The subject is influenced in a general manner by the economic, political, physical and social characteristics of the
Lexington-Fayette Metropolitan Statistical Area (MSA). A MSA is a geographic area with a significant population nucleus,
along with any adjacent communities that have a high degree of economic and social integration with that nucleus. 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.

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 2014 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 2008 there was more than $750,000,000 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 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, Construction, Manufacturing, Trade, Transportation, Utilities
(TTU), Information, Finance, Insurance, Real Estate (FIRE), Services, and Government.  

Appraisal Regional Analysis


In 2005, the population in Franklin County was 48,010. The census revealed a population of 47,687 in 2000, and a population of 43,781 in 1990. The total change in
population between 1990 and 2000 was 8.92% indicating an annual average growth rate of 0.89%. By 2010, the population is projected to be 48,174, representing a
change of 0.34% from 2005. The projected annual average population growth rate between 2005 and 2010 is 0.07%. The annual average growth rate based on future
projections appears to be decreasing as compared to historical growth rate figures.

Males comprise 48.52% of the current population, while females comprise the remaining 51.48%. Of the total population, 22.27% are under the age of 18 years. Another
67.55% are between the ages of 18 and 64, an indication of the potential workforce in the area. The remaining 12.77% of the people are aged 65 or older. In 2005, the
median age of the population in the identified market was 38.6 years, as compared to the 36.3 year median age reported for the US base geography. The population
density was 226.4 people per square mile.


In 2005, there were 19,926 households in Franklin County. The Census revealed household counts of 17,385 in 1990 and 19,907 in 2000.  The total change in households
was 14.51% over that 10 year period. The indicated average annual growth rate in households was 1.45%.  By 2010, the number of households is projected to be 19,980
indicating a change of 0.27% from 2005. Between 2005 and 2010, the indicated average annual household growth rate is expected to be 0.05%.   The annual average
growth rate based on future projections appears to be decreasing as compared to historical growth rate figures.

In 2005, the average household size was 2.32 persons.  In 1990, the average household size was 2.44, as compared to 2.30 in 2000 indicating that average household size
is decreasing during that period.

In 2005, the median number of years in residence was 3.8 as compared to 3.3 years in the US Index Base. The average number of vehicles per household was 1.8. The
number of households without a vehicle was 1,238.


In 2005, the median household income in Franklin County was $43,584. The US index base had a reported median household income of $46,350. In 2000, the median
household income was $27,443 as compared to $40,018 in 1990.  The total change in median household income between 1990 and 2000 was 45.82%. The indicated
average annual growth rate was 4.58%.  By 2010, the median household income is projected to be $48,494, indicating a projected total growth rate of 11.27% from 2005.   
The projected annual average growth equates to 2.25%.   The annual average growth rate based on future projections appears to be decreasing as compared to historical
growth rate figures.

In 2005, the per capita income was $24,051, as compared to the US base which reported a per capita income of $23,594.  In 2005, the average household income was
$56,706, as compared to the US base which reported an average household income of $61,553.  In 2005, 27.98% of all households reported an average household income
of less than $24,999. In addition, 47.38% of households reported an average income of between $25,000 and $74,999, and 18.60% averaged between $75,000 and
$124,999. The remaining 3.38% of all households reported an average household income exceeding $125,000.


In 2000, the median housing value in Franklin County was $91,440 representing a change of 51.89% from the reported median housing value of $60,201 in 1990.  This
comparison indicates annual average growth rates in housing values of 5.19%.  During that same period the US median housing value ranged from $78,382 in 1990 to
$115,194 in 2000.

In 2005, the total reported occupancy level in all housing units was 19,926, or 90.22%. Of that total, there were 12,723 reported owner occupied housing units and 7,203
renter occupied units.  Owner occupied units represent 57.61% of all occupied housing units as compared to the 32.61% occupied by renters.  Between 1990 and 2000, the
reported occupancy level in all housing units ranged from 17,385 (94%) to 19,907 (93%). The annual average occupancy level in all housing units appears to be

In 1990, the Census revealed the average rent in the neighborhood was $286, as compared to $406 in 2000. These figures indicate rental rates have increased during that


In 2005, there were 25,517 people over the age of 16 in Franklin County. Of that total, 96.44% were employed, 3.23% were unemployed, 33.74% were not in the labor force
and 0.22% were in the armed forces. In 2000, unemployment was reported to be 4.08%, as compared to 3.01% in 1990.

In 2005, there were 43,171 employees (daytime population) and 2,278 business establishments.  In 2000, white collar workers comprised 63.22% of the employed
workforce, while those employed in blue collar occupations comprised the remaining 37.00%. In 2000, manufacturing jobs accounted for 8.19% of the employed workforce
and, service industry jobs accounted for 29.95% of the workforce.

In 2000, the average time traveled to work was 16 minutes, as compared to 11 minutes in 1990.  During that period average travel time to work changed by 50.9%.  In
comparison, the average travel time reported in the US base area was 21 minutes in 2000.


In 2005, 83.77% of the population over the age of 25 had earned a high school diploma in Franklin County, while 16.23% did not earn a high school diploma. In comparison,
85.31% of the population over the age of 25 in the US index base earned a high school diploma.  In 1990, the population attaining a high school diploma was 75.90%, as
compared to 78.79% in 2000.  These figures indicate high school graduation rates within Franklin County have been increasing since 2000.

In 2005, a total of 20.87% of the population over 25 in Franklin County attended some college courses, while 4.46% earned an Associates Degree. Another 16.13% earned
a Bachelor's degree, and 9.51% earned a Graduate degree.  In comparison, the index base of US reported 19.78% of the population attended some college courses, while
7.37% earned an Associates degree. Within the US base, another 17.64% earned a Bachelor's degree, and 10.09% earned a Graduate degree.
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