RockSpringCluB-Hendricks Appraisal.pdf

HIGHEST AND BEST USE In connection with the analysis of highest and best use as improved, | have prepared a brief income analysis as well as a summary of recent golf course transactions. Both have been considered and readily support the determination of residential single family subdivision and development as the highest and best use of the property, as improved. The brief income analysis presented herein represents an analysis and valuation of the subject property as a public golf course. Please note that the direct capitalization (income) analysis has been presented in brief, and only as a component of the highest and best use conclusion and determination. In the preparation of the income (direct capitalization) analysis included herein, | have made certain assumptions regarding the utilization of the Rock Spring Club, specifically, | have assumed that the club will be converted to, and operated as, a public golf course under the supervision of a professional management firm. | have also estimated the annual number of rounds to be played along with annual expenses. The estimated number of rounds is based on the reported number of rounds played in 2018 at the East Orange Golf Course, a competitive eighteen (18) hole facility located in Millburn. This is a municipal owned public course operated by a professional management firm under an agreement with the City of East Orange. | have considered the daily rates charged at this facility along with those reported at the local Essex County Francis Byrne public golf course which is situated in West Orange. A summary of the individual (2018) rates for both courses have been included below. 2018 Rates: Weekday Daily Weekend Rates Facility Rates Adult Adult Cart Fees Francis Byrne $28.00 - $44.00 $34.00 - $51.00 $18.00 } East Orange $27.00 - $43.00 $32.00 - $45.00 $10.00-$12,00 i In the analysis on the following page, based on its lacation, physical features, amenities, history and location, | have assumed that Rock Spring Club, being operated as a public course would readily command a greater daily fee rate than East Orange or Francis Byrne (Essex County public course). | also note that in 2018, East Orange had reported a total of 20,455 individual rounds played. | was unable to obtain information relating to the number of rounds played at Francis Byrne, but in light of its direct competition and proximity to

eported a total of 20,455 individual rounds played. | was unable to obtain information relating to the number of rounds played at Francis Byrne, but in light of its direct competition and proximity to the East Orange Course, it can be assumed to have experienced a similar number. In this appraisal, as the subject property had previously been operated as a private country club, it is my opinion, that the facility would experience, at least initially, a greater number of rounds being played when compared with its public comparison set. In addition, | have also assumed that the average rate charged would be higher than East Orange or Byrne, but nonetheless remain competitive. Assumptions: 22,500 Rounds - May 1, 2019 - October 31, 2019 Weekend Rate Including Cart - $75.00 (54) Weekday Rate including Cart - $68.00 (135) Assumed 120 Rounds Per Day Weekend Revenues -$ 486,000.00 Weekday Revenues - $1,101,600.00 REAL ESTATE - 60 - 5 APPRAISALS G RESEARCH

HIGHEST AND BEST USE It should be noted that the revenue projections exclude additional potential tevenues from outings, food, beverage, driving range, pro-shop, and other amenities. The foregoing also does not consider potential adverse weather conditions. The direct capitalization analysis as presented above has been utilized only in support of the determination of highest and best use as improved. It should also be noted that the expense projection assumes that the property will be a tax exempt (public) facility. As previously discussed, | have also reviewed several recent conveyances involving current and former golf courses within Northern New Jersey. The sales included in summary format below include transactions which were acquired for continued utilization as golf courses, along with sales in which the golf courses were acquired for alternate residential development. The comparison of the two, coupled with the brief income analysis presented above, readily supports and confirms my conclusions as to the highest and best use of the subject. Golf Course Transactions - Acquired For Residential Development os SalePrice | es Carfough Road - $1, 708,333.00 $276,256.00 Mahwah & USR $30,750,000.00 111.31 Acres Per Hole Per Acre Comment: The sale involves the former Apple Ridge Country Club, a private 18 hole country club which ceased operations in 2015. The property was acquired with approvals for a 78 lot residential subdivision. The sale also reflects $394,231.00 per approved residential unit. Ewing Avenue 2/21/2017 18 Holes $2,000,000.00 $273,182.00 Franklin Lakes $36,000,000.00 (Semi-Private) Per Hole Per Acre 431.78 Acres Comment: The sale involves the former High Mountain Country Club, a semi-private 18 hole country club which ceased operations in 2014. The property was acquired with approvals for a 275 residential units including 60 single family detached dwellings, 160 market rate townhouse units and 55 affordable units. The | sale also reflects $130,909.00 per approved residential unit. J Continued... REALESTATE - 61 - APPRAISALS. a & RESEARCH

HIGHEST AND BEST USE Golf Course Transactions - Acquired For Continued Golf Course Utilization Palisades Avenue 12/8/2017 18 Holes - Public $ 434,657.00 $ 58,265.00 Emerson & Oradell $7,823,818.59 Daily Fee Course Per Hole Per Acre {Contract Price) 134.28 Acres Comment: The sale involves the Emerson Golf Ciub a privately owned, public 18 hole daily fee course. ft was acquired by the Bergen County improvement Authority following the issuance of bonds in the amount — | (not to exceed) $8,500,000.00 which also included provisions for necessary capital improvements. The | acquisition was based on two (2) independent appraisals. A review of the deed and other documents reveals | that with the possible exception of 5.27 acres, the entire property is encumbered with a deed restriction that | requires the property to remain as a golf course. This deed restriction runs with the land and precludes any | | other use or development of the property. The 5.27 acre portion of the property may not be subject to the deed restriction and could potentially be independently developed residentially. The purchase also included Personal property as well as the assumption of several contracts and leases for equipment including the golf cart(s) lease. J River Vale Road 27/2015 27 Holes (Private) River Vale & $7, 750,000.00 + 185.24 Acres Hillsdale Comment: The sale invoives the Edgewood Country Club propery, a private 27 hole country club. The purchase does not include additional consideration paid to redeem membership certificates as well as other 2s since acquisition. in addition, the purchasers have stated their intent to residentially develop a portion of the property which will reduce the number of holes from 27 to 18. ri 100 W. Green Brook Road 2/1/2018 18 Holes (Private) $ 301,061.00 $ 31,622.00 North Caldwell & $5,419,099.82 + 171.373Acres Per Hole Per Acre Fairfield Comment: The sale involves the Green Brook Country Club property, a private 18 hole country club. The purchase does not include additional consideration paid to redeem membership certificates as well as other items. According to statements by the purchaser, capital expenditures in excess of several million dollars was required to be invested in the facility as part of the transaction. The purchaser was also required to continue the golf course utilization of the property for a minimum of three years. The

llars was required to be invested in the facility as part of the transaction. The purchaser was also required to continue the golf course utilization of the property for a minimum of three years. The purchaser has indicated | that potential (future) residential development of a portion of the property is being contemplated. | 79 Two Bridges Rd 4/26/2018 18 Holes (Public) $ 201,944.00 $ 33,392.00 Lincoln Park, NuJ. $3,635,000.00 108.857 Acres Per Hole Per Acre Comment: The sale invoives the Meadows Golf Course, a privately owned, public eighteen (18) hole golf course. The property was acquired for continued use as a golf course. However, the purchaser had previously proposed development of a portion of the property with a 180 unit age restricted apartment complex along with a 120 unit assisted living facility. The property was reportedly conveyed without any approvals. in addition, the entire property is located within a designated flood zone. - 62 - REAL ESTATE | APPRAIBALS & RESEARCH

HIGHEST AND BEST USE The sales included on the preceding pages have been considered in connection with the highest and best use determination for the subject property. The first set of comparables represent former golf course properties which were acquired for residential subdivision and development. These sales reflect a rather narrow range of value on a per acre basis - $273,182.00 to $276,256.00 with an average or mid-range found at $274,719.00 per acre. The analysis per hole is also provided and ranges from $1,708,333.00 to $2,000,000.00 with an average range found at $1,854, 166.00 per hole. The second set of comparable sales involved transactions which were acquired for continued use as golf courses. In two of the sales, there was additional (significant- non-disclosed) expenditures by the purchaser in connection with capital investment, membership certificate redemptions, etc. Nonetheless, all of the sales also reflect a Narrow range on a per acre basis - $31,622.00 to $58,625.00 with an average or mid- range found at $41,279.00 (per acre). The per hole analysis ranges from $201,944.00 to $434,657.00 also with a mid-range or average found at $306,175.00 (per hole). An illustration-tabulation and summary of the brief income analysis applied to the Rock Spring Club as a public facility along with the sales data has been included below. 7 "income Analysis | Acquired For Golf Course _ (Basbd.on/RSC Only) | Use (Average $293,889.00 Per Hole $306,175.00 Per Hole $ 37,792.00 PerAcre | §$ 41,279.00 Per Acre $1,854, 166.00 Per Hole $274,719.00 Per Acre The table above clearly and convincingly illustrates and supports the conclusion that the highest and best use of the subject property, both as vacant land and improved is residential single family subdivision and development as zoned. It has been noted that the two comparable sales of golf course facilities which were purchased for residential development would absolutely require independent analysis along with comparative adjustments for significant differences in location and physical characteristics. The average analysis included above reflects the unadjusted per hole and per acre values. In this regard, application of the unadjusted per acre value and/or the per hole value to the Rock Spring Ciub property would suggest a total unadjusted valuation well in excess of $30,000,000.00. The comparative

d, application of the unadjusted per acre value and/or the per hole value to the Rock Spring Ciub property would suggest a total unadjusted valuation well in excess of $30,000,000.00. The comparative analysis involving the transactions of properties acquired for continued golf course use reflects and supports a substantially lower valuation. If the unadjusted average sale on a per acre and per hole basis are applied to the Rock Spring Club property, the indicated value range (unadjusted) would be $5,511,150.00 to $5,780,000.00 (rounded). The foregoing coupled with the brief income (direct capitalization) analysis valuation at $5,290,000.00 readily supports the conclusion and determination that residential development of the Rock Spring Club property is the highest and best use. The appraiser cautions that a direct comparative analysis involving sales of golf course properties with the subject property is not an appropriate valuation method. The sales noted herein involved going-concerns; included the assumption of debt, leases, contracts, etc. Furthermore, several transactions involved additional capital investment along with membership redemptions which were not reflected in the purchase price. REAL ESTATE | APPRAISALS - 63 - & RESEARCH

VALUATION METHOD An estimate of value will usually be based on one (1) or more valuation indicators. Generally accepted appraisal practice will usually consider a Cost Approach, an Income Approach and a Comparative Approach to Value. THE COST APPROACH - AS A VALUATION INDICATOR The cost new of the improvements, less appropriate depreciation and obsolescence. The replacement cost new of the improvements is based on a nationally recognized building cost index. Depreciation and obsolescence is deducted to the extent of market recognition. Land value is also market oriented. The Cost Approach is often a mechanical technique more relevant to special purpose or limited market properties such as the subject. However, it does offer an independent indication of value when considered in the context of the Income Approach and the Comparative Approach. THE INCOME APPROACH - AS A VALUATION INDICATOR The net income after expenses is capitalized into a valuation. The resulting sum is the present value of the net income produced by the property payable over a period of time. This valuation indicator is particularly appropriate with investment properties, as it reflects buyer and seller reaction to the market. THE COMPARATIVE APPROACH - AS A VALUATION INDICATOR The property being appraised is compared with similar properties recently sold. After adjustments for differences in time, location and physical characteristics, a value or range of values is suggested for the subject property. This valuation technique is usually considered one of the most appropriate valuation indicators if sufficient market data is available. As previously discussed, the subject property involves a private golf and country club which includes an eighteen (18) hole golf course with related amenities and improvements. As discussed on the preceding pages, it is my opinion, based on the analysis presented that the highest and best use of the property, both as vacant land and as improved is residential single family subdivision and development. Therefore, only the Comparative (market data) Approach has been employed in this appraisal. In view of the highest and best use of the property, neither the Cost Approach nor the Income Approach have any relevance in the valuation estimate. However, the Cost Approach utilizing the Marshall & Swift - Core Logic has been employed in connection with the

the Cost Approach nor the Income Approach have any relevance in the valuation estimate. However, the Cost Approach utilizing the Marshall & Swift - Core Logic has been employed in connection with the demolition of the subject improvements. On the following pages will be found an introduction to the Comparative (market data) Approach followed by several transactions of competitive single family residential subdivisions. These sales have been employed in the valuation of the subject property as contained herein. [T] REALRNIATS #104 = a 6 RESEARCH

VALUATION METHOD. As discussed on the preceding page, this appraisal assignment has employed the Comparative Approach in the estimate of land value under its highest and best use - as a single family residential subdivision. Nonetheless, the Rock Spring Club property is presently improved with several structures which will require demolition, specifically the club house, the pool building, cart storage building, along with the maintenance structures. | have recognized the estimated demolition costs for these structures as reported by Core Logic - Marshall & Swift. Since the cost of demolition is based on the cost new per square foot of the individual improvements, | have prepared a replacement cost new for each utilizing the Core Logic-Marshall & Swift service and have included the demolition cost summaries and copies of the cost print-outs in the Addenda to this teport. The removal of the golf course improvements (i.e., tee boxes, greens, fairways, etc.) is considered to be nominal and would typically be included with the grading costs involved in any future residential development of the property. Nonetheless, | have included an estimated, lump-sum deduction of $700,000.00 for the cost of removing the golf course improvements, parking lots, tennis courts, and pools. The lump sum deduction is based on the actual reported costs for the demolition and removal of similar improvements at the High Mountain Country Club in Franklin Lakes. It also includes an increment for the additional features found with the subject property. It should be noted that in the event the property was to be appraised specifically as a private country club, a use for which it had been since 1925, the underlying land value as noted herein would be unaffected. Furthermore, the depreciated replacement cost new of the buildings, and other improvements including the individual per hole development costs as indicated by Marshall & Swift Core Logic would be added to the land value estimate. The total combined valuation (both land and improvements) would teflect the Market Value of the property, as a private country club. In this regard, the private country club use would be considered as an interim or temporary highest and best use of the property. In view of the recent closure of the facility (December 2018) as well as the depleted status of membership, it is my opinion that as of the