REGIONAL ANALYSIS OF LEXINGTON, KENTUCKY MSA
The subject is influenced in a general manner by the economic, political, physical and social characteristics of the Lexington-Fayette
Metropolitan Statistical Area (MSA). An 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. The Lexington-Fayette Metropolitan Statistical Area covers six
counties in the state of Kentucky.  These counties include Fayette, Scott, Woodford, Bourbon, Clark, and Jessamine.

Lexington is located in the central portion of the State of Kentucky.  Lexington is located 70 miles west of Louisville, 20 miles southeast of
Frankfort, the state Capital of Kentucky, 70 miles south of Cincinnati, Ohio, 150 miles west of Charleston, West Virginia, and 150 miles north of
Knoxville, Tennessee.

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.

The tables and charts presented throughout the following pages include additional data that help tell the story about Louisville's economy.    

A presentation of the Lexington MSA is presented on the following page.


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 Growth
Population growth trends influence employment growth, income levels, and many other key demand parameters analyzed in determining
commercial real estate productivity.  The table below shows the population in the Lexington MSA in comparison with the State of Kentucky and
the United States.  Historical data, as well as projections, are shown.  The MSA population is steadily increasing faster than both the state of
Kentucky and the United States.  These trends are expected to continue as indicated by the 2022 population projections.  The chart is shown
below.

Local Economy:        The Bluegrass is the financial, educational, retail, health care, service, and cultural center of Central Kentucky.  Lexington-
Fayette County is the merged urban county government centered among an eight county alliance, which represents the Bluegrass Region.  The
local economy is centered on the horse industry, healthcare, technology, and higher education.  In 2014 there was more than $1,180,000,000 in
horse sales.  

The world headquarters of Lexmark International is located in the MSA as well as IBM and Hewlett-Packard facilities, and a thriving biosciences
community.  


The healthcare industry is the leader in economic growth in the area with all three major hospitals in Lexington planning or has started
expansions at their current facilities.  The UK Chandler Medical Center and 7 other colleges in the area are involved in medical related
instruction.  

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.  The area is anchored around the University of Kentucky, and there are 10 colleges or universities within 40
miles of Lexington.  In this area over 65,000 students are enrolled and graduating 12,000 annually.  Census data for 2007 ranks Lexington as the
11th most highly educated city in the nation for cities with a population over 250,000.  Also when high school graduates are considered
Lexington is the second most educated workforce in the nation with Seattle, Washington ranking first.

Recreational and Regional Attractions
Recreational facilities and regional attractions enhance an area’s quality of life and generate additional employment.  The Lexington MSA offers
numerous historical, cultural, and recreational options for both residents and visitors.

Lexington is home to many thriving arts organizations including a professional orchestra, two ballet companies, professional theatre, and
several museums including a basketball museum, several choral organizations and a highly respected opera program at the University of
Kentucky. In addition, there are several events and fairs that draw people from throughout the Bluegrass.


Mayfest is a free outdoor festival that takes place annually over Mother's Day weekend. Held in Gratz park between the Carnegie Center and
Transylvania University, the festival typically features up to 100 art and craft booths, live entertainment throughout the weekend, food,
children's activities, adult activities and literary events, free carriage rides, a traditional Morris and Maypole dance and various demonstrations.
Taking part the first full weekend of June is the Festival of the Bluegrass, Kentucky's oldest bluegrass music festival. It includes three stages for
music and a "music camp" that teaches the bluegrass music to school children. Also in June is the popular Broadway review presented by UK
Opera Theatre, "It's A Grand Night for Singing!"

Lexington has over 100 parks ranging in size from the 0.20-acre Smith Street Park to the 659-acre Masterson Station Park.  There are also six
public golf courses at Avon, Kearney Links, Lakeside, Meadowbrook, Tates Creek and Picadome.

Lexington is home to two historic horse racing tracks. Keeneland; which has sported live races in April and October since 1936, and The Red
Mile Harness Track, the oldest horseracing track in the city, and second oldest in the nation. The Kentucky Horse Park, located along scenic Iron
Works Pike, is a relatively late-comer to Lexington, opening in 1978. It is a working horse farm and an educational theme park.


The University of Kentucky is by far Lexington's most popular sports team. The school fields 22 varsity sports teams, most of which compete in
the Southeastern Conference. The Kentucky Men's Basketball team has won 8 NCAA Championships and is the winningest program in college
basketball history. Lexington's only other collegiate team; the Transylvania University Pioneers compete in NCAA Division III athletics.  
Lexington is also home to the Lexington Legends, a Class A minor league affiliate of the Houston Astros.

There are numerous parks and attractions in Winchester, the site of the subject as well.  The Bluegrass Heritage Museum is located in
Winchester.  Housed in the historic Guerrant Mission Clinic and Hospital in Winchester, the Bluegrass Heritage Museum examines regional
history through engaging and innovative exhibits and the Leeds Center for the Arts was built in 1925, and renovated in the mid 1980’s.  This
theater offers cultural and community events including plays, musicals, concerts, classes, seminars and children’s programming.
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.  


Sector Employment

The chart below compares the employment composition of the Lexington area with that of the state of Kentucky.  Total employment is broken
down into the following sectors:  Mining/Logging/Construction, Manufacturing, Trade/Transportation/ Utilities (TTU), Information, Financial,
Services, Education/Health Services, Leisure/Hospitality, Other Services, and Government.  


Overall, the sector employment is balanced and the percentage sector employment of the Lexington MSA is similar to that of the state.
Industries
The major regional employers are listed below in which 9 of the top 11 top regional employers are located within the Lexington MSA.  The major
employers are consistent with the sector employment for the area.  


Unemployment
The following chart shows the historical unemployment rates for the MSA, state, and US from 2006 to 2018.  As shown, the unemployment rate
for the MSA historically has been lower than the rates of the state and nation.  The MSA’s unemployment, as well as the State and national
unemployment levels have been decreasing since 2010.


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.  

Climate
The climate of the area is comparable to other communities in the Midwest region. Generally, these areas are known for their seasonal climate,
with warm weather in the summer and cold weather in the winter.  

Transportation
Two interstate highways run through Lexington and its suburbs.  I-75 is a north-south limited access highway that passes through the eastern
portion of Lexington and connects the city with Cincinnati to the north and Knoxville to the South.  I-64 is an east-west limited access highway
that passes through the northern Lexington area and connects the city with Louisville to the west and Huntington, West Virginia to the east.  

The Transit Authority of the Lexington-Fayette Urban County Government or LexTran, is a public bus transportation system servicing
Lexington.  It operates seven days a week on eight bus routes from 5:30 a.m. to 12:30 a.m.  In addition to mainline and paratransit, LexTran
contracts with the University of Kentucky and operates four routes around the campus.  It also runs two routes to the Bluegrass Community and
Technical College campuses.  LexTran does not provide service outside the Lexington city proper due to limited funding sources.


The Bluegrass Airport (Code LEX) is a public airport that is located in Fayette County.  There are approximately 65 direct and nonstop flights
daily from the two runways of Blue Grass Airport.  Seven major airlines operate connection service at Blue Grass, including Allegiant Air,
American Eagle Airlines, Delta Air Lines, Continental Express, Northwest Airlink, United Express, and US Airways Express.  The airport is
located about 5 miles west of the Lexington CBD.

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 Lexington 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, Lexington, like 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 Lexington economy is faring better than comparable markets.  Lexington 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 Lexington 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, less new development, increased foreclosures, and overall decreased property values. The fact that unemployment levels are improving
should serve to help spur more activity for the real estate market and lead to future appreciation; however, the real estate market typically lags
other more liquid financial markets.  Housing is a primary economic indicator and historically low interest rates have spurned growth in the
housing sector while apartment vacancies have declined and rents have shown a marked increase.  The economic trends in the Lexington, KY
(MSA) suggest that investment and economic activity is increasing and should continue to do so into the future.  




Appraisal Regional Analysis
FRANKLIN COUNTY KENTUCKY

The subject not located within an MSA; therefore, it is influenced in a general manner by the economic, political, physical and social characteristics of the Lexington-Fayette
Metropolitan Statistical Area (MSA). An 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. The Lexington-Fayette Metropolitan Statistical Area covers six counties in the state of Kentucky.  These counties include Fayette, Scott,
Woodford, Bourbon, Clark, and Jessamine.

Lexington is located in the central portion of the State of Kentucky.  Lexington is located 70 miles west of Louisville, 20 miles southeast of Frankfort, the state Capital of Kentucky,
70 miles south of Cincinnati, Ohio, 150 miles west of Charleston, West Virginia, and 150 miles north of Knoxville, Tennessee.

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.

The tables and charts presented throughout the following pages include additional data that help tell the story about Louisville's economy.    

A presentation of the Lexington MSA is presented on the following page.


LEXINGTON-FAYETTE, KENTUCKY MSA MAP


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 Growth
Population growth trends influence employment growth, income levels, and many other key demand parameters analyzed in determining commercial real estate productivity.  The
table below shows the population in the Lexington MSA in comparison with the State of Kentucky and the United States.  Historical data, as well as projections, are shown.  The MSA
population is steadily increasing faster than both the state of Kentucky and the United States.  These trends are expected to continue as indicated by the 2022 population
projections.  The chart is shown below.



Local Economy:        The Bluegrass is the financial, educational, retail, health care, service, and cultural center of Central Kentucky.  Lexington-Fayette County is the merged urban
county government centered among an eight county alliance, which represents the Bluegrass Region.  The local economy is centered on the horse industry, healthcare,
technology, and higher education.  In 2014 there was more than $1,180,000,000 in horse sales.  

The world headquarters of Lexmark International is located in the MSA as well as IBM and Hewlett-Packard facilities, and a thriving biosciences community.  


The healthcare industry is the leader in economic growth in the area with all three major hospitals in Lexington planning or has started expansions at their current facilities.  The
UK Chandler Medical Center and 7 other colleges in the area are involved in medical related instruction.  

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.  
The area is anchored around the University of Kentucky, and there are 10 colleges or universities within 40 miles of Lexington.  In this area over 65,000 students are enrolled and
graduating 12,000 annually.  Census data for 2007 ranks Lexington as the 11th most highly educated city in the nation for cities with a population over 250,000.  Also when high
school graduates are considered Lexington is the second most educated workforce in the nation with Seattle, Washington ranking first.

Recreational and Regional Attractions
Recreational facilities and regional attractions enhance an area’s quality of life and generate additional employment.  The Lexington MSA offers numerous historical, cultural, and
recreational options for both residents and visitors.

Lexington is home to many thriving arts organizations including a professional orchestra, two ballet companies, professional theatre, and several museums including a basketball
museum, several choral organizations and a highly respected opera program at the University of Kentucky. In addition, there are several events and fairs that draw people from
throughout the Bluegrass.


Mayfest is a free outdoor festival that takes place annually over Mother's Day weekend. Held in Gratz park between the Carnegie Center and Transylvania University, the festival
typically features up to 100 art and craft booths, live entertainment throughout the weekend, food, children's activities, adult activities and literary events, free carriage rides, a
traditional Morris and Maypole dance and various demonstrations.
Taking part the first full weekend of June is the Festival of the Bluegrass, Kentucky's oldest bluegrass music festival. It includes three stages for music and a "music camp" that
teaches the bluegrass music to school children. Also in June is the popular Broadway review presented by UK Opera Theatre, "It's A Grand Night for Singing!"

Lexington has over 100 parks ranging in size from the 0.20-acre Smith Street Park to the 659-acre Masterson Station Park.  There are also six public golf courses at Avon, Kearney
Links, Lakeside, Meadowbrook, Tates Creek and Picadome.

Lexington is home to two historic horse racing tracks. Keeneland; which has sported live races in April and October since 1936, and The Red Mile Harness Track, the oldest
horseracing track in the city, and second oldest in the nation. The Kentucky Horse Park, located along scenic Iron Works Pike, is a relatively late-comer to Lexington, opening in
1978. It is a working horse farm and an educational theme park.


The University of Kentucky is by far Lexington's most popular sports team. The school fields 22 varsity sports teams, most of which compete in the Southeastern Conference. The
Kentucky Men's Basketball team has won 8 NCAA Championships and is the winningest program in college basketball history. Lexington's only other collegiate team; the
Transylvania University Pioneers compete in NCAA Division III athletics.  Lexington is also home to the Lexington Legends, a Class A minor league affiliate of the Houston Astros.

There are numerous parks and attractions in Winchester, the site of the subject as well.  The Bluegrass Heritage Museum is located in Winchester.  Housed in the historic Guerrant
Mission Clinic and Hospital in Winchester, the Bluegrass Heritage Museum examines regional history through engaging and innovative exhibits and the Leeds Center for the Arts
was built in 1925, and renovated in the mid 1980’s.  This theater offers cultural and community events including plays, musicals, concerts, classes, seminars and children’s
programming.
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.  


Sector Employment

The chart below compares the employment composition of the Lexington area with that of the state of Kentucky.  Total employment is broken down into the following sectors:  
Mining/Logging/Construction, Manufacturing, Trade/Transportation/ Utilities (TTU), Information, Financial, Services, Education/Health Services, Leisure/Hospitality, Other Services,
and Government.  


Overall, the sector employment is balanced and the percentage sector employment of the Lexington MSA is similar to that of the state.
Industries
The major regional employers are listed below in which 9 of the top 11 top regional employers are located within the Lexington MSA.  The major employers are consistent with the
sector employment for the area.  


Unemployment
The following chart shows the historical unemployment rates for the MSA, state, and US from 2006 to 2018.  As shown, the unemployment rate for the MSA historically has been
lower than the rates of the state and nation.  The MSA’s unemployment, as well as the State and national unemployment levels have been decreasing since 2010.


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.  

Climate
The climate of the area is comparable to other communities in the Midwest region. Generally, these areas are known for their seasonal climate, with warm weather in the summer
and cold weather in the winter.  

Transportation
Two interstate highways run through Lexington and its suburbs.  I-75 is a north-south limited access highway that passes through the eastern portion of Lexington and connects
the city with Cincinnati to the north and Knoxville to the South.  I-64 is an east-west limited access highway that passes through the northern Lexington area and connects the city
with Louisville to the west and Huntington, West Virginia to the east.  

The Transit Authority of the Lexington-Fayette Urban County Government or LexTran, is a public bus transportation system servicing Lexington.  It operates seven days a week on
eight bus routes from 5:30 a.m. to 12:30 a.m.  In addition to mainline and paratransit, LexTran contracts with the University of Kentucky and operates four routes around the
campus.  It also runs two routes to the Bluegrass Community and Technical College campuses.  LexTran does not provide service outside the Lexington city proper due to limited
funding sources.


The Bluegrass Airport (Code LEX) is a public airport that is located in Fayette County.  There are approximately 65 direct and nonstop flights daily from the two runways of Blue
Grass Airport.  Seven major airlines operate connection service at Blue Grass, including Allegiant Air, American Eagle Airlines, Delta Air Lines, Continental Express, Northwest
Airlink, United Express, and US Airways Express.  The airport is located about 5 miles west of the Lexington CBD.

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 Lexington 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, Lexington, like 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 Lexington economy is faring better than comparable markets.  Lexington 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 Lexington 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, less new development, increased foreclosures, and overall decreased
property values. The fact that unemployment levels are improving should serve to help spur more activity for the real estate market and lead to future appreciation; however, the
real estate market typically lags other more liquid financial markets.  Housing is a primary economic indicator and historically low interest rates have spurned growth in the housing
sector while apartment vacancies have declined and rents have shown a marked increase.  The economic trends in the Lexington, KY (MSA) suggest that investment and
economic activity is increasing and should continue to do so into the future.  
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