opinion that the market �
values of the fee simple interest in the Mello-Roos Community Facilities District No. 03-01
(Truckee Donner PUD), subject to the assumptions and limiting conditions stated herein, as of
November 1, 2003, are as follows:
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Market Value - CFD No. 03-01 "As is"Assuming CFD Reimbursement s
EIGHTY FIVE MILLION DOLLARS
$85.000.0�
The value conclusion stated above is for the entire Community Facilities District
No. 03-01 (Truckee Donner PUD). As requested, we have separated the total value in an
allocation to Zone 1 and Zone 2 of the district. This allocation is made to indicate the value
attributable to the single-family lots and existing cabins in Zone 1 and the fractional units in
Zone 2. Based on the analysis presented herein, we have concluded the value of the CFD
attributable to Zone 1 is approximately $36,300,000, and the value attributable to Zone 2 is
$48,700,000.
The following is a detailed report containing the property description, market data,
and value analyses, which form the primary basis of our value conclusions.
Respectfully submitted,
BROWN, CHUDLEIGH, SCHULER, DONALDSON
AND ASSOCIATES
Christopher T. Donaldson, MAI, CCIM
F
alifornia State;-certified General Appraiser
cense No.AG161 Expires 05/20/05
CTD:kf
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SUMMARY OF SALIENT DATA
Identification
Truckee Donner Public Utilities District
Mello-Roos Community Facilities District No. 03-01
Interstate 80 at the Prosser Village Exit
Truckee, California
Land Area
616.20 acres in the boundaries of the district.
Proposed Taxable Improvements
Cabin Cottage
Single Family Lots Fractional Ownership Fractional Ownership
No. of Units 99 74 Cabins/1,258 Shares 72 Cottages/1,224 Shares
Size .534 Acres Average 3BD/3.5BA 2,470 Sq. Ft. 2BD/2.5BA 1,270 Sq. Ft.
4BD/4.5BA 2,985 Sq. Ft. 3BD/3.5BA 1,760 Sq. Ft.
Date of Value October 10, 2003
Market Value Conclusions
Market Value Conclusion of CFD No. 03-01
"As Is" Assuming CFD Reimbursement $85,000,000
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TABLE OF CONTENTS
Paqe
Letterof Transmittal ...................................:.......................................................................... i
Summaryof Salient Data ...................... ........................................................................ iv
Purposeof Appraisal................................... --.......—.......................................................... 1
Intended Use/Intended User . . . . . . . . . . . . : . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Dateof Inspection ................................................................................................................ 1
Dateof Appraisal...................................................................................................................1
PropertyRights Appraised ................................................................................................... 1
Definition .............................................................................................................................. 1
Definitionof Market Value .....................................................................................................2
Scopeof Appraisal ................................................................................................................3
LegalDescription.......................................................'............................................................5
PropertyHistory ....................................................................................................................5
ExposureTime ......................................................................................................................7
LocationAnalysis ..................................................................................................................8
TahoeMountain Club..........................................................................................................24
SkiMarket Analysis.............................................................................................................27
GolfMarket Analysis ...........................................................................................................31
HousingMarket Analysis.....................................................................................................34
Fractional Interest Market Analysis ........ ....... ....... ............ .......................—.......48
Lake Tahoe Area Fractional/Timeshare Analysis.......... ............ .......... .......59
TheLand ......... ................................................... .................... .....—75
Old Greenwood Development Agreement Summary ....... .............. ......79
Description of Improvements...............................................................................................83
Highestand Best Use........................................................................... ..............................90
Assessed Valuation and Taxes - 2002-2003.......................................................................93
Truckee Donner Public Utilities District/Community Facilities District No. 03-01 .................95
Sales Comparison Approach - Lot Sales....--........ ........... ............... ...... ....—97
Sales Comparison Approach - Development Land Sales............---................ .....109
Existing Cabin Valuation ...................................................................................................113
CostApproach ..................................................................................................................115
Sales Comparison Approach - Fractional/Timeshare......... .......... ....--...... .........118
Developmental Analysis - Land Residual ..........................................................................140
Truckee Donner CFD Value Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A 55
Valuation ....—.................... ................................ ...... .................... 157
Assumptions and Limiting Conditions................................................................................158
Certification .......................................................................................................................161
Addenda
Qualifications
PURPOSE OF THE APPRAISAL
The purpose of this appraisal is to set forth our opinion of the market value of the
fee simple interest in Mello-Roos Community Facilities District No. 03-01, Truckee Donner
PUD, located in Truckee, California.
INTENDED USE/USER OF THE APPRAISAL
It is our understanding that the intended use of this appraisal is for CFD bond
financing purposes and that the intended users of the appraisal are the parties related to
issuing and purchasing the bonds.
DATE OF INSPECTION
The subject property was physically inspected on several occasions in
September 2003, the most recent being September 9, 2003.
DATE OF APPRAISAL
The effective date of this appraisal is November 1, 2003, assuming completion of
all private improvements as of this date.
PROPERTY RIGHTS APPRAISED
The property rights appraised herein pertain to the fee simple interest, in the
single-family lots and fractional ownership at the subject property, subject to special tax and
special assessment liens.
DEFINITION
Fee Simple Interest
Fee simple interest, in valuation terms, 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." It is an
inheritable estate.
Source: The Appraisal of Real Estate, Twelfth Edition, the Appraisal Institute, 2001.
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DEFINITION OF 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 United States 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. A
The intent of the above definition is considered similar to the market value
defined in the CDAC guidelines published in 1994. The above definition is employed, as it
is more current.
"The Appraisal Foundation, Uniform Standards of Professional Appraisal Practice,
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SCOPE OF APPRAISAL
The scope of this appraisal has the primary function of researching pertinent
details and developing an opinion as to the market value of the fee simple interest in the
subject property assuming completion of all CFD and private improvements in a timely and
workmanlike manner. In order to establish the value opinion, the three traditional valuation
approaches were considered in this appraisal. These include the cost, sales comparison, and
income valuation methods. In addition, the income approach includes a developmental or
discounted cash flow analysis. The resultant opinion of value is stated "free and clear" of any
existing or proposed financing. The extent of the process for the preparation of the appraisal
report included the following:
1. Discussions in order to accurately identify the appraisal problem and the
objective of the assignment;
2. A preliminary study was conducted in order to determine what information
would be required and the sources of the information; i.e., development
consultants, title companies, real estate agencies, planning
representatives, etc.;
3. General data relating to the subject region, and specific data relating to
the immediate subject area and the property itself were then assembled.
Sources of this information include the following:
• Subject property ownership and management personnel
• Representatives of City and County government offices
• Area Chamber of Commerce representatives
• State government agencies; i.e., population and economic
research divisions;
4. An in-depth analysis of the demographic trends in the subject region was
conducted. This information is necessary in forming conclusions as to the
intermediate and long-term growth prospects and economic stability of
the region;
5. A market overview was conducted, with information assembled pertaining
to prevailing market conditions affecting real estate similar to the subject
within the Lake Tahoe region, as well as on a national basis. In addition,
an extensive analysis of the trade area in which the subject operates was
performed;
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6. The property itself was analyzed in terms of the overall economics of the s
development including, but not limited to, the following:
• Marketability of the proposed product
• Cost of development and construction
7. Information was assembled in regard to the sales of similar land parcels
considered useful in the determination of land value for the subject, as
follows:
• Principals involved in the transactions
• County records
Representatives of local real estate agencies
• Local real estate appraisers
8. The subject property and, where possible, the comparable properties
were physically inspected, with pertinent differences noted. In addition,
the appraisers have delineated the market boundaries of the subject and
visited the major thoroughfares in order to analyze the land use
characteristics of the surrounding area;
9. Based on the market data gathered, an opinion is formulated as to the
highest and best use of the subject property both as if vacant and as
improved;
10. The results of the various valuation approaches utilized are examined,
and a reconciliation, or correlation of final value concluded; and,
11. A complete appraisal in a self-contained report is presented, with
supporting information subsequently categorized and placed into our job
file.
LEGAL DESCRIPTION
The subject of this appraisal is the 616.20 acres per the Nevada County
Assessor's plat. The following table summarizes the Assessor's parcel numbers assigned by
the Nevada County Assessor,
Acres Assessor's Parcel No.
285.62 19-370-08
77.69 19-430-14
79.36 19-430-15
78.87 19-430-16
78.45 19-430-17
16.21 19-430-23
616.20
We have recognized slight differences in acreage between the survey and the
assessor's information. The difference is negligible in relation to the scope of the subject
development and has no impact on the value conclusions stated herein. The subject is located
within the town limits of Truckee, California 96161,
PROPERTY HISTORY
The subject parcels are under the ownership of Truckee Land LLC, which is a
holding company of East West Partners, the subject developer. East West Partners acquired
the subject land as part of a larger land acquisition, which included an additional 300.47 acres
north of the proposed subject development and Interstate 80. Thus, the total land area of the
subject acquisition was 900.46 acres. East West Partners purchased the subject property from
Truckee Sierra Resorts Inc. and Ken Inc. for a consideration of$20,000,000 on May 5, 2001,
per Nevada County records. An additional 16.21 acres to the south end of the project was r
acquired on January 25, 2002 for consideration of$500,000. j
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The subject was purchased by East West Partners as an entitled development
parcel. The previous owner of the subject had a development plan in place and approved by r
the town of Truckee. The plan consisted of a resort development of approximately 235 cabin-
style single-family residences scattered throughout the subject's 900 acres known as the
Featherstone Resort. Subsequent to East West Partner's acquisition of the subject, a revised
development plan was conceived by East West known as Old Greenwood which included a
golf course, club facilities, and a combination of clustered single family lots, fractional }
ownership single family residences and fractional ownership cottages. Through the town of
Truckee Planning Department, the revised plan was approved. East West Partners is donating
the 300.47 acres north of the development parcel to the Truckee Donner Land Trust
Conservancy Organization. The developer has elected to utilize bond financing offered by
California's Mello-Roos Community Facilities Act of 1982, as amended (the "Act') to fund
certain infrastructure at the subject development. For the purposes of the bond financing and
this appraisal, the subject is referred to as Community Facilities District No. 03-1, Truckee
Donner Public Utilities District.
As of the date of value, 86 of the 99 single-family lots were under binding sales
contract.We have retained a list of the buyers and lot numbers in our files. The contract prices
are discussed herein. There have been no other transfers of the subject property within the last
three years.
Tahoe Club Company is a related entity to the subject developer. This company
oversees development and operations of the Tahoe Mountain Club,which offers the amenities
to their various developments in the Lake Tahoe area. Tahoe Club Company is scheduled to
make a land payment of $5,000,000 to Old Greenwood at the completion of the golf course
and swim/tennis/fitness pavilion in approximately June 2004. For this payment, Tahoe
Mountain Club will acquire an estimated 325 acres that comprise the land for the golf course,
pro shop, swim/tennis/fitness pavilion and related facilities.
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EXPOSURE TIME
Exposure time may be defined as follows:
"The estimated length of time the property interest being appraised would
have been offered on the market prior to the hypothetical consummation
of a sale at market value on the effective date of the appraisal; a
retrospective estimate based upon an analysis of past events assuming a
competitive and open market."
Source: Uniform Standards of Professional Appraisal Practice (USPAP).
The overall concept of reasonable exposure also assumes adequate, sufficient,
and reasonable effort in marketing. The subject represents a unique resort property with a
large value, which limits the number of potential investors. Our analysis has considered all
revenue sources in place at the subject, as well as expenses, and has applied a reasonable
profit and discount, which should attract a buyer to the present value of the subject as stated
herein. In our opinion, the subject is to the point where there is substantially less risk involved
in terms of entitlements, approvals and development costs, and would be considered a
desirable project by resort developers. We are aware of projects on a national basis that have
similar scope that trade in various stages of development. In our opinion, based on the values
concluded herein, the appropriate exposure time estimate for the subject is twelve months.
As stated above, exposure time is intended as a retrospective time period prior to
the date of sale. Marketing period is the opposite in that it is the anticipated time period
required to sell the property going forward from the date of value at the market value stated
herein. In our opinion, the marketing period for the subject would be similar to the exposure
period of twelve months.
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LOCATION ANALYSIS
The subject Mello-Roos Community Facilities District No. 03-01,Truckee Donner
PUD, is located in Truckee, Nevada County, California. Reference is made to the location map
on the facing page,which shows the location of the subject property in Northern California and
in relation to the Lake Tahoe Basin area. The following provides an overview of the area,
demographic and market factors for the region and its geographic location, as well as the
immediate property surroundings.
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Regional Analysis
The regional analysis provides a brief review of the state, Lake Tahoe Basin and
North Lake Tahoe demographic and economic conditions.
The state of California is among the most dynamic of international communities.
California's economic strength is based upon its population, business diversity, strategic
location and recent economic restructuring for the 21 st century.These positive factors support
the future economic performance of business and real estate investment within the state.
California is the most populous state in the United States,with a 2002 population
of 34.5 million residents. California's population grew by 13.8 percent from 1990 to 2000, and
is projected to grow to approximately 36.5 million by 2007.
California's economic strength has been tied to its diversity of businesses,which
includes a wide range of manufacturing, trade, services, and agriculture activities. One factor
supporting California's economy has been its strategic location as a gateway to the Pacific and
Mexico. California is the center of trade with the Pacific Rim countries, and over 80 percent of
all U.S. trade with these nations is through California's airports and harbors.
California consistently out-performed the rest of the country during the 1980s, but
was particularly hard hit by the national and regional recession of the early 1990s. During the
late 1980s and early 1990s, California lagged the nation's slide into recession, as well as its
economic rebound. The recession hit later and harder in California than on the national level.
The state and southern California region began measurable economic recovery in mid-1993
and experienced strong growth in late 1990s, particularly the San Francisco Bay area, as a
result of immense growth in the technology sector. However, in 2000/2001, the decline in the
technology sector greatly affected job growth and the economy in the Northern California area.
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Overall, economic forecasts for the California region, including the San Francisco
Bay area, project generally favorable job growth trends, and there has been continued Strong
housing demand.
San Francisco/Northern California/Reno/Sparks
The subject is located in a resort area around Lake Tahoe, which straddles the
California/Nevada border. It has long been a recreational area for the substantial population
base located within an approximate three-to four-hour drive. The following table summarizes
the population trends for the most significant areas of Northern California and the Nevada
counties located around Lake Tahoe.
Population Trend Summary Report
2000 Census 1 1 2002 Estimate 2007 Projection
San Francisco-Oakland-San Jose, CA DMA
Total Population- 6,679,769 6'800,139 7,125,925
Total Households 2,443,380 2,480,324 2,577,122
Sacramento MSA
Total Population 11628,190 11679,405 1,813,727
Total Households 605.919 624,875 673,908
Source: STDBonline
Nevada Counties Population and Household
Trends
Po ulation
County 2000 2002 2007 Proi.
Dou las 41,259 43,813 50,377
Washoe 339,486 355,073 395,419
Carson Cit 52,457 54,651 60,343
Source: CCIM,STDBonline, U.S.Census
The above tables indicate there have been strong growth trends and there is
continued projected growth and population for the area, which influenced the property values
and economic trends in the subject's market area. The total population in the areas indicated
above is over 8.9 million people, which is significant as it relates to the influence on the subject
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property. More specific analysis of the outlying population centers which impact the subject
property is addressed in the Housing Market Analysis, Fractional Interest Market Analysis and },
other areas of this appraisal report.
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Lake Tahoe Basin/North Lake Tahoe
The subject property is located in the Town of Truckee, in the North Lake Tahoe
Region, which is just north of the Lake Tahoe Basin and accessed by Interstate 80. Truckee is
located approximately 32 miles from the Reno/Tahoe Airport,with a drive time of approximately
30 minutes. The Lake Tahoe region is located on the California-Nevada border between the
Sierra Nevada Crest and the Carson Range mountains. Approximately two-thirds of the Lake
Tahoe Basin is in California and one-third is in Nevada. The Basin comprises approximately
501 square miles, including the waters of Lake Tahoe, which is 191 square miles. Lake Tahoe
is well known for its crystal blue pure water and beautiful mountain setting. The lake itself is 22
miles long, 12 miles wide, has 72 miles of shoreline, and a greatest depth of 1,645 feet, making
it the third deepest lake in North America.
The Lake Tahoe region includes portions of El Dorado and Placer Counties in
California, and Washoe and Douglas Counties in Nevada, as well as the rural areas east of
Carson City, Nevada, which are not incorporated in a county. Nevada County is north of the
Lake Tahoe Basin, and its eastern portion has a strong association with the Lake Tahoe Basin
due to proximity and a wide range of recreational opportunities it offers. The average elevation
of the lake is 6,225 feet above sea level, with mountain ranges around the basin going up to
11,200 feet in elevation. There are various populated areas in the Lake Tahoe Basin
surrounding the lake. The largest incorporated area is South Lake Tahoe, California, with a
population of 23,000 people, and adjacent Stateline, Nevada in the south. Tahoe City,
California to the northwest is the next largest, followed by Incline Village, Nevada on Lake
Tahoe's northeast shore. There is primarily extensive forest service land and areas of large
lakefront summer homes between South Lake Tahoe and Tahoe City along Highway 89.
Between Tahoe City and Incline Village on the north shore of the lake are primarily more
upscale, retail service-oriented developments, as well as additional lakefront homes,
condominiums, and camping areas. Between Incline Village and South Lake Tahoe on the east
side of the lake are generally more sparsely populated areas and more residential oriented
areas.
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The Lake Tahoe Basin has a very sensitive environment, which has led to
significant government regulation of development. Tourism generates the majority of income in
the area, as it is the primary industry. In particular, the six major casinos in Stateline, Nevada
adjacent to the east of South Lake Tahoe generate significant tourism traffic in the area.
Following is a discussion of some of the unique aspects of the area.
Environmental
Lake Tahoe Basin is a sensitive alpine environment with the lake containing very
pure water. The entire basin has been categorized as to land capabilities, such as their
tolerance for use as it relates to watersheds, unstable soil, runoff, erosion, and other
considerations. There are 14 watersheds surrounding the lake, and development within these
watersheds is finite in terms of the total allowable impervious coverage and building area.
Wastewater treatment has been one of the most significant factors influencing
planning in the Lake Tahoe Basin. Up until the late 1960s, most wastewater was discharged to
land leaching systems by small community treatment systems or individual septic tank leach
fields. Due to the sensitivity of the water, government authorities mandated the export of all
sewage from the Tahoe Basin. These exportation facilities are situated in all areas surrounding
the lake and have eliminated many of the problems of lost wastewater leaching into the lake
itself.
There is also no disposal of solid waste at the Tahoe Basin. The south shore
waste is generally transported to landfills in or near Gardnervilie, Nevada or Alpine County.
The north shore area has a landfill in Placer County.
Overall, the Lake Tahoe Basin has a sensitive alpine environment that has been
addressed by regulations, which add significant barriers to new development.
Governmental Forces
The environmental sensitivity of the Lake Tahoe Basin environment created
contentious issues between the neighboring states of Nevada and California as to how to
handle development. Development on one side of the state line impacted the environment and
properties on the other side. In response to this, the Tahoe Regional Planning Agency (TRPA)
was established by an Act of Congress on December 19, 1980, This joint planning agency was
created to enhance the efficiency and governmental effectiveness of the region in order to
enforce a regional plan and implement ordinances to protect the area; this is governed by the
Tahoe Regional Planning Compact. Since its inception, TRPA has created an extensive
inventory of soils, watershed, and other environmental properties of the region in order to
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monitor growth and create guidelines for growth. These guidelines have evolved into very
stringent planning policies and have resulted, in some cases, to a finite amount of allowable
development within the various planning areas around the lake. The requirements and
guidelines of the planning process are onerous to development due to the complexity of
environmental issues. This extensive regulation has created significant barriers to entry for
future development.
Transportation/Access
The primary transportation linkages for South Lake Tahoe are U.S. Highway 50
connecting to the Sacramento area in the west and Carson City and Reno areas to the east.
U.S. Highway 50 links with State Highway 89 in the west going north along the west side of
Lake Tahoe and connects with State Highway 28 in Nevada on the east side of the lake.
Interstate 80 provides access to the Truckee/North Lake Tahoe Region, specifically connecting
Truckee and Reno. Interstate 80 continues west to Sacramento, California Central Valley and
San Francisco Bay Area. State Highways 267 and 89 provide access from Interstate 80 south
to the communities in the North Lake Tahoe Basin. The most popular mode of access to South
Lake Tahoe is the automobile. Airline transportation is available at the South Lake Tahoe
airport and the Truckee-Tahoe Airport, which serve small regional carriers and private flights.
Most airport traffic comes through the Reno/Tahoe International Airport. The airport has
actually experienced declines in passengers since 1998 attributed to fewer daily non-stop
departures and connecting flights, as airline operators have found it difficult to run profitably out
of the Reno/Tahoe Airport. Overall, 2002 annual passengers at the airport decreased 8.5
percent from 2000 annual figures, while overall aircraft operations were up 3.8 percent over the
same time period. A portion of the decrease in passengers is due to the reduction of American
Airlines flights into the region.
Tourism
Tourism is the major industry in the Lake Tahoe Basin and the North Lake Tahoe
Region. There are numerous recreational opportunities in the summer with the lake, hiking,
biking and other activities, and skiing in the winter. in addition, there is the gaming attraction of
six casinos in Stateline, Nevada on the south side of the lake.
Gamin
The majority of casino development and gaming is located in the South Shore of
Lake Tahoe where there are six major casino operators and several smaller gaming
establishments. Gaming in the North Shore area is much less developed with Incline Village
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offering the largest Casinos and Brockway also offering some gaming opportunities. Gaming
revenues for Tahoe North Shore for the year 2002 were $38,435,771 compared to
$336,401,045 for the South Shore in 2002.
Skier Days
There are 24 ski resorts in the Lake Tahoe region, with the largest being
Heavenly Valley Ski Resort in South Lake Tahoe. Squaw Valley ski area, which is famous for
hosting the 1960 Winter Olympics, is in the northwest area approximately halfway between
Truckee and Tahoe City on Route 89. Heavenly Valley Ski Resort has over 4,800 acres of
skiable terrain, with the summit just over 10,000 feet. Other major ski resort development
includes Northstar at Tahoe just south of the subject and Alpine Meadows and Sugar Bowl,
both in Placer County. Kirkwood is located south of South Lake Tahoe in Alpine County. The
Lake Tahoe area ski resorts generally experience between 1.5 and 2 million annual skierdays.
Conclusion
Overall, the Lake Tahoe Basin area represents an area of significant natural
beauty, with tourism as its primary industry. There are a large number of recreational activities
offered in the summer and winter, but the area is subject to seasonal fluctuations. The unique
environmental considerations of the area have led to strong governmental constraints on
growth. This is significant as it relates to potential for new competition in relation to existing
properties.
Nevada and Placer Counties
The subject is located in the Town of Truckee, which is in the eastern portion of
Nevada County just north of the Nevada/Placer Counties boundary. The majority of Nevada
County is located west of the subject on the western slope of the Sierra Nevada Mountain
Range towards Sacramento. The subject has strong regional ties to Placer County to the
south, due to the geographic constraints of the mountain terrain and area transportation
linkages.
Nevada and Placer Counties are generally bound on the west by Sacramento
and California's Central Valley, and on the east by the Sierra Nevada Mountains and the
Nevada state border. Interstate 80 provides the main access to the western portion of both
counties, with Lake Tahoe Basin access provided by State Highways 89 and 267. Nearly 40
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i
percent of the Placer County population lives in unincorporated areas of the county, while 70
percent of the Nevada County population lives in unincorporated areas of the county.
Population
Nevada and Placer Counties offer a good quality of life and proximity to
increased employment opportunities as the region continues to grow as a recreation and
second home hot spot. The western portion of Nevada and Placer Counties offer good access
and proximity to Sacramento, which has resulted in steady growth over the past 20 years, with
a 26.9 percent growth from 1990 to 2000, or approximately 2.7 percent per year.
Presented in the following table are population trends for Nevada County, Placer
County, and the state of California.
Po ulation Trends
Change
1990 2000 2002 2007 1990-2000
Nevada County 78,510 92,033 94,377 100,586 17.2%
Placer County 172,794 248,399 265,511 298,850 43.8%
California 29,759,163 33,871,648 34,561,775 36,413,932 13.8%
Source: U.S. Census Bureau, STBD Online
Households
The number of households in Placer County has grown considerably from
1990 to 2000, from 64,098 to 99,163, or a 45.7 percent increase. Much of this growth is
attributed to suburban growth in the western portion of the county near Sacramento. Nevada
County is a more rural-oriented community with a 2002 estimate of just over 38,000
households. Household growth in Nevada County is projected to grow by approximately 8
percent from 2002 to 2007. Overall, household growth in each county has been consistent with
overall population trends and is expected to continue that trend. The following table shows
historic housing units for both counties.
Total Housing Units
1990 2000 2002 1 % Change 1990-2000
Nevada County 37,352 44,282 45,296 1 18.6%
Placer County 77,881 107,302 114,148 37.8%
Source: STBD Online.
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_ _ ...... .. . _. ........... _ _ ._
Economy
The following tables summarize the major employers in Nevada and Placer
Counties.
Nevada County Major Employers
Employer Name Location Industry
Boreal Ski Area Soda S rin s Lod in and Recreation
Count of Nevada Multi le Public Administration/Government
Nevada Joint Union HS District Grass Valle Public Education
Northstar at Tahoe Truckee Lod in and Recreation
Sierra Nevada Memorial Hos ital Grass Valle Healthcare
Su ar Bowl Ski Area Norden Lodging and Recreation
Tahoe-Donner Association Truckee Lod in
Tahoe Forest Hos ital Truckee Healthcare
Thom son Multimedia/Grass Valle Grou Nevada Cit
US Government Communications Equipment
Multi le Public Administration/Government
Source: California Employment Development Department,
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`s
Placer County Major Employers
Ern to er Name Location Indust
Al ine Meadows Ski Resort OI m is Valle Lod in & Recreation
Arles n Solutions, Inc. Lincoln
Com uter P. Data Processin Services ',
Ci of Roseville Roseville Public Administration Government ='
Coherent Inc. Auburn Medical Instruments & Sun-"--
Count of Placer Multi le
Public Administration Government
Computer& Office E ui ment '
Hewlett-Packard Roseville r
NEC Electronics Roseville Electronic Components&Accessories
Oracle Cor Rocklin Com uter& Data Processin Services
amil Services
Pride Industries Roseville
Individual & F
Resort at S uaw Creek OI m is Valle ' tod inJ & Recreation
Sierra Communit Colle e
Rocklin Coile es & Universities y
S uaw Valle USA Ski Cor OI m is Valle Lodging & Recreation
Surewest Communications Roseville Telephone Communications
Sutter Hos itals Roseville Hospitals
Union Pacific Railroad Co. Roseville Railroads
Source: California Employment Development Department.
The following table summarizes the labor force information for Nevada and
Placer Counties for July 2003 as compared to the previous year.
Nevada County Labor Force Statistics
Seasonally Adjusted
000S
July July. Percent
2003 2002 Chan e
Labor Force 50,130 50,170 -0.08%
Employment 47,900 47,940 -0.08%
Unem to ment 2,230 2,240 -0.45%
Unem to ment Rate 4.5% 4.5%
California Unem to ment Rate 6.9% 7.1% 2.8%
United States Unem to ment Rate
Source: State of California, Employment Development Department, Labor
Market Information Division.
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Placer County Labor Force Statistics
Seasonally Adjusted
OOOs
July July. Percent
2003 2002 Change
Labor Force 142,400 140,100 1.6%
Employment 135,600 133,600 1.5%
Unemployment 6,800 6,500 4.6%
Unemployment Rate 4.8% 4.6% 4.3%
California Unemployment Rate 4.5% 4.5% ----
United States Unemployment Rate 6.9% 1 7.1% -2.8%
Source: State of California, Employment Development Department, Labor
Market Information Division. '
As indicated, the unemployment rate in Nevada County was unchanged and
Placer County was basically stable over the past year. The total civilian labor force was
relatively stable in both counties over the last year. The unemployment rate for both counties is
lower than the state of California and the U.S. averages.
Reference is made to the following table, which presents average annual non-
farm wage and salary employment statistics for Nevada County for July 2002 and July 2003.
Nevada County
Nonagricultural Wage and Salary Employment by Industry`
OOOs
July July Percent
Industry Category 2003 2002 Chan e
Total All Industries 30.9 29,67 -1.4
Total Farm 0.12 0,12 0
Total Non-farm 29.97 29.55 -14
Goods-Producin 5.44 5.12 -5.9
Mining & Construction 3.57 3.25 -9.0
Manufacturin2 1.87 1.87 0
Service-Producing 24.53 24.43 1 44
Transportation & Public Utilities 5.43 5.53 1.8
Information, Finance, Insurance & Real Estate 2.02 2.0 1.0
Services 11.32 11,45 -1.1
Government 1 5,76 5.45 5.7
Source: State of California Employment Development Dept.
_17-
As indicated by the previous summary, the services category encompasses a
significant portion of the Nevada County total employment. Other large employment categories
include government and trade.
Services have consistently reflected one of the highest rates of employment
increases of all industries in Nevada County. This growth has occurred as a result of
continuous population expansion and continued resort oriented development in the Truckee
area. Health care services exhibited the largest job gains, while tourism continues to exhibit
strong growth rates.
Similar employment by industry data for Placer County was not considered
relevant as it is included in the Sacramento Metropolitan Statistical Area (MSA) and has very
different characteristics compared to the subject's market area.
Transportation
A limited range of transportation opportunities are available to businesses located
in the subject's area. Interstate 80 is the major highway accessing eastern Nevada and Placer
Counties. The western portion of these counties is positioned as part of the rapidly growing
greater Sacramento Metropolitan area, which offers rail, air, truck, and bus service. In addition,
the deep-water port of Sacramento provides easy access to the markets of the Pacific Rim.
Well-designed highway systems allow for the rapid large-scale movement of people and
products with generally moderate congestion. The central location also allows one-day freight
delivery to all West Coast cities.
Commercial air service to the Truckee area is provided by the Reno/Tahoe
Airport, approximately 35 miles east of the subject. Commercial air service in the western
portion of Nevada and Placer County is provided via the Sacramento Metropolitan Airport, a
1.5-hour drive west of Truckee. The Tahoe Basin is served by the Lake Tahoe Airport in South
Lake Tahoe and the Truckee-Tahoe Airport in Placer County just south of the subject.
Bus service for the Truckee area is provided by Greyhound lines from both
Sacramento and the Carson City/Reno areas. There are also numerous daily charter services
from the Bay Area to the Lake Tahoe area. Freight and passenger train services to the
Truckee area are provided by Southern Pacific and Amtrak.
-1s-
Conclusion
Overall, the subject's immediate area comprised of Truckee and eastern Nevada
and Placer Counties has maintained a stable growth rate in both population and employment.
This trend is expected to continue in the future with continued growth in tourism, construction
and services industries.
Truckee
The subject is located within the Town of Truckee town limits. Truckee lies just
north of the Lake Tahoe Basin; however, due to its location on Interstate 80, which is a major
transportation link, and its proximity and recreational orientation, it is identified as a Lake
Tahoe community. Truckee is located on Interstate 80 near the California-Nevada State line.
Reno is located approximately 35 miles west of Truckee and provides the closest major airport.
Major metropolitan centers west of Truckee include Sacramento (100 miles) and San
Francisco (190 miles).
Historically, Truckee was a gateway through the Sierra Nevada mountain range
during westward migration in the middle of the 18th century and the Gold Rush. Truckee was
established as a community with the construction of the transcontinental railroad over Donner
Pass, just west of Truckee. Early industry in Truckee included lumber and ice production.
Today, the center of Truckee has maintained its historical identity with many early 1900s
buildings and facades intact. During the 1900s, the local economy of Truckee shifted from
production to winter recreation, which was accelerated by the 1960 Winter Olympics in nearby
Squaw Valley. Over the later part of 20tt' Century, Truckee began to establish itself as a
summer and winter recreation community and destination with golf course development,
including the master planned community of Tahoe-Donner. This community of 6,200 single-
family lots was once considered the single largest subdivision development in the country and
includes amenities such as a community ski resort and championship golf course. Mild four-
season weather, abundant open space, proximity to Lake Tahoe, good transportation access,
availability of excellent quality recreational amenities and the scenic alpine environment are
favorable aspects of the Truckee area which have attracted people to the area. In recent
years, second homeowners have increasingly built homes in the Truckee area as recreational 'x
amenities have been developed, the Tahoe Basin has become built out, and regulations
regarding development have become an obstacle. Today, Truckee is a popular year-round
i
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resort based community with significant opportunity for future development, particularly in
relation to the more restricted Tahoe Basin just to the south. r
Population :
As noted the town of Truckee has experienced growth over the last decade. The
s'
following table shows the trend in population growth in Truckee since 1990. £
Population in Town of Truckee r
Janua Po ulation % Chan e #Chan e <
1994 11,150 ----- ----- r
1995 11,800 5.8% 650
1996 12,050 2.1% 250
1997 12,600 4.6% 550
1998 13,000 3.2% 400
1999 13,300 2.3% 300
2000 13,800 3.8% 500
2001 14,200 2.9% 400
2002 14,700 3.5% 500
2003 14,850 1.0% 150
Annual Chan e 3.2% 411
Source: California Department of Finance
It is noted that Truckee was incorporated as a town in 1993. This was significant
in addressing the population growth, land development and services for the area.
Permit Authorized Construction
The following table shows the total annual building permits authorized for both
residential and commercial construction in the town of Truckee.
Truckee Total Annual Building Permits
2000 2001 2002 2003*
Residential 372 187 317 156
Commercial 28 7.5% 62 33% 122 38% 83 55%
Total 400 249 439 239
Source: Town of Truckee
January through August
In 2001, the building activity in Truckee was at a four-year low of 249 permits.
20
Immediate Surroundings
The subject property is south of Interstate 80 in the eastern portion of the Town
of Truckee. The subject has direct access from Interstate 80 via a dedicated highway exit. The
following is a description of the subject's immediate surroundings.
North
Immediately north of the subject is Interstate 80 which serves as the major
transportation linkage to Truckee and the North Lake Tahoe Region and Sacramento,
California's Central Valley and the San Francisco Bay Area to the west, and Reno to the east.
Further north across Interstate 80 is primarily open space with scattered single-family
development leading to Prosser Dam Road and further north to Prosser Lakeview Estates.
Prosser Lakeview Estates is an established single-family home development with home prices
ranging from $250,000 to $800,000, Residents in this development are approximately 30
percent second homeowners and 70 percent full-time. Just to the northwest across Interstate
80 is the proposed Gray's Crossing project, also being developed by East West Partners.
Gray's Crossing will have an 18-hole championship golf course and a variety of residential
product. Further north is the Town of Truckee town boundary, and just over the boundary is
Prosser Reservoir. Further north, on Highway 89, in Sierra County are the communities of
Loyalton, Portola and Sierraville.
South
Immediately south of the subject is Olympic Heights, a small single-family
residential development with modest, older homes. Also south of the subject is the Union
Pacific Railroad tracks and the Truckee River, both of which follow the Interstate 80 corridor
west to Reno. Further south is a mix of residential and commercial development including the
Truckee River Regional Park, Ponderosa golf course and the Truckee-Tahoe Airport, which
serves the north Lake Tahoe area. Also south of the subject is the Martis Valley in Placer
County. Much of the Martis Valley is currently privately owned vacant land, which is the focus
of substantial future development planning. Significant development in the Martis Valley
includes the Lahontan Golf Community,which was developed in the late 1990s. This is an 880-
acre, exclusive golf and amenity based second home community with approximately 500 lots,
approximately one-half of which have been built with luxury homes. Prices for resale lots in this
community range between $275,000 and $750,000. Further analysis of this subdivision will be
covered later in this report.
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The North sta r-at-Ta hoe Resort is also located in this valley and is the nearest
major ski and golf resort development to the subject and Truckee. This resort contains over
3,000 acres of land owned in fee simple by resort operator Booth Creek Holdings. Northstar
was master-planned in 1972 with approval for over 3,000 homes, an 18-hole golf course and
an excellent quality alpine resort. Currently, there is significant development of single-family
ski-in/ski-out lots at the resort. Other significant development at the resort includes proposed
development of 1,450 on-mountain condominium and cottage units and 350 condominiums
and cottage units on a village base area land parcels recently purchased from Booth Creek
Resorts by East West Partners.Approximately twelve miles south of Truckee, on Highway 267,
is Lake Tahoe and the Lake Tahoe Basin community of King's Beach. Incline Village, Nevada
is located approximately 20 minutes south from the subject.
East
Immediately east of the subject is vacant, forested land leading to the Glenshire
community. Glenshire is primarily a community of full-time residents and is popular with Reno
commuters. Glenshire offers 1/3- to 1-acre lots with amenities including a swimming pool,
clubhouse and tennis courts. Home prices in Glenshire range from $225,000 to $700,000.
Further east is vacant land leading to the Reno metropolitan area.
West
Immediately west of the subject is the recently completed realignment of Highway
267 and junction with Interstate 80. This was a highway project, which was necessary to
relieve vehicular congestion in central Truckee. This project is a major enhancement to all
traffic in central Truckee and greatly enhances the subject's access to the surrounding area.
Further west is the historic downtown area of central Truckee. This area is primarily developed
with retail shops, bars and restaurants. Further west is the Donner Pass Road business district.
This area is a mix of older and recent commercial development related to shopping and
services. Further west is Donner Memorial State Park located on the eastern shore of Donner
Lake. Donner Lake is a significant recreational amenity for the Truckee area, including boating,
camping and swimming activities. Further west, Interstate 80 leads to Sacramento, California's
Central Valley and the San Francisco Bay Area.
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Trend
The trend of development proposed in the subject's immediate area is for resort
related communities. The existing development includes some older established residential
subdivisions.
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TAHOE MOUNTAIN CLUB
The subject developer, East West Partners, has recently created a private club
membership concept to a family of resort properties and amenities located in the
Truckee/North Lake Tahoe Region, referred to as the Tahoe Mountain Club. This is considered
a unique offering, which encompasses many of the year-round recreational and resort
experiences that make the Lake Tahoe area a unique destination. A separate ownership entity
of the developer called the Tahoe Club Company funds and operates the amenities for their
group of resorts in the region. The benefits of the Tahoe Mountain Club are a key marketing
tool in the sales of the product at Old Greenwood. Membership in the club is included with the
purchase of Old Greenwood fractional property, but must be purchased separately by the lot
owners. The following is a brief discussion of the on-site and off-site Tahoe Mountain Club
amenities and facilities offered at Old Greenwood.
On-Site —
• Special privileges at the 18-hole, Jack Nicklaus Signature Golf Course.
Private access to the 18,000 square foot Swim, Tennis, Fitness Pavilion and
Spa.
• Golf Academy with short game teaching center and double-ended driving range.
• Fly fishing teaching and practice area.
All on-site amenities at Old Greenwood are under construction and are expected to be
complete by June of 2004.
Off-Site —
• Special privileges at the 18-hole, highly acclaimed, Coyote Moon Golf Course
under the ownership of East West Partners since opening in 2000.
• Preferred reservations at the Wild Goose Restaurant located on the Lake Tahoe
waterfront. This is a fine dining restaurant purchased by East West Partners and
remodeled in 2003. It is approximately 15 minutes south of the subject in Tahoe
Vista near the terminus of Highway 267.
• Valet ski storage and spa privileges in the Alpine Club at the Village at Northstar
(estimated completion in 2005).
• Schaffer's Camp, a members-only, on-mountain restaurant/ski lodge at Northstar
(estimated completion in 2005).
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• Access to membership at the Gray's Crossing's 18-hole, Peter Jacobsen/Jim
Hardy designed golf course located north of Interstate 80 adjacent to Old
Greenwood (estimated completion in 2006).
The Northstar Resort amenities offered to Tahoe Mountain Club members are a
result of the development partnership between East West Partners and Booth Creek. Other
development proposed at Northstar by East West Partners includes the development of the
Village at Northstar, a pedestrian mountain village featuring condominiums, boutique shopping
and dining and services, and The Highlands, a community of on-mountain ski-in/ski-out homes.
There are various levels of club membership ranging from limited to full use of the amenities
described above, with initiation fees ranging from $30,000 to $125,000. The Tahoe Mountain
Club is a unique package of resort amenities, which has been carefully conceived by East
West Partners to include most of the key resort elements of the Lake Tahoe region and is
considered to contribute to the marketability of Old Greenwood and future developments by
East West Partners. It is significant to note that several of these amenities are already in place.
This enhances the marketability of the product compared to trying to sell a product before any
of the amenities are built.
The Tahoe Mountain Club memberships are currently being offered at sports
membership or signature golf membership levels. The club membership is being included as
part of the fractional product sale price. The fractional owners will have all membership
privileges only when in residence for their time allotment. The lot owners are not required to
purchase a membership, but are being offered a priority to purchase membership in several
different forms. The cost and privileges of this club are summarized in the following table.
{
J
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Y
Tahoe Mountain Club x
Membership Plan Overview
's
Sports Signature Golf
Membership Price $25,000 $75,000
Membership Deposit Phasing: #
November 2003 $ 5,000 $ 10,000
July 2004
20 000' 65 0002
Total $25,000 $75,000
Month) Dues:
July 2004 $250 $500
If neither the Northstar Alpine Club nor Schaffer's Camp Club facilities have commenced construction by
June 2004, then $5,000 of the final deposit payment shall not be due until one of the two facilities has
commenced construction.
3 Monthly dues will be $50 st nuary 1, 2004 until Jul 1, 2004 as shown above.
Golf Privileges Coyote Moon Old Greenwood
Signature Golf Membershi
Advance Tee Times 60 Days in Advance 60 Days in Advance
Greens Fee Discount Cart Fee Only Cart Fee Only
Sports Membership:
Advance Tee Times 45 Da s in Advance 45 Days in Advance
Greens Fee Discount 10% 10%
The Tahoe Mountain Club is a separate, but related, entity of East West Partners. The
amenities on-site within the CFD will be available to members of the Tahoe Mountain Club who
have purchased property off-site in other related projects. Thus, the cost of construction of
these amenities is shared by the other projects. Therefore, as stated previously, our analysis
recognizes only the costs attributable to the taxable property in the CFD, and specifically
assumes the Tahoe Mountain Club entity will pay the costs attributable to the other projects.
-26-
SKI MARKET ANALYSIS
The subject is being marketed as a second home community that offers year-
round recreational amenities. One of the key amenities offered at the subject is excellent
access to alpine skiing in the Lake Tahoe region of the Sierra Nevada Mountains. The Lake
Tahoe area is home to the largest concentration of ski resorts in North America with 15 resorts
within close range of the Lake Tahoe Basin, including world-class resorts such as Squaw
Valley and Heavenly. The presence of ski resorts is a major economic force in mountain
communities. Over the past ten years, the ski industry growth in the United States has been
stable, as evidenced by the following table of skier visits in the U.S. by market.
U.S. Ski Industry Skier/Snowboarder Visits
(In Millions)
United States Northeast Southeast Midwest Pacific West Rocky Mountain
Season Skiers %Change Skiers Skiers Skiers Skiers %Chan e Skiers
1992-93 54,032 6.3% 13,217 4,660 6,978 10,575 6.4% 18,602
1993-94 54,637 1.1% 13,718 5,808 7,364 10,244 -3.1% 17,503
1994-95 52,677 -3.6% 11,265 4,746 6,907 11,346 10.8% 18,412
1995-96 53,983 2.5% 13,825 5,693 7,284 9,033 -20.4% 18,148
1996-97 1 52,520 -2.7% 12,407 4,231 7,137 9,841 8.9% 18,904
1997-98 54,122 3.1% 12,712 4,343 6,707 11,169 13.5% 19,191
1998-99 52,089 -3.8% 12,299 4,261 6,005 11,084 -0.8% 13,439
1999-00 52,198 0.2% 12,025 5,191 6,422 10,451 -5.7% 18,109
2000-01 57,337 9.8% 13,697 5,458 7,580 11,277 7.9% 19,324
2001-02 54,410 -5A% 12,188 4,994 6,980 12,126 7.5% 18,123
2002-03 57,624 5.9% 14,232 5,844 8,250 10,602 -12.6% 18,696
Annual Chan e
92-93 to 02-03 0.6% 0.7% 2.3% 1.7% 0.0% 0.1%
97-98 to 02-03 1.3% 2.3% 6.1% 4.2% -10% -0.5%
Source: National Ski Areas Association
The subject's sub-market of the Pacific West has had 0 percent growth over the
last ten years, while the United States ski market has had modest growth of 0.6 percent over
the same time period.
Resorts in the Pacific West region are generally smaller in scope than resorts in
the Rocky Mountains (Colorado, Utah, Wyoming, Idaho)and have experienced less investment
of capital in base facilities, on-mountain improvements and real estate development compared
-27-
to larger resorts in the Rocky Mountains. This is, in part, due to the superior ski experience in
these other areas. Overall, the high altitude and location further inland provide these areas with
better snow and better ski conditions than the wetter and warmer snow and ski season in the
Sierra Nevada. Recent trends in Tahoe area resort development have been toward greater
capital improvements and resort development, including the following:
Squaw Valley
Intrawest's development of 13 acres of a base area village approved for 640 total
units and 80 boutique retail shops, Phase I of which is complete (139 condos, 17 shops).
Heavenly
$250 million redevelopment, including Marriott's Grand Residence and Timber
Lodge, retail, and Heavenly gondola station development in 2002.
Northstar At Tahoe
Recent acquisition by Booth Creek Ski Holdings and subsequent development of
Big Springs' ski-in/ski-out residential lots. East West Partners recent purchase of land and
development rights at the base area to include fractional ownership units and commercial
space and on-mountain units.
Sugar Bowl
$34 million dollar expansion including six new quad lifts, Mt. Judah entrance and
lodge.
Kirkwood
$250 million in base area and multi-family unit development since 1994.
As investment and development opportunities in higher profile Colorado and Utah
resorts are becoming exhausted due to lack of available land, Tahoe area resorts are
becoming attractive alternatives. The proximity of strong feeder and drive-in markets in
Sacramento and San Francisco has spurred much of the recent capital investment in the
Tahoe area resorts.
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Tahoe Area Resorts
As noted, there are 15 alpine ski resorts in the Lake Tahoe Region. These resorts
range from small community resorts to world-class resort destinations. The following table
contains an inventory of the area resorts, including the number of lifts and general location in
the Lake Tahoe region.
Lake Tahoe Area Ski Resorts
Resort No. of Lifts Location
Soda S rin s 2 8 miles east of Truckee
Boreal Ski Area 9 92miles west of Truckee
Su ar Bowl Ski Resort 12 10 miles west of Truckee
Donner Ski Ranch 6 10 miles west of Truckee
Tahoe Donner Downhill 4 Truckee
S uaw Valle USA 31 11 miles south of Truckee[West of Tahoe Cit
At ine Meadows 14 13 miles south of Truckee
Northstar-at-Tahoe 15 6 miles south of Truckee
Granlibakken Ski Resort 2 South of Tahoe City
Homewood Mountain Resort 8 5 miles south of Tahoe Ci
Mount Rose Ski Area 5 Reno area
Diamond Peak 6 Incline Village
Heaven) Ski Resort 29 South Lake Tahoe
Sierra-at-Tahoe 12 12 miles south of South Lake Tahoe
Kirkwood 12 35 miles south of South Lake Tahoe
Source: www.Skitahoe.com
Of the Tahoe area resorts listed above, Squaw Valley represents the most major
resort in the vicinity of the subject, famous for its vast and challenging terrain, as well as
hosting the 1960 Winter Olympic alpine skiing events. The next tier of resorts in the subject's
vicinity is represented by Alpine Meadows, Sugar Bowl and Northstar-at-Tahoe, all of which
are quality resorts oriented toward family skiing; however, they lack the sheer scope and
reputation of Squaw Valley and Heavenly in South Lake Tahoe. We have conducted a further
analysis of Northstar due to its association as a subject property amenity.
Northstar-at-Tahoe
s
Northstar-at-Tahoe is a master-planned community originally developed in the
1970's on the site of a former tree farm previously owned by the Fiber Board Company. The
master-planned community at Northstar consists of over 1,500 existing private homes and
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y
single family lots and condominiums, 2,420 skiable acres with a vertical drop of over 2,200 $,
feet, an18-hole golf course and a base area village. Summer activities at the resort include lift
served mountain biking and hiking. Northstar is unique in the ski resort industry in that all of the
land is privately owned by the resort owner and operator, Booth Creek Ski Holdings Inc.,which Y
purchased the resort in 1998. Typically, resorts in the U.S. are operated on land leased from
the USDA Forest Service, with only a small percentage of privately owned land available for
development. The private ownership situation at Northstar-at-Tahoe allows for large-scale x
development opportunities, as well as increased ski terrain. Currently, a second wave of
development is occurring in the form of ski-in/ski-out single-family lots in the Big Springs area
of the resort by Booth Creek. The most significant development proposed for Northstar-at-
Tahoe is the result of a partnership between Booth Creek and East West Partners. These
entities entered into an agreement that was finalized in April 2003 and includes the following
plans for a new base area village and mountainside lot development.
Maximum construction of 1,800 base area units, including 350 units adjacent to
the existing village.
122,300 square feet of commercial space.
38,000 square foot conference and spa facility.
Conclusion
The Lake Tahoe region has the largest concentration of ski areas in North
America, ranging from mostly small, family oriented resorts to an Olympic caliber venue.
Overall, the Lake Tahoe area resorts have followed national trends in the stabilization of skier
days over the last ten years. Recently, there has been a trend of intensive capital investment in
the region's resort lodging, amenities and infrastructure, illustrated by the proposed
development at Northstar-at-Tahoe by East West Partners. The subject's association with
Northstar-at-Tahoe is considered an excellent amenity, as Northstar-at-Tahoe is well
positioned as a quality resort with a strong future.
GOLF MARKET ANALYSIS
The subject is a golf course based community featuring the only Jack Nicklaus
Signature golf course in the Lake Tahoe area. Golfing has played a large part in Lake Tahoe's
reputation as a year-round resort area. The mild temperatures, high percentage of sunny days
and mountain scenery all contribute to region's suitability for an enjoyable golf environment.
There are ten golf courses located in the subject's local North Lake Tahoe area. An inventory
of golf courses in the subject's area is listed below.
North Lake Tahoe Golf Courses
Identification Location Holes Par Type
Lahontan Truckee 18/72 Private
Cc ote Moon Truckee 18/72 Public
Incline Villa e Cham ionshi Incline Villa e 18/NA Public/Resort
Incline Villa e, Mountain Course Incline Villa e 18/58 Public/Resort
Northstar-at-Tahoe Northstar Resort 18/72 Public/Resort
Old Brockwa Kin s Beach 9/36 Public
Ponderosa Golf Course Truckee 9/36 Public
Resort at S uaw Creek OI m is Valle 18/71 Public/Resort
Tahoe Ci Golf Course Tahoe Ci 9/33 Public
Tahoe Donner Truckee 18(72 Semi-Private
All but one of the courses is open to public play, thus allowing the capture of
tourist and corporate group golf rounds, as well as local play. Greens fees generally range from
$85 to $200 dollars for 18 holes and $18 to $40 at the 9-hole courses. Lahontan is the only
private golf course included and will most likely offer the most similar golf experience as the
subject, Old Greenwood. Other than Lahontan, all of the golf courses listed above are open to
public play. It is noted that although the subject is a private golf course community, limited
public play will be offered at Old Greenwood per the subject's development agreement with the
town of Truckee, and the Truckee High School Golf team will have the option of using it as their
home course. The following is a brief description of the golf courses in the Truckee areas
considered most similar to the proposed Old Greenwood course.
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Lahontan
Lahontan is an exclusive golf community with over 500 homesites on
approximately 900 acres. The 18-hole championship course is a Tom Weiskopf design and is
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highly regarded. This community sold out ail of the lots in the initial offering over a 40-month
period. Currently, there are 100 resale home sites available. Golf operations data was not y
available, although due to the exclusive private nature of the community, the appraisers have F
assumed that the number of annual rounds played at Lahontan is significantly less than other
area courses. Lahontan has a maximum of 400 golf memberships available.
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Coyote Moon
This is the newest public course, having opened in 1999. Coyote Moon is
courses, having been named the best golf course
considered the most prestigious of the public
in the entire Tahoe region by the Northern California Golf Guide. Coyote Moon was acquired
by East West Partners in 2000. Approximately 20,000 average annual rounds are played at
Coyote Moon, which is considered to be approximately 85 percent of the capacity. Most of the
rounds are played by destination golfers, with local play accounting for only 10 percent of the
rounds played. Coyote Moon is the most expensive golf course in the area, with fees ranging
from $150 to $195 for 18 holes. Management indicated that there has been in increase in the
rounds played as word spreads about the beauty and quality of the course.
Northstar
Northstar is an 18-hole course that originally opened in 1972 as part of the
Northstar-at-Tahoe master-planned community. Interviews with management indicated that
24,000 to 26,000 annual rounds are played at the course, with group business representing 75
to 80 percent of these rounds. Northstar is the least expensive golf course in the region at
$105 per 18-holes. It was reported that from mid-June to mid-September, tee times are fully
booked.
Tahoe-Donner
The Tahoe-Donner Golf Course is also an amenity to a master-planned
community.The course caters primarily to residents of the Tahoe-Donner community by way of
special season pass rates. As a result, there is little public play at this course. This
development is not considered to be directly competitive with the subject as it is not an
exclusive gated community. in addition, the community is over 30 years old and homes and
lots are available at a much lower price point.
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Gray's Crossing
Gray's Crossing is a proposed golf course community being developed by the
subject developer, East West Partners, featuring an 18-hole championship golf course virtually
adjacent to the subject to the north. Gray's Crossing will be an upscale community; however,
due to timing and control of the development by the subject developer, it is not considered to
be competitive with the subject. This project is currently in the planning process.
Conclusion
Golf is a major component of the Lake Tahoe region's four-season resort lifestyle.
There are several golf course operations in the Truckee area, offering a wide range of golf
opportunities. Discussions with golf course personnel in the area indicate that there is a strong
demand for golf and that the subject will arguably offer the best course yet in the area.
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HOUSING MARKET ANALYSIS
a
Analysis of the residential housing market includes a regional analysis of the #
greater Lake Tahoe region, including three counties in California and three counties in Nevada,
as well as a more in-depth look at recent trends in Truckee. Factors that influence housing t
demand, particularly as it relates to higher value second homes, will be addressed. factors #
discussed in this analysis include trends and projections for the following characteristics:
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Population
Households
Housing Units
Median Home Value
Vacant Housing Units
Owner vs. Renter Occupied Units
The following table demonstrates general growth trends in population and
households in the Lake Tahoe area counties. it is noted that the majority of the population and
land area in the California counties included below are located west of the Lake Tahoe region
and are influenced more by the Sacramento economy and demographic trends. It was not
possible to isolate the portions of counties relevant to the Lake Tahoe region. This data is still
considered meaningful, as larger regional trends are toward development and growth east from
the more populated areas into the historically more rural, mountainous areas near the Lake
Tahoe area.
California Counties Population and Household Trends
Po ulation Households
Coun 1990 2000 2002 2007 Pro. %Chan e 1990 2000 2002 2007 %Chan e
Nevada 78,510 92,033 94,377 100,586 17.2% 30,760 36,894 38,082 41,153 19.9%
Placer 172,794 248,399 262,571 198,850 43.8°/ 64,098 93,382 99,163 114,073 45.7%
El Dorado 125,994 156,299 161,741 175,956 24.1% 46,846 58,939 61.291 67,380 26.8%
Source:CCIM,STDBONine,U.S.Census
Nevada Counties Population and Household Trends
Po ulation Households
Count 1990 2000 2002 2007(Pro. %Chan e 1990 2000 2002 2007 %Chan e
Dou Ias 27,638 41,259 43,813 50.377 49.3% 10.572 16,401 17,631 20.686 55.1%
Washoe 254,673 339,486 355,073 395,419 33.3% 102,296 132,084 137,898 152,801 29.1%
Carson City 40,435 62,457 54,651 60,343 39.7% 15,891 20 171 1 21,024 23,269 26:9%
Source:CCIM,STDBonline, U.S.Census
The subject is located in Nevada County, which has experienced total population
growth of 15,867 and household growth of 7,322 between 1990 and 2002. Population and
household growth are growing at similar rates, which indicates balanced and healthy growth.
Overall, the area has experienced significant growth, which is projected to continue through
2007. Washoe County has the largest population in the Nevada region, containing the city of
Reno.
The number of housing units and median home values are also indications of
growth. The following table shows the total housing unit inventory in the Lake Tahoe region
counties and the change in median home value from 1990 to 2000.
California Counties
Total Housin Units Median Home Value
coun 1990 !44,282
00 2002 2007(Pro. %Change 1990 2000 %Chan e
Nevada 37.352 45,296 48,442 18.6% 154 7717 199,205 28.8%Placer 77,88102 114,148 129,300 378% 1691037 207,521 22.8%EI Dorado 61,44999 161,743 175,956 16.0% 154,995 191,043 23.3%Average 25.0%Source:CCIMSTDBonline.U.S.
Nevada Counties
Total Housin Units Median Home Value
County 1990 2000 2002 2007 Pro. %Chan e 1990 2000 %Chan e
Douglas 14,122 19,006 21,323 24.527 34.6% 121,025 174,101 43.9%
Washoe 112,195 143,908 148,535 163,675 28.3% 111,239 149,216 34.1%
Carson City 16,625 21.283 21,798 24,074 38.0% 98,257 127,231 28.2%
Average 35.4%
Source:CCIM,STDBonline, U.S.Census
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Balanced growth rates are also indicated by the increase in housing units
commensurate with population and household growth. The average change in value of median
home prices for the California Counties from 1990 to 2000 was 25 percent, while the Nevada
Counties experienced a 35.4 percent change in median home value. It should be noted that
there is a key distinction between the California and Nevada communities in terms of the f
economic forces contributing to growth. The state of Nevada does not have a personal state
income tax. In addition, the prevalence of the gaming industry is a consideration(either positive
or negative) for potential home purchasers in the state of Nevada.
It is anticipated that the subject will be a vacation community for the majority of
the homebuyers and is being marketed as such. We have examined trends in vacant housing
units in the area to understand the place of vacation homes in the area market. The following
table shows vacant housing units in each area county by total number of vacant units and
vacant units as a percentage of the total housing inventory.
Vacant Housing Units
1990 2000 2002 2007
California Counties
Nevada 6,594 18% 7,388 16,7%L 7,214 15.9°!° 7,289 15%
Placer 13,774 18Z.J 13,920 (13.0%1 14,985 13.1% 15,227 11.8%
El Dorado 14,602 249% 12,339 17.3% 16,143 20.8% 16,266 19.4%
Nevada Counties
Dou las 3,550 25% 2,605 13.7%) 3,692 17.3% 3,841 15.7%
Washoe 9,896 9% 11,824 8.2% 10,637 7.2% 10.874 6.6%
Carson City 732 4°!° 1,112 ft2%J 774 3.6% 805 3.3%
Source: CCIM, STDBonline, U.S. Census
El Dorado, Douglas and Nevada Counties have the highest percentage of vacant
housing units, while Wahsoe County and Carson City have the lowest percentage at 3.3
percent and 6.6 percent, respectively. This suggests that Washoe County and Carson City are
less resort oriented in terms of housing development, as second homes tend to be
concentrated near recreational amenities. This is consistent with the appraisers' observations
during the physical inspection of the market area.
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.. .._.._ ., . .. _..
Truckee
We have recapped the population and building permit data for the Town of
Truckee from the previously presented Location Analysis.
Population in the Town of Truckee
Janua Po ulation % Chan e #Chan e
1994 11,150 ____
1995 11,800 5.8% 650
1996 12,050 2.1%
250
1997 12,600 4.6% 550
1998 13,000 3.20/c 400
1999 13,300 2.3% 300
2000 13,800 3.8%
500
2001 14,200 2.9% 400
2002 14,700 3.5% 500
2003 14,850 1.0% 150
Annual Chan e 3.2% 411
Source: California Department of Finance
Truckee Total Annual Building Permits
2000 2001 2002 2003`
Residential 372 187 317
156
Commercial 28 7.5% 62 33% 122 38°!° 83 55%
Total 400 249 439
239
Source: Town of Truckee
January through August
As noted previously, the Town Truckee was incorporated as a town in 1993, thus
the most meaningful population figures are from 1993 forward. The following table summarizes
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several vital statistics for the town of Truckee, which were presented previously in separate
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tables for the counties in the region.
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Housing Units Summary Report
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Percent Change
1990 Census 2000 Census 1990 to 2000
Housin Unit Value 207 1.118%
$0-$6%999 17
$60,000 -$74,999 47 2.4% }
25 0.7%
$70,000-$79,999
$75,000 -$99,999 333 9.3%
45 1.3%
$80,000-$89,999 28 0.8%
$90,000 -$99,999 185 5.1% -79.0%
$100,000-$149,999 877 45.1%
$150,000-$199,999 353 % 884 24.7% 0.$%
$200,000 -$299,999 204 10.518.2% 1,517 42.3% 642.4%
0
$300,000-$399,999 72 3.7% 578 16.1% 699.3/o
$400,000-$499,999 25 1.3% 373 10.4% 1,381.8%
14 0.7% 495 13.8%
$500,000 or more 313 $ 7%
$500,000-$749,999
$750,000 -$999,999 116 3.2%67 1.9%
$1,000,000 or more
Median Home Value $137,925
$242,118 76.5%
%Chan e
1990 2000 2002 2007 90-00 02-07
Census
Census Est. Pro'ect
Po ulation# 9,816
15,550 16,633 19,706 58.4% 16.7%
Households 3,608
5,785 6,215 7,314 60.3% 17.7%
Housin Units 13,061 35.7% 9.3%
8,761 11,885 11,950
Total o 0 743 44.0% 97.5% 21.6%
Owner-Occu ied
2,392 27% 4,336 36.5/0 4,724 39.5/0 5,
Renter-OCCU ied 1,216 14% 1,449 12.2% 1,491 12.5% 1,571 12.0% 22.6% 5.4%
Vacant 5,154 59% 6,100 51.3% 5,735 48.0% 5,747 44.0% 11.3% 0.2%
This table indicates strong growth in Truckee in all categories presented. Most
noteworthy is the large increase in owner-occupied homes valued at over$500,000 from 1990
to 2000. In 2000, there were 991 homes valued at over $500,000, compared to a total of 14
homes in the same value range in 1990. Homes in Lahontan represent a good portion of the
homes in this category, as well as homes in the more recent phases of Northstar, which
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although located in Placer County, is located within the geographic limits of the Truckee ZIP
code. Current levels of growth for high-end homes are expected to taper off after the subject
property and Gray's Crossing reach build-out over the next few years as there is less
development land available in Truckee. Other future development of note, which may contain
high-end homes, will most likely be located in the Martis Valley planning area south of the
subject.
Conclusion
The Lake Tahoe region has been experiencing strong levels of population and
housing growth over the last decade. Growth on the'Nevada side is most influenced by the
metropolitan Reno area. Growth in Truckee is generally consistent with area trends, although it
is experiencing a larger share of growth in the higher value housing market. This is assumed to
be driven by the area's resort oriented developments such as the Lahontan, and eventually the
subject.
This section of the housing market analysis will examine housing price trends, as
well as existing/ future supply and demand for homes in the subject's market. The demand
section will consist of an examination of eligible buyers in the subject's primary markets of
Sacramento and San Francisco Bay area. These two markets represent, by far, the buyers of
Tahoe area second home properties, as confirmed by conversations with several area real
estate brokers and developers. It is estimated that approximately 80 percent of the second
homeowners in the Tahoe area hail from the Bay area.
Pricing Trends
The following table shows pricing trends for single-family homes and
condominium/cottages in Truckee from 1998 to 2002.
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xisting Home Sales Data for Truckee Area (Zip Code 96161)
Sin le FamiI Homes Condominiums/Cotta es
r No. of Sales Median Price % Change No. of Sales Median Price % Chan e
738 $179,000 7.0% 82 $140,000 8.5%
863 202,000 12.8% 96 150,000 7.1%
691 280,000 38.6% 94 193,000 28.7%
423 316.500 13.0% 66 209,500 8.5%
672 356,250 12.6% 88 227,500 8.6%
han e2 176 $359,500 $165,000 -----
3 173 400,000 11_3% 30 244,000 47.9%
ata uick Information S stems
There have been significant increases in the median price of existing home sales
over the last five years. We have also provided the following table comparing the median
single-family home price for 2002 communities on the California side of the Lake Tahoe to
understand Truckee's real estate market relative to other markets in the area.
iBeach/96143
ian 2002 Existing Single Family Home Price
elected Lake Tahoe Region Communities
Code Median Price
ke Tahoe/96150 $250,000
rin s/95728 300,000
/96161 356.250
n Ba /96140 400,000
od/96141 335,000
/96142 322,500
Kingseach/96143 300,000
Tahoe Cit /96145 400,000
Olympic Valle /96146 620,000
Tahoe Vista/96148 360,000
Source: Data quick Information Systems
This table suggests that Truckee generally fits in the middle of the range of the
area real estate markets in terms of pricing. It is noted that the Olympic Valley, which is
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essentially the entrance to Squaw Valley ski resort, has the highest median home pricing in the
area at $620,000.
Truckee Housing Inventory
Residential development in Truckee has occurred sporadically in phases over the
years since Truckee was first established as a wagon train stop in the late 1800s. The historic
area of downtown Truckee has a variety of housing development that contributes to the charm
of the town. Most development in Truckee has been single family oriented. The following is a
discussion of Truckee's neighborhoods and organized developments per the town of Truckee
general plan.
Downtown Truckee
Downtown Truckee is the historic heart of the community and contains a mixture
of commercial development centered around Commercial Row, older residences, and industrial
and railroad uses.
Gatewav
This central Truckee neighborhood largely consists of more recent commercial
development, including a major grocery store, several restaurants, and small strip mall
developments along Donner Pass Road. Residential areas are located near the intersection of
Northwoods Boulevard and Donner Pass Road, and between Donner Pass Road and the
freeway. Several important public facilities are located in the Gateway area, including the
Tahoe Forest Hospital, a public library, the Nevada County Government Center, and four
school sites.
Tahoe Donner
This major residential area consists of 6,200 residential lots across seven square
miles in the northeast quadrant of Truckee. Approximately 75 percent of these properties are
second homes. The closest grocery store is between two and one-half and five miles away.
Services within the development include a convenience store/deli, real estate services and
other limited professional services, restaurants, a pre-school, and a variety of development-
related recreational facilities, including a ski area and a golf course.
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Donner Lake Area
This area consists of a series of subdivisions clustered along the north,west and
south shores of Donner Lake. Many properties are second homes or vacation rentals, including r
several condominium developments along the shoreline. Donner Memorial State Park r
surrounds the southeastern part of the lake. Limited commercial services are located at the t
west end of the lake's north shore, including a restaurant, gift shop and real estate services,
and the Donner Pines Center at the east end,which includes a small market and a restaurant.
Recreational facilities include a public beach, boat launching facilities and boat rentals. f
Glenshire/Devonshire Area t
Glenshire/Devonshire consists of a series of subdivisions comprising about 1,500
cated at the eastern boundary of Truckee. Most of
housing units on about three square miles lo
ied by full-time residents. Services within the
the housing units in the area are occup
development include a corner store, child-care, an elementary school, a neighborhood club
house/swimming pool and real estate services.
Sierra s
This area consists of a series of subdivisions, including Sierra Meadows and
Ponderosa Palisades, comprising about 1,500 housing units on about two square miles in the
south central area of Truckee. The Nevada/Placer County line splits the neighborhood, with
some homes in the south part of Sierra Meadows lying outside the town limits in Placer
County. The only commercial service within the subdivision is a homeowner's association club
house/pool. A convenience store and a regional park are located adjacent to the northern
boundary of the development.
Prosser Area
The Prosser area includes a grouping of subdivisions, including Prosser
Lakeview, Sugar Pine Estates and Prosser Lake Heights, comprising several hundred housing
units over three square miles in the northern central area of Truckee. There are no services in
this area, and the closest grocery store is about four miles away.
Other Residential Areas
Other smaller residential subdivision include the Armstrong Tract, north of
Interstate 80 between Donner Lake and the Gateway area; Olympic Heights, southwest of the
Airport Flats area; and Pannonia Ranchos, a rural, large lot subdivision east of Prosser
Lakeview.
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Of the neighborhoods described above, Lahontan and Tahoe Donner have been
developed as master-planned, amenity-based communities and are considered to share similar
characteristics with the subject. These developments are covered in further detail, including
current lot listings, pricing trends.
Tahoe Donner
When first developed in the 1970s, Tahoe Donner was known as the largest
subdivision in the United States. This project consists mainly of single-family homes, which
have been developed over the last 30 years on lots ranging in size from 0.25 to 0.50 acres.
Many of the lots are located adjacent to the 18-hole golf course; however, due to the sheer
scope of the project, most of the lots are not on the golf course. Recent sales of lots in Tahoe
Donner range from $100,000 to$200,000 for non-golf course lots with golf course frontage and
mountain-view lots selling in the$220,000 to $350,000 range.All of the lots available are in-fill
lots scattered throughout the development. Prices for single-family homes vary due to the age
and quality of homes, generally ranging from $300,000 to $2,000,000. Recent lot sales in
Tahoe Donner are analyzed in the Sales Comparison Approach section of this report. There is
a limited amount of multifamily development in Tahoe Donner; the most recently completed
project in the summer of 2003 is Zurich Place. This project offers two-to four-bedroom cottage
units ranging in size from 1,778 to 2,860 square feet, with pricing ranging from $439,000 to
$869,000 ($246.91 to $303.85 per square foot). Overall, Tahoe Donner represents the first
amenity-based development of its kind in the Truckee area and is considered a desirable
community. Recent trends indicate construction of higher end homes on the in-fill lots. Tahoe
Donner is not considered competitive with the subject due to its massive size and lack of
identity and exclusivity. It does demonstrate a strong track record for demand of resort and
amenity-based living in the Truckee area.
Lahontan
Lahontan has been discussed in detail throughout this appraisal report as it
represents the first and most successful high end, amenity-based resort community.
Lahnontan shares many characteristics with the subject in terms of exclusivity and its identity
as the Amodern interpretation of a resort community. Lahontan varies from the subject in that it
offers single family lots only and its amenity offerings do not extend outside the community,
unlike the Tahoe Mountain Club benefits offered to owners at Old Greenwood, which will be
discussed later in this report. As a real estate development project, Lahontan was extremely
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successful, having sold out all 509 lots in 40 months, for an absorption rate of 12.73 units per
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month. One factor of this high absorption rate was the timing of the development which
coincided with the high-tech stock surge related to the dot com boom in the Bay Area. It was
reported that approximately 75 percent of the buyers in Lahontan were from the Bay Area, with
many of being dot com beneficiaries. Moreover,the 509 lots were initially sold to 330 owners,
with some buyers purchasing up to three lots for future investment, etc. In the initial period of
lot sales at Lahontan, lots sold in the range of$375,000 to $2,250,000 with lowest lot sale at
$350,000. During the resale period, sale prices generally ranged from$350,000 to$1,000,000,
with a low of$209,000. This is attributed to the recent downturn in economic conditions, as well K
as the fact that Lahontan is now an established community and perhaps the novelty and
marketing intensity has diminished somewhat. Currently,;it is reported that there are100 resale
lots on the market and seven finished homes. A search of the Tahoe Sierra MILS identified 80 {
Lahontan lot listings as of September 5, 2003 ranging from $229,000 to $2,195,000, with an
average listing price of $508,261. A search of Lahontan lot sales over the past 36 months
indicated 69 lot resales ranging from $375,000 to $1,500,000, with an average sale price of
$467,532 per lot.
Future Development
Future development in Truckee is encompassed under the Truckee General
Plan, which was first adopted in 1996 and forecasts out to the year 2025. The following table
shows the estimated development potential in Truckee per the General Plan Update Briefing
Book dated April 2003.
Estimated Development Potential in Truckee
Area Units
Downtown 830
Tahoe Donner 1,357
Donner Lake 497
Glenshire-Devonshire 351
Large Lot Subdivisions East of Tahoe Donner, Glenshire Area, Tahoe Boca 191
Residential Development Areas (Brockway Road, Northwoods Boulevard 1,711
Existing Residential Area In-fill (Sierra Meadows, Olympics Heights, Prosser, Pannonia
Ranchos, Gateway, Armstrong) 777
Old Greenwood 306
PC-1 50
PC-2 Gra 's Crossing) 600
McIver Hill 50
ESTIMATED POTENTIAL UNITS 6,720
EXISTING UNITS 10,903
BUILD-OUT POTENTIAL 17,623
Source: Town of Truckee, General Plan Update Briefing Book, April 2003)
Significant development potential in Truckee includes the previously discussed
in-fill lots in Tahoe Donner, peripheral residential development areas, and Gray's Crossing,
being planned and developed by East West Partners. According to the statistics provided in the
General Plan Update, Truckee is approximately at 62 percent of residential build-out capacity.
There are significant development areas adjacent to the south of the town limits of Truckee in
the Martis Valley in Placer County. These developments will use Truckee services and
influence traffic and commerce in Truckee proper. Development in the Martis Valley falls under
the Martis Valley General Plan, which was first adopted in 1975 with a maximum number of
12,000 residential units. This plan was later revised to a maximum of 8,600 residential dwelling
units; a reduction of 28 percent from the original plan. It is anticipated that a large percentage
of this development will cater to second homebuyers. Other significant development in this
area pertains to base area and on-mountain development at Northstar-at-Tahoe Resort.
Northstar-at-Tahoe
This ski area was originally master-planned and developed in 1972 on privately
owned land with approvals for a total of 3,300 dwelling units. Approximately one-half of the
allowable density at Northstar has been developed, providing the opportunity for vast real
estate development at the resort. The following events have been the recent highlights in real
estate development at Northstar:
• Booth Creek's 1998 auction of 32 lots for an average sales price of$212,000 per
lot in the Big Springs subdivision.
• Booth Creek's 1999 auction of 46 Big Springs lots for an average price of
$304,000 per lot.
• 2001: 26 new lots sold in the Overlook at Big Springs for$333,000 to $751,000.
• Recent marketing of 15 ski-in/ski-out lots in The Summit at Big Springs, with 12
lots under contract at $539,000 to $990,000.
• Construction of the Northstar Club in 2000, a base area fractional ownership
project (to be discussed in detail later).
• 1999: Development agreement between Booth Creek and East West Partners
including future base area construction of 1,800 units, 122,300 square feet of
commercial space, and a 38,000 square foot conference/spa facility.
Current single family, condominium and lot listings are summarized below as
provided by the on-site Northstar real estate offices of Sheridan-Williamson.
Northstar-at-Tahoe Listings
Price
Type No. of Listings Range Average
Single amil Homes 22 $618,500 to $3,500,000 $1,403,113
Condominiums/Cottages 16 $175,000 to $459,000 $ 319,125
Single Family Lots 12 $450,000 to$975,000 $ 638,667
Recent lot sales at Northstar are discussed in detail in the Sales Comparison
Approach section of this report. Northstar is positioned for a transformation from an
underdeveloped small family ski area to a freshly developed resort with an animated base area
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village and new, high quality single and multi-family development. East West Partners will play
a major role in the transformation at Northstar, which puts them in the position to offer ski
amenities to the owners in Old Greenwood.
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FRACTIONAL INTEREST MARKET ANALYSIS
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The Truckee Donner Public Utilities District, Community Facilities District No. 03- ,
01, has been created to help provide for infrastructure development costs for the Old
Greenwood development. Old Greenwood is amaster-planned development consisting of
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single-family lots, freestanding cabins and attached cottages. The cabins and cottages are
proposed for sale in fractional ownership based on a 1/17 share. In other words, each cottage
and cabin will have 17 owners, each entitled to three weeks of occupancy. This type of
ownership is currently referred to in the market as a fractional interest. This market analysis is
ional ownership industry, providing definitions for
intended to provide an overview of the fract
certain concepts in a rapidly evolving product type. Extensive research has been conducted by
the appraisers regarding the fractional ownership industry. Specifically, the reports and
information reviewed by the appraisers in preparation of this market analysis include the
following:
Fractional Interest: A Market Profile, 2003 edition prepared by Ragatz
Associates, May 2003.
Industry Overview of the Luxury Fractional and Private Residential Club
prepared by Hobson and Ferrarim Associates, October 2000.
The High End Fractional Interest Market and Comments on the Proposed
Truckee Sierra Resort and Spa (pre-cursor to Old Greenwood), prepared by RCI
Consulting, September 1999.
Interviews with the development personnel of East West Partners, and other
reports and information provided by the developer.
Fieldwork conducted through interviews and site visits to numerous fractional
timeshare properties in the Lake Tahoe region and other resort areas.
Attendance at and review of information from"Taking Fractional Development to
the Next Level' seminar hosted in Deer Valley, Utah by
www WorldsFinestResorts.com. in September 2003.
The information gathered from the above sources has been summarized and is
reported in this market analysis section as succinctly and precisely as possible as it relates to
the overall industry trends to a comparison of the proposed development at the subject
property, which is being marketed as Old Greenwood.
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Fractional Interest Overview
Generally, the fractional interest concept can be defined as the selling of resort
real estate in intervals of more than one week but less than whole ownership. The fractional
interest resort market has been formally evolving as a product type very rapidly since the mid-
1990s. Prior to its current evolution as a well-defined marketable product, the fractional
ownership concept has existed for many years in the form of individual friends or relatives
collectively purchasing a vacation home and sharing its use. Difficulties with this historical type
of use has been that friendships and family would have conflicts as to how much time and
when each party could use the property, and responsibilities for maintenance, costs and legal
issues if an owner moves or cannot afford continued ownership. Developers have formalized
the fractional approach by providing shared ownership through employment of a professional
management company, which provides a detailed schedule of use and access and
professional management, as well as facilitating re-sales and other services or amenities.
There is an important distinction to be made in the current marketplace between
a timeshare and a fractional interest. Historically, timeshare developments have only sold one
week of ownership and no more. Due to unscrupulous developers and high-pressure sales
tactics from various timeshare developments in the 1970s and 1980s, the term timeshare has
developed a negative connotation, from which the developers of fractional interest products are
trying to distance themselves. Thus, there is a high degree of sensitivity among current
developers that is intended to help differentiate fractional interest from timeshare. While the
concepts are the same in that the purchasers are buying an allocated amount of time in a
specific resort property, there have been significant differences offered in the products as it
relates to services, amenities, location and other factors. However, the primary distinction
currently being made in the market between timeshare and fractional interest is the amount of
time owned. Timeshare is still generally regarded as one-week ownership, and fractional
ownership is regarded as a unique type of time ownership greater than one week but less than
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whole ownership. This has ranged from 1/4 to 1/26 shares.
Further differentiation has been occurring in the product type being offered within x
the fractional interest market. In our opinion, it is appropriate to utilize the terminology for the
different types of fractional interest as set forth in the Fractional Interests Market Profile
prepared by Ragatz Associates. These are summarized as follows:
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Traditional Fractional: Product selling for less than $500 per square foot. These are
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usually resort condominiums of average quality, in regional resort areas, with typical resort
amenities and services, often characterized as at the three-star level of quality.
High-End Fractional: Product sellingper square foot. This product
for $500 to $999
represents a step up from the preceding category, typically due to some combination of more
ize, higher construction and furnishings quality, or
desirable location, lower density, larger unit s
additional amenities or services. Often characterized as of four-star quality.
Private Residence Clubs (PRCs): Product selling for $1,000 or more per square foot.
These represent the pinnacle of quality -- not just among fractional interest but in comparison
with virtually any resort accommodations available -- due to a combination of locations in the
top tier of resort destinations on prime sites, extraordinary architecture and design, and the
highest levels of services and amenities. A five-star quality product in every way. #
The above definitions are differentiated by product selling cost, but also note
significant differences in product related to other items such as location, lower density, unit
size, quality, amenities and services. The subject's market position as it relates to these
definitions will be discussed in greater detail later in this section of the report. Overall, the
subject represents something of a hybrid between the high-end fractional and the private
residence club type of product. The subject will be offering larger units of superior quality and
good amenities and services, but will not be at the very top of the spectrum in terms of quality
and service. Thus, when additional information is utilized from the Ragatz Associates report,
the subject is most closely associated with the high-end fractional type of product.
Some of the advantages of fractional ownership from a consumer standpoint are
summarized as follows:
Use of an upscale vacation property without the costs and responsibilities of
wholly owned second homes.
Flexibility in use.
Fractional allows for a greater proportion of the purchase price to be allocated to
the product itself, rather than expensive marketing and administrative costs
associated with timeshare. Fractional represents a step up from timesharing and
a substitute for second home ownership.
Creates some control over future vacation costs.
There are advantages to developers of fractional properties, as well, in
nership condominiums. These are summarized as follows:
comparison to whole ow
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• Lower price points for the fractional interest provides for a broader market.
• More consistent cash flow is realized by the broader market.
• Higher profitability due to greater levels of ongoing sales.
The locations of most fractional interest properties are in resorts of some type.
The primary difference in resorts as it relates to the type of buyer for fractional interest is
location in a destination report typically traveled to by air, or regional resorts typically located
within a three-hour drive time, with most owners arriving by automobile.
Existing Fractional Interest Resorts
According to Ragatz Associates, as of April 2003 approximately 138 fractional
interest resorts were identified worldwide. Ragatz Associates indicates that approximately 48 of
the total resorts are high-end fractional, 27 are private residence clubs (PRCs), and 63 are
more traditional fractional. The majority of these resorts (39 percent) are located in the United
States, with the others in Canada, Mexico, the Caribbean, and other areas, including London
and Fiji. The expansion and evolution of the fractional interest product market is evidenced by
the fact that Ragatz Associates identifies 31 high-end PRC resorts in various stages of
planning throughout the world, with 21 being located in the United States. The following table
summarizes the rapid expansion in the supply of high-end fractional and private residence club
(PRC) resorts.
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Existing High-End/PRC Resorts r
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Before 1995 4
1996 6 #
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1997 13 3f
1998 20
1999 33
2000 44
2001 52
2002 69
2003 1s`Qtr.) 75
Source: Ragatz Associates, Traditional
Interests 5/03
The above table illustrates the rapid increase in supply for this evolving market
over the past eight years. Ragatz Associates reports that the annual growth in the number of
high-end/PRC resorts averaged 15.2 percent between 1996 and 2002.
The majority of fractional interest resorts are in ski destinations, with beach
locations being the second most common. Less than one-quarter of the fractional interest
resorts are in golf and urban locations. The most substantial concentration of high-end/PRC
resorts in the United States is in the state of Colorado, which accounts for the orientation
towards ski destinations. The following table summarizes the locations of fractional interest
resorts throughout the United States.
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Locations of Fractional Interest Resorts
Traditional
High- Fractional Traditional
End/PRCs Interests Total Nigh' Fractional
Arizona End/PRCs Interests Total
5 1
6 Nevada 0 1 California g 1 1
g New Ham shire 1 4 Colorado 21 6 g
27 New York 1 2 Delaware p 1 3
Florida 1
p North Carolina 2 p
2
1
2 Ore on 3
Hawaii p 2 5 g
2 Penns Ivania 0
Idaho 2 p 2 1 1
Rhode Island 0 1 1
Indiana 0 1
1 South Carolina 2 $
Maine 0 2
Ma land p 3 Texas 1 3 q
3 Utah 1 1 Massachusetts p 2 2
2 Vermont
Michi an 2 5 2 0 g
� Vir inia 1 0 Minnesota 0 1 1
1 Washington 0 4
Missouri 1 3 4
Montana p 3 3 W omin 3 0 3
Source: Ragatz Associates
The above table indicates that California is a distant third behind Colorado in
terms of total number of fractional interest resorts. It is noted that some of these are in the
subject's Lake Tahoe Basin area, which will be discussed later in this section of the report. In
terms of the distribution of ownership represented by the resorts, there are approximately
31,700 owners of fractional interest product worldwide, representing nearly 250,000 weeks of
shared ownership. The following table summarizes the average number of weeks owned and
number of units and shares owned worldwide.
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Fractional Units Supply/Ownership
Avg. No. No. of Units No. of Owners No. of Weeks p
Owned
Weeks Owned Worldwide Worldwide r,
10 1,610 15,800 158,100
Traditional/Fractional 2 135 15 900 90 500
Hi h-End/PRC 7
3,745 31,700 248,600
Total
Source: Ra atz Associatesz
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Fractional Interest Product Characteristics
The previous table has indicated that there are approximately 3,745 fractional
interest properties worldwide, with the majority being high-end or private residence club
projects. According to Ragatz Associates, the average size of a traditional fractional interest
resort is 25 units, and the average size of a high-end/PRC resort is 29 units. However, they
note that if projects that are under construction are planned and completed, the average high-
end/PRC resort will contain 49 units, which is a substantial increase in total project size. It is
noted that the subject's Old Greenwood development is proposing 72 attached cottages and
74 freestanding cabins.This does represent a substantially larger scope development than has
been typical of the market in the past. However, it is noted that the trend is towards a larger
development size. Also, the resort locations do not have sites available for larger scope
projects such as the subject. The following table summarizes the unit characteristics of the
existing resorts.
Fractional Interest Unit Characteristics
Unit Confi uration Avera e Unit Size S . Ft.
Traditional TraditionalFractional Hi h-EndIPRC
Fractional Hi h-End/PRC
6.5 465 565
Studio 4'7 755 820
1 Bedroom 28.1 15.8
2 Bedroom 44.6
39.0 1,165 1,470
29.0 1,790 2,075
3 Bedroom 22.4 3,290
4 Bedroom
0.2 9.7 N/A
Source: Ragatz Associates
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The above table indicates that the most common unit configuration by far is the
two-bedroom unit, and that the average two-bedroom unit size is 1,165 square feet in more
traditional projects, and 1,470 square feet in the high-end/PRC product. Overall, the average
unit size tends to be larger in the hi
gh-end/PRC product than in the traditional fractional
product. In addition, there are four-bedroom units noted for the high-end/PRC product, which
generally do not exist in a meaningful way in the traditional fractional market. Overall, the unit
mix for the subject Old Greenwood project fits well within the market indications.
The fractional share size for the units in the existing product varies substantially.
The evolution of the fractional share size has generally gone from larger shares of 1/4 shares
to 1/6 shares, or approximately 8 to 13 weeks, to smaher shares. The 1/17 share offered by the
subject represents three weeks. The following table summarizes the fractional share size and
the existing supply as identified by Ragatz Associates.
Fractional Share Size
Fraction 1/6-1/4 1/9-1/7 1(13-1110 1/26-1/17
#Weeks Other
8.6-13 5.7-7.4 4-5.2 2.0-3.0 Traditional Fractional Interest o N!A
56/0 21% 21% 9%Hi h-End/PRCs o 6%
15/0 33% 42% 8% 8%
Source: Ra atz Associates
The above table indicates huge growth from 1999 to 2000 and that the 1/17
share offered by the subject is currently in the minority as it relates to more abundant fractions
of 1/4 to 1/6 share. However, as discussed, it is our opinion there is evidence of change in the
market as several of the sources we have reviewed indicate that unused time represents a
drawback to current ownership of the larger shares. The subject developers have reported a
carefully researched plan offering three weeks, which is regarded as a typical amount of s
achievable time to visit the Lake Tahoe area from the most significant drive-to market near the
subject, which is the San Francisco Bay area. This attribute will be discussed in greater detail
later in this report. According to Ragatz Associates, the average fraction size among high-
end/PRC projects is a 1/8 share,
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Fractional Interest Sales Volume/Pricing #
Sales volume for high-end and private residence clubs has increased ,
90s. The following table summarizes sales volume for this product
substantially from the late 19
type.
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High-End/Private Residence Clubs
Sales Volume
Year
Sales in Millions % Chan e r.
1999 $160.7
2000 328.5 104.4%
2001 350.4
2002
357.9 2.1
Source: Ragatz Associates
The above table indicates the flattening of sales volume since 2000. In our
opinion, this is due to several factors. One is that the economic downturn and impacts of the
recession began late 2000/early 2001 and were intensified for the travel industry by the events
of 9/11. The recession and downturn in the market have created somewhat less demand for
vacation ownership due primarily to the diminishing returns in the stock market.
Individual pricing of fractional units varies substantially based on location,
amenities and services offered, as well as fraction size. Ragatz Associates has applied three
different units of comparison to examine retail prices of fractional interest real estate, including
price per fraction, price per square foot, and price per week of ownership. An analysis of the
fraction price by unit size results in a wide range due to the various amount of time per fraction.
An examination of the price per square foot of the units provides a more consistent comparison
across various fraction sizes. In addition, the price per week of ownership also accounts for
fraction size but is unable to consider the different types of units. The following table
summarizes the average pricing for the existing supply of fraction projects surveyed by Ragatz
Associates.
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Fractional Interest Average Pricing
B Unit T e Per S . Ft. by Unit Type Per Week of Ownershi
Unit Type Traditional High-End PRC High End PRC #Weeks Traditional High-End PRCs
Studio $29,250 $ 64.950 $ 97,800 $675 $1,460 2-3 $10,000 $44,000 $28,780
1 BR 41,000 80,700 134,600 610 1,480 4-5 15,525 25,160 51,000
2 BR 54,750 117,420 208,830 695 1,320 6-7 6,780 35,390 46,150
3 BR 75,000 157,165 288,950 595 1,300 8-10 N/A 20,500 33,440
4 BR N/A 281,250 312,100 575 985 12-13 2,700 14,600 28,280
Source: Ra atz Associates
The above pricing provides a wide range of indications, which generally brackets
those proposed for the subject property. The subject pricing is summarized in the following
table.
Developer Proposed Pricing
Old Greenwood
2002 Price 2002 Price Price Per
T e S . Ft. No. of Units Per Fraction Per S . Ft. Week
Fractional Units
3 BR Cabin - 17ths 2,470 48.0 74 138,030 $950 $46,010
4 BR Cabin - 17ths 2,985 26.0 74 166,810 950 55,603
2 BR Attached' 1,270 36.0 72 67,240 900 22,413
3 BR Attached" 1,760 36.0 72 93,180 900 31,060
Total Fraction Units 146.0
Source: East West Partners
The above table indicates that the subject units have a relatively mid-range price
point in relation to the market data. The subject's two-bedroom cottages are priced at$67,000
per unit and allow for a price point closer to the average pricing for two-bedroom traditional
type units. The three-bedroom cottage units are also priced towards the lower end of the range
indicated by the pricing by unit type. The cabin units are at a substantially higher price point,
which is considered appropriate given the more luxurious orientation and freestanding nature
of the cabins. Their unit pricing for three- and four-bedroom units is more consistent with the
pricing indicated by the high-end fractional units, but is not anywhere near as expensive as the
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price points indicated by the PRC units. The price per square foot for the subject units also falls
generally within the lower half of the range indicated by the Ragatz Associates data. The price
per week indicated for the subject cabin units actually exceeds the price per week for the three- t
and four-bedroom units indicated in the Ragatz Associates study by substantial amounts. This
higher average price per week is generally attributable to the high level of amenities at the
subject, which will be discussed later in this report.
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LAKE TAHOE AREA FRACTIONAUTIMESHARE ANALYSIS
The preceding section of this market analysis was intended to provide an
overview of the fractional interest market on a national basis with some comparisons to the
subject. This section is intended to analyze the competitive product and market characteristics
of the subject's specific market area, which is the Lake Tahoe Basin. The subject's Old
Greenwood development is situated in the town of Truckee along Interstate 80 at the northern
end of the Lake Tahoe area. The Lake Tahoe area is a well-established vacation area for
Northern California, and most specifically, the Sacramento and San Francisco Bay Area
regions. The city of San Francisco and general Bay Area population is within a 3.5-hour driving
time from the subject and Lake Tahoe Basin. Thus, the subject's specific market area can be
characterized as a drive-to regional market, as opposed to many ski area or beach
destinations, which require more extensive travel and are characterized as destination resorts.
The subject's proximity to this huge drive-to market and population centers of the Bay Area and
Sacramento is the primary key to its likely success. As discussed previously in the Location
Analysis section of this report, there are over 9,000,000 people considered to be within a 3.5-
hour driving distance, representing a huge potential market, particularly given the well-
established desirability of the Lake Tahoe area for recreational activities, including skiing, the
lake, and other recreational activities.
Existing Fractional/Timeshare Projects
There are eight projects in the Lake Tahoe area that are selling fractional
interests or weekly timeshares. As discussed previously, there has been a concerted effort
among developers of fractional projects to distance themselves from timeshare in terms of
nomenclature. However, the projects are all competing for vacation customers from the same
feeder markets, and thus represent competition that should be evaluated and reviewed in
relation to the subject. The following table summarizes the existing supply of competitive
projects in the Lake Tahoe area.
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Lake Tahoe Area Fractional/Timeshare Product Summary J
Total Total Total Shares
Year
Identification Built #of Units Share Size % Sold Shares Shares Sold Available
Fractional Interests Product - 94% 134 126 8 (Developer
Northstar Club 2000 18 1/7. hold-backs)
7 Weeks
Northstar-at-Tahoe g
California 17 45% 133 60 73
Tonopalo Under 19 7 Weeks
6731 North Lake Blvd. Const.
Tahoe Vista, CA gg% 756 650 106 t
1/4
Marriott Grand Residence 12/02 189 13 Weeks
1001 Park Avenue
South Lake Tahoe 40 12/99 100% 210 210 0
1/4+ VS r
Kirkwood Mountain Club 13&6.5 Weeks
Kirkwood Mountain Resort
Kirkwood, CA g 3% 750 70 680
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Trendwest South Tahoe 4/03 59 1113 4 Weeks
180 Elks Point Road
Ze h r Cove, NV 56% 1,983 1,116 867
Total-Fractional Interest Product
Timeshare Pro'ects 1/50 29% 6,750 1,958 4,792
Marriott Timberlodge (Phase I)
12/02 1 Week (Phase 1)
4100 Lake Tahoe Blvd,
South Lake Tahoe 9l99 60 1152 70% 3,060 2,142 918
Hyatt Sierra Lodge 1 Week
989 Incline Way
Incline Villa e, NV 70% 12 5 979 1 963
Embassy Vacation Resort 4/97 142 1 Week
got Ski Run Boulevard
South Lake Tahoe 55% 17,052 9,379 71673
Total-Timeshare Pro ects 19,035 10,495 8,540
Grand Total 2,482 ----- 438
Subject-Old Greenwood Under 72/74 1/17
3 Weeks
1-80 @ Prosser Village Exit Const.
Truckee
The above table indicates that the eight fractional or timeshare projects in the
Lake Tahoe area have all been constructed since 1997, with most having been constructed
within the last three years. The table shows that overall these projects are 55 to 56 percent
sold out. Following is a brief discussion of the subject and its characteristics, as well as a brief
discussion of each of the competitive projects in the Tahoe region as they compare to the
subject. More specific comparisons with regards to pricing and unit size are conducted in the
Sales Comparison Approach section of this report.
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Old Greenwood - Subject
The subject's Old Greenwood fractional product is to be contained in two different
types of improvements. There will be 74 freestanding cabin units with sizes ranging from 2,470
square feet in a three-bedroom unit to 2,985'square feet in a four-bedroom unit. These cabins
represent a unique product type in the market, as none of the competitive projects discussed
herein have this type of freestanding detached product. Old Greenwood will also have 72
attached cottage units in buildings that have two or three units per building. These are also
unique in the market given their cottage or town home type of design, as opposed to stacked
flat design. One of the distinguishing marketing factors for the subject will be its' amenities
through the Tahoe Mountain Club. In addition to the onsite Jack Nicklaus Signature golf course
and clubhouse with fitness center, pools and spas, the subject is also able to offer on-mountain
amenities at Northstar-at-Tahoe and the member's restaurant situated on the lakefront in
Tahoe Vista. These are additional amenities that allow the subject to address the primary
factors that draw visitors to the Lake Tahoe area, which are the lake itself, skiing, and summer
golf.
The subject's use plan is based on the sale of 1/17 fractions, which allows
owners three weeks of time on a 51-week year. The subject's use plan is well conceived from
both the developer's standpoint and a user's standpoint. Owners will buy an interest in a
specific unit with 17 owners total for each unit. There are a total of 17 fixed weeks of ownership
within a calendar year with eight fixed weeks established during the ski season and nine
established in the summer season. The fixed weeks will be spaced at least a week apart, and
by allowing owners to select a prime week, the developer is able to incorporate premiums into
the various pricing structures. The remaining time is to be called float time. Float reservation
rules will be implemented which provide for equitable use of prime time and allow owners
flexibility in terms of using available unreserved time and possibly attaching the float week to
one of their fixed weeks to allow for extended stays of two weeks. The amount of time, three
weeks, and the flexibility of float time, are intended to target the drive-to market of the Northern
California areas around Sacramento and San Francisco. This use plan is considered well
conceived and highly flexible for attracting these types of visitors to Lake Tahoe.
Branding is a significant asset as it relates to marketability of timeshares, in
particular, but fractional interests as well. East West Partners is a well-established resort
developer known for good quality resorts. While they do not intend to affiliate with any type of
brand, they are likely to affiliate with an exchange organization to increase the flexibility and
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marketability of their product. As of the date of appraisal, the two exchange organizations being
considered are www.WorldsFinestResorts.com and Interval International. #
Accessibility to the subject is a key factor in its marketability. The subject enjoys
immediate access to Interstate 80, which is one of the two primary transportation linkages
between Lake Tahoe and the Sacramento/Bay Area markets. Overall, Interstate 80 is regarded
as a more efficient transportation linkage than U.S. Highway 50. These two routes converge in
Sacramento, and Interstate 80 continues on to San Francisco. U.S. Highway 50 is not a limited r
access highway and turns into two-lane transportation leading to South Lake Tahoe. The s
subject's connection to Interstate 80 also allows for a 25-minute drive to the Reno airportto the
east, which is another good accessibility characteristic as it relates to potential fly-in customers.
Following is a discussion of the competitive fractional and timeshare projects in
the Lake Tahoe area.
Northstar Club
The Northstar Club is an 18-unit, three-story stacked flat condominium project
selling seven weeks, 1/7 shares, in a private residence club concept. This project is located at
the base of the ski lift in the Northstar-at-Tahoe Village area, providing it with excellent ski-
in/ski-out access. This project is regarded as among the more successful fractional
developments in the area. There is golf available to owners in this resort at the Northstar
Resort golf course, which is a short drive from this project within the master-planned Northstar
community. The developer reports price fluctuations for this project occurred. Pricing was
strong in the opening in 2000, but declined after the events of September 11, 2001 and the
overall recessionary economy. In our opinion, this is among the most competitive projects to
the subject as it relates to location and price points, which are discussed later. Re-sales have
been occurring in this project, and the brokers for the re-sales report that, on average, there
are approximately 10 percent of the units available for sale at any given time.
Tonopalo
This is most recent fractional project to be undertaken in the Lake Tahoe area. It
is currently under construction and scheduled for completion by year-end 2003. This project is
considered highly desirable due its unique lakefront location. The building restrictions and
development requirements of the Tahoe Regional Planning Agency (TRPA) have made it very
difficult for lakefront projects to occur. It is our understanding this project was approximately
five years in the planning and development process. The lakefront location also relates to a
substantially higher price point for this project than any other projects in the South Tahoe area.
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The projects will offer a 300-foot pier and twelve docking buoys for boats. This amenity is
substantial as it relates to owners utilizing the recreational aspects of Lake Tahoe itself. Sales
are reasonably strong in this project, particularly in consideration of its'pricing, with 45 percent
of the units reported to be sold as of September 2003.
Marriott Grand Residence Club
The Marriott Grand Residence Club is a four-and five-story project with stacked
flats above commercial space on the main level. This location is adjacent to the recently
constructed gondola for the Heavenly Valley ski area. Thus, this project has excellent ski
access. In addition, this project is within walking distance of the Stateline Casino District of
Nevada, which has several high-rise casinos, including Harrahs, Caesar's Palace, Harvey's
and others. These features make this a highly competitive project in the Lake Tahoe area,
which has enjoyed excellent sales. This project is also within walking distance of the public
beach on Lake Tahoe. The quarter-share interests represent 13 weeks, which is a high amount
of usage for second home ownership, and thus caters to owners putting their units in a rental
Pool, While considered a highly desirable project and competitive for all of its amenities and
qualities, this project is quite different from the type of product to be offered at the subject. In
addition, there has always been something of a dichotomy in the market for North Tahoe
versus South Tahoe. The South Tahoe area has always been regarded as a bit more
metropolitan due to the presence of the casinos, and also more congested in terms of traffic.
However, redevelopment projects such as those incorporated in the Marriott buildings have
created a new desirability for the South Tahoe area. There is golf available nearby at the
Edgewood Tahoe Golf Course in Nevada.
Kirkwood Mountain Club
The Kirkwood Mountain Club has excellent ski-in/ski-out access at the base of
the Kirkwood ski area. Kirkwood is generally regarded as an outlying area from the Lake Tahoe
region with more limited availability of restaurants, shopping and services. The access to this
area is more difficult and can be tedious in poor weather. It is approximately 30 to 40 minutes #from South Lake Tahoe via a two-lane highway. In addition, this project does not have good
proximity to golfing and summer activities. One of the general criteria in creating a successful
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fractional project is locating it in areas with high real estate values. The Kirkwood area does not
have the same high real estate values of the towns more proximate to Lake Tahoe.As a result,
the price points at this property are substantially less, but the project has been successfully
marketed, primarily for its ap
peal to families for the isolated nature of the project and the
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overall good skiing on this mountain. While considered somewhat linked to the Lake Tahoe l
area, this project is far less competitive to the subject. }
Trendwest South Tahoe
The Trendwest South Tahoe project has distinctly different market orientation s
from most of the other projects in the area. It is much more average in its appeal with the
appearance of typical three-story stacked apartment type buildings with large building mass
and very little architectural detail and design. This project is a blend of fractional units, and
system. It is located approximately two miles
units that trade within the Trendwest point
northeast of the Stateline Casino District and is within walking distance of a public beach on
Lake Tahoe. Its proximity to golf is the same as the projects in South Tahoe,with availability to
ect does offer the most similar
the Edgewood Tahoe Golf Course just to the south. This proj
size fraction to the subject,with a 1113 share, or four weeks. However, its pricing is intended to
be substantially different, and its amenities and overall market orientation are not truly
competitive to the subject.
Marriott Timberlodae
st and most active timeshare project in the
The Marriott Timberlodge is the large
Lake Tahoe area. it is adjacent to the Marriott Grand Residence on the other side of the
Heavenly gondola in the same South Tahoe Redevelopment Project. This project is
commanding the highest weekly prices for timeshare among the three timeshare projects
currently active in the Tahoe area. While potentially competitive for some of the vacation
buyers in the Lake Tahoe area, this project is substantially different from what is to be offered
in Old Greenwood.
Hyatt Sierra Lodge
The Hyatt Sierra Lodge is located on the Nevada side of Lake Tahoe in Incline
Village. They have had difficulty in construction delays and marketing delays, but overall has
experienced good success, due in part to its branding with the Hyatt name. It does have a
casino amenity and a private beach area on Lake Tahoe, as well. This is generally a good
quality project.
Embassy Vacation Resort
in South Lake Tahoe with good proximity to the lake.
This project is also located
Its location on Ski Run Boulevard gives it a more direct drive to the Heavenly Valley ski area
and is also a short drive to the Stateline Casino District to the east. There are some good
onsite amenities, including a swimming pool and owner's lounge. This project was developed
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by the Sunterra Corporation, which experienced bankruptcy filing in 2000, and this has created
some difficulties and stigma associated with this development. Also, this is a very different
product type from the subject and not truly competitive.
Summary of Subiect's Competitive Market Po r
ion
The previous discussion was intended to provide some basis of comparison for
the subject as it relates to the overall market for fractional and timeshare projects in the Lake
Tahoe area. All of these developments are competitive to the subject in that they are drawing
their primary customer base from the Northern California markets of Sacramento and the San
Francisco Bay area. However, they all offer relatively different characteristics. In our opinion,
the subject has an excellent market position as it relates to competing in the marketplace for
the following reasons:
• Accessibility- The subject has excellent accessibility directly to Interstate 80. In
addition, the recent completion of the Highway 267 bypass has addressed the
issue of congestion for traffic in the Truckee area during high seasons and has
significantly reduced the drive time to Northstar-at-Tahoe ski area and Lake
Tahoe.
• Amenities - The subject offers excellent amenities, which address almost all of
the desirable aspects of recreation in the Lake Tahoe area. Onsite amenities are
excellent, with the golf course, golf teaching academy, swimming pools, fitness
center and owner's lounge, tennis courts and fly fishing streams. Offsite
amenities included in the subject's sports membership include golfing privileges
at the Coyote Moon Golf Club, on-mountain privileges with the proposed Village
at Northstar development being constructed by East West Partners, as well as
the Schaffer's Camp member's only restaurant at mid-mountain on the Northstar-
at-Tahoe ski area. The Wild Goose restaurant, which is on the lakefront,
provides for a direct member link to Lake Tahoe. The only missing amenity is
some type of link to the recreational boating on the lake.
• Use Plan - The subject's use plan is considered highly desirable as it does
provide each owner with a prime season week in either summer or winter, as
well as excellent flexibility with regards to the floating time. }
• Product Type - The subject has a unique product type for the Tahoe market,
which in some ways is more directly addressing the desirability of Lake Tahoe as
an area for second home ownership. All of the other fractional product in the
area is generally stacked flat type condominiums, with the exception of
Tonopalo. These development products will have golf course frontage, and all of
the products will share in an area that does have excellent forested feel of Lake
Tahoe, with the large pine trees and some excellent mountain views. j
s
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}
Overall, based on the characteristics described above, the subject property is
i
considered to be well positioned in its current market. Due to the uniqueness of the product,
some effort has been made to identify more similar projects in other market areas of the
Western United States. We have surveyed projects in Park City, Utah, Colorado, Jackson
help further define the subject's competitive
Hole, Wyoming, and Big Bear, California, to #
market position. Further discussion was also made herein as it relates to the primary target
market for the subject property.
f
Northern California Feeder Markets
The fact that the subject's primary target market are the Sacramento and an
n areas has already been extensively mentioned and discussed
Francisco Bay metropolita
herein. The proximity to a population of approximately 10,000,000 people within a 3.5-hour
the market potential for the subject property. The
drive period is very significant as it relates to
to appeal to the higher income levels, which are quite
subject is generally going strong in the
Sacramento and San Francisco Bay areas, in particular. Generally, it is considered that most of
the subject's potential market is in the income bracket of $250,000 annually or higher;
however, it could also cater to buyers in the $150,000 to $250,000 annual income range. The
following table summarizes the population, households and income levels for these primary
market areas.
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Demographic Trend Summary Report
2000 Census 2002 Estimate
San Francisco-Oakland-San Jose, CA DMA 2007 Projection
Total Po ulation 6.679,769
Total Households 6,800,139 7,125,925
2;443,380 2,480,324
Households b Income: 2,577,122
$0-$15,000 250,185 10,2%
$15,000 - $24,999 330,486 13.3% 255,753
194,085 7.9% 189,436 7.6%$25,000-$34,999 21249 .493 0 154,307
8.7/0
$35,000-$ ,999 211,940 8.5%321,348 13.2% 184,874
$50,,000-$74,999 223,361 9.0% 212,393
472,732 19.3% 298,598
$75,000-$99,999 339,082 13.9% 280,032
$100,000-$149,999 291,343 11.7% 327,584
366,314 15.0% 628,801 25.4%
$150,000+ 289,223 11.g% 776,344
Avera e HH Income 306,358 12.4% 385,836
$83,726 $87,866 Median HH Income $62,333 $102,741
Per Ca ita Income $74,012 $90,947
$30,564 $32,049
$37,293
Sacramento MSA
Total Po ulation 1,628,190
Total Households 605,919 11,679,405 1,813,727 Households b Income: 624,875 673,908
$0 -$15,000 78.965 13.0%
$15,000-$24,999 106,006 17.0% 87,587
68,382 11.3% 65,708 10.5%
$25,000-$34,999 74,799 123% 59,348
.
$35,000-$49,999 73,580 11.8% 73,206
101,188 16.7% 69,630 11.1%
$50,000 -$74,999 126,173 2D.8% 73,140
$75,000-$99,999 84,190 13.5% 87,636
71.487 11.8% 71,876 11.5%$100,000 -$149,999 57,545 0 87,668
$150,000+ 9.5/0 118,87' 19.0%
27,818 4.6% 157, 37
Avera e HH Income $59,829 35,411 007 5.6% 47,47
$62, '
Median HH Income $46,674 $70,260
Per Capita Income 1 $22,361 $49,075 $65,171 f
$23,222
$26,307
Source: STDBonline }
The above table illustrates that as of 2002, the total population of these two
primary metropolitan areas is 8,479,544 people. The 10,000,000 population figure mentioned
Previously for the subject's market area also includes the Reno/Sparks area of Nevada and
s
some of the outlying areas of Northern California. The above table indicates that in the San
_6i_
i
F
Francisco/Oakland/San Jose area, there are 306,358 people earning an income in excess of
$150,000, and 35,007 in the Sacramento area.This will represent the primary target market for
the subject. This information illustrates there is a large viable marketplace within driving {
distance to the subject.
Competitive Projects in Other Areas
The subject's freestanding cabin product and the cottages represent a unique
fractional product type in the Lake Tahoe area. East West Partners is an experienced
z
developer, particularly in other areas of the country such as Beaver Creek, Bachelor Gulch,
Colorado, and thus have carefully tailored the product type to be offered to
and Breckenridge,
golf orientation of the subject
their perception of what the market wants in this area. The
uating
property also represents a unique attribute in the market area. For the purposes of a to
pricing and absorption potential for the subject property, we have considered it appropriate
lt by East West Partners, as well as other market area
research other resorts bui s which ave
re summarized in the following
golf-oriented product or similar freestanding product. These a
table.
Fractional and Timeshare Absorption Rates
Weeks Price/Week Price/SF
#of Share o Mo UNIT e $65,000 Avg,' Unit S Ft. Price/Share
. $1 300
Identification Units Size Sold $25,000
438-602 (APprox.)
East West Partners 40 1/20 100% 122 Studio 28R/2BA 923-1,200
Hyatt Mountain Lodge 3BR13BA 1,318-1,353 $25,000 $t,225
Beaver C[eek,CO 65% 37 Studio 498 $65,000 �Approx.}
40 4'20 2BR/2BA 1,097
East West Partners 1,550
Hyatt Main Street Station 36R/38A $42,230 $917
Roaring
e,CO 2,400 $550.000 114 $4P 300
Roaring Fork Club Cabins
qg 1/6&114 100% 10 38R/36A $550,0001[4
Basalt,CO $1,324
Jack Nicklaus Golf Course 2BR12BA 1,450 $40,000/Week $40,000 $1,038
Teton Club 37 1/4-t/26 57% 29 3BRi3BA 1,850
Jackson Hole,WY $35000 $890
Arnold Palmer Go]f Course 43 3BR/3BA 2 045 $182000 $632
The Club at Big Bear Village 61
tM0 25% 4BR14BA 2880
Bi Bear Lake,CA 377-587 $6t,4000-$1 3,0 $4 7250-$4500 $651-$586
02
Grand Summit Resort 212 1/4 85 31 Studio
iBDit BA 695-1082 $t09000-$163000 $27250-$40750 $627- 6
The Canyons 2BO12BA 1,190-1,606 $t95,000-$350000 $48750-$87500 $655-$871
Park City,UT Penthouse 2470-3693 $550.000-$820.000 $i37,500-$205,000 888
Resort Nos. 1 and 2 in the above table were ski area developments constructed
by East West Partners and marketed with the e Hyatt
wb h a high ate of absorption.The Beaver
Beaver Creek, Colorado enjoyed excellen nding. The Hyatt Mountain Lodge in
t success
Creek area is well known for its upscale product, and the Hyatt Mountain Lodge was extremely
d-out. It is in a destination resort area where there is
well appointed with excellent quality buil
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good golfing availability in the summer months, but no golf course was specifically linked to this
Property. This property had good timing to the market. The Hyatt Main Street Station in
Breckenridge, Colorado has suffered from greater competition and more marketing difficulties,
and has not enjoyed the same success as its Beaver Creek counterpart. Much of this was due
to the timing in the market, as well as pricing relative to the market. The experience of these
two resorts illustrates the difficulties and variances in marketing, which very often cannot be
anticipated by the developer.
Resort No. 3, the Roaring Fork Club Cabins, is regarded as the most similar
Product type to that proposed for the subject. These log cabins are well located along the
Roaring Fork River in Basalt, Colorado, approximately 12 miles down valley from Aspen. Their
proximity to Aspen puts them in the destination resort category. In addition to the similarity in
product type, these cabins are also situated on a Jack Nicklaus golf course, similar to the
subject development.A total of 18 of the 48 cabins were offered with fractional ownership, with
three of the cabins offering 1/6 shares and 15 of the cabins offering quarter-shares. One of the
unique characteristics of the project is that an $80,000 membership requirement to the Roaring
Fork Country Club was required. This club has 375 regular members and 125 national
members, and golf definitely enhances the prospects of the summer months for this area.
While the area has developed more of a two-season market, it is not as fully developed as the
Lake Tahoe area.
Resort No. 4, the Teton Club, is located in Jackson Hole, Wyoming and offers
golf privileges at the adjacent Teton Pines Golf Course designed by Arnold Palmer. The golfing
privileges here are not as substantial as those offered at the subject. This project does allow
for good ski and golf access, making it similar to the subject in this respect. They offer a
different type of flexibility in their share offerings in that a buyer may purchase between two
and 12 weeks of time. The amenities package at this project is considered good and consistent
with the subject.
Resort No. 5, The Club at Big Bear Village in Big Bear Lake, California, has been
researched due its California market orientation and the fact that it is located near a much
larger drive-to market, which is the Southern California market area within five hours driving r
time, which includes the entire Los Angeles Basin and San Diego. The population of this drive-
to market is over 20,000,000 people. While golf is not a significant part of this project, it is a
good year-round resort with skiing at Big Bear, as well as Big Bear Lake for summer activities.
f
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}
Resort No. 6, the Grand Summit Resort located at The Canyons ski resort in
Park City, Utah, is a quarter-share project similar to that being developed in South Tahoe.The
Park City market is also competitive with the Tahoe area as it relates to travel time, and the
San Francisco area as a feeder market. If you allow two hours on the front end of a 1.5 hour
flight to Salt Lake City and another hour on the back end for car rental and drive time, Park City
is an approximate 4.5 hour travel time, which is only one hour longer the 3.5 hour drive time
Park City resorts market heavily in the San
from most of the Bay Area to Truckee. The
Francisco Bay Area as one of its feeder markets. This project is located with ski-in/ski-out s,
access to The Canyons ski resort. There is a golf course planned at the base area of the
resort, which has not yet come to fruition due to the financial problems of the developer.
Overall, the subject property app
ears to have all the necessary components to
ll as national
achieve good successful marketing in comparison to local developments, as we
developments.
Absorption
Absorption projections are very difficult to make based on comparisons to other
resorts given the wide variations in product type and amenities, as well as type of location and
feeder markets, as discussed previously. The following table summarizes the absorption
experienced by the different resorts in the Tahoe area and national resorts we have surveyed.
The absorption has been compared on the basis of weeks sold per month. This comparison is
necessary to mitigate the differences in share size.
�a-
Fractional and Timeshare Absorption Rates
Pro ect # Units Share Size Marketin Period /° Sold Weeks
Northstar Club 18 Sold/Month
Tono alo 1/7 4/00-9/03 gq
19 1/7 18
Marriott Grand Residence 5f02-9/03 45 30
189 114 6/01-9/03
Marriott Timberlod e 135 86 299
1/50 6/01-9/03 29
H att Sierra Lod e 60 75
1&1 9/99-9/03 70
Kirkwood Mountain Club 40 36
Embass Vacation Resort 1/4&1/8 7/99-9/03 100
142 1/51 42
Trendwest South Tahoe 4/96-9/03 70 58
59 1/13 8/01-9/03 H att Mountain Lode 40 9.3 2.9
H att Main Street Station 1/20 6/97-1/99 100
40 1120 122
Roarin Fork Club Cabins 8/00-9/03 65 37
18 t/6&1/4 12/97-9/03 Teton Club 100 10
37 1/26-1/4 1/99-9/03 The Club at Bi Bear Villa e 57 29
61 1/10 12l00-9/03 Grand Summit Resort 212 25 23
Mean
114 2/98-9/03 85
35
Median 58 Weeks/Month
Average Excluding 2 High and 2 Low Indications 33.5 Weeks/Month
38 Weeks/Month
The above table indicates a wide range of absorption rates depending on product
type, location and many factors. The Northstar Club and Tonopalo represent the two projects
closest to the subject in terms of location and indicate a range of 18 to 30 weeks sold per
month. Interestingly, both of these projects have the same share size but substantially different
price points, with the much higher priced product actually selling at a higher rate. The Marriott
projects in South Tahoe were experiencing extremely high rates of absorption. This is due to
the Marriott brand name and the excellent location of these projects. In addition, the higher rate
Of weeks sold per month for the Grand Residence is also due to the quarter-share size. The
more remote Kirkwood project was also experiencing good absorption, as was the Embassy
z
Vacation Resort in South Tahoe, which is a timeshare project. The Trendwest absorption was G
substantially lower than the other projects due to its product type and difficulties in marketing
experienced by this project.
The resorts out of the area that were reviewed included the Roaring Fork Club
Cabins, which were the most similar product type to the subject and indicated one of the lowest
j
absorption rates. However, they have a substantially larger share and number of weeks, and
_71_
their price points were higher than the subject's. The other out-of-area resorts indicate a
# '
nth. The Hyatt Mountain Lodge has exhibited
generally tight range of 23 to 37 weeks per mo
offering a share slightly smaller in terms of numbers of
among the highest absorption rates,
weeks than the subject.
Pricing is among the most significant variables in determining absorption, and this
is discussed in detail in the Sales Comparison Approach section of this report. Overall, it was
ri
concluded that the subject's pricing is appropriate and should allow for absorption rates
r
consistent with the market.
As discussed previously herein,the subject is offering the appropriate amenities,
has good accessibility to a large market and is well located, which should allow it to be highly
competitive in the market.
One of the more significant aspects of the subject that is unique in comparison to
all of the elements summarized previously is that the subject is offering two distinct product
types. The freestanding cabins are unique, and we were able to find only one other project in
rk Club Cabins. The subject's
the country offering this type of product in the Roaring Fo
t it is not a
attached cottage product is also somewhat unique in isdifferentfrom any fd flat arrangement
the other projects.
but a cottage or town home style development,which
Absorption at the subject is influenced by the fact that there are two distinct product types
available at different price points and unit size ranges. This allows for absorption to occur
simultaneously at generally similar rates on two different product types.
We have also reviewed the developer's projections as it relates to absorption
before making conclusions for use in our analysis. The following table summarizes the
developer's absorption projections, as provided by East West Partners.
Developer's Absorption Projections
1 2 3
4 5 6 7 8
2004 2005 2006 2007
36R Cabins 2008 2009 2010 2011 7 5 6 Total 6 4 BR Cabins 6 6 6 6 6
3 3 3 3 48
Total Cabin Units 13 3 3 2 26
Total Cabin Shares 8 9 9 9 9
221 136 153 153 9 8 74
663 408 459 459
Total Cabin Weeks 153 153 153 136 1,258
55 34
Cabin Weeks/Mo. 459 459 459 408 3,774
38 38
38 38 38 34 39 AV .2BR Cotta e 3
3BR Cotta e 5 5 4 5
4 4 5 5 36
Total Cotta e Units 5 4 5 4 5
7 10 4 5 36
Total Cotta e Shares 9 9 9 9
'. 119 170 153 9 10 72
Total Cotta e Weeks 153 153 153 153 170 1,224
357 510 459 459 Cotta e Weeks/Mo. 459 459 459 510 3,672
30 43 38 38
38 38 38 43
Total Fractional Weeks/Mo. 38
85 77 76 76
76 76 76 77 77 Avg.
The above table indicates that the developer is projecting an overall average
absorption of 39 weeks per month for the cabin units and 38 weeks per month for the cottage
units. It is noted that this absorption is very consistent with the absorption identified in the
previously presented table of fractional and timeshare projects. Indeed, the average, excluding
the highs and lows from the body of fractional and timeshare data presented previously, was
38 weeks per month.
Marketing Plan
East West Partners has a very specific marketing plan devised for marketing the
subject property. In addition, they have hired a professional marketing company, IMI Resorts,
based out of South Carolina, which specializes in fractional and golf course resorts marketing.
The marketing for the subject will be multi-faceted but focused primarily on major media and
direct mail to create a trial stay at the subject property. They will be sending approximately
30,000 to 40,000 pieces per month to the San Francisco Bay area, as well as the Los Angeles
area. The direct mail offering will be for two nights and three days at the subject, including two
rounds of golf and a$100.00 dinner certificate at the Wild Goose restaurant for$299.00. There
will be an ap
proximate three-month rotation in terms of the style and appearance of the direct
mail and media pieces. In addition, print advertising in specific magazines such as Nicklaus
_73_
:
ll
s, which
and Altitude offering this free trial stay will also be advertised,
lainteeceat malsketiag is also
already exist in the Truckee area, and the Wall Street Journa p
underway with an existing space on the Main Street tourist area in Truckee. East West
t marketing at the Northstar-at-Tahoe ski area
Partners will also be able to conduct intercep of that skssesort. The
given their proposed improvements and presence at the base area
subject and developers also intend to build a relationship with the local brokerage market,
s
providing advertising graphics for free to the brokers and offering 5 percent commissions to the
s
outside brokers.
Overall,the subject developers appear tohave a well-conceived marketing plan,
P
which is crucial to achieving good rates of absorption. It i5 significant to note that the developer
s speaks
le
has pre-sold 86 of the 99 single-family lots prior as the marketing efforts of the developer of
desirability
of the project and its location, as we
desirabd�ty
Absor tion Conclusion
Based on the previous analysis, it is our opinion that it is appropriate to apply 38
weeks per month absorption, which equates to app
roximately 12 to 13 shares per month of
each the cabin and cottage product types. We consider this a reasonable projection based on
a review of the wide range of product and all of the considerationsanalysis sc ssed in thispre-market
a kof
analysis.The absorption reflected in our discounted cash flow
approximately 10 percent of each product type, which makes for more sales in the first quarter
of completion. Reference is made to the discounted cash flow analysis presented later in this
report, which shows the detailed absorption figures projected for the subject.
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