Susquehanna Art Museum building appraisal

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SUMMARY APPRAISAL REPORT

PROPOSED SUSQUEHANNA ART MUSEUM

LOCATED AT

1407 NORTH THIRD STREETCITY OF HARRISBURG, DAUPHIN COUNTY

HARRISBURG, PENNSYLVANIA 17102

FORMR. ANDREW J. GIORGIONE, ESQ.

S.A.M. BOARD OF TRUSTEES409 NORTH SECOND STREET, SUITE 500

HARRISBURG, PA 17101

DATE OF REPORTFEBRUARY 27, 2013

PREPARED BYRSR APPRAISERS & ANALYSTS3 LEMOYNE DRIVE, SUITE 100

LEMOYNE, PA 17043(717) 763-1212

RSR FILE NO. 13-21GJ



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February 27, 2013

Mr. Andrew J. Giorgione

Buchanan Ingersoll & Rooney, PC

409 North Second Street, Suite 500

Harrisburg, PA 17101

Dear Mr. Giorgione:

At your request we are transmitting this Summary Appraisal Report on the property known as:

1407 North Third StreetCity of Harrisburg, Dauphin County

Harrisburg, Pennsylvania 17102

The subject property consists of eleven (11) parcels and is improved with a 7,520 square-foot, two-story

bank building situated on 0.44 acres in the City of Harrisburg, Dauphin County, Pennsylvania. The

subject site is going to be redeveloped into a two-story, 17,000 square-foot art museum. Part of the two-

story bank will be renovated while all other improvements are expected to be demolished. The effective

date of the appraisal is February 18, 2013 the date on which the property was physically inspected by W.

Greg Rothman, MAI, MRICS, CPE, CCIM, Andrew Wolfe, Licensed Appraiser Trainee, and Jeremy

Heintzelman, Licensed Appraiser Trainee.

The report that follows provides a detailed description of the property, and the basis upon which the

estimated values have been developed. In this report, we have provided a value estimate which complies

with the regulations of 12 CFR 225 - FIRREA.

It is our opinion that the market value of the fee simple interest in the subject property, in its “as is”

condition as of February 18, 2013 is:

*** EIGHT HUNDRED TEN THOUSAND DOLLARS***($810,000)

Although there did not appear to be any signs of environmentally hazardous materials on the site, it is

suggested that a Phase I environmental audit be conducted on the subject property if such materials are

suspected on the site.



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Mr. Andrew J. Giorgione

Page -2-

This letter does not constitute a full appraisal of the subject property. The narrative which follows

contains the data and analyses from which this value conclusion was developed. This appraisal has beendeveloped as if the property were free and clear of any liens or encumbrances. This appraisal does not

include the value of any personal property which may be attached to the real estate.

This report has been completed in compliance with the Uniform Standards of Professional Appraisal

Practice adopted by the Appraisal Standards Board of the Appraisal Foundation on July 1, 2006,

including Standards Rule 2-2 (b) of a Complete Appraisal performed under Standard 1. This appraisal has

also been completed according to your instructions, which are included in the addenda to this report.

Our compensation is in no way contingent upon the value estimate and we will be available to discuss the

findings contained within the report with the respective parties at your request and convenience.

Respectfully submitted,

RSR APPRAISERS AND ANALYSTS

W. Greg Rothman, MAI, MRICS, CPE, CCIM

Certified General Appraiser

License # GA 001455 LExpiration June 30, 2013

Jeremy D. Heintzelman Andrew R. Wolfe

Licensed Appraiser Trainee Licensed Appraiser Trainee

License # LAT000288 License # LAT000423

Expiration June 30, 2013 Expiration June 30, 2013



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TABLE OF CONTENTS

SUMMARY APPRAISAL REPORT 5

REAL ESTATE APPRAISAL REPORT SUMMARY 11

SUBJECT PHOTOGRAPHS 13

AREA ANALYSIS 17

NEIGHBORHOOD ANALYSIS 20

SITE DATA 22

IMPROVEMENT DESCRIPTION 25

ZONING 26

TAXES AND ASSESSMENT 27

HIGHEST AND BEST USE 28

APPROACHES TO VALUE 31

SALES COMPARISON APPROACH 33RECONCILIATION AND CORRELATION 41

CERTIFICATION 43

ASSUMPTIONS AND LIMITING CONDITIONS 46

ADDENDUM

-PROPERTY DEED

-ZONING ORDINANCE

-ZONING MAP-PROPERTY CARDS

-QUALIFICATIONS OF APPRAISERS

-PRIVACY NOTICE



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SUMMARY APPRAISAL REPORT

This is a Summary Appraisal Report, which is intended to comply with the reporting requirements set

forth under Standards Rule 2-2(b) of the Uniform Standards of Professional Appraisal Practice for a

Summary Appraisal Report. As such, it presents only summary discussions of the data, reasoning, and

analyses that were used in the appraisal process to develop the appraiser's opinion of value. Supporting

documentation concerning the data, reasoning, and analyses is retained in the appraiser's file. The depth

of discussion contained in this report is specific to the needs of the client(s) and for the intended use

stated below. The appraisers are not responsible for unauthorized use of this report.

This report has been prepared in accordance with the Uniform Standards of Professional Appraisal

Practice of the Appraisal Foundation, and the Code of Ethics and Standards of Professional Practice of

the Appraisal Institute.

Client: Mr. Andrew J. GiorgioneSAM Board of Trustees409 North Second Street, Suite 500Harrisburg, PA 17101

Appraisers: RSR Appraisers & Analysts

W. Greg Rothman, MAI, MRICS, CPE, CCIMJeremy D. Heintzelman, Licensed Appraiser TraineeAndrew R. Wolfe, Licensed Appraiser Trainee3 Lemoyne Drive, Suite 100Lemoyne, PA 17043

Subject: 1407 North Third Street, Harrisburg, PA 17102

Owner: Third Street Development, LP

Date of Report: The date of the report is February 27, 2013.

Ownership and Sales History: The property is presently owned by Third Street Development, LP. This

group purchased the property from Fulton Bank on October 24, 2008 for a consideration of $550,000.

This sale is referenced by Instrument 20080039234 in the Dauphin County Courthouse and contains ten



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(10) parcels. There were no other sales of the subject property in the previous three years. Also, the

group is expecting to acquire one (1) more parcel (06-015-010) for the Art Museum.

Agreement of Sale: There is currently an agreement of sale on the property between Third Street

Partners, LP and The Susquehanna Art Museum for $875,000. The seller has agreed to incur the cost of

demolition of Parcel 010. A copy of the agreement of sale is included in the addenda of this report.

Property Rights Appraised: The property rights under appraisal in this report are the Fee Simple

ownership in the subject property.

Fee Simple ownership 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.”

Definition of Market Value: Market value is the major focus of most real property appraisal

assignments. Both economic and legal definitions of market value have been developed and refined. A

current economic definition agreed upon by federal financial institutions in the United States is:

“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 are the consummation of a

sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

i) buyer and seller are typically motivated;

ii) both parties are well informed or well advised and acting in what they consider

their best interest;

iii) a reasonable time is allowed for exposure in the open market;iv) payment is made in terms of cash in United States dollars or in terms of financial

arrangements compatible thereto; and



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v) 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.1

Definition of Use Value: Use Value is the value a specific property has for a specific use. Use Value

focuses on the value the real estate contributes to the property as a whole, without regard to themonetary amount that might be realized upon its sale.

Current Use: The subject property is currently vacant, but construction is expected to begin on the

Susquehanna Art Museum in 2013.

Scope of Work Rule

According to the Uniform Standards of Professional Appraisal Practice (USPAP) Scope of Work Rule:

“For each appraisal, appraisal review, and appraisal consulting assignment, an appraiser must:

1. identify the problem to be solved;

2. determine and perform the scope of work necessary to develop credible

assignment results; and

3. disclose the scope of the work in the report.

An appraiser must properly identify the problem to be solved in order to determine the appropriate scope

of work. The appraiser must be prepared to demonstrate that the scope of work is sufficient to producecredible assignment results.”2

Problem Identification

We have identified the appraisal problem as determining the “as is” market value, for the client’s internal

use.

Description of the Appraisal Process: The appraisal process included an inspection of the subject

property (accompanied by Matt Tunnell of GreenWorks Development) by W. Greg Rothman, MAI,

MRICS, CCIM, CPE, Jeremy Heintzelman, Licensed Appraiser Trainee, and Andrew Wolfe, Licensed

Appraiser Trainee, on February 18, 2013, verification of all information with buyers, sellers, brokers,

1Appraisal Foundation, Uniform Standards of Professional Appraisal Practice of the Appraisal Institute, 2012-2013 Edition,

(Wash. D.C.: 2012)



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public records, and/or with other knowledgeable sources; analysis of market conditions, locational

factors, physical attributes and other pertinent factors.

In this appraisal report, only the Sales Comparison Approach was used to value the subject property.

Scope of Work: The scope of this appraisal encompasses the research and analysis of data required to

prepare a reliable opinion of market value of the subject property. The procedures used in the appraisal

analysis of the subject property are as follows:

Regional and neighborhood data was gathered from various sources, including public data sources such

as the Pennsylvania State Data Center, CCIM Site to Do Business, and the United States Bureau of the

Census. We analyzed specific neighborhood conditions through a neighborhood inspection.

We have researched site data listed on the subject’s tax assessment record, and the most recently

recorded legal description. A site inspection was conducted on February 18, 2013. Zoning information

was obtained from the City of Harrisburg. Flood Zone information was obtained from FEMA. Current

property assessment and millage information was obtained from the Dauphin County Tax Assessment

Office. All site information gathered is reasonable and considered accurate.

Site data was obtained from an inspection of the property conducted on February 18, 2013. Further

information gathered was obtained from the Dauphin County Tax Assessment records, and from in-house

appraisal files.

The Highest and Best Use Analysis as though vacant and as improved was determined through analysis

of uses that are legally permitted, physically possible, financially feasible and maximally productive. The

determination of the Highest and Best Use is a compilation of all relevant market conditions and

anticipated yield rates.

2 USPAP 2012-2013 Edition, © The Appraisal Foundation, page U-13.



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In determining the Approaches to Value the appraiser collected data from public records, interviews with

Dauphin County officials, municipal officials, buyers, sellers, residential builders, real estate

brokers/agents, residential property managers, and/or with other knowledgeable sources. In addition to

the above-mentioned sources, we have used data contained within our data bank from previous

assignments. A final reconciliation of value was determined based on my professional judgment of the

available data. In this appraisal report, the Sales Comparison Approach was utilized to form an opinion

of market value for the subject. This appraisal is to be used in whole and not in part. No part of this

appraisal shall be used in conjunction with any other appraisal report.

The current (effective date of appraisal) purchasing power of the dollar is the basis for the value opinion

stated within; no extreme fluctuations in economic cycles are anticipated.

This Summary Appraisal Report is a recapitulation of the appraiser's data, analyses, and conclusions.

Supporting documentation is retained in the appraiser's file.

The Income Capitalization Approach was considered, but was not developed due to the owner

occupied nature of the property. The improvements are currently vacant and are not in leasable

condition.

The Cost Approach was considered, but was not applied due to the age of the existing improvements

and the difficulty in measuring depreciation. There is also a lack of comparable land sales that would

deem this approach applicable.

Exposure Time: Exposure time is different for various types of real estate and under various market

conditions. It is noted that the overall concept of reasonable exposure encompasses not only adequate,

sufficient and reasonable time but also adequate, sufficient and reasonable effort. Based on the

information presented in the body of the report, which follows, a reasonable exposure time for the subject

property at the indicated market value is eight to twelve months. [The reader should note that exposure

time is different than marketing time in that exposure time is always presumed to precede the effective



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date of an appraisal, whereas marketing time is a time period immediately subsequent to the date of the

appraisal.]

Trends and Marketing Time: The economy in general has been strong for most all types of commercial

property, as it proliferates throughout all regions of the country and especially central Pennsylvania. A

reasonable marketing time assumes that the seller is motivated; the property is priced within a reasonable

percentage of an appraised market value and is actively advertised and marketed by a competent real

estate broker or the like. A reasonable marketing time also assumes that the sale of the property would

not require any unusual financing or seller concessions.

Consultations with area real estate professionals for their opinion indicated a range within a nine to

twelve month period of time in the central Pennsylvania area. It is the appraisers’ opinion; the subject

property would most likely experience a marketing time of nine to twelve months if placed on the market

for sale. The estimate of marketing time assumes that the property is exposed in the open market at a

reasonable asking price and that there are no distressed factors affecting its exposure in the market. If the

property is listed at a liquidation price, the estimated marketing period may be less than what the

appraisers have forecasted.

Intended Use of the Appraisal Report: The intended use of this report is to provide an estimate of

market value of the subject property for the client’s internal purposes.

Intended Users of the Appraisal Report: The intended user of this report is the client, Mr. Andrew

Giorgione of the Susquehanna Art Museum.

Purpose of the Appraisal Report: The purpose of this report is to give an opinion of value for the fee

simple ownership of the subject property.

Function of the Appraisal Report: The function of the appraisal is for estimating the “as is” market

value of the property.



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REAL ESTATE APPRAISAL REPORT SUMMARY

Property Type: Vacant Bank Building

Location: 1407 North Third Street, City of HarrisburgDauphin County, Pennsylvania 17102

Tax Map Parcel(s): 06-15-011, 06-15-012, 06-15-013, 06-15-014, 06-

15-15, 06-15-016, 06-15-017, 06-016-058, 06-016-

079, 06-016-080 (10 parcels total). Ownership is

expected to acquire parcel 06-015-010, as well.

This parcel is included in this appraisal report.

Owner of Record: Third Street Development, LP

Deed Reference: 20080039234

Lot Size: A combined 0.44 acres or 19,166 square-feet over

eleven (11) parcels.

Effective Date of the Appraisal: February 18, 2013

Date of the Report: February 27, 2013

Property Rights Appraised: Fee Simple

Improvements: A 7,520 square-foot, two-story bank building

located on 0.44 acres. The building was

constructed in 1923 and is considered to be in

average condition. All other improvements will

be demolished once construction begins.

Zoning: Business General (BG)

Utilities: Public water, sewer, electric, gas and telephone

Highest & Best Use of the Site as Vacant: Commercial Retail Development

Highest & Best Use of the Site as Improved: Redevelopment and renovation of current

improvements with some demolition.



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FINAL VALUE ESTIMATES

“As Is” Value Estimates: Value Effective DateSales Approach:

Cost Approach:

$810,000

Not Applicable

February 18, 2013

Not Applicable

Income Approach: Not Applicable Not ApplicableFinal Market Value Estimate: $810,000 February 18, 2013





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Subject Property: Parcel to be Acquired Subject Property: Rear Parking Lot

Street View: North Third Street (North) Street View: North Third Street (South)

Street View: James Street (North) Street View: James Street (South)



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Interior: Entrance Interior: Main Floor

Interior: Teller Area Interior: Bank Vault

Interior: 2nd Floor Interior: Basement



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AERIAL PHOTOGRAPH

TAX MAP



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DAUPHIN COUNTY ANALYSIS

Regional Overview

The subject property is located in the city of Harrisburg in Dauphin County, Pennsylvania. Dauphin

County is bounded by Northumberland County to the north, Cumberland County across the Susquehanna

River to the west, Lancaster County to the south, and Lebanon County to the east. Dauphin County,

together with Cumberland and Perry Counties form the Harrisburg Metropolitan Statistical Area (MSA).

At the heart of the MSA is the City of Harrisburg, the Capitol of the Commonwealth of Pennsylvania,

which is located 70 miles from Allentown, 80 miles from Baltimore, 90 miles from Philadelphia, 110 miles

from Washington D.C. and 200 miles from Pittsburgh. Interstate highway routes 76, 78, 81 and 83 run

through the MSA and provide access to these markets.

Regional Transportation

The major traffic arteries and highway systems that run through the MSA provide important links to

other primary and secondary markets in Pennsylvania and the northeast. Approximately 25% of the

U.S. population lies within a 250-mile radius of the Harrisburg area.

Interstate 76, also known as the Pennsylvania Turnpike, links the area with Pittsburgh to the west and

Philadelphia to the east. Interstate 78 runs from Interstate 81 in Lebanon County, eastward to

Allentown and northern New Jersey. Interstate 83 runs from Harrisburg to Baltimore, and Interstate 81

runs north to New York State and Canada, and south to Tennessee.

Other major roads in the area include PA Route 283, which runs from Harrisburg to Lancaster, U.S.

Routes 11 and 15, which run north to New York State and south to Maryland, and PA Route 581,

which runs from Harrisburg westward to the Naval Ships Parts Control Center in Mechanicsburg. Bothof these roads are four lane limited access highways. A six-mile extension of Route 581 was completed

in 1996, joining the road with Interstate 81.

Passenger rail service is provided by Amtrak on ConRail's main line (formerly Penn Central and Reading

Companies). The train/rail terminal is located in downtown Harrisburg at the recently renovated



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Harrisburg Transportation Center. Passenger rail service is available to Pittsburgh and other destinations

to the west, and also to Philadelphia along ConRail's northeast corridor. Freight service throughout the

area is provided by ConRail.

Continental Trailways and Greyhound buses run out of a terminal located in the same facility. Intercity

bus service is provided by the Capital Area Transit (CAT); with routes throughout the East and West

Shores of the Harrisburg MSA. The bus system provides important transportation services for many city

residents who work outside of Harrisburg proper.

The area is also served by the Harrisburg International Airport (HIA), which is located 10 miles south

of Harrisburg, along the Susquehanna River. Major carriers include Air Canada, American Eagle,

Continental Airlines, Delta Airlines, Northwest Airlines, Air Tran, United Airlines, and US Airways.

The Harrisburg area is well served with its own beltway. The combination of Route 581, I-83 and I-81

form a circle around the immediate East Shore areas, Harrisburg City, and near West Shore areas.

Larger cities such as Pittsburgh and Philadelphia do not have a full circle route around the core area.

This is a large advantage to assist in the ease of travel around the city.

The Harrisburg MSA employment base is centered on state and federal government and those

government-servicing industries. Located in the center of the Harrisburg MSA is the Pennsylvania State

Capitol and over a dozen state office buildings. Military installations are also prominent in the area and

include: 1) Mechanicsburg Naval Depot, aka Defense Distribution East; 2) New Cumberland Army

Depot; 3) the U.S. Army War College in Carlisle; and, 4) Fort Indiantown Gap.

The Harrisburg-Carlisle area's unemployment rate fell to 7.5 percent in August 2012, according to the

Pennsylvania Department of Labor & Industry. The area has seen several real estate construction projects

underway in the year 2012.



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MAP OF DAUPHIN COUNTY



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NEIGHBORHOOD ANALYSIS – CITY OF HARRISBURG

The neighborhood analysis provides a bridge between the Area Analysis and the study of the subject

property. As in the Area Analysis, the goal of the Neighborhood Analysis is to determine how the

operation of social, economic, governmental and environmental factors influence the value of real estate.

AREA MAP

The neighborhood analysis provides a bridge between the Regional Analysis and the study of the subject

property. As in the Regional Analysis, the goal of the Neighborhood Analysis is to determine how the

operation of social, economic, governmental and environmental factors influences the value of real estate.

Location

The subject property is located on the corner of North Third, James and Calder Streets, in the Midtown

district of Harrisburg. The subject’s local market area is the fifth and sixth wards of the City of

Harrisburg, Dauphin County, Pennsylvania. The area is often referred to as the Midtown market of

Harrisburg. The State Capitol building and the Central Business District are adjacent, to the South and

East of the neighborhood.



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Neighborhood Boundaries

The neighborhood boundaries are North Second Street to the West; Forster Street to the South; North

Sixth Street to the East; and Verbeke Street to the North.

Physical Description & Neighboring Uses

The neighboring uses include retail and commercial office space with a mix of residential buildings. The

Downtown district is adjacent to the subject property. The subject improvements are considered to be

compatible with the overall neighborhood development. The local market area generally consists of

office, apartment, row homes, townhouses, and various commercial and retail uses. There is a small

grocery and convenience store, a pizza shop, a Sprint store, a gas station, an auto repair shop, an Italian

restaurant, and numerous other small retail stores. Many buildings consist of first floor retail or

restaurant use with the upper floor(s) used as offices or residential apartments.

Overview

The neighborhood is experiencing the urban revitalization that started in the downtown of the city in

1998. Urban renewal has spread into the mid-town and uptown areas. This is a good sign for the subject

property.

Conclusion

The neighborhood will be a positive factor for the subject property. The subject neighborhood is a

mature, fully developed, area of mixed use known as the Midtown Market District. The Third Street

Corridor is the secondary retail strip often characterized by start-up retail stores. The Midtown area

remains an attractive place for residential living. In conclusion, the neighborhood and local market area

represents a strong location for a school in an area that has experienced much of the city’s revitalization.



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SITE DATA

The following site description is based upon a physical inspection conducted on February 18, 2013.

Size: 0.44 acres or 19,166 square feet

Shape: The subject property consists of eleven (11) parcels. All parcels are

rectangular in shape.

Topography: The topography is level at street grade.

Drainage: Appears adequate.

Zoning: The subject property is located in the Business General (BG) zoning

district of the City of Harrisburg.

Environmental Hazards: None observed or reported. The appraiser is not an expert in environmen-

tal matters. A Phase I environmental test is suggested.

Seismic Hazards: Not a recognized problem.

Soil Conditions: The appraisers have not been made aware of any unusual or adverse soil

conditions.

Landscaping: There is minimal landscaping on-site and is well-maintained.

Parking and Drives: The site has an asphalt parking lot, which is in need of some repair. There

are 12 on-site parking spaces.

Yard Improvements: Concrete curbing and sidewalks.



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Visibility: The subject site has very good visibility from the corner of North Third

Street and Calder Street.

Access: Vehicular access to the site is available off of North Third Street and

Calder Street. Access to the subject property is considered to be very

good.

Public Utilities: Public water, sewer, electric, gas and telephone services

Favorable Site Attributes: The site has very good access & visibility at a corner lot.

Unfavorable Site Attributes: The small size of the site is the only unfavorable attribute.



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FEMA FLOOD MAP

According to Flood Hazard Map, Community Panel No. 42043C0319D, effective date August 2, 2012,

the subject property is located in Zone X, areas outside the floodplain. Flood insurance would not be

required at the subject property. The flood map can be seen below.



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IMPROVEMENT DESCRIPTION

Property Identification: The subject property is located at 1407 North Third Street in the City of

Harrisburg, Dauphin County, Pennsylvania. The property consists of eleven (11) total parcels.

Improvements:

Square Footage: The two-story bank building contains 7,520 square feet.

Year Built: 1923

Foundation: Concrete slab

Construction: Masonry

Roof: Flat rubber

Exterior Finish: Masonry and stone

Interior Finish: Carpet and vinyl tile flooring, finished drywall, plaster walls, and glass doors.

Ceiling: Acoustic tile

Ceiling Height: 15 to 25 feet

Windows: Stationary

HVAC: Oil Furnace

Sprinkler: None

Overall Condition: Average

Physical Adequacy: The design and layout of the improvements are physically adequate and the

construction quality of the building is average.



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ZONING

The subject property is located in the Business General (BG) zoning district of the City of Harrisburg,

Dauphin County, Pennsylvania. Permitted uses include the following: all uses, buildings and structures

permitted in any Residence zone, all uses, buildings and structures permitted in a BL zone, sales shops,

cigar making shops, fur and fabric storage buildings, lithography, radio broadcasting stations and studios,

storage or parking garages, express freight offices, recreation halls, filling stations, bar rooms, clubs or

fraternal homes, home and beverage distributors, Laundromats or dry-cleaning pick-up and delivery and

office buildings. The subject property is considered a permitted use in this zoning district. Area

requirements include the following: maximum building height – no height limitations, minimum front

setback – 5 feet, minimum rear setback – 5 feet, minimum side setback – 10 feet.



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TAXES AND ASSESSMENT

The subject property consists of 11 parcels. The assessment values for each parcel can be seen below.

Parcel Acreage Assessment (Land) Assessment (Building) Total Assessment

06-015-010 0.08 $19,800 $120,400 $140,200

06-015-011 0.01 $3,000 $300 $3,300

06-015-012 0.01 $3,000 $300 $3,300

06-015-013 0.03 $7,900 $800 $8,700

06-015-014 0.04 $11,100 $1,100 $12,200

06-015-015 0.04 $12,100 $33,300 $45,400

06-015-016 0.04 $12,100 $207,100 $219,200

06-015-017 0.08 $22,800 $398,100 $420,900

06-016-058 0.02 $3,900 $400 $4,30006-016-079 0.07 $11,400 $1,200 $12,600

06-016-080 0.02 $3,300 $400 $3,700

Total 0.44 $110,400 $763,400 $873,800

Total millage rates for Dauphin County and the City of Harrisburg are shown in the table below.

Land:County Library Municipal School Total

6.876 0.35 30.97 26.965 65.161

Improvements:

County Library Municipal School Total

6.876 0.35 5.16 26.965 39.351

Applying this to the assessed value of the property results in an annual tax liability of $37,235 ($7,194 for

land and $30,040 for improvements). The current Common Level Factor (CLF) in Dauphin County,

effective July 1, 2012, is 1.38, translating into an implied market value of $1,205,844 ($873,800 x 1.38).

The subject property appears to be over-assessed.



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HIGHEST AND BEST USE

The highest and best use of a property is that use to which the land can be put which will create the

greatest utility for the land, be it in profit or in amenities, and that which is permitted or would be

permitted by the local municipal or township authorities, and that which would not be unduly

objectionable to the character of the surrounding property and keeping within the scope of the general

neighborhood development.

Elements affecting value, which depend on events or a combination of occurrences, which, while within

the realm of possibility are not fairly shown to be reasonably probable, should be excluded from

consideration. Also, if the intended use is dependent upon an uncertain act of another person, the

intention cannot be considered.

Highest and best use is considered as that use of the land, which may reasonably be expected to produce

the highest and best return to the land, over a given period of time. Highest and best use is that legal use

which will yield to the land the highest present value. It is sometimes referred to as "optimum use".

In estimating highest and best use, there are essentially three states of analysis:

A. Possible Use: Uses to which it is physically possible to put the site inquestion.

B. Permissible Use: Legal uses permitted by zoning and deed restrictions

on the site in question.

C. Feasible Use: Possible and permissible uses that will produce the

highest net return or highest present worth.

The highest and best use of the land (site) if vacant and available for use may be different from the highest

and best use of the improved property. This is normally true when the improvement is not an appropriate

use and yet makes a contribution to the total property value in excess of the value of the site.

The following test must be passed in determining the highest and best use:

A. The use must be legal.



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B. The use must be probable, not speculative.

C. There must be a profitable demand for such use and it must return to

the land the highest net return for the longest period of time.

HIGHEST AND BEST USE AS VACANT:

The highest and best use of land as though vacant assumes that the site is vacant or can be made vacant

by demolishing the existing improvements. The questions to be answered in this analysis are: If the land

is, or were, vacant, what use should be made of it? What type of building or other improvement if any

should be constructed on the land, and when?

Legally Permissible: The subject property is located in the Business General (BG) zoning district of

the City of Harrisburg, Dauphin County, Pennsylvania. Permitted uses include the following: all uses,

buildings and structures permitted in any Residence zone, all uses, buildings and structures permitted in a

BL zone, sales shops, cigar making shops, fur and fabric storage buildings, lithography, radio

broadcasting stations and studios, storage or parking garages, express freight offices, recreation halls,

filling stations, bar rooms, clubs or fraternal homes, home and beverage distributors, Laundromats or dry-

cleaning pick-up and delivery and office buildings.

Physically Possible: Here the shape, size, utility, and terrain of the site are taken into account. The

subject property contains eleven (11) parcels. The shape of the parcels is rectangular. The site contains a

total of 0.44 acres. The topography is level at street grade. The site has excellent visibility from North

Third Street, James Street, and Calder Street. There do not appear to be any apparent existing hazards

on the site. The site operates on all public utilities. According to Flood Hazard Map, Community Panel

No. 42043C0319D, the subject property is located in Zone X, areas outside the floodplain.

While no soil or engineering tests were reviewed, the surrounding improvements suggest that there are no

physical constraints on development of the subject site. Commercial retail development would be

physically possible.



30

Financially Feasible: Uses that meet the above two criteria must also be capable of providing sufficient

revenue to meet operation expenses, the required rate of return on investment, and the required rate of

return on the site. The neighborhood is urban in nature. Commercial retail development would be

financially feasible.

Maximally Productive: It is our opinion that the subject property is suited for commercial retail.

Therefore, the highest and best use “as vacant” is for commercial retail development.

HIGHEST AND BEST USE AS IMPROVED:

The highest and best use of the property as improved pertains to the use that should be made of an

improved property in light of its improvements. It is the use that maximizes an investment property's

value, consistent with the long-term rate of return and associated risk.

The subject property consists of a 7,520 square foot, two-story bank situated on 0.44 acres along North

Third Street. The other on-site improvements will be demolished once construction of the Susquehanna

Art Museum begins. Therefore, the highest and best use as improved is renovating and redeveloping the

bank building.



31

THE APPROACHES TO VALUE

Typically, after analyzing the physical characteristics of the subject and current conditions within the real

estate markets, three approaches to value are developed to arrive at three separate indications of the

subject's value. These three approaches, the Sales Comparison Approach, Income Capitalization

Approach, and Cost Approach arrive at a value indication through dissimilar methods and the use of

different types of data. However, these three approaches are not always unrelated, and some aspects of

each approach may be applicable to the others.

In applying the Cost Approach to value, the appraiser attempts to estimate the difference in worth to a

buyer between the property being appraised and a newly constructed building with optimal utility. The

depreciated replacement cost of the improvements is estimated by analyzing three forms of depreciation;

physical deterioration, functional obsolescence and external or economic obsolescence. This depreciated

replacement cost is then added to the market value of the underlying site, to arrive at a value indication

for the subject. The Cost Approach was not developed due to the age of the improvements and the lack

of available land sales.

In the Sales Comparison Approach, market value is estimated by comparing the subject to similar

properties which have been sold recently, or to properties which are currently offered for sale. The

analysis of the sales relative to the subject focuses upon differences in legal, locational, physical and

economic characteristics. This approach is applicable to all types of real property when there is sufficient

data in the market.

Real estate which is capable of producing income through rents and leasing is often purchased as an

investment. From the buyer's point of view, the earning power of a property is the most significant

determinant of property value. The buyer is essentially trading present dollars for the right to receive

future income. Development of the Income Capitalization Approach involves estimating net operating

income by analyzing encumbering leases, market rents, market occupancy levels and absorption rates, and

expenses. This net operating income is then capitalized at an appropriate rate, which is also determined

by the market, to arrive at a single value estimate.



32

The Income Capitalization Approach was considered but was not developed due to the owner occupied

nature of the property. After developing each of the approaches to value, the three value estimates are

reconciled into a single estimate of value for the subject property. Since the approaches involve different

techniques, and the reliability of data involved in each technique may vary, the market value is usually

based upon the approach which utilized the strongest market evidence.



33

SALES COMPARISON APPROACH

The Sales Comparison Approach is a method of estimating market value where the subject property is

compared to similar properties which have been sold. The main premise of this approach is that the

market value of a particular property is directly related to the prices of similar, competing properties in

the market. The analysis of the comparable sales focuses upon differences in legal, physical, locational

and economic characteristics as well as differences in property rights conveyed, dates of sale, financing

and the motivations of the buyers and sellers.3

The principles of real estate appraisal involved in the Sales Comparison Approach include Supply and

Demand, Substitution, Balance and Externalities. The Principle of Supply and Demand suggests that if

demand for a property is high, prices will rise; if demand is low, prices will decline. Shifts in supply will

often lag shifts in demand since supply may only be created as fast as it takes to build a building, or

improve land suitable for developing housing. The premise of the Principle of Substitution is that the

value of a property tends to be set by the price that would be paid to acquire a substitute property of

similar utility and desirability. The Principle of Balance focuses upon the balance of supply and demand,

which tend toward equilibrium. The balance of supply and demand will change continually due to shifts

in population, purchasing power, and preferences. Construction of new buildings and demolition of oldones cause supply to vary. Finally, the Principle of Externalities holds that external forces may positively

or negatively impact the value of a property. Changes in the economic climate, political climate, or just

the neighborhood in general will have an impact on values.

The application of the Sales Comparison Approach involves thorough analysis of sales in the market to

determine the most comparable properties to the subject. Once these sales are researched they are

compared to the subject property through appropriate elements of comparison.

Units of Comparison

3 The Appraisal of Real Estate, 13th Edition; The Appraisal Institute, 2008.



34

An important step in the Sales Comparison Approach is the selection of an appropriate unit of

comparison, i.e. the components into which a property may be divided for purposes of comparison. In

the analysis of the subject property, the price per square foot is the appropriate unit of comparison for

the building improvements.

The subject property consists of a 7,520 square foot, two-story bank building situated on 0.44 acres.

Elements of Comparison

Key value elements under scrutiny that may require adjustments are: property rights conveyed, financing

terms, conditions of sale, date of sale, location, and physical characteristics.

The following table shows some comparable office listings in Harrisburg:

Address Location List Price Square Ft. $/SF Year Built

321 N Front St. Harrisburg 799,900$ 10,160 78.73$ 1995



1707 S Cameron St. Harrisburg 460,000$ 14,934 30.80$ 1987

126 Walnut St. Harrisburg 394,000$ 13,000 30.31$ 1920

Comparable sales are presented on the following pages.



35

COMPARABLE SALE ONE

Location: 325-327 North Front Street, City of Harrisburg

Dauphin County, Pennsylvania

Transaction Data:Consideration: $600,000

Sale Date: September 2012

Grantor: KDR Investments, LLP

Grantee: PARS Real Estate, LLC

Parcel ID: 04-037-008 and 04-037-009


Conditions of Sale: Arm’s Length

Property Rights: Fee Simple

Financing: Conventional Mortgage

Verification: Mark Santana (NAI CIR), grantor, Co-Star and Public Records

Improvement Data:

Gross Square Feet: 8,372 SF

Age/Condition: 1850/Average

Construction: Masonry

Site Data:Site Size: 0.13 acres or 5,663 SF

Topography: Generally Level

Access/Visibility: Good/Good

Public Utilities: All public available

Zoning: RLB, Residential Limited Zone B

Land-to-Building Ratio: 0.68 to 1

Appraisal Measures:

Sale Price per SF: $71.67

Comments: This property overlooks the Susquehanna River. The property is a multi-story, semi-detached

professional office building configured with single occupant. This property was originally listed for $699,000 for a

17 months period with NAI CIR. There is no parking on-site.



36

COMPARABLE OFFICE SALE TWO

Location: 600 North 2nd Street, City of Harrisburg


Transaction Data:

Consideration: $1,290,000Date of Sale: August 2012

Grantor: Arcus Properties, LP

Grantee: PA AFL CIO Building Association

Tax Parcel: 27-04-025-013, 04-025-009, 04-026-001

Conditions of Sale: Arm’s length

Property Rights Conveyed: Leased Fee

Financing: Conventional

Verification: Richard Bloomingdale (grantor), Dan Alderman (NAI CIR), & Co-Star

Improvement Data:

Construction: Five-story masonryQuality of Construction: Average

Size: 17,600 SF

Age: 1926

Condition: Average

Site Data:

Lot Size: 0.23 acres or 9,808 SF

Shape/Topography: Rectangular/Level


Zoning: CCL, Community Commercial Limited Zone


Appraisal Measures:

Sale Price per SF: $73.30

Comments: Five-story, office building structure inclusive of 17,600 square feet gross or net 16,500 square feet andan unfinished basement. This building was multi-tenant occupied and owner occupied on the first floor. The building was originally constructed in 1926 and renovated throughout the years for tenant fit-out. Overall the building was considered to be in average to good condition. There are 34 on-site parking spaces.



37

COMPARABLE SALE THREE

Location: 2701 North Front Street, City of Harrisburg


Transaction Data:

Consideration: $840,000 (Real Estate Only)

Date of Sale: August 11, 2011Grantor: Robin Clemens and Sean Adams

Grantee: Jonas Rupp House, LP

Tax Parcel: 10-064-018

Conditions of Sale/Deed Ref : Arm’s length/2011-0021996

Property Rights Conveyed: Fee Simple

Financing: Conventional

Verification: Greg Rothman (RSR Realtors, Broker) 717-763-1212

Improvement Data:

Construction: Two & a half-story brick/frame

Quality of Const./Condition: Good/ GoodSize: 8,437 SF

Age/ Utility: 1925/Good

Site Data:

Area: 0.55 acres or 23,958 square feet

Shape/ Topography: Rectangular/Level

Zoning: Apartment Office Limited (A-O-L)


Access/ Visibility: Good/Good


Appraisal Measures:

Sale Price per Square Foot: $99.56

Comments: This is the sale of a two and a half-story office building located along North Front Street in the City of

Harrisburg. The building was originally constructed as a residence and used as an office building by the United

Way. It was converted back to a residential property and then a bed & breakfast. The new buyer will be using it

as an office building with some special events. The sale included allocation of $100,000 towards furniture,

fixtures, and equipment. There is no parking on-site.



38

COMPARABLE SALE FOUR

Location: 2 West High Street, Carlisle Borough 3rd Ward

Cumberland County, Pennsylvania

Transaction Data:Consideration: $875,000

Sale Date: February 5, 2009

Grantor: Martin Equities, LLC

Grantee: A & K Real Estate Holdings, LLC

Parcel ID: 04-21-0320-027


Conditions of Sale: Arm’s Length

Property Rights: Fee Simple

Financing: Conventional Mortgage

Verification: Ray Wolfe Jr. (Broker of Wolfe & Co. Realtors), Public Records

Improvement Data:

Gross Square Feet: 11,323 SF

Age/Condition: 1915/Average

Construction: Masonry & Glass

Site Data:Site Size: 0.27 acres or 11,761 SF

Topography: Generally Level

Access/Visibility: Good/Good


Zoning: C1, Commercial Zoning District

Land-to-Building Ratio: 1 to 1

Appraisal Measures:Sale Price per SF: $77.28

Comments: This is the sale of an old two-story bank building in Carlisle Borough. The bank was converted into a

law office, and significant renovations were completed after the sale. This was a private sale between the grantor

and grantee. There are ten (10) parking spaces on-site.



39

COMPARABLE SALES GRID

COMPARABLE SALES SUBJECT SALE 1 SALE 2 SALE 3 SA

LOCATION 1407 N 3rd St. 325-327 N Front St. 600 N 2nd St. 2701 N Front St. 2 W Hig

TOWNSHIP City of Harrisburg City of Harrisburg City of Harrisburg City of Harrisburg Carlisle Bo

COUNTY Dauphin Dauphin Dauphin Dauphin Cumbe

DATE OF SALE N/A Sep-12 Aug-12 Aug-12 Fe

CONSIDERATION N/A $600,000 $1,290,000 $840,000 $87

SQUARE FEET 7,520 8,372 17,600 8,437 1

SIZE (ACRES) 0.44 0.13 0.23 0.55

PRICE PER SQUARE FOOT N/A $71.67 $73.30 $99.56 $

PROPERTY RIGHTS

CONVEYED N/A Fee Simple Leased Fee Fee Simple Fee Si

FINANCING N/A Conventional Conventional Conventional Convent

CONDITIONS OF SALE N/A Arm's Length Arm's Length Arm's Length Arm's L

TIME N/A 0% 0% 0%

LOCATION Urban -10% -10% -10%

ACCESS & VISIBILITY Very Good 15% 15% 15%

AGE & CONDITION 1923/Average 0% 0% -5%

SITE CHARACTERISTICS Generally Level 0% 0% 0%

LAND-TO-BUILDING RATIO2.55:1

25% 25% 0%

PARKING 12 Spaces 15% -15% 15%

ZONINGBusiness General

(BG) 0% 0% 0%

ECONOMIES OF SCALE 7,520 SF 0% 20% 0%

NET ADJUSTMENT 45% 35% 15%

ADJUSTED PRICE PER SF $103.92 $98.95 $114.50 $1

Comparable Sales Adjusted $/SF

Comparable Sale Two $98.95

Comparable Sale Four $100.46

Comparable Sale One $103.92

SUBJECT PROPERTY

Comparable Sale Three $114.50



40

Sale One was adjusted downward to account for its superior location on N. Front Street. It was

adjusted upwards for inferior access & visibility; N. Front Street is a one-way street, and this property is

not located on a corner lot. Upward adjustments were made for land-to-building ratio & parking

available.

Sale Two was adjusted downward for its superior location on North 2nd Street as well as on-site parking

available. An upward adjustment was made for access & visibility, land-to-building ratio, and economies

of scale.

Sale Three was adjusted downwards for superior location on North Front Street and superior age &

condition. This sale was adjusted upwards for inferior access & visibility and on-site parking available.

Sale Four was adjusted upwards for time, land-to-building ratio, and economies of scale.

RELATIVE COMPARISON ANALYSIS

Comparable Price/Sq. Ft. x Percentage Weighting = Product

4 $100.46 20.00% $20.09

2 $98.95 20.00% $19.79

SUBJECT

1 $103.92 10.00% $10.39

3 $114.50 50.00% $57.25Column Totals 100.00% $107.52

Conclusion – Sales Comparison Approach “As Is”

The comparable sales are indicated on the Sales Adjustment Grid. The adjusted price per square foot

ranged from $98.95 to $114.50 per square foot with a mean of $104.46. Sale Four is considered most

similar to the subject property is given greatest weight. A Relative Comparison Analysis was used to

appropriately weigh each comparable sale’s influence on the final price per square foot chosen for the

subject property. Based on the foregoing analysis, we estimate a price per square foot of $108.00 for

the subject property. Therefore, it is our opinion that the “as is” Fee Simple Value of the subject

property as of February 18, 2013 is $812,160 (7,520 SF x $108.00/SF), rounded to:

* * * EIGHT HUNDRED TEN THOUSAND DOLLARS* * *($810,000)



41

RECONCILIATION AND CORRELATION

The Sales Comparison Approach has been developed in the analysis of the subject property, 1407 North

Third Street, City of Harrisburg, Dauphin County. The value conclusion from this approach is as

follows:

“AS IS”

Sales Comparison: $810,000

Cost Approach: N/A

Income Capitalization: N/A

The Sales Comparison Approach is an approach to value wherein the appraiser seeks out sales of similar

type properties that have recently sold in the subject's market area. These sales are then compared to the

subject and adjusted for dissimilarities between the comparable properties and the subject to arrive at an

indication of value. Theoretically, the Sales Comparison Approach reflects the actions of both buyers and

sellers in the market. No two sales or properties are exactly alike. Therefore, numerous adjustments are

applied based on interpretations of market information. This approach is most reliable when there are

relatively homogeneous properties or when there are certain strong, similar traits, which transcend the

sales sample.

Due to the fact that land sales within the City of Harrisburg are very scarce, a significant upwards

adjustment was made to Comparable Sales 1, 2 and 4 for land-to-building ratio. Parcel 010 is currently

improved with a building that is inhabitable and must be demolished to make way for redevelopment for

the Susquehanna Art Museum. Demolition costs were not taken into account in the valuation of the

subject property due to the fact that the costs ($60,000) will be incurred by the seller. This is stated in

the agreement of sale.

The Cost Approach was considered, but was not developed for the subject property, due to the age of the

improvements and the lack of land sales. The Income Approach was considered but was not developed

for the subject property, due to its owner occupied nature. More weight is given to the Sales

Comparison Approach due to the availability of sales in the market.



42

Therefore, it is concluded that the market value of the fee simple interest in the subject property in its

“as is” condition, as of February 18, 2013 is:

***EIGHT HUNDRED TEN THOUSAND DOLLARS***($810,000)



43

CERTIFICATION OF VALUE

I certify that, to the best of my knowledge and belief:

1. The statements of fact contained in this report are true and correct.

2. The reported analyses, opinions, and conclusions are limited only by the reported

assumptions and limiting conditions, and are my personal, unbiased professional analyses,

opinions, and conclusions.

3. I have no present or prospective interest in the property that is the subject of this report,

and I have no personal interest or bias with respect to the parties involved.

4. My compensation in not contingent upon the reporting of a predetermined value of

direction in value that favors the cause of the client, the amount of the value estimate, theattainment of a stipulated result, or the occurrence of a subsequent event.

5. My analyses, opinions, and conclusions were developed, and this report has been

prepared, in conformity with the Uniform Standards of Professional Appraisal Practice.

6. I have made a personal inspection of the property that is the subject of this report.

7. Jeremy D. Heintzelman and Andrew Wolfe provided significant professional assistance to

the person signing this report.

8. The reported analyses, opinions, and conclusions were developed, and this report has

been prepared, in conformity with the requirements of the Code of Professional Ethics and

the Standards of Professional Appraisal Practice of the Appraisal Institute.

Signature:

_____________________

W. Greg Rothman, MAI, MRICS, CCIM, CPE

Pennsylvania Certified General Appraiser

License No. GA -001455-L

Expiration June 30, 2013



44

CERTIFICATION OF VALUE




assumptions and limiting conditions and are my personal, impartial, and unbiased

professional analyses, opinions, and conclusions.

3. I have no (or the specified) present or prospective interest in the property that is the

subject of this report and no (or the specified) personal interest with respect to the parties

involved.

4. I have no bias with respect to the property that is the subject of this report or to the

parties involved with this assignment. RSR Appraisers and Analysts have not appraised

this property before.

5. My engagement in this assignment was not contingent upon developing or reporting

predetermined results.

6. My compensation for completing this assignment is not contingent upon the development

or reporting of a predetermined value or direction in value that favors the cause of the

client, the amount of the value opinion, the attainment of a stipulated result, or theoccurrence of a subsequent event directly related to the intended use of this appraisal.




_____________________________

Jeremy D. Heintzelman

Licensed Appraiser Trainee

License #: LAT000288

Expires: June 30, 2013



45

CERTIFICATION




assumptions and limiting conditions and are my personal, impartial, and unbiased

professional analyses, opinions, and conclusions.

3. I have no (or the specified) present or prospective interest in the property that is the

subject of this report and no (or the specified) personal interest with respect to the parties

involved.

4. I have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment. RSR Appraisers and Analysts have not appraised

this property before.

5. My engagement in this assignment was not contingent upon developing or reporting

predetermined results.

6. My compensation for completing this assignment is not contingent upon the development

or reporting of a predetermined value or direction in value that favors the cause of the

client, the amount of the value opinion, the attainment of a stipulated result, or the

occurrence of a subsequent event directly related to the intended use of this appraisal.




Signature:

Andrew R. WolfeLicensed Appraiser Trainee

No: LAT000423

Expires: June 30, 2013



46

ASSUMPTIONS AND LIMITING CONDITIONS

1. No responsibility is assumed for the legal descriptions provided or for matters pertaining

to legal or title considerations. Title to the property is assumed to be good and

marketable unless otherwise stated.

2. The property is appraised free and clear of any or all liens or encumbrances unless

otherwise stated.

3. Responsible ownership and competent property management are assumed.

4. The information furnished by others is believed to be reliable, but no warranty is given for

accuracy.

5. All engineering studies are assumed to be correct. The plot plans and illustrative material

in this report are included only to help the reader visualize the property.

6. No survey has been made by the appraiser and no responsibility is assumed in connection

with such matters.

7. It is assumed that there are no hidden or unapparent conditions of the property, subsoil, or

structures that render it more or less valuable. No responsibility is assumed for such

conditions or for obtaining the engineering studies that may be required to discover them.

8. It is assumed the property is in full compliance with all applicable federal, state, and local

environmental regulations and laws unless the lack of compliance is stated, described, and

considered in the appraisal report.

9. It is assumed that the utilization of the land and improvements is within the boundaries or

property lines of the property described and that there is no encroachment or trespass

unless noted within the report.

10. The distribution of the total valuation in this report between land and improvements

applies only under the stated program utilization. The separate allocations for land and

buildings must not be used in conjunction with any other appraisal and are invalid if so

used.

11. Acceptance and/or use of this appraisal report constitutes acceptance of the foregoingAssumptions and Limiting Conditions.

12. The appraiser of this property will not be required to give testimony or appear in court

because of having made this appraisal, unless arrangements have been previously made.



ADDENDUM

Documents

Susquehanna Art Museum building appraisal