American
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10801 Electron Drive, Suite 308
Louisville, KY.  40299
Appraisal Regional Analysis of   

Louisville, Kentucky

The subject is influenced in a general manner by the economic, political, physical and social characteristics of the Louisville Metropolitan
Statistical Area (MSA). A MSA is a geographic area with a significant population nucleus, along with any adjacent communities that have a high
degree of economic and social integration with that nucleus. Louisville is part of a metropolitan statistical area that includes Jefferson County,
Bullitt County, Oldham County, Trimble County, Meade County, Shelby County, and Nelson County in Kentucky, and three Indiana Counties
including Clark, Harrison and Floyd.

The value of real property is influenced by the interaction of four basic forces. These forces include social trends, economic circumstances,
environmental conditions, and governmental controls and regulations. The interaction of these four forces influences the value of every parcel of
real estate in the market.

Social Trends
Social forces are trends that are exerted primarily through population characteristics. Real property values are affected not only by population
changes and characteristics, but also by various forms of human activity.

Population and Area       

Population growth trends influence employment growth, income levels, and many other key demand parameters analyzed in determining
commercial real estate productivity.

As shown, the Louisville MSA comprises nearly 30% of the entire population of Kentucky.  Both the MSA and the state have shown steady
growth.  Population growth tends to be a positive indicator for real estate values.

Higher Education       

Institutions of higher learning typically are not as vulnerable to economic downswings, and they help to provide an area with a more solid
employment base. Noted universities and colleges in Metro Louisville are the University of Louisville, Jefferson Community College, Sullivan
University network, Bellarmine University, Louisville Technical Institute, Louisville Presbyterian Theological Seminary, Spalding University, Indiana
University Southeast, and Indiana Vocational Technical School.


Recreational and Regional Attractions

Recreational and regional attractions enhance an area’s quality of life. These activities may also have a significant economic impact on an area
by increasing the demand for services and retail trade created by visitors.

Cultural sites in Metro Louisville include the Louisville Science Center, and My Old Kentucky Home State Park (in nearby Bardstown). The
Louisville Slugger Museum, Slugger Park (home of the Louisville Riverbats minor league baseball team), the Falls of the Ohio Museum, the
Kentucky Center for the Arts, the Louisville Zoo, Freedom Hall, and Churchill Downs, home of the Kentucky Derby.

Louisville is home to a number of annual cultural events.  Perhaps most well-known is the Kentucky Derby, held annually during the first Saturday
of May. The Derby is preceded by a two-week long Kentucky Derby Festival, which starts with Thunder Over Louisville, the largest annual
fireworks display in the nation.  In September is the Bluegrass Balloon Festival, the fifth largest hot air balloon festival in the nation.  The suburb
of Jeffersontown is also the home of the annual Gaslight Festival, a series of events spread over a week.  The month of October features the St.
James Court Art Show in Old Louisville. Thousands of artists gather on the streets and in the courtyard to exhibit and sell their wares, and the
event is attended by many art collectors and enthusiasts. Another art-related event that occurs every month is the First Friday Trolley Hop. A
TARC trolley takes art lovers to many downtown area art galleries on the first Friday of every month. The West Main District in downtown
Louisville features what is locally known as "Museum Row". In this area, the Frazier International History Museum features a collection of arms,
armor and related historical artifacts spanning 1,000 years, concentrating on U.S. and UK arms.  Also nearby is the Louisville Science Center,
which is Kentucky's largest hands-on science center and features interactive exhibits, IMAX films, educational programs and technology
networks.  The Speed Art Museum is the oldest and largest art museum in the state of Kentucky. Located adjacent to the University of Louisville,
the museum features over 12,000 pieces of art in its permanent collection and hosts regular temporary exhibitions.

Louisville Metro has 122 city parks covering more than 14,000 acres (57 km²). Several of these parks were designed by Frederick Law Olmsted,
who also designed New York City's Central Park as well as parks, parkways, college campuses and public facilities in many U.S. locations. The
Louisville Waterfront Park is prominently located on the banks of the Ohio River near downtown, and features large open areas, which often
feature free concerts and other festivals. Cherokee Park features a 2.6-mile (4.2 km) mixed-use loop and many well-known landscaping features.
Other notable parks in the system include Iroquois Park, Shawnee Park and Central Park.

In development is the City of Parks, a project to create a continuous paved pedestrian and biking trail around Louisville Metro while also adding a
large amount of park land. Current plans call for making basically the entire 1,600-acre (6 km2) Floyds Fork flood plain in eastern Jefferson
County into park space, expanding area in the Jefferson Memorial Forest, and adding riverfront land and wharfs along the Riverwalk Trail and
Levee Trail.  Some of the new park system has been opened.


College sports are very popular in the Louisville area, especially college basketball.  The Louisville Cardinals have recently built a new basketball
stadium in downtown Louisville that was completed in October 2010.

Louisville has six professional and semi-professional sports teams. The Louisville Bats are a baseball team playing in the International League as
the Class AAA affiliate of the nearby Cincinnati Reds. The team plays at Louisville Slugger Field at the edge of the city's downtown.

Downtown Louisville has undergone a revitalization project that includes both public and private investment.  Numerous projects that have been
completed including the building of Slugger Field, Riverfront Park, 4th Street Live, the new construction of the Louisville Cardinals Stadium, as
well as a project that was just completed to expand 4th Street Live.  Market Street has also undergone a major revitalization that includes
numerous new bar and restaurant establishments that has been classified as the NuLu District.  The NuLu District is a fast growing sector of
downtown that has become very popular with the city.

Overall, the Louisville area has an excellent mix of cultural and recreational attractions.

Economic Forces
Economic forces are the fundamental relationships between current and anticipated supply and demand and the economic activities in which the
population participates in order to satisfy its wants, needs, and demands through its purchase power.  

Industries               
The major employers of Louisville are consistent with the sector employment shown above.  The chart below lists the 20 largest private
employers.  It is noted, that the government and school systems make up a large component of the area employment.   

Of note for the industries and employment in the region is that in late 2010, Aegon announced that it was consolidating offices and would
downsize its Louisville operations by 300 people.  Ford on the other hand announced it would increase its work force by 1,300 people.

Unemployment                           
The following chart shows the historical unemployment rates for the MSA, state, and US from 2000 to August 2013.  Current local and state levels
(July 2013) are 8.2% and 8.5%, which is considerably higher than the national average of 7.3%.

Environmental Forces
Environmental forces are both natural and manmade forces that influence real property values. Some environmental forces include climactic
conditions, natural barriers to future development, primary transportation systems, and the nature and desirability of the immediate areas
surrounding a property.

Highway Transportation    
Highway accessibility is a primary consideration in planning an area’s future growth and development.  The Louisville metropolitan area is
accessed via three different interstate highways.  I-64 is a major east-west corridor, capable of delivering goods to the East or West Coasts.  St.
Louis lies to the west on I-64; West Virginia is accessible to the east.  I-65 is a major north-south corridor, connecting Louisville with Indianapolis,
IN and Chicago to the north, and Nashville, TN and Montgomery, AL to the south.  I-71 is a regional interstate highway that connects Louisville
with Cincinnati, OH, as well as I-75, which services not only major points in Ohio but all major points between Detroit, MI and Florida.  Regionally,
Indianapolis, Cincinnati, and Nashville are all within a three-hour drive.

Louisville’s central location in the eastern United States, gives it the claim that over 50% of the United States Population can be reached within a
one day drive.  This makes Louisville and ideal location for distribution.

Louisville's main airport is the centrally located Louisville International Airport, whose IATA Airport Code (SDF) reflects its former name of
Standiford Field. The airport is also home to UPS's Worldport global air hub. UPS operates its largest package-handling hub at Louisville
International Airport and bases its UPS Airlines division there. Over 3.5 million passengers and over 3 billion pounds (1,400,000 t) of cargo pass
through the airport each year. Louisville International Airport is also the 4th busiest airport in the United States when in cargo passage, and it is
the 11th busiest in cargo passage in the world.

The Ohio River provides an avenue for water transportation, which includes a considerable amount of barge traffic.  The Ohio River connects
with the Mississippi River in St. Louis to the west and the Allegheny River in Pittsburgh, PA to the east.

Public transportation consists mainly of buses run by the Transit Authority of River City (TARC).  The city buses serve all parts of downtown
Louisville and Jefferson County, as well as Kentucky suburbs in Oldham County, Bullitt County, and the Indiana suburbs of Jeffersonville,
Clarksville and New Albany.

Louisville is served by two major freight railroads, CSX (with a major classification yard in the southern part of the metro area) and Norfolk
Southern. Five major main lines connect Louisville to the rest of the region. Two regional railroads, the Paducah and Louisville Railway and the
Louisville and Indiana Railroad, also serve the city.

Climate         
The Louisville area enjoys a distinct four-season year.  The topography is generally green, lush, and moderately hilly.  Humidity is usually fairly
high, even in cold temperatures.  Winter temperatures normally range from mid-teens to mid-40s.  Summer temperatures range from 70s to low
90s.  Annual precipitation is moderate to heavy in volume and heaviest during late winter and spring

Governmental Forces
Governmental, political and legal actions at all levels have an impact on property values. The legal climate of a particular time or in a particular
place may overshadow the natural market forces of supply and demand.  

Outlook
Our review of the above data indicates that the Louisville MSA has historically enjoyed a relatively stable economy, evidenced by a historical
pattern of increasing income levels, a steady creation of new jobs, and relatively low unemployment rates. However, Louisville, similar to rest of
the nation has recently experienced set-backs due the national and global recession. The area has experienced increasing foreclosures,
increasing unemployment, and has had other recessionary effects.  This has mostly passed, but the long-term lingering effects of this economic
calamity continue as both the city and country move forward into the future.  

In comparison to the greater Midwest Region, the Louisville economy is faring better than comparable markets.  Louisville saw smaller growth and
a less intense boom prior to the recession that started to take its effects in late 2007 and 2008 through now.  And because the area was not over-
built to the degree as many other parts of the Midwest and Nation, the decline has not been as drastic as seen elsewhere.


In conclusion, the economic outlook for the Metro Louisville MSA is favorable for the long term overall success of the subject.  In the short term,
increased unemployment, increased foreclosures, tighter lending standards, and more risk averse buyers have led to higher capitalization rates
even though the operating performances of most apartments is superior as there are higher occupancy levels, less rent concessions, and stable
to increasing rent levels.  This process has started to reverse as the economy has stabilized and the unemployment rate has declined.  
Historically low interest rates have spurned growth in the housing sector while apartment vacancies have declined and rents have shown a
marked increase.  Regardless, the economic trends suggest that investment and economic activity is increasing and should continue into the
future.      

SUBJECT MARKET AREA AND ANALYSIS

Neighborhood is defined as follows: A group of complementary land uses; a congruous grouping of inhabitants, buildings, or business enterprises.

The subject is located in east Clark County, Indiana in Charlestown Township.  This location is 1.6 miles north of Charlestown, Indiana. Access to
I-65 is available 7.3 miles to the west via Highway 403 and U.S. 31, at Exit 9 in Sellersburg. I-265 can be accessed 7.15 miles southwest at its I-65
junction. Secondary roads in the area include SR 403, U.S. 31 to the west, and SR 160 to the east.  

The 2000 population of Charlestown was 5,993, with a median age of 32.0 years. By 2007 the population had grown to 7,227, representing 7.0%
of the Clark County population.   From U.S. Census figures, Charlestown household income average  $41,257 in 2007.  

Leading Southern Indiana employers include American Commercial Lines (Jeffboat), Horseshoe Southern Indiana and Floyd Memorial Hospital.  
All are easily accessed from the subject’s location near Charlestown due to the proximity of Interstate-65, I-265, and the extensive network of
secondary roads in the area.

Charlestown is a small Clark County town, historically surrounded by agricultural land, but with new commercial and subdivision development
influencing the community. Charlestown Landing is a 77,000 acre mixed-use development on Highway 62 at Charlestown State Park.  This major
development is located northeast of River Ridge Commerce Center and will feature a Clark Memorial Hospital site, 56 single family residential
lots, and nearly 23.0 acres of commercial development.  

New development in the subject’s immediate area includes Hawks Landing, with over 150 one-half to two acre lot homes starting in the low 200’s,
located off Stoney Point on Charlestown-Memphis Road. Developer Dan Christiani of 403 Properties LLC, is seeking Sellersburg sewer access
for a maximum of 35 single-family patio homes along Old Ind. 60. Serenity Oaks is off of Bethany Road 2.0 miles southeast of the subject and
features 1.0 + acres lots with homes starting in the low 300’s, and Danbury Oaks Sections 1 and 2 is located less than a mile southeast of the
subject.

According to representatives of Clark County Planning and Zoning, heavy residential development is welcomed in their community when
developers are willing to assume the burden of infrastructure improvements. The nearest possible sewer hookups are at either SR 403, or the
Charlestown-Memphis Road/Stoney Point intersection, each slightly over 1.0 mile away. According to the property owner, Mr. Gary Brinkworth of
Brinkworth Engineering has estimated the cost of engineering and construction for sewers in either direction would run about $250,000.  Mr.
Tony Semones of Clark County Planning and Zoning believes a development the size of that planned by the subject’s owner would require R-2
zoning, 9,600 SF per lot, and three or more 75’ separate entrances to county roads with divided entries.   

A 750 home development has already been approved 3.0 miles north of the subject at Hansbury Road off the Memphis exit, and it is likely that
the subject also will one day be developed as a 225 +/- home site residential subdivision. Such massive subdivision projects do not bode well for
immediate development. From conversations with area real estate brokers it appears obvious that development in the area has been stalled by
the economic downturn of late 2007 to the present, and that subdivision land purchases made several years ago are still sitting undeveloped due
to a current lack of demand.   
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