CRAFT BREWING COMPANY

Appraisal Economics Inc. has determined the fair market value of a minority, non-controlling membership interest in a craft brewing company based in the northeastern United States. The brewery produces over 20 varieties of beer and ships tens of thousands of barrels annually. We determined the business enterprise value of the Company using the discounted cash flow method of the income approach and the guideline transaction method of the market approach. In the discounted cash flow method, we determined the aggregate present value of the Company’s expected future cash flows. In the guideline transaction method, we computed multiples to apply to the Company’s fundamentals based on the multiples from transactions of other similar companies. As part of our analysis, we made adjustments to the pro rata value of the subject interest to account for its lack of control and lack of marketability.

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SCENARIO ANALYSIS FOR LONG-TERM INCENTIVE PLAN DESIGN

Appraisal Economics Inc. has performed valuations under a series of proposed terms to assist company management in the design of its long-term incentive plan (LTIP). The company that granted the LTIP units is a large publicly traded real estate investment trust (REIT) that owns hundreds of office and industrial properties across the United States and internationally. The LTIPs are incentive units granted to management that vest into shares of the company’s common stock if certain market-based performance conditions are met. The long-term incentive plan has an absolute component, with vesting hurdles based on the Company’s total shareholder return (TSR) performance compared to fixed targets, and a relative component, with vesting hurdles based on the percentile rank of the Company’s TSR compared to the constituents of a real estate index. As part of our analysis, we determined the fair value of the LTIP units under a wide range of possible scenarios, each with different sets of absolute and relative performance hurdles. Our valuations helped enable management to design the terms of the LTIPs to best suit the Company’s needs.

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OUTPERFORMANCE PLAN WITH RELATIVE PERFORMANCE HURDLES

Appraisal Economics Inc. has determined the fair value of an outperformance plan (OPP) granted to employees of a large publicly-traded real estate investment trust (REIT), which owns thousands of industrial buildings in the United States and internationally. This OPP grants employees shares of the company’s common stock based on the achievement of certain relative performance hurdles at the end of the performance period. These market-based performance conditions are intended to align the incentives of the employee grantees with shareholders. Participants in the plan can earn an outperformance pool, paid in restricted shares of the Company’s common stock, based on the Company’s total return to shareholders (TRS) performance compared to that of a real estate index. We also compute a discount for lack of marketability for the award, to account for the post-vesting lock-up applicable to shares earned under the outperformance plan.

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EXPERT WITNESS TESTIMONY

Appraisal Economics Inc. has provided expert witness testimony at a binding arbitration hearing in New York. One of two general partners in a limited partnership died, and the value of the interest was disputed between the remaining general partner and the estate of the deceased general partner. The partnership owns a long-term leasehold interest in commercial real estate. As the partnership is a holding entity, we used the net asset value approach, in which we marked the partnership’s assets and liabilities to fair market value and computed the value that would be received by a holder of the interest upon the sale of the property and liquidation of the partnership. We also used the income approach, in which we calculated the present value of the projected future cash flows to the subject interest if the partnership was continued. Our analysis also involved selecting appropriate discounts for lack of control and lack of marketability that were supported by our consideration of the rights, restrictions, and other factors specified in the partnership agreement.

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NATURAL GAS TURBINES

Appraisal Economics Inc. has completed a valuation of over a dozen natural gas turbines located throughout the United States. The assets are owned by a publicly traded power company with a market capitalization of over $200 billion, and each unit is capable of generating between 23 megawatts and 55 megawatts of electricity. The natural gas turbines are part of a lease pool used by electricity generators that require backup units when their primary turbines are undergoing repair. Appraisal Economics was engaged to estimate the fair market value of the assets for financing purposes.

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PURCHASE PRICE ALLOCATION OF A PET FOOD MANUFACTURING COMPANY

Appraisal Economics Inc. has valued the tangible and intangible assets of a pet food manufacturer acquired as part of a private equity roll-up. The acquired company sells baked pet treat products to wholesale pet food distributors, manufacturers, and retailers across the United States. The company operates a 200,000-square foot facility with multiple independent production and packaging lines. The acquisition involved a complex series of direct and indirect transactions of equity interests by another pet food company that was previously acquired by the private equity firm. Appraisal Economics was engaged to allocate the aggregate purchase price among the financial, tangible, and intangible assets of the company, including the real property, machinery and equipment, trade name, non-compete agreement, customer relationships, and goodwill.

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EQUITY IN A PRIVATELY HELD INTERNATIONAL CONGLOMERATE

Appraisal Economics Inc. valued a non-controlling interest in a holding company that owns a minority interest in a privately held international conglomerate that is headquartered in Russia. The operating company has several dozen subsidiaries in Europe and Asia that specialize in oil and gas, construction, telecommunications, and finance. Our valuation included analyzing the recent sale between third parties of shares of common stock in the underlying operating company. To determine the current value of the operating company’s common stock, we adjusted for changes in the company’s financial performance, industry and economic conditions, and currency exchange rates. The concluded value of the interest in the holding company that owns the conglomerate’s shares reflected incremental discounts for lack of control and lack of marketability. Our valuation was used for gift and estate tax planning purposes.

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WIND ENERGY SYSTEM

Appraisal Economics Inc. has completed a valuation of a wind park located in the Midwestern United States. The wind park consists of approximately 100 wind turbines with a combined electrical generating capacity of about 150 megawatts, the equivalent of providing clean energy to over 50,000 homes. The assets include the towers, foundations, blades, rotors, generators, and power converters. Electricity is generated and sold to the local power grid via a long-term power purchase agreement, which provides enough revenue to help recoup the substantial cost of construction. Appraisal Economics was engaged by the local taxing authority to estimate the fair market value of the wind park for litigation support related to property taxes.

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INTERESTS IN COSMETICS COMPANY

Appraisal Economics Inc. has determined the fair market values of two minority, non-controlling membership interests in a leading cosmetics company that develops and markets skin care products. Part of our analysis required the valuation of the preferred equity of a related entity. The income and market approaches were utilized to determine the company’s total equity value, and Monte Carlo simulations were used to allocate the total equity value among eight different equity classes including the preferred membership interest. Appraisal Economics applied appropriate lack of control and lack of marketability discounts to the pro rata values and determined the fair market values of the two interests for gift and estate tax purposes.

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WIND FARM LITIGATION SUPPORT

Appraisal Economics has provided litigation support to attorneys representing a Michigan taxing authority regarding wind farms and tax incentives. Specifically, we considered whether the availability of specific tax incentives necessarily indicates that the value of the property is less than its cost, which would indicate that economic obsolescence exists. Typically, newly constructed wind farms receive federal incentives for renewable energy such as the (i) Production Tax Credit; (ii) Investment Tax Credit; and (iii) Section 1603 Cash Grants. Wind farms typically also benefit from state-level renewable portfolio standards (RPS) that require utilities to purchase a minimum percentage of electricity from renewable sources, generally at higher rates than hydrocarbon-based sources of energy. The federal incentives and the terms of the power purchase agreement must therefore be examined in tandem to identify whether economic obsolescence exists immediately upon completion of construction. Any reduction to the value of the property affects the taxes assessed on the property, and is therefore of significant importance to both the taxpayer that owns the property and the taxing authority.

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