Model Case: 14-Unit A-Frame Cabin Resort in Wears Valley, Sevier County, Tennessee, SBA 504

A model feasibility case built only from public data. The parcel, borrower and operator are hypothetical; no client file or engagement data is used. The case follows the house format: at a glance, determination, program eligibility, regulatory pathway, market analysis, full cost table, operating assumptions, ten-year pro forma, DSCR by year and by month, break-even, sensitivities, valuation indication and conditions. Figures are as of October 8, 2026. Part of the glamping and short-term rental feasibility study cluster; programme detail on SBA 7(a) and 504 for glamping and cabin resorts and format detail on treehouse and A-frame resorts.

The project is not feasible as proposed. At $200 per sq ft the fourteen cabins cost $2,520,000 before hot tubs and furnishings, and with the $925,000 land parcel, a 2,000 sq ft clubhouse, the pool and the slope, septic and utility work the budget reaches $6,368,457, or $454,890 per key. At the 20 percent equity floor for a new business on a special purpose property, debt of $5,094,766 costs $449,159 a year. Stabilized NOI of $360,082 covers it 0.80x; reaching 1.25x on the proposed cost would need equity near 48 percent. Revenue is not the gap. Fourteen cabins at $295 and 54 percent occupancy gross $815,262 of lodging revenue plus cleaning and ancillary fees, about $71,064 per cabin, between AirDNA's Gatlinburg ($46,400) and Pigeon Forge ($65,200) revenue per listing. The gap is cost per key against a market whose ADR is slipping and whose listings count is contracting.

The project is feasible as restructured, subject to the conditions at the end of this page. The restructure keeps all fourteen cabins and the pool and changes three things: the cabins are built on an Avrame kit plus local labour basis at $150 per sq ft, inside the HomeBlue range and conditioned on executed bids; the clubhouse is deferred to a phase two triggered by trailing-twelve-month DSCR of 1.25x or better; and equity rises to 37.0% of cost, including a $90,000 funded reserve for the first year. Total project cost falls to $5,159,693, debt to $3,250,607 and debt service to $286,577. Stabilized DSCR is 1.26x in year 3 and 1.29x in year 4; year 1 is 0.95x, which the reserve carries.

The eight-cabin phase one the research pack suggested was tested and rejected. On the same land, septic, pool and site infrastructure, eight cabins gross $568,512 against fixed costs that barely move, and year-3 DSCR is 0.52x. Fourteen keys are what the $925,000 parcel and the 4,200 gallon per day wastewater system need to carry; phasing the cabins makes coverage worse, not better. The lever that works is cost per cabin and equity, and the clubhouse is the only element the evidence supports deferring.

USDA B&I was considered as an alternative. Wears Valley is unincorporated and the county's largest town, Sevierville, is below the 50,000 threshold on the 2020 Census, so the parcel is likely rural; B&I would carry an 85 percent guarantee and a 25 percent equity tier for a new construction business, which the restructured equity already exceeds. 504's fixed debenture rate is the reason to prefer it here.

Wears Valley is unincorporated, so Sevier County's zoning resolution (updated December 15, 2025) governs rather than a city ordinance. Uses other than single-family and duplex homes need Planning Commission site plan approval, and a 2025 Wears Valley Road rezoning from R-1 to C-1 is the precedent if the base district does not permit a multi-unit overnight resort. The Critical Slope Overlay under Section 313 applies to all properties with an average slope of 30 percent or greater, and a rewrite of the critical slope and hillside overlay rules, with site plan stages, driveway and parking grade standards and a five-foot Firewise zone around building envelopes, went to the County Commission in August 2026; its adopted text is a condition. Tennessee's Short-Term Rental Unit Act (T.C.A. 13-7-601 to 606) grandfathers existing STR uses and gives a new build no protection against current zoning.

Wastewater is the gating engineering item. TDEC rule 0400-48-01-.15 sizes alternative systems at 150 gallons per bedroom per day, so 28 bedrooms produce 4,200 gallons before the pool, far above the 750 gallon threshold for a large system needing site-specific design; Sevier is a contract county running its own septic programme, and a decentralized treatment system would need a State Operating Permit under 0400-40-06. The restructured budget carries $300,000 for the system as a model assumption pending the engineered design.

The county requires an annual STR permit for every unit outside city limits since January 1, 2024, $250 for 12 occupants or fewer with a yearly fire marshal inspection. Taxes on the guest are 12.75 percent: 9.75 percent combined sales tax and the 3 percent county lodging tax, remitted monthly to the Trustee. Property tax is modelled at the 40 percent commercial assessment ratio and the FY2026-27 rate of $0.87 per $100, about $18,000 a year, with the prior $1.48 rate as a sensitivity.

Demand. Great Smoky Mountains National Park recorded 11,527,939 recreation visits in 2025, down 5.4 percent in a year with a 43-day partial shutdown, after a 2024 counting-method change; the series runs 12,547,743 (2019), 14,161,548 (2021, the record), 12,937,633 (2022), 13,297,647 (2023) and 12,191,834 (2024). The monthly curve is the revenue shape: in 2024, January ran 407,804 visits and October 1,510,684, a 3.7x swing, with June and July near 1.38 million. Sevier County visitor spending was a record $3,929,693,370 in 2024, third of Tennessee's 95 counties, with $251.7 million of state and $187.2 million of local tax receipts; lodging took $1.47 billion of the spending. Dollywood drew 3.14 million visitors in 2024 on the Themed Entertainment Association's estimate; the park's own figure for 2025 is nearly four million, and the model uses the independent figure.

Supply and saturation. AirDNA's public pages show Pigeon Forge at 3,120 active listings (down 26.9 percent), 56 percent occupancy, a $344 ADR (down 4.8 percent) and $192 RevPAR (down 2.1 percent) to August 2026, and Gatlinburg at 7,032 listings (down 7.7 percent), 53 percent occupancy and a $347 ADR (up 1.7 percent) to June 2026. AirROI puts Pigeon Forge at 45 percent occupancy and a $338 ADR for 2025 with a June peak of 58.1 percent and a February trough near 37 percent; the city's 2025 lodging overview puts cabins and chalets at a $271 ADR and 55 percent occupancy, with summer at 68 percent, fall 66 percent and winter 49 percent. The county assessor identified about 13,000 overnight rentals in 2023. Measured supply is contracting, occupancy is stable in the low fifties and ADR is flat to falling: a mature, price-competitive market. The named competitive set in Wears Valley is The Preserve Resort (cabins from one to twelve bedrooms), On Higher Ground (cabin development built 2005 to 2008), an eight-cabin resort on Wears Valley Road with five traditional and three treehouse cabins, Black Bear Ridge Cabin Resort, Shagbark (gated, new construction with pool) and individual A-frames such as Whiskey Sunrise; none publishes dated seasonal rates, so the rate shop is a condition. Honeymoon Hills and Shagbark show new cabin-community construction in the valley, and no permitted-unit pipeline register exists.

ADR and occupancy. New two-bedroom A-frames with hot tubs are modelled at $295, above the city's $271 cabin average and below the AirDNA whole-market $344, with monthly occupancy shaped on the market's June peak and February trough and averaging 54.1%, between AirROI's 45 percent and AirDNA's 56 percent. Cleaning fees are modelled as revenue at $150 per stay on a 2.7-night average stay (Cairn Consulting, 2025), with $10 per night of hot tub, pet and firewood fees. The ramp is a model assumption: 85 percent of stabilized occupancy in year 1, 95 percent in year 2, stabilized from year 3, ADR flat for two years and 3 percent a year thereafter.

Stabilized revenue in year-1 dollars is $994,896 on 2,764 occupied nights, of which $179,634 is cleaning and ancillary fees.

The 504 fees are modelled at 2.0 percent of the debenture (the 0.50 percent SBA guaranty fee plus CDC processing, a model assumption) and 1.0 percent bank origination; the FY2027 rural waiver would remove the SBA portion if SBA treats the parcel as rural.

Payroll is built from BLS Occupational Employment and Wage Statistics for the East Tennessee nonmetropolitan area, which includes Sevier County: maids and housekeeping cleaners $12.24 mean (May 2022) trended 3 percent a year to $14.20 at a 2027 opening; lodging managers $62,000 a year (May 2023) trended to $68,000; maintenance and repair at the Knoxville MSA installation and maintenance group mean of $26.96 (May 2024). A 22 percent burden applies.

Distribution and card processing is 9.0 percent of lodging revenue (60 percent of bookings through platforms at a blended 13 percent, 2.9 percent processing on direct bookings). Utilities are $42,000 a year, anchored to Sevier County Electric System's commercial GSA rate of 9.919 cents per kWh (effective September 1, 2026) for fourteen hot-tub cabins and the pool, plus propane, water, internet and waste; pool operation and chemicals $15,000; insurance $42,000 as a model assumption pending a quote; property tax $18,000. Marketing is 3.5 percent and administrative and general 4.5 percent of revenue; repairs and maintenance (including hot tub service) 4.0 percent and supplies 3.0 percent of lodging revenue; the replacement reserve is 3.0 percent of revenue. Expenses grow 3 percent a year. Lodging and sales taxes are a pass-through and are excluded. Stabilized NOI margin is 36.2%.

The weakest three consecutive months are Dec, Jan, Feb: NOI of $50,248 against debt service of $71,644, a coverage of 0.70x. Year-round cabins with hot tubs hold winter occupancy near 40 to 46 percent in this market, which is why the seasonal trough is far shallower than at a tent resort, and why the reserve requirement is one year rather than a standing winter reserve.

With revenue scaled proportionally, the restructured project covers debt service at 48.7% occupancy and reaches 1.25x at 53.9%, against 54.1% modelled and 45 to 56 percent in the market depending on vendor. As proposed, break-even is 60.6%, above anything the market has recorded.

All rows start from the restructured base unless labelled otherwise.

Occupancy is the binding variable: the five-point spread between AirDNA and AirROI for the same market takes year-3 coverage below 1.1x on its own, and combined with a 10 percent ADR decline it takes the project below 1.0x. Cost, rate and amortization risks are each absorbable at the restructured equity level. The eight-cabin phase is the worst row in the table because the land and infrastructure are fixed and the revenue is not.

No cabin-resort sale with a published cap rate exists in the public record. The indications below apply hotel and campground evidence to restructured year-3 NOI of $360,082.

At every rate the indicated value is below total project cost, which is the going-concern appraiser's problem on a special purpose new build and the reason the CDC and the bank will look to the equity position and the DSCR rather than to loan-to-value alone. HVS's H1 2026 hotel sales averaged $137,000 per key against $368,549 per key here, a comparison that argues for the kit-plus-labour cost basis and against the $200 per sq ft case.

Prepared by Michal Mohelsky, J.D., FMVA, Practicing Affiliate of the Appraisal Institute. Model case aligned with SBA SOP 50 10 8.1, under USPAP discipline. MMCG Invest, LLC, 27 Maiden Lane, Suite 625, San Francisco, CA 94108.