<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Date of Report: July 22, 1997
- ----------------------------
(Date of earliest event reported)
GS Mortgage Securities Corporation II
(Exact name of registrant as specified in its charter)
Delaware 33-99774-02 22-3442024
- -------------------------------------------------------------------------------
(State or Other (Commission (I.R.S. Employer
Jurisdiction of File Number) Identification No.)
Incorporation
85 Broad Street, New York, N.Y. 10004
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 902-1000
<PAGE>
ITEM 5. OTHER EVENTS.
Attached as exhibits to this Current Report are (i) the
consent of Koeppel Tener Real Estate Services, Inc. (the "Koeppel Consent")
furnished to the Registrant by Koeppel Tener Real Estate Services, Inc. in
respect of the Registrant's proposed offering of Commercial Mortgage
Pass-Through Certificates, Series 1997-GL I (the "Certificates"); (ii) the
consent of Cushman & Wakefield, Inc. (the "Cushman & Wakefield Consent")
furnished to the Registrant by Cushman & Wakefield, Inc.
in respect of the Registrant's proposed offering of the Certificates; and
(iii) certain property appraisals (the "Property Appraisals") furnished to the
Registrant by Cushman & Wakefield, Inc. in respect of the Registrant's
proposed offering of the Certificates.
The Certificates will be offered pursuant to a Prospectus
and related Prospectus Supplement (together, the "Prospectus"), which will be
filed with the Commission pursuant to Rule 424 under the Securities Act of
1933, as amended (the "Act"). The offer and sale contemplated by the Prospectus
of the Certificates will be registered pursuant to the Act under the
Registrant's Registration Statement on Form S-3 (No. 333-27083) (the
"Registration Statement"). The Registrant hereby incorporates the Koeppel
Consent, the Cushman & Wakefield Consent and the Property Appraisals by
reference in the Prospectus and the Registration Statement.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits
Item 601(a) of Regulation
S-K Exhibit No. Description
------------------------- -----------
23.1 Consent of Koeppel Tener Real Estate
Services, Inc., dated July 1, 1997
23.2 Consent of Cushman & Wakefield, Inc.,
dated July 15, 1997
99.1 1760 Market Street Appraisal
99.2 Dabney Area Properties Appraisal
99.3 Arboretum VI and VII Appraisal
99.4 Bennett Park Appraisal
99.5 Cadillac Fairview (Update) Appraisal
99.6 Campus Point Appraisal
99.7 Century Plaza Towers Appraisal
99.8 City Center Appraisal
99.9 Commerce Center Appraisal
99.10 East Gate Corporate Center Appraisal
99.11 Golden East Crossing Appraisal
99.12 Hookston Square Appraisal
99.13 Iron Run Corporate Appraisal
99.14 Keystone Industrial Park Appraisal
99.15 Masons Mill Business Park Appraisal
99.16 Northpark Mall Appraisal
99.17 North Ranch Plaza Appraisal
99.18 Oakwood Center Appraisal
99.19 One Northwest Centre Appraisal
99.20 Plaza 1900 Appraisal
99.21 San Valente Building Appraisal
<PAGE>
99.22 Stevens Creek Appraisal
99.23 Sun Buildings Appraisal
99.24 Swedesford Square Appraisal
99.25 1511-1515 Third Avenue Appraisal
99.26 Westpark Corporate Center Appraisal
99.27 380 Madison Avenue Appraisal
99.28 Dover Mall and Commons Appraisal
99.29 Downtown Plaza Appraisal
99.30 Esplanade Shopping Mall Appraisal
99.31 Galleria at White Plains Appraisal
99.32 Greenwood Corporate Center Appraisal
99.33 Lakebrooke Pointe Appraisal
99.34 Main Street Centre Appraisal
99.35 Maschellmac I, II, III, IV Appraisal
99.36 Montehiedra Town Center Appraisal
99.37 One Montvale Avenue Appraisal
99.38 North Dekalb Mall Appraisal
99.39 The Ritz Plaza Appraisal
99.40 Shannon Southpark Mall Appraisal
2
<PAGE>
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on behalf of
the Registrant by the undersigned thereunto duly authorized.
GS MORTGAGE SECURITIES CORPORATION II
By: GS Mortgage Securities Corporation II
-----------------------------------------
Name: /s/ Sheridan Schechner
Title: Managing Director
Date: July 22, 1997
<PAGE>
Exhibit Index
-------------
Item 601(a) of Regulation
S-K Exhibit No. Description
------------------------- -----------
23.1 Consent of Koeppel Tener Real Estate
Services, Inc., dated July 1, 1997
23.2 Consent of Cushman & Wakefield, Inc.,
dated July 15, 1997
99.1 1760 Market Street Appraisal
99.2 Dabney Area Properties Appraisal
99.3 Arboretum VI and VII Appraisal
99.4 Bennett Park Appraisal
99.5 Cadillac Fairview (Update) Appraisal
99.6 Campus Point Appraisal
99.7 Century Plaza Towers Appraisal
99.8 City Center Appraisal
99.9 Commerce Center Appraisal
99.10 East Gate Corporate Center Appraisal
99.11 Golden East Crossing Appraisal
99.12 Hookston Square Appraisal
99.13 Iron Run Corporate Appraisal
99.14 Keystone Industrial Park Appraisal
99.15 Masons Mill Business Park Appraisal
99.16 Northpark Mall Appraisal
99.17 North Ranch Plaza Appraisal
99.18 Oakwood Center Appraisal
99.19 One Northwest Centre Appraisal
99.20 Plaza 1900 Appraisal
99.21 San Valente Building Appraisal
<PAGE>
99.22 Stevens Creek Appraisal
99.23 Sun Buildings Appraisal
99.24 Swedesford Square Appraisal
99.25 1511-1515 Third Avenue Appraisal
99.26 Westpark Corporate Center Appraisal
99.27 380 Madison Avenue Appraisal
99.28 Dover Mall and Commons Appraisal
99.29 Downtown Plaza Appraisal
99.30 Esplanade Shopping Mall Appraisal
99.31 Galleria at White Plains Appraisal
99.32 Greenwood Corporate Center Appraisal
99.33 Lakebrooke Pointe Appraisal
99.34 Main Street Centre Appraisal
99.35 Maschellmac I, II, III, IV Appraisal
99.36 Montehiedra Town Center Appraisal
99.37 One Montvale Avenue Appraisal
99.38 North Dekalb Mall Appraisal
99.39 The Ritz Plaza Appraisal
99.40 Shannon Southpark Mall Appraisal
<PAGE>
EXHIBIT 23.1
July 1, 1997
GS Mortgage Securities Corporation II
c/o Goldman, Sachs & Co.
85 Broad Street
New York, NY 10004
Attn: J. Theodore Borter
We consent to the inclusion in any form (whether in paper or digital
format, including any electronic media such as CD-ROM or the
Internet) in the Prospectus Supplement relating to the GS Mortgage
Securities Corporation II Commercial Mortgage Pass-Through
Certificates, Series 1997-GL 1, of our appraisal with respect to the
properties listed below, and we consent to the reference to our firm
under the caption "Experts" in such Prospectus Supplement.
The Ritz Plaza: March 31, 1997
380 Madison Avenue: June 23, 1997
Sincerely,
Koeppel Tener Real Estate Services, Inc.
By: /s/ Wayne A. Nygard
-----------------------------------
Title: Senior Vice President
-----------------------------------
<PAGE>
EXHIBIT 23.2
July 15, 1997
CUSHMAN & WAKEFIELD CONSENT
GS Mortgage Securities Corporation II
c/o Goldman, Sachs & Co.
85 Broad Street
New York, N.Y. 10004
Attn: J. Theodore Borter
We consent to the inclusion in any form (whether in paper or digital
format, including any electronic media such as CD-ROM or the
Internet) in the Prospectus Supplement relating to the GS Mortgage
Securities Corporation II Commercial Mortgage Pass-Through
Certificates, Series 1997-GL 1, of our complete appraisal (or an
agreed-upon summary for CAP and AAPT) with respect to the properties
listed below, and we consent to the reference to our firm under the
caption "Experts" in such Prospectus Supplement.
<TABLE>
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Century Plaza Towers: December 6, 1996 Montehiedra Town Center March 7, 1997
Cadillac Fairview Whitehall Pool
Dover Commons: April 17, 1996 1511-1515 Third Avenue: August 1, 1996
Dover Mall: April 17, 1996 Bennett Park: July 26, 1996
Esplanade: April 25, 1996 City Center: July 31, 1996
Galleria at White Plains: May 14, 1996 Downtown Plaza: August 1, 1996
Golden East Crossing Mall: June 1, 1996 Hookston Square: July 24, 1996
North DeKalb Mall: April 18, 1996 North Ranch Plaza: July 27, 1996
Northpark Mall: June 1, 1996 One Montvale Avenue: July 25, 1996
Shannon Southpark Mall April 18, 1996 One Northwest Center: July 25, 1996
San Valente Building: July 26, 1996
Stevens Creek: July 26, 1996
Cadillac Fairview (Update) November 20, 1996 Sun Buildings: July 26, 1996
CAP Pool: AAPT Pool
Arboretum VI and VII July 1, 1997 1760 Market Street: July 1, 1997
Campus Point: July 1, 1997 50 and 52 Swedesford Square: July 1, 1997
Commerce Center: July 1, 1997 East Gate Corporate Center: July 1, 1997
Dabney Area Properties: July 1, 1997 EM- Venture (Keystone Industrial
Park): July 1, 1997
Greenwood Corporate Center: July 1, 1997 Iron Run Properties: July 1, 1997
Lakebrooke Pointe: July 1, 1997 Main Street Center: July 1, 1997
Oakwood Center: July 1, 1997 Maschellmac I-IV: July 1, 1997
Plaza 1900: July 1, 1997 Westpark Corporate Center: July 1, 1997
Masons Mill July 1, 1997
- -------------------------------------------------------------------------------------------------------------------
Sincerely,
Cushman & Wakefield, Inc.
By: /s/ Mathew Mondanile
--------------------------------
Title: Senior Director
--------------------------------
</TABLE>
This CD ROM contains an electronic version of appraisals for the Mortgaged
Properties in PDF format and forms part of the paper version of the Prospectus
Supplement. The information contained in this CD ROM does not appear elsewhere
in paper form in this Prospectus Supplement and must be considered as part of,
and together with, the information contained elsewhere in this Prospectus
Supplement and the Prospectus. The information contained in this CD ROM has
been filed by the Seller with the Securities and Exchange Commission as part
of a Current Report on Form 8-K, which is incorporated by reference in this
Prospectus Supplement, and is also available through the public reference
branch of the Securities and Exchange Commission. Defined terms used in this CD
ROM but not otherwise defined therein shall have the respective meanings
assigned to them in the paper portion of the Prospectus Supplement and the
Prospectus. All of the information contained in this CD ROM is subject to the
same limitations and qualifications contained in this Prospectus Supplement and
the Prospectus. Prospective investors are strongly urged to read the paper
portion of this Prospectus Supplement and the Prospectus in its entirety prior
to accessing this CD ROM. If this CD ROM was not received in a sealed package,
there can be no assurances that it remains in its original format and should
not be relied upon for any purpose. Prospective investors may contact J.
Theodore Borter of Goldman, Sachs Co. at (212)902-3857 to receive an original
copy of the CD ROM.
<PAGE>
================================================================================
COMPLETE APPRAISAL
OF REAL PROPERTY
1760 Market Street
1742-48 Market Street
Philadelphia, Pennsylvania
================================================================================
IN A SELF-CONTAINED REPORT
As of July 1, 1997
Prepared For:
Goldman Sachs Mortgage Company
85 Broad Street
New York, New York 10004
Prepared By:
Cushman & Wakefield of Pennsylvania, Inc.
Valuation Advisory Services
Two Logan Square - 20th Floor
Philadelphia, Pennsylvania 19103
<PAGE>
Cushman & Wakefield of Pennsylvania, Inc. CUSHMAN &
Two Logan Square WAKEFIELD(R)
Philadelphia, PA 19103 A ROCKEFELLER GROUP COMPANY
(215) 963-4000
July 1, 1997
Mr. Sheridan Schechner
Managing Partner
Goldman Sachs Mortgage Company
85 Broad Street
New York, New York 10004
Re: Complete Appraisal of Real Property
1760 Market Street
1742-48 Market Street
Philadelphia, Pennsylvania
Dear Mr. Schechner
In fulfillment of our agreement as outlined in the Letter of Engagement,
Cushman & Wakefield of Pennsylvania, Inc. is pleased to transmit our
self-contained appraisal report estimating the market value of the leased fee
estate in the subject property.
The value opinion reported below is qualified by certain assumptions,
limiting conditions, certifications, and definitions, which are set forth in the
report. We particularly call to your attention those unusual limiting conditions
dealing with the assumption that all pending lease agreements are executed
according to the terms provided by ownership.
This report was prepared for Goldman Sachs Mortgage Company and is
intended only for its specified use. It may not be distributed to or relied upon
by other persons or entities without written permission of Cushman & Wakefield
of Pennsylvania, Inc.
This appraisal report has been prepared in accordance with our
interpretation of your institution's guidelines, the regulations of OCC and the
Uniform Standards of Professional Appraisal Practice, including the Competency
Provision and The Financial Institutions Reform, Recovery and Enforcement Act
(FIRREA) and the guidelines of federal regulatory agencies.
The property was inspected by and the report was prepared by John J.
Lynch, MAI under the supervision of John B. Rush, MAI.
<PAGE>
Mr. Sheridan Schechner
Goldman Sachs Mortgage Company Page 2 July 1, 1997
Based on our complete appraisal as defined by the Uniform Standards of
Professional Appraisal Practice, we have formed an opinion that the market value
of the leased fee estate in the referenced property, subject to the assumptions,
limiting conditions, certifications, and definitions, as of July 1, 1997, was:
EIGHT MILLION FIVE HUNDRED THOUSAND DOLLARS
$8,500,000
This letter is invalid as an opinion of value if detached from the report,
which contains the text, exhibits, and an Addenda.
Respectfully submitted,
Cushman & Wakefield of Pennsylvania, Inc.
John J. Lynch, MAI
State Certified Appraiser No.GA-000485-L
John B. Rush, MAI
State Certified Appraiser No. GA-000331-L
<PAGE>
SUMMARY OF SALIENT FACTS AND CONCLUSIONS
================================================================================
Property Name: 1760 Market Street
Location: 1742-48 Market Street
Philadelphia, Pennsylvania
General Overview: This is modern 14-story
office building built in
1981 on a 0.21-acre site.
The building contains
123,546 rentable square feet
of building area. The
building, with structural
steel frame and plate glass
facade, is modern in
appearance and functional in
design. On the effective
date of appraisal, occupancy
stood at 99.4 percent.
Interest Appraised: Leased Fee
Date of Value: July 1, 1997
Date of Inspection: June 13, 1997
Ownership: Atlantic American Properties
Highest and Best Use: Continued Multi-tenant office
utilization
Value Indicators
Sales Comparison Approach: $8,000,000 to $8,600,000
Value Per Square Foot: $64.76 to $69.62
Indicated Value: $8,600,000
Income Capitalization Approach
Estimated Market Rental Rate: $17.75/SF
Stabilized Vacancy Rate: 3.0%
Effective Gross Income: $17.22/SF
Operating Expenses $ 7.84/SF
Real Estate Taxes: $ 2.20/SF
Net Operating Income: $885,548
Estimated Vacancy Between Tenants 6 months
Free Rent: -0- months
Probability of Renewal: 65%
Tenant Improvement Allowance
Shell Space: $25.00 per square foot
New Tenants in Previously
Occupied Space $18.00 per square foot
Renewal Tenants in Same Space- $ 8.00 per square foot
Estimated Market Rental Growth Rate Yr. 1 - 3.5%
Yr. 2 - 5.0%
Yr. 3 - 7.0%
Yr. 4 - 5.0%
Yr. 5 - 10 - 3.5%
Estimated Expense Growth Rate: 3.5%
<PAGE>
Summary of Salient Facts and Conclusions
================================================================================
Estimated Real Estate Tax Growth Rate: 3.5%
Reversion Year Capitalization Rate 10.5%
Transaction Costs in Reversion Sale: 3.0%
Discount Rate: 11.5%
Indicated Value: $8,500,000
Value Conclusion: $8,500,000
Value Per Square Foot: $68.81 (Net Rentable Area)
Implicit Capitalization Rate: 10.4%
Marketing Time: 6 months
Special Assumptions Affecting Valuation:
1. We have assumed all pending lease agreements are executed according to the
terms provided by ownership.
2. Please refer to the complete list of assumptions and limiting conditions
included at the end of this report.
<PAGE>
PHOTOGRAPHS OF SUBJECT PROPERTY
================================================================================
[PHOTO]
Subject Property Viewed Southeast
<PAGE>
Photographs of Subject Property
================================================================================
[PHOTO]
Market Street Viewed East
[PHOTO]
Eighteenth Street Viewed North
<PAGE>
Photographs of Subject Property
================================================================================
[PHOTO]
View of Main Entrance Lobby
<PAGE>
TABLE OF CONTENTS
Page
INTRODUCTION .............................................................. 1
Identification of Property .......................................... 1
Property Ownership and Recent History ............................... 1
Purpose and Intended Use of the Appraisal ........................... 1
Extent of the Appraisal Process ..................................... 1
Date of Value and Property Inspection ............................... 2
Property Rights Appraised ........................................... 2
Definitions of Value, Interest Appraised, and
Other Pertinent Terms ............................................... 2
Legal Description ................................................... 3
REGIONAL ANALYSIS ......................................................... 4
MARKET ANALYSIS ........................................................... 9
PROPERTY DESCRIPTION ...................................................... 27
Site Description .................................................... 27
Improvements Description ............................................ 28
REAL PROPERTY TAXES AND ASSESSMENTS ....................................... 32
ZONING .................................................................... 35
HIGHEST AND BEST USE ...................................................... 36
VALUATION PROCESS ......................................................... 38
SALES COMPARISON APPROACH ................................................. 40
INCOME CAPITALIZATION APPROACH ............................................ 45
RECONCILIATION AND FINAL VALUE ESTIMATE ................................... 59
ASSUMPTIONS AND LIMITING CONDITIONS ....................................... 60
CERTIFICATION OF APPRAISAL ................................................ 62
ADDENDA ................................................................... 63
<PAGE>
INTRODUCTION
================================================================================
Identification of Property
The subject of this appraisal is a 14-story office building called 1760
Market Street in the central business district of Philadelphia, Pennsylvania. It
is an attractive and modern complex located at the corner of 17th and Market
Streets. The street address is 1742-48 Market Street.
This modern 14-story building was built in 1981 on a 0.21 acre site. The
building contains 123,546 net rentable square feet. The building is modern in
appearance and functional in design. On the effective date of appraisal,
occupancy stood at 99.6 percent.
Property Ownership and Recent History
The property was built in 1981 by an affiliated entity of its current
owner, Atlantic American Properties. The subject is part of a portfolio of
property previously owned by Bell Atlantic Properties. Atlantic American
Properties acquired Bell Atlantic Properties as a going concern.
Purpose and Intended Use of the Appraisal
The purpose of this appraisal is to estimate the market value of a leased
fee estate on July 1, 1997. The appraisal is to be used as a supporting document
in a proposed financing by our client, Goldman Sachs Mortgage Company.
Extent of the Appraisal Process
In the process of preparing this appraisal, we:
- Inspected the exterior of the building and the site improvements and
a representative sample of tenant spaces with Peter Corcoran, the
manager;
- Interviewed Peter Corcoran of the property management company,
Atlantic American Properties;
- Reviewed leasing policy, concessions, tenant build-out allowances,
and history of recent rental rates and occupancy with the building
manager;
- Reviewed a detailed history of income and expense and a budget
forecast for 1997 including the budget for planned capital
expenditures and repairs;
- Conducted market research of occupancies, asking rents, concessions
and operating expenses at competing buildings which involved
interviews with on-site managers and a review of our own data base
from previous appraisal files;
- Prepared an estimate of stabilized income and expense (for
capitalization purposes);
- Conducted market inquiries into recent sales of similar buildings to
ascertain sales price per square foot, effective gross income
multipliers and capitalization rates. This process involved
telephone interviews with sellers, buyers and/or participating
brokers. (See detailed sales write-ups in Addenda for more complete
information on the verification process.);
- Prepared Sales Comparison and Income Capitalization Approaches to
value.
================================================================================
-1-
CUSHMAN &
WAKEFIELD(R)
<PAGE>
Introduction
================================================================================
Date of Value and Property Inspection
The date of value is July 1, 1997. We inspected the property on June 13,
1997.
Property Rights Appraised
Leased fee estate.
Definitions of Value, Interest Appraised, and Other Pertinent Terms
The definition of market value taken from the Uniform Standards of
Professional Appraisal Practice of the Appraisal Foundation, is as follows:
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 is the
consummation of a sale as of a specified date and the passing of title
from seller to buyer under conditions whereby:
1. Buyer and seller are typically motivated;
2. Both parties are well informed or well advised, and acting in what
they consider their own best interests;
3. A reasonable time is allowed for exposure in the open market;
4. Payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
5. 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.
Exposure Time
Under Paragraph 3 of the Definition of Market Value, the value estimate
presumes that "A reasonable time is allowed for exposure in the open
market". Exposure time is defined as the estimated length of time the
property interest being appraised would have been offered on the market
prior to the hypothetical consummation of a sale at the market value on
the effective date of the appraisal. Exposure time is presumed to precede
the effective date of the appraisal.
Based upon the analysis which is detailed elsewhere in this report, we
estimate a reasonable Exposure Time to have been six months for a property
like the subject at the concluded opinion of value reported.
The following definitions of pertinent terms are taken from the Dictionary
of Real Estate Appraisal, Third Edition (1993), published by the Appraisal
Institute.
================================================================================
-2-
CUSHMAN &
WAKEFIELD(R)
<PAGE>
Introduction
================================================================================
Leased Fee Estate
An ownership interest held by a landlord with the rights of use and
occupancy conveyed by lease to others. The rights of the lessor (the
leased fee owner) and the leased fee are specified by contract terms
contained within the lease.
Value As Is
The value of specific ownership rights to an identified parcel of real
estate as of the effective date of the appraisal; relates to what
physically exists and is legally permissible and excludes all assumptions
concerning hypothetical market conditions or possible rezoning.
Legal Description
The property is legally identified by the City of Philadelphia Assessor's
Office, as Ward 88, Book1S10, Number 158. We have not been provided with the
metes and bounds legal description of this site, therefore, none is exhibited.
================================================================================
-3-
CUSHMAN &
WAKEFIELD(R)
<PAGE>
REGIONAL ANALYSIS
================================================================================
Philadelphia Metropolitan Area
The subject property is located in the City of Philadelphia, the urban
center of the Philadelphia Metropolitan Area. The Philadelphia Metropolitan
Area, itself, encompasses over 3,500 square miles through the counties
immediately surrounding the city in both Pennsylvania and New Jersey. The
greater metropolitan area is actually part of a larger economic and geographic
entity known as the Delaware Valley, which extends from Trenton, New Jersey at
the north to Wilmington, Delaware at the south. The Delaware Valley is a closely
integrated market which pervades the many political subdivisions incorporated in
it.
Population
According to the most recent estimate of the Federal Census Bureau, the
Philadelphia Metropolitan Area has the fourth largest population in the nation
after Los Angeles, New York, and Chicago. The currently reported population of
just under five million represents a 0.7 percent increase over that counted in
1990. The statistics indicated population growth in the suburban counties
surrounding Philadelphia, with a decline in the city itself. The current
population of the City of Philadelphia is reported to be about 1.522 million, a
decrease of approximately four percent since 1990. These statistics are
significant in that demographers believe population growth is directly tied to
employment growth.
<TABLE>
<CAPTION>
=============================================================================================
Population Statistics
Philadelphia Metropolitan Area
(In Thousands)
=============================================================================================
County 1980 1990 (delta) 1995 (delta)
=============================================================================================
<S> <C> <C> <C> <C> <C>
Bucks 483.8 541.2 + 11.9% 570.6 + 5.4%
Chester 320.1 376.4 + 17.6% 399.7 + 6.2%
Delaware 552.2 547.7 - 0.8% 548.2 + .1%
Montgomery 644.6 678.1 + 5.2% 703.2 + 3.7%
Philadelphia 1,668.2 1,585.6 - 5.0% 1,521.5 - 4.0%
Burlington 366.0 395.1 + 8.0% 400.8 + 1.4%
Camden 472.8 502.8 + 6.4% 506.6 + .8%
Gloucester 202.1 230.1 + 13.9% 243.1 + 5.7%
Salem 65.0 65.3 + 0.5% 64.6 - 1.1%
- ---------------------------------------------------------------------------------------------
Total Metropolitan Area 4,774.8 4,922.3 + 3.1% 4,958.3 + .7%
- ---------------------------------------------------------------------------------------------
Source : U.S. Census Bureau
=============================================================================================
</TABLE>
Employment
The traditional economic base of the region was once heavy manufacturing.
Concurrent with national trends, the regional economy has now shifted toward a
skilled/service oriented base. Approximately 35 percent of the region's 2.2 +/-
million in the wage and salary workforce is now employed in the service
industries, as contrasted with the approximate 14 percent employed in
manufacturing. Furthermore, another 23 percent of the region's workforce is
employed in the wholesale and retail trades, while only 14 percent is employed
by government.
================================================================================
-4-
CUSHMAN &
WAKEFIELD(R)
<PAGE>
Regional Analysis
================================================================================
<TABLE>
<CAPTION>
================================================================================================
Philadelphia Metropolitan Area
January Employment Statistics
(in Thousands)
================================================================================================
Industry Classification 1990 1995 (delta) 1997 (delta)
================================================================================================
<S> <C> <C> <C> <C> <C>
Manufacturing 358.6 311.8 -2.6% 305.6 -2.0%
Construction & Mining 95.4 73.9 +6.0% 73.2 -1.0%
Transportation, Communication & Utilities 99.0 104.5 +3.3% 104.7 +1.9%
Wholesale & Retail Trades 508.0 482.8 -2.3% 494.6 +2.4%
Finance, Insurance & Real Estate 167.6 155.1 -1.3% 154.2 -0.6%
Services 659.1 717.5 +4.3% 765.4 +6.7%
Government 308.4 303.3 +0.6% 298.7 -1.5%
==================================================
Total Wage & Salary Employment 2,196.1 2,148.9 +0.8% 2,196.4 +2.2%
==================================================
Total Civilian Labor Force 2,409.0 2,397.6 -0.9% 2,450.3 +2.2%
==================================================
Unemployment 114.1 143.5 123 3
================================================================================================
Unemployment Rate 4.7 % 6.0% 5.0%
================================================================================================
Source: Pennsylvania Department of Labor and Industry
================================================================================================
</TABLE>
According to statistics prepared by the Pennsylvania Department of
Industry and Labor, wage and salary employment in the Philadelphia Metropolitan
Area increased by 47,500 jobs or 2.2 percent between 1995 and 1997.
Additionally, the total civilian labor force which includes wage and salary
employment plus those who are self-employed increased by 52,700 workers. As can
be seen, a vast majority of this growth in employment is in the service
industries and the wholesale and retail trades. The continued growth in the
service industries as well as the relative stability in the finance, insurance
and real estate classification is significant to real property like the subject
as it is from these groups that the occupants of office space come.
The state Department of Industry and Labor reports that, within the
service industries, business services, particularly temporary help agencies and
accounting firms, led this employment classification with a growth of 27,900
jobs created since 1992. Second place goes to medical services with 12,600 new
jobs created in the Philadelphia Metropolitan Area over the past four years.
Private sector education was third growing by 19,900 jobs. A listing of the ten
largest employers in Philadelphia County alone bears out these statistics.
<TABLE>
<CAPTION>
================================================================================================
Largest Non-Public Employers
Philadelphia County
================================================================================================
Employer Local Employees Product or Service
================================================================================================
<S> <C> <C>
University of Pennsylvania 10,900 Education; Research; Health Care
- ------------------------------------------------------------------------------------------------
Thomas Jefferson University 7,400 Education; Research; Health Care
- ------------------------------------------------------------------------------------------------
CoreStates Financial Corporation 6,100 Banking; Financial Services
- ------------------------------------------------------------------------------------------------
Bell Atlantic 5,600 Telecommunications
- ------------------------------------------------------------------------------------------------
Allegheny Health 5,100 Education; Health Care
- ------------------------------------------------------------------------------------------------
Aramark, Inc. 4,600 Food Services
- ------------------------------------------------------------------------------------------------
Einstein Healthcare 4,200 Education,- Health Care
- ------------------------------------------------------------------------------------------------
Cigna Corporation 4,100 Insurance, Financial Services
- ------------------------------------------------------------------------------------------------
Conrail, Inc. 3,800 Rail Freight Transportation
- ------------------------------------------------------------------------------------------------
PECO Energy Company 3,400 Public Utility
================================================================================================
Source: Philadelphia Business Journal
================================================================================================
</TABLE>
================================================================================
-5-
CUSHMAN &
WAKEFIELD(R)
<PAGE>
Regional Analysis
================================================================================
According to the Pennsylvania Department of Labor and Industry, the April,
1997 unemployment rate in the nine county Philadelphia Metropolitan Area was 4.9
percent as compared to 5.3 percent for the Commonwealth of Pennsylvania and 4.8
percent for the U.S. as a whole. Philadelphia County had a 6.6 percent
unemployment rate in April, 1997 which was the highest unemployment rate of any
county in region.
Income
The median effective household buying income or disposable income after
federal taxes in the Philadelphia Metropolitan Area is currently estimated to be
$39,470. Throughout the region, it is estimated that 20.3 percent of the 1.8
million households have an effective buying income under $35,000 annually. For
the entire metropolitan area, 37.3 percent of households have yearly EBI in
excess of $50,000. Philadelphia County has the lowest current median household
income level in the Metropolitan Area at $27,542 per dwelling unit.
================================================================================
Income Statistics
Philadelphia Metropolitan Area
================================================================================
Effective
County Households Buying Income Median Household EBI
(In Thousands)
================================================================================
Bucks 203,700 $11,424,599 $48,814
Chester 143,400 9,732,884 $55,798
Delaware 202,900 10,359,964 $42,366
Montgomery 269,700 16,369,926 $47,723
Philadelphia 571,500 20,080,366 $27,542
Burlington 140,600 7,341,632 $44,967
Camden 178,900 8,049,714 $37,788
Gloucester 83,900 3,700,926 $39,978
Salem 23,500 1,019,275 $38,123
--------------------------------
Total 1,818,100 $88,079,286 $39,470
================================================================================
Source: Sales & Marketing Management 1996
================================================================================
Retail Sales
Retail sales in the Philadelphia Metropolitan Area are currently estimated
to exceed $44.3 billion annually. The Philadelphia area ranked fifth nationally
behind Chicago, Los Angeles, New York and Washington, D.C. in total retail sales
for 1995, the last year for which statistics are currently available. Retail
sales in this metropolitan area have increased at a compound annual rate of 4.2
percent since 1990. Within the City of Philadelphia, annual retail sales for
1995 were estimated to be over $8.95 billion, down slightly from the 1994
estimate of 8.99 billion. However, since 1990, retail sales in the City of
Philadelphia have actually increased at an annual compound rate of 2.9 percent.
================================================================================
-6-
CUSHMAN &
WAKEFIELD(R)
<PAGE>
Regional Analysis
================================================================================
================================================================================
Retail Sales
Philadelphia Metropolitan Area and Philadelphia County
(In Thousands)
================================================================================
Year Metropolitan Philadelphia (delta) Philadelphia County (delta)
================================================================================
1990 $36,033,312 $7,741,383
- --------------------------------------------------------------------------------
1991 $35,120,446 - 2.5% $7,451,387 - 3.8%
- --------------------------------------------------------------------------------
1992 $39,811,716 + 13.4% $8,447,600 + 13.4%
- --------------------------------------------------------------------------------
1993 $40,858,286 + 2.6% $8,323,384 1.5%
- --------------------------------------------------------------------------------
1994 $43,480,561 +6.4% $8,985,763 +8.0%
- --------------------------------------------------------------------------------
1995 $44,309,612 +1.9% $8,950,479 -0.4%
================================================================================
Compound Annual Change +4.2% + 2.9%
================================================================================
Source: Sales & Marketing Management 1991-1996
================================================================================
Linkages
The Philadelphia Metropolitan Area benefits from an admirable
transportation system linking the region to the rest of the nation and points
throughout the world. The Port of Philadelphia is one of the largest fresh water
ports in the country. The Philadelphia International Airport provides service to
most major North American cities and many European destinations. From its
central location in the heart of the eastern megalopolis, excellent highway and
rail accessibility is also available.
Cultural, Educational and Recreational Resources
Educational opportunities abound throughout the region, with twelve major
colleges and universities located here. There are also four teaching medical
college hospitals in the Philadelphia area. As the nation's fourth largest urban
center and first capital, cultural and recreational activities available to the
populace are widely diverse.
Conclusions
The central core of this metropolitan area, the City of Philadelphia,
continues to experience a fiscal crisis precipitated by a diminishing tax base
and the increased need for new and costly municipal services. However, the
current administration and council are now cooperating to promote fiscal
responsibility which has created the city's first operating surplus in years.
And while the City of Philadelphia had its first net job gain in a decade during
1996, this trend has reversed itself in the first four months of 1997 due to
losses in transportation and defense employment. The surrounding suburban
counties are expected to be the focus of the region's population and job growth
well into the next century.
Overall, the Philadelphia Metropolitan Area is an older, densely developed
region with a mature economy which can only be expected to grow less and at a
slower pace in the months and years to come. Taxes and labor costs throughout
the Northeastern United States are higher than elsewhere so that the
opportunities for low cost start-up companies are less. Fortunately, the
patchwork of existing small to mid-sized companies in the Philadelphia
Metropolitan Area protect this region from the severe economic shocks seen
elsewhere.
================================================================================
-7-
CUSHMAN &
WAKEFIELD(R)
<PAGE>
Regional Analysis
================================================================================
Thus, over the long term, the Philadelphia Metropolitan Area benefits from
a diversified economic base which should protect the region from the effects of
wide swings in the economy. The region's strategic location along the eastern
seaboard and its reputation as a major business center should further enhance
the area's long term outlook. The region's real estate market is advancing
steadily toward equilibrium in most sectors. It is our conclusion that the long
term trends of the region will exert positive influences on the values of well
located and well designed real property.
================================================================================
-8-
CUSHMAN &
WAKEFIELD(R)
<PAGE>
MARKET ANALYSIS
================================================================================
Center City Philadelphia
The subject property is situated in Philadelphia's central business
district at the northwest corner of 20th and Market Streets. Center City
Philadelphia is broadly defined as that area bounded by Vine Street on the
north, South Street on the south, the Delaware River on the east and the
Schuylkill River to the west. Philadelphia's City Hall, with its administrative
and judicial offices, is located at Broad and Market Streets. One of the
principal users of office space is the legal profession which typically desires
to be close to governmental offices. Those industries which serve the legal
community and the government also elect to locate their offices in the West
Market Street area.
The financial community of Philadelphia was traditionally located on South
Broad Street, immediately adjacent to City Hall. In the last decade, a number of
the city's major banks have located their offices in the West Market area.
Again, the industries serving these financial institutions are then presented
with strong impetus to locate here.
West Market Street has become the primary office sector in Center City
extending from City Hall to the Schuylkill River, between Arch Street and
Chestnut Street. The area is the focus of intense office development. Beginning
in 1955 with a single office building, West Market Street/Kennedy Boulevard has
expanded to approximately 13,000,000 square feet of primary office space at
present. Known as Penn Center, this area owes its development to a close
proximity to all forms of transportation as well as municipal governmental
offices and the city's traditional financial district.
The suburban railroad station serving all of the city's western suburbs is
located in the heart of Penn Center on the north side of Kennedy Boulevard
between 16th and 17th Streets, and also at the Market East station at 11th and
Market Streets. From these stations, rail connections may easily be made with
Amtrak's 30th Street Station which provides rail service throughout the eastern
megalopolis. The subject property is convenient to both the commuter rail
network two blocks east at JFK Boulevard and the Amtrak system which lies just
across the Schuylkill River. This access is a primary consideration to many
office tenants in the downtown marketplace.
Additional public transportation to the downtown area is available at the
Southeastern Pennsylvania Transportation Authority's Market-Frankford subway
line with six stops along Market Street between 2nd and 15th Streets in Center
City. SEPTA's subway surface trolley lines also stop at 22nd Street near the
subject property. Finally, surface bus routes to all parts of the city converge
in the Penn Center West area, with Chestnut Street providing most service.
Historically, the retail center of Philadelphia has been Market Street,
east of City Hall. Philadelphia's largest department stores - Hechts (formerly
Wanamaker's but soon to be Lord & Taylor's), Strawbridge & Clothier (soon to be
Strawbridges), J.C. Penney and Clover are all located in Market East. The former
Lit Brothers Department Store has been renovated into a mixed office/retail use.
================================================================================
-9-
CUSHMAN &
WAKEFIELD(R)
<PAGE>
Market Analysis
================================================================================
After many years of decline, in 1977, the first phase of a revitalization
of Market Street began with the completion of the first phase of the Gallery.
Gallery I is a four level, 200,000 square foot urban shopping mall. Gallery 11
encompassing an additional 175,000 square feet was completed in 1983. In
addition to the retail stores, anchors such as Strawbridge & Clothier, Clover
and J.C. Penney department stores create a 1.3 million square foot mall. Mellon
Independence Center (formerly Lits) also offers over 120,000 square feet of
retail space on two levels.
Today, the frontage along Market Street from 7th Street to City Hall is a
thriving retail district. A recent development affecting the district is the
sale of the Strawbridge & Clothier Department Store chain to the May Companies.
Reportedly, May will convert the Hecht's Department Store to an upscale Lord &
Taylor. The Clover Division of Strawbridges was sold to KIMCO Realty. No plans
for the downtown Clover have been announced.
There is also a significant focus on retail commercial activity along
Chestnut and Walnut Streets, west of Broad Street. Along these two streets are
several quality shops and restaurants. Chestnut Street is a pedestrian mall that
is closed to traffic Saturday and Sunday during the day, while Walnut Street is
the site of many high fashion boutiques, particularly in the area of Rittenhouse
Square (18th and Walnut Streets). There are also additional retail/restaurant
uses along the subterranean concourse level of Penn Center which extends from
15th Street to 18th Street beneath Kennedy Boulevard. Liberty Place, at 17th &
Chestnut Streets, contains approximately 150,000 +/- square feet of upscale
retail space and food outlets. Recently, two other retailers opened outlets
along these corridors. Daffy's has opened in the former Bonwit Teller Building
and Filene's Basement opened in the former Wallachs Building on Chestnut Street.
Construction employment between 1993 and 1995 was buoyed by major public
projects such as the Pennsylvania Convention Center, the Justice Center and a
new Marriott Hotel. These projects are located several blocks east of the
subject property. The Pennsylvania Convention Center celebrated its grand
opening in July, 1993. Exhibit, banquet and meeting space for the center total
619,440 square feet. To complement the Convention Center a 1,200 room Marriott
Hotel opened in January, 1995. The Marriott is connected to the center via a
skywalk. By year-end 1995 Convention Center business surpassed projections for
the first three years by over 1 00,000 attendees. By 1997, more than 4,000 new
jobs will be created as a direct result of the center.
Although office development is the primary land use in Center City, hotel
and high rise residential properties are also found. Major residential projects
include the Rittenhouse, Independence Place, Wanamaker House, Kennedy House and
Society Hill Towers. The city now includes 20 major hotels, including four which
were constructed in the last decade. Aside from the Marriott, the most recent of
these is the 290 room Ritz Carlton which opened in the Fall of 1990 at 17th and
Chestnut Streets.
================================================================================
-10-
CUSHMAN &
WAKEFIELD(R)
<PAGE>
Market Analysis
================================================================================
With the construction of the Convention Center, an additional 2,000+/-
hotel rooms are projected by the year 2000. Four planned hotels for Center City
have recently reported progress toward construction. The Arden Group is in final
negotiations with lenders to fund $25 million toward the renovation of the
former Two Mellon Center office building into a 372 room Westin Hotel. A 350
room Hyatt Hotel has secured approximately $34 million of a total $51 million
required to construct this facility planned for the Penns Landing area. The
remaining debt is reportedly near a commitment. A 650 room Loews is planned in a
rehabilitation of the former PSFS office building at 12th and Market Streets.
Hawthorne Suites will construct a 294 suite facility in a former loft building
at 11th and Vine Streets. Additionally, there are discussions underway for
Marriott to expand by 200 rooms in the former Reading Railroad Headhouse at 12th
and Market Street. Ramada is looking at the former East Penn Square office
building for a 350 room Ramada Plaza hotel and Holiday Inns is considering the
Packard Building as a possible renovation.
The core of the office market has gradually been shifting west from City
Hall. Currently, the heart of the office market would be considered to be 17th
and Market Streets, due to its proximity to City Hall, public transportation,
other office buildings, restaurants and services. The subject is located one
block west of this intersection. Nearby uses include the 1700 Market Street
office tower, Mellon Bank office tower, Ten Penn Center and the Holiday Inn
Select.
To conclude, the neighborhood of the subject property is the premier
office corridor of the central business district. There is expected to be a
continuing demand for this product type in this neighborhood for the foreseeable
future. Thus, we conclude that the short to mid-term of this neighborhood is one
of stability to modest growth. However, in the long term, with a location at the
core of this metropolitan center, this neighborhood should experience more
positive growth approaching rates of general inflation in the economy.
General Overview
CBD office buildings, as an asset class, are attracting renewed interest
from investors in the current market. Many believe CBD office buildings offer
the greatest upside potential among the various property types and are willing
to commit large sums for acquisition provided the purchase price is well below
replacement cost. In many markets now, vacancy rates have declined among the
best quality urban office towers while rental rates have begun to appreciate for
the first time this decade in response to that shift in demand. Market
participants report a voracious appetite for quality Class A CBID office
complexes over the past twelve months as buyers seek to profit from this shift
in the market and sellers implement exit strategies.
The lack of new construction is also viewed as a positive in the office
market. Though firms are leasing less space per employee than ever before,
office building owners now have a stronger negotiating position as demand begins
to outpace supply. Still, in most communities, there is plenty of land available
for new competition.
The subject property shares in these macro-market observations and trends.
More importantly, the subject competes in its own micro-market for tenants,
users and ultimately, investment returns. The following points highlight
conditions in the local marketplace.
================================================================================
-11-
CUSHMAN &
WAKEFIELD(R)
<PAGE>
Market Analysis
================================================================================
Office Market - Center City Philadelphia
The office market of Center City Philadelphia is divided into two sections
by Broad Street which runs north and south through the central business
district. The West of Broad submarket is the larger of the two and is mostly
centered along Market Street and Kennedy Boulevard between City Hall and
Twenty-First Street. The East of Broad submarket is primarily focused around
Independence National Park in the proximity of Sixth and Market Streets. The
following presentation summarizes supply and demand characteristics in the
Center City Philadelphia office market as of March 31, 1997:
================================================================================
Office Market Overview
Center City Philadelphia
First Quarter 1997
================================================================================
Type of Space Existing Inventory Space Available Vacancy
================================================================================
Class A 26,389,000 SF 2,721,000 SF 10.3%
Class B 11,932,000 SF 2,725,000 SF 29.9%
Class C 1,337,000 SF 319,000 SF 23.9%
------------------------------------------------------
Total Existing Space 39,658,000 SF 5,765,000 SF 14.5%
New Construction -0- -0-
------------------------------------------------------
Total Market 39,658,000 SF 5,765,000 SF 14.5%
================================================================================
Market Supply
There are approximately 39.7 +/- million square feet of existing
commercial office space in Center City Philadelphia. Of this total, 28.0 +/-
million square feet or 70 percent are located on the West of Broad submarket.
The subject property competes for tenants in this West of Broad submarket.
================================================================================
Office Market Summary
West of Broad Street Submarket
First Quarter 1997
================================================================================
Type of Space Existing Inventory Space Available Vacancy
================================================================================
Class A 20,981,000 SF 2,233,000 SF 10.7%
class B 6,502,000 SF 1,103,000 SF 17.0%
Class C 586,000 SF 56,000 SF 9.6%
Total Existing Space 28,069,000 SF 3,392,000 SF l2.8%
New Construction -0- -0-
Total Market 28,069,000 SF 3,392,000 SF 12.8%
================================================================================
On the west side of Broad Street, total existing inventory declined during
1995 as Three Parkway was removed from commercial inventory since it is now
almost entirely owner-occupied by Reliance Insurance. Also, the 450,000 square
feet in 1650 Arch Street were removed from inventory in 1994 and "moth-balled".
Overall market vacancy on the west side was computed to be 12.8 percent at the
end of the first quarter of this year. Similar to the market at large, vacancy
for Class A space like the subject was measured to be only 10.7 percent. The
vast majority of availabilities is within lesser grade buildings
================================================================================
-12-
CUSHMAN &
WAKEFIELD(R)
<PAGE>
Market Analysis
================================================================================
In any type of market, there must be an inventory of goods maintained in
order to satisfy demand. In the real estate market, a shortage in available
inventory is indicated when there is a discernible lack of prime contiguous
office space for large users. Under these conditions, new construction is
stimulated. However, when the reverse is true, construction activity becomes
limited.
There is now a diminishing number of contiguous blocks of space available
in center city. Still, there is no new office construction occurring on any of
the prime seven sites available in Philadelphia at this time. The following is a
listing of blocks of contiguous Class A office space in the Philadelphia CBD at
the end of March, 1997:
======================================================
Major Contiguous Blocks
Class A Office Space
Center City Philadelphia
First Quarter 1996
======================================================
Competing Contiguous
Buildings Available
======================================================
West Market
1818 Market St. 138,000 sf
11 Penn Center 65,000 sf
1700 Market St. 60,000 sf
1515 Market St. 50,000 sf
Liberty Place 45,000 sf
One Commerce Square 44,000 sf
======================================================
There are several sites in the central business district which were
previously proposed for office development. Due to the current status of the
office market as well as stringent financing criteria, it is highly unlikely any
of these sites will be developed until early in the next decade or beyond. A
brief review of these potential office sites and their respective sponsor is
outlined below.
=======================================================================
Primary Potential Development Sites
Center City Philadelphia
=======================================================================
Rentable
Location Sponsor Square Feet
=======================================================================
NEC 20th & Market Street LCOR 760,000 sf
-----------------------------------------------------------------------
1777 JFK Boulevard Richard I. Rubin & Co. 760,000 sf
-----------------------------------------------------------------------
NWC 21st & Market sts. Maguire-Thomas 1,800,000 sf
-----------------------------------------------------------------------
NEC 15th & Chestnut Sts. Berwind 600,000 sf
-----------------------------------------------------------------------
SWC 18th & Arch Sts. Bell Atlantic 650,000 sf
=======================================================================
================================================================================
-13-
CUSHMAN &
WAKEFIELD(R)
<PAGE>
Market Analysis
================================================================================
As noted below, the current overall vacancy rate in the office market of
Center City Philadelphia is 14.5 percent, down 120 basis points from year-end
1995. According to past statistics, the March 31, 1997 vacancy is below the
vacancy rates demonstrated during 1992, 1993, 1994, 1995 and 1996. The current
vacancy of 14.5 percent does demonstrate continued improvement over the peak
1994 year-end vacancy of 18.04 percent. While still high by most standards, it
is most important to understand that vacancy in the Class A tier is now
approaching single digits. Further, in the upper tier of the Class A market
there is virtually no significant direct vacancy. The following is a
presentation of historic market vacancy rates since 1989 which will place
perspective on this analysis:
===================================================================
Office Market Vacancy
Center City Philadelphia
Historic Perspective
===================================================================
Date Rate Available Space
===================================================================
March, 1997 14.50% 5,765,000 +/- SF
December, 1996 14.70% 5,844,000 +/- SF
December, 1995 15.68% 6,345,000 +/- SF
December, 1994 18.04% 7,256,000 +/- SF
December, 1993 18.01% 6,960,000 +/- SF
December, 1992 18.02% 6,993,000 +/- SF
December, 1991 14.13% 5,372,000 +/- SF
December, 1990 12.66% 4,757,000 +/- SF
December, 1989 9.46% 3,253,000 +/- SF
===================================================================
Comparisons of data previous to 1994 are impacted by a
restructuring of our proprietary database This restructuring
included the addition, deletion and reclassification of various
buildings in each submarket. Our process was the result of a full
reexamination of the marketplace and implemented to provide the
most accurate market analyses. The data since the beginning of
1994 are consistent, the earlier data do provide historical
perspective.
===================================================================
The current overall market vacancy rate in center city has declined since
year-end 1994 from 18.04 percent. Market vacancy had been in the high teens
since 1992, yet over the last decade or so, overall vacancy has averaged about
13 percent. Interestingly, the vacancy that does exist in this market is
concentrated in the average and below average buildings. Older, lesser quality
office space cannot compete against newer, functional buildings and, in fact,
may never lease.
The aggregate amount of these dysfunctional spaces is such that many
analysts are now suggesting structural vacancy to be well above the conventional
five percent utilized in past years. Thus, if one assumes that within the
aforementioned 14.5 percent vacancy rate is space that will never lease, the
true vacancy rate for competitive purposes would be much lower and more
reasonable.
================================================================================
-14-
CUSHMAN &
WAKEFIELD(R)
<PAGE>
Market Analysis
================================================================================
Market Demand
The primary measure of demand in the, analysis of an office market is
absorption. Office space absorption in Center City Philadelphia was negative
between 1991 and 1994, before this trend was reversed in 1995. Absorption
statistics for 1995 indicate that the Center City marketplace reflected a
positive absorption of approximately 685,000 square feet. Absorption during 1996
was a only 233,000 square feet, but was impacted by negative absorption in the
East Market Street corridor. West Market Street experienced positive absorption
for 1996. Although the levels are still below the "boom" years of the late
Eighties, they are most impressive considering the trends of the early Nineties.
A second measure of market activity is leasing statistics which show the
amount of continued interest in a specific market and product type. Like
absorption, leasing activity declined from 1991 to 1993, although it did exhibit
a 30 percent increase in 1994. During 1995, leasing activity was very strong
with over 2,300,000 square feet leased, followed by 2,249,000 square feet in
1996. This trend has continued into 1997, albeit not at the same pace. Year-to-
date leasing activity in Center City Philadelphia has been approximately 371,000
square feet which is about 21,000 square feet lower than the same period of
1996. Nevertheless, on an annualized basis, the amount will approach 1.5 million
square feet.
Current absorption and leasing statistics do indicate the market's
continued interest in center city among the users of office space. The following
chart outlines leasing and absorption statistics since 1990:
===================================================================
Office Market Activity
Absorption and Leasing Statistics
Center City Philadelphia
===================================================================
Date Absorption Leasing
===================================================================
March, 1997 136,000 +/- SF 371,000 +/- SF
1996 213,000 +/- SF 2,249,000 +/- SF
1995 685,000 +/- SF 2,312,000 +/- SF
1994 -794,000 +/- SF 1,727,000 +/- SF
1993 -128,000 +/- SF 1,323,000 +/- SF
1992 -787,000 +/- SF 1,780,000 +/- SF
1991 -41,000 +/- SF 2,861,000 +/- SF
1990 1,997,000 +/- SF 2,325,000 +/- SF
===================================================================
The typical occupants of office space, the service industries plus
finance, insurance and real estate oriented businesses, were severely affected
by the economic recession which began about mid-year 1990. While the recession
has ended, job growth has not returned in any significant manner. Consolidations
in other industries which might utilize office space have also served to curtail
demand. When and until economic conditions dramatically improve to create new
office employment, demand of office space throughout the Delaware Valley will
suffer.
================================================================================
-15-
CUSHMAN &
WAKEFIELD(R)
<PAGE>
Market Analysis
================================================================================
During the 1990's, a number of firms have announced space downsizing or a
termination of occupancy in Center City Philadelphia. Office occupancies are now
being affected by American business' need to compete globally and an application
of new technologies to the way white collar employment is conducted. In order to
compete, many corporations are downsizing their operations, forcing fewer
employees to do more in less space. Also, technologies like portable phone
systems and voice mail enable many to work for extended periods outside their
base of operations.
We note corporate downsizings as well as companies such as Provident
Mutual Life which will be leaving the central business district. The largest
tenant at Eleven Penn Center and 1818 Market Street, Colonial Penn Insurance,
has vacated its space to occupy a building purchased at 399 Market Street. One
large user, PNC Bank, had a requirement for approximately 300,000 square feet
and re-located to the former Provident Mutual space at 1600 Market Street. PNC
will be vacated mostly Class B+/A- space among several buildings.
Other "wild card" type events that may or may not impact the market are
the recent merger trend among several of Philadelphia's major banking
institutions. These types of mergers usually result in overlapping employment
and eventual reductions in space requirements. Also, as a result of the recent
acquisition by Norfolk Southern and CSX, it is expected that ConRail will place
over 500,000 square feet of space back on the market at Two Commerce Square. The
recent merger announcement between Bell Atlantic and Nynex will result in the
corporate elimination of 3,000 jobs. No estimate of the impact this planned
elimination will have on Bell Atlantic's downtown headquarters has been
determined. It is noted however that Bell Atlantic is moving a significant
number of employees from the One Parkway Building into its corporate
headquarters. Also, Raytheon appears to be poised to place over 300,000 square
feet of sub-let space onto the market at the United Engineers building, as this
tenant is relocating to Princeton, New Jersey. Finally, market participants are
also expecting Cigna to reduce its CBD presence at Two Liberty Place.
On the positive side, there have been several large tenants who have
recently committed to leasing large blocks of space in the future. The largest
requirements came from the law firms of Morgan, Lewis and Bockius (220,000
square feet) and Blank, Rome, Comiskey & McCauley (130,000 square feet). Morgan,
Lewis & Bockius (MLB) will relocate from One Logan Square to the former Six Penn
Center which will be renovated by its owner, the Rubin Organization. Blank, Rome
will move to the lower floors of One Logan Square, while the law firm of
Drinker, Biddle & Reath will occupy the majority of the former MLB space. The
law firm of Wolf, Block, Shorr, & Solis-Cohen is also seeking to relocate from
the aging Packard Building, but recently signed a one year extension within that
building. The Department of Environmental Protection is in the market for
300,000 square feet and will likely relocate from 841 Chestnut Street. The
Department of Health and Human Resources will likely follow DEP. Finally, Smith
Kline Beecham has a requirement for 200,000 square feet and has requested bids
from developers to construct a building on its site at 15th and Spring Garden
Streets.
================================================================================
-16-
CUSHMAN &
WAKEFIELD(R)
<PAGE>
Market Analysis
================================================================================
Many smaller tenants whose businesses are not tied to this central
business district are relocating to the suburbs where taxes are lower and
services are greater. In the Philadelphia region, the differential in occupancy
costs between leasing in the city versus the suburbs, depending on the
sub-market, can be quite significant. For instance, tenants within the City of
Philadelphia are subject to real estate taxes which can be as high as $3.00 per
square foot while those realty taxes in the suburbs can be less than half that
amount. Additionally, tenants within the City of Philadelphia are subject to a
Use and Occupancy Tax equivalent to $4.62 per $100 of assessed value. In the
case of the subject, that would add approximately $1.22 per square foot to the
tenant's lease costs.
Other municipal taxes not levied in the suburbs include the Wage Tax
(4.96% on residents; 4.3125% on non-residents), the Business Privilege Tax
(.325% on gross receipts), and the Business Net Income Tax (6.5% on net taxable
income). However, recent rapidly increasing rental rates in the suburbs has
served to mitigate the inducement for firms to locate in the suburbs. On a
national basis, many market participants are expecting some tenants will move
into the city from the suburbs, particularly those with international business
functions.
Nevertheless, large space users such as government, law firms, insurance
companies, and financial institutions are tied to the city as they typically
require a sizable, moderately priced labor pool in the operation of their
businesses. As the financial and governmental core of the fourth largest
metropolitan area in the nation, Center City Philadelphia should remain the
focal point of larger space users in moderately priced labor intensive
businesses. This labor pool is, in turn, highly dependent upon the public
transportation system which converges in Center City. It is this public
transportation network which provides the CBD with its primary competitive
advantage.
It is true that job growth is occurring in the high tech/service oriented
businesses. However, many of these new jobs are frequently held by workers who
can perform their services from home offices, clients' offices or under
"hoteling" arrangements. Overall, the long term demand of office space, while
positive, will not approach historic levels.
We previously alluded to the notion that many analysts are now
reconsidering what structural vacancy should be. Many now believe it should be
away from the traditional 5 percent toward something closer to 10 percent. Much
of the available space in the market today is functionally obsolete and will not
be occupied at any rental rate. Thus, based upon the current single digit
vacancy rate for Class A+ space, it would appear the supply/demand relationship
will approach equilibrium in the next three years. This, of course, bodes well
for current investors with the patience and wherewithal to wait for that
expected turn of events. Given the data available, it would appear that upside
potential in terms of rental rates exists in well located and functionally
designed office properties. This pricing pressure has been felt by those large
tenants in the market which recently extended leases due to the lack of good
quality, contiguous, high floor space in the CBD.
================================================================================
-17-
CUSHMAN &
WAKEFIELD(R)
<PAGE>
Market Analysis
================================================================================
Rental Rates
In a free economy, prices are set where supply and demand meet. The
average rental rates for Class A office space in the West Side of Broad Street
at the end of the first quarter 1997 was $19.47 per square foot of rentable
building area on a full service basis. In the East of Broad submarket, the
average quoted rent was $19.09 per square foot on a full service basis. As
previously noted, the price differential between asking rental rates for Class A
space east and west of Broad Street has largely disappeared. However, brokers
also note that the spread between the asking rental rate and actual market
rental rate is much more narrow in the market West of Broad Street as compared
to the market East of Broad. This indicates that there is still a certain
premium for Class A space West of Broad Street. A full service rental rate
includes all expenses paid by the landlord including electric.
The current asking rent for Class A space west of Broad Street is
reflecting the first increase since 1992. The current average is dramatically
affected by the widespread elimination of free rent in the local market.
Building owners have in many cases brought their asking rental rates closer to
where the transactions are actually being signed. The following presentation
summarizes average full service face rental rates in the office market of Center
City Philadelphia over the last eight years. It is noted that these rates are
quoted rates. The actual contract rents would be somewhat less.
================================================================================
Average Face Rental Rates
Center City Philadelphia Office Market
Full Service Basis
================================================================================
Date East of Broad West of Broad
------------------------------------------------------------
Class A Class B Class A Class B
================================================================================
March 1997 $19.09/SF $15.88/SF $19.47/SF $14.58/SF
December, 1996 $19.02/SF $15.77/SF $19.39/SF $14.55/SF
December, 1995 $19.46/SF $15.79/SF $19.89/SF $14.76/SF
December, 1994 $19.96/SF $14.74/SF $20.79/SF $15.11/SF
December, 1993 $19.32/SF $14.85/SF $21.71/SF $17.16/SF
December, 1992 $21.18/SF $15.46/SF $22.70/SF $15.67/SF
December, 1991 $20.78/SF $15.48/SF $24.84/SF $15.99/SF
December, 1990 $20.55/SF $15.94/SF $25.69/SF $17.66/SF
December, 1989 $20.75/SF $17.94/SF $26.98/SF $18.18/SF
Over the last half decade, average face rental rates in the Class A office
market in center city have declined at a compound annual rate of about 2.5
percent. By contrast, the Consumer Price Index in Philadelphia has increased at
a compound annual rate of 3.4 percent since December, 1989. It is notable how
the overall increase in vacancy negatively impacted rental rates. Under such
conditions, real estate values eroded from the highs achieved during the late
Eighties.
================================================================================
-18-
CUSHMAN &
WAKEFIELD(R)
<PAGE>
Market Analysis
================================================================================
Eventually, a tight Class A office market will precipitate new
construction or renovation. The lack of a suitable contiguous block of upper
floor space appears to be the motivation behind Morgan, Lewis, & Bockius
agreeing to relocate to a building in need of complete retrofit. Another
indication of the reduction of contiguous space in quality buildings was the
recent decision of Cozen & O'Connor to restructure and extend its lease at the
Stock Exchange Building. In order to economically justify construction, users
must first be willing to pay higher rents than are now being achieved in the
competitive open market. The tightening of the office market is now putting
upward pressures on rental rates and downward pressures on tenant allowances. In
a recently published survey by Korpacz & Associates, almost two-thirds of the
participants indicated that they were now incorporating spikes in their rent
projections, but only in markets where absorption and rents are improving or are
likely to do so in the near term. Those who are unwilling to utilize rent spikes
feel it too speculative to predict the time of such an event or its magnitude
and will not base a purchase decision on them.
Rent spikes are heavily dependent on local market conditions and those who
utilize them do so with extreme care. Hard evidence of a market comeback must
exist such as a diversified economic base, job growth, good current absorption
and a strong indication of higher rents. Thus, rent spikes in future projections
are not universally appropriate. Our experience with both portfolio valuation
and asset dispositions indicate most participants active in the Philadelphia CBD
office market are projecting rent spikes within their analyses. These
participants are expecting substantial rent increases in the period 1999-2001.
Nevertheless, most participants will view a compound annual average increase in
excess of five percent as unreasonable.
The standard leasing practice for office space throughout the Philadelphia
Metropolitan Area calls for the tenant to pay a fixed minimum rent on a monthly
basis for a time ranging from three to five years although seven and ten year
terms are available with stated increase in the rent. In the traditional lease
agreement, the lessee is also responsible for increases in expenses over those
incurred during the initial year of occupancy. Rental rates and expenses are
typically expressed on the basis of the building's rentable area. Rentable area
includes all demised areas, all mechanical areas and all common areas of the
building. Vertical shafts are excluded from this measurement.
While a number of variations in this leasing practice exist, the most
common is to separately charge the tenants for their own electric consumption.
In the current marketplace, the typical tenants electrical charge for power and
lights is approximately $1.25 per square foot of rentable building area. Thus,
where the market rental rate is perhaps $20.00 per square foot on a full service
basis, a developer can advertise his or her product at $18.75 per square foot
plus electricity when electricity in the initial year of occupancy is $1.25 per
square foot. Alternatively, many buildings in the upper tier of the market are
now quoting rents on a net basis with the tenant being responsible for a full
proportionate share of all real estate taxes and operating expenses. Thus, a
full service rent of $20.00 per square foot is equivalently to a net rent of
$10.00 when taxes and operating expenses are at $10.00 per square foot.
================================================================================
-19-
CUSHMAN &
WAKEFIELD(R)
<PAGE>
Market Analysis
================================================================================
Rent Abatements
Rent abatements had been standard inducement to tenants over the past
number of years, but are now not frequently being granted. Until the last year
and a half or so, rent abatements varied depending upon the size of the tenant,
its creditworthiness and the duration of the lease. These free rent periods
ranged from about six months free on a five year lease to a whole year on a ten
year lease. In the current marketplace, however, leases are more frequently
being negotiated wherein rent is paid on the first day of occupancy, but at an
effective rate which still accounts for the economic benefits of free rent to
the tenant. Though there are still instances of free rent being quoted, the
current marketplace is definitely characterized by effective rents.
Tenant Improvements' Costs
In the leasing of new professional office space, a building standard for
interior finishes is established. Should a particular tenant desire interior
office finishes which exceed the established building standard, then the tenant
must reimburse the landlord for constructing these. The standard work letter for
new office space in Center City Philadelphia is approximately $25.00 to $35.00
per square foot of rentable area. Historically, the cost of tenant requested
interior office finishes which exceed these standards were traditionally borne
by the lessee. In relet space, however, the cost of tenant alterations is
considerably less as many materials can be recycled. Brokers indicate that it is
only the whole floor or larger user which can command the top tenant improvement
allowances. For smaller users, the work letter for new space declines to $15.00
to $20.00 per square foot.
The trend of the current marketplace, particularly in second generation
space, has been to work with what is in place. From ownership's perspective,
cash for tenant improvements is scarce so that avoiding demolition and
reconstruction costs is important. We are informed that tenants are also less
demanding in their space improvements needs in order to secure a more favorable
rental rate in these competitive times for American business.
In general terms, a simple re-painting, re-carpeting and cleaning of
ceiling tiles can cost from $8.00 to $10.00 per square foot of rentable area.
When some demolition and reconstruction is necessary, tenant improvement costs
easily escalate to the $15.00 to $20.00 per square foot range. A complete
demolition and reconstruction of a major tenant area or full floor will cost
from $25.00 to $35.00 per square foot in the current market. Attorney's firms,
prime occupants of office space in center city, require significantly more
partitioning; reinforced libraries, and a generally higher degree of finish
which can push costs to as much as $40.00 per square foot. The amortization of
these costs over the term of the lease is expensive and can further lower
ownership's return from its already depressed levels.
Obviously, the current marketplace is still highly competitive in favor of
tenants as the supply of available space continues to exceed demand. In order to
win new tenants, landlords had been paying for tenant requested improvements
well over the standard work letters. In some instances, landlords were also
paying the tenants' moving charges, assuming the rental payments on the tenants'
existing leases, and even making cash bonus payments to the tenants in order to
entice them to a new project. Most of these types of concessions have ceased,
however, as conditions have improved.
================================================================================
-20-
CUSHMAN &
WAKEFIELD(R)
<PAGE>
Market Analysis
================================================================================
Leasing Commissions
During the Eighties, the typical commission structure in Center City
Philadelphia was 3 percent of effective rent (base rent net of free rent)
payable 50 percent at signing and 50 percent at occupancy. Additionally,
virtually all buildings downtown offered overrides to in-house brokers of
between 1.5 percent to 2 percent on co-brokered transactions. More recently,
commission structures have been changing at many Class A or A- buildings.
Whereas a higher commission of 4 percent or 5 percent often indicated
desperation on the part of the owner, today it is becoming a marketing strategy
to lure brokers who have a multitude of acceptable alternatives to show their
prospects.
Examples of buildings which have increased their commissions to 4 percent
include 1600 Market Street, 1700 Market Street and 1818 Market Street. Including
overrides, brokerage commissions to ownership average 4.5 percent to 6.0 percent
of the effective rent. Conversely, the market quotes brokerage commissions of
between $4.50 and $6.00 per square foot of leased area.
================================================================================
-21-
CUSHMAN &
WAKEFIELD(R)
<PAGE>
Market Analysis
================================================================================
Direct Competition
The subject property was constructed, in 1981 at the beginning of the
building wave of new Class A office construction in the West of Broad Street
market area. The subject is a quality constructed office tower in a location
convenient to the regional highway system and public transportation. The
building is designed with small floor plates (8,900 square feet) which enables
relatively small tenants to project the strong image a full floor tenant
commands. Commercial brokers designate the subject as a Class A building,
indicating that its appeal is aligned with those buildings along West Market
Street which were constructed or renovated between the mid Seventies to the mid
Eighties. While the subject would compete primarily with these buildings for
office tenants, there is significant secondary competition from the Class B+
tier of the market due to space availability and rental rate considerations.
Cushman & Wakefield has identified several projects in downtown Philadelphia
which compete directly with the subject. The most directly competitive
properties are those constructed prior to 1985 and which represent the Class A
tier of the market. On the subsequent pages are profiles of these properties.
================================================================================
-22-
CUSHMAN &
WAKEFIELD(R)
<PAGE>
<TABLE>
<CAPTION>
=============================================================================================
CENTRE SQUARE
1500 Market Street
Philadelphia, PA 19102
=============================================================================================
[PHOTO]
=============================================================================================
BUILDING DESCRIPTION: This two-towered office building with a five-story atrium
lobby features a 63-foot waterfall, glass enclosed balconies and marble and
brass accents. East Tower: 39 Floors, West Tower: 43-Floors.
=============================================================================================
<S> <C> <C>
SQUARE FOOTAGE AND Owner: Metropolitan Life/RE Investments
FEATURES DATA: Office Rentable Square Feet: 1,800,000
Percent Occupied: 96
Year Built: 1974
Number of Floors: 43
Passenger/Freight Elevators: 43/1
Electricity: Included
Security: 24 Hr Staff/Monitor
Parking Ratio: 0.20/1000
=============================================================================================
LOCATION DATA: Miles to Airport (1) 8
Miles to Airport (2) 0
Access Highway: Market Street
Public Transportation: Yes
Amenities Restaurants, snack shop bank, concourse access
Major Tenants: Compacts Crop; Saul,, Eking Remake & Saul;,
CoreStates Financial
=============================================================================================
<CAPTION>
AVAILABILITIES:
SF Available Floor Base Rent Possession
Smallest Div Avail Status Rent Type Lease Term
============ ============ =============== ===========
<S> <C> <C> <C> <C>
13,000 LWR - MEZZ $22.00 - $24.00 Immediate
</TABLE>
Source: Cushman & Wakefield of Pennsylvania, Inc.
<PAGE>
CENTRE SQUARE (Continued)
<TABLE>
<CAPTION>
SF Available Floor Base Rent Possession
Smallest Div Avail Status Rent Type Lease Term
============ ============ =============== ===========
<S> <C> <C> <C> <C>
13,000 25 $22.00 - $24.00 Immediate
31,689 35 $22.00 - $24.00 Immediate
</TABLE>
Source: Cushman & Wakefield of Pennsylvania, Inc.
<PAGE>
<TABLE>
<CAPTION>
1600 MARKET STREET
1600 Market Street
Philadelphia, PA 19103
=============================================================================================
[PHOTO]
=============================================================================================
BUILDING DESCRIPTION: Located at the southwest corner 16th & Market Streets, this
was the first all-reflective glass office building in the city.
=============================================================================================
<S> <C> <C>
SQUARE FOOTAGE AND Owner: Market Street 1600 Assoc. LIP
FEATURES DATA: Office Rentable Square Feet: 760,000
Percent Occupied: 95
Year Built: 1983
Number of Floors: 39
Passenger/Freight Elevators: 17/1
Electricity: Separately Metered
Security: 24 Hour Desk
Parking Ratio: /1000
=============================================================================================
LOCATION DATA: Miles to Airport (1) 8
Miles to Airport (2) 0
Access Highway: Market Street
Public Transportation: Yes
Amenities Sandwich Shop/Banks Near Holiday Inn
Major Tenants: PNC Bank, Schnader, Harrison,, Segal & Lewis
=============================================================================================
<CAPTION>
AVAILABILITIES:
SF Available Floor Base Rent Possession
Smallest Div Avail Status Rent Type Lease Term
============ ============ =============== ===========
<S> <C> <C> <C> <C>
1,512 17 $19.00 - $21.00 Immediate
3,255 17 $19.00 - $21.00 Immediate
</TABLE>
Source: Cushman & Wakefield of Pennsylvania, Inc.
<PAGE>
1600 MARKET STREET (Continued)
<TABLE>
<CAPTION>
SF Available Floor Base Rent Possession
Smallest Div Avail Status Rent Type Lease Term
============ ============ =============== ===========
<S> <C> <C> <C> <C>
4,300 25 SL $16.75 Immediate
5,548 26 $19.00 - $21.00 Immediate
5,800 32 $19.00 - $21.00 Immediate
15,751 39 SL $20.00 Immediate
</TABLE>
Source: Cushman & Wakefield of Pennsylvania, Inc.
<PAGE>
<TABLE>
<CAPTION>
1700 MARKET STREET
1700 Market Street
Philadelphia, PA 19103
=============================================================================================
[PHOTO]
=============================================================================================
BUILDING DESCRIPTION: Located at the southeast corner of 17th and Market Streets,
1700 Market Street has a five-level garage for over 600 cars attached to the
building. A comprehensive renovation program was completed in spring 1988.
=============================================================================================
<S> <C> <C>
SQUARE FOOTAGE AND Owner: Prudential Realty Group/ASAP
FEATURES DATA: Office Rentable Square Feet: 840,792
Percent Occupied: 90
Year Built: 1969
Number of Floors: 34
Passenger/Freight Elevators: 16/1
Electricity: Included
Security: 24 Hour Desk
Parking Ratio: 1.00/1000
=============================================================================================
LOCATION DATA: Miles to Airport (1) 8
Miles to Airport (2) 0
Access Highway: Market Street
Public Transportation: Yes
Amenities Day care center; ATM; Pharmacy; Restaurant
Major Tenants: Xerox Corp.; Fidelity Bank; Deloitte & Touche;
Keystone Mercy Health Plan
=============================================================================================
<CAPTION>
AVAILABILITIES:
SF Available Floor Base Rent Possession
Smallest Div Avail Status Rent Type Lease Term
============ ============ =============== ===========
<S> <C> <C> <C> <C>
21,469 LWR - LVL $18.00 - $22.00 Immediate
</TABLE>
Source: Cushman & Wakefield of Pennsylvania, Inc.
<PAGE>
1700 MARKET STREET (Continued)
<TABLE>
<CAPTION>
SF Available Floor Base Rent Possession
Smallest Div Avail Status Rent Type Lease Term
============ ============ =============== ===========
<S> <C> <C> <C> <C>
59,768 Group B 8-9 N/A Immediate
29,884 B 8 $15.00 Immediate
29,884 B 9 $15.00 Immediate
</TABLE>
Source: Cushman & Wakefield of Pennsylvania, Inc.
<PAGE>
<TABLE>
<CAPTION>
1818 MARKET STREET
1818 Market Street
Philadelphia, PA 19103
=============================================================================================
[PHOTO]
=============================================================================================
BUILDING DESCRIPTION: This building has a white concrete exterior and is located
on the southeast corner of 19th & Market Streets. A parking lot for 350 cars is
within the building. Recently renovated.
=============================================================================================
<S> <C> <C>
SQUARE FOOTAGE AND Owner: Equitable
FEATURES DATA: Office Rentable Square Feet: 947,000
Percent Occupied: 79
Year Built: 1974
Number of Floors: 37
Passenger/Freight Elevators: 18/1
Electricity: Sub-Metered
Security: 24-Hour Desk
Parking Ratio: 3.00/1000
=============================================================================================
LOCATION DATA: Miles to Airport (1) 8
Miles to Airport (2) 0
Access Highway: Market Street
Public Transportation: Yes
Amenities Adjacent Holiday Inn, Banks, Restaurant
Major Tenants: Day & Zimmerman Inc;, LaBrum & Doak; DE,
Group, Right Manag/Tropp & Ayers/Nigro/Zurich,
Bagby, State Of PA - Court Administration
=============================================================================================
<CAPTION>
AVAILABILITIES:
SF Available Floor Base Rent Possession
Smallest Div Avail Status Rent Type Lease Term
============ ============ =============== ===========
<S> <C> <C> <C> <C>
1,495 13 $19.50 Immediate
</TABLE>
Source: Cushman & Wakefield of Pennsylvania, Inc.
<PAGE>
1818 MARKET STREET (Continued)
<TABLE>
<CAPTION>
SF Available Floor Base Rent Possession
Smallest Div Avail Status Rent Type Lease Term
============ ============ =============== ===========
<S> <C> <C> <C> <C>
14,351 14 $19.50 Immediate
13,100 16 SL $13.00 - $17.00 Immediate
6,219 23 $19.50 immediate
150,000 24 - 28 $19.50 Immediate
1,657 31 $19.50 Immediate
1,974 32 $19.50 Immediate
3,310 35 $19.50 Immediate
2,129 37 $19.50 Immediate
2,313 N/A SL N/A Immediate
2,500 N/A SL $17.00 Immediate
</TABLE>
Source: Cushman & Wakefield of Pennsylvania, Inc.
<PAGE>
<TABLE>
<CAPTION>
PHILADELPHIA STOCK EXCHANGE
1900 Market Street
Philadelphia, PA 19103
=============================================================================================
[PHOTO]
=============================================================================================
BUILDING DESCRIPTION: Between 19th & 20th Streets, the Philadelphia Stock
Exchange has a skylighted courtyard, glass elevators, trees, plants and
fountains in its court. A restaurant and Deli are in the building as well as
street level retail space.
=============================================================================================
SQUARE FOOTAGE AND Owner: Institutional Property Assets
FEATURES DATA: Office Rentable Square Feet: 386,000
Percent Occupied: 95
Year Built: 1981
Number of Floors: 8
Passenger/Freight Elevators: 10/1
Electricity: Plus Electric
Security: 24hr Grd/Motion Dtr
Parking Ratio: /1000
=============================================================================================
LOCATION DATA: Miles to PHI Airport (1) 8
Miles to Airport (2) 0
Access Highway: Market Street
Public Transportation: Yes
Amenities 1 block Holiday Inn Penn Center Inn
Major Tenants: Cozen & O'Connor, Phila.Stock Exchange, Smith
Kline Beckman
=============================================================================================
AVAILABILITIES:
SF Available Floor Base Rent Possession
Smallest Div Avail Status Rent Type Lease Term
============ ============ =============== ===========
<S> <C> <C> <C> <C>
8,755 5 $24.00 immediate
</TABLE>
Source: Cushman & Wakefield of Pennsylvania, Inc.
<PAGE>
PHILADELPHIA STOCK EXCHANGE (Continued)
<TABLE>
<CAPTION>
SF Available Floor Base Rent Possession
Smallest Div Avail Status Rent Type Lease Term
============ ============ =============== ===========
<S> <C> <C> <C> <C>
3,660 5 $24.00 Immediate
6,167 6 $24.00 Immediate
</TABLE>
Source: Cushman & Wakefield of Pennsylvania, Inc.
<PAGE>
<TABLE>
<CAPTION>
2000 MARKET STREET
2000 Market Street
Philadelphia, PA 19103
=============================================================================================
[PHOTO]
=============================================================================================
BUILDING DESCRIPTION: Black exterior with solar-bronze windows located at
southwest corner of 20th & Market Streets. Parking nearby. Restaurant and bank
facilities within building. - FOR SALE -
=============================================================================================
<S> <C> <C>
SQUARE FOOTAGE AND Owner: Metropolitan Life Insurance Co.
FEATURES DATA: Office Rentable Square Feet: 650,000
Percent Occupied: 90
Year Built: 1973
Number of Floors: 29
Passenger/Freight Elevators: 16/1
Electricity: Included
Security: 24-Hour Desk
Parking Ratio: /1000
=============================================================================================
LOCATION DATA: Miles to Airport (1) 8
Miles to Airport (2) 0
Access Highway: Market Street
Public Transportation: Yes
Amenities Restaurants Holiday Inn Two Blocks
Major Tenants: Atochem, Fox Rothchild et al, Brotherhood of
employees, Atochem, Stock Exchange
=============================================================================================
<CAPTION>
AVAILABILITIES:
SF Available Floor Base Rent Possession
Smallest Div Avail Status Rent Type Lease Term
============ ============ =============== ===========
<S> <C> <C> <C> <C>
25,666 6 $18.00 Immediate
</TABLE>
Source: Cushman & Wakefield of Pennsylvania, Inc.
<PAGE>
2000 MARKET STREET (Continued)
<TABLE>
<CAPTION>
SF Available Floor Base Rent Possession
Smallest Div Avail Status Rent Type Lease Term
============ ============ =============== ===========
<S> <C> <C> <C> <C>
14,480 7 $18.00 Immediate
12,000 12 $18.00 Immediate
3,600 13 $18.00 Immediate
2,000 14 $18.00 Immediate
7,000 29 $18.00 Immediate
</TABLE>
Source: Cushman & Wakefield of Pennsylvania, Inc.
<PAGE>
<TABLE>
<CAPTION>
7 PENN CENTER PLAZA
1635 Market Street
Philadelphia, PA 19102
=============================================================================================
[PHOTO]
=============================================================================================
BUILDING DESCRIPTION: Located on NE corner of 17th & Market Streets, this marble
and granite base building provides a striking appearance, Originally designed as
the IBM regional headquarters. Completely Renovated.
=============================================================================================
<S> <C> <C>
SQUARE FOOTAGE AND Owner: Arden Group
FEATURES DATA: Office Rentable Square Feet: 296,000
Percent Occupied: 83
Year Built: 1968
Number of Floors: 21
Passenger/Freight Elevators: 6/1
Electricity: Separately Metered
Security: 24 Hour Manned Sec.
Parking Ratio: /1000
=============================================================================================
LOCATION DATA: Miles to Airport (1) 8
Miles to Airport (2) 0
Access Highway: Kennedy Blvd.
Public Transportation: Yes
Amenities Direct Concourse Access to Suburban Station;
Three on-site restaurants; Bank with ATM;
Major Tenants: Reich Group
=============================================================================================
<CAPTION>
AVAILABILITIES:
SF Available Floor Base Rent Possession
Smallest Div Avail Status Rent Type Lease Term
============ ============ =============== ===========
<S> <C> <C> <C> <C>
5,341 5 $20.75 Immediate
6,000 8 $19.00 Immediate
</TABLE>
Source: Cushman & Wakefield of Pennsylvania, Inc.
<PAGE>
7 PENN CENTER PLAZA (Continued)
<TABLE>
<CAPTION>
SF Available Floor Base Rent Possession
Smallest Div Avail Status Rent Type Lease Term
============ ============ =============== ===========
<S> <C> <C> <C> <C>
3,117 13 $20.75 Immediate
14,330 B 14 $20.00 Immediate
5,995 18 $20.00 Immediate
14,072 19 $19.00 Immediate
</TABLE>
Source: Cushman & Wakefield of Pennsylvania, Inc.
<PAGE>
<TABLE>
<CAPTION>
1601 MARKET STREET
1601 Market St.
Philadelphia, PA 19103
=============================================================================================
[PHOTO]
=============================================================================================
BUILDING DESCRIPTION: This building has redesigned common areas on the
multi-tenant floors as well as the highly acclaimed lobby renovations by Cope
Linder Associates.
=============================================================================================
SQUARE FOOTAGE AND Owner: Equity Office Holdings
FEATURES DATA: Office Rentable Square Feet: 700,000
Percent Occupied: 94
Year Built: 1970
Number of Floors: 36
Passenger/Freight Elevators: 15/
Electricity: Included
Security: Kastle Card
Parking Ratio: /1000
=============================================================================================
LOCATION DATA: Miles to Airport (1) 8
Miles to Airport (2) 0
Access Highway: Market Street
Public Transportation: Yes
Amenities Concourse access near Ritz-Carlton
Major Tenants: Arthur Anderson & Co, IRS,
=============================================================================================
<CAPTION>
AVAILABILITIES:
SF Available Floor Base Rent Possession
Smallest Div Avail Status Rent Type Lease Term
============ ============ =============== ===========
<S> <C> <C> <C> <C>
8,972 3 $20.00 01-Sep-97
2,322 7 $20.00 Immediate
</TABLE>
Source: Cushman & Wakefield of Pennsylvania, Inc.
<PAGE>
1601 MARKET STREET (Continued)
<TABLE>
<CAPTION>
SF Available Floor Base Rent Possession
Smallest Div Avail Status Rent Type Lease Term
============ ============ =============== ===========
<S> <C> <C> <C> <C>
4,257 8 $20.00 Immediate
9,659 15 $20.00 Immediate
8,556 17 SL $15.00 Immediate
3,654 23 $20.00 Immediate
9,142 33 $20.00 01-Apr-98
14,850 36 $20.00 01-Apr-98
</TABLE>
Source: Cushman & Wakefield of Pennsylvania, Inc.
<PAGE>
<TABLE>
<CAPTION>
8 PENN CENTER PLAZA
1637 John F. Kennedy Boulevard
Philadelphia, PA 19103
=============================================================================================
[PHOTO]
=============================================================================================
BUILDING DESCRIPTION: Located at the southeast corner of 17th and John F Kennedy
Blvd., this building has a three-story atrium and a poured concrete exterior
with an unusual curved facade. Retail space is on the first and second floors.
=============================================================================================
<S> <C> <C>
SQUARE FOOTAGE AND Owner: Steinhart Ptrs.
FEATURES DATA: Office Rentable Square Feet: 237,000
Percent Occupied: 59
Year Built: 1981
Number of Floors: 22
Passenger/Freight Elevators: 6/1
Electricity: Separately Metered
Security: Card Op Sec System
Parking Ratio: /1000
=============================================================================================
LOCATION DATA: Miles to Airport (1) 8
Miles to Airport (2) 0
Access Highway: JF Kennedy Boulevard
Public Transportation: Yes
Amenities Philadelphia Centre Hotel
Major Tenants: Tucker Anthony
=============================================================================================
<CAPTION>
AVAILABILITIES:
SF Available Floor Base Rent Possession
Smallest Div Avail Status Rent Type Lease Term
============ ============ =============== ===========
<S> <C> <C> <C> <C>
50,000 3 - 7 $16.50 Immediate
</TABLE>
Source: Cushman & Wakefield of Pennsylvania, Inc.
<PAGE>
8 PENN CENTER PLAZA (Continued)
<TABLE>
<CAPTION>
SF Available Floor Base Rent Possession
Smallest Div Avail Status Rent Type Lease Term
============ ============ =============== ===========
<S> <C> <C> <C> <C>
1,235 8 $16.50 Immediate
9,928 9 $16.50 Immediate
15,606 13 - 14 $16.50 Immediate
5,721 17 $16.50 Immediate
14,165 19 - 21 $16.50 Immediate
</TABLE>
Source: Cushman & Wakefield of Pennsylvania, Inc.
<PAGE>
<TABLE>
<CAPTION>
10 PENN CENTER PLAZA
1801 Market Street
Philadelphia, PA 19103
=============================================================================================
[PHOTO]
=============================================================================================
BUILDING DESCRIPTION: Located at the northwest corner of 18th & Market Streets, 10
Penn Center Plaza has a red brick exterior with bronze glass.
=============================================================================================
<S> <C> <C>
SQUARE FOOTAGE AND Owner: Rubenstein Company
FEATURES DATA: Office Rentable Square Feet: 636,000
Percent Occupied: 89
Year Built: 1981
Number of Floors: 27
Passenger/Freight Elevators: 14/1
Electricity: Included
Security: Guard-24 Hour
Parking Ratio: /1000
=============================================================================================
LOCATION DATA: Miles to PHI Airport (1) 8
Miles to Airport (2) 0
Access Highway: Market Street
Public Transportation: Yes
Amenities Bank, Gift Shop, Travel Agency
Major Tenants: Sun Oil, Janney Montgomery, Scott; CDI
=============================================================================================
<CAPTION>
AVAILABILITIES:
SF Available Floor Base Rent Possession
Smallest Div Avail Status Rent Type Lease Term
============ ============ =============== ===========
<S> <C> <C> <C> <C>
11,663 2 SL $16.00 Immediate
25,000 7 $18.00 Immediate
</TABLE>
Source: Cushman & Wakefield of Pennsylvania, Inc.
<PAGE>
10 PENN CENTER PLAZA (Continued)
<TABLE>
<CAPTION>
SF Available Floor Base Rent Possession
Smallest Div Avail Status Rent Type Lease Term
============ ============ =============== ===========
<S> <C> <C> <C> <C>
8,600 12 $18.00 Immediate
24,580 14 SL $16.00 Immediate
</TABLE>
Source: Cushman & Wakefield of Pennsylvania, Inc.
<PAGE>
<TABLE>
<CAPTION>
UNITED ENGINEERS
30 South 17th Street
Philadelphia, PA 19103
=============================================================================================
[PHOTO]
=============================================================================================
BUILDING DESCRIPTION: Granite exterior with solar dual pane windows located on
17th street between Ludlow and Panstead. Restaurant and bank facilities within
building. Nineteenth floor may be coming available.
=============================================================================================
<S> <C> <C>
SQUARE FOOTAGE AND Owner: Shuwa Trust of Philadelphia
FEATURES DATA: Office Rentable Square Feet: 600,000
Percent Occupied: 95
Year Built: 1975
Number of Floors: 20
Passenger/Freight Elevators: 11/1
Electricity: Included
Security: 24 Hour Desk
Parking Ratio: 0.30/1000
=============================================================================================
LOCATION DATA: Miles to Airport (1) 8
Miles to Airport (2) 0
Access Highway: 17th Street
Public Transportation: Yes
Amenities Restaurant/Bank Near Holiday Inn
Major Tenants: Raytheon, Price Waterhouse, Prudential Security
=============================================================================================
<CAPTION>
AVAILABILITIES:
SF Available Floor Base Rent Possession
Smallest Div Avail Status Rent Type Lease Term
============ ============ =============== ===========
<S> <C> <C> <C> <C>
30,000 19 $20.00 Immediate
300,000 N/A N/A Immediate
</TABLE>
Source: Cushman & Wakefield of Pennsylvania, Inc.
<PAGE>
<TABLE>
<CAPTION>
ONE LOGAN SQUARE
18th and Cherry Streets
Philadelphia, PA 19103
=============================================================================================
[PHOTO]
=============================================================================================
BUILDING DESCRIPTION: This building has a dark gray exterior and is adjacent to
the Four Seasons Hotel overlooking the Art Museum and Logan Circle. It is across
from a 600-car parking garage.
=============================================================================================
<S> <C> <C>
SQUARE FOOTAGE AND Owner: The Rubenstein Company
FEATURES DATA: Office Rentable Square Feet: 570,000
Percent Occupied: 95
Year Built: 1983
Number of Floors: 30
Passenger/Freight Elevators: 13/1
Electricity: Separately metered
Security: 24 Hour Desk
Parking Ratio: /1000
=============================================================================================
LOCATION DATA: Miles to PHI Airport (1) 8
Miles to NEP Airport (2) 0
Access Highway: 18th St./BF Parkway
Public Transportation: Yes
Amenities Mortons Restaurant/Four Seasons Hotel
Major Tenants: Legion Insurance Corporation/General
Reinsurance Corporation/Blank, Rome, Comisky &
McCauley
=============================================================================================
<CAPTION>
AVAILABILITIES:
SF Available Floor Base Rent Possession
Smallest Div Avail Status Rent Type Lease Term
============ ============ =============== ===========
<S> <C> <C> <C>
6,300 13 $24.00 Immediate
</TABLE>
Source: Cushman & Wakefield of Pennsylvania, Inc.
<PAGE>
ONE LOGAN SQUARE (Continued)
<TABLE>
<CAPTION>
SF Available Floor Base Rent Possession
Smallest Div Avail Status Rent Type Lease Term
============ ============ =============== ===========
<S> <C> <C> <C>
7,066 29 $20.00 - $23.00 Immediate
9,159 30 $20.00 - $24.00 Immediate
5,540 30 $24.00 Immediate
</TABLE>
Source: Cushman & Wakefield of Pennsylvania, Inc.
<PAGE>
Market Analysis
================================================================================
On the opposing page is a chart which outlines the direct competition for
the subject property. A review of the forgoing indicates a total inventory of
approximately 8,900,000 square feet of directly competitive space in 14
buildings. There are about 998,000 square feet of space available in these
buildings, representing a vacancy rate of 11.2 percent. Therefore, the directly
competitive properties are experiencing a higher overall vacancy rate than the
entire Class A market West of Broad Street, which is currently 10.3 percent. The
lower overall vacancy rate is reflective of the extremely high occupancy
exhibited by the Class A+ tier of the market. The vacancy rate among the
directly competitive properties is skewed somewhat by 8 Penn Center, a decidedly
inferior building. Additionally, both 1700 Market Street and 1818 Market Street
offer significant current availabilities. The current office vacancy at the
subject, after considering all executed leases, is less than 1 percent.
The asking rental rates for comparable Class A space ranges from $16.50
per square foot plus electric at the aforementioned 8 Penn Center to $24.00 per
square foot plus electric at One Logan Square. However, office brokers also
indicate that the market rent for these buildings is primarily between $18.00
and $22.00 per square foot, plus electric with upper floors commanding a
premium.
Current and Potential Market Dynamics
Previously we have noted corporate downsizings as well as companies such
as Provident Mutual Life which left the central business district. The largest
tenant at Eleven Penn Center and 1818 Market Street, Colonial Penn Insurance,
vacated their space to occupy a building they purchased at 399 Market Street.
One large user, PNC Bank, had a requirement for approximately 220,000 square
feet and it recently occupied the former Provident Mutual Space at 1600 Market
Street. PNC vacated mostly Class B+ space among several buildings. As we
previously noted, other "wild card" type events that may or may not impact the
market is the recent merger trend among several of Philadelphia's major banking
institutions. These types of mergers usually result in overlapping employment
and eventual reductions in space requirements. Also, it is rumored that ConRail
will place space back on the market and Raytheon will sublet space at the United
Engineers Building. Additionally, market participants are expecting Cigna to
reduce its CBD presence at Two Liberty Place. Finally, it appears the previously
"mothballed" 1650 Arch Street will begin marketing space and undergo retrofit.
On the positive side, several large tenant moves which will further
tighten the CBD market. Although Morgan, Lewis & Bockius will be leaving a gap
in One Logan Square, Drinker, Biddle & Reath will fill most of the space. Blank,
Rome will also be occupying the lower floors of One Logan Square. Both of these
firms will primarily be vacating Class B buildings.
Market Rental Estimates
The subject property offers certain positive characteristics which include
an attractive and functional design, its mechanical systems, life safety
systems, level of maintenance, location, and quality ownership.
================================================================================
-23-
CUSHMAN &
WAKEFIELD(R)
<PAGE>
Market Analysis
================================================================================
In the Income Capitalization Approach to this report, we have identified
several recent transactions in this market. These transactions have been
segregated into minor office tenant leases and first floor retail space. Minor
office tenant transactions indicate an average rent of approximately $16.03 per
square foot on a full service basis to $19.30 per square foot on a full service
basis. Recent lease transactions at the subject property have been structured at
between $16.55 to $18.64 per square foot on a gross basis. The few vacant suites
at the subject property are currently being marketed at rental rates ranging
from $17.00 to $18.00 per square foot on a gross basis.
Retail leases on the ground floor of office towers in the West Market
Street office sector typically range from $18.50 per square foot gross to $35.00
per square foot on a net basis. The leases at the subject property are
structured on a gross basis and range from $31.00 to $40.00 per square foot.
In our analysis, after discussions with property management, as well as
our analysis of recent market transactions at the subject and at competing
facilities, we have come to a conclusion of market rent for the various
categories of space at the subject. These market rental rates are exhibited on
the following chart.
================================================================================
1760 Market Street
Economic Rental Estimates
================================================================================
Tenant Market Tenant
Type Rent Term Improvements Expenses
================================================================================
Storage $ 8.00/sf 5 yrs. -0- Gross
- --------------------------------------------------------------------------------
Retail (Market St.) $35.00/sf 5 yrs. $18.00 Gross
- --------------------------------------------------------------------------------
Retail (18th Street) $32.00/sf 5 yrs. $18.00 Gross
- --------------------------------------------------------------------------------
Office $17.75/sf 5 yrs. $18.00 Gross
================================================================================
Buyer Characteristics
Knowledgeable brokers indicate that the overall rate on net operating
income for the sale of an office building in Philadelphia would need to be above
9 percent to attract investor interest. Buyers are keying-in on the sale price
per square foot as an important financial indicator. It is reported that most
buyers of available Class A-/B+ buildings are interested in properties between
$50.00 and $85.00 per square foot.
The subject property, as noted, is a Class A building which would warrant
something toward the upper end of the range based upon its ability to generate a
return on invested capital. Almost regardless of the income characteristics,
buyers believe that, with replacement costs of approximately $200.00 to $250.00
per square foot, properties below $125.00 per square foot will generate a
substantial return over time.
================================================================================
-24-
CUSHMAN &
WAKEFIELD(R)
<PAGE>
Market Analysis
================================================================================
It is also being reported that the traditional institutional investors are
again actively seeking Class A CBD buildings for their portfolios. These
institutional investors include pension funds and foreign investors. Due to the
weakening of the dollar, U.S. real estate appeals to Asian and European
investors. REITs are particularly attractive to the Dutch investor due to
favorable tax treatment of dividend income. Reduced yields on other asset
classes have shifted investors toward CBD office product where significant
upside potential still exists. Recently, the Philadelphia market has attracted
these institutional investment groups. 1601 Market Street was acquired by an
affiliated partnership of Samuel Zell, while the note sale for Two Logan Square
attracted significant interest and was eventually acquired by Blackstone and a
local investment group.
1818 Market Street received several qualified offers from both domestic
and foreign investment groups as did 2000 Market Street. Cushman & Wakefield is
currently marketing 1700 Market Street and has received bona fide offers from
more than seven diversified investor groups. This type of activity has
reinforced the market perception that Philadelphia is a recovering office market
with both near and long term potential for increased rents and higher yields. In
each of the latter two transactions, the existing vacancy within these buildings
was viewed as an opportunity to increase yield by leasing into an improving
marketplace.
Conclusions
The Center City office market in which the subject competes is now
experiencing an overall vacancy rate of 14.5 percent. This vacancy rate is
deceptive as a survey of direct competition generates a vacancy rate closer to
11% percent. In response to the imbalance between supply and demand, rental
rates have steadily declined over the last five years. Absorption had been
negative for the past four years prior to 1995 and leasing activity had dropped.
A migration outward to the less expensive suburbs, a slow recovery in employment
for office workers, corporate consolidations, and a basic change in the ways
white collar employment is conducted is behind the lack of demand. Despite this,
there has been a short term trend towards increased leasing activity and
positive absorption for 1995 and 1996.
The subject property is currently 99 percent occupied. The complex
represents one of the highest quality, smaller investment properties in the City
of Philadelphia. There are currently two tiers for sales in the marketplace. One
tier is for institutional grade property with quality tenants on long term
leases or lease guarantees. The second tier is for properties which would be
perceived as requiring entrepreneurial efforts in order to lease remaining
blocks of vacant space. Buyers are seeking such properties at discounts between
40 percent and 60 percent of replacement cost new. Assuming new construction
costs average $225 per square foot, the range in pricing would be $90 to $125
per square foot. Due to the lower magnitude of investment required for
acquisition of the subject, we believe it would appeal to a broad range of
investors, including many smaller institutional funds.
================================================================================
-25-
CUSHMAN &
WAKEFIELD(R)
<PAGE>
Market Analysis
================================================================================
Exposure Time
Exposure Time is defined as the estimated length of time the property
interest being appraised would have been offered on the market prior to the
hypothetical consummation of a sale at the estimated market value on the
effective date of the appraisal. It is a retrospective estimate based upon an
analysis of past events assuming a competitive and open market. Thus, Exposure
Time is presumed to precede the effective date of the appraisal.
Our analysis of comparable sales indicates that an exposure time of
between 6 and 9 months was typical for Class A office buildings in Center City
Philadelphia. Therefore, based upon our analysis of comparable sales in
conjunction with the physical, locational and economic characteristics of the
subject property, it is our opinion that an exposure time of approximately six
months would be typical prior to our market value conclusion as of the date of
valuation.
================================================================================
-26-
CUSHMAN &
WAKEFIELD(R)
<PAGE>
PROPERTY DESCRIPTION
================================================================================
The Subject Property
The subject property is a 14 story Class A office building situated at the
southeast corner of 18th and Market Streets in Philadelphia, Pennsylvania. The
improvements were constructed in 1981 and, according to management, contain a
rentable area of 123,536+/- square feet on an 8,944+/- square foot site. The
following is a more detailed description of the subject property.
Site Description - 1760 Market Street
Location: Southeast Corner of 18th Street and Market
Street Philadelphia, Pennsylvania
Shape: Rectangular
Land Area: 0.21 +/- acres
Frontage: 52' along the south side of Market Street;
172' along the east side of 18th Street
Topography: Level at street grade
Street Improvements: Concrete curbs and sidewalks
Access: Vehicular access to the property is
considered very good. Market Street is a
100' wide right-of-way and the primary
east/west artery in the CBD providing
traffic flow in an easterly direction.
Eighteenth Street permits traffic flow in a
northerly direction.
Soil Conditions: We did not receive nor review a soil
report. However, we assume that the soil's
load-bearing capacity is sufficient to
support the existing structure. We did not
observe any evidence to the contrary during
our physical inspection of the property.
The tract's drainage appears to be
adequate.
Land Use Restrictions: We were not given a title report to review.
We do not know of any easements,
encroachments, or restrictions that would
adversely affect the site's use. However,
we recommend a title search to determine
whether any adverse conditions exist.
Flood Hazard: According to Community Panel No.
420757-0035D, National Flood Insurance Rate
Map, effective March 19, 1982, the subject
property is in Flood Hazard Zone C and,
therefore, does not require flood hazard
insurance.
================================================================================
-27-
CUSHMAN &
WAKEFIELD(R)
<PAGE>
Property Description
================================================================================
Wetlands: We were not given a Wetlands survey. If
subsequent engineering data reveal the
presence of regulated wetlands, it could
materially affect property value. We
recommend a wetlands survey by a competent
engineering firm.
Hazardous Substances: We observed no evidence of toxic or
hazardous substances during our inspection
of the site. However, we are not trained to
perform technical environmental inspections
and recommend the services of a
professional engineer for this purpose.
Improvements Description - 1760 Market Street
General Description
Year Built: 1981
Number of Floors: 14
Gross Leasable Area: 125,000 square feet
Net Rentable Area: 123,536 square feet
Typical Floor Plate: 8,929 square feet
Construction Detail:
Foundation: Poured reinforced concrete caissons and
column pads.
Framing: Fireproofed structural steel.
Floors: Reinforced concrete slab on grade; elevated
tower floors are poured concrete over steel
decking.
Exterior Walls: Face brick and glass.
Roof Cover: Flat, insulated roof with ballasted cover
over concrete deck.
Windows: Tinted insulated windows in metal frames.
Pedestrian Doors: Revolving and bi-parting aluminum and plate
glass pedestrian doors.
Loading Doors Loading is provided along Ludlow Street
================================================================================
-28-
CUSHMAN &
WAKEFIELD(R)
<PAGE>
Property Description
================================================================================
Mechanical Detail
Heating and Cooling: The HVAC system consists of water source
heat pumps installed in the ceiling plenum
in tenant spaces and common areas. An
electrical boiler and evaporative cooling
towers are installed to provide heating and
condensing for the water source loop.
Elevator Service: Four, automatic passenger elevators service
the building.
Electric Service: Commercial grade electric service. The
building is not separately metered for
tenant electric.
Fire Protection: 100 percent wet sprinklered throughout;
integrated smoke evacuation, fire
annunciation and elevator recall system.
Security: Security cameras monitored by lobby
personnel; and card key system for after
hours entry.
Interior Detail
Layout: The basic design of the building provides
for a grade level retail/lobby area, and
upper floor offices in the 14 story
structure.
Lobby Level - The main entrance to the
building is off of 18th Street. The lobby
is one story in height and framed in marble
and painted gypsum. The lobby features
approximately 4,383 square feet of
office/retail space which is entirely
occupied by two tenants. The tenants are
Charles Schwab (3,135 s.f.) and Saladworks
(1,248 s.f.).
Office Tower - The office tower consists of
floors 2 through 14. Floor plates for full
floor users are 8,900 square feet.
Floor Covering: Granite in lobby; carpet & vinyl tile in
offices.
Walls: Typical wall covering is painted or vinyl
covered gypsum.
Ceilings: Typical ceiling finish is suspended tiles
in aluminum grid system.
Lighting: Recessed fluorescent and incandescent
lighting.
Restrooms. Men's and women's restrooms are located on
each floor.
================================================================================
-29-
CUSHMAN &
WAKEFIELD(R)
<PAGE>
Property Description
================================================================================
Site Improvements
Parking: No on-site parking.
On-Site Landscaping: None.
Americans With Disabilities Act: The Americans With Disabilities Act (ADA)
became effective January 26, 1992. We have
not made, nor are we qualified by training
to make, a specific compliance survey and
analysis of this property to determine
whether or not it is in conformity with the
various detailed requirements of the ADA.
It is possible that a compliance survey and
a detailed analysis of the requirements of
the ADA could reveal that the property is
not in compliance with one or more of the
requirements of the Act. If so, this fact
could have a negative effect upon the value
of the property. Since we have not been
provided with the results of a survey, we
did not consider possible non- compliance
with the requirements of ADA in estimating
the value of the property.
Hazardous Substances: We are not aware of any potentially
hazardous materials (such as formaldehyde
foam insulation, asbestos insulation, radon
gas emitting materials, or other
potentially hazardous materials) which may
have been used in the construction of the
improvements. However, we are not qualified
to detect such materials and urge the
client to employ an expert in the field to
determine if such hazardous materials are
thought to exist.
Design Features and Functionality: The subject property provides quality
office space in a functional design. The
relatively small floor plate provides
smaller tenants with a higher profile than
at larger floor plate buildings. The design
permits efficient demising capability for
multi-tenant floors as well.
Physical Condition: Our inspection of the subject property
indicates that the building is constructed
with high quality materials and is in good
overall condition. By virtue of its quality
and design, the building remains very
competitive with other Class A buildings in
the Philadelphia CBD.
================================================================================
-30-
CUSHMAN &
WAKEFIELD(R)
<PAGE>
Property Description
================================================================================
We did not inspect the roof of the building
or make a detailed inspection of the
mechanical systems. The appraisers,
however, are not qualified to render an
opinion as to the adequacy or condition of
these components. The client is urged to
retain an expert in this field if detailed
information is needed about the adequacy
and condition of mechanical systems.
================================================================================
-31-
CUSHMAN &
WAKEFIELD(R)
<PAGE>
REAL PROPERTY TAXES AND ASSESSMENTS
================================================================================
The subject property is under the taxing jurisdiction of the City of
Philadelphia. The amount of ad valorem taxes is determined by the current
assessed value for the real and personal property, in conjunction with the total
combined tax rates of the taxing jurisdiction. In an effort to project the
future tax liability for the subject's real property, we have reviewed both the
present and historical tax rates combined with a forecast of the assessments.
Tax Rates
The following is a chart displaying the five and ten year trend in tax
rates levied by the above noted taxing jurisdictions:
================================================================================
Tax Rates Per $1000 of Assessed Value
================================================================================
Taxing Authority 1987 Tax Rate 1992 Tax Rate 1997 Tax Rate
================================================================================
City of Philadelphia $35.05 $37.45 $37.45
- --------------------------------------------------------------------------------
School District $39.70 $45.19 $45.19
- --------------------------------------------------------------------------------
Total $74.75 $82.64 $82.64
================================================================================
As the preceding chart indicates, the tax rates affecting the subject
property have remained stable over the past five years (since 1992), and
increased only 0.9 percent per year over the past eleven years (since 1987).
Typically, in most municipalities over the long term, tax rates will mirror
inflationary trends, with average compound growth rates of 3.0 to 4.0 percent.
The City of Philadelphia has been very successful in stabilizing tax rates over
time, particularly in light of increased demand for services during a period of
real estate deflation.
Tax rates increase or decrease annually based upon changes in municipal
budgets and the total tax base. Again, over the longer term, tax rate increases
tend to mirror inflationary trends, except during periods of economic decline or
in fast growing areas where new services are required. With the likely
stabilization of real estate values and the tax base, we are of the opinion that
more normal increases in tax rates, of say 3.0 to 4.0 percent, will be the trend
over the intermediate term.
Tax Assessment
The City of Philadelphia Board of Revision of Taxes establishes the
assessed value on real property for all of the previously noted taxing
jurisdictions. The 1997 assessment, as well as the historical assessments for
1995 and 1996 are as follows:
================================================================================
Historical Assessed Value
================================================================================
1995 1996 1997
================================================================================
Land $1,171,456 $1,171,456 $1,171,456
- --------------------------------------------------------------------------------
Building $2,092,576 $1,868,544 $1,868,544
- --------------------------------------------------------------------------------
Total $3,264,032 $3,040,000 $3,040,000
================================================================================
================================================================================
-32-
CUSHMAN &
WAKEFIELD(R)
<PAGE>
Real Property Taxes And Assessments
================================================================================
As can be seen from the above chart, the 1997 assessment is the same as
the 1996 assessment, but represents a slight reduction from the 1995 assessment.
In an effort to evaluate the fairness of the subject's current assessed value
and future prospects for a change in the assessment, we have (1) compared the
assessment to estimated value of the subject property via the Income
Capitalization Approach as presented later in this report; and (2) the market
value estimate concluded in this report.
The estimated value of the subject property in the Income Capitalization
Approach section of this report is $8,500,000, while our final value conclusion
is also $8,500,000. Based on our discussion with the City of Philadelphia Board
of Revision of Taxes, the Income Capitalization Approach is the typical
methodology the Assessor's office uses in determining the value of a facility
such as the subject. Reportedly, one-third of all commercial properties are to
be re-assessed in any one year. However, due to the amount of appeals in
Philadelphia in recent years, this practice has not occurred. While the
assessment is designated at 32 percent of the market value of a property, it is
our understanding that this taxing authority is not particularly diligent in its
property assessments. Thus, we are not surprised that the market value for
assessment purposes of $9,500,000 is approximately 12 percent higher than our
value estimate via the Income Capitalization Approach and our final value
conclusion. Thus, the subject appears to be unfairly assessed and we would
recommend a tax appeal.
Ad Valorem Tax Conclusions
Applying the 1997 assessment for the subject to the total 1997 tax rate
results in a combined tax burden of $251,225 in that year as calculated in the
following chart.
================================================================================
$3,264,032/ 1,000 x $82.64 = $251,225
================================================================================
The above taxes have been paid for 1997.
In addition to the above, the subject property is liable for a second levy
as it is located in the Special Services District of Central Philadelphia. The
Special Services District was established to provide additional street cleaning
and security for Center City properties. This levy can be calculated for the
subject property as follows:
Assessed Value of Subject Property: $3,040,000
Divided by Total Assessed Value of Special Service District: $1,389,811,197
Equals the Subject property's Pro-Rata Share 2.187%
Multiplied by Special Services 1997 Projected Cost: $7,490,000
Equals the Subject Property's Special Services Tax: $16,383
================================================================================
-33-
CUSHMAN &
WAKEFIELD(R)
<PAGE>
Real Property Taxes And Assessments
================================================================================
Therefore, the total taxes attributable to the subject in 1997 are
$287,329, equivalent to $2.32 per square foot of rentable area. The taxes are
allocated as follows:
================================================================================
Category Amount Unit Rate
================================================================================
Real Estate Tax $251,225 $2.07/s.f.
- --------------------------------------------------------------------------------
Special Services District 16,384 .13/s.f.
- --------------------------------------------------------------------------------
Total $267,609 $2.20/s.f.
================================================================================
================================================================================
-34-
CUSHMAN &
WAKEFIELD(R)
<PAGE>
ZONING
================================================================================
The subject property is currently zoned C-5, Commercial by the City of
Philadelphia. It is the intention of this section of the zoning code to allow
uses that are commonly found in and compatible with a high-density business
core. These uses include office buildings, hotels and most retail enterprises
along with all uses permitted in any residential district. The developmental
requirements of this zone are summarized as follows:
Some of the restrictions imposed by this classification include:
================================================================
Maximum Lot Coverage 100 percent
----------------------------------------------------------------
Minimum Set Back None
----------------------------------------------------------------
Maximum Building Height None
----------------------------------------------------------------
Maximum Floor Area Ratio 1,200 percent of area of lot plus
cumulative five percent bonuses
per foot of street width in
excess of 60 feet.
----------------------------------------------------------------
On Site Parking Not required
================================================================
The code allows for cumulative bonuses where additional floor area is
permitted based upon the widths of the street on which the property fronts or if
it is a corner property and there is more than one street frontage. Also,
setbacks from streets produce a bonus.
Off street loading is a requirement. However, the code makes no provisions
for the inclusion of on-site or off-street parking if no residential uses are
included within the building. The calculation of maximum building density
requires the projecting of a specific development program onto a site. The
complexity of all the ramifications of the zoning code of the City of
Philadelphia with cumulative bonuses for street widths, setbacks and other
design considerations introduce significant variables, many of which may be
unique to an investor's development program.
We know of no deed restrictions (private or public) which would further
limit the use of the subject property. However, this statement should not be
taken as a guarantee or warranty that no such restrictions exist. Deed
restrictions are a legal matter and only a title examination by an attorney
would normally uncover such restrictive covenants. Thus, an updated title search
of the subject property is recommended to determine the existence of such
restrictions.
================================================================================
-35-
CUSHMAN &
WAKEFIELD(R)
ALTERATION OF THIS DOCUMENT IS A CRIMINAL OFFENSE UNDER 18 PA.C.S.ss. 4911
<PAGE>
HIGHEST AND BEST USE
================================================================================
Highest and Best Use of Site as Though Vacant
According to the Dictionary of Real Estate Appraisal, Third Edition
(1993), a publication of the Appraisal Institute, the highest and best use of
the site as though vacant is defined as:
Among all reasonable, alternative uses, the use that yields the highest
present land value, after payments are made for labor, capital, and
coordination. The use of a property based on the assumption that the
parcel of land is vacant or can be made vacant by demolishing any
improvements.
Physically Possible
The subject site contains approximately 8,944 square feet of land, with
excellent exposure along Market Street. The size and configuration of the site
is felt to provide a suitable land use and/or development potential for a wide
variety of possible and ordinary downtown-oriented land uses, although on a
smaller scale. Municipal utilities would adequately provide for nearly all uses.
Street improvements are also adequate.
Legally Permissible
The subject's zoning classification permits development of office, retail,
and service related uses, as well as residential and lodging uses. Office uses
with a ground level retail component are consistent with the overall development
of the area.
Financially Feasible
Our analysis of the local office market indicates an overall vacancy rate
of about 14.5 percent, but less than 11 percent in the Class A sector of West
Broad Street. The Class A+ tier has a direct vacancy rate of less than four
percent. Absorption has recently turned positive in 1995 and 1996 after four
years of negative absorption, but it is uncertain whether this trend can
continue in the face of announced corporate downsizings. Rental rates average
approximately $16.00 to $22.00 per square foot on a full service basis and are
expected to increase over the long term. Additionally, construction in this
marketplace has been non-existent for the last several years, with no new
projects planned. Finally, the Central Business District continues to represent
the focal point of office activity for the Philadelphia Metropolitan Area.
Despite stable market conditions in the local office market, the
oversupply of space and the continued introduction of sublet space has had a
depressing effect on rental rates. Consequently, it is apparent the cost of
constructing an office development is not feasible for the subject site at the
present time. Once the office market stabilizes and rental rates escalate into
the $30.00 per square foot range, the financial feasibility of developing the
subject site with an office building is probable. Thus, no physically possible
and legally permissible use would produce an acceptable return on the land. Only
with the financial strength of a tenant willing to occupy virtually an entire
facility or with an owner-user would immediate development be feasible.
Based on the above, we have concluded that the highest and best use of the
subject, as vacant, is for high density commercial development, once market
conditions warrant new construction.
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Highest and Best Use
================================================================================
Highest and Best Use of Property as Improved
According to the Dictionary of Real Estate Appraisal, highest and best use
of the property as improved is defined as:
The use that should be made of a property as it exists. An existing
property should be renovated or retained so long as it continues to
contribute to the total market value of the property, or until the return
from a new improvement would more than offset the cost of demolishing the
existing building and constructing a new one.
Unlike the previous analysis of the subject site as vacant, this analysis
considers the subject property as currently improved with an evaluation as to
the physical, legal, and financial appropriateness of the existing land use.
Physical Considerations
The subject site has been improved with the existing structure and, based
upon our observation, there are no apparent physical factors such as soils,
drainage, or other site characteristics that would adversely affect the
continued utility and/or existence of the subject improvements.
Legal Considerations
The subject site, as presently improved, represents a legal, conforming
use.
Financially Feasible
The use of the subject improvements is considered to contribute in an
economic manner to the subject site. Occupancy levels at the subject property
are higher than competing office buildings in downtown Philadelphia. We believe
the occupancy of the subject property (99 percent) is generally considered to
indicate market feasibility.
Therefore, based on the subject's historical performance and the prospect
for continued growth, it is our opinion that the subject property, as presently
developed, represents the highest and best use of the site as improved.
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VALUATION PROCESS
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In this appraisal, we have used the Sales Comparison Approach and the
Income Capitalization Approach to develop a market value estimate.
The Cost Approach was not performed for the following reasons:
o This approach is more relevant for new construction or where
sufficient information is available to reasonably estimate the
replacement cost new of the improvements and land.
o The investment marketplace does not typically trade buildings such
as the subject on a cost/value basis, particularly in markets where
it is generally perceived that cost exceeds value.
o The subjectivity of accurately estimating accrued depreciation of
the existing improvements significantly limits the reliability of
this approach.
In the Sales Comparison Approach, we performed the following steps:
o Searched the market for recent office building sales within the
Philadelphia central business district, which contain similar
physical and economic characteristics to the subject property.
o Analyzed differences between those sales and the subject on the
basis of the sales price per square foot and extracted overall
capitalization rates.
o Correlated the various value indications into a point value estimate
from within the range.
In developing the Income Capitalization Approach, we:
o Studied rents in effect in the immediate and competing areas to
estimate potential rental income at market levels for office uses.
o Studied the recent history of operating expenses at the subject
property and competing properties to estimate an appropriate level
of stabilized expenses and reserves for replacement.
o Estimated net operating income by subtracting stabilized expenses
from potential gross income after deduction for vacancy and
collection loss.
o Prepared a discounted cash flow analysis in which the estimated
income and expenses over a projected holding period, and the
estimated property value at the time of reversion, are discounted at
an appropriate rate to estimate present market value.
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VALUATION PROCESS
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In estimating the final value, we performed the following:
o Reviewed and re-examined each of the approaches to value which were
employed.
o Considered the type and reliability of the data used and
applicability of each approach.
o Reconciled the approaches to a final value conclusion.
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SALES COMPARISON APPROACH
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Methodology
In the Sales Comparison Approach, we estimated value by comparing this
property with similar, recently sold properties in the surrounding or competing
area. Inherent in this approach is the principle of substitution, which holds
that when a property is replaceable in the market, its value tends to be set at
the cost of acquiring an equally desirable substitute property, assuming that no
costly delay is encountered in making the substitution.
By analyzing sales that qualify as arms-length transactions between
willing and knowledgeable buyers and sellers, we can identify value and price
trends. The basic steps of this approach are:
1. research recent, relevant property sales and current offerings
throughout the competitive area;
2. select and analyze properties that are similar to the property
appraised, considering changes in economic conditions that may have
occurred between the sale date and the date of value, and other
physical, functional, or locational factors;
3. identify sales that include favorable financing and calculate the
cash equivalent price;
4. reduce the sale prices to a common unit of comparison such as price
per square foot of net rentable area, and overall capitalization
rate;
5. make appropriate comparative adjustments to the prices of the
comparable properties to relate them to the property being
appraised; and
6. interpret the adjusted sales data and draw a logical value
conclusion.
Analysis of Sales
Over the past 24 months, the Philadelphia CBD office market has shown
signs of improvement. Rents have increased and concession packages have all but
disappeared as positive net absorption is taking place. In terms of the
investment market, demand is primarily being generated by REITs and
institutional investors including several large pension funds. Transactions
occurring prior to mid-1996 were executed primarily by Vulture Funds stimulated
in an effort to capture "bottom of the market" sale prices.
On the opposing page is a presentation of the comparable property sales
which were analyzed for the valuation of 1760 Market Street. The most
widely-used and market-oriented unit of comparison for properties such as the
subject is the sales price per square foot of building area. All comparable
sales were analyzed on this basis. Detail sheets describing these and all the
sales employed in this analysis can be found among the Addenda to this report.
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<PAGE>
Sales Comparison Approach
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The subject property is a 123,000 +/- square foot, 14 story office
building on 0.21 acres of land which was constructed in 1981. It is now 99
percent occupied by a number of tenants. On the date of inspection, the building
was in good condition having benefited from an on-going maintenance program. The
property possesses good "curb appeal" and features good quality construction
materials. With regard to the market data assembled for this analysis, the
following comparisons are made:
Comparable Property Sale #1,2000 Market Street, is an arm's length
transaction which is being accomplished with market oriented financing. It
is also a recent transfer; thus no adjustment for market conditions is
appropriate. However, an adverse leasehold interest is held by one of the
major tenants, The Board of Pensions for the Presbyterian Church. A
positive adjustment for this factor is warranted. Locationally, Sale #1 is
situated two blocks west and exhibits similar attributes as the subject.
Physically, this property represents a Class A building which was
constructed in 1974, but renovated extensively over the years. Containing
665,819 square feet and situate on a 40,864 square foot site, the complex
is considered in average condition. This building recently underwent HVAC
upgrades and has been well maintained, but still exhibits an inferior
condition relative to the subject. Economically, Sale #1 was 89 percent
leased at the time of conveyance which is inferior to the 99 percent
occupancy now experienced by the subject. No non-realty items of property
were reported to be included in the price for this property. Overall, a
positive adjustment is warranted for Sale #1.
Comparable Property Sale #2, One Logan Square, despite the involvement of
the U.S. Bankruptcy Court, was an arm's length transaction accomplished
with market oriented financing. It is also a recent transfer; thus no
adjustment for market conditions is appropriate. The major tenant in the
property, Morgan, Lewis, and Bockius, provided notice of lease termination
in August of 1998, at which time they are entitled to a $2,000,000
payment. There were no other adverse leasehold interests apparent at the
time of sale. Locationally, Sale #2 is situated two blocks north and
exhibits similar attributes as the subject.
Physically, this property represents a Class A building which was
constructed in 1983, but renovated extensively over the years. Containing
589,508 square feet and situate on a 33,098 square foot site, the complex
is considered in average condition. This building was well maintained, but
required base building improvements in order to remain competitive.
Economically, Sale #2 was 64 percent leased at the time of conveyance,
although leases were in place which will bring the property to 91 percent
occupancy in two years. The purchaser was to incur all costs associated
with these tenants, estimated to be $16,927,000. This requirement was
clearly a negative factor in the final pricing of the asset and a positive
adjustment is appropriate. No non-realty items of property were reported
to be included in the price for this property. Overall, a positive
adjustment is warranted for Sale #2.
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Sales Comparison Approach
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Comparable Property Sale #3, 1818 Market Street, was an arm's length
transaction accomplished with market oriented financing. Despite its year
end 1996 sale date, the final pricing was negotiated in the fall of that
year. Since that time, both office market conditions and capital market
conditions have improved dramatically, with significant competition noted
for quality assets. An upward adjustment for more favorable market
conditions is appropriate. The building exhibited an adverse leasehold
interest as the major tenant, Day & Zimmerman, was subject to a long term
lease at a relatively flat rental rate. Locationally, Sale #3 is situated
one block west and exhibits similar attributes as the subject.
Physically, this property represents a Class A building which was
constructed in 1974, but extensively renovated in the early 1990's.
Containing 982,000 square feet of net rentable area and situated on a
42,669 square foot site, the complex was in good condition at the time of
sale, but still inferior to the condition of the subject. This building
was well maintained, but required base building improvements in the form
of sprinkler installation for approximately 30 percent of the building.
However, the property included a 385 space parking garage which the
purchaser valued at $10,000,000. Thus, a negative adjustment of $10.18 per
square foot is appropriate to this transaction for this physical
characteristic. Economically, Sale #3 was 81 percent leased at the time of
conveyance requiring a negative adjustment. No non-realty items of
property were reported to be included in the price for this property.
Overall, a negative adjustment is warranted for Sale #3.
Comparable Property Sale #4, Two Logan Square, was a note sale by the
complex's lender. Although actively marketed, the seller was considered
somewhat motivated. Since the date of sale in June of 1996, both office
market conditions and capital market conditions have improved
dramatically. An upward adjustment for more favorable market conditions is
appropriate. Approximately 45 percent of the building's rentable area was
leased at rental rates which were above market levels. The duration of
these leases was anywhere from about 18 months up to over nine years. The
purchaser of this property obtains the right to receive this premium rent
over time, but also incurs the risks associated with rental payments which
are above market.
Physically, this property represents a Class A+ building which was
constructed in 1988. Containing 675,000 square feet and situate on a
38,015 square foot site, the complex is considered in very good condition.
This building is felt to be superior to the subject. Economically, Sale #3
was 92 percent leased at the time of conveyance requiring a slight
negative adjustment. No non-realty items of property were reported to be
included in the price for this property. Overall, a negative adjustment is
warranted for Sale #4.
Comparable Property Sale #5, 1601 Market Street, was an arm's length
transaction accomplished with market oriented financing. Due to its early
1996 conveyance, an upward adjustment is required to reflect the
improvement in both office market conditions and capital market
conditions. The purchaser of Comparable Property Sale #5 paid all transfer
taxes and assumed future free rent and tenant improvement obligations to
the major tenant, thus necessitating a negative adjustment. Locationally,
Sale #5 is situated two blocks east and exhibits similar attributes as the
subject.
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Sales Comparison Approach
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Physically, this property represents a Class A building which was
constructed in 1969, but extensively renovated. Containing 681,000 square
feet of net rentable area and situated on a 33,938 square foot site, the
complex was in average condition at the time of sale. Still, it is
reported that the complex was acquired with a concern for significant
capital requirements. Subsequent to purchase, it was determined that the
capital requirements were lower than anticipated. The subject property is
considered physically superior to this property. Economically, Sale #5 was
89 percent leased at the time of conveyance requiring a negative
adjustment. No non-realty items of property were reported to be included
in the price for this property. Overall, a positive adjustment is
warranted for Sale #5.
Conclusion
The four sales assembled for this analysis of 1760 Market Street reflect a
range in unit value from $51.23 to $113.79 per square foot of building area. The
adjustments discussed above are presented to outline the logic of our thought
processes with the ultimate result being a plausible market value conclusion for
the subject property. Based on our analysis of these data on a price per square
foot basis, we have concluded an appropriate adjusted range of $65.00 to $75.00
per square foot of building area. From within this adjusted range, we conclude
the Sales Comparison Approach to indicate a current market value of $8,600,000
for 1760 Market Street. This indication of value is equal to $69.62 per square
foot of building area.
Comparing Properties Based on NOI per Square Foot
Another market measure compares the NOI per square foot of the property
appraised with the NOI per square foot of the comparison. If the properties are
truly comparable in terms of occupancy, operating expense ratio and stability of
income stream, then this can be an effective method of analysis. It is, in
effect, the same thing as comparing the capitalization rate derived from the
sales to the appropriate capitalization rate for the property appraised.
=============================================================
Comparing Properties Based on NOI Per Square Foot
=============================================================
NOI/SF
Sale Subject Unadjusted Sale Adjusted Sale
----------
No. Comparable x Price/SF = Price/SF
=============================================================
1 $7.17
-----
$5.10 $79.15 $111.28
3 $7.17
-----
$8.40 $80.86 $69.02
4 $7.17
-----
$14.52 $113.79 $56.19
5 $7.17
-----
$5.05 $51.23 $72.74
=============================================================
Based on our analysis of these data on a NOI per square foot basis, we
have concluded an appropriate adjusted range of $60.00 to $70.00 per square foot
of building area. From within this adjusted range, we conclude the Sales
Comparison Approach to indicate a current market value of $8,000,000 for 1760
Market Street. This indication of value is equal to $64.76 per square foot of
building area.
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Sales Comparison Approach
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Summary and Conclusion
====================================================================
Low High
====================================================================
Value Indicated on Basis of Price
Per Square Foot of NRA $8,000,000 $9,300,000
Value Indicated Based on Ratio of N0I to
Sale Price Derived $7,400,000 $8,650,000
From Comparison Sales
====================================================================
Final Conclusions
We feel both methods provide reasonable value parameters for the subject
property. However, the Income Ratio Method is somewhat weakened as it does not
directly recognize the market participants expectation of property cash flow.
The quality of the data available for a direct comparison of sale prices per
square foot, though, is significant to the overall analysis. Yet while the
magnitude of the adjustments is substantial in some cases, their logic is
reasonable and acceptable in our opinion. Based upon this total analysis, we
conclude the Sales Comparison Approach to indicate a current market value of
EIGHT MILLION SIX HUNDRED THOUSAND DOLLARS ($8,600,000) for the subject
property.
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INCOME CAPITALIZATION APPROACH
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Methodology
The Income Capitalization Approach is a method of converting the
anticipated economic benefits of owning property into a value estimate through
capitalization. The principle of "anticipation" underlies this approach in that
investors recognize the relationship between an asset's income and its value. In
order to value the anticipated economic benefits of a particular property,
potential income and expenses must be estimated, and the most appropriate
capitalization method must be selected.
The two most common methods of converting net income into value are direct
capitalization and discounted cash flow analysis. In direct capitalization, net
operating income is divided by an overall rate extracted from market sales to
indicate a value. In the discounted cash flow method, anticipated future net
income streams and a reversionary value are discounted to an estimate of net
present value at a chosen yield rate (internal rate of return).
In our opinion the discounted cash flow method is appropriate. The
discounted cash flow analysis is generally thought to be the best method for
evaluating income producing properties purchased for investment. Forecasted
future patterns of income and expenses are modeled to reflect perceived investor
expectations.
Potential Gross Income
Generally, office tenants pay fixed gross rent on a rentable area basis
which is consistent with space measurement standards for buildings of similar
vintage, plus any increases in operating expenses and real estate taxes above
stipulated base year amounts. Tenant electric costs are either directly metered,
submetered or included in base rent (charged as additional rent). At the subject
property, tenant electric is included in base rent and incorporated within the
operating expense stop.
Existing Leases
1760 Market Street is currently 99 percent occupied by 35 tenants under 44
leases. The property contains 700+/- square feet which are vacant and available
for lease. The property includes a total of 1,344 square feet of storage space;
4,383 square feet of retail space; and 117,809 square feet of office space.
A breakdown of average contract rents per space type is as follows:
====================================================================
Use Square Footage Percent Average Rent/SF
====================================================================
Office 117,809 s.f. 95.4% $17.01
Retail 4,383 s.f. 3.5% $37.15
Storage 1,344 s.f. 1.1% $ 8.18
Total 123,536 s.f. 100.0% $17.53
====================================================================
Due to the small floor plates within the subject, the largest tenants are
full floor users Ominsky & Welsh and Gruntal & Company. The balance of the
building is occupied by a mixture of communication firms, financial service and
law firms. The credit quality for the minor tenants ranges from average to good
within the context of their mostly unrated status.
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Income Capitalization Approach
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Based upon the subject's current lease expiration schedule, 26 percent of
the property's rentable area is represented by leases which are due to expire
within the next three fiscal years. Within the following three years, 64 percent
of current leases are due to expire. Within our projected 10 year holding
period 100 percent of the leases currently in place or projected to be signed
will expire.
Based upon the lease expiration schedule, we have forecasted a ten year
investment holding period. The 11th year is estimated to be the reversionary
year. As can be seen from the fiscal year schedule, the 11th fiscal year will
experience a generally typical number of lease expirations as a percentage of
total building area and, for analysis purposes, is considered a stabilized
reversionary year (please refer to fiscal year cash flow).
Market Rental Rate
Market rent for the office space within the property has been estimated by
analyzing eight comparable leases exhibited on the summary chart on the facing
page.
Prior to adjustment, the comparables reflect a range in average base rent
of $16.03 to $19.30 per square foot, gross. This range in actual comparable
leases has been compared with average asking rent for several comparable
properties which are summarized opposite page 23 of this report. These 14
properties reflect average asking rents ranging from $16.50 per square foot plus
electric to $24.00 per square foot plus electric.
The subject's contract rents average $17.01 per square foot, gross.
Certain leases within the property were signed several years ago and fall above
the current market rents. Other leases, however; were signed during the recent
market downturn. On average, we believe the contract rents within the building
are at or slightly below market. The most recent leases within the property have
been in the $16.55 to $18.64 per square foot range. These leases may be
summarized as follows:
Most Recent Leases
================================================================================
Area Term Yr/Rent
No. Tenant Floor Date (SF) (Yrs) (SF) Concessions
================================================================================
1. ADIA 8/97 1,569 3 $17.50 $ 5.00/sf T.I.
- --------------------------------------------------------------------------------
2. Brodsky & Deluca 8/97 864 5 $18.64 None
- --------------------------------------------------------------------------------
3 Rylon Forbes 4/97 2,094 5 $17.50 $25.00/sf T.I.
- --------------------------------------------------------------------------------
4. Trademar 12/96 1,104 3 $16.55 None
- --------------------------------------------------------------------------------
5. Source 10/96 2,563 3 $17.50 $25.00/sf T.I.
================================================================================
Additional rent for these leases include a real estate tax reimbursement
and operating expense escalation.
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Income Capitalization Approach
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Recent leases within the Philadelphia CBD market typically do not include
concessions in the form of free rent, although do include tenant workletters
consistent with those offered within the subject property. The smaller floor
plates at the subject tend to mitigate the need for substantial partitioning,
thereby reducing the average tenant improvement cost. In addition to analyzing
actual deals inside and outside the property, leasing brokers were interviewed
in an effort to ascertain competitive packages available in the marketplace
today. Most brokers interviewed were of the opinion that no free rent was
available for most tenants. In addition, tenant workletters were felt to range
from $15.00 to $30.00 per square foot. The range in concession packages varies
by the size of the space leased. The larger the tenant, the more generous the
concession package.
The leasing brokers interviewed indicated that the downtown office market
has stabilized. Several brokers indicated that the market has improved slightly
over the last twelve months, with rents increasing and concessions decreasing.
In the view of many, the leasing market should continue to strengthen through
the end of 1997. It is expected that further improvement should be seen in
1998-1999 with a materially stronger leasing market by 2000. In keeping with
these observations, we have assumed that market rent will increase at an average
rate of 3.5 percent per annum through the remainder of 1997, 5.0 percent during
1998, 7.0 percent during 1999, 5.0 percent during 2000, and stabilizing at the
underlying rate of inflation thereafter. Although the market may witness the
introduction of sub-let space which will negatively influence rental rates,
market participants are continuing to utilize rent spikes in their financial
analyses. We believe the free rent and tenant workletter concessions should
remain consistent with current levels.
The suggested rental range compares reasonably well to the average
contract rent within the subject property. In our opinion, market rents for
space within the subject property range from $17.00 to $18.50 per square foot,
with an average rental rate of $17.75 per square foot.
The above estimated market rents assume the following concession package.
================================================================================
Free Rent Tenant Improvements
================================================================================
New Leases 1997 0 months 1997 $18.00
Thereafter 0 months Thereafter $18.00
- --------------------------------------------------------------------------------
Renewing Leases 1997 0 months 1997 $ 8.00
Thereafter 0 months Thereafter $ 8.00
================================================================================
Market rent for the retail space within the property has also been
estimated by analyzing eight comparable leases exhibited on the summary chart on
the facing page.
Prior to adjustment, the comparables reflect a range in base rent of
$18.50 per square foot gross to $35.00 per square foot, net. After adjustment
to the comparables, a range of $30.00 to $40.00 per square foot, gross, was
revealed. Our adjustment for rent concessions considers the difference in the
comparables for market standard workletters of $18.00 per square foot.
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Income Capitalization Approach
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The subject's retail contract rents average $37.15 per square foot, gross.
On average, we believe the retail contract rents within the building are at
market. The most recent lease within the property is for Salad Works and
averages $31.00 per square foot.
Assumptions Regarding Existing and Proposed Leases
Our analysis specifically assumes that all of the existing tenants will
remain in the property and continue to pay rent under the terms of their leases.
Information provided by management indicates that none of the tenants are
currently in default. The tenant base appears to be stable and management has
indicated that defaults are not anticipated.
With regard to lease expirations, we have projected that 65 percent of all
tenants will rollover (sign a new lease) and approximately 35 percent will
turnover (allow their lease to expire and vacate the property) upon expiration
of their primary lease term. This assumption is based in large part on
management's projection of a near term 75 percent retention rate which is based
on their knowledge and expertise in the subject CBD market; however, we do not
believe that this level of retention can be achieved over a long term holding
period.
Typical office leases are three to five years in duration. We have assumed
five year terms for all tenants. Vacancy between leases includes the period of
actual downtime and the construction period to build-out tenant spaces.
Consistent with our experience, we have assumed a five month vacancy between
leases along with a one month construction period, resulting in a combined
downtime of six months. Vacancy between leases is weighted for a renewal
probability of 65 percent (35 percent vacate), resulting in an effective
downtime of two months upon each lease expiration of a tenant.
Reimbursable Expenses (Escalations)
Tenants are responsible for their pro-rata share of real estate taxes and
operations when total expenses exceed those incurred during the first full year
of their occupancy. The majority of current leases in the subject property
include an operating expense escalation, which calculation may be summarized as
follows:
Billing Year Operating Expenses
Less: Base Year Operating Expenses
Equals: Increase in Operating Expenses
Multiplied by: Tenant's Pro Rata Share
We have assumed that future leases in the subject property will be on a
full service basis. Tenants will be responsible for a real estate tax and
operating expense increase over the base calendar year amount.
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Income Capitalization Approach
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Vacancy and Collection Loss
Our cash flow projection assumes a tenant vacancy of six months upon each
lease expiration set against our probability of renewal estimated at 65 percent,
in addition to a vacancy/global credit loss provision applied to the gross
rental income. The vacancy/ global loss provision is applied to all tenants. Our
estimated vacancy/global credit loss provision applied to the gross rental
income is estimated at three percent throughout the holding period.
There is only one vacant space within the property encompassing 700 square
feet. In our analysis, we have assumed that vacant space will be expanded into
by the adjacent tenant at the expiration of the current lease term.
Based on the subject's weighted average downtime between leases, as well
as the preceding absorption schedule for the subject property, the overall
average occupancy rate of the subject property over the ten year holding period
is 97 percent. Including our overall vacancy/global credit loss allowance
estimated at 3.0 percent, the implied overall occupancy rate of the subject
property over the ten year holding period is 94 percent, which is generally
consistent with the actual historical occupancy levels of the subject property
over the last three years.
Operating Expenses
We have analyzed the reported operating expenses for 1994-1996 and
budgeted expenses for 1997. We forecasted the property's operating expenses
after reviewing operating expenses of similar buildings and after consulting
local building managers and agents, including Cushman & Wakefield property
management personnel, etc. We also examined industry norms as reported by the
BOMA Experience Exchange Report published by the Building Owners and Managers
Association International, a nationally recognized publication.
On the facing page is the income and expense analysis for the property.
The following analysis attempts to utilize the subject's historical operating
expense data supported by the comparable expense data. The age and unique
physical features of the subject warrant consideration of the subject's
historical expenses in estimating market operating expenses.
Following are the projected operating, recoverable and non-recoverable
expenses we have used in our cash flow analysis. We have analyzed each item of
expense individually and attempted to project what the typical informed investor
would consider reasonable.
The forecast of projected growth rates in all categories of expense
reflect typical investor expectations as noted in the Cushman & Wakefield
Investor Survey, which has been placed in the Addenda of this report. Except
where noted, our projected growth rates for the various types of expense
categories generally do not attempt to reflect growth rates for any individual
year, but rather the long term trend over the period of analysis.
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Income Capitalization Approach
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Total Operating Expenses
As can be seen, historic operating expenses, exclusive of real estate
taxes, at the subject property were $8.45 per square foot in 1995 and $8.39 per
square foot in 1996. Current ownership budgets operating expenses at $7.54 per
square foot for 1997. In our analysis of the subject property, the total
operating expenses estimated for fiscal year 1998, exclusive of real estate
taxes, are $969,079, or $7.85 per square foot of net rentable area. Our
operating expenses estimated for the subject property are within the range of
actual operating expenses of competing office buildings located in the
Philadelphia CBD as presented below.
================================================================================
Primary Office Building
Operating Expenses
================================================================================
# of
Name/Location Age Stories NRA Year Surveyed Expenses/SF NRA
================================================================================
1900 Market Street 1980 8 458,432 sf 1996 $8.45
- --------------------------------------------------------------------------------
2000 Market Street 1974 29 665,819 sf 1996 $6.66
- --------------------------------------------------------------------------------
One Logan Square 1983 30 589,908 sf 1996 $6.08
- --------------------------------------------------------------------------------
1700 Market Street 1969 32 840,908 sf 1996 $5.96
- --------------------------------------------------------------------------------
1818 Market Street 1974 37 982,009 sf 1995 $7.61
================================================================================
The five expense comparables reflect a range of $5.96 per square foot to
$8.45 per square foot. The five comparables reflect a range near the BOMA
average of $7.90 per square foot, inclusive of tenant electric costs. The
subject property, at $7.85 per square foot, is bracketed by the expense
comparables and considered reasonable. The following is a discussion and
analysis of our projected operating expenses.
Utilities - At the subject property, ownership is responsible for all
energy costs including common area and tenant electricity, water and sewer
charges. Historically, utilities have ranged from $2.06 to $2.41 per
square foot. Current ownership forecasts $2.04 per square foot in their
budget. For this analysis of the subject property, in consideration of
recent energy management programs which include the installation of new
lighting ballast, we project utilities at $2.28 per square foot in the
initial year.
Insurance - The history of the subject and the data available from our
files indicate an extremely tight range for this expense item on a square
foot basis. Therefore, we have stabilized the insurance expense at $0.20
per square foot for this analysis.
Management Fee - This item of expense provides for professional management
services like collections, supervision and the preparation of all budgets.
Recent experience at the subject and its current pro forma provide for a
management fee of $0.32 to $0.54 per square foot. Comparable expense data
indicate management expenses from $.50 to $1.00 per square foot. Mindful
of the experience at the subject, we project a management expense of $.54
per square foot in the initial year. This expense is equivalent to
approximately 3.1 percent of effective gross income.
Real Estate Taxes - A complete discussion of taxes is included elsewhere
in this report. In the initial year of investment, (FY 1998), the real
estate/special services district tax expense is estimated at $272,292 or
$2.20 per square foot of rentable area.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
Janitorial - Historically, the cost of contract cleaning, window cleaning,
trash removal and supplies at the subject property has ranged from $1.45
to $1.56 per square foot. Current ownership is budgeting $1.73 per square
foot in the current year. At comparable office buildings, janitorial
expense generally runs lower than the subject from $1.25 to $1.44 per
square foot. However, it is noted that this category includes window
cleaning and trash removal which are typically found within the
maintenance classification. For this analysis, in consideration of the
historical experience, we project janitorial expense to be $1.75 per
square foot of office area at the subject in the initial year of the
investment holding period.
General Maintenance - This expense item includes direct maintenance labor,
and other general maintenance items. At the subject, general maintenance
expenses have been $.78 to $1.21 per square foot. Ownership now projects
$1.19 per square foot in their budget. For this analysis, we have
projected $1.20 per square foot in the initial year of investment.
Outside Contracts - This expense item includes all service contracts for
landscaping, HVAC and elevator maintenance. At the subject, contracts have
been $.86 to $1.00 per square foot. Ownership now projects $1.08 per
square foot in their budget. For this analysis, we have projected $1.07
per square foot in the initial year of investment.
Administration - Included in this item are office expenses and payroll as
well as certain recoverable professional fees and licenses. Over the past
three years, administrative costs have also included insurance expense
estimated at approximately $.20 per square foot. Reducing historical
levels by this figure results in administration fees ranging from $.50 and
$.71 per square foot. Current ownership is using $.50 in their budgets. At
comparable properties, administrative charges vary widely depending on
accounting practices. Here, we utilize $.51 per square foot in the initial
year of the investment holding period.
Non-Escalatable Expenses - We have projected $.30 per square foot of
rentable area as an allowance for sundry expenses which invariably occur
in the operation of a property such as the subject. These include
advertising and promotion expenses, space planning and brochures. While
necessary to operate the real estate from ownership's perspective, they do
not directly benefit the tenants so that their costs are not typically
passed on to them in expense reimbursements.
Other Non-Operating Expenses - Other, non-operating expenses of the
subject property are projected in this analysis from prevailing commission
schedules, construction costs, and accepted practices. We have analyzed
each item of capital expenditure in an attempt to project what the typical
investor in a property like the subject would consider reasonable, based
upon informed opinion and experience. The following is a discussion of the
other, non-operating expenses incorporated into this analysis of the
subject property.
================================================================================
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
Tenant Alterations - Upon the expiration of a lease, it is our best
estimate that there is a 65 percent probability of the existing tenant
renewing their lease and a 35 percent probability that the existing tenant
will vacate. The current cost to alter and re-decorate office space for a
rollover tenant is estimated to be $8.00 per square foot while that to
prepare space for a new turnover tenant is estimated to be $18.00 per
square foot. On average, then, the weighted cost of tenant alterations is
projected to be $10.45 per square foot in the initial year of the
investment holding period. The following is a presentation of these
computations.
==========================================================================
Tenant Improvements Costs
==========================================================================
Event Probability X Unit Cost = Weighted Cost
==========================================================================
Rollover 65% X $ 8.00/SF = $ 5.20/SF
Turnover 35% X $18.00/SF = $ 6.30/SF
--------------------------------------------------------------------------
Total 100% Average Weighted Cost = $11.50/SF
==========================================================================
Leasing Commissions - As discussed in the Market Analysis, the standard
leasing commission for a new tenant in an office building like the subject
ranges from four to six percent of the lease value payable in the initial
year. A two percent commission is payable for rollover tenants. Upon the
expiration of the existing lease term, identical turnover/rollover
probabilities as described above are utilized in this computation. Thus,
the weighted average leasing commission is computed to be 2.70 percent of
base rent. The following is a presentation of these computations:
==========================================================================
Leasing Commission Expense
==========================================================================
Event Probability X Commission = Weighted Rate
==========================================================================
Rollover 65% X 2.0% = 1.30%
Turnover 35% X 4.0% = 1.40%
--------------------------------------------------------------------------
Total 100% Average Weighted Rate = 2.70%
==========================================================================
Reserves - It is customary and prudent to set aside an amount annually for
the replacement of short lived capital items such as roofs, lobby or
mechanical equipment and ADA Compliance. In this analysis, we have
projected an allowance for reserves of $.15 per square foot of rentable
building area which is typical in the local market place for a property
like the subject.
Other non-operating expenses are also forecasted to increase at an average
annual rate of 3.5 percent over the investment holding period. This too is
consistent with the Cushman & Wakefield Investor Survey. Again, our projected
growth rates for the various types of expense categories generally do not
attempt to reflect growth rates for any individual year, but rather the long
term trend over the period of analysis.
================================================================================
-52-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
Discounted Cash Flow Analysis
In the discounted cash flow analysis, we employed the PRO-JECT+ plus
software which allowed us to simulate the operating characteristics of the
property and to make a variety of operating assumptions. We attempted to reflect
the most likely investment assumptions of typical buyers and sellers in this
particular market segment.
Discounted Cash Flow Assumptions
We used the following figures and assumptions in the computer model.
Years in Forecast: 11
Holding Period: 10
Starting Date: July 1, 1997
Market Rental Rate (Year 1)
Storage: $8.00/SF
Retail:
Market Street $35.00/SF
18th Street $32.00/SF
Office: $17.75/SF
For all leases, a 1.75%
step-up in base rent is
assumed in each year of
the lease.
Growth in Market Rental Rate: 3.5% per annum - Year 1
5.0% per annum - Year 2
7.0% per annum - Year 3
5.0% per annum - Year 4
3.5% per annum - Years 5-10
Expense and Tax Pass-Throughs: Gross leases - tenants pay pro-rata
share of real estate tax and operating
cost increases over a lease year base.
Expense Growth Rate: 3.5% per annum
Consumer Price Index: 3.5% per annum
Free Rent - New Leases
Major Tenants: 0 months
Minor Tenants: 0 months
Free Rent - Renewing Leases
Major Tenants: 0 months
Minor Tenants: 0 months
================================================================================
-53-
CUSHMAN &
WAKEFIELD(R)
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<PAGE>
Income Capitalization Approach
================================================================================
Lease Term (Typical): 5 years
Renewal Probability: 65%
Tenant Improvements - New Leases
Major Tenants: $18.00/sf
Minor Tenants: $18.00/sf
Tenant Improvements - Renewing Leases
Major Tenants: $ 8.00/sf
Minor Tenants: $ 8.00/sf
Leasing Commissions: 4% of aggregate lease value.
All payable in year 1 of the
lease.
Vacancy Between Leases: 6 months (prior to renewal
probability of 65%; effective
vacancy is 2 months for all
tenants.
Credit Loss: 3% (average; applies to all
tenants).
Reversion Year: 2007 (11th fiscal year).
Reversion Cap Rate: 10.5% (applied to net operating
income).
Reversion Selling Expenses: 3% (includes brokerage, legal
fees and estimated transfer
taxes).
Discount Rate (IRR): 11.50% (see Discount Rate
Analysis).
Cash Flow Projection
On the following page is our 11 year cash flow projection which includes
our ten year holding period and 11th year reversion. The cash flow reflects the
results of the PRO-JECT+ plus projection.
================================================================================
-54-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
1760 Market Street
ANNUAL CASH FLOW REPORT
BEGINNING 7/1/97 FOR 11 YEARS
<TABLE>
<CAPTION>
FY1998 FY1999 FY2000 FY2001 FY2002 FY2003 FY2004 FY2005 FY2006
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME
MINIMUM RENT:
GROSS RENTS 2,208,865 2,268,908 2,383,919 2,478,548 2,563,704 2,714,090 2,832,240 2,960,986 3,068,419
LESS LAG VACANCY (42,882) (40,214) (103,534) (112,518) (59,050) (98,636) (51,270) (130,371) (94,820)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL MINIMUM RENT 2,165,983 2,228,694 2,280,385 2,366,030 2,504,654 2,615,454 2,780,970 2,830,615 2,973,599
RECOVERIES:
OPEX LESS TAXES 22,223 29,217 44,911 62,108 75,066 85,570 103,240 100,641 105,623
REAL ESTATE TAXES 4,494 6,250 9,367 13,929 19,559 21,653 26,083 26,673 28,127
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL RECOVERIES 26,717 35,467 54,278 76,037 94,625 107,223 129,323 127,314 133,750
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
GROSS RENTAL
INCOME 2,192,700 2,264,161 2,334,663 2,442,067 2,599,279 2,722,677 2,910,293 2,957,929 3,107,349
VACANCY ALLOWANCE (65,781) (67,925) (70,040) (73,262) (77,978) (81,680) (87,309) (88,738) (93,220)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL INCOME 2,126,919 2,196,236 2,264,623 2,368,805 2,521,301 2,640,997 2,822,984 2,869,191 3,014,129
EXPENSES
UTILITIES 281,339 291,186 301,377 311,925 322,843 334,142 345,837 357,942 370,469
INSURANCE 24,929 25,801 26,704 27,639 28,606 29,608 30,644 31,716 32,826
MANAGEMENT FEE 67,155 69,505 71,938 74,456 77,062 79,759 82,551 85,440 88,430
REAL ESTATE TAXES 272,292 281,822 291,686 301,895 312,462 323,398 334,717 346,432 358,557
CLEANING 216,347 223,919 231,756 239,868 248,263 256,952 265,946 275,254 284,888
MAINTENANCE 148,580 153,781 159,163 164,734 170,499 176,467 182,643 189,036 195,652
OUTSIDE CONTRACTS 132,275 136,905 141,696 146,656 151,789 157,101 162,600 168,291 174,181
ADMINISTRATIVE 62,841 65,040 67,317 69,673 72,111 74,635 77,247 79,951 82,749
OTHER 35,613 36,859 38,149 39,484 40,866 42,296 43,777 45,309 46,895
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL EXPENSES 1,241,371 1,284,818 1,329,786 1,376,330 1,424,501 1,474,358 1,525,962 1,579,371 1,634,647
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
NET OPERATING
INCOME 885,548 911,418 934,837 992,475 1,096,800 1,166,639 1,297,022 1,289,820 1,379,482
ALTERATIONS 167,372 153,064 411,759 253,569 297,226 409,470 121,319 516,471 268,585
COMMISSIONS 44,407 33,723 92,534 58,530 68,682 105,159 28,035 119,344 62,064
RESERVES 18,530 19,179 19,850 20,545 21,264 22,008 22,779 23,576 24,401
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
CASH FLOW 655,239 705,452 410,694 659,831 709,628 630,002 1,124,889 630,429 1,024,432
FY2007 FY2008
INCOME
MINIMUM RENT:
GROSS RENTS 3,184,232 3,299,880
LESS LAG VACANCY (100,138) (148,481)
---------- ----------
TOTAL MINIMUM RENT 3,084,094 3,151,399
RECOVERIES:
OPEX LESS TAXES 94,310 93,460
REAL ESTATE TAXES 26,615 27,262
---------- ----------
TOTAL RECOVERIES 120,925 120,722
---------- ----------
GROSS RENTAL
INCOME 3,205,019 3,272,121
VACANCY ALLOWANCE (96,150) (98,164)
---------- ----------
TOTAL INCOME 3,108,869 3,173,957
EXPENSES
UTILITIES 383,436 396,856
INSURANCE 33,975 35,164
MANAGEMENT FEE 91,525 94,729
REAL ESTATE TAXES 371,106 384,095
CLEANING 294,859 305,179
MAINTENANCE 202,500 209,587
OUTSIDE CONTRACTS 180,277 186,587
ADMINISTRATIVE 85,646 88,643
OTHER 48,536 50,235
---------- ----------
TOTAL EXPENSES 1,691,860 1,751,075
---------- ----------
NET OPERATING
INCOME 1,417,009 1,422,882
ALTERATIONS 463,728 514,368
COMMISSIONS 111,159 131,375
RESERVES 25,255 26,139
---------- ----------
CASH FLOW 816,867 751,000
</TABLE>
<PAGE>
INCOME CAPITALIZATION APPROACH
================================================================================
Terminal Capitalization Rate Selection
A terminal capitalization rate was used to estimate the market value of
the property at the end of the assumed investment holding period. We estimated
an appropriate terminal rate based on indicated rates in today's market.
=========================================================
Summary of Capitalization Rates
=========================================================
Sale No. Address Capitalization Rate
=========================================================
1 2000 Market Street 6.40%
---------------------------------------------------------
2 One Logan Square N/A
---------------------------------------------------------
3 1818 Market Street 8.50%
---------------------------------------------------------
4 Two Logan Square 12.60%
---------------------------------------------------------
5 1601 Market Street 9.86%
=========================================================
Terminal Capitalization Rate Selected 10.50%
=========================================================
A slight premium was added to today's rate to allow for the risk of
unforeseen events or trends which might affect our estimate of net operating
income during the holding period, including a possible deterioration in market
conditions for the property. Investors typically add 25 to 50 basis points to
the "going-in" rate to arrive at a terminal capitalization rate, according to
Cushman & Wakefield's periodic investor surveys. More recently however, our
experience indicates minimal difference between the two rates.
Discount Rate Analysis
We estimated future cash flows, including property value at reversion, and
discounted that income stream at an internal rate of return (yield rates)
currently required by investors for similar-quality real property. The yield
rate (internal rate of return or IRR) is the single rate that discounts all
future equity benefits (cash flows and equity reversion) to an estimate of net
present value.
Cushman & Wakefield Valuation Advisory Services periodically surveys
national real estate investors to determine their investment objectives.
Following is a brief review of internal rates of return, overall rates, and
income and expense growth rates considered acceptable by respondents.
=================================================================
AUTUMN 1996 INVESTOR SURVEY
FOR URBAN CLASS A OFFICE BUILDINGS
=================================================================
GOING-IN TERMINAL IRR
-----------------------------------------------------------------
Low High Low High Low High
=================================================================
Mean 9.20% 9.60% 9.20% 9.70% 11.70% 12.0%
-----------------------------------------------------------------
Range 8.00% 13.0% 8.00% 11.0% 10.0% 15.0%
=================================================================
This table summarizes the investment parameters of some of the most
prominent investors currently acquiring good quality urban Class A properties in
the United States. The entire survey is included in the Addenda to this report.
================================================================================
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WAKEFIELD(R)
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<PAGE>
Income Capitalization Approach
================================================================================
The wide range of investment parameters indicates that property risk and
yield are assessed to a particular investment property based on a variety of
variables. Risk is the primary determinant, and the risk variables include
whether current contract rents are significantly above or below current market
rents; the amount and timing of tenant roll-overs; the risk to lease-up the
property and the strength of the market during the lease-up period; the
durability of the cash flow, and its ability to increase with inflation along
with the creditworthiness of the existing tenancy; investor demand for the
property type; the diversification of the metropolitan area; the property's
location within the local market and the supply and demand for the property type
within the market; and the effective age of the property.
The investors' internal rates of return cited above range from 10.5 to 15
percent. Considering the locational attributes, physical traits and leasing
structure of the subject property, we believe a discount rate ranging from 11.0
to 12.0 percent would be appropriate for the subject property in light of the
investment criteria presented here. Thus, we have discounted the projected
future pre-tax cash flows to be received by an investor in the subject property
to a present value so as to yield 11.0 percent to 12.0 percent on capital at 25
basis point intervals over the holding period. This discounting process is
summarized as follows:
====================================================================
Investment Summary
====================================================================
Discount Rate Present Worth Overall Rate Unit Rate
====================================================================
11.00% $8,789,000 10.08% $71.15
--------------------------------------------------------------------
11.25% $8,639,000 10.25% $69.93
--------------------------------------------------------------------
11.50% $8,493,000 10.43% $68.75
--------------------------------------------------------------------
11.75% $8,349,000 10.61% $67.58
--------------------------------------------------------------------
12.00% $8,209,000 10.79% $66.45
====================================================================
The internal rate of return and terminal capitalization rate selected for
this analysis were strongly influenced by our recent Investor Survey. We realize
that this type of survey reflects target rather than transactional rates.
Transactional rates are usually difficult to obtain in the verification process
and are actually only target rates of the buyer at the time of sale. The
property's performance will ultimately determine the actual yield and
capitalization rate at the time of sale after a specific holding period. We have
found that, in improving markets or with above average properties, demand will
be high and transactional rates may be lower than target rates that are quoted
in surveys. We have tried to recognize this factor in our choice of these two
rates for our cash flow model.
In our opinion, the discounted cash flow method is the more appropriate
capitalization technique as the subject property consists of a complex
investment property occupied by a number of tenants at differing rental rates
for varying lease durations. Direct capitalization does not adequately account
for the subtleties of all those variables.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
Reconciliation Within Income Capitalization Approach
Value Indicated by Discounted Cash Flow Analysis: $8,500,000
The "going in" capitalization rate indicated in the discounted cash flow
analysis is 10.42 percent, This is in line with going-in capitalization rates
indicated by the sales and the most recent Investor Survey.
Analysis and Conclusion
Value Indicated by Income Capitalization Approach: $8,500,000
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
RECONCILIATION AND FINAL VALUE ESTIMATE
================================================================================
We have considered all of the traditional approaches to estimating market
value of commercial real estate in our analysis. Two of the three traditional
approaches were utilized, indicating the following values for the subject
property:
Sales Comparison Approach $8,600,000
Income Capitalization Approach $8,500,000
The three traditional methods of estimating the market value of commercial
real estate are not mutually exclusive approaches to deriving an estimate of
most probable selling price, but are inter-dependent methodologies, each relying
on components from at least one of the other approaches. Hence, the Cost
Approach requires extensive market data to derive estimates of depreciation and
to determine the value of land as if vacant. This approach may also require
income data in order to make adjustments for functional and economic
obsolescence. The Sales Comparison Approach requires application of methods from
the Income Capitalization Approach in order to make adjustments for differences
in income that have influenced the sale price. Consideration of market data is
also required for the Income Capitalization Approach in the selection and
application of equity, capitalization and discount rates, and estimation of
income and expenses. Consequently, it is our opinion that purchasers and
sellers, at least intuitively, consider components of all three approaches in
the process of negotiating an acceptable price for a particular property.
It is the Income Capitalization Approach, however, that is logically
considered the most appropriate technique for estimating the value of
income-producing property. Not only does this approach represent the most direct
and accurate simulation of market behavior, it is the method explicitly employed
by buyers and sellers in acquisition and disposition decisions. Therefore,
following the implied dictum of the market, we have used an approach based
primarily on projected income as the foundation for our valuation of the subject
property.
There are several additional reasons why the Sales Comparison Approach
does not form the basis of our value estimate for the subject property. The
quantity and quality of market information inhibits the use of the Sales
Comparison Approach. Inadequacy of information regarding gross and net income,
lease details and expenses of comparable sales often deters accurate and
relevant adjustments of unit price indicators. Comparison at a dollar per square
foot level precludes the analysis of those key factors which form the basis for
projections on which the purchase decision was made.
In light of the above, we are of the opinion that the market value of the
leased fee estate in the property, as of July 1, 1997, was:
EIGHT MILLION FIVE HUNDRED THOUSAND DOLLARS
$8,500,000
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CUSHMAN &
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<PAGE>
ASSUMPTIONS AND LIMITING CONDITIONS
================================================================================
"Appraisal" means the appraisal report and opinion of value stated therein; or
the letter opinion of value, to which these Assumptions and Limiting Conditions
are annexed.
"Property" means the subject of the Appraisal.
"C&W" means Cushman & Wakefield, Inc. or its subsidiary which issued the
Appraisal.
"Appraiser(s)" means the employee(s) of C&W who prepared and signed the
Appraisal.
This appraisal is made subject to the following assumptions and limiting
conditions;
1. No opinion is intended to be expressed and no responsibility is assumed
for the legal description or for any matters which are legal in nature or
require legal expertise or specialized knowledge beyond that of a real
estate appraiser. Title to the Property is assumed to be good and
marketable and the Property is assumed to be free and clear of all liens
unless otherwise stated. No survey of the Property was undertaken.
2. The information contained in the Appraisal or upon which the Appraisal is
based has been gathered from sources the Appraiser assumes to be reliable
and accurate. Some of such information may have been provided by the owner
of the Property. Neither the Appraiser nor C&W shall be responsible for
the accuracy or completeness of such information, including the
correctness of estimates, opinions, dimensions, sketches, exhibits and
factual matters.
3. The opinion of value is only as of the date stated in the Appraisal.
Changes since that date in external and market factors or in the Property
itself can significantly affect property value.
4. The Appraisal is to be used in whole and not in part. No part of the
Appraisal shall be used in conjunction with any other appraisal.
Publication of the Appraisal or any portion thereof without the prior
written consent of C&W is prohibited. Except as may be otherwise stated in
the letter of engagement, the Appraisal may not be used by any person
other than the party to whom it is addressed or for purposes other than
that for which it was prepared. No part of the Appraisal shall be conveyed
to the public through advertising, or used in any sales or promotional
material without C&W`s prior written consent. Reference to the Appraisal
Institute or to the MAI designation is prohibited.
5. Except as may be otherwise stated in the letter of engagement, the
Appraiser shall not be required to give testimony in any court or
administrative proceeding relating to the Property or the Appraisal.
================================================================================
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<PAGE>
Assumptions and Limiting Conditions
================================================================================
6. The Appraisal assumes (a) responsible ownership and competent management
of the Property; (b) there are no hidden or unapparent conditions of the
Property, subsoil or structures that render the Property more or less
valuable (no responsibility is assumed for such conditions or for
arranging for engineering studies that may be required to discover them);
(c) full compliance with all applicable federal, state and local zoning
and environmental regulations and laws, unless noncompliance is stated,
defined and considered in the Appraisal; and (d) all required licenses,
certificates of occupancy and other governmental consents have been or can
be obtained and renewed for any use on which the value estimate contained
in the Appraisal is based.
7. The physical condition of the improvements considered by the Appraisal is
based on visual inspection by the Appraiser or other person identified in
the Appraisal. C&W assumes no responsibility for the soundness of
structural members nor for the condition of mechanical equipment, plumbing
or electrical components.
8. The forecasted potential gross income referred to in the Appraisal may be
based on lease summaries provided by the owner or third parties. The
Appraiser has not reviewed lease documents and assumes no responsibility
for the authenticity or completeness of lease information provided by
others. C&W recommends that legal advice be obtained regarding the
interpretation of lease provisions and the contractual rights of parties.
9. The forecasts of income and expenses are not predictions of the future.
Rather, they are the Appraiser's best estimates of current market thinking
on future income and expenses. The Appraiser and C&W make no warranty or
representation that these forecasts will materialize. The real estate
market is constantly fluctuating and changing. It is not the Appraiser's
task to predict or in any way warrant the conditions of a future real
estate market; the Appraiser can only reflect what the investment
community, as of the date of the Appraisal, envisages for the future in
terms of rental rates, expenses, supply and demand.
10. Unless otherwise stated in the Appraisal, the existence of potentially
hazardous or toxic materials which may have been used in the construction
or maintenance of the improvements or may be located at or about the
Property was not considered in arriving at the opinion of value. These
materials (such as formaldehyde foam insulation, asbestos insulation and
other potentially hazardous materials) may adversely affect the value of
the Property. The Appraisers are not qualified to detect such substances.
C&W recommends that an environmental expert be employed to determine the
impact of these matters on the opinion of value.
Unless otherwise stated in the Appraisal, compliance with the requirements
of the Americans With Disabilities Act of 1990 (ADA) has not been
considered in arriving at the opinion of value. Failure to comply with the
requirements of the ADA may adversely affect the value of the property.
C&W recommends that an expert in this field be employed.
================================================================================
-61-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
CERTIFICATION OF APPRAISAL
================================================================================
We certify that, to the best of our knowledge and belief:
1. John J. Lynch, MAI inspected the property, and John B. Rush, MAI, Manager,
Valuation Advisory Services, has reviewed and approved the report but did
not inspect the property.
2. The statements of fact contained in this report are true and correct.
3. The reported analyses, opinions, and conclusions are limited only by the
reported assumptions and limiting conditions, and are our personal,
unbiased professional analyses, opinions, and conclusions.
4. We have no present or prospective interest in the property that is the
subject of this report, and we have no personal interest or bias with
respect to the parties involved.
5. Our compensation is not contingent upon the reporting of a predetermined
value or direction in value that favors the cause of the client, the
amount of the value estimate, the attainment of a stipulated result, or
the occurrence of a subsequent event. The appraisal assignment was not
based on a requested minimum valuation, a specific valuation or the
approval of a loan.
6. No one provided significant professional assistance to the persons signing
this report.
7. Our analyses, opinions, and conclusions were developed, and this report
has been prepared, in conformity with the Uniform Standards of
Professional Appraisal Practice of the Appraisal Foundation and the Code
of Professional Ethics and the Standards of Professional Appraisal
Practice of the Appraisal Institute.
8. The use of this report is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives.
9. As of the date of this report, John J. Lynch, MAI and John B. Rush, MAI
have completed the requirements of the continuing education program of the
Appraisal Institute.
-----------------------------------------------
John J. Lynch, MAI
State Certified Appraiser No. GA-00485-L
-----------------------------------------------
John B. Rush, MAI
State Certified Appraiser No. GA-000331-L
Reviewed and Approved
================================================================================
-62-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
ADDENDA
================================================================================
RENT ROLL
INVESTOR SURVEY
IMPROVED SALES
APPRAISERS' QUALIFICATIONS
================================================================================
<PAGE>
OFFICE BUILDING SALE
================================================================================
I-1 Sale
Building Name: 2000 Market Street
Location: 2000-24 Market Street
S/W/C 20th & Market Streets
Philadelphia, PA
Grantor: Metropolitan Life Insurance
Company
Grantee: The Rubenstein Company
Date of Sale: 07/02/97
Recording Data: Not Yet Recorded
Physical Description:
Land Area: 40,864 Square Feet
Net Rentable Area: 665,819 Square Feet
Year Built: 1972
Occupancy at Sale: 89 %
Parking: Not Available
Quality: Average
Construction: Structural steel & glass
Zoning: C-5; Commercial
Stories: 29
Sale Price: $52,700,000
Terms of Sale: Cash and market oriented debt
from CoreStates Bank.
Economic Indicators:
Effective Gross Income: $9,706,000 Estimate
Less: Operating Expenses: $6,150,000 Estimate
Net Operating Income: $3,556,000 Estimate
Appraisal Indicators:
Overall Rate (OAR): 6.75%
Sale Price/Square Foot (RSF): $79.15
COMMENTS:
2000 Market Street is a 29 story office tower situated
at the southwest corner of 20th and Market Streets at the
<PAGE>
OFFICE BUILDING SALE
================================================================================
I-1 Continued
western periphery of the West Market Street office corridor. The building
was constructed in 1979 and continually upgraded since 1984, including a
new HVAC system installed in 1993-97. The building features approximately
648,838 square feet of office area, 6,147 square feet of lobby retail
area, and 10,834 square feet of storage space.
The property featured four major tenants which occupy over 65% of
the building including Elf Atochem (258,000 sf) Fox, Rothchild (91,200
sf), Board of Pensions for the Presbyterian Church (77,000 sf) and the
Philadelphia Stock Exchange (33,750 sf). Over the next seven years, only
9% of the rentable area expires, indicating the stability of the income
stream. However, the Board of Pensions was provided with free rent periods
which do not "burn off" completely until 2000.
Confirmation Data:
By: BUYER
With: David Rubenstein
<PAGE>
OFFICE BUILDING SALE
================================================================================
I-2 Sale
Building Name: One Logan Square
Location: 130 North 18th Street
N/W/C 18th & Cherry Streets
Philadelphia, PA
Parcel Number: 88-03-0615-05
Grantor: Circle Associates
(Aetna/JMB)
Grantee: Blackstone Real Estate
Advisors/Rubenstein Company
Date of Sale: 01/31/97
Recording Data: Not Yet Recorded
Physical Description:
Land Area: 33,098 Square Feet
Gross Building Area: 736,000 Square Feet
Net Rentable Area: 589,508 Square Feet
Year Built: 1983
Occupancy at Sale: 64 %
Parking: Adjacent 642 space garage
Quality: Good
Construction: Structural steel & granite
Zoning: C-5; Commercial
Stories: 30
Sale Price: $34,000,000
Terms of Sale: Cash & market oriented debt
provided by Helaba Bank.
Economic Indicators:
Effective Gross Income: $8,467,000 Estimate
Less: Operating Expenses: $4,670,000 Estimate
Net Operating Income: $3,797,600 Estimate
Appraisal Indicators:
Overall Rate (OAR): 11.2%
Sale Price/Square Foot (GSF): $46.20
Sale Price/Square Foot (RSF): $57.68
<PAGE>
OFFICE BUILDING SALE
================================================================================
I-2 Continued
COMMENTS:
One Logan Square is a 30 story office tower situated at the
northwest corner of 18th and Cherry Streets, just north of the West Market
Street office corridor. The building was constructed in 1983 and in good
physical condition at the time of sale, but required approximately $3.8
million in base building capital expenditures.
Although the property was only 64% occupied at the time of sale, the
largest tenant (Morgan, Lewis & Bockius), had provided notice of
termination by August of 1998. A $2,000,000 payment was due MLB at that
time as part of the original lease negotiation.
Prior to the transaction, leases were negotiated with the law firm
of Drinker, Biddle & Reath to occupy 144,600 square feet of the MLB space
and Blank, Rome to occupy 160,856 square feet within the lower floors.
Approximately $16,927,000 in tenant improvements and leasing commissions
were to be funded by the purchaser. Thus, total acquisition costs are
estimated at $52,927,000 for the property, or $89.78. This total cost
excludes the anticipated $3.8 million in base building costs.
This transaction was a result of a sealed bid sale as part of a
pre-packaged plan of reorganization of One Logan Square. The total
acquisition price was reported to be $115,000,000, with $34,000,000
internally allocated to the One Logan Square office building. The other
components of the complex consist of the Four Seasons Hotel and the Logan
Square parking facility.
Confirmation Data:
By: BUYER
With: David Rubenstein
<PAGE>
OFFICE BUILDING SALE
================================================================================
I-3 Sale
Building Name: 1818 Market Street
Location: SEC 19th & Market Street
Philadelphia, PA
Grantor: Heitman PA
Grantee: Confidential
Date of Sale: 12/01/96
Physical Description:
Land Area: 42,669 Square Feet
Gross Building Area: 1,243,374 Square Feet
Net Rentable Area: 982,009 Square Feet
Year Built: 1974
Occupancy at Sale: 82 %
Parking: 385 Spaces
Quality: Good
Construction: Masonry & Steel
Zoning: C-5;Commercial
Stories: 37
Sale Price: $79,400,000
Terms of Sale: cash to seller
Economic Indicators:
Gross Annual Income: $18,163,000 Seller's Proforma
Less: Vacancy: $482,000 Seller's Proforma
Effective Gross Income: $17,681,000 Seller's Proforma
Less: Operating Expenses: $9,428,000 Seller's Proforma
Net Operating Income: $8,253,000 Seller's Proforma
Appraisal Indicators:
Gross Income Multiplier: 4.37
Effective Gross Inc. Mult.: 4.49
Overall Rate (OAR): 10.41%
Sale Price/Square Foot (GSF): $63.86
Sale Price/Square Foot (RSF): $80.85
COMMENTS:
1818 Market Street is a 37 story office tower situated
<PAGE>
OFFICE BUILDING SALE
================================================================================
I-3 Continued
at the southeast corner of 19th and Market Streets in the West Market
Street office corridor. The facility was constructed in 1974 and was
substantially renovated in 1990-1991. Major tenants include Day &
Zimmerman, Delaware Management and the law firm LaBrum & Doak.
The building is currently 82% occupied as a result of the relocation
of two major tenants, Colonial Penn Insurance and Merrill Lynch.
The property received several bonafide offers from both foreign and
domestic investors and, in the final analysis, the purchase price was bid
up close to the offering price of $80,000,000.
Confirmation Data:
By: BROKER
With: Robert Fahey
Phone: (215)963-4000
<PAGE>
OFFICE BUILDING SALE
================================================================================
I-4 SALE
Building Name: Two Logan Square
Location: 100 North Eighteenth Street
Philadelphia, PA
Grantor: Two Logan Square Associates
(JMB Realty)
Grantee: Blackstone R.E. Advisors &
The Rubenstein Company
Date of Sale: 06/01/96
Physical Description:
Land Area: 38,015 Square Feet
Gross Building Area: 803,000 Square Feet
Net Rentable Area: 694,266 Square Feet
Year Built: 1988
Occupancy at Sale: 92 %
Parking: None
Quality: Excellent
Construction: Masonry & Steel
Zoning: C-4
Stories: 34
Sale Price: $79,000,000
Terms of Sale: See comments
Economic Indicators:
Gross Annual Income: $17,161,986 Buyer's Proforma
Less: Vacancy: $566,741 Buyer's Proforma
Effective Gross Income: $16,595,245 Buyer's Proforma
Less: Operating Expenses: $6,512,266 Buyer's Proforma
Net Operating Income: $10,082,979 Buyer's Proforma
Appraisal Indicators:
Gross Income Multiplier: 4.60
Effective Gross Inc. Mult.: 4.76
Overall Rate (OAR): 12.76%
Sale Price/Square Foot (GSF): $98.38
Sale Price/Square Foot (RSF): $113.79
<PAGE>
OFFICE BUILDING SALE
================================================================================
I-4 Continued
COMMENTS:
Two Logan Square is a 34 story office tower situated at the northwest
corner of 18th and Arch Streets, just north of the West Market Street
office corridor. The building was constructed in 1988 and in excellent
physical condition. The grantee, Blackstone Real Estate Advisors and The
Rubenstein Company, were the successful bidders on the purchase of a
$142,405,449 loan secured by a 1st and 2nd mortgage on the property. The
Loan was owned by a bank group led by Chemical Bank. Other participants in
the bank group were the Toronto Dominion Bank, the National Bank of
Detroit, Bank of America and Chuo Trust. The bank group agreed to sell the
loan for $79,000,000, plus undisclosed closing costs. Financing of
$55,000,000 was provided by Credit Lyonnais.
This transaction represents a note sale wherein the original ownership
entity remained in place but with the JMB interest diluted to limited
partner status. The extent of the status was undisclosed, although termed
"material". Blackstone/Rubenstein have gained majority controlling
interest. Reportedly, Rubenstein contributed the equity, while Blackstone
recapitalized the debt and acquired the secondary mortgages.
Confirmation Data:
By: BUYER
<PAGE>
OFFICE BUILDING SALE
================================================================================
I-5 Sale
Building Name: 1601 Market Street
Location: NWC 16th & Market Streets
Philadelphia, PA
Grantor: Prudential Insurance
Grantee: ZML-1601 Market Street LP, LLC
(Zell/Merrill Lynch)
Date of Sale: 01/16/96
Physical Description:
Land Area: 33,885 Square Feet
Gross Building Area: 787,000 Square Feet
Net Rentable Area: 681,289 Square Feet
Year Built: 1969
Occupancy at Sale: 88 %
Parking: None
Quality: Good
Construction: Steel w/ Limestone & Glass
Zoning: C-5
Stories: 36
Sale Price: $34,900,000
Terms of Sale: All cash
Economic Indicators:
Effective Gross Income: $9,339,276 Buyer's Proforma
Less: Operating Expenses: $5,897,078 Buyer's Proforma
Net Operating Income: $3,442,198 Buyer's Proforma
Appraisal Indicators:
Overall Rate (OAR): 9.86%
Sale Price/Square Foot (GSF): $44.35
Sale Price/Square Foot (RSF): $51.23
COMMENTS:
1601 Market Street is a 36 story office tower situated at the
northwest corner of 17th and Market Streets at the core of the West
Market Street office corridor. The facility was constructed in 1969
and serves as the regional
<PAGE>
OFFICE BUILDING SALE
================================================================================
I-5 Continued
headquarters for Arthur Andersen. Other major tenants include the GSA, BDO
Seidman, Dechert, Price & Rhoads, and Schwartz, Campbell & Detweiler. The
buildings value was negatively impacted by the GSA leases which are
structured with a rental reduction after the 5th year of the lease. In
addition, the purchaser paid all of the realty transfer tax of $1.42
million and assumed free rent and tenant improvement obligations for
Arthur Andersen.
Confirmation Data:
Date: 01/16/95
By: BROKER
With: RF
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET OFFICE MARKET - URBAN/CBD
- ------------------------------------------------------------------------------------------------------------------------------------
9.5% 10.0% 10.0% 10.0% 11.5% 11.5% 3.0% 3.0% 3.0% 4.0% 10.0 10.0
9.5% 10.0% 10.0% 10.5% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
8.0% 9.0% 8.5% 8.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
13.0% 13.0% -- -- 14.0% 14.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
8.0% 8.0% 8.5% 8.5% 10.5% 10.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.3% 9.3% 10.3% 10.3% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 9.0% 8.5% 9.0% 10.5% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
10.0% 10.0% 10.0% 10.0% 12.5% 12.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
9.0% 9.0% 9.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.0% 9.0% 8.0% 9.0% 10.0% 12.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
Responses 11 11 10 10 11 11 11 11 11 11 11 11
Average (%) 9.2% 9.6% 9.2% 9.7% 11.7% 12.0% 3.3% 4.2% 3.4% 3.9% 8.5 9.5
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 9.0% 9.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 12.0% 12.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.5% 9.5% 10.5% 10.5% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 10.0% 10.0% 11.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
15.0% 15.0% -- -- 20.0% 20.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
9.0% 10.0% -- -- -- -- -- -- -- -- -- --
9.0% 10.0% 9.0% 10.0% 12.0% 13.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
Responses 8 8 6 6 7 7 7 7 7 7 7 7
Average (%) 10.0% 10.4% 9.7% 10.3% 12.8% 13.1% 3.3% 4.7% 3.5% 4.0% 8.3 9.7
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
8.0% 9.0% 9.5% 10.0% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
8.0% 10.0% 8.5% 9.0% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0 10.0 10.0
10.0% 10.0% 10.0% 10.0% 13.0% 13.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.5% 9.5% 10.5% 10.5% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
12.0% 12.0% -- -- 13.0% 13.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
-- -- -- -- 12.0% 13.0% 4.0% 4.0% 4.0% 4.0 5.0 10.0
Responses 8 8 7 7 9 9 9 9 9 9 9 9
Average (%) 9.4% 10.0% 9.6% 10.2% 12.8% 13.5% 3.5% 4.6% 3.5% 3.9% 7.6 8.9
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
12.0% 12.0% 12.0% 12.0% 15.0% 15.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.8% 9.8% 10.8% 10.8% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
14.0% 14.0% -- -- 20.0% 20.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 11.0% 14.0% 14.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 6 6 5 5 6 6 6 6 6 6 6 6
Average (%) 10.7% 11.0% 10.5% 11.2% 14.6% 15.3% 3.2% 4.6% 3.3% 3.9% 8.0 8.8
--------------------------------------------------------------------------------------------------------
Total Responses 33 33 28 28 33 33 33 33 33 33 33 33
Weighted Average (%) 9.8% 10.3% 9.7% 10.3% 13.0% 13.5% 3.3% 4.6% 3.4% 3.9% 8.1 9.2
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
8 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET OFFICE MARKET - SUBURBAN/NON - CBD
- ------------------------------------------------------------------------------------------------------------------------------------
9.5% 9.5% 10.5% 10.5% 10.5% 10.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.5% 8.5% 9.3% 9.3% 11.3% 11.3% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
11.0% 11.0% -- -- 12.0% 12.0% 5.0% 3.0% 3.0% 3.0% 5.0 7.0
8.5% 10.0% 9.0% 10.5% 11.0% 12.5% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
8.0% 10.0% 9.5% 10.0% 11.5% 12.0% 4.0% 6.0% 4.0% 4.0% 10.0 10.0
l0.0% 11.0% 10.5% 11.0% 12.0% 12.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.0% 9.0% 8.5% 8.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
8.0% 8.0% 8.5% 8.5% 10.5% 10.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.1% 9.1% 10.1% l0.1% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 10.0% 9.0% 10.5% 11.0% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
9.0% 9.0% 10.0% 10.0% 11.5% 11.5% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.0% 9.0% 9.0% 9.0% 12.0% 13.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.0% 10.0% -- -- -- -- -- -- -- -- --
8.0% 9.0% 8.0% 9.0% 10.0% 12.0% 5.0% 5.0% 4.0% 4.0% 5.0 10.0
Responses 16 16 14 14 15 15 15 15 15 15 15 15
Average (%) 8.8% 9.5% 9.3% 9.9% 11.2% 11.6% 3.5% 4.4% 3.6% 3.8% 8.9 9.7
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
9.5% 9.5% 10.5% 10.5% 10.5% 10.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.8% 8.8% 9.5% 9.5% 11.8% 11.8% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
12.0% 12.0% -- -- 18.0% 18.0% 5.0% 3.0% 3.0% 3.0% 5.0 7.0
10.5% 10.5% 10.0% 10.0% 11.0% 13.0% 2.0% 2.0% 2.0% 2.0% 10.0 10.0
8.0% 10.0% 9.5% 10.0% 11.0% 12.0% 4.0% 6.0% 4.0% 4.0% 10.0 10.0
9.0% 10.0% 9.0% 9.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.0% 11.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.4% 9.4% 10.4% 10.4% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 10.0% 14.0% 15.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
10.0% 11.0% -- -- -- -- -- -- -- -- -- --
10.0% 11.0% 10.0% 11.0% 12.0% 13.0% 5.0% 5.0% 4.0% 4.0% 5.0 10.0
Responses 13 13 11 11 12 12 12 12 12 12 12 12
Average (%) 9.5% 10.0% 9.8% 10.2% 12.0% 12.5% 3.4% 4.5% 3.4% 3.7% 8.6 9.6
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% -- -- 13.0% 13.0% 3.0% 3.0% 3.0% 3.0% 5.0 7.0
8.0% 10.0% 8.5% 9.0% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
10.0% 10.0% 10.0% 10.0% 12.5% 12.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.4% 9.4% 10.4% 10.4% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
6.0% 6.0% 9.0% 9.0% 17.0% 20.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.0% 10.0% -- -- -- -- -- -- -- -- -- --
12.0% 12.0% 10.0% 10.0% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 2.0 2.0
Responses 10 10 8 8 9 9 9 9 9 9 9 9
Average (%) 9.1% 9.7% 9.5% 10.0% 13.4% 14.3% 3.1% 4.6% 3.4% 3.8% 7.2 8.0
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% -- -- 18.0% 18.0% 3.0% 3.0% 3.0% 3.0% 5.0 7.0
10.5% 10.5% 10.0% 10.0% 11.0% 13.0% 2.0% 2.0% 2.0% 2.0% 10.0 10.0
11.0% 11.0% 11.0% 11.0% 14.0% 14.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.6% 9.6% 10.6% 10.6% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
6.0% 6.0% 10.0% 10.0% 20.0% 20.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.0% 10.0% -- -- -- -- -- -- -- -- -- --
12.0% 12.0% 10.0% 10.0% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 2.0 2.0
Responses 10 10 8 8 9 9 9 9 9 9 9 9
Average (%) 9.7% 10.0% 10.0% 10.5% 14.5% 15.2% 2.9% 4.3% 3.2% 3.6% 7.2 8.0
--------------------------------------------------------------------------------------------------------
Total Responses 49 49 41 41 45 45 45 45 45 45 45 45
Weighted Average (%) 9.3% 9.8% 9.7% 10.1% 12.8% 13.4% 3.2% 4.4% 3.4% 3.7% 8.0 8.8
--------------------------------------------------------------------------------------------------------
</TABLE>
AUTUMN 1996 9
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET INDUSTRIAL MARKET - WAREHOUSE/DISTRIBUTION
- ------------------------------------------------------------------------------------------------------------------------------------
9.2% 9.2% 9.5% 9.5% 10.0% 10.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.5% 8.5% 9.3% 9.3% 11.0% 11.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
8.5% 10.0% 9.5% 10.0% 11.0% 12.0% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
9.0% 9.0% 9.5% 9.5% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
8.0% 8.0% 8.5% 8.5% 10.5% 10.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 10.0% 9.0% 10.5% 11.0% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
9.0% 9.0% 10.0% 10.0% 11.0% 11.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
9.0% 9.0% 9.5% 9.5% 10.5% 10.5% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 10 10 10 10 10 10 10 10 10 10 10 10
Average (%) 8.8% 9.2% 9.4% 9.8% 10.9% 11.0% 2.9% 4.0% 3.3% 3.8% 9.8 10.1
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
9.2% 9.2% 9.5% 9.5% 10.0% 10.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.8% 8.8% 9.5% 9.5% 11.3% 11.3% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.5% 11.5% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
10.0% 10.0% 11.0% 11.0% 12.0% 12.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.8% 9.8% 10.3% 10.3% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 7 7 7 7 7 7 7 7 7 7 7 7
Average (%) 9.3% 9.5% 10.0% 10.2% 11.2% 11.2% 2.8% 4.3% 3.2% 3.9% 9.7 10.1
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 12.0% 12.0% 13.0% 13.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.8% 9.8% 10.3% 10.3% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 9.7% 9.9% 10.4% 10.8% 11.9% 11.9% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
12.0% 12.0% 13.0% 13.0% 14.0% 14.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 10.0% 10.5% 10.5% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.5% 10.5% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 10.1% 10.4% 10.9% 11.3% 12.4% 12.4% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
--------------------------------------------------------------------------------------------------------
Total Responses 25 25 25 25 25 25 25 25 25 25 25 25
Weighted Average (%) 9.5% 9.7% 10.2% 10.5% 11.6% 11.6% 2.6% 4.5% 3.2% 4.0% 9.6 10.2
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
10 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET INDUSTRIAL MARKET - BUSINESS PARKS, OTHER INDUSTRIAL & MANUFACTURING
- ------------------------------------------------------------------------------------------------------------------------------------
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 10.0 10.0
9.0% 9.0% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 3 3 4 4 4 4 4 4 4 4
Average (%) 8.9% 9.4% 9.7% 10.7% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.8 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.5% 10.5% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 10.0 10.0
10.0% 10.0% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 3 3 4 4 4 4 4 4 4 4
Average (%) 9.3% 9.8% 9.8% 10.8% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.8 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.5% 10.5% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 5 5 4 4 5 5 5 5 5 5 5 5
Average (%) 9.4% 10.0% 9.9% 10.9% 12.4% 13.2% 3.4% 4.0% 3.2% 3.8% 8.2 9.4
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.5% 10.5% 11.0% 11.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.5% 10.5% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 5 5 4 4 5 5 5 5 5 5 5 5
Average (%) 9.6% 10.2% 10.0% 11.0% 12.4% 13.2% 3.4% 4.0% 3.2% 3.8% 8.2 9.4
--------------------------------------------------------------------------------------------------------
Total Responses 18 18 14 14 18 18 18 18 18 18 18 18
Weighted Average(%) 9.3% 9.8% 9.8% 10.8% 12.0% 12.4% 3.3% 4.0% 3.2% 3.9% 8.5 9.8
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
AUTUMN 1996 11
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET RETAIL MARKET - NEIGHBORHOOD & COMMUNITY CENTERS
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 10.5% 9.5% 10.5% 11.0% 12.5% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
9.5% 10.0% 10.0% 10.0% 12.5% 12.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
10.0% 10.0% 10.5% 10.5% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
10.3% 10.3% 10.8% 10.8% 13.0% 13.0% 2.0% 2.0% 4.0% 4.0% 7.0 7.0
9.0% 9.0% 10.0% 10.0% 10.0% 10.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
9.8% 9.8% 10.3% 10.3% 11.5% 11.5% 3.8% 4.0% 4.0% 4.0% 10.0 10.0
9.0% 10.0% -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
9.0% 9.0% 9.5% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
Responses 9 9 8 8 8 8 9 9 9 9 9 9
Average (%) 9.3% 9.8% 10.0% 10.4% 11.9% 12.1% 2.9% 3.7% 3.4% 3.9% 8.9 9.4
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
10.8% 10.8% 11.3% 11.3% 14.0% 14.0% 2.0% 2.0% 4.0% 4.0% 7.0 7.0
10.0% 10.0% 11.0% 11.0% 12.0% 12.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
9.0% 10.0% -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 11.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.5% 10.5% -- -- -- -- -- -- -- -- -- --
Responses 6 6 4 4 4 4 5 5 5 5 5 5
Average (%) 9.5% 10.0% 10.4% 11.1% 12.3% 12.3% 2.3% 3.8% 3.3% 4.2% 9.0 9.6
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 12.0% 12.0% 13.0% 13.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 10.0 10.0
9.0% 10.0% -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 9.5% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.0% 10.0% -- -- -- -- -- -- -- --
11.0% 11.0% 9.5% 9.5% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 3.0 3.0
Responses 7 7 5 5 5 5 6 6 6 6 6 6
Average (%) 9.7% 10.3% 10.1% 10.7% 13.8% 14.6% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
13.0% 13.0% 14.0% 14.0% 14.0% 14.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 10.0 10.0
9.0% 10.0% -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 11.0% 14.0% 14.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
11.0% 11.0% 10.5% 10.5% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 3.0 3.0
Responses 6 6 5 5 5 5 6 6 6 6 6 6
Average (%) 10.3% 10.8% 10.8% 11.5% 14.2% 15.0% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
--------------------------------------------------------------------------------------------------------
Total Responses 28 28 22 22 22 22 26 26 26 26 26 26
Weighted Average (%) 9.7% 10.2% 10.3% 10.9% 13.0% 13.5% 2.7% 3.9% 3.2% 4.0% 8.7 9.3
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
12 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET RETAIL MARKET - POWER CENTERS & "BIG BOX"
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 9.0% 9.5% 9.5% 11.0% 11.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
10.0% 10.0% 9.5% 9.5% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
10.5% 10.5% 10.5% 10.5% 11.0% 12.0% 2.0% 2.0% 3.0% 3.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.4% 11.4% 3.8% 3.8% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 9.5% 10.0% 11.0% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
9.3% 9.3% 9.5% 10.0% 10.5% 10.5% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.0% 9.0% -- -- -- -- -- -- -- -- -- --
9.0% 9.5% 9.5% 10.0% 11.0% 11.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
Responses 9 9 8 8 8 8 8 8 8 8 8 8
Average (%) 9.4% 9.5% 9.7% 10.1% 11.5% 11.7% 3.3% 3.5% 3.4% 3.7% 9.1 10.1
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
10.8% 10.8% 10.8% 10.8% 11.0% 12.0% 2.0% 3.0% 3.0% 3.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 3 3 3 3 3 3 3 3 3 3 3 3
Average (%) 9.8% 10.1% 10.1% 10.6% 11.0% 11.3% 2.8% 3.7% 3.2% 3.7% 9.3 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.8% 10.8% 10.8% 10.8% 12.0% 12.0% 2.0% 2.0% 3.0% 3.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 3 3 3 3 3 3 3 3 3 3 3 3
Average (%) 9.6% 9.9% 10.1% 10.6% 12.0% 12.0% 2.8% 3.3% 3.2% 3.7% 9.3 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 10.8% 10.8% 12.0% 12.0% 2.0% 2.0% 3.0% 3.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
-- -- -- -- 15.0% 15.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 2 2 2 2 3 3 3 3 3 3 3 3
Average (%) 9.8% 10.3% 10.1% 10.9% 12.7% 12.7% 2.8% 3.3% 3.2% 3.7% 9.3 10.3
--------------------------------------------------------------------------------------------------------
Total Responses 17 17 16 16 17 17 17 17 17 17 17 17
Weighted Average (%) 9.6% 9.9% 10.0% 10.5% 11.8% 11.9% 2.9% 3.5% 3.2% 3.7% 9.3 10.3
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
AUTUMN 1996 13
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET RETAIL MARKET - REGIONAL MALLS
- ------------------------------------------------------------------------------------------------------------------------------------
7.5% 7.5% 8.0% 8.0% 11.3% 11.3% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.0% 9.0% 9.0% 9.0% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
7.5% 7.5% 7.8% 7.8% 12.0% 12.0% 1.5% 2.0% 3.0% 3.0% 10.0 10.0
7.0% 8.0% 8.0% 8.0% 10.5% 11.5% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
9.0% -- -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.0% 8.0% 9.0% 10.5% 11.0% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
8.0% 8.0% 8.5% 8.5% 11.0% 11.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
7.8% 8.0% 8.3% 8.5% 11.0% 12.0% 2.5% 3.0% 2.5% 3.0% 10.0 10.0
7.0% 8.0% 7.0% 8.0% 10.0% 11.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
Responses 10 9 9 9 9 9 10 10 10 10 10 10
Average (%) 7.9% 8.2% 8.2% 8.6% 11.4% 11.8% 3.0% 3.6% 3.5% 3.8% 9.1 9.6
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 10.0% 10.0% 17.0% 17.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
9.0% 9.0% 9.0% 9.0% 13.5% 13.5% 2.0% 2.0% 4.0% 4.0% 7.0 7.0
9.0% 10.0% 10.0% 10.0% 12.0% 14.0% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
10.0% -- -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
Responses 5 4 4 4 4 4 5 5 5 5 5 5
Average (%) 9.3% 9.6% 9.6% 10.0% 13.4% 13.9% 2.5% 3.4% 3.7% 4.0% 8.6 8.6
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 10.0% 10.0% 18.0% 18.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
11.0% 11.0% 11.0% 11.0% 13.0% 14.0% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
9.0% -- -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.5% 8.5% 9.0% 11.5% 12.5% 2.5% 3.0% 2.5% 3.0% 10.0 10.0
Responses 5 4 4 4 4 4 5 5 5 5 5 5
Average (%) 9.3% 9.8% 9.8% 10.3% 13.4% 13.9% 2.6% 3.6% 3.4% 3.8% 9.2 9.2
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 11.0% 11.0% 20.0% 20.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
12.5% 12.5% 12.0% 12.0% 14.0% 15.0% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
10.0% -- -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 9.0% 9.3% 9.8% 12.0% 13.0% 2.5% 3.0% 2.5% 3.0% 10.0 10.0
13.0% 13.0% 11.0% 11.0% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 3.0 3.0
Responses 6 5 5 5 5 5 6 6 6 6 6 6
Average (%) 10.6% 11.0% 10.6% 11.0% 14.6% 15.0% 2.7% 3.5% 3.3% 3.7% 8.2 8.2
--------------------------------------------------------------------------------------------------------
Total Responses 26 22 22 22 22 22 26 26 26 26 26 26
Weighted Average (%) 9.3% 9.6% 9.5% 10.0% 13.2% 13.6% 2.7% 3.5% 3.5% 3.8% 8.8 8.9
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
14 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET RESIDENTIAL - APARTMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
8.5% 10.0% 9.0% 10.5% -- -- -- -- 3.5% 3.5% 1.0 1.0
8.5% 9.0% 9.0% 9.0% 11.0% 11.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
9.8% 9.8% 10.0% 10.0% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
8.3% 9.0% 9.0% 9.5% 10.5% 11.5% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
7.5% 8.5% 8.0% 9.0% 10.0% 11.0% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.8% 8.8% 9.0% 9.0% 11.3% 11.3% 3.8% 4.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 9.0% 9.0% 9.5% 10.0% 11.5% 3.0% 4.0% 3.0% 3.0% 10.0 10.0
8.5% 9.0% 8.5% 9.0% -- -- 3.0% 3.5% 3.0% 3.5% 10.0 10.0
8.8% 9.0% 9.0% 9.5% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 10 10 10 10 8 8 9 9 10 l0 l0 10
Average (%) 8.6% 9.2% 9.0% 9.6% 11.2% 11.7% 2.9% 3.9% 3.3% 3.8% 8.4 8.9
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 9.5% 9.5% 10.0% 11.0% 12.0% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
9.0% 10.0% 10.0% 10.0% 11.0% 12.5% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.0% 10.0% 10.0% 10.5% 10.5% 12.0% 3.0% 4.0% 3.0% 3.0% 10.0 10.0
9.0% 9.5% 9.5% 10.0% 11.5% 11.5% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 5 5 5 5 5 5 5 5 5 5 5 5
Average (%) 8.9% 9.7% 9.7% 10.3% 11.0% 11.8% 2.5% 4.2% 3.1% 4.0% 9.6 10.2
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 11.0% 11.0% 11.0% 12.5% 13.5% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.0% 9.0% 9.0% 11.0% 12.0% 4.0% 6.0% 3.0% 3.0% 3.0 5.0
9.0% 9.0% 9.5% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 8.9% 9.4% 9.8% 10.3% 11.6% 12.1% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
12.0% 13.0% 13.0% 13.0% 13.0% 15.0% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.0% 10.0% 10.0% 11.0% 13.0% 4.0% 6.0% 3.0% 3.0% 3.0 5.0
9.5% 10.0% 10.0% 11.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 9.5% 10.1% 10.6% 11.3% 12.0% 13.0% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
Total Responses 23 23 23 23 21 21 22 22 23 23 23 23
Weighted Average (%) 9.0% 9.6% 9.8% 10.4% 11.5% 12.1% 2.7% 4.4% 3.2% 4.0% 8.4 9.3
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical
issues
AUTUMN 1996 15
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICE SUMMARY OF WEIGHTED AVERAGE
- ------------------------------------------------------------------------------------------------------------------------------------
Urban/CBD 9.8% 10.3% 9.7% 10.3% 13.0% 13.5% 3.3% 4.6% 3.4% 3.9% 8.1 9.2
Class A - Leased Asset 9.2% 9.6% 9.2% 9.7% 11.7% 12.0% 3.3% 4.2% 3.4% 3.9% 8.5 9.5
Class B - Leased Asset 10.0% 10.4% 9.7% 10.3% 12.8% 13.1% 3.3% 4.7% 3.5% 4.0% 8.3 9.7
Class A - Value Added 9.4% 10.0% 9.6% 10.2% 12.8% 13.5% 3.5% 4.6% 3.5% 3.9 7.6 8.9
Class B - Value Added 10.7% 11.0% 10.5% 11.2% 14.6% 15.3% 3.2% 4.8% 3.3% 3.9% 8.0 8.8
Suburban 9.3% 9.8% 9.7% 10.1% 12.8% 13.4% 3.2% 4.4% 3.4% 3.7% 8.0 8.8
Class A - Leased Asset 8.8% 9.5% 9.3% 9.9% 11.2% 11.6% 3.5% 4.4% 3.6% 3.8% 8.9 9.7
Class B - Leased Asset 9.5% 10.0% 9.8% 10.2% 12.0% 12.5% 3.4% 4.5% 3.4% 3.7% 8.6 9.6
Class A - Value Added 9.1% 9.7% 9.5% 10.0% 13.4% 14.3% 3.1% 4.6% 3.4% 3.8% 7.2 8.0
Class B - Value Added 9.7% 10.0% 10.0% 10.5% 14.5% 15.2% 2.9% 4.3% 3.2% 3.6% 7.2 8.0
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL
- ------------------------------------------------------------------------------------------------------------------------------------
Warehouse/Distribution 9.5% 9.7% 10.2% 10.5% 11.6% 11.6% 2.6% 4.5% 3.2% 4.0% 9.6 10.2
Class A - Leased Asset 8.8% 9.2% 9.4% 9.8% 10.9% 11.0% 2.9% 4.0% 3.3% 3.8% 9.8 10.1
Class B - Leased Asset 9.3% 9.5% 10.0% 10.2% 11.2% 11.2% 2.8% 4.3% 3.2% 3.9% 9.7 10.1
Class A - Value Added 9.7% 9.9% 10.4% 10.8% 11.9% 11.9% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
Class 8 - Value Added 10.1% 10.4% 10.9% 11.3% 12.4% 12.4% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
Business Parks 9.4% 9.9% 10.0% 10.8% 12.3% 12.9% 3.4% 4.0% 3.2% 3.8% 8.3 9.6
Class A - Leased Asset 9.0% 9.5% 9.8% 10.5% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
Class B - Leased Asset 9.3% 9.8% 10.0% 10.8% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
Class A - Value Added 9.5% 10.2% 10.0% 10.8% 13.0% 14.3% 3.5% 4.0% 3.2% 3.7% 7.7 8.7
Class B - Value Added 9.7% 10.3% 10.2% 11.0% 13.0% 14.3% 3.5% 4.0% 3.2% 3.7% 7.7 8.7
0ther Industrial/
Manufacturing 9.2% 9.7% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.8 10.3
Class A - Leased Asset 8.8% 9.3% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.5 10.0
Class B - Leased Asset 9.3% 9.8% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.5 10.0
Class A - Value Added 9.3% 9.8% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
Class B - Value Added 9.5% 10.0% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
- ------------------------------------------------------------------------------------------------------------------------------------
RETAIL
- ------------------------------------------------------------------------------------------------------------------------------------
Neighborhood & Community
Centers 9.7% 10.2% 10.3% 10.9% 13.0% 13.5% 2.7% 3.9% 3.2% 4.0% 8.7 9.3
Class A - Leased Asset 9.3% 9.8% 10.0% 10.4% 11.9% 12.1% 2.9% 3.7% 3.4% 3.9% 8.9 9.4
Class B - Leased Asset 9.5% 10.0% 10.4% 11.1% 12.3% 12.3% 2.3% 3.8% 3.3% 4.2% 9.0 9.6
Class A - Value Added 9.7% 10.3% 10.1% 10.7% 13.8% 14.6% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
Class B - Value Added 10.3% 10.8% 10.8% 11.5% 14.2% 15.0% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
Power Center & "Big Box" 9.6% 9.9% 10.0% 10.5% 11.8% 11.9% 2.9% 3.5% 3.2% 3.7% 9.3 10.3
Class A - Leased Asset 9.4% 9.5% 9.7% 10.1% 11.5% 11.7% 3.3% 3.5% 3.4% 3.7% 9.1 10.1
Class B - Leased Asset 9.8% 10.1% 10.1% 10.6% 11.0% 11.3% 2.8% 3.7% 3.2% 3.7% 9.3 10.3
Class A - Value Added 9.6% 9.9% 10.1% 10.6% 12.0% 12.0% 2.8% 3.3% 3.2% 3.7% 9.3 10.3
Class B - Value Added 9.8% 10.3% 10.1% 10.9% 12.7% 12.7% 2.8% 3.3 3.2% 3.7% 9.3 10.3
Regional Malls 9.3% 9.6% 9.5% 10.0% 13.2% 13.6% 2.7% 3.5% 3.5% 3.8% 8.8 8.9
Class A - Leased Asset 7.9% 8.2% 8.2% 8.6% 11.4% 11.8% 3.0% 3.6% 3.5% 3.8% 9.1 9.6
Class B - Leased Asset 9.3% 9.6% 9.6% 10.0% 13.4% 13.9% 2.5% 3.4% 3.7% 4.0% 8.6 8.6
Class A - Value Added 9.3% 9.8% 9.8% 10.3% 13.4% 13.9% 2.6% 3.6% 3.4% 3.8% 9.2 9.2
Class B - Value Added 10.6% 11.0% 10.6% 11.0% 14.6% 15.0% 2.7% 3.5% 3.3% 3.7% 8.2 8.2
Specialty Retail 9.5% 10.5% 10.8% 11.5% 12.0% 12.6 1.9% 4.0% 3.3% 4.0% 10.0 10.5
Class A - Leased Asset 8.2% 9.0% 8.8% 9.7% 10.7% 11.3% 2.5% 4.0% 3.5% 4.0% 8.7 10.3
Class B - Leased Asset 9.3% 10.3% 10.8% 11.5% 11.5% 12.5% 1.8% 4.0% 3.3% 4.0% 10.5 10.5
Class A - Value Added 10.0% 11.0% 11.3% 12.0% 12.5% 13.0% 1.8% 4.0% 3.3% 4.0% 10.5 10.5
Class B - Value Added 10.8% 11.8% 12.3% 13.0% 13.5% 13.5% 1.8% 4.0% 3.3% 4.0% 10.5 10.5
- ------------------------------------------------------------------------------------------------------------------------------------
RESIDENTIAL
- ------------------------------------------------------------------------------------------------------------------------------------
Apartments 9.0% 9.6% 9.8% 10.4% 11.5% 12.1% 2.7% 4.4% 3.2% 4.0% 8.4 9.3
Class A - Leased Asset 8.6% 9.2% 9.0% 9.6% 11.2% 11.7% 2.9% 3.9% 3.3% 3.8% 8.4 8.9
Class B - Leased Asset 8.9% 9.7% 9.7% 10.3% 11.0% 11.8% 2.5% 4.2% 3.1% 4.0% 9.6 10.2
Class A - Value Added 8.9% 9.4% 9.8% 10.3% 11.6% 12.1% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
Class B - Value Added 9.5% 10.1% 10.6% 11.3% 12.0% 13.0% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
</TABLE>
16 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
Single-Tenant NNN Leased Properties
(Excludes "Bondable" Leases)
Minimum No. Going-In Cap Rate Internal Rate of Return
of Years Low High Low High
Investment Grade Tenant
- --------------------------------------------------------------------------------
4.0 9.0% 9.0% 10.0% 12.0%
----------------------------------------------------------
10.0 8.0 9.0 10.5 11.5
----------------------------------------------------------
5.0 10.5 10.5 13.0 13.0
----------------------------------------------------------
10.0 9.0 10.5 13.0 15.0
----------------------------------------------------------
10.0 8.5 9.0 10.5 12.0
----------------------------------------------------------
10.0 9.5 10.0 10.5 11.5
----------------------------------------------------------
10.0 8.5 11.0 10.8 12.0
----------------------------------------------------------
10.0 9.5 9.5 11.0 11.0
----------------------------------------------------------
20.0 9.0 9.0 N/A N/A
----------------------------------------------------------
10.0 8.0 10.0 N/A N/A
- --------------------------------------------------------------------------------
Responses 10.0 10.0 10.0 8.0 8.0
Average 9.9 9.0% 9.8% 11.2% 12.3%
Non-Investment Grade
Tenant
- --------------------------------------------------------------------------------
4.0 9.5% 9.5% 10.5% 13.0%
----------------------------------------------------------
10.0 9.0 10.0 11.5 12.5
----------------------------------------------------------
5.0 13.0 13.0 15.0 15.0
----------------------------------------------------------
10.0 10.0 12.0 17.0 20.0
----------------------------------------------------------
10.0 9.0 10.0 11.0 13.0
----------------------------------------------------------
10.0 11.0 12.0 13.0 15.0
----------------------------------------------------------
10.0 10.5 10.5 13.0 13.0
----------------------------------------------------------
20.0 11.0 11.0 N/A N/A
----------------------------------------------------------
10.0 10.0 12.5 N/A N/A
----------------------------------------------------------
Responses 9.0 9.0 9.0 7.0 7.0
Average 9.9 10.3% 11.2% 13.0% 14.5%
AUTUMN 1996 17
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES BLENDED INTERNAL EQUITY INTERNAL GROWTH RATES TYPICAL PROJECTION MANAGEMENT RESERVES FOR
GOING-IN TERMINAL RATE OF RETURN RATE OF RETURN INCOME EXPENSES PERIOD (YEARS) FEES* REPLACEMENT*
----------------------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
LUXURY
- ------------------------------------------------------------------------------------------------------------------------------------
8.0% 8.0% 10.0% 10.0% 18.0% 18.0% 25.0% 25.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 5.0% 5.0%
7.0% 7.0% 10.0% 10.0% 15.0% 15.0% 20.0% 20.0% 7.0% 7.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
6.0% 9.5% 10.0% 10.0% 12.0% 15.0% 15.0% 18.0% 3.0% 3.0% 3.0% 3.0% 5.0 5.0 2.0% 4.0% 4.0% 4.0%
8.0% 11.0% 8.5% 12.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
9.5% 9.5% 10.5% 10.5% 15.0% 15.0% 18.0% 18.0% 4.5% 4.5% 4.0% 4.0% 10.0 10.0 3.5% 3.5% 4.0% 4.0%
-- -- 11.0% 13.0% 15.0% 15.0% 18.0% 18.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0 3.0% 3.0% 4.0% 4.0%
6.0% 8.0% 10.0% 12.0% 13.0% 14.0% 20.0% 22.0% 3.0% 4.0% 3.0% 4.0% 5.0 5.0 2.0% 3.0% 4.0% 5.0%
8.0% 12.0% 8.0% 10.0% 15.0% 15.0% 20.0% 20.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0 3.0% 4.0% 4.0% 5.0%
Responses 7 7 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8
Average (%) 7.5% 9.3% 9.8% 10.9% 14.5% 15.3% 19.5% 20.1% 4.1% 4.3% 3.8% 3.9% 6.5 6.9 2.8% 3.3% 4.1% 4.4%
- ------------------------------------------------------------------------------------------------------------------------------------
FIRST CLASS
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 9.0% 11.0% 11.0% 12.0% 12.0% 20.0% 20.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
10.0% 10.0% 10.0% 10.0% -- -- 13.0% 13.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0 3.0% 3.0% 4.0% 5.0%
9.0% 9.0% 11.0% 11.0% 14.0% 14.0% 18.0% 18.0% 6.0% 6.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
9.5% 11.0% 11.0% 11.0% 15.0% 20.0% 18.0% 22.0% 3.0% 3.0% 2.0% 2.0% 5.0 5.0 2.0% 3.0% 4.0% 4.0%
10.0% 12.0% 10.5% 13.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
7.0% 9.0% 10.0% 11.0% 11.5% 12.0% 14.0% 16.0% 4.0% 5.0% 3.0% 4.0% 5.0 5.0 2.5% 2.5% 5.0% 5.0%
9.5% 9.5% 10.5% 10.5% 15.0% 15.0% 18.0% 18.0% 4.5% 4.5% 4.0% 4.0% 10.0 10.0 3.5% 3.5% 4.0% 4.0%
9.0% 9.0% 10.5% 10.5% 21.0% 21.0% 14.0% 14.0% 4.0% 4.0% 3.0% 3.0% 7.0 7.0 3.0% 3.0% 4.0% 4.0%
10.0% 12.0% 11.0% 11.0% -- -- -- -- 3.5% 3.5% 3.5% 3.5% 5.0 10.0 2.0% 3.0% 4.0% 4.0%
10.0% 10.0% 9.0% 9.5% 19.0% 19.0% 15.0% 15.0% 8.0% 8.0% 6.0% 6.0% -- -- 2.5% 2.5% 4.0% 4.0%
10.0% 13.0% 12.0% 13.0% 25.0% 25.0% 20.0% 20.0% 3.5% 4.0% 3.5% 4.0% 5.0 5.0 3.5% 3.5% 4.0% 4.0%
10.5% 10.5% 10.5% 10.5% 13.5% 13.5% -- -- 3.5% 3.5% 3.5% 3.5% 10.0 10.0 3.0% 3.0% 5.0% 5.0%
8.0% 12.0% 8.0% 10.0% 15.0% 15.0% 20.0% 20.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0 3.0% 4.0% 4.0% 5.0%
Responses 13 13 13 13 11 11 11 11 13 13 13 13 12 12 13 13 13 13
Average (%) 9.3% 10.5% 10.4% 10.9% 15.8% 16.5% 17.3% 17.8% 4.2% 4.3% 3.7% 3.8% 6.6 7.3 2.8% 3.1% 4.2% 4.3%
- ------------------------------------------------------------------------------------------------------------------------------------
MID-RATE
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 12.0% 12.0% 15.0% 15.0% 18.0% 18.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
11.0% 11.0% 11.0% 11.0% 13.0% 13.0% 17.0% 17.0% 6.0% 6.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
9.5% 11.0% 11.0% 11.0% 15.0% 18.0% 17.0% 20.0% 3.0% 3.0% 2.0% 2.0% 5.0 5.0 2.0% 3.0% 4.0% 4.0%
10.0% 12.0% 10.5% 13.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
9.5% 9.5% 10.5% 10.5% 15.0% 15.0% 18.0% 18.0% 4.5% 4.5% 4.0% 4.0% 10.0 10.0 3.5% 3.5% 4.0% 4.0%
Responses 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5
Average (%) 10.0% 10.7% 11.0% 11.5% 14.2% 15.2% 18.0% 18.6% 4.2% 4.2% 3.7% 3.7% 6.4 7.0 2.9% 3.1% 4.0% 4.0%
----------------------------------------------------------------------------------------------------------------------
Total
Responses 25 25 26 26 24 24 24 24 26 26 26 26 25 25 26 26 26 26
Weighted
Average (%) 8.9% 10.1% 10.4% 11.1% 14.8% 15.7% 18.3% 18.8% 4.2% 4.3% 3.7% 3.8% 6.5 7.0 2.9% 3.2% 4.1% 4.2%
----------------------------------------------------------------------------------------------------------------------
</TABLE>
*as percent of total revenues
18 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES BLENDED INTERNAL EQUITY INTERNAL GROWTH RATES TYPICAL PROJECTION MANAGEMENT RESERVES FOR
GOING-IN TERMINAL RATE OF RETURN RATE OF RETURN INCOME EXPENSES PERIOD (YEARS) FEES* REPLACEMENT*
----------------------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
MID-RATE HOTEL - LIMITED SERVICE
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 12.0% 12.0% 15.0% 15.0% 15.0% 15.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
12.0% 12.0% 12.0% 12.0% 13.0% 13.0% 17.0% 17.0% 3.0% 3.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
8.0% 10.0% 10.0% 10.0% 12.0% 15.0% 14.0% 16.0% 3.0% 3.0% 2.0% 2.0% 5.0 5.0 3.0% 4.0% 4.0% 5.0%
11.0% 13.0% 11.5% 14.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
11.0% 11.0% 11.8% 11.8% 16.0% 16.0% 19.0% 19.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0 4.0% 4.0% 4.5% 4.5%
10.0% 13.0% 12.0% 13.0% 25.0% 25.0% 20.0% 20.0% 3.5% 4.0% 3.5% 4.0% 5.0 5.0 4.0% 4.0% 5.0% 5.0%
Responses 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6
Average (%) 10.3% 11.5% 11.5% 12.1% 15.7% 16.5% 17.5% 17.8% 3.5% 3.6% 3.7% 3.8% 6.2 6.7 3.3% 3.5% 4.3% 4.4%
- ------------------------------------------------------------------------------------------------------------------------------------
ECONOMY
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 12.0% 12.0% 15.0% 15.0% 15.0% 15.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
13.0% 13.0% 13.0% 13.0% 13.0% 13.0% 17.0% 17.0% 3.0% 3.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
9.0% 11.0% 10.0% 10.0% 12.0% 15.0% 14.0% 16.0% 3.0% 3.0% 3.0% 3.0% 5.0 5.0 4.0% 5.0% 5.0% 5.0%
11.0% 13.0% 11.5% 14.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
11.0% 11.0% 11.8% 11.8% 16.0% 16.0% 19.0% 19.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0 4.0% 4.0% 4.5% 4.5%
Responses 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5
Average (%) 10.8% 11.6% 11.7% 12.2% 13.8% 14.8% 17.0% 17.4% 3.5% 3.5% 3.9% 3.9% 6.4 7.0 3.4% 3.6% 4.3% 4.3%
Total
Responses 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11
Weighted
Average(%) 10.6% 11.6% 11.6% 12.1% 14.7% 15.7% 17.3% 17.6% 3.5% 3.5% 3.8% 3.8% 6.3 6.8 3.4% 3.6% 4.3% 4.4%
</TABLE>
*as percent of total revenues
AUTUMN 1996 19
<PAGE>
QUALIFICATIONS OF JOHN J. LYNCH
================================================================================
Professional Affiliations
Member, Appraisal Institute (MAI Designation #10585)
New Jersey Certified General Appraiser (Certificate #RG 01569)
Ohio Certified General Appraiser (Certificate #414115)
Pennsylvania Certified General Appraiser (Certificate #GA-000485-L)
Pennsylvania Real Estate Broker (License #ABO42902A)
Affiliate, Tri-State Commercial & Industrial Association of Realtors
Real Estate Experience
Associate Director of Cushman & Wakefield of Pennsylvania, Inc. and
Assistant Manager of its Valuation Advisory Services Department in
Philadelphia. Mr. Lynch remains active with the Hospitality Group and
continues to advise clients on complex income producing properties.
Associate Director, Cushman & Wakefield of Pennsylvania, Inc. and member
of the firms Hospitality Group, which specializes in the valuation and
investment counseling on hotel properties, through June, 1993.
Senior Appraiser, Cushman & Wakefield Appraisal Division, specializing in
a wide variety of commercial and industrial real estate appraisal and
investment counseling assignments throughout the nation from January, 1980
to March, 1987. Cushman & Wakefield is an international full seminar real
estate organization and a Rockefeller Group Company.
Staff Appraiser, Walter A. McClatchy Co., Inc. of Philadelphia,
Pennsylvania, specializing in commercial and industrial real estate
appraisal and investment counseling throughout a wide geographic area from
March, 1977 to December, 1979.
Sales Associate, William Brucker Co. - Real Estate of Philadelphia,
Pennsylvania, specializing in the sale and leasing of residential,
commercial and industrial real estate from February, 1976 to March, 1977.
Formal Education
Pennsylvania State University, University Park, Pennsylvania
Bachelor of Science - 1975
Appraisal Institute, Chicago, Illinois
Introduction to Appraising Real Property - 1977
Basic Appraisal Principles, Methods and Techniques - 1978
Capitalization Theory and Techniques - 1978
Case Studies in Real Estate Valuation - 1981
Valuation Analysis and Report Writing - 1982
Investment Analysis - 1983
Standards of Professional Practice - 1989
Various Lectures and Seminars for Continuing Education Credits
<PAGE>
DISPLAY THIS CERTIFICATE PROMINENTLY o NOTIFY AGENCY WITHIN 10 DAYS
OF ANY CHANGE
Commonwealth of Pennsylvania
Department of State
Bureau of Professional and Occupational Affairs
P.O. BOX 2649 Harrisburg, PA 17105-2649
Classification
[SEAL OF THE BUREAU OF PROFESSIONAL AND OCCUPATIONAL AFFAIRS]
GENERAL APPRAISER
Certificate Number Certification Date Issued Expires
GA-000485-L DEC 02 1991 JUL 10 1995 JUN 30 1997
/s/ [ILLEGIBLE]
- ----------------------
Signature
/s/ [ILLEGIBLE]
- ----------------------
Commissioner of Professional and Occupational Affairs
Issued To:
JOHN JOSEPH LYNCH
29 WOODLAKE DRIVE
MARLTON NJ 08053
ALTERATION OF THIS DOCUMENT IS A CRIMINAL OFFENSE UNDER 18 PA.C.S.ss. 4911
<PAGE>
QUALIFICATIONS OF JOHN B. RUSH
================================================================================
Professional Affiliations
Member, Appraisal Institute (MAI Designation #7261)
Delaware Certified General Appraiser (Certificate #Xl-0000051)
Maryland Certified General Appraiser (Certificate #10041)
New Jersey Certified General Appraiser (Certificate #RG 00808)
Pennsylvania Certified General Appraiser (Certificate #GA-000331-L)
Pennsylvania Real Estate Broker (License #ABO43144A)
Affiliate, Tri-State Commercial & Industrial Association of Realtors
Associate, Urban Land Institute (Associate #164089)
Real Estate Experience
Director of Cushman & Wakefield of Pennsylvania, Inc. and Manager of its
Valuation Advisory Services Department in Philadelphia. Cushman &
Wakefield is a international full service real estate organization and a
Rockefeller Group Company.
Senior Appraiser, Cushman & Wakefield Appraisal Division, specializing in
commercial and industrial real estate appraisal and investment counseling
throughout the nation from January, 1980 to September, 1985.
Staff Appraiser, Boyle/Helbig Realty, Inc. of Philadelphia, Pennsylvania,
specializing in commercial and industrial real estate appraisal and
investment counseling throughout a wide geographic area from December,
1977 to December, 1979.
Associate, Michael Singer Real Estate Company of Philadelphia,
Pennsylvania, specializing in the investment, leasing and management of
local commercial and residential real estate from June, 1975 to December,
1977.
Formal Education
Drexel University, Philadelphia, Pennsylvania
Master of Business Administration - 1982
Saint Joseph's College, Philadelphia, Pennsylvania
Bachelor of Arts - 1975
Appraisal Institute, Chicago, Illinois
Required Courses of Study Leading to the MAI Designation
Various Lectures and Seminars for Continuing Education Credits
Board of Realtors, Philadelphia, Pennsylvania
Required Courses of Study for State Licensure
<PAGE>
Qualifications of John B. Rush
================================================================================
Qualified Expert Witness
United States Bankruptcy Court,
Eastern District of Pennsylvania
United States Bankruptcy Court,
Middle District of Pennsylvania
Court of Common Pleas
Dauphin County, Pennsylvania
Board of Assessment Appeals
Bucks County, Pennsylvania
Board of Revision of Taxes
City of Philadelphia
Board of Tax Review
City of Philadelphia
Board of Assessment Appeals
Dauphin County, Pennsylvania
<PAGE>
DISPLAY THIS CERTIFICATE PROMINENTLY o NOTIFY AGENCY WITHIN 10 DAYS
OF ANY CHANGE
Commonwealth of Pennsylvania
Department of State
Bureau of Professional and Occupational Affairs
P.O. BOX 2649 Harrisburg, PA 17105-2649
Classification
[SEAL OF THE BUREAU OF PROFESSIONAL AND OCCUPATIONAL AFFAIRS]
GENERAL APPRAISER
Certificate Number Certification Date Issued Expires
GA-000331-L SEP 10 1991 MAY 15 1995 JUN 30 1997
/s/ [ILLEGIBLE]
- ---------------------
Signature
/s/ [ILLEGIBLE]
- ---------------------
Commissioner of Professional and Occupational Affairs
Issued To:
JOHN BENJAMIN RUSH
325 POWDER HORN ROAD
FORT WASHINGTON PA 19034
ALTERATION OF THIS DOCUMENT IS A CRIMINAL OFFENSE UNDER 18 PA.C.S.ss. 4911
This CD ROM contains an electronic version of appraisals for the Mortgaged
Properties in PDF format and forms part of the paper version of the Prospectus
Supplement. The information contained in this CD ROM does not appear elsewhere
in paper form in this Prospectus Supplement and must be considered as part of,
and together with, the information contained elsewhere in this Prospectus
Supplement and the Prospectus. The information contained in this CD ROM has
been filed by the Seller with the Securities and Exchange Commission as part
of a Current Report on Form 8-K, which is incorporated by reference in this
Prospectus Supplement, and is also available through the public reference
branch of the Securities and Exchange Commission. Defined terms used in this CD
ROM but not otherwise defined therein shall have the respective meanings
assigned to them in the paper portion of the Prospectus Supplement and the
Prospectus. All of the information contained in this CD ROM is subject to the
same limitations and qualifications contained in this Prospectus Supplement and
the Prospectus. Prospective investors are strongly urged to read the paper
portion of this Prospectus Supplement and the Prospectus in its entirety prior
to accessing this CD ROM. If this CD ROM was not received in a sealed package,
there can be no assurances that it remains in its original format and should
not be relied upon for any purpose. Prospective investors may contact J.
Theodore Borter of Goldman, Sachs Co. at (212)902-3857 to receive an original
copy of the CD ROM.
<PAGE>
================================================================================
COMPLETE APPRAISAL
OF REAL PROPERTY
17 Industrial Buildings
Located in the Greater Dabney Area
Henrico County, Virginia
VOLUME I OF II
================================================================================
IN A SELF CONTAINED REPORT
As Of July 1, 1997
Prepared For
Goldman Sachs Mortgage Company
85 Broad Street
New York, New York 10004
Prepared By:
Cushman & Wakefield of Washington, D.C., Inc.
Valuation Advisory Services
1875 Eye Street, NW
Suite 700
Washington, D.C. 20006
<PAGE>
Cushman & Wakefield of Washington, D.C., Inc. CUSHMAN & WAKEFIELD
1875 Eye Street, N.W., Suite 700 A ROCKEFELLER GROUP COMPANY
Washington, D.C. 20006
(202) 467-0600
June 20, 1997
Mr. Sheridan Schechner
Managing Partner
Goldman Sachs Mortgage Company
85 Broad Street
New York, New York 10004
RE: Complete Appraisal of Real Property
17 Industrial Buildings
Located in the Greater Dabney Area
Known as Dabney I through XI, Dabney A-1 and A-2, Britton's Hill,
Westmoreland Plaza, Morton Marks and 2110 Tomlynn
Henrico County, Virginia
Dear Mr. Schechner:
In fulfillment of our agreement as outlined in the Letter of Engagement,
Cushman & Wakefield, Inc. is pleased to transmit our self-contained appraisal
report estimating the prospective market value of the leased fee estate in the
above referenced properties. This appraisal report has been prepared in
accordance with our interpretation of your institution's guidelines, the
regulations of OCC and the Uniform Standards of Professional Appraisal Practice,
including the Competency Provision and The Financial Institutions Reform,
Recovery and Enforcement Act (FIRREA) and the guidelines of federal regulatory
agencies.
The value opinions reported below is qualified by certain assumptions,
limiting conditions, certifications, and definitions, which are set forth in the
report. We particularly call to your attention those unusual limiting conditions
dealing with the following:
1. We assumed that the leases reportedly out for signature will be
consummated upon the terms presented to us. Otherwise the value may
be different.
2. We were given a site size for Dabney VI that was substantially
smaller than the tax assessor's site size for that property. We
relied on the data supplied to us by ownership and modified the
assessment accordingly. As a result, our value conclusion may be
different if the full assessment were employed.
3. Pursuant to your request, the date of value is July 1, 1997. We
specifically assumed that no value affecting changes occur between
the date of inspection, which was June 3, 1997, and the prospective
date of value.
<PAGE>
Mr. Sheridan Schechner Page 2
Goldman Sacks Mortgage Company
This report was prepared for Goldman Sachs Mortgage Company and is
intended only for its specified use. It may not be distributed to or relied upon
by other persons or entities without written permission of Cushman & Wakefield,
Inc. of Washington, D.C.
The property was inspected and the report prepared by Lynda Gallagher and
Steven M. Halbert, J.D., MAI. Donald R. Morris, MAI, also inspected the
property, reviewed the report and concurred with the conclusions herein.
The subject property consists of 17 industrial properties situated in the
Greater Dabney area of Richmond, Virginia, and more fully described within the
body of this report. Individual cash flow projections were prepared for each
property leading to a conclusion of value on a building by building basis.
The balance of this page intentionally left blank.
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Mr. Sheridan Schechner Page 3
Goldman Sacks Mortgage Company
Therefore, based on our complete appraisal as defined by the Uniform
Standards of Professional Appraisal Practice, we have formed an opinion that the
prospective market values of the leased fee estate in the referenced properties,
subject to the assumptions, limiting conditions, certifications, and
definitions, as of July 1, 1997, is:
==================================================
Property Market Value
==================================================
Dabney I $1,200,000
Dabney II $1,400,000
Dabney III $900,000
Dabney IV $1,500,000
Dabney V $1,900,000
Dabney VI $1,900,000
Dabney VII $1,600,000
Dabney VIII $1,200,000
Dabney IX $1,300,000
Dabney X $4,100,000
Dabney XI $2,300,000
Dabney A-1 $1,200,000
Dabney A-2 $2,600,000
Britton's Hill $4,500,000
Westmoreland $5,200,000
Morton Marks $1,500,000
2110 Tomlynn $550,000
==================================================
This letter is invalid as an opinion of value if detached from the report,
which contains the text, exhibits, and an Addenda.
Respectfully submitted,
CUSHMAN & WAKEFIELD OF D.C. INC.
/s/ Lynda Gallagher
- ----------------------------
Lynda Gallagher
/s/ Steven M. Halbert
- ----------------------------
Steven M. Halbert, J.D., MAI
Associate Director
Virginia Certified General Real Estate Appraiser 4001 001971
COMMONWEALTH OF VIRGINIA
Steven M. Halbert
No. 4001 001971
Certified General Real Estate
Appraiser
/s/ Donald R. Morris
- -----------------------------
Donald R. Morris, MAI
Manager, Director
Virginia Commercial General Real Property Appraiser No. 4001-002465001-002465
COMMONWEALTH OF VIRGINIA
Donald R. Morris
No. 4001 002465
Certified General Real Estate
Appraiser
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
SUMMARY OF SALIENT FACTS AND CONCLUSIONS
================================================================================
Property Name: 17 Industrial Buildings in Dabney Center
Location: All within the Greater Dabney Industrial Park in
Richmond, Henrico County, Virginia
Dabney I 2256 Dabney Road
Dabney II 2251 Dabney Road
Dabney III 2112-2124 Tomlynn St
Dabney IV 2161-2179 Tomlynn St
Dabney V 2200-2224 Tomlynn St
Dabney VI 2277 Dabney Road
Dabney VII 2246 Dabney Road
Dabney VIII 2130-2146 Tomlynn Street
Dabney IX 2248 Dabney Road
Dabney X 2201-2247 Tomlynn Street
Dabney XI 2221-2245 Dabney Road
Dabney A-1 2238 Dabney Road
Dabney A-2 2240 Dabney Road
Britton's Hill 2511 Britton's Hill Road
Westmoreland Plaza 1957 Westmoreland St
Morton Marks 2201 Dabney Road
2110 Tomlynn 2100 Tomlynn St
General Overview: The appraised properties consist of 17
industrial buildings built between 1965 and 1994
with the square footage ranging from 15,000 to
132,000 square feet. Occupancies are all above
90 percent for the brick and reinforced concrete
buildings.
Interest Appraised: Leased fee estate
Date of Value: July 1, 1997
Date of Inspection: June 3, 1997
Ownership: Various entities related to RF&P; see
Introduction section for detailed listing
Highest and Best Use: Existing industrial buildings
Marketing Time: 12 months
Value Indicators See the table on the following table
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Summary of Salient Facts and Conclusions
<TABLE>
<CAPTION>
=======================================================================================================================
Dabney I Dabney II Dabney III Dabney IV Dabney V Dabney VI
Building Type Flex-Low Off Flex-Low Off Flex-Med Off Flex-Low Off Flex-Med Off Flex-Low Off
=======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Size (SF) 33,600 42,000 23,850 41,550 45,353 50,400
Sales Comparison Approach $ 1,200,0O0 $ 1,500,000 $ 1,000,000 $ 1,50O,000 $ 1,800,000 $ 1,800,000
per SF $ 35.71 $ 35.71 $ 41.93 $ 36.10 $ 39.69 $ 35.71
Income Capitalization Approach
Estimated Market Rental Rate: $ 5.40 $ 5.40 $ 6.35 $ 5.40 $ 6.35 $ 5.40
Stabilized Vacancy Rate: 5% 5% 5% 5% 5% 5%
Blended Vacancy Between Tenants 4 months 4 months 4 months 4 months 4 months 4 months
Free Rent: 0 0 0 0 0 0
Probability of Renewal: 70% 70% 70% 70% 70% 70%
Tenant Improvement Allowance
New Tenants $ 2.00 $ 2.00 $ 2.00 $ 2.00 $ 2.00 $ 2.00
Renewal Tenants $ 0.50 $ 0.50 $ 0.50 $ 0.50 $ 0.50 $ 0.50
Estimated Market Rental Growth Rate 3.5% 3.5% 3.5% 3.5% 3.5% 3.5%
Estimated Expense Growth Rate: 3.5% 3.5% 3.5% 3.5% 3.5% 3.5%
Estimated Real Estate Tax Growth Rate: 3.5% 3.5% 3.5% 3.5% 3.5% 3.5%
Reversion Year Capitalization Rate 10.5% 10.5% 10.5% 10.5% 10.5% 10.5%
Transaction Costs in Reversion Sale: 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
Discount Rate: 12.0% 12.0% 12.0% 12.0% 12.0% 12.0%
Indicated Value: $ 1,200,000 $ 1,400,000 $ 900,000 $ 1,500,000 $ 1,900,000 $ 1,900,000
Value Conclusion: $ 1,200,000 $ 1,400,000 $ 900,000 $ 1,500,000 $ 1,900,000 $ 1,900,000
Value Per Square Foot: $ 35.71 $ 33.33 $ 37.74 $ 36.10 $ 41.89 $ 37.70
Implicit Capitalization Rate: 10.8% 10.9% 9.9% 10.8% 10.2% 10.0%
=======================================================================================================================
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Summary of Salient Facts and Conclusions
<TABLE>
<CAPTION>
=======================================================================================================================
Dabney VII Dabney VIII Dabney IX Dabney X Dabney XI Dabney A-1
Building Type Flex-Hi Off Flex-Med Off Flex-Hi Off Flex-Hi Off Flex-Hi Off R&D
=======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Size (SF) 33,149 29,700 30,263 85,844 45,250 15,389
Sales Comparison Approach $1,500,000 $1,200,000 $1,400,000 $3,900,000 $2,000,000 $1,200,000
per SF $45.25 $40.40 $46.26 $45.43 $44.20 $77.98
Income Capitalization Approach
Estimated Market Rental Rate: $7.30 $6.35 $7.30 $7.30 $7.30 $8.50
Stabilized Vacancy Rate: 5% 5% 5% 5% 5% 5%
Blended Vacancy Between Tenants 4 months 4 months 4 months 4 months 4 months 4 months
Free Rent: 0 0 0 0 0 0
Probability of Renewal: 70% 70% 70% 70% 70% 70%
Tenant Improvement Allowance
New Tenants $2.00 $2.00 $2.00 $2.00 $2.00 $2.00
Renewal Tenants $0.50 $0.50 $0.50 $0.50 $0.50 $0.50
Estimated Market Rental Growth Rate 3.5% 3.5% 3.5% 3.5% 3.5% 3.5%
Estimated Expense Growth Rate: 3.5% 3.5% 3.5% 3.5% 3.5% 3.5%
Estimated Real Estate Tax Growth Rate: 3.5% 3.5% 3.5% 3.5% 3.5% 3.5%
Reversion Year Capitalization Rate 10.5% 10.5% 10.5% 10.5% 10.5% 10.5%
Transaction Costs in Reversion Sale: 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
Discount Rate: 12.0% 12.0% 12.0% 12.0% 12.0% 12.0%
Indicated Value: $1,600,000 $1,200,000 $1,300,000 $41,100,000 $2,300,000 $1,200,000
Value Conclusion: $1,600,000 $1,200,000 $1,300,000 $4,100,000 $2,300,000 $1,200,000
Value Per Square Foot: $48.27 $40.40 $42.96 $47.76 $50.83 $77.98
Implicit Capitalization Rate: 11.1% 13.4% 10.6% 9.6% 9.5% 10.9%
=======================================================================================================================
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Summary of Salient Facts and Conclusions
<TABLE>
<CAPTION>
========================================================================================================================
Dabney A-2 Britton's Hill Westmoreland Morten's Mark 2110 Tomlynn St
Building Type R&D Warehouse Warehouse Warehouse Warehouse
========================================================================================================================
<S> <C> <C> <C> <C> <C>
Size (SF) 33,050 132,103 121,815 45,000 15,910
Sales Comparison Approach $2,500,000 $4,400,000 $4,900,000 $1,500,000 $500,000
per SF $75.64 $33.31 $40.22 $33.33 $31.43
Income Capitalization Approach
Estimated Market Rental Rate: $8.50 $4.00 $5.00 $4.00 $4.00
Stabilized Vacancy Rate: 5% 5% 5% 5% 5%
Blended Vacancy Between Tenants 4 months 4 months 4 months 4 months 4 months
Free Rent: 0 0 0 0
Probability of Renewal: 70% 70% 70% 70% 70%
Tenant Improvement Allowance
New Tenants $2.00 $2.00 $2.00 $2.00 $2.00
Renewal Tenants $0.50 $0.50 $0.50 $0.50 $0.50
Estimated Market Rental Growth Rate 3.5% 3.5% 3.5% 3.5% 3.5%
Estimated Expense Growth Rate: 3.5% 3.5% 3.5% 3.5% 3.5%
Estimated Real Estate Tax Growth Rate: 3.5% 3.5% 3.5% 3.5% 3.5%
Reversion Year Capitalization Rate 10.5% 10.5% 10.5% 10.5% 10.5%
Transaction Costs in Reversion Sale: 4.0% 4.0% 4.0% 4.0% 4.0%
Discount Rate: 12.0% 12.0% 12.0% 12.0% 12.0%
Indicated Value: $2,600,000 $4,500,000 $5,200,000 $1,500,000 $550,000
Value Conclusion: $2,600,000 $4,500,000 $5,200,000 $1,500,000 $550,000
Value Per Square Foot: $78.67 $34.06 $42.69 $33.33 $34.57
Implicit Capitalization Rate: 10.7% 10.5% 9.1% 10.4% 12.4%
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Summary Of Salient Facts And Conclusions
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Special Assumptions Affecting Valuation:
1. We assumed that the leases reportedly out for signature will be
consummated upon the terms presented to us. Otherwise the value may be
different.
2. We were given a site size for Dabney VI that was substantially smaller
than the tax assessor's site size for that property. We relied on the data
supplied to us by ownership and modified the assessment accordingly. As a
result, our value conclusion may be different if the full assessment were
employed.
3. Pursuant to your request, the date of value is July 1, 1997. We
specifically assumed that no value affecting changes occur between the
date of inspection, which was June 3, 1997, and the prospective date of
value.
4. Please refer to the complete list of assumptions and limiting conditions
included at the end of this report.
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<PAGE>
PHOTOGRAPHS OF SUBJECT PROPERTY
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Dabney I [GRAPHIC OMITTED]
Dabney II [GRAPHIC OMITTED]
<PAGE>
Photographs of Subject Property
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Dabney III [GRAPHIC OMITTED]
Dabney IV [GRAPHIC OMITTED]
<PAGE>
Photographs of Subject Property
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Dabney V [GRAPHIC OMITTED]
Dabney VI [GRAPHIC OMITTED]
<PAGE>
Photographs of Subject Property
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Dabney VII [GRAPHIC OMITTED]
Dabney VIII [GRAPHIC OMITTED]
<PAGE>
Photographs of Subject Property
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Dabney IX [GRAPHIC OMITTED]
Dabney X [GRAPHIC OMITTED]
<PAGE>
Photographs of Subject Property
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Dabney XI [GRAPHIC OMITTED]
Dabney A-1 [GRAPHIC OMITTED]
<PAGE>
Photographs of Subject Property
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Dabney A-2 [GRAPHIC OMITTED]
Britton's Hill [GRAPHIC OMITTED]
<PAGE>
Photographs of Subject Property
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Westmoreland Plaza [GRAPHIC OMITTED]
Morton Marks [GRAPHIC OMITTED]
<PAGE>
Photographs of Subject Property
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2110 Tomlynn Street [GRAPHIC OMITTED]
Street scene looking north on Dabney Road [GRAPHIC OMITTED]
<PAGE>
Photographs of Subject Property
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Street scene looking south on Dabney Road [GRAPHIC OMITTED]
Street scene looking north on Tomlynn Street [GRAPHIC OMITTED]
<PAGE>
Photographs of Subject Property
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Street scene looking south on Tomlynn Street [GRAPHIC OMITTED]
<PAGE>
TABLE OF CONTENTS
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Page
INTRODUCTION .............................................................. 1
Identification of Property ........................................... 1
Property Ownership and Recent History ................................ 1
Purpose and Function of Appraisal .................................... 2
Extent of the Office Appraisal Process ............................... 2
Date of Value and Property Inspection ................................ 3
Property Rights Appraised ............................................ 3
Definitions of Value, Interest Appraised, and Other Pertinent Terms .. 3
Exposure Time ........................................................ 4
Marketing Time ....................................................... 4
Legal Description .................................................... 5
REGIONAL ANALYSIS ......................................................... 6
INDUSTRIAL MARKET ANALYSIS ................................................ 16
PROPERTY DESCRIPTION ...................................................... 20
Site Description ..................................................... 20
Improvements Description ............................................. 25
REAL ESTATE TAXES AND ASSESSMENTS ......................................... 46
ZONING .................................................................... 50
HIGHEST AND BEST USE ...................................................... 51
VALUATION PROCESS ......................................................... 53
SALES COMPARISON APPROACH ................................................. 55
INCOME CAPITALIZATION APPROACH ............................................ 62
RECONCILIATION AND FINAL VALUE ESTIMATE .................................. 147
ASSUMPTIONS AND LIMITING CONDITIONS ...................................... 149
CERTIFICATION OF APPRAISAL ............................................... 151
ADDENDA .................................................................. 153
<PAGE>
INTRODUCTION
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Identification of Property
The subject property is comprised of 17 industrial buildings containing a
total of 824,226 square feet of net rentable area (NRA). All of the buildings
are located in or near the Dabney Center Industrial Park, situated just north of
the city of Richmond in Henrico County, Virginia. The subject property, as a
whole, is known as Greater Dabney and consist of Dabney I through XI, Dabney A-1
and A-2, Britton's Hill, Westmoreland Plaza, Morton Mark, and 2110 Tomlynn.
Greater Dabney is bounded by the I-95 and I-64 interchange to the northeast,
Westwood Avenue to the south, Broad Street West to the southwest, and Staples
Mill Road to the northwest. The subject property is summarized in the following
table.
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Subject Property Summary
================================================================================
Building Land Area Building Size
Building Name Address Type (Acres) (SF/NRA)
================================================================================
Dabney I 2256 Dabney Road Office/Warehouse 1.9 33,600
Dabney II 2251 Dabney Road Office/Warehouse 2.6 42,000
Dabney III 2112-2124 Tomlynn Street Office/Warehouse 1.9 23,850
Dabney IV 2161-2179 Tomlynn Street Office/Warehouse 3.1 41,550
Dabney V 2200-2224 Tomlynn Street Office/Warehouse 2.8 45,353
Dabney VI 2277 Dabney Road Office/Warehouse 3.1 50,400
Dabney VII 2246 Dabney Road Office/Warehouse 2.8 33,149
Dabney VIII 2130-2146 Tomlynn Street Office/Warehouse 2.8 29,700
Dabney IX 2248 Dabney Road Office/Warehouse 3.6 30,263
Dabney X 2201-2247 Tomlynn Street Office/Warehouse 6.6 85,844
Dabney XI 2221-2245 Dabney Road Office/Warehouse 2.7 45,250
Dabney A-1 2238 Dabney Road R & D 1.3 15,389
Dabney A-2 2240 Dabney Road R & D 1.7 33,050
Britton's Hill 2511 Britton's Hill Road Warehouse 8.2 132,103
Westmoreland 1957 Westmoreland Street Warehouse 13.3 121,815
Morton Marks 2201 Dabney Road Warehouse 3.2 45,000
2110 Tomlynn 2110 Tomlynn Street Warehouse 0.8 15,910
================================================================================
Total 62.4 824,226
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Property Ownership and Recent History
Title to the subject property is vested in a variety of entities according
to the tax rolls, all related to R F & P Corporation. The table on the following
page presents the ownership.
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Building Name Address Ownership
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Dabney I 2256 Dabney Road R F & P Corporation
Dabney II 2251 Dabney Road R F & P Corporation
Dabney III 2112-2124 Tomlynn Street Richmond Land Corp.
Dabney IV 2161-2179 Tomlynn Street Richmond Land Corp.
Dabney V 2200-2224 Tomlynn Street R F & P Corporation
Dabney VI 2277 Dabney Road Richmond Frederick & Potomac
Railroad Company
Dabney VII 2246 Dabney Road R F & P Properties, Inc.
Dabney VIII 2130-2146 Tomlynn Street R F & P Corporation
Dabney IX 2248 Dabney Road R F & P Corporation
Dabney X 2201-2247 Tomlynn Street R F & P Corporation
Dabney XI 2221-2245 Dabney Road R F & P Corporation
Dabney A-1 2238 Dabney Road R F & P Corporation
Dabney A-2 2240 Dabney Road R F & P Corporation
Britton's Hill 2511 Britton's Hill Road R F & P Corporation
Westmoreland 1957 Westmoreland Street R F & P Corporation
Morton Marks 2201 Dabney Road Richmond Land Corp.
2110 Tomlynn 2110 Tomlynn Street Richmond Land Corp.
================================================================================
There have been no transfers during the last three years. Britton's Hill
and Westmoreland Plaza both transferred within the last five years, but not
within the last three years. With the changes in the market since their sales
dates and with the tremendous capital improvements made to Westmoreland by the
new owner, the sales prices paid back then are not probative in our current
assignment.
It is our understanding that these properties along with a much larger
portfolio are being transferred for securitization purposes. We were not
provided with any details of this pending transaction.
Purpose and Function of Appraisal
The purpose of the appraisal is to provide an estimate of market value of
the leased fee estate in the subject property. The function of this report is to
assist Goldman Sacks Mortgage Company, its affiliates, rating agencies and
designees of Goldman Sacks Mortgage Company, in connection with asset
acquisition and loan securitization.
Extent of the Office Appraisal Process
In the process of preparing this appraisal, we:
o Inspected the exterior of the building and site improvements, and a
representative sample of tenant spaces with Mr. Thomas Butch Hall,
maintenance engineer with Morton G. Thalheimer;
o Interviewed Mr. M. Pinson Neal, Mr. Gary Hooper, and Mr. Austin
Newman with Morton G. Thalheimer, the property management and
leasing company.
o Conducted market inquiries into recent sales of similar buildings to
ascertain the sales prices per square foot and capitalization rates.
This process involved telephone interviews with sellers, buyers
and/or participating brokers;
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Introduction
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involved telephone interviews with sellers, buyers and/or
participating brokers;
o Conducted market inquiries into recent sales of land in the suburban
Richmond to ascertain the sales prices per square foot, and related
value indicators. This process involved telephone interviews with
sellers, buyers and/or participating brokers;
o Reviewed the leasing policy, tenant build-out allowances, and
history of recent rental rates and occupancy with management and
leasing agent;
o Reviewed a history of the income and expenses for 1994, 1995, 1996,
and a budget forecast for 1997;
o Conducted market research into occupancies, asking rents, and
operating expenses at competing buildings including interviews with
on-site managers and a review of our own data base; and,
o Prepared sales comparison and income capitalization approaches to
value.
Date of Value and Property Inspection
The date of value is July 1, 1997. Steven M. Halbert, J.D., MAI, inspected
the subject property on June 3, 1997.
Property Rights Appraised
Leased fee estate.
Definitions of Value, Interest Appraised, and Other Pertinent Terms
The definition of market value, taken from the Uniform Standards of
Professional Appraisal Practice, 1995 Edition, published by The Appraisal
Foundation, is as follows:
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 is the consummation of a sale as
of a specified date and the passing of title from seller to buyer under
conditions whereby:
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Introduction
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1 Buyer and seller are typically motivated;
2. Both parties are well informed or well advised, and acting in what
they consider their own best interests;
3. A reasonable time is allowed for exposure in the open market;
4. Payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
5. 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.
Exposure Time
Under Paragraph 3 of the Definition of Market Value, the value estimate
presumes that A reasonable time is allowed for exposure in the open
market. Exposure time is defined as the estimated length of time the
property interest being appraised would have been offered on the market
prior to the hypothetical consummation of a sale at the market value on
the effective date of the appraisal. Exposure time is presumed to precede
the effective date of the appraisal.
Based upon the available sales data in the marketplace, as well as our
discussions with area brokers familiar with this property type, an exposure time
of 12 months would appear to have been reasonably appropriate for the subject
property as of the date of valuation.
Marketing Time
Marketing time is an estimate of the time that might be required to sell a
real property interest at the appraised value. Marketing time is presumed
to start on the effective date of the appraisal, whereas exposure time is
presumed to precede the effective date of appraisal. The estimate of
marketing time uses some of the same data analyzed in the process of
estimating the reasonable exposure time and is not intended to be a
prediction of a date of sale.
Our estimate of an appropriate marketing time for the subject relates to a
sale of the property in its As Is condition. Based on our discussions with local
brokers and buyer/sellers of apartment projects like the subject, as well as our
assessment of the local real estate market and economic forces in general, we
have concluded that the probable marketing period for the subject property in
today's environment would be about 12 months.
The following definitions of pertinent terms are taken from the Dictionary
of Real Estate Appraisal, Third Edition (1993), published by The Appraisal
Institute:
Leased Fee Estate
An ownership interest held by a landlord with the rights of use and
occupancy conveyed by lease to others. The rights of the lessor (the
leased fee owner) and the leased fee are specified by contract terms
contained within the lease.
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Market Rent
The rental income that a property would most probably command on the open
market, indicated by the current rents paid and asked for comparable space
as of the date of appraisal.
Cash Equivalent
A price expressed in terms of cash, as distinguished from a price
expressed totally or partly in terms of the face amounts of notes or other
securities that cannot be sold at their face amounts.
Discounted Cash Flow (DCF) Analysis
The procedure in which a discount rate is applied to a set of projected
income streams and a reversion. The analyst specifies the quantity,
variability, timing and duration of the income streams as well as the
quantity and timing of the reversion and discounts each to its present
values at a specified yield rate. DCF analysis can be applied with any
yield capitalization rate and may be performed on either a lease-by-lease
or aggregate basis.
Market Value As Is on Appraisal Date
The value of specific ownership rights to an identified parcel of real
estate as of the effective date of the appraisal; related to what
physically exists and is legally permissible and excludes all assumptions
concerning hypothetical market conditions or possible rezoning.
Legal Description
The subject property is precisely described by the Henrico County Tax
Assessor's Office as follows:
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Legal Description Summary
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Building Name Address Tax Parcel number
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Dabney I 2256 Dabney Road 116-01-E-01
Dabney II 2251 Dabney Road 116-01-C-02
Dabney III 2112-2124 Tomlynn Street 116-01-C-01
Dabney IV 2161-2179 Tomlynn Street 116-01-A-01
Dabney V 2200-2224 Tomlynn Street 116-01-C-04
Dabney VI 2277 Dabney Road 104-OA-32-G
Dabney VII 2246 Dabney Road 116-01-01-02
Dabney VIII 2130-2146 Tomlynn Street Same as Dabney V
Dabney IX 2248 Dabney Road 116-01-01-03
Dabney X 2201-2247 Tomlynn Street 116-01-B-01
Dabney XI 2221-2245 Dabney Road Same as Dabney II
Dabney A-1 2238 Dabney Road 116-01-F-02
Dabney A-2 2240 Dabney Road 116-01-01-01
Britton's Hill 2511 Britton's Hill Road 104-OA-02
Westmoreland 1957 Westmoreland Street 116-OA-25 and 116-OA-10
Morton Marks 2201 Dabney Road 116-OA-56
2110 Tomlynn 2110 Tomlynn Street Same as Morton Marks
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REGIONAL ANALYSIS
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The dynamic nature of economic relationships within a market area have a
direct bearing on real estate values and the long-term quality of a real estate
investment. In the market, the value of a property is not based on the price
paid for it in the past or the cost of its creation, but on what buyers and
sellers perceive it will provide in the future. Consequently, the attitude of
the market toward a property within a specific neighborhood or market area
reflects the probable future trend of that area.
Since real estate is an immobile asset, economic trends affecting its
locational quality in relation to other competing properties within its market
area will also have a direct effect on its value as an investment. To accurately
reflect such influences, it is necessary to examine the past and probable future
trends which may affect the economic structure of the market and evaluate their
impact on the market potential of the subject. This section of the report is
designed to isolate and examine the discernible economic trends in the region
and neighborhood which influence and create value for the subject property.
A regional map indicating the location of the subject is presented on the
following page.
Location
The subject property is located in the City of Richmond, Virginia within
the Richmond Petersburg Metropolitan Statistical Area (MSA). For statistical
purposes, this area includes Chesterfield, Dinwiddle, Goochland, Hanover,
Henrico, New Kent, Powhatan and Prince George Counties. In addition, this MSA
also includes Charles, Colonial Heights, Hopewell, Petersburg and Richmond
Cities.
Richmond is located approximately 100 miles south of Washington, D.C. and
is midway between Atlanta and Boston. The City of Richmond is situated at the
end of the navigable portion of the James River, which bisects the city. Founded
in 1737 as a central marketplace of inland Virginia, it linked the piedmont and
mountain areas of Virginia with the seaports at Hampton Roads. In 1779, Richmond
became the state capital which has had a profound effect upon the growth of the
region. Richmond is the home of the Virginia General Assembly, state and federal
courts, and Virginia's capital. The success of the Richmond area is evidenced by
the influx and growth of local businesses, immigration to and population growth
in the area, as well as expansion of the employment base.
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Regional Map [GRAPHIC OMITTED]
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Regional Analysis
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Demographics
Demographic statistics for the Richmond MSA are summarized in the
following table.
=========================================================
Demographic Summary
=========================================================
Population
=========================================================
2001 Projection 1,000,848
1996 Estimate 942,346
1990 Census 865,640
1980 Census 761,304
1980-1990 % Change 13.70%
1990-1996 % Change 8.86%
1996-2001 % Change 6.21%
=========================================================
Households
=========================================================
2001 Projection 386,777
1996 Estimate 362,848
1990 Census 331,824
1980 Census 269,289
1980-1990 % Change 23.22%
1990-1996 % Change 9.35%
1996-2001 % Change 6.59%
=========================================================
Median Household Income
=========================================================
2001 Projection $46,784
1996 Estimate $40,118
1990 Census $33,489
1980 Census $18,293
1980-1990 % Change 86.07%
1990-1996 % Change 19.79%
1996-2001 % Change 16.62%
1990 Average Home Value $78,111
1990 % College Graduates 18.3%
=========================================================
Source: Strategic Mapping, Inc.
=========================================================
Population
According to Strategic Mapping, Inc., the population in the Richmond MSA
has increased dramatically slightly since 1980. In 1980 the population for the
entire MSA was 761,304 which then increased to 865,640 or 13.70 percent in 1990.
The population estimate for 1996 shows a slight slowing trend in the population
as the estimate increased from the 1990 figure to 942,346 or 8.86 percent.
Projections for the year 2001 show an increase expected over the next five year
period of 6.21 percent. This trend shows strong growth across the region.
Households
The total number of households in the MSA has increased approximately
23.22 percent from 1980 to 1990. The 1990 household figure of 331,824 households
has increased to an estimated figure of 362,848 in 1996 which indicates an
increase of 9.35 percent over the six
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Regional Analysis
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year period since 1990. Similar to the overall population growth, the average
annual increase has decelerated from the previous ten year period to a more
normalized basis, which is still above the national averages. The number of
households has been increasing since 1980, even during periods when the
population was shrinking. This has been possible due to the declining household
size which has dropped from 2.72 persons in 1980 to 2.52 persons in 1996. The
number of households is expected to increase to 386,777 in the year 2001, an
increase of 6.59 percent from the 1996 estimate. The steadily increasing number
of households should have a positive impact on the local economic condition.
Income
The median income per household in the MSA has increased considerably
since 1980. In 1980 the median household income was $18,293, which increased by
86.07 percent or 8.61 percent per annum to $33,489 in 1990. Based on estimates
from Strategic Mapping, Inc., the 1996 median household income was $40,118. The
1996 estimate indicates that overall growth in the median household income
slowed to 19.79 percent from 1990 to 1996 or a still strong 3.30 percent per
annum. The area is expected to continue in this income growth trend through
2001.
A breakdown of the household income characteristics for the MSA is shown
as follows:
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Household Income Characteristics
================================================================================
1980 1990 1996 Est. 2001 Proj.
================================================================================
$0 - $9,999 25.6% 12.0% 9.6% 8.1%
$10,000 - $14,999 15.0% 7.5% 6.1% 4.8%
$15,000 - $24,999 28.3% 16.5% 13.3% 10.9%
$25,000 - $34,999 17.5% 16.1% 13.9% 12.1%
$35,000 - $49,999 9.4% 20.0% 19.5% 17.5%
$50,000 - $74,999 2.8% 18.1% 20.9% 22.1%
$75,000 - $99,999 1.4% 5.7% 8.9% 11.5%
$100,000 - $149,999 - 2.7% 5.6% 9.3%
$150,000+ - 1.5% 2.2% 3.7%
TOTAL 100.0% 100.0% 100.0% 100.0%
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Source: Strategic Mapping, Inc.
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Unemployment Rate
Over the past year, the overall unemployment rate in the Richmond MSA
remained flat. Henrico County had a lower unemployment rate of 3.0 percent as of
year end 1996. The most recent unemployment figure as of March 1997 for Henrico
County was 2.6 percent, which is slightly below the 2.7 percent figure twelve
months earlier. The March 1997 rate for the metro area of 3.3 percent was the
same for the previous period. The metropolitan area has been experiencing an
improvement in the economy. The Richmond MSA has outperformed the nation and the
state in terms of employment over the past few years; and it is anticipated that
it will continue to do so in the future.
The following tables compare the unemployment rate for the area to that of
the state and national average for the year end averages and the current month
figures.
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Regional Analysis
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Unemployment Rate
Comparison by County, MSA, State, and U.S.
================================================================================
Year Henrico Richmond Virginia U.S.
County MSA
================================================================================
1996 3.0% 3.7% 4.4% 5.4%
1995 2.9% 3.7% 4.5% 5.6%
1994 3.3% 4.4% 4.9% 6.1%
1993 3.9% 4.9% 5.1% 6.9%
1992 5.4% 6.7% 6.4% 7.5%
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Source: U.S. Department of Labor and Employment Security, Bureau of Labor
Market Information.
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Current Month - Unemployment Rate
==================================================================
Geographic Area March 1996 March 1997
==================================================================
Henrico County 2.7% 2.6%
Richmond MSA 3.3% 3.3%
Virginia 4.6% 4.4%
U.S. 6.0% 5.9%
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Source: U.S. Department of Labor and Employment Security
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As population in the Richmond area has increased, employment has grown as
existing businesses expanded and new companies located in the area. Local
businesses are attracted to the convenient location between Atlanta and Boston,
competitive tax policies, and excellent transportation systems. In Richmond,
there is no sales tax on raw materials, and no state or local inventory tax on
manufacturing. Furthermore, sales and use tax, corporate income tax, and
unemployment insurance tax rates are low compared to national averages of other
cities. In fact, Richmond has the lowest unemployment insurance tax rate in the
nation, while the worker's compensation rate is seventh in the U.S. The labor
force has an education level as high or higher than other metro areas of
Richmond's size, or larger. Furthermore, Richmond area workers are reportedly 43
percent more productive per worker hour than U.S. workers as a whole, according
to the Metropolitan Economic Development Council. In addition, less than 11
percent of Richmond area workers are unionized, compared to the national average
of 20 percent. These factors have contributed to the influx of employers into
the Richmond area. Richmond's business climate has attracted and retained some
of the most prestigious businesses in the U.S., helping to boost the local
employment base.
As shown in the following table, with the exception of manufacturing all
industry segments witnessed steady growth. The largest increases came from
services at 3.24 percent followed by T.C.P.U. at 2.87 percent, and construction
at 2.67 percent. The following table illustrates the five year trend for
employment by sector for the Richmond MSA.
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Regional Analysis
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At-place Employment -- 1992 - 1996
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Category 1992 1993 1994 1995 1996 Percent
================================================================================
Manufacturing 62,900 61,400 61,100 60,600 59,700 -1.04
Mining 7,000 7,000 7,000 8,000 8,000 2.71
Construction 27,000 27,500 27,900 29,300 30,800 2.67
T.C.P.U 23,000 24,100 25,000 26,000 26,500 2.87
Wholesale & Retail
Trade 106,300 108,700 115,000 119,700 120,400 2.52
F. I. R. E. 38,700 39,700 42,000 42,400 42,900 2.08
Services 109,200 113,100 118,700 125,,000 128,100 3.24
Federal, State & 96,300 99,100 100,900 98,300 96,800 0.10
Local
Government
================================================================================
Total 464,100 474,300 491,200 502,100 506,000 1.74
================================================================================
Unemployment Rate 6.7 4.9 4.4 3.7 3.7 -
- Richmond MSA
Unemployment Rate 7.5 6.9 6.1 5.6 5.4 -
- USA
================================================================================
Source: Bureau of Labor Static's
================================================================================
Total employment increased by 0.78 percent over the past year and 1.74
percent over the past five years, in combination with a declining unemployment
rate (as of March 1997), indicates economic stability in the area. We anticipate
slow growth in employment during the next few years and possibly accelerated
growth towards the end of the decade. The largest increases are anticipated in
the services and construction categories with the strengthening economy, with
growth expected from all areas with the exception of government which is
expected to decline.
Shown on the following page is the most recent employment by industry in
the subject's area.
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<PAGE>
Regional Analysis
================================================================================
NON-AGRICULTURAL INSURED EMPLOYMENT BY MAJOR INDUSTRY DIVISION
April 1996 to 1997 Comparison - Not Seasonally Adjusted
RICHMOND AREA MSA
================================================================================
INDUSTRY Average Employment SHARE Average Employment SHARE CHANGE
April 1996 (000's) April 1997 (000's)
================================================================================
Manufacturing 59.3 11.7% 59.8 11.7% 0.84%
Construction 30.2 6.0% 31.6 6.2% 4.64%
Mining 0.8 0.2% 0.7 0.1% -12.50%
T.C.P.U.* 26.2 5.2% 26.5 5.2% 1.15%
Trade 118.4 23.4% 120.1 23.5% 1.44%
F.I.R.E.** 42.6 8.4% 43.1 8.4% 1.17%
Services 130.1 25.7% 130.6 25.5% 0.38%
Government 98.5 19.5% 98.9 19.3% 0.41%
================================================================================
TOTALS 506.1 100.0% 511.3 100.0% 1.03%
================================================================================
* Transportation, & Public Utilities
** Finance/Insurance/Real Estate
================================================================================
Over the past year, total employment witnessed a small increase of 1.03
percent. Construction and Retail Trade were the leading industries with an
overall increase of 4.64 percent and 1.44 percent respectively. This offset the
small losses in the mining industry.
The appraisers have outlined both the major employers in the local market
of Henrico County and the macro market of metropolitan Richmond, Virginia. It
should be noted that in both the metropolitan rankings and the county rankings
the top employment lists include private industry only. As can be seen, the
majority of the employment is trade and service oriented in nature for both
areas. The following charts summarize the major employers within the county and
the MSA.
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<PAGE>
Regional Analysis
================================================================================
Major Area Employers
Henrico County (1997)
================================================================================
Employer Number of Employees
================================================================================
Circuit City 5,000-6,000
Reynolds Metal 4,000-5,000
Crestar Financial 3,000-4,000
Secours 3,000-4,000
Tri-Son Health Care 2,000-3,000
Via Systems Technology 2,000-3,000
American Home Products 1,000-2,000
United Parcel Service 1,000-2,000
Tysons Ford 900-1,000
Stone Container 800-900
================================================================================
Source: Henrico County Office of Economic Development
================================================================================
================================================================================
Major Area Employers
Richmond, Virginia Metro Area (1997)
================================================================================
Employer Number of Employees
================================================================================
Philip Morris USA 8,000
Columbia/HCA Healthcare Corp. 6,340
Circuit City Stores 5,194
Reynolds Metals Co. 4,300
Capital One Financial Corp. 4,064
Dominion Resources Inc. 3,803
Ukrops Super Markets Inc. 3,585
Allied Signal Corp. 3,400
Crestar Financial Corp. 3,252
Bon Secours Richmond Health 3,051
NationsBank Corp. 2,726
Trigon Blue Cross/Blue Shield 2,705
Signet Banking Corp. 2,501
DuPont Co. 2,500
Bell Atlantic-Virginia 2,445
Viasystems Technologies Corp. 2,100
Food Lion Inc. 1,621
Central Fidelity Banks, Inc. 1,595
Richfood Holdings Inc. 1,583
Wal-Mart Stores Inc. 1,512
================================================================================
Source: Richmond Times Dispatch
================================================================================
Transportation
The Richmond area is served by four interstate highways creating an
excellent network for entering and exiting the vicinity. Interstate routes 95,
64, 195 and 295 are within the City
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VALUATION ADVISORY SERVICES
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<PAGE>
Regional Analysis
================================================================================
and serve the metropolitan area. Interstate 95 is the most important north-south
highway on the eastern seaboard. To the north, it connects Richmond with
Washington, D.C. and other cities in the northeast corridor; to the south, it
reaches to Miami, Florida. Route 95 also traverses downtown Richmond and serves
as an expressway in the local vicinity. Interstate 64, which runs principally
east to west, lends access to Hampton Roads and the Tidewater area of Virginia.
To the west, it intersects with Interstate 81 in the Shenandoah Valley before
continuing to West Virginia and Kentucky. Locally, I-295 forms a semicircle
around the metropolitan area, with an eventual extension south to Prince George
County and a southern connector to Interstate 95 is proposed. Interstate Route
195 gives access to the portion of Richmond located along the James River. Yet
another local expressway is the Powhite Parkway which links the two halves of
the city of Richmond (the north and south banks of the James River). The Powhite
has been extended to the emerging suburban areas of central Chesterfield County.
Several U.S. highways converge in Richmond, namely, Routes 1, 33, 60, 250, 301
and 360.
Richmond International Airport has recently undergone a $38 million
expansion, making it a modem state-of-the-art airport. The expansion includes
all-weather second level boarding courses and a new entrance roadway connecting
with Interstate 64. The airport is located 12 miles east of Richmond in Henrico
County. There are over 200 flights daily by American, Delta, Eastern, United and
U.S. Air, plus six regional carriers. Air time to New York is only 60 minutes.
The Richmond area is a major East Coast rail center. Passenger railways
are utilized by AMTRAK while the major freight railway companies are CSX
Transportation; Richmond, Fredericksburg and Potomac; and Norfolk-Southern.
The port of Richmond provides an excellent water transportation system for
cargo to Europe, Africa, South America, Canada and the Caribbean. The deep water
port is the westernmost on the north Atlantic and handles over 413,000 tons of
bulk and container cargo annually.
The Greater Richmond Transit Company (GRTC) provides transportation
services to commuters. The system offers several transit routes in Henrico
County as well as downtown service connecting the financial and retail
districts. Trailways, Greyhound and Groome Transportation charter buses to other
cities.
Education/Recreation
The Richmond area boasts of numerous colleges and universities in the
vicinity. Among these educational institutions are Randolf-Macon College,
University of Richmond, Virginia Commonwealth University, Medical College of
Virginia, Virginia Union College, etc. Many of the area's public secondary
school systems allocate higher per student expenditures than the national
average. Area school systems have also adopted progressive measures over the
past decade to improve and enhance the normal school criteria. In addition,
there are many prestigious private secondary schools including St.
Christopher's, St. Catherine's, Collegiate, and Benedictine.
The city of Richmond serves as the cultural and recreational heart of
Central Virginia. There are many museums including the Virginia Museum of Fine
Arts, The Valentine Museum, Museum of the Confederacy, and the Science Museum of
Virginia.
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Regional Analysis
================================================================================
In addition, Richmond serves as a center for the performing arts at
locations including the Carpenter Center and the Theater Virginia. Local area
residents can also enjoy numerous park lands including James River Park, Bryan
Park and Pocohontas State Park.
Conclusion
Richmond is centrally located along the East Coast at the northern end of
the Sun Belt. This location contributed to its growth as a business and
industrial area over the last decade. While population and employment growth in
the region have recently diminished, both are expected to continue growing at
moderate rates during the 1990's. The moderate cost of living, low taxes and
strong economics appeal to Richmond businesses. Transportation networks and
waterways that make Richmond attractive to corporations also make it attractive
to individuals. Overall, the Richmond area is expected to prosper moderately in
the future.
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VALUATION ADVISORY SERVICES
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<PAGE>
<TABLE>
<CAPTION>
Richmond Industrial Market
================================================================================================================
Heavy Industrial Light Industrial
===================================================================================================================================
Year Quadrant Rentable Vacant Vacancy Net Under Rentable Vacant Vacancy Net Under
Sq. Ft. Sq. Ft. Rate Absorption Construction Sq. Ft. Sq. Ft. Rate Absorption Construction
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 NEQ 2,237,828 53,500 2.4% 74,248 - 476,848 6,530 1.4% 8,400 -
NWQ 472,031 - 0.0% - - 2,575,621 83,420 3.2% 84,101 50,000
SEQ 1,619,032 100,421 6.2% 441,579 453,000 496,668 25,400 5.1% (24,636) -
SWQ 3,296,207 284,183 8.6% 293,150 98,243 1,445,917 125,508 8.7% (61,363) 40,000
------------------------------------------------------ ---------------------------------------------------------
Totals 7,625,098 438,104 5.7% 808,977 551,243 4,995,054 240,858 4.8% 6,502 90,000
1995 NEQ 2,184,828 74,748 3.4% 262,406 - 488,848 14,930 3.1% 14,270 -
NWQ 472,131 5,000 1.1% 7,736 - 2,598,307 167,521 6.4% (31,808) -
SEQ 1,077,032 - 0.0% 9,858 542,000 555,604 8,700 1.6% 20,800 -
SWQ 2,756,874 38,000 1.4% 197,780 230,000 1,434,472 65,145 4.5% 109,795 -
------------------------------------------------------ ---------------------------------------------------------
Totals 6,490,865 117,748 1.8% 477,780 772,000 5,077,231 256,296 5.0% 113,057 -
1994 NEQ 2,184,828 337,154 15.4% (302,660) - 471,148 11,500 2.4% 23,091 -
NWQ 471,131 11,736 2.5% 19,700 - 2,658,972 196,378 7.4% 173,211 -
SEQ 1,077,032 9,858 0.9% 97,891 - 555,604 29,500 5.3% 48,451 -
SWQ 2,762,149 241,055 8.7% (73,825) - 1,447,670 188,138 13.0% 40,566 -
------------------------------------------------------ ---------------------------------------------------------
Totals 6,495,140 599,803 9.2% (258,894) - 5,133,394 425,516 8.3% 285,319 -
1993 NEQ 2,184,828 34,494 1.6% 192,066 - 471,148 34,591 7.3% 26,975 45,000
NWQ 471,131 31,436 6.7% 21,924 - 2,586,722 297,339 11.5% 148,325 -
SEQ 1,077,032 107,749 10.0% (33,855) - 555,604 77,951 14.0% 2,153 -
SWQ 2,859,789 167,230 5.8% 102,670 - 1,447,270 228,304 15.8% 20,229 -
------------------------------------------------------ ---------------------------------------------------------
Totals 6,592,780 340,909 5.2% 282,805 - 5,060,744 638,185 12.6% 197,682 45,000
1992 NEQ 2,184,828 226,560 10.4% 262,920 - 471,148 61,566 13.1% 12,415 -
NWQ 471,131 53,360 11.3% 33,175 - 2,594,624 453,566 17.5% 111,417 -
SEQ 1,077,032 73,894 6.9% 116,416 - 545,604 70,104 12.8% 2,300 -
SWQ 2,818,379 228,490 8.1% (6,530) - 1,442,415 243,678 16.9% (24,188) -
------------------------------------------------------ ---------------------------------------------------------
Totals 6,551,370 582,304 8.9% 405,981 - 5,053,791 828,914 16.4% 101,944 -
===================================================================================================================================
</TABLE>
<PAGE>
INDUSTRIAL MARKET ANALYSIS
================================================================================
This market analysis is prepared to illustrate the current trends which
exist throughout the Richmond region, specific to its industrial market. Local
professionals segment the industrial market into four geographic quadrants
(Northwest, Northeast, Southwest and Southeast) radiating from the Richmond CBD.
More simply, the market is divided into northern and southern halves by the
James River. South of the James, the industrial market has historically been
manufacturing union intensive and anchored by the corporations of Phillip Morris
(tobacco) and DuPont (chemical). The north is more distribution and less union
oriented.
According to Harrison & Bates, Inc., a local commercial real estate firm,
the Richmond industrial market is basically segmented into two categories: heavy
and light. Heavy industrial is made up of manufacturing and distribution uses.
Light industrial included office/warehouse or flex space, characterized by a
higher percentage of average office finish and improved curb appeal. High tech
or R&D uses may also be accommodated in flex space if the interior is finished
to include satisfactory mechanical and plumbing components and/or other above
standard items unique to the tenant's operation. As described, the subject
property is comprised of 17 industrial buildings including eleven multi-tenant
office/warehouse (flex) structures, two R&D facilities, and four warehouse
buildings. Accordingly, we will examine both the heavy and light industrial
market.
The statistical data used in this analysis of the industrial market is
taken from The 1997 Richmond Commercial Real Estate Market Review prepared by
Harrison & Bates, Inc. The table on the facing page summarizes the inventory,
availability, absorption and development activity since 1992 for both market
segments. The survey excludes owner-occupied space.
Inventory and Development
Richmond's heavy industrial market is comprised of 7,625,098 square feet,
of which the majority of inventory is located in the northeast (29.3 percent)
and southwest (43.2 percent) quadrants. The northeast submarket includes the
Fairgrounds Distribution Center, and the southeast quadrant includes portions of
Interstate 95 south of Richmond. In terms of supply, this market segment held
constant from 1990 to 1994, with no deliveries occurring during this time
frame. In 1995, the first speculative projects broke ground with a total of
772,000 square feet under construction. The following year, over 550,000 square
was under construction.
Based on information provided by Harrison & Bates, the following heavy
industrial projects, as of June 1997, are currently under construction.
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Industrial Market Analysis
================================================================================
================================================================================
Heavy Industrial Market Under Construction Supply
================================================================================
Building Name Submarket Total SF Delivery Date Asking Rent
Property Address Available SF Per SF
================================================================================
Eastport VI 174,720 10/97 $4.50
-------
5701 Eastport Blvd. Southeast 174,720
- --------------------------------------------------------------------------------
Highwoods I 165,000 N/A $4.00 to $6.00
-------
Lewis Road Southeast 165,000
- --------------------------------------------------------------------------------
River's Bend 158,400 06/97 N/A
-------
600 Liberty Way Southwest 0
- --------------------------------------------------------------------------------
River's Bend 146,000 11/97 N/A
-------
500 Liberty Way Southwest 0
- --------------------------------------------------------------------------------
River's Bend Center 98,243 09/97 $4.59
-------
Kingston Avenue Southwest 98,243
- --------------------------------------------------------------------------------
10552 Air Park Road 19,500 N/A $4.50
-------
10552 Air Park Road Northeast 19,500
================================================================================
Total Under Construction Supply 761,863
================================================================================
As can be seen, there is currently about 760,000 square feet under
construction in six projects. The majority of activity is occurring in the
southern submarkets. This is partially due to the development of two
semiconductor manufacturing plants in Henrico County and Chesterfield County.
Motorola recently built a wafer fabrication complex in the West Creek. This
facility upon full operation is projected to employ 5,000. White Oak
Semiconductor, a Siemens Motorola Joint Venture, is developing a random access
memory chip facility in eastern Henrico County, near the Richmond International
Airport, and upon completion will employ 1,500. These two projects, along with
positive market dynamics, are the catalysts for much of the current speculative
development, with developers are looking to capture the anticipated demand
generated by related high-tech companies.
The light industrial segment is smaller with a current inventory of
4,995,054 square feet. The majority of light industrial product is located in
the northwest quadrant. This submarket contains 51.6 percent of current supply.
Interestingly, this quadrant is the smallest heavy industrial submarket. The
southwest quadrant possesses 28.9 percent of product, and the remaining two
submarkets are evenly split. In terms of inventory, the light industrial market
has experience little movement over the past five years. However, there is a
renewed interest in flex buildings and the market is poised for expansion.
In the southwest quadrant, Liberty Property Trust recently delivered a
40,000 square foot flex/office building in River's Bend Center. The project,
known as River's Bend Center II, is located in Kingston Avenue and asking rents
are $7.50 per square foot. In the northwest quadrant, there are two buildings
under construction -- Villa Park III with 90,000 square feet, and Grove Park I
at Wyndham with 24,000 square feet. The asking rents at these facilities are
between $7.50 and $11.00 per square foot. These two projects are scheduled for
delivery by year end. According to a mid-year report prepared by Morton G.
Thalheimer, there as much as 386,000 square feet of flex space planned.
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<PAGE>
Industrial Market Analysis
================================================================================
There are several factors which seem to be driving the renewed interest in
flex product. The construction of the White Oak Semiconductor plant has
attracted a steady stream of vendors, many of which find office/service
buildings most attractive for their flexible requirements. Secondly, as office
rents continue to increase, the gap between office and flex rental rates widens.
This creates a secondary market of tenants which may have traditionally occupied
office space, but are realizing the cost savings and efficiencies associated
with flex buildings. Thus, the light industrial segment benefits from both the
expansion in the region's industrial base and recovery of the office market. We
expect to see a continued growth in the light industrial market over the next
two years.
Absorption and Vacancy
The heavy industrial market experienced positive net absorption in 1996,
with more than half of the absorption occurring in the industrial parks
surrounding Richmond International Airport in eastern Henrico County. The 1996
net absorption has twice that of 1995. Nonetheless, vacancy rates increased by
390 basis points over the prior year to 5.7 percent. This is due to the market
expansion and several speculative buildings delivered in 1996.
According to the Morton Thalheimer mid-year report, the heavy industrial
vacancy rate has increased sharply to about 10.7 percent. This increase is due
primarily to previously leased or occupied space being added to inventory. The
biggest single factor is the availability of the Best Products Distribution
Center located in Ashland, Virginia. This high-bay warehouse contains about
680,000 square feet and is available because of the liquidation of the Best
Products Company. Several other warehouse spaces of less than 100,000 square
feet have come on the market adding to the Best Products impact. The upside is
no new speculative construction was announced during the first half of the year;
although, construction continued on new buildings in the Richmond International
Airport area and the newly developed Rivers Bend area in Chesterfield County.
The Best Products Distribution Center represents 47.3 percent of
availabilities, and as such, current vacancy rates are skewed. We believe the
heavy industrial market remains strong and the latter half of the year should
experience positive net absorption coupled with a decrease in vacancy rates to
below 10.0 percent overall and various quadrants below 5.0 percent.
The light industrial market experienced nominal absorption is 1996 and a
slight decline in vacancy rates to 4.8 percent. This low net absorption is due
to the lack of availabilities with much of the remaining inventory comprised of
functionally obsolete buildings or those located in less desirable locations.
There is presently a backlog of prospective tenants for spaces in the 10,000 to
15,000 square foot and over range. In response, there are several speculative
projects under construction. This should further strengthen the flex market.
As of mid-year 1997, the flex market post a vacancy level of 4.0 percent.
Over the second half of the year, we expect vacancy to be around 5.0 percent as
new product is added to inventory,
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<PAGE>
Industrial Market Analysis
================================================================================
Rental Rates
Both Harrison & Bates and Morton Thalheimer report increased rental rates
for the heavy and light industrial sectors over the prior two years. According
to Harrison & Bates, rental rates for heavy industrial product ranges from $3.00
to $5.00 per square foot, and for light industrial buildings ranges from $6.00
to $9.00 per square foot. These rents are either triple net or industrial gross.
In the Richmond market, industrial gross is the reimbursement of real estate
taxes and insurance over the base year. Many older buildings (1970s and 1980s)
lease on an industrial gross basis with newer properties most often leasing on a
triple net basis. As always, location is a major determinant while rail access,
although helpful for heavy industrial properties, does not reportedly carry a
rent premium. Concessions, once an integral component to close a deal, have
disappeared. Leasing terms range from five to ten years.
Conclusion
The Richmond industrial market, for both the heavy and light segments,
appears to be in balance, with supply and demand near equilibrium for existing
properties. With regard to the heavy industrial market, there are a number of
speculative buildings under development scheduled for delivery by year end.
Beyond this, there are no speculative projects planned. The overall vacancy
rate, while low, has increased slightly in 1997 due to the return of the Best
Product Distribution Center, with 680,000 square feet, to the market. This one
building represents 47.3 percent of available supply, and as such, skews the
overall vacancy rate. Extracting this building from supply, the implied vacancy
is 5.6 percent. In addition, rental rates have increases in 1996. Overall, the
outlook for this market segment is one of optimism, but industry participants
are keeping a close eye on the third and forth quarters as much of the
speculative space comes on line. Nonetheless, given the expansion in the regions
economic base, we believe vacancy levels will remain around the five percent
level.
The light industrial or flex market has undergone a resurgence in the last
year. The year end vacancy rate was reported at 4.8 percent and has declined
during the first half of 1997 to 4.0 percent. Absorption has been flat due to
the lack of desirable space. Further, rental rates increased due to the tight
supply. In response, there are several new flex buildings under development.
This expansion of the flex market should strengthen this market segment and
provide existing and new tenants with options. The outlook is positive with
continued low vacancy rates.
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<PAGE>
Dabney I 1
Dabney II 2
Dabney III 3
Dabney IV 4
Dabney V 5
Dabney VI 6
Dabney VII 7
Dabney VIII 8
Dabney IX 9
Dabney X 10
Dabney XI 11
Dabney A-1 12
Dabney A-2 13
Britton's Hill 14
Westmoreland 15
Morton Marks 16
2110 Tomlynn 17
[Photo of Map] [GRAPHIC OMITTED]
Tax Map Location
<PAGE>
PROPERTY DESCRIPTION
================================================================================
The subject property consists of 17 industrial buildings four of which are
triple net leased warehouses, two are R&D (research and development) and 11 are
flex buildings. Within the flex category, we categorized the buildings by the
extent of office build-out into minimal, medium and high office build-out.
Site Description
For ease of analysis and reporting, characteristics which are common to
all sites were presented first. Thereafter, we present a more detailed
description of the individual building sites which comprise the subject
property. Finally, we discuss the improvements on each site.
Topography: Level and at street grade
Street Improvements: Asphalt pavement, two lanes, curbs,
gutters and storm drains
Access: Via the respective frontage street
Soil Conditions: We did not receive nor review a soil
report. However, we assume that the
soil's load-bearing capacity is
sufficient to support the existing
structures. We did not observe any
evidence to the contrary during our
physical inspection of the property. Each
tract's drainage appears to be adequate.
Land Use Restrictions: We were not given a title report to
review. We do not know of any easements,
encroachments, or restrictions that would
adversely affect the site's use. However,
we recommend a title search to determine
whether any adverse conditions exist.
Flood Hazard: According to Community Panel No.
5100770050 B National Flood Insurance
Rate Map, effective February 4, 1981, the
subject property is in Flood Hazard Zone
C and, therefore, does not require flood
hazard insurance.
Wetlands: We were not given a Wetlands survey. If
subsequent engineering data reveal the
presence of regulated wetlands, it could
materially affect property value. We
recommend a wetlands survey by a
competent engineering firm.
Hazardous Substances: We observed no evidence of toxic or
hazardous substances during our
inspection of the site. However, we are
not trained to perform technical
environmental inspections and recommend
the services of a professional engineer
for this purpose.
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<PAGE>
Property Description
================================================================================
Dabney I
Location: Northwest corner of Dabney Street and
Tomlynn Street (extended)
Richmond, Henrico County, Virginia
Shape: Basically rectangular
Land Area: 1.9 acres
Dabney II
Location: Southeast corner of Dabney Street and
Tomlynn Street
Richmond, Henrico County, Virginia
Shape: Basically rectangular
Land Area: 2.6 acres
Dabney III
Location: North of the northwest corner of Jacques
Street and Tomlynn Street
Richmond, Henrico County, Virginia
Shape: Basically rectangular
Land Area: 1.9 acres
Dabney IV
Location: North of the northeast corner of Jacques
Street and Tomlynn Street
Richmond, Henrico County, Virginia
Shape: Basically rectangular
Land Area: 3.1 acres
Dabney V
Location: North of the northwest corner of Jacques
Street and Tomlynn Street
Richmond, Henrico County, Virginia
Shape: Basically rectangular
Land Area: 2.8 acres
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<PAGE>
Property Description
================================================================================
Dabney VI
Location: Northwest of the northwest corner of Par
Street and Dabney Street
Richmond, Henrico County, Virginia
Shape: Basically rectangular
Land Area: 3.1 acres per data provided (tax parcel
records showed 16.7 acres)
Dabney VII
Location: Northeast corner of Dabney Street and
Tomlynn Street (extended)
Richmond, Henrico County, Virginia
Shape: Basically rectangular
Land Area: 2.8 acres
Dabney VIII
Location: North of the northwest corner of Jacques
Street and Tomlynn Street
Richmond, Henrico County, Virginia
Shape: Basically rectangular
Land Area: 2.8 acres
Dabney IX
Location: Southwest corner of Dabney Street and
Tomlynn Street
Richmond, Henrico County, Virginia
Shape: Basically rectangular
Land Area: 3.6 acres
Dabney X
Location: North of the northeast corner of Jacques
Street and Tomlynn Street
Richmond, Henrico County, Virginia
Shape: Basically rectangular
Land Area: 6.6 acres
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<PAGE>
Property Description
================================================================================
Dabney XI
Location: North of the northeast corner of Jacques
Street and Dabney Street
Richmond, Henrico County, Virginia
Shape: Basically rectangular
Land Area: 2.7 acres
Dabney A-1
Location: North of the northwest corner of Jacques
Street and Dabney Street
Richmond, Henrico County, Virginia
Shape: Basically rectangular
Land Area: 1.3 acres
Dabney A-2
Location: North of the northwest corner of Jacques
Street and Dabney Street
Richmond, Henrico County, Virginia
Shape: Basically rectangular
Land Area: 1.7 acres
Britton's Hill
Location: North of the northeast corner of
Bethlehem Road and Britton's Hill Drive
Richmond, Henrico County, Virginia
Shape: Basically rectangular
Land Area: 8.2 acres
Westmoreland Plaza
Location: Northeast corner of Jacques Street and
Westmoreland Street
Richmond, Henrico County, Virginia
Shape: Irregular
Land Area: 13.3 acres
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<PAGE>
Property Description
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Morton Marks
Location: Northeast corner of Jacques Street and
Dabney Street
Richmond, Henrico County, Virginia
Shape: Basically rectangular
Land Area: 3.2 acres
2110 Tomlynn Street
Location: North of the northwest corner of Jacques
Street and Tomlynn Street
Richmond, Henrico County, Virginia
Shape: Basically rectangular
Land Area: 0.8 acres
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Property Description
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Improvements, Description
Again, the following presents the generic characteristics common to all
properties, after which we detail each individual property.
Americans With Disabilities Act: The Americans With Disabilities Act (ADA)
became effective January 26, 1992. We
have not made, nor are we qualified by
training to make, a specific compliance
survey and analysis of this property to
determine whether or not it is in
conformity with the various detailed
requirements of the ADA. It is possible
that a compliance survey and a detailed
analysis of the requirements of the ADA
could reveal that the property is not in
compliance with one or more of the
requirements of the Act. If so, this fact
could have a negative effect upon the
value of the property. Since we have not
been provided with the results of a
survey, we did not consider possible
non-compliance with the requirements of
ADA in estimating the value of the
property.
Hazardous Substances: We are not aware of any potentially
hazardous materials (such as formaldehyde
foam insulation, asbestos insulation,
radon gas emitting materials, or other
potentially hazardous materials) which
may have been used in the construction of
the improvements. However, we are not
qualified to detect such materials and
urge the client to employ an expert in
the field to determine if such hazardous
materials are thought to exist.
Design Features and Functionality: Each building's overall design features
and the functionality of its layout are
deemed acceptable to the market based on
high level of occupancy. These building
represent typical and ordinary product of
their respective types--access is good,
parking appears adequate, layout typical,
etc.
Physical Condition: The subject properties appear to be well
maintained. We noted no items of deferred
maintenance beyond what would normally be
taken care of within an on-going
maintenance and capital repair program.
We did not inspect the roofs or make a
detailed inspection of the mechanical
systems. The appraisers, however, are not
qualified to render an opinion as to the
adequacy or condition of these
components. The client is urged to retain
an expert in this field if detailed
information is needed about the
mechanical systems.
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CUSHMAN &
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VALUATION ADVISORY SERVICES
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Property Description
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Dabney I
General Description
Year Built: 1982
Net Rentable Area: 33,600 square feet
Percent Office: 20 Percent
Construction Detail:
Foundation: Reinforced concrete
Framing: Reinforced concrete
Floors: Concrete
Exterior Walls: Brick
Roof Cover: Either hot mopped tar/built-up system or
insulated membrane with ballast
Windows: Safety glass in aluminum frames
Pedestrian Doors: Safety glass in aluminum frames
Loading Doors: Eight
Clear Height: 21 feet
Mechanical Detail
Heating and Cooling: Package heating and cooling units in
office areas; gas heat in warehouse areas
Fire Protection: None
Interior Detail
Layout: Offices and/or show rooms in front,
warehouse in rear
Floor Covering: Carpet or tile in office; bare concrete
in warehouse
Walls: Painted gypsum board
Ceilings: Dropped suspended ceiling tile in office;
none in warehouse
Lighting: Typically, fluorescent in office and
various incandescent and fluorescent in
warehouse
Restrooms: Varies with unit size; fixtures in each
unit
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CUSHMAN &
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Property Description
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Site Improvements
Parking: Appears adequate
On-Site Landscaping: Minimal trees and shrubbery typically
around perimeter and as street buffer
Dabney II
General Description
Year Built: 1983
Net Rentable Area: 42,000 square feet
Percent Office: 14 Percent
Construction Detail:
Foundation: Reinforced concrete
Framing: Reinforced concrete
Floors: Concrete
Exterior Walls: Brick
Roof Cover: Either hot mopped tar/built-up system or
insulated membrane with ballast
Windows: Safety glass in aluminum frames
Pedestrian Doors: Safety glass in aluminum frames
Loading Doors: Ten
Clear Height: 14-18 feet
Mechanical Detail
Heating and Cooling: Package heating and cooling units in
office areas; gas heat in warehouse areas
Fire Protection: None
Interior Detail
Layout: Offices and/or show rooms in front,
warehouse in rear
Floor Covering: Carpet or tile in office; bare concrete
in warehouse
Walls: Painted gypsum board
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CUSHMAN &
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Property Description
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Ceilings: Dropped suspended ceiling tile in office;
none in warehouse
Lighting: Typically, fluorescent in office and
various incandescent and fluorescent in
warehouse
Restrooms: Varies with unit size; fixtures in each
unit
Site Improvements
Parking: Appears adequate
On-Site Landscaping: Minimal trees and shrubbery typically
around perimeter and as street buffer
Dabney III
General Description
Year Built: 1984
Net Rentable Area: 23,850 square feet
Percent Office: 25 Percent
Construction Detail:
Foundation: Reinforced concrete
Framing: Reinforced concrete
Floors: Concrete
Exterior Walls: Brick
Roof Cover: Either hot mopped tar/built-up system or
insulated membrane with ballast
Windows: Safety glass in aluminum frames
Pedestrian Doors: Safety glass in aluminum frames
Loading Doors: Seven
Clear Height: 14-18 feet
Mechanical Detail
Heating and Cooling: Package heating and cooling units in
office areas; gas heat in warehouse areas
Fire Protection: None
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WAKEFIELD(R)
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Property Description
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Interior Detail
Layout: Offices and/or show rooms in front,
warehouse in rear
Floor Covering: Carpet or tile in office; bare concrete
in warehouse
Walls: Painted gypsum board
Ceilings: Dropped suspended ceiling tile in office;
none in warehouse
Lighting: Typically, fluorescent in office and
various incandescent and fluorescent in
warehouse
Restrooms: Varies with unit size; fixtures in each
unit
Site Improvements
Parking: Appears adequate
On-Site Landscaping: Minimal trees and shrubbery typically
around perimeter and as street buffer
Dabney IV
General Description
Year Built: 1985
Net Rentable Area: 41,550 square feet
Percent Office: 20 Percent
Construction Detail:
Foundation: Reinforced concrete
Framing: Reinforced concrete
Floors: Concrete
Exterior Walls: Brick
Roof Cover: Either hot mopped tar/built-up system or
insulated membrane with ballast
Windows: Safety glass in aluminum frames
Pedestrian Doors: Safety glass in aluminum frames
Loading Doors: Ten
Clear Height: 19 feet
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CUSHMAN &
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VALUATION ADVISORY SERVICES
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Property Description
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Mechanical Detail
Heating and Cooling: Package heating and cooling units in
office areas; gas heat in warehouse areas
Fire Protection: None
Interior Detail
Layout: Offices and/or show rooms in front,
warehouse in rear
Floor Covering: Carpet or tile in office; bare concrete
in warehouse
Walls: Painted gypsum board
Ceilings: Dropped suspended ceiling tile in office;
none in warehouse
Lighting: Typically, fluorescent in office and
various incandescent and fluorescent in
warehouse
Restrooms: Varies with unit size; fixtures in each
unit
Site Improvements
Parking: Appears adequate
On-Site Landscaping: Minimal trees and shrubbery typically
around perimeter and as street buffer
Dabney V
General Description
Year Built: 1985
Net Rentable Area: 45,353 square feet
Percent Office: 34 Percent
Construction Detail:
Foundation: Reinforced concrete
Framing: Reinforced concrete
Floors: Concrete
Exterior Walls: Brick
Roof Cover: Either hot mopped tar/built-up system or
insulated membrane with ballast
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VALUATION ADVISORY SERVICES
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Property Description
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Windows: Safety glass in aluminum frames
Pedestrian Doors: Safety glass in aluminum frames
Loading Doors: Ten
Clear Height: 14-18 feet
Mechanical Detail
Heating and Cooling: Package heating and cooling units in
office areas; gas heat in warehouse areas
Fire Protection: None
Interior Detail
Layout: Offices and/or show rooms in front,
warehouse in rear
Floor Covering: Carpet or tile in office; bare concrete
in warehouse
Walls: Painted gypsum board
Ceilings: Dropped suspended ceiling tile in office;
none in warehouse
Lighting: Typically, fluorescent in office and
various incandescent and fluorescent in
warehouse
Restrooms: Varies with unit size; fixtures in each
unit
Site Improvements
Parking: Appears adequate
On-Site Landscaping: Minimal trees and shrubbery typically
around perimeter and as street buffer
Dabney VI
General Description
Year Built: 1986
Net Rentable Area: 50,400 square feet
Percent Office: 20 Percent
Construction Detail:
Foundation: Reinforced concrete
Framing: Reinforced concrete
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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Property Description
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Floors: Concrete
Exterior Walls: Brick
Roof Cover: Either hot mopped tar/built-up system or
insulated membrane with ballast
Windows: Safety glass in aluminum frames
Pedestrian Doors: Safety glass in aluminum frames
Loading Doors: 12
Clear Height: 14-18 feet
Mechanical Detail
Heating and Cooling: Package heating and cooling units in
office areas; gas heat in warehouse areas
Fire Protection: None
Interior Detail
Layout: Offices and/or show rooms in front,
warehouse in rear
Floor Covering: Carpet or tile in office; bare concrete
in warehouse
Walls: Painted gypsum board
Ceilings: Dropped suspended ceiling tile in office;
none in warehouse
Lighting: Typically, fluorescent in office and
various incandescent and fluorescent in
warehouse
Restrooms: Varies with unit size; fixtures in each
unit
Site Improvements
Parking: Appears adequate
On-Site Landscaping: Minimal trees and shrubbery typically
around perimeter and as street buffer
Dabney VII
General Description
Year Built: 1987
Net Rentable Area: 33,149 square feet
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Property Description
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Percent Office: 35 Percent
Construction Detail:
Foundation: Reinforced concrete
Framing: Reinforced concrete
Floors: Concrete
Exterior Walls: Brick
Roof Cover: Either hot mopped tar/built-up system or
insulated membrane with ballast
Windows: Safety glass in aluminum frames
Pedestrian Doors: Safety glass in aluminum frames
Loading Doors: 14
Clear Height: 16 feet
Mechanical Detail
Heating and Cooling: Package heating and cooling units in
office areas; gas heat in warehouse areas
Fire Protection: None
Interior Detail
Layout: Offices and/or show rooms in front,
warehouse in rear
Floor Covering: Carpet or tile in office; bare concrete
in warehouse
Walls: Painted gypsum board
Ceilings: Dropped suspended ceiling tile in office;
none in warehouse
Lighting: Typically, fluorescent in office and
various incandescent and fluorescent in
warehouse
Restrooms: Varies with unit size; fixtures in each
unit
Site Improvements
Parking: Appears adequate
On-Site Landscaping: Minimal trees and shrubbery typically
around perimeter and as street buffer
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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Property Description
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Dabney VIII
General Description
Year Built: 1988
Net Rentable Area: 29,700600 square feet
Percent Office: 20 Percent
Construction Detail:
Foundation: Reinforced concrete
Framing: Reinforced concrete
Floors: Concrete
Exterior Walls: Brick
Roof Cover: Either hot mopped tar/built-up system or
insulated membrane with ballast
Windows: Safety glass in aluminum frames
Pedestrian Doors: Safety glass in aluminum frames
Loading Doors: Nine
Clear Height: 17 feet
Mechanical Detail
Heating and Cooling: Package heating and cooling units in
office areas; gas heat in warehouse areas
Fire Protection: None
Interior Detail
Layout: Offices and/or show rooms in front,
warehouse in rear
Floor Covering: Carpet or tile in office; bare concrete
in warehouse
Walls: Painted gypsum board
Ceilings: Dropped suspended ceiling tile in office;
none in warehouse
Lighting: Typically, fluorescent in office and
various incandescent and fluorescent in
warehouse
Restrooms: Varies with unit size; fixtures in each
unit
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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Property Description
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Site Improvements
Parking: Appears adequate
On-Site Landscaping: Minimal trees and shrubbery typically
around perimeter and as street buffer
Dabney IX
General Description
Year Built: 1989
Net Rentable Area: 30,263 square feet
Percent Office: 44 Percent
Construction Detail:
Foundation: Reinforced concrete
Framing: Reinforced concrete
Floors: Concrete
Exterior Walls: Brick
Roof Cover: Either hot mopped tar/built-up system or
insulated membrane with ballast
Windows: Safety glass in aluminum frames
Pedestrian Doors: Safety glass in aluminum frames
Loading Doors: 15
Clear Height: 14-18 feet
Mechanical Detail
Heating and Cooling: Package heating and cooling units in
office areas; gas heat in warehouse areas
Fire Protection: None
Interior Detail
Layout: Offices and/or show rooms in front,
warehouse in rear
Floor Covering: Carpet or tile in office; bare concrete
in warehouse
Walls: Painted gypsum board
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WAKEFIELD(R)
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Property Description
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Ceilings: Dropped suspended ceiling tile in office;
none in warehouse
Lighting: Typically, fluorescent in office and
various incandescent and fluorescent in
warehouse
Restrooms: Varies with unit size; fixtures in each
unit
Site Improvements
Parking: Appears adequate
On-Site Landscaping: Minimal trees and shrubbery typically
around perimeter and as street buffer
Dabney X
General Description
Year Built: 1989
Net Rentable Area: 85,844 square feet
Percent Office: 44 Percent
Construction Detail:
Foundation: Reinforced concrete
Framing: Reinforced concrete
Floors: Concrete
Exterior Walls: Brick
Roof Cover: Either hot mopped tar/built-up system or
insulated membrane with ballast
Windows: Safety glass in aluminum frames
Pedestrian Doors: Safety glass in aluminum frames
Loading Doors: 24
Clear Height: 18 feet
Mechanical Detail
Heating and Cooling: Package heating and cooling units in
office areas; gas heat in warehouse areas
Fire Protection: Yes
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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Property Description
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Interior Detail
Layout: Offices and/or show rooms in front,
warehouse in rear
Floor Covering: Carpet or tile in office; bare concrete
in warehouse
Walls: Painted gypsum board
Ceilings: Dropped suspended ceiling tile in office;
none in warehouse
Lighting: Typically, fluorescent in office and
various incandescent and fluorescent in
warehouse
Restrooms: Varies with unit size; fixtures in each
unit
Site Improvements
Parking: Appears adequate
On-Site Landscaping: Minimal trees and shrubbery typically
around perimeter and as street buffer
Dabney XI
General Description
Year Built: 1994
Net Rentable Area: 45,250 square feet
Percent Office: 22 Percent
Construction Detail:
Foundation: Reinforced concrete
Framing: Reinforced concrete
Floors: Concrete
Exterior Walls: Brick
Roof Cover: Either hot mopped tar/built-up system or
insulated membrane with ballast
Windows: Safety glass in aluminum frames
Pedestrian Doors: Safety glass in aluminum frames
Loading Doors: 13
Clear Height: 18-20 feet
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Property Description
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Mechanical Detail
Heating and Cooling: Package heating and cooling units in
office areas; gas heat in warehouse areas
Fire Protection: Yes
Interior Detail
Layout: Offices and/or show rooms in front,
warehouse in rear
Floor Covering: Carpet or tile in office; bare concrete
in warehouse
Walls: Painted gypsum board
Ceilings: Dropped suspended ceiling tile in office;
none in warehouse
Lighting: Typically, fluorescent in office and
various incandescent and fluorescent in
warehouse
Restrooms: Varies with unit size; fixtures in each
unit
Site Improvements
Parking: Appears adequate
On-Site Landscaping: Minimal trees and shrubbery typically
around perimeter and as street buffer
Dabney A-1
General Description
Year Built: 1984
Net Rentable Area: 15,389 square feet
Percent Office: 100 Percent
Construction Detail:
Foundation: Reinforced concrete
Framing: Reinforced concrete
Floors: Concrete
Exterior Walls: Brick
Roof Cover: Either hot mopped tar/built-up system or
insulated membrane with ballast
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Property Description
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Windows: Safety glass in aluminum frames
Pedestrian Doors: Safety glass in aluminum frames
Loading Doors: None
Clear Height: 18-20 feet
Mechanical Detail
Heating and Cooling: Package heating and cooling units in
office areas; gas heat in warehouse areas
Fire Protection: None
Interior Detail
Layout: Offices and/or show rooms in front,
warehouse in rear
Floor Covering: Carpet or tile in office; bare concrete
in warehouse
Walls: Painted gypsum board
Ceilings: Dropped suspended ceiling tile in office;
none in warehouse
Lighting: Typically, fluorescent in office and
various incandescent and fluorescent in
warehouse
Restrooms: Varies with unit size; fixtures in each
unit
Site Improvements
Parking: Appears adequate
On-Site Landscaping: Minimal trees and shrubbery typically
around perimeter and as street buffer
Dabney A-2
General Description
Year Built: 1993
Net Rentable Area: 33,050 square feet
Percent Office: 100 Percent (more precisely about 1/3
office and 1/3 high build out laboratory)
Construction Detail:
Foundation: Reinforced concrete
Framing: Reinforced concrete
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Property Description
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Floors: Concrete
Exterior Walls: Brick
Roof Cover: Either hot mopped tar/built-up system or
insulated membrane with ballast
Windows: Safety glass in aluminum frames
Pedestrian Doors: Safety glass in aluminum frames
Loading Doors: One
Clear Height: 22 feet
Mechanical Detail
Heating and Cooling: Package heating and cooling units in
office areas; gas heat in warehouse areas
Fire Protection: Yes
Interior Detail
Layout: Offices and/or show rooms in front,
warehouse in rear
Floor Covering: Carpet or tile in office; bare concrete
in warehouse
Walls: Painted gypsum board
Ceilings: Dropped suspended ceiling tile in office;
none in warehouse
Lighting: Typically, fluorescent in office and
various incandescent and fluorescent in
warehouse
Restrooms: Varies with unit size; fixtures in each
unit
Site Improvements
Parking: Appears adequate
On-Site Landscaping: Minimal trees and shrubbery typically
around perimeter and as street buffer
Britton's Hill
General Description
Year Built: 1987
Net Rentable Area: 132,103 square feet
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Property Description
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Percent Office: 30 Percent
Construction Detail:
Foundation: Reinforced concrete
Framing: Reinforced concrete
Floors: Concrete
Exterior Walls: Brick
Roof Cover: Either hot mopped tar/built-up system or
insulated membrane with ballast
Windows: Safety glass in aluminum frames
Pedestrian Doors: Safety glass in aluminum frames
Loading Doors: 22
Clear Height: 18-24 feet
Mechanical Detail
Heating and Cooling: Package heating and cooling units in
office areas; gas heat in warehouse areas
Fire Protection: Yes
Interior Detail
Layout: Offices and/or show rooms in front,
warehouse in rear
Floor Covering: Carpet or tile in office; bare concrete
in warehouse
Walls: Painted gypsum board
Ceilings: Dropped suspended ceiling tile in office;
none in warehouse
Lighting: Typically, fluorescent in office and
various incandescent and fluorescent in
warehouse
Restrooms: Varies with unit size; fixtures in each
unit
Site Improvements
Parking: Appears adequate
On-Site Landscaping: Minimal trees and shrubbery
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Property Description
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Westmoreland Plaza
General Description
Year Built: 1975/93
Net Rentable Area: 121,815 square feet
Percent Office: 100 Percent
Construction Detail:
Foundation: Reinforced concrete
Framing: Reinforced concrete
Floors: Concrete
Exterior Walls: Brick
Roof Cover: Either hot mopped tar/built-up system or
insulated membrane with ballast
Windows: Safety glass in aluminum frames
Pedestrian Doors: Safety glass in aluminum frames
Loading Doors: Four
Clear Height: 14-18 feet
Mechanical Detail
Heating and Cooling: Package heating and cooling units in
office areas; gas heat in warehouse areas
Fire Protection: Yes
Interior Detail
Layout: Offices and/or show rooms in front,
warehouse in rear
Floor Covering: Carpet or tile in office; bare concrete
in warehouse
Walls: Painted gypsum board
Ceilings: Dropped suspended ceiling tile in office;
none in warehouse
Lighting: Typically, fluorescent in office and
various incandescent and fluorescent in
warehouse
Restrooms: Varies with unit size; fixtures in each
unit
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Property Description
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Site Improvements
Parking: Appears adequate
On-Site Landscaping: Minimal trees and shrubbery typically
around perimeter and as street buffer
Morton Marks
General Description
Year Built: 1962/85 est.
Net Rentable Area: 45,000 square feet
Percent Office: 30 Percent
Construction Detail:
Foundation: Reinforced concrete
Framing: Reinforced concrete
Floors: Concrete
Exterior Walls: Brick
Roof Cover: Either hot mopped tar/built-up system or
insulated membrane with ballast
Windows: Safety glass in aluminum frames
Pedestrian Doors: Safety glass in aluminum frames
Loading Doors: Three
Clear Height: 14-18 feet
Mechanical Detail
Heating and Cooling: Package heating and cooling units in
office areas; gas heat in warehouse areas
Fire Protection: Yes
Interior Detail
Layout: Offices and/or show rooms in front,
warehouse in rear
Floor Covering: Carpet or tile in office; bare concrete
in warehouse
Walls: Painted gypsum board
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Property Description
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Ceilings: Dropped suspended ceiling tile in office;
none in warehouse
Lighting: Typically, fluorescent in office and
various incandescent and fluorescent in
warehouse
Restrooms: Varies with unit size; fixtures in each
unit
Site Improvements
Parking: Appears adequate
On-Site Landscaping: Minimal trees and shrubbery typically
around perimeter and as street buffer
2110 Tomlynn Street
General Description
Year Built: 1965
Net Rentable Area: 15,910 square feet
Percent Office: 30 Percent
Construction Detail:
Foundation: Reinforced concrete
Framing: Reinforced concrete
Floors: Concrete
Exterior Walls: Brick
Roof Cover: Either hot mopped tar/built-up system or
insulated membrane with ballast
Windows: Safety glass in aluminum frames
Pedestrian Doors: Safety glass in aluminum frames
Loading Doors: Two
Clear Height: 21 feet
Mechanical Detail
Heating and Cooling: Package heating and cooling units in
office areas; gas heat in warehouse areas
Fire Protection: No
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Property Description
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Interior Detail
Layout: Offices and/or show rooms in front,
warehouse in rear
Floor Covering: Carpet or tile in office; bare concrete
in warehouse
Walls: Painted gypsum board
Ceilings: Dropped suspended ceiling tile in office;
none in warehouse
Lighting: Typically, fluorescent in office and
various incandescent and fluorescent in
warehouse
Restrooms: Varies with unit size; fixtures in each
unit
Site Improvements
Parking: Appears adequate
On-Site Landscaping: Minimal trees and shrubbery typically
around perimeter and as street buffer
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<PAGE>
<TABLE>
<CAPTION>
Greater Dabney 1997 Real Estate Assessment and Tax Summary
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Tax Parcel Building 1997 Assessment Tax Real Estate Taxes
-----------------------------------------
Property Number Size Land Building Total Rate Taxes Per SF
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dabney I 116-01-E-01 33,600 $203,400 $793,300 $996,700 0.0094 $9,369 $0.28
Dabney II 116-01-C-02 42,000 $334,500 $3,320,500 $3,655,000 0.0094 $34,357 $0.39
Dabney XI 45,250
------
Total Dabney X and XI 87,250
Dabney III 116-01-C-01 23,850 $202,600 $847,900 $1,050,500 0.0094 $9,875 $0.41
Dabney IV 116-01-A-O1 41,550 $309,800 $1,237,700 $1,547,500 0.0094 $14,547 $0.35
Dabney V 116-01-C-04 45,353 $463,900 $2,885,800 $3,349,700 0.0094 $31,487 $0.42
Dabney VIII 29,700
------
Total Dabney V and VIII 75,053
Dabney VI 104-0A-32-G 50,400 $172,173 $1,485,100 $1,657,273 0.0094 $15,578 $0.31
Dabney VII 116-01-01-02 29,700 $288,300 $1,243,300 $1,531,600 0.0094 $14,397 $0.48
Dabney IX 116-01-01-03 30,263 $356,700 $1,138,100 $1,494,800 0.0094 $14,051 $0.46
Dabney X 116-01-B-01 85,844 $561,300 $3,746,100 $4,307,400 0.0094 $40,490 $0.47
Dabney A-1 116-01-F-02 15,389 $137,200 $711,800 $849,000 0.0094 $7,981 $0.52
Dabney A-2 116-01-01-01 33,050 $298,100 $1,441,600 $1,739,700 0.0094 $16,353 $0.49
Britton's Hill 104-0A-02 132,103 $643,200 $2,195,500 $2,838,700 0.0094 $26,684 $0.20
Westmoreland 116-OA-25 $1,141,200 $3,706,800 $4,848,000
116-OA-10 $269,700 $20,000 $289,700
---------- ---------- ----------
Total Westmoreland 121,815 $1,410,900 $3,726,800 $5,137,700 0.0094 $48,294 $0.40
Morton Marks 116-OA-56 45,000 $812,700 $1,178,200 $1,990,900 0.0094 $18,714 $0.31
2ll0 Tomlynn 15,910
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Total Morton and Tomlynn 60,910
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NOTES: Dabney II and XI are assessed as one tax parcel.
Dabney II and XI are assessed as one tax parcel.
Dabney VI's land assessment is an allocation of land attributed to the improvements (3.1 acres out of a 16.6638
acre parcel).
Westmoreland Plaza consists of two tax parcels.
Morton Marks and 2110 Tomlynn are assessed as one tax parcel.
===================================================================================================================================
</TABLE>
CUSHMAN &
WAKEFIELD(R)
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<PAGE>
REAL ESTATE TAXES AND ASSESSMENTS
================================================================================
The subject property is under the taxing jurisdiction of Henrico County.
The county assesses real property at a ratio of 100 percent of ad Valorem value
on a calendar year basis with re-valuations conducted every two to three years.
For the 1997 tax year, the annual real estate tax rate is $0.94 per $100 of
assessed valuation. Real estate taxes are payable in two installments due in
June and December. In an effort to project the future tax liability for the
subject properties, we have reviewed both the present and historical tax rates
combined with a forecast of the assessments.
Tax Rates
The following is a table displaying the five and ten year trend in tax
rates levied by the above noted taxing jurisdictions.
================================================================================
Tax Rate Per $100 of Assessed Value
================================================================================
Taxing Authority 1987 1992 1997
================================================================================
Henrico County $0.98 $0.98 $0.94
================================================================================
As can be seen, the tax rates were flat from 1987 through 1992. In fact,
the real estate tax rate was set at $0.98 in 1985 and did not change until 1996.
In 1995, a newly elected Board of Supervisors announced that they intended to
drop real estate tax rates by $0.02 per year for five years. As a result, the
rate decreased to $0.96 in 1996 and $0.94 in 1997. The rate decrease, however,
is not expected to continue because the Board of Supervisors indicated that they
will not be decreasing the rate for the following year and early indications are
that the tax rate will remain at the $0.94 level over the short term.
It is difficult, at best to judge the likelihood of future tax rate
increases when viewing only a short history. Tax rates tend to increase or
decrease based upon the combined influences of changes in property values and
increasing governmental budgetary needs as the jurisdiction tries to maintain a
pace with inflationary pressures. Henrico County is very stable financially,
with a high ratio of commercial to residential properties and as a result, the
county has been able to keep the tax rate constant and recently, decreased them.
Therefore, we do not expect to see much movement in the tax rates over the next
few years, with a possible increase in incremental bumps during the latter half
of the holding period (ten years).
Tax Assessment
The subject property is comprised of 17 industrial buildings, but for tax
purposes, it consist of only 16 tax parcels. Deviations from the norm (one
property being one tax parcel) are described as follows:
1. Dabney II and XI are considered one tax parcel (116-01-C-02);
2. Dabney V and VIII are considered one tax parcel (116-01-C-04);
3. Dabney VI's tax parcel contains 16.6638 acres, but only 3.1 acres are
allocated to the improvements;
4. Westmoreland Plaza is comprised of two tax parcels (116-OA-25 and 116-
OA-10); and
5. Morton Marks and 2110 Tomlynn are considered one tax parcel
(116-OA-56).
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<PAGE>
Real Estate Taxes and Assessments
================================================================================
The subject's current and associated tax liability is presented in the
table on the facing page.
Based on conversations with Mr. Leonard Biff, commercial appraiser with
the Henrico County Assessor's Office, the properties considered flex by the
assessor's office were assessed for 1997. These properties are Dabney II through
XI, and the assessment's increased by 7.6 to 72.6 percent over the prior year.
Mr. Biff indicated that the assessment is based primarily on the income
capitalization approach, with secondary support from the sales comparison
approach. In the subject's case, operating statements were provided by the owner
and as such, the re-assessed values are based on the individual property's
financial performance. Although, it should be noted that there is a lag, with
the assessment established in 1996 (based on 1995 income statements) for the
1997 tax year. We do not expect these properties assessments to change in the
next two years.
The remaining properties' assessments did not change over the prior year.
The assessor's office is currently re-assessing distribution and warehouse
buildings, over 20,000 square foot, for the following tax year (1998). As such,
we would expect the assessment for Dabney I, Dabney A-1 and A-2, Britton's Hill,
Westmoreland Plaza, Morton Marks, and 2110 Tomlynn to increase in 1998. This
appears reasonable given our concluded value estimate for these properties.
In an effort to evaluate the fairness of the subject's current assessed
value and future prospect for change, we have compared the assessments to the
market value estimates concluded in this report. The following table depicts
this comparison
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<PAGE>
Real Estate Taxes and Assessments
================================================================================
================================================================================
Assessment and Value Comparison
================================================================================
1997 Market Value Percentage
Property Tax Parcel Number Assessment Estimate Difference
================================================================================
Dabney I 116-01-E-01 $996,700 $1,200,000 +20.4%
- --------------------------------------------------------------------------------
Dabney II 116-01-C-02 $3,655,000 $3,700,000 +1.2%
Dabney XI
- --------------------------------------------------------------------------------
Dabney III 116-01-C-01 $1,050,500 $900,000 -14.3%
- --------------------------------------------------------------------------------
Dabney IV 116-01-A-01 $1,547,500 $1,500,000 -3.1%
- --------------------------------------------------------------------------------
Dabney V 116-01-C-04 $3,349,700 $3,100,000 -7.5%
Dabney VIII
- --------------------------------------------------------------------------------
Dabney VI 104-A-32-G $1,657,273 $1,900,000 +14.6%
- --------------------------------------------------------------------------------
Dabney VII 116-01-01-02 $1,531,600 $1,600,000 +4.5%
- --------------------------------------------------------------------------------
Dabney IX 116-01-01-03 $1,494,800 $1,300,000 -13.0%
- --------------------------------------------------------------------------------
Dabney X 116-01-B-01 $4,307,400 $4,100,000 -4.8%
- --------------------------------------------------------------------------------
Dabney A-1 116-01-F-02 $849,000 $1,200,000 +41.3%
- --------------------------------------------------------------------------------
Dabney A-2 116-01-01-01 $1,739,700 $2,600,000 +49.5%
- --------------------------------------------------------------------------------
Britton's Hill 104-A-02 $2,838,700 $4,500,000 +58.5%
- --------------------------------------------------------------------------------
Westmoreland 116-A-25,116-A-10 $5,137,700 $5,200,000 +1.2%
- --------------------------------------------------------------------------------
Morton Marks 116-A-56 $1,990,900 $2,050,000 +2.9%
2110 Tomlynn
================================================================================
The recently assessed properties (Dabney II through XI) current assessment
compares favorable with our concluded value estimate. Only Dabney III and IX had
a difference greater than 10.0 percent, and the difference is attributed to
changes in the tenancy between when the assessment was established (1996) and
today. For example, Dabney III has some significant rollover in Year 1 of the
analysis and our value conclusion reflects the lease expirations. Overall, we
believe the above noted properties are fairly assessed.
The remaining properties have not been re-assessed for several years. Not
surprisingly our market value conclusion is significantly higher than the
assessment. This, however, should be temporary since these properties are
currently being re-assessed for the next tax year. At this time, the assessment
should fall in line with market parameters. Thus, the these properties are
considered to be fairly assessed.
The only exception is Westmoreland Plaza, which was substantially improved
in late-1993 to a 100 percent office build-out for Capital One. The property
was re-assessed at this time based on the upgrades made and new leasing status.
The current assessment is based on the income capitalization approach, wherein
the assessor uses the direct capitalization method. Our market value conclusion
is similar to the assessment.
Ad Valorem Tax Conclusions
In the discounted cash flow analyses to follow, each individual property's
current tax liability was used for all but two properties. Thereafter, we
assumed a 3.5 percent increase in real estate taxes over the ten year holding
period. This is considered reasonable given long
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CUSHMAN &
WAKEFIELD(R)
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<PAGE>
Real Estate Taxes and Assessments
================================================================================
term trends. The two atypical properties, Dabney A-2 and Britton's, had
assessments that were significantly below our estimated values. Hence, in the
cash flows for them, we increased in Year Two the tax liability to reflect an
assessment approximately 90 percent of our final value conclusion.
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<PAGE>
ZONING
================================================================================
The subject property is situated in two zones: M-1, Light Industrial
District and M-2, General Industrial District. Dabney III, Dabney IV, Britton's
Hill, Morton Marks and 2110 Tomlynn are zoned Ml; whereas, the remaining twelve
properties are zoned M2. The purpose of these industrial zoning classifications
is to provide areas for industrial and manufacturing uses. A wide range of uses
are permitted including manufacturing, fabricating, processing, wholesale
distribution and warehousing facilities, as well as office and retail. The
Henrico Zoning Ordinance is pyramidal with respect to business, industrial and
office zones and essentially, most use allowed in the business and office zone
is permitted in the M-1 and M-2 districts. Nonetheless, the M-2 zone permitted
the more intensive industrial uses.
The following restrictions apply:
================================================================================
M-1 Zone M-2 Zone
================================================================================
Minimum Lot Area: None Specified None Specified
Minimum Lot Width: None Specified None Specified
Maximum Height: 45 Feet 50 Feet
Minimum Setbacks:
Front: 25 Feet 25 Feet
Side: None, Unless adjacent to a None, Unless adjacent to a
residential district then residential district then
25 feet 25 feet
Rear: 30 Feet 30 Feet
================================================================================
Off street parking requirements for industrial establishments are based
upon a ratio of office and warehouse use. For office use, one parking space for
the first 1,000 square feet and one parking space per each 400 square feet
remaining is required. For warehouse use, one parking space per two employees is
required. We were not provided with an accounting of the number of employees at
the various properties and as such, it is difficult to estimate the exact number
of off street parking spaces required. Nonetheless, based on conversations with
property management, as well as our inspection of the property, there appears to
be ample off street parking to meet the needs of the existing tenant base. We
assume that the property conforms with the zoning ordinance in this regard.
We are not experts in the interpretation of complex zoning ordinances. As
the buildings went through the approval process at the time of construction, we
assume that they are legal and conforming structure. The formal determination of
compliance is beyond the scope of a real estate appraisal.
To the best of our knowledge, there are no known deed restrictions
(private or public) which would further limit the use of the subject property.
This statement should not be taken as a guarantee or warranty that no such
restrictions exist. Deed restrictions are a legal matter and only a title
examination by an attorney would normally uncover such restrictive covenants.
Thus, an examination by a title attorney is recommended on the subject property
if any questions regarding such restrictions arise.
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<PAGE>
HIGHEST AND BEST USE
================================================================================
Highest and Best Use of Site as Though Vacant
According to the Dictionary of Real Estate Appraisal, Third Edition
(1993), a publication of the Appraisal Institute, the highest and best use of
the site as though vacant is defined as:
Among all reasonable, alternative uses, the use that yields the highest
present land value, after payments are made for labor, capital, and
coordination. The use of a property based on the assumption that the
parcel of land is vacant or can be made vacant by demolishing any
improvements.
Legally Permissible
The subject's zoning classification permits development of a broad range
of industrial uses plus office and retail.
Physically Possible
Each of the sites would allow for development of the legally permissible
uses. The only obvious physical limitation would be size. Some of the smaller
sites would not permit large uses of any kind. All appropriate and necessary
utilities are available to the sites, and all have appropriate access and
frontage. Street improvements are also adequate.
Financially Feasible
Several features of the subject property indicate that industrial use is
the highest and best use of the subject property. First, the sites lie within a
major industrial park. While some R&D uses can be found, including at the
subject, the primary uses reflect typical industrial and warehouse operations.
Transportation corridors are conveniently located, enhancing the desirability of
the sites for appropriate industrial uses. While office and retail are
permissible, they would not be anticipated under the principle of conformity.
Hence, we excluded them.
Based on the above, we concluded that the highest and best use of the
subject sites, as vacant, would be industrial uses ranging from warehouse to
R&D, depending on market conditions for each market segment.
Highest and Best Use of Property as Improved
According to the Dictionary of Real Estate Appraisal, highest and best use
of the property as improved is defined as:
The use that should be made of a property as it exists. An existing
property should be renovated or retained so long as it continues to
contribute to the total market value of the property, or until the return
from a new improvement would more than offset the cost of demolishing the
existing building and constructing a new one.
We next considered the subject property as improved vis-a-vis the highest
and best use conclusion to assess whether the improvement should remain as is or
whether an addition, a conversion or a renovation should be made, or whether the
improvements should be demolished.
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<PAGE>
Highest and Best Use
================================================================================
Since the subject as improved closely resembles the ideal use, the
existing use reflects the highest and best use. Converting the subject to an
alternative use would not be appropriate as the current use is consistent with
the ideal use. No other modification would appear to make economic sense.
Given our final value conclusion there is obviously sufficient value in
the property, as improved, to negate any possible redevelopment of the tract for
the foreseeable future. This conclusion is supported by the data and analysis
presented in the balance of this report. This premise is obviously contingent
upon property management exercising prudence in maintaining the property.
For these reasons, it is our opinion that the subject property, as
presently developed, represents the highest and best use of the site as
improved.
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<PAGE>
VALUATION PROCESS
================================================================================
In this appraisal, we have used the Sales Comparison Approach and the
Income Capitalization Approach to develop a market value estimate.
The Cost Approach was not performed for the following reasons:
o This approach is more relevant for new construction or where
sufficient information is available to reasonably estimate the
replacement cost new of the improvements and land.
o The investment marketplace does not typically trade buildings such as
the subject on a cost/value basis, particularly in markets where it is
generally perceived that cost exceeds value.
o The subjectivity of accurately estimating accrued depreciation of the
existing improvements significantly limits the reliability of this
approach.
In the Sales Comparison Approach, we performed the following steps:
o Searched the market for recent industrial building sales within the
Richmond area which contain similar physical and economic
characteristics to the subject property.
o Analyzed differences between those sales and the subject on the basis
of the sales price per square foot and extracted overall
capitalization rates.
o Correlated the various value indications into a point value estimate
from within the range.
In developing the Income Capitalization Approach, we:
o Studied rents in effect in the immediate and competing areas to
estimate potential rental income at market levels for the three
industrial property types.
o Studied the recent history of operating expenses at the subject
property and competing properties to estimate an appropriate level of
stabilized expenses and reserves for replacement.
o Estimated net operating income by subtracting stabilized expenses from
potential gross income after deduction for vacancy and collection
loss.
o Prepared a discounted cash flow analysis in which the estimated income
and expenses over a projected holding period, and the estimated
property value at the time of reversion, are discounted at an
appropriate rate to estimate present market value.
In estimating the final value, we performed the following:
o Reviewed and re-examined each of the approaches to value which were
employed.
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<PAGE>
Valuation Process
================================================================================
o Considered the type and reliability of the data used and applicability
of each approach.
o Reconciled the approaches to a final value conclusion.
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<PAGE>
SALES COMPARISON APPROACH
================================================================================
Methodology
In the Sales Comparison Approach, we estimated value by comparing these
individual properties with similar, recently sold properties in the surrounding
or competing area. Inherent in this approach is the principle of substitution,
which holds that when a property is replaceable in the market, its value tends
to be set at the cost of acquiring an equally desirable substitute property,
assuming that no costly delay is encountered in making the substitution.
By analyzing sales that qualify as arms-length transactions between
willing and knowledgeable buyers and sellers, we can identify value and price
trends. The basic steps of this approach are:
1. research recent, relevant property sales and current offerings
throughout the competitive area;
2. select and analyze properties that are similar to the property
appraised, considering changes in economic conditions that may have
occurred between the sale date and the date of value, and other
physical, functional, or locational factors;
3. identify sales that include favorable financing and calculate the
cash equivalent price;
4. reduce the sale prices to a common unit of comparison such as price
per square foot of net rentable area, effective gross income
multiplier, and overall capitalization rate;
5. make appropriate comparative adjustments to the prices of the
comparable properties to relate them to the property being
appraised; and
6. interpret the adjusted sales data and draw a logical value
conclusion.
Analysis of Sales
The Richmond industrial market has historically been a stable and fared
better than other commercial sectors during the real estate down cycle of the
early 1990s. Today, the market is strengthened with an expansion of the regions
employment base specific to the manufacturing and related industries. The
industrial market, both light and heavy, have shown signs of improvement with an
upward pressure on rents, diminished concession packages, positive net
absorption and the beginning of a development cycle with several speculative
projects under construction. Due to the stability of this market, investor
demand is strong and primarily generated by institutional investors including
large pension funds and REITs. For example, in 1996 Liberty Trust increased its
holdings through the purchase of a $20 million portfolio of land and buildings
in Henrico County.
The subject property consists of 17 industrial buildings in the Greater
Dabney area. The subject buildings are generally classified in five categories:
flex--minimum office build-out, flex--medium office build-out, flex--high
office build-out, research and development (R&D) buildings, and warehouse
buildings. For purposes of this analysis, we combined all of the flex product
together, and will analyze the subject via the sales comparison approach in
these three groups.
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<PAGE>
Sales Comparison Approach
================================================================================
A summary of the improved sales used is shown on the following page along
with a location map, and a detailed description of each sale is included in the
Addenda. The most widely-used and market-oriented unit of comparison for
properties such as the subject is the sales price per square foot of net
rentable area. All of the comparable sales were analyzed on this basis.
Sales Price Per Square Foot Analysis
The comparables indicate sales prices ranging from $26.32 to $60.30 per
square foot of net rentable area on a cash equivalent basis. These prices per
square foot have been influenced by differences in construction quality,
condition of the premises, character of the tenancy, and location. Nevertheless,
it is important to address each property in terms of the conventional sequence
of adjustments. Following are those considerations which are relevant to the
subject. The first four elements (property rights conveyed, financing,
conditions of sale, market conditions) must be considered in advance of applying
any other compensating factors to derive value conclusions via the sales price
per square foot methodology. After these first four adjustments, we will
consider the comparable by property type: flex, R&D and warehouse.
Property Rights Conveyed - At the time of sale, all of the comparable
sales were encumbered by existing leases; therefore, the leased fee estate
was conveyed in each case. As such, no adjustments are warranted for
differences in property rights conveyed.
Seller Financing/Cash Equivalency - All of the comparables were sold on
the basis of cash to the seller. Thus, we have made no adjustments to the
comparables for seller financing.
Conditions of Sale - The conditions of sale evidenced by the comparables
appear to be typical of the market and do not reflect unusual motivations
of the parties.
Market Conditions - The sales occurred between January 1994 and February
1997 during a period of stable market conditions based on overall market
vacancies, rental rates and yield rates. We conclude that no adjustment is
necessary.
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<PAGE>
Improved Sales Summary
<TABLE>
<CAPTION>
=================================================================================================================================
Clear
Sale Sale Sales Building Site Size Percent Year Const. Ceiling
No. Location Date Price Size(SF) (Acre) Office Built Type Height(Ft.)
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
R&D-1 3701 Saunders Avenue Apr-96 $3,300,000 64,705 6.42 60% 1984 Masonry N/A
Richmond, Virginia
R&D-2 1001-l063 Technology Park Drive Nov-94 $7,241,905 120,098 16.913 70% 1985 Masonry 16
Henrico County, Virginia
R&D-3 3801-3827 Gaskin Road Dec-94 $5,350,000 97,394 9.827 55% 1985/86 Masonry 16
Henrico County, Virginia
I-4 11351 Virginia Precast Road Feb-97 $3,000,000 79,068 38.23 5% N/A Masonry N/A
Hanover County, Virginia
I-5 510 Eastpark Court Oct-96 $6,611,622 196,800 9.72 5% 1990 Masonry 18-24
Henrico County, Virginia
I-6 4200 Oakleys Place Oct-96 $2,799,389 80,000 7.5 7% 1990 Masonry N/A
Henrico County, Virginia
I-7 4717 Eubank Road Sep-95 $3,720,000 141,313 9.24 4% 1975 N/A 23
Henrico County, Virginia
I-8 5600-5700 Eastport Boulevard Dec-94 $10,850,219 330,103 18.76 11% 1991 Masonry 27
Henrico County, Virginia
I-9 2511 Britton's Hill Road Jan-94 $4,335,000 132,103 8.2 10% 1988 Masonry 21
Henrico County, Virginia
=================================================================================================================================
<CAPTION>
=================================================================================================
Land/ Sales Price
Sale Condition of Building Per SF of Overall
No. Location Improvements Ratio Building Area Rate
=================================================================================================
<S> <C> <C> <C> <C> <C>
R&D-1 3701 Saunders Avenue Average 4.32 $51.00 12.0%
Richmond, Virginia
R&D-2 1001-l063 Technology Park Drive Average 6.13 $60.30 12.4%
Henrico County, Virginia
R&D-3 3801-3827 Gaskin Road Average 4.40 $54.93 10.5%
Henrico County, Virginia
I-4 11351 Virginia Precast Road Average 21.06 $37.94 N/A
Hanover County, Virginia
I-5 510 Eastpark Court Good 2.15 $33.60 10.6%
Henrico County, Virginia
I-6 4200 Oakleys Place Good 4.08 $34.99 10.6%
Henrico County, Virginia
I-7 4717 Eubank Road Average 2.85 $26.32 10.8%
Henrico County, Virginia
I-8 5600-5700 Eastport Boulevard Good 2.48 $32.87 10.5%
Henrico County, Virginia
I-9 2511 Britton's Hill Road Average 2.70 $32.82 10.4%
Henrico County, Virginia
=================================================================================================
</TABLE>
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<PAGE>
Sales Comparison Approach
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Flex Buildings
The subject property is composed of eleven buildings classified as flex
buildings. These properties are Dabney I through XI, and have varying degrees of
office build-out (from 20 to 40 percent). We have sub-classified the flex
buildings as minimum, medium and high office build-out. The flex buildings are
sub-classified as follows:
====================================================================
Category Property
====================================================================
Minimum Office Build-Out (20 Percent) Dabney I, II, IV and IV
Medium Office Build-Out (30 Percent) Dabney Ill, V and VIII
High Office Build-Out (40 Percent) Dabney VII, IX, X and XI
====================================================================
Based on our analysis of the improved sales, we believe the subject flex
buildings are most similar to Comparables 1-4, 1-5, 1-6 and 1-7. These
industrial buildings reflect sales price between $26.32 and $37.94 per square
foot. All of these sales are warehouse buildings, located in established
industrial districts in suburban Richmond, with a small percentage of office
finish, between four and seven percent. This is inferior to the Dabney flex
buildings and suggest an upward adjustment.
The flex buildings range in size from 23,850 to 85,884 square feet, with
all but one building less than 50,000 square feet. In comparison, the improved
sales are generally larger and range from 79,068 to 196,800 square feet. In
general, a smaller building should sell for more on a per unit basis than a
similar but larger building due to economies of scale. This appears to be the
case with the comparable sales as 1-5 and 1-7 are the largest sized buildings
and have the lowest per square foot price. Mindful of this, it would appear that
an upward adjustment to the comparable sales is warranted.
In addition to percentage of office build-out and building size,
consideration must be given to the age and quality of the building, condition at
the time of sale and other physical factors such as ceiling heights and dock
height door. We have examining each of the comparable sales relative to the
subject's eleven flex buildings.
Based on the above analysis, we conclude a value for the flex buildings -
minimum office build-out at $35.00 per square foot, the flex buildings - medium
office build-out at $40.00 per square foot and the flex buildings - high office
build-out at $45.00 per square foot. Thus, our estimated value by the sales
price per square foot method is calculated on the following page.
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<PAGE>
Sales Comparison Approach
================================================================================
Flex Buildings -- Sales Price Per Square Foot Unit Analysis
================================================================================
Property Size(SF) Price Per SF Calculated Value Rounded Value
================================================================================
Dabney I 33,600 $35.00 $1,176,000 $1,200,000
Dabney II 42,000 $35.00 $1,470,000 $1,500,000
Dabney III 23,850 $40.00 $ 954,000 $1,000,000
Dabney IV 41,550 $35.00 $1,454,250 $1,500,000
Dabney V 45,353 $40.00 $1,814,120 $1,800,000
Dabney VI 50,400 $35.00 $1,764,000 $1,800,000
Dabney VII 33,149 $45.00 $1,491,705 $1,500,000
Dabney VIII 29,700 $40.00 $1,188,000 $1,200,000
Dabney IX 30,263 $45.00 $1,361,835 $1,400,000
Dabney X 85,844 $45.00 $3,862,980 $3,900,000
Dabney XI 45,250 $45.00 $2,036,250 $2,000,000
================================================================================
R & D Buildings
The subject property has two assets classified as research and development
buildings: Dabney A-1 and A-2. These two buildings are actually connected by a
corridor built by a tenant in both properties. Dabney A-1 and A-2 are
essentially 100 percent finished. We researched three improved sales, which we
classified as R&D buildings because of the high percentage of office build-out.
These sales are R&D-1 through R&D-3, which sold between December 1994 and April
1996 for $51.00 to $60.30 per square foot.
The percentage of office build-out for the improved sales is between 55
and 80 percent. This is lower than the subject's two R&D buildings and as such,
an upward adjustment to the comparables is necessary. In addition, Dabney A-1
and A-2 contain 15,389 and 33,050 square feet respectively. The research and
development sales are significantly larger (between 64,705 and 120,098 square
feet). Based on the above discussed premise of economies of scale, an upward
adjustment is warranted. Other factors considered are location, age and quality
of the improvements, condition at the time of sale, and economic factors such as
occupancy and achievable rental rates.
Therefore, in consideration of the above analysis, we believe the
subject's R&D properties should sell for a higher per unit price than indicated
by the comparable sales because of the higher percentage of office finish and
smaller size. Based on our analysis of the selected sales, we conclude a value
for the R&D buildings at $75.00 per square foot of net rentable area. Our
estimated value by the sales price per square foot method is calculated as
follows:
================================================================================
R&D Buildings -- Sales Price Per Square Foot Unit Analysis
================================================================================
Property Size(SF) Price Per SF Calculated Value Rounded Value
================================================================================
Dabney A-1 15,389 $75.00 $1,154,175 $1,200,000
Dabney A-2 33,050 $75.00 $2,478,750 $2,500,200
================================================================================
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<PAGE>
Sales Comparison Approach
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Warehouse Buildings
The last group are the warehouse buildings. These properties are composed
of Britton's Hill, Westmoreland Plaza, Morton's Mark, and 2110 Tomlynn. The
physical characteristics of these buildings differ significantly. However, with
the exception of Westmoreland Plaza, the achievable rents are similar and as
such, we have analyzed these properties together. The sales considered most
comparable are 1-7 through 1-9. The sale price per square foot of these three
comparables is between $26.32 and $32.87 per square foot. In fact, two of the
sales are near $33.00 per square foot. In addition, 1-9 is the sale of one of
the subject properties, Britton's Hill.
In comparison with the subject warehouse buildings, these sales are viewed
as similar with varying degrees of differences, which tend to offset each other.
Although dated, in our opinion, 1-9 is the best indicator of value supported by
the remaining two sales. As a result, we estimate the value of the Britton's
Hill, Morton's Mark and 2210 Tomlynn at $33.00 per square foot.
With regard to Westmoreland Plaza, the property was sold in August 1993
for $28.53 per square foot. The building was vacant at the time of sale and was
complete reconfigured by the tenant, Capital One, as a credit card processing
center. This building is superior to the other warehouse buildings in the
Greater Dabney portfolio and accordingly, we believe a higher per unit value is
warranted. Thus, taking into consideration the sales comparables presented, we
estimate the value of Westmoreland Plaza at $40.00 per square foot. Our
estimated value by the sales price per square foot method is calculated as
follows:
================================================================================
Warehouse Buildings -- Sales Price Per Square Foot Unit Analysis
================================================================================
Property Size(SF) Price Per SF Calculated Value Rounded Value
================================================================================
Britton's Hill 132,103 $33.00 $4,359,399 $4,400,000
Westmoreland 121,815 $40.00 $4,872,600 $4,900,000
Morton's Mark 45,000 $33.00 $1,485,000 $1,500,000
2110 Tomlynn 15,910 $33.00 $ 525,030 $ 500,000
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Sales Comparison Approach
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Final Conclusions via Sales Comparison Approach
The subject property consists of 17 industrial properties. Individual
sales comparisons were prepared for each property leading to a conclusion of
value on a building by building basis via the Sales Comparison Approach which
are summarized in the following table:
============================================
Sales
Property Comparison
============================================
Dabney I $1,200,000
Dabney II $1,500,000
Dabney III $1,000,000
Dabney IV $1,500,000
Dabney V $1,800,000
Dabney VI $1,800,000
Dabney VII $1,500,000
Dabney VIII $1,200,000
Dabney IX $1,400,000
Dabney X $3,900,000
Dabney XI $2,000,000
Dabney A-1 $1,200,000
Dabney A-2 $2,500,000
Britton's Hill $4,400,000
Westmoreland $4,900,000
Morton Marks $1,500,000
2110 Tomlynn $ 500,000
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<PAGE>
INCOME CAPITALIZATION APPROACH
================================================================================
Methodology
The Income Capitalization Approach is a method of converting the
anticipated economic benefits of owning property into a value estimate through
capitalization. The principle of "anticipation" underlies this approach in that
investors recognize the relationship between an assets income and its value. In
order to value the anticipated economic benefits of a particular property,
potential income and expenses must be estimated, and the most appropriate
capitalization method must be selected.
The two most common methods of converting net income into value are direct
capitalization and discounted cash flow analysis. In direct capitalization, net
operating income is divided by an overall rate extracted from market sales to
indicate a value. In the discounted cash flow method, anticipated future net
income streams and a reversionary value are discounted to an estimate of net
present value at a chosen yield rate (internal rate of return).
In our opinion, the discounted cash flow method is the more appropriate
capitalization technique as the subject property consists of 17 industrial
buildings occupied by a number of tenants at differing rental rates for varying
lease terms. Direct capitalization does not adequately account for the
subtleties of all those variables. The following is a discussion of our
discounted cash flow analysis for each building which comprises the subject
property.
Because our subject property consists of three categories of industrial
properties, we will first analyze rental rates and conclude to a market rent for
each category. Thereafter, we will discuss each property individually in
sequence, applying its appropriate market rent.
Market Rent Analysis
As previously described, the subject properties generally fall into five
categories: flex minimum office build-out, flex - medium office build-out, flex
- - high office build-out, research and development (R&D) buildings, and warehouse
buildings. Each property type appeals to a different market segment and will
generate a difference rent level. As a result, we have estimated a market rent
appropriate for each property type.
In order to form a conclusion of current market rent, consideration is
given to the most recent leases at the subject since these deals are the best
comparables and therefore, the best indicators of achievable rents. The table on
the following page highlights the most recent leasing activity at the subject
property. In addition, we have examined actual lease data for competitive
buildings in the suburban Richmond market. The comparable rentals are outlined
in the table on the second following page. The majority of comparable rentals
are located in established business and industrial parks in Henrico County. We
highlighted warehouse, suburban office and flex buildings.
Each property type will be discussed separately.
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Income Capitalization Approach
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<TABLE>
<CAPTION>
=========================================================================================================================
Recent Leasing Activity at The Subject Property
=========================================================================================================================
Leased Percent Start Term Rental Expense
Property/Address Tenant SF Office Finish Date (Years) Rate Structure
=========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Dabney I
2256 Dabney Road Ellis Flooring Sales 7,420 20% 02/97 10 $5.65 IG
Unijax 4,200 20% 07/97 5 $6.14 IG
Dabney II
2251 Dabney Road Aladdin Mills Inc. 8,400 20% 07/97 6 $3.97 IG
Dabney V
2200-2224 Tomlynn Street Office Masters 5,400 30% 05/97 5 $6.45 IG
Forshaw Chemicals 3,900 30% 02/97 5 $5.73 IG
Dabney VI
2277 Dabney Road Kap Inc. 16,800 20% 03/96 5 $4.63 IG
Cort Furniture Rental 12,600 20% 02/97 5 $4.50 IG
West Home Health Care 12,600 20% 08/96 5 $5.25 IG
Goodall Rubber Co. 8,400 20% 06/96 5 $5.87 IG
Dabney VII
2246 Dabney Road Pharmaco International 2,400 40% 03/96 9 $7.65 IG
Dabney IX
2248 Dabney Road Business Equipment 4,178 40% 07/96 5 $6.55 IG
Reface Inc. 2,134 40% 05/96 5 $6.72 IG
Joyner's Mach. 1,580 40% 02/96 5 $7.23 IG
Dabney X
2201-2247 Tomlynn Street Micro View Inc. 11,300 40% 03/96 5 $6.83 IG
Dabney A-1
2238 Dabney Road Comquest Communication 7,000 100% 04/97 5 $13.50 FS
Pharmaco Analytical Lab 6,860 100% 05/97 10 $8.50 NNN
Britton's Hill
2511 Brittons Hill Road Color Tree 12,682 Minimal 07/97 5 $3.83 NNN
=========================================================================================================================
</TABLE>
Flex Buildings - Minimum Office Build-Out
This property type consist of Dabney I, II, IV and VI. These buildings
have the smallest percentage of office build-out of the Dabney assets.
Typical unit size is between 2,000 and 12,000 square feet, with about 20
percent office finish and one dock-height door per unit.
The most recently signed leases for this property type is depicted above
and ranges from $3.97 to $6.14 per square foot, industrial gross. The low
end of the range is marked by a tenant, Alassin Mills Inc., in Dabney II.
According to the leasing agent, this tenant has been in the building since
the 1980s, has minimal office finish and took the space as is. We do not
believe this rental rate is indicative of current rent levels and has not
been considered in this analysis.
It is difficult to compare flex rents due to the differences in office
finish. Based on conversations with market participants, rental rates for
flex space is a blend of office and warehouse rents. As a result, the
asking rent is function of the percentage of office build-out and in
general, the office segment is quoted at $10.00 to $15.00 per square foot,
and the warehouse portion is quoted at $2.50 to $5.00 per square foot.
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<PAGE>
Rent Comparables - Warehouse, Suburban Office and Flex Buildings
<TABLE>
<CAPTION>
====================================================================================================================================
Leased Percent Start Term Rental Expense
Property/Address Tenant SF Office Finish Date (Years) Rate Structure
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Warehouse Rent Comparables
W-1 Interport Business Center Reynolds & Reynolds 65,200 8% 02/97 5 $ 3.68 IG
4800 Eubank Road
Henrico County, Virginia
W-2 1801 Willis Road ABB 24,000 5% 05/97 3 $ 3.35 Net
Chesterfield County, Virginia
W-3 Eastport II Pierce Leary Corp. 42,754 Minimal 02/96 10 $ 3.25 IG
5650 Eastport Boulevard
Henrico County, Virginia Affa Laval Therma 22,994 Minimal 06/96 4 $ 3.60 IG
W-4 Eastport I Central National Gottesman 30,063 Minimal 11/96 5 $ 4.55 IG
5654 Eastport Boulevard
Henrico County, Virginia
W-5 Interport Industrial Whitehall-Robins 59,000 4% 06/96 5 $ 3.75 IG
2248 Darbytown Road
Henrico County, Virginia
W-6 5600 Lewis Road Stone Container 150,000 Minimal 10/96 5 $ 4.10 IG
Henrico County, Virginia
Suburban Office Rent Comparables
O-1 Interstate Center Dictaphone 2,993 100% 06/97 5 $13.50 FS
Building B - Laburnum Avenue
Henrico County, Virginia
O-2 Interstate Center Prima Consulting 1,407 100% 08/96 2 $14.75 FS
Building C - Laburnum Avenue
Henrico County, Virginia I. V. Harris 3,353 100% 06/96 5 $14.49 FS
O-3 Interstate Center DeJarnette & Paul 9,126 100% 06/96 6.7 $13.05 FS
Building E - Laburnum Avenue
Henrico County, Virginia Commercial Union 10,503 100% 07/96 5 $13.75 FS
O-4 Parham Place Tuff-Stuff 3,104 100% 10/96 5 $12.00 NNN
1920 Parham Road
Henrico County, Virginia
Flex Rent Comparables
F-1 North Run Business Park Marco Sonix 20,000 75% 11/95 3 $ 8.50 NNN
Building IV
1550 East Parham Road
Henrico County, Virginia
F-2 North Run Business Park American Medical Labs. 4,756 75% 03/97 5 $ 9.00 NNN
Building V
1600 East Parham Road
Henrico County, Virginia
F-3 Parham Forest Business Park APD 6,966 78% 02/97 3 $ 8.75 NNN
2600-2852 Parham Road
Henrico County, Virginia
F-4 Virginia Center Tech Park Confidential 4,925 70% 1996 5 $ 8.85 IG
1043 Technology Park
Henrico County, Virginia
====================================================================================================================================
</TABLE>
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WAKEFIELD(R)
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<PAGE>
Income Capitalization Approach
================================================================================
The office rents at Interstate Center, located on Laburnum Avenue just
east of the subject property, range from $13.05 to $14.75 per square foot
full service for the most recent deals. Rent Comparable 0-4 is the most
recent lease at Parham Place, a flex building with 100 percent office
finish, and a rental rate of $12.00 per square foot triple net. An
additional indication of office rents are the recent leases signed at
Dabney A-1 for $13.50 per square foot full service and $8.50 per square
foot triple net. Mindful of these indicators and taking into consideration
the difference in expense structure, we estimate the office segment to
lease for $13.00 per square foot.
The warehouse leases range from $3.25 to $4.55 per square foot on either
an industrial gross or triple net basis. The most recent warehouse lease
at the subject property is the Color Tree lease of 12,682 square feet at
Britton's Hill for $3.83 per square foot triple net. Taking the rent
comparables and subject's most recent experience, we estimate the
warehouse portion to lease for $3.50 per square foot.
Given the above estimated parameters, the weighted average rent equals
$5.40 per square foot ($13.00 x 20 percent + $3.50 x 80 percent). This is
in keeping with the most recent leasing activity and as such, we estimate
the market rent for the flex buildings - minimum office build-out at $5.40
per square foot industrial gross.
Flex Buildings - Medium Office Build-Out
The group of properties consist of Dabney III, V, and VIll. The average
office finish of these buildings is close to 30 percent. As such, this
section of the portfolio appeals to a slightly different tenant base and
achieved a higher market rate than the above discussed properties. The
most recent leasing activity for the property type occurred at Dabney V,
with two 1997 leases consummated for $5.73 and $6.45 per square foot
industrial gross.
Based on the office and warehouse rents concluded above, the weighted
average rent equals $6.35 per square foot ($13.00 x 30 percent + $3.50 x
70 percent). This rent supported by the most recent deals signed at the
subject. Thus, we estimate the market rent for the flex buildings - medium
office build-out at $6.35 per square foot,
Flex Buildings - High Office Build-Out
These flex buildings consist of Dabney V11, IX, X, and XI. The average
office build- out of these properties is about 40 percent. As would be
expected, this portion of the portfolio achieved the highest rents of the
flex buildings. Three of these buildings experienced some recent leasing
activity. The most recent rents range from $6.55 to $7.65 per square foot
industrial gross.
Given the concluded office rate of $13.00 per square foot and warehouse
rate of $3.50 per square foot, the weighted average rent for this property
type equals $7.40 per square foot ($13.00 x 40 percent + $3.50 x 60
percent). This blended rent is supported by current leases signed at the
subject. Thus, we estimate the market rent for the flex buildings - high
office build-out at $7.40 per square foot.
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<PAGE>
Income Capitalization Approach
R & D Buildings
The research and development buildings are Dabney A-1 and A-2, which are
essentially 100 percent finished. In fact, these buildings are connected
by a corridor built by the tenant in both buildings, Pharmaco. Two leases
were recently negotiated at Dabney A-1. In March 1997, Comquest
Communication leased 7,000 square foot for $13.50 per square foot full
service and in April 1997, Pharmaco Analytical Lab leased 6,860 square
feet for $8.50 per square foot triple net. For this property type, a
triple net lease is the most common and as such, we have estimated the
market rent on this basis.
Obviously, the most recent leases are viewed as the best indication of
market rent levels. Nonetheless, we have examined recent leasing activity
at other high quality industrial buildings in the market. The Richmond
industrial market does not possess a significant supply of R & D product
and as such, we looked at flex projects with a significant percentage (70
or high) of office build-out. As shown on the Rent Comparable table, the
most current rental rates range from $8.50 to $9.00 per square foot triple
net. Overall, these properties are of a superior quality than the subject
and we would expect the rental rates to be slightly higher. Nonetheless,
the rent comparables support the current rents at the subject. Therefore,
we estimate the market rent for the R & D buildings at $8.50 per square
foot triple net.
Warehouse Buildings
This group of properties consist of Britton's Hill, Westmoreland Plaza,
Morton Marks, and 2110 Tomlynn. The physical characteristics of these
buildings differ significantly. However, with the exception of
Westmoreland Plaza, we believe the achievable rents are similar for these
remaining three properties.
The most recent lease was signed for 12,682 square feet in Britton's Hill.
The rental rate is $3.83 per square foot triple net. The warehouse rent
comparables profiled ranged from $3.35 to $4.55 per square foot on either
an industrial gross or triple net basis. Adjusting for differences in
expense structure, we estimate the market rent for Britton's Hill, Morton
Marks and 2110 Tomlynn at $4.00 per square foot triple net.
With respect to Westmoreland Plaza, the building was originally built as a
Price Club and has since been reconfigured by Capital One Bank as a credit
card processing facility. The quality of this building is superior to the
other warehouse buildings and as such, we believe that a rent premium is
warranted. Based on conversations with market participants, we conclude a
market rent at $5.00 per square foot triple net.
In addition to the above rent analysis, it is also appropriate to
determine the average lease term and annual rent escalation, The lease terms for
existing tenants range from two to 15 years and the average term is 7.5 years.
The subject leasing agent indicated that five to ten year deals are most common.
Thus, we conclude an average lease term of seven years for all new and renewal
speculative leases in the following cash flow analyses. Further, annual rent
escalation tend to range from 3.0 to 4.0 percent. The most recent leases were
negotiated
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<PAGE>
Income Capitalization Approach
================================================================================
at 3.0 percent and accordingly, we have implemented an annual escalation of 3.0
percent in the following cash flow analyses. Given the strong industrial market,
there are no rent concessions such as free rent, moving allowances or above
standard tenant improvement allowances. All of the rents are estimated on an
effective basis.
The following table summarizes the estimated market rent for the subject
property.
===========================================
Market
Property Rent
===========================================
Dabney I $5.40 IG
Dabney II $5.40 IG
Dabney III $6.35 IG
Dabney IV $5.40 IG
Dabney V $6.35 IG
Dabney VI $5.40 IG
Dabney VII $7.40 IG
Dabney VIII $6.35 IG
Dabney IX $7.40 IG
Dabney X $7.40 IG
Dabney XI $7.40 IG
Dabney A-1 $8.50 NNN
Dabney A-2 $8.50 NNN
Britton's Hill $4.00 NNN
Westmoreland $5.00 NNN
Morton Marks $4.00 NNN
2110 Tomlynn $4.00 NNN
===========================================
IG - Industrial gross lease wherein
the tenant is responsible for
increases in real estate taxes and
insurance over the base year.
NNN - Triple net lease wherein the tenant
is responsible for all operating expenses.
===========================================
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Income Capitalization Approach
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Dabney I
This is property is a 33,600 square foot single story flex building which
is currently 100 percent occupied by five tenants. Following is an analysis of
the current rental income, vacancy and collection loss projections, and
historical/future operating and fixed expenses for this property.
Current Rental Income
The weighted average rental rate during the next 12 months is $5.19 per
square foot industrial gross. The Pro-Ject Lease Abstract Report is in the
Addenda. In our opinion, this property's tenant base is composed of local
tenants which represents no atypical credit risk. Market rent for this property
was discussed above as $5.40 per square foot.
Expense Reimbursements
Consistent with market leasing practice for this type of real estate, the
tenants in a property like the subject are responsible for a proportionate share
of certain expenses incurred annually in the operation and ownership of the
investment above an established base amount. These expenses include real estate
taxes and insurance premiums. The tenant pays for utilities, maintenance,
cleaning and miscellaneous items occasionally incurred. Structural and roof
repairs typically are borne by ownership. Future leases in the subject property
are projected to be structured in a similar fashion.
Allowance for Vacancy and Credit Loss
A deduction must be made from the total gross revenues due an investor to
account for the possibility of vacancy and/or non-collection of rent. We have,
therefore, deducted 2.0 percent from gross revenues as a global allowance for
the non-payment of rent and expenses reimbursements by a tenant. This rate has
considered the creditworthiness of the tenant roster and long-term market
conditions.
Additionally. our analysis over time has incorporated a lag vacancy
allowance which provides for downtime between the expiration of an existing
lease and the commencement of a new lease. Upon the expiration of a lease, we
estimate that a 70 percent of the time a tenant will renew and 30 percent of the
time a tenant will vacate. We estimate that a space will remain vacate for six
to twelve months on average between tenants or say nine months. Therefore, the
weighted average lag vacancy utilized between lease expirations can be
calculated as follows:
================================================================================
Lag Vacancy Allowance
================================================================================
Event Probability X Down Time = Weighted Time
================================================================================
Rollover 70% X - 0 - = - 0 -
Turnover 30% X 9 months = 3.6 months
- --------------------------------------------------------------------------------
Total 100% Average Weighted Time = 4.0 months rounded
================================================================================
Based on the subject's weighted average downtime between leases, the
overall average occupancy rate of this building over the ten year holding period
is 95.3 percent. Including our overall vacancy/global credit loss allowance, the
implied overall occupancy rate
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Income Capitalization Approach
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over the ten year holding period is 93.3 percent. This is consistent with market
experience over the long term.
Total Operating Expenses
We were provided with historic operating expense data and the 1997 budget
for this building, a copy of which is in the Addenda. Finally, we analyzed
expense data from our files on similar properties.
Historic operating expenses at this building ranged from a low of $1.01
per square foot in 1996 to a high of $1.24 per square foot in 1995. The 1997
budget calls for $1.24 per square foot. This is consistent with other comparable
buildings in the Greater Dabney area. In the initial year of the investment
holding period, we project operating expenses to be $1.25 per square foot, based
on the following:
Operating Expenses - This expense category includes insurance, water and
sewer charges, repairs and maintenance allocable to ownership, etc.
Historically, this line item fluctuated wildly. Relying most on the
current budget, as supported by other known operating expenses in the
area, we stabilized this cost at $18,000 or $0.54 per square foot for Year
One.
General & Administrative - This item of expense covers payroll,
supervision and the preparation of all budgets, office expenses, licenses
and the like. Recent experience at the subject and its current pro forma
suggest a figure in the range of $0.25 per square foot. Based on the
subject's history, we selected $9,000 or $0.27 per square foot.
Management - This item of expense provides for professional management
services like collections, supervision and the preparation of all budgets.
Typical management fees typically range from 3.0 to 5.0 percent of
effective gross income. The 1997 budget provides from a management fee
of- 3.0 percent. Based on- market data, we used 3.0 percent.
Real Estate Taxes - We discussed real estate taxes in the Real Estate Tax
and Assessments section.
Other Non-Operating Expenses
Other, non-operating expenses are projected in this analysis from
prevailing commission schedules, construction costs and accepted practices. We
analyzed each item of capital expenditure in an attempt to project what the
typical investor in a property like the subject would consider reasonable, based
upon informed opinion and experience. The following is a discussion of the
other, non-operating expenses incorporated into this analysis.
Tenant Improvements - Upon the expiration of a lease, we applied a tenant
improvement allowance of $2.00 per square foot for new tenants and $0.50
per square foot for renewing tenants. With our selected renewal
probability discussed previously, the blended or weighted alteration
amount is calculated as follows:
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Income Capitalization Approach
================================================================================
====================================================================
Tenant Improvements
====================================================================
Event Probability X Unit Cost = Weighted Cost
====================================================================
Rollover 70% X $0.50/SF = $0.35/SF
Turnover 30% X $2.00/SF = $0.60/SF
--------------------------------------------------------------------
Total 100% Average Weighted Cost = $0.95/SF
====================================================================
Leasing Commissions - In estimating the appropriate stabilized leasing
expense, the same rollover/tumover probabilities as described above are
utilized. The standard leasing commission for new tenants is 6.0 percent
of the aggregate lease value and for renewing tenants is 2.0 percent. We
modeled commission payments being cashed out. With our selected renewal
probability discussed previously, the blended or weighted alteration
amount is calculated as follows:
====================================================================
Leasing Commissions
====================================================================
Event Probability X Commission = Weighted Cost
====================================================================
Rollover 70% X 2.0% = 1.4%
Turnover 30% X 6.0% = 1.8%
--------------------------------------------------------------------
Total 100% Average Weighted Cost = 3.2%
====================================================================
Reserves - It is customary and prudent to set aside an amount annually for
the replacement of short lived capital items such as roofs, parking lots,
or mechanical equipment. In this analysis, we have projected an allowance
for reserves of $0.20 per square foot of rentable building area which is
typical in the local market place for a property like the subject.
All the above discussed expenses are forecasted to increase at an average
annual rate of 3.5 percent over the investment holding period. The forecast of
projected growth rates in all categories of expense reflect typical investor
expectations as noted in the Cushman & Wakefield Investor Survey, which is in
the Addenda. Except where noted, our projected growth rates for the various
types of expense categories generally do not attempt to reflect growth rates for
any individual year, but rather the long term trend over the period of analysis.
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<PAGE>
Dabney I
Cash Flow Analysis
<TABLE>
<CAPTION>
=================================================================================================================
1 2 3 4 5 6 7
Fiscal Year 1998 1999 2000 2001 2002 2003 2004
=================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue From Operations
Minimum Rent $ 174,317 $ 176,715 $ 177,035 $ 187,851 $ 208,598 $ 202,233 $ 216,937
Expense Recoveries $ 676 $ 919 $ 585 $ 789 $ 1,130 $ 1,374 $ 1,903
Other Income $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Vacancy & Collection Loss ($ 3,500) ($ 3,553) ($ 3,552) ($ 3,773) ($ 4,195) ($ 4,072) ($ 4,377)
------------------------------------------------------------------------------------
Effective Gross Income $ 171,493 $ 174,081 $ 174,068 $ 184,867 $ 205,533 $ 199,535 $ 214,463
Expenses
Operating Expenses $ 18,158 $ 18,636 $ 19,288 $ 19,963 $ 20,662 $ 21,385 $ 22,133
G&A Expense $ 9,079 $ 9,318 $ 9,644 $ 9,981 $ 10,331 $ 10,692 $ 11,067
Management $ 5,145 $ 5,222 $ 5,222 $ 5,546 $ 6,166 $ 5,986 $ 6,434
Real Estate Taxes $ 9,451 $ 9,700 $ 10,039 $ 10,391 $ 10,754 $ 11,131 $ 11,520
------------------------------------------------------------------------------------
Total Expenses $ 41,833 $ 42,876 $ 44,193 $ 45,881 $ 47,913 $ 49,194 $ 51,154
Net Operating Income $ 129,660 $ 131,205 $ 129,875 $ 138,986 $ 157,620 $ 150,341 $ 163,309
Commisions $ 2,738 $ 0 $ 19,014 $ 12,336 $ 0 $ 6,353 $ 0
Capital Reserves $ 6,720 $ 6,838 $ 7,077 $ 7,325 $ 7,581 $ 7,846 $ 8,121
Alterations $ 2,100 $ 0 $ 13,768 $ 9,002 $ 0 $ 4,659 $ 0
------------------------------------------------------------------------------------
Net Cash Flow $ 118,102 $ 124,367 $ 90,016 $ 110,323 $ 150,039 $ 131,483 $ 155,188
=================================================================================================================
</TABLE>
==========================================================================
8 9 10 11
Fiscal Year 2005 2006 2007 2008
==========================================================================
Revenue From Operations
Minimum Rent $ 223,445 $ 230,149 $ 187,212 $ 230,829
Expense Recoveries $ 2,450 $ 3,018 $ 2,240 $ 1,317
Other Income $ 0 $ 0 $ 0 $ 0
Vacancy & Collection Loss ($ 4,518) ($ 4,663) ($ 3,789) ($ 4,643)
---------------------------------------------
Effective Gross Income $ 221,377 $ 228,504 $ 185,663 $ 227,503
Expenses
Operating Expenses $ 22,908 $ 23,710 $ 24,539 $ 25,398
G&A Expense $ 11,454 $ 11,855 $ 12,270 $ 12,699
Management $ 6,641 $ 6,855 $ 5,570 $ 6,825
Real Estate Taxes $ 11,924 $ 12,341 $ 12,773 $ 13,220
---------------------------------------------
Total Expenses $ 52,927 $ 54,761 $ 55,152 $ 58,142
Net Operating Income $ 168,450 $ 173,743 $ 130,511 $ 169,361
Commisions $ 0 $ 0 $ 23,813 $ 13,011
Capital Reserves $ 8,405 $ 8,699 $ 9,004 $ 9,319
Alterations $ 0 $ 0 $ 17,890 $ 9,775
---------------------------------------------
Net Cash Flow $ 160,045 $ 165,044 $ 79,804 $ 137,256
==========================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Terminal Capitalization Rate
The residual cash flows annually generated by the property comprise only
the first part of the return which an investor will receive. The second
component of this investment return is the pre-tax cash proceeds from the resale
of the property at the end of a projected investment holding period. A terminal
capitalization rate was used to estimate the market value of the property at the
end of the assumed investment holding period. We estimated an appropriate
terminal rate based on indicated rates in today's market.
====================================================================
Summary of Capitalization Rates
====================================================================
Sale Location Capitalization Rate
====================================================================
R&D-1 3701 Saunders Avenue 12.0%
R&D-2 1001-1063 Technology Park Drive 12.4%
R&D-3 3801-3827 Gaskin Road 10.5%
I-4 11351 Virginia Precast Road N/A
I-5 510 Eastpark Court 10.6%
I-6 4200 Oakleys Place 10.6%
I-7 4717 Eubank Road 10.8%
I-8 5600-5700 Eastport Boulevard 10.5%
I-9 2511 Britton's Hill Road 10.4%
====================================================================
Terminal Capitalization Rate Selected 10.5%
====================================================================
A premium was added to today's rate to allow for the risk of unforeseen
events or trends which might affect our estimate of net operating income during
the holding period. Investors typically add 50 to 100 basis points to the
going-in rate to arrive at a terminal capitalization rate, according to Cushman
& Wakefield's periodic investor surveys. The survey suggested terminal rates
between 9.5 and 11.0 percent. Due to the fact that Richmond is a secondary
market, a rate from the upper middle of the range is warranted.
For this analysis, we project a sale of the property at the end of the
10th year of the holding period. The gross reversion is calculated by
capitalizing the 11th year's net operating income at our selected terminal rate.
Transaction Costs - From the projected reversion, we deducted 4.0 percent
to account for the various transaction costs associated with the sale of an
asset, such as, transfer taxes, brokerage fees and other miscellaneous expenses
that the seller pays at final closing.
Discount Rate - In our valuation, we endeavored to reflect the most likely
actions of typical buyers and sellers in this market. We forecasted cash flows
and discounted them and the future property value at reversion to a present
value at an appropriate rate of return or yield rate as currently required by
investors for similar quality real property. The yield rate (internal rate of
return or IRR) is the single rate that discounts all future benefits (cash flow
and reversion) to an estimate of net present value.
Cushman & Wakefield Valuation Advisory Services periodically surveys
national real estate investors to determine their investment objectives.
Following is a brief review of internal rates of return and overall rates
considered acceptable by survey respondents. The entire survey is included among
the Addenda to this report.
================================================================================
-72-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
========================================================
Autumn 1996 Winter Investor Survey
for Industrial Buildings
========================================================
Going-In Terminal IRR
--------------------------------------------------------
Low High Low High Low High
========================================================
Mean 8.90% 9.40% 9.70% 10.7% 11.5% 11.5%
--------------------------------------------------------
Range 8.50% 9.50% 9.50% 11.0% 11.0% 12.0%
========================================================
The wide range of investment parameters indicates that property risk and
yield are assessed to a particular investment property based on a variety of
variables. Risk is the primary determinant, and the risk variables include
whether current contract rents are significantly above or below current market
rents; the amount and timing of tenant roll-overs, the reliability of the cash
flow, and its ability to increase with inflation along with the creditworthiness
of the existing tenancy; investor demand for the property type; the
diversification of the metropolitan area; the property's location within the
local market and the supply and demand for the property type within the market;
and the effective age of the property.
The internal rate of return and terminal capitalization rate selected for
this analysis were strongly influenced by our recent Investor Survey. We realize
that this type of survey reflects target rather than transactional rates.
Transactional rates are usually difficult to obtain in the verification process
and are actually only target rates of the buyer at the time of sale. The
property's performance will ultimately determine the actual yield and
capitalization rate at the time of sale after a specific holding period. We have
found that, in improving markets or with above average properties, demand will
be high and transactional rates may be lower than target rates that are quoted
in surveys. We have tried to recognize this factor in our choice of these two
rates for our cash flow model.
Considering the locational attributes, physical traits and economic
characteristics of the subject property, we chose a discount rate of 12.0
percent in light of the investment criteria presented here.
On the following page is the Discounted Cash Flow Analysis for this asset.
Using the above indicated rates of return, our cash flow model indicated a value
of $1,200,000 or $35.71 per square foot. This value estimate produces an implied
going-in capitalization rate of 10.8 percent, a figure well within the
anticipated return necessary to interest investors for this quality of building.
It is skewed upward slightly due to the essentially 100 percent leased status of
this building.
Regarding the composition of the yield, a significant 59 percent of the
subject's ultimate yield is derived from the cash flow of the property with the
balance attributable to the reversion or resale of the property at the
conclusion of the holding period. Typical investor requirements dictate that a
substantial amount of the value be derived from the cash flow. Finally, the
average annual cash on cash return equals 10.7 percent.
================================================================================
-73-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Dabney I
10 Year Holding Period
Discounted Cash Flow Analysis
<TABLE>
<CAPTION>
========================================================================================
Discount Annual
Fiscal Net Rate Present Value Composition Cash on Cash
Year Cash Flow 12.00% of Cash Flows Of Yield Return
========================================================================================
<S> <C> <C> <C> <C> <C>
1998 $118,102 X 0.89286 = $105,448 8.7% 9.8%
1999 $124,367 X 0.79719 = $ 99,145 8.2% 10.4%
2000 $ 90,016 X 0.71178 = $ 64,072 5.3% 7.5%
2001 $110,323 X 0.63552 = $ 70,112 5.8% 9.2%
2002 $150,039 X 0.56743 = $ 85,136 7.0% 12.5%
2003 $131,483 X 0.50663 = $ 66,613 5.5% 11.0%
2004 $155,188 X 0.45235 = $ 70,199 5.8% 12.9%
2005 $160,045 X 0.40388 = $ 64,639 5.3% 13.3%
2006 $165,044 X 0.36061 = $ 59,517 4.9% 13.8%
2007 $ 79,804 X 0.32197 = $ 25,695 2.1% 6.7%
-------- --- ----
Total Present Value of Cash Flows $710,576 59% 10.7%
Average
Reversion:
2008 $169,361 (1))/ 10.5% = $1,612,962
Less: Cost of 4.0% $ 64,518
----------
Net Reversion $1,548,443
X Discount Factor 0.32197
----------
Total Present Value of Reversion $ 498,557 41%
Total Present Value $1,209,134 100%
ROUNDED: $1,200,000
==========
----------------------------------------------------------
Net Rentable Area: 33,600
Per SF NRA: $35.71
Implicit Going-in Capitalization Rate:
Year One NOI $129,660
Going-In Capitalization Rate: 10.8%
==========================================================
Note: (1) Net Operating Income
========================================================================================
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Dabney II
This property is a 42,000 square foot, single story flex building which is
currently 100 percent occupied by five tenants. Dabney II has minimum office
build-out of about 20 percent. Following is an analysis of the current rental
and expense recovery income, vacancy and collection loss projections, and
historical/future operating and non-operating expenses for this property.
Current Rental Income
The weighted average rental rate during the next 12 months is $5.19 per
square foot industrial gross. The property currently has one tenant, Aladdin
Mills, Inc., who leases space on a month-to-month basis. According to the
leasing agent, there is on-going negotiations for a five-year lease renewal at
the same rental rate. For purposes of this analysis, we have assumed this
renewal is consummated. The remaining four leases are scheduled to expire in
three to five years. The Pro-Ject Lease Abstract Report is in the Addenda. The
tenant base is comprised of local companies and does not represents an atypical
credit risk.
Market rent for flex buildings with minimal office build-out was
previously discussed and is estimated at $5.40 per square foot. The subject's
contract rent is slightly below market levels. This is attributed to the
majority of leases being signed in the early 1990s.
Expense Reimbursements
Expense reimbursements for this property are similar to those discussed
for Dabney I and are treated the same way in this analysis.
Allowance for Vacancy and Credit Loss
We used the same parameters for this property as for Dabney I relative to
credit loss and renewal probability. The resulting overall average occupancy
rate over the ten year holding period is 96.6 percent. Including our overall
vacancy/global credit loss allowance, the implied overall occupancy rate is 94.6
percent.
Total Operating Expenses
Historic operating expenses at this building ranged from a low of $0.84
per square foot in 1994 to a high of $0.93 per square foot in 1995. The 1997
budget calls for $1.12 per square foot. We deviated from the budget with respect
to operating expenses and real estate taxes. With respect to operating expenses,
the budget projected this line item at $0.49 per square foot, which is
significantly above the historical trends and accordingly, we estimated this
expense at $0.43 per square foot ($18,000). As discussed in the Real Estate Tax
and Assessment section, the 1997 assessment increased significantly and
subsequently, the tax liability increased for this property. We used the actual
real estate tax liability in the cash flow. Based on this, we project operating
expenses to be $1.21 per square foot in the initial year of the holding period.
Other Non-Operating Expenses
We employed the same tenant improvement allowance, leasing commissions and
capital reserves as used for Dabney I above.
================================================================================
-75-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Dabney II
Cash Flow Analysis
<TABLE>
<CAPTION>
=================================================================================================================
1 2 3 4 5 6 7
Fiscal Year 1998 1999 2000 2001 2002 2003 2004
=================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue From Operations
Minimum Rent $ 202,208 $ 206,787 $ 185,862 $ 182,263 $ 239,976 $ 243,062 $ 267,626
Expense Recoveries $ 4,887 $ 5,433 $ 4,500 $ 2,177 $ 1,248 $ 1,384 $ 2,240
Other Income $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Vacancy & Collection Loss ($ 4,142) ($ 4,244) ($ 3,807) ($ 3,689) ($ 4,824) ($ 4,889) ($ 5,397)
------------------------------------------------------------------------------------
Effective Gross Income $ 202,953 $ 207,976 $ 186,555 $ 180,751 $ 236,400 $ 239,557 $ 264,469
Expenses
Operating Expenses $ 18,158 $ 18,636 $ 19,288 $ 19,963 $ 20,662 $ 21,385 $ 22,133
G&A Expense $ 10,088 $ 10,353 $ 10,715 $ 11,090 $ 11,479 $ 11,880 $ 12,296
Management $ 6,089 $ 6,239 $ 5,597 $ 5,423 $ 7,092 $ 7,187 $ 7,934
Real Estate Taxes $ 16,523 $ 16,958 $ 17,552 $ 18,166 $ 18,802 $ 19,460 $ 20,141
------------------------------------------------------------------------------------
Total Expenses $ 50,858 $ 52,186 $ 53,152 $ 54,642 $ 58,035 $ 59,912 $ 62,504
Net Operating Income $ 152,095 $ 155,790 $ 133,403 $ 126,109 $ 178,365 $ 179,645 $ 201,965
Commisions $ 0 $ 0 $ 17,965 $ 30,660 $ 0 $ 12,706 $ 0
Capital Reserves $ 8,400 $ 8,547 $ 8,846 $ 9,156 $ 9,476 $ 9,808 $ 10,151
Alterations $ 0 $ 0 $ 13,047 $ 22,354 $ 0 $ 9,317 $ 0
------------------------------------------------------------------------------------
Net Cash Flow $ 143,695 $ 147,243 $ 93,545 $ 63,939 $ 168,889 $ 147,814 $ 191,814
=================================================================================================================
</TABLE>
==========================================================================
8 9 10 11
Fiscal Year 2005 2006 2007 2008
==========================================================================
Revenue From Operations
Minimum Rent $ 275,656 $ 283,925 $ 262,406 $ 272,481
Expense Recoveries $ 3,125 $ 4,043 $ 4,228 $ 3,261
Other Income $ 0 $ 0 $ 0 $ 0
Vacancy & Collection Loss ($ 5,576) ($ 5,759) ($ 5,333) ($ 5,515)
---------------------------------------------
Effective Gross Income $ 273,205 $ 282,209 $ 261,301 $ 270,227
Expenses
Operating Expenses $ 22,908 $ 23,710 $ 24,539 $ 25,398
G&A Expense $ 12,727 $ 13,172 $ 13,633 $ 14,110
Management $ 8,196 $ 8,466 $ 7,839 $ 8,107
Real Estate Taxes $ 20,846 $ 21,576 $ 22,331 $ 23,112
---------------------------------------------
Total Expenses $ 64,677 $ 66,924 $ 68,342 $ 70,727
Net Operating Income $ 208,528 $ 215,285 $ 192,959 $ 199,500
Commisions $ 0 $ 0 $ 22,094 $ 15,172
Capital Reserves $ 10,506 $ 10,874 $ 11,255 $ 11,649
Alterations $ 0 $ 0 $ 16,599 $ 11,454
---------------------------------------------
Net Cash Flow $ 198,022 $ 204,411 $ 143,011 $ 161,225
==========================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Terminal Capitalization Rate
Similarly, we selected the same terminal capitalization rate of 10.5
percent for this property.
Transaction Costs
A costs of sale of 4.0 percent is used in this analysis.
Discount Rate
We used an IRR of 12.0 percent. On the following page is the Discounted
Cash Flow Analysis for this asset. Using the above indicated rates of return,
our cash flow model indicated a value of $1,400,000 or $33.33 per square foot.
This value estimate produces an implied going-in capitalization rate of 10.9
percent, a figure well within the anticipated return necessary to interest
investors for this quality of building. It is skewed upward slightly due to the
essentially 100 percent leased status of this building.
Regarding the composition of the yield, a significant 58 percent of the
subject's ultimate yield is derived from the cash flow of the property with the
balance attributable to the reversion or resale of the property at the
conclusion of the holding period. Typical investor requirements dictate that a
substantial amount of the value be derived from the cash flow. Finally, the
average annual cash on cash return equals 10.7 percent.
================================================================================
-77-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Dabney II
10 Year Holding Period
Discounted Cash Flow Analysis
<TABLE>
<CAPTION>
========================================================================================
Discount Annual
Fiscal Net Rate Present Value Composition Cash on Cash
Year Cash Flow 12.00% of Cash Flows Of Yield Return
========================================================================================
<S> <C> <C> <C> <C> <C>
1998 $143,695 X 0.89286 = $128,299 9.2% 10.3%
1999 $147,243 X 0.79719 = $117,381 8.4% 10.5%
2000 $ 93,545 X 0.71178 = $ 66,583 4.8% 6.7%
2001 $ 63,939 X 0.63552 = $ 40,634 2.9% 4.6%
2002 $168,889 X 0.56743 = $ 95,832 6.9% 12.1%
2003 $147,814 X 0.50663 = $ 74,887 5.4% 10.6%
2004 $191,814 X 0.45235 = $ 86,767 6.2% 13.7%
2005 $198,022 X 0.40388 = $ 79,978 5.7% 14.1%
2006 $204,411 X 0.36061 = $ 73,713 5.3% 14.6%
2007 $143,011 X 0.32197 = $ 46,046 3.3% 10.2%
-------- --- ----
Total Present Value of Cash Flows $810,121 58% 10.7%
Average
Reversion:
2008 $199,500 (1))/ 10.5% = $1,900,000
Less: Cost of 4.0% $ 76,000
----------
Net Reversion $1,824,000
X Discount Factor 0.32197
----------
Total Present Value of Reversion $ 587,279 42%
Total Present Value $1,397,400 100%
ROUNDED: $1,400,000
==========
----------------------------------------------------------
Net Rentable Area: 42,000
Per SF NRA: $33.33
Implicit Going-in Capitalization Rate:
Year One NOI $152,095
Going-In Capitalization Rate: 10.9%
==========================================================
Note: (1) Net Operating Income
========================================================================================
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Dabney III
This property consists of a 23,850 square foot, single story flex building
which is 100 percent occupied by four tenants. Dabney III has medium office
build-out of 30 percent. Following is an analysis of the current rental income,
vacancy and collection loss projections, and historical/future operating and
non-operating expenses for this property.
Current Rental Income
This property is currently fully leased to four tenants; however, two of
the tenants have lease expiration date of November 1997. Based on conversations
with the leasing agent, Unijax is expected to renew their lease for five years
at the current rent escalated by 3.0 percent. The other tenant, West End Signs,
recently sold its business, and it is unknown whether they will renew their
lease. For purposes of this analysis, we have speculatively leased this space
upon lease expiration. The Pro-Ject Lease Abstract Report is in the Addenda. The
tenant base is primarily local and represents no atypical credit risk.
The weighted average rental rate during the next 12 months is $5.46 per
square foot industrial gross. Market rent for this property type (flex -- medium
office build-out) is estimated at $6.35 per square foot. The estimated rent
level of $5.46 per square foot is below market, and is reflective of older
leases and the anticipated rollover occurring in Year One of our analysis.
Expense Reimbursements
Similar to the above discussed properties, all of the leases were
negotiated on an industrial gross basis. The tenant reimburses ownership for
increases in real estate taxes and insurance over the base year. This analysis
reflects this leasing structure.
Allowance for Vacancy and Credit Loss
We used the same parameters for this property as for Dabney I relative to
credit loss and renewal probability. The resulting overall average occupancy
rate over the ten year holding period is 96.3 percent. Including our overall
vacancy/global credit loss allowance, the implied overall occupancy rate is 94.3
percent.
Total Operating Expenses
Since 1994, total operating expenses at Dabney III ranged from a low of
$0.96 per square foot in 1996 to a high of $1.38 per square foot in 1995. The
1997 budget calls for $1.59 per square foot. With the exception of real estate
taxes, we estimated operating expenses similar to ownership's budget
projections. As discussed in the Real Estate Tax and Assessment section, the
1997 assessment increased by over 40 percent and subsequently, the tax liability
increased for this property. We used the actual real estate tax liability in the
cash flow. Based on this, we project operating expenses to be $1.68 per square
foot in the initial year of the holding period. The higher total operating
expenses is solely attributed to the higher than projected real estate taxes.
Other Non-Operating Expenses
We employed the same tenant improvement allowance, leasing commissions and
capital reserves as used in Dabney I above.
================================================================================
-79-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Dabney III
Cash Flow Analysis
<TABLE>
<CAPTION>
=================================================================================================================
1 2 3 4 5 6 7
Fiscal Year 1998 1999 2000 2001 2002 2003 2004
=================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue From Operations
Minimum Rent $ 130,285 $ 142,195 $ 146,460 $ 150,854 $ 136,668 $ 148,149 $ 179,697
Expense Recoveries $ 1,776 $ 1,521 $ 1,966 $ 2,426 $ 1,300 $ 684 $ 868
Other Income $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Vacancy & Collection Loss ($ 2,641) ($ 2,874) ($ 2,969) ($ 3,066) ($ 2,759) ($ 2,977) ($ 3,611)
------------------------------------------------------------------------------------
Effective Gross Income $ 129,420 $ 140,842 $ 145,457 $ 150,214 $ 135,209 $ 145,856 $ 176,954
Expenses
Operating Expenses $ 19,166 $ 19,671 $ 20,359 $ 21,072 $ 21,809 $ 22,573 $ 23,363
G&A Expense $ 7,061 $ 7,247 $ 7,501 $ 7,763 $ 8,035 $ 8,316 $ 8,607
Management $ 3,883 $ 4,225 $ 4,364 $ 4,506 $ 4,056 $ 4,376 $ 5,309
Real Estate Taxes $ 9,961 $ 10,224 $ 10,581 $ 10,952 $ 11,335 $ 11,732 $ 12,142
------------------------------------------------------------------------------------
Total Expenses $ 40,071 $ 41,367 $ 42,805 $ 44,293 $ 45,235 $ 46,997 $ 49,421
Net Operating Income $ 89,349 $ 99,475 $ 102,652 $ 105,921 $ 89,974 $ 98,859 $ 127,533
Commisions $ 9,377 $ 0 $ 0 $ 0 $ 17,609 $ 19,319 $ 0
Capital Reserves $ 4,770 $ 4,853 $ 5,023 $ 5,199 $ 5,381 $ 5,569 $ 5,764
Alterations $ 6,715 $ 0 $ 0 $ 0 $ 10,981 $ 12,087 $ 0
------------------------------------------------------------------------------------
Net Cash Flow $ 68,487 $ 94,622 $ 97,629 $ 100,722 $ 56,003 $ 61,884 $ 121,769
=================================================================================================================
</TABLE>
==========================================================================
8 9 10 11
Fiscal Year 2005 2006 2007 2008
==========================================================================
Revenue From Operations
Minimum Rent $ 178,548 $ 188,264 $ 196,091 $ 201,974
Expense Recoveries $ 1,277 $ 1,470 $ 2,036 $ 2,621
Other Income $ 0 $ 0 $ 0 $ 0
Vacancy & Collection Loss ($ 3,596) ($ 3,795) ($ 3,963) ($ 4,092)
---------------------------------------------
Effective Gross Income $ 176,229 $ 185,939 $ 194,164 $ 200,503
Expenses
Operating Expenses $ 24,180 $ 25,027 $ 25,903 $ 26,809
G&A Expense $ 8,909 $ 9,220 $ 9,543 $ 9,877
Management $ 5,287 $ 5,578 $ 5,825 $ 6,015
Real Estate Taxes $ 12,567 $ 13,007 $ 13,463 $ 13,934
---------------------------------------------
Total Expenses $ 50,943 $ 52,832 $ 54,734 $ 56,635
Net Operating Income $ 125,286 $ 133,107 $ 139,430 $ 143,868
Commisions $ 0 $ 6,414 $ 0 $ 0
Capital Reserves $ 5,966 $ 6,175 $ 6,391 $ 6,615
Alterations $ 0 $ 4,058 $ 0 $ 0
---------------------------------------------
Net Cash Flow $ 119,320 $ 116,460 $ 133,039 $ 137,253
==========================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Terminal Capitalization Rate
Similarly, we selected the same terminal capitalization rate of 10.5
percent for this property.
Transaction Costs
A costs of sale of 4.0 percent is used in this analysis.
Discount Rate
We used an IRR of 12.0 percent. On the following page is the Discounted
Cash Flow Analysis for this asset. Using the above indicated rates of return,
our cash flow model indicated a value of $900,000 or $37.74 per square foot.
This value estimate produces an implied going-in capitalization rate of 9.9
percent, a figure well within the anticipated return necessary to interest
investors for this quality of building.
Regarding the composition of the yield, a significant 55 percent of the
subject's ultimate yield is derived from the cash flow of the property with the
balance attributable to the reversion or resale of the property at the
conclusion of the holding period. Typical investor requirements dictate that a
substantial amount of the value be derived from the cash flow. Finally, the
average annual cash on cash return equals 10.8 percent.
================================================================================
-81-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Dabney III
10 Year Holding Period
Discounted Cash Flow Analysis
<TABLE>
<CAPTION>
========================================================================================
Discount Annual
Fiscal Net Rate Present Value Composition Cash on Cash
Year Cash Flow 12.00% of Cash Flows Of Yield Return
========================================================================================
<S> <C> <C> <C> <C> <C>
1998 $ 68,487 X 0.89286 = $61,149 6.5% 7.6%
1999 $ 94,622 X 0.79719 = $75,432 8.0% 10.5%
2000 $ 97,629 X 0.71178 = $69,490 7.4% 10.8%
2001 $100,722 X 0.63552 = $64,011 6.8% 11.2%
2002 $ 56,003 X 0.56743 = $31,778 3.4% 6.2%
2003 $ 61,884 X 0.50663 = $31,352 3.3% 6.9%
2004 $121,769 X 0.45235 = $55,082 5.8% 13.5%
2005 $119,320 X 0.40388 = $48,191 5.1% 13.3%
2006 $116,460 X 0.36061 = $41,997 4.4% 12.9%
2007 $133,039 X 0.32197 = $42,835 4.5% 14.8%
-------- --- ----
Total Present Value of Cash Flows $521,317 55% 10.8%
Average
Reversion:
2008 $143,868 (1))/ 10.5% = $1,370,171
Less: Cost of 4.0% $ 54,807
----------
Net Reversion $1,315,365
X Discount Factor 0.32197
----------
Total Present Value of Reversion $ 423,512 45%
Total Present Value $ 944,829 100%
ROUNDED: $ 900,000
==========
----------------------------------------------------------
Net Rentable Area: 23,850
Per SF NRA: $ 37.74
Implicit Going-in Capitalization Rate:
Year One NOI $ 89,349
Going-In Capitalization Rate: 9.9%
==========================================================
Note: (1) Net Operating Income
========================================================================================
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Dabney IV
This property consists of a 41,550 square foot, single story flex building
which is 100 percent leased to five tenants. Dabney IV has minimum office
build-out of 20 percent. Following is an analysis of the current rental income,
vacancy and collection loss projections, and historical/future operating and
non-operating expenses for this property.
Current Rental Income
Dabney IV is 100 percent occupied by five tenants with suites ranging from
4,200 to 12,600 square feet. The property is encumbered with several long term
leases. One of the leases expire in Year Eleven of the cash flow (we will
discuss the impact of this lease later in the analysis). The Pro-Ject Lease
Abstract Report is in the Addenda. The tenant base is primarily local and
represents no atypical credit risk.
The weighted average rental rate during the next 12 months is $5.10 per
square foot industrial gross. Market rent for this property type (flex --
minimum office build-out) is estimated at $5.40 per square foot. The estimated
rent level is about five percent below market, and is reflective of several
older leases signed in 1991 through 1994 at lower than current rates.
Expense Reimbursements
Expense reimbursements for this property are similar to those discussed
for Dabney I through III, and are treated the same manner in this analysis.
Allowance for Vacancy and Credit Loss
We used the same above discussed parameters for this property relative to
credit loss and renewal probability. The resulting overall average occupancy
rate over the ten year holding period is 97.7 percent. Including our overall
vacancy/global credit loss allowance, the implied overall occupancy rate is 95.7
percent. This is slightly higher than market parameters and is attributed to the
long-term nature of several of the existing leases.
Total Operating Expenses
The total operating expenses at Dabney IV ranged from a low of $0.91 per
square foot in 1996 to a high of $1.45 per square foot in 1995. The 1997 budget
calls for $1.13 per square foot. With the exception of real estate taxes, we
estimated operating expenses similar to ownership's budget projections. As
discussed in the Real Estate Tax and Assessment section, the 1997 assessment
increased by about nine percent and subsequently, the tax liability increased
slightly for this property. We used the actual real estate tax liability in the
cash flow. Based on this, we project operating expenses to be $1.16 per square
foot in the initial year of the holding period.
Other Non-Operating Expenses
We employed the same tenant improvement allowance, leasing commissions and
capital reserves as used in Dabney I above.
================================================================================
-83-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Dabney IV
Cash Flow Analysis
<TABLE>
<CAPTION>
=================================================================================================================
1 2 3 4 5 6 7
Fiscal Year 1998 1999 2000 2001 2002 2003 2004
=================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue From Operations
Minimum Rent $ 211,682 $ 219,154 $ 226,894 $ 211,570 $ 191,570 $ 240,134 $ 247,338
Expense Recoveries $ 2,590 $ 3,085 $ 3,762 $ 3,921 $ 2,724 $ 2,330 $ 3,109
Other Income $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Vacancy & Collection Loss ($ 4,285) ($ 4,445) ($ 4,613) ($ 4,310) ($ 3,886) ($ 4,849) ($ 5,009)
------------------------------------------------------------------------------------
Effective Gross Income $ 209,987 $ 217,794 $ 226,043 $ 211,181 $ 190,408 $ 237,615 $ 245,438
Expenses
Operating Expenses $ 18,158 $ 18,636 $ 19,288 $ 19,963 $ 20,662 $ 21,385 $ 22,133
G&A Expense $ 9,079 $ 9,318 $ 9,644 $ 9,981 $ 10,331 $ 10,692 $ 11,067
Management $ 6,300 $ 6,534 $ 6,781 $ 6,335 $ 5,712 $ 7,128 $ 7,363
Real Estate Taxes $ 14,674 $ 15,061 $ 15,588 $ 16,133 $ 16,698 $ 17,282 $ 17,887
------------------------------------------------------------------------------------
Total Expenses $ 48,211 $ 49,549 $ 51,301 $ 52,412 $ 53,403 $ 56,487 $ 58,450
Net Operating Income $ 161,776 $ 168,245 $ 174,742 $ 158,769 $ 137,005 $ 181,128 $ 186,988
Commisions $ 0 $ 0 $ 0 $ 12,156 $ 31,765 $ 0 $ 0
Capital Reserves $ 8,310 $ 8,455 $ 8,751 $ 9,058 $ 9,375 $ 9,703 $ 10,042
Alterations $ 0 $ 0 $ 0 $ 8,850 $ 23,293 $ 0 $ 0
------------------------------------------------------------------------------------
Net Cash Flow $ 153,466 $ 159,790 $ 165,991 $ 128,705 $ 72,572 $ 171,425 $ 176,946
=================================================================================================================
</TABLE>
==========================================================================
8 9 10 11
Fiscal Year 2005 2006 2007 2008
==========================================================================
Revenue From Operations
Minimum Rent $ 254,758 $ 262,401 $ 270,273 $ 258,357
Expense Recoveries $ 3,913 $ 4,747 $ 5,610 $ 5,790
Other Income $ 0 $ 0 $ 0 $ 0
Vacancy & Collection Loss ($ 5,173) ($ 5,343) ($ 5,518) ($ 5,283)
---------------------------------------------
Effective Gross Income $ 253,498 $ 261,805 $ 270,365 $ 258,864
Expenses
Operating Expenses $ 22,908 $ 23,710 $ 24,539 $ 25,398
G&A Expense $ 11,454 $ 11,855 $ 12,270 $ 12,699
Management $ 7,605 $ 7,854 $ 8,111 $ 7,766
Real Estate Taxes $ 18,513 $ 19,161 $ 19,832 $ 20,526
---------------------------------------------
Total Expenses $ 60,480 $ 62,580 $ 64,752 $ 66,389
Net Operating Income $ 193,018 $ 199,225 $ 205,613 $ 192,475
Commisions $ 0 $ 0 $ 0 $ 15,172
Capital Reserves $ 10,394 $ 10,758 $ 11,134 $ 11,524
Alterations $ 0 $ 0 $ 0 $ 11,454
---------------------------------------------
Net Cash Flow $ 182,624 $ 188,467 $ 194,479 $ 154,325
==========================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Terminal Capitalization Rate
Similarly, we selected the same terminal capitalization rate of 10.5
percent for this property.
Transaction Costs
A costs of sale of 4.0 percent is used in this analysis.
Discount Rate
We used an IRR of 12.0 percent. On the following page is the Discounted
Cash Flow Analysis for this asset. Using the above indicated rates of return,
our cash flow model indicated a value of $1,400,000 or $33.69 per square foot.
This value estimate produces an implied going-in capitalization rate of 11.6
percent. It is skewed upward due to the essentially 100 percent leased status,
coupled with the erratic cash flows due to the subject's lease expiration
schedule, which results in little growth over the holding period.
As a result, we also considered the value indications from holding periods
ranging from ten to 15 years, the average of which suggested a value of
$1,500,000. See the second following page. We believe that on owner would
attempt to optimize the date of sale rather than sale at the end of exactly ten
years. Therefore, we concluded to this higher figure. The lower value indication
for the ten year holding period is due to significant lease expirations in
either the terminal or following year. We believe that an owner would attempt to
optimize the date of sale rather than sell the property in exactly ten years.
Therefore, we concluded to this higher value which yielded an implied going-in
capitalization rate of 10.8 percent, a figure well within the anticipated return
necessary to interest investors for this quality of building.
================================================================================
-85-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Dabney IV
10 Year Holding Period
Discounted Cash Flow Analysis
<TABLE>
<CAPTION>
========================================================================================
Discount Annual
Fiscal Net Rate Present Value Composition Cash on Cash
Year Cash Flow 12.00% of Cash Flows Of Yield Return
========================================================================================
<S> <C> <C> <C> <C> <C>
1998 $153,466 X 0.89286 = $137,023 9.5% 11.0%
1999 $159,790 X 0.79719 = $127,384 8.8% 11.4%
2000 $165,991 X 0.71178 = $118,149 8.2% 11.9%
2001 $128,705 X 0.63552 = $ 81,794 5.7% 9.2%
2002 $ 72,572 X 0.56743 = $ 41,179 2.9% 5.2%
2003 $171,425 X 0.50663 = $ 86,849 6.0% 12.2%
2004 $176,946 X 0.45235 = $ 80,041 5.5% 12.6%
2005 $182,624 X 0.40388 = $ 73,759 5.1% 13.0%
2006 $188,467 X 0.36061 = $ 67,963 4.7% 13.5%
2007 $194,479 X 0.32197 = $ 62,617 4.3% 13.9%
-------- --- ----
Total Present Value of Cash Flows $876,759 61% 11.4%
Average
Reversion:
2008 $192,475 (1) / 10.5% = $1,833,095
Less: Cost of 4.0% $ 73,324
----------
Net Reversion $1,759,771
X Discount Factor 0.32197
----------
Total Present Value of Reversion $ 566,599 39%
Total Present Value $1,443,358 100%
ROUNDED: $1,400,000
==========
----------------------------------------------------------
Net Rentable Area: 41,550
Per SF NRA: $ 33.69
Implicit Going-in Capitalization Rate:
Year One NOI $161,776
Going-In Capitalization Rate: 11.6%
==========================================================
Note: (1) Net Operating Income
========================================================================================
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Dabney IV
Present Value Report
<TABLE>
<CAPTION>
===============================================================================================
IRR or Discount Rate 12.00%
Cost of Sales 4.0%
Terminal Cap Rate 10.5%
================================================================================================
CF as %
Sale at End of Year: Residual Residual PV Cash Flow PV of Total Total PV
================================================================================================
<S> <C> <C> <C> <C> <C> <C>
10 $1,759,771 $566,599 $ 876,759 60.7% $1,443,358
11 $1,431,753 $411,595 $ 921,124 69.1% $1,332,719
12 $2,139,520 $549,161 $ 948,054 63.3% $1,497,216
13 $2,255,397 $516,879 $ 983,109 65.5% $1,499,988
14 $2,328,585 $476,475 $1,030,971 68.4% $1,507,446
15 $2,403,867 $439,178 $1,075,086 71.0% $1,514,264
Average: $1,465,832
================================================================================================
Value Conclusion: $1,500,000
================================================
Square Feet NRA: 41,550
Value Per SF NRA: $36
Year One NOI: $161,776
Implied Going-In
Capitalization Rate: 10.8%
Average Cash on Cash
Return over 10 Year Hold: 11.4%
================================================
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Dabney V
This property consists of a 45,353 square foot, single story flex building
which is 100 percent leased to eight tenants. Dabney V has medium office
build-out of 30 percent. Following is an analysis of the current rental income,
vacancy and collection loss projections, and historical/future operating and
non-operating expenses for this property.
Current Rental Income
This property is currently fully occupied by eight tenants, with the
largest tenant being Carriage House Press Inc. with 18,000 square feet or 39.7
percent of gross leasable area. One of the tenants, Alkat Electrical Contract,
lease expires at the end of July 1997. According to the leasing agent, this
tenant is negotiating a two year renewal at the same terms as the original
lease. This tenant is a government contractor and the lease term tends to
coincide with the length of their government contract. Accordingly, we have
included this lease renewal in the cash flow analysis. Thereafter, we assume a
speculative leasing scenario. The Pro-Ject Lease Abstract Report is in the
Addenda. The tenant base is primarily local and represents no atypical credit
risk.
The weighted average rental rate during the next 12 months is $5.72 per
square foot industrial gross. Market rent for this property type (flex -- medium
office build-out) is estimated at $6.35 per square foot. The subject's current
average rent is below market, and reflective of older leases signed at lower
rates.
Expense Reimbursements
Similar to the above discussed properties, all of the leases were
negotiated on an industrial gross basis. This analysis reflects this leasing
structure.
Allowance for Vacancy and Credit Loss
We used the same parameters for this property relative to credit loss and
renewal probability. The resulting overall average occupancy rate over the ten
year holding period is 95.8 percent. Including our overall vacancy/global credit
loss allowance, the implied overall occupancy rate is 93.8 percent.
Total Operating Expenses
Since 1994, total operating expenses at Dabney V ranged from a low of
$1.30 per square foot in 1996 to a high of $1.71 per square foot in 1995. The
1997 budget calls for $1.32 per square foot. With the exception of real estate
taxes, we estimated operating expenses similar to ownership's budget
projections. As discussed in the Real Estate Tax and Assessment section, the
1997 assessment increased by over 20 percent and subsequently, the tax liability
increased for this property. We used the actual real estate tax liability in the
cash flow. Based on this, we project operating expenses to be $1.37 per square
foot in the first year of the holding period. The higher total operating
expenses is solely attributed to the higher than projected real estate taxes.
Other Non-Operating Expenses
We employed the same tenant improvement allowance, leasing commissions and
capital reserves as used for the prior properties.
================================================================================
-88-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Dabney V
Cash Flow Analysis
<TABLE>
<CAPTION>
=================================================================================================================
1 2 3 4 5 6 7
Fiscal Year 1998 1999 2000 2001 2002 2003 2004
=================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue From Operations
Minimum Rent $ 259,441 $ 250,712 $ 266,304 $ 275,283 $ 274,701 $ 278,241 $ 304,627
Expense Recoveries $ 1,676 $ 2,028 $ 2,460 $ 2,999 $ 3,466 $ 3,553 $ 1,985
Other Income $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Vacancy & Collection Loss ($ 5,222) ($ 5,055) ($ 5,375) ($ 5,566) ($ 5,563) ($ 5,636) ($ 6,132)
------------------------------------------------------------------------------------
Effective Gross Income $ 255,895 $ 247,685 $ 263,389 $ 272,716 $ 272,604 $ 276,158 $ 300,480
Expenses
Operating Expenses $ 22,697 $ 23,294 $ 24,110 $ 24,954 $ 25,827 $ 26,731 $ 27,666
G&A Expense $ 12,609 $ 12,941 $ 13,394 $ 13,863 $ 14,348 $ 14,850 $ 15,370
Management $ 7,677 $ 7,431 $ 7,902 $ 8,181 $ 8,178 $ 8,285 $ 9,014
Real Estate Taxes $ 19,215 $ 19,721 $ 20,411 $ 21,125 $ 21,864 $ 22,630 $ 23,422
------------------------------------------------------------------------------------
Total Expenses $ 62,198 $ 63,387 $ 65,817 $ 68,123 $ 70,217 $ 72,496 $ 75,472
Net Operating Income $ 193,697 $ 184,298 $ 197,572 $ 204,593 $ 202,387 $ 203,662 $ 225,008
Commisions $ 1,146 $ 6,348 $ 13,190 $ 5,533 $ 11,686 $ 9,605 $ 32,977
Capital Reserves $ 9,071 $ 9,229 $ 9,552 $ 9,887 $ 10,233 $ 10,591 $ 10,962
Alterations $ 2,400 $ 3,902 $ 8,107 $ 3,417 $ 7,273 $ 5,990 $ 20,665
------------------------------------------------------------------------------------
Net Cash Flow $ 181,080 $ 164,819 $ 166,723 $ 185,756 $ 173,195 $ 177,476 $ 160,404
=================================================================================================================
</TABLE>
==========================================================================
8 9 10 11
Fiscal Year 2005 2006 2007 2008
==========================================================================
Revenue From Operations
Minimum Rent $ 347,389 $ 347,196 $ 346,873 $ 371,714
Expense Recoveries $ 2,999 $ 3,759 $ 3,629 $ 3,852
Other Income $ 0 $ 0 $ 0 $ 0
Vacancy & Collection Loss ($ 7,008) ($ 7,019) ($ 7,010) ($ 7,511)
---------------------------------------------
Effective Gross Income $ 343,380 $ 343,936 $ 343,492 $ 368,055
Expenses
Operating Expenses $ 28,635 $ 29,637 $ 30,674 $ 31,748
G&A Expense $ 15,908 $ 16,465 $ 17,041 $ 17,638
Management $ 10,301 $ 10,318 $ 10,305 $ 11,042
Real Estate Taxes $ 24,242 $ 25,090 $ 25,968 $ 26,877
---------------------------------------------
Total Expenses $ 79,086 $ 81,510 $ 83,988 $ 87,305
Net Operating Income $ 264,294 $ 262,426 $ 259,504 $ 280,750
Commisions $ 0 $ 7,808 $ 16,709 $ 7,009
Capital Reserves $ 11,345 $ 11,742 $ 12,153 $ 12,579
Alterations $ 0 $ 4,964 $ 10,675 $ 4,500
---------------------------------------------
Net Cash Flow $ 252,949 $ 237,912 $ 219,967 $ 256,662
==========================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Terminal Capitalization Rate
Similarly, we selected the same terminal capitalization rate of 10.5
percent for this property.
Transaction Costs
A costs of sale of 4.0 percent is used in this analysis.
Discount Rate
We used an IRR of 12.0 percent. On the following page is the Discounted
Cash Flow Analysis for this asset. Using the above indicated rates of return,
our cash flow model indicated a value of $1,900,000 or $41.89 per square foot.
This value estimate produces an implied going-in capitalization rate of 10.2
percent, a figure well within the anticipated return necessary to interest
investors for this quality of building.
Regarding the composition of the yield, a significant 56 percent of the
subject's ultimate yield is derived from the cash flow of the property with the
balance attributable to the reversion or resale of the property at the
conclusion of the holding period. Typical investor requirements dictate that a
substantial amount of the value be derived from the cash flow. Finally, the
average annual cash on cash return equals 10.1 percent.
================================================================================
-90-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Dabney V
10 Year Holding Period
Discounted Cash Flow Analysis
<TABLE>
<CAPTION>
========================================================================================
Discount Annual
Fiscal Net Rate Present Value Composition Cash on Cash
Year Cash Flow 12.00% of Cash Flows Of Yield Return
========================================================================================
<S> <C> <C> <C> <C> <C>
1998 $181,080 X 0.89286 = $161,679 8.6% 9.5%
1999 $164,819 X 0.79719 = $131,393 7.0% 8.7%
2000 $166,723 X 0.71178 = $118,670 6.3% 8.8%
2001 $185,756 X 0.63552 = $118,051 6.3% 9.8%
2002 $173,195 X 0.56743 = $ 98,275 5.2% 9.1%
2003 $177,476 X 0.50663 = $ 89,915 4.8% 9.3%
2004 $160,404 X 0.45235 = $ 72,559 3.9% 8.4%
2005 $252,949 X 0.40388 = $102,162 5.4% 13.3%
2006 $237,912 X 0.36061 = $ 85,793 4.6% 12.5%
2007 $219,967 X 0.32197 = $ 70,823 3.8% 11.6%
-------- --- ----
Total Present Value of Cash Flows $1,049,320 56% 10.1%
Average
Reversion:
2008 $280,750 (1)/ 10.5% = $2,673,810
Less: Cost of 4.0% $ 106,952
----------
Net Reversion $2,566,857
X Discount Factor 0.32197
----------
Total Present Value of Reversion $ 826,459 44%
Total Present Value $1,875,780 100%
ROUNDED: $1,900,000
==========
----------------------------------------------------------
Net Rentable Area: 45,353
Per SF NRA: $ 41.89
Implicit Going-In Capitalization Rate:
Year One NOI $193,697
Going-In Capitalization Rate: 10.2%
==========================================================
Note: (1) Net Operating Income
========================================================================================
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Dabney VI
This property consists of a 50,400 square foot, single story flex building
which is 100 percent occupied by four tenants. Dabney VI has medium office
build-out of 30 percent. Following is an analysis of the current rental income,
vacancy and collection loss projections, and historical/future operating and
non-operating expenses for this property.
Current Rental Income
This property lost its sole tenant in January 1996 and was kept off the
market for three months while being re-configured from multi-tenant occupancy.
The building was 75 percent leased-up by August 1996 with three tenants at base
rents of $4.50, $5.70 and $6.00 per square foot, industrial gross. The final
suite was leased in February 1997 after a delay caused by the fallout of a
potential tenant. All of the tenants have five year lease terms and as such, the
building is fully leased for the first three years of the analysis. The Pro-Ject
Lease Abstract Report is in the Addenda. The tenant base is primarily local and
represents no atypical credit risk.
The weighted average rental rate during the next 12 months is $5.02 per
square foot industrial gross. Market rent for this property type (flex -- medium
office build-out) is estimated at $6.35 per square foot.
Expense Reimbursements
Similar to the above discussed properties, all of the leases were
negotiated on an industrial gross basis. This analysis reflects this leasing
structure.
Allowance for Vacancy and Credit Loss
We used the same parameters for this property relative to credit loss and
renewal probability. The resulting overall average occupancy rate over the ten
year holding period is 96.7 percent. Including our overall vacancy/global credit
loss allowance, the implied overall occupancy rate is 94.7 percent.
Total Operating Expenses
Historical total operating expenses at Dabney VI ranged from a low of
$0.69 per square foot in 1994 to a high of $0.88 per square foot in 1995. The
1997 budget calls for a higher level at $1.05 per square foot. The higher level
is to be expected given the shift from single- to multi-tenant occupancy. We
deviate from the budget projections for general and administrative, and real
estate tax expenses. The budget forecasts a general and administrative expense
at $0.40 per square foot. This is significantly above prior year levels as well
as comparable properties. Accordingly, we project this expense at $0.24 per
square foot ($12,000), which is in line with market levels. As discussed in the
Real Estate Tax and Assessment section, the 1997 assessment increased by over
seven percent and subsequently, the tax liability increased for this property.
We used the actual real estate tax liability in the cash flow. Based on this, we
project operating expenses to be $1.00 per square foot in the initial year of
the holding period.
Other Non-Operating Expenses
We employed the same tenant improvement allowance, leasing commissions and
capital reserves as used for the other flex buildings described herein.
================================================================================
-92-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Dabney VI
Cash Flow Analysis
<TABLE>
<CAPTION>
=================================================================================================================
1 2 3 4 5 6 7
Fiscal Year 1998 1999 2000 2001 2002 2003 2004
=================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue From Operations
Minimum Rent $ 253,229 $ 260,826 $ 268,651 $ 242,903 $ 231,120 $ 309,593 $ 318,881
Expense Recoveries $ 2,983 $ 3,530 $ 4,278 $ 4,253 $ 913 $ 1,032 $ 1,890
Other Income $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Vacancy & Collection Loss ($ 5,124) ($ 5,287) ($ 5,459) ($ 4,943) ($ 4,641) ($ 6,212) ($ 6,415)
------------------------------------------------------------------------------------
Effective Gross Income $ 251,088 $ 259,069 $ 267,470 $ 242,213 $ 227,392 $ 304,413 $ 314,356
Expenses
Operating Expenses $ 15,131 $ 15,530 $ 16,073 $ 16,636 $ 17,218 $ 17,821 $ 18,444
G&A Expense $ 12,105 $ 12,424 $ 12,859 $ 13,309 $ 13,774 $ 14,256 $ 14,755
Management $ 7,533 $ 7,772 $ 8,024 $ 7,266 $ 6,822 $ 9,132 $ 9,431
Real Estate Taxes $ 15,714 $ 16,128 $ 16,692 $ 17,277 $ 17,881 $ 18,507 $ 19,155
------------------------------------------------------------------------------------
Total Expenses $ 50,483 $ 51,854 $ 53,648 $ 54,488 $ 55,695 $ 59,716 $ 61,785
Net Operating Income $ 200,605 $ 207,215 $ 213,822 $ 187,725 $ 171,697 $ 244,697 $ 252,571
Commisions $ 0 $ 0 $ 0 $ 0 $ 55,512 $ 19,059 $ 0
Capital Reserves $ 10,080 $ 10,256 $ 10,615 $ 10,987 $ 11,371 $ 11,769 $ 12,181
Alterations $ 0 $ 0 $ 0 $ 0 $ 40,511 $ 13,976 $ 0
------------------------------------------------------------------------------------
Net Cash Flow $ 190,525 $ 196,959 $ 203,207 $ 176,738 $ 64,303 $ 199,893 $ 240,390
=================================================================================================================
</TABLE>
==========================================================================
8 9 10 11
Fiscal Year 2005 2006 2007 2008
==========================================================================
Revenue From Operations
Minimum Rent $ 328,446 $ 338,301 $ 348,449 $ 358,903
Expense Recoveries $ 2,776 $ 3,695 $ 4,645 $ 5,629
Other Income $ 0 $ 0 $ 0 $ 0
Vacancy & Collection Loss ($ 6,624) ($ 6,840) ($ 7,062) ($ 7,291)
---------------------------------------------
Effective Gross Income $ 324,598 $ 335,156 $ 346,032 $ 357,241
Expenses
Operating Expenses $ 19,090 $ 19,758 $ 20,450 $ 21,165
G&A Expense $ 15,272 $ 15,806 $ 16,360 $ 16,932
Management $ 9,738 $ 10,055 $ 10,381 $ 10,717
Real Estate Taxes $ 19,825 $ 20,519 $ 21,237 $ 21,981
---------------------------------------------
Total Expenses $ 63,925 $ 66,138 $ 68,428 $ 70,795
Net Operating Income $ 260,673 $ 269,018 $ 277,604 $ 286,446
Commisions $ 0 $ 0 $ 0 $ 0
Capital Reserves $ 12,608 $ 13,049 $ 13,506 $ 13,978
Alterations $ 0 $ 0 $ 0 $ 0
---------------------------------------------
Net Cash Flow $ 248,065 $ 255,969 $ 264,098 $ 272,468
==========================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Terminal Capitalization Rate
Similarly, we selected the same terminal capitalization rate of 10.5
percent for this property.
Transaction Costs
A costs of sale of 4.0 percent is used in this analysis.
Discount Rate
We used an IRR of 12.0 percent. On the following page is the Discounted
Cash Flow Analysis for this asset. Using the above indicated rates of return,
our cash flow model indicated a value of $2,000,000 or $39.68 per square foot.
This value estimate produces an implied going-in capitalization rate of 10.0
percent, a figure well within the anticipated return necessary to interest
investors for this quality of building.
Regarding the composition of the yield, a significant 57 percent of the
subject's ultimate yield is derived from the cash flow of the property with the
balance attributable to the reversion or resale of the property at the
conclusion of the holding period. Typical investor requirements dictate that a
substantial amount of the value be derived from the cash flow. Finally, the
average annual cash on cash return equals 10.2 percent.
================================================================================
-94-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Dabney VI
10 Year Holding Period
Discounted Cash Flow Analysis
<TABLE>
<CAPTION>
========================================================================================
Discount Annual
Fiscal Net Rate Present Value Composition Cash on Cash
Year Cash Flow 12.00% of Cash Flows Of Yield Return
========================================================================================
<S> <C> <C> <C> <C> <C>
1998 $190,525 X 0.89286 = $170,112 8.7% 9.5%
1999 $196,959 X 0.79719 = $157,015 8.0% 9.8%
2000 $203,207 X 0.71178 = $144,639 7.4% 10.2%
2001 $176,738 X 0.63552 = $112,320 5.8% 8.8%
2002 $ 64,303 X 0.56743 = $ 36,487 1.9% 3.2%
2003 $199,893 X 0.50663 = $101,272 5.2% 10.0%
2004 $240,390 X 0.45235 = $108,740 5.6% 12.0%
2005 $248,065 X 0.40388 = $100,189 5.1% 12.4%
2006 $255,969 X 0.36061 = $ 92,305 4.7% 12.8%
2007 $264,098 X 0.32197 = $ 85,032 4.4% 13.2%
-------- --- ----
Total Present Value of Cash Flows $1,108,111 57% 10.2%
Average
Reversion:
2008 $286,446 (1)/ 10.5% = $2,728,057
Less: Cost of 4.0% $ 109,122
----------
Net Reversion $2,618,935
X Discount Factor 0.32197
----------
Total Present Value of Reversion $ 843,227 43%
Total Present Value $1,951,338 100%
ROUNDED: $2,000,000
==========
----------------------------------------------------------
Net Rentable Area: 50,400
Per SF NRA: $ 39.68
Implicit Going-In Capitalization Rate:
Year One NOI $200,605
Going-In Capitalization Rate: 10.0%
==========================================================
Note: (1) Net Operating Income
========================================================================================
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Dabney VII
This property consists of a 33,149 square foot single story flex building
which is now 100 percent occupied by six tenants. Following is an analysis of
the current rental income, vacancy and collection loss projections, and
historical/future operating and fixed expenses for this property.
Current Rental Income
The weighted average rental rate during the next 12 months is $7.12 per
square foot industrial gross. The Pro-Ject Lease Abstract Report is in the
Addenda. In our opinion, this property's tenant base is comprised of local
tenants which represents no atypical credit risk. Market rent for this property
was discussed above as $7.30 per square foot.
Expense Reimbursements
Expense reimbursements for this property are similar to Dabney I (as
previously discussed) and were treated the same way in this analysis.
Allowance for Vacancy and Credit Loss
We used the same parameters for this property as for Dabney I relative to
credit loss and renewal probability. The resulting overall average occupancy
rate over the ten year holding period is 97.3 percent. Including our overall
vacancy/global credit loss allowance, the implied overall occupancy rate is 95.3
percent.
Total Operating Expenses
Historic operating expenses at this building ranged from a low of $150 per
square foot in 1996 to a high of $1.71 per square foot in 1995. The 1997 budget
calls for $1.67 per square foot. In the initial year of the investment holding
period, we project operating expenses to be $1.72 per square foot, primarily due
to a 67 percent increase in real estate taxes.
Other Non-Operating Expenses
We employed the same tenant improvement allowance, leasing commissions and
capital reserves as used in Dabney I above.
================================================================================
-96-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Dabney VII
Cash Flow Analysis
<TABLE>
<CAPTION>
=================================================================================================================
1 2 3 4 5 6 7
Fiscal Year 1998 1999 2000 2001 2002 2003 2004
=================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue From Operations
Minimum Rent $ 235,895 $ 243,169 $ 229,897 $ 241,536 $ 243,305 $ 275,770 $ 285,504
Expense Recoveries $ 3,104 $ 3,576 $ 3,891 $ 4,043 $ 4,002 $ 4,037 $ 4,750
Other Income $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Vacancy & Collection Loss ($ 4,780) ($ 4,935) ($ 4,676) ($ 4,912) ($ 4,946) ($ 5,596) ($ 5,805)
------------------------------------------------------------------------------------
Effective Gross Income $ 234,219 $ 241,810 $ 229,112 $ 240,667 $ 242,361 $ 274,211 $ 284,449
Expenses
Operating Expenses $ 23,201 $ 23,812 $ 24,645 $ 25,508 $ 26,401 $ 27,325 $ 28,281
G&A Expense $ 12,105 $ 12,424 $ 12,859 $ 13,309 $ 13,774 $ 14,256 $ 14,755
Management $ 7,027 $ 7,254 $ 6,873 $ 7,220 $ 7,271 $ 8,226 $ 8,533
Real Estate Taxes $ 14,523 $ 14,905 $ 15,427 $ 15,967 $ 16,526 $ 17,104 $ 17,703
------------------------------------------------------------------------------------
Total Expenses $ 56,856 $ 58,395 $ 59,804 $ 62,004 $ 63,972 $ 66,911 $ 69,272
Net Operating Income $ 177,363 $ 183,415 $ 169,308 $ 178,663 $ 178,389 $ 207,300 $ 215,177
Commisions $ 0 $ 0 $ 12,586 $ 4,824 $ 9,815 $ 9,365 $ 0
Capital Reserves $ 6,630 $ 6,746 $ 6,982 $ 7,226 $ 7,479 $ 7,741 $ 8,012
Alterations $ 0 $ 0 $ 6,762 $ 2,592 $ 5,324 $ 5,080 $ 0
------------------------------------------------------------------------------------
Net Cash Flow $ 170,733 $ 176,669 $ 142,978 $ 164,021 $ 155,771 $ 185,114 $ 207,165
=================================================================================================================
</TABLE>
==========================================================================
8 9 10 11
Fiscal Year 2005 2006 2007 2008
==========================================================================
Revenue From Operations
Minimum Rent $ 275,022 $ 298,683 $ 271,359 $ 303,686
Expense Recoveries $ 4,608 $ 5,199 $ 3,759 $ 1,954
Other Income $ 0 $ 0 $ 0 $ 0
Vacancy & Collection Loss ($ 5,593) ($ 6,078) ($ 5,502) ($ 6,113)
---------------------------------------------
Effective Gross Income $ 274,037 $ 297,804 $ 269,616 $ 299,527
Expenses
Operating Expenses $ 29,271 $ 30,296 $ 31,356 $ 32,453
G&A Expense $ 15,272 $ 15,806 $ 16,360 $ 16,932
Management $ 8,221 $ 8,934 $ 8,088 $ 8,986
Real Estate Taxes $ 18,322 $ 18,964 $ 19,627 $ 20,314
---------------------------------------------
Total Expenses $ 71,086 $ 74,000 $ 75,431 $ 78,685
Net Operating Income $ 202,951 $ 223,804 $ 194,185 $ 220,842
Commisions $ 12,461 $ 0 $ 21,657 $ 21,590
Capital Reserves $ 8,292 $ 8,583 $ 8,883 $ 9,194
Alterations $ 6,855 $ 0 $ 12,036 $ 12,016
---------------------------------------------
Net Cash Flow $ 175,343 $ 215,221 $ 151,609 $ 178,042
==========================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Terminal Capitalization Rate
Similarly, we selected the same terminal cap rate for this building.
Transaction Costs
The costs of sale were again the same discussed for Dabney I.
Discount Rate
We again used an IRR of 12.0 percent.
On the following page is the Discounted Cash Flow Analysis for this asset.
Using the above indicated rates of return, our cash flow model indicated a value
of $1,600,000 or $48.27 per square foot. This value estimate produces an implied
going-in capitalization rate of 11.1 percent, a figure well within the
anticipated return necessary to interest investors for this quality of building.
It is skewed upward slightly due to the essentially 100 percent leased status of
this building.
Regarding the composition of the yield, a significant 60 percent of the
subject's ultimate yield is derived from the cash flow of the property with the
balance attributable to the reversion or resale of the property at the
conclusion of the holding period. Typical investor requirements dictate that a
substantial amount of the value be derived from the cash flow. Finally, the
average annual cash on cash return equals 10.9 percent.
================================================================================
-98-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Dabney VII
10 Year Holding Period
Discounted Cash Flow Analysis
<TABLE>
<CAPTION>
========================================================================================
Discount Annual
Fiscal Net Rate Present Value Composition Cash on Cash
Year Cash Flow 12.00% of Cash Flows Of Yield Return
========================================================================================
<S> <C> <C> <C> <C> <C>
1998 $170,733 X 0.89286 = $152,440 9.4% 10.7%
1999 $176,669 X 0.79719 = $140,839 8.7% 11.0%
2000 $142,978 X 0.71178 = $101,769 6.3% 8.9%
2001 $164,021 X 0.63552 = $104,238 6.4% 10.3%
2002 $155,771 X 0.56743 = $ 88,389 5.4% 9.7%
2003 $185,114 X 0.50663 = $ 93,785 5.8% 11.6%
2004 $207,165 X 0.45235 = $ 93,711 5.8% 12.9%
2005 $175,343 X 0.40388 = $ 70,818 4.4% 11.0%
2006 $215,221 X 0.36061 = $ 77,611 4.8% 13.5%
2007 $151,609 X 0.32197 = $ 48,814 3.0% 9.5%
-------- --- ----
Total Present Value of Cash Flows $ 972,414 60% 10.9%
Average
Reversion:
2008 $220,842 (1)/ 10.5% = $2,103,257
Less: Cost of 4.0% $ 84,130
----------
Net Reversion $2,019,127
X Discount Factor 0.32197
----------
Total Present Value of Reversion $ 650,105 40%
Total Present Value $1,622,519 100%
ROUNDED: $1,600,000
==========
----------------------------------------------------------
Net Rentable Area: 33,149
Per SF NRA: $48
Implicit Going-In Capitalization Rate:
Year One NOI $177,363
Going-In Capitalization Rate: 11.1%
==========================================================
Note: (1) Net Operating Income
========================================================================================
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Dabney VIII
This property consists of a 29,700 square foot, single story flex building
which is 100 percent leased to one tenant. Dabney VIII has medium office
build-out of 30 percent. Following is an analysis of the current rental income,
vacancy and collection loss projections, and historical/future operating and
non-operating expenses for this property.
Current Rental Income
Dabney VIII is 100 percent occupied by one tenant, United Power
Corporation. This tenant has been at the property since March 1988. This lease
has expired and the tenant is negotiating a three year extension at $6.14 per
square foot. We have incorporated this extension in the following cash flow
analysis. Thereafter, we assume a speculative leasing scenario. The Pro-Ject
Lease Abstract Report is in the Addenda.
The weighted average rental rate during the next 12 months is $6.17 per
square foot industrial gross. Market rent for this property type (flex -- medium
office build-out) is estimated at $6.35 per square foot.
Expense Reimbursements
Expense reimbursements for this property are similar to those discussed
above, and are treated the same way in this analysis.
Allowance for Vacancy and Credit Loss
We used the same above discussed parameters for this property relative to
credit loss and renewal probability. The resulting overall average occupancy
rate over the ten year holding period is 96.7 percent. Including our overall
vacancy/global credit loss allowance, the implied overall occupancy rate is 94.7
percent.
Total Operating Expenses
Historical total operating expenses at Dabney VIII has been fairly
consistent and ranged from a low of $1.25 per square foot in 1994 to a high of
$1.37 per square foot in 1995. The 1997 budget calls for $1.40 per square foot.
With the exception of real estate taxes, we estimated operating expenses similar
to ownership's budget projections. As discussed in the Real Estate Tax and
Assessment section, the 1997 assessment increased by about 12 percent and
subsequently, the tax liability increased slightly for this property. We used
the actual real estate tax liability in the cash flow. Based on this, we project
operating expenses to be $1.56 per square foot in the initial year of the
holding period.
Other Non-Operating Expenses
We employed the same tenant improvement allowance, leasing commissions and
capital reserves as used for the above discussed flex properties.
================================================================================
-100-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Dabney VIII
Cash Flow Analysis
<TABLE>
<CAPTION>
=================================================================================================================
1 2 3 4 5 6 7
Fiscal Year 1998 1999 2000 2001 2002 2003 2004
=================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue From Operations
Minimum Rent $ 183,270 $ 188,768 $ 161,220 $ 169,235 $ 208,159 $ 214,403 $ 220,836
Expense Recoveries $ 135 $ 545 $ 873 $ 295 $ 894 $ 1,515 $ 2,157
Other Income $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Vacancy & Collection Loss ($ 3,668) ($ 3,786) ($ 3,242) ($ 3,391) ($ 4,181) ($ 4,318) ($ 4,460)
------------------------------------------------------------------------------------
Effective Gross Income $ 179,737 $ 185,527 $ 158,851 $ 166,139 $ 204,872 $ 211,600 $ 218,533
Expenses
Operating Expenses $ 21,184 $ 21,741 $ 22,502 $ 23,290 $ 24,105 $ 24,949 $ 25,822
G&A Expense $ 7,061 $ 7,247 $ 7,501 $ 7,763 $ 8,035 $ 8,316 $ 8,607
Management $ 5,392 $ 5,566 $ 4,766 $ 4,984 $ 6,146 $ 6,348 $ 6,556
Real Estate Taxes $ 12,583 $ 12,914 $ 13,366 $ 13,834 $ 14,318 $ 14,820 $ 15,338
------------------------------------------------------------------------------------
Total Expenses $ 46,220 $ 47,468 $ 48,135 $ 49,871 $ 52,604 $ 54,433 $ 56,323
Net Operating Income $ 133,517 $ 138,059 $ 110,716 $ 116,268 $ 152,268 $ 157,167 $ 162,210
Commisions $ 0 $ 0 $ 0 $ 49,795 $ 0 $ 0 $ 0
Capital Reserves $ 5,940 $ 6,044 $ 6,255 $ 6,474 $ 6,701 $ 6,936 $ 7,178
Alterations $ 0 $ 0 $ 0 $ 30,754 $ 0 $ 0 $ 0
------------------------------------------------------------------------------------
Net Cash Flow $ 127,577 $ 132,015 $ 104,461 $ 29,245 $ 145,567 $ 150,231 $ 155,032
=================================================================================================================
</TABLE>
==========================================================================
8 9 10 11
Fiscal Year 2005 2006 2007 2008
==========================================================================
Revenue From Operations
Minimum Rent $ 227,461 $ 234,284 $ 241,313 $ 169,044
Expense Recoveries $ 2,821 $ 3,509 $ 4,221 $ 764
Other Income $ 0 $ 0 $ 0 $ 0
Vacancy & Collection Loss ($ 4,606) ($ 4,756) ($ 4,911) ($ 3,396)
---------------------------------------------
Effective Gross Income $ 225,676 $ 233,037 $ 240,623 $ 166,412
Expenses
Operating Expenses $ 26,726 $ 27,661 $ 28,629 $ 29,631
G&A Expense $ 8,909 $ 9,220 $ 9,543 $ 9,877
Management $ 6,770 $ 6,991 $ 7,219 $ 4,992
Real Estate Taxes $ 15,875 $ 16,431 $ 17,006 $ 17,601
---------------------------------------------
Total Expenses $ 58,280 $ 60,303 $ 62,397 $ 62,101
Net Operating Income $ 167,396 $ 172,734 $ 178,226 $ 104,311
Commisions $ 0 $ 0 $ 0 $ 63,079
Capital Reserves $ 7,430 $ 7,690 $ 7,959 $ 8,237
Alterations $ 0 $ 0 $ 0 $ 40,497
---------------------------------------------
Net Cash Flow $ 159,966 $ 165,044 $ 170,267 ($ 7,502)
==========================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Terminal Capitalization Rate
Similarly, we selected the same terminal capitalization rate of 10.5
percent for this property.
Transaction Costs
A costs of sale of 4.0 percent is used in this analysis.
Discount Rate
We used an IRR of 12.0 percent. On the following page is the Discounted
Cash Flow Analysis for this asset. Using the above indicated rates of return,
our cash flow model indicated a value of $1,000,000 or $33.67 per square foot.
This value estimate produces an implied going-in capitalization rate of 13.4
percent. This is skewed upward due to the essentially 100 percent leased status
coupled, the anticipated rollover in the terminal year. This results in a
negative cash flow in Year Eleven of the analysis. As such, we also considered
the value indications from holding periods ranging from ten to 15 years, the
average of which suggested a value of $1,200,000. See the second following page.
The lower value indication for the ten year holding period is due to the entire
building rolling in the terminal year. We believe that an owner would attempt to
optimize the date of sale rather than sale the property in exactly ten years.
Therefore, we concluded to this higher value of $1,200,000. The implied going-in
capitalization rate at the concluded value estimate is 11.1 percent.
================================================================================
-102-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Dabney VIII
10 Year Holding Period
Discounted Cash Flow Analysis
<TABLE>
<CAPTION>
========================================================================================
Discount Annual
Fiscal Net Rate Present Value Composition Cash on Cash
Year Cash Flow 12.00% of Cash Flows Of Yield Return
========================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
1998 $127,577 X 0.89286 = $113,908 11.1% 12.8%
1999 $132,015 X 0.79719 = $105,242 10.2% 13.2%
2000 $104,461 X 0.71178 = $ 74,353 7.2% 10.4%
2001 $ 29,245 X 0.63552 = $ 18,586 1.8% 2.9%
2002 $145,567 X 0.56743 = $ 82,599 8.0% 14.6%
2003 $150,231 X 0.50663 = $ 76,112 7.4% 15.0%
2004 $155,032 X 0.45235 = $ 70,129 6.8% 15.5%
2005 $159,966 X 0.40388 = $ 64,608 6.3% 16.0%
2006 $165,044 X 0.36061 = $ 59,517 5.8% 16.5%
2007 $170,267 X 0.32197 = $ 54,821 5.3% 17.0%
-------- ---- ----
Total Present Value of Cash Flows $ 719,873 70% 13.4%
Average
Reversion:
2008 $104,311 (1)/ 10.5% = $ 993,438
Less: Cost of 4.0% $ 39,738
----------
Net Reversion $ 953,701
X Discount Factor 0.32197
----------
Total Present Value of Reversion $ 307,066 30%
Total Present Value $1,026,939 100%
ROUNDED: $1,000,000
==========
----------------------------------------------------------
Net Rentable Area: 29,700
Per SF NRA: $33.67
Implicit Going-In Capitalization Rate:
Year One NOI $133,517
Going-In Capitalization Rate: 13.4%
==========================================================
Note: (1) Net Operating Income
========================================================================================
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Dabney VIII
Present Value Report
================================================================================
IRR or Discount Rate 12.00%
Cost of Sales 4.0%
Terminal Cap Rate 10.5%
================================================================================
CF as %
Sale at End of Year: Residual Residual PV Cash Flow PV of Total Total PV
================================================================================
10 $ 953,701 $307,066 $719,873 70.1% $1,026,939
11 $1,732,379 $498,018 $717,716 59.0% $1,215,734
12 $1,788,379 $459,032 $764,163 62.5% $1,223,195
13 $1,846,043 $423,066 $806,968 65.6% $1,230,033
14 $1,905,362 $389,875 $846,414 68.5% $1,236,289
15 $1,966,391 $359,252 $882,761 71.1% $1,242,013
Average: $1,195,701
================================================================================
Value Conclusion: $1,200,000
=======================================
Square Feet NRA: 29,700
Value Per SF NRA: $ 40
Year One NOI: $ 133,517
Implied Going-In
Capitalization Rate: 11.1%
Average Cash on Cash
Return over 10 Year Hold: 13.4%
=======================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Dabney IX
This property is a 30,263 square foot single story flex building which is
now 95 percent occupied by eight tenants. Following is an analysis of the
current rental income, vacancy and collection loss projections, and
historical/future operating and fixed expenses for this property.
Current Rental Income
The weighted average rental rate during the next 12 months is $7.27 per
square foot industrial gross. The Pro-Ject Lease Abstract Report is in the
Addenda. In our opinion, this property's tenant base is composed of local
tenants which represents no atypical credit risk. Market rent for this property
was discussed above as $7.30 per square foot.
Expense Reimbursements
Expense reimbursements for this property are similar to Dabney I (as
previously discussed) and were treated the same way in this analysis.
Allowance for Vacancy and Credit Loss
We used the same parameters for this property as for Dabney I relative to
credit loss and renewal probability. The resulting overall average occupancy
rate over the ten year holding period is 95.4 percent. Including our overall
vacancy/global credit loss allowance, the implied overall occupancy rate is 93.4
percent.
Total Operating Expenses
Historic operating expenses at this building ranged from a low of $1.58
per square foot in 1994 to a high of $2.22 per square foot in 1995. The 1997
budget calls for $1.98 per square foot. In the initial year of the investment
holding period, we project operating expenses to be $2.34 per square foot,
primarily due to a 67 percent increase in taxes.
Other Non-Operating Expenses
We employed the same tenant improvement allowance, leasing commissions and
capital reserves as used in Dabney I above.
================================================================================
-105-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Dabney IX
Cash Flow Analysis
<TABLE>
<CAPTION>
=================================================================================================================
1 2 3 4 5 6 7
Fiscal Year 1998 1999 2000 2001 2002 2003 2004
=================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue From Operations
Minimum Rent $ 208,885 $ 241,756 $ 246,582 $ 252,493 $ 245,391 $ 244,870 $ 260,570
Expense Recoveries $ 4,543 $ 3,769 $ 4,112 $ 4,387 $ 3,055 $ 2,616 $ 2,190
Other Income $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Vacancy & Collection Loss ($ 4,269) ($ 4,911) ($ 5,014) ($ 5,138) ($ 4,969) ($ 4,950) ($ 5,255)
------------------------------------------------------------------------------------
Effective Gross Income $ 209,159 $ 240,614 $ 245,680 $ 251,742 $ 243,477 $ 242,536 $ 257,505
Expenses
Operating Expenses $ 38,333 $ 39,342 $ 40,719 $ 42,144 $ 43,619 $ 45,145 $ 46,726
G&A Expense $ 12,105 $ 12,424 $ 12,859 $ 13,309 $ 13,774 $ 14,256 $ 14,755
Management $ 6,275 $ 7,218 $ 7,370 $ 7,552 $ 7,304 $ 7,276 $ 7,725
Real Estate Taxes $ 14,174 $ 14,547 $ 15,056 $ 15,583 $ 16,129 $ 16,693 $ 17,277
------------------------------------------------------------------------------------
Total Expenses $ 70,887 $ 73,531 $ 76,004 $ 78,588 $ 80,826 $ 83,370 $ 86,483
Net Operating Income $ 138,272 $ 167,083 $ 169,676 $ 173,154 $ 162,651 $ 159,166 $ 171,022
Commisions $ 28,150 $ 0 $ 3,122 $ 3,137 $ 16,803 $ 13,589 $ 0
Capital Reserves $ 6,053 $ 6,159 $ 6,374 $ 6,597 $ 6,828 $ 7,067 $ 7,314
Alterations $ 15,813 $ 0 $ 1,677 $ 1,693 $ 9,082 $ 7,407 $ 0
------------------------------------------------------------------------------------
Net Cash Flow $ 88,256 $ 160,924 $ 158,503 $ 161,727 $ 129,938 $ 131,103 $ 163,708
=================================================================================================================
</TABLE>
==========================================================================
8 9 10 11
Fiscal Year 2005 2006 2007 2008
==========================================================================
Revenue From Operations
Minimum Rent $ 250,567 $ 256,636 $ 278,384 $ 290,644
Expense Recoveries $ 2,523 $ 1,779 $ 2,453 $ 3,085
Other Income $ 0 $ 0 $ 0 $ 0
Vacancy & Collection Loss ($ 5,062) ($ 5,168) ($ 5,617) ($ 5,875)
---------------------------------------------
Effective Gross Income $ 248,028 $ 253,247 $ 275,220 $ 287,854
Expenses
Operating Expenses $ 48,361 $ 50,054 $ 51,805 $ 53,619
G&A Expense $ 15,272 $ 15,806 $ 16,360 $ 16,932
Management $ 7,441 $ 7,597 $ 8,257 $ 8,636
Real Estate Taxes $ 17,882 $ 18,508 $ 19,156 $ 19,826
---------------------------------------------
Total Expenses $ 88,956 $ 91,965 $ 95,578 $ 99,013
Net Operating Income $ 159,072 $ 161,282 $ 179,642 $ 188,841
Commisions $ 8,386 $ 18,897 $ 3,840 $ 0
Capital Reserves $ 7,570 $ 7,835 $ 8,110 $ 8,393
Alterations $ 4,615 $ 10,401 $ 2,134 $ 0
---------------------------------------------
Net Cash Flow $ 138,501 $ 124,149 $ 165,558 $ 180,448
==========================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Terminal Capitalization Rate
Similarly, we selected the same terminal cap rate for this building.
Transaction Costs
The costs of sale were again the same discussed for Dabney I.
Discount Rate
We again used an IRR of 12.0 percent.
On the following page is the Discounted Cash Flow Analysis for this asset.
Using the above indicated rates of return, our cash flow model indicated a value
of $1,300,000 or $43 per square foot. This value estimate produces an implied
going-in capitalization rate of 10.6 percent, a figure well within the
anticipated return necessary to interest investors for this quality of building.
It is skewed upward slightly due to the high occupancy of this building.
Regarding the composition of the yield, a significant 59 percent of the
subject's ultimate yield is derived from the cash flow of the property with the
balance attributable to the reversion or resale of the property at the
conclusion of the holding period. Typical investor requirements dictate that a
substantial amount of the value be derived from the cash flow. Finally, the
average annual cash on cash return equals 10.9 percent.
================================================================================
-107-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Dabney IX
10 Year Holding Period
Discounted Cash Flow Analysis
<TABLE>
<CAPTION>
========================================================================================
Discount Annual
Fiscal Net Rate Present Value Composition Cash on Cash
Year Cash Flow 12.00% of Cash Flows Of Yield Return
========================================================================================
<S> <C> <C> <C> <C> <C>
1998 $ 88,256 X 0.89286 = $ 78,800 5.9% 6.8%
1999 $160,924 X 0.79719 = $128,288 9.5% 12.4%
2000 $158,503 X 0.71178 = $112,819 8.4% 12.2%
2001 $161,727 X 0.63552 = $102,780 7.6% 12.4%
2002 $129,938 X 0.56743 = $ 73,730 5.5% 10.0%
2003 $131,103 X 0.50663 = $ 66,421 4.9% 10.1%
2004 $163,708 X 0.45235 = $ 74,053 5.5% 12.6%
2005 $138,501 X 0.40388 = $ 55,938 4.2% 10.7%
2006 $124,149 X 0.36061 = $ 44,769 3.3% 9.5%
2007 $165,558 X 0.32197 = $ 53,305 4.0% 12.7%
-------- ---- ----
Total Present Value of Cash Flows $790,905 59% 10.9%
Average
Reversion:
2008 $188,841 (1)/ 10.5% = $1,798,486
Less: Cost of 4.0% $ 71,939
----------
Net Reversion $1,726,546
X Discount Factor 0.32197
----------
Total Present Value of Reversion $ 555,902 41%
Total Present Value $1,346,806 100%
ROUNDED: $1,300,000
==========
----------------------------------------------------------
Net Rentable Area: 30,262
Per SF NRA: $43
Implicit Going-In Capitalization Rate:
Year One NOI $138,272
Going-In Capitalization Rate: 10.6%
==========================================================
Note: (1) Net Operating Income
========================================================================================
</TABLE>
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Dabney X
This property is a 85,844 square foot single story flex building which is
now 97 percent occupied by seven tenants. Following is an analysis of the
current rental income, vacancy and collection loss projections, and
historical/future operating and fixed expenses for this property.
Current Rental Income
The weighted average rental rate during the next 12 months is $6.14 per
square foot industrial gross. The Pro-Ject Lease Abstract Report is in the
Addenda. In our opinion, this property's tenant base is comprised of local
tenants which represents no atypical credit risk. Market rent for this property
was discussed above as $7.30 per square foot.
Expense Reimbursements
Expense reimbursements for this property are similar to Dabney I (as
previously discussed) and were treated the same way in this analysis.
Allowance for Vacancy and Credit Loss
We used the same parameters for this property as for Dabney I relative to
credit loss and renewal probability. The resulting overall average occupancy
rate over the ten year holding period is 95.0 percent. Including our overall
vacancy/global credit loss allowance, the implied overall occupancy rate is 93.0
percent.
Total Operating Expenses
Historic operating expenses at this building ranged from a low of $1.30
per square foot in 1995 to a high of $1.32 per square foot in 1996. The 1997
budget calls for $1.53 per square foot. In the initial year of the investment
holding period, we project operating expenses to be $1.60 per square foot, again
due to a significant increase in taxes.
Other Non-Operating Expenses
We employed the same tenant improvement allowance, leasing commissions and
capital reserves as used in Dabney I above.
================================================================================
-109-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Dabney X
Cash Flow Analysis
================================================================================
<TABLE>
<CAPTION>
1 2 3 4 5 6 7
Fiscal Year 1998 1999 2000 2001 2002 2003 2004
================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue From Operations
Minimum Rent $ 527,339 $ 553,694 $ 573,390 $ 599,450 $ 636,151 $ 656,226 $ 636,284
Expense Recoveries $ 13,069 $ 11,782 $ 9,004 $ 9,772 $ 10,307 $ 12,057 $ 7,843
Other Income $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Vacancy & Collection Loss ($ 10,808) ($ 11,310) ($ 11,648) ($ 12,184) ($ 12,929) ($ 13,366) ($ 12,883)
----------------------------------------------------------------------------------
Effective Gross Income $ 529,600 $ 554,166 $ 570,746 $ 597,038 $ 633,529 $ 654,917 $ 631,244
Expenses
Operating Expenses $ 50,438 $ 51,765 $ 53,577 $ 55,452 $ 57,393 $ 59,402 $ 61,481
G&A Expense $ 30,263 $ 31,059 $ 32,146 $ 33,271 $ 34,436 $ 35,641 $ 36,889
Management $ 15,888 $ 16,625 $ 17,122 $ 17,911 $ 19,006 $ 19,648 $ 18,937
Real Estate Taxes $ 40,844 $ 41,920 $ 43,387 $ 44,905 $ 46,477 $ 48,104 $ 49,787
----------------------------------------------------------------------------------
Total Expenses $ 137,433 $ 141,369 $ 146,232 $ 151,539 $ 157,312 $ 162,795 $ 167,094
Net Operating Income $ 392,167 $ 412,797 $ 424,514 $ 445,499 $ 476,217 $ 492,122 $ 464,150
Commisions $ 15,431 $ 44,750 $ 24,286 $ 0 $ 22,434 $ 5,065 $ 65,081
Capital Reserves $ 17,169 $ 17,469 $ 18,081 $ 18,714 $ 19,368 $ 20,046 $ 20,748
Alterations $ 10,044 $ 23,890 $ 13,047 $ 0 $ 12,110 $ 2,761 $ 35,647
----------------------------------------------------------------------------------
Net Cash Flow $ 349,523 $ 326,688 $ 369,100 $ 426,785 $ 422,305 $ 464,250 $ 342,674
</TABLE>
8 9 10 11
Fiscal Year 2005 2006 2007 2008
===========================================================================
Revenue From Operations
Minimum Rent $ 748,350 $ 752,119 $ 729,520 $ 831,700
Expense Recoveries $ 6,361 $ 6,632 $ 5,285 $ 6,557
Other Income $ 0 $ 0 $ 0 $ 0
Vacancy & Collection Loss ($ 15,094) ($ 15,175) ($ 14,696) ($ 16,765)
---------------------------------------------
Effective Gross Income $ 739,617 $ 743,576 $ 720,109 $ 821,492
Expenses
Operating Expenses $ 63,633 $ 65,860 $ 68,165 $ 70,551
G&A Expense $ 38,180 $ 39,516 $ 40,899 $ 42,330
Management $ 22,189 $ 22,307 $ 21,603 $ 24,645
Real Estate Taxes $ 51,530 $ 53,333 $ 55,200 $ 57,132
---------------------------------------------
Total Expenses $ 175,532 $ 181,016 $ 185,867 $ 194,658
Net Operating Income $ 564,085 $ 562,560 $ 534,242 $ 626,834
Commisions $ 5,363 $ 22,847 $ 68,795 $ 0
Capital Reserves $ 21,474 $ 22,226 $ 23,004 $ 23,809
Alterations $ 2,952 $ 12,575 $ 38,129 $ 0
---------------------------------------------
Net Cash Flow $ 534,296 $ 504,912 $ 404,314 $ 603,025
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Terminal Capitalization Rate
Similarly, we selected the same terminal cap rate for this building.
Transaction Costs
The costs of sale were again the same discussed for Dabney I.
Discount Rate
We again used an IRR of 12.0 percent.
On the following page is the Discounted Cash Flow Analysis for this asset.
Using the above indicated rates of return, our cash flow model indicated a value
of $4,100,000 or $48 per square foot. This value estimate produces an implied
going-in capitalization rate of 9.6 percent, a figure well within the
anticipated return necessary to interest investors for this quality of building.
Regarding the composition of the yield, 55 percent of the subject's
ultimate yield is derived from the cash flow of the property with the balance
attributable to the reversion or resale of the property at the conclusion of the
holding period. Typical investor requirements dictate that a substantial amount
of the value be derived from the cash flow. Finally, the average annual cash on
cash return equals 10.1 percent.
================================================================================
-111-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Dabney X
10 Year Holding Period
Discounted Cash Flow Analysis
<TABLE>
<CAPTION>
===================================================================================================
Discount Annual
Fiscal Net Rate Present Value Composition Cash on Cash
Year Cash Flow 12.00% of Cash Flows Of Yield Return
===================================================================================================
<S> <C> <C> <C> <C> <C>
1998 $349,523 X 0.89286 = $312,074 7.6% 8.5%
1999 $326,688 X 0.79719 = $260,434 6.3% 8.0%
2000 $369,100 X 0.71178 = $262,718 6.4% 9.0%
2001 $426,785 X 0.63552 = $271,230 6.6% 10.4%
2002 $422,305 X 0.56743 = $239,627 5.8% 10.3%
2003 $464,250 X 0.50663 = $235,203 5.7% 11.3%
2004 $342,674 X 0.45235 = $155,008 3.8% 8.4%
2005 $534,296 X 0.40388 = $215,793 5.3% 13.0%
2006 $504,912 X 0.36061 = $182,076 4.4% 12.3%
2007 $404,314 X 0.32197 = $130,178 3.2% 9.9%
---------- ---- -----
Total Present Value of Cash Flows $2,264,342 55% 10.1%
Average
</TABLE>
Reversion:
2008 $626,834 (1)/ 10.5% = $5,969,848
Less: Cost of 4.0% $238,794
----------
Net Reversion $5,731,054
X Discount Factor 0.32197
----------
Total Present Value of Reversion $1,845,246 45%
Total Present Value $4,109,588 100%
ROUNDED: $4,100,000
==========
---------------------------------------------------
Net Rentable Area: 85,844
Per SF NRA: $48
Implicit Going-In Capitalization Rate:
Year One NOI $392,167
Going-In Capitalization Rate: 9.6%
---------------------------------------------------
Note: (1) Net Operating Income
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Dabney XI
This property is a 45,250 square foot single story flex building which is
now 100 percent occupied by five tenants. Following is an analysis of the
current rental income, vacancy and collection loss projections, and
historical/future operating and fixed expenses for this property.
Current Rental Income
The weighted average rental rate during the next 12 months is $6.26 per
square foot industrial gross. The Pro-Ject Lease Abstract Report is in the
Addenda. In our opinion, this property's tenant base is comprised of local
tenants which represents no atypical credit risk. Market rent for this property
was discussed above as $7.30 per square foot.
Expense Reimbursements
Expense reimbursements for this property are similar to Dabney I (as
previously discussed) and were treated the same way in this analysis.
Allowance for Vacancy and Credit Loss
We used the same parameters for this property as for Dabney I relative to
credit loss and renewal probability. The resulting overall average occupancy
rate over the ten year holding period is 96.6 percent. Including our overall
vacancy/global credit loss allowance, the implied overall occupancy rate is 94.6
percent.
Total Operating Expenses
Historic operating expenses at this building ranged from a low of $0.67
per square foot in 1994 to a high of $1.19 per square foot in 1996. The 1997
budget calls for $1.30 per square foot. In the initial year of the investment
holding period, we project operating expenses to be $1.30 per square foot.
Other Non-Operating Expenses
We employed the same tenant improvement allowance, leasing commissions and
capital reserves as used in Dabney I above.
================================================================================
-113-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Dabney XI
Cash Flow Analysis
================================================================================
<TABLE>
<CAPTION>
1 2 3 4 5 6 7
Fiscal Year 1998 1999 2000 2001 2002 2003 2004
================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue From Operations
Minimum Rent $ 283,154 $ 293,199 $ 273,589 $ 299,875 $ 341,737 $ 351,987 $ 362,548
Expense Recoveries $ 689 $ 1,187 $ 1,398 $ 1,782 $ 2,467 $ 3,359 $ 4,281
Other Income $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Vacancy & Collection Loss ($ 5,677) ($ 5,888) ($ 5,500) ($ 6,033) ($ 6,884) ($ 7,107) ($ 7,337)
----------------------------------------------------------------------------------
Effective Gross Income $ 278,166 $ 288,498 $ 269,487 $ 295,624 $ 337,320 $ 348,239 $ 359,492
Expenses
Operating Expenses $ 23,201 $ 23,812 $ 24,645 $ 25,508 $ 26,401 $ 27,325 $ 28,281
G&A Expense $ 9,381 $ 9,628 $ 9,965 $ 10,314 $ 10,675 $ 11,049 $ 11,435
Management $ 8,345 $ 8,655 $ 8,085 $ 8,869 $ 10,120 $ 10,447 $ 10,785
Real Estate Taxes $ 17,802 $ 18,271 $ 18,911 $ 19,572 $ 20,257 $ 20,966 $ 21,700
----------------------------------------------------------------------------------
Total Expenses $ 58,729 $ 60,366 $ 61,606 $ 64,263 $ 67,453 $ 69,787 $ 72,201
Net Operating Income $ 219,437 $ 228,132 $ 207,881 $ 231,361 $ 269,867 $ 278,452 $ 287,291
Commisions $ 0 $ 0 $ 25,520 $ 21,441 $ 0 $ 0 $ 0
Capital Reserves $ 9,050 $ 9,208 $ 9,531 $ 9,864 $ 10,209 $ 10,567 $ 10,937
Alterations $ 0 $ 0 $ 13,675 $ 11,575 $ 0 $ 0 $ 0
----------------------------------------------------------------------------------
Net Cash Flow $ 210,387 $ 218,924 $ 159,155 $ 188,481 $ 259,658 $ 267,885 $ 276,354
</TABLE>
8 9 10 11
Fiscal Year 2005 2006 2007 2008
===========================================================================
Revenue From Operations
Minimum Rent $ 335,516 $ 412,935 $ 383,161 $ 402,997
Expense Recoveries $ 2,656 $ 3,158 $ 3,054 $ 2,475
Other Income $ 0 $ 0 $ 0 $ 0
Vacancy & Collection Loss ($ 6,763) ($ 8,322) ($ 7,724) ($ 8,109)
---------------------------------------------
Effective Gross Income $ 331,409 $ 407,771 $ 378,491 $ 397,363
Expenses
Operating Expenses $ 29,271 $ 30,296 $ 31,356 $ 32,453
G&A Expense $ 11,836 $ 12,250 $ 12,679 $ 13,122
Management $ 9,942 $ 12,233 $ 11,355 $ 11,921
Real Estate Taxes $ 22,460 $ 23,246 $ 24,060 $ 24,902
---------------------------------------------
Total Expenses $ 73,509 $ 78,025 $ 79,450 $ 82,398
Net Operating Income $ 257,900 $ 329,746 $ 299,041 $ 314,965
Commisions $ 46,025 $ 0 $ 31,884 $ 26,370
Capital Reserves $ 11,319 $ 11,716 $ 12,126 $ 12,550
Alterations $ 25,253 $ 0 $ 17,719 $ 14,726
---------------------------------------------
Net Cash Flow $ 175,303 $ 318,030 $ 237,312 $ 261,319
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Terminal Capitalization Rate
Similarly, we selected the same terminal cap rate for this building.
Transaction Costs
The costs of sale were again the same discussed for Dabney I.
Discount Rate
We again used an IRR of 12.0 percent.
On the following page is the Discounted Cash Flow Analysis for this asset.
Using the above indicated rates of return, our cash flow model indicated a value
of $2,200,000 or $49 per square foot. This value estimate produces an implied
going-in capitalization rate of 10.0 percent, a figure well within the
anticipated return necessary to interest investors for this quality of building.
It is skewed upward slightly due to the high occupancy of this building.
As a result, we also considered the value indications from holding periods
ranging from ten to 15 years, the average of which suggested a value of
$2,300,000. See the second following page. We believe that on owner would
attempt to optimize the date of sale rather than sale at the end of exactly ten
years. Therefore, we concluded to this higher figure. The lower value indication
for the ten year holding period is due to significant lease expirations in
either the terminal or following year. We believe that an owner would attempt to
optimize the date of sale rather than sell the property in exactly ten years.
Therefore, we concluded to this higher value which yielded an implied going-in
capitalization rate of 9.5 percent, a figure well within the anticipated return
necessary to interest investors for this quality of building.
================================================================================
-115-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Dabney XI
10 Year Holding Period
Discounted Cash Flow Analysis
<TABLE>
<CAPTION>
===================================================================================================
Discount Annual
Fiscal Net Rate Present Value Composition Cash on Cash
Year Cash Flow 12.00% of Cash Flows Of Yield Return
===================================================================================================
<S> <C> <C> <C> <C> <C>
1998 $210,387 X 0.89286 = $187,846 8.6% 9.6%
1999 $218,924 X 0.79719 = $174,525 8.0% 10.0%
2000 $159,155 X 0.71178 = $113,283 5.2% 7.2%
2001 $188,481 X 0.63552 = $119,783 5.5% 8.6%
2002 $259,658 X 0.56743 = $147,337 6.7% 11.8%
2003 $267,885 X 0.50663 = $135,719 6.2% 12.2%
2004 $276,354 X 0.45235 = $125,009 5.7% 12.6%
2005 $175,303 X 0.40388 = $70,802 3.2% 8.0%
2006 $318,030 X 0.36061 = $114,685 5.2% 14.5%
2007 $237,312 X 0.32197 = $76,408 3.5% 10.8%
---------- ---- -----
Total Present Value of Cash Flows $1,265,396 58% 10.5%
Average
</TABLE>
Reversion:
2008 $314,965 (1)/ 10.5% = $2,999,667
Less: Cost of 4.0% $119,987
----------
Net Reversion $2,879,680
X Discount Factor 0.32197
----------
Total Present Value of Reversion $927,180 42%
Total Present Value $2,192,576 100%
ROUNDED: $2,200,000
==========
-------------------------------------------------
Net Rentable Area: 45,250
Per SF NRA: $49
Implicit Going-In Capitalization Rate:
Year One NOI: $219,437
Going-In Capitalization Rate: 10.0%
-------------------------------------------------
Note: (1) Net Operating Income
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Dabney XI
Present Value Report
================================================================================
IRR or Discount Rate 12.00%
Cost of Sales 4.0%
Terminal Cap Rate 10.5%
<TABLE>
<CAPTION>
=====================================================================================================
CF as %
Sale at End of Year: Residual Residual PV Cash Flow PV of Total Total PV
=====================================================================================================
<S> <C> <C> <C> <C> <C>
10 $2,879,680 $927,180 $1,265,396 57.7% $2,192,576
11 $3,275,035 $941,494 $1,340,519 58.7% $2,282,013
12 $3,379,109 $867,333 $1,429,128 62.2% $2,296,461
13 $3,486,235 $798,955 $1,510,747 65.4% $2,309,703
14 $2,919,717 $597,432 $1,585,923 72.6% $2,183,355
15 $3,695,333 $675,123 $1,625,089 70.6% $2,300,212
Average: $2,260,720
=====================================================================================================
</TABLE>
Value Conclusion: $2,300,000
=================================================
Square Feet NRA: 45,250
Value Per SF NRA: $51
Year One NOI: $219,437
Implied Going-In
Capitalization Rate: 9.5%
Average Cash on Cash
Return over 10 Year Hold: 10.5%
=================================================
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Dabney A-1
This property is a 15,389 square foot single story flex building which is
now 100 percent occupied by two tenants. Following is an analysis of the current
rental income, vacancy and collection loss projections, and historical/future
operating and fixed expenses for this property.
Current Rental Income
The weighted average rental rate during the next 12 months is $10.82 per
square foot with one tenant on a full service basis and the other on a triple
net basis. The Pro-Ject Lease Abstract Report is in the Addenda. In our opinion,
this property's tenant base is comprised of local tenants which represents no
atypical credit risk. Market rent for this property was discussed above as $8.50
per square foot triple net.
Expense Reimbursements
Expense reimbursements for this property are triple net for one tenant and
pro rata above a base year (or full service) for the other. In the future, we
treated tenants on a triple net basis.
Allowance for Vacancy and Credit Loss
We used the same parameters for this property as for Dabney I relative to
credit loss and renewal probability. The resulting overall average occupancy
rate over the ten year holding period is 98.5 percent. Including our overall
vacancy/global credit loss allowance, the implied overall occupancy rate is 96.5
percent.
Total Operating Expenses
Historic operating expenses at this building ranged from a low of $1.82
per square foot in 1995 to a high of $2.83 per square foot in 1994. The 1997
budget calls for $4.97 per square foot due to a change from triple net to full
service on one of the tenants. In the initial year of the investment holding
period, we project operating expenses to be $4.59 per square foot, consistent
with the current lease structure.
Other Non-Operating Expenses
We employed the same tenant improvement allowance, leasing commissions and
capital reserves as used in Dabney I above.
================================================================================
-118-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Dabney A-1
Cash Flow Analysis
================================================================================
<TABLE>
<CAPTION>
1 2 3 4 5 6 7
Fiscal Year 1998 1999 2000 2001 2002 2003 2004
================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue From Operations
Minimum Rent $ 166,458 $ 171,451 $ 176,594 $ 181,892 $ 169,091 $ 139,514 $ 155,029
Expense Recoveries $ 38,830 $ 40,743 $ 43,286 $ 45,632 $ 47,110 $ 76,584 $ 85,866
Other Income $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Vacancy & Collection Loss ($ 4,106) ($ 4,244) ($ 4,398) ($ 4,550) ($ 4,324) ($ 4,322) ($ 4,818)
----------------------------------------------------------------------------------
Effective Gross Income $ 201,182 $ 207,950 $ 215,482 $ 222,974 $ 211,877 $ 211,776 $ 236,077
Expenses
Operating Expenses $ 50,438 $ 51,765 $ 53,577 $ 55,452 $ 57,393 $ 59,402 $ 61,481
G&A Expense $ 6,053 $ 6,212 $ 6,429 $ 6,654 $ 6,887 $ 7,128 $ 7,378
Management $ 6,035 $ 6,239 $ 6,464 $ 6,689 $ 6,356 $ 6,353 $ 7,082
Real Estate Taxes $ 8,051 $ 8,263 $ 8,552 $ 8,851 $ 9,161 $ 9,482 $ 9,814
----------------------------------------------------------------------------------
Total Expenses $ 70,577 $ 72,479 $ 75,022 $ 77,646 $ 79,797 $ 82,365 $ 85,755
Net Operating Income $ 130,605 $ 135,471 $ 140,460 $ 145,328 $ 132,080 $ 129,411 $ 150,322
Commisions $ 0 $ 0 $ 0 $ 0 $ 0 $ 16,667 $ 0
Capital Reserves $ 3,078 $ 3,132 $ 3,241 $ 3,355 $ 3,472 $ 3,594 $ 3,719
Alterations $ 0 $ 0 $ 0 $ 0 $ 0 $ 23,294 $ 0
----------------------------------------------------------------------------------
Net Cash Flow $ 127,527 $ 132,339 $ 137,219 $ 141,973 $ 128,608 $ 85,856 $ 146,603
</TABLE>
8 9 10 11
Fiscal Year 2005 2006 2007 2008
===========================================================================
Revenue From Operations
Minimum Rent $ 159,679 $ 164,470 $ 161,418 $ 149,242
Expense Recoveries $ 88,845 $ 91,736 $ 90,017 $ 84,781
Other Income $ 0 $ 0 $ 0 $ 0
Vacancy & Collection Loss ($ 4,970) ($ 5,124) ($ 5,029) ($ 4,680)
---------------------------------------------
Effective Gross Income $ 243,554 $ 251,082 $ 246,406 $ 229,343
Expenses
Operating Expenses $ 63,633 $ 65,860 $ 68,165 $ 70,551
G&A Expense $ 7,636 $ 7,903 $ 8,180 $ 8,466
Management $ 7,307 $ 7,532 $ 7,392 $ 6,880
Real Estate Taxes $ 10,157 $ 10,513 $ 10,881 $ 11,261
---------------------------------------------
Total Expenses $ 88,733 $ 91,808 $ 94,618 $ 97,158
Net Operating Income $ 154,821 $ 159,274 $ 151,788 $ 132,185
Commisions $ 0 $ 0 $ 0 $ 23,155
Capital Reserves $ 3,850 $ 3,984 $ 4,124 $ 4,268
Alterations $ 0 $ 0 $ 0 $ 33,155
---------------------------------------------
Net Cash Flow $ 150,971 $ 155,290 $ 147,664 $ 71,607
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Terminal Capitalization Rate
Similarly, we selected the same terminal cap rate for this building.
Transaction Costs
The costs of sale were again the same discussed for Dabney I.
Discount Rate
We again used an IRR of 12.0 percent.
On the following page is the Discounted Cash Flow Analysis for this asset.
Using the above indicated rates of return, our cash flow model indicated a value
of $1,100,000 or $71 per square foot. This value estimate produces an implied
going-in capitalization rate of 11.9 percent, a figure well within the
anticipated return necessary to interest investors for this quality of building.
It is skewed upward due to the 100 percent leased status of this building.
As a result, we also considered the value indications from holding periods
ranging from ten to 15 years, the average of which suggested a value of
$1,200,000. See the second following page. We believe that on owner would
attempt to optimize the date of sale rather than sale at the end of exactly ten
years. Therefore, we concluded to this higher figure. The lower value indication
for the ten year holding period is due to significant lease expirations in
either the terminal or following year. We believe that an owner would attempt to
optimize the date of sale rather than sell the property in exactly ten years.
Therefore, we concluded to this higher value which yielded an implied going-in
capitalization rate of 10.9 percent, a figure well within the anticipated return
necessary to interest investors for this quality of building.
================================================================================
-120-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Dabney A-1
10 Year Holding Period
Discounted Cash Flow Analysis
<TABLE>
<CAPTION>
===================================================================================================
Discount Annual
Fiscal Net Rate Present Value Composition Cash on Cash
Year Cash Flow 12.00% of Cash Flows Of Yield Return
===================================================================================================
<S> <C> <C> <C> <C> <C>
1998 $127,527 X 0.89286 = $113,863 10.0% 11.6%
1999 $132,339 X 0.79719 = $105,500 9.2% 12.0%
2000 $137,219 X 0.71178 = $97,670 8.5% 12.5%
2001 $141,973 X 0.63552 = $90,226 7.9% 12.9%
2002 $128,608 X 0.56743 = $72,976 6.4% 11.7%
2003 $85,856 X 0.50663 = $43,497 3.8% 7.8%
2004 $146,603 X 0.45235 = $66,316 5.8% 13.3%
2005 $150,971 X 0.40388 = $60,975 5.3% 13.7%
2006 $155,290 X 0.36061 = $55,999 4.9% 14.1%
2007 $147,664 X 0.32197 = $47,544 4.2% 13.4%
-------- ---- -----
Total Present Value of Cash Flows $754,566 66% 12.3%
Average
</TABLE>
Reversion:
2008 $132,185 (1)/ 10.5% = $1,258,905
Less: Cost of 4.0% $50,356
----------
Net Reversion $1,208,549
X Discount Factor 0.32197
----------
Total Present Value of Reversion $389,120 34%
Total Present Value $1,143,686 100%
ROUNDED: $1,100,000
==========
-------------------------------------------------
Net Rentable Area: 15,389
Per SF NRA: $71
Implicit Going-In Capitalization Rate:
Year One NOI $130,605
Going-In Capitalization Rate: 11.9%
-------------------------------------------------
Note: (1) Net Operating Income
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Dabney A-1
Present Value Report
================================================================================
IRR or Discount Rate 12.00%
Cost of Sales 4.0%
Terminal Cap Rate 10.5%
<TABLE>
<CAPTION>
=====================================================================================================
CF as %
Sale at End of Year: Residual Residual PV Cash Flow PV of Total Total PV
=====================================================================================================
<S> <C> <C> <C> <C> <C>
10 $1,208,549 $389,120 $754,566 66.0% $1,143,686
11 $1,565,879 $450,153 $775,151 63.3% $1,225,304
12 $1,247,205 $320,126 $817,977 71.9% $1,138,104
13 $1,682,249 $385,528 $836,324 68.4% $1,221,852
14 $1,732,626 $354,530 $873,005 71.1% $1,227,534
15 $1,784,402 $326,004 $906,732 73.6% $1,232,736
Average: $1,198,203
=====================================================================================================
</TABLE>
Value Conclusion: $1,200,000
=================================================
Square Feet NRA: 15,389
Value Per SF NRA: $78
Year One NOI: $130,605
Implied Going-In
Capitalization Rate: 10.9%
Average Cash on Cash
Return over 10 Year Hold: 12.3%
=================================================
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Dabney A-2
This property is a 33,050 square foot single story flex building which is
now 100 percent occupied by one tenant. Following is an analysis of the current
rental income, vacancy and collection loss projections, and historical/future
operating and fixed expenses for this property.
Current Rental Income
The weighted average rental rate during the next 12 months is $8.64 per
square foot triple net. The Pro-Ject Lease Abstract Report is in the Addenda. In
our opinion, this property's tenant base is composed of local tenants which
represents no atypical credit risk. Market rent for this property was discussed
above as $8.50 per square foot triple net
Expense Reimbursements
Expense reimbursements for this property are similar to Dabney I (as
previously discussed) and were treated the same way in this analysis.
Allowance for Vacancy and Credit Loss
We used the same parameters for this property as for Dabney I relative to
credit loss and renewal probability. The resulting overall average occupancy
rate over the ten year holding period is 96.7 percent. Including our overall
vacancy/global credit loss allowance, the implied overall occupancy rate is 94.7
percent.
Total Operating Expenses
Historic operating expenses at this building ranged from a low of $0.13
per square foot in 1994 to a high of $1.11 per square foot in 1996. The 1997
budget calls for $1.41 per square foot. In the initial year of the investment
holding period, we project operating expenses to be $1.74 per square foot, due
once again to an increase in real estate taxes.
Other Non-Operating Expenses
We employed the same tenant improvement allowance, leasing commissions and
capital reserves as used in Dabney I above.
================================================================================
-123-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Dabney A-2
Cash Flow Analysis
================================================================================
<TABLE>
<CAPTION>
1 2 3 4 5 6 7
Fiscal Year 1998 1999 2000 2001 2002 2003 2004
================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue From Operations
Minimum Rent $ 285,607 $ 291,319 $ 297,146 $ 303,089 $ 309,150 $ 315,333 $ 321,640
Expense Recoveries $ 50,901 $ 54,936 $ 56,725 $ 58,574 $ 60,484 $ 62,433 $ 62,695
Other Income $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Vacancy & Collection Loss ($ 6,730) ($ 6,925) ($ 7,077) ($ 7,233) ($ 7,393) ($ 7,555) ($ 7,687)
----------------------------------------------------------------------------------
Effective Gross Income $ 329,778 $ 339,330 $ 346,794 $ 354,430 $ 362,241 $ 370,211 $ 376,648
Expenses
Operating Expenses $ 9,583 $ 9,835 $ 10,180 $ 10,536 $ 10,905 $ 11,286 $ 11,681
G&A Expense $ 12,105 $ 12,424 $ 12,859 $ 13,309 $ 13,774 $ 14,256 $ 14,755
Management $ 9,893 $ 10,180 $ 10,404 $ 10,633 $ 10,867 $ 11,106 $ 11,299
Real Estate Taxes $ 19,177 $ 22,385 $ 23,168 $ 23,979 $ 24,819 $ 25,687 $ 26,586
----------------------------------------------------------------------------------
Total Expenses $ 50,758 $ 54,824 $ 56,611 $ 58,457 $ 60,365 $ 62,335 $ 64,321
Net Operating Income $ 279,020 $ 284,506 $ 290,183 $ 295,973 $ 301,876 $ 307,876 $ 312,327
Commisions $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Capital Reserves $ 6,610 $ 6,726 $ 6,961 $ 7,205 $ 7,457 $ 7,718 $ 7,988
Alterations $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
----------------------------------------------------------------------------------
Net Cash Flow $ 272,410 $ 277,780 $ 283,222 $ 288,768 $ 294,419 $ 300,158 $ 304,339
</TABLE>
8 9 10 11
Fiscal Year 2005 2006 2007 2008
===========================================================================
Revenue From Operations
Minimum Rent $ 229,125 $ 355,945 $ 366,624 $ 377,622
Expense Recoveries $ 44,495 $ 69,500 $ 71,878 $ 74,337
Other Income $ 0 $ 0 $ 0 $ 0
Vacancy & Collection Loss ($ 5,472) ($ 8,509) ($ 8,770) ($ 9,039)
---------------------------------------------
Effective Gross Income $ 268,148 $ 416,936 $ 429,732 $ 442,920
Expenses
Operating Expenses $ 12,090 $ 12,513 $ 12,951 $ 13,405
G&A Expense $ 15,272 $ 15,806 $ 16,360 $ 16,932
Management $ 8,044 $ 12,508 $ 12,892 $ 13,288
Real Estate Taxes $ 27,517 $ 28,480 $ 29,477 $ 30,508
---------------------------------------------
Total Expenses $ 62,923 $ 69,307 $ 71,680 $ 74,133
Net Operating Income $ 205,225 $ 347,629 $ 358,052 $ 368,787
Commisions $ 85,988 $ 0 $ 0 $ 0
Capital Reserves $ 8,268 $ 8,557 $ 8,856 $ 9,166
Alterations $ 121,936 $ 0 $ 0 $ 0
---------------------------------------------
Net Cash Flow ($ 10,967) $ 339,072 $ 349,196 $ 359,621
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Terminal Capitalization Rate
Similarly, we selected the same terminal cap rate for this building.
Transaction Costs
The costs of sale were again the same discussed for Dabney I.
Discount Rate
We again used an IRR of 12.0 percent.
On the following page is the Discounted Cash Flow Analysis for this asset.
Using the above indicated rates of return, our cash flow model indicated a value
of $1,600,000 or $79 per square foot. This value estimate produces an implied
going-in capitalization rate of 10.7 percent, a figure well within the
anticipated return necessary to interest investors for this quality of building.
It is skewed upward slightly due to the essentially 100 percent leased status of
this building.
Regarding the composition of the yield, a significant 59 percent of the
subject's ultimate yield is derived from the cash flow of the property with the
balance attributable to the reversion or resale of the property at the
conclusion of the holding period. Typical investor requirements dictate that a
substantial amount of the value be derived from the cash flow. Finally, the
average annual cash on cash return equals 10.4 percent.
================================================================================
-125-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Dabney A-2
10 Year Holding Period
Discounted Cash Flow Analysis
<TABLE>
<CAPTION>
===================================================================================================
Discount Annual
Fiscal Net Rate Present Value Composition Cash on Cash
Year Cash Flow 12.00% of Cash Flows Of Yield Return
===================================================================================================
<S> <C> <C> <C> <C> <C>
1998 $272,410 X 0.89286 = $243,223 9.3% 10.5%
1999 $277,780 X 0.79719 = $221,445 8.4% 10.7%
2000 $283,222 X 0.71178 = $201,592 7.7% 10.9%
2001 $288,768 X 0.63552 = $183,517 7.0% 11.1%
2002 $294,419 X 0.56743 = $167,061 6.4% 11.3%
2003 $300,158 X 0.50663 = $152,069 5.8% 11.5%
2004 $304,339 X 0.45235 = $137,668 5.2% 11.7%
2005 ($10,967) X 0.40388 = ($4,429) -0.2% -0.4%
2006 $339,072 X 0.36061 = $122,273 4.7% 13.0%
2007 $349,196 X 0.32197 = $112,432 4.3% 13.4%
---------- ---- -----
Total Present Value of Cash Flows $1,536,850 59% 10.4%
Average
</TABLE>
Reversion:
2008 $368,787 (1)/ 10.5% = $3,512,257
Less: Cost of 4.0% $140,490
----------
Net Reversion $3,371,767
X Discount Factor 0.32197
----------
Total Present Value of Reversion $1,085,619 41%
Total Present Value $2,622,469 100%
ROUNDED: $2,600,000
==========
-------------------------------------------------
Net Rentable Area: 33,050
Per SF NRA: $79
Implicit Going-In Capitalization Rate:
Year One NOI $279,020
Going-In Capitalization Rate: 10.7%
-------------------------------------------------
Note: (1) Net Operating Income
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Britton's Hill
This property is a 132,103 square foot single story warehouse which is now
100 percent occupied by three tenants. Following is an analysis of the current
rental income, vacancy and collection loss projections, and historical/future
operating and fixed expenses for this property.
Current Rental Income
The weighted average rental rate during the next 12 months is $3.66 per
square foot triple net. The Pro-Ject Lease Abstract Report is in the Addenda. In
our opinion, this property's tenant base is comprised of local tenants which
represents no atypical credit risk. Market rent for this property was discussed
above as $4.00 per square foot triple net.
Expense Reimbursements
Expense reimbursements for this property follow a triple net format
wherein tenant reimburses landlord for the cost of operating the property. We
treated them this way in this analysis.
Allowance for Vacancy and Credit Loss
We used the same parameters for this property as for Dabney I relative to
credit loss and renewal probability. The resulting overall average occupancy
rate over the ten year holding period is 96.2 percent. Including our overall
vacancy/global credit loss allowance, the implied overall occupancy rate is 94.2
percent.
Total Operating Expenses
Historic operating expenses at this building ranged from a low of $0.49
per square foot in 1994 to a high of $0.76 per square foot in 1995. The 1997
budget calls for $0.77 per square foot. In the initial year of the investment
holding period, we project operating expenses to be $0.83 per square foot.
Other Non-Operating Expenses
We employed the same tenant improvement allowance, leasing commissions and
capital reserves as used in Dabney I above.
================================================================================
-127-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Britton's Hill
Cash Flow Analysis
================================================================================
<TABLE>
<CAPTION>
1 2 3 4 5 6 7
Fiscal Year 1998 1999 2000 2001 2002 2003 2004
================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue From Operations
Minimum Rent $ 484,002 $ 481,877 $ 524,915 $ 482,736 $ 560,375 $ 535,482 $ 617,493
Expense Recoveries $ 109,326 $ 113,132 $ 121,418 $ 107,588 $ 125,524 $ 120,865 $ 141,112
Other Income $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Vacancy & Collection Loss ($ 11,867) ($ 11,900) ($ 12,927) ($ 11,806) ($ 13,718) ($ 13,127) ($ 15,172)
----------------------------------------------------------------------------------
Effective Gross Income $ 581,461 $ 583,109 $ 633,406 $ 578,518 $ 672,181 $ 643,220 $ 743,433
Expenses
Operating Expenses $ 40,350 $ 41,412 $ 42,862 $ 44,362 $ 45,915 $ 47,522 $ 49,185
G&A Expense $ 19,166 $ 19,671 $ 20,359 $ 21,072 $ 21,809 $ 22,573 $ 23,363
Management $ 17,444 $ 17,493 $ 19,002 $ 17,356 $ 20,165 $ 19,297 $ 22,303
Real Estate Taxes $ 32,342 $ 38,665 $ 40,018 $ 41,419 $ 42,869 $ 44,369 $ 45,922
----------------------------------------------------------------------------------
Total Expenses $ 109,302 $ 117,241 $ 122,241 $ 124,209 $ 130,758 $ 133,761 $ 140,773
Net Operating Income $ 472,159 $ 465,868 $ 511,165 $ 454,309 $ 541,423 $ 509,459 $ 602,660
Commisions $ 0 $ 16,406 $ 0 $ 61,652 $ 0 $ 64,681 $ 0
Capital Reserves $ 26,421 $ 26,883 $ 27,824 $ 28,798 $ 29,806 $ 30,849 $ 31,929
Alterations $ 0 $ 16,007 $ 0 $ 60,446 $ 0 $ 64,033 $ 0
----------------------------------------------------------------------------------
Net Cash Flow $ 445,738 $ 406,572 $ 483,341 $ 303,413 $ 511,617 $ 349,896 $ 570,731
</TABLE>
8 9 10 11
Fiscal Year 2005 2006 2007 2008
===========================================================================
Revenue From Operations
Minimum Rent $ 636,018 $ 641,384 $ 660,625 $ 594,173
Expense Recoveries $ 145,701 $ 147,343 $ 150,928 $ 136,189
Other Income $ 0 $ 0 $ 0 $ 0
Vacancy & Collection Loss ($ 15,634) ($ 15,775) ($ 16,231) ($ 14,607)
---------------------------------------------
Effective Gross Income $ 766,085 $ 772,952 $ 795,322 $ 715,755
Expenses
Operating Expenses $ 50,906 $ 52,688 $ 54,532 $ 56,441
G&A Expense $ 24,180 $ 25,027 $ 25,903 $ 26,809
Management $ 22,983 $ 23,189 $ 23,860 $ 21,473
Real Estate Taxes $ 47,529 $ 49,193 $ 50,914 $ 52,696
---------------------------------------------
Total Expenses $ 145,598 $ 150,097 $ 155,209 $ 157,419
Net Operating Income $ 620,487 $ 622,855 $ 640,113 $ 558,336
Commisions $ 0 $ 0 $ 20,177 $ 78,099
Capital Reserves $ 33,046 $ 34,203 $ 35,400 $ 36,639
Alterations $ 0 $ 0 $ 20,366 $ 79,595
---------------------------------------------
Net Cash Flow $ 587,441 $ 588,652 $ 564,170 $ 364,003
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Terminal Capitalization Rate
Similarly, we selected the same terminal cap rate for this building.
Transaction Costs
The costs of sale were again the same discussed for Dabney I.
Discount Rate
We again used an IRR of 12.0 percent.
On the following page is the Discounted Cash Flow Analysis for this asset.
Using the above indicated rates of return, our cash flow model indicated a value
of $4,300,000 or $33 per square foot. This value estimate produces an implied
going-in capitalization rate of 11.0 percent, a figure well within the
anticipated return necessary to interest investors for this quality of building.
It is skewed upward slightly due to the essentially 100 percent leased status of
this building.
As a result, we also considered the value indications from holding periods
ranging from ten to 15 years, the average of which suggested a value of
$4,500,000. See the second following page. We believe that on owner would
attempt to optimize the date of sale rather than sale at the end of exactly ten
years. Therefore, we concluded to this higher figure. The lower value indication
for the ten year holding period is due to significant lease expirations in
either the terminal or following year. We believe that an owner would attempt to
optimize the date of sale rather than sell the property in exactly ten years.
Therefore, we concluded to this higher value which yielded an implied going-in
capitalization rate of 10.5 percent, a figure well within the anticipated return
necessary to interest investors for this quality of building.
================================================================================
-129-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Britton's Hill
10 Year Holding Period
Discounted Cash Flow Analysis
<TABLE>
<CAPTION>
===================================================================================================
Discount Annual
Fiscal Net Rate Present Value Composition Cash on Cash
Year Cash Flow 12.00% of Cash Flows Of Yield Return
===================================================================================================
<S> <C> <C> <C> <C> <C>
1998 $445,738 X 0.89286 = $397,980 9.3% 10.4%
1999 $406,572 X 0.79719 = $324,117 7.6% 9.5%
2000 $483,341 X 0.71178 = $344,033 8.1% 11.2%
2001 $303,413 X 0.63552 = $192,824 4.5% 7.1%
2002 $511,617 X 0.56743 = $290,305 6.8% 11.9%
2003 $349,896 X 0.50663 = $177,268 4.2% 8.1%
2004 $570,731 X 0.45235 = $258,170 6.1% 13.3%
2005 $587,441 X 0.40388 = $237,258 5.6% 13.7%
2006 $588,652 X 0.36061 = $212,274 5.0% 13.7%
2007 $564,170 X 0.32197 = $181,648 4.3% 13.1%
---------- ---- -----
Total Present Value of Cash Flows $2,615,876 61% 11.2%
Average
</TABLE>
Reversion:
2008 $558,336 (1)/ 10.5% = $5,317,486
Less: Cost of 4.0% $212,699
----------
Net Reversion $5,104,786
X Discount Factor 0.32197
----------
Total Present Value of Reversion $1,643,605 39%
Total Present Value $4,259,481 100%
ROUNDED: $4,300,000
==========
---------------------------------------------------
Net Rentable Area: 132,103
Per SF NRA: $33
Implicit Going-In Capitalization Rate:
Year One NOI $472,159
Going-In Capitalization Rate: 11.0%
---------------------------------------------------
Note: (1) Net Operating Income
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Britton's Hill
Present Value Report
================================================================================
IRR or Discount Rate 12.00%
Cost of Sales 4.0%
Terminal Cap Rate 10.5%
<TABLE>
<CAPTION>
=====================================================================================================
CF as %
Sale at End of Year: Residual Residual PV Cash Flow PV of Total Total PV
=====================================================================================================
<S> <C> <C> <C> <C> <C>
10 $5,104,786 $1,643,605 $2,615,876 61.4% $4,259,481
11 $6,418,688 $1,845,219 $2,720,518 59.6% $4,565,738
12 $5,494,528 $1,410,308 $2,890,982 67.2% $4,301,291
13 $6,886,491 $1,578,206 $2,981,611 65.4% $4,559,817
14 $7,092,873 $1,451,342 $3,127,421 68.3% $4,578,763
15 $7,299,995 $1,333,682 $3,261,472 71.0% $4,595,154
Average: $4,476,707
=====================================================================================================
</TABLE>
Value Conclusion: $4,500,000
=================================================
Square Feet NRA: 132,103
Value Per SF NRA: $34
Year One NOI: $472,159
Implied Going-In
Capitalization Rate: 10.5%
Average Cash on Cash
Return over 10 Year Hold: 11.2%
=================================================
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Westmoreland Plaza
This property is a 115,815 square foot single story warehouse which is now
100 percent occupied by one tenant. Following is an analysis of the current
rental income, vacancy and collection loss projections, and historical/future
operating and fixed expenses for this property.
Current Rental Income
The weighted average rental rate during the next 12 months is $3.99 per
square foot triple net. The Pro-Ject Lease Abstract Report is in the Addenda. In
our opinion, this property's tenant base is comprised of local tenants which
represents no atypical credit risk. Market rent for this property was discussed
above as $5.00 per square foot triple net.
Expense Reimbursements
Expense reimbursements for this property follow a triple net format
wherein tenant reimburses landlord for the cost of operating the property. We
treated them this way in this analysis.
Allowance for Vacancy and Credit Loss
We used the same parameters for this property as for Dabney I relative to
credit loss and renewal probability. The resulting overall average occupancy
rate over the ten year holding period is 93.4 percent. Including our overall
vacancy/global credit loss allowance, the implied overall occupancy rate is 91.4
percent.
Total Operating Expenses
Historic operating expenses at this building ranged from a low of $0.57
per square foot in 1996 to a high of $0.76 per square foot in 1994. The 1997
budget calls for $0.77 per square foot. In the initial year of the investment
holding period, we project operating expenses to be $0.73 per square foot.
Other Non-Operating Expenses
We employed the same tenant improvement allowance, leasing commissions and
capital reserves as used in Dabney I above.
================================================================================
-132-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Westmoreland
Cash Flow Analysis
================================================================================
<TABLE>
<CAPTION>
1 2 3 4 5 6 7
Fiscal Year 1998 1999 2000 2001 2002 2003 2004
================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue From Operations
Minimum Rent $ 485,914 $ 352,674 $ 639,941 $ 659,139 $ 678,914 $ 699,281 $ 720,259
Expense Recoveries $ 86,374 $ 58,445 $ 98,434 $ 101,781 $ 105,242 $ 108,820 $ 112,488
Other Income $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Vacancy & Collection Loss ($ 11,446) ($ 8,222) ($ 14,768) ($ 15,218) ($ 15,683) ($ 16,162) ($ 16,655)
----------------------------------------------------------------------------------
Effective Gross Income $ 560,842 $ 402,897 $ 723,607 $ 745,702 $ 768,473 $ 791,939 $ 816,092
Expenses
Operating Expenses $ 8,070 $ 8,282 $ 8,572 $ 8,872 $ 9,183 $ 9,504 $ 9,837
G&A Expense $ 15,131 $ 15,530 $ 16,073 $ 16,636 $ 17,218 $ 17,821 $ 18,444
Management $ 16,825 $ 12,087 $ 21,708 $ 22,371 $ 23,054 $ 23,758 $ 24,483
Real Estate Taxes $ 48,717 $ 49,999 $ 51,749 $ 53,560 $ 55,435 $ 57,375 $ 59,383
----------------------------------------------------------------------------------
Total Expenses $ 88,743 $ 85,898 $ 98,102 $ 101,439 $ 104,890 $ 108,458 $ 112,147
Net Operating Income $ 472,099 $ 316,999 $ 625,505 $ 644,263 $ 663,583 $ 683,481 $ 703,945
Commisions $ 0 $ 156,132 $ 0 $ 0 $ 0 $ 0 $ 0
Capital Reserves $ 24,363 $ 24,789 $ 25,657 $ 26,555 $ 27,484 $ 28,446 $ 29,442
Alterations $ 0 $ 121,871 $ 0 $ 0 $ 0 $ 0 $ 0
----------------------------------------------------------------------------------
Net Cash Flow $ 447,736 $ 14,207 $ 599,848 $ 617,708 $ 636,099 $ 655,035 $ 674,503
</TABLE>
8 9 10 11
Fiscal Year 2005 2006 2007 2008
===========================================================================
Revenue From Operations
Minimum Rent $ 741,867 $ 633,601 $ 652,609 $ 802,709
Expense Recoveries $ 114,041 $ 96,113 $ 102,360 $ 128,390
Other Income $ 0 $ 0 $ 0 $ 0
Vacancy & Collection Loss ($ 17,118) ($ 14,594) ($ 15,099) ($ 18,622)
---------------------------------------------
Effective Gross Income $ 838,790 $ 715,120 $ 739,870 $ 912,477
Expenses
Operating Expenses $ 10,181 $ 10,538 $ 10,906 $ 11,288
G&A Expense $ 19,090 $ 19,758 $ 20,450 $ 21,165
Management $ 25,164 $ 21,454 $ 22,196 $ 27,374
Real Estate Taxes $ 61,462 $ 63,613 $ 65,839 $ 68,144
---------------------------------------------
Total Expenses $ 115,897 $ 115,363 $ 119,391 $ 127,971
Net Operating Income $ 722,893 $ 599,757 $ 620,479 $ 784,506
Commisions $ 0 $ 0 $ 192,023 $ 0
Capital Reserves $ 30,472 $ 31,539 $ 32,643 $ 33,785
Alterations $ 0 $ 0 $ 155,054 $ 0
---------------------------------------------
Net Cash Flow $ 692,421 $ 568,218 $ 240,759 $ 750,721
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Terminal Capitalization Rate
Similarly, we selected the same terminal cap rate for this building.
Transaction Costs
The costs of sale were again the same discussed for Dabney I.
Discount Rate
We again used an IRR of 12.0 percent.
On the following page is the Discounted Cash Flow Analysis for this asset.
Using the above indicated rates of return, our cash flow model indicated a value
of $5,100,000 or $42 per square foot. This value estimate produces an implied
going-in capitalization rate of 9.3 percent, a figure well within the
anticipated return necessary to interest investors for this quality of building.
As a result, we also considered the value indications from holding periods
ranging from ten to 15 years, the average of which suggested a value of
$5,200,000. See the second following page. We believe that on owner would
attempt to optimize the date of sale rather than sale at the end of exactly ten
years. Therefore, we concluded to this higher figure. The lower value indication
for the ten year holding period is due to significant lease expirations in
either the terminal or following year. We believe that an owner would attempt to
optimize the date of sale rather than sell the property in exactly ten years.
Therefore, we concluded to this higher value which yielded an implied going-in
capitalization rate of 9.1 percent, a figure well within the anticipated return
necessary to interest investors for this quality of building.
================================================================================
-134-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Westmoreland
10 Year Holding Period
Discounted Cash Flow Analysis
<TABLE>
<CAPTION>
===================================================================================================
Discount Annual
Fiscal Net Rate Present Value Composition Cash on Cash
Year Cash Flow 12.00% of Cash Flows Of Yield Return
===================================================================================================
<S> <C> <C> <C> <C> <C>
1998 $447,736 X 0.89286 = $399,764 7.8% 8.8%
1999 $ 14,207 X 0.79719 = $ 11,326 0.2% 0.3%
2000 $599,848 X 0.71178 = $426,960 8.4% 11.8%
2001 $617,708 X 0.63552 = $392,565 7.7% 12.1%
2002 $636,099 X 0.56743 = $360,940 7.1% 12.5%
2003 $655,035 X 0.50663 = $331,861 6.5% 12.8%
2004 $674,503 X 0.45235 = $305,111 6.0% 13.2%
2005 $692,421 X 0.40388 = $279,657 5.5% 13.6%
2006 $568,218 X 0.36061 = $204,905 4.0% 11.1%
2007 $240,759 X 0.32197 = $ 77,518 1.5% 4.7%
---------- ---- ----
Total Present Value of Cash Flows $2,790,607 55% 10.1%
Average
</TABLE>
Reversion:
2008 $784,506 (1)/ 10.5% = $7,471,486
Less: Cost of 4.0% $298,859
----------
Net Reversion $7,172,626
X Discount Factor 0.32197
----------
Total Present Value of Reversion $2,309,394 45%
Total Present Value $5,100,000 100%
ROUNDED: $5,100,000
==========
-------------------------------------------------
Net Rentable Area: 121,815
Per SF NRA: $42
Implicit Going-in Capitalization Rate:
Year One NOI $472,099
Going-in Capitalization Rate: 9.3%
-------------------------------------------------
Note: (1) Net Operating Income
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Westmoreland
Present Value Report
================================================================================
IRR or Discount Rate 12.00%
Cost of Sales 4.0%
Terminal Cap Rate 10.5%
<TABLE>
<CAPTION>
=====================================================================================================
CF as %
Sale at End of Year: Residual Residual PV Cash Flow PV of Total Total PV
=====================================================================================================
<S> <C> <C> <C> <C> <C>
10 $7,172,626 $2,309,394 $2,790,607 54.7% $5,100,000
11 $7,387,712 $2,123,791 $3,006,421 58.6% $5,130,212
12 $7,609,243 $1,953,103 $3,204,847 62.1% $5,157,950
13 $7,837,422 $1,796,135 $3,387,285 65.3% $5,183,420
14 $8,071,753 $1,651,641 $3,555,025 68.3% $5,206,665
15 $8,267,895 $1,510,513 $3,709,235 71.1% $5,219,748
Average: $5,166,333
=====================================================================================================
</TABLE>
Value Conclusion: $5,200,000
=================================================
Square Feet NRA 121,815
Value Per SF NRA: $43
Year One NOI: $472,099
Implied Going-in
Capitalization Rate: 9.1%
Average Cash on Cash
Return over 10 Year Hold: 10.1%
=================================================
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Morton Marks
This property is a 45,000 square foot single story warehouse which is now
100 percent occupied by one tenant. Following is an analysis of the current
rental income, vacancy and collection loss projections, and historical/future
operating and fixed expenses for this property.
Current Rental Income
The weighted average rental rate during the next 12 months is $3.55 per
square foot triple net. The Pro-Ject Lease Abstract Report is in the Addenda. In
our opinion, this property's tenant base is comprised of local tenants which
represents no atypical credit risk. Market rent for this property was discussed
above as $4.00 per square foot on a triple net basis..
Expense Reimbursements
Expense reimbursements for this property follow a triple net format
wherein tenant reimburses landlord for the cost of operating the property. We
treated them this way in this analysis.
Allowance for Vacancy and Credit Loss
We used the same parameters for this property as for Dabney I relative to
credit loss and renewal probability. The resulting overall average occupancy
rate over the ten year holding period is 95.0 percent. Including our overall
vacancy/global credit loss allowance, the implied overall occupancy rate is 93.0
percent.
Total Operating Expenses
Historic operating expenses at this building ranged from a low of $0.44
per square foot in 1996 to a high of $0.51 per square foot in 1995. The 1997
budget calls for $0.33 per square foot. In the initial year of the investment
holding period, we project operating expenses to be $0.55 per square foot based
on the historical expenses.
Other Non-Operating Expenses
We employed the same tenant improvement allowance, leasing commissions and
capital reserves as used in Dabney I above.
================================================================================
-137-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
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<PAGE>
Morton Marks
Cash Flow Analysis
================================================================================
<TABLE>
<CAPTION>
1 2 3 4 5 6 7
Fiscal Year 1998 1999 2000 2001 2002 2003 2004
================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue From Operations
Minimum Rent $ 159,750 $ 164,542 $ 125,454 $ 191,945 $ 197,703 $ 203,634 $ 209,743
Expense Recoveries $ 24,604 $ 24,499 $ 17,580 $ 27,567 $ 28,502 $ 29,469 $ 30,469
Other Income $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Vacancy & Collection Loss ($ 3,687) ($ 3,781) ($ 2,861) ($ 4,390) ($ 4,524) ($ 4,662) ($ 4,804)
----------------------------------------------------------------------------------
Effective Gross Income $ 180,667 $ 185,260 $ 140,173 $ 215,122 $ 221,681 $ 228,441 $ 235,408
Expenses
Operating Expenses $ 4,035 $ 4,141 $ 4,286 $ 4,436 $ 4,591 $ 4,752 $ 4,918
G&A Expense $ 1,009 $ 1,035 $ 1,072 $ 1,109 $ 1,148 $ 1,188 $ 1,230
Management $ 5,420 $ 5,558 $ 4,205 $ 6,454 $ 6,650 $ 6,853 $ 7,062
Real Estate Taxes $ 14,071 $ 14,441 $ 14,947 $ 15,470 $ 16,012 $ 16,572 $ 17,152
----------------------------------------------------------------------------------
Total Expenses $ 24,535 $ 25,175 $ 24,510 $ 27,469 $ 28,401 $ 29,365 $ 30,362
Net Operating Income $ 156,132 $ 160,085 $ 115,883 $ 187,653 $ 193,280 $ 199,076 $ 205,048
Commisions $ 0 $ 0 $ 46,142 $ 0 $ 0 $ 0 $ 0
Capital Reserves $ 9,000 $ 9,158 $ 9,478 $ 9,810 $ 10,153 $ 10,508 $ 10,876
Alterations $ 0 $ 0 $ 45,021 $ 0 $ 0 $ 0 $ 0
----------------------------------------------------------------------------------
Net Cash Flow $ 147,132 $ 150,927 $ 15,022 $ 177,843 $ 183,127 $ 188,568 $ 194,170
</TABLE>
8 9 10 11
Fiscal Year 2005 2006 2007 2008
===========================================================================
Revenue From Operations
Minimum Rent $ 216,035 $ 222,516 $ 154,360 $ 240,766
Expense Recoveries $ 31,484 $ 31,277 $ 21,649 $ 34,967
Other Income $ 0 $ 0 $ 0 $ 0
Vacancy & Collection Loss ($ 4,950) ($ 5,076) ($ 3,520) ($ 5,515)
---------------------------------------------
Effective Gross Income $ 242,569 $ 248,717 $ 172,489 $ 270,218
Expenses
Operating Expenses $ 5,091 $ 5,269 $ 5,453 $ 5,644
G&A Expense $ 1,273 $ 1,317 $ 1,363 $ 1,411
Management $ 7,277 $ 7,462 $ 5,175 $ 8,107
Real Estate Taxes $ 17,752 $ 18,374 $ 19,017 $ 19,682
---------------------------------------------
Total Expenses $ 31,393 $ 32,422 $ 31,008 $ 34,844
Net Operating Income $ 211,176 $ 216,295 $ 141,481 $ 235,374
Commisions $ 0 $ 0 $ 58,451 $ 0
Capital Reserves $ 11,257 $ 11,651 $ 12,059 $ 12,481
Alterations $ 0 $ 0 $ 59,283 $ 0
---------------------------------------------
Net Cash Flow $ 199,919 $ 204,644 $ 11,688 $ 222,893
================================================================================
CUSHMAN &
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<PAGE>
Income Capitalization Approach
================================================================================
Terminal Capitalization Rate
Similarly, we selected the same terminal cap rate for this building.
Transaction Costs
The costs of sale were again the same discussed for Dabney 1.
Discount Rate
We again used an IRR of 12.0 percent.
On the following page is the Discounted Cash Flow Analysis for this asset.
Using the above indicated rates of return, our cash flow model indicated a value
of $1,500,000 or $33 per square foot. This value estimate produces an implied
going-in capitalization rate of 10.4 percent, a figure well within the
anticipated return necessary to interest investors for this quality of building.
It is skewed upward slightly due to the essentially 100 percent leased status
of this building.
Regarding the composition of the yield, a significant 54 percent of the
subject's ultimate yield is derived from the cash flow of the property with the
balance attributable to the reversion or resale of the property at the
conclusion of the holding period. Typical investor requirements dictate that a
substantial amount of the value be derived from the cash flow. Finally, the
average annual cash on cash return equals 9.8 percent.
================================================================================
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<PAGE>
Morton Marks
10 Year Holding Period
Discounted Cash Flow
<TABLE>
<CAPTION>
===================================================================================================
Discount Annual
Fiscal Net Rate Present Value Composition Cash on Cash
Year Cash Flow 12.00% of Cash Flows Of Yield Return
===================================================================================================
<S> <C> <C> <C> <C> <C>
1998 $147,132 X 0.89286 = $131,368 8.7% 9.8%
1999 $150,927 X 0.79719 = $120,318 7.9% 10.1%
2000 $15,022 X 0.71178 = $10,692 0.7% 1.0%
2001 $177,843 X 0.63552 = $113,022 7.5% 11.9%
2002 $183,127 X 0.56743 = $103,911 6.9% 12.2%
2003 $188,568 X 0.50663 = $95,534 6.3% 12.6%
2004 $194,170 X 0.45235 = $87,833 5.8% 12.9%
2005 $199,919 X 0.40388 = $80,744 5.3% 13.3%
2006 $204,644 X 0.36061 = $73,797 4.9% 13.6%
2007 $11,688 X 0.32197 = $3,763 0.2% 0.8%
---------- ---- ----
Total Present Value of Cash Flows $820,983 54% 9.8%
Average
</TABLE>
Reversion:
2008 $235,374 (1)/ 10.5% = $2,241,657
Less: Cost of 4.0% $89,666
----------
Net Reversion $2,151,991
X Discount Factor 0.32197
----------
Total Present Value of Reversion $692,883 46%
Total Present Value $1,513,866 100%
ROUNDED: $1,500,000
==========
--------------------------------------------------
Net Rentable Area: 45,000
Per SF NRA: $33
Implicit Going-in Capitalization Rate:
Year One NOI $156,132
Going-In Capitalization Rate: 10.4%
--------------------------------------------------
Note: (1) Net Operating Income
================================================================================
CUSHMAN &
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<PAGE>
Income Capitalization Approach
================================================================================
2110 Tomlynn Street
This property is a 15,910 square foot single story warehouse which is now
100 percent occupied by one tenant. Following is an analysis of the current
rental income, vacancy and collection loss projections, and historical/future
operating and fixed expenses for this property.
Current Rental Income
The weighted average rental rate during the next 12 months is $4.39 per
square foot triple net. The Pro-Ject Lease Abstract Report is in the Addenda. In
our opinion, this property's tenant base is comprised of local tenants which
represents no atypical credit risk. Market rent for this property was discussed
above as $4.00 per square foot triple net.
Expense Reimbursements
Expense reimbursements for this property follow a triple net format
wherein tenant reimburses landlord for the cost of operating the property. We
treated them this way in this analysis.
Allowance for Vacancy and Credit Loss
We used the same parameters for this property as for Dabney I relative to
credit loss and renewal probability. The resulting overall average occupancy
rate over the ten year holding period is 96.7 percent. Including our overall
vacancy/global credit loss allowance, the implied overall occupancy rate is 94.7
percent.
Total Operating Expenses
Historic operating expenses at this building ranged from a low of $0.34
per square foot in 1996 to a high of $0.44 per square foot in 1995. The 1997
budget calls for $0.95 per square foot. The budget includes a management fee not
included in the historical statements and a substantial increase in operating
expenses. In the initial year of the investment holding period, we project
operating expenses to be $1.01 per square foot, relying most on the budget.
Other Non-Operating Expenses
We employed the same tenant improvement allowance, leasing commissions and
capital reserves as used in Dabney I above.
================================================================================
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<PAGE>
2110 Tomlynn Street
Cash Flow Analysis
================================================================================
<TABLE>
<CAPTION>
1 2 3 4 5 6 7
Fiscal Year 1998 1999 2000 2001 2002 2003 2004
================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue From Operations
Minimum Rent $ 69,809 $ 72,601 $ 49,675 $ 68,528 $ 70,584 $ 72,702 $ 74,883
Expense Recoveries $ 16,047 $ 16,028 $ 10,775 $ 17,387 $ 17,985 $ 18,604 $ 19,244
Other Income $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Vacancy & Collection Loss ($ 1,717) ($ 1,773) ($ 1,209) ($ 1,718) ($ 1,771) ($ 1,826) ($ 1,883)
----------------------------------------------------------------------------------
Effective Gross Income $ 84,139 $ 86,856 $ 59,241 $ 84,197 $ 86,798 $ 89,480 $ 92,244
Expenses
Operating Expenses $ 6,053 $ 6,212 $ 6,429 $ 6,654 $ 6,887 $ 7,128 $ 7,378
G&A Expense $ 2,623 $ 2,692 $ 2,786 $ 2,884 $ 2,984 $ 3,089 $ 3,197
Management $ 2,524 $ 2,606 $ 1,777 $ 2,526 $ 2,604 $ 2,684 $ 2,767
Real Estate Taxes $ 4,807 $ 4,933 $ 5,106 $ 5,285 $ 5,470 $ 5,661 $ 5,859
----------------------------------------------------------------------------------
Total Expenses $ 16,007 $ 16,443 $ 16,098 $ 17,349 $ 17,945 $ 18,562 $ 19,201
Net Operating Income $ 68,132 $ 70,413 $ 43,143 $ 66,848 $ 68,853 $ 70,918 $ 73,043
Commisions $ 0 $ 0 $ 0 $ 16,803 $ 0 $ 0 $ 0
Capital Reserves $ 3,182 $ 3,238 $ 3,351 $ 3,468 $ 3,590 $ 3,715 $ 3,845
Alterations $ 0 $ 0 $ 0 $ 16,474 $ 0 $ 0 $ 0
----------------------------------------------------------------------------------
Net Cash Flow $ 64,950 $ 67,175 $ 39,792 $ 30,103 $ 65,263 $ 67,203 $ 69,198
</TABLE>
8 9 10 11
Fiscal Year 2005 2006 2007 2008
===========================================================================
Revenue From Operations
Minimum Rent $ 77,129 $ 79,443 $ 81,827 $ 56,188
Expense Recoveries $ 19,906 $ 20,583 $ 20,770 $ 14,626
Other Income $ 0 $ 0 $ 0 $ 0
Vacancy & Collection Loss ($ 1,941) ($ 2,001) ($ 2,052) ($ 1,416)
---------------------------------------------
Effective Gross Income $ 95,094 $ 98,025 $ 100,545 $ 69,398
Expenses
Operating Expenses $ 7,636 $ 7,903 $ 8,180 $ 8,466
G&A Expense $ 3,309 $ 3,425 $ 3,545 $ 3,669
Management $ 2,853 $ 2,941 $ 3,016 $ 2,082
Real Estate Taxes $ 6,064 $ 6,276 $ 6,496 $ 6,723
---------------------------------------------
Total Expenses $ 19,862 $ 20,545 $ 21,237 $ 20,940
Net Operating Income $ 75,232 $ 77,480 $ 79,308 $ 48,458
Commisions $ 0 $ 0 $ 0 $ 20,666
Capital Reserves $ 3,980 $ 4,119 $ 4,263 $ 4,413
Alterations $ 0 $ 0 $ 0 $ 20,960
---------------------------------------------
Net Cash Flow $ 71,252 $ 73,361 $ 75,045 $ 2,419
================================================================================
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Terminal Capitalization Rate
Similarly, we selected the same terminal cap rate for this building.
Transaction Costs
The costs of sale were again the same discussed for Dabney I.
Discount Rate
We again used an IRR of 12.0 percent.
On the following page is the Discounted Cash Flow Analysis for this asset.
Using the above indicated rates of return, our cash flow model indicated a value
of $480,000 or $30 per square foot. This value estimate produces an implied
going-in capitalization rate of 14.2 percent, a figure above the anticipated
return necessary to interest investors for this quality of building, but
reflective the this asset's age and skewed upward due to the high occupancy.
As a result, we also considered the value indications from holding periods
ranging from ten to 15 years, the average of which suggested a value of
$550,000. See the second following page. We believe that on owner would attempt
to optimize the date of sale rather than sale at the end of exactly ten years.
Therefore, we concluded to this higher figure. The lower value indication for
the ten year holding period is due to significant lease expirations in either
the terminal or following year. We believe that an owner would attempt to
optimize the date of sale rather than sell the property in exactly ten years.
Therefore, we concluded to this higher value which yielded an implied going-in
capitalization rate of 12.4 percent, a figure well within the anticipated return
necessary to interest investors for this quality of building.
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<PAGE>
2110 Tomlynn Street
10 Year Holding Period
Discounted Cash Flow Analysis
<TABLE>
<CAPTION>
===================================================================================================
Discount Annual
Fiscal Net Rate Present Value Composition Cash on Cash
Year Cash Flow 12.00% of Cash Flows Of Yield Return
===================================================================================================
<S> <C> <C> <C> <C> <C>
1998 $64,950 X 0.89286 = $57,991 12.0% 13.5%
1999 $67,175 X 0.79719 = $53,551 11.1% 14.0%
2000 $39,792 X 0.71178 = $28,323 5.9% 8.3%
2001 $30,103 X 0.63552 = $19,131 4.0% 6.3%
2002 $65,263 X 0.56743 = $37,032 7.7% 13.6%
2003 $67,203 X 0.50663 = $34,047 7.0% 14.0%
2004 $69,198 X 0.45235 = $31,302 6.5% 14.4%
2005 $71,252 X 0.40388 = $28,777 6.0% 14.8%
2006 $73,361 X 0.36061 = $26,455 5.5% 15.3%
2007 $75,045 X 0.32197 = $24,162 5.0% 15.6%
-------- ---- -----
Total Present Value of Cash Flows $340,772 70% 13.0%
Average
</TABLE>
Reversion:
2008 $48,458 (1)/ 10.5% = $461,505
Less: Cost of 4.0% $18,460
--------
Net Reversion $443,045
X Discount Factor 0.32197
--------
Total Present Value of Reversion $142,648 30%
Total Present Value $483,421 100%
ROUNDED: $480,000
========
--------------------------------------------------
Net Rentable Area: 15,910
Per SF NRA: $30
Implicit Going-In Capitalization Rate:
Year One NOI $68,132
Going-In Capitalization Rate: 14.2%
--------------------------------------------------
Note: (1) Net Operating Income
================================================================================
CUSHMAN &
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---------------------------
<PAGE>
2110 Tomlynn Street
Present Value Report
================================================================================
IRR or Discount Rate 12.00%
Cost of Sales 4.0%
Terminal Cap Rate 10.5%
<TABLE>
<CAPTION>
=====================================================================================================
CF as %
Sale at End of Year: Residual Residual PV Cash Flow PV of Total Total PV
=====================================================================================================
<S> <C> <C> <C> <C> <C>
10 $443,045 $142,648 $340,772 70.5% $483,421
11 $766,546 $220,364 $341,468 60.8% $561,831
12 $789,531 $202,653 $361,815 64.1% $564,468
13 $813,202 $186,365 $380,522 67.1% $566,887
14 $837,568 $171,383 $397,721 69.9% $569,104
15 $862,610 $157,596 $413,532 72.4% $571,128
Average: $552,807
=====================================================================================================
</TABLE>
Value Conclusion: $550,000
=================================================
Square Feet NRA: 15,910
Value Per SF NRA: $35
Year One NOI: $68,132
Implied Going-In
Capitalization Rate: 12.4%
Average Cash on Cash
Return over 10 Year Hold: 13.0%
=================================================
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
Final Conclusions
The subject property consists of 17 industrial properties. Individual cash
flow projections were prepared for each property leading to a conclusion of
value on a building by building basis via the Income Capitalization Approach
which are summarized in the following table:
====================================
Income
Property Capitalization
====================================
Dabney I $1,200,000
Dabney II $1,400,000
Dabney III $900,000
Dabney IV $1,500,000
Dabney V $1,900,000
Dabney VI $1,900,000
Dabney VII $1,600,000
Dabney VIII $1,200,000
Dabney IX $1,300,000
Dabney X $4,100,000
Dabney XI $2,300,000
Dabney A-1 $1,200,000
Dabney A-2 $2,600,000
Britton's Hill $4,500,000
Westmoreland $5,200,000
Morton Marks $1,500,000
2110 Tomlynn $550,000
====================================
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<PAGE>
RECONCILIATION AND FINAL VALUE ESTIMATE
================================================================================
We have considered all of the traditional approaches to estimating market
value of commercial real estate in our analysis. Two of the three traditional
approaches were utilized, indicating the following values for the subject
property:
============================================
Sales Income
Property Comparison Capitalization
============================================
Dabney I $1,200,000 $1,200,000
Dabney II $1,500,000 $1,400,000
Dabney III $1,000,000 $900,000
Dabney IV $1,500,000 $1,500,000
Dabney V $1,800,000 $1,900,000
Dabney VI $1,800,000 $1,900,000
Dabney VII $1,500,000 $1,600,000
Dabney VIII $1,200,000 $1,200,000
Dabney IX $1,400,000 $1,300,000
Dabney X $3,900,000 $4,100,000
Dabney XI $2,000,000 $2,300,000
Dabney A-1 $1,200,000 $1,200,000
Dabney A-2 $2,500,000 $2,600,000
Britton's Hill $4,400,000 $4,500,000
Westmoreland $4,900,000 $5,200,000
Morton Marks $1,500,000 $1,500,000
2110 Tomlynn $500,000 $550,000
============================================
The three traditional methods of estimating the market value of commercial
real estate are not mutually exclusive approaches to deriving an estimate of
most probable selling price, but are interdependent methodologies, each relying
on components from at least one of the other approaches. Hence, the Cost
Approach requires extensive market data to derive estimates of depreciation and
to determine the value of land as if vacant. This approach may also require
income data in order to make adjustments for functional and economic
obsolescence. The Sales Comparison Approach requires application of methods from
the Income Capitalization Approach in order to make adjustments for differences
in income that have influenced the sale price. Consideration of market data is
also required for the Income Capitalization Approach in the selection and
application of equity, capitalization and discount rates, and estimation of
income and expenses. Consequently, it is our opinion that purchasers and
sellers, at least intuitively, consider components of all three approaches in
the process of negotiating an acceptable price for a particular property.
It is the Income Capitalization Approach, however, that is logically
considered the most appropriate technique for estimating the value of income
producing property. Not only does this approach represent the most direct and
accurate simulation of market behavior, it is the method explicitly employed by
buyers and sellers in acquisition and disposition decisions. Therefore,
following the implied dictum of the market, we have used an approach based
primarily on projected income as the foundation for our valuation of the subject
property.
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-147-
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<PAGE>
Reconciliation and Final Value Estimate
================================================================================
There are several additional reasons why the Sales Comparison Approach
does not form the basis of our value estimate for the subject property. The
quantity and quality of market information inhibits the use of the Sales
Comparison Approach. Inadequacy of information regarding gross and net income,
lease details and expenses of comparable sales often deters accurate and
relevant adjustments of unit price indicators. Comparison at a dollar per square
foot level precludes the analysis of those key factors which form the basis for
projections on which the purchase decision was made.
In light of the above, we are of the opinion that the market value of the
leased fee estate in the 17 individual properties, as of July 1, 1997, was:
=============================
Final Value
Property Conclusions
=============================
Dabney I $1,200,000
Dabney II $1,400,000
Dabney III $900,000
Dabney IV $1,500,000
Dabney V $1,900,000
Dabney VI $1,900,000
Dabney VII $1,600,000
Dabney VIII $1,200,000
Dabney IX $1,300,000
Dabney X $4,100,000
Dabney XI $2,300,000
Dabney A-1 $1,200,000
Dabney A-2 $2,600,000
Britton's Hill $4,500,000
Westmoreland $5,200,000
Morton Marks $1,500,000
2110 Tomlynn $550,000
=============================
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<PAGE>
ASSUMPTIONS AND LIMITING CONDITIONS
================================================================================
"Appraisal" means the appraisal report and opinion of value stated therein; or
the letter opinion of value, to which these Assumptions and Limiting Conditions
are annexed.
"Property" means the subject of the Appraisal.
"C&W" means Cushman & Wakefield, Inc. or its subsidiary which issued the
Appraisal.
"Appraiser(s)" means the employee(s) of C&W who prepared and signed the
Appraisal.
This appraisal is made subject to the following assumptions and limiting
conditions:
1. No opinion is intended to be expressed and no responsibility is assumed
for the legal description or for any matters which are legal in nature or
require legal expertise or specialized knowledge beyond that of a real
estate appraiser. Title to the Property is assumed to be good and
marketable and the Property is assumed to be free and clear of all liens
unless otherwise stated. No survey of the Property was undertaken.
2. The information contained in the Appraisal or upon which the Appraisal is
based has been gathered from sources the Appraiser assumes to be reliable
and accurate. Some of such information may have been provided by the owner
of the Property. Neither the Appraiser nor C&W shall be responsible for
the accuracy or completeness of such information, including the
correctness of estimates, opinions, dimensions, sketches, exhibits and
factual matters.
3. The opinion of value is only as of the date stated in the Appraisal.
Changes since that date in external and market factors or in the Property
itself can significantly affect property value.
4. The Appraisal is to be used in whole and not in part. No part of the
Appraisal shall be used in conjunction with any other appraisal.
Publication of the Appraisal or any portion thereof without the prior
written consent of C&W is prohibited. Except as may be otherwise stated in
the letter of engagement, the Appraisal may not be used by any person
other than the party to whom it is addressed or for purposes other than
that for which it was prepared. No part of the Appraisal shall be conveyed
to the public through advertising, or used in any sales or promotional
material without C&W`s prior written consent. Reference to the Appraisal
Institute or to the MAI designation is prohibited.
5. Except as may be otherwise stated in the letter of engagement, the
Appraiser shall not be required to give testimony in any court or
administrative proceeding relating to the Property or the Appraisal.
================================================================================
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<PAGE>
Assumption
================================================================================
6. The Appraisal assumes (a) responsible ownership and competent management
of the Property; (b) there are no hidden or unapparent conditions of the
Property, subsoil or structures that render the Property more or less
valuable (no responsibility is assumed for such conditions or for
arranging for engineering studies that may be required to discover them);
(c) full compliance with all applicable federal, state and local zoning
and environmental regulations and laws, unless noncompliance is stated,
defined and considered in the Appraisal; and (d) all required licenses,
certificates of occupancy and other governmental consents have been or can
be obtained and renewed for any use on which the value estimate contained
in the Appraisal is based.
7. The physical condition of the improvements considered by the Appraisal is
based on visual inspection by the Appraiser or other person identified in
the Appraisal. C&W assumes no responsibility for the soundness of
structural members nor for the condition of mechanical equipment, plumbing
or electrical components.
8. The forecasted potential gross income referred to in the Appraisal may be
based on lease summaries provided by the owner or third parties. The
Appraiser has not reviewed lease documents and assumes no responsibility
for the authenticity or completeness of lease information provided by
others. C&W recommends that legal advice be obtained regarding the
interpretation of lease provisions and the contractual rights of parties.
9. The forecasts of income and expenses are not predictions of the future.
Rather, they are the Appraiser's best estimates of current market thinking
on future income and expenses. The Appraiser and C&W make no warranty or
representation that these forecasts will materialize. The real estate
market is constantly fluctuating and changing. It is not the Appraisers
task to predict or in any way warrant the conditions of a future real
estate market; the Appraiser can only reflect what the investment
community, as of the date of the Appraisal, envisages for the future in
terms of rental rates, expenses, supply and demand.
10. Unless otherwise stated in the Appraisal, the existence of potentially
hazardous or toxic materials which may have been used in the construction
or maintenance of the improvements or may be located at or about the
Property was not considered in arriving at the opinion of value. These
materials (such as formaldehyde foam insulation, asbestos insulation and
other potentially hazardous materials) may adversely affect the value of
the Property. The Appraisers are not qualified to detect such substances.
C&W recommends that an environmental expert be employed to determine the
impact of these matters on the opinion of value.
11. Unless otherwise stated in the Appraisal, compliance with the requirements
of the Americans With Disabilities Act of 1990 (ADA) has not been
considered in arriving at the opinion of value. Failure to comply with the
requirements of the ADA may adversely affect the value of the property.
C&W recommends that an expert in this field be employed.
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<PAGE>
CERTIFICATION OF APPRAISAL
================================================================================
We certify that, to the best of our knowledge and belief:
1. Lynda Gallagher and Steven M. Halbert, J.D., MAI, inspected the property
and wrote the report. Donald R. Morris, MAI, Manager, Cushman & Wakefield
of Washington D.C., Valuation Advisory Services, inspected the property
and has reviewed and approved the report.
2. The statements of fact contained in this report are true and correct.
3. The reported analyses, opinions, and conclusions are limited only by the
reported assumptions and limiting conditions, and are our personal,
unbiased professional analyses, opinions, and conclusions.
4. We have no present or prospective interest in the property that is the
subject of this report, and we have no personal interest or bias with
respect to the parties involved.
5. Our compensation is not contingent upon the reporting of a predetermined
value or direction in value that favors the cause of the client, the
amount of the value estimate, the attainment of a stipulated result, or
the occurrence of a subsequent event. The appraisal assignment was not
based on a requested minimum valuation, a specific valuation or the
approval of a loan.
6. No one provided significant professional assistance to the persons signing
this report.
7. Our analyses, opinions and conclusions were developed, and this report has
been prepared, in conformity with the Uniform Standards of Professional
Appraisal Practice of the Appraisal Foundation and the Code of
Professional Ethics and the Standards of Professional Appraisal Practice
of the Appraisal Institute.
8. The use of this report is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives.
9. As of the date of this report, Steven M. Halbert, J.D., MAI, and Donald R.
Morris, MAI, have completed the requirements of the continuing education
program of the Appraisal Institute.
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---------------------------
<PAGE>
Certification of Appraisal
================================================================================
10. It is our opinion that the estimated market value of the subject property,
in as-is condition, as of the effective date of the appraisal, as of July
1, 1997, is:
=============================
Value
Property Conclusions
=============================
Dabney I $1,200,000
Dabney II $1,400,000
Dabney III $900,000
Dabney IV $1,500,000
Dabney V $1,900,000
Dabney VI $1,900,000
Dabney VII $1,600,000
Dabney VIII $1,200,000
Dabney IX $1,300,000
Dabney X $4,100,000
Dabney XI $2,300,000
Dabney A-1 $1,200,000
Dabney A-2 $2,600,000
Britton's Hill $4,500,000
Westmoreland $5,200,000
Morton Marks $1,500,000
2110 Tomlynn $550,000
=============================
/s/ Lynda Gallagher
Lynda Gallagher
/s/ Steven M. Halbert [SEAL]
Steven M. Halbert, J.D., MAI
Associate Director
Virginia Certified General Real Estate Appraiser No. 4001 001971
/s/ Donald R. Morris [SEAL]
Donald R. Morris, MAI
Manager, Director
Virginia Certified General Appraiser No. 4001-002465
================================================================================
-152-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
===============================================================
COMPLETE ADDENDA TO THE
APPRAISAL OF REAL PROPERTY
17 Industrial Buildings
Located in the Greater Dabney Area
Henrico County, Virginia
VOLUME II OF II
===============================================================
As Of July 1, 1997
Prepared For:
Goldman Sachs Mortgage Company
85 Broad Street
New York, New York 10004
Prepared By:
Cushman & Wakefield of Washington, D.C., Inc.
Valuation Advisory Services
1875 Eye Street, NW
Suite 700
Washington, D.C. 20006
===============================================================
<PAGE>
Addenda
================================================================================
ADDENDA
o Property Specific Data Under Separate Tabs
Historical and Budget Income and Expense Statement
Pro Ject +Plus Lease Abstract Report
Pro Ject +Plus Assumptions Report
=========================
Property Tab
=========================
Dabney I I
Dabney II II
Dabney III III
Dabney IV IV
Dabney V V
Dabney VI VI
Dabney VII VII
Dabney VIII VIII
Dabney IX IX
Dabney X X
Dabney XI XI
Dabney A-1 XII
Dabney A-2 XIII
Britton's Hill XIV
Westmoreland XV
Morton Marks XVI
2110 Tomlynn XVII
=========================
o Improved Sales
o Investor Survey
o Appraisers Qualifications
================================================================================
<PAGE>
Addenda
================================================================================
Dabney I
Operating Expense Statement
Pro-Ject Lease Abstract Report
Pro-Ject Assumptions Report
<PAGE>
Historical Operating Statements
Dabney I
Building NRA 33,600 SF
<TABLE>
<CAPTION>
1994 Actual 1995 Actual 1996 Actual 1997 Budget
--------------- --------------- --------------- ---------------
Item Amount Per SF Amount Per SF Amount Per SF Amount Per SF
============================================================== =============== ===============
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME
Gross Income $122,398 $3.64 $155,340 $4.62 $170,960 $5.09 $157,698 $4.69
Reimbursements 0 0.00 0 0.00 1,342 0.04 1,416 0.04
--------------- --------------- --------------- ---------------
Total Income $122,398 $3.64 $155,340 $4.62 $172,302 $5.13 $159,114 $4.74
--------------- --------------- --------------- ---------------
EXPENSES
Real Estate Taxes $ 9,768 $0.29 $ 9,768 $0.29 $ 9,568 $0.28 $ 9,766 $0.29
Operating Expense 12,171 0.36 23,435 0.70 13,156 0.39 18,031 0.54
General & Administrative 17,708 0.53 6,594 0.20 8,866 0.26 9,010 0.27
Management Fee 0 0.00 1,729 0.05 2,448 0.07 4,702 0.14
--------------- --------------- --------------- ---------------
Total Expenses $ 39,647 $1.18 $ 41,526 $1.24 $ 34,038 $1.01 $ 41,509 $1.24
--------------- --------------- --------------- ---------------
NET OPERATING INCOME $ 82,751 $2.46 $113,814 $3.39 $138,264 $4.12 $117,605 $3.50
=============== =============== =============== ===============
- ------------------------------------------------------------------------------------------------
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Dabney 1
PROJECT DESIGNATOR: DAB1
REVISION: 6/12/97 @ 11:08
LEASE ABSTRACT REPORT
FOR ALL TENANTS
6/16/97 @ 9:04
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE CEILING BREAKPOINT PRO RATA % OF RENT
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI
- --------------- --------- ------ ----- ----- ------ ------- ------- ------- ------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 1-SUITE 1 - 8,400 12/95 12/00 - 5.51 46,284 - - - TAX & INSURANCE 13,128
Media Post Marketi - 1/98 5.73 48,135
1/99 5.96 50,061
1/00 6.20 52,063
# 2-SUITE 2 - 8,400 5/82 5/99 - 4.45 37,380 - - - TAX & INSURANCE 11,263
Scherr Refrig - 6/98 4.58 38,501
# 3-SUITE 3 - 7,420 2/97 2/07 - 5.65 41,923 - - - TAX & INSURANCE 12,729
Ellis Flooring - 3/98 5.82 43,181
3/99 5.99 44,476
3/00 6.17 45,810
3/01 6.36 47,185
3/02 6.55 48,600
3/03 6.75 50,058
3/04 6.95 51,560
3/05 7.16 53,107
3/06 7.37 54,700
# 4-SUITE 4 - 5,180 12/93 9/99 - 4.06 21,031 - - - TAX & INSURANCE 11,263
Durfee Thurber - 10/97 4.18 21,662
10/98 4.31 22,312
# 5-SUITE 5 - 4,200 7/97 6/02 - 6.14 25,788 - - - TAX & INSURANCE 12,729
UnijAX - 7/98 6.32 26,562
7/99 6.51 27,358
7/00 6.71 28,179
7/01 6.91 29,025
------
33,600
======
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Dabney 1
PROJECT DESIGNATOR: DAB1
REVISION: 6/12/97 @ 11:08
PROJECT ASSUMPTIONS REPORT
INCLUDING ALL TENANTS
6/17/97 @ 23:30
BUILDING PROLOGUE
-----------------
LEASEHOLD ANALYSIS OF Dabney 1 BEGINNING 7/1997
FOR 18 YEARS ON A FISCAL YEAR BASIS
AREA MEASURES
-------------
NRA
1997 VALUE - 33,600
THEREAFTER - CONSTANT
OCCA
1997 VALUE - 30,882
1998 VALUE - 33,600
1999 VALUE - 29,505
2000 VALUE - 33,168
2001 VALUE - 30,800
2002 VALUE - 32,200
2003 VALUE - 33,600
2004 VALUE - 33,600
2005 VALUE - 33,600
2006 VALUE - 31,500
2007 VALUE - 28,700
2008 VALUE - 30,800
2009 VALUE - 32,900
2010 VALUE - 32,900
2011 VALUE - 33,600
2012 VALUE - 33,600
2013 VALUE - 33,600
2014 VALUE - 26,600
THEREAFTER - CONSTANT
GROWTH RATES
------------
INC1
1997 VALUE - 1.50
1998 VALUE - 3.00
THEREAFTER - CONSTANT
EXP1
1997 VALUE - 1.75
1998 VALUE - 3.50
THEREAFTER - CONSTANT
3%
1997 VALUE - 3.00
THEREAFTER - CONSTANT
4%
1997 VALUE - 4.00
THEREAFTER - CONSTANT
CPI
1997 VALUE - 1.75
1998 VALUE - 3.50
THEREAFTER - CONSTANT
COMN
<PAGE>
PAGE 2
1997 VALUE - 6.00
THEREAFTER - CONSTANT
COMR
1997 VALUE - 2.00
THEREAFTER - CONSTANT
COMB
+30.0% OF COMN +70.0% OF COMR
MARKET RATES
------------
MRKR
1997 VALUE - 5.40
THEREAFTER - GROWING AT GROWTH RATE INC1
TIRN
1997 VALUE - 0.50
THEREAFTER - GROWING AT GROWTH RATE EXP1
TINW
1997 VALUE - 2.00
THEREAFTER - GROWING AT GROWTH RATE EXP1
TIWA
+70.0% OF TIRN +30.0% OF TINW
RESR
1997 VALUE 0.20
THEREAFTER - GROWING AT GROWTH RATE EXP1
INSE
1997 VALUE 0.10
THEREAFTER - GROWING AT GROWTH RATE EXP1
MISCELLANEOUS INCOMES
---------------------
NONE
EXPENSES
--------
Real Estate Taxes , REFERRED TO AS TAX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 9,369
THEREAFTER - GROWING AT GROWTH RATE EXP1
OPERATING EXPENSES, REFERRED TO AS OPEX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 18,000
THEREAFTER - GROWING AT GROWTH RATE EXP1
G&A EXPENSES , REFERRED TO AS G&A
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 9,000
THEREAFTER - GROWING AT GROWTH RATE EXP1
MANAGEMENT FEES , REFERRED TO AS MGMT
CHARGED AGAINST NET OPERATING INCOME
3.00% OF EFFECTIVE GROSS INCOME
Industrial Gross , REFERRED TO AS GRSS
AN INFORMATIONAL EXPENSE
<PAGE>
PAGE 3
+100.0% OF TAX +2.0% OF OPEX
INSURANCE , REFERRED TO AS INSE
AN INFORMATIONAL EXPENSE
MARKET RATE INSE MULTIPLIED BY AREA MEASURE NRA
TAX & INSURANCE , REFERRED TO AS TX&I
AN INFORMATIONAL EXPENSE
+100.0% OF TAX +100.0% OF INSE
VACANCY ALLOWANCE
-----------------
PERCENTAGE OF POTENTIAL GROSS INCOME
FOR ALL TENANTS SUBJECT TO VACANCY
1997 VALUE - 2.00
THEREAFTER - CONSTANT
MANAGEMENT FEE
--------------
NONE
COMMISSION CALCULATIONS
-----------------------
STANDARD METHOD #1 0.000% OF TOTAL RENT
STANDARD METHOD #2 0.000% OF TOTAL RENT
STANDARD METHOD #3 0.000% OF TOTAL RENT
STANDARD METHOD #4 0.000% OF TOTAL RENT
STANDARD METHOD #5 0.000% OF TOTAL RENT
COMMISSION PAYOUTS
-----------------
STANDARD METHOD #1 CASHED OUT
STANDARD METHOD #2 AMORTIZED OVER LIFE OF LEASE
STANDARD METHOD #3 CASHED OUT
STANDARD METHOD #4 CASHED OUT
STANDARD METHOD #5 CASHED OUT
ALTERATION CALCULATION
----------------------
1997 VALUE - 0.00
1998 VALUE - 0.00
1999 VALUE - 0.00
2000 VALUE - 0.00
2001 VALUE - 0.00
2002 VALUE - 0.00
2003 VALUE - 0.00
2004 VALUE - 0.00
2005 VALUE - 0.00
2006 VALUE - 0.00
2007 VALUE - 0.00
<PAGE>
PAGE 4
2008 VALUE - 0.00
2009 VALUE - 0.00
2010 VALUE - 0.00
2011 VALUE - 0.00
THEREAFTER - CONSTANT
ALTERATION PAYOUTS
------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - CASHED OUT
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
COMMON AREA MAINTENANCE POOL
----------------------------
NONE
CAPITAL EXPENDITURES
-------------------
RESERVES
MARKET RATE RESR MULTIPLIED BY AREA MEASURE NRA
PRIMARY CLASSIFICATION CODES
----------------------------
NONE
SECONDARY CLASSIFICATION CODES
------------------------------
NONE
COST CENTERS
------------
NONE
SALES VOLUME PROFILE
--------------------
PERCENT OF RELATIVE
MONTH ANNUAL SALES VOLUME
----- ------------ --------
JAN 8.33% 1.00
FEB 8.33% 1.00
MAR 8.33% 1.00
APR 8.33% 1.00
MAY 8.33% 1.00
JUN 8.33% 1.00
JUL 8.33% 1.00
AUG 8.33% 1.00
SEP 8.33% 1.00
OCT 8.33% 1.00
<PAGE>
PAGE 5
NOV 8.33% 1.00
DEC 8.33% 1.00
------- -------
TOTALS 100.00% 12.00
GLOBAL RECOVERIES
- ------------------
Industrial Gross , REFERRED TO AS INGR
PRO RATA SHARE RECOVERY OF EXPENSE GRSS
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
TENANT PROLOGUE
- ---------------
MINIMUM RENTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
SALES VOLUMES AND BREAKPOINTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
RENEWAL RENTS ARE COMPOUNDED ANNUALLY
RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET
REFERENCE TENANTS
- ----------------
THERE ARE A TOTAL OF 1 REFERENCE TENANT(S):
- --------------------------------------------------------------------------------
# 1 - reference3
BASE LEASE DATES: 1/1996 TO 12/2005
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1
NOT SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MRKR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
<PAGE>
PAGE 6
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
TENANTS
- -------
THERE ARE A TOTAL OF 5 LEASEHOLD TENANT(S):
- --------------------------------------------------------------------------------
# 1 - SUITE I , Media Post Marketi
BASE LEASE DATES: 12/1995 TO 12/2000
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 8,400
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 5.51/SF/YR
THEREAFTER - GROWING AT 4.00%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 13,128
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MRKR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
<PAGE>
PAGE 7
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 2 - SUITE 2 , Scherr Refrig
BASE LEASE DATES: 5/1982 TO 5/1999
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 8,400
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 4.45/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 11,263
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
3 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MRKR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 3 - SUITE 3 , Ellis Flooring
BASE LEASE DATES: 2/1997 TO 2/2007
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 7,420
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 5.65/SF/YR
THEREAFTER - GROWING AT 3.00%
<PAGE>
PAGE 8
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MRKR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 4 - SUITE 4 , Durfee Thurber
BASE LEASE DATES: 12/1993 TO 9/1999
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 5,180
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 4.06/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 11,263
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
<PAGE>
PAGE 9
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
3 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MRKR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 5 - SUITE 5 , UnijAX
BASE LEASE DATES: 7/1997 TO 6/2002
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 4,200
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 6.14/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
COMMISSIONS: GROWTH RATE COMR
PAYOUT: CASHED OUT
ALTERATIONS: MARKET RATE TIRN
PAYOUT: CASHED OUT
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MRKR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
<PAGE>
PAGE 10
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
<PAGE>
Addenda
================================================================================
Dabney II
Operating Expense Statement
Pro-Ject Lease Abstract Report
Pro-Ject Assumptions Report
<PAGE>
Historical Operating Statements
Dabney II
Building NRA 42,000 SF
<TABLE>
<CAPTION>
1994 Actual 1995 Actual 1996 Actual 1997 Budget
--------------- --------------- --------------- ---------------
Item Amount Per SF Amount Per SF Amount Per SF Amount Per SF
============================================================== =============== ===============
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME
Gross Income $154,716 $3.68 $177,370 $4.22 $200,494 $4.77 $192,227 $4.58
Reimbursements 0 0.00 14 0.00 14 0.00 24 0.00
--------------- --------------- --------------- ---------------
Total Income $154,716 $3.68 $177,384 $4.22 $200,508 $4.77 $192,251 $4.58
--------------- --------------- --------------- ---------------
EXPENSES
Real Estate Taxes $ 10,521 $0.25 $ 10,521 $0.25 $ 10,306 $0.25 $ 10,306 $0.25
Operating Expense 12,116 0.29 18,715 0.45 14,910 0.36 20,442 0.49
General & Administrative 12,559 0.30 7,940 0.19 8,915 0.21 10,426 0.25
Management Fee 0 0.00 2,077 0.05 2,988 0.07 5,765 0.14
--------------- --------------- --------------- ---------------
Total Expenses $ 35,196 $0.84 $ 39,253 $0.93 $ 37,119 $0.88 $ 46,939 $1.12
--------------- --------------- --------------- ---------------
NET OPERATING INCOME $119,519 $2.85 $138,131 $3.29 $163,389 $3.89 $145,312 $3.46
=============== =============== =============== ===============
- ------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
DABNEY 2
PROJECT DESIGNATOR: DAB2
REVISION: 6/17/97 @ 15:01
LEASE ABSTRACT REPORT
FOR ALL TENANTS
6/18/97 @ 9:04
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE CEILING BREAKPOINT PRO RATA % OF RENT
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI
- --------------- --------- ------ ----- ----- ------ ------- ------- ------- ------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 1-SUITE 1 - 12,600 8/90 1/01 - 4.41 55,566 - - - TAX & INSURANCE 14,674
WYNNE GUILD -
# 2-SUITE 2 - 12,600 10/94 9/99 - 5.44 68,544 - - - TAX & INSURANCE 14,721
MIRROR COMPANY - 10/97 5.60 70,600
10/98 5.77 72,718
# 3-SUITE 3 - 8,400 7/97 6/02 - 3.97 33,348 - - - TAX & INSURANCE 20,580
ALADDIN MILLS - 7/98 4.09 34,348
7/99 4.21 35,379
7/00 4.34 36,440
7/01 4.47 37,533
# 4-SUITE 4 - 4,200 9/95 8/00 - 5.88 24,696 - - - TAX & INSURANCE 14,720
FACELIFT MID-ATLAN - 9/97 6.06 25,437
9/98 6.24 26,200
9/99 6.43 26,986
# 5-SUITE 5 - 4,200 5/92 7/00 - 4.11 17,262 - - - TAX & INSURANCE 14,674
DOMINION RESTORATI - 8/97 4.27 17,952
8/98 4.45 18,671
8/99 4.62 19,417
------
42,000
======
</TABLE>
<PAGE>
DABNEY 2
PROJECT DESIGNATOR: DAB2
REVISION: 6/17/97 @ 15:01
PROJECT ASSUMPTIONS REPORT
INCLUDING ALL TENANTS
6/17/97 @ 23:30
BUILDING PROLOGUE
-----------------
LEASEHOLD ANALYSIS OF DABNEY 2 BEGINNING 7/1997
FOR 18 YEARS ON A FISCAL YEAR BASIS
AREA MEASURES
-------------
NRA
1997 VALUE - 42,000
THEREAFTER - CONSTANT
OCCA
1997 VALUE - 37,800
1998 VALUE - 42,000
1999 VALUE - 38,850
2000 VALUE - 38,150
2001 VALUE - 37,800
2002 VALUE - 39,200
2003 VALUE - 42,000
2004 VALUE - 42,000
2005 VALUE - 42,000
2006 VALUE - 42,000
2007 VALUE - 37,450
2008 VALUE - 35,350
2009 VALUE - 40,600
2010 VALUE - 40,600
2011 VALUE - 42,000
2012 VALUE - 42,000
2013 VALUE - 42,000
2014 VALUE - 37,800
THEREAFTER - CONSTANT
GROWTH RATES
------------
INC1
1997 VALUE - 1.50
1998 VALUE - 3.00
THEREAFTER - CONSTANT
EXP1
1997 VALUE - 1.75
1998 VALUE - 3.50
THEREAFTER - CONSTANT
3%
1997 VALUE - 3.00
THEREAFTER - CONSTANT
4%
1997 VALUE - 4.00
THEREAFTER - CONSTANT
CPI
1997 VALUE - 1.75
1998 VALUE - 3.50
THEREAFTER - CONSTANT
COMN
<PAGE>
PAGE 2
1997 VALUE - 6.00
THEREAFTER - CONSTANT
COMR
1997 VALUE - 2.00
THEREAFTER - CONSTANT
COMB
+30.0% OF COMN +70.0% OF COMR
MARKET RATES
------------
MKT1
1997 VALUE - 5.40
THEREAFTER - GROWING AT GROWTH RATE INC1
TIRN
1997 VALUE - 0.50
THEREAFTER - GROWING AT GROWTH RATE EXP1
TINW
1997 VALUE - 2.00
THEREAFTER - GROWING AT GROWTH RATE EXP1
TIWA
+70.0% OF TIRN +30.0% OF TINW
RESR
1997 VALUE - 0.20
THEREAFTER - GROWING AT GROWTH RATE EXP1
INSE
1997 VALUE 0.10
THEREAFTER - GROWING AT GROWTH RATE EXP1
MISCELLANEOUS INCOMES
---------------------
NONE
EXPENSES
--------
Property Taxes , REFERRED TO AS TAX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 16,380
THEREAFTER - GROWING AT GROWTH RATE EXP1
OPERATING EXPENSES, REFERRED TO AS OPEX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 18,000
THEREAFTER - GROWING AT GROWTH RATE EXP1
G&A EXPENSES , REFERRED TO AS G&A
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 10,000
THEREAFTER - GROWING AT GROWTH RATE EXP1
MANAGEMENT FEES , REFERRED TO AS MGMT
CHARGED AGAINST NET OPERATING INCOME
3.00% OF EFFECTIVE GROSS INCOME
Industrial Gross , REFERRED TO AS GRSS
AN INFORMATIONAL EXPENSE
<PAGE>
PAGE 3
+100.0% OF TAX +2.0% OF OPEX
INSURANCE , REFERRED TO AS INSE
AN INFORMATIONAL EXPENSE
MARKET RATE INSE MULTIPLIED BY AREA MEASURE NRA
TAX & INSURANCE , REFERRED TO AS TX&I
AN INFORMATIONAL EXPENSE
+100.0% OF TAX +100.0% OF INSE
VACANCY ALLOWANCE
-----------------
PERCENTAGE OF POTENTIAL GROSS INCOME
FOR ALL TENANTS SUBJECT TO VACANCY
1997 VALUE - 2.00
THEREAFTER - CONSTANT
MANAGEMENT FEE
--------------
NONE
COMMISSION CALCULATIONS
-----------------------
STANDARD METHOD #1 - 0.000% OF TOTAL RENT
STANDARD METHOD #2 - 0.000% OF TOTAL RENT
STANDARD METHOD #3 - 0.000% OF TOTAL RENT
STANDARD METHOD #4 - 0.000% OF TOTAL RENT
STANDARD METHOD #5 - 0.000% OF TOTAL RENT
COMMISSION PAYOUTS
-----------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - AMORTIZED OVER LIFE OF LEASE
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
ALTERATION CALCULATION
----------------------
1997 VALUE - 0.00
1998 VALUE - 0.00
1999 VALUE - 0.00
2000 VALUE - 0.00
2001 VALUE - 0.00
2002 VALUE - 0.00
2003 VALUE - 0.00
2004 VALUE - 0.00
2005 VALUE - 0.00
2006 VALUE - 0.00
2007 VALUE - 0.00
<PAGE>
PAGE 4
2008 VALUE - 0.00
2009 VALUE - 0.00
2010 VALUE - 0.00
2011 VALUE - 0.00
THEREAFTER - CONSTANT
ALTERATION PAYOUTS
------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - CASHED OUT
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
COMMON AREA MAINTENANCE POOL
----------------------------
NONE
CAPITAL EXPENDITURES
-------------------
RESERVES
MARKET RATE RESR MULTIPLIED BY AREA MEASURE NRA
PRIMARY CLASSIFICATION CODES
----------------------------
NONE
SECONDARY CLASSIFICATION CODES
------------------------------
NONE
COST CENTERS
------------
NONE
SALES VOLUME PROFILE
--------------------
PERCENT OF RELATIVE
MONTH ANNUAL SALES VOLUME
----- ------------ --------
JAN 8.33% 1.00
FEB 8.33% 1.00
MAR 8.33% 1,00
APR 8.33% 1.00
MAY 8.33% 1.00
JUN 8.33% 1.00
JUL 8.33% 1.00
AUG 8.33% 1.00
SEP 8.33% 1.00
OCT 8.33% 1.00
<PAGE>
PAGE 5
NOV 8.33% 1.00
DEC 8.33% 1.00
------- -------
TOTALS 100.00% 12.00
GLOBAL RECOVERIES
- ------------------
Industrial Gross , REFERRED TO AS INGR
PRO RATA SHARE RECOVERY OF EXPENSE GRSS
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
TENANT PROLOGUE
- ---------------
MINIMUM RENTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
SALES VOLUMES AND BREAKPOINTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
RENEWAL RENTS ARE COMPOUNDED ANNUALLY
RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET
REFERENCE TENANTS
- ----------------
THERE ARE A TOTAL OF 1 REFERENCE TENANT(S):
- --------------------------------------------------------------------------------
# 1 - reference3
BASE LEASE DATES: 1/1996 TO 12/2005
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1
NOT SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
<PAGE>
PAGE 6
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
TENANTS
- -------
THERE ARE A TOTAL OF 5 LEASEHOLD TENANT(S):
- --------------------------------------------------------------------------------
# 1 - SUITE 1 , WYNNE GUILD
BASE LEASE DATES: 8/1990 TO 1/2001
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 12,600
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 4.41/SF/YR
THEREAFTER - GROWING AT 0.00%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 14,674
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
<PAGE>
PAGE 7
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 2 - SUITE 2 , MIRROR COMPANY
BASE LEASE DATES: 10/1994 TO 9/1999
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 12,600
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 5.44/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 14,721
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
3 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 3 - SUITE 3 , ALADDIN MILLS
BASE LEASE DATES: 7/1997 TO 6/2002
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 8,400
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 3.97/SF/YR
THEREAFTER - GROWING AT 3.00%
<PAGE>
PAGE 8
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 4 - SUITE 4 , FACELIFT MID-ATLAN
BASE LEASE DATES: 9/1995 TO 8/2000
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 4,200
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 5.88/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 14,720
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
<PAGE>
PAGE 9
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
3 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 5 - SUITE 5 , DOMINION RESTORATI
BASE LEASE DATES: 5/1992 TO 7/2000
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 4,200
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 4.11/SF/YR
THEREAFTER - GROWING AT 4.00%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 14,674
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
3 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
<PAGE>
PAGE 10
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
<PAGE>
Addenda
================================================================================
Dabney III
Operating Expense Statement
Pro-Ject Lease Abstract Report
Pro-Ject Assumptions Report
<PAGE>
Historical Operating Statements
Dabney III
Building NRA 23,850 SF
<TABLE>
<CAPTION>
1994 Actual 1995 Actual 1996 Actual 1997 Budget
--------------- --------------- --------------- ---------------
Item Amount Per SF Amount Per SF Amount Per SF Amount Per SF
============================================================== =============== ===============
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME
Gross Income $120,628 $5.06 $126,857 $5.32 $ 70,039 $2.94 $128,052 $5.37
Reimbursements 0 0.00 1,120 0.05 290 0.01 600 0.03
--------------- --------------- --------------- ---------------
Total Income $120,628 $5.06 $127,976 $5.37 $ 70,329 $2.95 $128,652 $5.39
--------------- --------------- --------------- ---------------
EXPENSES
Real Estate Taxes $ 7,330 $0.31 $ 7,330 $0.31 $ 7,181 $0.30 $ 7,330 $0.31
Operating Expense 15,703 0.66 18,913 0.79 10,766 0.45 19,753 0.83
General & Administrative 5,632 0.24 5,590 0.23 3,827 0.16 7,133 0.30
Management Fee 0 0.00 1,160 0.05 1,022 0.04 3,754 0.16
--------------- --------------- --------------- ---------------
Total Expenses $ 28,665 $1.20 $ 32,994 $1.38 $ 22,796 $0.96 $ 37,970 $1.59
--------------- --------------- --------------- ---------------
NET OPERATING INCOME $ 91,963 $3.86 $ 94,982 $3.98 $ 47,533 $1.99 $ 90,682 $3.80
=============== =============== =============== ===============
- ------------------------------------------------------------------------------------------------
</TABLE>
Note: 9,900 square feet or 42 percent of the building rolled in 1996 which
contributes to the lower 1996 income figures.
<PAGE>
DABNET 3
PROJECT DESIGNATOR: DAB3
REVISION: 6/17/97 @ 15:11
LEASE ABSTRACT REPORT
FOR ALL TENANTS
6/18/97 @ 9:04
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE CEILING BREAKPOINT PRO RATA % OF RENT
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI
- --------------- --------- ------ ----- ----- ------ ------- ------- ------- ------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 1-SUITE 1 - 9,900 9/96 8/01 - 5.48 54,252 - - - TAX & INSURANCE 9,565
UNITED POWER - 9/97 5.64 55,880
9/98 5.81 57,556
9/99 5.99 59,283
9/00 6.17 61,061
# 2-SUITE 2 - 7,050 8/84 11/97 - 5.40 38,070 - - - TAX & INSURANCE 9,170
UNIJAX -
1- 60 5.56 39,198 - - - TAX & INSURANCE 12,260
12/98 5.73 40,374
12/99 5.90 41,585
12/00 6.08 42,833
12/01 6.26 44,118
# 3-SUITE 3 - 3,600 6/97 5/02 - 6.35 22,860 - - - TAX & INSURANCE 12,260
SWING N' DOOR - 6/98 6.54 23,546
6/99 6.74 24,252
6/00 6.94 24,980
6/01 7.15 25,729
# 4-SUITE 4 - 3,300 1/92 11/97 - 5.61 18,513 - - - TAX & INSURANCE 9,068
WEST END SIGNS -
------
23,850
======
</TABLE>
<PAGE>
DABNET 3
PROJECT DESIGNATOR: DAB3
REVISION: 6/17/97 @ 15:11
PROJECT ASSUMPTIONS REPORT
INCLUDING ALL TENANTS
6/17/97 @ 23:30
BUILDING PROLOGUE
-----------------
LEASEHOLD ANALYSIS OF DABNET 3 BEGINNING 7/1997
FOR 18 YEARS ON A FISCAL YEAR BASIS
AREA MEASURES
-------------
NRA
1997 VALUE - 23,850
THEREAFTER - CONSTANT
OCCA
1997 VALUE - 22,075
1998 VALUE - 23,025
1999 VALUE - 23,850
2000 VALUE - 23,850
2001 VALUE - 20,550
2002 VALUE - 22,063
2003 VALUE - 22,088
2004 VALUE - 23,850
2005 VALUE - 22,750
2006 VALUE - 23,850
2007 VALUE - 23,850
2008 VALUE - 23,850
2009 VALUE - 19,650
2010 VALUE - 21,200
2011 VALUE - 23,850
2012 VALUE - 22,750
2013 VALUE - 23,850
2014 VALUE - 23,850
THEREAFTER - CONSTANT
GROWTH RATES
------------
INC1
1997 VALUE - 1.50
1998 VALUE - 3.00
THEREAFTER - CONSTANT
EXP1
1997 VALUE - 1.75
1998 VALUE - 3.50
THEREAFTER - CONSTANT
3%
1997 VALUE - 3.00
THEREAFTER - CONSTANT
4%
1997 VALUE - 4.00
THEREAFTER - CONSTANT
CPI
1997 VALUE - 1.75
1998 VALUE - 3.50
THEREAFTER - CONSTANT
COMN
<PAGE>
PAGE 2
1997 VALUE - 6.00
THEREAFTER - CONSTANT
COMR
1997 VALUE - 2.00
THEREAFTER - CONSTANT
COMB
+30.0% OF COMN +70.0% OF COMR
MARKET RATES
------------
MKT1
1997 VALUE - 6.35
THEREAFTER - GROWING AT GROWTH RATE INC1
TIRN
1997 VALUE - 0.50
THEREAFTER - GROWING AT GROWTH RATE EXP1
TINW
1997 VALUE - 2.00
THEREAFTER - GROWING AT GROWTH RATE EXPI
TIWA
+70.0% OF TIRN +30.0% OF TINW
RESR
1997 VALUE - 0.20
THEREAFTER - GROWING AT GROWTH RATE EXP1
INSE
1997 VALUE - 0.10
THEREAFTER - GROWING AT GROWTH RATE EXP1
MISCELLANEOUS INCOMES
---------------------
NONE
EXPENSES
--------
PROPERTY TAXES , REFERRED TO AS TAX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 9,875
THEREAFTER - GROWING AT GROWTH RATE EXP1
OPERATING EXPENSES, REFERRED TO AS OPEX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 19,000
THEREAFTER - GROWING AT GROWTH RATE EXP1
General , REFERRED TO AS G&A
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 7,000
THEREAFTER - GROWING AT GROWTH RATE EXP1
MANAGEMENT FEES , REFERRED TO AS MGMT
CHARGED AGAINST NET OPERATING INCOME
3.00% OF EFFECTIVE GROSS INCOME
Industrial Gross , REFERRED TO AS GRSS
AN INFORMATIONAL EXPENSE
<PAGE>
PAGE 3
+100.0% OF TAX +2.0% OF OPEX
INSURANCE , REFERRED TO AS INSE
AN INFORMATIONAL EXPENSE
MARKET RATE INSE MULTIPLIED BY AREA MEASURE NRA
TAX & INSURANCE , REFERRED TO AS TX&I
AN INFORMATIONAL EXPENSE
+100.0% OF TAX +100.0% OF INSE
VACANCY ALLOWANCE
-----------------
PERCENTAGE OF POTENTIAL GROSS INCOME
FOR ALL TENANTS SUBJECT TO VACANCY
1997 VALUE - 2.00
THEREAFTER - CONSTANT
MANAGEMENT FEE
--------------
NONE
COMMISSION CALCULATIONS
-----------------------
STANDARD METHOD #1 - 0.000% OF TOTAL RENT
STANDARD METHOD #2 - 0.000% OF TOTAL RENT
STANDARD METHOD #3 - 0.000% OF TOTAL RENT
STANDARD METHOD #4 - 0.000% OF TOTAL RENT
STANDARD METHOD #5 - 0.000% OF TOTAL RENT
COMMISSION PAYOUTS
-----------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - AMORTIZED OVER LIFE OF LEASE
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
ALTERATION CALCULATION
----------------------
1997 VALUE - 0.00
1998 VALUE - 0.00
1999 VALUE - 0.00
2000 VALUE - 0.00
2001 VALUE - 0.00
2002 VALUE - 0.00
2003 VALUE - 0.00
2004 VALUE - 0.00
2005 VALUE - 0.00
2006 VALUE - 0.00
2007 VALUE - 0.00
<PAGE>
PAGE 4
2008 VALUE - 0.00
2009 VALUE - 0.00
2010 VALUE - 0.00
2011 VALUE - 0.00
THEREAFTER - CONSTANT
ALTERATION PAYOUTS
------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - CASHED OUT
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
COMMON AREA MAINTENANCE POOL
----------------------------
NONE
CAPITAL EXPENDITURES
-------------------
RESERVES
MARKET RATE RESR MULTIPLIED BY AREA MEASURE NRA
PRIMARY CLASSIFICATION CODES
----------------------------
NONE
SECONDARY CLASSIFICATION CODES
------------------------------
NONE
COST CENTERS
------------
NONE
SALES VOLUME PROFILE
--------------------
PERCENT OF RELATIVE
MONTH ANNUAL SALES VOLUME
----- ------------ --------
JAN 8.33% 1.00
FEB 8.33% 1.00
MAR 8.33% 1.00
APR 8.33% 1.00
MAY 8.33% 1.00
JUN 8.33% 1.00
JUL 8.33% 1.00
AUG 8.33% 1.00
SEP 8.33% 1.00
OCT 8.33% 1.00
<PAGE>
PAGE 5
NOV 8.33% 1.00
DEC 8.33% 1.00
------- -------
TOTALS 100.00% 12.00
GLOBAL RECOVERIES
- ------------------
Industrial Gross , REFERRED TO AS INGR
PRO RATA SHARE RECOVERY OF EXPENSE GRSS
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
TENANT PROLOGUE
- ---------------
MINIMUM RENTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
SALES VOLUMES AND BREAKPOINTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
RENEWAL RENTS ARE COMPOUNDED ANNUALLY
RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET
REFERENCE TENANTS
- ----------------
THERE ARE A TOTAL OF 1 REFERENCE TENANT(S):
- --------------------------------------------------------------------------------
# 1 - reference3
BASE LEASE DATES: 1/1996 TO 12/2005
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1
NOT SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
<PAGE>
PAGE 6
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
TENANTS
- -------
THERE ARE A TOTAL OF 4 LEASEHOLD TENANT(S):
- ------------------------------------------------------------------------------
# - SUITE 1 , UNITED POWER
BASE LEASE DATES: 9/1996 TO 8/2001
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 9,900
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 5.48/SF/YR
THEREAFTER - GROWING AT GROWTH RATE 3%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 9,565
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
<PAGE>
PAGE 7
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 2 - SUITE 2 , UNIJAX
BASE LEASE DATES: 8/1984 TO 11/1997
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 7,050
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 5.40/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 9,170
COMMISSIONS: NONE
ALTERATIONS: NONE
OPTION 1 DATES: 12/1997 TO 11/2002
SQUARE FOOTAGE: 7,050
MINIMUM RENT:
1998 VALUE - 5.56/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
COMMISSIONS: GROWTH RATE COMR
PAYOUT: CASHED OUT
ALTERATIONS: MARKET RATE TIRN
PAYOUT: CASHED OUT
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
<PAGE>
PAGE 8
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 3 - SUITE 3 , SWING N' DOOR
BASE LEASE DATES: 6/1997 TO 5/2002
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 3,600
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - MARKET RATE MKT1
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 4 - SUITE 4 , WEST END SIGNS
BASE LEASE DATES: 1/1992 TO 11/1997
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 3,300
<PAGE>
PAGE 9
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 5.61/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 9,068
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
3 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
<PAGE>
Addenda
================================================================================
Dabney IV
Operating Expense Statement
Pro-Ject Lease Abstract Report
Pro-Ject Assumptions Report
<PAGE>
Historical Operating Statements
Dabney IV
Building NRA 41,550 SF
<TABLE>
<CAPTION>
1994 Actual 1995 Actual 1996 Actual 1997 Budget
--------------- --------------- --------------- ---------------
Item Amount Per SF Amount Per SF Amount Per SF Amount Per SF
============================================================== =============== ===============
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME
Gross Income $183,104 $4.41 $181,621 $4.37 $209,160 $5.03 $207,232 $4.99
Reimbursements 0 0.00 459 0.01 2,829 0.07 0 0.00
--------------- --------------- --------------- ---------------
Total Income $183,104 $4.41 $182,080 $4.38 $211,989 $5.10 $207,232 $4.99
--------------- --------------- --------------- ---------------
EXPENSES
Real Estate Taxes $ 13,210 $0.32 $ 13,498 $0.32 $ 13,576 $0.33 $ 13,496 $0.32
Operating Expense 22,864 0.55 38,488 0.93 13,849 0.33 17,882 0.43
General & Administrative 22,955 0.55 6,661 0.16 7,151 0.17 9,364 0.23
Management Fee 0 0.00 1,508 0.04 3,056 0.07 6,191 0.15
--------------- --------------- --------------- ---------------
Total Expenses $ 59,029 $1.42 $ 60,155 $1.45 $ 37,632 $0.91 $ 46,933 $1.13
--------------- --------------- --------------- ---------------
NET OPERATING INCOME $124,076 $2.99 $121,926 $2.93 $174,357 $4.20 $160,299 $3.86
=============== =============== =============== ===============
- ------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
DABNET 4
PROJECT DESIGNATOR: DAB4
REVISION: 6/17/97 @ 15:56
LEASE ABSTRACT REPORT
FOR ALL TENANTS
6/16/97 @ 9:05
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE CEILING BREAKPOINT PRO RATA % OF RENT
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI
- --------------- --------- ------ ----- ----- ------ ------- ------- ------- ------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 1-SUITE 1 - 12,600 11/94 10/01 - 4.76 59,976 - - - TAX & INSURANCE 15,929
ARK ENVELOPE - 11/97 4.95 62,375
11/98 5.15 64,870
11/99 5.35 67,465
11/00 5.57 70,163
# 2-SUITE 2 - 12,150 6/93 9/08 - 3.99 46,479 - - - TAX & INSURANCE 15,929
VIRGINIA DONUTS - 10/97 4.11 49,933
10/98 4.23 51,431
10/99 4.36 52,974
10/00 4.49 54,563
10/01 4.63 56,200
10/02 4.76 57,886
10/03 4.91 59,622
10/04 5.05 61,411
10/05 5.21 63,253
10/06 5.36 65,151
10/07 5.52 67,106
# 3-SUITE 3 - 8,400 12/91 11/01 - 5.86 49,224 - - - TAX & INSURANCE 15,929
DILLARD - 12/97 6.04 50,701
12/98 6.22 52,222
12/99 6.40 53,788
12/00 6.60 55,402
# 4-SUITE 4 - 4,200 7/95 6/00 - 6.04 25,368 - - - TAX & INSURANCE 17,653
THERAEUTICS - 7/98 6.28 26,363
7/99 6.53 27,438
# 5-SUITE 5 - 4,200 9/95 8/00 - 5.78 24,276 - - - TAX & INSURANCE 17,652
BUSINESS CONTROLS - 9/97 6.01 25,247
9/98 6.25 26,257
9/99 6.50 27,307
------
41,550
======
</TABLE>
<PAGE>
DABNET 4
PROJECT DESIGNATOR: DAB4
REVISION: 6/17/97 @ 15:56
PROJECT ASSUMPTIONS REPORT
INCLUDING ALL TENANTS
6/17/97 @ 23:31
BUILDING PROLOGUE
-----------------
LEASEHOLD ANALYSIS OF DABNET 4 BEGINNING 7/1997
FOR 18 YEARS ON A FISCAL YEAR BASIS
AREA MEASURES
-------------
NRA
1997 VALUE - 41,550
THEREAFTER - CONSTANT
OCCA
1997 VALUE - 41,550
1996 VALUE - 41,550
1999 VALUE - 41,550
2000 VALUE - 38,750
2001 VALUE - 38,750
2002 VALUE - 37,350
2003 VALUE - 41,550
2004 VALUE - 41,550
2005 VALUE - 41,550
2006 VALUE - 41,550
2007 VALUE - 40,850
2008 VALUE - 36,413
2009 VALUE - 33,538
2010 VALUE - 41,550
2011 VALUE - 41,550
2012 VALUE - 41,550
2013 VALUE - 41,550
2014 VALUE - 41,550
THEREAFTER - CONSTANT
GROWTH RATES
------------
INC1
1997 VALUE - 1.50
1998 VALUE - 3.00
THEREAFTER - CONSTANT
EXP1
1997 VALUE - 1.75
1998 VALUE - 3.50
THEREAFTER - CONSTANT
3%
1997 VALUE - 3.00
THEREAFTER - CONSTANT
4%
1997 VALUE - 4.00
THEREAFTER - CONSTANT
CPI
1997 VALUE - 1.75
1998 VALUE - 3.50
THEREAFTER - CONSTANT
COMN
<PAGE>
PAGE 2
1997 VALUE - 6.00
THEREAFTER - CONSTANT
COMR
1997 VALUE - 2.00
THEREAFTER - CONSTANT
COMB
+30.0% OF COMN +70.0% OF COMR
MARKET RATES
------------
MRKR
1997 VALUE - 5.40
THEREAFTER - GROWING AT GROWTH RATE INC1
TIRN
1997 VALUE - 0.50
THEREAFTER - GROWING AT GROWTH RATE EXP1
TINW
1997 VALUE - 2.00
THEREAFTER - GROWING AT GROWTH RATE EXP1
TIWA
+70.0% OF TIRN +30.0% OF TINW
RESR
1997 VALUE - 0.20
THEREAFTER - GROWING AT GROWTH RATE EXP1
INSE
1997 VALUE - 0.10
THEREAFTER - GROWING AT GROWTH RATE EXP1
MISCELLANEOUS INCOMES
---------------------
NONE
EXPENSES
--------
PROPERTY TAXES , REFERRED TO AS TAX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 14,547
THEREAFTER - GROWING AT GROWTH RATE EXP1
OPERATING EXPENSES, REFERRED TO AS OPEX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 18,000
THEREAFTER - GROWING AT GROWTH RATE EXP1
G&A EXPENSES , REFERRED TO AS G&A
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 9,000
THEREAFTER - GROWING AT GROWTH RATE EXP1
MANAGEMENT FEES , REFERRED TO AS MGMT
CHARGED AGAINST NET OPERATING INCOME
3.00% OF EFFECTIVE GROSS INCOME
Industrial Gross , REFERRED TO AS GRSS
AN INFORMATIONAL EXPENSE
<PAGE>
PAGE 3
+100.0% OF TAX +2.0% OF OPEX
INSURANCE , REFERRED TO AS INSE
AN INFORMATIONAL EXPENSE
MARKET RATE INSE MULTIPLIED BY AREA MEASURE NRA
TAX & INSURANCE , REFERRED TO AS TX&I
AN INFORMATIONAL EXPENSE
+100.0% OF TAX +100.0% OF INSE
VACANCY ALLOWANCE
-----------------
PERCENTAGE OF POTENTIAL GROSS INCOME
FOR ALL TENANTS SUBJECT TO VACANCY
1997 VALUE - 2.00
THEREAFTER - CONSTANT
MANAGEMENT FEE
--------------
NONE
COMMISSION CALCULATIONS
-----------------------
STANDARD METHOD #1 - 0.000% OF TOTAL RENT
STANDARD METHOD #2 - 0.000% OF TOTAL RENT
STANDARD METHOD #3 - 0.000% OF TOTAL RENT
STANDARD METHOD #4 - 0.000% OF TOTAL RENT
STANDARD METHOD #5 - 0.000% OF TOTAL RENT
COMMISSION PAYOUTS
-----------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - AMORTIZED OVER LIFE OF LEASE
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
ALTERATION CALCULATION
----------------------
1997 VALUE - 0.00
1998 VALUE - 0.00
1999 VALUE - 0.00
2000 VALUE - 0.00
2001 VALUE - 0.00
2002 VALUE - 0.00
2003 VALUE - 0.00
2004 VALUE - 0.00
2005 VALUE - 0.00
2006 VALUE - 0.00
2007 VALUE - 0.00
<PAGE>
PAGE 4
2008 VALUE - 0.00
2009 VALUE - 0.00
2010 VALUE - 0.00
2011 VALUE - 0.00
THEREAFTER - CONSTANT
ALTERATION PAYOUTS
------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - CASHED OUT
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
COMMON AREA MAINTENANCE POOL
----------------------------
NONE
CAPITAL EXPENDITURES
-------------------
RESERVES
MARKET RATE RESR MULTIPLIED BY AREA MEASURE NRA
PRIMARY CLASSIFICATION CODES
----------------------------
NONE
SECONDARY CLASSIFICATION CODES
------------------------------
NONE
COST CENTERS
------------
NONE
SALES VOLUME PROFILE
--------------------
PERCENT OF RELATIVE
MONTH ANNUAL SALES VOLUME
----- ------------ --------
JAN 8.33% 1.00
FEB 8.33% 1.00
MAR 8.33% 1,00
APR 8.33% 1.00
MAY 8.33% 1.00
JUN 8.33% 1.00
JUL 8.33% 1.00
AUG 8.33% 1.00
SEP 8.33% 1.00
OCT 8.33% 1.00
<PAGE>
PAGE 5
NOV 8.33% 1.00
DEC 8.33% 1.00
------- -------
TOTALS 100.00% 12.00
GLOBAL RECOVERIES
- -----------------
Industrial Gross , REFERRED TO AS INGR
PRO RATA SHARE RECOVERY OF EXPENSE GRSS
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
TENANT PROLOGUE
- ---------------
MINIMUM RENTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
SALES VOLUMES AND BREAKPOINTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
RENEWAL RENTS ARE COMPOUNDED ANNUALLY
RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET
REFERENCE TENANTS
- ----------------
THERE ARE A TOTAL OF 1 REFERENCE TENANT(S):
- --------------------------------------------------------------------------------
# 1 - reference3
BASE LEASE DATES: 1/1996 TO 12/2005
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1
NOT SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MRKR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
<PAGE>
PAGE 6
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
TENANTS
- -------
THERE ARE A TOTAL OF 5 LEASEHOLD TENANT(S):
- ------------------------------------------------------------------------------
# - SUITE 1 , ARK ENVELOPE
BASE LEASE DATES: 11/1994 TO 10/2001
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 12,600
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 4.76/SF/YR
THEREAFTER - GROWING AT 4.00%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 15,929
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MRKR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
<PAGE>
PAGE 7
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 2 - SUITE 2 , VIRGINIA DONUTS
BASE LEASE DATES: 6/1993 TO 9/2008
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 12,150
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 3.99/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 15,929
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 3 - SUITE 3 , DILLARD
BASE LEASE DATES: 12/1991 TO 11/2001
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 8,400
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 5.86/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
<PAGE>
PAGE 8
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 15,929
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MRKR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 4 - SUITE 4 , THERAEUTICS
BASE LEASE DATES: 7/1995 TO 6/2000
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 4,200
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 6.04/SF/YR
THEREAFTER - GROWING AT 4.00%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 17,653
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
<PAGE>
PAGE 9
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
3 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MRKR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 5 - SUITE 5 , BUSINESS CONTROLS
BASE LEASE DATES: 9/1995 TO 8/2000
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 4,200
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 5.78/SF/YR
THEREAFTER - GROWING AT 4.00%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 17,652
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
3 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MRKR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
<PAGE>
PAGE 10
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
<PAGE>
Addenda
================================================================================
Dabney V
Operating Expense Statement
Pro-Ject Lease Abstract Report
Pro-Ject Assumptions Report
<PAGE>
Historical Operating Statements
Dabney V
Building NRA 45,353 SF
<TABLE>
<CAPTION>
1994 Actual 1995 Actual 1996 Actual 1997 Budget
--------------- --------------- --------------- ---------------
Item Amount Per SF Amount Per SF Amount Per SF Amount Per SF
============================================================== =============== ===============
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME
Gross Income $249,833 $5.51 $245,951 $5.42 $251,875 $5.55 $258,009 $5.69
Reimbursements 0 0.00 711 0.02 1,351 0.03 0 0.00
--------------- --------------- --------------- ---------------
Total Income $249,833 $5.51 $246,662 $5.44 $253,226 $5.58 $258,009 $5.69
--------------- --------------- --------------- ---------------
EXPENSES
Real Estate Taxes $ 16,958 $0.37 $ 16,958 $0.37 $ 16,612 $0.37 $ 16,958 $0.37
Operating Expense 21,932 0.48 47,287 1.04 18,881 0.42 22,500 0.50
General & Administrative 20,619 0.45 10,188 0.22 19,935 0.44 12,532 0.28
Management Fee 0 0.00 3,176 0.07 3,569 0.08 7,712 0.17
--------------- --------------- --------------- ---------------
Total Expenses $ 59,510 $1.31 $ 77,610 $1.71 $ 58,997 $1.30 $ 59,702 $1.32
--------------- --------------- --------------- ---------------
NET OPERATING INCOME $190,323 $4.20 $169,052 $3.73 $194,229 $4.28 $198,307 $4.37
=============== =============== =============== ===============
- ------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
DABNEY 5
PROJECT DESIGNATOR: DAB5
REVISION: 6/17/97 @ 17:03
LEASE ABSTRACT REPORT
FOR ALL TENANTS
6/18/97 @ 9:05
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE CEILING BREAKPOINT PRO RATA % OF RENT
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI
- --------------- --------- ------ ----- ----- ------ ------- ------- ------- ------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 1-SUITE 1 - 18,000 1/93 5/03 - 5.27 94,860 - - - TAX & INSURANCE 21,493
CARRIAGE HOUSE - 6/98 4.96 89,280
6/99 5.45 98,100
# 2-SUITE 2 - 5,400 6/97 5/02 - 6.45 34,830 - - - TAX & INSURANCE 23,583
OFFICE MASTERS - 6/98 6.64 35,875
6/99 6.84 36,951
6/00 7.05 38,060
6/01 7.26 39,201
# 3-SUITE 3 - 4,800 6/91 7/97 - 5.71 27,408 - - - TAX & INSURANCE 21,493
ALKAT ELECTRICAL -
1- 24 5.88 28,224 - - - TAX & INSURANCE 23,583
8/98 6.06 29,071
# 4-SUITE 4 - 3,900 9/95 8/98 - 5.72 22,308 - - - TAX & INSURANCE 21,493
ROYAL CUP\ - 9/97 5.95 23,200
# 5 - 3,900 2/97 1/02 - 5.73 22,347 - - - TAX & INSURANCE 23,583
FORSHAW - 2/98 5.90 23,017
2/99 6.08 23,708
2/00 6.26 24,419
2/01 6.45 25,152
# 6-SUITE 6 - 3,303 5/93 4/99 - 4.75 15,689 - - - TAX & INSURANCE 21,493
BELL ATLATICOM - 5/98 4.89 16,160
# 7-SUITE 6 - 3,300 5/95 5/00 - 7.24 23,892 - - - TAX & INSURANCE 21,493
GRAPHIC SYSTEMS - 6/98 7.53 24,848
6/99 7.83 25,842
# 8 - 2,750 4/96 4/01 - 5.98 16,445 - - - TAX & INSURANCE 21,320
ON DEMAND - 5/98 6.22 17,103
5/99 6.47 17,787
5/00 6.73 18,498
------
45,353
======
</TABLE>
<PAGE>
DABNEY 5
PROJECT DESIGNATOR: DAB5
REVISION: 6/17/97 @ 17:03
PROJECT ASSUMPTIONS REPORT
INCLUDING ALL TENANTS
6/17/97 @ 23:31
BUILDING PROLOGUE
-----------------
LEASEHOLD ANALYSIS OF DABNEY 5 BEGINNING 7/1997
FOR 18 YEARS ON A FISCAL YEAR BASIS
AREA MEASURES
-------------
NRA
1997 VALUE - 45,353
THEREAFTER - CONSTANT
OCCA
1997 VALUE - 42,778
1998 VALUE - 44,053
1999 VALUE - 42,652
2000 VALUE - 44,253
2001 VALUE - 44,436
2002 VALUE - 42,253
2003 VALUE - 39,353
2004 VALUE - 45,353
2005 VALUE - 45,353
2006 VALUE - 42,552
2007 VALUE - 43,328
2008 VALUE - 44,161
2009 VALUE - 42,703
2010 VALUE - 40,403
2011 VALUE - 43,853
2012 VALUE - 45,353
2013 VALUE - 44,053
2014 VALUE - 42,652
THEREAFTER - CONSTANT
GROWTH RATES
------------
INC1
1997 VALUE - 1.50
1998 VALUE - 3.00
THEREAFTER - CONSTANT
EXP1
1997 VALUE - 1.75
1998 VALUE - 3.50
THEREAFTER - CONSTANT
3%
1997 VALUE - 3.00
THEREAFTER - CONSTANT
4%
1997 VALUE - 4.00
THEREAFTER - CONSTANT
CPI
1997 VALUE - 1.75
1998 VALUE - 3.50
THEREAFTER - CONSTANT
COMN
<PAGE>
PAGE 2
1997 VALUE - 6.00
THEREAFTER - CONSTANT
COMR
1997 VALUE - 2.00
THEREAFTER - CONSTANT
COMB
+30.0% OF COMN +70.0% OF COMR
MARKET RATES
------------
MKT1
1997 VALUE - 6.35
THEREAFTER - GROWING AT GROWTH RATE INC1
TIRN
1997 VALUE - 0.50
THEREAFTER - GROWING AT GROWTH RATE EXP1
TINW
1997 VALUE - 2.00
THEREAFTER - GROWING AT GROWTH RATE EXP1
TIWA
+70.0% OF TIRN +30.0% OF TINW
RESR
1997 VALUE - 0.20
THEREAFTER - GROWING AT GROWTH RATE EXP1
INSE
1997 VALUE - 0.10
THEREAFTER - GROWING AT GROWTH RATE EXP1
MISCELLANEOUS INCOMES
---------------------
NONE
EXPENSES
--------
PROPERTY TAXES , REFERRED TO AS TAX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 19,048
THEREAFTER - GROWING AT GROWTH RATE EXP1
OPERATING EXPENSES, REFERRED TO AS OPEX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 22,500
THEREAFTER - GROWING AT GROWTH RATE EXP1
GENERAL & ADMIN , REFERRED TO AS G&A
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 12,500
THEREAFTER - GROWING AT GROWTH RATE EXP1
MANAGEMENT FEES , REFERRED TO AS MGMT
CHARGED AGAINST NET OPERATING INCOME
3.00% OF EFFECTIVE GROSS INCOME
Industrial Gross , REFERRED TO AS GRSS
AN INFORMATIONAL EXPENSE
<PAGE>
PAGE 3
+100.0% OF TAX +2.0% OF OPEX
INSURANCE , REFERRED TO AS INSE
AN INFORMATIONAL EXPENSE
MARKET RATE INSE MULTIPLIED BY AREA MEASURE NRA
TAX & INSURANCE , REFERRED TO AS TX&I
AN INFORMATIONAL EXPENSE
+100.0% OF TAX +100.0% OF INSE
VACANCY ALLOWANCE
-----------------
PERCENTAGE OF POTENTIAL GROSS INCOME
FOR ALL TENANTS SUBJECT TO VACANCY
1997 VALUE - 2.00
THEREAFTER - CONSTANT
MANAGEMENT FEE
--------------
NONE
COMMISSION CALCULATIONS
-----------------------
STANDARD METHOD #1 - 0.000% OF TOTAL RENT
STANDARD METHOD #2 - 0.000% OF TOTAL RENT
STANDARD METHOD #3 - 0.000% OF TOTAL RENT
STANDARD METHOD #4 - 0.000% OF TOTAL RENT
STANDARD METHOD #5 - 0.000% OF TOTAL RENT
COMMISSION PAYOUTS
------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - AMORTIZED OVER LIFE OF LEASE
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
ALTERATION CALCULATION
----------------------
1997 VALUE - 0.00
1998 VALUE - 0.00
1999 VALUE - 0.00
2000 VALUE - 0.00
2001 VALUE - 0.00
2002 VALUE - 0.00
2003 VALUE - 0.00
2004 VALUE - 0.00
2005 VALUE - 0.00
2006 VALUE - 0.00
2007 VALUE - 0.00
<PAGE>
PAGE 4
2008 VALUE - 0.00
2009 VALUE - 0.00
2010 VALUE - 0.00
2011 VALUE - 0.00
THEREAFTER - CONSTANT
ALTERATION PAYOUTS
------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - CASHED OUT
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
COMMON AREA MAINTENANCE POOL
----------------------------
NONE
CAPITAL EXPENDITURES
--------------------
RESERVES
MARKET RATE RESR MULTIPLIED BY AREA MEASURE NRA
PRIMARY CLASSIFICATION CODES
----------------------------
NONE
SECONDARY CLASSIFICATION CODES
------------------------------
NONE
COST CENTERS
------------
NONE
SALES VOLUME PROFILE
--------------------
PERCENT OF RELATIVE
MONTH ANNUAL SALES VOLUME
----- ------------ --------
JAN 8.33% 1.00
FEB 8.33% 1.00
MAR 8.33% 1,00
APR 8.33% 1.00
MAY 8.33% 1.00
JUN 8.33% 1.00
JUL 8.33% 1.00
AUG 8.33% 1.00
SEP 8.33% 1.00
OCT 8.33% 1.00
<PAGE>
PAGE 5
NOV 8.33% 1.00
DEC 8.33% 1.00
------- -------
TOTALS 100.00% 12.00
GLOBAL RECOVERIES
- -----------------
Industrial Gross , REFERRED TO AS INGR
PRO RATA SHARE RECOVERY OF EXPENSE GRSS
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
TENANT PROLOGUE
- ---------------
MINIMUM RENTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
SALES VOLUMES AND BREAKPOINTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
RENEWAL RENTS ARE COMPOUNDED ANNUALLY
RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET
REFERENCE TENANTS
- ----------------
THERE ARE A TOTAL OF 1 REFERENCE TENANT(S):
- --------------------------------------------------------------------------------
# 1 - reference3
BASE LEASE DATES: 1/1996 TO 12/2005
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1
NOT SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
<PAGE>
PAGE 6
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
TENANTS
- -------
THERE ARE A TOTAL OF 8 LEASEHOLD TENANT(S):
- ------------------------------------------------------------------------------
# 1 - SUITE 1 , CARRIAGE HOUSE
BASE LEASE DATES: 1/1993 TO 5/2003
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 18,000
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 5.27/SF/YR
CHANGING TO - 4.96/SF/YR ON 5/1998
CHANGING TO - 5.45/SF/YR ON 5/1999
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 21,493
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
<PAGE>
PAGE 7
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 2 - SUITE 2 , OFFICE MASTERS
BASE LEASE DATES: 6/1997 TO 5/2002
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 5,400
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 6.45/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 3 - SUITE 3 , ALKAT ELECTRICAL
BASE LEASE DATES: 6/1991 TO 7/1997
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 4,800
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 5.71/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
<PAGE>
PAGE 8
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 21,493
COMMISSIONS: NONE
ALTERATIONS: NONE
OPTION 1 DATES: 8/1997 TO 7/1999
SQUARE FOOTAGE: 4,800
MINIMUM RENT:
1998 VALUE - 5.88/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
COMMISSIONS: GROWTH RATE COMR
PAYOUT: CASHED OUT
ALTERATIONS: MARKET RATE TIRN
PAYOUT: CASHED OUT
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
3 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 4 - SUITE 4 , ROYAL CUP\
BASE LEASE DATES: 9/1995 TO 8/1998
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 3,900
<PAGE>
PAGE 9
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 5.72/SF/YR
THEREAFTER - GROWING AT 4.00%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 21,493
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
3 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 5 - FORSHAW
BASE LEASE DATES: 2/1997 TO 1/2002
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 3,900
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 5.73/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
<PAGE>
PAGE 10
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 6 - SUITE 6 , BELL ATLATICOM
BASE LEASE DATES: 5/1993 TO 4/1999
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 3,303
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 4.75/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 21,493
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
3 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
<PAGE>
PAGE 11
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 7 - SUITE 6 , GRAPHIC SYSTEMS
BASE LEASE DATES: 5/1995 TO 5/2000
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 3,300
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 7.24/SF/YR
THEREAFTER - GROWING AT 4.00%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 21,493
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
3 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
<PAGE>
PAGE 12
- --------------------------------------------------------------------------------
# 8 - ON DEMAND
BASE LEASE DATES. 4/1996 TO 4/2001
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 2,750
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 5.98/SF/YR
THEREAFTER - GROWING AT 4.00%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 21,320
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
<PAGE>
Addenda
================================================================================
Dabney VI
Operating Expense Statement
Pro-Ject Lease Abstract Report
Pro-Ject Assumptions Report
<PAGE>
Historical Operating Statements
Dabney VI
<TABLE>
<CAPTION>
Building NRA 50,400 SF
1994 Actual 1995 Actual 1996 Actual 1997 Budget
----------------- ----------------- ----------------- -----------------
Item Amount Per SF Amount Per SF Amount Per SF Amount Per SF
=================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME
Gross Income $221,744 $ 4.40 $197,513 $ 3.92 $188,962 $ 3.75 $250,629 $ 4.97
Reimbursements 0 0.00 0 0.00 0 0.00 0 0.00
----------------- ----------------- ----------------- -----------------
Total Income $221,744 $ 4.40 $197,513 $ 3.92 $188,962 $ 3.75 $250,629 $ 4.97
----------------- ----------------- ----------------- -----------------
EXPENSES
Real Estate Taxes $ 11,964 $ 0.24 $ 11,964 $ 0.24 $ 11,720 $ 0.23 $ 11,962 $ 0.24
Operating Expense 6,720 0.13 25,743 0.51 15,733 0.31 13,554 0.27
General & Administrative 15,892 0.32 4,905 0.10 12,010 0.24 20,073 0.40
Management Fee 0 0.00 1,927 0.04 2,835 0.06 7,495 0.15
----------------- ----------------- ----------------- -----------------
Total Expenses $ 34,576 $ 0.69 $ 44,539 $ 0.88 $ 42,298 $ 0.84 $ 53,084 $ 1.05
----------------- ----------------- ----------------- -----------------
NET OPERATING INCOME $187,168 $ 3.71 $152,975 $ 3.04 $146,664 $ 2.91 $197,545 $ 3.92
================= ================= ================= =================
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
Note: A single tenant occupying the entire building rolled in late-1995 which
contributes to the lower 1995 and 1996 income figures.
<PAGE>
DABNEY 6
PROJECT DESIGNATOR: DAB6
REVISION: 6/17/97 @ 17:15
LEASE ABSTRACT REPORT
FOR ALL TENANTS
6/18/97 @ 9:05
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL % OF RENT
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE CEILING BREAKPOINT PRO RATA SUBJ
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) (000'S) RECOVERIES SHARE BASE TO CPI
- ------------- --------- ------- ----- ----- ----- ----------- ------- ------- ------- --------- --------------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 1-SUITE 1 - 16,800 3/96 2/01 - 4.63 77,784 - - - TAX & INSURANCE 16,881
KAP - 3/98 4.77 80,118
3/99 4.91 82,521
3/00 5.06 84,997
# 2-SUITE 2 - 12,600 2/97 2/02 - 4.50 56,700 - - - TAX & INSURANCE 20,618
CORT FURNITURE - 3/98 4.64 58,401
3/99 4.77 60,153
3/00 4.92 61,958
3/01 5.06 63,816
# 3-SUITE 3 - 12,600 8/96 7/01 - 5.25 66,150 - - - TAX & INSURANCE 16,881
WEST HOME - 8/97 5.41 68,135
8/98 5.57 70,179
8/99 5.74 72,284
8/00 5.91 74,452
# 4-SUITE 4 - 8,400 6/96 5/01 - 5.87 49,308 - - - TAX & INSURANCE 16,881
GOODALL - 6/98 6.05 50,787
6/99 6.23 52,311
6/00 6.41 53,880
------
50,400
======
</TABLE>
<PAGE>
DABNEY 6
PROJECT DESIGNATOR: DAB6
REVISION: 6/17/97 @ 17:15
PROJECT ASSUMPTIONS REPORT
INCLUDING ALL TENANTS
6/17/97 @ 23:32
BUILDING PROLOGUE
-----------------
LEASEHOLD ANALYSIS OF DABNEY 6 BEGINNING 7/1997
FOR 18 YEARS ON A FISCAL YEAR BASIS
AREA MEASURES
-------------
NRA
1997 VALUE - 50,400
THEREAFTER - CONSTANT
OCCA
1997 VALUE - 49,350
1998 VALUE - 50,400
1999 VALUE - 5O,400
2000 VALUE - 50,400
2001 VALUE - 37,800
2002 VALUE - 46,200
2003 VALUE - 5O,400
2004 VALUE - 50,400
2005 VALUE - 50,400
2006 VALUE - 5O,400
2007 VALUE - 50,400
2008 VALUE - 41,650
2009 VALUE - 42,350
2010 VALUE - 50,400
2011 VALUE - 5O,400
2012 VALUE - 50,400
2013 VALUE - 50,400
2014 VALUE - 50,400
THEREAFTER - CONSTANT
GROWTH RATES
------------
INC1
1997 VALUE - 1.50
1998 VALUE - 3.00
THEREAFTER - CONSTANT
EXP1
1997 VALUE - 1.75
1998 VALUE - 3.50
THEREAFTER - CONSTANT
1997 VALUE - 3.00
THEREAFTER - CONSTANT
4%
1997 VALUE - 4.00
THEREAFTER - CONSTANT
CPI
1997 VALUE - 1.75
1998 VALUE - 3.50
THEREAFTER - CONSTANT
COMN
<PAGE>
PAGE 2
1997 VALUE - 6.00
THEREAFTER - CONSTANT
COMR
1997 VALUE - 2.00
THEREAFTER - CONSTANT
COMB
+30.O% OF COMN +70.0% OF COMR
MARKET RATES
------------
MKT1
1997 VALUE - 5.40
THEREAFTER - GROWING AT GROWTH RATE INC1
TIRN
1997 VALUE - 0.50
THEREAFTER - GROWING AT GROWTH RATE EXP1
TINW
1997 VALUE - 2.00
THEREAFTER - GROWING AT GROWTH RATE EXP1
TIWA
+70.0% OF TIRN +30.0% OF TINW
RESR
1997 VALUE - 0.20
THEREAFTER - GROWING AT GROWTH RATE EXP1
INSE
1997 VALUE - 0.10
THEREAFTER - GROWING AT GROWTH RATE EXP1
MISCELLANEOUS INCOMES
---------------------
NONE
EXPENSES
--------
REAL ESTATE TAXES , REFERRED TO AS TAX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 15,578
THEREAFTER - GROWING AT GROWTH RATE EXP1
OPERATING EX , REFERRED TO AS OPEX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 15,000
THEREAFTER - GROWING AT GROWTH RATE EXP1
G&A EXPENSES , REFERRED TO AS G&A
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 12,000
THEREAFTER - GROWING AT GROWTH RATE EXP1
MANAGEMENT FEES , REFERRED TO AS MGMT
CHARGED AGAINST NET OPERATING INCOME
3.00% OF EFFECTIVE GROSS INCOME
Industrial Gross , REFERRED TO AS GRSS
AN INFORMATIONAL EXPENSE
<PAGE>
PAGE 3
+100.0% OF TAX +2.0% OF OPEX
INSURANCE , REFERRED TO AS INSE
AN INFORMATIONAL EXPENSE
MARKET RATE INSE MULTIPLIED BY AREA MEASURE NRA
TAX & INSURANCE , REFERRED TO AS TX&I
AN INFORMATIONAL EXPENSE
+100.0% OF TAX +100.0% OF INSE
VACANCY ALLOWANCE
-----------------
PERCENTAGE OF POTENTIAL GROSS INCOME
FOR ALL TENANTS SUBJECT TO VACANCY
1997 VALUE - 2.00
THEREAFTER - CONSTANT
MANAGEMENT FEE
--------------
NONE
COMMISSION CALCULATIONS
-----------------------
STANDARD METHOD #1 - 0.000% OF TOTAL RENT
STANDARD METHOD #2 - 0.000% OF TOTAL RENT
STANDARD METHOD #3 - 0.000% OF TOTAL RENT
STANDARD METHOD #4 - 0.000% OF TOTAL RENT
STANDARD METHOD #5 - 0.000% OF TOTAL RENT
COMMISSION PAYOUTS
------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - AMORTIZED OVER LIFE OF LEASE
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
ALTERATION CALCULATION
----------------------
1997 VALUE - 0.00
1998 VALUE - 0.00
1999 VALUE - 0.00
2000 VALUE - 0.00
2001 VALUE - 0.00
2002 VALUE - 0.00
2003 VALUE - 0.00
2004 VALUE - 0.00
2005 VALUE - 0.00
2006 VALUE - 0.00
2007 VALUE - 0.00
<PAGE>
PAGE 4
2008 VALUE - 0.00
2009 VALUE - 0.00
2010 VALUE - 0.00
2011 VALUE - 0.00
THEREAFTER - CONSTANT
ALTERATION PAYOUTS
-------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - CASHED OUT
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
COMMON AREA MAINTENANCE POOL
----------------------------
NONE
CAPITAL EXPENDITURES
--------------------
RESERVES
MARKET RATE RESR MULTIPLIED BY AREA MEASURE NRA
PRIMARY CLASSIFICATION CODES
---------------------------
NONE
SECONDARY CLASSIFICATION CODES
------------------------------
NONE
COST CENTERS
------------
NONE
SALES VOLUME PROFILE
--------------------
PERCENT OF RELATIVE
MONTH ANNUAL SALES VOLUME
----- ------------ --------
JAN 8.33% 1.00
FEB 8.33% 1.00
MAR 8.33% 1.00
APR 8.33% 1.00
MAY 8.33% 1.00
JUN 8.33% 1.00
JUL 8.33% 1.00
AUG 8.33% 1.00
SEP 8.33% 1.00
OCT 8.33% 1.00
<PAGE>
PAGE 5
NOV 6.33% 1.00
DEC 8.33% 1.00
------- -------
TOTALS 100.00% 12.00
GLOBAL RECOVERIES
-----------------
Industrial Gross , REFERRED TO AS INGR
PRO RATA SHARE RECOVERY OF EXPENSE GRSS
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
TENANT PROLOGUE
---------------
MINIMUM RENTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
SALES VOLUMES AND BREAKPOINTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
RENEWAL RENTS ARE COMPOUNDED ANNUALLY
RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET
REFERENCE TENANTS
-----------------
THERE ARE A TOTAL OF 1 REFERENCE TENANT(S):
----------------------------------------------------------------------------
# 1 - reference3
BASE LEASE DATES: 1/1996 TO 12/2005
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1
NOT SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------- -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
<PAGE>
PAGE 6
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
TENANTS
-------
THERE ARE A TOTAL OF 4 LEASEHOLD TENANT(S):
-----------------------------------------------------------------------------
# 1 - SUITE 1 , KAP
BASE LEASE DATES: 3/1996 TO 2/2001
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 16,800
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 4.63/SF/YR
THEREAFTER - GROWING AT GROWTH RATE 3%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 16,881
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------- -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
<PAGE>
PAGE 7
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
----------------------------------------------------------------------------
# 2 - SUITE 2 CORT FURNITURE
BASE LEASE DATES: 2/1997 TO 2/2002
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 12,600
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 4.50/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------- -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
----------------------------------------------------------------------------
# 3 - SUITE 3 WEST HOME
BASE LEASE DATES: 8/1996 TO 7/2001
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 12,600
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1999 VALUE - 5.25/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
<PAGE>
PAGE 8
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 16,881
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------- -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
----------------------------------------------------------------------------
# 4 - SUITE 4 , GOODALL
BASE LEASE DATES: 6/1996 TO 5/2001
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 8,400
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 5.87/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 16,881
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------- -------- --------- ----------- -----------
<PAGE>
PAGE 9
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
<PAGE>
Addenda
================================================================================
Dabney VII
Operating Expense Statement
Pro-Ject Lease Abstract Report
Pro-Ject Assumptions Report
<PAGE>
Historical Operating Statements
Dabney VII
Building NRA 33,149 SF
<TABLE>
<CAPTION>
1994 Actual 1995 Actual 1996 Actual 1997 Budget
----------------------- ----------------------- ------------------------ -------------------------
Item Amount Per SF Amount Per SF Amount Per SF Amount Per SF
============================================================================= ======================== =========================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME
Gross Income $ 252,482 $ 7.62 $ 207,950 $ 6.27 $ 236,149 $ 7.12 $ 234,420 $ 7.07
Reimbursements 0 0.00 1,967 0.06 3,740 0.11 0 0.00
----------------------- ----------------------- ------------------------ ------------------------
Total Income $ 252,482 $ 7.62 $ 209,917 $ 6.33 $ 239,889 $ 7.24 $ 234,420 $ 7.07
----------------------- ----------------------- ------------------------ ------------------------
EXPENSES
Real Estate Taxes $ 12,859 $ 0.39 $ 13,318 $ 0.40 $ 13,046 $ 0.39 $ 13,318 $ 0.40
Operating Expense 17,862 0.54 28,129 0.85 23,339 0.70 22,776 0.69
General & Administrative 25,869 0.78 9,890 0.30 9,897 0.30 12,373 0.37
Management Fee 0 0.00 2,448 0.07 3,467 0.10 7,008 0.21
----------------------- ----------------------- ------------------------ ------------------------
Total Expenses $ 56,589 $ 1.71 $ 53,786 $ 1.62 $ 49,749 $ 1.50 $ 55,475 $ 1.67
----------------------- ----------------------- ------------------------ ------------------------
NET OPERATING INCOME $ 195,894 $ 5.91 $ 156,132 $ 4.71 $ 190,140 $ 5.74 $ 178,945 $ 5.40
======================= ======================= ======================== ========================
===================================================================================================================================
</TABLE>
Note: Two units comprising 4,903 square feet, Al5(14.8 percent of the building)
rolled in 1995 which contributes to the lower 1995 income figures.
<PAGE>
DABNEY 7
PROJECT DESIGNATOR: DAB7
REVISION: 6/11/97 @ 12:12
LEASE ABSTRACT REPORT
FOR ALL TENANTS
6/11/97 @ 12:21
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL % OF RENT
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE CEILING BREAKPOINT PRO RATA SUBJ
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) (000'S) RECOVERIES SHARE BASE TO CPI
- ------------- --------- ------- ----- ----- ----- ----------- ------- ------- ------- --------- --------------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 1 - 9,136 10/88 11/06 - 6.68 61,028 - - - TAX & INSURANCE 11,480
Delmar Communicati - 12/97 6.88 62,859
12/98 7.09 64,745
12/99 7.30 66,687
12/00 7.52 68,688
12/01 7.74 70,749
12/02 7.98 72,871
12/03 8.22 75,057
12/04 8.46 77,309
12/05 8.72 79,628
# 2 - 6,530 3/93 12/99 - 8.22 53,677 - - - TAX & INSURANCE 15,983
Combined Technolog - 1/98 8.47 55,287
1/99 8.72 56,946
# 3 . - 4,800 8/91 8/01 - 5.06 24,288 - - - TAX & INSURANCE 15,983
Suitable for Frame - 9/97 5.21 25,017
9/98 5.37 25,767
9/99 5.53 26,540
9/00 5.70 27,336
# 4 - 4,580 11/94 3/02 - 6.32 28,946 - - - TAX & INSURANCE 15,573
Canning Corp - 4/98 6.51 29,814
4/99 6.70 30,708
4/00 6.91 31,630
4/01 7.11 32,579
# 5 - 2,503 8/95 7/00 - 7.60 19,023 - - - TAX & INSURANCE 16,633
Xerox - 8/97 7.90 19,784
8/98 8.22 20,575
8/99 8.55 21,398
# 6 - 2,400 5/94 8/04 - 7.43 17,832 - - - TAX & INSURANCE 15,983
Pharmaco - 9/97 7.65 18,367
9/98 7.88 18,918
9/99 8.12 19,486
9/00 8.36 20,070
9/01 8.61 20,672
9/02 8.87 21,292
9/03 9.14 21,931
# 7 - 2,400 3/96 8/04 - 7.65 18,360 - - - TAX & INSURANCE 16,361
Pharmaco Internati - 9/97 7.88 18,911
<PAGE>
<CAPTION>
9/98 8.12 19,478
9/99 8.36 20,062
9/00 8.61 20,664
9/01 8.87 21,284
9/02 9.13 21,923
9/03 9.41 22,580
# 8 - 800 9/93 4/04 - 10.50 8,400 - - - TAX & INSURANCE 15,983
Pharmaco 5/98 10.81 8,652
5/99 11.14 8,912
5/co 11.47 9,179
5/01 11.82 9,454
5/02 12.17 9,738
5/03 12.54 10,030
-------
<CAPTION>
PAGE 2
PRIMARY/ ANNUAL % OF RENT
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE CEILING BREAKPOINT PRO RATA SUBJ
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) (000'S) RECOVERIES SHARE BASE TO CPI
- ------------- --------- ------- ----- ----- ----- ----------- ------- ------- ------- --------- --------------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
33,149
=======
</TABLE>
<PAGE>
DABNEY 7
PROJECT DESIGNATOR: DAB7
REVISION: 6/17/97 @ 14:05
PROJECT ASSUMPTIONS REPORT
INCLUDING ALL TENANTS
6/17/97 @ 14:05
BUILDING PROLOGUE
-----------------
LEASEHOLD ANALYSIS OF DABNEY 7 BEGINNING 7/1997
FOR 18 YEARS ON A FISCAL YEAR BASIS
AREA MEASURES
-------------
NRA
1997 VALUE - 33,149
THEREAFTER - CONSTANT
OCCA
1997 VALUE - 33,149
1998 VALUE - 33,149
1999 VALUE - 33,149
2000 VALUE - 30,138
2001 VALUE - 31,549
2002 VALUE - 31,622
2003 VALUE - 33,149
2004 VALUE - 31,282
2005 VALUE - 33,149
2006 VALUE - 32,388
2007 VALUE - 28,480
2008 VALUE - 32,523
2009 VALUE - 30,022
2010 VALUE - 33,149
2011 VALUE - 32,882
2012 VALUE - 31,549
2013 VALUE - 33,149
2014 VALUE - 27,927
THEREAFTER - CONSTANT
GROWTH RATES
------------
INC1
1997 VALUE - 1.50
1998 VALUE - 3.00
THEREAFTER - CONSTANT
EXP1
1997 VALUE - 1.75
1998 VALUE - 3.50
THEREAFTER - CONSTANT
3%
1997 VALUE - 3.00
THEREAFTER - CONSTANT
4%
1997 VALUE - 4.00
THEREAFTER - CONSTANT
CPI
1997 VALUE - 1.75
1998 VALUE - 3.50
THEREAFTER - CONSTANT
COMN
<PAGE>
PAGE 2
1997 VALUE - 6.00
THEREAFTER - CONSTANT
COMR
1997 VALUE - 2.00
THEREAFTER - CONSTANT
COMB
+30.0% OF COMN +70.0% OF COMR
MARKET RATES
------------
MKT1
1997 VALUE - 7.30
THEREAFTER - GROWING AT GROWTH RATE INC1
TIRN
1997 VALUE - 0.50
THEREAFTER - GROWING AT GROWTH RATE EXP1
TINW
1997 VALUE - 2.00
THEREAFTER - GROWING AT GROWTH RATE EXP1
TIWA
+70.0% OF TIRN +30.0% OF TINW
RESR
1997 VALUE - 0.20
THEREAFTER - GROWING AT GROWTH RATE EXP1
INSE
1997 VALUE - 0.10
THEREAFTER - GROWING AT GROWTH RATE EXP1
MISCELLANEOUS INCOMES
---------------------
NONE
EXPENSES
--------
PROPERTY TAXES , REFERRED TO AS TAX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 14,397
THEREAFTER - GROWING AT GROWTH RATE EXP1
OPERATING EXPENSES, REFERRED TO AS OPEX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 23,000
THEREAFTER - GROWING AT GROWTH RATE EXP1
G&A EXPENSES , REFERRED TO AS G&A
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 12,000
THEREAFTER GROWING AT GROWTH RATE EXP1
MANAGEMENT FEES , REFERRED TO AS MGMT
CHARGED AGAINST NET OPERATING INCOME
3.00% OF EFFECTIVE GROSS INCOME
Industrial Gross , REFERRED TO AS GRSS
AN INFORMATIONAL EXPENSE
<PAGE>
PAGE 3
+100.0% OF TAX +2.0% OF OPEX
INSURANCE , REFERRED TO AS INSE
AN INFORMATIONAL EXPENSE
MARKET RATE INSE MULTIPLIED BY AREA MEASURE NRA
TAX & INSURANCE , REFERRED TO AS TX&I
AN INFORMATIONAL EXPENSE
+100.0% OF TAX +100.O% OF INSE
VACANCY ALLOWANCE
-----------------
PERCENTAGE OF POTENTIAL GROSS INCOME
ALL TENANTS SUBJECT TO VACANCY
1997 VALUE - 2.00
THEREAFTER - CONSTANT
MANAGEMENT FEE
--------------
NONE
COMMISSION CALCULATIONS
-----------------------
STANDARD METHOD #1 - 0.000% OF TOTAL RENT
STANDARD METHOD #2 - 0.000% OF TOTAL RENT
STANDARD METHOD #3 - 0.000% OF TOTAL RENT
STANDARD METHOD #4 - 0.000% OF TOTAL RENT
STANDARD METHOD #5 - 0.000% OF TOTAL RENT
COMMISSION PAYOUTS
------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - AMORTIZED OVER LIFE OF LEASE
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD $5 - CASHED OUT
ALTERATION CALCULATION
----------------------
1997 VALUE - 0.00
1998 VALUE - 0.00
1999 VALUE - 0.00
2000 VALUE - 0.00
2001 VALUE - 0.00
2002 VALUE - 0.00
2003 VALUE - 0.00
2004 VALUE - 0.00
2005 VALUE - 0.00
2006 VALUE - 0.00
2007 VALUE - 0.00
<PAGE>
PAGE 4
2008 VALUE - 0.00
2009 VALUE - 0.00
2010 VALUE - 0.00
2011 VALUE - 0.00
THEREAFTER - CONSTANT
ALTERATION PAYOUTS
------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - CASHED OUT
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
COMMON AREA MAINTENANCE POOL
----------------------------
NONE
CAPITAL EXPENDITURES
--------------------
RESERVES
MARKET RATE RESR MULTIPLIED BY AREA MEASURE NRA
PRIMARY CLASSIFICATION CODES
----------------------------
NONE
SECONDARY CLASSIFICATION CODES
------------------------------
NONE
COST CENTERS
------------
NONE
SALES VOLUME PROFILE
--------------------
PERCENT OF RELATIVE
MONTH ANNUAL SALES VOLUME
----- ------------ --------
JAN 8.33% 1.00
FEB 8.33% 1.00
MAR 8.33% 1.00
APR 8.33% 1.00
MAY 8.33% 1.00
JUN 8.33% 1.00
JUL 8.33% 1.00
AUG 8.33% 1.00
SEP 8.33% 1.00
OCT 8.33% 1.00
<PAGE>
PAGE 5
NOV 8.33% 1.00
DEC 8.33% 1.00
------- -------
TOTALS 100.00% 12.00
GLOBAL RECOVERIES
-----------------
Industrial Gross , REFERRED TO AS INGR
PRO RATA SHARE RECOVERY OF EXPENSE GRSS
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
TENANT PROLOGUE
---------------
MINIMUM RENTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
SALES VOLUMES AND BREAKPOINTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR
MARKET PATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
RENEWAL RENTS ARE COMPOUNDED ANNUALLY
RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET
REFERENCE TENANTS
-----------------
THERE ARE A TOTAL OF 1 REFERENCE TENANT(S):
----------------------------------------------------------------------------
# 1 - reference3
BASE LEASE DATES: 1/1996 TO 12/2005
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1
NOT SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------- -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
<PAGE>
PAGE 6
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
TENANTS
-------
THERE ARE A TOTAL OF 8 LEASEHOLD TENANT(S):
---------------------------------------------------------------------------
# 1 - Delmar Communicati
BASE LEASE DATES: 10/1988 TO 11/2006
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 9,136
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE 6.68/SF/YR
THEREAFTER GROWING AT 3.00%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 11,480
COMMISSIONS: NONE
NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------- -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
<PAGE>
PAGE 7
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
-----------------------------------------------------------------------------
# 2 - Combined Technology
BASE LEASE DATES: 3/1993 TO 12/1999
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 6,530
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 8.22/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 15,983
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------- -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
3 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH PATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
-----------------------------------------------------------------------------
# 3 - Suitable for Frame
BASE LEASE DATES: 8/1991 TO 8/2001
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 4,800
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE 5.06/SF/YR
THEREAFTER GROWING AT 3.00%
<PAGE>
PAGE 8
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 15,983
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------- -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
-----------------------------------------------------------------------------
# 4 - Canning Corp
BASE LEASE DATES: 11/1994 TO 3/2002
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 4,580
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 6.32/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 15,573
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
<PAGE>
PAGE 9
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------- -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
----------------------------------------------------------------------------
# 5 - Xerox
BASE LEASE DATES: 8/1995 TO 7/2000
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 2,503
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE 7.60/SF/YR
THEREAFTER GROWING AT 4.00%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 16,633
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------- -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
3 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
<PAGE>
PAGE 10
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
-----------------------------------------------------------------------------
# 6 - Pharmaco
BASE LEASE DATES: 5/1994 TO 8/2004
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 2,400
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 7.43/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 15,983
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------- -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1,000
INCREASING AT GROWTH PATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
-----------------------------------------------------------------------------
# 7 - Pharmaco Internati
BASE LEASE DATES: 3/1996 TO 8/2004
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 2,400
<PAGE>
PAGE 11
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 7.65/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 16,361
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------- -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
-----------------------------------------------------------------------------
# 8 - Pharmaco
BASE LEASE DATES: 9/1993 TO 4/2004
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 800
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 10.50/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 15,983
C0MMISSIONS: NONE
<PAGE>
PAGE 12
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------- -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
<PAGE>
Addenda
================================================================================
Dabney VIII
Operating Expense Statement
Pro-Ject Lease Abstract Report
Pro-Ject Assumptions Report
<PAGE>
Historical Operating Statements
Dabney VIII
Building NRA 29,700 SF
<TABLE>
<CAPTION>
1994 Actual 1995 Actual 1996 Actual 1997 Budget
----------------------- ----------------------- ------------------------ -------------------------
Item Amount Per SF Amount Per SF Amount Per SF Amount Per SF
============================================================================= ======================== =========================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME
Gross Income $ 199,571 $ 6.72 $ 177,245 $ 5.97 $ 177,677 $ 5.98 $ 130,362 $ 4.39
Reimbursements 0 0.00 0 0.00 3,731 0.13 0 0.00
----------------------- ----------------------- ------------------------ ------------------------
Total Income $ 199,571 $ 6.72 $ 177,245 $ 5.97 $ 181,408 $ 6.11 $ 130,362 $ 4.39
----------------------- ----------------------- ------------------------ ------------------------
EXPENSES
Real Estate Taxes $ 9,948 $ 0.33 $ 9,948 $ 0.33 $ 9,745 $ 0.33 $ 10,448 $ 0.35
Operating Expense 13,856 0.47 21,080 0.71 20,415 0.69 21,149 0.71
General & Administrative 13,174 0.44 7,957 0.27 7,560 0.25 6,890 0.23
Management Fee 0 0.00 1,698 0.06 2,630 0.09 3,086 0.10
----------------------- ----------------------- ------------------------ ------------------------
Total Expenses $ 36,977 $ 1.25 $ 40,683 $ 1.37 $ 40,350 $ 1.36 $ 41,573 $ 1.40
----------------------- ----------------------- ------------------------ ------------------------
NET OPERATING INCOME $ 162,593 $ 5.47 $ 136,562 $ 4.60 $ 141,058 $ 4.75 $ 88,789 $ 2.99
======================= ======================= ======================== ========================
===================================================================================================================================
</TABLE>
<PAGE>
DABNET 8
PROJECT DESIGNATOR: DAB8
REVISION: 6/17/97 @ 17:58
LEASE ABSTRACT REPORT
FOR ALL TENANTS
6/18/97 @ 9:05
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL % OF RENT
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE CEILING BREAKPOINT PRO RATA SUBJ
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) (000'S) RECOVERIES SHARE BASE TO CPI
- ------------- --------- ------- ----- ----- ----- ----------- ------- ------- ------- --------- --------------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 1 - 29,700 5/97 4/00 - 6.14 182,358 - - - TAX & INSURANCE 15,444
united power 5/98 6.32 187,829
5/99 6.51 193,464
------
29,700
======
</TABLE>
<PAGE>
DABNET 8
PROJECT DESIGNATOR: DAB8
REVISION: 6/17/97 0 17:58
PROJECT ASSUMPTIONS REPORT
INCLUDING ALL TENANTS
6/17/97 @ 23:32
BUILDING PROLOGUE
-----------------
LEASEHOLD ANALYSIS OF DABNET 8 BEGINNING 7/1997
FOR 18 YEARS ON A FISCAL YEAR BASIS
AREA MEASURES
-------------
NRA
1997 VALUE - 29,700
THEREAFTER - CONSTANT
OCCA
1997 VALUE - 19,800
1998 VALUE - 29,700
1999 VALUE - 29,700
2000 VALUE - 19,800
2001 VALUE - 29,700
2002 VALUE - 29,700
2003 VALUE - 29,700
2004 VALUE - 29,700
2005 VALUE - 29,700
2006 VALUE - 29,700
2007 VALUE - 19,800
2008 VALUE - 29,700
2009 VALUE - 29,700
2010 VALUE - 29,700
2011 VALUE - 29,700
2012 VALUE - 29,700
2013 VALUE - 29,700
2014 VALUE - 29,700
THEREAFTER - CONSTANT
GROWTH RATES
------------
INC1
1997 VALUE - 1.50
1998 VALUE - 3.00
THEREAFTER - CONSTANT
EXP1
1997 VALUE - 1.75
1998 VALUE - 3.50
THEREAFTER - CONSTANT
3%
1997 VALUE - 3.00
THEREAFTER - CONSTANT
4%
1997 VALUE - 4.00
THEREAFTER - CONSTANT
CPI
1997 VALUE - 1.75
1998 VALUE - 3.50
THEREAFTER - CONSTANT
COMN
<PAGE>
PAGE 2
1997 VALUE - 6.00
THEREAFTER - CONSTANT
C0MR
1997 VALUE - 2.00
THEREAFTER - CONSTANT
COMB
+30.0% OF COMN +70.0% OF COMR
MARKET RATES
------------
MKT1
1997 VALUE - 6.35
THEREAFTER - GROWING AT GROWTH RATE INC1
TIRN
1997 VALUE - 0.50
THEREAFTER - GROWING AT GROWTH RATE EXP1
TINW
1997 VALUE - 2.00
THEREAFTER - GROWING AT GROWTH RATE EXP1
TIWA
+70.0% OF TIRN +30.0% OF TINW
RESR
1997 VALUE - 0.20
THEREAFTER - GROWING AT GROWTH RATE EXP1
INSE
1997 VALUE - 0.10
THEREAFTER - GROWING AT GROWTH RATE EXP1
MISCELLANEOUS INCOMES
---------------------
NONE
EXPENSES
--------
PROPERTY TAXES , REFERRED TO AS TAX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 12,474
THEREAFTER - GROWING AT GROWTH RATE EXP1
OPERATING EX , REFERRED TO AS OPEX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 21,000
THEREAFTER - GROWING AT GROWTH RATE EXP1
G&A EXPENSES , REFERRED TO AS G&A
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 7,000
THEREAFTER - GROWING AT GROWTH RATE EXP1
MANAGEMENT FEES , REFERRED TO AS MGMT
CHARGED AGAINST NET OPERATING INCOME
3.00% OF EFFECTIVE GROSS INCOME
Industrial Gross , REFERRED TO AS GRSS
AN INFORMATIONAL EXPENSE
<PAGE>
PAGE 3
+100.0% OF TAX +2.0% OF OPEX
INSURANCE , REFERRED TO AS INSE
AN INFORMATIONAL EXPENSE
MARKET RATE INSE MULTIPLIED BY AREA MEASURE NRA
TAX & INSURANCE , REFERRED TO AS TX&I
AN INFORMATIONAL EXPENSE
+100.0% OF TAX +100.0% OF INSE
VACANCY ALLOWANCE
-----------------
PERCENTAGE OF POTENTIAL GROSS INCOME
FOR ALL TENANTS SUBJECT TO VACANCY
1997 VALUE - 2.00
THEREAFTER - CONSTANT
MANAGEMENT FEE
--------------
NONE
COMMISSION CALCULATIONS
-----------------------
STANDARD METHOD #1 - 0.000% OF TOTAL RENT
STANDARD METHOD #2 - 0.000% OF TOTAL RENT
STANDARD METHOD #3 - 0.000% OF TOTAL RENT
STANDARD METHOD #4 - 0.000% OF TOTAL RENT
STANDARD METHOD #5 - 0.000% OF TOTAL RENT
COMMISSION PAYOUTS
------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - AMORTIZED OVER LIFE OF LEASE
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
ALTERATION CALCULATION
----------------------
1997 VALUE - 0.00
1998 VALUE - 0.00
1999 VALUE - 0.00
2000 VALUE - 0.00
2001 VALUE - 0.00
2002 VALUE - 0.00
2003 VALUE - 0.00
2004 VALUE - 0.00
2005 VALUE - 0.00
2006 VALUE - 0.00
2007 VALUE - 0.00
<PAGE>
PAGE 4
2008 VALUE - 0.00
2009 VALUE - 0.00
2010 VALUE - 0.00
2011 VALUE - 0.00
THEREAFTER - CONSTANT
ALTERATION PAYOUTS
------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - CASHED OUT
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
COMMON AREA MAINTENANCE POOL
----------------------------
NONE
CAPITAL EXPENDITURES
--------------------
RESERVES
MARKET RATE RESR MULTIPLIED BY AREA MEASURE NRA
PRIMARY CLASSIFICATION CODES
----------------------------
NONE
SECONDARY CLASSIFICATION CODES
------------------------------
NONE
COST CENTERS
------------
NONE
SALES VOLUME PROFILE
--------------------
PERCENT OF RELATIVE
MONTH ANNUAL SALES VOLUME
----- ------------ --------
JAN 8.33% 1.00
FEB 8.33% 1.00
MAR 8.33% 1.00
APR 8.33% 1.00
MAY 8.33% 1.00
JUN 8.33% 1.00
JUL 8.33% 1.00
AUG 8.33% 1.00
SEP 8.33% 1.00
OCT 8.33% 1.00
<PAGE>
PAGE 5
NOV 8.33% 1.00
DEC 8.33% 1.00
------- -------
TOTALS 100.00% 12.00
GLOBAL RECOVERIES
-----------------
Industrial Gross , REFERRED TO AS INGR
PRO RATA SHARE RECOVERY OF EXPENSE GRSS
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
TENANT PROLOGUE
---------------
MINIMUM RENTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
SALES VOLUMES AND BREAKPOINTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
RENEWAL RENTS ARE COMPOUNDED ANNUALLY
RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET
REFERENCE TENANTS
-----------------
THERE ARE A TOTAL OF 1 REFERENCE TENANT(S):
---------------------------------------------------------------------------
# 1 - references3
BASE LEASE DATES: 1/1996 TO 12/2005
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1
NOT SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------- -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
<PAGE>
PAGE 6
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
TENANTS
THERE ARE A TOTAL OF 1 LEASEHOLD TENANT(S):
----------------------------------------------------------------------------
# 1 - united power
BASE LEASE DATES: 5/1997 TO 4/2000
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 29,700
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 6.14/SF/YR
THEREAFTER - GROWING AT GROWTH RATE 3%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------- -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
3 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
<PAGE>
PAGE 7
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
<PAGE>
Addenda
- --------------------------------------------------------------------------------
Dabney IX
Operating Expense Statement
Pro-Ject Lease Abstract Report
Pro-Ject Assumptions Report
<PAGE>
Historical Operating Statements
Dabney IX
Building NRA 30,263 SF
<TABLE>
<CAPTION>
1994 Actual 1995 Actual 1996 Actual 1997 Budget
--------------------- ----------------------- ------------------------ -------------------------
Item Amount Per SF Amount Per SF Amount Per SF Amount Per SF
============================================================================= ======================== =========================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME
Gross Income $ 220,762 $ 7.29 $ 216,278 $ 7.15 $ 224,447 $ 7.42 $ 231,183 $ 7.64
Reimbursements 0 0.00 549 0.02 1,375 0.05 0 0.00
----------------------- ----------------------- ------------------------ ------------------------
Total Income $ 220,762 $ 7.29 $ 216,827 $ 7.16 $ 225,822 $ 7.46 $ 231,183 $ 7.64
----------------------- ----------------------- ------------------------ ------------------------
EXPENSES
Real Estate Taxes $ 8,485 $ 0.28 $ 8,485 $ 0.28 $ 8,312 $ 0.27 $ 8,484 $ 0.28
Operating Expense 24,036 0.79 47,060 1.56 38,455 1.27 32,437 1.07
General & Administrative 15,427 0.51 9,594 0.32 10,114 0.33 11,953 0.39
Management Fee 0 0.00 1,975 0.07 3,117 0.10 6,840 0.23
----------------------- ----------------------- ------------------------ ------------------------
Total Expenses $ 47,947 $ 1.58 $ 67,114 $ 2.22 $ 59,998 $ 1.98 $ 59,714 $ 1.97
----------------------- ----------------------- ------------------------ ------------------------
NET OPERATING INCOME $ 172,815 $ 5.71 $ 149,713 $ 4.95 $ 165,824 $ 5.48 $ 171,469 $ 5.67
======================= ======================= ======================== ========================
===================================================================================================================================
</TABLE>
<PAGE>
DABNEY 9
PROJECT DESIGNATOR: DAB9
REVISION: 6/11/97 @ 12:48
LEASE ABSTRACT REPORT
FOR ALL TENANTS
6/11/97 @ 12:49
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL % OF RENT
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE CEILING BREAKPOINT PRO RATA SUBJ
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) (000'S) RECOVERIES SHARE BASE TO CPI
- ------------- --------- ------- ----- ----- ----- ----------- ------- ------- ------- --------- --------------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 1 - 2,133 1/98 12/04 - 7.41 15,804 - - - TAX & INSURANCE 17,680
RF&P - 1/99 7.63 16,279
1/00 7.86 16,767
1/01 8.10 17,270
1/02 8.34 17,788
1/03 8.59 18,322
1/04 8.85 18,871
# 2 - 2,134 5/96 4/01 - 6.75 14,405 - - - TAX & INSURANCE 11,424
REFACE - 5/98 7.02 14,981
5/99 7.30 15,580
5/00 7.59 16,203
# 3 - 2,089 8/91 11/01 - 9.41 19,657 - - - TAX & INSURANCE 12,320
KARATEC - 12/97 9.79 20,444
12/98 10.18 21,262
12/99 10.58 22,112
12/00 11.01 22,996
# 4 - 1,620 10/94 9/99 - 6.76 10,951 - - - TAX & INSURANCE 11,511
Margaret Farinhold - 10/97 7.03 11,389
10/98 7.31 11,845
# 5 - 1,580 2/96 1/01 - 7.23 11,423 - - - TAX & INSURANCE 11,424
JOYNER'S MECHANICA - 2/98 7.52 11,880
2/99 7.82 12,356
2/00 8.13 12,850
# 6 - 8,457 11/89 1/98 - 9.09 76,874 - - - TAX & INSURANCE 9,968
FIRST IMAGE MGMT -
# 7 - 4,178 7/96 7/01 - 6.55 27,366 - - - TAX & INSURANCE 11,424
BUSINESS EQUIP - 8/97 6.81 28,461
8/98 7.08 29,599
8/99 7.37 30,783
8/00 7.66 32,014
# 8 - 6,452 1/95 1/03 - 9.00 58,068 - - - TAX & INSURANCE 11,511
A&J TELEPHONE - 2/98 9.36 60,391
2/99 9.73 62,806
2/00 10.12 65,319
2/01 10.53 67,931
2/02 10.95 70,649
<PAGE>
<CAPTION>
# 9 - 1,620 1/98 12/04 7.41 12,003 - - - TAX & INSURANCE 17,680
Vacant - 1/99 7.63 12,363
1/00 7.86 12,734
1/01 8.10 13,116
1/02 8.34 13,510
1/03 8.59 13,915
1/04 8.85 14,333
------
30,263
======
</TABLE>
<PAGE>
DABNEY 9
PROJECT DESIGNATOR: DAB9
REVISION: 6/17/97 @ 14:06
PROJECT ASSUMPTIONS REPORT
INCLUDING ALL TENANTS
6/17/97 @ 14:06
BUILDING PROLOGUE
-----------------
LEASEHOLD ANALYSIS OF DABNEY 9 BEGINNING 7/1997
FOR 18 YEARS ON A FISCAL YEAR BASIS
AREA MEASURES
-------------
NRA
1997 VALUE - 30,263
THEREAFTER - CONSTANT
OCCA
1997 VALUE - 26,510
1998 VALUE - 27,444
1999 VALUE - 29,858
2000 VALUE - 30,128
2001 VALUE - 27,458
2002 VALUE - 29,741
2003 VALUE - 28,112
2004 VALUE - 30,263
2005 VALUE - 26,193
2006 VALUE - 30,263
2007 VALUE - 29,723
2008 VALUE - 28,677
2009 VALUE - 28,522
2010 VALUE - 28,112
2011 VALUE - 30,263
2012 VALUE - 26,898
2013 VALUE - 29,558
2014 VALUE - 29,723
THEREAFTER - CONSTANT
GROWTH RATES
------------
INC1
1997 VALUE - 1.50
1998 VALUE - 3.00
THEREAFTER - CONSTANT
EXP1
1997 VALUE - 1.75
1998 VALUE - 3.50
THEREAFTER - CONSTANT
3%
1997 VALUE - 3.00
THEREAFTER - CONSTANT
4%
1997 VALUE - 4.00
THEREAFTER - CONSTANT
CPI
1997 VALUE - 1.75
1998 VALUE - 3.5O
THEREAFTER - CONSTANT
COMN
<PAGE>
PAGE 2
1997 VALUE - 6.00
THEREAFTER - CONSTANT
COMR
1997 VALUE - 2.00
THEREAFTER - CONSTANT
COMB
+30.0% OF COMN +70.O% OF COMR
MARKET RATES
------------
MKT1
1997 VALUE - 7.30
THEREAFTER - GROWING AT GROWTH RATE INC1
TIRN
1997 VALUE - 0.50
THEREAFTER - GROWING AT GROWTH RATE EXP1
TINW
1997 VALUE - 2.00
THEREAFTER - GROWING AT GROWTH RATE EXP1
TIWA
+70.0% OF TIRN +30.O% OF TINW
RESR
1997 VALUE - 0.20
THEREAFTER - GROWING AT GROWTH RATE EXP1
INSE
1997 VALUE - 0.10
THEREAFTER - GROWING AT GROWTH RATE EXP1
MISCELLANEOUS INCOMES
---------------------
NONE
EXPENSES
--------
PROPERTY TAXES , REFERRED TO AS TAX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 14,051
THEREAFTER - GROWING AT GROWTH RATE EXP1
OPERATING EXPENSES, REFERRED TO AS OPEX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 38,000
THEREAFTER - GROWING AT GROWTH RATE EXP1
G&A EXPENSES , REFERRED TO AS G&A
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 12,000
THEREAFTER - GROWING AT GROWTH RATE EXP1
MANAGEMENT FEES , REFERRED TO AS MGMT
CHARGED AGAINST NET OPERATING INCOME
3.00% OF EFFECTIVE GROSS INCOME
Industrial Gross , REFERRED TO AS GRSS
AN INFORMATIONAL EXPENSE
<PAGE>
PAGE 3
+100.0% OF TAX +2.0% OF OPEX
INSURANCE , REFERRED TO AS INSE
AN INFORMATIONAL EXPENSE
MARKET RATE INSE MULTIPLIED BY AREA MEASURE NRA
TAX & INSURANCE , REFERRED TO AS TX&I
AN INFORMATIONAL EXPENSE
+100.0% OF TAX +100.0% OF INSE
VACANCY ALLOWANCE
-----------------
PERCENTAGE OF POTENTIAL GROSS INCOME
FOR ALL TENANTS SUBJECT TO VACANCY
1997 VALUE - 2.00
THEREAFTER - CONSTANT
MANAGEMENT FEE
--------------
NONE
COMMISSION CALCULATIONS
-----------------------
STANDARD METHOD #1 - 0.000% OF TOTAL RENT
STANDARD METHOD #2 - 0.000% OF TOTAL RENT
STANDARD METHOD #3 - 0.000% OF TOTAL RENT
STANDARD METHOD #4 - 0.000% OF TOTAL RENT
STANDARD METHOD #5 - 0.000% OF TOTAL RENT
COMMISSION PAYOUTS
------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - AMORTIZED OVER LIFE OF LEASE
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
ALTERATION CALCULATION
----------------------
1997 VALUE - 0.00
1998 VALUE - 0.00
1999 VALUE - 0.00
2000 VALUE - 0.00
2001 VALUE - 0.00
2002 VALUE - 0.00
2003 VALUE - 0.00
2004 VALUE - 0.00
2005 VALUE - 0.00
2006 VALUE - 0.00
2007 VALUE - 0.00
<PAGE>
PAGE 4
2008 VALUE - 0.00
2009 VALUE - 0.00
2010 VALUE - 0.00
2011 VALUE - 0.00
THEREAFTER - CONSTANT
ALTERATION PAYOUTS
--------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - CASHED OUT
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
COMMMON AREA MAINTENANCE POOL
-----------------------------
NONE
CAPITAL EXPENDITURES
--------------------
RESERVES
MARKET RATE RESR MULTIPLIED BY AREA MEASURE NRA
PRIMARY CLASSIFICATION CODES
----------------------------
NONE
SECONDARY CLASSIFICATION CODES
------------------------------
NONE
COST CENTERS
------------
NONE
SALES VOLUME PROFILE
--------------------
PERCENT OF RELATIVE
MONTH ANNUAL SALES VOLUME
----- ------------ --------
JAN 8.33% 1.00
FEB 8.33% 1.00
MAR 8.33% 1.00
APR 8.33% 1.00
MAY 8.33% 1.00
JUN 8.33% 1.00
JUL 8.33% 1.00
AUG 8.33% 1.00
SEP 8.33% 1.00
OCT 8.33% 1.00
<PAGE>
PAGE 5
NOV 8.33% 1.00
DEC 8.33% 1.00
------- -------
TOTALS 100.00% 12.00
GLOBAL RECOVERIES
------------------
Industrial Gross , REFERRED TO AS INGR
PRO RATA SHARE RECOVERY OF EXPENSE GRSS
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
TENANT PROLOGUE
---------------
MINIMUM RENTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
SALES VOLUMES AND BREAKPOINTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
RENEWAL RENTS ARE COMPOUNDED ANNUALLY
RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET
REFERENCE TENANTS
-----------------
THERE ARE A TOTAL OF 1 REFERENCE TENANT(S):
----------------------------------------------------------------------------
# 1 - reference3
BASE LEASE DATES: 1/1996 TO 12/2005
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1
NOT SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------- -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
<PAGE>
PAGE 6
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
TENANTS
-------
THERE ARE A TOTAL OF 9 LEASEHOLD TENANT(S):
-----------------------------------------------------------------------------
# 1 - RF&P
BASE LEASE DATES: 1/1998 TO 12/2004
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 2,133
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1999 VALUE - MARKET RATE MKT1
THEREAFTER - GROWING AT GROWTH RATE 3%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
COMMISSIONS: GROWTH RATE COMN
PAYOUT: CASHED OUT
ALTERATIONS: MARKET RATE TINW
PAYOUT: CASHED OUT
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------- -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
<PAGE>
PAGE 7
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
----------------------------------------------------------------------------
# 2 - REFACE
BASE LEASE DATES: 5/1996 TO 4/2001
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 2,134
SUBECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 6.75/SF/YR
THEREAFTER - GROWING AT 4.00%
RECOVERIES:
TAX & INSURANCE
PR0 RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 11,424
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------- -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
----------------------------------------------------------------------------
# 3 - KARATEC
BASE LEASE DATES: 8/1991 TO 11/2001
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 2,089
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 - 9.41/SF/YR
THEREAFTER - GROWING AT 4.00%
<PAGE>
PAGE 8
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 12,320
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------- -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
----------------------------------------------------------------------------
# 4 - Margaret Farinhold
BASE LEASE DATES: 10/1994 TO 9/1999
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,620
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 6.76/SF/YR
THEREAFTER - GROWING AT 4.00%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 11,511
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
<PAGE>
PAGE 9
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------- -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
3 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTI MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
----------------------------------------------------------------------------
# 5 - JOYNER'S MECHANICA
BASE LEASE DATES: 2/1996 TO 1/2001
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,580
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 7.23/SF/YR
THEREAFTER - GROWING AT 4.00%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 11,424
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------- -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
<PAGE>
PAGE 10
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
----------------------------------------------------------------------------
# 6 - FIRST IMAGE MGMT
BASE LEASE DATES: 11/1989 TO 1/1998
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 8,457
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 9.09/SF/YR
THEREAFTER - GROWING AT 0.00%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 9,968
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------- -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
3 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAY OUT CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
----------------------------------------------------------------------------
# 7 - BUSINESS EQUIP
BASE LEASE DATES: 7/1996 TO 7/2001
TYPE OF TENANT: OFFICE
<PAGE>
PAGE 11
SQUARE FOOTAGE: 4,178
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 6.55/SF/YR
THEREAFTER - GROWING AT 4.00%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 11,424
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------- -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
-----------------------------------------------------------------------------
# 8 - A&J TELEPHONE
BASE LEASE DATES: 1/1995 TO 1/2003
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 6,452
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE 9.00/SF/YR
THEREAFTER GROWING AT 4.00%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 11,511
<PAGE>
PAGE 12
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------- -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTI MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
----------------------------------------------------------------------------
# 9 - Vacant
BASE LEASE DATES: 1/1998 TO 12/2004
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,620
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1999 VALUE - MARKET RATE MKT1
THEREAFTER - GROWING AT GROWTH RATE 3%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
COMMISSIONS: GROWTH RATE COMN
PAYOUT: CASHED OUT
ALTERATIONS: MARKET RATE TINW
PAYOUT: CASHED OUT
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------- -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTI MULTIPLIED BY 1.000
<PAGE>
PAGE 13
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
<PAGE>
Addenda
================================================================================
Dabney X
Operating Expense Statement
Pro-Ject Lease Abstract Report
Pro-Ject Assumptions Report
<PAGE>
Historical Operating Statements
Dabney X
Building NRA 85,844 SF
<TABLE>
<CAPTION>
1994 Actual 1995 Actual 1996 Actual 1997 Budget
------------------ ------------------- ------------------ -------------------
Item Amount Per SF Amount Per SF Amount Per SF Amount Per SF
- -------------------------------------------------------------------- ------------------ -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME
Gross Income $ 379,459 $ 4.42 $ 545,134 $ 6.35 $ 560,832 $ 6.53 $ 599,601 $ 6.98
Reimbursements 0 0.00 0 0.00 13,203 0.15 7,596 0.09
------------------ ------------------- ------------------ -------------------
Total Income $ 379,459 $ 4.42 $ 545,134 $ 6.35 $ 574,035 $ 6.69 $ 607,197 $ 7.07
------------------ ------------------- ------------------ -------------------
EXPENSES
Real Estate Taxes $ 32,312 $ 0.38 $ 33,598 $ 0.39 $ 32,913 $ 0.38 $ 33,598 $ 0.39
Operating Expense 34,636 0.40 45,004 0.52 49,128 0.57 49,706 0.58
General & Administrative 45,242 0.53 28,453 0.33 22,992 0.27 30,172 0.35
Management Fee 0 0.00 4,625 0.05 8,214 0.10 17,983 0.21
------------------ ------------------- ------------------ -------------------
Total Expenses $ 112,189 $ 1.31 $ 111,681 $ 1.30 $ 113,247 $ 1.32 $ 131,459 $ 1.53
------------------ ------------------- ------------------ -------------------
NET OPERATING INCOME $ 267,270 $ 3.11 $ 433,453 $ 5.05 $ 460,788 $ 5.37 $ 475,738 $ 5.54
================== =================== ================== ===================
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
DABNEY 10
PROJECT DESIGNATOR: DABO
REVISION: 6/11/97 @ 13:58
LEASE ABSTRACT REPORT
FOR ALL TENANTS
6/11/97 @ 13:58
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL % OF RENT
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE CEILING BREAKPOINT PRO RATA SUBJ
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) (000'S) RECOVERIES SHARE BASE TO CPI
- ------------- --------- ------- ----- ----- ----- ----------- ------- ------- ------- --------- --------------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 1 - 30,000 8/93 10/03 - 5.49 164,700 - - - TAX & INSURANCE 34,293
ENVIRONMENTAL TECH - 11/97 5.65 169,641
11/98 5.82 174,730
11/99 6.00 179,972
11/00 6.18 185,371
11/01 6.36 190,932
11/02 6.56 196,660
# 2 - 11,300 3/96 3/01 - 6.83 77,179 - - - TAX & INSURANCE 41,497
Micro View 4/98 7.03 79,494
4/99 7.25 81,879
4/00 7.46 84,336
# 3 - 9,714 2/92 1/99 - 7.18 69,747 - - - TAX & INSURANCE 34,293
CMS Automation - 2/98 7.32 71,141
# 4 - 8,400 4/91 8/99 - 8.10 68,040 - - - TAX & INSURANCE 31,852
Contract Specifix - 9/97 8.42 70,694
9/98 8.74 73,451
# 5 - 7,210 3/93 2/98 - 4.10 29,561 - - - TAX & INSURANCE 34,293
L. Fishman & Son -
# 6 - 7,200 3/93 1/99 - 6.22 44,784 - - - TAX & INSURANCE 34,293
CMS Automation - 2/98 6.34 45,680
# 7 - 4,200 6/94 8/99 - 8.10 34,020 - - - TAX & INSURANCE 31,852
Contract Specifix - 9/97 8.44 35,449
9/98 8.79 36,938
# 8 - 3,015 11/92 10/97 - 7.36 22,190 - - - TAX & INSURANCE 31,852
Interbake Foods -
# 9 - 2,400 3/94 9/97 - 6.75 16,200 - - - TAX & INSURANCE 40,895
Atlantic Office -
# 10 - 2,405 9/97 8/02 - 7.30 17,557 - - - TAX & INSURANCE 49,935
Vacant out for sig - 9/98 7.52 18,083
9/99 7.74 18,626
9/00 7.98 19,184
9/01 8.22 19,760
------
85,844
======
</TABLE>
<PAGE>
DABNEY 10
PROJECT DESIGNATOR: DABO
REVISION: 6/17/97 @ 14:06
PROJECT ASSUMPTIONS REPORT
INCLUDING ALL TENANTS
6/17/97 @ 23:24
BUILDING PROLOGUE
- -----------------
LEASEHOLD ANALYSIS OF DABNEY 10 BEGINNING 7/1997
FOR 18 YEARS ON A FISCAL YEAR BASIS
AREA MEASURES
- -------------
NRA
1997 VALUE - 85,844
THEREAFTER - CONSTANT
CCCA
1997 VALUE - 83,138
1998 VALUE - 82,738
1999 VALUE - 76,006
2000 VALUE - 85,844
2001 VALUE - 82,077
2002 VALUE - 85,042
2003 VALUE - 80,844
2004 VALUE - 80,844
2005 VALUE - 81,636
2006 VALUE - 80,206
2007 VALUE - 81,644
2008 VALUE - 82,077
2009 VALUE - 85,844
2010 VALUE - 85,042
2011 VALUE - 75,844
2012 VALUE - 82,837
2013 VALUE - 80,414
2014 VALUE - 80,235
THEREAFTER - CONSTANT
GROWTH RATES
- ------------
INC1
1997 VALUE - 1.50
1998 VALUE - 3.00
THEREAFTER - CONSTANT
EXP1
1997 VALUE - 1.75
1998 VALUE - 3.50
THEREAFTER - CONSTANT
3%
1997 VALUE - 3.00
THEREAFTER - CONSTANT
4%
1997 VALUE - 4.00
THEREAFTER - CONSTANT
CPI
1997 VALUE - 1.75
1998 VALUE - 3.50
THEREAFTER - CONSTANT
COMN
<PAGE>
PAGE 2
1997 VALUE - 6.00
THEREAFTER - CONSTANT
COMR
1997 VALUE - 2.00
THEREAFTER - CONSTANT
COMB
+3O.O% OF COMN +70.O% OF COMR
MARKET RATES
- ------------
MKT1
1997 VALUE - 7.30
THEREAFTER - GROWING AT GROWTH RATE INC1
TIRN
1997 VALUE - 0.50
THEREAFTER - GROWING AT GROWTH RATE EXP1
TINW
1997 VALUE - 2.00
THEREAFTER - GROWING AT GROWTH RATE EXP1
TIWA
+70.0% OF TIRN +30.0% OF TINW
RESR
1997 VALUE- 0.20
THEREAFTER - GROWING AT GROWTH RATE EXP1
INSE
1997 VALUE - 0.10
THEREAFTER - GROWING AT GROWTH RATE EXP1
MISCELLANEOUS INCOMES
- ---------------------
NONE
EXPENSES
TAXES , REFERRED TO AS TAX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 40,490
THEREAFTER - GROWING AT GROWTH RATE EXP1
OPERATING EXPENSES, REFERRED TO AS OPEX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 50,000
THEREAFTER - GROWING AT GROWTH RATE EXP1
G&A EXPENSES , REFERRED TO AS G&A
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 30,000
THEREAFTER - GROWING AT GROWTH RATE EXP1
MANAGEMENT FEES , REFERRED TO AS MGMT
CHARGED AGAINST NET OPERATING INCOME
3.00% OF EFFECTIVE GROSS INCOME
Industrial Gross , REFERRED TO AS GRSS
AN INFORMATIONAL EXPENSE
<PAGE>
PAGE 3
+100.0% OF TAX +2.0% OF OPEX
INSURANCE , REFERRED TO AS INSE
AN INFORMATIONAL EXPENSE
MARKET RATE INSE MULTIPLIED BY AREA MEASURE NRA
TAX & INSURANCE , REFERRED TO AS TX&I
AN INFORMATIONAL EXPENSE
+100.0% OF TAX +100.0% OF INSE
VACANCY ALLOWANCE
- -----------------
PERCENTAGE OF POTENTIAL GROSS INCOME
FOR ALL TENANTS SUBJECT TO VACANCY
1997 VALUE - 2.00
THEREAFTER - CONSTANT
MANAGEMENT FEE
- --------------
NONE
COMMISSION CALCULATIONS
- -----------------------
STANDARD METHOD #1 - 0.000% OF TOTAL RENT
STANDARD METHOD #2 - 0.000% OF TOTAL RENT
STANDARD METHOD #3 - 0.000% OF TOTAL RENT
STANDARD METHOD #4 - 0.000% OF TOTAL RENT
STANDARD METHOD #5 - 0.000% OF TOTAL RENT
COMMISSION PAYOUTS
- ------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - AMORTIZED OVER LIFE OF LEASE
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
ALTERATION CALCULATION
- ----------------------
1997 VALUE - 0.00
1998 VALUE - 0.00
1999 VALUE - 0.00
2000 VALUE - 0.00
2001 VALUE - 0.00
2002 VALUE - 0.00
2003 VALUE - 0.00
2004 VALUE - 0.00
2005 VALUE - 0.00
2006 VALUE - 0.00
2007 VALUE - 0.00
<PAGE>
PAGE 4
2008 VALUE - 0.00
2009 VALUE - 0.00
2010 VALUE - 0.00
2011 VALUE - 0.00
THEREAFTER - CONSTANT
ALTERATION PAYOUTS
- -------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - CASHED OUT
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
COMMON AREA MAINTENANCE POOL
- ----------------------------
NONE
CAPITAL EXPENDITURES
- --------------------
RESERVES
MARKET RATE RESR MULTIPLIED BY AREA MEASURE NRA
PRIMARY CLASSIFICATION CODES
- ----------------------------
NONE
SECONDARY CLASSIFICATION CODES
- ------------------------------
NONE
COST CENTERS
- ------------
NONE
SALES VOLUME PROFILE
- --------------------
PERCENT OF RELATIVE
MONTH ANNUAL SALES VOLUME
- ----- ------------ --------
JAN 8.33% 1.00
FEB 8.33% 1.00
MAR 8.33% 1.00
APR 8.33% 1.00
MAY 8.33% 1.00
JUN 8.33% 1.00
JUL 8.33% 1.00
AUG 8.33% 1.00
SEP 8.33% 1.00
OCT 8.33% 1.00
<PAGE>
PAGE 5
NOV 8.33% 1.00
DEC 8.33% 1.00
------- -------
TOTALS 100.00% 12.00
GLOBAL RECOVERIES
- ------------------
Industrial Gross , REFERRED TO AS INGR
PRO RATA SHARE RECOVERY OF EXPENSE GRSS
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
TENANT PROLOGUE
- ---------------
MINIMUM RENTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
SALES VOLUMES AND BREAKPOINTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
RENEWAL RENTS ARE COMPOUNDED ANNUALLY
RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET
REFERENCE TENANTS
- -----------------
THERE: ARE A TOTAL OF 1 REFERENCE TENANT(S):
- -----------------------------------------------------------------------------
# 1 - reference3
BASE LEASE DATES: 1/1996 TO 12/2005
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1
NOT SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
<PAGE>
PAGE 6
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
TENANTS
- -------
THERE ARE A TOTAL OF 10 LEASEHOLD TENANT(S):
- ------------------------------------------------------------------------------
# 1 - ENVIRONMENTAL TECH
BASE LEASE DATES: 8/1993 TO 10/2003
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 30,000
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 5.49/SF/YR
THEREAFTER - GROWING AT GROWTH RATE 3%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 34,293
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL, COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
<PAGE>
PAGE 7
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 2 - Micro View
BASE LEASE DATES: 3/1996 TO 3/2001
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 11,300
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 6.83/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 41,497
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 3 - CMS Automation
BASE LEASE DATES: 2/1992 TO 1/1999
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 9,714
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 7.18/SF/YR
THEREAFTER - GROWING AT 2.00%
RECOVERIES:
<PAGE>
PAGE 8
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 34,293
C0MMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
3 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
------------------------------------------------------------------------------
# 4 - Contract Specifix
BASE LEASE DATES: 4/1991 TO 8/1999
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 8,400
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 8.10/SF/YR
THEREAFTER - GROWING AT 3.90%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 31,852
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
<PAGE>
PAGE 9
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
3 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 5 - L. Fishman & Son
BASE LEASE DATES: 3/1993 TO 2/1998
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 7,210
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1996 VALUE - 4.10/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 34,293
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
3 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
<PAGE>
PAGE 10
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 6 - CMS Automation
BASE LEASE DATES: 3/1993 TO 1/1999
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 7,200
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 6.22/SF/YR
THEREAFTER - GROWING AT 2.00%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 34,293
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
3 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 7 - Contract Specifix
BASE LEASE DATES: 6/1994 TO 8/1999
<PAGE>
PAGE 11
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 4,200
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 8.10/SF/YR
THEREAFTER - GROWING AT 4.20%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 31,852
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
3 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 8 - Interbake Foods
BASE LEASE DATES: 11/1992 TO 10/1997
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 3,015
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 7.36/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
<PAGE>
PAGE 12
AND A BASE AMOUNT OF 31,852
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
3 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 9 - Atlantic Office
BASE LEASE DATES: 3/1994 TO 9/1997
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 2,400
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 6.75/SF/YR
THEREAFTER - GROWING AT GROWTH RATE 3%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 40,895
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
3 7.00 4 NONE NONE YES YES
<PAGE>
PAGE 13
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 10 - Vacant out for sig
BASE LEASE DATES: 9/1997 TO 8/2002
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 2,405
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - MARKET RATE MKT1
THEREAFTER - GROWING AT GROWTH RATE 3%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
COMMISSIONS: GROWTH RATE COMN
PAYOUT: CASHED OUT
ALTERATIONS: MARKET RATE TINW
PAYOUT: CASHED OUT
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
<PAGE>
PAGE 14
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
<PAGE>
Addenda
================================================================================
Dabney XI
Operating Expense Statement
Pro-Ject Lease Abstract Report
Pro-Ject Assumptions Report
<PAGE>
Historical Operating Statements
Dabney XI
Building NRA 45,250 SF
<TABLE>
<CAPTION>
1994 Actual 1995 Actual 1996 Actual 1997 Budget
--------------------- ----------------------- ------------------------ -------------------------
Item Amount Per SF Amount Per SF Amount Per SF Amount Per SF
============================================================================= ======================== =========================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME
Gross Income $ 48,615 $ 1.07 $ 260,812 $ 5.76 $ 274,754 $ 6.07 $ 279,513 $ 6.18
Reimbursements 0 0.00 0 0.00 1,960 0.04 1,122 0.02
----------------------- ----------------------- ------------------------ ------------------------
Total Income $ 48,615 $ 1.07 $ 260,812 $ 5.76 $ 276,714 $ 6.12 $ 280,635 $ 6.20
----------------------- ----------------------- ------------------------ ------------------------
EXPENSES
Real Estate Taxes $ 15,735 $ 0.35 $ 18,411 $ 0.41 $ 18,035 $ 0.40 $ 18,410 $ 0.41
Operating Expense 7,537 0.17 19,916 0.44 23,276 0.51 22,661 0.50
General & Administrative 7,133 0.16 6,526 0.14 8,617 0.19 9,304 0.21
Management Fee 0 0.00 2,274 0.05 4,043 0.09 8,361 0.18
----------------------- ----------------------- ------------------------ ------------------------
Total Expenses $ 30,404 $ 0.67 $ 47,126 $ 1.04 $ 53,971 $ 1.19 $ 58,736 $ 1.30
----------------------- ----------------------- ------------------------ ------------------------
NET OPERATING INCOME $ 18,211 $ 0.40 $ 213,686 $ 4.72 $ 222,743 $ 4.92 $ 221,899 $ 4.90
======================= ======================= ======================== ========================
===================================================================================================================================
</TABLE>
Note: Low income attributed to below market occupancy in 1994. Property has
since stabilized with leases expiring in 1999 and 2000.
<PAGE>
DABNEY 11
PROJECT DESIGNATOR: DABB
REVISION: 6/11/97 @ 14:14
LEASE ABSTRACT REPORT
FOR ALL TENANTS
6/11/97 - 14:15
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL % OF RENT
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE CEILING BREAKPOINT PRO RATA SUBJ
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) (000'S) RECOVERIES SHARE BASE TO CPI
- ------------- --------- ------- ----- ----- ----- ----------- ------- ------- ------- --------- --------------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 1 - 13,800 7/94 7/04 - 6.10 84,180 - - - TAX & INSURANCE 21,461
Ademco Distributio - 8/97 6.28 86,705
8/98 6.47 89,307
8/99 6.67 91,986
8/00 6.87 94,745
8/01 7.07 97,588
8/02 7.28 100,515
8/03 7.50 103,531
# 2 - 10,800 9/94 9/00 - 5.80 62,640 - - - TAX & INSURANCE 22,936
Thulman Eastern - 10/97 6.03 65,146
10/98 6.27 67,751
10/99 6.52 70,461
# 3 7,200 7/94 9/04 - 5.66 40,752 - - - TAX & INSURANCE 21,461
Dal Tile 10/97 5.83 41,975
10/98 6.00 43,234
10/99 6.18 44,531
10/00 6.37 45,867
10/01 6.56 47,243
10/02 6.76 48,660
10/03 6.96 50,120
# 4 - 7,200 7/94 7/99 - 6.99 50,328 - - - TAX & INSURANCE 21,461
Information Integr - 8/97 7.27 52,341
8/98 7.56 54,435
# 5 - 6,250 4/94 8/99 - 5.93 37,063 - - - TAX & INSURANCE 21,461
DHL Airways - 9/97 6.17 38,545
9/98 6.41 40,087
------
45,250
======
</TABLE>
<PAGE>
DABNEY 11
PROJECT DESIGNATOR: DABB
REVISION: 6/17/97 @ 14:06
PROJECT ASSUMPTIONS REPORT
INCLUDING ALL TENANTS
6/17/97 @ 23:24
BUILDING PROLOGUE
- ----------------
LEASEHOLD ANALYSIS OF DABNEY 11 BEGINNING 7/1997
FOR 18 YEARS ON A FISCAL YEAR BASIS
AREA MEASURES
- -------------
NRA
1997 VALUE - 45,250
THEREAFTER - CONSTANT
OCCA
1997 VALUE - 45,250
1998 VALUE - 45,250
1999 VALUE - 40,767
2000 VALUE - 42,550
2001 VALUE - 44,350
2002 VALUE - 45,250
2003 VALUE - 45,250
2004 VALUE - 38,850
2005 VALUE - 44,650
2006 VALUE - 44,650
2007 VALUE - 41,367
2008 VALUE - 41,650
2009 VALUE - 45,250
2010 VALUE - 45,250
2011 VALUE - 44,100
2012 VALUE - 39,400
2013 VALUE - 45,250
2014 VALUE - 40,767
THEREAFTER - CONSTANT
GROWTH RATES
- ------------
INC1
1997 VALUE - 1.50
1998 VALUE - 3.00
THEREAFTER - CONSTANT
EXP1
1997 VALUE - 1.75
1998 VALUE - 3.50
THEREAFTER - CONSTANT
3%
1997 VALUE - 3.00
THEREAFTER - CONSTANT
4%
1997 VALUE - 4.00
THEREAFTER - CONSTANT
CPI
1997 VALUE - 1.75
1998 VALUE - 3.50
THEREAFTER - CONSTANT
COMN
<PAGE>
PAGE 2
1997 VALUE - 6.00
THEREAFTER - CONSTANT
COMR
1997 VALUE - 2.00
THEREAFTER - CONSTANT
COMB
+30.0% OF COMN +70.0% OF COMR
MARKET RATES
- ------------
MKT1
1997 VALUE - 7.30
THEREAFTER - GROWING AT GROWTH RATE INC1
TIRN
1997 VALUE - 0.50
THEREAFTER - GROWING AT GROWTH RATE EXP1
TINW
1997 VALUE - 2.00
THEREAFTER - GROWING AT GROWTH RATE EXP1
TIWA
+70.0% OF TIRN +30.0% OF TINW
RESR
1997 VALUE - 0.20
THEREAFTER - GROWING AT GROWTH RATE EXP1
INSE
1997 VALUE - 0.10
THEREAFTER - GROWING AT GROWTH RATE EXP1
MISCELLANEOUS INCOMES
- ---------------------
NONE
EXPENSES
- --------
TAXES , REFERRED TO AS TAX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 17,648
THEREAFTER - GROWING AT GROWTH RATE EXP1
OPERATING EXPENSES, REFERRED TO AS OPEX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 23,000
THEREAFTER - GROWING AT GROWTH RATE EXP1
G&A EXPENSES , REFERRED TO AS G&A
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 9,300
THEREAFTER - GROWING AT GROWTH RATE EXP1
MANAGEMENT FEES , REFERRED TO AS MGMT
CHARGED AGAINST NET OPERATING INCOME
3.00% OF EFFECTIVE GROSS INCOME
Industrial Gross , REFERRED TO AS GRSS
AN INFORMATIONAL EXPENSE
<PAGE>
PAGE 3
+100.0% OF TAX +2.0% OF OPEX
INSURANCE , REFERRED TO AS INSE
AN INFORMATIONAL EXPENSE
MARKET RATE INSE MULTIPLIED BY AREA MEASURE NRA
TAX & INSURANCE , REFERRED TO AS TX&I
AN INFORMATIONAL EXPENSE
+100.0% OF TAX +100.0% OF INSE
VACANCY ALLOWANCE
- -----------------
PERCENTAGE OF POTENTIAL GROSS INCOME
FOR ALL TENANTS SUBJECT TO VACANCY
1997 VALUE - 2.00
THEREAFTER - CONSTANT
MANAGEMENT FEE
- --------------
NONE
COMMISSION CALCULATIONS
- -----------------------
STANDARD METHOD #1 - 0.000% OF TOTAL RENT
STANDARD METHOD #2 - 0.000% OF TOTAL RENT
STANDARD METHOD #3 - 0.000% OF TOTAL RENT
STANDARD METHOD #4 - 0.000% OF TOTAL RENT
STANDARD METHOD #5 - 0.000% OF TOTAL RENT
COMMISSION PAYOUTS
- ------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - AMORTIZED OVER LIFE OF LEASE
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
ALTERATION CALCULATION
- ----------------------
1997 VALUE - 0.00
1998 VALUE - 0.00
1999 VALUE - 0.00
2000 VALUE - 0.00
2001 VALUE - 0.00
2002 VALUE - 0.00
2003 VALUE - 0.00
2004 VALUE - 0.00
2005 VALUE - 0.00
2006 VALUE - 0.00
2007 VALUE - 0.00
<PAGE>
PAGE 4
2008 VALUE - 0.00
2009 VALUE - 0.00
2010 VALUE - 0.00
2011 VALUE - 0.00
THEREAFTER - CONSTANT
ALTERATION PAYOUTS
- -------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - CASHED OUT
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
COMMON AREA MAINTENANCE POOL
- ----------------------------
NONE
CAPITAL EXPENDITURES
- --------------------
RESERVES
MARKET RATE RESR MULTIPLIED BY AREA MEASURE NRA
PRIMARY CLASSIFICATION CODES
- ----------------------------
NONE
SECONDARY CLASSIFICATION CODES
- ------------------------------
NONE
COST CENTERS
- ------------
NONE
SALES VOLUME PROFILE
- --------------------
PERCENT OF RELATIVE
M0NTH ANNUAL SALES VOLUME
- ---- ------------ --------
JAN 8.33% 1.00
FEB 8.33% 1.00
MAR 8.33% 1.00
APR 8.33% 1.00
MAY 8.33% 1.00
JUN 8.33% 1.00
JUL 8.33% 1.00
AUG 8.33% 1.00
SEP 8.33% 1.00
OCT 8.33% 1.00
<PAGE>
PAGE 5
NOV 8.33% 1.00
DEC 8.33% 1.00
------- -------
TOTALS 100.00% 12.00
GLOBAL RECOVERIES
- ------------------
Industrial Gross , REFERRED TO AS INGR
PRO RATA SHARE RECOVERY OF EXPENSE GRSS
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
TENANT PROLOGUE
- ---------------
MINIMUM RENTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
SALES VOLUMES AND BREAKPOINTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
RENEWAL RENTS ARE COMPOUNDED ANNUALLY
RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET
REFERENCE TENANTS
- -----------------
THERE ARE A TOTAL OF 1 REFERENCE TENANT(S):
- ------------------------------------------------------------------------------
# 1 - reference3
BASE LEASE DATES: 1/1996 TO 12/2005
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1
NOT SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
<PAGE>
PAGE 6
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
TENANTS
- -------
THERE ARE A TOTAL OF 5 LEASEHOLD TENANT(S):
- -------------------------------------------------------------------------------
# 1 - Ademco Distributio
BASE LEASE DATES: 7/1994 TO 7/2004
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 13,800
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 6.10/SF/YR
THEREAFTER - GROWING AT GROWTH RATE 3%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 21,461
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
<PAGE>
PAGE 7
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 2 - Thulman Eastern
BASE LEASE DATES: 9/1994 TO 9/2000
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 10,800
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 5.80/SF/YR
THEREAFTER - GROWING AT 4.00%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 22,936
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
3 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- ------------------------------------------------------------------------------
# 3 - Dal Tile
BASE LEASE DATES: 7/1994 TO 9/2004
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 7,200
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 5.66/SF/YR
THEREAFTER - GROWING AT 3.00%
<PAGE>
PAGE 8
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 21,461
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1, MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 4 - Information Integr
BASE LEASE DATES: 7/1994 TO 7/1999
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 7,200
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 6.99/SF/YR
THEREAFTER - GROWING AT 4.00%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 21,461
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
<PAGE>
PAGE 9
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
3 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 5 - DHL Airways
BASE LEASE DATES: 4/1994 TO 8/1999
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 6,2SO
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 5.93/SF/YR
THEREAFTER - GROWING AT 4.00%
RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 21,461
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
3 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
TAX & INSURANCE
PRO RATA SHARE RECOVERY OF EXPENSE TX&I
<PAGE>
PAGE 10
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
<PAGE>
Addenda
================================================================================
Dabney A-1
Operating Expense Statement
Pro-Ject Lease Abstract Report
Pro-Ject Assumptions Report
<PAGE>
Historical Operating Statements
Dabney A-1
Building NRA 13,860 SF
<TABLE>
<CAPTION>
1994 Actual 1995 Actual 1996 Actual 1997 Budget
------------------- ------------------- ------------------- -------------------
Item Amount Per SF Amount Per SF Amount Per SF Amount Per SF
========================================================================== =================== =============================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME
Gross Income $134,653 $ 9.72 $158,716 $11.45 $166,762 $12.03 $148,251 $10.70
Reimbursements 0 0.00 0 0.00 1,859 0.13 0 0.00
------------------- ------------------- ------------------- -------------------
Total Income $134,653 $ 10 $158,716 $11.45 $168,621 $12.17 $148,251 $10.70
------------------- ------------------- ------------------- -------------------
EXPENSES
Real Estate Taxes $ 6,836 $ 0.49 $ 8,320 $ 0.60 $ 8,150 $ 0.59 $ 8,320 $ 0.60
Operating Expense 6,716 0.48 7,853 0.57 9,260 0.67 50,844 3.67
General & Administrative 25,607 1.85 7,401 0.53 6,739 0.49 5,640 0.41
Management Fee 0 0.00 1,587 0.11 2,469 0.18 4,103 0.30
------------------- ------------------- ------------------- -------------------
Total Expenses $ 39,158 $ 2.83 $ 25,162 $ 1.82 $ 26,618 $ 1.92 $ 68,907 $ 4.97
------------------- ------------------- ------------------- -------------------
NET OPERATING INCOME $ 95,495 $ 6.89 $133,554 $ 9.64 $142,003 $10.25 $ 79,344 $ 5.72
=================== =================== =================== ===================
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: 7,000 square feet (50 percent of total net rentable area) is out for
signing with a new tenant. 1997 Budget forecasts a longer downtime period than
that which will likely occur.
<PAGE>
DABNEY A-1
PROJECT DESIGNATOR: DA-1
REVISION: 6/11/97 @ 14:29
LEASE ABSTRACT REPORT
FOR ALL TENANTS
6/11/97 @ 14:30
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT
- ------ --------- ------ ----- ----- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
# 1 - 7,000 4/97 4/02 - 13.50 94,500
Comquest Communic - 5/98 13.90 97,335
5/99 14.32 100,255
5/00 14.75 103,263
5/01 15.19 106,361
# 2 - 8,389 5/97 5/07 - 8.50 71,307
Pharmco Analytical - 6/98 8.76 73,446
6/99 9.02 75,649
6/00 9.29 77,919
6/01 9.57 80,256
6/02 9.85 82,664
6/03 10.15 85,144
6/04 10.45 87,698
6/05 10.77 90,329
6/06 11.09 93,039
-------
15,389
=======
<CAPTION>
OVERAGE CEILING BREAKPOINT PRO RATA % OF RENT
TENANT % (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI
- ------ ------- ------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
# 1 -- -- -- total expenses 72,246
Comquest Communic
# 2 -- -- - total expenses ZERO
Pharmco Analytical
</TABLE>
<PAGE>
DABNEY A-1
PROJECT DESIGNATOR: DA-1
REVISION: 6/17/97 @ 15:46
PROJECT ASSUMPTIONS REPORT
INCLUDING ALL TENANTS
6/17/97 @ 15:47
BUILDING PROLOGUE
- -----------------
LEASEHOLD ANALYSIS OF DABNEY A-1 BEGINNING 7/1997
FOR 18 YEARS ON A FISCAL YEAR BASIS
AREA MEASURES
- ------------
NRA
1997 VALUE - 15,389
THEREAFTER - CONSTANT
OCCA
1997 VALUE - 10,843
1998 VALUE - 15,389
1999 VALUE - 15,389
2000 VALUE - 15,389
2001 VALUE - 15,389
2002 VALUE - 13,056
2003 VALUE - 15,389
2004 VALUE - 15,389
2005 VALUE - 15,389
2006 VALUE - 15,389
2007 VALUE - 12,593
2008 VALUE - 15,389
2009 VALUE - 13,056
2010 VALUE - 15,389
2011 VALUE - 15,389
2012 VALUE - 15,389
2013 VALUE - 15,389
2014 VALUE - 13,292
THEREAFTER - CONSTANT
GROWTH RATES
- ------------
INC1
1997 VALUE - 1.50
1998 VALUE - 3.00
THEREAFTER - CONSTANT
EXP1
1997 VALUE - 1.75
1998 VALUE - 3.50
THEREAFTER - CONSTANT
3%
1997 VALUE - 3.00
THEREAFTER - CONSTANT
4%
1997 VALUE - 4.00
THEREAFTER - CONSTANT
CPI
1997 VALUE - 1.75
1998 VALUE - 3.50
THEREAFTER - CONSTANT
<PAGE>
PAGE 2
1997 VALUE - 6.00
THEREAFTER - CONSTANT
COMR
1997 VALUE - 2.00
THEREAFTER - CONSTANT
COMB
+30.0% OF COMN +70.0% OF COMR
MARKET RATES
- ------------
MKT1
1997 VALUE - 8.50
THEREAFTER - GROWING AT GROWTH RATE INC1
TIRN
+25.0% OF TINW
TINW
1997 VALUE - 6.00
THEREAFTER - GROWING AT GROWTH RATE EXP1
TIWA
+70.0% OF TIRN +30.0% OF TINW
RESR
1997 VALUE - 0.20
THEREAFTER - GROWING AT GROWTH RATE EXP1
INSE
1997 VALUE - 0.10
THEREAFTER - GROWING AT GROWTH RATE EXP1
MISCELLANEOUS INCOMES
- ---------------------
NONE
EXPENSES
- --------
TAXES , REFERRED TO AS TAX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 7,981
THEREAFTER - GROWING AT GROWTH RATE EXP1
OPERATING EXPENSES, REFERRED TO AS OPEX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 50,000
THEREAFTER - GROWING AT GROWTH RATE EXP1
G&A EXPENSES , REFERRED TO AS G&A
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 6,000
THEREAFTER - GROWING AT GROWTH RATE EXP1
MANAGEMENT FEES , REFERRED TO AS MGMT
CHARGED AGAINST NET OPERATING INCOME
3.00% OF EFFECTIVE GROSS INCOME
Industrial Gross , REFERRED TO AS GRSS
AN INFORMATIONAL EXPENSE
- -100.0% OF TAX +2.0% OF OPEX
<PAGE>
PAGE 3
INSURANCE , REFERRED TO AS INSE
AN INFORMATIONAL EXPENSE
MARKET RATE INSE MULTIPLIED BY AREA MEASURE NRA
total expenses , REFERRED TO AS tote
AN INFORMATIONAL EXPENSE
+100.0% OF TAX +100.0% OF OPEX
+100.0% OF G&A +100.0% OF MGMT
TAX & INSURANCE , REFERRED TO AS TX&I
AN INFORMATIONAL EXPENSE
+100.0% OF TAX +100.0% OF INSE
VACANCY ALLOWANCE
- -----------------
PERCENTAGE OF POTENTIAL GROSS INCOME
FOR ALL TENANTS SUBJECT TO VACANCY
1997 VALUE - 2.00
THEREAFTER - CONSTANT
MANAGEMENT FEE
- -------------
NONE
COMMISSION CALCULATIONS
- -----------------------
STANDARD METHOD #1 - 0.000% OF TOTAL RENT
STANDARD METHOD #2 - 0.000% OF TOTAL RENT
STANDARD METHOD #3 - 0.000% OF TOTAL RENT
STANDARD METHOD #4 - 0.000% OF TOTAL RENT
STANDARD METHOD #5 - 0.000% OF TOTAL RENT
COMMISSION PAYOUTS
- ------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - AMORTIZED OVER LIFE OF LEASE
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
ALTERATION CALCULATION
- ----------------------
1997 VALUE - 0.00
1998 VALUE - 0.00
1999 VALUE - 0.00
2000 VALUE - 0.00
2001 VALUE - 0.00
2002 VALUE - 0.00
2003 VALUE - 0.00
2004 VALUE - 0.00
<PAGE>
PAGE 4
2005 VALUE - 0.00
2006 VALUE - 0.00
2007 VALUE - 0.00
2008 VALUE - 0.00
2009 VALUE - 0.00
2010 VALUE - 0.00
2011 VALUE - 0.00
THEREAFTER - CONSTANT
ALTERATION PAYOUTS
- --------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - CASHED OUT
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
COMMON AREA MAINTENANCE POOL
- ----------------------------
NONE
CAPITAL EXPENDITURES
- --------------------
RESERVES
MARKET RATE RESR MULTIPLIED BY AREA MEASURE NRA
PRIMARY CLASSIFICATION CODES
- ----------------------------
NONE
SECONDARY CLASSIFICATION CODES
- ------------------------------
NONE
COST CENTERS
- -----------
NONE
SALES VOLUME PROFILE
- --------------------
PERCENT OF RELATIVE
MONTH ANNUAL SALES VOLUME
- ----- ------------ --------
JAN 8.33% 1.00
FEB 8.33% 1.00
MAR 8.33% 1.00
APR 8.33% 1.00
MAY 8.33% 1.00
JUN 8.33% 1.00
JUL 8.33% 1.00
<PAGE>
PAGE 5
AUG 8.33% 1.00
SEP 8.33% 1.00
OCT 8.33% 1.00
NOV 8.33% 1.00
DEC 8.33% 1.00
------- -------
TOTALS 100.00% 12.00
GLOBAL RECOVERIES
- ------------------
Industrial Gross , REFERRED TO AS INGR
PRO RATA SHARE RECQVERY OF EXPENSE GRSS
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
TENANT PROLOGUE
- ---------------
MINIMUM RENTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
SALES VOLUMES AND BREAKPOINTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
RENEWAL RENTS ARE COMPOUNDED ANNUALLY
RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET
REFERENCE TENANTS
- -----------------
THERE ARE A TOTAL OF 1 REFERENCE TENANT(S):
- --------------------------------------------------------------------------------
# 1 - reference3
BASE LEASE DATES: 1/1996 TO 12/2005
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1
NOT SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
<PAGE>
PAGE 6
RENEWAL RECOVERIES:
total expenses
PRO RATA SHARE RECOVERY OF EXPENSE tote
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
TENANTS
- -------
THERE ARE A TOTAL OF 2 LEASEHOLD TENANT(S):
- --------------------------------------------------------------------------------
# 1 - Comquest Communic
BASE LEASE DATES: 4/1997 TO 4/2002
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 7,000
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 13.50/SF/YR
THEREAFTER - GROWING AT GROWTH RATE 3%
RECOVERIES:
total expenses
PRO RATA SHARE RECOVERY OF EXPENSE tote
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
total expenses
PRO RATA SHARE RECOVERY OF EXPENSE tote
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
RENEWAL COMMISSIONS: GROWTH RATE COMB
<PAGE>
PAGE 7
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 2 - Pharmco Analytical
BASE LEASE DATES: 5/1997 TO 5/2007
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 8,389
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 8.50/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
total expenses
PRO RATA SHARE RECOVERY OF EXPENSE tote
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
1NCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
total expenses
PRO RATA SHARE RECOVERY OF EXPENSE tote
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
<PAGE>
Addenda
================================================================================
Dabney A-2
Operating Expense Statement
Pro-Ject Lease Abstract Report
Pro-Ject Assumptions Report
<PAGE>
Historical Operating Statements
Dabney A-2
Building NRA 33,050 SF
<TABLE>
<CAPTION>
1994 Actual 1995 Actual 1996 Actual 1997 Budget
------------------- ------------------- ------------------- -------------------
Item Amount Per SF Amount Per SF Amount Per SF Amount Per SF
========================================================================== =================== ===================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME
Gross Income $ 0 $ 0.00 $223,087 $ 6.75 $226,328 $ 6.85 $241,292 $ 7.30
Reimbursements 0 0.00 0 0.00 33,750 1.02 17,046 0.52
------------------- ------------------- ------------------- -------------------
Total Income $ 0 $ 0.00 $223,087 $ 6.75 $260,078 $ 7.87 $258,338 $ 7.82
------------------- ------------------- ------------------- -------------------
EXPENSES
Real Estate Taxes $ 2,921 $ 0.09 $ 17,049 $ 0.52 $ 16,701 $ 0.51 $ 17,052 $ 0.52
Operating Expense 194 0.01 3,322 0.10 7,240 0.22 9,544 0.29
General & Administrative 1,132 0.03 9,921 0.30 9,422 0.29 12,613 0.38
Management Fee 0 0.00 2,231 0.07 3,351 0.10 7,236 0.22
------------------- ------------------- ------------------- -------------------
Total Expenses $ 4,247 $ 0.13 $ 32,523 $ 0.98 $ 36,714 $ 1.11 $ 46,445 $ 1.41
------------------- ------------------- ------------------- -------------------
NET OPERATING INCOME $ (4,247) $(0.13) $190,565 $ 5.77 $223,364 $ 6.76 $211,893 $ 6.41
=================== =================== =================== ===================
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: This was a build-to-suit for Pharmco in 1994. They commenced occupancy on
9/30/94 and used their contracted three months free rent, hence no reported 1994
income.
<PAGE>
DABNEY A-2
PROJECT DESIGNATOR: DA-2
REVISION: 6/11/97 @ 14:45
LEASE ABSTRACT REPORT
FOR ALL TENANTS
6/11/97 @ 14:46
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT
- ------ --------- ------ ----- ----- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
# 1 -- 33,050 9/94 8/04 -- 8.50 280,925
Pharmco Analytical -- 9/97 8.67 286,544
9/98 8.84 292,274
9/99 9.02 298,120
9/00 9.20 304,082
9/01 9.38 310,164
9/02 9.57 316,367
9/03 9.76 322,695
-------
33,050
=======
<CAPTION>
OVERAGE CEILING BREAKPOINT PRO RATA % OF RENT
TENANT % (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI
- ------ ------- ------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
# 1 -- -- -- total expenses ZERO
Pharmco Anaytical
</TABLE>
<PAGE>
DABNEY A-2
PROJECT DESIGNATOR: DA-2
REVISION: 6/17/97 @ 15:49
PROJECT ASSUMPTIONS REPORT
INCLUDING ALL TENANTS
6/17/97 @ 15:49
BUILDING PROLOGUE
- -----------------
LEASEHOLD ANALYSIS OF DABNEY A-2 BEGINNING 7/1997
FOR 18 YEARS ON A FISCAL YEAR BASIS
AREA MEASURES
- --------------
NRA
1997 VALUE - 33,050
THEREAFTER - CONSTANT
OCCA
1997 VALUE - 33,050
1998 VALUE - 33,050
1999 VALUE - 33,050
2000 VALUE - 33,050
2001 VALUE - 33,050
2002 VALUE - 33,050
2003 VALUE - 33,050
2004 VALUE - 22,033
2005 VALUE - 33,050
2006 VALUE - 33,050
2007 VALUE - 33,050
2008 VALUE - 33,050
2009 VALUE - 33,050
2010 VALUE - 33,050
2011 VALUE - 33,050
2012 VALUE - 22,033
2013 VALUE - 33,050
2014 VALUE - 33,050
THEREAFTER - CONSTANT
GROWTH RATES
- ------------
INC1
1997 VALUE - 1.50
1998 VALUE - 3.00
THEREAFTER - CONSTANT
1997 VALUE - 1.75
1998 VALUE - 3.50
THEREAFTER - CONSTANT
3 %
1997 VALUE - 3.00
THEREAFTER - CONSTANT
4%
1997 VALUE - 4.00
THEREAFTER - CONSTANT
CPI
1997 VALUE - 1.75
1999 VALUE - 3.50
THEREAFTER - CONSTANT
COMN
<PAGE>
PAGE 2
1997 VALUE - 6.00
THEREAFTER - CONSTANT
COMR
1997 VALUE - 2.00
THEREAFTER - CONSTANT
COMB
+30.O% OF COMN +70.0% OF COMR
MARKET RATES
- ------------
MKT1
1997 VALUE - 8.50
THEREAFTER - GROWING AT GROWTH RATE INC1
TIRN
+25.0% OF TINW
TINW
1997 VALUE - 6.00
THEREAFTER - GROWING AT GROWTH RATE EXP1
TIWA
+70.0@ OF TIRN +30.0% OF TINW
RESR
1997 VALUE - 0.20
THEREAFTER - GROWING AT GROWTH RATE EXP1
INSE
1997 VALUE - 0.10
THEREAFTER - GROWING AT GROWTH RATE EXP1
MISCELLANEOUS INCOMES
- ---------------------
NONE
EXPENSES
- --------
TAXES ,REFERRED TO AS TAX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 16,353
1998 VALUE - 22,000
THEREAFTER - GROWING AT GROWTH RATE EXP1
OPERATING EXPENSES, REFERRED TO AS OPEX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 9,500
THEREAFTER - GROWING AT GROWTH RATE EXP1
G&A EXPENSES , REFERRED TO AS G&A
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 12,000
THEREAFTER - GROWING AT GROWTH RATE EXP1
MANAGEMENT FEES , REFERRED TO AS MGMT
CHARGED AGAINST NET OPERATING INCOME
3.00% OF EFFECTIVE GROSS INCOME
Industrial Gross , REFERRED TO AS GRSS
AN INFORMATIONAL EXPENSE
<PAGE>
PAGE 3
+100.0% OF TAX +2.0% OF OPEX
INSURANCE , REFERRED TO AS INSE
AN INFORMATIONAL EXPENSE
MARKET RATE INSE MULTIPLIED BY AREA MEASURE NRA
total expenses , REFERRED TO AS tote
AN INFORMATIONAL EXPENSE
+100.0% OF TAX +100.0% OF OPEX
+100.0% OF G&A +100.0% OF MGMT
TAX & INSURANCE , REFERRED TO AS TX&I
AN INFORMATIONAL EXPENSE
+100.0% OF TAX +100.0% OF INSE
VACANCY ALLOWANCE
- -----------------
PERCENTAGE OF POTENTIAL GROSS INCOME
FOR ALL TENANTS SUBJECT TO VACANCY
1997 VALUE - 2.00
THEREAFTER - CONSTANT
MANAGEMENT FEE
- --------------
NONE
COMMISSION CALCULATIONS
- -----------------------
STANDARD METHOD #1 - 0.000% OF TOTAL RENT
STANDARD METHOD #2 - 0.000% OF TOTAL RENT
STANDARD METHOD #3 - 0.000% OF TOTAL RENT
STANDARD METHOD #4 - 0.000% OF TOTAL RENT
STANDARD METHOD #5 - 0.000% OF TOTAL RENT
COMMISSION PAYOUTS
- ------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - AMORTIZED OVER LIFE OF LEASE
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD 44 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
ALTERATION CALCULATION
- ----------------------
1997 VALUE - 0.00
1998 VALUE - 0.00
1999 VALUE - 0.00
2000 VALUE - 0.00
2001 VALUE - 0.00
2002 VALUE - 0.00
<PAGE>
PAGE 4
2003 VALUE - 0.00
2004 VALUE - 0.00
2005 VALUE - 0.00
2006 VALUE - 0.00
2007 VALUE - 0.00
2008 VALUE - 0.00
2009 VALUE - 0.00
2010 VALUE - 0.00
2011 VALUE - 0.00
THEREAFTER - CONSTANT
ALTERATION PAYOUTS
- --------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - CASHED OUT
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
COMMON AREA MAINTENANCE POOL
- ----------------------------
NONE
CAPITAL EXPENDITURES
- --------------------
RESERVES
MARKET RATE RESR MULTIPLIED BY AREA MEASURE NRA
PRIMARY CLASSIFICATION CODES
- ----------------------------
NONE
SECONDARY CLASSIFICATION CODES
- ------------------------------
NONE
COST CENTERS
- ------------
NONE
SALES VOLUME PROFILE
- --------------------
PERCENT OF RELATIVE
MONTH ANNUAL SALES VOLUME
- ---- ------------ --------
JAN 8.33% 1.00
FEB 8.33% 1.00
MAR 8.33% 1.00
APR 8.33% 1.00
MAY 8.33% 1.00
<PAGE>
PAGE 5
JUN 8.33% 1.00
JUL 8.33% 1.00
AUG 8.33% 1.00
SEP 8.33% 1.00
OCT 8.33% 1.00
NOV 8.33% 1.00
DEC 8.33% 1.00
------- -------
TOTALS 100.00% 12.00
GLOBAL RECOVERIES
- -----------------
Industrial Gross , REFERRED TO AS INGR
PRO RATA SHARE RECOVERY OF EXPENSE GRSS
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
TENANT PROLOGUE
- ---------------
MINIMUM RENTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
SALES VOLUMES AND BREAKPOINTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
RENEWAL RENTS ARE COMPOUNDED ANNUALLY
RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET
REFERENCE TENANTS
- -----------------
THERE ARE A TOTAL OF 1 REFERENCE TENANT(S):
- --------------------------------------------------------------------------------
# 1 - reference
BASE LEASE DATES: 1/1996 TO 12/2005
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1
NOT SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
<PAGE>
PAGE 6
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
total expenses
PRO RATA SHARE RECOVERY OF EXPENSE tote
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
TENANTS
- -------
THERE ARE A TOTAL OF 1 LEASEHOLD TENANT(S):
- --------------------------------------------------------------------------------
# 1 - Pharmco Analytical
BASE LEASE DATES: 9/1994 TO 8/2004
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 33,050
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 8.50/SF/YR
THEREAFTER - GROWING AT 2.00%
RECOVERIES:
total expenses
PRO RATA SHARE RECOVERY OF EXPENSE tote
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
total expenses
PRO RATA SHARE RECOVERY OF EXPENSE tote
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
<PAGE>
PAGE 7
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
<PAGE>
Addenda
================================================================================
Britton's Hill
Operating Expense Statement
Pro-Ject Lease Abstract Report
Pro-Ject Assumptions Report
<PAGE>
Historical Operating Statements
Brittons Hill
Building NRA 132,103 SF
<TABLE>
<CAPTION>
1994 Actual 1995 Actual 1996 Actual 1997 Budget
------------------- ------------------- ------------------- -------------------
Item Amount Per SF Amount Per SF Amount Per SF Amount Per SF
========================================================================== =================== ===================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME
Gross Income $533,149 $ 4.04 $536,089 $ 4.06 $494,091 $ 3.74 $480,294 $ 3.64
Reimbursements 5,126 0.04 0 0.00 86,326 0.65 85,329 0.65
------------------- ------------------- ------------------- -------------------
Total Income $538,274 $ 4.07 $536,089 $ 4.06 $580,417 $ 4.39 $565,623 $ 4.28
------------------- ------------------- ------------------- -------------------
EXPENSES
Real Estate Taxes $ 30,606 $ 0.23 $ 30,606 $ 0.23 $ 29,982 $ 0.23 $ 30,294 $ 0.23
Operating Expense 28,033 0.21 44,929 0.34 42,321 0.32 37,591 0.28
General & Administrative 6,104 0.05 19,786 0.15 16,707 0.13 19,333 0.15
Management Fee 0 0.00 4,925 0.04 7,360 0.06 14,406 0.11
------------------- ------------------- ------------------- -------------------
Total Expenses $ 64,744 $ 0.49 $100,246 $ 0.76 $ 96,370 $ 0.73 $101,624 $ 0.77
------------------- ------------------- ------------------- -------------------
NET OPERATING INCOME $473,531 $ 3.58 $435,844 $ 3.30 $484,047 $ 3.66 $463,999 $ 3.51
=================== =================== =================== ===================
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
BRITTON'S HILL
PROJECT DESIGNATOR: DBRI
REVISION: 6/11/97 @ 14:57
LEASE ABSTRACT REPORT
FOR ALL TENANTS
6/11/97 @ 14:57
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT
- ------ --------- ------ ----- ----- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
# 1 -- 58,375 7/95 6/00 -- 3.50 204,313
Circuit City -- 7/98 3.63 212,076
7/99 3.77 220,135
# 2 -- 57,728 6/97 5/02 -- 3.83 221,098
Colortree Inc. -- 6/98 3.96 228,837
6/99 4.10 236,846
6/00 4.25 245,136
6/01 4.40 253,715
# 3 -- 16,000 12/92 12/98 -- 3.60 57,600
Lucent Technologie -- 1/98 3.64 58,291
-------
132,103
=======
<CAPTION>
OVERAGE CEILING BREAKPOINT PRO RATA % OF RENT
TENANT % (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI
- ------ ------- ------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
# 1 -- -- -- total expenses ZERO
Circuit City
# 2 -- -- -- total expenses ZERO
Colortree Inc.
# 3 -- -- -- total expenses ZERO
Lucent Technologie
</TABLE>
<PAGE>
BRITTON'S HILL
PROJECT DESIGNATOR: DBRI
REVISION: 6/17/97 @ 16:39
PROJECT ASSUMPTIONS REPORT
INCLUDING ALL TENANTS
6/17/97 @ 23:26
BUILDING PROLOGUE
- -----------------
LEASEHOLD ANALYSIS OF BRITTON'S HILL BEGINNING 7/1997
FOR 18 YEARS ON A FISCAL YEAR BASIS
AREA MEASURES
- -------------
NRA
1997 VALUE - 132,103
THEREAFTER - CONSTANT
OCCA
1997 VALUE - 108,050
1998 VALUE - 132,103
1999 VALUE - 126,770
2000 VALUE - 112,645
2001 VALUE - 132,103
2002 VALUE - 112,860
2003 VALUE - 132,103
2004 VALUE - 132,103
2005 VALUE - 132,103
2006 VALUE - 126,770
2007 VALUE - 122,374
2008 VALUE - 122,374
2009 VALUE - 117,671
2010 VALUE - 127,292
2011 VALUE - 132,103
2012 VALUE - 132,103
2013 VALUE - 126,770
2014 VALUE - 132,103
THEREAFTER - CONSTANT
GROWTH RATES
- ------------
INC1
1997 VALUE - 1.50
1998 VALUE - 3.00
THEREAFTER - CONSTANT
EXP1
1997 VALUE - 1.75
1998 VALUE - 3.50
THEREAFTER - CONSTANT
3 %
1997 VALUE - 3.00
THEREAFTER - CONSTANT
4%
1997 VALUE - 4.00
THEREAFTER - CONSTANT
CPI
1997 VALUE - 1.75
1998 VALUE - 3.50
THEREAFTER - CONSTANT
COMN
<PAGE>
PAGE 2
1997 VALUE - 6.00
THEREAFTER - CONSTANT
COMR
1997 VALUE - 2.00
THEREAFTER - CONSTANT
COMB
+30.0% OF COMN +70.0% OF COMR
MARKET RATES
- ------------
MKT1
1997 VALUE - 4.00
THEREAFTER - GROWING AT GROWTH RATE INC1
TIRN
1997 VALUE - 0.50
THEREAFTER - GROWING AT GROWTH RATE EXP1
TINW
1997 VALUE - 2.00
THEREAFTER - GROWING AT GROWTH RATE EXP1
TIWA
+70.0% OF TIRN +30.0% OF TINW
TESR
1997 VALUE - 0.20
THEREAFTER - GROWING AT GROWTH RATE EXP1
TNSE
1997 VALUE - 0.10
THREAFTER - GROWING AT GROWTH RATE EXP1
MISCELLANEOUS INCOMES
- ---------------------
NONE
EXPENSES
- --------
TAXES , REFERRED TO AS TAX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 26,684
1998 VALUE - 38,000
THEREAFTER - GROWING AT GROWTH RATE EXP1
OPERATING EXPENSES, REFERRED TO AS OPEX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 40,000
THEREAFTER - GROWING AT GROWTH RATE EXP1
G&A EXPENSES , REFERRED TO AS G&A
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 19,000
THEREAFTER - GROWING AT GROWTH RATE EXP1
MANAGEMENT FEES , REFERRED TO AS MGMT
CHARGED AGAINST NET OPERATING INCOME
3.00% OF EFFECTIVE GROSS INCOME
Industrial Gross , REFERRED TO AS GRSS
<PAGE>
PAGE 3
AN INFORMATIONAL EXPENSE
+100.0% OF TAX +2.0% OF OPEX
INSURANCE , REFERRED TO AS INSE
AN INFORMATIONAL EXPENSE
MARKET RATE INSE MULTIPLIED BY AREA MEASURE NRA
total expenses , REFERRED TO AS tote
AN INFORMATIONAL EXPENSE
+100.0% OF TAX +100.0% OF OPEX
+100.0% OF G&A +100.0% OF MGMT
TAX & INSURANCE , REFERRED TO AS TX&I
AN INFORMATIONAL EXPENSE
+100.0% OF TAX +100.0% OF INSE
VACANCY ALLOWANCE
- -----------------
PERCENTAGE OF POTENTIAL GROSS INCOME
FOR ALL TENANTS SUBJECT TO VACANCY
1997 VALUE - 2.00
THEREAFTER - CONSTANT
MANAGEMENT FEE
- --------------
NONE
COMMISSION CALCULATIONS
- -----------------------
STANDARD METHOD #1 - 0.000% OF TOTAL RENT
STANDARD METHOD #2 - 0.000% OF TOTAL RENT
STANDARD METHOD #3 - 0.000% OF TOTAL RENT
STANDARD METHOD #4 - 0.000% OF TOTAL RENT
STANDARD METHOD #5 - 0.000% OF TOTAL RENT
COMMISSION PAYOUTS
- ------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - AMORTIZED OVER LIFE OF LEASE
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
ALTERATION CALCULATION
- ---------------------
1997 VALUE - 0.00
1998 VALUE - 0.00
1999 VALUE - 0.00
2000 VALUE - 0.00
2001 VALUE - 0.00
<PAGE>
PAGE 4
2002 VALUE - 0.00
2003 VALUE - 0.00
2004 VALUE - 0.00
2005 VALUE - 0.00
2006 VALUE - 0.00
2007 VALUE - 0.00
2008 VALUE - 0.00
2009 VALUE - 0.00
2010 VALUE - 0.00
2011 VALUE - 0.00
THEREAFTER - CONSTANT
ALTERATION PAYOUTS
- -------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - CASHED OUT
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
COMMON AREA MAINTENANCE POOL
- ----------------------------
NONE
CAPITAL EXPENDITURES
- -------------------
RESERVES
MARKET RATE RESR MULTIPLIED BY AREA MEASURE NRA
PRIMARY CLASSIFICATION CODES
- ---------------------------
NONE
SECONDARY CLASSIFICATION CODES
- ------------------------------
NONE
COST CENTERS
- -----------
NONE
SALES VOLUME PROFILE
- --------------------
PERCENT OF RELATIVE
MONTH ANNUAL SALES VOLUME
- ----- ------------ --------
JAN 8.33% 1.00
FEB 8.33% 1.00
MAR 8.33% 1.00
APR 8.33% 1.00
<PAGE>
PAGE 5
MAY 8.33% 1.00
JUN 8.33% 1.00
JUL 8.33% 1.00
AUG 8.33% 1.00
SEP 8.33% 1.00
OCT 8.33% 1.00
NOV 8.33t 1.00
DEC 8.33% 1.00
------- -------
TOTALS 100.00% 12.00
GLOBAL RECOVERIES
- ------------------
Industrial Gross , REFERRED TO AS INGR
PRO RATA SHARE RECOVERY OF EXPENSE GRSS
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
TENANT PROLOGUE
- ---------------
MINIMUM RENTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
SALES VOLUMES AND BREAKPOINTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
RENEWAL RENTS ARE COMPOUNDED ANNUALLY
RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET
REFERENCE TENANTS
- -----------------
THERE ARE A TOTAL OF 1 REFERENCE TENANT(S):
- --------------------------------------------------------------------------------
# 1 - references3
BASE LEASE DATES: 1/1996 TO 12/2005
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1
NOT SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
<PAGE>
PAGE 6
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
total expenses
PRO RATA SHARE RECOVERY OF EXPENSE tote
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
TENANTS
THERE ARE A TOTAL OF 3 LEASEHOLD TENANT(S);
- --------------------------------------------------------------------------------
# 1 - Circuit City
BASE LEASE DATES: 7/1995 TO 6/2000
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 58,375
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 3.50/SF/YR
THEREAFTER - GROWING AT 3.80%
RECOVERIES:
total expenses
PRO RATA SHARE RECOVERY OF EXPENSE tote
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
3 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
total expenses
PRO RATA SHARE RECOVERY OF EXPENSE tote
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
<PAGE>
PAGE 7
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 2 - Colortree Inc.
BASE LEASE DATES: 6/1997 TO 5/2002
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 57,728
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 3.83/SF/YR
THEREAFTER - GROWING AT 3.50%
RECOVERIES:
total expenses
PRO RATA SHARE RECOVERY OF EXPENSE tote
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
total expenses
PRO RATA SHARE RECOVERY OF EXPENSE tote
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 3 - Lucent Technologie
BASE LEASE DATES: 12/1992 TO 12/1998
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 16,000
<PAGE>
PAGE 8
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 3.60/SF/YR
THEREAFTER - GROWING AT 1.20%
RECOVERIES:
total expenses
PRO RATA SHARE RECOVERY OF EXPENSE tote
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
3 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
total expenses
PRO RATA SHARE RECOVERY OF EXPENSE tote
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
<PAGE>
Addenda
================================================================================
Westmoreland Plaza
Operating Expense Statement
Pro-Ject Lease Abstract Report
Pro-Ject Assumptions Report
<PAGE>
Historical Operating Statements
Westmoreland Plaza
<TABLE>
<CAPTION>
Building NRA 121,815 SF
1994 Actual 1995 Actual 1996 Actual 1997 Budget
-------------------- -------------------- ------------------- --------------------
Item Amount Per SF Amount Per SF Amount Per SF Amount Per SF
============================================================================ =================== ====================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME
Gross Income $ 173,318 $ 1.42 $ 451,690 $ 3.71 $ 465,241 $ 3.82 $ 479,203 $ 3.93
Reimbursements 0 0.00 50,349 0.41 49,322 0.40 74,379 0.61
-------------------- -------------------- ------------------- --------------------
Total Income $ 173,318 $ 1.42 $ 502,040 $ 4.12 $ 514,563 $ 4.22 $ 553,582 $ 4.54
-------------------- -------------------- ------------------- --------------------
EXPENSES
Real Estate Taxes $ 0 $ 0.00 $ 50,349 $ 0.41 $ 49,322 $ 0.40 $ 50,348 $ 0.41
Operating Expense 84,083 0.69 4,397 0.04 7,432 0.06 8,177 0.07
General & Administrative 8,911 0.07 16,840 0.14 8,930 0.07 19,302 0.16
Management Fee 0 0.00 0 0.00 3,489 0.03 15,854 0.13
-------------------- -------------------- ------------------- --------------------
Total Expenses $ 92,995 $ 0.76 $ 71,586 $ 0.59 $ 69,173 $ 0.57 $ 93,681 $ 0.77
-------------------- -------------------- ------------------- --------------------
NET OPERATING INCOME $ 80,324 $ 0.66 $ 430,454 $ 3.53 $ 445,390 $ 3.66 $ 459,901 $ 3.78
==================== ==================== =================== ====================
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: low income attributed to below market occupancy in 1994.
<PAGE>
WESTMORELAND
PROJECT DESIGNATOR: DWES
REVISION: 6/11/97 @ 15:02
LEASE ABSTRACT REPORT
FOR ALL TENANTS
6/11/97 @ 15:03
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE CEILING BREAKPOINT PRO RATA % OF RENT
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI
- --------------- -------- ------- ----- ----- ------ -------- -------- ------- ------- --------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 1 - 115,815 10/93 12/98 - 3.93 455,153 - - - total expenses ZERO
Capital One Bank - 1/98 4.05 468,808
--------
115,815
========
</TABLE>
<PAGE>
WESTMORELAND
PROJECT DESIGNATOR: DWES
REVISION: 6/17/97 @ 16:41
PROJECT ASSUMPTIONS REPORT
INCLUDING ALL TENANTS
6/17/97 @ 23:27
BUILDING PROLOGUE
- -----------------
LEASEHOLD ANALYSIS OF WESTMORELAND BEGINNING 7/1997
F0R 18 YEARS ON A FISCAL YEAR BASIS
AREA MEASURES
- -------------
NRA
1997 VALUE - 121,815
THEREAFTER - CONSTANT
OCCA
1997 VALUE - 121,815
1998 VALUE - 121,815
1999 VALUE - 81,210
200O VALUE - 121,815
2001 VALUE - 121,815
2002 VALUE - 121,815
2003 VALUE - 121,815
2004 VALUE - 121,815
2005 VALUE - 121,815
2006 VALUE - 81,210
2007 VALUE - 121,815
2008 VALUE - 121,815
2009 VALUE - 121,815
2010 VALUE - 121,815
2011 VALUE - 121,815
2012 VALUE - 121,815
2013 VALUE - 81,210
2014 VALUE - 121,815
THEREAFTER - CONSTANT
GROWTH RATES
- ------------
INC1
1997 VALUE - 1.50
1998 VALUE - 3.00
THEREAFTER - CONSTANT
EXP1
1997 VALUE - 1.75
1998 VALUE - 3.50
THEREAFTER - CONSTANT
3%
1997 VALUE - 3.00
THEREAFTER - CONSTANT
4%
1997 VALUE - 4.00
THEREAFTER - CONSTANT
CPI
1997 VALUE - 1.75
1998 VALUE - 3.50
THEREAFTER - CONSTANT
COMN
<PAGE>
PAGE 2
1997 VALUE - 6.00
THEREAFTER - CONSTANT
COMR
1997 VALUE - 2.00
THEREAFTER - CONSTANT
COMB
+30.O% OF COMN +70.0% OF COMR
MARKET RATES
- ------------
MKT1
1997 VALUE - 5.00
THEREAFTER - GROWING AT GROWTH RATE INC1
TIRN
1997 VALUE - 0.50
THEREAFTER - GROWING AT GROWTH RATE EXP1
TINW
1997 VALUE - 2.00
THEREAFTER - GROWING AT GROWTH RATE EXP1
TIWA
+70.O% OF TIRN +30.O% OF TINW
RESR
1997 VALUE - 0.20
THEREAFTER - GROWING AT GROWTH RATE EXP1
INSE
1997 VALUE - 0.10
THEREAFTER - GROWING AT GROWTH RATE EXP1
MISCELLANEOUS INCOMES
- ---------------------
NONE
EXPENSES
- --------
TAXES , REFERRED TO AS TAX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 48,294
THEREAFTER - GROWING AT GROWTH RATE EXP1
OPERATING EXPENSES, REFERRED TO AS OPEX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 8,000
THEREAFTER - GROWING AT GROWTH RATE EXP1
G&A EXPENSES , REFERRED TO AS G&A
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 15,000
THEREAFTER - GROWING AT GROWTH RATE EXP1
MANAGEMENT FEES , REFERRED TO AS MGMT
CHARGED AGAINST NET OPERATING INCOME
3.00% OF EFFECTIVE GROSS INCOME
Industrial Gross , REFERRED TO AS GRSS
AN INFORMATIONAL EXPENSE
<PAGE>
PAGE 3
+100.0% OF TAX +2.0% OF OPEX
INSURANCE , REFERRED TO AS INSE
AN INFORMATIONAL EXPENSE
MARKET RATE INSE MULTIPLIED BY AREA MEASURE NRA
total expenses , REFERRED TO AS tote
AN INFORMATIONAL EXPENSE
+100.0% OF TAX +100.0% OF OPEX
+100.0% OF G&A +100.0% OF MGMT
TAX & INSURANCE , REFERRED TO AS TX&I
AN INFORMATIONAL EXPENSE
+100.0% OF TAX +100.O% OF INSE
VACANCY ALLOWANCE
- -----------------
PERCENTAGE OF POTENTIAL GROSS INCOME
FOR ALL TENANTS SUBJECT TO VACANCY
1997 VALUE - 2.00
THEREAFTER - CONSTANT
MANAGEMENT FEE
- --------------
NONE
COMMISSION CALCULATIONS
- -----------------------
STANDARD METHOD #1 - 0.000% OF TOTAL RENT
STANDARD METHOD #2 - 0.000% OF TOTAL RENT
STANDARD METHOD #3 - 0.000% OF TOTAL RENT
STANDARD METHOD #4 - 0.000% OF TOTAL RENT
STANDARD METHOD #5 - 0.000% OF TOTAL RENT
COMMISSION PAYOUTS
- ------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - AMORTIZED OVER LIFE OF LEASE
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
ALTERATION CALCULATION
- ----------------------
1997 VALUE - 0.00
1998 VALUE - 0.00
1999 VALUE - 0.00
2000 VALUE - 0.00
2001 VALUE - 0.00
2O02 VALUE - 0.00
<PAGE>
PAGE 4
2003 VALUE - 0.00
2004 VALUE - 0.00
2005 VALUE - 0.00
2006 VALUE - 0.00
2007 VALUE - 0.00
2008 VALUE - 0.00
2009 VALUE - 0.00
2010 VALUE - 0.00
2011 VALUE - 0.00
THEREAFTER - CONSTANT
ALTERATION PAYOUTS
- -------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - CASHED OUT
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
COMMON AREA MAINTENANCE POOL
- ----------------------------
NONE
CAPITAL EXPENDITURES
- --------------------
RESERVES
MARKET RATE RESR MULTIPLIED BY AREA MEASURE NRA
PRIMARY CLASSIFICATION CODES
- ----------------------------
NONE
SECONDARY CLASSIFICATION CODES
- ------------------------------
NONE
COST CENTERS
- ------------
NONE
SALES VOLUME PROFILE
- --------------------
PERCENT OF RELATIVE
MONTH ANNUAL SALES VOLUME
- ----- ------------ --------
JAN 8.33% 1.00
FEE 8.33% 1.00
MAR 8.33% 1.00
APR 8.33% 1.00
MAY 8.33% 1.00
<PAGE>
PAGE 5
JUN 8.33% 1.00
JUL 8.33% 1.00
AUG 8.33% 1.00
SEP 8.33% 1.00
OCT 8.33% 1.00
NOV 8.33% 1.00
DEC 8.33% 1.00
------- ------
TOTALS 100.00% 12.00
GLOBAL RECOVERIES
- -----------------
Industrial Gross , REFERRED TO AS INGR
PRO RATA SHARE RECOVERY OF EXPENSE GRSS
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
TENANT PROLOGUE
- ---------------
MINIMUM RENTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
SALES VOLUMES AND BREAKPOINTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
RENEWAL RENTS ARE COMPOUNDED ANNUALLY
RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET
REFERENCE TENANTS
- -----------------
THERE ARE A TOTAL OF 1 REFERENCE TENANT(S):
- ------------------------------------------------------------------------------
# 1 - reference3
BASE LEASE DATES: 1/1996 TO 12/2005
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1
NOT SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
<PAGE>
PAGE 6
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
total expenses
PRO RATA SHARE RECOVERY OF EXPENSE tote
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
TENANTS
- -------
THERE ARE A TOTAL OF 1 LEASEHOLD TENANT(S):
- -------------------------------------------------------------------------------
# 1 - Capital One Bank
BASE LEASE DATES: 10/1993 TO 12/1998
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 121,815
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 3.93/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
total expenses
PRO RATA SHARE RECOVERY OF EXPENSE tote
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
3 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
total expenses
PRO RATA SHARE RECOVERY OF EXPENSE tote
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
<PAGE>
PAGE 7
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
<PAGE>
Addenda
================================================================================
Morton Marks
Operating Expense Statement
Pro-Ject Lease Abstract Report
Pro-Ject Assumptions Report
<PAGE>
Historical Operating Statements
Morton Marks (2201 Dabney)
20130
<TABLE>
<CAPTION>
Building NRA 45,000 SF
1994 Actual 1995 Actual 1996 Actual 1997 Budget
-------------------- -------------------- ------------------- --------------------
Item Amount Per SF Amount Per SF Amount Per SF Amount Per SF
============================================================================ =================== ====================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME
Gross Income $ 141,840 $ 3.15 $ 153,362 $ 3.41 $ 154,123 $ 3.42 $ 157,314 $ 3.50
Reimbursements 0 0.00 0 0.00 1,939 0.04 14,820 0.33
-------------------- -------------------- ------------------- --------------------
Total Income $ 141,840 $ 3.15 $ 153,362 $ 3.41 $ 156,062 $ 3.47 $ 172,134 $ 3.83
-------------------- -------------------- ------------------- --------------------
EXPENSES
Real Estate Taxes $ 19,550 $ 0.43 $ 20,408 $ 0.45 $ 18,254 $ 0.41 $ 5,920 $ 0.13
Operating Expense 602 0.01 1,506 0.03 851 0.02 4,094 0.09
General & Administrative 0 0.00 970 0.02 585 0.01 150 0.00
Management Fee 0 0.00 0 0.00 0 0.00 4,806 0.11
-------------------- -------------------- ------------------- --------------------
Total Expenses $ 20,153 $ 0.45 $ 22,884 $ 0.51 $ 19,690 $ 0.44 $ 14,970 $ 0.33
-------------------- -------------------- ------------------- --------------------
NET OPERATING INCOME $ 121,687 $ 2.70 $ 130,478 $ 2.90 $ 136,372 $ 3.03 $ 157,164 $ 3.49
==================== ==================== =================== ====================
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
MORTON MARKS
PROJECT DESIGNATOR: DMOR
REVISION: 6/11/97 @ 15:15
LEASE ABSTRACT REPORT
FOR ALL TENANTS
6/11/97 @ 15:16
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE CEILING BREAKPOINT PRO RATA % OF RENT
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI
- --------------- -------- ------- ----- ----- ------ -------- -------- ------- ------- --------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 1 - 45,000 8/88 6/99 - 3.55 159,750 - - - total expenses ZERO
Morton Marks - 7/98 3.66 164,543
-------
45,000
=======
</TABLE>
<PAGE>
MORTON MARKS
PROJECT DESIGNATOR: DMOR
REVISION: 6/17/97 @ 16:37
PROJECT ASSUMPTIONS REPORT
INCLUDING ALL TENANTS
6/17/97 @ 23:28
BUILDING PROLOGUE
- -----------------
LEASEHOLD ANALYSIS OF MORTON MARKS BEGINNING 7/1997
FOR 18 YEARS ON A FISCAL YEAR BASIS
AREA MEASURES
- -------------
NRA
1997 VALUE - 45,000
THEREAFTER - CONSTANT
OCCA
1997 VALUE - 45,000
1998 VALUE - 45,000
1999 VALUE - 30,000
2000 VALUE - 45,000
2001 VALUE - 45,000
2002 VALUE - 45,000
2003 VALUE - 45,000
2004 VALUE - 45,000
2005 VALUE - 45,000
2006 VALUE - 37,500
2007 VALUE - 37,500
2008 VALUE - 45,000
2009 VALUE - 45,000
2010 VALUE - 45,000
2011 VALUE - 45,000
2012 VALUE - 45,000
2013 VALUE - 45,000
2014 VALUE - 30,000
THEREAFTER - CONSTANT
GROWTH RATES
- ------------
INC1
1997 VALUE - 1.50
1998 VALUE - 3.00
THEREAFTER - CONSTANT
EXP1
1997 VALUE - 1.75
1998 VALUE - 3.50
THEREAFTER - CONSTANT
3%
1997 VALUE - 3.00
THEREAFTER - CONSTANT
4%
1997 VALUE - 4.00
THEREAFTER - CONSTANT
CPI
1997 VALUE - 1.75
1998 VALUE - 3.50
THEREAFTER - CONSTANT
COMN
<PAGE>
PAGE 2
1997 VALUE - 6.00
THEREAFTER - CONSTANT
COMR
1997 VALUE - 2.00
THEREAFTER - CONSTANT
COMB
+30.0% OF COMN +70.0% OF COMR
MARKET RATES
- ------------
MKTI
1997 VALUE - 4.00
THEREAFTER - GROWING AT GROWTH RATE INC1
TIRN
1997 VALUE - 0.50
THEREAFTER - GROWING AT GROWTH RATE EXP1
TINW
1997 VALUE - 2.00
THEREAFTER - GROWING AT GROWTH RATE EXP1
TIWA
+70.0% OF TIRN +30.0% OF TINW
RESR
1997 VALUE - 0.20
THEREAFTER - GROWING AT GROWTH RATE EXP1
INSE
1997 VALUE - 0.10
THEREAFTER - GROWING AT GROWTH RATE EXP1
MISCELLANEOUS INCOMES
- ---------------------
NONE
EXPENSES
- --------
TAXES , REFERRED TO AS TAX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 13,949
THEREAFTER - GROWING AT GROWTH RATE EXP1
OPERATING EXPENSES, REFERRED TO AS OPEX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 4,000
THEREAFTER - GROWING AT GROWTH RATE EXP1
G&A EXPENSES , REFERRED TO AS G&A
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 1,000
THEREAFTER - GROWING AT GROWTH RATE EXP1
MANAGEMENT FEES , REFERRED TO AS MGMT
CHARGED AGAINST NET OPERATING INCOME
3.00% OF EFFECTIVE GROSS INCOME
Industrial Gross , REFERRED TO AS GRSS
AN INFORMATIONAL EXPENSE
<PAGE>
PAGE 3
+100.0% OF TAX +2.0% OF OPEX
INSURANCE , REFERRED TO AS INSE
AN INFORMATIONAL EXPENSE
MARKET RATE INSE MULTIPLIED BY AREA MEASURE NRA
total expenses , REFERRED TO AS tote
AN INFORMATIONAL EXPENSE
+100.0% OF TAX +100.0% OF OPEX
+100.0% OF G&A +100.0% OF MGMT
TAX & INSURANCE , REFERRED TO AS TX&I
AN INFORMATIONAL EXPENSE
+100.0% OF TAX +100.0% OF INSE
VACANCY ALLOWANCE
- -----------------
PERCENTAGE OF POTENTIAL GROSS INCOME
FOR ALL TENANTS SUBJECT TO VACANCY
1997 VALUE - 2.00
THEREAFTER - CONSTANT
MANAGEMENT FEE
- --------------
NONE
COMMISSION CALCULATIONS
- -----------------------
STANDARD METHOD #1 - 0.000% OF TOTAL RENT
STANDARD METHOD #2 - 0.000% OF TOTAL RENT
STANDARD METHOD #3 - 0.000% OF TOTAL RENT
STANDARD METHOD #4 - 0.000% OF TOTAL RENT
STANDARD METHOD #5 - 0.000% OF TOTAL RENT
COMMISSION PAYOUTS
- ------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - AMORTIZED OVER LIFE OF LEASE
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
ALTERATION CALCULATION
- ----------------------
1997 VALUE - 0.00
1998 VALUE - 0.00
1999 VALUE - 0.00
2000 VALUE - 0.00
2001 VALUE - 0.00
2002 VALUE - 0.00
<PAGE>
PAGE 4
2003 VALUE - 0.00
2004 VALUE - 0.00
2005 VALUE - 0.00
2006 VALUE - 0.00
2007 VALUE - 0.00
2008 VALUE - 0.00
2009 VALUE - 0.00
2010 VALUE - 0.00
2011 VALUE - 0.00
THEREAFTER - CONSTANT
ALTERATION PAYOUTS
- -------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - CASHED OUT
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
COMMON AREA MAINTENANCE POOL
---------------------------
NONE
CAPITAL EXPENDITURES
- --------------------
RESERVES
MARKET RATE RESR MULTIPLIED BY AREA MEASURE NRA
PRIMARY CLASSIFICATION CODES
---------------------------
NONE
SECONDARY CLASSIFICATION CODES
- ------------------------------
NONE
COST CENTERS
- ------------
NONE
SALES VOLUME PROFILE
- --------------------
PERCENT OF RELATIVE
MONTH ANNUAL SALES VOLUME
- ----- ------------ --------
JAN 8.33% 1.00
FEB 8.33% 1.00
MAR 8.33% 1.00
APR 8.33% 1.00
MAY 8.33% 1.00
<PAGE>
PAGE 5
JUN 8.33% 1.00
JUL 8.33% 1.00
AUG 8.33% 1.00
SEP 8.33% 1.00
OCT 8.33% 1.00
NOV 8.33% 1.00
DEC 8.33% 1.00
------- ------
TOTALS 100.00% 12.00
GLOBAL RECOVERIES
- -------------------
Industrial Gross , REFERRED TO AS INGR
PRO RATA SHARE RECOVERY OF EXPENSE GRSS
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
TENANT PROLOGUE
- ---------------
MINIMUM RENTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
SALES VOLUMES AND BREAKPOINTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
RENEWAL RENTS ARE COMPOUNDED ANNUALLY
RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET
REFERENCE TENANTS
- -----------------
THERE ARE A TOTAL OF 1 REFERENCE TENANT(S):
- -------------------------------------------------------------------------------
# 1 - reference3
BASE LEASE DATES: 1/1996 TO 12/2005
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1
NOT SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM. YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
<PAGE>
PAGE 6
MARKET RATE MKTI MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
total expenses
PRO RATA SHARE RECOVERY OF EXPENSE tote
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
TENANTS
- -------
THERE ARE A TOTAL OF 1 LEASEHOLD TENANT(S):
- -------------------------------------------------------------------------------
# I - Morton Marks
BASE LEASE DATES: 8/1988 TO 6/1999
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 45,000
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 3.55/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
total expenses
PRO RATA SHARE RECOVERY OF EXPENSE tote
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
3 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
total expenses
PRO RATA SHARE RECOVERY OF EXPENSE tote
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
<PAGE>
PAGE 7
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
<PAGE>
Addenda
================================================================================
2110 Tomlynn Street I
Operating Expense Statement
Pro-Ject Lease Abstract Report
Pro-Ject Assumptions Report
<PAGE>
Historical Operating Statements
2110 Tomlyn Street
<TABLE>
<CAPTION>
Building NRA 15,910 SF
1994 Actual 1995 Actual 1996 Actual 1997 Budget
-------------------- -------------------- ------------------- --------------------
Item Amount Per SF Amount Per SF Amount Per SF Amount Per SF
============================================================================ =================== ====================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME
Gross Income $ 27,584 $ 1.73 $ 55,685 $ 3.50 $ 65,761 $ 4.13 $ 68,390 $ 4.30
Reimbursements 0 0.00 0 0.00 4,056 0.25 12,588 0.79
-------------------- -------------------- ------------------- --------------------
Total Income $ 27,584 $ 1.73 $ 55,685 $ 3.50 $ 69,817 $ 4.39 $ 80,978 5.09
-------------------- -------------------- ------------------- --------------------
EXPENSES
Real Estate Taxes $ 0 $ 0.00 $ 0 $ 0.00 $ 1,737 $ 0.11 $ 2,094 $ 0.13
Operating Expense 1,089 0.07 4,732 0.30 1,100 0.07 8,354 0.53
General & Administrative 4,563 0.29 2,284 0.14 2,558 0.16 2,539 0.16
Management Fee 0 0.00 0 0.00 0 0.00 2,140 0.13
-------------------- -------------------- ------------------- --------------------
Total Expenses $ 5,652 $ 0.36 $ 7,015 $ 0.44 $ 5,395 $ 0.34 $ 15,127 $ 0.95
-------------------- -------------------- ------------------- --------------------
NET OPERATING INCOME $ 21,932 $ 1.38 $ 48,670 $ 3.06 $ 64,422 $ 4.05 $ 65,851 $ 4.14
==================== ==================== =================== ====================
- ---------------------------------------------------------------------------------------------------------------------------
Note: low income attributed to below market occupancy in 1994. Property has since stabilized.
</TABLE>
<PAGE>
2110 TOMLYNN STREET
PROJECT DESIGNATOR: DTOM
REVISION: 6/11/97 @ 15:18
LEASE ABSTRACT REPORT
FOR ALL TENANTS
6/11/97 @ 15:18
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE CEILING BREAKPOINT PRO RATA % OF RENT
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) (000'S) RECOVERIES SHARE BASE SUBJ TO CPI
- --------------- -------- ------- ----- ----- ------ -------- -------- ------- ------- --------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 1 - 15,910 2/95 2/00 - 4.33 68,890 - - - total expenses ZERO
Reynolds Metals Co - 3/98 4.50 71,646
3/99 4.68 74,512
-------
15,910
=======
</TABLE>
<PAGE>
2110 TOMLYNN STREET
PROJECT DESIGNATOR: DTOM
REVISION: 6/17/97 @ 16:40
PROJECT ASSUMPTIONS REPORT
INCLUDING ALL TENANTS
6/17/97 @ 23:28
BUILDING PROLOGUE
- -----------------
LEASEHOLD ANALYSIS OF 2110 TOMLYNN STREET BEGINNING 7/1997
FOR 18 YEARS ON A FISCAL YEAR BASIS
AREA MEASURES
- -------------
NRA
1997 VALUE - 15,910
THEREAFTER - CONSTANT
OCCA
1997 VALUE - 15,910
1998 VALUE - 15,910
1999 VALUE - 15,910
2000 VALUE - 10,607
2001 VALUE - 15,910
2002 VALUE - 15,910
2003 VALUE - 15,910
2004 VALUE - 15,910
2005 VALUE - 15,910
2006 VALUE - 15,910
2007 VALUE - 10,607
2008 VALUE - 15,910
2009 VALUE - 15,910
2010 VALUE - 15,910
2011 VALUE - 15,910
2012 VALUE - 15,910
2013 VALUE - 15,910
2014 VALUE - 13,258
THEREAFTER - CONSTANT
GROWTH RATES
- ------------
INC1
1997 VALUE - 1.50
1998 VALUE - 3.00
THEREAFTER - CONSTANT
EXP1
1997 VALUE - 1.75
1998 VALUE - 3.50
THEREAFTER - CONSTANT
3%
1997 VALUE - 3.00
THEREAFTER - CONSTANT
4%
1997 VALUE - 4.00
THEREAFTER - CONSTAN7T
CPI
1997 VALUE - 1.75
1998 VALUE - 3.50
THEREAFTER - CONSTANT
COMN
<PAGE>
PAGE 2
1997 VALUE - 6.00
THEREAFTER - CONSTANT
COMR
1997 VALUE - 2.00
THEREAFTER - CONSTANT
COMB
+30.0% OF COMN +70.0% OF COMR
MARKET RATES
- ------------
MKT1
1997 VALUE - 4.00
THEREAFTER - GROWING AT GROWTH RATE INC1
TIRN
1997 VALUE - 0.50
THEREAFTER - GROWING AT GROWTH RATE EXP1
TINW
1997 VALUE - 2.00
THEREAFTER - GROWING AT GROWTH RATE EXP1
TIWA
+70.0% OF TIRN +30.0% OF TINW
RESR
1997 VALUE - 0.20
THEREAFTER - GROWING AT GROWTH RATE EXP1
INSE
1997 VALUE - 0.10
THEREAFTER - GROWING AT GROWTH RATE EXP1
MISCELLANEOUS INCOMES
- ---------------------
NONE
EXPENSES
- --------
TAXES , REFERRED TO AS TAX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 4,765
THEREAFTER - GROWING AT GROWTH RATE EXP1
OPERATING EXPENSES, REFERRED TO AS OPEX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 6,000
THEREAFTER - GROWING AT GROWTH RATE EXP1
G&A EXPENSES , REFERRED TO AS G&A
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 2,600
THEREAFTER - GROWING AT GROWTH RATE EXP1
MANAGEMENT FEES , REFERRED TO AS MGMT
CHARGED AGAINST NET OPERATING INCOME
3.00% OF EFFECTIVE GROSS INCOME
Industrial Gross , REFERRED TO AS GRSS
AN INFORMATIONAL EXPENSE
<PAGE>
PAGE 3
+100.0% OF TAX +2.0% OF OPEX
INSURANCE , REFERRED TO AS INSE
AN INFORMATIONAL EXPENSE
MARKET RATE INSE MULTIPLIED BY AREA MEASURE NRA
total expenses , REFERRED TO AS tote
AN INFORMATIONAL EXPENSE
+100.0% OF TAX +100.0% OF OPEX
+100.0% OF G&A +100.0% OF MGMT
TAX & INSURANCE , REFERRED TO AS TX&I
AN INFORMATIONAL EXPENSE
+100.0% OF TAX +100.0% OF INSE
VACANCY ALLOWANCE
- -----------------
PERCENTAGE OF POTENTIAL GROSS INCOME
FOR ALL TENANTS SUBJECT TO VACANCY
1997 VALUE - 2.00
THEREAFTER - CONSTANT
MANAGEMENT FEE
- --------------
NONE
COMMISSION CALCULATIONS
- -----------------------
STANDARD METHOD #1 - 0.000% OF TOTAL RENT
STANDARD METHOD #2 - 0.000% OF TOTAL RENT
STANDARD METHOD #3 - 0.000% OF TOTAL RENT
STANDARD METHOD #4 - 0.000% OF TOTAL RENT
STANDARD METHOD #5 - 0.000% OF TOTAL RENT
COMMISSION PAYOUTS
- -----------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - AMORTIZED OVER LIFE OF LEASE
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
ALTERATION CALCULATION
- ----------------------
1997 VALUE - 0.00
1998 VALUE - 0.00
1999 VALUE - 0.00
2000 VALUE - 0.00
2001 VALUE - 0.00
2002 VALUE - 0.00
<PAGE>
PAGE 4
2003 VALUE - 0.00
2004 VALUE - 0.00
2005 VALUE - 0.00
2006 VALUE - 0.00
2007 VALUE - 0.00
2008 VALUE - 0.00
2009 VALUE - 0.00
2010 VALUE - 0.00
2011 VALUE - 0.00
THEREAFTER - CONSTANT
ALTERATION PAYOUTS
- ------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - CASHED OUT
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
COMMON AREA MAINTENANCE POOL
- ----------------------------
NONE
CAPITAL EXPENDITURES
- --------------------
RESERVES
MARKET RATE RESR MULTIPLIED BY AREA MEASURE NRA
PRIMARY CLASSIFICATION CODES
- ----------------------------
NONE
SECONDARY CLASSIFICATION CODES
- ------------------------------
NONE
COST CENTERS
- ------------
NONE
SALES VOLUME PROFILE
- -------------------
PERCENT OF RELATIVE
MONTH ANNUAL SALES VOLUME
- ----- ------------ --------
JAN 8.33% 1.00
FEB 8.33% 1.00
MAR 8.33% 1.00
APR 8.33% 1.00
MAY 8.33% 1.00
<PAGE>
PAGE 5
JUN 8.33% 1.00
JUL 8.33% 1.00
AUG 8.33% 1.00
SEP 8.33% 1.00
OCT 8.33% 1.00
NOV 8.33% 1.00
DEC 8.33% 1.00
------- ------
TOTALS 100.00% 12.00
GLOBAL RECOVERIES
- -----------------
Industrial Gross , REFERRED TO AS INGR
PRO RATA SHARE RECOVERY OF EXPENSE GRSS
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
TENANT PROLOGUE
- ---------------
MINIMUM RENTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
SALES VOLUMES AND BREAKPOINTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
RENEWAL RENTS ARE COMPOUNDED ANNUALLY
RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET
REFERENCE TENANTS
- -----------------
THERE ARE A TOTAL OF 1 REFERENCE TENANT(S):
- -------------------------------------------------------------------------------
# 1 - reference3
BASE LEASE DATES: 1/1996 TO 12/2005
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1
NOT SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
<PAGE>
PAGE 6
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
total expenses
PRO RATA SHARE RECOVERY OF EXPENSE tote
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
TENANTS
- -------
THERE ARE A TOTAL OF 1 LEASEHOLD TENANT(S):
- -------------------------------------------------------------------------------
# 1 - Reynolds Metals Co
BASE LEASE DATES: 2/1995 TO 2/2000
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 15,910
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 4.33/SF/YR
THEREAFTER - GROWING AT 4.00%
RECOVERIES:
total expenses
PRO RATA SHARE RECOVERY OF EXPENSE tote
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 7.00 4 NONE NONE YES YES
2 7.00 4 NONE NONE YES YES
3 7.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTI MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE 3% PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
total expenses
PRO RATA SHARE RECOVERY OF EXPENSE tote
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
<PAGE>
PAGE 7
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
<PAGE>
Addenda
================================================================================
Improved Sales Comparables
<PAGE>
RESEARCH & DEVELOP. SALE
- --------------------------------------------------------------------------------
I-1 Sale
Location: 3701 Saunders Avenue
Richmond, VA
Date of Sale: 04/01/96
Physical Description:
Land Area: 279,655 Square Feet
6.42 Acres
Gross Building Area: 64,705 Square Feet
Finished Office Area: 80.0 %
% Air Conditioned: 80 %
Sprinklered: No
Year Built: 1984
Land/Building Ratio: 4.32:1
Rail Access: No
Sale Price: $3,300,000
Economic Indicators:
Net Operating Income: $396,000 Buyer's Proforma
Appraisal Indicators:
Overall Rate (OAR): 12.0%
Sale Price/Square Foot (GSF): $51.00
DCA4-4273
<PAGE>
RESEARCH & DEVELOP. SALE
- --------------------------------------------------------------------------------
I-2 Sale
Building Name: Technology Park
Location: 1001-1063 Technology Park
Richmond, Henrico, VA
Parcel Number: 033-A-52
Grantor: Virginia Center
Grantee: Highwoods Realty LP
Date of Sale: 11/29/94
Recording Data: 2558-499
Recording Date: 11/29/94
Physical Description:
Land Area: 736,600 Square Feet
16.91 Acres
Gross Building Area: 120,098 Square Feet
Finished Office Area: 70.0 %
% Air Conditioned: 70 %
Sprinklered: No
Year Built: 1985
Land/Building Ratio: 6.13:1
Rail Access: No
Construction Type: Masonry
Zoning: M-1C
Sale Price: $7,241,905
Terms of Sale: Cash to seller
Economic Indicators:
Gross Annual Income: $1,089,538 Seller's Proforma
Less: Vacancy: $21,791 Seller's Proforma
Effective Gross Income: $1,067,747 Seller's Proforma
Less: Operating Expenses: $171,740 Seller's Proforma
Net Operating Income: $896,007 Seller's Proforma
Appraisal Indicators:
Overall Rate (OAR): 12.37%
Sale Price/Square Foot (GSF): $60.30
<PAGE>
RESEARCH & DEVELOP. SALE
- --------------------------------------------------------------------------------
I-2 Continued
COMMENTS:
Tenants pay rent on a net basis with expense pass throughs.
DCA4-4278
<PAGE>
RESEARCH & DEVELOP. SALE
- --------------------------------------------------------------------------------
I-3 Sale
Building Name: Gaskins Centre A & C
Location: 3801-3827 Gaskins Rd & 9878
to 9898 Mayland Drive
Richmond, Henrico, VA
Parcel Number: 48-4-D-1A, 1B
Grantor: Crown Life Insurance Co
Grantee: Banks Gaskins LP
Date of Sale: 12/29/94
Recording Data: 2562-1857
Recording Date: 12/29/94
Physical Description:
Land Area: 428,195 Square Feet
9.83 Acres
Gross Building Area: 97,394 Square Feet
Finished Office Area: 55.0 %
% Air Conditioned: 55 %
Sprinklered: No
Year Built: 1986
Land/Building Ratio: 4.4:1
Rail Access: No
Zoning: M-1C
Sale Price: $5,350,000
Terms of Sale: Cash equivalent
Economic Indicators:
Gross Annual Income: $715,902 Seller's Proforma
Less: Vacancy: $35,795 Seller's Proforma
Effective Gross Income: $680,107 Seller's Proforma
Less: Operating Expenses: $118,632 Seller's Proforma
Net Operating Income: $561,475 Seller's Proforma
Appraisal Indicators:
Overall Rate (OAR): 10.5%
Sale Price/Square Foot (GSF): $54.93
<PAGE>
RESEARCH & DEVELOP. SALE
- --------------------------------------------------------------------------------
I-3 Continued
COMMENTS:
Rents in this property were in the $6.62 to $9.05 per
square foot range, with tenants responsible for
utilities and janitorial.
DCA4-4277
<PAGE>
WAREHOUSE BUILDING SALE
- --------------------------------------------------------------------------------
I-4 Sale
Building Name: Hanover Industrial Air Park
Location: 11351 Virginia Precast Road
Hanover, Hanover, VA
Parcel Number: 7798-06-02399
Grantor: Hydro Conduit Corporation
Grantee: UBI Corp
Date of Sale: 02/19/97
Recording Data: 1239-0655
Recording Date: 02/19/97
Physical Description:
Land Area: 1,665,299 Square Feet
38.23 Acres
Gross Building Area: 79,068 Square Feet
Finished Office Area: 5.1 %
% Air Conditioned: 5.1 %
Sprinklered: No
Land/Building Ratio: 21:1
Rail Access: No
Sale Price: $3,000,000
Terms of Sale: Cash to seller
Sale Price/Square Foot (GSF): $37.94
COMMENTS:
DCA4-4274
<PAGE>
WAREHOUSE BUILDING SALE
- --------------------------------------------------------------------------------
I-5 Sale
Building Name: Sammis Business Center
Location: 510 Eastpark Court
Henrico, Henrico, VA
Parcel Number: 155-9-B-1 (pt)
Grantor: Richmond Business Center Assoc
Grantee: Liberty Property Development
Date of Sale: 10/01/96
Recording Data: 2676-1317
Recording Date: 10/01/96
Physical Description:
Land Area: 423,403 Square Feet
9.72 Acres
Gross Building Area: 196,800 Square Feet
Finished Office Area: 5.1 %
% Air Conditioned: 5.1 %
Sprinklered: No
Year Built: 1990
Land/Building Ratio: 2.15:1
Rail Access: No
Construction Type: Masonry
Zoning: M-1
Sale Price: $6,611,622
Terms of Sale: None recorded
Economic Indicators:
Gross Annual Income: $808,848 Seller's Proforma
Effective Gross Income: $808,848 Seller's Proforma
Less: Operating Expenses: $108,016 Seller's Proforma
Net Operating Income: $700,832 Seller's Proforma
Appraisal Indicators:
Overall Rate (OAR): 10.6%
Sale Price/Square Foot (GSF): $33.60
<PAGE>
WAREHOUSE BUILDING SALE
- --------------------------------------------------------------------------------
I-5 Continued
COMMENTS:
This was part of a five property transaction.
DCA4-4276
<PAGE>
WAREHOUSE BUILDING SALE
- --------------------------------------------------------------------------------
I-6 Sale
Building Name: Oakley's Center
Location: 4200 Oakleys Place
Henrico, Henrico, VA
Parcel Number: 154-3-B-1 (pt)
Grantor: Oakley's Center Associates
Grantee: Liberty Property Development
Date of Sale: 10/01/96
Recording Data: 2676-1300
Recording Date: 10/10/96
Physical Description:
Land Area: 326,700 Square Feet
7.50 Acres
Gross Building Area: 80,000 Square Feet
Finished Office Area: 7.0 %
% Air Conditioned: 7 %
Sprinklered: No
Year Built: 1990
Land/Building Ratio: 4.1:1
Rail Access: No
Construction Type: Masonry
Zoning: M-1C
Sale Price: $2,799,389
Terms of Sale: None recorded
Economic Indicators:
Gross Annual Income: $334,400 Seller's Proforma
Effective Gross Income: $334,400 Seller's Proforma
Less: Operating Expenses: $37,665 Seller's Proforma
Net Operating Income: $296,735 Seller's Proforma
Appraisal Indicators:
Overall Rate (OAR): 10.6%
Sale Price/Square Foot (GSF): $34.99
<PAGE>
WAREHOUSE BUILDING SALE
- --------------------------------------------------------------------------------
I-6 Continued
COMMENTS:
This property was leased to a single tenant through 2001
at which time tenant had an option to purchase.
This property was part of a five property transaction.
DCA4-4275
<PAGE>
WAREHOUSE BUILDING SALE
- --------------------------------------------------------------------------------
I-7 Sale
Location: 4717 Eubank Road
Richmond Industrial Interport
Richmond, Henrico, VA
Parcel Number: 172-A-28
Grantor: Eubank Road Warehouse Partners
Grantee: Liberty Property, L.P.
Date of Sale: 09/28/95
Recording Data: 2608/1727
Recording Date: 09/28/95
Physical Description:
Land Area: 402,494 Square Feet
9.24 Acres
Gross Building Area: 141,313 Square Feet
Net Rentable Area: 141,313 Square Feet
Finished Office Area: 4.0 %
% Air Conditioned: 4 %
Clear Ceiling Height: 23.0 feet
Sprinklered: Yes
Year Built: 1975
Land/Building Ratio: 2.9:1
Rail Access: Yes
Dock High: Yes
Condition: Good
Construction Type: Steel/Block
Zoning: Warehouse Distribution
Sale Price: $3,720,000
Terms of Sale: Cash to seller
Appraisal Indicators:
Overall Rate (OAR): 10.8%
Sale Price/Square Foot (GSF): $26.32
Sale Price/Square Foot (RSF): $26.32
COMMENTS:
<PAGE>
WAREHOUSE BUILDING SALE
- --------------------------------------------------------------------------------
I-7 Continued
Six of the 18 doors share a common loading dock.
The building does NOT appear to be 20 plus years old.
DCA4-2540
<PAGE>
WAREHOUSE BUILDING SALE
- --------------------------------------------------------------------------------
I-8 Sale
Building Name: Eastport I, II, and III
Location: 5600-5700 Eastport Blvd
Richmond, Henrico, VA
Parcel Number: 181-((1))-(A)
Grantor: CSX Realty, Inc.
Grantee: Easport Associates, LP
Date of Sale: 12/30/94
Recording Data: 2525/548
Recording Date: 01/17/95
Physical Description:
Land Area: 817,186 Square Feet
18.76 Acres
Gross Building Area: 330,103 Square Feet
Net Rentable Area: 330,103 Square Feet
Finished Office Area: 10.6 %
% Air Conditioned: 10.6 %
Clear Ceiling Height: 27.0 feet
Sprinklered: Yes
Year Built: 1989
Land/Building Ratio: 2.5:1
Rail Access: No
Dock High: Yes
Condition: Good
Construction Type: Brick/steel/block
Zoning: Warehouse Distribution
Sale Price: $10,850,219
Terms of Sale: 3rd Party financing
Cash to seller
Appraisal Indicators:
Overall Rate (OAR): 10.5%
Sale Price/Square Foot (GSF): $32.87
Sale Price/Square Foot (RSF): $32.87
<PAGE>
WAREHOUSE BUILDING SALE
- --------------------------------------------------------------------------------
I-8 Continued
COMMENTS:
One building has a ceiling height of only 17 feet; the
others have 27 feet ceilings.
The purchase contract also provided buyer with an
option to buy another 4.094 acres at the then current
market value, but in no event less than $65,000 per
acre. Option expires 12/2002.
According to grantee, the capitalization rate was a
blend of roughly 11% for flex space and 10% for
shell or bulk storage space.
DCA4-2541
<PAGE>
WAREHOUSE BUILDING SALE
- --------------------------------------------------------------------------------
I-9 Sale
Location: 2511-2523 Briton's Hill Road
Britton's Hill/Danbey Center
Henrico, VA
Parcel Number: 96-Bl-24
Grantor: New England Mutual Life Ins.
Company
Grantee: RF & P Corporation
Date of Sale: 01/18/94
Recording Data: Deed Book 2490, Page 1722
Physical Description:
Land Area: 356,321 Square Feet
8.18 Acres
Gross Building Area: 132,103 Square Feet
Finished Office Area: 15.0 %
Clear Ceiling Height: 24.0 feet
Sprinklered: Yes
Year Built: 1987
Land/Building Ratio: 2.70:1
Rail Access: No
Dock High: Yes
Condition: Average
Construction Type: masonry
Zoning: M-1. Light Industrial District
Sale Price: $4,335,000
Terms of Sale: All Cash to Seller
Economic Indicators:
Effective Gross Income: $541,776
Less: Operating Expenses: $92,225
Net Operating Income: $449,551
Sale Price/Square Foot (GSF): $32.82
Loading System 22 Dock High Bays
COMMENTS:
This the recent sale of a multi-tenant warehouse in
<PAGE>
WAREHOUSE BUILDING SALE
- --------------------------------------------------------------------------------
I-9 Continued
Britton's Hill Industrial park situated immediately
west of the junction of Interstates 64, 95 and 195. It
was in average conditon at the sale. The grantee
purchased the property based on stabilized net
operating income and capitalization rate of 10.37%. It
is an investment based purchase. Four tenants occupy
100% of the improvements, to include Owen & Minor, Inc.
(58,375 square feet), Norandex, Inc. (12,682 square
feet), ColorTree, Inc. (45,046 sqaure feet) and AT&T
Resource Manangement Corporation (16,000 square
feet). This transaction is considered arms-length.
Estimated marketing time equalled 18+ months.
DCA4-4248
<PAGE>
Addenda
================================================================================
Investor Survey
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET OFFICE MARKET - URBAN/CBD
- ------------------------------------------------------------------------------------------------------------------------------------
9.5% 10.0% 10.0% 10.0% 11.5% 11.5% 3.0% 3.0% 3.0% 4.0% 10.0 10.0
9.5% 10.0% 10.0% 10.5% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
8.0% 9.0% 8.5% 8.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
13.0% 13.0% -- -- 14.0% 14.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
8.0% 8.0% 8.5% 8.5% 10.5% 10.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.3% 9.3% 10.3% 10.3% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 9.0% 8.5% 9.0% 10.5% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
10.0% 10.0% 10.0% 10.0% 12.5% 12.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
9.0% 9.0% 9.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.0% 9.0% 8.0% 9.0% 10.0% 12.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
Responses 11 11 10 10 11 11 11 11 11 11 11 11
Average (%) 9.2% 9.6% 9.2% 9.7% 11.7% 12.0% 3.3% 4.2% 3.4% 3.9% 8.5 9.5
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 9.0% 9.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 12.0% 12.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.5% 9.5% 10.5% 10.5% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 10.0% 10.0% 11.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
15.0% 15.0% -- -- 20.0% 20.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
9.0% 10.0% -- -- -- -- -- -- -- -- -- --
9.0% 10.0% 9.0% 10.0% 12.0% 13.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
Responses 8 8 6 6 7 7 7 7 7 7 7 7
Average (%) 10.0% 10.4% 9.7% 10.3% 12.8% 13.1% 3.3% 4.7% 3.5% 4.0% 8.3 9.7
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
8.0% 9.0% 9.5% 10.0% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
8.0% 10.0% 8.5% 9.0% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0 10.0 10.0
10.0% 10.0% 10.0% 10.0% 13.0% 13.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.5% 9.5% 10.5% 10.5% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
12.0% 12.0% -- -- 13.0% 13.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
-- -- -- -- 12.0% 13.0% 4.0% 4.0% 4.0% 4.0 5.0 10.0
Responses 8 8 7 7 9 9 9 9 9 9 9 9
Average (%) 9.4% 10.0% 9.6% 10.2% 12.8% 13.5% 3.5% 4.6% 3.5% 3.9% 7.6 8.9
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
12.0% 12.0% 12.0% 12.0% 15.0% 15.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.8% 9.8% 10.8% 10.8% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
14.0% 14.0% -- -- 20.0% 20.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 11.0% 14.0% 14.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 6 6 5 5 6 6 6 6 6 6 6 6
Average (%) 10.7% 11.0% 10.5% 11.2% 14.6% 15.3% 3.2% 4.6% 3.3% 3.9% 8.0 8.8
--------------------------------------------------------------------------------------------------------
Total Responses 33 33 28 28 33 33 33 33 33 33 33 33
Weighted Average (%) 9.8% 10.3% 9.7% 10.3% 13.0% 13.5% 3.3% 4.6% 3.4% 3.9% 8.1 9.2
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
8 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET OFFICE MARKET - SUBURBAN/NON - CBD
- ------------------------------------------------------------------------------------------------------------------------------------
9.5% 9.5% 10.5% 10.5% 10.5% 10.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.5% 8.5% 9.3% 9.3% 11.3% 11.3% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
11.0% 11.0% -- -- 12.0% 12.0% 5.0% 3.0% 3.0% 3.0% 5.0 7.0
8.5% 10.0% 9.0% 10.5% 11.0% 12.5% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
8.0% 10.0% 9.5% 10.0% 11.5% 12.0% 4.0% 6.0% 4.0% 4.0% 10.0 10.0
l0.0% 11.0% 10.5% 11.0% 12.0% 12.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.0% 9.0% 8.5% 8.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
8.0% 8.0% 8.5% 8.5% 10.5% 10.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.1% 9.1% 10.1% l0.1% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 10.0% 9.0% 10.5% 11.0% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
9.0% 9.0% 10.0% 10.0% 11.5% 11.5% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.0% 9.0% 9.0% 9.0% 12.0% 13.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.0% 10.0% -- -- -- -- -- -- -- -- --
8.0% 9.0% 8.0% 9.0% 10.0% 12.0% 5.0% 5.0% 4.0% 4.0% 5.0 10.0
Responses 16 16 14 14 15 15 15 15 15 15 15 15
Average (%) 8.8% 9.5% 9.3% 9.9% 11.2% 11.6% 3.5% 4.4% 3.6% 3.8% 8.9 9.7
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
9.5% 9.5% 10.5% 10.5% 10.5% 10.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.8% 8.8% 9.5% 9.5% 11.8% 11.8% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
12.0% 12.0% -- -- 18.0% 18.0% 5.0% 3.0% 3.0% 3.0% 5.0 7.0
10.5% 10.5% 10.0% 10.0% 11.0% 13.0% 2.0% 2.0% 2.0% 2.0% 10.0 10.0
8.0% 10.0% 9.5% 10.0% 11.0% 12.0% 4.0% 6.0% 4.0% 4.0% 10.0 10.0
9.0% 10.0% 9.0% 9.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.0% 11.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.4% 9.4% 10.4% 10.4% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 10.0% 14.0% 15.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
10.0% 11.0% -- -- -- -- -- -- -- -- -- --
10.0% 11.0% 10.0% 11.0% 12.0% 13.0% 5.0% 5.0% 4.0% 4.0% 5.0 10.0
Responses 13 13 11 11 12 12 12 12 12 12 12 12
Average (%) 9.5% 10.0% 9.8% 10.2% 12.0% 12.5% 3.4% 4.5% 3.4% 3.7% 8.6 9.6
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% -- -- 13.0% 13.0% 3.0% 3.0% 3.0% 3.0% 5.0 7.0
8.0% 10.0% 8.5% 9.0% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
10.0% 10.0% 10.0% 10.0% 12.5% 12.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.4% 9.4% 10.4% 10.4% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
6.0% 6.0% 9.0% 9.0% 17.0% 20.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.0% 10.0% -- -- -- -- -- -- -- -- -- --
12.0% 12.0% 10.0% 10.0% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 2.0 2.0
Responses 10 10 8 8 9 9 9 9 9 9 9 9
Average (%) 9.1% 9.7% 9.5% 10.0% 13.4% 14.3% 3.1% 4.6% 3.4% 3.8% 7.2 8.0
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% -- -- 18.0% 18.0% 3.0% 3.0% 3.0% 3.0% 5.0 7.0
10.5% 10.5% 10.0% 10.0% 11.0% 13.0% 2.0% 2.0% 2.0% 2.0% 10.0 10.0
11.0% 11.0% 11.0% 11.0% 14.0% 14.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.6% 9.6% 10.6% 10.6% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
6.0% 6.0% 10.0% 10.0% 20.0% 20.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.0% 10.0% -- -- -- -- -- -- -- -- -- --
12.0% 12.0% 10.0% 10.0% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 2.0 2.0
Responses 10 10 8 8 9 9 9 9 9 9 9 9
Average (%) 9.7% 10.0% 10.0% 10.5% 14.5% 15.2% 2.9% 4.3% 3.2% 3.6% 7.2 8.0
--------------------------------------------------------------------------------------------------------
Total Responses 49 49 41 41 45 45 45 45 45 45 45 45
Weighted Average (%) 9.3% 9.8% 9.7% 10.1% 12.8% 13.4% 3.2% 4.4% 3.4% 3.7% 8.0 8.8
--------------------------------------------------------------------------------------------------------
</TABLE>
AUTUMN 1996 9
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET INDUSTRIAL MARKET - WAREHOUSE/DISTRIBUTION
- ------------------------------------------------------------------------------------------------------------------------------------
9.2% 9.2% 9.5% 9.5% 10.0% 10.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.5% 8.5% 9.3% 9.3% 11.0% 11.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
8.5% 10.0% 9.5% 10.0% 11.0% 12.0% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
9.0% 9.0% 9.5% 9.5% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
8.0% 8.0% 8.5% 8.5% 10.5% 10.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 10.0% 9.0% 10.5% 11.0% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
9.0% 9.0% 10.0% 10.0% 11.0% 11.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
9.0% 9.0% 9.5% 9.5% 10.5% 10.5% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 10 10 10 10 10 10 10 10 10 10 10 10
Average (%) 8.8% 9.2% 9.4% 9.8% 10.9% 11.0% 2.9% 4.0% 3.3% 3.8% 9.8 10.1
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
9.2% 9.2% 9.5% 9.5% 10.0% 10.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.8% 8.8% 9.5% 9.5% 11.3% 11.3% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.5% 11.5% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
10.0% 10.0% 11.0% 11.0% 12.0% 12.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.8% 9.8% 10.3% 10.3% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 7 7 7 7 7 7 7 7 7 7 7 7
Average (%) 9.3% 9.5% 10.0% 10.2% 11.2% 11.2% 2.8% 4.3% 3.2% 3.9% 9.7 10.1
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 12.0% 12.0% 13.0% 13.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.8% 9.8% 10.3% 10.3% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 9.7% 9.9% 10.4% 10.8% 11.9% 11.9% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
12.0% 12.0% 13.0% 13.0% 14.0% 14.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 10.0% 10.5% 10.5% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.5% 10.5% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 10.1% 10.4% 10.9% 11.3% 12.4% 12.4% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
--------------------------------------------------------------------------------------------------------
Total Responses 25 25 25 25 25 25 25 25 25 25 25 25
Weighted Average (%) 9.5% 9.7% 10.2% 10.5% 11.6% 11.6% 2.6% 4.5% 3.2% 4.0% 9.6 10.2
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
10 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET INDUSTRIAL MARKET - BUSINESS PARKS, OTHER INDUSTRIAL & MANUFACTURING
- ------------------------------------------------------------------------------------------------------------------------------------
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 10.0 10.0
9.0% 9.0% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 3 3 4 4 4 4 4 4 4 4
Average (%) 8.9% 9.4% 9.7% 10.7% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.8 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.5% 10.5% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 10.0 10.0
10.0% 10.0% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 3 3 4 4 4 4 4 4 4 4
Average (%) 9.3% 9.8% 9.8% 10.8% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.8 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.5% 10.5% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 5 5 4 4 5 5 5 5 5 5 5 5
Average (%) 9.4% 10.0% 9.9% 10.9% 12.4% 13.2% 3.4% 4.0% 3.2% 3.8% 8.2 9.4
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.5% 10.5% 11.0% 11.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.5% 10.5% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 5 5 4 4 5 5 5 5 5 5 5 5
Average (%) 9.6% 10.2% 10.0% 11.0% 12.4% 13.2% 3.4% 4.0% 3.2% 3.8% 8.2 9.4
--------------------------------------------------------------------------------------------------------
Total Responses 18 18 14 14 18 18 18 18 18 18 18 18
Weighted Average(%) 9.3% 9.8% 9.8% 10.8% 12.0% 12.4% 3.3% 4.0% 3.2% 3.9% 8.5 9.8
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
AUTUMN 1996 11
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET RETAIL MARKET - NEIGHBORHOOD & COMMUNITY CENTERS
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 10.5% 9.5% 10.5% 11.0% 12.5% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
9.5% 10.0% 10.0% 10.0% 12.5% 12.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
10.0% 10.0% 10.5% 10.5% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
10.3% 10.3% 10.8% 10.8% 13.0% 13.0% 2.0% 2.0% 4.0% 4.0% 7.0 7.0
9.0% 9.0% 10.0% 10.0% 10.0% 10.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
9.8% 9.8% 10.3% 10.3% 11.5% 11.5% 3.8% 4.0% 4.0% 4.0% 10.0 10.0
9.0% 10.0% -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
9.0% 9.0% 9.5% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
Responses 9 9 8 8 8 8 9 9 9 9 9 9
Average (%) 9.3% 9.8% 10.0% 10.4% 11.9% 12.1% 2.9% 3.7% 3.4% 3.9% 8.9 9.4
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
10.8% 10.8% 11.3% 11.3% 14.0% 14.0% 2.0% 2.0% 4.0% 4.0% 7.0 7.0
10.0% 10.0% 11.0% 11.0% 12.0% 12.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
9.0% 10.0% -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 11.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.5% 10.5% -- -- -- -- -- -- -- -- -- --
Responses 6 6 4 4 4 4 5 5 5 5 5 5
Average (%) 9.5% 10.0% 10.4% 11.1% 12.3% 12.3% 2.3% 3.8% 3.3% 4.2% 9.0 9.6
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 12.0% 12.0% 13.0% 13.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 10.0 10.0
9.0% 10.0% -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 9.5% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.0% 10.0% -- -- -- -- -- -- -- --
11.0% 11.0% 9.5% 9.5% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 3.0 3.0
Responses 7 7 5 5 5 5 6 6 6 6 6 6
Average (%) 9.7% 10.3% 10.1% 10.7% 13.8% 14.6% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
13.0% 13.0% 14.0% 14.0% 14.0% 14.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 10.0 10.0
9.0% 10.0% -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 11.0% 14.0% 14.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
11.0% 11.0% 10.5% 10.5% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 3.0 3.0
Responses 6 6 5 5 5 5 6 6 6 6 6 6
Average (%) 10.3% 10.8% 10.8% 11.5% 14.2% 15.0% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
--------------------------------------------------------------------------------------------------------
Total Responses 28 28 22 22 22 22 26 26 26 26 26 26
Weighted Average (%) 9.7% 10.2% 10.3% 10.9% 13.0% 13.5% 2.7% 3.9% 3.2% 4.0% 8.7 9.3
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
12 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET RETAIL MARKET - POWER CENTERS & "BIG BOX"
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 9.0% 9.5% 9.5% 11.0% 11.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
10.0% 10.0% 9.5% 9.5% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
10.5% 10.5% 10.5% 10.5% 11.0% 12.0% 2.0% 2.0% 3.0% 3.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.4% 11.4% 3.8% 3.8% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 9.5% 10.0% 11.0% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
9.3% 9.3% 9.5% 10.0% 10.5% 10.5% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.0% 9.0% -- -- -- -- -- -- -- -- -- --
9.0% 9.5% 9.5% 10.0% 11.0% 11.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
Responses 9 9 8 8 8 8 8 8 8 8 8 8
Average (%) 9.4% 9.5% 9.7% 10.1% 11.5% 11.7% 3.3% 3.5% 3.4% 3.7% 9.1 10.1
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
10.8% 10.8% 10.8% 10.8% 11.0% 12.0% 2.0% 3.0% 3.0% 3.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 3 3 3 3 3 3 3 3 3 3 3 3
Average (%) 9.8% 10.1% 10.1% 10.6% 11.0% 11.3% 2.8% 3.7% 3.2% 3.7% 9.3 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.8% 10.8% 10.8% 10.8% 12.0% 12.0% 2.0% 2.0% 3.0% 3.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 3 3 3 3 3 3 3 3 3 3 3 3
Average (%) 9.6% 9.9% 10.1% 10.6% 12.0% 12.0% 2.8% 3.3% 3.2% 3.7% 9.3 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 10.8% 10.8% 12.0% 12.0% 2.0% 2.0% 3.0% 3.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
-- -- -- -- 15.0% 15.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 2 2 2 2 3 3 3 3 3 3 3 3
Average (%) 9.8% 10.3% 10.1% 10.9% 12.7% 12.7% 2.8% 3.3% 3.2% 3.7% 9.3 10.3
--------------------------------------------------------------------------------------------------------
Total Responses 17 17 16 16 17 17 17 17 17 17 17 17
Weighted Average (%) 9.6% 9.9% 10.0% 10.5% 11.8% 11.9% 2.9% 3.5% 3.2% 3.7% 9.3 10.3
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
AUTUMN 1996 13
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET RETAIL MARKET - REGIONAL MALLS
- ------------------------------------------------------------------------------------------------------------------------------------
7.5% 7.5% 8.0% 8.0% 11.3% 11.3% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.0% 9.0% 9.0% 9.0% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
7.5% 7.5% 7.8% 7.8% 12.0% 12.0% 1.5% 2.0% 3.0% 3.0% 10.0 10.0
7.0% 8.0% 8.0% 8.0% 10.5% 11.5% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
9.0% -- -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.0% 8.0% 9.0% 10.5% 11.0% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
8.0% 8.0% 8.5% 8.5% 11.0% 11.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
7.8% 8.0% 8.3% 8.5% 11.0% 12.0% 2.5% 3.0% 2.5% 3.0% 10.0 10.0
7.0% 8.0% 7.0% 8.0% 10.0% 11.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
Responses 10 9 9 9 9 9 10 10 10 10 10 10
Average (%) 7.9% 8.2% 8.2% 8.6% 11.4% 11.8% 3.0% 3.6% 3.5% 3.8% 9.1 9.6
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 10.0% 10.0% 17.0% 17.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
9.0% 9.0% 9.0% 9.0% 13.5% 13.5% 2.0% 2.0% 4.0% 4.0% 7.0 7.0
9.0% 10.0% 10.0% 10.0% 12.0% 14.0% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
10.0% -- -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
Responses 5 4 4 4 4 4 5 5 5 5 5 5
Average (%) 9.3% 9.6% 9.6% 10.0% 13.4% 13.9% 2.5% 3.4% 3.7% 4.0% 8.6 8.6
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 10.0% 10.0% 18.0% 18.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
11.0% 11.0% 11.0% 11.0% 13.0% 14.0% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
9.0% -- -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.5% 8.5% 9.0% 11.5% 12.5% 2.5% 3.0% 2.5% 3.0% 10.0 10.0
Responses 5 4 4 4 4 4 5 5 5 5 5 5
Average (%) 9.3% 9.8% 9.8% 10.3% 13.4% 13.9% 2.6% 3.6% 3.4% 3.8% 9.2 9.2
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 11.0% 11.0% 20.0% 20.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
12.5% 12.5% 12.0% 12.0% 14.0% 15.0% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
10.0% -- -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 9.0% 9.3% 9.8% 12.0% 13.0% 2.5% 3.0% 2.5% 3.0% 10.0 10.0
13.0% 13.0% 11.0% 11.0% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 3.0 3.0
Responses 6 5 5 5 5 5 6 6 6 6 6 6
Average (%) 10.6% 11.0% 10.6% 11.0% 14.6% 15.0% 2.7% 3.5% 3.3% 3.7% 8.2 8.2
--------------------------------------------------------------------------------------------------------
Total Responses 26 22 22 22 22 22 26 26 26 26 26 26
Weighted Average (%) 9.3% 9.6% 9.5% 10.0% 13.2% 13.6% 2.7% 3.5% 3.5% 3.8% 8.8 8.9
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
14 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET RESIDENTIAL - APARTMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
8.5% 10.0% 9.0% 10.5% -- -- -- -- 3.5% 3.5% 1.0 1.0
8.5% 9.0% 9.0% 9.0% 11.0% 11.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
9.8% 9.8% 10.0% 10.0% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
8.3% 9.0% 9.0% 9.5% 10.5% 11.5% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
7.5% 8.5% 8.0% 9.0% 10.0% 11.0% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.8% 8.8% 9.0% 9.0% 11.3% 11.3% 3.8% 4.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 9.0% 9.0% 9.5% 10.0% 11.5% 3.0% 4.0% 3.0% 3.0% 10.0 10.0
8.5% 9.0% 8.5% 9.0% -- -- 3.0% 3.5% 3.0% 3.5% 10.0 10.0
8.8% 9.0% 9.0% 9.5% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 10 10 10 10 8 8 9 9 10 l0 l0 10
Average (%) 8.6% 9.2% 9.0% 9.6% 11.2% 11.7% 2.9% 3.9% 3.3% 3.8% 8.4 8.9
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 9.5% 9.5% 10.0% 11.0% 12.0% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
9.0% 10.0% 10.0% 10.0% 11.0% 12.5% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.0% 10.0% 10.0% 10.5% 10.5% 12.0% 3.0% 4.0% 3.0% 3.0% 10.0 10.0
9.0% 9.5% 9.5% 10.0% 11.5% 11.5% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 5 5 5 5 5 5 5 5 5 5 5 5
Average (%) 8.9% 9.7% 9.7% 10.3% 11.0% 11.8% 2.5% 4.2% 3.1% 4.0% 9.6 10.2
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 11.0% 11.0% 11.0% 12.5% 13.5% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.0% 9.0% 9.0% 11.0% 12.0% 4.0% 6.0% 3.0% 3.0% 3.0 5.0
9.0% 9.0% 9.5% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 8.9% 9.4% 9.8% 10.3% 11.6% 12.1% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
12.0% 13.0% 13.0% 13.0% 13.0% 15.0% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.0% 10.0% 10.0% 11.0% 13.0% 4.0% 6.0% 3.0% 3.0% 3.0 5.0
9.5% 10.0% 10.0% 11.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 9.5% 10.1% 10.6% 11.3% 12.0% 13.0% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
Total Responses 23 23 23 23 21 21 22 22 23 23 23 23
Weighted Average (%) 9.0% 9.6% 9.8% 10.4% 11.5% 12.1% 2.7% 4.4% 3.2% 4.0% 8.4 9.3
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical
issues
AUTUMN 1996 15
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICE SUMMARY OF WEIGHTED AVERAGE
- ------------------------------------------------------------------------------------------------------------------------------------
Urban/CBD 9.8% 10.3% 9.7% 10.3% 13.0% 13.5% 3.3% 4.6% 3.4% 3.9% 8.1 9.2
Class A - Leased Asset 9.2% 9.6% 9.2% 9.7% 11.7% 12.0% 3.3% 4.2% 3.4% 3.9% 8.5 9.5
Class B - Leased Asset 10.0% 10.4% 9.7% 10.3% 12.8% 13.1% 3.3% 4.7% 3.5% 4.0% 8.3 9.7
Class A - Value Added 9.4% 10.0% 9.6% 10.2% 12.8% 13.5% 3.5% 4.6% 3.5% 3.9 7.6 8.9
Class B - Value Added 10.7% 11.0% 10.5% 11.2% 14.6% 15.3% 3.2% 4.8% 3.3% 3.9% 8.0 8.8
Suburban 9.3% 9.8% 9.7% 10.1% 12.8% 13.4% 3.2% 4.4% 3.4% 3.7% 8.0 8.8
Class A - Leased Asset 8.8% 9.5% 9.3% 9.9% 11.2% 11.6% 3.5% 4.4% 3.6% 3.8% 8.9 9.7
Class B - Leased Asset 9.5% 10.0% 9.8% 10.2% 12.0% 12.5% 3.4% 4.5% 3.4% 3.7% 8.6 9.6
Class A - Value Added 9.1% 9.7% 9.5% 10.0% 13.4% 14.3% 3.1% 4.6% 3.4% 3.8% 7.2 8.0
Class B - Value Added 9.7% 10.0% 10.0% 10.5% 14.5% 15.2% 2.9% 4.3% 3.2% 3.6% 7.2 8.0
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL
- ------------------------------------------------------------------------------------------------------------------------------------
Warehouse/Distribution 9.5% 9.7% 10.2% 10.5% 11.6% 11.6% 2.6% 4.5% 3.2% 4.0% 9.6 10.2
Class A - Leased Asset 8.8% 9.2% 9.4% 9.8% 10.9% 11.0% 2.9% 4.0% 3.3% 3.8% 9.8 10.1
Class B - Leased Asset 9.3% 9.5% 10.0% 10.2% 11.2% 11.2% 2.8% 4.3% 3.2% 3.9% 9.7 10.1
Class A - Value Added 9.7% 9.9% 10.4% 10.8% 11.9% 11.9% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
Class 8 - Value Added 10.1% 10.4% 10.9% 11.3% 12.4% 12.4% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
Business Parks 9.4% 9.9% 10.0% 10.8% 12.3% 12.9% 3.4% 4.0% 3.2% 3.8% 8.3 9.6
Class A - Leased Asset 9.0% 9.5% 9.8% 10.5% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
Class B - Leased Asset 9.3% 9.8% 10.0% 10.8% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
Class A - Value Added 9.5% 10.2% 10.0% 10.8% 13.0% 14.3% 3.5% 4.0% 3.2% 3.7% 7.7 8.7
Class B - Value Added 9.7% 10.3% 10.2% 11.0% 13.0% 14.3% 3.5% 4.0% 3.2% 3.7% 7.7 8.7
0ther Industrial/
Manufacturing 9.2% 9.7% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.8 10.3
Class A - Leased Asset 8.8% 9.3% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.5 10.0
Class B - Leased Asset 9.3% 9.8% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.5 10.0
Class A - Value Added 9.3% 9.8% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
Class B - Value Added 9.5% 10.0% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
- ------------------------------------------------------------------------------------------------------------------------------------
RETAIL
- ------------------------------------------------------------------------------------------------------------------------------------
Neighborhood & Community
Centers 9.7% 10.2% 10.3% 10.9% 13.0% 13.5% 2.7% 3.9% 3.2% 4.0% 8.7 9.3
Class A - Leased Asset 9.3% 9.8% 10.0% 10.4% 11.9% 12.1% 2.9% 3.7% 3.4% 3.9% 8.9 9.4
Class B - Leased Asset 9.5% 10.0% 10.4% 11.1% 12.3% 12.3% 2.3% 3.8% 3.3% 4.2% 9.0 9.6
Class A - Value Added 9.7% 10.3% 10.1% 10.7% 13.8% 14.6% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
Class B - Value Added 10.3% 10.8% 10.8% 11.5% 14.2% 15.0% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
Power Center & "Big Box" 9.6% 9.9% 10.0% 10.5% 11.8% 11.9% 2.9% 3.5% 3.2% 3.7% 9.3 10.3
Class A - Leased Asset 9.4% 9.5% 9.7% 10.1% 11.5% 11.7% 3.3% 3.5% 3.4% 3.7% 9.1 10.1
Class B - Leased Asset 9.8% 10.1% 10.1% 10.6% 11.0% 11.3% 2.8% 3.7% 3.2% 3.7% 9.3 10.3
Class A - Value Added 9.6% 9.9% 10.1% 10.6% 12.0% 12.0% 2.8% 3.3% 3.2% 3.7% 9.3 10.3
Class B - Value Added 9.8% 10.3% 10.1% 10.9% 12.7% 12.7% 2.8% 3.3 3.2% 3.7% 9.3 10.3
Regional Malls 9.3% 9.6% 9.5% 10.0% 13.2% 13.6% 2.7% 3.5% 3.5% 3.8% 8.8 8.9
Class A - Leased Asset 7.9% 8.2% 8.2% 8.6% 11.4% 11.8% 3.0% 3.6% 3.5% 3.8% 9.1 9.6
Class B - Leased Asset 9.3% 9.6% 9.6% 10.0% 13.4% 13.9% 2.5% 3.4% 3.7% 4.0% 8.6 8.6
Class A - Value Added 9.3% 9.8% 9.8% 10.3% 13.4% 13.9% 2.6% 3.6% 3.4% 3.8% 9.2 9.2
Class B - Value Added 10.6% 11.0% 10.6% 11.0% 14.6% 15.0% 2.7% 3.5% 3.3% 3.7% 8.2 8.2
Specialty Retail 9.5% 10.5% 10.8% 11.5% 12.0% 12.6 1.9% 4.0% 3.3% 4.0% 10.0 10.5
Class A - Leased Asset 8.2% 9.0% 8.8% 9.7% 10.7% 11.3% 2.5% 4.0% 3.5% 4.0% 8.7 10.3
Class B - Leased Asset 9.3% 10.3% 10.8% 11.5% 11.5% 12.5% 1.8% 4.0% 3.3% 4.0% 10.5 10.5
Class A - Value Added 10.0% 11.0% 11.3% 12.0% 12.5% 13.0% 1.8% 4.0% 3.3% 4.0% 10.5 10.5
Class B - Value Added 10.8% 11.8% 12.3% 13.0% 13.5% 13.5% 1.8% 4.0% 3.3% 4.0% 10.5 10.5
- ------------------------------------------------------------------------------------------------------------------------------------
RESIDENTIAL
- ------------------------------------------------------------------------------------------------------------------------------------
Apartments 9.0% 9.6% 9.8% 10.4% 11.5% 12.1% 2.7% 4.4% 3.2% 4.0% 8.4 9.3
Class A - Leased Asset 8.6% 9.2% 9.0% 9.6% 11.2% 11.7% 2.9% 3.9% 3.3% 3.8% 8.4 8.9
Class B - Leased Asset 8.9% 9.7% 9.7% 10.3% 11.0% 11.8% 2.5% 4.2% 3.1% 4.0% 9.6 10.2
Class A - Value Added 8.9% 9.4% 9.8% 10.3% 11.6% 12.1% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
Class B - Value Added 9.5% 10.1% 10.6% 11.3% 12.0% 13.0% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
</TABLE>
16 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
Single-Tenant NNN Leased Properties
(Excludes "Bondable" Leases)
Minimum No. Going-In Cap Rate Internal Rate of Return
of Years Low High Low High
Investment Grade Tenant
- --------------------------------------------------------------------------------
4.0 9.0% 9.0% 10.0% 12.0%
----------------------------------------------------------
10.0 8.0 9.0 10.5 11.5
----------------------------------------------------------
5.0 10.5 10.5 13.0 13.0
----------------------------------------------------------
10.0 9.0 10.5 13.0 15.0
----------------------------------------------------------
10.0 8.5 9.0 10.5 12.0
----------------------------------------------------------
10.0 9.5 10.0 10.5 11.5
----------------------------------------------------------
10.0 8.5 11.0 10.8 12.0
----------------------------------------------------------
10.0 9.5 9.5 11.0 11.0
----------------------------------------------------------
20.0 9.0 9.0 N/A N/A
----------------------------------------------------------
10.0 8.0 10.0 N/A N/A
- --------------------------------------------------------------------------------
Responses 10.0 10.0 10.0 8.0 8.0
Average 9.9 9.0% 9.8% 11.2% 12.3%
Non-Investment Grade
Tenant
- --------------------------------------------------------------------------------
4.0 9.5% 9.5% 10.5% 13.0%
----------------------------------------------------------
10.0 9.0 10.0 11.5 12.5
----------------------------------------------------------
5.0 13.0 13.0 15.0 15.0
----------------------------------------------------------
10.0 10.0 12.0 17.0 20.0
----------------------------------------------------------
10.0 9.0 10.0 11.0 13.0
----------------------------------------------------------
10.0 11.0 12.0 13.0 15.0
----------------------------------------------------------
10.0 10.5 10.5 13.0 13.0
----------------------------------------------------------
20.0 11.0 11.0 N/A N/A
----------------------------------------------------------
10.0 10.0 12.5 N/A N/A
----------------------------------------------------------
Responses 9.0 9.0 9.0 7.0 7.0
Average 9.9 10.3% 11.2% 13.0% 14.5%
AUTUMN 1996 17
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES BLENDED INTERNAL EQUITY INTERNAL GROWTH RATES TYPICAL PROJECTION MANAGEMENT RESERVES FOR
GOING-IN TERMINAL RATE OF RETURN RATE OF RETURN INCOME EXPENSES PERIOD (YEARS) FEES* REPLACEMENT*
----------------------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
LUXURY
- ------------------------------------------------------------------------------------------------------------------------------------
8.0% 8.0% 10.0% 10.0% 18.0% 18.0% 25.0% 25.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 5.0% 5.0%
7.0% 7.0% 10.0% 10.0% 15.0% 15.0% 20.0% 20.0% 7.0% 7.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
6.0% 9.5% 10.0% 10.0% 12.0% 15.0% 15.0% 18.0% 3.0% 3.0% 3.0% 3.0% 5.0 5.0 2.0% 4.0% 4.0% 4.0%
8.0% 11.0% 8.5% 12.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
9.5% 9.5% 10.5% 10.5% 15.0% 15.0% 18.0% 18.0% 4.5% 4.5% 4.0% 4.0% 10.0 10.0 3.5% 3.5% 4.0% 4.0%
-- -- 11.0% 13.0% 15.0% 15.0% 18.0% 18.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0 3.0% 3.0% 4.0% 4.0%
6.0% 8.0% 10.0% 12.0% 13.0% 14.0% 20.0% 22.0% 3.0% 4.0% 3.0% 4.0% 5.0 5.0 2.0% 3.0% 4.0% 5.0%
8.0% 12.0% 8.0% 10.0% 15.0% 15.0% 20.0% 20.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0 3.0% 4.0% 4.0% 5.0%
Responses 7 7 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8
Average (%) 7.5% 9.3% 9.8% 10.9% 14.5% 15.3% 19.5% 20.1% 4.1% 4.3% 3.8% 3.9% 6.5 6.9 2.8% 3.3% 4.1% 4.4%
- ------------------------------------------------------------------------------------------------------------------------------------
FIRST CLASS
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 9.0% 11.0% 11.0% 12.0% 12.0% 20.0% 20.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
10.0% 10.0% 10.0% 10.0% -- -- 13.0% 13.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0 3.0% 3.0% 4.0% 5.0%
9.0% 9.0% 11.0% 11.0% 14.0% 14.0% 18.0% 18.0% 6.0% 6.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
9.5% 11.0% 11.0% 11.0% 15.0% 20.0% 18.0% 22.0% 3.0% 3.0% 2.0% 2.0% 5.0 5.0 2.0% 3.0% 4.0% 4.0%
10.0% 12.0% 10.5% 13.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
7.0% 9.0% 10.0% 11.0% 11.5% 12.0% 14.0% 16.0% 4.0% 5.0% 3.0% 4.0% 5.0 5.0 2.5% 2.5% 5.0% 5.0%
9.5% 9.5% 10.5% 10.5% 15.0% 15.0% 18.0% 18.0% 4.5% 4.5% 4.0% 4.0% 10.0 10.0 3.5% 3.5% 4.0% 4.0%
9.0% 9.0% 10.5% 10.5% 21.0% 21.0% 14.0% 14.0% 4.0% 4.0% 3.0% 3.0% 7.0 7.0 3.0% 3.0% 4.0% 4.0%
10.0% 12.0% 11.0% 11.0% -- -- -- -- 3.5% 3.5% 3.5% 3.5% 5.0 10.0 2.0% 3.0% 4.0% 4.0%
10.0% 10.0% 9.0% 9.5% 19.0% 19.0% 15.0% 15.0% 8.0% 8.0% 6.0% 6.0% -- -- 2.5% 2.5% 4.0% 4.0%
10.0% 13.0% 12.0% 13.0% 25.0% 25.0% 20.0% 20.0% 3.5% 4.0% 3.5% 4.0% 5.0 5.0 3.5% 3.5% 4.0% 4.0%
10.5% 10.5% 10.5% 10.5% 13.5% 13.5% -- -- 3.5% 3.5% 3.5% 3.5% 10.0 10.0 3.0% 3.0% 5.0% 5.0%
8.0% 12.0% 8.0% 10.0% 15.0% 15.0% 20.0% 20.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0 3.0% 4.0% 4.0% 5.0%
Responses 13 13 13 13 11 11 11 11 13 13 13 13 12 12 13 13 13 13
Average (%) 9.3% 10.5% 10.4% 10.9% 15.8% 16.5% 17.3% 17.8% 4.2% 4.3% 3.7% 3.8% 6.6 7.3 2.8% 3.1% 4.2% 4.3%
- ------------------------------------------------------------------------------------------------------------------------------------
MID-RATE
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 12.0% 12.0% 15.0% 15.0% 18.0% 18.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
11.0% 11.0% 11.0% 11.0% 13.0% 13.0% 17.0% 17.0% 6.0% 6.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
9.5% 11.0% 11.0% 11.0% 15.0% 18.0% 17.0% 20.0% 3.0% 3.0% 2.0% 2.0% 5.0 5.0 2.0% 3.0% 4.0% 4.0%
10.0% 12.0% 10.5% 13.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
9.5% 9.5% 10.5% 10.5% 15.0% 15.0% 18.0% 18.0% 4.5% 4.5% 4.0% 4.0% 10.0 10.0 3.5% 3.5% 4.0% 4.0%
Responses 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5
Average (%) 10.0% 10.7% 11.0% 11.5% 14.2% 15.2% 18.0% 18.6% 4.2% 4.2% 3.7% 3.7% 6.4 7.0 2.9% 3.1% 4.0% 4.0%
----------------------------------------------------------------------------------------------------------------------
Total
Responses 25 25 26 26 24 24 24 24 26 26 26 26 25 25 26 26 26 26
Weighted
Average (%) 8.9% 10.1% 10.4% 11.1% 14.8% 15.7% 18.3% 18.8% 4.2% 4.3% 3.7% 3.8% 6.5 7.0 2.9% 3.2% 4.1% 4.2%
----------------------------------------------------------------------------------------------------------------------
</TABLE>
*as percent of total revenues
18 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES BLENDED INTERNAL EQUITY INTERNAL GROWTH RATES TYPICAL PROJECTION MANAGEMENT RESERVES FOR
GOING-IN TERMINAL RATE OF RETURN RATE OF RETURN INCOME EXPENSES PERIOD (YEARS) FEES* REPLACEMENT*
----------------------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
MID-RATE HOTEL - LIMITED SERVICE
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 12.0% 12.0% 15.0% 15.0% 15.0% 15.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
12.0% 12.0% 12.0% 12.0% 13.0% 13.0% 17.0% 17.0% 3.0% 3.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
8.0% 10.0% 10.0% 10.0% 12.0% 15.0% 14.0% 16.0% 3.0% 3.0% 2.0% 2.0% 5.0 5.0 3.0% 4.0% 4.0% 5.0%
11.0% 13.0% 11.5% 14.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
11.0% 11.0% 11.8% 11.8% 16.0% 16.0% 19.0% 19.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0 4.0% 4.0% 4.5% 4.5%
10.0% 13.0% 12.0% 13.0% 25.0% 25.0% 20.0% 20.0% 3.5% 4.0% 3.5% 4.0% 5.0 5.0 4.0% 4.0% 5.0% 5.0%
Responses 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6
Average (%) 10.3% 11.5% 11.5% 12.1% 15.7% 16.5% 17.5% 17.8% 3.5% 3.6% 3.7% 3.8% 6.2 6.7 3.3% 3.5% 4.3% 4.4%
- ------------------------------------------------------------------------------------------------------------------------------------
ECONOMY
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 12.0% 12.0% 15.0% 15.0% 15.0% 15.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
13.0% 13.0% 13.0% 13.0% 13.0% 13.0% 17.0% 17.0% 3.0% 3.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
9.0% 11.0% 10.0% 10.0% 12.0% 15.0% 14.0% 16.0% 3.0% 3.0% 3.0% 3.0% 5.0 5.0 4.0% 5.0% 5.0% 5.0%
11.0% 13.0% 11.5% 14.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
11.0% 11.0% 11.8% 11.8% 16.0% 16.0% 19.0% 19.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0 4.0% 4.0% 4.5% 4.5%
Responses 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5
Average (%) 10.8% 11.6% 11.7% 12.2% 13.8% 14.8% 17.0% 17.4% 3.5% 3.5% 3.9% 3.9% 6.4 7.0 3.4% 3.6% 4.3% 4.3%
Total
Responses 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11
Weighted
Average(%) 10.6% 11.6% 11.6% 12.1% 14.7% 15.7% 17.3% 17.6% 3.5% 3.5% 3.8% 3.8% 6.3 6.8 3.4% 3.6% 4.3% 4.4%
</TABLE>
*as percent of total revenues
AUTUMN 1996 19
<PAGE>
Addenda
================================================================================
Qualifications of Appraisers
<PAGE>
QUALIFICATIONS
================================================================================
Donald R. Morris, MAI
Professional Affiliations:
Member of the Appraisal Institute (MAI Designations #9812)
District of Columbia Certified General Real Estate Appraiser (#GA00010267)
Commonwealth of Virginia Certified General Real Estate
Appraiser (#4001002465)
State of Maryland Certified General Real Estate Appraiser (#7220)
State of West Virginia Certified General Real Estate Appraiser (#237)
Appraisal/Real Estate Experience:
Director/Manager, Cushman & Wakefield of Washington, D.C. and Assistant
Manager, Cushman & Wakefield of Texas, Inc., Dallas, Texas, Valuation
Advisory Services, a full service real estate organization specializing in
appraisal and consultation. April 1990 to present.
Associate Appraiser, Joseph A. Dengel & Company, Dallas, Texas, May 1977
to April 1990.
Other real estate experience includes work as a residential listing and
selling agent preparing market analyses and origination contracts.
Experience includes appraisal of the following types of property:
Office Buildings Medical Office Buildings
Regional Malls Power Centers
Outlet Centers Community & Neighborhood Shopping Centers
Department Stores Industrial Buildings
Residential Subdivisions Single Family Residences
Multi-Family Properties Condominiums/Duplexes
Subdivision Analysis Farm/Ranch
Mixed Use Properties Golf Courses
Grape Vineyards Special Purpose Facilities
Commercial Land Hotel/Motel
Ad Valorem Tax Appeals
Appraisal and consulting services used for mortgage loans, relocations,
gift and estate tax, condemnation and litigation purposes.
Qualified as an expert witness in state and federal real estate court
cases.
Education:
Bachelor of Arts (Political Science), 1981
University of Texas at Arlington, Arlington, Texas.
<PAGE>
QUALIFICATIONS
================================================================================
Donald R. Morris, MAI
Appraisal Institute Courses:
#1A1 - Real Estate Appraisal Principles
#1A2 - Basic Valuation Procedures
#1B1 - Capitalization Theory & Techniques, Part A
#1B2 - Capitalization Theory & Techniques, Part B
#410 - Standards of Professional Appraisal Practice, Part A (USPAP)
#420 - Standards of Professional Appraisal Practice, Part B (AI)
#21 - Case Studies in Real Estate Valuation
#22 - Report Writing and Valuation Analysis
#82 - Residential Valuation Procedures
Additional Accredited Real Estate Courses:
Real Estate Appraisal
Principles of Real Estate
Real Estate Marketing
Real Estate Finance
Property Management
Federal National Mortgage Corporation (Fannie Mae) - Appraisal Training
Certified in the Appraisal's Institute's voluntary program of continuing
education for its designated members.
<PAGE>
QUALIFICATIONS
================================================================================
Steven M. Halbert, MAI
Professional Affiliations:
Member of the Appraisal Institute (MAI Designations #10241)
The Association for Commercial Real Estate (NAIOP)
Certified General Real Estate Appraiser District of Columbia - (#GA10262)
Certified General Real Estate Appraiser Commonwealth of Virginia - (#4001
001971)
Certified General Real Estate Appraiser State of Maryland - (#10252)
Certified General Real Estate Appraiser State of Florida - (#0002223)
Certified General Real Estate Appraiser State of Michigan (#1201005786)
Real Estate/Appraisal Experience:
Associate Director, Cushman & Wakefield of Washington, D.C., Valuation
Advisory Services, a full service real estate organization specializing in
appraisal and consultation. August, 1992 to present.
Senior Vice President, Cimarron Federal Savings & Loan, Muskogee,
Oklahoma. 1990 to 1991
Asset Specialist, FDIC/RTC, Phoenix, Arizona. 1990.
Vice President, Western Savings & Loan, Phoenix, Arizona. 1987 to 1990
Corporate Counsel, James Stewart Company, real estate developer, Phoenix,
AZ. 1981 to 1987.
Faculty Associate, College of Business Administration, Arizona State
University, Tempe, Arizona. 1981 to 1982.
Extensive experience in the real estate industry in the roles of investor,
broker, investment analyst, syndicator, appraiser, developer and bank and
government asset manager.
Experience includes appraisal of the following types of property:
Office Buildings Medical Office Buildings
Regional Malls Power Centers
Outlet Centers Community & Neighborhood Shopping Centers
Department Stores Industrial Buildings
Residential Subdivisions Bulk Single Family Lots
Multi-Family Properties Mixed Use Properties
Cold Storage Facilities Hydroelectric Projects
<PAGE>
QUALIFICATIONS
================================================================================
Steven M. Halbert, MAI
Grape Vineyards Special Purpose Facilities
Commercial Land Hotel
Historic Hotel Rehabilitation Motel Feasibility
Pacer Gold Mines Aquaculture Projects
Farm Land for Development Wind Turbine Electric Projects
Timbered Resort Land for Residential Subdivision
Education:
Bachelor of Arts (Economics, English & German), 1975
Brigham Young University, Provo, Utah
Juris Doctor (Law), 1978
Brigham Young University, Provo, Utah
Accredited Courses Beyond the Appraisal Institute course for MAI
designation.
The Appraiser's Complete Review
Appraisal of Environmentally Impacted Real Estate
Developing Small Income Properties
Investing in Self Storage Warehouses
Pro-Ject +plus Advanced Case Studies
Appraising Troubled Properties
Valuing Income Properties
Fundamentals of Real Estate
Investment and Taxation
The Appraiser as an Expert Witness
Certified in the Appraisal's Institute's voluntary program of continuing
education for its designated members.
<PAGE>
QUALIFICATIONS
================================================================================
Lynda Gallagher
Appraisal/Real Estate Experience:
Appraiser, Cushman & Wakefield of Washington, D.C., Inc., Valuation
Advisory Services, a full service real estate organization specializing in
appraisal and consultation. August, 1996-present.
Associate Appraiser, Anthony J. Oddo & Associates, Hampton, Virginia,
1995-1996
Associate Appraiser, Dominion Realty Advisors, Inc., Hampton, Virginia,
1991-1995
Research Associate and Associate Appraiser, Gretakis & Associates, Inc.,
Hampton, Virginia, 1988-1991
Experience includes appraisal of the following types of property:
Office Buildings Shopping Centers
Office condominiums Industrial Facilities
Commercial Land Multi-Family Properties
Single Family Residences Leasehold/Leased Fee Interests
Extensive experience in appraisals used for mortgage loans, REIT
formation, foreclosure, condemnation, tax appeal, and litigation purposes.
Extensive experience in land valuations, lease analyses, rental surveys,
market research and residual analyses.
Education:
Bachelor of Arts in Finance, 1988
Old Dominion University, Norfolk, Virginia,
Appraisal Institute Courses
#1A1 - Real Estate Appraisal Principles
#1A2 - Basic Valuation Procedures
#1B1 - Capitalization Theory & Techniques, Part A
#1B2 - Capitalization Theory & Techniques, Part B
#410 - Standards of Professional Appraisal Practice, Part A (USPAP)
#420 - Standards of Professional Appraisal Practice, Part B (AI)
#610 - Report Writing and Valuation Analysis
<PAGE>
QUALIFICATIONS
================================================================================
Lynda Gallagher
Other course work in Financial Theory, Quantitative Analysis, Statistics
and Institutional Investment Theory.
This CD ROM contains an electronic version of appraisals for the Mortgaged
Properties in PDF format and forms part of the paper version of the Prospectus
Supplement. The information contained in this CD ROM does not appear elsewhere
in paper form in this Prospectus Supplement and must be considered as part of,
and together with, the information contained elsewhere in this Prospectus
Supplement and the Prospectus. The information contained in this CD ROM has
been filed by the Seller with the Securities and Exchange Commission as part
of a Current Report on Form 8-K, which is incorporated by reference in this
Prospectus Supplement, and is also available through the public reference
branch of the Securities and Exchange Commission. Defined terms used in this CD
ROM but not otherwise defined therein shall have the respective meanings
assigned to them in the paper portion of the Prospectus Supplement and the
Prospectus. All of the information contained in this CD ROM is subject to the
same limitations and qualifications contained in this Prospectus Supplement and
the Prospectus. Prospective investors are strongly urged to read the paper
portion of this Prospectus Supplement and the Prospectus in its entirety prior
to accessing this CD ROM. If this CD ROM was not received in a sealed package,
there can be no assurances that it remains in its original format and should
not be relied upon for any purpose. Prospective investors may contact J.
Theodore Borter of Goldman, Sachs Co. at (212)902-3857 to receive an original
copy of the CD ROM.
<PAGE>
==============================================
COMPLETE APPRAISAL
OF REAL PROPERTY
Arboretum VI and VII
9011 and 9211 Arboretum Parkway
Chesterfield County, Virginia
==============================================
IN A SELF CONTAINED REPORT
As Of July 1, 1997
Prepared For:
Goldman Sachs Mortgage Company
85 Broad Street
New York, New York 10004
Prepared By:
Cushman & Wakefield of Washington, D.C., Inc.
Valuation Advisory Services
1875 Eye Street, NW
Suite 700
Washington, D.C. 20006
<PAGE>
Cushman & Wakefield of Washington, D.C., Inc.
1875 Eye Street, N.W., Suite 700
Washington, D.C. 20006
(202) 467-0600
CUSHMAN &
WAKEFIELD(R)
A ROCKEFELLER GROUP COMPANY
July 1, 1997
Mr. Sheridan Schechner
Managing Partner
Goldman Sachs Mortgage Company
85 Broad Street
New York, New York 10004
RE: Complete Appraisal of Real Property
Arboretum VI and VII
Chesterfield County, Virginia
Dear Mr. Schechner:
In fulfillment of our agreement as outlined in the Letter of Engagement,
Cushman & Wakefield, Inc. is pleased to transmit our self-contained appraisal
report estimating the prospective market value of the leased fee estate in the
above referenced properties. This appraisal report has been prepared in
accordance with our interpretation of your institution's guidelines, the
regulations of OCC and the Uniform Standards of Professional Appraisal Practice,
including the Competency Provision and The Financial Institutions Reform,
Recovery and Enforcement Act (FIRREA) and the guidelines of federal regulatory
agencies.
The value opinions reported below is qualified by certain assumptions,
limiting conditions, certifications, and definitions, which are set forth in the
report. We particularly call to your attention those unusual limiting conditions
dealing with the following:
1. Pursuant to your request, the date of value is July 1, 1997. We
specifically assumed that no value affecting changes occur between
the date of inspection, which was June 15, 1997, and the prospective
date of value.
This report was prepared for Goldman Sachs Mortgage Company and is
intended only for its specified use. It may not be distributed to or relied upon
by other persons or entities without written permission of Cushman & Wakefield,
Inc. of Washington, D.C.
The property was inspected and the report prepared by Kelly J. Small.
Donald R. Morris, MAI reviewed the report and concurred with the conclusions
herein.
The subject property consists of two office buildings located within the
Arboretum Office Park In Chesterfield County, Virginia, and more fully described
within the body of this report. Individual cash flow projections were prepared
for each property leading to a conclusion of value on a building by building
basis.
<PAGE>
Mr. Sheridan Schechner Page 2
Goldman Sacks Mortgage Company
Based on our complete appraisal, as defined by the Uniform Standards of
Professional Appraisal Practice, we have formed an opinion that the prospective
market values of the leased fee estate in the referenced properties, subject to
the assumptions, limiting conditions, certifications, and definitions, as of
July 1, 1997, will be:
============================================
Property Market Value
============================================
Arboretum VI $7,000,000
Arboretum VII $2,000,000
============================================
This letter is invalid as an opinion of value if detached from the report,
which contains the text, exhibits, and an Addenda.
Respectfully submitted,
CUSHMAN & WAKEFIELD OF WASHINGTON, D.C. INC.
/s/ Kelly J. Small
Kelly J. Small
Appraiser
Washington D.C. Valuation Advisory Services
/s/ Donald R. Morris, MAI
Donald R. Morris, MAI
Manager, Director
Washington D.C. Valuation Advisory Services
Virginia General Real Property Appraiser No. 4001-002465
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
SUMMARY OF SALIENT FACTS AND CONCLUSIONS
================================================================================
Property Name- Arboretum VI and VII
Arboretum Office Park
Location: Arboretum Parkway, Chesterfield County, Virginia
Arboretum VI 9011 Arboretum Parkway
Arboretum VII 9211 Arboretum Parkway
General Overview: The appraised properties consist of two office
buildings built in 1991 and containing 73,195
(Arboretum VI) and 30,791 square feet (Arboretum
VII). Occupancies are 92 and 96 percent,
respectively.
Interest Appraised: Leased fee estate
Date of Value: July 1, 1997
Date of Inspection: June 15, 1997
Ownership: Various entities related to RF&P; see Introduction
section for detailed listing
Highest and Best Use: Office buildings, as market conditions permit
Marketing Time: 12 months
Value Indicators See the table on the following table
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
SUMMARY OF SALIENT FACTS AND CONCLUSIONS
================================================================================
<TABLE>
<CAPTION>
================================================================================================
Arboretum VI Arboretum VII
Building Type Class A Office Class B Office
================================================================================================
<S> <C> <C>
Size (SF) 73,195 30,791
Sales Comparison Approach $6,600,000 - $7,000,000 $2,000,000 - $2,300,000
per SF $90.00 - $95.00 $65.00 - $75.00
Income Capitalization Approach
Estimated Market Rental Rate: $16.50 $13.00
Stabilized Vacancy Rate: 5% 5%
Blended Vacancy Between Tenants 3 months 3 months
Free Rent: 0 0
Probability of Renewal: 70% 70%
Tenant Improvement Allowance
New Tenants $8.00 $6.00
Renewal Tenants $4.00 $3.00
Estimated Market Rental Growth Rate 3.5% 3.5%
Estimated Expense Growth Rate: 3.5% 3.5%
Estimated Real Estate Tax Growth Rate: 3.5% 3.5%
Reversion Year Capitalization Rate 10.5% 10.5%
Transaction Costs in Reversion Sale: 3.0% 3.0%
Discount Rate: 12.0% 12.0%
Indicated Value: $7,000,000 $2,000,000
Value Conclusion: $7,000,000 $2,000,000
Value Per Square Foot: $95.63 $64.95
Implicit Capitalization Rate: 10.0% 9.4%
================================================================================================
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Summary of Salient Facts And Conclusions
================================================================================
Special Assumptions Affecting Valuation:
1. Pursuant to your request, the date of value is July 1, 1997. We
specifically assumed that no value affecting changes occur between the
date of inspection, which was June 15, 1997, and the prospective date of
value.
2. Please refer to the complete list of assumptions and limiting conditions
included at the end of this report.
Job No. 97-0128
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Photographs of Subject Property
================================================================================
[GRAPHIC OMITTED]
Arboretum VI
[GRAPHIC OMITTED]
Arboretum VII
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Photographs of Subject Property
================================================================================
[GRAPHIC OMITTED]
Interior View
[GRAPHIC OMITTED]
Interior View
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Photographs of Subject Property
================================================================================
[GRAPHIC OMITTED]
Looking East Along Arboretum Parkway
[GRAPHIC OMITTED]
Looking West Along Arboretum Parkway
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
TABLE OF CONTENTS
================================================================================
Page
INTRODUCTION ............................................................... 1
Identification of Property ............................................... 1
Property Ownership and
Recent History ........................................................... 1
Purpose and Function of Appraisal ........................................ 1
Extent of the Office Appraisal Process ................................... 1
Date of Value and Property Inspection .................................... 2
Property Rights Appraised ................................................ 2
Definitions of Value, Interest Appraised, and Other Pertinent Terms ...... 2
Exposure Time ............................................................ 2
Marketing Time ........................................................... 3
Legal Description ........................................................ 4
REGIONAL ANALYSIS .......................................................... 5
INDUSTRIAL MARKET ANALYSIS ................................................. 14
PROPERTY DESCRIPTION ....................................................... 23
Site Description ......................................................... 23
Improvements Description ................................................. 24
REAL ESTATE TAXES AND ASSESSMENTS .......................................... 28
ZONING ..................................................................... 29
HIGHEST AND BEST USE ....................................................... 31
VALUATION PROCESS .......................................................... 33
SALES COMPARISON APPROACH .................................................. 35
INCOME CAPITALIZATION APPROACH ............................................. 41
RECONCILIATION AND FINAL VALUE ESTIMATE .................................... 60
ASSUMPTIONS AND LIMITING CONDITIONS ........................................ 62
CERTIFICATION OF APPRAISAL ................................................. 64
ADDENDA .................................................................... 65
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
INTRODUCTION
================================================================================
Identification of Property
The subject property is comprised of two office buildings (Arboretum VI
and VII) containing 73,195 and 30,791 square feet of net rentable area (NRA),
respectively. The buildings are located in the Arboretum Office Park, situated
at the southwest corner of the intersection of Midlothian Turnpike (Route 60)
and the Powhite Parkway (Route 76), just south of the City of Richmond in
Chesterfield County, Virginia. The individual buildings which comprise the
subject property are presented in the following table.
================================================================================
Subject Property Summary
================================================================================
Building No. Building Size Land Area
Building Address Type Stories (SF/NRA) (Acres)
Name
================================================================================
Arboretum VI 9011 Arboretum Parkway Class A 3 73,195 7.74
Arboretum VII 9211 Arboretum Parkway Class B 1 30,791 4.21
================================================================================
Property Ownership and Recent History
Title to the properties is vested in RF&P Land II Corporation and were
acquired from Southgate Associates (Childress Klein) in June 1996 for a purchase
price of $9,067,500 ($87.20 per square foot).
There have been no other transfers during the last three years. It is our
understanding that these properties, along with a much larger portfolio, are
being transferred for securitization purposes. We were not provided with any
details of this pending transaction.
Purpose and Function of Appraisal
The purpose of the appraisal is to provide an estimate of market value of
the leased fee estate in the subject property. The function of this report is to
assist Goldman Sacks Mortgage Company, its affiliates, rating agencies and
designees of Goldman Sacks Mortgage Company, in connection with asset
acquisition and loan securitization.
Extent of the Office Appraisal Process
In the process of preparing this appraisal, we;
o Inspected the exterior of the building, site improvements, and a
representative sample of tenant spaces with property management;
o Conducted market inquiries into recent sales of similar buildings to
ascertain the sales prices per square foot and capitalization rates.
This process involved telephone interviews with sellers, buyers
and/or participating brokers;
o Reviewed the leasing policy, tenant build-out allowances, and
history of recent rental rates and occupancy with management and
leasing agent;
================================================================================
-1-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Introduction
================================================================================
o Reviewed a history of the income and expenses for 1994-1996, and a
budget forecast for 1997;
o Conducted market research into occupancies, asking rents, and
operating expenses at competing buildings including interviews with
on-site managers and a review of our own data base; and,
o Prepared the Sales Comparison and Income Capitalization Approaches
to value.
Date of Value and Property Inspection
The date of value is July 1, 1997, with the date of inspection being June
15, 1997.
Property Rights Appraised
Leased fee estate.
Definitions of Value, Interest Appraised, and Other Pertinent Terms
The definition of market value, taken from the Uniform Standards of
Professional Appraisal Practice, 1995 Edition, published by The Appraisal
Foundation, is as follows:
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 is the consummation of a sale as
of a specified date and the passing of title from seller to buyer under
conditions whereby:
1. Buyer and seller are typically motivated;
2. Both parties are well informed or well advised, and acting in what
they consider their own best interests;
3. A reasonable time is allowed for exposure in the open market;
4. Payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
5. 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.
Exposure Time
Under Paragraph 3 of the Definition of Market Value, the value estimate
presumes that A reasonable time is allowed for exposure in the open
market. Exposure time is defined as the estimated length of time the
property interest being appraised would have been offered on the market
prior to the hypothetical consummation of a sale at the market value on
the effective date of the appraisal. Exposure time is presumed to precede
the effective date of the appraisal.
================================================================================
-2-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Introduction
================================================================================
Based upon the available sales data in the marketplace, as well as our
discussions with area brokers familiar with this property type, an exposure time
of 12 months would appear to have been reasonably appropriate for the subject
property as of the date of valuation.
Marketing Time
Marketing time is an estimate of the time that might be required to sell a
real property interest at the appraised value. Marketing time is presumed
to start on the effective date of the appraisal, whereas exposure time is
presumed to precede the effective date of appraisal. The estimate of
marketing time uses some of the same data analyzed in the process of
estimating the reasonable exposure time and is not intended to be a
prediction of a date of sale.
Our estimate of an appropriate marketing time for the subject relates to a
sale of the property in its As Is condition. Based on our discussions with local
brokers and buyer/sellers of apartment projects like the subject, as well as our
assessment of the local real estate market and economic forces in general, we
have concluded that the probable marketing period for the subject property in
today's environment would be about 12 months.
The following definitions of pertinent terms are taken from the Dictionary
of Real Estate Appraisal, Third Edition (1993), published by The Appraisal
Institute:
Leased Fee Estate
An ownership interest held by a landlord with the rights of use and
occupancy conveyed by lease to others. The rights of the lessor (the
leased fee owner) and the leased fee are specified by contract terms
contained within the lease.
Market Rent
The rental income that a property would most probably command on the open
market, indicated by the current rents paid and asked for comparable space
as of the date of appraisal.
Cash Equivalent
A price expressed in terms of cash, as distinguished from a price
expressed totally or partly in terms of the face amounts of notes or other
securities that cannot be sold at their face amounts.
Discounted Cash Flow (DCF) Analysis
The procedure in which a discount rate is applied to a set of projected
income streams and a reversion. The analyst specifies the quantity,
variability, timing and duration of the income streams as well as the
quantity and timing of the reversion and discounts each to its present
values at a specified yield rate. DCF analysis can be applied with any
yield capitalization rate and may be performed on either a lease-by-lease
or aggregate basis.
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Introduction
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Market Value As Is on Appraisal Date
The value of specific ownership rights to an identified parcel of real
estate as of the effective date of the appraisal, related to what
physically exists and is legally permissible and excludes all assumptions
concerning hypothetical market conditions or possible rezoning.
Legal Description
The subject property is described by the Chesterfield County Tax
Assessor's Office as follows:
================================================================================
Building Address Tax Parcel
================================================================================
Arboretum VI 9011 Arboretum Parkway 28-1-1-27
Arboretum VII 9211 Arboretum Parkway 28-1-1-25
================================================================================
A copy of the legal description can be found in the Addenda.
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REGIONAL ANALYSIS
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The dynamic nature of economic relationships within a market area have a
direct bearing on real estate values and the long-term quality of a real estate
investment. In the market, the value of a property is not based on the price
paid for it in the past or the cost of its creation, but on what buyers and
sellers perceive it will provide in the future. Consequently, the attitude of
the market toward a property within a specific neighborhood or market area
reflects the probable future trend of that area.
Since real estate is an immobile asset, economic trends affecting its
locational quality in relation to other competing properties within its market
area will also have a direct effect on its value as an investment. To accurately
reflect such influences, it is necessary to examine the past and probable future
trends which may affect the economic structure of the market and evaluate their
impact on the market potential of the subject. This section of the report is
designed to isolate and examine the discernible economic trends in the region
and neighborhood which influence and create value for the subject property.
A regional map indicating the location of the subject is presented on the
following page.
Location
The subject property is located in Chesterfield County, Virginia within
the Richmond-Petersburg Metropolitan Statistical Area (MSA). For statistical
purposes, this area includes Chesterfield, Dinwiddle, Goochland, Hanover,
Henrico, New Kent, Powhatan and Prince George Counties. In addition, this MSA
also includes Charles, Colonial Heights, Hopewell, Petersburg and Richmond
Cities.
Richmond is located approximately 100 miles south of Washington, D.C. and
is midway between Atlanta and Boston. The City of Richmond is situated at the
end of the navigable portion of the James River, which bisects the city. Founded
in 1737 as a central marketplace of inland Virginia, it linked the piedmont and
mountain areas of Virginia with the seaports at Hampton Roads. In 1779, Richmond
became the state capital which has had a profound effect upon the growth of the
region. Richmond is the home of the Virginia General Assembly, state and federal
courts, and Virginia's capital. The success of the Richmond area is evidenced by
the influx and growth of local businesses, immigration to and population growth
in the area, as well as expansion of the employment base.
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<PAGE>
[GRAPHIC OMITTED]
[Area Map]
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<PAGE>
Regional Analysis
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Demographics
Demographic statistics for the Richmond MSA are summarized in the
following table.
================================================================================
Demographic Summary
================================================================================
Population
================================================================================
2001 Projection 1,000,848
1996 Estimate 942,346
1990 Census 865,640
1980 Census 761,304
1980-1990 % Change 13.70%
1990-1996 % Change 8.86%
1996-2001 % Change 6.21%
================================================================================
Households
================================================================================
2001 Projection 386,777
1996 Estimate 362,848
1990 Census 331,824
1980 Census 269,289
1980-1990 % Change 23.22%
1990-1996 % Change 9.35%
1996-2001 % Change 6.59%
================================================================================
Median Household Income
================================================================================
2001 Projection $46,784
1996 Estimate $40,118
1990 Census $33,489
1980 Census $18,293
1980-1990 % Change 86.07%
1990-1996 % Change 19.79%
1996-2001 % Change 16.62%
1990 Average Home Value $78,111
1990 % College Graduates 18.3%
================================================================================
Source: Strategic Mapping, Inc.
================================================================================
Population
According to Strategic Mapping, Inc., the population in the Richmond MSA
has increased dramatically slightly since 1980. In 1980 the population for the
entire MSA was 761,304 which then increased to 865,640 or 13.70 percent in 1990.
The population estimate for 1996 shows a slight slowing trend in the population
as the estimate increased from the 1990 figure to 942,346 or 8.86 percent.
projections for the year 2001 show an increase expected over the next five year
period of 6.21 percent. This trend shows strong growth across the region.
Households
The total number of households in the MSA has increased approximately
23.22 percent from 1980 to 1990. The 1990 household figure of 331,824 households
has increased to an estimated figure of 362,848 in 1996 which indicates an
increase of 9.35 percent over the six
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Regional Analysis
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year period since 1990. Similar to the overall population growth, the average
annual increase has decelerated from the previous ten year period to a more
normalized basis, which is still above the national averages. The number of
households has been increasing since 1980, even during periods when the
population was shrinking. This has been possible due to the declining household
size which has dropped from 2.72 persons in 1980 to 2.52 persons in 1996. The
number of households is expected to increase to 386,777 in the year 2001, an
increase of 6.59 percent from the 1996 estimate. The steadily increasing number
of households should have a positive impact on the local economic condition.
Income
The median income per household in the MSA has increased considerably
since 1980. In 1980 the median household income was $18,293, which increased by
86.07 percent or 8.61 percent per annum to $33,489 in 1990. Based on estimates
from Strategic Mapping, Inc., the 1996 median household income was $40,118. The
1996 estimate indicates that overall growth in the median household income
slowed to 19.79 percent from 1990 to 1996 or a still strong 3.30 percent per
annum. The area is expected to continue in this income growth trend through
2001.
A breakdown of the household income characteristics for the MSA is shown
as follows:
================================================================================
Household Income Characteristics
================================================================================
1980 1990 1996 Est. 2001 Proj.
================================================================================
$0 - $9,999 25.6% 12.0% 9.6% 8.1%
$10,000 - $14,999 15.0% 7.5% 6.1% 4.8%
$15,000 - $24,999 28.3% 16.5% 13.3% 10.9%
$25,000 - $34,999 17.5% 16.1% 13.9% 12.1%
$35,000 - $49,999 9.4% 20.0% 19.5% 17.5%
$50,000 - $74,999 2.8% 18.1% 20.9% 22.1%
$75,000 - $99,999 1.4% 5.7% 8.9% 11.5%
$100,000 - $149,999 -- 2.7% 5.6% 9.3%
$150,000+ -- 1.5% 2.2% 3.7%
TOTAL 100.0% 100.0% 100.0% 100.0%
================================================================================
Source: Strategic Mapping, Inc.
================================================================================
Unemployment Rate
Over the past year, the overall unemployment rate in the Richmond MSA
remained flat and was 3.3 percent, as of March 1997. The metropolitan area has
been experiencing an improvement in the economy. The Richmond MSA has
outperformed the nation and the state in terms of employment over the past few
years; and it is anticipated that it will continue to do so in the future.
The following tables compare the unemployment rate for the area to that of
the state and national average for the year end averages and the current month
figures.
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Regional Analysis
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Unemployment Rate
Comparison by County, MSA, State, and U.S.
================================================================================
Year Henrico Richmond Virginia U.S.
County MSA
================================================================================
1996 3.0% 3.7% 4.4% 5.4%
1995 2.9% 3.7% 4.5% 5.6%
1994 3.3% 4.4% 4.9% 6.1%
1993 3.9% 4.9% 5.1% 6.9%
1992 5.4% 6.7% 6.4% 7.5%
- --------------------------------------------------------------------------------
Source: U.S. Department of Labor and Employment Security, Bureau of Labor Market
Information.
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================================================================================
Current Month - Unemployment Rate
================================================================================
Geographic Area March 1996 March 1997
================================================================================
Richmond MSA 3.3% 3.3%
Virginia 4.6% 4.4%
U.S. 6.0% 5.9%
- --------------------------------------------------------------------------------
Source: U.S. Department of Labor and Employment Security
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As population in the Richmond area has increased, employment has grown as
existing businesses expanded and new companies located in the area. Local
businesses are attracted to the convenient location between Atlanta and Boston,
competitive tax policies, and excellent transportation systems. In Richmond,
there is no sales tax on raw materials, and no state or local inventory tax on
manufacturing. Furthermore, sales and use tax, corporate income tax, and
unemployment insurance tax rates are low compared to national averages of other
cities. In fact, Richmond has the lowest unemployment insurance tax rate in the
nation, while the worker's compensation rate is seventh in the U.S. The labor
force has an education level as high or higher than other metro areas of
Richmond's size, or larger. Furthermore, Richmond area workers are reportedly 43
percent more productive per worker hour than U.S. workers as a whole, according
to the Metropolitan Economic Development Council. In addition, less than 11
percent of Richmond area workers are unionized, compared to the national average
of 20 percent. These factors have contributed to the influx of employers into
the Richmond area. Richmond's business climate has attracted and retained some
of the most prestigious businesses in the U.S., helping to boost the local
employment base.
As shown in the following table, with the exception of manufacturing all
industry segments witnessed steady growth. The largest increases came from
services at 3.24 percent followed by T.C.P.U. at 2.87 percent, and construction
at 2.67 percent. The following table illustrates the five year trend for
employment by sector for the Richmond MSA.
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Regional Analysis
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<TABLE>
<CAPTION>
=====================================================================================
At-place Employment -- 1992 - 1996
=====================================================================================
Category 1992 1993 1994 1995 1996 Percent
=====================================================================================
<S> <C> <C> <C> <C> <C> <C>
Manufacturing 62,900 61,400 61,100 60,600 59,700 -1.04
Mining 7,000 7,000 7,000 8,000 8,000 2.71
Construction 27,000 27,500 27,900 29,300 30,800 2.67
T.C.P.U 23,000 24,100 25,000 26,000 26,500 2.87
Wholesale & Retail Trade 106,300 108,700 115,000 119,700 120,400 2.52
F.I.R.E. 38,700 39,700 42,000 42,400 42,900 2.08
Services 109,200 113,100 118,700 125,000 128,100 3.24
Federal, State & Local Government 96,300 99,100 100,900 98,300 96,800 0.10
=====================================================================================
Total 464,100 474,300 491,200 502,100 506,000 1.74
=====================================================================================
Unemployment Rate - Richmond MSA 6.7 4.9 4.4 3.7 3.7 --
Unemployment Rate - USA 7.5 6.9 6.1 5.6 5.4 --
=====================================================================================
Source: Bureau of Labor Static's
=====================================================================================
</TABLE>
Total employment increased by 0.78 percent over the past year and 1.74
percent over the past five years, in combination with a declining unemployment
rate (as of March 1997), indicates economic stability in the area. We anticipate
slow growth in employment during the next few years and possibly accelerated
growth towards the end of the decade. The largest increases are anticipated in
the services and construction categories with the strengthening economy, with
growth expected from all areas with the exception of government which is
expected to decline.
Shown on the following page is the most recent employment by industry in
the subject's area.
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Regional Analysis
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<TABLE>
<CAPTION>
========================================================================================================
NON-AGRICULTURAL INSURED EMPLOYMENT BY MAJOR INDUSTRY DIVISION
April 1996 to 1997 Comparison - Not Seasonally Adjusted
RICHMOND AREA MSA
========================================================================================================
INDUSTRY Average Employment SHARE Average Employment SHARE CHANGE
April 1996 (000's) April 1997 (000's)
========================================================================================================
<S> <C> <C> <C> <C> <C>
Manufacturing 59.3 11.7% 59.8 11.7% 0.84%
Construction 30.2 6.0% 31.6 6.2% 4.64%
Mining 0.8 0.2% 0.7 0.1% -12.50%
T.C.P.U.* 26.2 5.2% 26.5 5.2% 1.15%
Trade 118.4 23.4% 120.1 23.5% 1.44%
F.I.R.E.** 42.6 8.4% 43.1 8.4% 1.17%
Services 130.1 25.7% 130.6 25.5% 0.38%
Government 98.5 19.5% 98.9 19.3% 0.41%
========================================================================================================
TOTALS 506.1 100.0% 511.3 100.0% 1.03%
========================================================================================================
* Transportation, & Public Utilities
** Finance/Insurance/Real Estate
========================================================================================================
</TABLE>
Over the past year, total employment witnessed a small increase of 1.03
percent. Construction and Retail Trade were the leading industries with an
overall increase of 4.64 percent and 1.44 percent respectively. This offset the
small losses in the mining industry.
The appraisers have outlined both the major employers in the metropolitan
Richmond, Virginia. It should be noted that the metropolitan rankings in the top
employment lists include private industry only. As can be seen, the majority of
the employment is trade and service oriented in nature. The following charts
summarize the major employers within the MSA.
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Regional Analysis
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================================================================================
Major Area Employers
Richmond, Virginia Metro Area (1997)
================================================================================
Employer Number of Employees
================================================================================
Philip Morris USA 8,000
Columbia/HCA Healthcare Corp. 6,340
Circuit City Stores 5,194
Reynolds Metals Co. 4,300
Capital One Financial Corp. 4,064
Dominion Resources Inc. 3,803
Ukrops Super Markets Inc. 3,585
Allied Signal Corp. 3,400
Crestar Financial Corp. 3,252
Bon Secours Richmond Health 3,051
NationsBank Corp. 2,726
Trigon Blue Cross/Blue Shield 2,705
Signet Banking Corp. 2,501
DuPont Co. 2,500
Bell Atlantic-Virginia 2,445
Viasystems Technologies Corp. 2,100
Food Lion Inc. 1,621
Central Fidelity Banks, Inc. 1,595
Richfood Holdings Inc. 1,583
Wal-Mart Stores Inc. 1,512
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Source: Richmond Times Dispatch
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Transportation
The Richmond area is served by four interstate highways creating an
excellent network for entering and exiting the vicinity. Interstate routes 95,
64, 195 and 295 are within the City and serve the metropolitan area. Interstate
95 is the most important north-south highway on the eastern seaboard. To the
north, it connects Richmond with Washington, D.C. and other cities in the
northeast corridor; to the south, it reaches to Miami, Florida. Route 95 also
traverses downtown Richmond and serves as an expressway in the local vicinity.
Interstate 64, which runs principally east to west, lends access to Hampton
Roads and the Tidewater area of Virginia. To the west, it intersects with
Interstate 81 in the Shenandoah Valley before continuing to West Virginia and
Kentucky. Locally, I-295 forms a semicircle around the metropolitan area, with
an eventual extension south to Prince George County and a southern connector to
Interstate 95 is proposed. Interstate Route 195 gives access to the portion of
Richmond located along the James River. Yet another local expressway is the
Powhite Parkway which links the two halves of the city of Richmond (the north
and south banks of the James River). The Powhite has been extended to the
emerging suburban areas of central Chesterfield County. Several U.S. highways
converge in Richmond, namely, Routes 1, 33, 60, 250, 301 and 360.
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Regional Analysis
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Richmond International Airport has recently undergone a $38 million
expansion, making it a modern state-of-the-art airport. The expansion includes
all-weather second level boarding courses and a new entrance roadway connecting
with Interstate 64. The airport is located 12 miles east of Richmond in Henrico
County. There are over 200 flights daily by American, Delta, Eastern, United and
U.S. Air, plus six regional carriers. Air time to New York is only 60 minutes.
The Richmond area is a major East Coast rail center. Passenger railways
are utilized by AMTRAK while the major freight railway companies are CSX
Transportation; Richmond, Fredericksburg and Potomac; and Norfolk-Southern.
The port of Richmond provides an excellent water transportation system for
cargo to Europe, Africa, South America, Canada and the Caribbean. The deep water
port is the westernmost on the north Atlantic and handles over 413,000 tons of
bulk and container cargo annually.
The Greater Richmond Transit Company (GRTC) provides transportation
services to commuters. The system offers several transit routes in Henrico
County as well as downtown service connecting the financial and retail
districts. Trailways, Greyhound and Groome Transportation charter buses to other
cities.
Education/Recreation
The Richmond area boasts of numerous colleges and universities in the
vicinity. Among these educational institutions are Randolf-Macon College,
University of Richmond, Virginia Commonwealth University, Medical College of
Virginia, Virginia Union College, etc. Many of the area's public secondary
school systems allocate higher per student expenditures than the national
average. Area school systems have also adopted progressive measures over the
past decade to improve and enhance the normal school criteria. In addition,
there are many prestigious private secondary schools including St.
Christopher's, St. Catherine's, Collegiate, and Benedictine.
The city of Richmond serves as the cultural and recreational heart of
Central Virginia. There are many museums including the Virginia Museum of Fine
Arts, The Valentine Museum, Museum of the Confederacy, and the Science Museum of
Virginia.
In addition, Richmond serves as a center for the performing arts at
locations including the Carpenter Center and the Theater Virginia. Local area
residents can also enjoy numerous park lands including James River Park, Bryan
Park and Pocohontas State Park.
Conclusion
Richmond is centrally located along the East Coast at the northern end of the
Sun Belt. This location contributed to its growth as a business and industrial
area over the last decade. While population and employment growth in the region
have recently diminished, both are expected to continue growing at moderate
rates during the 1990's. The moderate cost of living, low taxes and strong
economics appeal to Richmond businesses. Transportation networks and waterways
that make Richmond attractive to corporations also make it attractive to
individuals. Overall, the Richmond area is expected to prosper moderately in the
future.
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<PAGE>
OFFICE MARKET ANALYSIS
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Richmond Metropolitan Office Market
Richmond is the capitol of Virginia and is headquarters to 14 Fortune 500
Companies. The office market is segmented by location within the metropolitan
area, with the Central Business District (CBD) of Richmond being the oldest
segment. As the office market expanded around the CBD, new development was
categorized into four quadrants, northwest, northeast, southwest and southeast.
Most of the growth in past decade occurred in the northwest and southwest
quadrants. Although many firms prefer to be located in downtown Richmond,
Henrico County has become a new growth area for office park development.
Development has generally expanded away from the urban core into the Innsbrook
area of northwestern Henrico County (just south of Interstate 295). The lack of
easy access across the James River to the West End of metropolitan Richmond has
caused the Southwest quadrant to lag behind the Northwest Quadrant in overall
growth. The amount of office space in the eastern quadrants is so insignificant
that reliable statistics for these areas were not available.
According to Harrison & Bates, Inc. 1997 Office Market Report, total
inventory of office space in the Richmond metropolitan area in 1996 was
approximately 18.1 million square feet, with approximately 6.1 million square
feet in the Richmond CBD and 11.9 million square feet in the suburban markets.
The following table presents the geographic distribution of the office inventory
in the metropolitan area, along with other statistical data:
<TABLE>
<CAPTION>
================================================================================================
Geographic Distribution of Inventory
Metropolitan Richmond Office Market
Year-End 1996
================================================================================================
Jurisdiction Inventory SF Overall SF Under Y-T-D Net
(000) Vacancy Construction Absorption
================================================================================================
<S> <C> <C> <C> <C>
Central Business District 6,131,500 16.36% 0 200,407
Northwest Quadrant 8,048,248 6.23% 80,000 316,002
Southwest Quadrant 3,890,710 9.46% 157,788 68,171
- ------------------------------------------------------------------------------------------------
Total 18,070,458 10.36% 237,788 584,580
================================================================================================
</TABLE>
As of year-end 1996, the overall vacancy rate stood at 10.36 percent,
continuing a slow recovery from the year-end 1994 vacancy of 12.43 percent. The
continued decline in vacancy is a result of minimal pure speculative office
space brought on the market in recent years. Vacancy was higher in the CBD at
16.4 percent than in the suburbs at 7.3 percent. The Northwest submarket
demonstrated the lowest vacancy rate of 6.2 percent, where it has generally
remained for the past three years. The Southwest Quadrant demonstrated the most
improvement, with vacancy decreasing from 14.44 percent in 1994 to the current
level of 9.46 percent. This is the first decline below ten percent since the
early 1980s. The following table presents the historical vacancy, rental rate
and absorption data, showing a steadily declining vacancy rate and increased
absorption:
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Office Market Analysis
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================================================================================
Historical Data
Metropolitan Richmond Office Market
1992 - 1996
================================================================================
Year Inventory SF Vacancy SF Under Net Absorption
(000) Construction (SF)
================================================================================
1992 17,308,988 19.51% 0 422,989
1993 17,463,253 14.76% 91,690 946,035
1994 17,430,591 12.43% 62,000 407,215
1995 17,655,281 11.56% 352,000 344,077
1996 18,070,458 10.36% 237,788 584,580
================================================================================
Source: Harrison & Bates, Inc.
================================================================================
Lenders' strict underwriting criteria, limited market demand, and the
increase in sublet market space as a result of corporate consolidations and
downsizing all contributed to the lack of office construction between 1992 and
1994. In 1995 and 1996, construction of office space increased, with a total of
352,000 and 237,788 square feet of space completed, respectively. Most of the
new construction in 1996 occurred in the Southwest Quadrant, accounting for
157,788 square feet or 66 percent of total new construction. The remaining
80,000 square feet of new space was delivered in the Northwest Quadrant and
included five build-to-suits within the Innsbrook Office Park, some of which
included speculative office space (minimal). No new construction was delivered
in the CBD, as it continues it slow recovery with a glut of Class C space.
The market absorbed 584,580 square feet in 1996, an increase of 70 percent
over the 1995 figure. This level approximates the average annual absorption
between 1992 and 1996 of 540,000+/- square feet. The Northwest Quadrant absorbed
the largest amount of space in 1996 totaling 316,002, or 54 percent of total
absorption. The Southwest Quadrant absorbed only 68,171 square feet of space, or
12 percent of total absorption.
Current Construction Activity
Only build-to-suit construction is expected through 1997 and 1998, as
developers are still having difficulty financing purely speculative projects.
According to numerous sources throughout the market, one of the most important
and far reaching commercial real estate developments over the past two years was
the announcement by Motorola's plans to build a major semi-conductor plant in
Goochland County. The company exercised an option to purchase 230 acres in the
West Creek Corporate Center. Long term plans call for construction of several
million square feet of buildings and the creation of an initial 5,000 jobs. This
location will likely increase demand from semi-conductor clients and associated
firms.
Discussions with local market participants indicated that it is a
developers market, given the lack of available space. A number of major
corporations, such as Wheat First, Circuit City, Virginia Mutual Insurance
Company, Cellular One, and Heilig Meyers, have built or are starting
construction of their own buildings. Innsbrook appears to be the most attractive
site for office development, with several deliveries expected by year-end 1997.
A summary of buildings currently under construction in the Richmond metropolitan
area is highlighted below. There are no buildings under construction within the
CBD.
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<PAGE>
Office Market Analysis
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================================================================================
Buildings Under Construction
Richmond MSA
================================================================================
Building Size (SF) Available (SF) % Available Asking Rent
(SF)
================================================================================
Northwest Quadrant
================================================================================
Glen Forest Medical 40,000 0 0% N/A
Virginia Mutual 64,000 35,000 54.7% $17.25
Wheat First 100,000 70,000 70.0% $17.00
================================================================================
Southwest Quadrant
================================================================================
Arboretum IX 73,000 0 50% N/A
Boulders VI 85,000 0 0% N/A
================================================================================
Within the subject's Arboretum Office Park, a 73,000 square foot
build-to-suit is currently under construction for Cellular One. The building is
50 percent preleased and is nearing completion.
Investment Market
The investment market in the metropolitan Richmond area has been active.
Since 1995, there has been a marked turnaround in property sales in the office
market, with buyers motivated by the turnaround in the market and the potential
appreciation of property values. Sellers are no longer lenders, as many of the
distressed situations have been resolved. Buyers returning to the market include
REITS, pension funds, insurance companies and local or regional investors. With
a higher concentration of available capital, the metropolitan market has
experienced rising prices on average. The table on the following page depicts
historical and recent office building sales that have occurred in the suburban
Richmond market.
The sales indicate a wide range in unit values from a low of $30.58 to a
high of $114.94 per square foot of rentable area. As depicted, real estate
values have stabilized throughout suburban Richmond over the past two years.
Class A and B properties located in highly desirable office parks with high
occupancy sold in the range of $85.00 to $110.00 per square foot. The
Southwest Quadrant office sales were generally lower than those in the Northwest
Quadrant, selling in the $80.00 to $90.00 per square foot range. Property values
in the downtown market continue to be depressed, with few sales occurring.
Apartment communities joined by suburban office properties as currently
the most desirable investment property type. In the office market, the few
downtown building sales were dwarfed by activities within the suburbs, with the
strongest action in the Northwest Quadrant. Highwoods REIT was the most active
buyer, purchasing a number of buildings in Innsbrook. In the Southwest
Quadrant, Brookdale Investors purchased two buildings in Moorefield, while two
other buildings were purchased by Commonwealth Atlantic Properties (formerly
RF&P) in The Arboretum.
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Office Market Analysis
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<TABLE>
<CAPTION>
=========================================================================================
Office Building Sales Summary
Suburban Richmond
=========================================================================================
Bldg. Address Size(SF) Yr Built Occup. Sale Date Price (SF)
=========================================================================================
<C> <C> <C> <C> <C> <C>
Vistas at Brookfield 70,582 1985 95% 05/97 $ 82.74
Pioneer Building 49,019 1987 100% 05/97 $ 76.50
Moorefield V 42,000 1986 96% 04/97 $ 86.67
4101 Cox Road 58,184 1990 95% 12/96 $103.12
804 Moorefield Park Dr. 51,307 1985 97.5% 12/96 $ 83.81
808 Moorefield Park Dr. 47,230 1987 100% 11/96 $ 69.87
4701 Cox Road 100,178 1990 99% 06/96 $106.90
Arboretum VI and VII 103,986 1990 95% 06/96 $ 85.54
4881 Cox Road 108,000 1996 100% 02/96 $101.16
Vantage Place 55,374 1986-88 96% 09/95 $ 79.28
Vantage Pointe 63,867 1990 95% 09/95 $ 84.71
Owens & Minor 63,000 1989 100% 09/95 $114.94
Markel & Mercer Buildings 197,260 1987/90 100% 07/95 $ 98.35
Proctor-Silex 97,253 1988 99% 07/95 $ 85.53
Colonnade at Innsbrook 65,757 1986 98% 12/94 $ 88.36
Aetna Office Building 101,293 1990 98% 12/94 $ 83.91
Markel Building 71,745 1988 95% 09/94 $100.36
Koger Southside 131,000 1986 84% 09/94 $ 55.00
Progressive Building 70,260 1987 90% 06/94 $ 83.09
Allstate Building 39,281 1985 100% 03/94 $ 77.65
10710 Midlothian Tnpk. 152,000 1989 64% 07/93 $ 38.98
2820 Waterford Lake Dr. 42,718 1989 69% 05/93 $ 40.97
9321-27 Midlothian Tnpk 63,770 1984 64% 03/93 $ 30.58
=========================================================================================
</TABLE>
Land Values
Over the past year, there has been an increased level of sales activity
for vacant office sites. However, tightened credit, a drop in new construction
and poor performance among improved properties has limited the pool of potential
buyers of office land. In addition to poor demand for office sites, there is a
glut of land available for development and for sale. Some of these projects
include Gateway, Boulders, Bellgrade, Stony Point, Westerre, Innsbrook,
Moorefield, West Creek, etc. At present, there are over 1,000 acres of office
land available for development in established office parks throughout the
region. In addition to these sites
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Office Market Analysis
================================================================================
available in park developments, there are many single office tracts dispersed
throughout the Richmond suburbs available for sale.
As with the improved sales, the land sale price trend is upward. The
primary hub of activity is the Innsbrook Office Park, where property values
have increased as demand for office space in this park continues to strengthen.
Prior to 1994, land tracts were sold from former lenders or institutions
regulated by the Resolution Trust Corporation (RTC), and buyers would only
purchase land at cut-rate prices. As noted in the following table, recent
activity includes a clear increase in the demand for and price of office land.
<TABLE>
<CAPTION>
=========================================================================================================
Office Land Sales Summary
Metropolitan Richmond Office Market
=========================================================================================================
Location Net Area Sale Date Sale Price Price/Acre
(Acres)
=========================================================================================================
<S> <C> <C> <C> <C>
Innslake Drive 2.90 02/97 $ 555,500 $191,552
Innsbrook, VA
Lake Brook Drive 8.00 11/95 $1,200,000 $150,000
Innsbrook, VA
North Park Drive 7.97 07/95 $ 995,625 $125,000
Innsbrook, VA
North Park Drive 12.84 07/95 $1,605,000 $125,000
Innsbrook, VA
Cox Road and Nuckols Road 5.00 01/95 $ 750,000 $150,000
Innsbrook, VA
Innsbrook Drive @ The Overlook 52.00 12/94 $5,096,000 $ 98,000
Innsbrook, VA
Lakebrook Drive 5.50 11/94 $ 808,500 $147,000
Innsbrook, VA
Westerre Office Park @ Gaskin Road 10.67 05/94 $ 880,400 $ 82,511
Innsbrook, VA
Polo Parkway/Bellgrade 4.14 10/93 $ 372,877 $ 90,165
Chesterfield County, VA
Cherokee Road/Stony Point 40.28 07/93 $2,202,483 $ 54,723
City of Richmond, VA
Waterfront Dr/Innsbrook 6.60 03/93 $ 485,000 $ 73,484
Henrico County, VA
=========================================================================================================
</TABLE>
The appropriate unit of comparison in suburban Richmond is the price per
usable acre. The preceding sales represent both speculative investors and
build-to-suit/owner-occupant sales. The most recent sale, however, involved the
purchase of a site within Innsbrook for development of a Homewood Suites hotel.
These sales represent a trading range from $54,723 per usable acre to $191,500
per usable acre. Market participants indicated that, due to the limited
availability of space, the market is shifting to a development market. This is
expected to continue to place upward pressure on land prices within the market.
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Office Market Analysis
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Summary of Metropolitan Office Market
Although some submarkets remain soft, the overall vacancy rate continues
to decline, and the remaining available space tends to be less desirable. The
Northwest Quadrant is leading the region in net absorption and vacancy, while
the Southwest Quadrant is leading the region in new construction. We believe
that over the next several years, the metropolitan office market should reach a
more stabilized position both from an occupancy and lease rate standpoint.
Southwest Quadrant Office Market
The subject property is located in within the Southwest Quadrant, which is
comprised primarily of Chesterfield County. This quadrant is the smallest
submarket in terms of total rentable area, with 3.9 million square feet of
office space, or 22 percent of total inventory. The Northwest Quadrant and CBD
have 8.1 million square feet and 6.1 million square feet, respectively. The
Southwest Quadrant is often considered secondary to the Northwest Quadrant, but
more recently, has emerged as a more viable alternative. The subject is located
within the Arboretum Office Park, one of the premier office locations in the
Southwest Quadrant. The following table presents the historical vacancy and
absorption data for the Southwest Quadrant.
================================================================================
Historical Data
Southwest Quadrant
1992 - 1996
================================================================================
Year Inventory SF Vacancy SF Under Net Absorption
(000) Construction (SF)
================================================================================
1992 3,833,890 16.61% 0 100,445
1993 3,826,719 14.47% 91,690 68,929
1994 3,884,356 14.44% 10,000 79,500
1995 3,886,374 11.11% 0 139,500
1996 3,890,710 9.46% 157,788 68,171
================================================================================
As of year-end 1996, the Southwest Quadrant office market exhibited an
overall vacancy rate of 9.46 percent; the first time vacancy has fallen below
ten percent since the early 1980s. As depicted, vacancy has steadily declined
since 1992, despite new deliveries. Although net absorption declined from
139,500 square feet in 1995 to 68,171 square feet in 1996, this was due
primarily to declining availability of large spaces. The Southwest Quadrant did
attract a number of major relocations in 1996 including K-Line (23,000 square
feet) and Masersk Line (19,000 square feet).
A breakdown by class indicates that the vacancy for Class A space has
continued to decline at a faster pace than the market as a whole. The lack of
significant new construction, coupled with positive absorption, has led to a
shortage of large blocks of Class A office space. According to Harrison & Bates,
Inc. Office Market Survey, Class A vacancy was 6.96 percent as of year-end
1996, compared to 13.23 and 15.0 percent for Class B and C space, respectively.
Class A space comprises about 60 percent of the market, while Class B and C
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Office Market Analysis
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space comprise 37 and 3 percent of the remaining inventory, respectively. The
following table illustrates the historical vacancy by class within the Southwest
Quadrant.
================================================================================
Historical Vacancy by Class
Southwest Quadrant
1992 - 1996
================================================================================
Year Class A Class B Class C
================================================================================
1994 13.5% 13.9% N/A
1995 8.80% 13.60% 28.80%
1996 6.96% 13.23% 15.00%
================================================================================
Despite strengthening market conditions within the Southwest Quadrant for
the past two years, rental rates for Class A and B space have edged up slightly,
while rents for Class C space have remained relatively stable. According to
Harrison & Bates, Class A rates increased from a range of $12.50-$15.50 per
square foot in 1995 to $14.50-$16.50 per square foot in 1996, while Class B
rates increased from a range of $10.50-$12.50 per square foot in 1995 to
$12.00-$14.00 per square foot in 1996. Due to the lack of large space
availability within the Class A market, brokers anticipate continued upward
pressure on rental rates. Free rent and tenant improvement allowances are
currently limited in the Southwest Quadrant, as tenants generally prefer the
lowest possible base rental rate.
The general consensus is that vacancy will continue to decline and rents
will continue to increase because demand is expected to remain strong and new
construction is rare. Many landlords in the market depicted limited tenant
improvement packages and no free rent allowances in recent deals. Furthermore,
landlords have been able to obtain an expense reimbursement from some tenants,
which has been absent from Richmond office leases for some time.
Brokers and investors were surveyed as to their opinions of rent spikes,
given the lack of available Class A space within the market. Several brokers
indicated that there would be a potential for rent spikes; however, this notion
has not come to fruition over the past two years and is not likely to occur
because of the large amounts of vacant land available for development. Moreover,
with continued construction of space (even build-to-suits), the potential for
rent spikes lessens. Over the past year, rental rates edged up only slightly.
Investors surveyed indicated that rent spikes were highly speculative and
generally not incorporated into their purchase decisions. Although many
investors felt that rental rates may in fact grow at a rate greater than
inflation over the short term, they are typically unwilling to make this
assumption in their investment projections.
As can be seen, the forces of supply and demand have pushed the Southwest
Quadrant Class A office market toward a landlord's market, with a shortage of
supply as evidenced by the declining vacancy factor, increased rental rates, and
declining concessions. Market participants expect rents to continue to increase
and reach a level which will justify speculative development in the near term.
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<PAGE>
Office Market Analysis
================================================================================
Micro Market Survey
The subject property is located on Arboretum Parkway within the Arboretum
Office Park, at the southwest quadrant of the intersection of Midlothian
Turnpike and Powhite Parkway. The boundaries of this planned development
comprise the immediate neighborhood. The broader neighborhood can be considered
the Midlothian Turnpike (Route 60) corridor from the Powhite Parkway to the
east, to the area of Chesterfield Town Center Mall to the west.
Midlothian Turnpike is the main thoroughfare through the neighborhood, and
connects with Chippenham Parkway at the City of Richmond line to the east, and
continues west through northern Chesterfield County. Adjacent to the Arboretum
complex, Midlothian Turnpike intersects with Powhite Parkway, which is a toll
road that connects Chesterfield County with downtown Richmond.
Predominant land uses in the area consist of a mixture of retail
development, office/service uses, and residential development. Midlothian
Turnpike is the primary commercial corridor with such uses as community and
neighborhood shopping centers, gasoline stations, restaurants, and other
free-standing retail uses. The western anchor is provided by Chesterfield Town
Center Mall, which is the primary regional mall in Richmond's Southside suburbs.
Residential and office development is located along the streets radiating from
Midlothian Turnpike.
As noted, the subject is located within the Arboretum Office Park, which
is the prime suburban office location in the Southwest Quadrant and more
specifically Chesterfield County. The Arboretum complex is a mixed-use planned
development comprising office and flex buildings in a park-like setting. The
complex's infrastructure consists of two roads: Arboretum Place and Arboretum
Parkway. These roads intersect at the southern portion of the development and
have direct access to the Powhite Parkway without entering onto Midlothian
Turnpike.
Arboretum Office Park includes a total nine office and flex buildings,
three of which are build-to-suits. The following table presents the buildings
within the park and their respective vacancies.
================================================================================
Arboretum Office Park
================================================================================
Building Size (SF) Vacancy %
================================================================================
Arboretum I 58,167 4.1%
Arboretum II 49,542 0%
Arboretum III 214,481 0.5%
Arboretum IV N/A 0%
Arboretum V 47,943 1.9%
Arboretum VI 73,195 7.8%
Arboretum VII 30,791 3.6%
Arboretum VIII 50,000 0%
Arboretum IX 73,000 50%
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Office Market Analysis
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Arboretum IV is owner-occupied by a TV radio station, while Arboretum VIII
is a build-to-suit for Commonwealth Gas. As previously discussed, Arboretum IX
is nearing completion and is 50 percent preleased to Cellular One. Excluding
Arboretum IX, vacancy the park is currently about 2.0 percent.
The subject's primary competition stems from Moorefield Office Park, which
is located about one mile west of the subject along Midlothian Turnpike and the
Boulders Office Park at Midlothian Parkway and Chippenham Parkway.
Moorfields is an 83 acre park which is developed with office and
office/service uses and a 200 room Sheraton Inn with ancillary retail uses. This
park contains a total of approximately 385,000 square feet of existing space
within seven buildings. Most of the buildings were constructed in the mid-1980s
and contain about 50,000 square feet of space. Build-out is projected at 175,000
square feet of space amongst three buildings ranging in size from 50,000 to
70,000 square feet. In comparison to the subject, Moorfields has inferior curb
appeal and prestige, with most of the recent sales being to owner-users.
The Boulders Office Park is a large 228 acre mixed-use development slated
for over 2.1 million square feet of Class A office space, a 284 unit Apartment
complex, and a 200 room Hilton Hotel. There are a total of six existing office
buildings ranging in size from 40,000 to 150,000 square feet. In comparison to
the subject, The Boulders has similar appeal, although development is somewhat
denser.
Relative to its competition, the subject represents the newest buildings
in the market. It is typical in terms of quality and finishes for most of the
competitive buildings.
Summary
The Richmond metropolitan market is continuing to experience declining
vacancy and increased absorption. Investment activity in the office market has
also continued to be active. Recent trends in the market include increasing
rental rates and the potential for new speculative or build-to-suit
construction.
The subject property benefits from its location at an easily accessible
intersection in central Chesterfield County. The neighborhood bodes well for the
subject property in terms of demand generated for office space due to the
excellent access and transportation arteries. Arboretum Office Park Center is
considered the prime location for suburban office users within Chesterfield
County.
Based on the characteristics of the neighborhood, we believe continued
investment in stabilized properties is warranted. The area appears stable and
improving. We project that growth will continue to be positive.
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PROPERTY DESCRIPTION
================================================================================
Site Description
For ease of analysis and reporting, characteristics which are common to
both sites were presented first. Thereafter, we present a more detailed
description of the individual building ites which comprise the subject property.
Finally, we discuss the improvements on each site.
Topography: Level and at street grade
Street Improvements: Asphalt pavement, two lanes, curbs,
gutters and storm drains
Access: Arboretum Parkway
Soil Conditions: We did not receive nor review a soil
report. However, we assume that the
soil's load-bearing capacity is
sufficient to support the existing
structures. We did not observe any
evidence to the contrary during our
physical inspection of the property.
Each tract's drainage appears to be
adequate.
Land Use Restrictions: We were not given a title report to
review. We do not know of any easements,
encroachments, or restrictions that
would adversely affect the site's use.
However, we recommend a title search to
determine whether any adverse conditions
exist.
Flood Hazard: According to Community Panel No. 510035
0053 B National Flood Insurance Rate
Map, effective February 4, 1981, the
subject property is in Flood Hazard Zone
C and, therefore, does not require flood
hazard insurance.
Wetlands: We were not given a Wetlands survey. If
subsequent engineering data reveal the
presence of regulated wetlands, it could
materially affect property value. We
recommend a wetlands survey by a
competent engineering firm.
Hazardous Substances: We observed no evidence of toxic or
hazardous substances during our
inspection of the site. However, we are
not trained to perform technical
environmental inspections and recommend
the services of a professional engineer
for this purpose.
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Property Description
================================================================================
Arboretum VI
Location: North side of Arboretum Parkway
Chesterfield County, Virginia
Shape: Irregular
Land Area: 7.74 acres
Arboretum VII
Location: North side of Arboretum Parkway
Chesterfield County, Virginia
Shape: Irregular
Land Area: 4.21 acres
Improvements Description
Again, the following presents the generic characteristics common to all
properties, after which we detail each individual property. Both of the
properties are adjacent to a lake.
Americans With Disabilities Act: The Americans With Disabilities Act
(ADA) became effective January 26, 1992.
We have not made, nor are we qualified
by training to make, a specific
compliance survey and analysis of this
property to determine whether or not it
is in conformity with the various
detailed requirements of the ADA. It is
possible that a compliance survey and a
detailed analysis of the requirements of
the ADA could reveal that the property
is not in compliance with one or more of
the requirements of the Act. If so, this
fact could have a negative effect upon
the value of the property. Since we have
not been provided with the results of a
survey, we did not consider possible
non-compliance with the requirements of
ADA in estimating the value of the
property.
Hazardous Substances: We are not aware of any potentially
hazardous materials (such as
formaldehyde foam insulation, asbestos
insulation, radon gas emitting
materials, or other potentially
hazardous materials) which may have been
used in the construction of the
improvements. However, we are not
qualified to detect such materials and
urge the client to employ an expert in
the field to determine if such hazardous
materials are thought to exist.
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Property Description
================================================================================
Design Features and Functionality: Each building's overall design features
and the functionality of its layout are
deemed acceptable to the market. These
building represent typical and ordinary
product of their respective types --
access is good, parking appears
adequate, layout typical, etc.
Physical Condition: The subject properties appear to be well
maintained. We noted no items of
deferred maintenance beyond what would
normally be taken care of within an
on-going maintenance and capital repair
program.
We did not inspect the roofs or make a
detailed inspection of the mechanical
systems. The appraisers, however, are
not qualified to render an opinion as to
the adequacy or condition of these
components. The client is urged to
retain an expert in this field if
detailed information is needed about the
mechanical systems.
Arboretum VI
General Description
Year Built: 1991
Net Rentable Area: 73,195 square feet
No. Stories: 3
Construction Detail:
Foundation: Reinforced concrete
Framing: Reinforced concrete
Floors: Concrete
Exterior Walls: Pre-cast concrete and glass
Roof Cover: Flat built-up tar and gravel
Windows: Glass in aluminum frames
Pedestrian Doors: Glass in aluminum frames
Mechanical Detail
Heating and Cooling: Rooftop unit
Fire Protection: Sprinklered
Interior Detail
Layout: Central elevator lobby with perimeter
offices
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<PAGE>
Property Description
================================================================================
Floor Covering: Primarily carpet in the office areas,
ceramic tile in the restrooms, and
marble flooring in the lobby.
Walls: Painted drywall
Ceilings: Dropped suspended ceiling tile
Lighting: Fluorescent
Restrooms: One set of restrooms on every floor
Site Improvements
Parking: 313 surface parking spaces
On-Site Landscaping: Good, mature trees, shrubbery around the
building and parking lot perimeter
Arboretum VII
General Description
Year Built: 1991
Net Rentable Area: 30,791 square feet
No. Stories: One-story flex building with 100 percent
office finish
Construction Detail:
Foundation: Reinforced concrete
Framing: Reinforced concrete
Floors: Concrete
Exterior Walls: Pre-cast concrete and glass
Roof Cover: Flat built-up tar and gravel
Windows: Glass in aluminum frames
Pedestrian Doors: Glass in aluminum frames
Mechanical Detail
Heating and Cooling: Rooftop unit
Fire Protection: Sprinklered
Interior Detail
Layout: Rectangular building with one common
area hallway and restrooms
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<PAGE>
Property Description
================================================================================
Floor Covering: Primarily carpet in the office areas and
ceramic tile in the restrooms.
Walls: Painted drywall
Ceilings: Dropped suspended ceiling tile
Lighting: Fluorescent
Restrooms: One set of common area restrooms
Site Improvements
Parking: 121 surface parking spaces
On-Site Landscaping: Good, mature trees, shrubbery around the
building and parking lot perimeter
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<PAGE>
REAL ESTATE TAXES AND ASSESSMENTS
================================================================================
The subject property is under the taxing jurisdiction of Chesterfield
County. The County assesses property every year, with the assessed values
representative of full market value. Real estate tax bills are payable in two
installments; on June 5th and December 5th. The tax rate is set in April by the
County Board. Present rules do not call for automatic reassessment upon sale or
transfer of ownership. The tax year is equivalent to the calendar year.
Tax Rate
The current tax rate (1997) is $1.09 per $100 of assessed value, which
has endured for several years. Front foot charges are not levied on these bills.
Tax Assessment
The subject property comprises two parcels of land identified as tax map
28-1-1, parcels 25 and 27. The subject's 1997 full cash value and subsequent
assessment is outlined in the following table.
<TABLE>
<CAPTION>
=================================================================================================
Assessment
=================================================================================================
Property Land Improvements Total Estimated Taxes
Taxes Per SF
=================================================================================================
<S> <C> <C> <C> <C> <C>
Arboretum VI $1,095,600 $ 4,850,500 $ 5,946,100 $ 64,812 $0.89
Arboretum VII $ 596,700 $ 1,707,400 $ 2,304,100 $ 25,115 $0.82
=================================================================================================
</TABLE>
Ad Valorem Tax Conclusions
As developed above, the net tax associated with the properties range from
$0.82 to $0.89 per square foot. In an effort to evaluate the fairness of the
current assessed value and future prospect for change, we have compared the
assessments to the market value estimates concluded in this report. The
following table depicts this comparison:
<TABLE>
<CAPTION>
=================================================================================================
Assessment and Value Comparison
=================================================================================================
1997 Market Value Percentage
Property Parcel Number Assessment Estimate Difference
=================================================================================================
<S> <C> <C> <C> <C>
Arboretum VI 28-1-1-27 $5,946,100 $7,000,000 17.7%
Arboretum VII 28-1-1-25 $2,304,100 $2,000,000 -13.2%
=================================================================================================
</TABLE>
The properties were assessed last year and are scheduled for reassessment
in 1998. The current full cash values indicate a -13.2 and 17.7 percent
differential from our value conclusions. Because present assessment rules do not
call for automatic reassessment upon sale or transfer of ownership, and the tax
rate has remained relatively flat over the past decade, we have not forecast a
substantial change in real estate taxes in our analysis of the property.
Overall, we are projecting growth in real estate taxes consistent with
inflationary expectations, or about 3.5 percent per year.
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<PAGE>
ZONING
================================================================================
The subject property is zoned O-2, an Office District of Chesterfield
County. The O-2 zone emphasizes office development and is superseded by
Conditional Use Planned Development (CUPD) approvals encumbering the entire
Arboretum complex. Permitted uses include office and public uses. Only a limited
amount of retail or quasi-retail uses are permitted (i.e., travel agencies,
funeral homes, etc.). The following restrictions apply:
Building Height: 12 stories or 120 feet for office
buildings
Setback Along Major Artery:: 50 Feet
Minimum Setbacks:
Front: 30 Feet
Side: 20 Feet
Rear: 30 Feet
Parking Requirements: For buildings in excess of 10,000 square
feet, but less than 50,000 square feet -
1.0 space per 200 square feet of gross
floor area for the first 10,000 square
feet plus 1.0 space per 250 square feet
of gross floor area in excess of 10,000
square feet.
For buildings in excess of 50,000 square
feet, but less than 75,000 square feet -
1.0 space per 200 square feet of gross
floor area for the first 10,000 square
feet plus 1.0 space per 250 square feet
of gross floor area for the next 40,000
square feet, plus 1.0 space for each
additional 300 square feet in excess of
50,000 square feet.
For buildings in excess of 75,000 square
feet - 1.0 space per 200 square feet of
gross floor area for the first 10,000
square feet plus 1.0 space per 250
square feet of gross floor area for the
next 40,000 square feet plus 1.0 space
per 300 square feet for the next 25,000
square feet plus 1.0 space for each
additional 400 square feet in excess of
75,000 square feet.
We are not experts in the interpretation of complex zoning ordinances, but
one of the buildings does not appears to conform to current parking
requirements. As the buildings went through the approval process at the time of
construction, we assume that they are legal non-conforming uses. The formal
determination of compliance is beyond the scope of a real estate appraisal. The
following chart depicts the provided and required parking spaces for the
individual buildings.
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<PAGE>
Zoning
================================================================================
================================================================================
Building Size Parking Required
Building Name (SF/NRA) Provided Parking
================================================================================
Arboretum VI 73,195 313 287
Arboretum VII 30,791 121 133
================================================================================
Based on our physical inspection of the site, parking appeared to be
adequate, with various spaces available.
To the best of our knowledge, there are no known deed restrictions
(private or public) which would further limit the use of the subject property.
This statement should not be taken as a guarantee or warranty that no such
restrictions exist. Deed restrictions are a legal matter and only a title
examination by an attorney would normally uncover such restrictive covenants.
Thus, an examination by a title attorney is recommended on the subject property
if any questions regarding such restrictions arise.
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<PAGE>
HIGHEST AND BEST USE
================================================================================
According to the Dictionary of Real Estate Appraisal, Third Edition
(1993), a publication of the Appraisal Institute , the highest and best use of
real property is defined as:
The reasonably probable and legal use of vacant land or an improved
property, which is physically possible, appropriately supported,
financially feasible, and that results in the highest value. The four
criteria the highest and best use must meet are legal permissibility,
physical possibility, financial feasibility, and maximum profitability.
We evaluated the sites' highest and best use as if vacant. In this case,
the highest and best use must meet the aforementioned criteria. The use must be
(1) legally permissible, (2) physically possible, (3) financially feasible, and
(4) maximally productive.
Highest and Best Use, As If Vacant
The first test concerns permitted uses. According to our understanding of
the zoning ordinance noted earlier in this report, the site could be developed
with general office and public uses. Residential, retail and industrial uses are
not permitted.
The second test is what is physically possible. As discussed in the
Property Description section, the shape of the individual parcels, soil,
available utilities, topography, etc. do not physically limit development given
the sites' suburban location. Additionally, we know of no easements which
adversely impact the property. Thus, the sites have no physical limiting
conditions to restrict development.
The third and fourth tests are, respectively, what is feasible and what
will produce the highest net return. After determining those uses which are
physically possible and legally permissible, the remaining uses must be analyzed
in light of their financial feasibility. That is, for a potential use to be
seriously considered, it must have the potential to provide a sufficient return
to attract investment capital from alternative forms of investments.
The subject parcels are part of the Arboretum Office Park. Additional
office use would be logical and consistent with surrounding uses. Other
successful office developments have been developed in the surrounding areas,
leading to the conclusion that another similar use may also succeed. With the
site's good access and excellent location along the Midlothian Turnpike and
Powhite Parkway, prospective tenants would likely be interested in this
location. Accordingly, we conclude that the highest and best use of the subject
would be to develop an office building.
Although the office market in which the subject competes is showing
improvement in vacancy and rental rates, the rent level is still insufficient to
support the cost of new speculative construction. Currently, with the exception
of the pre-leased office space, there are no speculative buildings underway in
the subject market. Furthermore, this has been the case for the past five years.
This attests to the limited feasibility of new construction in the subject
market; however, as rental rates continue to increase, new construction is
anticipated to be feasible in the near future. A recent survey by the Morton G.
Thalhimer brokerage firm indicated that new speculative construction may be seen
in the market within one to two years.
Based on the foregoing, development of the sites, as if vacant, with
speculative office buildings appears unlikely at the present time. Nevertheless,
there are a number of larger
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<PAGE>
Highest and Best Use
================================================================================
tenants in the marketplace and a distinct lack of large availabilities.
Therefore, development of the sites on a build-to-suit basis could begin soon.
As Improved
According to the Dictionary of Real Estate Appraisal, highest and best use
of the property as improved is defined as:
The use that should be made of a property as it exists. An existing
property should be renovated or retained as is so long as it continues to
contribute to the total market value of the property, or until the return
from a new improvement would more than offset the cost of demolishing the
existing building and constructing a new one.
The highest and best use "as vacant" and "as improved" must be compatible.
If the site value as though vacant is greater than the property as improved
(less demolition cost), then existing improvements have no value. Sometimes,
however, existing improvements have interim use value. If the highest and best
use of the site as though vacant is holding for future development, then the
improvements might make a short term contribution to property value.
As noted in the Property Description section of this report, the subject
sites are improved with two office buildings totaling 30,791 and 73,195 net
rentable square feet. Completed in 1991, the improvements are functional in
design and are of good quality when compared to suburban office developments in
Chesterfield County. The building are 92 and 96 percent occupied. Since the
subject as improved closely resembles the ideal use, the existing use reflects
the highest and best use. Converting the subject to an alternative use would not
be appropriate as the current use is consistent with the ideal use. No other
modification would appear to make economic sense.
Given our final value conclusion there is obviously sufficient value in
the property, as improved, to negate any possible redevelopment of the tract for
the foreseeable future. This conclusion is supported by the data and analysis
presented in the balance of this report. This premise is obviously contingent
upon property management exercising prudence in maintaining the property.
For these reasons, it is our opinion that the subject property, as
presently developed, represents the highest and best use of the site as
improved.
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VALUATION PROCESS
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In this appraisal, we have used the Sales Comparison Approach and the
Income Capitalization Approach to develop a market value estimate.
The Cost Approach was not performed for the following reasons:
o As discussed in the Highest and Best Use section, new construction
is not feasible in the subject market at the present time.
Consequently, some external/economic obsolescence is inherent in the
reproduction/replacement cost new of the subject improvements.
Quantifying this form of obsolescence is highly subjective and very
theoretical. As a result, the reliability of this approach becomes
very suspect under these circumstances.
o The investment marketplace does not typically trade buildings such
as the subject on a cost/value basis.
o The value being sought is the leased fee estate, whereas the Cost
Approach normally depicts the fee simple estate. Therefore, the
interest being appraised cannot be reflected by the Cost Approach in
its traditional form.
o Market participants do not typically use this approach as a
determinant of value but rather as a reasonableness test that they
are paying less than replacement cost. While not justification in
itself to omit the approach, it does underscore its overall lack of
relevance in the market place.
In the Sales Comparison Approach, we performed the following steps:
o Searched the market for recent office building sales within the
Richmond area which contain similar physical and economic
characteristics to the subject property.
o Analyzed differences between those sales and the subject on the
basis of the sales price per square foot of net rentable area and
extracted overall capitalization rates.
o Correlated the various value indications into a point value estimate
from within the range.
In developing the Income Capitalization Approach, we:
o Studied rents in effect in the immediate and competing areas to
estimate potential rental income at market levels for the
properties.
o Studied the recent history of operating expenses at the subject
property and competing properties to estimate an appropriate level
of stabilized expenses and reserves for replacement.
o Estimated net operating income by subtracting stabilized expenses
from potential gross income after deduction for vacancy and
collection loss.
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Valuation Process
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o Prepared a discounted cash flow analysis in which the estimated
income and expenses over a projected holding period, and the
estimated property value at the time of reversion, are discounted at
an appropriate rate to estimate present market value.
In estimating the final value, we performed the following:
o Reviewed and re-examined each of the approaches to value which were
employed.
o Considered the type and reliability of the data used and
applicability of each approach.
o Reconciled the approaches to a final value conclusion.
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SALES COMPARISON APPROACH
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Methodology
In the Sales Comparison Approach, we estimated value by comparing these
individual properties with similar, recently sold properties in the surrounding
or competing area. Inherent in this approach is the principle of substitution,
which holds that when a property is replaceable in the market, its value tends
to be set at the cost of acquiring an equally desirable substitute property,
assuming that no costly delay is encountered in making the substitution.
By analyzing sales that qualify as arms-length transactions between
willing and knowledgeable buyers and sellers, we can identify value and price
trends. The basic steps of this approach are:
1. research recent, relevant property sales and current offerings throughout
the competitive area;
2. select and analyze properties that are similar to the property appraised,
considering changes in economic conditions that may have occurred between
the sale date and the date of value, and other physical, functional, or
locational factors;
3. identify sales that include favorable financing and calculate the cash
equivalent price;
4. reduce the sale prices to a common unit of comparison such as price per
square foot of net rentable area, effective gross income multiplier, and
overall capitalization rate;
5. make appropriate comparative adjustments to the prices of the comparable
properties to relate them to the property being appraised; and
6. interpret the adjusted sales data and draw a logical value conclusion.
In this instance, the sale prices inherent in the comparables were reduced
to those common units of comparison that can be used to analyze improved
properties that are similar to the subject. Considering the available units of
comparison, one of the most important benchmarks used by buyers and sellers of
office building is price per square foot of net rentable area (NRA).
The following summary chart includes recent transactions of suburban
office and flex buildings from which price trends can be identified for the
extraction of value parameters. The complete survey results on each property
appear in detain in the Addenda of the report.
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Sales Comparison Approach
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Arboretum VI and VII
Arboretum Parkway
Chesterfield County, Virginia
Summary of Building Sales
<TABLE>
<CAPTION>
=============================================================================================================================
Net Cash Sale Price Overall
Sale Year Built Rentable Percent Equivalent Per SF Rate
No. Name/Location Sale Date Renovated Area (SF) Occupied Sale Price (NRA)
=============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Vistas at Brookfield May 1997 1985 70,582 95% $5,840,000 $82.74 10.66%
5516 and 5540 Falmouth Street
Henrico County, Virginia
- -----------------------------------------------------------------------------------------------------------------------------
2 Liberty Mutual Building Dec 1996 1990 58,184 95% $6,000,000 $103.12 10.83%
4101 Cox Road
Henrico County, Virginia
- -----------------------------------------------------------------------------------------------------------------------------
3 Aetna Building June 1996 1990 100,178 99% $10,750,000 $107.31 10.20%
4701 Cox Road
Henrico County, Virginia
- -----------------------------------------------------------------------------------------------------------------------------
4 Capitol One Feb 1996 1996 108,000 100% $10,914,000 $101.06 10.26%
4881 Cox Road
Henrico County, Virginia
- -----------------------------------------------------------------------------------------------------------------------------
5 Owens & Minor Sept 1995 1989 63,000 100% $7,241,000 $114.94 8.71%
4800 Cox Road
Henrico County, Virginia
- -----------------------------------------------------------------------------------------------------------------------------
6 Technology Park Nov-1994 1985 120,098 98% $7,241,905 $60.30 12.37%
1001-1063 Technology Park
Henrico County, Virginia
- -----------------------------------------------------------------------------------------------------------------------------
7 Gaskins Center Dec-1994 1986 97,394 95% $5,350,000 $54.93 10.5%
3801-27 Gaskins Road
Henrico County, Virginia
=============================================================================================================================
Subj Arboretum VI and VII Date of 1991 30,791- 92%- -- -- --
Chesterfield County, Virginia Value 73,195 96%
=============================================================================================================================
</TABLE>
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Sales Comparison Approach
================================================================================
The subject property consists of two office buildings in Chesterfield
County. The buildings are generally classified in two categories: Class A
multi-story office and Class B one-story flex buildings. Arboretum VI comprises
Class A office product. Arboretum VII is a one-story flex building with 100
percent office finish. For purposes of this analysis, we will analyze the
subject via the Sales Comparison Approach in the two groups described above.
Sales Price Per Square Foot Analysis
The comparables indicate sales prices ranging from $82.74 to $114.94 per
square foot for multi-story Class A office product (Sales I-1 through I-5) and
$54.93. to $60.30 per square foot of net rentable area for flex product with 55
to 70 percent office finish (Sales I-6 and I-7). These prices per square foot
have been influenced by differences in construction quality, condition of the
premises, character of the tenancy, and location. Nevertheless, it is important
to address each property in terms of the conventional sequence of adjustments.
Following are those considerations which are relevant to the subject. The first
four elements (property rights conveyed, financing, conditions of sale, market
conditions) must be considered in advance of applying any other compensating
factors to derive value conclusions via the sales price per square foot
methodology. After these first four adjustments, we will consider the comparable
by property type: office or flex.
Property Rights Conveyed
At the time of sale, all of the comparable sales were encumbered by
existing leases; therefore, the leased fee estate was conveyed in each case. As
such, no adjustments are warranted for differences in property rights conveyed.
Seller Financing/Cash Equivalency
All of the comparables were sold on the basis of cash to the seller. Thus,
we have made no adjustments to the comparables for seller financing.
Conditions of Sale
The conditions of sale evidenced by the comparables appear to be typical
of the market and do not reflect unusual motivations of the parties.
Market Conditions
As shown in the summary table, the transactions occurred between November
1994 and May 1997. As indicated in the Office Market Analysis section, the
suburban Richmond office market has strengthened over the past year, with
declining vacancy and increasing rents. With the exception of Sale I-1, which
occurred in May 1997, all of the sales require upward adjustments for the date
of sale to reflect the improved market conditions.
Class A Office Building
As previously discussed, Arboretum VI comprises a multi-story Class A
office building that was constructed in 1991. This building is considered
superior to the other property which is the subject of this appraisal.
We researched five improved sales of Class A office buildings within
metropolitan Richmond. These sales, Comparables I-1 through I-5, sold between
September 1995 and May 1997 for $82.47 to $114.94 per square foot. As previously
discussed, with the exception of Sale I-1, which occurred in May 1997, all of
the sales require upward adjustments for the date of sale to reflect the
improved market conditions.
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Sales Comparison Approach
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The sales are all located within Henrico County in the Northwest Quadrant
and are considered superior in terms of location. With the exception of Sales
I-1 and I-4, all of the comparables are basically of similar age/condition as
the subject and are considered similar from a physical standpoint. Sale I-1 was
constructed in 1985 and is older than the subject buildings, requiring an upward
adjustment. In addition, this building has high expenses caused by an
inefficient floorplate. Sale I-4 was built in 1996 and represents new
construction and requires a downward adjustment for its superior age/condition.
Occupancy at these projects ranged from 95 to 100 percent, which is
considered basically equivalent to the subject's occupancy of 92 percent. Sale
I-5 was fully leased to a single tenant for an eleven year term and had limited
rollover risk, accounting for the higher overall sale price.
Sale I-1 is considered slightly inferior to the subject due to its older
age and inefficient floorplate. Sales I-2 and I-3 are of similar age to the
subject, but are located in a better submarket. Thus, they are considered
slightly superior. Sale I-4 is located in a better submarket and represents
newer construction; thus, it is also considered superior. Sale I-5 is considered
significantly superior due the longevity of the existing lease and resulting
limited rollover over the holding period. The following chart summarizes how
each sale compares to the subject property.
================================================================================
Improved Sales Comparison
================================================================================
Overall Rating
Sale Price Relative to
No. Per SF the Subject
================================================================================
I-1 $ 82.74 Inferior
I-2 $103.12 Slightly Superior
I-3 $107.31 Slightly Superior
I-4 $101.06 Slightly Superior
I-5 $114.94 Significantly Superior
================================================================================
Because of the multiple differences inherent in office properties with
respect to quality and design, location, and economics, not to mention the
quality of the tenant base, mathematical adjustments for the reasoning noted
above would be extremely difficult, at best.
Comparable I-1, with a sale price of $82.74 per square foot, is considered
inferior to the subject, while Comparables I-2 through I-5, with sale prices of
$101.06 to $114.94 per square foot, are considered superior. Thus, the
subject's value should most likely fall within the range of $82.74 and $101.06
per square foot, and probably nearer the high end of the range because Sales I-2
through I-4 are considered only slightly superior.
In consideration of the above analysis, we conclude a value for Arboretum
VI, which is a Class A office building, at $90.00 to $95.00 per square foot of
net rentable area. Our estimated value by the sales price per square foot method
is calculated as follows:
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Sales Comparison Approach
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<TABLE>
<CAPTION>
======================================================================================================
Class A Office Building
Sales Price Per Square Foot
======================================================================================================
Property Size (SF) Price Per SF Calculated Value Rounded Value
======================================================================================================
<S> <C> <C> <C> <C>
Arboretum VI 73,195 $90.00 - $95.00 $6,587,550 - $6,953,525 $6,600,000 - $7,000,000
======================================================================================================
</TABLE>
Flex Buildings
As previously discussed, Arboretum VII comprises a one-story flex
building with 100 percent office finish. This building is considered inferior to
the other property which is the subject of this appraisal.
We researched two improved sales of flex buildings within metropolitan
Richmond. These sales, Comparables I-6 and I-7 sold between November and
December 1994 for $54.93 to $60.30 per square foot. The buildings contain a
significantly lower percentage of office finish relative to the subject building
at 55 to 70 percent. Thus, in determining a unit price for the subject's flex
buildings, we also utilized Comparable Sale I-1. It is our opinion that the
value of the subject building lies within the range indicated by the flex
buildings with lower office finish and the low end of the range indicated for
pure multi-story office product.
The sales are all located within Henrico County in the Northwest Quadrant
and are considered superior in terms of location, requiring downward
adjustments. All of the sales represent slightly older construction than the
subject and are considered slightly inferior in terms of age/condition,
requiring upward adjustments. Sale I-1 comprises a multi-story Class A office
building with 100 percent office finish, requiring a downward adjustment for its
superior quality. Sales I-6 and I-7 represent flex product with 55 to 70 percent
office finish, requiring an upward adjustment for the lower build-out. Occupancy
at these projects ranged from 95 to 98 percent, which is considered basically
equivalent to the subject occupancy of 96 percent. Thus, no adjustment is
required for this factor.
Sale I-1 is considered superior to the subject due to its better location
and quality of construction (pure office product). Sales I-6 and I-7 are
considered overall inferior to the subject due to their inferior age/condition
and lower percentage of office finish, as well as for the date of sale. The
following chart summarizes how each sale compares to the subject property.
================================================================================
Improved Sales Comparison
================================================================================
Overall Rating
Sale Price Relative to
No. Per SF the Subject
================================================================================
I-1 $82.74 Superior
I-6 $60.30 Inferior
I-7 $54.93 Inferior
================================================================================
Because of the multiple differences inherent in office properties with
respect to quality and design, location, and economics, not to mention the
quality of the tenant base, mathematical adjustments for the reasoning noted
above would be extremely difficult, at best.
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Sales Comparison Approach
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Comparable I-1, with a sale price of $82.74 per square foot, is considered
superior to the subject, while Comparables I-6 and I-7, with sale prices of
$54.93 to $60.30 per square foot, are considered inferior. Thus, the subject's
value should most likely fall within the range of $60.30 and $82.74 per square
foot.
In consideration of the above analysis, we conclude a value for Arboretum
VII, which is a one-story flex building with 100 percent office finish, at
$65.00 to $75.00 per square foot of net rentable area. Our estimated value by
the sales price per square foot method is calculated as follows:
<TABLE>
<CAPTION>
===================================================================================================
Flex Building
Sales Price Per Square Foot
===================================================================================================
Property Size Price Per SF Calculated Value Rounded Value
(SF)
===================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Arboretum VII 30,791 $65.00 - $75.00 $2,001,415 - $2,309,325 $2,000,000 - $2,300,000
===================================================================================================
</TABLE>
Final Conclusions via Sales Comparison Approach
The subject property consists of two office properties. Individual sales
comparisons were prepared for each property leading to a conclusion of value on
a building by building basis via the Sales Comparison Approach which are
summarized in the following table:
================================================================================
Sales Comparison Approach
================================================================================
Property Value Conclusion
================================================================================
Arboretum VI $6,600,000 - $7,000,000
Arboretum VII $2,000,000 - $2,300,000
================================================================================
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INCOME CAPITALIZATION APPROACH
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Methodology
The Income Capitalization Approach is a method of converting the
anticipated economic benefits of owning property into a value estimate through
capitalization. The principle of "anticipation" underlies this approach in that
investors recognize the relationship between an asset's income and its value. In
order to value the anticipated economic benefits of a particular property,
potential income and expenses must be estimated, and the most appropriate
capitalization method must be selected.
The two most common methods of converting net income into value are direct
capitalization and discounted cash flow analysis. In direct capitalization, net
operating income is divided by an overall rate extracted from market sales to
indicate a value. In the discounted cash flow method, anticipated future net
income streams and a reversionary value are discounted to an estimate of net
present value at a chosen yield rate (internal rate of return).
In our opinion, the discounted cash flow method is the more appropriate
capitalization technique as the subject property consists of two office
buildings occupied by a number of tenants at differing rental rates for varying
lease terms. Direct capitalization does not adequately account for the
subtleties of all those variables. The following is a discussion of our
discounted cash flow analysis for each building which comprises the subject
property.
Because our subject property consists of various classes of office
properties, we will first analyze rental rates and conclude to a market rent for
each category. Thereafter, we will discuss each property individually in
sequence, applying its appropriate market rent.
Market Rent Analysis
Arboretum VI is a three-story Class A office building, while Arboretum
VII is a one-story Class B flex building with 100 percent office finish. Each
property type appeals to a different market segment and will generate a
different rent level. As a result, we have estimated a market rent appropriate
for each property type.
In order to form a conclusion of current market rent, consideration is
given to the most recent leases within the Arboretum Office Park since these
deals are the best comparables and therefore, the best indicators of achievable
rents. The table on the following page highlights the most recent leasing
activity within the park. In addition, we have examined actual lease data for
competitive buildings in the suburban Richmond market. The comparable rentals
are outlined in the table on the second following page. The majority of
comparable rentals are located in established business and industrial parks in
Henrico and Chesterfield Counties.
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<TABLE>
<CAPTION>
====================================================================================================================================
Recent Leases
Arboretum Office Park
- ------------------------------------------------------------------------------------------------------------------------------------
Minimum Tenant
Comp. Lease Lease Size Rent Term Expense Stop Annual Improvement
No. Building Name/Address Date Yr Built (SF) ($/SF) (Yrs) ($/SF) Escalations Concessions Allowance (SF)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Arboretum I Mar-97 1988 6,383 $15.75 3 Base Year 4.0% None $2.00
Nov-96 961 $16.50 5 Base Year 4.0% None As Is
2 Arboretum III Mar-97 1988 904 $16.00 1 Base Year N/A None As Is
Feb-97 1,874 $15.95 1.6 Base Year 3.0% $1.00
Oct-96 2,441 $15.95 3 Base Year 4.0% None As Is
3 Arboretum VI Mar-97 1991 2,678 $16.75 3 Base Year 4.0% None $7.00
-------------------------------------------------------------------------------------------------------------------------------
Totals 15,241 $16.15 3 Base Year 3.0% - 4.0% None $0.00 - $7.00
-------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
</TABLE>
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<TABLE>
<CAPTION>
====================================================================================================================================
COMPARABLE OFFICE RENTALS
- ------------------------------------------------------------------------------------------------------------------------------------
Minimum Tenant
Comp. Lease Lease Size Rent Term Expense Stop Annual Improvement
No. Building Name/Address Date Yr Built (SF) ($/SF) (Yrs) ($/SF) Escalations Concessions Allowance (SF)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Wheat First Securities May-97 1997 5,638 $17.00 3 Base Year 2.50% None $13.00
10700 North Park Drive
Innsbrook, Henrico County
2 Rowe Plaza Feb-97 1990 4,422 $16.50 5 Base Year 3.0% None $10.00
4510 Cox Road
Innsbrook, Henrico County
3 Liberty Mutual Building Feb-97 1990 4,000 $16.00 5 Base Year 3.0% None $6.00
4101 Cox Road
Innsbrook, Henrico County
4 The Allstate Building Jan-97 1986 1,300 $16.00 5 Base Year 3.0% None $5.00
4191 Cox Road
Innsbrook, Henrico County
-------------------------------------------------------------------------------------------------------------------------------
Totals 15,360 $16.38 5 Base Year 2.5% - 3.0% None $5.00 - $13.00
-------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
==========================================================================================================================
COMPARABLE FLEX RENTALS
- --------------------------------------------------------------------------------------------------------------------------
Minimum
Comp. Lease % Lease Size Rent Term Expense Stop Annual
No. Building Name/Address Date Office (SF) ($/SF) (Yrs) ($/SF) Escalations
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Interstate Center Jun-97 1981 100% 2,933 $13.50 3 Tax Escalation 5.0%
Laburnum Avenue Sep-96 100% 10,503 $13.75 5 Base Year 3.0%
Henrico County Aug-96 100% 1,407 $14.75 2 Base Year 3.0%
Jun-96 100% 3,353 $14.00 5 None 3.5%
Jun-96 100% 9,126 $13.00 7 Base Year 2.0%
2 Dabney A-1 Apr-97 1984 100% 7,000 $13.50 5 Base Year 3.0%
2238 Dabney Road May-97 100% 6,860 $8.50 10 Triple Net 3.0%
Henrico County
3 North Run Business Park Mar-97 1990 75% 4,576 $9.00 5 Triple Net 3.0%
1550 East Parham Road
Henrico County
4 Parham Forest Business Park Feb-97 1985 78% 6,966 $8.75 3 Triple Net CPI
2800-52 Parham Road
Henrico County
---------------------------------------------------------------------------------------------------------------------
Totals 41,182 $13.80 4 Base Year 2.0% - 3.0%
Average
---------------------------------------------------------------------------------------------------------------------
==========================================================================================================================
</TABLE>
===============================================================
COMPARABLE FLEX RENTALS
- ---------------------------------------------------------------
Tenant
Comp. Improvement
No. Building Name/Address Concessions Allowance (SF)
- ---------------------------------------------------------------
1 Interstate Center None Renewal
Laburnum Avenue None N/A
Henrico County None $1.50
2 months $8.50
None $10.00
2 Dabney A-1 N/A N/A
2238 Dabney Road
Henrico County
3 North Run Business Park 4 months N/A
1550 East Parham Road
Henrico County
4 Parham Forest Business Park None None
2800-52 Parham Road
Henrico County
----------------------------------------------------------
Totals None
----------------------------------------------------------
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<PAGE>
Income Capitalization Approach
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Class A Multi-Story Office
This property type consist of Arboretum VI, which is three stories in
height and contains 73,195 square feet. Typical unit sizes are between 535 and
11,946 square feet, with most in the 2,000 to 6,000 square foot range.
The most recently leases signed in the Arboretum Office Park range from
$15.75 to $16.75 per square foot, full service. Annual escalators were 3.0 to
4.0 percent. Tenant improvements ranged from none to $7.00 per square foot.
Additional rent for these leases include operating expense escalation over the
base year of occupancy. The 1997 leases at Arboretum III and the lease at
Arboretum VI represent new leases (rather than renewals). These leases indicate
rents of $15.95 to $16.75 per square foot. The highest rent of $16.75 per square
foot was achieved at the subject property (Arboretum VI) and includes the
highest tenant improvement allowance of $7.00 per square foot.
Prior to adjustment, the comparables reflect a rental range of $16.00 to
$17.00 per square foot, full service. After adjustment for rent concessions, the
range was unchanged. Rental 1, which indicated the highest rent of $17.00 per
square foot, represents new construction and included a tenant improvement
allowance of $13.00 per square foot. It is our opinion that the subject's rent
will be lower than the rent indicated for new construction. Excluding this
rental, the range narrows to $16.00 to $16.50 per square foot.
There are few concessions being granted in today's market. None of the
rentals included above standard tenant improvement allowances. Allowances ranged
from $5.00 to $10.00 per square foot for second generation space. Annual rent
escalations were generally 2.5 to 3.0 percent per year. Lease terms ranged from
three to five years, with most at five years.
Several brokers indicated that the market has continued to improve over
the last 12 to 24 months, with rents increasing and concessions remaining almost
non-existent. In the view of many, the leasing market has generally reached
stabilization and delivery of new office buildings to the market will be the
primary influence on rental rate and occupancy trends. In keeping with these
observations, we have assumed that market rent will increase at an average rate
of 3.5 percent per annum through the projection period. As discussed in the
Office Market Analysis section, rent spikes are not anticipated to occur in the
minds of market participants due primarily to the large amounts of vacant land
available for development. Investors surveyed indicated that rent spikes were
highly speculative and generally not incorporated into their purchase decisions.
Although many investors felt that rental rates may in fact grow at a rate
greater than inflation over the short term, they are unwilling to make this
assumption in their investment projections. Although it is not inconceivable
that rent spikes could occur, we believe the prudent approach at this stage is
level rent growth. Finally, free rent and tenant workletter concessions will
remain consistent with current levels.
The most recent lease deals within the Arboretum Office Park of $15.95 to
$16.75 per square foot are basically in-line with the rents for new leases in
the market of $16.00 to $16.50 per square foot. In our opinion, market rents
for Class A space at Arboretum VI will be $16.50 per square foot, recognizing
that some leasing will be done above and below this rate.
The above estimated market rents assume the following concession package.
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<PAGE>
Income Capitalization Approach
================================================================================
================================================================================
Free Rent Tenant Improvements
================================================================================
New Leases 1997 0 months 1997 $8.00
Thereafter 0 months Growing Thereafter at 3.5%
- --------------------------------------------------------------------------------
Renewing Leases 1997 0 months 1997 $4.00
Thereafter 0 months Growing Thereafter at 3.5%
================================================================================
Flex Building
This property type consist of Arboretum VII, which is a one-story flex
building with 100 percent office build-out and 30,791 square feet of space.
Typical unit size are between 1,111 and 20,577 square feet, with most in the
3,000 square foot range.
The most recently leases signed in the Arboretum Office Park for this
property type were executed in 1996 and range from $11.25 to $12.85 per square
foot, full service. Annual escalators were 3.0 to 4.0 percent. Additional rent
for these leases include operating expense escalation over the base year of
occupancy.
Prior to adjustment, the comparables reflect a rental range of $8.50 to
$9.00 per square foot, triple net, and $13.00 to $14.75 per square foot, full
service. Adjusting the triple net leases to a full service basis by adding
expenses of about $3.50 to $4.00 per square foot, indicates an adjusted rent of
$12.00 to $13.00 per square foot. Thus, the indicated rental range is $12.00 to
$14.75 per square foot. As depicted by the rentals, there does not appear to be
a significant rent differential between 80 and 100 percent office finish. Thus,
we have not adjusted the comparables to the subject for this factor. All of the
comparables are located in a superior location within the Northwest Quadrant.
However, this factor is offset somewhat by their older age. Nonetheless, it is
our opinion that the subject's rent will fall at the low end of the indicated
range given its inferior location.
There are few concessions being granted in today's market. None of the
rentals included above standard tenant improvement allowances. Allowances ranged
from $0.00 to $10.00 per square foot for second generation space. Annual rent
escalations were generally 2.0 to 3.5 percent per year. Lease terms ranged from
three to ten years, with most at five years.
The most recent lease deals at the Arboretum Office Park of $11.25 to
$12.85 per square foot in 1996 are at the low end of the range for new leases in
the market of $12.00 to $14.75 per square foot. In our opinion, market rents for
one-story flex space at Arboretum VII will be $12.00 per square foot. The above
estimated market rents assume the following concession package.
================================================================================
Free Rent Tenant Improvements
================================================================================
New Leases 1997 0 months 1997 $6.00
Thereafter 0 months Growing Thereafter at 3.5%
- --------------------------------------------------------------------------------
Renewing Leases 1997 0 months 1997 $3.00
Thereafter 0 months Growing Thereafter at 3.5%
================================================================================
Market Rent Summary
The following table summarizes the estimated market rent for the subject
property.
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
================================================================================
Year Built No. Class Market
Property Stores Rent
================================================================================
Arboretum VI 1991 3 A $16.50
Arboretum VII 1991 1 B $12.00
================================================================================
Arboretum VI
This property consists of a 73,195 square foot three-story Class A office
building which is 92 percent leased to 18 tenants. Tenants range in size from
535 to 11,946 square feet. Prime Company is the largest tenant, occupying 24
percent of the building, with a lease expiration in 2005. All of the remaining
leases expire by the year 2002. Following is an analysis of the current rental
income, vacancy and collection loss projections, and historical/future operating
and non-operating expenses for this property.
Current Rental Income
The current weighted average rental rate during is $15.59 per square foot
full service. Market rent for this building is estimated at $16.50 per square
foot. The subject's current average rent is below market and reflective of older
leases signed at lower rates. The Pro-Ject Lease Abstract Report is in the
Addenda. The tenant base is comprised of local companies and does not represents
an atypical credit risk.
Expense Reimbursements
Consistent with market leasing practice for this type of real estate, the
majority of tenants are responsible for their pro-rata share of operating
expenses (including real estate taxes) when they exceed those incurred during
the first full year of their occupancy. Future leases in the subject property
are projected to be structured in a similar fashion.
Allowance for Vacancy and Credit Loss
A deduction must be made from the total gross revenues due an investor to
account for the possibility of vacancy and/or non-collection of rent. We have,
therefore, deducted 2.0 percent from gross revenues as a global allowance for
the non-payment of rent and expenses reimbursements by a tenant. This rate has
considered the creditworthiness of the tenant roster and long-term market
conditions.
Additionally, our analysis over time has incorporated a lag vacancy
allowance which provides for downtime between the expiration of an existing
lease and the commencement of a new lease. Given the limited amount of space
availability in the market, we estimate that a 70 percent of the time a tenant
will renew and 30 percent of the time a tenant will vacate upon lease
expiration. We estimate that a space will remain vacate for six to twelve months
on average between tenants, or say nine months. Therefore, the weighted average
lag vacancy utilized between lease expirations can be calculated as follows:
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
Lag Vacancy Allowance
================================================================================
Event Probability X Down Time = Weighted Time
================================================================================
Rollover 70% X - 0 - = - 0 -
Turnover 30% X 9 months = 2.7 months
- --------------------------------------------------------------------------------
Total 100% Average Weighted Time = 3.0 months rounded
================================================================================
Based on the subject's weighted average downtime between leases, the
overall average occupancy rate of this building over the ten year holding period
is 95.4 percent. Including our overall vacancy/global credit loss allowance, the
implied overall occupancy rate is 93.4 percent. This is consistent with market
experience over the long term.
Total Operating Expenses
We were provided with historical operating expense data and the 1997
budget for this building, a copy of which is included in the Addenda. Finally,
we analyzed expense data from our files on similar properties.
Total Operating Expenses
Total operating expenses have decreased from $6.03 in 1994 to $5.05 per
square foot in 1996. The 1997 budget calls for $5.63 per square foot. The
expenses are somewhat high relative to other comparable buildings in the greater
Richmond area; however, a review of the individual expense categories indicated
bad debt expenses included within general & administrative expenses. In the
initial year of the investment holding period, we project operating expenses as
follows:
Real Estate Taxes - We discussed real estate taxes in the Real Estate Tax
and Assessments section. This expense was estimated at $64,812.
Operating Expenses - This expense category includes insurance, water and
sewer charges, repairs and maintenance, contract services, etc.
Historically, this line item fluctuated from $3.34 to $4.48 per square
foot, with a 1997 budget estimate of $3.55 per square foot. Relying on the
current budget, as supported by other known operating expenses in the
area, we stabilized this cost at $3.55 per square foot.
General & Administrative - This item of expense covers payroll,
supervision and the preparation of all budgets, office expenses, licenses
and the like. Deducting bad debt expenses, this category has been adjusted
to $37,350 or $0.51 per square foot.
Management - This item of expense provides for professional management
services like collections, supervision and the preparation of all budgets.
Typical management fees typically range from 3.0 to 4.0 percent of
effective gross income. The 1997 budget provides from a management fee of
3.0 percent. Based on market data, we used 3.0 percent.
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
Other Non-Operating Expenses
Other, non-operating expenses are projected in this analysis from
prevailing commission schedules, construction costs and accepted practices. We
analyzed each item of capital expenditure in an attempt to project what the
typical investor in a property like the subject would consider reasonable, based
upon informed opinion and experience. The following is a discussion of the
other, non-operating expenses incorporated into this analysis.
Tenant Improvements- Upon the expiration of a lease, we applied a tenant
improvement allowance of $8.00 per square foot for new tenants and $4.00
per square foot for renewing tenants. This expense is not passed through
to the tenants. The probability factor applies to speculative renewals.
Tenant improvements/finish costs are projected to increase at the rate of
3.5 percent per year through the projection period.
Leasing Commissions - New leases will require a leasing commission
equivalent to 4.0 percent of total rental income and 2.0 percent on
renewal leases. The new lease commission rate reflects the fact that a
landlord will typically be charged a commission of 3.0 to 4.0 percent by
the tenant's agent and 2.0 to 3.0 percent by the landlord's agent. Upon
renewal, landlords resist paying leasing commissions, but typically pay a
portion of the full commission rate or a partial fee to the management
company for its assistance in working with the tenant. This expense item
is not passed through to the tenant. The probability factor is used for
speculative renewals.
Reserves - Reserves for replacements should be (though as a practical
matter, they may not be) set aside to accumulate an amount sufficient to
replace and/or repair certain major building components, i.e., roof, HVAC
system, etc. during the period under analysis. We have estimated capital
reserves of $0.25 per net rentable square foot for Year One, increasing by
3.5 percent per year throughout our analysis.
All the above discussed expenses are forecasted to increase at an average
annual rate of 3.5 percent over the investment holding period. The forecast of
projected growth rates in all categories of expense reflect typical investor
expectations as noted in the Cushman & Wakefield Investor Survey, which is in
the Addenda. Except where noted, our projected growth rates for the various
types of expense categories generally do not attempt to reflect growth rates for
any individual year, but rather the long term trend over the period of analysis.
Cash Flow Projection
On the following page is our 11 year cash flow projections which include
our 10 year holding period and 11th year reversion. The cash flow reflects the
results of the PRO-JECT+ plus projection.
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Arboretum VI
Arboretum Parkway
Chesterfield County, Virginia
Cash Flow Analysis
<TABLE>
<CAPTION>
================================================================================================================================
Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year
1998 1999 2000 2001 2002 2003 2004 2005
================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUE FROM OPERATIONS
Rental Income $1,109,997 $1,140,719 $1,189,784 $1,271,854 $1,269,830 $1,275,697 $1,374,299 $1,378,525
Total Recoveries $15,033 $22,907 $31,249 $43,886 $55,452 $54,781 $58,485 $57,817
Less: Credit Loss ($22,501) ($23,273) ($24,421) ($26,315) ($26,506) ($26,610) ($28,656) ($28,727)
------------------------------------------------------------------------------------------------------
Effective Gross Income $1,102,529 $1,140,353 $1,196,612 $1,289,425 $1,298,776 $1,303,868 $1,404,128 $1,407,615
EXPENSES
Real Estate Taxes $65,757 $68,059 $70,441 $72,906 $75,458 $78,099 $80,832 $83,661
Operating Expenses $263,820 $273,054 $282,611 $292,502 $302,740 $313,335 $324,302 $335,653
General & Administrative $37,895 $39,221 $40,594 $42,015 $43,485 $45,007 $46,582 $48,213
Management $33,076 $34,211 $35,898 $38,683 $38,963 $39,116 $42,124 $42,229
------------------------------------------------------------------------------------------------------
TOTAL EXPENSES $400,548 $414,545 $429,544 $446,106 $460,646 $475,557 $493,840 $509,756
======================================================================================================
Net Operating Income $701,981 $725,808 $767,068 $843,319 $838,130 $828,311 $910,288 $897,859
======================================================================================================
Commissions $35,257 $18,882 $40,094 $6,763 $24,705 $51,895 $22,931 $34,170
Capital Reserves $18,299 $18,939 $19,602 $20,288 $20,998 $21,733 $22,494 $23,281
Alterations $80,495 $43,110 $91,538 $15,440 $56,403 $118,481 $52,353 $78,014
------------------------------------------------------------------------------------------------------
$567,930 $644,877 $615,834 $800,828 $736,024 $636,202 $812,510 $762,394
================================================================================================================================
</TABLE>
================================================================
Fiscal Year Fiscal Year Fiscal Year
2006 2007 2008
================================================================
REVENUE FROM OPERATIONS
Rental Income $1,444,523 $1,557,195 $1,577,387
Total Recoveries $39,082 $47,449 $47,517
Less: Credit Loss ($29,672) ($32,093) ($32,498)
---------------------------------------
Effective Gross Income $1,453,933 $1,572,551 $1,592,406
EXPENSES
Real Estate Taxes $86,590 $89,620 $92,757
Operating Expenses $347,401 $359,560 $372,144
General & Administrative $49,900 $51,647 $53,454
Management $43,618 $47,177 $47,772
---------------------------------------
TOTAL EXPENSES $527,509 $548,004 $566,127
=======================================
Net Operating Income $926,424 $1,024,547 $1,026,279
=======================================
Commissions $74,187 $29,947 $47,721
Capital Reserves $24,096 $24,939 $25,812
Alterations $169,377 $68,371 $108,951
---------------------------------------
$658,764 $901,290 $843,795
================================================================
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
Terminal Capitalization Rate
A terminal capitalization rate was used to estimate the market value of
the property at the end of the assumed investment holding period. We estimated
an appropriate terminal rate based on indicated rates in today's market.
================================================================================
Summary of Capitalization Rates
================================================================================
Sale Capitalization
No. Rate
================================================================================
1 10.66%
2 10.83%
3 10.20%
4 10.26%
5 8.71%
================================================================================
The OARs for the comparable sales from which we were able to derive
capitalization rates ranged from 8.71 to 10.83 percent. A premium was added to
today's rate to allow for the risk of unforeseen events or trends which might
affect our estimate of net operating income during the holding period, including
a possible deterioration in market conditions for the property. Investors
typically add 50 to 100 basis points to the "going-in" rate to arrive at a
terminal capitalization rate, according to Cushman & Wakefield's periodic
investor surveys.
Discount Rate Analysis
We estimated future cash flows, including property value at reversion, and
discounted that income stream at an internal rate of return (yield rates)
currently required by investors for similar-quality real property. The yield
rate (internal rate of return or IRR) is the single rate that discounts all
future equity benefits (cash flows and equity reversion) to an estimate of net
present value.
Cushman & Wakefield Valuation Advisory Services periodically surveys
national real estate investors to determine their investment objectives.
Following is a brief review of internal rates of return, overall rates, and
income and expense growth rates considered acceptable by respondents.
================================================================================
Autumn 1996 Investor Survey
Suburban Office Buildings
================================================================================
Going-in Terminal IRR
Low High Low High Low High
================================================================================
Mean 8.80% 9.50% 9.30% 9.90% 11.2% 11.6%
- --------------------------------------------------------------------------------
Range 8.00% 11.0% 8.00% 11.0% 10.0% 13.0%
================================================================================
The preceding table summarizes the investment parameters of some of the
most prominent investors currently acquiring high-grade investment properties in
the United States. Generally speaking, our survey reveals terminal
capitalization rates of 8.0 to 11.0 percent with the average low and high
responses of 9.3 and 9.9 percent for investment grade offices in non-CBD
suburban locations.
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
The wide range of investment parameters indicates that property risk and
yield are assessed to a particular investment property based on a variety of
variables. Risk is the primary determinant, and the risk variables include
whether current contract rents are significantly above or below current market
rents; the amount and timing of tenant rollovers; the risk to lease-up the
property and the strength of the market during the lease-up period; the
durability of the cash flow, and its ability to increase with inflation along
with the creditworthiness of the existing tenancy; investor demand for the
property type; the diversification of the metropolitan area; the property's
location within the local market and the supply and demand for the property type
within the market; and the effective age of the property.
The internal rate of return and terminal capitalization rate selected for
this analysis were strongly influenced by our recent Investor Survey. We realize
that this type of survey reflects target rather than transactional rates.
Transactional rates are usually difficult to obtain in the verification process
and are actually only target rates of the buyer at the time of sale. The
property's performance will ultimately determine the actual yield and
capitalization rate at the time of sale after a specific holding period. We have
found that, in improving markets or with above average properties, demand will
be high and transactional rates may be lower than target rates that are quoted
in surveys. We have tried to recognize this factor in our choice of these two
rates for our cash flow model.
Discussions with local investors and brokers including Morton G.
Thalhimer, Harrison and Bates, Innsbrook Development Company and the Joyner
Company, to name a few, indicated a yield rate range of 12.0 to 13.0 percent for
suburban Richmond office properties and a terminal capitalization rate of 10.0
to 10.5 percent. One investor familiar with the Richmond market noted that,
given the second-tier orientation of the Richmond market (on a national scale),
the subject's discount rate would be above the mean indicated in our national
survey. Another broker indicated that an investor purchasing a building recently
within Innsbrook utilized as discount rate of 12.5 percent and a terminal rate
of 10.0 percent.
In our DCF model, we selected a terminal capitalization rate that
accounted for the anticipated holding period and reflected the subject's
tenancy, quality and location. This rate also reflected the risk involved in our
DCF analysis based on the income and expense projections that were modeled, as
well as the approximate age of the property at the end of the holding period.
The rate we selected reflects the rollover risk over the holding period, as well
as the strengthening office market.
Conclusion
Using a 10.5 percent terminal rate and a 12.0 percent discount rate, our
cash flow model indicated a value of $7,000,000 or $95.63 per square foot. This
value estimate produces an implied going-in capitalization rate of 10.0 percent,
a figure well within the anticipated return necessary to interest investors for
this quality of building.
Regarding the composition of the yield, a significant 56 percent of the
subject's ultimate yield is derived from the cash flow of the property with the
balance attributable to the reversion or resale of the property at the
conclusion of the holding period. Typical investor requirements dictate that a
substantial amount of the value be derived from the cash flow. Greater risk is
evident when the reversion provides a larger percentage of the overall return
than the cash
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
flows. Finally, the average annual cash on cash return equals 10.2 percent,
based on this value conclusion. This rate would generate investor interest
because the yields are appropriate relative to the risks involved.
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Arboretum VI
Arboretum Parkway
Chesterfield County, Virginia
Discounted Cash Flow Analysis
================================================================================
NET DISCOUNT PRESENT ANNUAL
CALENDAR CASH FACTOR @ VALUE OF COMPOSITION CASH ON CASH
YEAR FLOW 12.00% CASH FLOWS OF YIELD RETURN
================================================================================
1998 $567,930 X 0.89286 = $507,080 7.28% 8.11%
1999 $644,877 X 0.79719 = $514,092 7.38% 9.21%
2000 $615,834 X 0.71178 = $438,338 6.29% 8.80%
2001 $800,828 X 0.63552 = $508,941 7.31% 11.44%
2002 $736,024 X 0.56743 = $417,640 6.00% 10.51%
2003 $636,202 X 0.50663 = $322,320 4.63% 9.09%
2004 $812,510 X 0.45235 = $367,538 5.28% 11.61%
2005 $762,394 X 0.40388 = $307,918 4.42% 10.89%
2006 $658,764 X 0.36061 = $237,557 3.41% 9.41%
2007 $901,290 X 0.32197 = $290,191 4.17% 12.88%
---------- -----
Total Present Value of Cash Flows $3,911,616 56.17% 10.20%
Average
Reversion:
2008 $1,026,279 (1) / 10.50% = $9,774,086
Less: Cost of Sale @ 3.00% $293,223
----------
Net Reversion $9,480,863
X Discount Factor 0.32197
----------
Total Present Value of Reversion $3,052,584 43.83%
Total Present Value of Cash Flow $6,964,200 100.00%
ROUNDED: $7,000,000
==========
---------------------------------------------------------
Gross Leasable Area (S.F.): 73,195
Per Square Foot of Gross Leasable Area: $95.63
Implicit Going-In Capitalization Rate:
Year One NOI $701,981
Going-In Capitalization Rate: 10.0%
---------------------------------------------------------
Note: (1) Net Operating Income
================================================================================
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
Arboretum VII
This property consists of a 30,791 square foot single story flex building
that contains 100 percent office finish. The building is 96 percent occupied by
four tenants. There is one vacant 1,111 square foot space. Cellular One is the
largest tenant, occupying 20,577 square feet, or 67 percent of the building,
through July 1997. Cellular One pays a current rent of $12.66 per square foot.
Following is an analysis of the current rental income, vacancy and collection
loss projections, and historical/future operating and non-operating expenses for
this property.
Current Rental Income
The current weighted average rental rate is $12.96 per square foot full
service. Market rent for this building is estimated at $12.00 per square foot.
The subject's current average rent is slightly above market; however, it will
become more in-line with market rent in year one, when Cellular One's lease
expires. The Pro-Ject Lease Abstract Report is in the Addenda. The tenant base
is comprised of local companies and does not represents an atypical credit risk.
Expense Reimbursements
Similar to the above discussed property, all of the leases were negotiated
on a full service basis. This analysis reflects this leasing structure.
Allowance for Vacancy and Credit Loss
We used the same parameters for this property relative to credit loss and
renewal probability. The resulting overall average occupancy rate over the ten
year holding period is 95.1 percent. Including our overall vacancy/global credit
loss allowance, the implied overall occupancy rate is 93.1 percent.
Total Operating Expenses
Total operating expenses ranged from $4.64 to $5.03 per square foot
between 1994 and 1996. The 1997 budget calls for $4.68 per square foot. Real
estate taxes were estimated in the Tax and Assessment section at $25,115. With
respect to operating expenses, the budget projected this line item at $3.01 per
square foot, which is in-line with the historical trends at $2.98 to $3.79 per
square foot. Accordingly, we estimated this expense consistent with the budget.
General and administrative expenses included bad debt expenses and have been
adjusted to $15,744 or $0.51 per square foot.
Other Non-Operating Expenses
We applied a tenant improvement allowance of $6.00 per square foot for new
tenants and $3.00 per square foot for renewing tenants. Again, the probability
factor applies to speculative renewals. We employed the same leasing commissions
and capital reserves as used for Arboretum VI.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Arboretum VII
Arboretum Parkway
Chesterfield County, Virginia
Cash Flow Analysis
<TABLE>
<CAPTION>
================================================================================================================================
Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year
1998 1999 2000 2001 2002 2003 2004 2005
================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUE FROM OPERATIONS
Rental Income $337,623 $416,898 $407,799 $440,617 $440,267 $385,663 $491,596 $483,643
Total Recoveries $3,107 $8,512 $11,886 $16,935 $21,284 $12,141 $8,264 $11,535
Less: Credit Loss ($6,815) ($8,508) ($8,394) ($9,151) ($9,231) ($7,956) ($9,997) ($9,904)
-----------------------------------------------------------------------------------------------------
Effective Gross Income $333,915 $416,902 $411,291 $448,401 $452,320 $389,848 $489,863 $485,274
EXPENSES
Real Estate Taxes $25,481 $26,373 $27,296 $28,252 $29,240 $30,264 $31,323 $32,419
Operating Expenses $94,068 $97,361 $100,768 $104,295 $107,945 $111,723 $115,634 $119,681
General & Administrative $15,974 $16,533 $17,111 $17,710 $18,330 $18,972 $19,636 $20,323
Management $10,017 $12,507 $12,339 $13,452 $13,570 $11,695 $14,696 $14,558
-----------------------------------------------------------------------------------------------------
TOTAL EXPENSES $145,540 $152,774 $157,514 $163,709 $169,085 $172,654 $181,289 $186,981
=====================================================================================================
Net Operating Income $188,375 $264,128 $253,777 $284,692 $283,236 $217,194 $308,574 $298,293
=====================================================================================================
Commissions $39,992 $0 $11,507 $0 $0 $54,401 $0 $14,145
Capital Reserves $7,698 $7,967 $8,246 $8,535 $8,833 $9,143 $9,462 $9,794
Alterations $86,916 $0 $25,008 $0 $0 $118,232 $0 $30,741
-----------------------------------------------------------------------------------------------------
$53,769 $256,161 $209,016 $276,157 $274,402 $35,418 $299,112 $243,613
================================================================================================================================
</TABLE>
===============================================================
Fiscal Year Fiscal Year Fiscal Year
2006 2007 2008
===============================================================
REVENUE FROM OPERATIONS
Rental Income $526,687 $542,487 $446,747
Total Recoveries $14,666 $21,631 $16,014
Less Credit Loss ($10,827) ($11,282) ($9,255)
------------------------------------
Effective Gross Income $530,526 $552,836 $453,506
EXPENSES
Real Estate Taxes $33,554 $34,728 $35,944
Operating Expenses $123,870 $128,205 $132,692
General & Administrative $21,034 $21,770 $22,532
Management $15,916 $16,585 $13,605
------------------------------------
TOTAL EXPENSES $194,374 $201,288 $204,773
====================================
Net Operating Income $336,162 $351,548 $248,733
====================================
Commissions $0 $0 $64,711
Capital Reserves $10,136 $10,491 $10,858
Alterations $0 $0 $140,637
------------------------------------
$326,016 $341,057 $32,527
===============================================================
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
Terminal Capitalization Rate
Similarly, we selected the same terminal capitalization rate of 10.5
percent for this property.
Transaction Costs
A costs of sale of 3.0 percent is used in this analysis.
Discount Rate
We used an IRR of 12.0 percent. On the following page is the Discounted
Cash Flow Analysis for this asset. Using the above indicated rates of return,
our cash flow model indicated a value of $2,000,000 or $64.95 per square foot.
This value estimate produces an implied going-in capitalization rate of 9.4
percent, which is slightly below the anticipated return necessary to interest
investors for this quality of building; however, It is skewed downward due to
the significant rollover in the first year of the holding period due to Cellular
One's lease expiration for 67 percent of the building.
Regarding the composition of the yield, a significant 62 percent of the
subject's ultimate yield is derived from the cash flow of the property with the
balance attributable to the reversion or resale of the property at the
conclusion of the holding period. Typical investor requirements dictate that a
substantial amount of the value be derived from the cash flow. Finally, the
average annual cash on cash return equals 11.6 percent.
================================================================================
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Arboretum VII
Arboretum Parkway
Chesterfield County, Virginia
Discounted Cash Flow Analysis
================================================================================
NET DISCOUNT PRESENT ANNUAL
CALENDAR CASH FACTOR @ VALUE OF COMPOSITION CASH ON CASH
YEAR FLOW 12.00% CASH FLOWS OF YIELD RETURN
================================================================================
1998 $53,769 X 0.89286 = $48,008 2.46% 2.69%
1999 $256,161 X 0.79719 = $204,210 10.47% 12.81%
2000 $209,016 X 0.71178 = $148,773 7.63% 10.45%
2001 $276,157 X 0.63552 = $175,503 9.00% 13.81%
2002 $274,402 X 0.56743 = $155,703 7.98% 13.72%
2003 $35,418 X 0.50663 = $17,944 0.92% 1.77%
2004 $299,112 X 0.45235 = $135,303 6.93% 14.96%
2005 $243,613 X 0.40388 = $98,391 5.04% 12.18%
2006 $326,016 X 0.36061 = $117,565 6.03% 16.30%
2007 $341,057 X 0.32197 = $109,811 5.63% 17.05%
---------- -----
Total Present Value of Cash Flows $1,211,211 62.08% 11.57%
Average
Reversion:
2008 $248,733 (1) / 10.50% = $2,368,886
Less: Cost of Sale @ 3.00% $71,067
----------
Net Reversion $2,297,819
X Discount Factor 0.32197
----------
Total Present Value of Reversion $739,836 37.92%
Total Present Value of Cash Flow $1,951,048 100.00%
ROUNDED: $2,000,000
==========
---------------------------------------------------------
Gross Leasable Area (S.F.): 30,791
Per Square Foot of Gross Leasable Area: $64.95
Implicit Going-In Capitalization Rate:
Year One NOI $188,375
Going-In Capitalization Rate: 9.4%
---------------------------------------------------------
Note: (1) Net Operating Income
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
Final Conclusions via Income Approach
The subject property consists of two office properties: a three-story
Class A building (Arboretum VI) and a one-story Class B flex building (Arboretum
VII). Individual cash flow projections were prepared for each property leading
to a conclusion of value on a building by building basis via the Income
Capitalization Approach which are summarized in the following table:
================================================================================
Income Approach
================================================================================
Property Value Conclusion Value Per SF
================================================================================
Arboretum VI $7,000,000 $95.63
Arboretum VII $2,000,000 $64.95
================================================================================
================================================================================
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
RECONCILIATION AND FINAL VALUE ESTIMATE
================================================================================
We have considered two of the three traditional approaches to estimating
market value of commercial real estate in our analysis, which indicate the
following values for the subject property:
================================================================================
Property Sales Comparison Income Capitalization
================================================================================
Arboretum VI $6,600,000 - $7,000,000 $7,000,000
Arboretum VII $2,000,000 - $2,300,000 $2,000,000
================================================================================
The three traditional methods of estimating the market value of commercial
real estate are not mutually exclusive approaches to deriving an estimate of
most probable selling price, but are interdependent methodologies, each relying
on components from at least one of the other approaches. Hence, the Cost
Approach requires extensive market data to derive estimates of depreciation and
to determine the value of land as if vacant. This approach may also require
income data in order to make adjustments for functional and economic
obsolescence. The Sales Comparison Approach requires application of methods from
the Income Capitalization Approach in order to make adjustments for differences
in income that have influenced the sale price. Consideration of market data is
also required for the Income Capitalization Approach in the selection and
application of equity, capitalization and discount rates, and estimation of
income and expenses. Consequently, it is our opinion that purchasers and
sellers, at least intuitively, consider components of all three approaches in
the process of negotiating an acceptable price for a particular property.
It is the Income Capitalization Approach, however, that is logically
considered the most appropriate technique for estimating the value of income
producing property. Not only does this approach represent the most direct and
accurate simulation of market behavior, it is the method explicitly employed by
buyers and sellers in acquisition and disposition decisions. Therefore,
following the implied dictum of the market, we have used an approach based
primarily on projected income as the foundation for our valuation of the subject
property.
There are several additional reasons why the Sales Comparison Approach
does not form the basis of our value estimate for the subject property. The
quantity and quality of market information inhibits the use of the Sales
Comparison Approach. Inadequacy of information regarding gross and net income,
lease details and expenses of comparable sales often deters accurate and
relevant adjustments of unit price indicators. Comparison at a dollar per square
foot level precludes the analysis of those key factors which form the basis for
projections on which the purchase decision was made.
Based on our complete appraisal, as defined by the Uniform Standards of
Professional Appraisal Practice, we have formed an opinion that the prospective
market values of the leased fee estate in the referenced properties, subject to
the assumptions, limiting conditions, certifications, and definitions, as of
July 1, 1997, will be:
================================================================================
-60-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Reconciliation and Final Value Estimate
================================================================================
================================================================================
Property Market Value
================================================================================
Arboretum VI $7,000,000
Arboretum VII $2,000,000
================================================================================
================================================================================
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
ASSUMPTIONS AND LIMITING CONDITIONS
================================================================================
"Appraisal" means the appraisal report and opinion of value stated therein; or
the letter opinion of value, to which these Assumptions and Limiting Conditions
are annexed.
"Property" means the subject of the Appraisal.
C&W" means Cushman & Wakefield, Inc. or its subsidiary which issued the
Appraisal.
"Appraiser(s)" means the employee(s) of C&W who prepared and signed the
Appraisal.
This appraisal is made subject to the following assumptions and limiting
conditions:
1. No opinion is intended to be expressed and no responsibility is assumed
for the legal description or for any matters which are legal in nature or
require legal expertise or specialized knowledge beyond that of a real
estate appraiser. Title to the Property is assumed to be good and
marketable and the Property is assumed to be free and clear of all liens
unless otherwise stated. No survey of the Property was undertaken.
2. The information contained in the Appraisal or upon which the Appraisal is
based has been gathered from sources the Appraiser assumes to be reliable
and accurate. Some of such information may have been provided by the owner
of the Property. Neither the Appraiser nor C&W shall be responsible for
the accuracy or completeness of such information, including the
correctness of estimates, opinions, dimensions, sketches, exhibits and
factual matters.
3. The opinion of value is only as of the date stated in the Appraisal.
Changes since that date in external and market factors or in the Property
itself can significantly affect property value.
4. The Appraisal is to be used in whole and not in part. No part of the
Appraisal shall be used in conjunction with any other appraisal.
Publication of the Appraisal or any portion thereof without the prior
written consent of C&W is prohibited. Except as may be otherwise stated in
the letter of engagement, the Appraisal may not be used by any person
other than the party to whom it is addressed or for purposes other than
that for which it was prepared. No part of the Appraisal shall be conveyed
to the public through advertising, or used in any sales or promotional
material without C&W's prior written consent. Reference to the Appraisal
Institute or to the MAI designation is prohibited.
5. Except as may be otherwise stated in the letter of engagement, the
Appraiser shall not be required to give testimony in any court or
administrative proceeding relating to the Property or the Appraisal.
================================================================================
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Assumptions And Limiting Conditions
================================================================================
6. The Appraisal assumes (a) responsible ownership and competent management
of the Property; (b) there are no hidden or unapparent conditions of the
Property, subsoil or structures that render the Property more or less
valuable (no responsibility is assumed for such conditions or for
arranging for engineering studies that may be required to discover them);
(c) full compliance with all applicable federal, state and local zoning
and environmental regulations and laws, unless noncompliance is stated,
defined and considered in the Appraisal; and (d) all required licenses,
certificates of occupancy and other governmental consents have been or can
be obtained and renewed for any use on which the value estimate contained
in the Appraisal is based.
7. The physical condition of the improvements considered by the Appraisal is
based on visual inspection by the Appraiser or other person identified in
the Appraisal. C&W assumes no responsibility for the soundness of
structural members nor for the condition of mechanical equipment, plumbing
or electrical components.
8. The forecasted potential gross income referred to in the Appraisal may be
based on lease summaries provided by the owner or third parties. The
Appraiser has not reviewed lease documents and assumes no responsibility
for the authenticity or completeness of lease information provided by
others. C&W recommends that legal advice be obtained regarding the
interpretation of lease provisions and the contractual rights of parties.
9. The forecasts of income and expenses are not predictions of the future.
Rather, they are the Appraiser's best estimates of current market thinking
on future income and expenses. The Appraiser and C&W make no warranty or
representation that these forecasts will materialize. The real estate
market is constantly fluctuating and changing. It is not the Appraiser's
task to predict or in any way warrant the conditions of a future real
estate market; the Appraiser can only reflect what the investment
community, as of the date of the Appraisal, envisages for the future in
terms of rental rates, expenses, supply and demand.
10. Unless otherwise stated in the Appraisal, the existence of potentially
hazardous or toxic materials which may have been used in the construction
or maintenance of the improvements or may be located at or about the
Property was not considered in arriving at the opinion of value. These
materials (such as formaldehyde foam insulation, asbestos insulation and
other potentially hazardous materials) may adversely affect the value of
the Property. The Appraisers are not qualified to detect such substances.
C&W recommends that an environmental expert be employed to determine the
impact of these matters on the opinion of value.
11. Unless otherwise stated in the Appraisal, compliance with the requirements
of the Americans With Disabilities Act of 1990 (ADA) has not been
considered in arriving at the opinion of value. Failure to comply with the
requirements of the ADA may adversely affect the value of the property.
C&W recommends that an expert in this field be employed.
================================================================================
-63-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
CERTIFICATION OF APPRAISAL
================================================================================
We certify that, to the best of our knowledge and belief:
1. Kelly J. Small inspected the property and prepared the report. Donald R.
Morris, MAI, Manager, Cushman & Wakefield of Washington D.C., Valuation
Advisory Services, inspected the property and has reviewed and approved
the report.
2. The statements of fact contained in this report are true and correct.
3. The reported analyses, opinions, and conclusions are limited only by the
reported assumptions and limiting conditions, and are our personal,
unbiased professional analyses, opinions, and conclusions.
4. We have no present or prospective interest in the property that is the
subject of this report, and we have no personal interest or bias with
respect to the parties involved.
5. Our compensation is not contingent upon the reporting of a predetermined
value or direction in value that favors the cause of the client, the
amount of the value estimate, the attainment of a stipulated result, or
the occurrence of a subsequent event. The appraisal assignment was not
based on a requested minimum valuation, a specific valuation or the
approval of a loan.
6. No one provided significant professional assistance to the persons signing
this report.
7. Our analyses, opinions and conclusions were developed, and this report has
been prepared, in conformity with the Uniform Standards of Professional
Appraisal Practice of the Appraisal Foundation and the Code of
Professional Ethics and the Standards of Professional Appraisal Practice
of the Appraisal Institute.
8. The use of this report is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives.
9. As of the date of this report, Donald R. Morris, MAI, have completed the
requirements of the continuing education program of the Appraisal
Institute.
10. It is our opinion that the estimated market value of the subject property,
in as-is condition, as of the effective date of the appraisal, as of July
1, 1997, is:
================================================================================
Property Value Conclusions
================================================================================
Arboretum VI $7,000,000
Arboretum VII $2,000,000
================================================================================
/s/ Kelly J. Small /s/ Donald R. Morris
Kelly J. Small Donald R. Morris, MAI
Appraiser Manager, Director
Virginia Certified General Appraiser No. 4001-002465
================================================================================
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
ADDENDA
================================================================================
================================================================================
-65-
<PAGE>
Addenda
================================================================================
Legal Description
<PAGE>
Exhibit "A-2"
ARBORETUM VI
LEGAL DESCRIPTION
as outlined in red on Exhibit "A-1" attached hereto and made a part hereof, out
of a larger building situated on the 7.739 acre parcel shown on the attached
plat prepared by Dewberry and Davis, dated September 29, 1989, attached hereto
as Exhibit "A-3" and made a part hereof
<PAGE>
Exhibit "B-1"
ARBORETUM VII
LEGAL DESCRIPTION
as outlined in red on Exhibit "B" attached hereto and made a part hereof out of
a larger building situated on the 4.213 acre parcel as shown on the plat
prepared by Dewberry and Davis dated September 29, 1989, attached hereto as
Exhibit "B-2" and made part hereof.
<PAGE>
Addenda
================================================================================
Floor Plans
<PAGE>
[GRAPHIC OMITTED]
[FLOOR PLANS OF ARBORETUM VI FIRST FLOOR]
<PAGE>
[GRAPHIC OMITTED]
[ARBORETUM VI]
CHILDRESS KLEIN
P R 0 P E R T I E S
<PAGE>
Addenda
================================================================================
Site Plans
<PAGE>
[GRAPHIC OMITTED]
[PLAT SHOWING TWO PARCELS OF LAND]
<PAGE>
Addenda
================================================================================
Improved Building Sales
<PAGE>
OFFICE BUILDING SALE
================================================================================
I-1 Sale
Building Name: Vistas at Brookfield
Location: 5516 and 5540 Falmouth Street
Brookfield Office Park
Richmond, Henrico, VA
Grantor: Continental Properties, Inc.
Grantee: Brookfield Holdings LP
Date of Sale: 05/01/97
Physical Description:
Gross Building Area; 70,582 Square Feet
Net Rentable Area: 70,582 Square Feet
Year Built: 1985
Occupancy at Sale: 95%
Quality: Good
Stories: 4
Sale Price: $5,840,000
Terms of Sale: All cash
Economic Indicators:
Effective Gross Income: $1,149,812 Buyer's Proforma
Less: Operating Expenses: $527,000
Net Operating Income: $622,812
Appraisal Indicators:
Effective Gross Inc. Mult.: 5.08
Overall Rate (OAR): 10.66%
Sale Price/Square Foot (GSF): $82.74
Sale Price/Square Foot (RSF): $82.74
COMMENTS:
This is the sale of two four-story Class B office
buildings located within the Brookfield Office
Park, just south of the intersection of
Interstate 64 and West Broad Street. The
buildings are adjoining and were 95 percent
leased at the time of sale to numerous mid-size
tenants including AEC Engineering, Brian
Brothers, and Kelsum and Lee. According to the
broker for the sale, there was limited
<PAGE>
OFFICE BUILDING SALE
================================================================================
I-1 Continued
rollover over the next two years. Rental rates in
this building range from $15.50 to $16.50 per
square foot, full service.
The broker also indicated that the expenses for
these buildings are high due to high utility
expenses caused by an inefficient floorplate. A
$10,000 credit was given to the buyer for physical
item.
<PAGE>
OFFICE BUILDING SALE
================================================================================
I-2 Sale
Building Name: Liberty Mutual Building
Location: 4101 Cox Road
Innsbrook Office Park
Richmond, Henrico, VA
Grantor: Home Beneficial Life Ins Co.
Grantee: Highwoods-Forsythe LP
Date of Sale: 12/01/96
Recording Data: 2691/2034
Physical Description:
Gross Building Area: 58,184 Square Feet
Net Rentable Area: 58,184 Square Feet
Year Built: 1990
Occupancy at Sale: 95%
Quality: Good
Sale Price: $6,000,000
Terms of Sale: All cash
Economic Indicators:
Effective Gross Income: $940,000 Buyer's Proforma
Less: Operating Expenses: $290,000
Net Operating Income: $650,000
Appraisal Indicators:
Effective Gross Inc. Mult.: 6.38
Overall Rate (OAR): 10.83%
Sale Price/Square Foot (GSF): $103.12
Sale Price/Square Foot (RSF): $103.12
COMMENTS:
This is the sale of a Class A building that was
100 percent occupied by five tenants. Capitol One
was the largest tenant, with 35,000 square feet,
followed by Libery Mutual with 18,000 square
feet. The seller's proforma included a lower
effective gross income and higher expense
estimate, resulting in a lower overall rate of
10.0 percent. The property was marketed for six
months before
<PAGE>
OFFICE BUILDING SALE
================================================================================
I-2 Continued
selling.
The building was delivered to the market during the
beginning of the recession, with a subsequent poor
absorption history. The lender ultimately foreclosed
on the property and sold it to Home Beneficial Life
Insurance Company in December 1993 for $5,050,000.
The 1993 sale included 2.9 acres of excess land
valued at $252,000. The most recent acquisition did
not include this land.
<PAGE>
OFFICE BUILDING SALE
================================================================================
I-3 Sale
Building Name: Aetna Building
Location: 4701 Cox Road
Innsbrook Office Park
Richmond, Henrico, VA
Grantor: 4701 Cox Road LP
Grantee: Highwoods-Forsythe LP
Date of Sale: 06/01/96
Recording Data: 2656/1793
Physical Description:
Gross Building Area: 100,178 Square Feet
Net Rentable Area: 100,178 Square Feet
Year Built: 1990
Occupancy at Sale: 99 %
Quality: Good
Stories: 4
Sale Price: $10,750,000
Terms of Sale: All cash
Economic Indicators:
Effective Gross Income: $1,546,763 Buyer's Proforma
Less: Operating Expenses: $451,338
Net Operating Income: $1,095,425
Appraisal Indicators:
Effective Gross Inc. Mult.: 6.95
Overall Rate (OAR): 10.2%
Sale Price/Square Foot (GSF): $107.31
Sale Price/Square Foot (RSF): $107.31
COMMENTS:
This property was built in 1990 with Aetna as the
lead tenant. Atena subsequently downsized,
vacating 56,000 square feet.
The property was acquired in July 1993 by several local
investors for speculative investment. The initial owner,
<PAGE>
OFFICE BUILDING SALE
================================================================================
I-3 Continued
Rowe Development, experienced company-wide financial
problems and lost most of its extensive office
holdings. The previous purchaser was a Dutch group
who viewed the property as a long term investment
with good upside potential. They considered the loss
of Aetna as a lead tenant as minimal risk given the
low occupancy in Innsbrook.
At the time of sale, the property was 99 percent,
with the most recent rental rates at $16.00 to $16.50
per square foot. The income data presented above was
estimated by the buyer based on existing leases and
expenses and do not include reserves, leasing
commissions, or alterations.
<PAGE>
OFFICE BUILDING SALE
================================================================================
I-4 Sale
Building Name: Capitol One
Location: 4881 Cox Road
Innsbrook Office Park
Richmond, Henrico, VA
Grantor: Liberty Property LP
Grantee: First Security Bank of Utah
Date of Sale: 02/01/96
Recording Data: 2633/402
Physical Description:
Gross Building Area: 108,000 Square Feet
Net Rentable Area: 108,000 Square Feet
Year Built: 1996
Occupancy at Sale: 100 %
Quality: Good
Stories: 4
Sale Price: $10,914,000
Terms of Sale: Cash to seller
Economic Indicators:
Effective Gross Income: $1,178,500 Actual
Less: Operating Expenses: $58,925
Net Operating Income: $1,119,575
Appraisal Indicators:
Effective Gross Inc. Mult.: 9.26
Overall Rate (OAR): 10.26%
Sale Price/Square Foot (GSF): $101.06
Sale Price/Square Foot (RSF): $101.06
COMMENTS:
This was a build-to-suit project for which a
purchase option was exercised immediately after
completion of construction. At the time of sale,
the building was triple net leased to the tenant
at a rental rate of $10.91 per square foot.
<PAGE>
OFFICE BUILDING SALE
================================================================================
I-5 Sale
Building Name: Owens & Minor Headquarters
Location: 4800 Cox Road
Innsbrook Office Park
Richmond, Henrico, VA
Grantor: Owens & Minor JV
Grantee: O&M Investors LP
Date of Sale: 09/01/95
Recording Data: 2604/1487
Physical Description:
Gross Building Area: 63,000 Square Feet
Net Rentable Area: 63,000 Square Feet
Year Built: 1989
Occupancy at Sale: 100 %
Quality: Good
Sale Price: $7,241,000
Terms of Sale: All cash
Economic Indicators:
Effective Gross Income: $778,000 Actual
Less: Operating Expenses: $147,261
Net Operating Income: $630,739
Appraisal Indicators:
Overall Rate (OAR): 8.71 %
Sale Price/Square Foot (GSF): $114.94
Sale Price/Square Foot (RSF): $114.94
COMMENTS:
This represents a sale/leaseback of the Owens &
Minors Headquarters office building. At the time
of sale, the buiding was triple net leased for
eleven years to a single tenant at a rental rate
of $12.35 per square foot. The rent schedule
over the term is as follows:
Yr 1: $778,000
Yr 2: $828,000
<PAGE>
OFFICE BUILDING SALE
================================================================================
I-5 Continued
Yr 3: $867,500
Yr 4-10: $878,000
Yr 11: $927,500
<PAGE>
RESEARCH & DEVELOP. SALE
- --------------------------------------------------------------------------------
I-6 Sale
Building Name: Technology Park
Location: 1001-1063 Technology Park
Richmond, Henrico, VA
Parcel Number: 033-A-52
Grantor: Virginia Center
Grantee: Highwoods Realty LP
Date of Sale: 11/29/94
Recording Data: 2558-499
Recording Date: 11/29/94
Physical Description:
Land Area: 736,600 Square Feet
16.91 Acres
Gross Building Area: 120,098 Square Feet
Finished Office Area: 70.0 %
% Air Conditioned: 70 %
Sprinklered: No
Year Built: 1985
Land/Building Ratio: 6.13:1
Rail Access: No
Construction Type: Masonry
Zoning: M-1C
Sale Price: $7,241,905
Terms of Sale: Cash to seller
Economic Indicators:
Gross Annual Income: $1,089,538 Seller's Proforma
Less: Vacancy: $21,791 Seller's Proforma
Effective Gross Income: $1,067,747 Seller's Proforma
Less: Operating Expenses: $171,740 Seller's Proforma
Net Operating Income: $896,007 Seller's Proforma
Appraisal Indicators:
Overall Rate (OAR): 12.37%
Sale Price/Square Foot (GSF): $60.30
<PAGE>
RESEARCH & DEVELOP. SALE
- --------------------------------------------------------------------------------
I-6 (Continued)
COMMENTS:
Tenants pay rent on a net basis with expense pass throughs.
<PAGE>
RESEARCH & DEVELOP. SALE
- --------------------------------------------------------------------------------
I-7 Sale
Building Name: Gaskins Centre A & C
Location: 3801-3827 Gaskins Rd & 9878
to 9898 Mayland Drive
Richmond, Henrico, VA
Parcel Number: 48-4-D-1A, 1B
Grantor: Crown Life Insurance Co
Grantee: Banks Gaskins LP
Date of Sale: 12/29/94
Recording Data: 2562-1857
Recording Date: 12/29/94
Physical Description:
Land Area: 428,195 Square Feet
9.83 Acres
Gross Building Area: 97,394 Square Feet
Finished Office Area: 55.0%
% Air Conditioned: 55%
Sprinklered: No
Year Built: 1986
Land/Building Ratio: 4.4:1
Rail Access: No
Zoning: M-1C
Sale Price: $5,350,000
Terms of Sale: Cash equivalent
Economic Indicators:
Gross Annual Income: $715,902 Seller's Proforma
Less: Vacancy: $35,795 Seller's Proforma
Effective Gross Income: $680,107 Seller's Proforma
Less: Operating Expenses: $118,632 Seller's Proforma
Net Operating Income: $561,475 Seller's Proforma
Appraisal Indicators:
Overall Rate (OAR): 10.5%
Sale Price/Square Foot (GSF): $54.93
<PAGE>
RESEARCH & DEVELOP. SALE
- --------------------------------------------------------------------------------
I-7 Continued
COMMENTS:
Rents in this property were in the $6.62 to $9.05 per square foot range,
with tenants responsible for utilities and janitorial.
<PAGE>
Addenda
- --------------------------------------------------------------------------------
Rent Roll
<PAGE>
5/8/97 WMG
================================================================================
Arboretum VI Office
9011 Arboretum Parkway
Richmond, Virginia 23236
7.739 Acres/75,392 Gross Buliding Area
Rent Roll
<TABLE>
<CAPTION>
Apr-97 Base Base
Lease Lease Security Apr Rental Esc Year Year
Flr Tenant Commence Expires Deposit RSF Rate Rate Esc. Stop Term
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1st Johnson Mirmiran Thompson 01-Nov-96 30-Nov-99 2,242 4,484 $16.74 1.04 4% -- 37
New England Life 01-Aug-96 31-Jul-01 90 6,741 15.50 1.00 96 5.56 60
Norfolk Southern 01-Mar-97 28-Feb-00 2,678 16.75 1.00 97 -- 36
Signet 15-Mar-94 14-Mar-99 1,947 16.93 1.03 3% -- 60
TPK Asset Management 15-May-94 14-May-99 2,432 2,048 15.27 1.04 3.5% -- 60
Drake Beam Morin 01-Jul-93 31-Aug-98 5,153 15.98 1.00 93 5.25 62
2nd Manufacturers Life 01-Sep-96 31-Aug-01 5,573 16.15 1.03 n/a -- 60
Drake Beam (Exp) 06-Jan-96 30-Jun-97 1,315 16.50 1.00 n/a --
PrimeCo 15-Aug-95 31-Jul-05 5,628 14.85 varies 96 5.56 119
PrimeCo 15-Sep-95 31-Jul-05 11,946 14.87 varies 96 5.56 118
3rd Ohio Casualty Insurance 01-Apr-91 30-Sep-01 3,748 14.75 3% - 4% 97 126
Speculative (Ohio) 5,760
Healthsource Provident 01-Apr-96 31-Mar-99 3,898 0.00 1.04 96 5.56 36
Microsoft 01-Apr-96 31-Mar-98 1,405 16.81 1.05 5% -- 24
Cornwell Enterprises 01-May-94 30-Apr-97 5,663 4,607 16.25 1.05 5% -- 36
Ericsson 01-Mar-96 28-Feb-99 741 16.23 1.03 96 5.56 36
Building Conference Room 378 n/a
Lincoln Financial 01-Mar-93 28-Feb-99 3,158 16.66 1.05 5% -- 72
Norrell Services 01-May-93 30-Apr-98 1,281 1,452 14.76 1.03 3% -- 60
Globe Life & Accident 01-Jul-94 30-Jun-97 650 535 14.58 1.00 n/a -- 36
Total Occupied 12,358 67,435
Total Leased 67,435
Total Available 5,760
Total Building 73,195
% Occupied 92.13%
% Leased 92.13%
</TABLE>
Rent Roll Current
Rent
Flr Tenant @ 4/97 Specific Use of Space
- -----------------------------------------------------------------------------
1st Johnson Mirmiran Thompson $6,254.00 Engineers
New England Life 8,707.00 Life Insurance Company
Norfolk Southern 3,738.04 Railway Company
Signet 2,747.00 Mortgage Company
TPK Asset Management 2,606.00 Asset Manager
Drake Beam Morin 6,861.00 Publisher
2nd Manufacturers Life 7,500.33 Life Insurance Company
Drake Beam (Exp) 1,808.13 Publisher
PrimeCo 6,964.00 Phone Company
PrimeCo 14,798.47 Phone Company
3rd Ohio Casualty Insurance 4,606.92 Life Insurance Company
Speculative (Ohio)
Healthsource Provident 0.00 Health Insurance
Microsoft 1,967.70 Computer Company
Cornwell Enterprises 6,239.00 Author
Ericsson 1,002.00 Radio system sales
Building Conference Room
Lincoln Financial 4,384.00 Insurance
Norrell Services 1,786.00 Employment Agency
Globe Life & Accident 650.00 Life Insurance Company
Total Occupied $82,619.59
Total Leased
Total Available
Total Building
% Occupied
% Leased
================================================================================
<PAGE>
5/8/97 WMG
================================================================================
Arboretum VII Office
9211 Arboretum Parkway
Richmond, Virginia 23236
4.215 Acres/30,357 Gross Building Area
Rent Roll
<TABLE>
<CAPTION>
Apr-97 Base Base
Lease Lease Security Apr Rental Esc Year Year
Flr Tenant Commence Expires Deposit RSF Rate Rate Esc. Stop Term
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1st Cellular One 31-Oct-91 31-Dec-96 20,577 12.66 1.035 4% -- 62
Duboy Advertising 01-Feb-92 28-Feb-02 3,117 15.02 1.03 n/a 121
Speculative
(Success Stories) 01-Feb-92 28-Feb-98 1,111 0.00 1.03 0
B. F. Saul (Expansion) 01-Sep-96 31-Aug-99 2,969 12.85 1.03 3% - 36
B. F. Saul 01-Feb-94 31-Aug-99 3,017 12.95 1.03 3% - 67
Total Occupied -- 29,680
Total Leased 29,680
Total Available 1,111
Total Building 30,791
% Occupied 96.39%
% Leased 96.39%
- -------------------------------------------------------------------------------------------------------------------------
Total RF&P Arboretum
Total Occupied 130,112 462,003
Total Leased 462,979
Total Available 11,140
Total Building 474,119
% Occupied 97.44%
% Leased 97.65%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rent Roll Current
Rent
Flr Tenant @ 4/97 Specific Use of Space
- ------------------------------------------------------------------------------
1st Cellular One $21,709.00 Phone Company
Duboy Advertising 3,901.00 Advertising
Speculative
(Success Stories) 0.00
B. F. Saul (Expansion) 3,178.95 Mortgage Company
B. F. Saul 3,256.00 Mortgage Company
Total Occupied $32,044.95
Total Leased
Total Available
Total Building
% Occupied
% Leased
- ----------------------------------------------
Total RF&P Arboretum
Total Occupied $546,210.30
Total Leased
Total Available
Total Building
% Occupied
% Leased
- ----------------------------------------------
================================================================================
<PAGE>
Addenda
- --------------------------------------------------------------------------------
Operating Statements
<PAGE>
Historical Operating Statements
Arboretum, VI
Building NRA 73,195 SF
<TABLE>
<CAPTION>
1994 Actual 1995 Actual 1996 Actual 1997 Budget
--------------------- ------------------- ------------------- -------------------
Item Amount Per SF Amount Per SF Amount Per SF Amount Per SF
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME
Gross Income $ 1,157,791 $15.82 $1,082,314 $14.79 $1,034,992 $14.14 $1,112,154 $15.19
Reimbursements (2,298) (0.03) 905 0.01 2,803 0.04 3,507 0.05
--------------------- ------------------- ------------------- -------------------
Total Income $ 1,155,492 $15.79 $1,083,219 $14.80 $1,037,795 $14.18 $1,115,661 $15.24
EXPENSES
Real Estate Taxes $ 54,589 $ 0.75 $ 55,218 $ 0.75 $ 59,570 $ 0.81 $ 69,496 $ 0.95
Operating Expense 328,223 4.48 306,908 4.19 244,599 3.34 260,028 3.55
General & Administrative 0 0.00 0 0.00 39,951 0.55 50,805 0.69
Management Fee 58,852 0.80 54,749 0.75 25,879 0.35 33,135 0.45
--------------------- ------------------- ------------------- -------------------
Total Expenses $ 441,664 $ 6.03 $ 416,875 $ 5.70 $ 369,999 $ 5.05 $ 413,464 $ 5.65
NET OPERATING INCOME $ 713,828 $ 9.75 $ 666,344 $ 9.10 $ 667,795 $ 9.12 $ 702,197 $ 9.59
===================== =================== =================== ===================
</TABLE>
- --------------------------------------------------------------------------------
Note: Acquired in June, 1996. YTD expenses are June through December,
annualized.
10
<PAGE>
Historical Operating Statements
Arboretum VII
Building NRA 30,791 SF
<TABLE>
<CAPTION>
1994 Actual 1995 Actual 1996 Actual 1997 Budget
--------------------- ------------------- ------------------- -------------------
Item Amount Per SF Amount Per SF Amount Per SF Amount Per SF
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME
Gross Income $382,741 $12.43 $337,417 $10.96 $353,669 $11.49 $289,967 $ 9.42
Reimbursements 15,190 0.49 18,721 0.61 26,388 0.86 29,280 0.95
--------------------- ------------------- ------------------- -------------------
Total Income $397,931 $12.92 $356,137 $11.57 $380,057 $12.34 $319,247 $10.37
EXPENSES
Real Estate Taxes $ 20,796 $ 0.68 $ 21,480 $ 0.70 $ 22,918 $ 0.74 $ 23,190 $ 0.75
Operating Expense 116,668 3.79 119,119 3.87 91,767 2.98 92,716 3.01
General & Administrative 0 0.00 0 0.00 17,242 0.56 19,091 0.62
Management Fee 15,822 0.51 14,245 0.46 10,858 0.35 9,186 0.30
--------------------- ------------------- ------------------- -------------------
Total Expenses $153,286 $ 4.98 $154,844 $ 5.03 $142,786 $ 4.64 $144,183 $ 4.68
NET OPERATING INCOME $244,644 $ 7.95 $201,293 $ 6.54 $237,271 $ 7.71 $175,064 $ 5.69
===================== =================== =================== ===================
</TABLE>
- --------------------------------------------------------------------------------
Note: Acquired in June, 1996. YTD income is June through December, annualized.
11
<PAGE>
Addenda
- --------------------------------------------------------------------------------
Investor Survey
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET OFFICE MARKET - URBAN/CBD
- ------------------------------------------------------------------------------------------------------------------------------------
9.5% 10.0% 10.0% 10.0% 11.5% 11.5% 3.0% 3.0% 3.0% 4.0% 10.0 10.0
9.5% 10.0% 10.0% 10.5% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
8.0% 9.0% 8.5% 8.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
13.0% 13.0% -- -- 14.0% 14.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
8.0% 8.0% 8.5% 8.5% 10.5% 10.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.3% 9.3% 10.3% 10.3% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 9.0% 8.5% 9.0% 10.5% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
10.0% 10.0% 10.0% 10.0% 12.5% 12.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
9.0% 9.0% 9.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.0% 9.0% 8.0% 9.0% 10.0% 12.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
Responses 11 11 10 10 11 11 11 11 11 11 11 11
Average (%) 9.2% 9.6% 9.2% 9.7% 11.7% 12.0% 3.3% 4.2% 3.4% 3.9% 8.5 9.5
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 9.0% 9.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 12.0% 12.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.5% 9.5% 10.5% 10.5% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 10.0% 10.0% 11.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
15.0% 15.0% -- -- 20.0% 20.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
9.0% 10.0% -- -- -- -- -- -- -- -- -- --
9.0% 10.0% 9.0% 10.0% 12.0% 13.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
Responses 8 8 6 6 7 7 7 7 7 7 7 7
Average (%) 10.0% 10.4% 9.7% 10.3% 12.8% 13.1% 3.3% 4.7% 3.5% 4.0% 8.3 9.7
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
8.0% 9.0% 9.5% 10.0% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
8.0% 10.0% 8.5% 9.0% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0 10.0 10.0
10.0% 10.0% 10.0% 10.0% 13.0% 13.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.5% 9.5% 10.5% 10.5% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
12.0% 12.0% -- -- 13.0% 13.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
-- -- -- -- 12.0% 13.0% 4.0% 4.0% 4.0% 4.0 5.0 10.0
Responses 8 8 7 7 9 9 9 9 9 9 9 9
Average (%) 9.4% 10.0% 9.6% 10.2% 12.8% 13.5% 3.5% 4.6% 3.5% 3.9% 7.6 8.9
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
12.0% 12.0% 12.0% 12.0% 15.0% 15.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.8% 9.8% 10.8% 10.8% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
14.0% 14.0% -- -- 20.0% 20.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 11.0% 14.0% 14.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 6 6 5 5 6 6 6 6 6 6 6 6
Average (%) 10.7% 11.0% 10.5% 11.2% 14.6% 15.3% 3.2% 4.6% 3.3% 3.9% 8.0 8.8
--------------------------------------------------------------------------------------------------------
Total Responses 33 33 28 28 33 33 33 33 33 33 33 33
Weighted Average (%) 9.8% 10.3% 9.7% 10.3% 13.0% 13.5% 3.3% 4.6% 3.4% 3.9% 8.1 9.2
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
8 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET OFFICE MARKET - SUBURBAN/NON - CBD
- ------------------------------------------------------------------------------------------------------------------------------------
9.5% 9.5% 10.5% 10.5% 10.5% 10.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.5% 8.5% 9.3% 9.3% 11.3% 11.3% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
11.0% 11.0% -- -- 12.0% 12.0% 5.0% 3.0% 3.0% 3.0% 5.0 7.0
8.5% 10.0% 9.0% 10.5% 11.0% 12.5% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
8.0% 10.0% 9.5% 10.0% 11.5% 12.0% 4.0% 6.0% 4.0% 4.0% 10.0 10.0
l0.0% 11.0% 10.5% 11.0% 12.0% 12.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.0% 9.0% 8.5% 8.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
8.0% 8.0% 8.5% 8.5% 10.5% 10.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.1% 9.1% 10.1% l0.1% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 10.0% 9.0% 10.5% 11.0% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
9.0% 9.0% 10.0% 10.0% 11.5% 11.5% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.0% 9.0% 9.0% 9.0% 12.0% 13.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.0% 10.0% -- -- -- -- -- -- -- -- --
8.0% 9.0% 8.0% 9.0% 10.0% 12.0% 5.0% 5.0% 4.0% 4.0% 5.0 10.0
Responses 16 16 14 14 15 15 15 15 15 15 15 15
Average (%) 8.8% 9.5% 9.3% 9.9% 11.2% 11.6% 3.5% 4.4% 3.6% 3.8% 8.9 9.7
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
9.5% 9.5% 10.5% 10.5% 10.5% 10.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.8% 8.8% 9.5% 9.5% 11.8% 11.8% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
12.0% 12.0% -- -- 18.0% 18.0% 5.0% 3.0% 3.0% 3.0% 5.0 7.0
10.5% 10.5% 10.0% 10.0% 11.0% 13.0% 2.0% 2.0% 2.0% 2.0% 10.0 10.0
8.0% 10.0% 9.5% 10.0% 11.0% 12.0% 4.0% 6.0% 4.0% 4.0% 10.0 10.0
9.0% 10.0% 9.0% 9.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.0% 11.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.4% 9.4% 10.4% 10.4% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 10.0% 14.0% 15.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
10.0% 11.0% -- -- -- -- -- -- -- -- -- --
10.0% 11.0% 10.0% 11.0% 12.0% 13.0% 5.0% 5.0% 4.0% 4.0% 5.0 10.0
Responses 13 13 11 11 12 12 12 12 12 12 12 12
Average (%) 9.5% 10.0% 9.8% 10.2% 12.0% 12.5% 3.4% 4.5% 3.4% 3.7% 8.6 9.6
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% -- -- 13.0% 13.0% 3.0% 3.0% 3.0% 3.0% 5.0 7.0
8.0% 10.0% 8.5% 9.0% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
10.0% 10.0% 10.0% 10.0% 12.5% 12.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.4% 9.4% 10.4% 10.4% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
6.0% 6.0% 9.0% 9.0% 17.0% 20.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.0% 10.0% -- -- -- -- -- -- -- -- -- --
12.0% 12.0% 10.0% 10.0% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 2.0 2.0
Responses 10 10 8 8 9 9 9 9 9 9 9 9
Average (%) 9.1% 9.7% 9.5% 10.0% 13.4% 14.3% 3.1% 4.6% 3.4% 3.8% 7.2 8.0
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% -- -- 18.0% 18.0% 3.0% 3.0% 3.0% 3.0% 5.0 7.0
10.5% 10.5% 10.0% 10.0% 11.0% 13.0% 2.0% 2.0% 2.0% 2.0% 10.0 10.0
11.0% 11.0% 11.0% 11.0% 14.0% 14.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.6% 9.6% 10.6% 10.6% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
6.0% 6.0% 10.0% 10.0% 20.0% 20.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.0% 10.0% -- -- -- -- -- -- -- -- -- --
12.0% 12.0% 10.0% 10.0% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 2.0 2.0
Responses 10 10 8 8 9 9 9 9 9 9 9 9
Average (%) 9.7% 10.0% 10.0% 10.5% 14.5% 15.2% 2.9% 4.3% 3.2% 3.6% 7.2 8.0
--------------------------------------------------------------------------------------------------------
Total Responses 49 49 41 41 45 45 45 45 45 45 45 45
Weighted Average (%) 9.3% 9.8% 9.7% 10.1% 12.8% 13.4% 3.2% 4.4% 3.4% 3.7% 8.0 8.8
--------------------------------------------------------------------------------------------------------
</TABLE>
AUTUMN 1996 9
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET INDUSTRIAL MARKET - WAREHOUSE/DISTRIBUTION
- ------------------------------------------------------------------------------------------------------------------------------------
9.2% 9.2% 9.5% 9.5% 10.0% 10.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.5% 8.5% 9.3% 9.3% 11.0% 11.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
8.5% 10.0% 9.5% 10.0% 11.0% 12.0% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
9.0% 9.0% 9.5% 9.5% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
8.0% 8.0% 8.5% 8.5% 10.5% 10.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 10.0% 9.0% 10.5% 11.0% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
9.0% 9.0% 10.0% 10.0% 11.0% 11.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
9.0% 9.0% 9.5% 9.5% 10.5% 10.5% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 10 10 10 10 10 10 10 10 10 10 10 10
Average (%) 8.8% 9.2% 9.4% 9.8% 10.9% 11.0% 2.9% 4.0% 3.3% 3.8% 9.8 10.1
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
9.2% 9.2% 9.5% 9.5% 10.0% 10.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.8% 8.8% 9.5% 9.5% 11.3% 11.3% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.5% 11.5% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
10.0% 10.0% 11.0% 11.0% 12.0% 12.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.8% 9.8% 10.3% 10.3% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 7 7 7 7 7 7 7 7 7 7 7 7
Average (%) 9.3% 9.5% 10.0% 10.2% 11.2% 11.2% 2.8% 4.3% 3.2% 3.9% 9.7 10.1
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 12.0% 12.0% 13.0% 13.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.8% 9.8% 10.3% 10.3% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 9.7% 9.9% 10.4% 10.8% 11.9% 11.9% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
12.0% 12.0% 13.0% 13.0% 14.0% 14.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 10.0% 10.5% 10.5% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.5% 10.5% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 10.1% 10.4% 10.9% 11.3% 12.4% 12.4% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
--------------------------------------------------------------------------------------------------------
Total Responses 25 25 25 25 25 25 25 25 25 25 25 25
Weighted Average (%) 9.5% 9.7% 10.2% 10.5% 11.6% 11.6% 2.6% 4.5% 3.2% 4.0% 9.6 10.2
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
10 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET INDUSTRIAL MARKET - BUSINESS PARKS, OTHER INDUSTRIAL & MANUFACTURING
- ------------------------------------------------------------------------------------------------------------------------------------
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 10.0 10.0
9.0% 9.0% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 3 3 4 4 4 4 4 4 4 4
Average (%) 8.9% 9.4% 9.7% 10.7% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.8 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.5% 10.5% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 10.0 10.0
10.0% 10.0% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 3 3 4 4 4 4 4 4 4 4
Average (%) 9.3% 9.8% 9.8% 10.8% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.8 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.5% 10.5% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 5 5 4 4 5 5 5 5 5 5 5 5
Average (%) 9.4% 10.0% 9.9% 10.9% 12.4% 13.2% 3.4% 4.0% 3.2% 3.8% 8.2 9.4
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.5% 10.5% 11.0% 11.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.5% 10.5% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 5 5 4 4 5 5 5 5 5 5 5 5
Average (%) 9.6% 10.2% 10.0% 11.0% 12.4% 13.2% 3.4% 4.0% 3.2% 3.8% 8.2 9.4
--------------------------------------------------------------------------------------------------------
Total Responses 18 18 14 14 18 18 18 18 18 18 18 18
Weighted Average(%) 9.3% 9.8% 9.8% 10.8% 12.0% 12.4% 3.3% 4.0% 3.2% 3.9% 8.5 9.8
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
AUTUMN 1996 11
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET RETAIL MARKET - NEIGHBORHOOD & COMMUNITY CENTERS
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 10.5% 9.5% 10.5% 11.0% 12.5% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
9.5% 10.0% 10.0% 10.0% 12.5% 12.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
10.0% 10.0% 10.5% 10.5% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
10.3% 10.3% 10.8% 10.8% 13.0% 13.0% 2.0% 2.0% 4.0% 4.0% 7.0 7.0
9.0% 9.0% 10.0% 10.0% 10.0% 10.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
9.8% 9.8% 10.3% 10.3% 11.5% 11.5% 3.8% 4.0% 4.0% 4.0% 10.0 10.0
9.0% 10.0% -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
9.0% 9.0% 9.5% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
Responses 9 9 8 8 8 8 9 9 9 9 9 9
Average (%) 9.3% 9.8% 10.0% 10.4% 11.9% 12.1% 2.9% 3.7% 3.4% 3.9% 8.9 9.4
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
10.8% 10.8% 11.3% 11.3% 14.0% 14.0% 2.0% 2.0% 4.0% 4.0% 7.0 7.0
10.0% 10.0% 11.0% 11.0% 12.0% 12.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
9.0% 10.0% -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 11.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.5% 10.5% -- -- -- -- -- -- -- -- -- --
Responses 6 6 4 4 4 4 5 5 5 5 5 5
Average (%) 9.5% 10.0% 10.4% 11.1% 12.3% 12.3% 2.3% 3.8% 3.3% 4.2% 9.0 9.6
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 12.0% 12.0% 13.0% 13.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 10.0 10.0
9.0% 10.0% -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 9.5% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.0% 10.0% -- -- -- -- -- -- -- --
11.0% 11.0% 9.5% 9.5% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 3.0 3.0
Responses 7 7 5 5 5 5 6 6 6 6 6 6
Average (%) 9.7% 10.3% 10.1% 10.7% 13.8% 14.6% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
13.0% 13.0% 14.0% 14.0% 14.0% 14.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 10.0 10.0
9.0% 10.0% -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 11.0% 14.0% 14.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
11.0% 11.0% 10.5% 10.5% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 3.0 3.0
Responses 6 6 5 5 5 5 6 6 6 6 6 6
Average (%) 10.3% 10.8% 10.8% 11.5% 14.2% 15.0% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
--------------------------------------------------------------------------------------------------------
Total Responses 28 28 22 22 22 22 26 26 26 26 26 26
Weighted Average (%) 9.7% 10.2% 10.3% 10.9% 13.0% 13.5% 2.7% 3.9% 3.2% 4.0% 8.7 9.3
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
12 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET RETAIL MARKET - POWER CENTERS & "BIG BOX"
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 9.0% 9.5% 9.5% 11.0% 11.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
10.0% 10.0% 9.5% 9.5% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
10.5% 10.5% 10.5% 10.5% 11.0% 12.0% 2.0% 2.0% 3.0% 3.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.4% 11.4% 3.8% 3.8% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 9.5% 10.0% 11.0% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
9.3% 9.3% 9.5% 10.0% 10.5% 10.5% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.0% 9.0% -- -- -- -- -- -- -- -- -- --
9.0% 9.5% 9.5% 10.0% 11.0% 11.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
Responses 9 9 8 8 8 8 8 8 8 8 8 8
Average (%) 9.4% 9.5% 9.7% 10.1% 11.5% 11.7% 3.3% 3.5% 3.4% 3.7% 9.1 10.1
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
10.8% 10.8% 10.8% 10.8% 11.0% 12.0% 2.0% 3.0% 3.0% 3.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 3 3 3 3 3 3 3 3 3 3 3 3
Average (%) 9.8% 10.1% 10.1% 10.6% 11.0% 11.3% 2.8% 3.7% 3.2% 3.7% 9.3 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.8% 10.8% 10.8% 10.8% 12.0% 12.0% 2.0% 2.0% 3.0% 3.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 3 3 3 3 3 3 3 3 3 3 3 3
Average (%) 9.6% 9.9% 10.1% 10.6% 12.0% 12.0% 2.8% 3.3% 3.2% 3.7% 9.3 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 10.8% 10.8% 12.0% 12.0% 2.0% 2.0% 3.0% 3.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
-- -- -- -- 15.0% 15.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 2 2 2 2 3 3 3 3 3 3 3 3
Average (%) 9.8% 10.3% 10.1% 10.9% 12.7% 12.7% 2.8% 3.3% 3.2% 3.7% 9.3 10.3
--------------------------------------------------------------------------------------------------------
Total Responses 17 17 16 16 17 17 17 17 17 17 17 17
Weighted Average (%) 9.6% 9.9% 10.0% 10.5% 11.8% 11.9% 2.9% 3.5% 3.2% 3.7% 9.3 10.3
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
AUTUMN 1996 13
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET RETAIL MARKET - REGIONAL MALLS
- ------------------------------------------------------------------------------------------------------------------------------------
7.5% 7.5% 8.0% 8.0% 11.3% 11.3% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.0% 9.0% 9.0% 9.0% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
7.5% 7.5% 7.8% 7.8% 12.0% 12.0% 1.5% 2.0% 3.0% 3.0% 10.0 10.0
7.0% 8.0% 8.0% 8.0% 10.5% 11.5% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
9.0% -- -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.0% 8.0% 9.0% 10.5% 11.0% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
8.0% 8.0% 8.5% 8.5% 11.0% 11.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
7.8% 8.0% 8.3% 8.5% 11.0% 12.0% 2.5% 3.0% 2.5% 3.0% 10.0 10.0
7.0% 8.0% 7.0% 8.0% 10.0% 11.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
Responses 10 9 9 9 9 9 10 10 10 10 10 10
Average (%) 7.9% 8.2% 8.2% 8.6% 11.4% 11.8% 3.0% 3.6% 3.5% 3.8% 9.1 9.6
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 10.0% 10.0% 17.0% 17.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
9.0% 9.0% 9.0% 9.0% 13.5% 13.5% 2.0% 2.0% 4.0% 4.0% 7.0 7.0
9.0% 10.0% 10.0% 10.0% 12.0% 14.0% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
10.0% -- -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
Responses 5 4 4 4 4 4 5 5 5 5 5 5
Average (%) 9.3% 9.6% 9.6% 10.0% 13.4% 13.9% 2.5% 3.4% 3.7% 4.0% 8.6 8.6
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 10.0% 10.0% 18.0% 18.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
11.0% 11.0% 11.0% 11.0% 13.0% 14.0% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
9.0% -- -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.5% 8.5% 9.0% 11.5% 12.5% 2.5% 3.0% 2.5% 3.0% 10.0 10.0
Responses 5 4 4 4 4 4 5 5 5 5 5 5
Average (%) 9.3% 9.8% 9.8% 10.3% 13.4% 13.9% 2.6% 3.6% 3.4% 3.8% 9.2 9.2
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 11.0% 11.0% 20.0% 20.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
12.5% 12.5% 12.0% 12.0% 14.0% 15.0% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
10.0% -- -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 9.0% 9.3% 9.8% 12.0% 13.0% 2.5% 3.0% 2.5% 3.0% 10.0 10.0
13.0% 13.0% 11.0% 11.0% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 3.0 3.0
Responses 6 5 5 5 5 5 6 6 6 6 6 6
Average (%) 10.6% 11.0% 10.6% 11.0% 14.6% 15.0% 2.7% 3.5% 3.3% 3.7% 8.2 8.2
--------------------------------------------------------------------------------------------------------
Total Responses 26 22 22 22 22 22 26 26 26 26 26 26
Weighted Average (%) 9.3% 9.6% 9.5% 10.0% 13.2% 13.6% 2.7% 3.5% 3.5% 3.8% 8.8 8.9
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
14 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET RESIDENTIAL - APARTMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
8.5% 10.0% 9.0% 10.5% -- -- -- -- 3.5% 3.5% 1.0 1.0
8.5% 9.0% 9.0% 9.0% 11.0% 11.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
9.8% 9.8% 10.0% 10.0% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
8.3% 9.0% 9.0% 9.5% 10.5% 11.5% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
7.5% 8.5% 8.0% 9.0% 10.0% 11.0% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.8% 8.8% 9.0% 9.0% 11.3% 11.3% 3.8% 4.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 9.0% 9.0% 9.5% 10.0% 11.5% 3.0% 4.0% 3.0% 3.0% 10.0 10.0
8.5% 9.0% 8.5% 9.0% -- -- 3.0% 3.5% 3.0% 3.5% 10.0 10.0
8.8% 9.0% 9.0% 9.5% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 10 10 10 10 8 8 9 9 10 l0 l0 10
Average (%) 8.6% 9.2% 9.0% 9.6% 11.2% 11.7% 2.9% 3.9% 3.3% 3.8% 8.4 8.9
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 9.5% 9.5% 10.0% 11.0% 12.0% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
9.0% 10.0% 10.0% 10.0% 11.0% 12.5% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.0% 10.0% 10.0% 10.5% 10.5% 12.0% 3.0% 4.0% 3.0% 3.0% 10.0 10.0
9.0% 9.5% 9.5% 10.0% 11.5% 11.5% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 5 5 5 5 5 5 5 5 5 5 5 5
Average (%) 8.9% 9.7% 9.7% 10.3% 11.0% 11.8% 2.5% 4.2% 3.1% 4.0% 9.6 10.2
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 11.0% 11.0% 11.0% 12.5% 13.5% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.0% 9.0% 9.0% 11.0% 12.0% 4.0% 6.0% 3.0% 3.0% 3.0 5.0
9.0% 9.0% 9.5% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 8.9% 9.4% 9.8% 10.3% 11.6% 12.1% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
12.0% 13.0% 13.0% 13.0% 13.0% 15.0% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.0% 10.0% 10.0% 11.0% 13.0% 4.0% 6.0% 3.0% 3.0% 3.0 5.0
9.5% 10.0% 10.0% 11.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 9.5% 10.1% 10.6% 11.3% 12.0% 13.0% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
Total Responses 23 23 23 23 21 21 22 22 23 23 23 23
Weighted Average (%) 9.0% 9.6% 9.8% 10.4% 11.5% 12.1% 2.7% 4.4% 3.2% 4.0% 8.4 9.3
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical
issues
AUTUMN 1996 15
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICE SUMMARY OF WEIGHTED AVERAGE
- ------------------------------------------------------------------------------------------------------------------------------------
Urban/CBD 9.8% 10.3% 9.7% 10.3% 13.0% 13.5% 3.3% 4.6% 3.4% 3.9% 8.1 9.2
Class A - Leased Asset 9.2% 9.6% 9.2% 9.7% 11.7% 12.0% 3.3% 4.2% 3.4% 3.9% 8.5 9.5
Class B - Leased Asset 10.0% 10.4% 9.7% 10.3% 12.8% 13.1% 3.3% 4.7% 3.5% 4.0% 8.3 9.7
Class A - Value Added 9.4% 10.0% 9.6% 10.2% 12.8% 13.5% 3.5% 4.6% 3.5% 3.9 7.6 8.9
Class B - Value Added 10.7% 11.0% 10.5% 11.2% 14.6% 15.3% 3.2% 4.8% 3.3% 3.9% 8.0 8.8
Suburban 9.3% 9.8% 9.7% 10.1% 12.8% 13.4% 3.2% 4.4% 3.4% 3.7% 8.0 8.8
Class A - Leased Asset 8.8% 9.5% 9.3% 9.9% 11.2% 11.6% 3.5% 4.4% 3.6% 3.8% 8.9 9.7
Class B - Leased Asset 9.5% 10.0% 9.8% 10.2% 12.0% 12.5% 3.4% 4.5% 3.4% 3.7% 8.6 9.6
Class A - Value Added 9.1% 9.7% 9.5% 10.0% 13.4% 14.3% 3.1% 4.6% 3.4% 3.8% 7.2 8.0
Class B - Value Added 9.7% 10.0% 10.0% 10.5% 14.5% 15.2% 2.9% 4.3% 3.2% 3.6% 7.2 8.0
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL
- ------------------------------------------------------------------------------------------------------------------------------------
Warehouse/Distribution 9.5% 9.7% 10.2% 10.5% 11.6% 11.6% 2.6% 4.5% 3.2% 4.0% 9.6 10.2
Class A - Leased Asset 8.8% 9.2% 9.4% 9.8% 10.9% 11.0% 2.9% 4.0% 3.3% 3.8% 9.8 10.1
Class B - Leased Asset 9.3% 9.5% 10.0% 10.2% 11.2% 11.2% 2.8% 4.3% 3.2% 3.9% 9.7 10.1
Class A - Value Added 9.7% 9.9% 10.4% 10.8% 11.9% 11.9% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
Class 8 - Value Added 10.1% 10.4% 10.9% 11.3% 12.4% 12.4% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
Business Parks 9.4% 9.9% 10.0% 10.8% 12.3% 12.9% 3.4% 4.0% 3.2% 3.8% 8.3 9.6
Class A - Leased Asset 9.0% 9.5% 9.8% 10.5% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
Class B - Leased Asset 9.3% 9.8% 10.0% 10.8% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
Class A - Value Added 9.5% 10.2% 10.0% 10.8% 13.0% 14.3% 3.5% 4.0% 3.2% 3.7% 7.7 8.7
Class B - Value Added 9.7% 10.3% 10.2% 11.0% 13.0% 14.3% 3.5% 4.0% 3.2% 3.7% 7.7 8.7
0ther Industrial/
Manufacturing 9.2% 9.7% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.8 10.3
Class A - Leased Asset 8.8% 9.3% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.5 10.0
Class B - Leased Asset 9.3% 9.8% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.5 10.0
Class A - Value Added 9.3% 9.8% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
Class B - Value Added 9.5% 10.0% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
- ------------------------------------------------------------------------------------------------------------------------------------
RETAIL
- ------------------------------------------------------------------------------------------------------------------------------------
Neighborhood & Community
Centers 9.7% 10.2% 10.3% 10.9% 13.0% 13.5% 2.7% 3.9% 3.2% 4.0% 8.7 9.3
Class A - Leased Asset 9.3% 9.8% 10.0% 10.4% 11.9% 12.1% 2.9% 3.7% 3.4% 3.9% 8.9 9.4
Class B - Leased Asset 9.5% 10.0% 10.4% 11.1% 12.3% 12.3% 2.3% 3.8% 3.3% 4.2% 9.0 9.6
Class A - Value Added 9.7% 10.3% 10.1% 10.7% 13.8% 14.6% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
Class B - Value Added 10.3% 10.8% 10.8% 11.5% 14.2% 15.0% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
Power Center & "Big Box" 9.6% 9.9% 10.0% 10.5% 11.8% 11.9% 2.9% 3.5% 3.2% 3.7% 9.3 10.3
Class A - Leased Asset 9.4% 9.5% 9.7% 10.1% 11.5% 11.7% 3.3% 3.5% 3.4% 3.7% 9.1 10.1
Class B - Leased Asset 9.8% 10.1% 10.1% 10.6% 11.0% 11.3% 2.8% 3.7% 3.2% 3.7% 9.3 10.3
Class A - Value Added 9.6% 9.9% 10.1% 10.6% 12.0% 12.0% 2.8% 3.3% 3.2% 3.7% 9.3 10.3
Class B - Value Added 9.8% 10.3% 10.1% 10.9% 12.7% 12.7% 2.8% 3.3 3.2% 3.7% 9.3 10.3
Regional Malls 9.3% 9.6% 9.5% 10.0% 13.2% 13.6% 2.7% 3.5% 3.5% 3.8% 8.8 8.9
Class A - Leased Asset 7.9% 8.2% 8.2% 8.6% 11.4% 11.8% 3.0% 3.6% 3.5% 3.8% 9.1 9.6
Class B - Leased Asset 9.3% 9.6% 9.6% 10.0% 13.4% 13.9% 2.5% 3.4% 3.7% 4.0% 8.6 8.6
Class A - Value Added 9.3% 9.8% 9.8% 10.3% 13.4% 13.9% 2.6% 3.6% 3.4% 3.8% 9.2 9.2
Class B - Value Added 10.6% 11.0% 10.6% 11.0% 14.6% 15.0% 2.7% 3.5% 3.3% 3.7% 8.2 8.2
Specialty Retail 9.5% 10.5% 10.8% 11.5% 12.0% 12.6 1.9% 4.0% 3.3% 4.0% 10.0 10.5
Class A - Leased Asset 8.2% 9.0% 8.8% 9.7% 10.7% 11.3% 2.5% 4.0% 3.5% 4.0% 8.7 10.3
Class B - Leased Asset 9.3% 10.3% 10.8% 11.5% 11.5% 12.5% 1.8% 4.0% 3.3% 4.0% 10.5 10.5
Class A - Value Added 10.0% 11.0% 11.3% 12.0% 12.5% 13.0% 1.8% 4.0% 3.3% 4.0% 10.5 10.5
Class B - Value Added 10.8% 11.8% 12.3% 13.0% 13.5% 13.5% 1.8% 4.0% 3.3% 4.0% 10.5 10.5
- ------------------------------------------------------------------------------------------------------------------------------------
RESIDENTIAL
- ------------------------------------------------------------------------------------------------------------------------------------
Apartments 9.0% 9.6% 9.8% 10.4% 11.5% 12.1% 2.7% 4.4% 3.2% 4.0% 8.4 9.3
Class A - Leased Asset 8.6% 9.2% 9.0% 9.6% 11.2% 11.7% 2.9% 3.9% 3.3% 3.8% 8.4 8.9
Class B - Leased Asset 8.9% 9.7% 9.7% 10.3% 11.0% 11.8% 2.5% 4.2% 3.1% 4.0% 9.6 10.2
Class A - Value Added 8.9% 9.4% 9.8% 10.3% 11.6% 12.1% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
Class B - Value Added 9.5% 10.1% 10.6% 11.3% 12.0% 13.0% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
</TABLE>
16 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
Single-Tenant NNN Leased Properties
(Excludes "Bondable" Leases)
Minimum No. Going-In Cap Rate Internal Rate of Return
of Years Low High Low High
Investment Grade Tenant
- --------------------------------------------------------------------------------
4.0 9.0% 9.0% 10.0% 12.0%
----------------------------------------------------------
10.0 8.0 9.0 10.5 11.5
----------------------------------------------------------
5.0 10.5 10.5 13.0 13.0
----------------------------------------------------------
10.0 9.0 10.5 13.0 15.0
----------------------------------------------------------
10.0 8.5 9.0 10.5 12.0
----------------------------------------------------------
10.0 9.5 10.0 10.5 11.5
----------------------------------------------------------
10.0 8.5 11.0 10.8 12.0
----------------------------------------------------------
10.0 9.5 9.5 11.0 11.0
----------------------------------------------------------
20.0 9.0 9.0 N/A N/A
----------------------------------------------------------
10.0 8.0 10.0 N/A N/A
- --------------------------------------------------------------------------------
Responses 10.0 10.0 10.0 8.0 8.0
Average 9.9 9.0% 9.8% 11.2% 12.3%
Non-Investment Grade
Tenant
- --------------------------------------------------------------------------------
4.0 9.5% 9.5% 10.5% 13.0%
----------------------------------------------------------
10.0 9.0 10.0 11.5 12.5
----------------------------------------------------------
5.0 13.0 13.0 15.0 15.0
----------------------------------------------------------
10.0 10.0 12.0 17.0 20.0
----------------------------------------------------------
10.0 9.0 10.0 11.0 13.0
----------------------------------------------------------
10.0 11.0 12.0 13.0 15.0
----------------------------------------------------------
10.0 10.5 10.5 13.0 13.0
----------------------------------------------------------
20.0 11.0 11.0 N/A N/A
----------------------------------------------------------
10.0 10.0 12.5 N/A N/A
----------------------------------------------------------
Responses 9.0 9.0 9.0 7.0 7.0
Average 9.9 10.3% 11.2% 13.0% 14.5%
AUTUMN 1996 17
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES BLENDED INTERNAL EQUITY INTERNAL GROWTH RATES TYPICAL PROJECTION MANAGEMENT RESERVES FOR
GOING-IN TERMINAL RATE OF RETURN RATE OF RETURN INCOME EXPENSES PERIOD (YEARS) FEES* REPLACEMENT*
----------------------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
LUXURY
- ------------------------------------------------------------------------------------------------------------------------------------
8.0% 8.0% 10.0% 10.0% 18.0% 18.0% 25.0% 25.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 5.0% 5.0%
7.0% 7.0% 10.0% 10.0% 15.0% 15.0% 20.0% 20.0% 7.0% 7.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
6.0% 9.5% 10.0% 10.0% 12.0% 15.0% 15.0% 18.0% 3.0% 3.0% 3.0% 3.0% 5.0 5.0 2.0% 4.0% 4.0% 4.0%
8.0% 11.0% 8.5% 12.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
9.5% 9.5% 10.5% 10.5% 15.0% 15.0% 18.0% 18.0% 4.5% 4.5% 4.0% 4.0% 10.0 10.0 3.5% 3.5% 4.0% 4.0%
-- -- 11.0% 13.0% 15.0% 15.0% 18.0% 18.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0 3.0% 3.0% 4.0% 4.0%
6.0% 8.0% 10.0% 12.0% 13.0% 14.0% 20.0% 22.0% 3.0% 4.0% 3.0% 4.0% 5.0 5.0 2.0% 3.0% 4.0% 5.0%
8.0% 12.0% 8.0% 10.0% 15.0% 15.0% 20.0% 20.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0 3.0% 4.0% 4.0% 5.0%
Responses 7 7 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8
Average (%) 7.5% 9.3% 9.8% 10.9% 14.5% 15.3% 19.5% 20.1% 4.1% 4.3% 3.8% 3.9% 6.5 6.9 2.8% 3.3% 4.1% 4.4%
- ------------------------------------------------------------------------------------------------------------------------------------
FIRST CLASS
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 9.0% 11.0% 11.0% 12.0% 12.0% 20.0% 20.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
10.0% 10.0% 10.0% 10.0% -- -- 13.0% 13.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0 3.0% 3.0% 4.0% 5.0%
9.0% 9.0% 11.0% 11.0% 14.0% 14.0% 18.0% 18.0% 6.0% 6.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
9.5% 11.0% 11.0% 11.0% 15.0% 20.0% 18.0% 22.0% 3.0% 3.0% 2.0% 2.0% 5.0 5.0 2.0% 3.0% 4.0% 4.0%
10.0% 12.0% 10.5% 13.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
7.0% 9.0% 10.0% 11.0% 11.5% 12.0% 14.0% 16.0% 4.0% 5.0% 3.0% 4.0% 5.0 5.0 2.5% 2.5% 5.0% 5.0%
9.5% 9.5% 10.5% 10.5% 15.0% 15.0% 18.0% 18.0% 4.5% 4.5% 4.0% 4.0% 10.0 10.0 3.5% 3.5% 4.0% 4.0%
9.0% 9.0% 10.5% 10.5% 21.0% 21.0% 14.0% 14.0% 4.0% 4.0% 3.0% 3.0% 7.0 7.0 3.0% 3.0% 4.0% 4.0%
10.0% 12.0% 11.0% 11.0% -- -- -- -- 3.5% 3.5% 3.5% 3.5% 5.0 10.0 2.0% 3.0% 4.0% 4.0%
10.0% 10.0% 9.0% 9.5% 19.0% 19.0% 15.0% 15.0% 8.0% 8.0% 6.0% 6.0% -- -- 2.5% 2.5% 4.0% 4.0%
10.0% 13.0% 12.0% 13.0% 25.0% 25.0% 20.0% 20.0% 3.5% 4.0% 3.5% 4.0% 5.0 5.0 3.5% 3.5% 4.0% 4.0%
10.5% 10.5% 10.5% 10.5% 13.5% 13.5% -- -- 3.5% 3.5% 3.5% 3.5% 10.0 10.0 3.0% 3.0% 5.0% 5.0%
8.0% 12.0% 8.0% 10.0% 15.0% 15.0% 20.0% 20.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0 3.0% 4.0% 4.0% 5.0%
Responses 13 13 13 13 11 11 11 11 13 13 13 13 12 12 13 13 13 13
Average (%) 9.3% 10.5% 10.4% 10.9% 15.8% 16.5% 17.3% 17.8% 4.2% 4.3% 3.7% 3.8% 6.6 7.3 2.8% 3.1% 4.2% 4.3%
- ------------------------------------------------------------------------------------------------------------------------------------
MID-RATE
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 12.0% 12.0% 15.0% 15.0% 18.0% 18.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
11.0% 11.0% 11.0% 11.0% 13.0% 13.0% 17.0% 17.0% 6.0% 6.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
9.5% 11.0% 11.0% 11.0% 15.0% 18.0% 17.0% 20.0% 3.0% 3.0% 2.0% 2.0% 5.0 5.0 2.0% 3.0% 4.0% 4.0%
10.0% 12.0% 10.5% 13.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
9.5% 9.5% 10.5% 10.5% 15.0% 15.0% 18.0% 18.0% 4.5% 4.5% 4.0% 4.0% 10.0 10.0 3.5% 3.5% 4.0% 4.0%
Responses 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5
Average (%) 10.0% 10.7% 11.0% 11.5% 14.2% 15.2% 18.0% 18.6% 4.2% 4.2% 3.7% 3.7% 6.4 7.0 2.9% 3.1% 4.0% 4.0%
----------------------------------------------------------------------------------------------------------------------
Total
Responses 25 25 26 26 24 24 24 24 26 26 26 26 25 25 26 26 26 26
Weighted
Average (%) 8.9% 10.1% 10.4% 11.1% 14.8% 15.7% 18.3% 18.8% 4.2% 4.3% 3.7% 3.8% 6.5 7.0 2.9% 3.2% 4.1% 4.2%
----------------------------------------------------------------------------------------------------------------------
</TABLE>
*as percent of total revenues
18 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES BLENDED INTERNAL EQUITY INTERNAL GROWTH RATES TYPICAL PROJECTION MANAGEMENT RESERVES FOR
GOING-IN TERMINAL RATE OF RETURN RATE OF RETURN INCOME EXPENSES PERIOD (YEARS) FEES* REPLACEMENT*
----------------------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
MID-RATE HOTEL - LIMITED SERVICE
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 12.0% 12.0% 15.0% 15.0% 15.0% 15.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
12.0% 12.0% 12.0% 12.0% 13.0% 13.0% 17.0% 17.0% 3.0% 3.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
8.0% 10.0% 10.0% 10.0% 12.0% 15.0% 14.0% 16.0% 3.0% 3.0% 2.0% 2.0% 5.0 5.0 3.0% 4.0% 4.0% 5.0%
11.0% 13.0% 11.5% 14.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
11.0% 11.0% 11.8% 11.8% 16.0% 16.0% 19.0% 19.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0 4.0% 4.0% 4.5% 4.5%
10.0% 13.0% 12.0% 13.0% 25.0% 25.0% 20.0% 20.0% 3.5% 4.0% 3.5% 4.0% 5.0 5.0 4.0% 4.0% 5.0% 5.0%
Responses 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6
Average (%) 10.3% 11.5% 11.5% 12.1% 15.7% 16.5% 17.5% 17.8% 3.5% 3.6% 3.7% 3.8% 6.2 6.7 3.3% 3.5% 4.3% 4.4%
- ------------------------------------------------------------------------------------------------------------------------------------
ECONOMY
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 12.0% 12.0% 15.0% 15.0% 15.0% 15.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
13.0% 13.0% 13.0% 13.0% 13.0% 13.0% 17.0% 17.0% 3.0% 3.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
9.0% 11.0% 10.0% 10.0% 12.0% 15.0% 14.0% 16.0% 3.0% 3.0% 3.0% 3.0% 5.0 5.0 4.0% 5.0% 5.0% 5.0%
11.0% 13.0% 11.5% 14.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
11.0% 11.0% 11.8% 11.8% 16.0% 16.0% 19.0% 19.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0 4.0% 4.0% 4.5% 4.5%
Responses 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5
Average (%) 10.8% 11.6% 11.7% 12.2% 13.8% 14.8% 17.0% 17.4% 3.5% 3.5% 3.9% 3.9% 6.4 7.0 3.4% 3.6% 4.3% 4.3%
Total
Responses 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11
Weighted
Average(%) 10.6% 11.6% 11.6% 12.1% 14.7% 15.7% 17.3% 17.6% 3.5% 3.5% 3.8% 3.8% 6.3 6.8 3.4% 3.6% 4.3% 4.4%
</TABLE>
*as percent of total revenues
AUTUMN 1996 19
<PAGE>
Addenda
- --------------------------------------------------------------------------------
Qualifications of Appraisers
<PAGE>
QUALIFICATIONS
- --------------------------------------------------------------------------------
Donald R. Morris, MAI
Professional Affiliations:
Member of the Appraisal Institute (MAI Designations #9812)
District of Columbia Certified General Real Estate Appraiser (#GA00010267)
Commonwealth of Virginia Certified General Real Estate Appraiser (#4001002465)
State of Maryland Certified General Real Estate Appraiser (#7220)
State of West Virginia Certified General Real Estate Appraiser (#237)
Appraisal/Real Estate Experience:
Director/Manager, Cushman & Wakefield of Washington, D.C. and
Assistant Manager, Cushman & Wakefield of Texas, Inc.,
Dallas, Texas, Valuation Advisory Services, a full service
real estate organization specializing in appraisal and
consultation. April 1990 to present.
Associate Appraiser, Joseph A. Dengel & Company, Dallas, Texas, May 1977 to
April 1990.
Other real estate experience includes work as a residential listing and
selling agent preparing market analyses and origination contracts.
Experience includes appraisal of the following types of property:
Office Buildings Medical Office Buildings
Regional Malls Power Centers
Outlet Centers Community & Neighborhood Shopping Centers
Department Stores Industrial Buildings
Residential Subdivisions Single Family Residences
Multi-Family Properties Condominiums/Duplexes
Subdivision Analysis Farm/Ranch
Mixed Use Properties Golf Courses
Grape Vineyards Special Purpose Facilities
Commercial Land Hotel/Motel
Ad Valorem Tax Appeals
Appraisal and consulting services used for mortgage loans, relocations, gift
and estate tax, condemnation and litigation purposes.
Qualified as an expert witness in state and federal real estate court cases.
Education:
Bachelor of Arts (Political Science), 1981
University of Texas at Arlington, Arlington, Texas.
<PAGE>
QUALIFICATIONS
- --------------------------------------------------------------------------------
Donald R. Morris, MAI
Appraisal Institute Courses:
#1A1 - Real Estate Appraisal Principles
#1A2 - Basic Valuation Procedures
#1B1 - Capitalization Theory & Techniques, Part A
#1B2 - Capitalization Theory & Techniques, Part B
#410 - Standards of Professional Appraisal Practice, Part A (USPAP)
#420 - Standards of Professional Appraisal Practice, Part B (AI)
#21 - Case Studies in Real Estate Valuation
#22 - Report Writing and Valuation Analysis
#82 - Residential Valuation Procedures
Additional Accredited Real Estate Courses:
Real Estate Appraisal
Principles of Real Estate
Real Estate Marketing
Real Estate Finance
Property Management
Federal National Mortgage Corporation (Fannie Mae) - Appraisal Training
Certified in the Appraisal's Institute's voluntary program of continuing
education for its designated members.
<PAGE>
QUALIFICATIONS
- --------------------------------------------------------------------------------
Kelly J. Small
Professional Affiliations:
Candidate Member of the Appraisal Institute (#M921847)
State of Maryland Certified General Real Estate Appraiser (#20143)
Maryland Salesperson License (#313081)
Appraisal/Real Estate Experience:
Appraiser, Cushman & Wakefield of Washington, D.C., Inc., Valuation
Advisory Services, a full service real estate organization
specializing in appraisal and consultation. Member of National
Affordable Housing Group. October, 1995 to present.
Staff Appraiser, Legg Mason Realty Group, Inc., Baltimore, Maryland.
February, 1990, through October, 1995.
Other work experience includes financial analyst, market research
analyst and real estate settlement work.
Experience includes appraisal of the following types of property:
Office Buildings Shopping Centers
Subdivision Development Analysies Industrial Facilities
Commercial Land Multi-Family Properties
Single Family Residences Leasehold/Leased Fee Interests
Hotel Special Purpose Facilities
Manufacturing Facilities Warehouse Facilities
Education:
Bachelor of Science (Finance), 1990
University of Baltimore, Baltimore, Maryland
Masters of Science (Real Estate Development), 1996
The Johns Hopkins University, Baltimore, Maryland
Appraisal Institute Courses:
#1A1 - Real Estate Appraisal Principles
#lA2 - Basic Valuation Procedures
#1Bl - Capitalization Theory & Techniques, Part A
#1B2 - Capitalization Theory & Techniques, Part B
#410 - Standards of Professional Appraisal Practice, Part A (USPAP)
<PAGE>
QUALIFICATIONS
- --------------------------------------------------------------------------------
Kelly J. Small
#420 - Standards of Professional Appraisal Practice, Part B (AI)
#540 - Report Writing and Valuation Analysis
#550 - Advanced Applications
Specific course work and seminars:
The new URAR Appraisal Reports, Emerging Trends
Affordable Housing Tax Credit Coalition seminars
<PAGE>
Addenda
- --------------------------------------------------------------------------------
Pro-ject Assumptions
<PAGE>
ARBORETUM VI
PROJECT DESIGNATOR: ARB6
REVISION: 7/11/97 @ 23:52
TENANT REGISTER
7/11/97 @ 23:52
TENANT SQUARE FEET BEGIN DATE END DATE
- ------------------------------------- ----------- ---------- --------
# 1 - JOHNSON MIRMIRAN 4,484 11/1996 11/1999
# 2 - NEW ENGLAND LIFE 6,741 8/1996 7/2002
# 3 - SIGNET 1,947 3/1994 3/1999
# 4 - TPK ASSET MANAGEME 2,048 5/1994 5/1999
# 5 - DRAKE BEAM MORIN 5,153 7/1993 8/1998
# 6 - MANUFACTURERS LIFE 5,573 9/1996 8/2001
# 7 - PRIME CO 5,628 8/1995 7/2005
# 8 - PRIME CO 11,946 9/1995 7/2005
# 9 - OHIO CASUALTY INSU 3,748 4/1997 9/2001
# 10 - HEALTHSOURCE 3,898 4/1996 3/1999
# 11 - MICROSOFT 1,405 4/1996 3/1998
# 12 - CORNWELL ENTERPRIS 4,607 5/1997 10/1997
# 13 - ERICSSON 741 3/1996 2/1999
# 14 - LINCOLN FINANCIAL 3,158 3/1993 2/1999
# 15 - NORRELL SERVICES 1,452 5/1993 4/1998
# 16 - GLOBE LIFE 535 7/1994 6/1997
# 17 - Norfolk Southern 2,678 3/1997 2/2000
# 18 - DRAKE BEAM MORIN 1,315 1/1996 6/1997
# 19 - VACANT 5,760 9/1997 8/2002
# 20 - CONFERENCE ROOM 378 7/1995 6/2060
-----------
20 TENANTS 73,195
===========
<PAGE>
ARBORETUM VI
PROJECT DESIGNATOR: ARB6
REVISION: 7/6/97 @ 10:44
AVERAGE OCCUPANCY REPORT
FOR ALL TENANTS
7/11/97 @ 23:52
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001 2002 2003 2004 2005
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
JANUARY 56,402 68,588 73,195 68,711 73,195 73,195 73,195 68,042 73,195
FEBRUARY 56,402 73,195 73,195 68,711 73,195 73,195 68,588 68,042 73,195
MARCH 59,080 73,195 69,296 70,517 73,195 73,195 68,588 73,195 68,711
APRIL 62,828 71,790 63,451 70,517 73,195 73,195 68,588 73,195 68,711
MAY 67,435 70,338 63,451 70,517 73,195 73,195 73,195 73,195 68,711
JUNE 67,435 70,338 65,302 73,195 73,195 73,195 73,195 69,296 70,517
JULY 65,585 71,743 71,147 73,195 73,195 73,195 71,790 63,451 70,517
AUGUST 65,585 73,195 71,147 73,195 73,195 66,454 70,338 63,451 52,943
SEPTEMBER 71,345 68,042 73,195 73,195 67,622 60,694 70,338 65,302 55,621
OCTOBER 73,195 68,042 73,195 73,195 63,874 58,844 71,743 71,147 55,621
NOVEMBER 68,588 68,042 73,195 73,195 63,874 65,585 73,195 71,147 73,195
DECEMBER 68,588 73,195 68,711 73,195 69,447 71,345 68,042 73,195 73,195
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
AVERAGE SF
OCCUPIED-OCCA 65,206 70,809 69,873 71,778 70,865 69,607 70,900 69,388 67,011
TOTAL SF-NRA 73,195 73,195 73,195 73,195 73,195 73,195 73,195 73,195 73,195
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
OCCUPANCY % 89.09 96.74 95.46 98.06 96.82 95.10 96.86 94.80 91.55
========== ========== ========== ========== ========== ========== ========== ========== ==========
<CAPTION>
2006 2007 2008 2009 2010 2011 2012 2013 2014
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
JANUARY 73,195 63,874 58,844 71,743 71,147 55,621 73,195 73,195 71,790
FEBRUARY 73,195 63,874 65,585 73,195 71,147 73,195 73,195 66,454 70,338
MARCH 73,195 69,447 71,345 68,042 73,195 73,195 67,622 60,694 70,338
APRIL 73,195 73,195 73,195 68,042 73,195 73,195 63,874 58,844 71,743
MAY 73,195 73,195 68,588 68,042 73,195 73,195 63,874 65,585 73,195
JUNE 73,195 73,195 68,588 73,195 68,711 73,195 69,447 71,345 68,042
JULY 73,195 73,195 68,588 73,195 68,711 73,195 73,195 73,195 68,042
AUGUST 73,195 73,195 73,195 73,195 68,711 73,195 73,195 68,588 68,042
SEPTEMBER 73,195 73,195 73,195 69,296 70,517 73,195 73,195 68,588 73,195
OCTOBER 73,195 73,195 71,790 63,451 70,517 73,195 73,195 68,588 73,195
NOVEMBER 73,195 66,454 70,338 63,451 52,943 73,195 73,195 73,195 73,195
DECEMBER 67,622 60,694 70,338 65,302 55,621 73,195 73,195 73,195 69,296
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
AVERAGE SF
OCCUPIED-OCCA 72,731 69,726 69,466 69,179 68,134 71,731 70,865 68,456 70,868
TOTAL SF-NRA 73,195 73,195 73,195 73,195 73,195 73,195 73,195 73,195 73,195
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
OCCUPANCY % 99.37 95.26 94.91 94.51 93.09 98.00 96.82 93.53 96.82
========== ========== ========== ========== ========== ========== ========== ========== ==========
<CAPTION>
2015 2016 2017 2018 2019 2020 2021 2022 2023
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
JANUARY 63,451 70,517 73,195 73,195 68,588 73,195 68,711 73,195 73,195
FEBRUARY 63,451 52,943 73,195 73,195 73,195 73,195 68,711 73,195 73,195
MARCH 65,302 55,621 73,195 73,195 73,195 69,296 70,517 73,195 73,195
APRIL 71,147 55,621 73,195 73,195 71,790 63,451 70,517 73,195 73,195
MAY 71,147 73,195 73,195 66,454 70,338 63,451 52,943 73,195 73,195
JUNE 73,195 73,195 67,622 60,694 70,338 65,302 55,621 73,195 73,195
JULY 73,195 73,195 63,874 58,844 71,743 71,147 55,621 73,195 73,195
AUGUST 73,195 73,195 63,874 65,585 73,195 71,147 73,195 73,195 66,454
SEPTEMBER 68,711 73,195 69,447 71,345 68,042 73,195 73,195 67,622 60,694
OCTOBER 68,711 73,195 73,195 73,195 68,042 73,195 73,195 63,874 58,844
NOVEMBER 68,711 73,195 73,195 68,588 68,042 73,195 73,195 63,874 65,585
DECEMBER 70,517 73,195 73,195 68,588 73,195 68,711 73,195 69,447 71,345
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
</TABLE>
<PAGE>
PAGE 2
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AVERAGE SF
OCCUPIED-OCCA 69,228 68,355 70,865 68,839 70,809 69,873 67,385 70,865 69,607
TOTAL SF-NRA 73,195 73,195 73,195 73,195 73,195 73,195 73,195 73,195 73,195
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
OCCUPANCY % 94.58 93.39 96.82 94.05 96.74 95.46 92.06 96.82 95.10
========== ========== ========== ========== ========== ========== ========== ========== ==========
</TABLE>
2024 2025 2026 2027
---------- ---------- ---------- ----------
JANUARY 73,195 68,042 73,195 73,195
FEBRUARY 68,588 68,042 73,195 73,195
MARCH 68,588 73,195 68,711 73,195
APRIL 68,588 73,195 68,711 73,195
MAY 73,195 73,195 68,711 73,195
JUNE 73,195 69,296 70,517 73,195
JULY 71,790 63,451 70,517 73,195
AUGUST 70,338 63,451 52,943 73,195
SEPTEMBER 70,338 65,302 55,621 73,195
OCTOBER 71,743 71,147 55,621 73,195
NOVEMBER 73,195 71,147 73,195 73,195
DECEMBER 68,042 73,195 73,195 67,622
---------- ---------- ---------- ----------
AVERAGE SF
OCCUPIED-OCCA 70,900 69,388 67,011 72,731
TOTAL SF-NRA 73,195 73,195 73,195 73,195
---------- ---------- ---------- ----------
OCCUPANCY % 96.86 94.80 91.55 99.37
========== ========== ========== ==========
<PAGE>
ARBORETUM VI
PROJECT DESIGNATOR: ARB6
REVISION: 7/11/97 @ 23:52
RENT ROLL AS OF 7/1997
(FISCAL YEAR BASIS)
7/11/97 @ 23:53
<TABLE>
<CAPTION>
TENANT/
LEASE TYPE AND DATES/ BASE RENT/ OVERAGE/ SALES(000)/ RECOVERIES/ REVENUE/
SQUARE FEET PER SF PER SF PER SF PER SF PER SF
- ---------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
# 1
JOHNSON MIRMIRAN
BASE LEASE 11/96-11/99 76,563 0 0 0 76,563
4,484 SF 17.07 0.00 0.00 0.00 17.07
# 2
NEW ENGLAND LIFE
BASE LEASE 8/96- 7/02 106,227 0 0 2,816 109,043
6,741 SF 15.76 0.00 0.00 0.42 16.18
# 3
SIGNET
BASE LEASE 3/94- 3/99 33,128 0 0 35 33,163
1,947 SF 17.01 0.00 0.00 0.02 17.03
# 4
TPK ASSET MANAGEME
BASE LEASE 5/94- 5/99 31,273 0 0 0 31,273
2,048 SF 15.27 0.00 0.00 0.00 15.27
# 5
DRAKE BEAM MORIN
BASE LEASE 7/93- 8/98 82,448 0 0 1,147 83,595
5,153 SF 16.00 0.00 0.00 0.22 16.22
# 6
MANUFACTURERS LIFE
BASE LEASE 9/96- 8/01 92,029 0 0 100 92,129
5,573 SF 16.5l 0.00 0.00 0.02 16.53
# 7
PRIME CO
BASE LEASE 8/95- 7/05 85,317 0 0 2,351 87,668
5,628 SF 15.16 0.00 0.00 0.42 15.58
# 8
PRIME CO
BASE LEASE 9/95- 7/05 181,338 0 0 4,990 186,328
11,946 SF 15.18 0.00 0.00 0.42 15.60
# 9
OHIO CASUALTY INSU
BASE LEASE 4/97- 9/01 56,389 0 0 313 56,702
3,748 SF 15.05 0.00 0.00 0.08 15.13
# 10
HEALTHSOURCE
BASE LEASE 4/96- 3/99 61,567 0 0 1,628 63,195
3,898 SF 15.79 0.00 0.00 0.42 16.21
# 11
MICROSOFT
BASE LEASE 4/96- 3/98 18,745 0 0 462 19,207
1,405 SF 13.34 0.00 0.00 0.33 13.67
</TABLE>
<PAGE>
PAGE 2
<TABLE>
<CAPTION>
TENANT/
LEASE TYPE AND DATES/ BASE RENT/ OVERAGE/ SALES(000)/ RECOVERIES/ REVENUE/
SQUARE FEET PER SF PER SF PER SF PER SF PER SF
- ---------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
# 12
CORNWELL ENTERPRIS
BASE LEASE 5/97-10/97 60,547 0 0 0 60,547
4,607 SF 13.14 0.00 0.00 0.00 13.14
# 13
ERICSSON
BASE LEASE 3/96- 2/99 12,117 0 0 310 12,427
741 SF 16.35 0.00 0.00 0.42 16.77
# 14
LINCOLN FINANCIAL
BASE LEASE 3/93- 2/99 53,270 0 0 0 53,270
3,158 SF 16.87 0.00 0.00 0.00 16.87
# 15
NORRELL SERVICES
BASE LEASE 5/93- 4/98 19,646 0 0 21 19,667
1,452 SF 13.53 0.00 0.00 0.01 13.54
# 17
Norfolk Southern
BASE LEASE 3/97- 2/00 45,305 0 0 224 45,529
2,678 SF 16.92 0.00 0.00 0.08 17.00
# 20
CONFERENCE ROOM
BASE LEASE 7/95- 6/60 0 0 0 0 0
378 SF 0.00 0.00 0.00 0.00 0.00
---------- --------- ---------- ---------- ----------
TOTALS 1,015,909 0 0 14,397 1,030,306
65,585 SF 15.49 0.00 0.00 0.22 15.71
========== ========= ========== ========== ==========
</TABLE>
<PAGE>
ARBORETUM VI
PROJECT DESIGNATOR: ARB6
REVISION: 7/11/97 @ 23:52
EXPIRATION REPORT
YEARS 1998 TO 2028, ALL TENANTS,
INCLUDING OPTIONS, INCLUDING RENEWALS,
EXCLUDING BASE LEASES AND PRIOR OPTIONS,
BASE RENTS INCLUDING CPI ADJUSTMENTS,
INCLUDING PERCENTAGE RENTS
7/11/97 @ 23:53
<TABLE>
<CAPTION>
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- ------------------- --------- --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
# 16 INITIAL
GLOBE LIFE 535 6/1997 14.58 0.00 14.58 16.50
# 18 INITIAL
DRAKE BEAM MORIN 1,315 6/1997 16.5O 0.00 16.50 16.5O
# 12 INITIAL
CORNWELL ENTERPRIS 4,607 10/1997 17.88 0.00 17.88 16.50
# 11 INITIAL
MICROSOFT 1,405 3/1998 16.01 0.54 16.55 17.08
# 15 INITIAL
NORRELL SERVICES 1,452 4/1998 14.76 0.04 14.80 17.08
--------- ------- ------- ------- -------
5 FY 98 EXPIRATIONS 9,314 16.73 0.09 16.81 16.68
# 5 INITIAL
DRAKE BEAM MORIN 5,153 8/1998 16.00 0.34 16.34 17.08
# 14 INITIAL
LINCOLN FINANCIAL 3,158 2/1999 17.49 0.00 17.49 17.68
# 13 INITIAL
ERICSSON 741 2/1999 16.71 0.73 17.44 17.68
# 10 INITIAL
HEALTHSOURCE 3,898 3/1999 16.32 0.73 17.05 17.68
# 3 INITIAL
SIGNET 1,947 3/1999 17.44 0.07 17.50 17.68
# 4 INITIAL
TPK ASSET MANAGEME 2,048 5/1999 15.80 0.00 15.80 17.68
--------- ------- ------- ------- -------
6 FY 99 EXPIRATIONS 16,945 16.52 0.31 16.83 17.49
--------- ------- ------- ------- -------
11 CUMULATIVE EXPS 26,259 16.60 0.23 16.83 17.20
# 1 INITIAL
JOHNSON MIRMIRAN 4,484 11/1999 18.11 0.00 18.11 17.68
# 17 INITIAL
Norfolk Southern 2,678 2/2000 18.12 0.61 18.73 18.29
--------- ------- ------- ------- -------
2 FY100 EXPIRATIONS 7,162 18.11 0.23 18.34 17.91
--------- ------- ------- ------- -------
13 CUMULATIVE EXPS 33,421 16.92 0.23 17.15 17.35
</TABLE>
<PAGE>
PAGE 2
<TABLE>
<CAPTION>
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- ------------------- --------- --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
# 6 INITIAL
MANUFACTURERS LIFE 5,573 8/2001 18.18 0.14 18.32 18.93
# 9 INITIAL
OHIO CASUALTY INSU 3,748 9/2001 16.60 0.81 17.41 18.93
--------- ------- ------- ------- -------
2 FY102 EXPIRATIONS 9,321 17.54 0.41 17.95 18.93
--------- ------- ------- ------- -------
15 CUMULATIVE EXPS 42,742 17.06 0.27 17.33 17.70
# 2 INITIAL
NEW ENGLAND LIFE 6,741 7/2002 17.11 1.36 18.47 19.60
# 19 INITIAL
VACANT 5,760 8/2002 18.57 1.02 19.59 19.60
# 18 RENEWAL 1
DRAKE BEAM MORIN 1,315 9/2002 18.57 1.02 19.59 19.60
# 16 RENEWAL 1
GLOBE LIFE 535 9/2002 18.57 1.03 19.60 19.60
# 12 RENEWAL 1
CORNWELL ENTERPRIS 4,607 1/2003 19.22 1.06 20.28 20.28
--------- ------- ------- ------- -------
5 FY103 EXPIRATIONS 18,958 18.21 1.15 19.36 19.76
--------- ------- ------- ------- -------
20 CUMULATIVE EXPS 61,700 17.41 0.54 17.95 18.33
# 11 RENEWAL 1
MICROSOFT 1,405 6/2003 19.22 1.06 20.28 20.28
# 15 RENEWAL 1
NORRELL SERVICES 1,452 7/2003 19.22 1.06 20.28 20.28
# 5 RENEWAL 1
DRAKE BEAM MORIN 5,153 11/2003 19.22 1.06 20.28 20.28
# 13 RENEWAL 1
ERICSSON 741 5/2004 19.89 1.09 20.97 20.99
# 14 RENEWAL 1
LINCOLN FINANCIAL 3,158 5/2004 19.89 1.09 20.98 20.99
--------- ------- ------- ------- -------
5 FY104 EXPIRATIONS 11,909 19.44 1.07 20.51 20.52
--------- ------- ------- ------- -------
25 CUMULATIVE EXPS 73,609 17.74 0.63 18.36 18.69
# 3 RENEWAL 1
SIGNET 1,947 6/2004 19.90 1.08 20.98 20.99
# 10 RENEWAL 1
HEALTHSOURCE 3,898 6/2004 19.89 1.09 20.98 20.99
# 4 RENEWAL 1
TPK ASSET MANAGEME 2,048 8/2004 19.89 1.08 20.98 20.99
</TABLE>
<PAGE>
PAGE 3
<TABLE>
<CAPTION>
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- ------------------- --------- --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
# 1 RENEWAL 1
JOHNSON MIRMIRAN 4,484 2/2005 20.59 1.09 21.68 21.73
# 17 RENEWAL 1
Norfolk Southern 2,678 5/2005 20.59 1.09 21.68 21.73
--------- ------- ------- ------- -------
5 FY105 EXPIRATIONS 15,055 20.23 1.09 21.31 21.34
--------- ------- ------- ------- -------
30 CUMULATIVE EXPS 88,664 18.16 0.70 18.87 19.14
# 7 INITIAL
PRIME CO 5,628 7/2005 18.09 2.03 20.13 21.73
# 8 INITIAL
PRIME CO 11,946 7/2005 18.12 2.03 20.15 21.73
--------- ------- ------- ------- -------
2 FY106 EXPIRATIONS 17,574 18.11 2.03 20.14 21.73
--------- ------- ------- ------- -------
32 CUMULATIVE EXPS 106,238 18.15 0.92 19.08 19.57
# 6 RENEWAL 1
MANUFACTURERS LIFE 5,573 11/2006 21.31 1.20 22.51 22.49
# 9 RENEWAL 1
OHIO CASUALTY INSU 3,748 12/2006 22.06 0.98 23.04 23.27
--------- ------- ------- ------- -------
2 FY107 EXPIRATIONS 9,321 21.61 1.11 22.72 22.80
--------- ------- ------- ------- -------
34 CUMULATIVE EXPS 115,559 18.43 0.94 19.37 19.83
# 2 RENEWAL 1
NEW ENGLAND LIFE 6,741 10/2007 22.06 1.22 23.27 23.27
# 19 RENEWAL 1
VACANT 5,760 11/2007 22.06 1.22 23.27 23.27
# 16 RENEWAL 2
GLOBE LIFE 535 12/2007 22.83 0.99 23.82 24.09
# 18 RENEWAL 2
DRAKE BEAM MORIN 1,315 12/2007 22.83 0.98 23.81 24.09
# 12 RENEWAL 2
CORNWELL ENTERPRIS 4,607 4/2008 22.83 1.25 24.07 24.09
--------- ------- ------- ------- -------
5 FY108 EXPIRATIONS 18,958 22.32 1.20 23.52 23.55
--------- ------- ------- ------- -------
39 CUMULATIVE EXPS 134,517 18.98 0.98 19.96 20.35
# 11 RENEWAL 2
MICROSOFT 1,405 9/2008 22.83 1.25 24.08 24.09
# 15 RENEWAL 2
NORRELL SERVICES 1,452 10/2008 22.83 1.25 24.07 24.09
</TABLE>
<PAGE>
PAGE 4
<TABLE>
<CAPTION>
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- ------------------- --------- --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
# 5 RENEWAL 2
DRAKE BEAM MORIN 5,153 2/2009 23.63 1.30 24.93 24.93
--------- ------- ------- ------- -------
3 FY109 EXPIRATIONS 8,010 23.34 1.28 24.62 24.63
--------- ------- ------- ------- -------
42 CUMULATIVE EXPS 142,527 19.22 0.99 20.22 20.59
# 14 RENEWAL 2
LINCOLN FINANCIAL 3,158 8/2009 23.63 1.30 24.93 24.93
# 13 RENEWAL 2
ERICSSON 741 8/2009 23.63 1.30 24.92 24.93
# 10 RENEWAL 2
HEALTHSOURCE 3,898 9/2009 23.63 1.30 24.93 24.93
# 3 RENEWAL 2
SIGNET 1,947 9/2009 23.63 1.30 24.93 24.93
# 4 RENEWAL 2
TPK ASSET MANAGEME 2,048 11/2009 23.63 1.30 24.93 24.93
# 1 RENEWAL 2
JOHNSON MIRMIRAN 4,484 5/2010 24.45 1.35 25.81 25.81
--------- ------- ------- ------- -------
6 FY110 EXPIRATIONS 16,276 23.86 1.31 25.17 25.17
--------- ------- ------- ------- -------
48 CUMULATIVE EXPS 158,803 19.70 1.03 20.73 21.06
# 17 RENEWAL 2
Norfolk Southern 2,678 8/2010 24.45 1.35 25.81 25.81
# 8 RENEWAL 1
PRIME CO 11,946 10/2010 24.45 1.35 25.81 25.81
# 7 RENEWAL 1
PRIME CO 5,628 10/2010 24.45 1.35 25.81 25.81
--------- ------- ------- ------- -------
3 FY111 EXPIRATIONS 20,252 24.45 1.35 25.81 25.81
--------- ------- ------- ------- -------
51 CUMULATIVE EXPS 179,055 20.24 1.06 21.30 21.60
# 6 RENEWAL 2
MANUFACTURERS LIFE 5,573 2/2012 26.20 1.45 27.65 27.64
# 9 RENEWAL 2
OHIO CASUALTY INSU 3,748 3/2012 26.20 1.45 27.65 27.64
--------- ------- ------- ------- -------
2 FY112 EXPIRATIONS 9,321 26.20 1.45 27.65 27.64
--------- ------- ------- ------- -------
53 CUMULATIVE EXPS 188,376 20.53 1.08 21.61 21.90
# 2 RENEWAL 2
NEW ENGLAND LIFE 6,741 1/2013 27.11 1.47 28.59 28.61
</TABLE>
<PAGE>
PAGE 5
<TABLE>
<CAPTION>
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- ------------------- --------- --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
# 19 RENEWAL 2
VACANT 5,760 2/2013 27.11 1.47 28.59 28.61
# 18 RENEWAL 3
DRAKE BEAM MORIN 1,315 3/2013 27.11 1.47 28.58 28.61
# 16 RENEWAL 3
GLOBE LIFE 535 3/2013 27.12 1.48 28.60 28.61
--------- ------- ------- ------- -------
4 FY113 EXPIRATIONS 14,351 27.11 1.47 28.59 28.61
--------- ------- ------- ------- -------
57 CUMULATIVE EXPS 202,727 21.00 1.11 22.11 22.37
# 12 RENEWAL 3
CORNWELL ENTERPRIS 4,607 7/2013 27.11 1.47 28.58 28.61
# 11 RENEWAL 3
MICROSOFT 1,405 12/2013 28.07 1.20 29.26 29.61
# 15 RENEWAL 3
NORRELL SERVICES 1,452 1/2014 28.06 1.55 29.61 29.61
# 5 RENEWAL 3
DRAKE BEAM MORIN 5,153 5/2014 28.06 1.56 29.62 29.61
--------- ------- ------- ------- -------
4 FY114 EXPIRATIONS 12,617 27.71 1.48 29.20 29.25
--------- ------- ------- ------- -------
61 CUMULATIVE EXPS 215,344 21.39 1.13 22.52 22.78
# 13 RENEWAL 3
ERICSSON 741 11/2014 28.06 1.55 29.62 29.61
# 14 RENEWAL 3
LINCOLN FINANCIAL 3,158 11/2014 28.06 1.55 29.62 29.61
# 3 RENEWAL 3
SIGNET 1,947 12/2014 29.04 1.28 30.32 30.65
# 10 RENEWAL 3
HEALTHSOURCE 3,898 12/2014 29.04 1.28 30.32 30.65
# 4 RENEWAL 3
TPK ASSET MANAGEME 2,048 2/2015 29.04 1.60 30.64 30.65
--------- ------- ------- ------- -------
5 FY115 EXPIRATIONS 11,792 28.72 1.43 30.15 30.31
--------- ------- ------- ------- -------
66 CUMULATIVE EXPS 227,136 21.77 1.15 22.92 23.17
# 1 RENEWAL 3
JOHNSON MIRMIRAN 4,484 8/2015 29.04 1.60 30.64 30.65
# 17 RENEWAL 3
Norfolk Southern 2,678 11/2015 29.05 1.60 30.65 30.65
# 7 RENEWAL 2
PRIME CO 5,628 1/2016 30.06 1.60 31.66 31.72
</TABLE>
<PAGE>
PAGE 6
<TABLE>
<CAPTION>
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- ------------------- --------- --------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
# 8 RENEWAL 2
PRIME CO 11,946 1/2016 30.06 1.60 31.66 31.72
--------- ------- ------- ------- -------
4 FY116 EXPIRATIONS 24,736 29.77 1.60 31.37 31.41
--------- ------- ------- ------- -------
70 CUMULATIVE EXPS 251,872 22.56 1.19 23.75 23.98
# 6 RENEWAL 3
MANUFACTURERS LIFE 5,573 5/2017 31.11 1.70 32.81 32.83
--------- ------- ------- ------- -------
1 FY117 EXPIRATIONS 5,573 31.11 1.70 32.81 32.83
--------- ------- ------- ------- -------
71 CUMULATIVE EXPS 257,445 22.74 1.20 23.94 24.17
# 9 RENEWAL 3
OHIO CASUALTY INSU 3,748 6/2017 31.11 1.70 32.81 32.83
# 2 RENEWAL 3
NEW ENGLAND LIFE 6,741 4/2018 32.20 1.76 33.96 33.98
# 19 RENEWAL 3
VACANT 5,760 5/2018 32.20 1.76 33.96 33.98
--------- ------- ------- ------- -------
3 FY118 EXPIRATIONS 16,249 31.95 1.75 33.70 33.72
--------- ------- ------- ------- -------
74 CUMULATIVE EXPS 273,694 23.29 1.23 24.52 24.73
# 16 RENEWAL 4
GLOBE LIFE 535 6/2018 32.21 1.75 33.96 33.98
# 18 RENEWAL 4
DRAKE BEAM MORIN 1,315 6/2018 32.20 1.76 33.97 33.98
# 12 RENEWAL 4
CORNWELL ENTERPRIS 4,607 10/2018 32.20 1.76 33.96 33.98
# 11 RENEWAL 4
MICROSOFT 1,405 3/2019 33.33 1.82 35.15 35.17
# 15 RENEWAL 4
NORRELL SERVICES 1,452 4/2019 33.33 1.82 35.15 35.17
--------- ------- ------- ------- -------
5 FY119 EXPIRATIONS 9,314 32.55 1.78 34.33 34.35
--------- ------- ------- ------- -------
79 CUMULATIVE EXPS 283,008 23.59 1.25 24.85 25.05
# 5 RENEWAL 4
DRAKE BEAM MORIN 5,153 8/2019 33.33 1.82 35.15 35.17
# 14 RENEWAL 4
LINCOLN FINANCIAL 3,158 2/2020 34.50 1.89 36.39 36.40
# 13 RENEWAL 4
ERICSSON 741 2/2020 34.49 1.89 36.39 36.40
</TABLE>
<PAGE>
PAGE 7
<TABLE>
<CAPTION>
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- ------------------- --------- --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
# 10 RENEWAL 4
HEALTHSOURCE 3,898 3/2020 34.49 1.89 36.38 36.40
# 3 RENEWAL 4
SIGNET 1,947 3/2020 34.5O 1.89 36.39 36.40
# 4 RENEWAL 4
TPK ASSET MANAGEME 2,048 5/2020 34.49 1.89 36.39 36.40
--------- ------- ------- ------- -------
6 FY120 EXPIRATIONS 16,945 34.14 1.87 36.01 36.03
--------- ------- ------- ------- -------
85 CUMULATIVE EXPS 299,953 24.19 1.29 25.48 25.67
# 1 RENEWAL 4
JOHNSON MIRMIRAN 4,484 11/2020 34.50 1.89 36.39 36.40
# 17 RENEWAL 4
Norfolk Southern 2,678 2/2021 35.70 1.93 37.64 37.67
# 8 RENEWAL 3
PRIME CO 11,946 4/2021 35.70 1.93 37.63 37.67
# 7 RENEWAL 3
PRIME CO 5,628 4/2021 35.70 1.93 37.63 37.67
--------- ------- ------- ------- -------
4 FY121 EXPIRATIONS 24,736 35.48 1.92 37.41 37.44
--------- ------- ------- ------- -------
89 CUMULATIVE EXPS 324,689 25.05 1.34 26.39 26.57
# 6 RENEWAL 4
MANUFACTURERS LIFE 5,573 8/2022 36.95 2.02 38.97 38.99
# 9 RENEWAL 4
OHIO CASUALTY INSU 3,748 9/2022 36.95 2.02 38.97 38.99
--------- ------- ------- ------- -------
2 FY123 EXPIRATIONS 9,321 36.95 2.02 38.97 38.99
--------- ------- ------- ------- -------
91 CUMULATIVE EXPS 334,010 25.38 1.36 26.74 26.91
# 2 RENEWAL 4
NEW ENGLAND LIFE 6,741 7/2023 38.24 2.10 40.34 40.36
# 19 RENEWAL 4
VACANT 5,760 8/2023 38.25 2.10 40.35 40.36
# 18 RENEWAL 5
DRAKE BEAM MORIN 1,315 9/2023 38.24 2.10 40.34 40.36
# 16 RENEWAL 5
GLOBE LIFE 535 9/2023 38.24 2.11 40.35 40.36
# 12 RENEWAL 5
CORNWELL ENTERPRIS 4,607 1/2024 39.58 2.16 41.75 41.77
--------- ------- ------- ------- -------
5 FY124 EXPIRATIONS 18,958 38.57 2.12 40.69 40.70
--------- ------- ------- ------- -------
96 CUMULATIVE EXPS 352,968 26.09 1.40 27.49 27.66
</TABLE>
<PAGE>
PAGE 8
<TABLE>
<CAPTION>
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- ------------------- --------- --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
# 11 RENEWAL 5
MICROSOFT 1,405 6/2024 39.59 2.16 41.75 41.77
# 15 RENEWAL 5
NORRELL SERVICES 1,452 7/2024 39.59 2.17 41.75 41.77
# 5 RENEWAL 5
DRAKE BEAM MORIN 5,153 11/2024 39.58 2.17 41.75 41.77
# 13 RENEWAL 5
ERICSSON 741 5/2025 40.97 2.23 43.21 43.23
# 14 RENEWAL 5
LINCOLN FINANCIAL 3,l58 5/2025 40.97 2.23 43.20 43.23
--------- ------- ------- ------- -------
5 FY125 EXPIRATIONS 11,909 40.04 2.19 42.23 42.25
--------- ------- ------- ------- -------
101 CUMULATIVE EXPS 364,877 26.55 1.42 27.97 28.13
# 3 RENEWAL 5
SIGNET 1,947 6/2025 40.97 2.23 43.20 43.23
# 10 RENEWAL 5
HEALTHSOURCE 3,898 6/2025 40.97 2.23 43.20 43.23
# 4 RENEWAL 5
TPK ASSET MANAGEME 2,048 8/2025 40.97 2.23 43.20 43.23
# 1 RENEWAL 5
JOHNSON MIRMIRAN 4,484 2/2026 42.40 2.30 44.71 44.75
# 17 RENEWAL 5
Norfolk Southern 2,678 5/2026 42.40 2.30 44.71 44.75
--------- ------- ------- ------- -------
5 FY126 EXPIRATIONS 15,055 41.65 2.27 43.92 43.95
--------- ------- ------- ------- -------
106 CUMULATIVE EXPS 379,932 27.14 1.46 28.60 28.76
# 7 RENEWAL 4
PRIME CO 5,628 7/2026 42.40 2.30 44.71 44.75
# 8 RENEWAL 4
PRIME CO 11,946 7/2026 42.40 2.30 44.71 44.75
--------- ------- ------- ------- -------
2 FY127 EXPIRATIONS 17,574 42.40 2.30 44.71 44.75
--------- ------- ------- ------- -------
108 CUMULATIVE EXPS 397,506 27.82 1.49 29.31 29.47
# 6 RENEWAL 5
MANUFACTURERS LIFE 5,573 11/2027 43.89 2.43 46.32 46.31
# 9 RENEWAL 5
OHIO CASUALTY INSU 3,748 12/2027 45.42 2.00 47.43 46.31
--------- ------- ------- ------- -------
2 FY128 EXPIRATIONS 9,321 44.50 2.26 46.77 46.31
--------- ------- ------- ------- -------
110 CUMULATIVE EXPS 406,827 28.20 1.51 29.71 29.85
</TABLE>
<PAGE>
ARBORETUM VI
PROJECT DESIGNATOR: ARB6
REVISION: 7/11/97 @ 23:52
PROJECT ASSUMPTIONS REPORT
INCLUDING ALL TENANTS
7/11/97 @ 23:53
BUILDING PROLOGUE
- -----------------
LEASEHOLD ANALYSIS OF ARBORETUM VI BEGINNING 6/1997
FOR 31 YEARS ON A FISCAL YEAR BASIS
AREA MEASURES
- -------------
NRA
1997 VALUE - 73,195
THEREAFTER - CONSTANT
OCCA
1997 VALUE - 65,206
1998 VALUE - 70,809
1999 VALUE - 69,873
2000 VALUE - 71,778
2001 VALUE - 70,865
2002 VALUE - 69,607
2003 VALUE - 70,900
2004 VALUE - 69,388
2005 VALUE - 67,011
2006 VALUE - 72,731
2007 VALUE - 69,726
2008 VALUE - 69,466
2009 VALUE - 69,179
2010 VALUE - 68,134
2011 VALUE - 71,731
2012 VALUE - 70,865
2013 VALUE - 68,456
2014 VALUE - 70,868
2015 VALUE - 69,228
2016 VALUE - 68,355
2017 VALUE - 70,865
2018 VALUE - 68,839
2019 VALUE - 70,809
2020 VALUE - 69,873
2021 VALUE - 67,385
2022 VALUE - 70,865
2023 VALUE - 69,607
2024 VALUE - 70,900
2025 VALUE - 69,388
2026 VALUE - 67,011
2027 VALUE - 72,731
THEREAFTER - CONSTANT
GROWTH RATES
- ------------
INC1
1997 VALUE - 3.50
THEREAFTER - CONSTANT
EXP1
1997 VALUE - 3.50
THEREAFTER - CONSTANT
INC3
1997 VALUE - 3.00
1998 VALUE - 3.00
<PAGE>
PAGE 2
THEREAFTER - CONSTANT
INC4
1997 VALUE - 4.00
1998 VALUE - 4.00
THEREAFTER - CONSTANT
INC5
1997 VALUE - 5.00
1998 VALUE - 5.00
THEREAFTER - CONSTANT
CPI3
1997 VALUE - 5.00
1998 VALUE - 2.50
THEREAFTER - CONSTANT
CPI4
1997 VALUE - 2.75
1998 VALUE - 2.75
THEREAFTER - CONSTANT
MARKET RATES
- ------------
MKT1
1997 VALUE - 16.50
THEREAFTER - GROWING AT GROWTH RATE INC1
TIRN
+50.0% OF TINW
TINW
1997 VALUE - 8.00
THEREAFTER - GROWING AT GROWTH RATE EXP1
TIWA
+30.0% OF TINW +70.0% OF TIRN
RESR
1997 VALUE - 0.25
THEREAFTER - GROWING AT GROWTH RATE EXP1
MISCELLANEOUS INCOMES
- ---------------------
NONE
EXPENSES
- --------
PROPERTY TAXES , REFERRED TO AS TAX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 64,812
THEREAFTER - GROWING AT GROWTH RATE EXP1
OPERATING EXPENSES, REFERRED TO AS OPEX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 260,028
THEREAFTER - GROWING AT GROWTH RATE EXP1
G&A EXPENSES , REFERRED TO AS G&A
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 37,350
THEREAFTER - GROWING AT GROWTH RATE EXP1
<PAGE>
PAGE 3
MANAGEMENT FEES , REFERRED TO AS MGMT
AN INFORMATIONAL EXPENSE
1997 VALUE - 32,266
1998 VALUE - 34,270
1999 VALUE - 35,101
2000 VALUE - 37,359
2001 VALUE - 38,264
2002 VALUE - 39,140
2003 VALUE - 41,333
2004 VALUE - 41,829
2005 VALUE - 41,913
2006 VALUE - 47,704
2007 VALUE - 47,413
2008 VALUE - 48,976
2009 VALUE - 50,513
2010 VALUE - 51,476
2011 VALUE - 56,286
2012 VALUE - 57,664
2013 VALUE - 57,498
2014 VALUE - 61,646
2015 VALUE - 62,280
2016 VALUE - 63,393
2017 VALUE - 68,200
2018 VALUE - 68,455
2019 VALUE - 72,967
2020 VALUE - 74,442
2021 VALUE - 74,020
2022 VALUE - 80,717
2023 VALUE - 82,126
2024 VALUE - 86,533
2025 VALUE - 87,727
2026 VALUE - 87,280
2027 VALUE - 98,202
THEREAFTER - CONSTANT
Base Year Expense , REFERRED TO AS BASE
AN INFORMATIONAL EXPENSE
+100.0% OF TAX +100.0% OF OPEX
+100.0% OF G&A +100.0% OF MGMT
1997 EXPENSES @ 3%, REFERRED TO AS 973P
AN INFORMATIONAL EXPENSE
1997 VALUE - 394,325
THEREAFTER - GROWING AT GROWTH RATE INC3
1997 OE @ 3% , REFERRED TO AS 3PER
AN INFORMATIONAL EXPENSE
+100.0% OF BASE-100.0% OF 973P
VACANCY ALLOWANCE
- -----------------
PERCENTAGE OF POTENTIAL GROSS INCOME
FOR ALL TENANTS SUBJECT TO VACANCY
1997 VALUE - 2.00
THEREAFTER - CONSTANT
MANAGEMENT FEE
- --------------
PERCENTAGE OF EFFECTIVE GROSS INCOME
FOR ALL TENANTS
PASSED THROUGH TO TENANTS USING EXPENSE MGMT
1997 VALUE - 3.00
THEREAFTER - CONSTANT
<PAGE>
PAGE 4
COMMISSION CALCULATIONS
- -----------------------
STANDARD METHOD #1 - 4.000% OF TOTAL RENT
STANDARD METHOD #2 - 2.000% OF TOTAL RENT
STANDARD METHOD #3 - 2.600% OF TOTAL RENT
STANDARD METHOD #4 - 0.000% OF TOTAL RENT
STANDARD METHOD #5 - 0.000% OF TOTAL RENT
COMMISSION PAYOUTS
- ------------------
STANDARD METH0D #1 - CASHED OUT
STANDARD METHOD #2 - CASHED OUT
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
ALTERATION CALCULATION
- ----------------------
1997 VALUE - 0.00
1998 VALUE - 0.00
1999 VALUE - 0.00
2000 VALUE - 0.00
2001 VALUE - 0.00
2002 VALUE - 0.00
2003 VALUE - 0.00
2004 VALUE - 0.00
2005 VALUE - 0.00
2006 VALUE - 0.00
2007 VALUE - 0.00
2008 VALUE - 0.00
2009 VALUE - 0.00
2010 VALUE - 0.00
2011 VALUE - 0.00
THEREAFTER - CONSTANT
ALTERATION PAYOUTS
- -------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - CASHED OUT
STANDARD METH0D #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
COMMON AREA MAINTENANCE POOL
- ----------------------------
NONE
<PAGE>
PAGE 5
CAPITAL EXPENDITURES
- --------------------
RESERVES
MARKET RATE RESR MULTIPLIED BY AREA MEASURE NRA
PRIMARY CLASSIFICATION CODES
- ----------------------------
NONE
SECONDARY CLASSIFICATION CODES
- ------------------------------
NONE
COST CENTERS
- ------------
NONE
SALES VOLUME PROFILE
- --------------------
PERCENT OF RELATIVE
MONTH ANNUAL SALES VOLUME
- ----- ------------ --------
JAN 8.33% 1.00
FEB 8.33% 1.00
MAR 8.33% 1.00
APR 8.33% 1.00
MAY 8.33% 1.00
JUN 8.33% 1.00
JUL 8.33% 1.00
AUG 8.33% 1.00
SEP 8.33% 1.00
OCT 8.33% 1.00
NOV 8.33% 1.00
DEC 8.33% 1.00
------ ------
TOTALS 100.00% 12.00
GLOBAL RECOVERIES
- -----------------
Base Year Expense , REFERRED TO AS BYES
PRO RATA SHARE RECOVERY OF EXPENSE BASE
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
TENANT PROLOGUE
- ---------------
MINIMUM RENTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
SALES VOLUMES AND BREAKPOINTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
<PAGE>
PAGE 6
RENEWAL RENTS ARE COMPOUNDED ANNUALLY
RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET
REFERENCE TENANTS
- -----------------
NONE
TENANTS
- -------
THERE ARE A TOTAL OF 20 LEASEHOLD TENANT(S):
- --------------------------------------------------------------------------------
# 1 - JOHNSON MIRMIRAN
BASE LEASE DATES: 11/1996 TO 11/1999
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 4,484
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 16.74/SF/YR
THEREAFTER - GROWING AT 4.00%
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
3 5.00 3 NONE NONE YES YES
4 5.00 3 NONE NONE YES YES
5 5.00 3 NONE NONE YES YES
6 5.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE INC3 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY BYES
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 2 - NEW ENGLAND LIFE
BASE LEASE DATES: 8/1996 TO 7/2002
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 6,741
SUBJECT TO VACANCY ALLOWANCE
<PAGE>
PAGE 7
MINIMUM RENT:
1998 VALUE - 15.50/SF/YR
THEREAFTER - GROWING AT 2.00%
RECOVERIES:
Base Year Expense
PRO RATA SHARE RECOVERY OF EXPENSE BASE
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 369,999
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
3 5.00 3 NONE NONE YES YES
4 5.00 3 NONE NONE YES YES
5 5.00 3 NONE NONE YES YES
6 5.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE INC3 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY BYES
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 3 - SIGNET
BASE LEASE DATES: 3/1994 TO 3/1999
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,947
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 16.93/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
1997 OE @ 3%
PRO RATA SHARE RECOVERY OF EXPENSE 3PER
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
COMMISSIONS: NONE
ALTERATIONS: NONE
<PAGE>
PAGE 8
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
3 5.00 3 NONE NONE YES YES
4 5.00 3 NONE NONE YES YES
5 5.00 3 NONE NONE YES YES
6 5.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE INC3 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY BYES
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 4 - TPK ASSET MANAGEME
BASE LEASE DATES: 5/1994 TO 5/1999
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 2,048
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 15.27/SF/YR
THEREAFTER - GROWING AT 3.5O%
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
3 5.00 3 NONE NONE YES YES
4 5.00 3 NONE NONE YES YES
5 5.00 3 NONE NONE YES YES
6 5.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE INC3 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY BYES
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
<PAGE>
PAGE 9
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 5 - DRAKE BEAM MORIN
BASE LEASE DATES: 7/1993 TO 8/1998
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 5,153
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 16.00/SF/YR
THEREAFTER - GROWING AT 0.00%
RECOVERIES:
Base Year Expense
PRO RATA SHARE RECOVERY OF EXPENSE BASE
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF 5.25/SF MULTIPLIED BY AREA MEASURE NRA
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
3 5.00 3 NONE NONE YES YES
4 5.00 3 NONE NONE YES YES
5 5.00 3 NONE NONE YES YES
6 5.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE INC3 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY BYES
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 6 - MANUFACTURERS LIFE
BASE LEASE DATES: 9/1996 TO 8/2001
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 5,573
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 16.15/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
<PAGE>
PAGE 10
1997 OE @ 3%
PRO RATA SHARE RECOVERY OF EXPENSE 3PER
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
3 5.00 3 NONE NONE YES YES
4 5.00 3 NONE NONE YES YES
5 5.00 3 NONE NONE YES YES
6 5.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE INC3 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY BYES
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 7 - PRIME CO
BASE LEASE DATES: 8/1995 TO 7/2005
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 5,628
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 14.85/SF/YR
THEREAFTER - GROWING AT 2.50%
RECOVERIES:
Base Year Expense
PRO RATA SHARE RECOVERY OF EXPENSE BASE
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 369,999
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
<PAGE>
PAGE 11
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
3 5.00 3 NONE NONE YES YES
4 5.00 3 NONE NONE YES YES
5 5.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE INC3 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY BYES
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 8 - PRIME CO
BASE LEASE DATES: 9/1995 TO 7/2005
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 11,946
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 14.87/SF/YR
THEREAFTER - GROWING AT 2.50%
RECOVERIES:
Base Year Expense
PRO RATA SHARE RECOVERY OF EXPENSE BASE
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 369,999
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
3 5.00 3 NONE NONE YES YES
4 5.00 3 NONE NONE YES YES
5 5.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE INC3 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY BYES
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
<PAGE>
PAGE 12
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 9 - OHIO CASUALTY INSU
BASE LEASE DATES: 4/1997 TO 9/2001
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 3,748
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 14.75/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY BYES
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
3 5.00 3 NONE NONE YES YES
4 5.00 3 NONE NONE YES YES
5 5.00 3 NONE NONE YES YES
6 5.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE INC3 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY BYES
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 10 - HEALTHSOURCE
BASE LEASE DATES: 4/1996 TO 3/1999
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 3,898
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 15.69/SF/YR
THEREAFTER - GROWING AT 4.00%
RECOVERIES:
Base Year Expense
PRO RATA SHARE RECOVERY OF EXPENSE BASE
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
<PAGE>
PAGE 13
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 369,999
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
3 5.00 3 NONE NONE YES YES
4 5.00 3 NONE NONE YES YES
5 5.00 3 NONE NONE YES YES
6 5.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE INC3 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY BYES
RENEWAL COMMISSIONS. STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 11 - MICROSOFT
BASE LEASE DATES: 4/1996 TO 3/1998
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,405
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 16.01/SF/YR
THEREAFTER - GROWING AT 5.00%
RECOVERIES:
Base Year Expense
PRO RATA SHARE RECOVERY OF EXPENSE BASE
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 369,999
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
3 5.00 3 NONE NONE YES YES
<PAGE>
PAGE 14
4 5.00 3 NONE NONE YES YES
5 5.00 3 NONE NONE YES YES
6 5.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE INC3 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY BYES
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 12 - CORNWELL ENTERPRIS
BASE LEASE DATES: 5/1997 TO 10/1997
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 4,607
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 17.88/SF/YR
THEREAFTER - GROWING AT 0.00%
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
3 5.00 3 NONE NONE YES YES
4 5.00 3 NONE NONE YES YES
5 5.00 3 NONE NONE YES YES
6 5.00 3 NONE NONE YES YES
7 5.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE INC3 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY BYES
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 13 - ERICSSON
<PAGE>
PAGE 15
BASE LEASE DATES: 3/1996 TO 2/1999
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 741
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 16.23/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
Base Year Expense
PRO RATA SHARE RECOVERY OF EXPENSE BASE
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 369,999
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
3 5.00 3 NONE NONE YES YES
4 5.00 3 NONE NONE YES YES
5 5.00 3 NONE NONE YES YES
6 5.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE INC3 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY BYES
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 14 - LINCOLN FINANCIAL
BASE LEASE DATES: 3/1993 TO 2/1999
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 3,158
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 16.66/SF/YR
THEREAFTER - GROWING AT 5.00%
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
<PAGE>
PAGE 16
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
3 5.00 3 NONE NONE YES YES
4 5.00 3 NONE NONE YES YES
5 5.00 3 NONE NONE YES YES
6 5.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE INC3 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY BYES
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 15 - NORRELL SERVICES
BASE LEASE DATES: 5/1993 TO 4/1998
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,452
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 14.76/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
1997 OE @ 3%
PRO RATA SHARE RECOVERY OF EXPENSE 3PER
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
3 5.00 3 NONE NONE YES YES
4 5.00 3 NONE NONE YES YES
5 5.00 3 NONE NONE YES YES
6 5.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE INC3 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
<PAGE>
PAGE 17
GLOBAL GROUPING
GLOBAL RECOVERY BYES
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 16 - GLOBE LIFE
BASE LEASE DATES: 7/1994 TO 6/1997
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 535
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 14.58/SF/YR
THEREAFTER - GROWING AT 0.00%
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY BYES
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
3 5.00 3 NONE NONE YES YES
4 5.00 3 NONE NONE YES YES
5 5.00 3 NONE NONE YES YES
6 5.00 3 NONE NONE YES YES
7 5.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE INC3 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY BYES
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 17 - Norfolk Southern
BASE LEASE DATES: 3/1997 TO 2/2000
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 2,678
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 16.75/SF/YR
<PAGE>
PAGE 18
THEREAFTER - GROWING AT 4.00%
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY BYES
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
3 5.00 3 NONE NONE YES YES
4 5.00 3 NONE NONE YES YES
5 5.00 3 NONE NONE YES YES
6 5.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE INC3 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY BYES
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 18 - DRAKE BEAM MORIN
BASE LEASE DATES: 1/1996 TO 6/1997
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,315
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 16.50/SF/YR
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
3 5.00 3 NONE NONE YES YES
4 5.00 3 NONE NONE YES YES
5 5.00 3 NONE NONE YES YES
6 5.00 3 NONE NONE YES YES
7 5.00 3 NONE NONE YES YES
<PAGE>
PAGE 19
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE INC3 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY BYES
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 19 - VACANT
BASE LEASE DATES: 9/1997 TO 8/2002
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 5,760
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - MARKET RATE MKT1
THEREAFTER - GROWING AT GROWTH RATE INC3
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY BYES
COMMISSIONS: STANDARD METHOD #1
PAYOUT: CASHED OUT
ALTERATIONS: MARKET RATE TINW
PAYOUT: CASHED OUT
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
3 5.00 3 NONE NONE YES YES
4 5.00 3 NONE NONE YES YES
5 5.00 3 NONE NONE YES YES
6 5.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE INC3 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY BYES
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 20 - CONFERENCE ROOM
<PAGE>
PAGE 20
BASE LEASE DATES: 7/1995 TO 6/2060
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 378
NOT SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS: NONE
<PAGE>
ARBORETUM VII
PROJECT DESIGNATOR: ARB7
REVISION: 7/11/97 @ 23:53
TENANT REGISTER
7/11/97 @ 23:54
TENANT SQUARE FEET BEGIN DATE END DATE
- -------------------------------------- ----------- ---------- --------
# 1 - CELLULAR ONE 20,577 10/1991 7/1997
# 2 - DUBOY ADVERTISING 3,117 2/1992 2/2002
# 3 - BF SAUL 3,017 2/1994 8/1999
# 4 - VACANT 1,111 8/1997 7/2002
# 5 - BF Saul Expansion 2,969 9/1996 8/1999
-----------
5 TENANTS 30,791
===========
<PAGE>
ARBORETUM VII
PROJECT DESIGNATOR: ARB7
REVISION: 7/11/97 @ 23:53
AVERAGE OCCUPANCY REPORT
FOR ALL TENANTS
7/11/97 @ 23:54
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001 2002 2003 2004 2005
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
JANUARY 29,680 30,791 30,791 30,791 30,791 30,791 10,214 30,791 24,805
FEBRUARY 29,680 30,791 30,791 30,791 30,791 30,791 30,791 30,791 24,805
MARCH 29,680 30,791 30,791 30,791 30,791 27,674 30,791 30,791 30,791
APRIL 29,680 30,791 30,791 30,791 30,791 27,674 30,791 30,791 30,791
MAY 29,680 30,791 30,791 30,791 30,791 27,674 30,791 30,791 30,791
JUNE 29,680 30,791 30,791 30,791 30,791 30,791 30,791 30,791 30,791
JULY 29,680 30,791 30,791 30,791 30,791 30,791 30,791 30,791 30,791
AUGUST 10,214 30,791 30,791 30,791 30,791 29,680 30,791 30,791 30,791
SEPTEMBER 10,214 30,791 24,805 30,791 30,791 29,680 30,791 30,791 30,791
OCTOBER 10,214 30,791 24,805 30,791 30,791 29,680 30,791 30,791 30,791
NOVEMBER 30,791 30,791 24,805 30,791 30,791 10,214 30,791 30,791 30,791
DECEMBER 30,791 30,791 30,791 30,791 30,791 10,214 30,791 24,805 30,791
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
AVERAGE SF
OCCUPIED-OCCA 24,999 30,791 29,295 30,791 30,791 26,305 29,076 30,292 29,793
TOTAL SF-NRA 24,999 30,791 29,295 30,791 30,791 26,305 29,076 30,292 29,793
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
OCCUPANCY % 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
========== ========== ========== ========== ========== ========== ========== ========== ==========
2006 2007 2O08 2009 2010 2011 2012 2013 2014
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
JANUARY 30,791 30,791 29,680 30,791 30,791 30,791 30,791 30,791 30,791
FEBRUARY 30,791 30,791 10,214 30,791 30,791 30,791 30,791 29,680 30,791
MARCH 30,791 30,791 10,214 30,791 24,805 30,791 30,791 29,680 30,791
APRIL 30,791 30,791 10,214 30,791 24,805 30,791 30,791 29,680 30,791
MAY 30,791 30,791 30,791 30,791 24,805 30,791 30,791 10,214 30,791
JUNE 30,791 27,674 30,791 30,791 30,791 30,791 30,791 10,214 30,791
JULY 30,791 27,674 30,791 30,791 30,791 30,791 30,791 10,214 30,791
AUGUST 30,791 27,674 30,791 30,791 30,791 30,791 30,791 30,791 30,791
SEPTEMBER 30,791 30,791 30,791 30,791 30,791 30,791 27,674 30,791 30,791
OCTOBER 30,791 30,791 30,791 30,791 30,791 30,791 27,674 30,791 30,791
NOVEMBER 30,791 29,680 30,791 30,791 30,791 30,791 27,674 30,791 30,791
DECEMBER 30,791 29,680 30,791 30,791 30,791 30,791 30,791 30,791 30,791
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
AVERAGE SF
OCCUPIED-OCCA 30,791 29,827 25,554 30,791 29,295 30,791 30,012 25,369 30,791
TOTAL SF-NRA 30,791 29,827 25,554 30,791 29,295 30,791 30,012 25,369 30,791
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
OCCUPANCY % 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
========== ========== ========== ========== ========== ========== ========== ========== ==========
2015 2016 2017 2018 2019 2020 2021 2022 2023
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
JANUARY 30,791 30,791 30,791 27,674 30,791 30,791 30,791 30,791 30,791
FEBRUARY 30,791 30,791 30,791 27,674 30,791 30,791 30,791 30,791 30,791
MARCH 30,791 30,791 30,791 30,791 30,791 30,791 30,791 30,791 27,674
APRIL 30,791 30,791 30,791 30,791 30,791 30,791 30,791 30,791 27,674
MAY 30,791 30,791 30,791 29,680 30,791 30,791 30,791 30,791 27,674
JUNE 24,805 30,791 30,791 29,680 30,791 30,791 30,791 30,791 30,791
JULY 24,805 30,791 30,791 29,680 30,791 30,791 30,791 30,791 30,791
AUGUST 24,805 30,791 30,791 10,214 30,791 30,791 30,791 30,791 29,680
SEPTEMBER 30,791 30,791 30,791 10,214 30,791 24,805 30,791 30,791 29,680
OCTOBER 30,791 30,791 30,791 10,214 30,791 24,805 30,791 30,791 29,680
NOVEMBER 30,791 30,791 30,791 30,791 30,791 24,805 30,791 30,791 10,214
DECEMBER 30,791 30,791 27,674 30,791 30,791 30,791 30,791 30,791 10,214
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
</TABLE>
<PAGE>
PAGE 2
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AVERAGE SF
OCCUPIED-OCCA 29,295 30,791 30,531 24,850 30,791 29,295 30,791 30,791 26,305
TOTAL SF-NRA 29,295 30,791 30,531 24,850 30,791 29,295 30,791 30,791 26,305
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
OCCUPANCY % 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
========== ========== ========== ========== ========== ========== ========== ========== ==========
</TABLE>
2024 2025 2026 2027
---------- ---------- ---------- ----------
JANUARY 10,214 30,791 24,805 30,791
FEBRUARY 30,791 30,791 24,805 30,791
MARCH 30,791 30,791 30,791 30,791
APRIL 30,791 30,791 30,791 30,791
MAY 30,791 30,791 30,791 30,791
JUNE 30,791 30,791 30,791 30,791
JULY 30,791 30,791 30,791 30,791
AUGUST 30,791 30,791 30,791 30,791
SEPTEMBER 30,791 30,791 30,791 30,791
OCTOBER 30,791 30,791 30,791 30,791
NOVEMBER 30,791 30,791 30,791 30,791
DECEMBER 30,791 24,805 30,791 30,791
---------- ---------- ---------- ----------
AVERAGE SF
OCCUPIED-OCCA 29,076 30,292 29,793 30,791
TOTAL SF-NRA 29,076 30,292 29,793 30,791
---------- ---------- ---------- ----------
OCCUPANCY % 100.00 100.00 100.00 100.00
========== ========= ========== ==========
<PAGE>
ARBORETUM VII
PROJECT DESIGNATOR: ARB7
REVISION: 7/11/97 @ 23:54
RENT ROLL AS OF 7/1997
(FISCAL YEAR BASIS)
7/11/97 @ 23:54
TENANT/
LEASE TYPE AND DATES/ BASE RENT/ OVERAGE/ SALES(000)/ RECOVERIES/ REVENUE/
SQUARE FEET PER SF PER SF PER SF PER SF PER SF
- ---------------------- ---------- ---------- ---------- ---------- ----------
# 1
CELLULAR ONE
BASE LEASE 10/91- 7/97 199,460 0 0 2,383 201,843
20,577 SF 9.69 0.00 0.00 0.12 9.81
# 2
DUBOY ADVERTISING
BASE LEASE 2/92- 2/02 47,168 0 0 0 47,168
3,117 SF 15.13 0.00 0.00 0.00 15.13
# 3
BF SAUL
BASE LEASE 2/94- 8/99 39,949 0 0 300 40,249
3,017 SF 13.24 0.00 0.00 0.10 13.34
# 5
BF Saul Expansion
BASE LEASE 9/96- 8/99 39,010 0 0 295 39,305
2,969 SF 13.14 0.00 0.00 0.10 13.24
---------- ---------- ---------- ---------- ----------
TOTALS 325,587 0 0 2,978 328,565
29,680 SF 10.97 0.00 0.00 0.10 11.07
========== ========== ========== ========== ==========
<PAGE>
ARBORETUM VII
PROJECT DESIGNATOR: ARB7
REVISION: 7/11/97 @ 23:54
EXPIRATION REPORT
YEARS 1998 TO 2028, ALL TENANTS,
INCLUDING OPTIONS, INCLUDING RENEWALS,
EXCLUDING BASE LEASES AND PRIOR OPTIONS,
BASE RENTS INCLUDING CPI ADJUSTMENTS,
INCLUDING PERCENTAGE RENTS
7/11/97 @ 23:54
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- ------------------- --------- --------- ------- ------- ------- -------
# 1 INITIAL
CELLULAR ONE 20,577 7/1997 12.66 0.00 12.66 13.00
--------- ------- ------- ------- -------
1 FY 98 EXPIRATIONS 20,577 12.66 0.00 12.66 13.00
# 3 INITIAL
BF SAUL 3,017 8/1999 13.74 0.19 13.93 13.93
# 5 INITIAL
BF Saul Expansion 2,969 8/1999 13.63 0.19 13.82 13.93
--------- ------- ------- ------- -------
2 FY100 EXPIRATIONS 5,986 13.69 0.19 13.88 13.93
--------- ------- ------- ------- -------
3 CUMULATIVE EXPS 26,563 12.89 0.04 12.93 13.21
# 2 INITIAL
DUBOY ADVERTISING 3,117 2/2002 16.90 0.00 16.90 15.44
--------- ------- ------- ------- -------
1 FY102 EXPIRATIONS 3,117 16.90 0.00 16.90 15.44
--------- ------- ------- ------- -------
4 CUMULATIVE EXPS 29,680 13.31 0.04 13.35 13.44
# 4 INITIAL
VACANT 1,111 7/2002 14.64 0.93 15.56 15.44
# 1 RENEWAL 1
CELLULAR ONE 20,577 10/2002 14.63 0.93 15.56 15.44
--------- ------- ------- ------- -------
2 FY103 EXPIRATIONS 21,688 14.63 0.93 15.56 15.44
--------- ------- ------- ------- -------
6 CUMULATIVE EXPS 51,368 13.87 0.41 14.28 14.29
# 3 RENEWAL 1
BF SAUL 3,017 11/2004 15.68 0.96 16.63 16.54
# 5 RENEWAL 1
BF Saul Expansion 2,969 11/2004 15.67 0.96 16.63 16.54
--------- ------- ------- ------- -------
2 FY105 EXPIRATIONS 5,986 15.67 0.96 16.63 16.54
--------- ------- ------- ------- -------
8 CUMULATIVE EXPS 57,354 14.06 0.47 14.53 14.52
# 2 RENEWAL 1
DUBOY ADVERTISING 3,117 5/2007 17.38 1.11 18.49 18.34
--------- ------- ------- ------- -------
<PAGE>
PAGE 2
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- ------------------- --------- --------- ------- ------- ------- -------
1 FY107 EXPIRATIONS 3,117 17.38 1.11 18.49 18.34
--------- ------- ------- ------- -------
9 CUMULATIVE EXPS 60,471 14.23 0.50 14.73 14.72
# 4 RENEWAL 1
VACANT 1,111 10/2007 17.38 1.11 18.49 18.34
# 1 RENEWAL 2
CELLULAR ONE 20,577 1/2008 17.99 1.02 19.01 18.98
--------- ------- ------- ------- -------
2 FY108 EXPIRATIONS 21,688 17.95 1.03 18.98 18.95
--------- ------- ------- ------- -------
11 CUMULATIVE EXPS 82,159 15.21 0.64 15.85 15.83
# 3 RENEWAL 2
BF SAUL 3,017 2/2010 19.27 1.15 20.42 20.33
# 5 RENEWAL 2
BF Saul Expansion 2,969 2/2010 19.27 1.15 20.42 20.33
--------- ------- ------- ------- -------
2 FY110 EXPIRATIONS 5,986 19.27 1.15 20.42 20.33
--------- ------- ------- ------- -------
13 CUMULATIVE EXPS 88,145 15.49 0.68 16.16 16.14
# 2 RENEWAL 2
DUBOY ADVERTISING 3,117 8/2012 20.64 1.25 21.89 21.78
# 4 RENEWAL 2
VACANT 1,111 1/2013 21.36 1.27 22.64 22.54
# 1 RENEWAL 3
CELLULAR ONE 20,577 4/2013 21.36 1.27 22.63 22.54
--------- ------- ------- ------- -------
3 FY113 EXPIRATIONS 24,805 21.27 1.27 22.54 22.45
--------- ------- ------- ------- -------
16 CUMULATIVE EXPS 112,950 16.76 0.81 17.56 17.52
# 3 RENEWAL 3
BF SAUL 3,017 5/2015 22.88 1.38 24.26 24.15
# 5 RENEWAL 3
BF Saul Expansion 2,969 5/2015 22.88 1.38 24.26 24.15
--------- ------- ------- ------- -------
2 FY115 EXPIRATIONS 5,986 22.88 1.38 24.26 24.15
--------- ------- ------- ------- -------
18 CUMULATIVE EXPS 118,936 17.07 0.84 17.90 17.86
# 2 RENEWAL 3
DUBOY ADVERTISING 3,117 11/2017 24.51 1.49 26.00 25.87
# 4 RENEWAL 3
VACANT 1,111 4/2018 25.37 1.50 26.87 26.77
--------- ------- ------- ------- -------
<PAGE>
PAGE 3
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- ------------------- --------- --------- ------- ------- ------- -------
2 FY118 EXPIRATIONS 4,228 24.74 1.49 26.23 26.11
--------- ------- ------- ------- -------
20 CUMULATIVE EXPS 123,164 17.33 0.86 18.19 18.14
# 1 RENEWAL 4
CELLULAR ONE 20,577 7/2018 25.37 1.50 26.87 26.77
--------- ------- ------- ------- -------
1 FY119 EXPIRATIONS 20,577 25.37 1.50 26.87 26.77
--------- ------- ------- ------- -------
21 CUMULATIVE EXPS 143,741 18.48 0.95 19.43 19.38
# 3 RENEWAL 4
BF SAUL 3,017 8/2020 27.18 1.64 28.82 28.68
# 5 RENEWAL 4
BF Saul Expansion 2,969 8/2020 27.18 1.64 28.81 28.68
--------- ------- ------- ------- -------
2 FY121 EXPIRATIONS 5,986 27.18 1.64 28.82 28.68
--------- ------- ------- ------- -------
23 CUMULATIVE EXPS 149,727 18.83 0.98 19.81 19.75
# 2 RENEWAL 4
DUBOY ADVERTISING 3,117 2/2023 30.13 1.84 31.97 31.80
--------- ------- ------- ------- -------
1 FY123 EXPIRATIONS 3,117 30.13 1.84 31.97 31.80
--------- ------- ------- ------- -------
24 CUMULATIVE EXPS 152,844 19.06 1.00 20.05 19.99
# 4 RENEWAL 4
VACANT 1,111 7/2023 30.14 1.84 31.97 31.80
# 1 RENEWAL 5
CELLULAR ONE 20,577 10/2023 30.13 1.84 31.97 31.80
--------- ------- ------- ------- -------
2 FY124 EXPIRATIONS 21,688 30.13 1.84 31.97 31.80
--------- ------- ------- ------- -------
26 CUMULATIVE EXPS 174,532 20.44 1.10 21.54 21.46
# 3 RENEWAL 5
BF SAUL 3,017 11/2025 32.28 1.98 34.26 34.06
# 5 RENEWAL 5
BF Saul Expansion 2,969 11/2025 32.28 1.98 34.26 34.06
--------- ------- ------- ------- -------
2 FY126 EXPIRATIONS 5,986 32.28 1.98 34.26 34.06
--------- ------- ------- ------- -------
28 CUMULATIVE EXPS 180,518 20.83 1.13 21.96 21.88
<PAGE>
ARBORETUM VII
PROJECT DESIGNATOR: ARB7
REVISION: 7/11/97 @ 23:54
PROJECT ASSUMPTIONS REPORT
INCLUDING ALL TENANTS
7/11/97 @ 23:54
BUILDING PROLOGUE
- -----------------
LEASEHOLD ANALYSIS OF ARBORETUM VII BEGINNING 6/1997
FOR 31 YEARS ON A FISCAL YEAR BASIS
AREA MEASURES
- -------------
NRA
1997 VALUE - 24,999
1998 VALUE - 30,791
1999 VALUE - 29,295
2000 VALUE - 30,791
2001 VALUE - 30,791
2002 VALUE - 26,305
2003 VALUE - 29,076
2004 VALUE - 30,292
2005 VALUE - 29,793
2006 VALUE - 30,791
2007 VALUE - 29,827
2008 VALUE - 25,554
2009 VALUE - 30,791
2010 VALUE - 29,295
2011 VALUE - 30,791
2012 VALUE - 30,012
2013 VALUE - 25,369
2014 VALUE - 30,791
2015 VALUE - 29,295
2016 VALUE - 30,791
2017 VALUE - 30,531
2018 VALUE - 24,850
2019 VALUE - 30,791
2020 VALUE - 29,295
2021 VALUE - 30,791
2022 VALUE - 30,791
2023 VALUE - 26,305
2024 VALUE - 29,076
2025 VALUE - 30,292
2026 VALUE - 29,793
2027 VALUE - 30,791
THEREAFTER - CONSTANT
OCCA
1997 VALUE - 24,999
1998 VALUE - 30,791
1999 VALUE - 29,295
2000 VALUE - 30,791
2001 VALUE - 30,791
2002 VALUE - 26,305
2003 VALUE - 29,076
2004 VALUE - 30,292
2005 VALUE - 29,793
2006 VALUE - 30,791
2007 VALUE - 29,827
2008 VALUE - 25,554
2009 VALUE - 30,791
2010 VALUE - 29,295
2011 VALUE - 30,791
2012 VALUE - 30,012
2013 VALUE - 25,369
2014 VALUE - 30,791
<PAGE>
PAGE 2
2015 VALUE - 29,295
2016 VALUE - 30,791
2017 VALUE - 30,531
2018 VALUE - 24,85O
2019 VALUE - 30,791
2020 VALUE - 29,295
2021 VALUE - 30,791
2022 VALUE - 30,791
2023 VALUE - 26,305
2024 VALUE - 29,076
2025 VALUE - 30,292
2026 VALUE - 29,793
2027 VALUE - 30,791
THEREAFTER - CONSTANT
GROWTH RATES
- ------------
INC1
1997 VALUE - 3.50
THEREAFTER - CONSTANT
EXP1
1997 VALUE - 3.50
THEREAFTER - CONSTANT
INC3
1997 VALUE - 3.00
1998 VALUE - 3.00
THEREAFTER - CONSTANT
INC4
1997 VALUE - 4.00
1998 VALUE - 4.00
THEREAFTER - CONSTANT
INC5
1997 VALUE - 5.00
1998 VALUE - 5.00
THEREAFTER - CONSTANT
CPI3
1997 VALUE - 2.50
1998 VALUE - 2.50
THEREAFTER - CONSTANT
CPI4
1997 VALUE - 2.75
1998 VALUE - 2.75
THEREAFTER - CONSTANT
MARKET RATES
- ------------
MKT1
1997 VALUE - 13.00
THEREAFTER - GROWING AT GROWTH RATE INC1
TIRN
+50.0% OF TINW
TINW
1997 VALUE - 6.00
THEREAFTER - GROWING AT GROWTH RATE EXP1
TIWA
<PAGE>
PAGE 3
+30.0% OF TINW +70.0% OF TIRN
RESR
1997 VALUE - 0.25
THEREAFTER - GROWING AT GROWTH RATE EXP1
MISCELLANEOUS INCOMES
- ---------------------
NONE
EXPENSES
- --------
PROPERTY TAXES , REFERRED TO AS TAX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 25,115
THEREAFTER - GROWING AT GROWTH RATE EXP1
OPERATING EXPENSES, REFERRED TO AS OPEX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 92,716
THEREAFTER - GROWING AT GROWTH RATE EXP1
G&A EXPENSES , REFERRED TO AS G&A
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 15,744
THEREAFTER - GROWING AT GROWTH RATE EXP1
MANAGEMENT FEES , REFERRED TO AS MGMT
AN INFORMATIONAL EXPENSE
1997 VALUE - 8,431
1998 VALUE - 12,316
1999 VALUE - 12,143
2000 VALUE - 13,230
2001 VALUE - 13,765
2002 VALUE - 12,004
2003 VALUE - 13,651
2004 VALUE - 14,814
2005 VALUE - 15,148
2006 VALUE - 16,310
2007 VALUE - 16,413
2008 VALUE - 14,272
2009 VALUE - 17,896
2010 VALUE - 17,628
2011 VALUE - 19,281
2012 VALUE - 19,548
2013 VALUE - 16,802
2014 VALUE - 21,103
2015 VALUE - 20,814
2016 VALUE - 22,736
2017 VALUE - 23,476
2018 VALUE - 19,585
2019 VALUE - 24,956
2020 VALUE - 24,653
2021 VALUE - 26,889
2022 VALUE - 28,014
2023 VALUE - 24,641
2024 VALUE - 28,117
2025 VALUE - 30,511
2026 VALUE - 31,198
2027 VALUE - 33,590
THEREAFTER - CONSTANT
Base Year Expense , REFERRED TO AS BASE
AN INFORMATIONAL EXPENSE
<PAGE>
PAGE 4
+100.0% OF TAX +100.0% OF OPEX
+100.0% OF G&A +100.0% OF MGMT
1997 INCREASE @ 3%, REFERRED TO AS 3EXP
AN INFORMATIONAL EXPENSE
1997 VALUE - 140,754
THEREAFTER - GROWING AT GROWTH RATE INC3
3% INCREASE , REFERRED TO AS 3PER
AN INFORMATIONAL EXPENSE
+100.0% OF BASE-100.0% OF 3EXP
VACANCY ALLOWANCE
- -----------------
PERCENTAGE OF POTENTIAL GROSS INCOME
FOR ALL TENANTS SUBJECT TO VACANCY
1997 VALUE - 2.00
THEREAFTER - CONSTANT
MANAGEMENT FEE
- --------------
PERCENTAGE OF EFFECTIVE GROSS INCOME
FOR ALL TENANTS
PASSED THROUGH TO TENANTS USING EXPENSE MGMT
1997 VALUE - 3.00
THEREAFTER - CONSTANT
COMMISSION CALCULATIONS
- -----------------------
STANDARD METHOD #1 - 4.000% OF TOTAL RENT
STANDARD METHOD #2 - 2.000% OF TOTAL RENT
STANDARD METHOD #3 - 2.600% OF TOTAL RENT
STANDARD METHOD #4 - 0.000% OF TOTAL RENT
STANDARD METHOD #5 - 0.000% OF TOTAL RENT
COMMISSION PAYOUTS
- ------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - CASHED OUT
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
ALTERATION CALCULATION
- ----------------------
1997 VALUE - 0.00
1998 VALUE - 0.00
1999 VALUE - 0.00
2000 VALUE - 0.00
2001 VALUE - 0.00
<PAGE>
PAGE 5
2002 VALUE - 0.00
2003 VALUE - 0.00
2004 VALUE - 0.00
2005 VALUE - 0.00
2006 VALUE - 0.00
2007 VALUE - 0.00
2008 VALUE - 0.00
2009 VALUE - 0.00
2010 VALUE - 0.00
2011 VALUE - 0.00
THEREAFTER - CONSTANT
ALTERATION PAYOUTS
- ------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - CASHED OUT
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
COMMON AREA MAINTENANCE POOL
- ----------------------------
NONE
CAPITAL EXPENDITURES
- --------------------
RESERVES
MARKET RATE RESR MULTIPLIED BY AREA MEASURE NRA
PRIMARY CLASSIFICATION CODES
- ----------------------------
NONE
SECONDARY CLASSIFICATION CODES
- ------------------------------
NONE
COST CENTERS
- ------------
NONE
SALES VOLUME PROFILE
- --------------------
PERCENT OF RELATIVE
MONTH ANNUAL SALES VOLUME
- ----- ------------ --------
JAN 8.33% 1.00
FEB 8.33% 1.00
MAR 8.33% 1.00
APR 8.33% 1.00
<PAGE>
PAGE 6
MAY 8.33% 1.00
JUN 8.33% 1.00
JUL 8.33% 1.00
AUG 8.33% 1.00
SEP 8.33% 1.00
OCT 8.33% 1.00
NOV 8.33% 1.00
DEC 8.33% 1.00
------- -------
TOTALS 100.00% 12.00
GLOBAL RECOVERIES
- -----------------
Base Year Expense , REFERRED TO AS BYES
PRO RATA SHARE RECOVERY OF EXPENSE BASE
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
TENANT PROLOGUE
- ---------------
MINIMUM RENTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
SALES VOLUMES AND BREAKPOINTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
RENEWAL RENTS ARE COMPOUNDED ANNUALLY
RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET
REFERENCE TENANTS
- -----------------
NONE
TENANTS
- -------
THERE ARE A TOTAL OF 5 LEASEHOLD TENANT(S):
- -------------------------------------------------------------------------------
# 1 - CELLULAR ONE
BASE LEASE DATES: 10/1991 TO 7/1997
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 20,577
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 12.66/SF/YR
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
<PAGE>
PAGE 7
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
3 5.00 3 NONE NONE YES YES
4 5.00 3 NONE NONE YES YES
5 5.00 3 NONE NONE YES YES
6 5.00 3 NONE NONE YES YES
7 5.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE INC3 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
BYES
GLOBAL GROUPING
GLOBAL RECOVERY BYES
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 2 - DUBOY ADVERTISING
BASE LEASE DATES: 2/1992 TO 2/2002
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 3,117
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 15.02/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
3 5.00 3 NONE NONE YES YES
4 5.00 3 NONE NONE YES YES
5 5.00 3 NONE NONE YES YES
6 5.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE INC3 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY BYES
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
<PAGE>
PAGE 8
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 3 - BF SAUL
BASE LEASE DATES: 2/1994 TO 8/1999
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 3,017
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 12.95/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
3% INCREASE
PRO RATA SHARE RECOVERY OF EXPENSE 3PER
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
3 5.00 3 NONE NONE YES YES
4 5.00 3 NONE NONE YES YES
5 5.00 3 NONE NONE YES YES
6 5.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE INC3 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY BYES
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 4 - VACANT
BASE LEASE DATES: 8/1997 TO 7/2002
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,111
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - MARKET RATE MKT1
THEREAFTER - GROWING AT GROWTH RATE INC3
RECOVERIES:
<PAGE>
PAGE 9
BYES
GLOBAL GROUPING
GLOBAL RECOVERY BYES
COMMISSIONS: STANDARD METHOD #1
PAYOUT: CASHED OUT
ALTERATIONS: MARKET RATE TINW
PAYOUT: CASHED OUT
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
3 5.00 3 NONE NONE YES YES
4 5.00 3 NONE NONE YES YES
5 5.00 3 NONE NONE YES YES
6 5.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE INC3 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY BYES
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 5 - BP Saul Expansion
BASE LEASE DATES: 9/1996 TO 8/1999
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 2,969
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 12.85/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
3% INCREASE
PRO RATA SHARE RECOVERY OF EXPENSE 3PER
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
<PAGE>
PAGE 10
2 5.00 3 NONE NONE YES YES
3 5.00 3 NONE NONE YES YES
4 5.00 3 NONE NONE YES YES
5 5.00 3 NONE NONE YES YES
6 5.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE INC3 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY BYES
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
This CD ROM contains an electronic version of appraisals for the Mortgaged
Properties in PDF format and forms part of the paper version of the Prospectus
Supplement. The information contained in this CD ROM does not appear elsewhere
in paper form in this Prospectus Supplement and must be considered as part of,
and together with, the information contained elsewhere in this Prospectus
Supplement and the Prospectus. The information contained in this CD ROM has
been filed by the Seller with the Securities and Exchange Commission as part
of a Current Report on Form 8-K, which is incorporated by reference in this
Prospectus Supplement, and is also available through the public reference
branch of the Securities and Exchange Commission. Defined terms used in this CD
ROM but not otherwise defined therein shall have the respective meanings
assigned to them in the paper portion of the Prospectus Supplement and the
Prospectus. All of the information contained in this CD ROM is subject to the
same limitations and qualifications contained in this Prospectus Supplement and
the Prospectus. Prospective investors are strongly urged to read the paper
portion of this Prospectus Supplement and the Prospectus in its entirety prior
to accessing this CD ROM. If this CD ROM was not received in a sealed package,
there can be no assurances that it remains in its original format and should
not be relied upon for any purpose. Prospective investors may contact J.
Theodore Borter of Goldman, Sachs Co. at (212)902-3857 to receive an original
copy of the CD ROM.
<PAGE>
COMPLETE APPRAISAL OF
REAL PROPERTY
Bennet Park
5200 Great America Parkway
2903 and 2933 Bunker Hill Lane
Santa Clara, Santa Clara County, California
CUSHMAN &
WAKEFIELD(R)
A ROCKEFELLER GROUP COMPANY
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
-----------------------------------------------------------------
COMPLETE APPRAISAL OF
REAL PROPERTY
Bennet Park
5200 Great America Parkway
2903 and 2933 Bunker Hill Lane
Santa Clara, Santa Clara County, California
-----------------------------------------------------------------
IN A SUMMARY REPORT
As of July 26, 1996
Prepared For:
GMAC Commercial Mortgage Corporation
650 Dresher Road
Horsham, PA 19044-8015
Prepared By:
Cushman & Wakefield of California, Inc.
Valuation Advisory Services
2055 Gateway Place, Suite 550
San Jose, California 95110
<PAGE>
Cushman & Wakefield of California, Inc.
2055 Gateway Place, Suite 550 CUSHMAN &
San Jose, CA 95110-1068 WAKEFIELD(R)
Tel: (408) 436-5500
Fax: (408) 437-9129
August 5, 1996
Ms. Avis Tsuya
Senior Underwriter
GMAC COMMERCIAL MORTGAGE CORPORATION
650 Dresher Road
Horsham, PA 19044-8015
RE: Appraisal of Real Property
Bennett Park
5200 Great America Parkway
2903 and 2933 Bunker Hill Lane
Santa Clara, Santa Clara County, California
Dear Ms. Tsuya:
In fulfillment of our agreement as outlined in the Letter of Engagement,
Cushman & Wakefield of California, Inc. is pleased to transmit our summary
report estimating the market value of the leased fee estate in the referenced
property.
As specified in the Letter of Engagement, the value opinion reported below
is qualified by certain assumptions, limiting conditions, certifications, and
definitions, which are set forth in the report. We specifically call your
attention to the following special assumptions:
This is a complete appraisal prepared in accordance with the Uniform
Standards of Professional Appraisal Practice of The Appraisal Foundation. The
results of the appraisal are being conveyed in a Summary report according to our
agreement. Because this is a summary report, the level of detail of presentation
is less than that found in a self-contained report.
This report was prepared for GMAC Commercial Mortgage Corporation and it is
intended only for the specified use of said Client. It may not be distributed to
or relied upon by other persons or entities without written permission of the
Appraiser.
The property was inspected by and the report was prepared by Rob D.
Perrino. Kenneth E. Matlin, MAI has reviewed the report and is in concurrence
with the findings herein.
<PAGE>
Ms. Avis Tsuya
August 5, 1996
Page 2
As a result of our analysis, we have formed an opinion that the market
value of the leased fee estate in the subject property, subject to the
assumptions, limiting conditions, certifications, and definitions, as of July
26, 1996 was:
TWENTY-SEVEN MILLION ONE HUNDRED THOUSAND DOLLARS
$27,100,000
The preceding estimate of market value are based upon a forecasted
marketing period of approximately 6 to 12 months, which we believe (through a
review of recent office/research and development building sale activity, as well
as with conversations with local investment brokers) is reasonably
representative for this product type.
This letter is invalid as an opinion of value if detached from the report,
which contains the text, exhibits, and an Addenda.
Respectfully submitted,
CUSHMAN & WAKEFIELD OF TEXAS, INC.
/s/ Rob D. Perrino
Rob D. Perrino
Appraiser
Northern California Valuation Advisory Services
Certification No. CA-AG002595
/s/ Kenneth E. Matlin
Kenneth E. Matlin, MAI
Manager and Director
Northern California Valuation Advisory Services
Certification No. CA-AG002022
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
SUMMARY OF SALIENT FACTS AND CONCLUSIONS
================================================================================
Property Name: Bennett Park
Location: The subject property is located along the
northwest corner of Great America Parkway
and Bunker Hill Lane within the Marriott
Business Park. The street address is 5200
Great America Parkway and 2903 and 2933
Bunker Hill Lane, Santa Clara, Santa
Clara County, California.
Assessor's Parcel Number: 104-49-018
Interest Appraised: Leased fee estate
Date of Value: July 26, 1996
Date of Inspection: July 26, 1996
Ownership: WHC-Six Real Estate Limited Partnership
Land Area: 9.54 acres or 415,698 square feet
1995-96 Property Assessment
Land: $ 5,400,000
Building: $11,000,000
-----------
Total: $16,400,000
1995-96 Ad Valorem Taxes: $189,638.26
Zoning: ML, Light Industrial
Highest and Best Use
If Vacant: Office/research and development building
As Improved: Office/research and development building
(existing use)
Improvements
Type: Three, two-story, concrete with stucco
and brick, office/research and
development complex.
Year Built: 1983
Size
Gross Building Area: 227,800 square feet
Net Rentable Office Area: 227,800 square feet
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Summary of Salient Facts and Conclusions
================================================================================
Net Useable Area: 227,800 square feet
Condition: Good
Operating Data and Forecasts
Current Occupancy: 100.0%
Forecasted First Year Occupancy
(Fiscal Year 1997): 100.0%
Forecasted Average Occupancy: 95.0%
Average Monthly Rental Rate
Actual: $1.14 per square foot, full-service
Forecasted: $1.30 per square foot, full-service
$1.65 per square foot, full-service
Operating Expenses
Last Full Year (1995): $4.12 per square foot
Budget (1996): $4.15 per net rentable square foot
Forecasted (Fiscal Year 1997): $4.62 per net rentable square foot
Value Indicators
Sales Comparison Approach: $27,160,000 ($119.23 per square foot of
net rentable area)
Income Approach: $27,070,000 ($118.83 per square foot of
net rentable area)
Discounted Cash Flow Assumptions
Market Rental Growth Rate: 3.5% per annum
Expense Growth Rates: 3.5% per annum
Credit Loss Allowance: 2.0%
Projected Term of Future Leases: 5 years
Vacancy Between Tenants 4 months
Renewal Probability: 50.0%
Tenant Improvements
New Tenants: $4.00 per square foot
Renewal Tenants: $3.00 per square foot
Commission Expense (Weighted
Average): 4.6%
Terminal Capitalization Rate: 10.0%
Cost of Sale at Reversion: 3.0%
Discount Rate: 12.5%
Implicit Year 1 Overall
Capitalization Rate: 10.2%
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Summary of Salient Facts and Conclusions
================================================================================
Value Conclusion
As Is Value Estimate: $27,100,000
Resulting Indicators
Going-In Capitalization Rate
(Overall Capitalization Rate): 10.2%
Price Per Square Foot
(Net Rentable Area): $118.96
Estimated Marketing Time: 6 to 12 months
Special Assumption: 1) Please refer to the complete list of
assumptions and limiting conditions
included at the end of this report.
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
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<PAGE>
TABLE OF CONTENTS
================================================================================
Page
PHOTOGRAPHS OF THE SUBJECT PROPERTY ....................................... 1
INTRODUCTION .............................................................. 2
Identification of Property ........................................... 2
Property Ownership and Recent History ................................ 2
Purpose and Function of the Appraisal ................................ 2
Extent of the Appraisal Process ...................................... 2
Date of Value and Property Inspection ................................ 3
Property Rights Appraised ............................................ 3
Definitions of Value, Interest Appraised, and Other Pertinent Terms .. 3
Legal Description .................................................... 4
NEIGHBORHOOD ANALYSIS ..................................................... 5
Market Overview ...................................................... 7
Marketing and Exposure Time .......................................... 9
PROPERTY DESCRIPTION ...................................................... 10
Site Description ..................................................... 10
Improvements Description ............................................. 10
REAL PROPERTY TAXES AND ASSESSMENTS ....................................... 11
ZONING .................................................................... 12
HIGHEST AND BEST USE ...................................................... 13
VALUATION PROCESS ......................................................... 14
SALES COMPARISON APPROACH ................................................. 15
"As Is" Valuation .................................................... 19
INCOME APPROACH ........................................................... 20
RECONCILIATION AND FINAL ESTIMATE OF VALUE ................................ 29
ASSUMPTIONS AND LIMITING CONDITIONS ....................................... 31
CERTIFICATION OF APPRAISAL ................................................ 33
ADDENDA ................................................................... 34
Legal Description
Alta Survey
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Table of Contents
================================================================================
Flood Plain Map
Site Plan
Project Assumptions and Analysis
Cushman & Wakefield Investor Survey
Qualifications of Rob D. Perrino
Qualifications of Kenneth E. Matlin
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
INTRODUCTION
================================================================================
Identification of Property
The subject property is a three building, two-story, concrete with stucco
and brick, office/research and development complex containing 227,800 square
feet of net rentable area. The complex is situated on the northwest corner of
Great America Parkway and Bunker Hill Lane within the Marriott Business Park.
The improvements are situated on a 9.53 acre or 415,698 square feet of land. The
common address is 52 Great America Parkway and 2903 and 2933 Bunker Hill Lane,
Santa Clara, Santa Clara County, California. The Santa Clara County Assessor has
designated the subject site at as parcel number 104-49-018. The building was
constructed in 1983 and is in good condition. The improvements are 100% occupied
by seven tenants as of the appraisal date.
Property Ownership and Recent History
Ownership of the property is currently vested in WHC-Six Real Estate
Limited Partnership. According to the most recent grant deed, the subject
property was acquired in August, 1994, from Prudential Insurance Company as part
of a bulk purchase of properties, for an undisclosed amount.
The subject property is 100% occupied by seven tenants. On average the
tenants' contract rents are significantly below-market. The impact of the
property's below-market rent will be addressed later on in the Income Approach
of this report.
To the best of our knowledge, the property is not currently being offered
for sale, nor have there have been any subsequent ownership transfers.
Purpose and Function of the Appraisal
The purpose of the appraisal is to provide an estimate of market value of
the leased fee estate in the property. The function of this report is to assist
GMAC Commercial Mortgage Corporation in an evaluation of the property for loan
underwriting purposes.
Extent of the Appraisal Process
In the process of preparing this appraisal, we:
o Inspected the exterior and interior of the building and site
improvements.;
o Reviewed the leasing policy, tenant build-out allowances and history
of recent rental rates and occupancy with the building manager;
o Reviewed a detailed history of the income and expenses and a budget
forecast for 1996, including the budget for planned capital
expenditures and repairs;
o Conducted market research into occupancies, asking rents, and
operating expenses at competing buildings including interviews with
on-site managers and a review of our own data base from previous
appraisal files;
o Conducted market inquiries into recent sales of similar buildings to
ascertain the sales prices per square foot and overall capitalization
rates. This process
================================================================================
-2-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Introduction
================================================================================
involved telephone interviews with sellers, buyers and/or
participating brokers; and
o Prepared Sales Comparison and Income Approaches to value. The Cost
Approach was not used.
Date of Value and Property Inspection
The date of value is July 26, 1996, with our date of our last inspection
being the same.
Property Rights Appraised
Leased fee estate
Definitions of Value, Interest Appraised, and Other Pertinent Terms
The definition of market value taken from the Uniform Standards of
Professional Appraisal Practice, 1994 Edition, published by The Appraisal
Foundation, is as follows:
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 is the
consummation of a sale as of a specified date and the passing of title from
seller to buyer under conditions whereby:
(1) Buyer and seller are typically motivated;
(2) Both parties are well informed or well advised, and acting in what
they consider their own best interests;
(3) A reasonable time is allowed for exposure in the open market;
(4) Payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
(5) 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.
Exposure Time
Under Paragraph 3 of the Definition of Market Value, the value estimate
presumes that A reasonable time is allowed for exposure in the open market.
Exposure time is defined as the estimated length of time the property
interest being appraised would have been offered on the market prior to the
hypothetical consummation of a sale at the market value on the effective
date of the appraisal. Exposure time is presumed to precede the effective
date of the appraisal.
Based upon the available sales data in the marketplace, as well as our
discussions six to twelve months would appear to have been reasonably
appropriate for the subject property as the date of valuation.
================================================================================
-3-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Introduction
================================================================================
Definitions of pertinent terms taken from the Dictionary of Real Estate
Appraisal, Third Edition (1993), published by The Appraisal Institute, are as
follows:
Leased Fee Estate
An ownership interest held by a landlord with the rights of use and
occupancy conveyed by lease to others. The rights of the lessor (the leased
fee owner) and the leased fee are specified by contract terms contained
within the lease.
Market Rent
The rental income that a property would most probably command on the open
market; indicated by the current rents paid and asked for comparable space
as of the date of the appraisal.
Cash Equivalent
A price expressed in terms of cash, as distinguished from a price expressed
totally or partly in terms of the face amounts of notes or other securities
that cannot be sold at their face amounts.
Discounted Cash Flow (DCF) Analysis
The procedure in which a discount rate is applied to a set of projected
income streams and a reversion. The analyst specifies the quantity,
variability, timing, and duration of the income streams as well as the
quantity and timing of the reversion and discounts each to its present
value at a specified yield rate. DCF analysis can be applied with any yield
capitalization technique and may be performed on either a lease-by-lease or
aggregate basis.
Legal Description
We were provided with an ALTA/ACSM Land Title Survey, dated June 6, 1994,
prepared by International Land Surveying of Norman, Oklahoma. A copy of this
survey is included in the Addenda. We also reviewed the subject's most recent
grant deed for reference to its legal description. A copy of the grant deed is
included in the Addenda.
================================================================================
-4-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
NEIGHBORHOOD ANALYSIS
================================================================================
The subject property is located in the Marriott Business Park, in northern Santa
Clara. The neighborhood boundaries are defined below:
North - State Route 237
South - U.S. Highway 101
East - Lafayette Street
West - San Tomas Aquino Creek
The Marriott Business Park is considered one of the most prestigious parks
in the Santa Clara Valley. It was developed by the Marriott Corporation in 1975
and it includes a total of 475 acres. The total existing inventory of industrial
and office space in the Park is estimated at approximately 5,080,000 square
feet. The Park is quite unique in that it is anchored by both the 300-room
Marriott Hotel and the Great America Amusement Park, now owned by Paramount. The
area also includes the 240,000 square foot Santa Clara Convention Center,
TechMart, and the 500-room Westin Hotel, as well as the Days Inn Hotel and
numerous restaurants.
The business park evolved into the pacesetter for architectural styles
prevalent in the "Silicon Valley" today. It has expanded on ideas originally
initiated in older parks such as Oakmead and Moffett both located in neighboring
Sunnyvale. Marriott features a high percentage of owner occupied buildings. It
serves as the headquarters for Rolm. During 1989 and 1990, Vintage Properties
completed construction of Phase I of a build-to-suit for 3-Com Corporation. This
development is located on the north side of Old Mountain View-Alviso Road at
Betsy Ross Drive. This facility consists of two, five-story buildings and two,
two-story buildings with an aggregate building area of 442,826 square feet.
Phase II is under construction and will contain two, two-story buildings. Xerox,
Lam Research Corporation, Rolm, Control Data, Claris, AT&T, Xidex, and Hitachi
also pride themselves as being major tenants in the Marriott Business Park.
Currently, the park has very little privately owned land available for
development.
The most notable developments in the subject neighborhood include: Regency
Plaza, a 13-story, class "A" structure located on the south side of Mission
College Boulevard; and McCandless Towers, which consists of an 11-story, class
"A" structure located just north of U.S. Highway 101. Other large, office
facilities located within and proximate to the subject neighborhood include: the
Lakeside Atrium, a three-story, steel frame office building located along
Lakeside Drive; Parkway Towers, a five-story office structure containing
approximately 80,000 square feet located south of the subject property along
Great America Parkway; and Parkway Plaza, a four-building, office complex
containing a total of approximately 200,000 square feet, located south of the
subject site along Old Ironsides Drive.
The neighborhood enjoys good access. U.S. Highway 101, the Bayshore
Freeway, forms the southern neighborhood boundary, and provides access from San
Jose to the south and from the San Francisco Peninsula cities to the north.
State Route 237 is located along the subject neighborhood's northerly boundary.
State Route 237 runs east/west and thus provides a direct route to Interstates
880 and 680 which provide access to East Bay communities. Also, due to Measure
"A", State Route 237 is scheduled to be improved. Improvements will include the
elevation of some segments of the highway and the construction of several
off-ramps. These
================================================================================
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Neighborhood Analysis
================================================================================
future improvements will greatly ease traffic congestion during commute hours
and greatly enhance access into the subject neighborhood.
Great America Parkway is the main arterial serving the subject
neighborhood. It runs north/south and intersects both U.S. Highway 101 and State
Route 237. This six-lane thoroughfare becomes Bowers Avenue immediately south of
U.S. Highway 101.
The Santa Clara Light Rail Transit system provides access from downtown and
San Jose to the subject neighborhood. This 20-mile system currently provides
access from south San Jose to Downtown San Jose. The rail line terminates near
the corner of Tasman Drive and Great America Parkway, approximately 1/8 mile
south of the subject site.
Utilities are all immediately available within the neighborhood. The City
of Santa Clara provides not only water and sanitary sewer service but also
electrical power. Pacific Gas & Electric Company supplies only natural gas. It
should be noted that since the City of Santa Clara's electrical rates are less
than those offered by Pacific Gas & Electric, there are considerable savings for
major electrical users. This gives properties within the City of Santa Clara
somewhat of a competitive edge over other areas. Pacific Bell supplied telephone
service to the neighborhood.
================================================================================
-6-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
MARKET ANALYSIS
================================================================================
Market Overview
The electronics slump in the Silicon Valley, which began in late-1984 and
early-1985, and the concurrent over-building of the real estate market, caused
the industrial market in Santa Clara to decline between 1984 and 1986. The
slowed pace of new construction in neighboring areas and the gradual
revitalization of the high technology industry caused the market to improve from
1987 to 1988. However, this trend slowed in 1989 and 1990. The market
significantly declined in 1991 due to the Middle East War during the first
quarter of 1991, the recession in California, defense budget cuts, and the
resulting drop in demand for electronics products. The market overall remained
suppressed through 1993. However, the end of the recession in 1994 and the
strong increase in electronic goods demand resulted in a significant market
upturn throughout Silicon Valley which remains today.
Leasing Activity
The following chart illustrates research and development space absorption
for both the subject market and Silicon Valley as a whole from 1991 through the
second quarter of 1996. Silicon Valley includes all of Santa Clara County and
the Cities of Fremont and Newark, in southernmost Alameda County.
================================================================================
RESEARCH AND DEVELOPMENT SPACE GROSS ABOSORPTION - SILICON VALLEY
- --------------------------------------------------------------------------------
2nd. Qtr.
1991 1992 1993 1994 1995 1996
- --------------------------------------------------------------------------------
6,034,000 7,617,000 8,626,000 11,697,000 14,905,000 6,900,000
================================================================================
Absorption in Silicon Valley from 1991 to present experienced similar
patterns much like the subject market. Absorption of research and development
space went from 6,034,000 in 1991 to 7,617,000 in 1992 indicating an increase of
26%. However, the market witnessed a slowdown in 1993 with a 13% increase in
absorption from the previous year. However, absorption in Silicon Valley
increased significantly by 36% in 1994 with 11,697,000 square feet being
absorbed. This trend continued into 1995 with 14,905,000 square feet being
absorbed. As of the end of the second quarter of 1996, the overall market is off
to a steady start with professionals expecting absorption to stabilize from 1995
levels.
================================================================================
RESEARCH AND DEVELOPMENT SPACE GROSS ABSORPTION - SANTA CLARA
- --------------------------------------------------------------------------------
1991 1992 1993 1994 1995 2nd. Qtr. 1996
- --------------------------------------------------------------------------------
800,000 825,000 1,442,000 2,097,000 2,610,000 785,000
================================================================================
Total gross absorption for research and development space in the subject
market increased by 25,000 square feet or by 3% from 1991 to 1992. The market
significantly rebounded between 1992 and 1993 with an increase from 825,000
square feet to 1,442,000 square feet in absorption, or by an unprecedented 75%.
The market continued to improve in 1994 with an increase in absorption by 45% or
655,000 square feet. This trend continued into 1995 with an increase in
absorption by 25%. In comparison to 1995, the second quarter of 1996 was off to
a slower start, however, market activity is anticipated to remain stable from
the previous year.
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<PAGE>
Market Analysis
================================================================================
Availabilities
The reader's attention is directed to the following historical industrial
space availability charts. The charts include statistics for all industrial
product types pertaining to both the overall Silicon Valley market and Santa
Clara Market.
<TABLE>
<CAPTION>
=============================================================================================
INDUSTRIAL SPACE AVAILABLE - SILICON VALLEY
- ---------------------------------------------------------------------------------------------
2nd. Qtr.
1991 1992 1993 1994 1995 1996
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
High Technology 17,560,000 16,380,000 15,645,000 13,017,000 9,401,000 6,122,000
- ---------------------------------------------------------------------------------------------
Manufacturing 3,130,000 2,410,000 4,914,000 4,013,000 2,488,000 1,903,000
- ---------------------------------------------------------------------------------------------
Warehouse 3,590,000 5,400,000 3,704,000 3,270,000 2,433,000 2,505,000
- ---------------------------------------------------------------------------------------------
Total 24,280,000 24,190,000 24,263,000 20,300,000 14,322,000 10,530,000
=============================================================================================
</TABLE>
Due to a sluggish economy, total available industrial space was relatively
flat from 1991 through 1993, between approximately 24,200,000 to 24,300,000
square feet. This was attributable to many factors. Electronic companies were
downsizing their spaces to reduce costs or consolidating operations to larger
facilities. Some companies moved manufacturing operations out of California to
locations where labor and facility costs were lower. The recession and resulting
decrease in demand for electronics products forced many companies to layoff
workers, thus reducing their space requirements.
However, the easing of the recession in 1994 resulted in renewed
electronics demand. Consequently, total available industrial space in Silicon
Valley decreased from the end of 1993 to the end of 1994 by 16%. This trend
continued through 1995 with the amount of available space declining by 29%. As
of the second quarter of 1996, the overall market continued to experience a
decrease in the amount of available industrial space.
<TABLE>
<CAPTION>
=======================================================================================
INDUSTRIAL SPACE AVAILABLE - SANTA CLARA
- ---------------------------------------------------------------------------------------
2nd. Qtr.
1991 1992 1993 1994 1995 1996
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
High Technology 3,830,000 3,334,000 2,652,000 2,277,000 998,000 860,000
- ---------------------------------------------------------------------------------------
Manufacturing 1,040,000 633,000 535,000 523,000 543,000 562,000
- ---------------------------------------------------------------------------------------
Warehouse 62,000 331,000 609,000 365,000 385,000 151,000
- ---------------------------------------------------------------------------------------
Total 4,932,000 4,298,000 3,796,000 3,165,000 1,926,000 1,573,000
=======================================================================================
</TABLE>
The amount of available space in the subject market has continuously
decreased between 1991 and the second quarter of 1996. The largest decline in
the amount of available space
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Market Analysis
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occurred between 1994 and 1995. The amount of available space decreased by 39%.
As of the second quarter of 1996, the amount of available space continues to
decline.
Vacancy Rate
Cushman & Wakefield estimates the total industrial inventory in Silicon
Valley at 200 million square feet. Thus, the overall vacancy rate for Silicon
Valley industrial market, as of the end of the second quarter of 1996, was
approximately 5.3%. According to Colliers Parrish International market
statistics, as of June 1, 1996, the subject research and development market has
a vacancy rate of approximately 0.3%.
Rental Rates
We surveyed signed leases for existing, research and development space in
the subject market. Coupon rental rates for office/research and development
facilities generally range from $0.75 to $1.10 per square foot per month,
triple-net, or $1.20 to $1.70 per square foot per month on a full-service basis.
The fluctuation in the rental rate depends on their physical and locational
characteristics and the amount of tenant improvement dollars given. Based on the
low vacancy in Santa Clara, specifically the Marriott Business Park, rental
rates are anticipated to increase through 1996.
Cushman & Wakefield's Financial Services Group reports that the market
environment for investment sales and financing has changed dramatically over the
past 18 months. The national investment sales market is turning from a buyer's
market to a seller's market. The availability of both debt and equity capital
have turned the market around. Real estate as an asset class is again acceptable
to pension funds.
Summary and Conclusions
In summary, the Silicon Valley economy has significantly improved over the
past 18 months. As a result, the supply of good-quality, industrial space in
Silicon Valley is diminishing. Most brokers and owners interviewed feel that
this trend will continue over the next few years. The subject area remains one
of the most desirable locations in Silicon Valley and is expected to continue
low vacancy along with increasing rental rates.
Marketing and Exposure Time
Based on the office/research and development facility sales used in this
analysis, our conversations with brokers active in the subject market, and the
subject's size and location, it is our opinion that the subject property would
sell within a six to twelve month period if actively marketed for sale.
The Appraisal Standards Board of the Appraisal Foundation defines exposure
time as, "the estimated length of time that the property interest being
appraised would have been offered on the market prior to the hypothetical
consummation of a sale at market value on the effective date of the appraisal; a
retrospective estimate based upon an analysis of past events assuming a
competitive and open market." Based on historical market conditions and the
sales analyzed in this report, we estimated the exposure time for the subject
properties to be roughly equal to the marketing time previously stated at six to
twelve months.
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PROPERTY DESCRIPTION
================================================================================
Site Description
The subject site is situated on the northwest corner of Great America
Parkway and Bunker Hill Lane within the Marriott Business Park. The common
street address is 5200 Great America Parkway and 2903 and 2933 Bunker Hill Lane,
Santa Clara, Santa Clara County, California. The site is rectangular in shape
and contains 9.53 acres or 415,698 square feet of land area. The topography is
level and at street grade. We have assumed that the soil's load-bearing capacity
is sufficient to support the existing and any future structures. All essential
utilities including electricity, water, sewer, and telephone are currently
serving the site.
According to Community Panel No. 060350-0001C, effective July 16, 1980, the
subject property is situated in Zone "B", an area designated as being outside of
the floodplain.
Improvements Description
The subject improvements comprise three, two-story, concrete with stucco
and brick, office/ research and development buildings. The buildings
collectively contain 227,800 square feet of net rentable area. The improvements
are built-out with 80% of drop ceiling office space with the balance of the
space attributable to manufacturing/warehouse space. The property was
constructed in 1983 and is in good condition. Presently, the improvements are
100% occupied by seven tenants..
Construction is typical of office/research and development structures with
concrete panels, poured-in-place concrete foundation, and concrete slab. The
project is heated and cooled with a multi-zoned system with roof-mounted HVAC
systems. Plumbing and electrical is assumed to meet required building codes. The
buildings have passenger elevators serving the second floor. The property has
zoned smoke and fire alarm systems, and a monitored security system with card
access that restricts non-business hour access.
The subject has concrete surface parking for 634 vehicles which equates to
a parking ratio of 2.8 spaces per 1,000 square feet of net rentable area. Both
Great America Parkway and Bunker Hill Lane are improved with concrete sidewalks,
curbs, and gutters. The site is landscaped with trees, ornamental shrubs and
plants located around the buildings' perimeter and parking lot.
We have specifically assumed that the property complies with the Americans
With Disabilities Act, and that potentially hazardous materials have not been
used in the construction or maintenance of the property. Overall, the
improvements are in good condition. No evidence of structural damage was
observed on our physical inspection of the improvements. Further, we are not
aware of any major items of deferred maintenance at this time.
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REAL PROPERTY TAXES AND ASSESSMENTS
================================================================================
The subject property is located in the City of Santa Clara, County of Santa
Clara, and as such, is taxed by these governing bodies. The subject property is
located in tax rate area 07-116. The 1995-96 tax rate for these areas is $1.0436
per $100.00 of the property's assessed valuation. Under the provisions of
Article XIIIA of the California Tax and Revenue Code, properties are assessed
based on their market value as of March 1, 1975. This valuation may increase
only 2% per year until such time as the property is sold, substantial new
construction takes place, or the use of the property is changed. Under the
foregoing circumstances, the properties may be reassessed to their market value.
The 1995-96 fiscal year is the most recent year for which assessed
valuation and property tax information is available. The assessed value and
taxes for the property, are as follows:
================================================================================
ASSESSED VALUES AND REAL ESTATE TAXES
================================================================================
Improvement
A.P.N. Land Value Value Total Taxes
================================================================================
104-49-018 $5,400,000 $11,000,000 $16,400,000 $189,638.26
================================================================================
The total real estate taxes and assessments also include vector control,
flood control, and open space assessments. These assessments are reportedly paid
into perpetuity.
If the property was sold, it would be reassessed according to the
Assessor's opinion of its market value, which is the sale price in most cases.
Based on our estimated value conclusion of $27,100,000 real estate taxes and
assessments after sale would be approximately $285,000.
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ZONING
================================================================================
The City of Santa Clara maintains a Planning Department which has
jurisdiction over all development within the city limits. The City Planning
Department has zoned the subject property ML, or Light Industrial. The general
plan for the site is Industrial/Office/Research and Development. Uses allowed
under these designations include research and development, light manufacturing,
and office uses. Some of the other building requirements under this designation
are as follows:
Maximum Building Height: 70 feet
Minimum Setbacks: 25 feet from the front and street side; 10
feet from the non-street side; and 15 feet
from the rear.
Coverage Ratio: 75%, provided setback requirements are met.
Parking Requirement: One space for every 300 square feet of office
space and one space for every 450 square feet
of industrial (manufacturing/assembly) space.
Based upon our understanding of the existing zoning ordinance, it appears
the improvements are conforming to current zoning and general plan.
We are not experts in the interpretation of complex zoning ordinances but
the property appears to be a conforming development. We know of no additional
deed restrictions, private or public, that further limit the subject property's
use beyond those described in the site description.
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WAKEFIELD(R)
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<PAGE>
HIGHEST AND BEST USE
================================================================================
Highest and Best Use of Site As Though Vacant
The highest and best use must be (1) legally permissible, (2) physically
possible, (3) financially feasible, and (4) maximally productive. The size,
shape, and physical attributes of the site are considered sufficient to
accommodate most forms of development. Given the existing industrial zoning and
the surrounding office/research and development facilities, it appears this use
is supported. Furthermore, as previously discussed in the Market Analysis
section of this report, the subject research and development market has a
vacancy rate of 3.6%. Rental rates for this type of space are continuing to
increase at an unprecedented rate. Therefore, it is our opinion the highest and
best use of the site is for an office/research and development use.
Highest and Best Use, As Improved
As previously noted in the Property Description section of this report, the
subject site is improved with three, two-story, office/research and development
buildings collectively containing 227,800 square feet and related site
improvements. Constructed in 1983, the project is in good condition. Further,
the design and layout are considered to be very functional for its current use.
The subject property is 1 00 percent occupied by seven tenants.
Approximately 22% of the project space rollsover in 1996, there are no lease
expirations scheduled in 1997, and 71% of the project space rollsover in 1998.
The largest tenant Auspex (68% of the facility) utilizes the space as their
corporate headquarters. Furthermore, the tenant recently spent $750,000 to
upgrade their testing facilities. Thus, there is a likelihood that Auspex will
renew their lease. Therefore, it is our opinion that the highest and best use of
this site, as improved, is for continued use as an office/research and
development building.
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VALUATION PROCESS
================================================================================
In this appraisal, we have used the Sales Comparison Approach and Income
Approach to develop a market value estimate for the subject property. Because
this is a summary report, the level of detail of presentation is less than that
found in a self-contained report.
In our opinion, the Cost Approach is not relevant to this assignment.
Although the subject improvements are approximately 13 years old and of a
conforming type of construction for this market, estimating construction costs
and accrued depreciation for the improvements would be very subjective at best.
Additionally, depreciated replacement cost is not that important to the typical
investor. However, we have made the determination that the building improvements
do not contribute to the overall property value.
In the Sales Comparison Approach, we performed the following steps:
o Investigated the market for recent sales of similar office/research
and development properties.
o Analyzed those sales on the basis of the sales price per square foot;
and
o Correlated the value indications into a point value estimate from
within the range.
In developing the Income Approach we:
o Studied the rents in effect in this and competing properties to
estimate the potential rental income at market levels;
o Studied the recent history of operating expenses at this and competing
properties to estimate an appropriate level of expenses and reserves
for replacement;
o Estimated net operating income and cash flow by subtracting the
operating, fixed, and other expenses from the effective gross income;
and
o Prepared a discounted cash flow analysis in which the cash flow and
property value at reversion are discounted to an estimate of current
market value at a market-derived discount rate. Potential gross
revenues are estimated based on a modeling of the actual rents and
recovery provisions in effect through the term of existing leases. As
the existing leases expire, the space is estimated to rent at the then
current market rental rate with appropriate allowances for downtime.
From potential gross revenues, we subtract vacancy and expenses
(operating, fixed, and other) to arrive at an estimate of cash flow
over an 11 year forecast.
The appraisal process is concluded by a review and re-examination of each
of the approaches to value that have been employed. Consideration is given to
the type and reliability of data used, and the applicability of each approach.
Finally, the approaches are reconciled and a final value conclusion is
estimated.
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<PAGE>
SALES COMPARISON APPROACH
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Methodology
In the Sales Comparison Approach, we estimated the value by comparing this
property with similar, recently sold properties in the surrounding or competing
area. Inherent in this approach is the principle of substitution, which holds
that when a property is replaceable in the market, its value tends to be set at
the cost of acquiring an equally desirable substitute property, assuming that no
costly delay is encountered in making the substitution.
By analyzing sales which qualify as arms-length transactions between
willing, knowledgeable buyers and sellers, we can identify value and price
trends. The basic steps involved in the application of this approach are:
(1) researching recent, relevant property sales and current offerings
throughout the competitive area;
(2) selecting and analyzing those properties considered most similar to
the subject, considering changes in economic conditions that may have
occurred between the sale date and the date of value, and other
physical, functional, or locational factors;
(3) identifying sales which include favorable financing and calculate the
cash equivalent price;
(4) reducing the sale prices to a common unit of comparison, such as price
per square foot of building area (in this case net rentable area);
(5) making appropriate comparative adjustments to the prices of the
comparable properties to relate them to the property appraised; and
(6) interpreting the adjusted sales data and draw a logical value
conclusion.
In analyzing the leased fee estate of the subject property, the sale prices
inherent in the comparables were reduced to a price per square foot used to
analyze improved properties that are similar to the subject. The price square
foot of net rentable area is the most commonly used measurement to value
office/research and development buildings in the marketplace.
On the following page is a summary of recent market data considered to be
most indicative of the subject's current market value. A map of the sale
locations is on the following opposing page. A discussion of each comparable
follows.
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<PAGE>
<TABLE>
<CAPTION>
Bennett Park
5200 Great America Parkway, 2903 and 2933 Bunker Hill Lane
Santa Clara, Santa Clara County, California
Office/Research and Development Building Sales Summary
============================================================================================================
Net Ceiling Land % Occ.
Comp. Year Rentable Height Area Percent on
No. Location Sale Date Built Area (Feet) (Acres) Office Date of
Sale
============================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
I-1 1210 California Circle May-96 1984 120,576 9' to 16' 9.45 100.0% 100.0%
Milpitas, California
I-2 45757 Northport Loop Apr-96 1983 103,060 9' to 16' 6.50 68.0% 100.0%
Fremont, California
I-3 3939-4001 North First Street Mar-96 1984 134,500 9' to 16' 9.33 100.0% 100.0%
San Jose, California
I-4 3930-3970 North First Street Apr-96 1985 249,408 9' to 16' 18.05 70.0% 100.0%
San Jose, California
I-5 2100-2101 Logic Drive Apr-95 1982 221,960 9' to 16' 11.56 80.0% 100.0%
San Jose, California
============================================================================================================
Subj. Bennett Park Jul-96 1983 227,800 9' to 16' 9.53 80.0% 100.0%
Santa Clara, California
============================================================================================================
Low 1982 103,060 9' to 16' 6.50 68.0% 100.0%
Data Range: High 1985 249,408 9' to 16' 18.05 100.0% 100.0%
Mean 1984 165,901 9' to 16' 10.98 83.6% 100.0%
============================================================================================================
<CAPTION>
==========================================================================================
Cash Sale Overall
Comp. Equivalent Price NOI/ Capitalization
No. Location Sale Price Per SF SF Rate
==========================================================================================
<S> <C> <C> <C> <C> <C>
I-1 1210 California Circle $12,670,000 $105.08 $10.05 9.6%
Milpitas, California
I-2 45757 Northport Loop $9,278,000 $90.03 $8.11 9.0%
Fremont, California
I-3 3939-4001 North First Street $18,199,317 $135.31 N/A N/A
San Jose, California
I-4 3930-3970 North First Street $32,000,000 $128.30 N/A N/A
San Jose, California
I-5 2100-2101 Logic Drive $26,000,000 $117.14 $10.48 8.9%
San Jose, California
==========================================================================================
Subj. Bennett Park N/A N/A $12.16 N/A
Santa Clara, California
==========================================================================================
$9,278,000 $90.03 $8.11 8.9%
Data Range: $32,000,000 $135.31 $10.48 9.6%
$19,629,463 $115.17 $9.55 9.2%
==========================================================================================
</TABLE>
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<PAGE>
SALES COMPARISON APPROACH
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Comparable I-1 is a mid-1996 sale of a good-quality, office/research and
development building located adjacent just east of Interstate 880 in Milpitas,
just south of the Fremont city border. The property was fully leased to Lam
Research at sale. Reportedly, the rental rate at the time of sale was
approximately $0.90 per square foot per month, triple-net. Reportedly, ten years
remained on the lease at sale.
Comparable I-2 is the April, 1996 sale of a single-tenant, one-story,
office/research and development building. At the time of sale, the building was
in good condition. The building is fully occupied by Lam Research at a rental of
$0.73 per square foot per month, triple-net, with nine and one-half years
remaining on the lease.
Comparable I-3 is the sale of two contiguous buildings previously leased to
the buyer. 3939 North First Street contains 62,500 square feet of net rentable
area and 4001 North First Street contains 72,000 square feet of net rentable
area. Cypress Semiconductor occupied 4001 North First Street at sale.
Reportedly, Cypress vacated 3939 North First Street in 1994. Consequently, it
was vacant at sale. Cypress Semiconductor entered into a sales agreement to
purchase both properties on March 15, 1996. The total sales price for both
properties is $15,500,000. However, Cypress Semiconductor planned to
substantially renovate and reconfigure both buildings for its own occupancy.
Cypress Semiconductor will incur $2,146,280 to upgrade the interior of 3939
North First Street prior to occupancy. The upgrades will include the
reconfiguration of the lobby and offices, upgrade of the mechanical systems,
lighting, plumbing, restrooms to ADA standards. Cypress Semiconductor was to
incur $5~53,017 to upgrade the interior of 4001 North First Street prior to
occupancy. The upgrades include the reconfiguration of the lobby and offices,
new carpet and paint, and upgrade the restrooms to ADA standards. Consequently,
the total consideration to the buyer was $18,199,317, or $135.31 per square
foot.
Comparable I-4 is an early-1996 sale of a the McCandless Business Park,
consisting of five, one-story, research and development buildings located in the
subject neighborhood. The property was purchased by the majority tenant,
Novellus Systems, who leased three of the buildings and a portion of a fourth,
approximately 70% of the entire property, at the time of sale. Novellus'
contract rental rates ranged from $0.60 to $0.85 per square foot per month,
triple-net. At the time of sale, LTX leased 3930 North First Street through June
20, 1999. The monthly rental rate through lease termination is $0.68 per square
foot, triple-net. Sony leases 3960 North First Street. The lease commenced May
1, 1994 and expires April 30, 1999. The monthly rental rate at sale was also
$0.68 per square foot, triple-net. Novellus planned to occupy the building
leased to Sony shortly after the sale and plans to occupy the building leased to
LTX following its lease expiration in June 1999. One of the buildings occupied
by Novellus, 3950 North First Street, includes 18,000 square feet of class 100
to 1,000 clean rooms and demonstration rooms. These specialized improvements
were constructed by Novellus between 1992 and late-1995.
Comparable I-5 is the mid-1995 sale of two, two-story buildings, located
proximate to Los Gatos. The buildings contain 141,960 and 80,000 square feet of
net rentable area, and are connected by a breezeway. Collectively, the buildings
include 80% office area and 20% lab area. The buildings were in good condition
at sale. At the time of sale, Xilinx Corporation leased the
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<PAGE>
Sales Comparison Approach
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property from Berg & Berg Development at approximately $0.95 per square foot per
month, triple-net. The rental rate increases to $0.99 per square foot in January
1997. The lease expires on December 31, 1999. The lease rate at sale was
considered at market.
Sales Price Per Square Foot Analysis
The five comparables indicate sales prices ranging from $90.03 to $135.31
per square foot of net rentable area on a cash equivalent basis. The prices per
square foot are influenced by the differences in construction quality and
condition, occupancy levels, character of the tenancy, economics, and location.
Nevertheless, it is important to address each property in terms of the
conventional sequence of adjustments. Following are those considerations which
are relevant to the subject. The first three elements must be considered in
advance of applying any other compensating factors to derive value conclusions
via the sales price per square foot methodology.
Property Rights Conveyed
As shown in the summary table, all of the comparables are encumbered by
leases, therefore, the leased fee estate was conveyed in each of these cases.
Thus, no adjustments were made to the comparables for this variable.
Seller Financing/Cash Equivalency
All of the comparables were sold on the basis of cash to the seller. Thus,
no adjustments were made to the comparables for financing.
Conditions of Sale
We identified no special motivational conditions concerning the
comparables; therefore, no adjustments for conditions of sale were made.
Other
Because of the multiple differences inherent in office/research and
development properties with respect to quality, condition, design, location,
and, in this case economics, not to mention the quality of the tenant base,
mathematical adjustments for the reasoning noted above would be extremely
difficult, at best.
In our opinion, Comparables I-4 and I-5 are most similar to the subject in
terms of their physical and income attributes. These two comparables sold for
$128.30 and $117.14 per square foot. Based upon all of the above data, we
believe the a unit value of $123.00 per square foot of the net rentable area
would be reasonable and supportable for the subject. Thus, our value range by
the Sales Price Per Square Foot method is as follows:
================================================================================
Sales Price Per Square Foot Summary
================================================================================
Net Rentable Area Sales Price Per Indicated
(SF) Square Foot Value
================================================================================
227,800 X $123.00 = $28,019,400
Rounded To: $28,020,000
================================================================================
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<PAGE>
Sales Comparison Approach
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"As Is" Valuation
In order to estimate the market value of the leased fee estate on an "as
is" basis, we will deduct the impact of the subject's under-market rent from
the stabilized value. A further discussion of the below-market rent is presented
in the Income Approach. Therefore, the value of the leased fee estate on an "as
is basis is calculated and concluded as follows.
================================================================================
SALES COMPARISON APPROACH-"As Is"
================================================================================
Stabilized Value $28,020,000
- --------------------------------------------------------------------------------
Less: PV of Below-Market Rent $860,000
- --------------------------------------------------------------------------------
"As Is" Value $27,160,000
================================================================================
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<PAGE>
INCOME APPROACH
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Methodology
The Income Approach is a method of converting the anticipated economic
benefits of owning property into a value estimate through capitalization. The
principle of anticipation underlying this approach is that investors recognize
the relationship between an asset's income and its value. In order to value the
anticipated economic benefits of a particular property, potential income and
expenses must be estimated and the most appropriate capitalization method must
be selected.
The two most common methods of converting net income into value are through
direct capitalization and a discounted cash flow analysis. In direct
capitalization, the net operating income is divided by an overall capitalization
rate extracted from market sales to indicate a value. In the discounted cash
flow method, anticipated future income streams and a reversionary value are
discounted to a net present value at a chosen yield rate (internal rate of
return).
The direct capitalization method is an effective technique when stable
conditions exist both in the marketplace and for the property. However, when
market conditions are either changing or likely to change in a fairly dramatic
manner over time, direct capitalization becomes a more difficult technique to
administer. Direct capitalization is further inhibited by the numerous variables
that exist with multi-tenant properties, i.e., multiple leases, with staggered
lease terms and varying lease structures; the lease-up of vacant space; and
differing tenant finish allowances, depending upon whether the space is in a
shell or second generation state.
Given these numerous variables, coupled with our inquiries of participants
in the marketplace, we feel that the majority of investors for a property like
the subject would utilize the discounted cash flow method, in an attempt to
mirror the expectations relative to those variables. Consequently, the
discounted cash flow method affords the most realistic method of reflecting
investor expectations of the current period, as well as the projected recovery
(primarily rental rates in the subject's case). Also, the discounted cash flow
methodology can better quantify the Impact of the subject's below market rent
and lease-up costs during tenant turnover. Therefore, it is our opinion that the
discounted cash flow method is the most appropriate method in the valuation of
the subject property. As such, the direct capitalization method will not be used
in this analysis. However, at the conclusion of the Income Approach, we will
analyze the resulting overall capitalization rate derived from the discounted
cash flow analysis as a check for reasonableness.
In the following sections, we will first analyze the subject's existing
lease and market rents before discussing the subject's operating expenses and
preparing the discounted cash flow analysis.
Summary of Existing Leases
As of the effective date of appraisal, the subject property is 100%
occupied by seven tenants. The tenants' contract rents range from $0.50 to $2.44
per square foot on a full-service basis. In a full-service lease the tenant is
responsible for their pro-rata share of operating expenses over a base year
amount. Auspex occupies the entire building at 5200 Great America Parkway which
comprises 129,200 square feet. Their rental rate is $1.02 per square foot per
month on a triple-net basis. In a triple-net lease the tenant pays their
pro-rata share of operating expenses except for reserves for replacements which
is incurred by the landlord. On average the subject's contract rents are
significantly below-market. The impact of the property's below-market rent will
be
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Income Approach
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addressed later on in the Income Approach of this report. A rent roll of the
subject property abstracting the existing leases is located in the Addenda.
Lease Expiration
As part of our risk analysis, we reviewed the tenant expiration dates. The
subject property is 100 percent occupied by seven tenants. Approximately 22% of
the project space rollsover in 1996, there are no lease expirations scheduled in
1997, and 71% of the project space rollsover in 1998. The largest tenant Auspex
(68% of the facility) utilizes the space as their corporate headquarters.
Furthermore, the tenant recently spent $750,000 to upgrade their testing
facilities. Thus, there is a likelihood that Auspex will renew their lease.
Therefore, the subject is well positioned to benefit from strong market
conditions (i.e. increasing rental rates).
Estimate of Current Market Rent
According to the listing brokers, the current quoted rental rates in the
subject market for office/research and development facilities generally range
from $0.75 to $1.10 per square foot per month, triple-net, or $1.20 to $1.70 per
square foot per month on a full-service basis. The fluctuation in the rental
rate depends on their physical and locational characteristics and the amount of
tenant improvement dollars given. In order to gauge the reasonableness of the
quoted rent and form a conclusion as to the current market rent for the subject
property as of the appraisal date, we conducted a survey of the competing area.
All of these comparables are considered to be generally similar to the subject
with respect to location, quality, and functionality. On the following page is a
summary of properties utilized in our rent comparable analysis. A map of the
comparable locations is included on the following opposing page.
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<TABLE>
<CAPTION>
Bennett Park
5200 Great America Parkway and 2903 and 2933 Bunker Hill Lane
Santa Clara, Santa Clara County, California
Office/Research and Development Building Rental Summary
==========================================================================================================================
Net Ceiling Building
Comp. Date of Year Rentable Height Area Percent
No. Location Lease Built Area (Feet) Leased(SF) Office
==========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
R-1 150 River Oaks Parkway Apr-96 1986 100,024 16 100,024 30.0%
San Jose, California
R-2 2260 & 2280 Agnew Avenue Mar-96 1985 100,600 16 100,600 35.0%
Santa Clara, California
R-3 2805 Bowers Avenue Mar-96 1975 104,000 16 104,000 60.0%
Santa Clara, California ren. 1996
R-4 4800 Patrick Henry Drive Feb-96 1979 62,964 16 62,964 80.0%
Santa Clara, California
R-5 4600 Old Ironsides Drive Jan-96 1978 82,800 16 82,800 50.0%
Santa Clara, California
R-6 4699 Old Ironsides Drive Jun-96 1982 50,000 16 5,015 80.0%
Santa Clara, California
R-7 4655 Old Ironsides Drive Jul-96 1982 50,000 16 6,406 80.0%
Santa Clara, California
==========================================================================================================================
Subject Bennett Park Jul-96 1983 227,800 16 227,800 80.0%
Santa Clara California
==========================================================================================================================
Low 1975 62,964 16 5,015 30.0%
Data Range: High 1986 104,000 16 104,000 80.0%
Mean 1981 90,078 16 65,973 59.3%
==========================================================================================================================
<CAPTION>
=======================================================================================================================
Actual
Overall Coupon Lease Tenant
Comp. Percent Lease Term Expense Improvement
No. Location Leased Rate(SF) (Years) Provision Allowance
=======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
R-1 150 River Oaks Parkway 100.0% $0.75 10 Net $12.00
San Jose, California
R-2 2260 & 2280 Agnew Avenue 100.0% $0.79 5 Net $0.00
Santa Clara, California
R-3 2805 Bowers Avenue 100.0% $1.00 5 Net $15.00
Santa Clara, California
R-4 4800 Patrick Henry Drive 100.0% $1.06 1 Net $0.00
Santa Clara, California
R-5 4600 Old Ironsides Drive 100.0% $0.95 5 Net $20.00
Santa Clara, California
R-6 4699 Old Ironsides Drive 90.0% $1.67 3 Full $2.00
Santa Clara, California Service
R-7 4655 Old Ironsides Drive 90.0% $1.65 4 Full $4.00
Santa Clara, California Service
=======================================================================================================================
Subject Bennett Park 100.0% $1.30 -- Full $3.50
Service
Santa Clara California $1.65 Full
Service
=======================================================================================================================
90.0% $0.75 1 $0.00
Data Range: 100.0% $1.67 10 $20.00
97.1% $1.12 5 $7.57
=======================================================================================================================
</TABLE>
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INCOME APPROACH
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The rental rates summarized indicate the actual coupon rental rate for the
comparable properties. The comparable properties are deemed to be similar to the
subject in many respects. The size of the subject suites range from
approximately 1,000 square feet to 129,200 square feet. As a result, we surveyed
large spaces and small spaces.
The coupon rental rates of the larger space comparables range from $0.75 to
$1.06 per square foot per month on a triple-net basis. The net to full-service
conversion is approximately $0.35 per square foot per month. Thus, the adjusted
coupon rental rate for the comparables range from $1.10 to $1.41 per square foot
per month on a full-service basis. The tenant improvement allowance range from
an "as is" basis to $20.00 per square foot.
The coupon rental rates for the smaller space comparables average $1.65 per
square foot per month on a full-service basis. A tenant improvement allowance on
average is $3.00 per square foot.
After considering the competitive properties, it is our opinion that the
following parameters are representative of a market lease for the subject
property as of the effective date of appraisal:
1) The market rental rate for the subject's smaller space is estimated to
equate to $1.65 per square foot per month on a full-service basis and
$1.30 per square foot per month, full-service, for the subject's large
space.
2) Future leases are assumed to have a five-year lease term.
3) The tenant improvement allowance is projected to be $4.00 per square
foot for new tenants that lease second generation space and $3.00 per
square foot for tenant renewals of second generation space.
4) Rental rate growth rate of 3.5% per annum.
Impact of Below-Market Rent
The subject property is currently leased to seven tenants. On average their
contract rents are significantly below-market.
It is our opinion that it would not be prudent to capitalize the net
operating income based on a property which includes space leased below market.
Therefore, we first estimated the potential gross rental income for the subject
using our estimates of current market rent and assuming stabilized occupancy. We
will discount the difference between the contract rental income and the market
rental income over the remaining lease term by a discount rate of 7.0%. Our
selection of a 7.0% discount rate is based on current yields of alternative
investments in the investment marketplace. Presently, AA corporate bonds are
yielding approximately 7.6%, long-term treasury bonds are yielding 7.0%, and
municipal bonds are yielding 6.0%. Rental rates in the subject market are
increasing, thus, in the event of a default by an existing tenant there is a
strong likelihood that a leasehold advantage exists. Therefore, the landlord's
risk is minimal. As a result, we selected a safe rate of 7.0% to discount the
below-market rent. The discounted value is $860,000. This calculation is
presented on the opposing page. This discounted value will be deducted from our
stabilized value conclusion in the Sales Comparison Approach.
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Income Approach
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Expense Recovery Income
Leases for office/research and development space in the subject market are
typically written on a triple-net basis whereby the tenant pays their pro-rata
share of operating expenses, except for reserves for structural replacements,
leasing commissions, and tenant alterations. However, 43% or 97,954 square feet
of the subject complex is leased on a full-service basis whereby the tenant is
responsible for their pro-rata share of operating expenses over a base year.
Upon expiration of this lease we assumed it will be leased on a full-service
basis.
Vacancy and Collection Loss
Both the investor and the appraiser are primarily interested in the cash
revenue that an income property is likely to produce annually over a specified
period time rather than what it could produce if it were always 100 percent
occupied and all the tenants were actually paying their rent in full and on
time. It is normally a prudent practice to expect some income loss, either in
the form of actual vacancy or in the form of turnover, non-payment, or slow
payment of rent. Regarding collection loss specifically, we have applied a two
percent loss factor throughout the holding period primarily as a contingency for
potential collection problems and tenant defaults. This collection loss factor
is applied to rental income from all tenants.
We have projected an approximate four month vacancy period at the
expiration of every lease with an average lease term of five years. This equates
to a 6.7 percent vacancy factor (four months divided by 60 months). Our analysis
includes a 50 percent probability of rollover (existing tenants re-leasing their
space) and a 50 percent probability of turnover (existing tenants vacating the
premises and new tenants leasing the vacated space).
The resulting physical (rollover/turnover) occupancy level for the property
within the cash flow is 97.0 percent. In addition to this physical occupancy, we
have projected a 2.0 percent economic vacancy factor, as previously noted.
Therefore, the overall average occupancy factor over the projection term is 95.0
percent.
The average occupancy level of the subject property's submarket is 0.3
percent. The overall research and development vacancy rate for Silicon Valley is
5.3%. The projected occupancy for the subject is considered reasonable these
figures.
Operating Expenses
On the facing page is our Historical and Estimated Expense Summary for the
subject property. We based our estimated operating expenses on a review of the
1995 actual itemized expenses for the subject property. In addition, we were
provided with the property's 1996 budget. Finally, we consulted with the subject
property manager and Cushman & Wakefield's Asset Management Group.
Total operating expenses were $3.94 per square foot in 1995. The 1996
budgeted amount is projected to be higher at $4.15 per square foot. Our fiscal
year 1997 estimate of $4.62 per square foot appears reasonable since real estate
taxes for this period will significantly increase based upon the assumed sale of
our property value estimate.
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Income Approach
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Other Expenses:
Other operating expenses include Tenant Improvements and Leasing
Commissions. The probability of incurring future leasing commissions and tenant
alterations is based on a 50 percent probability of turnover (an existing tenant
vacates a space and the space is released to a new tenant) and a 50 percent
probability of rollover (an existing tenant relets his space).
Tenant Improvements - We have factored a $4.00 per square foot allowance
for second generation space and an allowance of $3.00 per square foot is
projected for tenant renewals. The weighted average finish-out allowance
for all tenants is therefore equals to $3.50 per square foot.
Tenant improvement costs are projected to increase at a rate of 3.5% per
year through the projection period.
Leasing Commissions - For the period under analysis, leasing commissions
for all new leases are estimated at 23% and 11.5% for renewals. As a result
of these projections, the weighted average commission applied to all
expiring space is equal to 4.6%, which we have rounded to 2.3%.
Capital Replacements/Reserves - Reserves for replacements are or should be
set aside to accumulate an amount sufficient to replace and/or repair
certain major building components over time, i.e., roof, major parking lot
repairs, HVAC systems, etc. during the period under analysis. Based on the
expense behavior of other comparable properties and the age of the subject
property, we have estimated capital replacements/reserves at $0.1 0 per net
rentable square foot, increasing by 4% per year throughout our analysis.
Our projected expenses are predicated on the assumption that the property
will be prudently managed, while maintaining the improvements at a competitive
level to preserve value.
Cash Flow Model
In the calculation of the cash flow forecasts and investment results
produced under these assumptions, projections and parameters, we employed the
Pro-Ject Plus+ computer program. The program has the flexibility to allow for a
tenant by tenant analysis of the subject as encumbered by the existing leases.
It also allows for a variety of assumptions regarding future income streams and
expenses. Our eleven-year discounted cash flow analysis can be found on the
opposing following page.
Terminal Capitalization Rate Selection
A terminal capitalization rate was used to estimate the market value of the
property at the end of the assumed investment holding period. The rate is
applied to the eleventh year estimate of net operating income before making
deductions for leasing commissions, tenant improvement allowances, or capital
reserves. We estimated an appropriate terminal rate based on the indicated
capitalization rates of the improved property sales in today's market, as
summarized below.
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Income Approach
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===============================
Summary of Capitalization Rates
===============================
Sale Capitalization
No. Rate
===============================
I-1 9.6%
I-2 9.0%
I-3 N/A
I-4 N/A
I-5 8.9%
===============================
A premium is generally added to today's rate to allow for the risk of
unforeseen events or trends which might affect our estimate of net operating
income during the holding period, including possible changes in market
conditions for the property. Investors typically add 50 to 100 basis points to
the going-in rate to arrive at a terminal capitalization rate, according to
Cushman & Wakefield's periodic investor surveys.
Considering the survey results and comparing the subject property to the
comparables included in the Sales Comparison Approach, but also tempered by the
fact that capitalization rates are failing (which is not reflected in the
sales), we are of the opinion that a 10.0 percent terminal capitalization rate
is appropriate to apply to the subject's projected net operating income in the
eleventh year. This results in an estimated terminal value (or sales price) for
the property at the end of the 10th year of $40,523,960 ($4,052,396/. 1 0).
From this projected sales price, the estimated costs of sale for such items
as real estate commissions, closing costs, legal fees, as well as others, must
be deducted. We have estimated these cost to be three percent of the sales price
resulting in cash flow from the sale of the property in the tenth year of
$39,308,241 ($40,523,960 - $1,215,719 = $39,308,241).
Discount Rate Analysis
We estimated future cash flows, including property value at reversion, and
discounted that income stream at an internal rate of return (yield rates)
currently required by investors for similar-quality real property. The yield
rate (internal rate of return or IRR) is the single rate that discounts all
future equity benefits (cash flows and equity reversion) to an estimate of net
present value.
Cushman & Wakefield Valuation Advisory Services periodically surveys
national real estate investors to determine their investment objectives.
Following is a brief review of internal rates of return, overall rates, and
income and expense growth rates considered acceptable by respondents.
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Income Approach
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<TABLE>
<CAPTION>
===================================================================================================
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES
FALL/WINTER 1995 NATIONAL INVESTOR SURVEY FOR INDUSTRIAL BUILDINGS
===================================================================================================
GOING IN TERMINAL IRR INCOME EXPENSE
GROWTH GROWTH Projection
----------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH Period
===================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mean 9.3 9.8 9.8 10.8 12.0 12.4 3.3 4.0 3.2 3.9 8.5-9.8
- ---------------------------------------------------------------------------------------------------
Range 8.5 11.0 9.5 11.0 11.0 20.0 3.0 4.0 3.0 4.0 5-11
- ---------------------------------------------------------------------------------------------------
No. of Responses: 10
===================================================================================================
</TABLE>
This table summarizes the investment parameters of some of the most
prominent investors currently acquiring good quality industrial properties in
the United States. The entire survey is included in the Addenda.
The investors internal rates of return cited above range from 10.0 to 14.0
percent. We have selected a 12.5 percent discount rate for the subject property.
The internal rate of return and terminal capitalization rate selected for
this analysis were strongly influenced by our recent Investor Survey, but we
also relied very heavily on the anecdotal data from Cushman & Wakefield's
Financial Services Group. Furthermore, we realize that the survey reflects
target rates rather than transactional rates. Transactional rates are usually
difficult to obtain in the verification process and are actually only target
rates of the buyer at the time of sale. The property's performance will
ultimately determine the actual yield and capitalization rate at the time of
sale after a specific holding period. We have found that, in improving markets
or with above average properties, demand will be high and transactional rates
may be lower than target rates that are quoted in surveys. We have tried to
recognize this factor in our choice of rate for our cash flow model.
Discounted Cash Flow Chart
The discounted cash flow matrix can be found on the following page.
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Income Approach
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PURCHASE/SALE YIELD TABLE FOR BENNETT PARK, SANTA CLARA, CA
Purchase Price (000's)/Cap Going In as a function of IRR
All Cash analysis (Purchased August 1996 Sold July 2006)
Sale Price (000's)/Terminal Cap
43,676 41,377 39,308 37,436 35,735 34,181 32,757
IRR 9.00 9.50 10.00 10.50 11.00 11.50 12.00
- ---------------------------------------- ------------------------------------
11.00 31,368 30,559 29,830 29,171 28,572 26,025 27,523
8.83 9.07 9.29 9.50 9.70 9.89 10.07
11.50 30,339 29,565 28,869 28,238 27,665 27,142 26,663
9.13 9.37 9.60 9.81 10.02 10.21 10.39
12.00 29,355 28,614 27,948 27,346 26,798 26,297 25,839
9.44 9.68 9.91 10.13 10.34 10.54 10.72
12.50 28,412 27,704 27,067 26,490 25,966 25,488 25,049
- --------------------------------------------------------------------------------
9.75 10.00 10.24 10.46 10.67 10.87 11.06
13.00 27,509 26,832 26,223 25,671 25,170 24,712 24,293
10.07 10.33 10.57 10.79 11.01 11.21 11.41
13.50 26,645 25,997 25,414 24,886 24,407 23,969 23,567
10.40 10.66 10.90 11.13 11.35 11.56 11.76
Conclusions Via the Income Approach
The resulting value estimate is $27,070,000, (rounded) or $118.83 per net
rentable square foot, which translates in a 10.2 percent going-in capitalization
rate.
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RECONCILIATION AND FINAL ESTIMATE OF VALUE
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Value indications for the subject property by the Approaches to Value are
indicated as follows:
Sales Comparison Approach $27,160,000
Income Approach $27,070,000
In the reconciliation, each approach to value is considered in order to
determine the reliability of the data in each and to weigh which approach best
represents the actions of typical users and investors in the market.
The Sales Comparison Approach, is based on the principle of substitution
which implies that a prudent person will not pay more to buy or rent a property
than it would cost to buy a comparable substitute property. In this approach,
the subject property was compared with five office/research and development
building sales. We analyzed the sales using the sales price per square foot
method. Although various dissimilarities between the sales and the subject were
noted, the general analysis is believed to provide reasonable support for our
value conclusion. As such, the Sales Comparison Approach is afforded appropriate
weight in the final conclusion.
The Income Approach is based upon investor expectations for the income
stream generated by an income producing property. After estimating gross income
and the absorption of the vacant space, deductions were made for vacancy and
collection losses, and variable, fixed and other expenses. The resulting net
operating income was then converted into an indication of value by means of
discounted cash flow model.
Since investment properties are generally bought and sold based upon their
income generating ability, all sources of pertinent data were carefully
researched. It is our opinion that the Income Approach is the most reliable
indicator of the value of the subject since the intent of our analysis was to
mirror investor expectations.
Therefore, giving primary weight to the indication of value via the Income
Approach, as supported by the Sales Comparison Approach, we have formed an
opinion that the market value of the leased fee estate in the referenced
property, subject to the assumptions, limiting conditions, certifications, and
definitions, as of July 29, 1996, was:
TWENTY-SEVEN MILLION ONE HUNDRED THOUSAND DOLLARS
$27,100,000
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Reconciliation and Final Estimate of Value
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Marketing Time
Marketing time is an estimate of the time that might be required to sell a
real property interest at the appraised value. Marketing time is presumed to
start on the effective date of the appraisal. Marketing time is subsequent to
the effective date of the appraisal, and exposure time is presumed to precede
the effective date of appraisal.
The estimate of marketing time uses some of the same data analyzed in the
process of estimating the reasonable exposure time and is not intended to be a
prediction of a date of sale.
Our estimate of an appropriate marketing time for the subject relates to a
sale of the property in its As Is condition. Based on our discussions with local
brokers and buyer/sellers of office projects like the subject, as well as our
assessment of the local real estate market and economic forces in general, we
have concluded that the probable marketing period for the subject property in
today's environment would approximate six to twelve months.
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ASSUMPTIONS AND LIMITING CONDITIONS
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Appraisal means the appraisal report and opinion of value stated therein; or the
letter opinion of value, to which these Assumptions and Limiting Conditions are
annexed.
Property means the subject of the Appraisal.
C&W means Cushman & Wakefield, Inc. or its subsidiary which issued the
Appraisal.
Appraiser(s) means the employee(s) of C&W who prepared and signed the Appraisal.
The Appraisal has been made subject to the following assumptions and limiting
conditions:
1) No opinion is intended to be expressed and no responsibility is assumed for
the legal description or for any matters which are legal in nature or
require legal expertise or specialized knowledge beyond that of a real
estate appraiser. Title to the Property is assumed to be good and
marketable and the Property is assumed to be free and clear of all liens
unless otherwise stated. No survey of the Property was undertaken.
2) The information contained in the Appraisal or upon which the Appraisal is
based has been gathered from sources the Appraiser assumes to be reliable
and accurate. Some of such information may have been provided by the owner
of the Property. Neither the Appraiser nor C&W shall be responsible for the
accuracy or completeness of such information, including the correctness of
estimates, opinions, dimensions, sketches, exhibits and factual matters.
3) The opinion of value is only as of the date stated in the Appraisal.
Changes since that date in external and market factors or in the Property
itself can significantly affect property value.
4) The Appraisal is to be used in whole and not in part. No part of the
Appraisal shall be used in conjunction with any other appraisal.
Publication of the Appraisal or any portion thereof without the prior
written consent of C&W is prohibited. Except as may be otherwise stated in
the letter of engagement, the Appraisal may not be used by any person other
than the party to whom it is addressed or for purposes other than that for
which it was prepared. No part of the Appraisal shall be conveyed to the
public through advertising, or used in any sales or promotional material
without C&Ws prior written consent. Reference to the Appraisal Institute or
to the MAI designation is prohibited.
5) Except as may be otherwise stated in the letter of engagement, the
Appraiser shall not be required to give testimony in any court or
administrative proceeding relating to the Property or the Appraisal.
6) The Appraisal assumes (a) responsible ownership and competent management of
the Property; (b) there are no hidden or unapparent conditions of the
Property, subsoil or structures that render the Property more or less
valuable (no responsibility is assumed for such conditions or for arranging
for engineering studies that may be required to discover them); (c) full
compliance with all applicable federal, state and local zoning and
environmental regulations and laws, unless noncompliance is stated, defined
and considered in the Appraisal; and (d) all required licenses,
certificates of occupancy and other governmental
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Assumptions and Limiting Conditions
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consents have been or can be obtained and renewed for any use on which the
value estimate contained in the Appraisal is based.
7) The physical condition of the improvements considered by the Appraisal is
based on visual inspection by the Appraiser or other person identified in
the Appraisal. C&W assumes no responsibility for the soundness of
structural members nor for the condition of mechanical equipment, plumbing
or electrical components.
8) The forecasted potential gross income referred to in the Appraisal may be
based on lease summaries provided by the owner or third parties. The
Appraiser assumes no responsibility for the authenticity or completeness of
lease information provided by others. C&W recommends that legal advice be
obtained regarding the interpretation of lease provisions and the
contractual rights of parties.
9) The forecasts of income and expenses are not predictions of the future.
Rather, they are the Appraiser's best estimates of current market thinking
on future income and expenses. The Appraiser and C&W make no warranty or
representation that these forecasts will materialize. The real estate
market is constantly fluctuating and changing. It is not the Appraisers
task to predict or in any way warrant the conditions of a future real
estate market; the Appraiser can only reflect what the investment
community, as of the date of the Appraisal, envisages for the future in
terms of rental rates, expenses, supply and demand.
10) Unless otherwise stated in the Appraisal, the existence of potentially
hazardous or toxic materials which may have been used in the construction
or maintenance of the improvements or may be located at or about the
Property was not considered in arriving at the opinion of value. These
materials (such as formaldehyde foam insulation, asbestos insulation and
other potentially hazardous materials) may adversely affect the value of
the Property. The Appraisers are not qualified to detect such substances.
C&W recommends that an environmental expert be employed to determine the
impact of these matters on the opinion of value.
11) Unless otherwise stated in the Appraisal, compliance with the requirements
of the Americans With Disabilities Act of 1990 (ADA) has not been
considered in arriving at the opinion of value. Failure to comply with the
requirements of the ADA may adversely affect the value of the Property. C&W
recommends that an expert in this field be employed.
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CERTIFICATION OF APPRAISAL
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We certify that, to the best of our knowledge and belief:
1) Rob D. Perrino inspected the property, and Kenneth E. Matlin, MAI,
has reviewed the report and concurs with the findings contained
herein.
2) The statements of fact contained in this report are true and correct.
3) The reported analyses, opinions, and conclusions are limited only by
the reported assumptions and limiting conditions, and are our
personal, unbiased professional analyses, opinions, and conclusions.
4) We have no present or prospective interest in the property that is the
subject of this report, and we have no personal interest or bias with
respect to the parties involved.
5) Our compensation is not contingent upon the reporting of a
predetermined value or direction in value that favors the cause of the
client, the amount of the value estimate, the attainment of a
stipulated result, or the occurrence of a subsequent event. The
appraisal assignment was not based on a requested minimum valuation, a
specific valuation or the approval of a loan.
6) No one provided significant professional assistance to the persons
signing this report.
7) Our analyses, opinions, and conclusions were developed, and this
report has been prepared, in conformity with the Uniform Standards of
Professional Appraisal Practice of the Appraisal Foundation and the
Code of Professional Ethics and the Standards of Professional
Appraisal Practice of the Appraisal Institute.
8) The use of this report is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives.
9) As of the date of this report, Kenneth E. Matlin, MAI, has completed
the requirements of the continuing education program of the Appraisal
Institute.
/S/ Rob D. Perrino
- -----------------------------------------------
Rob D. Perrino
Appraiser
Northern California Valuation Advisory Services
Certification No. AG002595
/S/ Kenneth E. Matlin
- -----------------------------------------------
Kenneth E. Matlin, MAI
Manager and Director
Northern California Valuation Advisory Services
Certification No. AG2022
================================================================================
-33-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
ADDENDA
================================================================================
================================================================================
-34-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
C/I - 735801 N568PAGE0873 12605743
INSURED
-------------
Property: Bennett Park REC FEE 7 Recorded at the request of
------------- Chicago Title Insurance Company
RMF 3
------------- Aug 4 1994
Control No: 0009 MICRO 1 Aug 4 1994
-------------
BTOS 2 [ILLEGIBLE]
------------- [ILLEGIBLE]
RECORDING REQUESTED BY AND LIEN SANTA CLARA COUNTY,
WHEN RECORDED MAIL TO: ------------- OFFICIAL RECORDS
David A. Hyman, Esq. SMPS
Arent Fax Klatner Pletkin & Kahn -------------
1058 Conneticut, Avenue, N.W. TE POOR
Washington, D.C.20036-5339 ------------- FILOR REQUESTS
DO NOT RECORD STAMP VALUE
MAIL TAX STATEMENTS TO:
J.K. Robert Companies
600 E. Las Colfreis Blvd.
Suite 1500
Irving, Texas 75039
Attn: Mr. Larry Carson
SPECIAL WARRANTY DEED
Parcel No. 104-49-018
Documentary transfer tax is not a matter of public record.
THIS SPECIAL WARRANTY DEED is made as of the 29th day of July, 1994, by The
Prudential Insurance Company of America, a New Jersey mutual insurance company,
whose address is 751 Broad Street, Newark, New Jersey 07102, as GRANTOR to
WHC-SIX, Real Estate Limited Partnership, a Delaware, a Delaware limited
partnership, whose address is 11 Canal Central Plaza , Suite 200, Alexandria, VA
22314, as GRANTEE.
Whereas that Grantor, for good and valuable consideration, receipt of which
is acknowledged, grants to Grantee all the real property located in the city of
Santa Clara, Unincorporated Area __________, in the County of Santa Clara in the
State of California more particularly described in Exhibit A attached hereto,
together with all [ILLEGIBLE], [ILLEGIBLE] and appurtenances thereto; subject to
current real property taxes and other assessments, [ILLEGIBLE], environmental,
municipal building and other governmental restrictions, laws, rules, permits,
approvals, regulations, ordinances, codes, restrictions or legal requirements
and all covenants, conditions, restrictions, [ILLEGIBLE], rights-of-way and
other matters of record.
Grantor hereby covenants with Grantee that Grantor will forever defend
Grantee against claims of all persons claiming by, through or under Grantor. No
other covenants or warranties, express or implied are given by this Deed.
-1-
<PAGE>
N548PAGE0874
IN WITNESS WHEREOF, Grantor has set its hand as of the day and year first
above written.
ATTEST: GRANTOR:
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
/s/ Lisa A. Vabdat By: /s/ Ray Gierdano
- ---------------------------- ------------------------------
Name: Lisa A. Vabdat [Seal]
Title: Assistant Secretary Name: Ray Gierdano
Title: Vice President
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On the 29th day of July, 1994, before me personally came Kay Giordano to me
known, who, being by me duly sworn, did depose and say that he resides in
Convent Station, New Jersey; that he is the Vice President of The Prudential
Insurance Company of America, a New Jersey mutual insurance company described in
and which executed the above instrument and that he signed his name thereto by
authority of the board of directors of said company.
/s/ Frank D. Caiatto
------------------------------
NOTARY PUBLIC
Frank D. Caiatto
Notary Public, State of New York
No. 4777878
Qualified in Richmond County
Certified in New York County
Commission expires March 20, [ILLEGIBLE]
NOTARY PUBLIC
STAMP
-2-
<PAGE>
N54BPAGE0875
Bennett Park
Santa Clara County 0008
EXHIBIT A
All that certain Real Property is the City of Santa Clara, County of Santa
Clara, State of California, described as follows:
All of Parcel 1, as shown upon that certain map entitled, "Parcel Map" being all
of Parcels 137 and 138, as above or that certain "Parcel Map" recorded in Book
430 of Maps, at page 22, Santa Clara County Records, which map was filed for
record is the Office of the Recorder of the County of Santa Clara, State of
California on November 14, 1988 in Book 478 of Maps, at Page 19.
RECORDER'S MEMO
FAINT WRITING, TYPING, CARBON
COPIES OR DOT MATRIX PRINTERS
MAKE POOR PHOTOGRAPHIC RECORD
<PAGE>
COMMERCIAL BUILDINGS
2903 BUNKER HILL LANE
SANTA CLARA, CALIFORNIA
[GRAPHIC OMITTED]
[MAP]
<PAGE>
COMMERCIAL BUILDINGS
2903 BUNKER HILL LANE
SANTA CLARA, CALIFORNIA
[GRAPHIC OMITTED]
[SURVEYOR'S CERTIFICATE & NOTES]
<PAGE>
[GRAPHICS OMITTED]
[ZONES & STREET MAP]
<PAGE>
BUNKER HILL LANE AND GREAT AMERICA PARKWAY
[GRAPHIC OMITTED]
[SITE PLAN]
<PAGE>
BENNETT PARK, SANTA CLARA, CA
PROJECT ASSUMPTIONS REPORT
INCLUDING ALL TENANTS
BUILDING PROLOGUE
- -----------------
LEASEHOLD ANALYSIS OF BENNETT PARK, SANTA CLARA, CA BEGINNING 8/1996
FOR 15 YEARS ON A FISCAL YEAR BASIS
AREA MEASURES
- -------------
BLDA
1996 VALUE - 227,699
THEREAFTER - CONSTANT
GROWTH RATES
- ------------
CPIG
1996 VALUE - 3.50
THEREAFTER - CONSTANT
MKTG
1996 VALUE - 3.50
THEREAFTER - CONSTANT
TAXG
1996 VALUE - 2.00
THEREAFTER - CONSTANT
MARKET RATES
- ------------
MKTR
1996 VALUE - 1.65
THEREAFTER - GROWING AT GROWTH RATE MKTG
MKT2
1996 VALUE - 1.30
THEREAFTER - GROWING AT GROWTH RATE MKTG
MISCELLANEOUS INCOMES
- ---------------------
NONE
EXPENSES
- --------
UTILITIES , REFERRED TO AS UTIL
CHARGED AGAINST NET OPERATING INCOME
1996 VALUE - 360,000
THEREAFTER - GROWING AT GROWTH RATE CPIG
COMMON AREA MAIN., REFERRED TO AS CAMM
CHARGED AGAINST NET OPERATING INCOME
1996 VALUE - 200,000
THEREAFTER - GROWING AT GROWTH RATE CPIG
REAL ESTATE TAXES, REFERRED TO AS RETX
CHARGED AGAINST NET OPERATING INCOME
1996 VALUE - 285,000
THEREAFTER - GROWING AT GROWTH RATE TAXG
INSURANCE , REFERRED TO AS INSU
CHARGED AGAINST NET OPERATING INCOME
1996 VALUE 95,000
THEREAFTER - GROWING AT GROWTH RATE CPIG
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
MANAGEMENT , REFERRED TO AS MGMT
AN INFORMATIONAL EXPENSE
1996 VALUE - 113,094
1997 VALUE - 120,902
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 2
1998 VALUE - 96,820
1999 VALUE - 127,301
2000 VALUE - 132,843
2001 VALUE - 139,973
2002 VALUE - 135,833
2003 VALUE - 114,987
2004 VALUE - 146,741
2005 VALUE - 155,454
2006 VALUE - 164,342
2007 VALUE - 159,681
2008 VALUE - 167,062
2009 VALUE - 147,569
2010 VALUE - 184,879
THEREAFTER - CONSTANT
REIMBURSABLE EXP. , REFERRED TO AS REIM
AN INFORMATIONAL EXPENSE
+100.0% OF UTIL+100.0% OF CAMM
+100.0% OF RETX+100.0% OF INSU
+100.0% OF MGMT
VACANCY ALLOWANCE
- -----------------
PERCENTAGE OF POTENTIAL GROSS INCOME
FOR ALL TENANTS SUBJECT TO VACANCY
1996 VALUE - 2.00
THEREAFTER - CONSTANT
MANAGEMENT FEE
- --------------
PERCENTAGE OF EFFECTIVE GROSS INCOME
FOR ALL TENANTS
PASSED THROUGH TO TENANTS USING EXPENSE MGMT
1996 VALUE - 3.00
THEREAFTER - CONSTANT
COMMISSION CALCULATIONS
- -----------------------
STANDARD METHOD #1 - PERCENT OF EACH YEAR'S RENT:
YEAR 1 - 3.000%
YEAR 2 - 2.500%
YEAR 3 - 2.500%
YEAR 4 - 2.000%
YEAR 5 - 1.500%
STANDARD METHOD #2 - 0.000% OF TOTAL RENT
STANDARD METHOD #3 - 0.000% OF TOTAL RENT
STANDARD METHOD #4 - 0.000% OF TOTAL RENT
STANDARD METHOD #5 - 0.000% OF TOTAL RENT
COMMISSION PAYOUTS
- ------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - CASHED OUT
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
ALTERATION CALCULATION
- ----------------------
1996 VALUE - 3.50
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PACE 3
THEREAFTER - GROWING AT GROWTH RATE CPIG
ALTERATION PAYOUTS
- ------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - CASHED OUT
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
COMMON AREA MAINTENANCE POOL
- ----------------------------
NONE
CAPITAL EXPENDITURES
- --------------------
RESERVES
1996 VALUE - 28,000
THEREAFTER - GROWING AT GROWTH RATE CPIG
PRIMARY CLASSIFICATION CODES
- ----------------------------
NONE
SECONDARY CLASSIFICATION CODES
- ------------------------------
NONE
COST CENTERS
- ------------
NONE
SALES VOLUME PROFILE
- --------------------
PERCENT OF RELATIVE
MONTH ANNUAL SALES VOLUME
- ----- ------------ --------
JAN 8.33% 1.00
FEB 8.33% 1.00
MAR 8.33% 1.00
APR 8.33% 1.00
MAY 8.331 1.00
JUN 8.33% 1.00
JUL 8.33% 1.00
AUG 8.33% 1.00
SEP 8.33% 1.00
OCT 8.33% 1.00
NOV 8.33% 1.00
DEC 8.33% 1.00
------- -------
TOTALS 100.00% 12.00
GLOBAL RECOVERIES
- -----------------
NONE
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 4
TENANT PROLOGUE
- ---------------
MINIMUM RENTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/MONTH
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/MONTH
SALES VOLUMES AND BREAKPOINTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
RENEWAL RENTS ARE COMPOUNDED ANNUALLY
RE~LETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET
REFERENCE TENANTS
- -----------------
NONE
TENANTS
THERE ARE A TOTAL OF 9 LEASEHOLD TENANT(S):
- -----------------------------------------------------------------------
# 1 - SUITE 100 AUSPEX
BASE LEASE DATES: 4/1993 TO 3/1998
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 129,200
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
TNTTIAL RENT 1.02/SF/MO
CHANGING TO 1.07/SF/MO ON 4/1997
RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE BLDA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
<TABLE>
<CAPTION>
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------- ------ --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1 5.00 4 NONE NONE YES YES
2 5.00 4 NONE NONE YES YES
3 5.00 4 NONE NONE YES YES
</TABLE>
RENEWAL MINIMUM RENT:
MARKET RATE MKT2 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE MKTG PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE BLDA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
RENEWAL COMMISSIONS: STANDARD METHOD #1
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 5
- --------------------------------------------------------------------------------
#2 - SUITE 102 , JVC LABORAORIES
BASE LEASE DATES: 10/1995 TO 9/1998
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 6,844
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 1.27/SF/MO
RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE BLDA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 364,480
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
<TABLE>
<CAPTION>
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1 5.00 4 NONE NONE YES YES
2 5.00 4 NONE NONE YES YES
3 5.00 4 NONE NONE YES YES
</TABLE>
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE MKTG PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE
FOOTAGE OVER AREA MEASURE BLDA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #1
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 3 - SUITE 105 CHIP EXPRESS
BASE LEASE DATES: 12/1994 TO 11/1999
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 8,438
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 2.44/SF/MO
CHANGING TO - 2.51/SF/MO ON 2/1998
RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE BLDA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 900,000
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
COMMISSIONS: NONE
ALTERATIONS: NONE
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 6
SPECULATIVE RENEWALS:
<TABLE>
<CAPTION>
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1 5.00 4 NONE NONE YES YES
2 5.00 4 NONE NONE YES YES
3 5.00 4 NONE NONE YES YES
</TABLE>
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE MKTG PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE BLDA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #1
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 4 - SUITE 106 QUICK LOGIC
BASE LEASE DATES: 9/1992 TO 12/1996
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,076
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.50/SF/MO
RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE BLDA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 830,000
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
<TABLE>
<CAPTION>
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS-MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1 5.00 4 NONE NONE YES YES
2 5.00 4 NONE NONE YES YES
3 5.00 4 NONE NONE YES YES
</TABLE>
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE MKTG PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE BLDA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
RENEWAL COMMISSIONS: STANDARD METHOD #1
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 7
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 5 - SUITE 200 AUSPEX
BASE LEASE DATES: 4/1993 TO 3/1998
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 32,724
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.94/SF/MO
CHANGING TO - 1.27/SF/MO ON 9/1996
RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE BLDA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
<TABLE>
<CAPTION>
LENGTH VACANT SO FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1 5.00 4 NONE NONE YES YES
2 5.00 4 NONE NONE YES YES
3 5.00 4 NONE NONE YES YES
</TABLE>
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE MKTG PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE BLDA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #1
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
- ----------------------------------------------------------------------
# 6 - SUITE 100 QUICK LOGIC
BASE LEASE DATES: 9/1992 TO 12/1996
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 19,921
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 1.25/SF/MO
RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE BLDA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
AND A BASE AMOUNT OF 830,000
COMMISSIONS: NONE
ALTERATIONS: NONE
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 8
SPECULATIVE RENEWALS:
<TABLE>
<CAPTION>
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1 5.00 4 NONE NONE YES YES
2 5.00 4 NONE NONE YES YES
3 5.00 4 NONE NONE YES YES
</TABLE>
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE MKTG PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE BLDA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #1
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 7 - SUITE 101 TEST DRIVE
BASE LEASE DATES: 6/1993 TO 12/1996
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 4,310
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 1.65/SF/MO
RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE BLDA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 830,000
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
<TABLE>
<CAPTION>
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1 5.00 4 NONE NONE YES YES
2 5.00 4 NONE NONE YES YES
3 S.00 4 NONE NONE YES YES
</TABLE>
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE MKTG PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE BLDA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
RENEWAL COMMISSIONS: STANDARD METHOD #1
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 9
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 8 - SUITE 200 INFOTEC
BASE LEASE DATES: 2/1994 TO 2/1999
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 12,196
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 1.32/SF/MO
CHANGING TO - 1.35/SF/MO ON 2/1997
RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE BLDA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 860,000
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
<TABLE>
<CAPTION>
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1 5.00 4 NONE NONE YES YES
2 5.00 4 NONE NONE YES YES
3 5.00 4 NONE NONE YES YES
</TABLE>
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE MKTG PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE BLDA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #1
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 9 - SUITE 202 MINERVA
BASE LEASE DATES: 1/1994 TO 8/1996
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 12,873
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 1.45/SF/MO
RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE BLDA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
AND A BASE AMOUNT OF 860,000
COMMISSIONS: NONE
ALTERATIONS: NONE
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 10
SPECULATIVE RENEWALS:
<TABLE>
<CAPTION>
LENGTH VACANT S~Q FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1 5.00 4 NONE NONE YES YES
2 5.00 4 NONE NONE YES YES
</TABLE>
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE MKTG PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE BLDA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #1
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Industrial Market
Business Parks, Other Industrial and Manufacturing
<TABLE>
<CAPTION>
====================================================================================================================================
Capitalization Rates Growth Rate Typical
------------------------------ Internal -------------------------------- Projection
Going In Terminal Rate of Return Income Expenses Period (Year)
Low High Low High Low High Low High Low High Low High
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A - Leased Asset 8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 10.0 10.0
9.0% 9.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
- ------------------------------------------------------------------------------------------------------------------------------------
Response Average (%) 4 4 3 3 4 4 4 4 4 4 4 4
8.9% 9.4% 9.7% 10.7% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.8 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
Class B - Leased Asset
- ------------------------------------------------------------------------------------------------------------------------------------
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.5% 10.5% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 10.0 10.0
10.0% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
- ------------------------------------------------------------------------------------------------------------------------------------
Responses Average (%) 4 4 3 3 4 4 4 4 4 4 4 4
9.3% 9.8% 9.8% 10.8% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.8 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
Class A - Value Added
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.5% 10.5% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
- ------------------------------------------------------------------------------------------------------------------------------------
Responses Average (%) 5 5 4 4 5 5 5 5 5 5 5 5
9.4% 10.0% 9.9% 10.9% 12.4% 13.2% 3.4% 4.0% 3.2% 3.8% 8.2 9.4
- ------------------------------------------------------------------------------------------------------------------------------------
Class B - Value Added
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.5% 10.5% 11.0% 11.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.5% 10.5% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
- ------------------------------------------------------------------------------------------------------------------------------------
Responses Average (%) 5 5 4 4 5 5 5 5 5 5 5 5
9.6% 10.2% 10.0% 11.0% 12.4% 13.2% 3.4% 4.0% 3.2% 3.8% 8.2 9.4
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Total Responses 18 18 14 14 18 18 18 18 18 18 18 18
Weighted Average (%) 9.3% 9.8% 9.8% 10.8% 12.0% 12.4% 3.3% 4.0% 3.2% 3.9% 8.5 9.8
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due to
leasing issues and/or additional capital investment for physical issues
- --------------------------------------------------------------------------------
Cushman & Wakefield Valuation Advisory Services
National Investor Survey-Summer 1996
REAL ESTATE OUTLOOK
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
QUALIFICATIONS OF APPRAISER
================================================================================
Rob D. Perrino
Professional Affiliations
Certified General Real Estate Appraiser, State of California, #AGO02595
MAI Candidate, Appraisal Institute, #M90-1530
Broker License, State of California, #01034857
Real Estate Experience
Appraiser, Cushman & Wakefield Valuation Advisory Services, San Jose,
California
Division is responsible for the appraisal and consulting function of
Cushman & Wakefield of California, Inc., a national full service real
estate organization.
Education
University of Southern California, Los Angeles, CA
Bachelor of Science in Economics
Completed Appraisal Institute Coursework:
No. 1A-1 - Real Estate Appraisal Principles
No. 1 A-2 - Basic Valuation Procedures
No. 1 B-A - Capitalization Theory & Techniques, Part A
No. 1 B-B - Capitalization Theory & Techniques, Part B
No. 2-1 - Case Studies
No. 2-2 - Valuation Analysis and Report Writing
No. 2-3 - Standards of Professional Practices
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
QUALIFICATIONS OF APPRAISER
================================================================================
Kenneth E. Matlin, MAI
Association Membership
Member Appraisal Institute (MAI No. 8397) Senior Residential Appraiser
Senior Member, American Society of Real Estate Appraisers - Past President
of San Jose Chapter
Brokers License - State of California
Certified - General, Certificate Number AGO02022
Kenneth E. Matlin has completed the requirements of the continuing
education programs of the Appraisal Institute and the American Society of
Appraisers
Real Estate Experience
Director and Manager, Cushman & Wakefield Valuation Advisory Services, San
Jose and San Francisco Divisions. San Jose and San Francisco Divisions are
responsible for the appraisal and consulting function of Cushman &
Wakefield of California, Inc., a national full service real estate
organization.
Regional Chief Appraiser, California First Bank, San Jose, California,
between 1974 and 1983.
Education
California State University of San Diego, California
Bachelor of Science Degree - Major: Real Estate, Minor:
Political Science (1973)
American Institute of Real Estate Appraisers:
No. 1-Al ~- Real Estate Appraisal Principles (6-86)
No. 1 -A2 ~- Basic Valuation Procedures (3-87)
No. 1 -BA ~- Capitalization Theory & Techniques, Part A (9-87)
No. 1 -BB ~- Capitalization Theory & Techniques, Part B (9-87)
No. 2-1 ~- Case Studies (3-87)
No. 2-2 ~- Valuation Analysis and Reporting Writing (10-86)
No. 2-3 ~- Standard of Professional Practice (6-86)
No. 410 ~- USPAP
No. 420 ~- Standards of Professional Practice 11-93)
No. 510 ~- Advanced Capitalization Theory (7-93)
Society of Real Estate Appraisers:
No. 101 ~- Introduction to Appraising Real Property (8-76)
No. 201 ~- Principles of Income Property Appraising (6-75)
No. 202 ~- Case Problems (6-83)
No. R-2 ~- Single Family Report Exam (2-77)
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Qualification of Appraiser
================================================================================
Kenneth E. Matlin, MAI
Litigation Experience
Qualified as expert witness Santa Clara County Superior Court
Qualified as expert witness Alameda County Superior Court
Qualified as expert witness Federal Bankruptcy Court
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
SUMMARY OF SALIENT FACTS AND CONCLUSIONS
================================================================================
Property Name: Bennett Park
Location: The subject property is located along the
northwest coner of Great America Parkway
and Bunker Hill Lane within the Marriott
Business Park. The street address is 5200
Great America Parkway and 2903 and 2933
Bunker Hill Lane, Santa Clara, Santa Clara
County, California.
Assessor's Parcel Number: 104-49-018
Interest Appraised: Leased fee estate
Date of Value: July 26, 1996
Date of Inspection: July 26, 1996
Ownership: WHC-Six Real Estate Limited Partnership
Land Area: 9.54 acres or 415,698 square feet
1995-96 Property Assessment
Land: $ 5,400,000
Building: $11,000,000
-----------
Total: $16,400,000
1995-96 Ad Valorem Taxes: $189,638.26
Zoning: ML, Light Industrial
Highest and Best Use
If Vacant: Office/research and development building
As Improved: Office/research and development building
(existing use)
Improvements
Type: Three, two-story, concrete with stucco and
brick, office/research and development
complex.
Year Built: 1983
Size
Gross Building Area: 227,800 square feet
Net Rentable Office Area: 227,800 square feet
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
This CD ROM contains an electronic version of appraisals for the Mortgaged
Properties in PDF format and forms part of the paper version of the Prospectus
Supplement. The information contained in this CD ROM does not appear elsewhere
in paper form in this Prospectus Supplement and must be considered as part of,
and together with, the information contained elsewhere in this Prospectus
Supplement and the Prospectus. The information contained in this CD ROM has
been filed by the Seller with the Securities and Exchange Commission as part
of a Current Report on Form 8-K, which is incorporated by reference in this
Prospectus Supplement, and is also available through the public reference
branch of the Securities and Exchange Commission. Defined terms used in this CD
ROM but not otherwise defined therein shall have the respective meanings
assigned to them in the paper portion of the Prospectus Supplement and the
Prospectus. All of the information contained in this CD ROM is subject to the
same limitations and qualifications contained in this Prospectus Supplement and
the Prospectus. Prospective investors are strongly urged to read the paper
portion of this Prospectus Supplement and the Prospectus in its entirety prior
to accessing this CD ROM. If this CD ROM was not received in a sealed package,
there can be no assurances that it remains in its original format and should
not be relied upon for any purpose. Prospective investors may contact J.
Theodore Borter of Goldman, Sachs Co. at (212)902-3857 to receive an original
copy of the CD ROM.
<PAGE>
Cushman & Wakefield, Inc. Cushman &
51 West 52nd Street Wakefield(R)
New York, NY 10019-6178 Improving your place
(212) 841-7500 in the world.
November 20, 1996
Mr. Mark D. Ettenger
Vice President
Goldman Sachs Mortgage Company
85 Broad Street
New York, New York 10004
Re: Update Appraisal
Cadillac Fairview Portfolio
(Herein "Portfolio")
Dear Mark:
In accordance with our Letter of Engagement, Cushman & Wakefield is
pleased to provide our updated appraisal of the above captioned portfolio which
is more completely described in the attached Exhibit A.
Specifically, we are providing a value estimate for the portfolio based
upon changes to the property which have occurred from the date of our prior
appraisals (dated April through June 1996, herein "Original Appraisals") for the
portfolio through November 20, 1996. Based upon our original appraisals, the
portfolio had an aggregate market value of $416.0 million.
As specified in the Letter of Engagement, the value opinions reported
herein as of our current date of value are qualified by certain assumptions,
limiting conditions, certifications, and definitions which are set forth within
the accompanying text. It is also specifically stated that our conclusions are
the results of a limited appraisal process which incorporate our original,
self-contained complete appraisal reports by reference. It is understood that
this update report should only be relied upon by someone familiar with the
original appraisals.
This Update Appraisal ("Update") has been prepared in accordance with the
Uniform Standards of Professional Appraisal Practice (USPAP).
Purpose of this Update Appraisal
This Update Report is being prepared for Goldman Sachs Mortgage Company in
connection with the underwriting of a proposed financing to Cadillac Fairview
U.S. Inc. (the client to which our Original Appraisals are addressed) which will
be secured by the Portfolio as collateral.
Intended Use of this Update Appraisal
We agree that participants to this financing may rely on this update
appraisal provided they have full and unrestricted access to our Original
Appraisals.
<PAGE>
Cushman & Wakefield, Inc.
Mr. Mark D. Ettenger
Goldman Sachs Mortgage Company -2- November 20, 1996
We understand that the Update will be used, and consent to its use, in
connection with one or more financings of the Portfolio (as well as the sale of
participations or securities representing interests in any such financings) and
we understand that the Update will be relied upon, and consent to reliance
thereon, by you, the borrower, the initial and subsequent holders from time to
time of any debt and/or debt securities secured directly or indirectly by the
Portfolio (provided that such holders are "Qualified Institutional Buyers"
("QIBS") as defined in Rule 144A ("Rule 144A" promulgated under the Securities
Act of 1933, as amended), any indenture trustee, servicer or other agent acting
on behalf of such holders of such debt and/or debt securities, any credit rating
agencies and the provider(s) from time to time of any liquidity facility or
credit support for such financings, Goldman, Sachs & Co. and its affiliates and
all successors and assigns of any of the persons mentioned above.
Further, with respect to offering materials used in a registered public
offering for investment grade rates securities, we hereby (a) consent to the
description of the Update and Original Appraisals, (b) agree that if the
Securities Exchange Commission ("SEC") shall request that Cushman & Wakefield
companies which prepared the reports be specifically identified in the offering
materials and/or that the appraisals be summarized in greater detail subject to
our review and approval in writing, which approval will not be unreasonably
withheld or delayed and/or that the appraisals and/or update be included in any
registration statement and/or that the Cushman & Wakefield companies which
prepared the Update and Original Appraisals be named as experts therein, we will
permit the same. You will afford to us a reasonable opportunity to discuss with
the SEC the need and/or appropriateness of any such request by the SEC.
Notwithstanding the foregoing reference to QIBS, we further understand
that you may desire that offering materials used from time to time in connection
with the offer and sale of any such participations or securities contain
references to the Cushman & Wakefield companies, which prepared the Update and
Original Appraisals, and to the Update and Original Appraisals, including a
summary of the Update and Original Appraisals. With respect to such offering
materials, we hereby consent to the inclusion therein of such references and
summaries, subject to our right to approve, in writing (such approval not to be
unreasonably withheld or delayed), all such references prior to publication or
use of such materials. Further, you will have the right, with respect to any
references to, or summaries of the Update and Original Appraisals pursuant to
the above terms, to request the Cushman & Wakefield companies which prepared the
Update and Original Appraisals to certify you that references or summaries
represent fair and accurate references to, or summaries of the Update and
Original Appraisals and upon such request such Cushman & Wakefield companies
shall so certify (such certification not to be unreasonably withheld or
delayed).
<PAGE>
EXHIBIT A - CADILLAC FAIRVIEW PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
====================================================================================================================================
Owned Original Original Nov. 13,
Property GLA (SF) GLA (SF) Date of Value 1996 Value
Property Name/Location Type Value Conclusion Conclusion
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Northpark Mall 2-Level 956,400 309,675 June-96 $ 85,000,000 $ 85,000,000
Ridgeland, MS Super-regional
- ------------------------------------------------------------------------------------------------------------------------------------
Galleria at White Plains 4-Level 882,728 326,813 May-96 $100,000,000 $100,000,000
White Plains, NY Regional
- ------------------------------------------------------------------------------------------------------------------------------------
Dover Mall and Commons Single-Level April-96 $ 59,500,000 $ 59,500,000
Dover, DE Regional and 671,493/ 418,013/
Strip Center 51,976 51,976
- ------------------------------------------------------------------------------------------------------------------------------------
Golden East Crossing Single-Level 572,914 459,957 June-96 $ 39,000,000 $ 38,000,000
Rocky Mount, NC Regional
- ------------------------------------------------------------------------------------------------------------------------------------
The Esplanade Shopping Mall 2-Level 910,555 413,015 April-96 $ 80,000,000 $ 80,000,000
Kenner,LA Regional
- ------------------------------------------------------------------------------------------------------------------------------------
Market Square at North DeKalb Mall Single-Level 630,830 358,878 April-96 $ 17,000,000 $ 15,900,000
DeKalb County, GA Regional
- ------------------------------------------------------------------------------------------------------------------------------------
Shannon Southpark Mall Single-Level 774,700 280,659 April-96 $ 35,500,000 $ 35,500,000
Union City, GA Regional
====================================================================================================================================
Total 5,451,596 2,618,986 $416,000,000 $413,900,00O
====================================================================================================================================
</TABLE>
<PAGE>
ASSUMPTIONS AND LIMITING CONDITIONS
- --------------------------------------------------------------------------------
"Appraisal" means the appraisal report and opinion of value stated therein, or
the letter opinion of value, to which these Assumptions and Limiting Conditions
are annexed.
"Property" means the subject of the Appraisal.
"C&W" means Cushman & Wakefield, Inc. or its subsidiary which issued the
Appraisal.
"Appraiser(s)" means the employee(s) of C&W who prepared and signed the
Appraisal.
The Appraisal has been made subject to the following assumptions and limiting
conditions:
1. This is an Update Appraisal intended to comply with the Uniform Standards
of Professional Appraisal Practice. This appraisal incorporates our
original, self-contained complete appraisal reports by reference.
2. No opinion is intended to be expressed and no responsibility is assumed
for the legal description or for any matters which are legal in nature or
require legal expertise or specialized knowledge beyond that of a real
estate appraiser. Title to the Property is assumed to be good and
marketable and the Property is assumed to be free and clear of all liens
unless otherwise stated. No survey of the Property was undertaken.
3. The information contained in the Appraisal or upon which the Appraisal is
based has been gathered from sources the Appraiser assumes to be reliable
and accurate. Some of such information may have been provided by the owner
of the Property. Neither the Appraiser nor C&W shall be responsible for
the accuracy or completeness of such information, including the
correctness of estimates, opinions, dimensions, sketches, exhibits and
factual matters.
4. The opinion of value is only as of the date stated in the Appraisal.
Changes since that date in external and market factors or in the Property
itself can significantly affect property value.
5. The Appraisal is to be used in whole and not in part. No part of the
Appraisal shall be used in conjunction with any other appraisal.
Publication of the Appraisal or any portion thereof without the prior
written consent of C&W is prohibited. Except as may be otherwise stated in
the letter of engagement, the Appraisal may not be used by any person
other than the party to whom it is addressed or for purposes other than
that for which it was prepared. No part of the Appraisal shall be conveyed
to the public through advertising, or used in any sales or promotional
material without C&W's prior written consent. Reference to the Appraisal
Institute or to the MAI designation is prohibited.
6. Except as may be otherwise stated in the letter of engagement, the
Appraiser shall not be required to give testimony in any court or
administrative proceeding relating to the Property or the Appraisal.
7. The Appraisal assumes (a) responsible ownership and competent management
of the Property; (b) there are no hidden or unapparent conditions of the
Property, subsoil or
<PAGE>
Assumptions and Limiting Conditions
- --------------------------------------------------------------------------------
structures that render the Property more or less valuable (no
responsibility is assumed for such conditions or for arranging for
engineering studies that may be required to discover them); (c) full
compliance with all applicable federal, state and local zoning and
environmental regulations and laws, unless noncompliance is stated,
defined and considered in the Appraisal; and (d) all required licenses,
certificates of occupancy and other governmental consents have been or can
be obtained and renewed for any use on which the value estimate contained
in the Appraisal is based.
8. The physical condition of the improvements considered by the Appraisal is
based on visual inspection by the Appraiser or other person identified in
the Appraisal. C&W assumes no responsibility for the soundness of
structural members nor for the condition of mechanical equipment, plumbing
or electrical components.
9. The forecasted potential gross income referred to in the Appraisal may be
based on lease summaries provided by the owner or third parties. The
Appraiser assumes no responsibility for the authenticity or completeness
of lease information provided by others. C&W recommends that legal advice
be obtained regarding the interpretation of lease provisions and the
contractual rights of parties.
10. The forecasts of income and expenses are not predictions of the future.
Rather, they are the Appraisers best estimates of current market thinking
on future income and expenses. The Appraiser and C&W make no warranty or
representation that these forecasts will materialize. The real estate
market is constantly fluctuating and changing. It is not the Appraiser's
task to predict or in any way warrant the conditions of a future real
estate market; the Appraiser can only reflect what the investment
community, as of the date of the Appraisal, envisages for the future in
terms of rental rates, expenses, supply and demand.
11. Unless otherwise stated in the Appraisal, the existence of potentially
hazardous or toxic materials which may have been used in the construction
or maintenance of the improvements or may be located at or about the
Property was not considered in arriving at the opinion of value. These
materials (such as formaldehyde foam insulation, asbestos insulation and
other potentially hazardous materials) may adversely affect the value of
the Property. The Appraisers are not qualified to detect such substances.
C&W recommends that an environmental expert be employed to determine the
impact of these matters on the opinion of value.
12. Unless otherwise stated in the Appraisal, compliance with the requirements
of the Americans With Disabilities Act of 1990 (ADA) has not been
considered in arriving at the opinion of value. Failure to comply with the
requirements of the ADA may adversely affect the value of the Property.
C&W recommends that an expert in this field be employed.
<PAGE>
CERTIFICATION OF APPRAISAL
- --------------------------------------------------------------------------------
We certify that, to the best of our knowledge and belief:
1. The properties have not been reinspected.
2. The statements of fact contained in this report are true and correct.
3. The reported analyses, opinions, and conclusions are limited only by the
reported assumptions and limiting conditions, and are our personal,
unbiased professional analyses, opinions, and conclusions.
4. We have no present or prospective interest in the property that is the
subject of this report, and we have no personal interest or bias with
respect to the parties involved.
5. Our compensation is not contingent upon the reporting of a predetermined
value or direction in value that favors the cause of the client, the
amount of the value estimate, the attainment of a stipulated result, or
the occurrence of a subsequent event. The appraisal assignment was not
based on a requested minimum valuation, a specific valuation or the
approval of a loan.
6. In addition to the undersigned, professional assistance has been provided
by Robert Nardella, Luten Teate, MAI, and Jay Booth.
7. Our analyses, opinions, and conclusions were developed, and this report
has been prepared, in conformity with the Uniform Standards of
Professional Appraisal Practice of the Appraisal Foundation and the Code
of Professional Ethics and the Standards of Professional Appraisal
Practice of the Appraisal Institute.
8. The use of this report is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives.
9. As of the date of this report, Richard W. Latella and Luten Teate have
completed the requirements of the continuing education program of the
Appraisal Institute.
/s/ Richard W. Latella
Richard W. Latella, MAI
Senior Director
Retail Valuation Group
<PAGE>
Cushman & Wakefield, Inc.
Mr. Mark D. Ettenger November 20, 1996
Goldman Sachs Mortgage Company -3-
Identification of the Property
The property comprises a portfolio of seven regional malls and one
adjacent strip center more completely described in the attached Exhibit A. At
the time of our original appraisal, the portfolio had a total GLA of
approximately 5,451,600 square feet of which approximately 2,619,000 square
feet were owned by Cadillac Fairview and the balance (generally comprised of
department stores) were under separate ownership.
Extent of the Appraisal Process
In the process of preparing this update appraisal, we:
o Did not reinspect the property, having relied upon our most recent
inspections performed over the course of the last seven months;
o Interviewed representatives of ownership, including Cadillac
Fairview personnel as well as the on-site managers;
o Reviewed an update of leasing activity, including lease status
reports, tenants concessions, tenant built-out allowances and
history of recent rental rates and occupancy with company and mail
personnel;
o Reviewed a revised income and expense budget forecast for 1996;
o Conducted market research of occupancies, asking rents, concessions
and operating expenses at competing retail properties, including
interviews with on-site managers and a review of our own data base
from pervious appraisal files;
o Conducted market inquires into recent sales of similar retail
centers to ascertain sale prices per square foot, effective gross
income multipliers, and capitalization rates;
o Made inquiries into the trading area for the mall as well as the
local economy for changes since our original appraisal;
o Reviewed the most recent reports on tenant sales activity at each
center;
o Reviewed current surveys for each property and reconciled
differences in reported land area to our satisfaction; and
o Reconciled any differences in value from our original appraisal
through November 20, 1996, the effective date of value for this
update appraisal.
<PAGE>
Cushman & Wakefield, Inc.
Mr. Mark D. Ettenger
Goldman Sachs Mortgage Company -4- November 20, 1996
Changes to the Property/Market
As outlined in the Extent of the Appraisal Process, we have reconciled
changes to the property and the market as defined herein. Based upon our review
of the current data available for each asset, a few changes are noteworthy. It
became apparent during our review of Market Square, that some of the leasing we
had anticipated had not come to fruition. As such, occupancy had decreased below
where it was at the time of our last appraisal and sales had slipped slightly.
For these reasons, we have concluded a change in value.
We have also been provided with current surveys for the properties which
resulted in some minor differences in land size as compared to our original
appraisal. With the exception of Golden East Crossing, we have determined that
there has been no significant impact on value because of these differences. In
our original appraisal of Golden East Crossing, we had valued three outparcels.
It has since been determined that these outparcels are not part of the
collateral and should be excluded. As such, this would result in a concurrent
reduction in value for this property. Based upon our review of the data, we are
of the conclusion that there has been no other significant changes to the
portfolio.
Highest and Best Use
According to the Dictionary of Real Estate Appraisal, highest and best use
of the property as improved is defined as:
The use that should be made of a property as it exists. An existing
property should be renovated or retained so long as it continues to
contribute to the total market value of the property, or until the return
from a new improvement would more than offset the cost of demolishing the
existing building and constructing a new one.
Based upon our review of each asset, we are of the opinion that the
highest and best use is for continued retail occupancy.
Valuation Process
Our review of the data has led us to conclude that there is a change in
value with respect to Market Square. In this instance we have relied principally
upon the Income Capitalization Approach. Through the process of updating our
projections and forecasts, we have determined that the market value of Market
Square is $15,900,000, a reduction of $1,100,000 from our conclusion of
$17,000,000 in the Original Appraisal. In addition, since it has been determined
that the outparcels at Golden East Crossing are not a part of the collateral, we
have cause to reduce our value conclusion from $39,000,000 to $38,000,000 in
this update appraisal.
<PAGE>
Cushman & Wakefield, Inc.
Mr. Mark D. Ettenger
Goldman Sachs Mortgage Company -5- November 20, 1996
In view of the above, we are of the opinion that the market value of the
individual portfolio properties totals $413,900,000, as of November 20, 1996,
our current date of value. The attached schedule summarizes our final
conclusions for the portfolio.
Sincerely,
Cushman & Wakefield
/s/ Richard W. Latella
Richard W. Latella, MAI
Senior Director
Retail Valuation Group
RWL:emf
This CD ROM contains an electronic version of appraisals for the Mortgaged
Properties in PDF format and forms part of the paper version of the Prospectus
Supplement. The information contained in this CD ROM does not appear elsewhere
in paper form in this Prospectus Supplement and must be considered as part of,
and together with, the information contained elsewhere in this Prospectus
Supplement and the Prospectus. The information contained in this CD ROM has
been filed by the Seller with the Securities and Exchange Commission as part
of a Current Report on Form 8-K, which is incorporated by reference in this
Prospectus Supplement, and is also available through the public reference
branch of the Securities and Exchange Commission. Defined terms used in this CD
ROM but not otherwise defined therein shall have the respective meanings
assigned to them in the paper portion of the Prospectus Supplement and the
Prospectus. All of the information contained in this CD ROM is subject to the
same limitations and qualifications contained in this Prospectus Supplement and
the Prospectus. Prospective investors are strongly urged to read the paper
portion of this Prospectus Supplement and the Prospectus in its entirety prior
to accessing this CD ROM. If this CD ROM was not received in a sealed package,
there can be no assurances that it remains in its original format and should
not be relied upon for any purpose. Prospective investors may contact J.
Theodore Borter of Goldman, Sachs Co. at (212)902-3857 to receive an original
copy of the CD ROM.
<PAGE>
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COMPLETE APPRAISAL
OF REAL PROPERTY
Campus Point
1880 Campus Commons Drive
Reston, Fairfax County, Virginia
===============================================
IN A SELF-CONTAINED REPORT
As of July 1, 1997
Prepared For:
Goldman Sachs Mortgage Company
85 Broad Street
New York, New York 10004
Prepared By:
Cushman & Wakefield of Washington, D.C., Inc.
Valuation Advisory Services
1875 Eye Street, NW
Suite 700
Washington, D.C. 20006
<PAGE>
Cushman & Wakefield of Washington, D.C., Inc. CUSHMAN &
1875 Eye Street, N.W., Suite 700 WAKEFIELD(R)
Washington, D.C. 20006 A ROCKEFELLER GROUP COMPANY
(202) 467-0600
June 18, 1997
Mr. Sheridan Schechner
Managing Partner
Goldman Sachs Mortgage Company
85 Broad Street
New York, New York 10004
RE: Complete Appraisal of Real Property
Campus Point
1880 Campus Commons Drive
Reston, Fairfax County, Virginia
Dear Mr. Schechner:
In fulfillment of our agreement as outlined in the Letter of Engagement,
Cushman & Wakefield of Washington, D.C., Inc. is pleased to transmit our
appraisal report estimating the market value of the leased fee estate in the
referenced real property.
As specified in the Letter of Engagement, the value opinion reported below
is qualified by certain assumptions, limiting conditions, certifications, and
definitions, which are set forth in the report.
This report was prepared for Goldman Sachs Mortgage Company and is
intended only for the specified use of the Client. It may not be distributed to
or relied upon by other persons or entities without the written permission of
the Cushman & Wakefield of Washington, D.C., Inc.
This appraisal report has been prepared in accordance with our
interpretation of your institution's guidelines, the regulations of OCC and the
Uniform Standards of Professional Appraisal Practice, including the Competency
Provision and The Financial Institutions Reform, Recovery and Enforcement Act
(FIRREA) and the guidelines of federal regulatory agencies.
The property was inspected and the report prepared by Kelly J. Small under
the supervision of Donald R. Morris, MAI.
As a result of our analysis, we estimate the market value of the leased
fee estate in the referenced property and subject to the assumptions, limiting
conditions, certifications and definitions set forth herein, as of July 1, 1997,
to be:
TWENTY THREE MILLION THREE HUNDRED THOUSAND DOLLARS
$23,300,000
<PAGE>
Mr. Sheridan Schechner
June 18, 1997 Page 2
Marketing time is an estimate of the time that might be required to sell a
real property interest at the appraised value. Marketing time is presumed to
start on the effective date of the appraisal, whereas exposure time is presumed
to precede the effective date of appraisal. The estimate of marketing time uses
some of the same data analyzed in the process of estimating the reasonable
exposure time and is not intended to be a prediction of a date of sale.
Our estimate of an appropriate marketing time for the subject relates to a
sale of the property in its As Is condition. Based on our discussions with local
brokers and buyer/sellers of office projects like the subject, as well as our
assessment of the local real estate market and economic forces in general, we
have concluded that the probable marketing period for the subject property in
today's environment would be about 12 months.
This letter is invalid as an opinion of value if detached from the report,
which contains the text, exhibits, and an Addenda.
Respectfully submitted,
CUSHMAN & WAKEFIELD OF WASHINGTON, D.C. INC.
/s/ Kelly J. Small
Kelly J. Small
Appraiser
Valuation Advisory Services
/s/ Donald Morris
Donald R. Morris, MAI
Manager, Director
Valuation Advisory Services
State of Virginia Certified General Appraiser No. 4001-002465
- --------------------------------------------------------------------------------
COMMONWEALTH OF VIRGINIA
Donald R. Morris
No. 4001-002465
Certified General
Real Estate
Appraiser
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SUMMARY OF SALIENT FACTS AND CONCLUSIONS
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Property Name: Campus Point
Location: 1880 Campus Common Drive
General Overview: This is modern two-story office
building built in 1985 on a 10.5
acre site. The building contains
172,448 net rentable square feet
of building area with surface
parking for 648 vehicles. On the
effective date of appraisal, the
entire building was leased to a
single tenant..
Interest Appraised: Leased fee estate
Date of Value: July 1, 1997
Date of Inspection: June 15, 1997
Ownership: R, F & P Land I, Inc.
Highest and Best Use: Office development, as market
conditions permit
Value Indicators
Sales Comparison Approach: $23,300,000 to $23,600,000
(rounded)
Value Per Square Foot: $135 to $137
Indicated Value: $23,500,000
Income Capitalization Approach
Estimated Market Rental Rate: $15.00 SF, Triple Net
Stabilized Vacancy Rate: 4.5%
Effective Gross Income: $2,919,065
Operating Expenses $579,820
Real Estate Taxes: $226,531
Net Operating Income: $2,339,245
Estimated Vacancy Between Tenants 9 months
Free Rent: None
Probability of Renewal: 60%
Tenant Improvement Allowance
Shell Space: N/A
New Tenants in Previously
Occupied Space $10.00 per square foot
Renewal Tenants in Same Space: $5.00 per square foot
Estimated Market Rental Growth Rate 3.5%
Estimated Expense Growth Rate: 3.5%
Estimated Real Estate Tax Growth Rate: 3.5%
Reversion Year Capitalization Rate 10.0%
Transaction Costs in Reversion Sale: 3.0%
CUSHMAN &
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Summary Of Salient Facts And Conclusions
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Discount Rate: 12.0%
Indicated Value: $23,300,000
Value Conclusion: $23,300,000
Value Per Square Foot: $135.11 (Net Rentable Area)
Implicit Capitalization Rate: 10.0%
Special Assumptions Affecting Valuation:
1. Please refer to the complete list of assumptions and limiting
conditions included at the end of this report.
CUSHMAN &
WAKEFIELD(R)
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PHOTOGRAPHS OF SUBJECT PROPERTY
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[GRAPHIC OMITTED]
[PHOTO]
Front View of the Subject
[GRAPHIC OMITTED]
[PHOTO]
Rear view of Subject
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Photographs of Subject Property
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[GRAPHIC OMITTED]
[PHOTO]
Looking East Along Campus Commons Drive
[GRAPHIC OMITTED]
[PHOTO]
Looking West Along Campus Commons Drive
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TABLE OF CONTENTS
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Page
INTRODUCTION ................................................................ 1
Identification of Property ........................................... 1
Property Ownership and Recent History ................................ 1
Purpose and Function of Appraisal .................................... 1
Extent of the Appraisal Process ...................................... 1
Date of Value and Property Inspection ................................ 1
Property Rights Appraised ............................................ 1
Definitions of Value, Interest Appraised,
and Other Pertinent Terms ......................................... 2
Legal Description .................................................... 3
REGIONAL ANALYSIS ........................................................... 4
NEIGHBORHOOD ANALYSIS ...................................................... 19
OFFICE MARKET ANALYSIS ..................................................... 24
PROPERTY DESCRIPTION ....................................................... 35
Site Description .................................................... 35
Improvements Description ............................................ 36
REAL ESTATE TAXES AND ASSESSMENTS .......................................... 39
ZONING ..................................................................... 41
HIGHEST AND BEST USE ANALYSIS .............................................. 43
VALUATION PROCESS .......................................................... 45
SALES COMPARISON APPROACH .................................................. 46
INCOME APPROACH ............................................................ 51
RECONCILIATION AND FINAL VALUE ESTIMATE .................................... 64
ASSUMPTIONS AND LIMITING CONDITIONS ........................................ 66
CERTIFICATION OF APPRAISAL ................................................. 68
ADDENDA .................................................................... 69
<PAGE>
Introduction
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Identification of Property
The subject property is a two-story office building known as Campus Point
which is located at 1880 Campus Commons Drive in Reston, Fairfax County,
Virginia. The building contains 174,448 square feet and is situated on a 10.5
acre parcel. The building is modern in appearance and functional in design. As
of the date of inspection, the property was 100 percent occupied by a single
tenant (Bell Atlantic).
Property Ownership and Recent History
The property is owned by RF&P Land I, Inc., who acquired the site in
December 1994 for $20,268,000 from CDCC Associates Limited Partnership. At the
time of sale, the property was full leased to the current tenant (Bell Atlantic)
at a rental rate of $13.25 per square foot, triple net. Since 1994, the office
market in Northern Virginia has improved significantly, with increasing rents
and decreasing vacancy, as will be depicted in the Office Market Analysis
section. Thus, the difference between the price paid for the property and our
value conclusion is attributable to improving market conditions. It is our
understanding that this property, along with a much larger portfolio, is being
transferred for securitization purposes. We were not provided with any details
on this pending transaction.
Purpose and Function of Appraisal
The purpose of the appraisal is to estimate the market value of the leased
fee estate. The appraisal is to be used to monitor the performance of a
portfolio asset.
Extent of the Appraisal Process
In the process of preparing this appraisal, we:
|_| Inspected the exterior of the building and the site improvements and
a representative sample of tenant spaces with property management.
|_| Reviewed leasing policy, concessions, tenant build-out allowances,
and history of recent rental rates and occupancy with the building
manager.
|_| Reviewed a detailed history of income and expense and a budget
forecast for 1997.
|_| Conducted market research of occupancies, asking rents, concessions
and operating expenses at competing buildings which involved
interviews with on-site managers and a review of our own data base
from previous appraisal files.
|_| Prepared an estimate of stabilized income and expense (for
capitalization purposes).
|_| Conducted market inquiries into recent sales of similar buildings to
ascertain sales price per square foot, effective gross income
multipliers and capitalization rates. This process involved
telephone interviews with sellers, buyers and/or participating
brokers. (See detailed sales write-ups in Addenda for more complete
information on the verification process.)
|_| prepared the Sales Comparison and Income Approaches to value.
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Introduction
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Date of Value and Property Inspection
The date of value is July 1, 1997. We inspected the property on June 18,
1997.
Property Rights Appraised
The rights being valued are the leased fee estate.
Definitions of Value, Interest Appraised, and Other Pertinent Terms
The definition of market value taken from the Uniform Standards of
Professional Appraisal Practice, 1994 Edition, published by The Appraisal
Foundation, is as follows:
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 is the
consummation of a sale as of a specified date and the passing of title
from seller to buyer under conditions whereby:
(1) Buyer and seller are typically motivated;
(2) Both parties are well informed or well advised, and acting in
what they consider their own best interests;
(3) A reasonable time is allowed for exposure in the open market;
(4) Payment is made in terms of cash in U.S. dollars or in terms
of financial arrangements comparable thereto; and
(5) 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.
Exposure Time
Under Paragraph 3 of the Definition of Market Value, the value estimate
presumes that "A reasonable time is allowed for exposure in the open
market." Exposure time is defined as the estimated length of time the
property interest being appraised would have been offered on the market
prior to the hypothetical consummation of a sale at the market value on
the effective date of the appraisal. Exposure time is presumed to precede
the effective date of the appraisal.
Based on the improved sales data presented in this document, coupled with
our conversations with local property owners, brokers and management
firms, we have estimated the appropriate exposure time would have been 12
months for the property.
Marketing Time
Marketing time is an estimate of the time that might be required to sell a
real property interest at the appraised value. Marketing time is presumed
to start on the effective date of the appraisal. Marketing time is
subsequent to the effective date of the appraisal and exposure time is
presumed to precede the effective date of the appraisal. The estimate of
marketing time uses some of the same data analyzed in the process of
estimating reasonable exposure time and it is not intended to be a
prediction of a date of sale. We estimated marketing time to be
approximately 12 months.
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Introduction
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Definitions of pertinent terms taken from the Dictionary of Real Estate
Appraisal, Third Edition (1993), published by The Appraisal Institute, are as
follows:
Leased Fee Estate
An ownership interest held by a landlord with the right of use and
occupancy conveyed by lease to others. The rights of the lessor (the
leased fee owner) and the leased fee are specified by contract terms
contained within the lease.
Leasehold Estate
The right to use and occupy real estate for a stated term and under
certain conditions; conveyed by a lease.
Market Rent
The rental income that a property would most probably command on the open
market; indicated by the current rents paid and asked for comparable space
as of the date of the appraisal.
Cash Equivalent
A price expressed in terms of cash, as distinguished from a price
expressed totally or partly in terms of the face amounts of notes or other
securities that cannot be sold at their face amounts.
Discounted Cash Flow (DCF) Analysis
The procedure in which a discount rate is applied to a set of projected
income streams and a reversion. The analyst specifies the quantity,
variability, timing and duration of the income streams as well as the
quantity and timing of the reversion and discounts each to its present
values at a specified yield rate. DCF analysis can be applied with any
yield capitalization rate and may be performed on either a lease-by-lease
or aggregate basis.
Legal Description
The subject is identified as parcel 26-2-01-0009-D among the land records
of Fairfax County, Virginia. We were not provided with a metes and bounds
description of the site.
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Regional Analysis
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Introduction
The real estate market is affected by a range of supply and demand
factors. As examples, the growth trends in population and the number of
households affect the general demand for housing, offices, shopping centers,
warehouses; the employment opportunities and unemployment levels influence the
ability or desire to buy or rent and the quality/cost of the facilities sought;
demographics influence the types of units demanded; and general economic
conditions affect the attitudes of the populace towards the future.
The following analysis will review each of the major factors affecting the
supply and demand for real estate in the metropolitan area. The discussion is
organized to provide the reader with an overview of the area's geographic scope
and facilities infrastructure, followed by discussions of the key economic
factors affecting supply and demand under the following headings:
o Background
o Area Definition
o Infrastructure
o Population
o Employment and The Economy
o Household Demographics
o Recent Trends
Background
Washington, D.C. is unique among American cities. As our nation's capital,
it serves as a focal point for our country both politically and economically. In
the role as host city for a major world power, it attracts people from all over
the world. Washington has been dubbed a "recession proof" city in that it is
insulated, as some have argued, from the full effects of economic ups and downs
by the stabilizing influence of the federal government as the area's biggest
employer. From the 1950s through the 1980s, the size of government continually
increased, which brought about an increase in government employment and
population in the Washington area.
Area Definition
The metropolitan Washington area is all of the Washington Metropolitan
Statistical Area (MSA) as defined by the U.S. Department of Commerce, Bureau of
the Census, as of June 1983. The Washington MSA includes: District of Columbia;
the Maryland Counties of Calvert, Charles, Frederick, Montgomery and Prince
George's; the Virginia Counties of Arlington, Fairfax, Loudoun, Prince William
and Stafford; and the Virginia independent Cities of Alexandria, Fairfax, Falls
Church, Manassas, and Manassas Park. Prior to the 1983 redefinition of the
Washington MSA, the Maryland counties of Calvert and Frederick and the Virginia
county of Stafford were excluded. The addition of these counties enlarged the
metropolitan area from approximately 2,800 square miles to 3,956 square miles.
Please refer to the Washington MSA map on the following page.
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[MAP]
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Regional Analysis
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Effective December 31, 1992, the Department of Commerce created a new
Washington-Baltimore-DC-MD-VA-WV CMSA (consolidated metropolitan statistical
area) that includes the primary Washington, D.C. and Baltimore MSAs, plus a new
Hagerstown MSA and nine additional counties in Virginia and West Virginia. The
expanded market was created to reflect the area's household and employment
patterns and is highly touted by economic development agencies. The current
Washington, D.C. metropolitan area is the appropriate focus for this analysis,
however, since the pertinent market is more localized.
The population, housing and employment characteristics of the region are
best defined by starting at the area's central jurisdictions: the District of
Columbia, Arlington County, and the City of Alexandria; then moving outward to
the first suburban tier of counties: Fairfax County, City of Fairfax, City of
Falls Church, Prince George's County, and Montgomery County; and thence to the
outer tier of suburbs: Loudoun County, Prince William County, Manassas and
Manassas Park, Frederick County, Calvert County, Charles County, and Stafford
County.
Infrastructure
Transportation
The Capital Beltway (I-495) is one of the most important factors driving
development in the Washington area. It has tied the Maryland and Virginia
suburbs together and significantly influenced real estate investment patterns.
One of the primary results has been a steady rise in land prices in the vicinity
of the Beltway. Apartments, light industrial facilities, distribution
warehouses, and shopping centers have gone up wherever the Beltway crosses other
major highways. Interestingly, closer-in sites have often been by-passed in
favor of locations adjacent to the Beltway.
In addition to the Beltway, Washington is connected to I-95, the major
north-south interstate highway that extends most of the length of the Atlantic
coast, and I-66, an east-west highway that begins in Washington, D.C. and
connects westward to other interstate highways in Virginia and West Virginia.
The Washington Metropolitan Area Transit Authority (WMATA) provides
transit service in Maryland, the District of Columbia, and Virginia, including
both rapid rail and bus transportation. The rapid rail network, referred to as
MetroRail, will cover 103 miles with 86 stations in D.C., suburban Maryland and
Virginia when completed in the late 1990s. The construction of MetroRail has had
a major impact on land values around the stations and has spurred dramatic new
development, both in downtown Washington and in suburban areas. Major new office
and mixed use projects have been built around the Metro stops. In particular,
portions of downtown Washington and Arlington County have experienced an
economic revitalization due to the opening of MetroRail. Apartment projects
often market themselves as being close to MetroRail stations and typically
command rents at the high end of the market and achieve higher occupancies as a
result. The same could be said for various primary employment centers and major
retail facilities.
In terms of air transportation, the Washington area is served by three
major airports: Washington National, Baltimore/Washington International and
Washington Dulles International. Washington National, located in Arlington
County, is located four and one-
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Regional Analysis
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half miles from the U.S. Capitol, and transports over 16 million passengers per
year. The airport was built in the 1940s and is currently undergoing major
renovations and expansion, which primarily includes a new terminal building and
improved parking.
Washington Dulles International Airport is bisected by the Loudoun County,
Fairfax County line and lies in the western part of the MSA. The Dulles Access
Road provides quick access to the airport, along with the Capital Beltway
(I-495) which connects Fairfax County to the Washington metropolitan area. The
Dulles Toll Road is a commuter road bordering the Dulles Access Road that is
being studied for expansion and extension to Leesburg (Route 15) and past
Dulles Airport.
Opened in 1962, Dulles Airport has been an important factor in the growth
of the regional economy of Northern Virginia. In 1985, it became the fastest
growing airport in the United States. Currently 19 airlines service the airport
with 500 daily departures serving 30,000 passengers. Three major airlines have
established regional hubs here including United Airlines, Continental, and Delta
Airlines. Further, international carriers including Air France, British Airways,
All Nippon Airways, TWA, Lufthansa and Swiss Air.
The Baltimore/Washington International Airport (BWI) is located in the
southern portion of the Baltimore MSA in Anne Arundel County, ten miles from
downtown Baltimore, and 30 miles from Washington, D.C. This airport hosts 18
passenger airlines that provide direct air service to 135 cities in the United
States and Canada. BWI also provides service to air-freight carriers with its
110,000 square foot air cargo complex. When compared with Dulles and Washington
National Airport, BWI services 28 percent of commercial passengers, 38 percent
of commercial operations and 57 percent of freight customers. BWI has spawned
the development of 15 new business parks and several hotels, has created nearly
10,000 jobs, and has generated a state-wide economic impact of $1.7 billion in
the form of business sales made, goods and services purchased, and wages and
taxes paid.
Government Services and Structures
The Washington, D.C. metropolitan area contains fourteen different
municipal jurisdictions, including the District of Columbia, ten counties and
three cities in two states. Local governments provide typical municipal services
found in a major metropolitan area, including welfare and social services,
refuse collection, emergency services, public education, and a variety of
regulatory functions. Each municipality has its own zoning ordinance and
governmental structure.
In addition to the local governments, the District of Columbia is the
headquarters for the federal government. Major federal agencies are located
throughout the District of Columbia and many of the surrounding suburbs. The
support functions for many agencies have been relocated to the less expensive
suburbs.
The area is also served by several cross-jurisdictional agencies. These
include the Maryland National-Capital Park and Planning Commission (MNCPPC)
which provides planning and zoning coordination to the Maryland suburbs. The
Washington Metropolitan Area Transit Authority (WMATA), which was referred to
earlier, is the regional public
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Regional Analysis
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transit authority. The Metropolitan Washington Council of Governments performs
studies on metropolitan economic and business issues and promotes the region to
outsiders.
Public and Private Amenities
As the nation's capital, the District of Columbia houses many national
museums, monuments, and institutions that attract visitors to the area from
around the world. Washington, D.C. is one of the leading tourist destinations
for domestic travelers and foreign visitors to the United States.
In addition, the metropolitan area is a strong supporter of the performing
arts. The Kennedy Center is the area's main stage for plays, opera, and symphony
presentations, but there are indoor and outdoor stages and theaters in all of
the adjacent jurisdictions. Professional athletics are played at RFK Stadium
(football) in southeast Washington, D.C. and the U.S. Air Arena (basketball and
hockey) in Landover, Maryland. Baseball is played at Oriole Park at Camden Yard
in Baltimore.
The region also offers numerous private and public golf courses, municipal
parks, and bicycle and jogging trails. One unique feature of the region's
outdoor attractions is the C&O Canal. The canal is maintained as a national
park and follows the Maryland side of the Potomac River between Georgetown in
northwest Washington, D.C. and Cumberland, Maryland. The Potomac River is an
active recreational area for fishing and various kinds of boating.
The public and private primary schools in the region include many with
national standing. The school districts face the typical challenges encountered
in urban centers with mixes of high and low income neighborhoods and growing
immigrant populations without English language skills. On average, the suburban
school districts tend to be better funded than those in the District of
Columbia.
With respect to higher education, the region has a network of nationally
recognized universities and regional and community colleges, including George
Washington University, Georgetown University, American University, the
University of Maryland, Howard University, Gallaudet University, The University
of the District of Columbia, Catholic University, George Mason University, and
Trinity College.
In review, the metropolitan area has a well established infrastructure of
roadways, light rail and bus systems, airports, attractive business and
residential neighborhoods, and many quality of life features that continue to
make Washington, D.C. a desirable place to work and live. There are continuing
efforts by municipal agencies to improve public transportation, especially the
commuter rail system, so as to ease road congestion and lessen air pollution.
The District of Columbia and nearby suburban office concentrations remain the
area's primary business destinations. Thus, improvement of the public
transportation system to facilitate wider access to the District and, more
importantly, connecting the suburban business centers is essential for long-term
growth.
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Regional Analysis
================================================================================
Population
This section will examine the population size and age trends for the
metropolitan area. Employment, income, and household related demographics will
be reviewed separately.
According to Market Statistics' 1995 Demographics USA, the Washington,
D.C. MSA ranks fifth in the nation in terms of total population. The Washington
area increased in population by 20.7 percent between 1980 and 1990, or an
average annual rate of 2.1 percent. The rate of growth has slowed somewhat with
the population change between 1990 and 1994 having decreased to 1.4 percent.
Nonetheless, population growth in the region during the 1980s far exceeded the
growth during the 1970s, when the region grew by an average of only 21,000
persons per year. During the 1980s, the region had an average growth of roughly
67,000 persons per year.
Interestingly, however, while there was an overall increase in population,
this increase was by no means uniform within the component jurisdictions of the
Washington MSA. The 1980s saw a shift in population from the inner-city and
close-in suburbs to the more remote suburban areas. The District of Columbia was
the big loser during this period with an average annual decline of 0.5 percent.
The annual rate of decline grew to 1.5 percent by 1994.
In contrast, the inner suburbs had an annual average growth rate of 2.5
percent during the 1980s, with both Fairfax County, Virginia, and Montgomery
County, Maryland having growth rates of 3.7 percent and 3.1 percent,
respectively. Both counties were the main suburban benefactors of commercial
office and retail development for this period and population increases were
primarily concentrated in the outer portions of the counties. The growth in
these areas has decreased in the 1990s to an annual growth rate of 1.8 percent.
The largest population increases occurred in the outer suburbs, the areas
beyond the first tier communities surrounding the District. The average annual
rate of increase in these areas was 4.4 percent. However, the rate of increase
has fallen off since 1990 to 3.2 percent, a phenomena concurrent with the slow
down in the economy. The chart on the next page presents population data and the
average growth rates for the various jurisdictions in the MSA:
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Regional Analysis
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================================================================================
Population Changes
1990 Census Estimates Versus 1980 Census
================================================================================
Annual Average
Jurisdiction Population (Thousands) Growth Rate (%)
========================================================
1980 1990 1994 Est 1980-1990 1990-1994
Est
================================================================================
District of Columbia 638.3 606.9 570.2 -0.4919 -2.0157
- --------------------------------------------------------------------------------
Arlington County 152.6 170.9 171.4 1.1992 0.0975
- --------------------------------------------------------------------------------
City of Alexandria 103.2 111.2 114.3 0.7752 0.9293
================================================================================
Central Jurisdictions 894.1 889 855.9 -0.0570 -1.2411
================================================================================
Fairfax County 596.9 818.6 910.1 3.7142 3.7259
- --------------------------------------------------------------------------------
City of Fairfax 19.4 19.6 19.6 0.1031 0.0000
- --------------------------------------------------------------------------------
City of Falls Church 9.5 9.6 9.6 0.1053 0.0000
- --------------------------------------------------------------------------------
Montgomery County 579.1 757 797.4 3.0720 1.7790
- --------------------------------------------------------------------------------
Prince George's County 665.1 729.3 764.7 0.9653 1.6180
================================================================================
Inner Suburban Area 1870 2334.1 2501.4 2.4818 2.3892
================================================================================
Loudoun County 57.4 86.1 96.1 5.0000 3.8715
- --------------------------------------------------------------------------------
Prince William County 144.7 215.7 246.3 4.9067 4.7288
- --------------------------------------------------------------------------------
Cities of Manassas/ 22 34.7 40.6 5.7727 5.6676
Manassas Park
- --------------------------------------------------------------------------------
Frederick County 114.8 150.2 164.2 3.0836 3.1070
- --------------------------------------------------------------------------------
Calvert County 34.6 51.4 60 4.8555 5.5772
- --------------------------------------------------------------------------------
Charles County 72.7 101.2 109.7 3.9202 2.7997
- --------------------------------------------------------------------------------
Stafford County 40.5 61.2 74.2 5.1111 7.0806
================================================================================
Outer Suburban Area 486.7 700.5 791.1 4.3929 4.3112
================================================================================
METRO AREA TOTAL 3250.8 3923.6 4148.4 2.0696 1.9098
================================================================================
Source: U.S. Census Data and 1994 Estimate Provided By Equifax National Decision
Systems, Inc.
Note: The list of municipalities corresponds to the DC-VA-MD MSA prior to the
December 31, 1992 expansion.
We noted earlier that the District of Columbia actually lost population
over the past ten years while the suburban areas actually grew. It is important
to note, however, that this phenomenon is being seen in most major metropolitan
areas in the United States. Nevertheless, in relative terms, the population
decreases in Washington, D.C. versus population increases in suburban areas are
significantly less than that seen in other parts of the country, thus attesting
to the continuing strength and viability, albeit somewhat lessened given the
more recent recessionary trends, of the metropolitan area's inner city.
Age Distribution
As can be seen in the following chart, the percentage of the region's
infant and elderly populations increased between 1980 and 1990. Interestingly,
however, the number of working aged residents increased the most in absolute
numbers. The number of youths and teenagers shrank. The table on the following
page displays the data.
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Regional Analysis
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=========================================================================
Population Trends By Age
(Council of Governments Members)
=========================================================================
1980 1990 % Change
=========================================================================
0 to 4 Years 192,372 262,578 +36.5%
-------------------------------------------------------------------------
5 to 17 Years 636,733 585,949 -7.2%
-------------------------------------------------------------------------
18 to 64 Years 2,020,989 2,509,056 + 24.1%
-------------------------------------------------------------------------
Over 65 Years 235,875 317,538 +34.6%
=========================================================================
Source: 1980 and 1990 Census Data; Metropolitan Washington Council of
Govemments: Where We Live: Housing and Household Characteristics in the
Washington Metropolitan Region, April, 1993.
The District of Columbia was the only major jurisdiction to lose working
age adults (down 1.9 percent). The largest gains among working age adults were
in the inner suburbs of Montgomery and Prince George's County in Maryland and
Arlington, Fairfax, and Loudoun Counties in Virginia. The increases in the
elderly population were spread across all municipalities.
As of the 1990 Census, the population was distributed with 21 percent
under 30 years, 39 percent between the ages of 30 and 49 years, and 12 percent
between 50 and 64 years of age. These are the key working age groupings.
Employment and The Economy
The employment picture has a very significant effect on the demand for
real estate. High unemployment rates and business downsizing, for example,
reduce the number of households able to buy homes. Similarly, a growth economy
creates increasing demand for goods and services. This section will review the
recent trends and the outlook for employment in the Washington, D.C. region.
Employment Characteristics
The table on the next page shows the area's total employment as a percent
of total employment for each industry group for the past eight years, and the
year-to-year growth rates in total employment.
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Regional Analysis
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<TABLE>
<CAPTION>
==================================================================================================================
Non-Agricultural Employment
Percent Share of Total Employment (%)
==================================================================================================================
Industry 1988 1989 1990 1991 1992 1993 1994 1995 Annual
(Dec) Growth %
==================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Manufacturing 4.1 4.0 3.9 3.8 3.6 4.0 3.9 4.9 2.4
- ------------------------------------------------------------------------------------------------------------------
Construction 6.6 6.6 6.0 4.8 4.4 4.4 4.8 4.0 -4.9
- ------------------------------------------------------------------------------------------------------------------
T.C.U. (1) 4.9 4.9 4.8 4.8 4.7 4.5 4.6 4.5 -1.0
- ------------------------------------------------------------------------------------------------------------------
Wholesale Trade 3.6 3.5 3.5 3.4 3.3 3.3 3.3 3.2 -1.4
- ------------------------------------------------------------------------------------------------------------------
Retail Trade 16.2 16.1 15.9 15.6 15.4 15.6 15.7 16.6 0.3
- ------------------------------------------------------------------------------------------------------------------
F.I.R.E. (2) 5.9 5.8 5.9 5.9 5.8 5.7 5.9 5.5 -0.8
- ------------------------------------------------------------------------------------------------------------------
Services 32.4 33.0 33.7 34.3 34.9 35.1 35.4 36.3 1.5
- ------------------------------------------------------------------------------------------------------------------
State Government 3.7 3.6 3.6 3.6 3.6 3.7 3.6 3.4 -1.0
- ------------------------------------------------------------------------------------------------------------------
Local Government 6.0 6.1 6.4 6.7 6.7 6.9 6.9 7.3 2.7
- ------------------------------------------------------------------------------------------------------------------
Federal Government 16.6 16.4 16.3 17.1 17.5 16.8 15.9 14.4 -1.7
==================================================================================================================
Total Employment 2,167.2 2,226.7 2,242.6 2,190.5 2,186.8 2,317.1 2,373.1 2,425.2 1.5
(Thousands)
==================================================================================================================
Yr-to-Yr Growth (%) N/A + 2.7 + 0.7 -2.3 -0.2 + 5.6 + 2.4 + 2.2 N/A
==================================================================================================================
</TABLE>
(1) Transportation, Communications, Utilities
(2) Finance, Insurance, Real Estate
Source: U.S. Department of Labor, Bureau of Labor Statistics, Wage and
Salary Employment, 1988-1993; Obtained From the District of
Columbia Department of Employment Services
The region enjoyed a period of unusual growth during the 1980s. The peak
year for job growth in the region was 1984, when growth reached 107,000 jobs.
The growth fell to 100,000 in 1985, and to 82,000 jobs in 1986. From 1986 to
1988, job growth settled at around 80,000 to 90,000 jobs per year, or in the
four percent range. Job growth dropped to 59,500 jobs (2.9 percent) in 1989, and
declined by another two percent to only 15,900 jobs in 1990. By this time, the
economy was being affected by the national recession with the area's total
employment declining by 52, 100 jobs (minus 2.3 percent) in 1991 and remaining
relatively flat in 1992. From 1992 to 1993, however, the area experienced 5.6
percent growth. This growth was found in the suburban areas as opposed to the
District of Columbia and was evenly distributed through all industry types. The
average growth rate for the 1988 to 1995 period reflects a 1.5 percent per
year average.
During 1994, employment in Northern Virginia grew by a strong 3.5 percent
but in the Maryland suburbs, the figure was only 2.1 percent while for the
District of Columbia it was less than 1 percent. Job growth in the region fell
below the average for the nation of 2.5 percent.
Although the federal government has historically been the major employer
in the region, its share of employment has remained around 15 to 17 percent. The
aggregate federal employment grew at an average annual rate of 1.7 percent
between 1988 and 1995 and was 14.4 percent of total civilian employment in 1995.
The most dramatic change in employment in the Washington area has been in
the private sector, particularly the emergence of the service industry as the
fastest growing and now largest employment opportunity. In 1960, the services
industry employed 18
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Regional Analysis
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percent of all non-agricultural workers and has grown to 36.3 percent by 1995.
Retail and wholesale trades have maintained a steady portion of total
employment, thus indicating that employment in these sectors expands and
contracts with the economy.
Construction employment fell dramatically in 1991. The construction boom
of the late 1980s came to an abrupt halt by late 1990, and the percent share
of employment held by the construction sector fell from 6.6 percent in 1988 and
1989 to 4.0 percent in 1995. The average annual rate of decline over the period
was 4.9 percent.
We noted earlier a growing diversification of the area's employment base.
The following list of major employers in the Washington area reflects the
growing diversity of the local economy, the continuing influence of educational
institutions, and the emergence of service-oriented firms.
===========================================================
Largest Private Employers
Ranked by Total Employees in Metro Area
===========================================================
Metro Area
Rank Company Name Employees
===========================================================
1 Inova Health Systems 9,500
-----------------------------------------------------------
2 Hechts 8,000
-----------------------------------------------------------
3 Medlantic Healthcare Group 6,000
-----------------------------------------------------------
4 Long & Foster Real Estate 5,300
-----------------------------------------------------------
5 Shoppers Food Warehouse 3,800
-----------------------------------------------------------
6 Booz Allen & Hamilton 3,100
-----------------------------------------------------------
7 Dyncorp 3,000
-----------------------------------------------------------
8 Holy Cross Hospital 2,300
-----------------------------------------------------------
9 Providence Hospital 2,000
-----------------------------------------------------------
10 Alexandria Hospital 1,742
===========================================================
Source: Washington Business Journal, November 17-23, 1995
If the federal government were included in the above list, the Department
of Defense would be the largest local employer, with over 86,000 employees. The
next closest is the Department of Health and Human Services with over 30,000
employees. The Treasury, Justice, Postal Service, and Commerce Departments all
have over 20,000 employees, and are larger individual employers than any other
local private firm.
The local governments are also major employers in the region. For example,
the City of Alexandria had over 5,100 employees between the city government,
Alexandria Hospital, and the public school system. Arlington, Fairfax, and
Loudoun Counties have, respectively, over 6,800, 25,500, and 3,900 employees for
the same functions. Montgomery County and Prince George's Counties are similarly
large local employers.
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Regional Analysis
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Unemployment Rates
According to the Census reports, the Washington region has one of the
highest labor force participation rates in the country, with more than 75
percent of the population between the ages of 16 and 65 being part of the labor
pool. This is ten percent higher than the national average.
For most of the 1980s, the demand for workers was increasing at a faster
rate than the number of workers in the area, causing a labor shortage. The 1991
through 1993 recession, however, halted job growth in the area and drove up
unemployment rates. The related statistics are summarized below.
================================================================================
Unemployment Rates
================================================================================
Year 1988 1989 1990 1991 1992 1993 1994 1995
(Nov)
================================================================================
Washington 2.9% 2.7% 3.4% 4.5% 5.0% 4.5% 4.1% 3.9%
MSA
- --------------------------------------------------------------------------------
United 5.5% 5.3% 5.5% 6.7% 7.4% 6.8% 6.1% 5.3%
States
================================================================================
Source: Metropolitan Council of Governments: Economic Trends in Metropolitan
Washington, 1988-1991 (The unemployment rates are not seasonally
adjusted.) Updated figures including 1992 through year-to-date 1995
obtained from the District of Columbia Department of Employment Services.
The outlook for employment in the region continues to be strong despite
the recent recession. Obviously, federal and local government employment is a
major contributor to the region's stability. Most of the swings in employment
have been experienced in the construction trades and retail employment. These
last two sectors are expected to remain soft for the next few years with slow
gains made as the economy stabilizes and demand for new housing and commercial
construction increases.
Employment Outlook
The Greater Washington Research Center reported that growth in the
Washington area economy finally returned during the latter part of 1993 after
staggering through the previous six years. In early 1994, most of the nine
indicators that the research group uses to track the health of the economy and
to predict its direction were up, the only exception being the employment index
which showed the number of jobs increasing at a pace somewhat slower than the
seasonal norm. On the positive side, however, the number of jobs increased by
the largest margin since mid-1993. Job gains in the private sector seem to be
leading those in the government.
The indicators utilized by the Research Center seem to suggest that the
economy is continuing to gain strength. However, the level of improvement still
falls short of generating the number of jobs the Washington area produced during
the boom of the 1980s. The number of jobs in the area increased by 18,900 in
March but the total number of jobs so far this year is still short of
pre-recession peak employment.
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Regional Analysis
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Job gains have been concentrated in the government and service sector,
with employment in retailing and construction still relatively depressed. The
new jobs numbers may be understated because they don't include self-employment.
In addition to employment, other guideposts to the state of the region's
economic health - airport boardings, classified advertising lineage and the
national consumer confidence index - all improved in 1994.
Even though the recovery in the Washington area may be slow, the region is
strong economically. The office vacancy rate in the Washington area is below
that in most metropolitan areas and unemployment is lower than the national
average. The indicators that the Greater Washington Research Center uses to
forecast economic growth six to nine months from now were up as well, albeit
less strongly.
Increases in the sales of durable goods, in the number of business
telephone lines installed, in housing sales, in the Johnston, Lemon Index of
local stocks and in the national leading index, produced a modest gain of 0.09
percent in March.
Overall, the region's 1993 performance was described as a year of recovery
as evidenced by the net increase in wage and salary jobs, with the services and
government sectors adding the most positions. For 1994, we witnessed further
employment gains for the region and a strengthening economy, as the recovery
broadened and deepened. However, there is concern among area economists that
1995 results will lag 1994 due to the effect of higher interest rates.
Household Demographics
One of the more important demographic factors influencing the demand for
goods and services is the household. The household is the basic consuming unit
in the housing market. It is defined by the U.S. Census as a person or group of
people who jointly occupy a dwelling unit and who constitute a single economic
unit for the purposes of meeting housing expenses. The household unit can be a
family, two or more individuals living together, or a single person.
The historical household growth patterns help define the region and are
shown in the following table. The forecasts were published by Equifax National
Decision Systems and were tabulated for them by an econometric modeling service
associated with a major university.
The figures show that the number of households in the region grew at an
average annual rate of 2.4 percent during the 1980s. The rate has slowed to
about 2.1 percent per year for 1990 through 1994, and is projected to slow to
about 1.5 percent for the next five years. As with the population figures
presented earlier, household formation has become negative in the District of
Columbia. However, the inner suburbs have showed continued growth with the
strongest counties being Fairfax and Prince George's. The outer suburbs had the
strongest 1980s and early 1990s growth rates, but are projected to slow to an
average annual rate of 2.6 percent.
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Regional Analysis
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<TABLE>
<CAPTION>
==============================================================================================
Household Changes
1990 Census Estimates Versus 1980 Census
==============================================================================================
Households Annual Average
Jurisdiction (Thousands) Growth Rate (%)
=====================================================================
1980 1990 1994 1999 1980- 1990- 1993-1999
Est. Fcst 1990 1994 Est. Fcst
==============================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
District of Columbia 253.1 249.6 240.8 231.1 -0.1 -0.9 -0.8
- ----------------------------------------------------------------------------------------------
Arlington County 71.6 78.5 79.2 80.0 1.0 0.2 0.2
- ----------------------------------------------------------------------------------------------
City of Alexandria 49.0 53.3 56.1 58.2 0.9 1.3 0.7
==============================================================================================
Central Jurisdictions 373.7 381.4 376.1 369.3 0.2 -0.3 -0.4
==============================================================================================
Fairfax County 205.2 292.3 331.3 373.7 4.3 3.3 2.6
- ----------------------------------------------------------------------------------------------
City of Fairfax 6.9 7.4 7.8 8.1 0.7 1.4 0.8
- ----------------------------------------------------------------------------------------------
City of Falls Church 4.3 4.2 4.3 4.4 -0.2 0.6 0.5
- ----------------------------------------------------------------------------------------------
Montgomery County 207.2 282.2 304.6 326.5 3.6 2.0 1.4
- ----------------------------------------------------------------------------------------------
Prince George's Cnty 224.8 258.0 281.7 308.1 1.5 2.3 1.9
==============================================================================================
Inner Suburban Area 648.4 844.1 929.7 1,020.8 3.0 2.5 2.0
==============================================================================================
Loudoun County 18.7 30.5 35.3 39.1 6.3 3.9 2.2
- ----------------------------------------------------------------------------------------------
Prince William Cnty 43.8 69.7 81.7 93.8 5.9 4.3 2.9
- ----------------------------------------------------------------------------------------------
Cities of Manassas/ 6.9 11.7 14.3 17.0 7.0 5.6 3.8
Manassas Park
- ----------------------------------------------------------------------------------------------
Frederick County 37.5 52.6 59.8 66.0 4.0 3.4 2.1
- ----------------------------------------------------------------------------------------------
Calvert County 10.7 17.0 20.6 23.4 5.9 5.3 2.7
- ----------------------------------------------------------------------------------------------
Charles County 21.4 32.9 37.6 42.0 5.4 3.6 2.3
- ----------------------------------------------------------------------------------------------
Stafford County 12.2 19.4 24.3 27.9 5.9 6.3 2.0
==============================================================================================
Outer Suburban Area 151.2 233.8 273.6 309.2 5.5 4.3 2.6
==============================================================================================
REGION TOTAL 1173.3 1459.3 1579.4 1699.3 2.4 2.1 1.5
==============================================================================================
</TABLE>
Source: U.S. Census Data Provided By National Decision Systems, Inc.
Note: The list of municipalities corresponds to the DC-VA-MD MSA prior
to the December 31, 1992 expansion.
The key items relating to Household (HH) Income and Statistics relating to
persons per dwelling unit (DU) are summarized below.
<TABLE>
<CAPTION>
=========================================================================================================
Selected Household Demographics for the Metropolitan Area
=========================================================================================================
Category 1990 1995 2000 % Change % Change
Estimate Forecast 1990-1995 1995-2000
=========================================================================================================
<S> <C> <C> <C> <C> <C>
Average HH Income $55,693 $67,747 $89,806 21.6% 32.6%
Median HH Income $46,196 $55,684 $68,889 20.5% 23.7%
=========================================================================================================
Population by HH % Family HH 81.1% % Non- 16.4%
Type(1990) Family HH
=========================================================================================================
No. Of Persons One Two Three Four Five or More
=========================================================================================================
Persons Per DU 24.9% 30.8% 18.5% 15.3% 10.5%
(% of Total)
=========================================================================================================
Characteristics: Single Male Single Married Other Family Non-Family
Female Couple Head Head
=========================================================================================================
HH Type (% of Total) 10.5% 14.4% 51.7% 15.4% 8.0%
=========================================================================================================
</TABLE>
Source: U.S. Census Data and Projections Provided by Equifax National Decision
Systems, Inc.
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Regional Analysis
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Since 1980 there has been a drop in household size and, correspondingly, a
growth in the number of non-family households. Married couples continue to
represent over 50 percent of the total households. Single person households grew
at an annual rate of 2.5 percent and non-family households grew at an annual
rate of 6.1 percent during the last decade while single parent households grew
at an annual rate of 3.0 percent during the 1980s. The growth in the single
person and non-family household categories of households contributes to housing
demand, which generates demand across the economy.
Another important issue affecting the demand for real estate is household
income. The following table shows the percent distribution of income within the
different jurisdictions.
<TABLE>
<CAPTION>
=========================================================================================
1994 Percent Distribution of Household Income
=========================================================================================
Jurisdiction Less Than $25- $35- $50- Over No. Of
$25K 34.9K 49.91K 74.9K $75K Household
=========================================================================================
<S> <C> <C> <C> <C> <C> <C>
District of Columbia 33.4 13.3 15.6 16.5 21.2 240,777
- -----------------------------------------------------------------------------------------
Arlington County 17.0 11.2 17.2 22.3 32.3 79,254
- -----------------------------------------------------------------------------------------
City of Alexandria 17.4 13.4 21.0 22.0 26.3 56,113
=========================================================================================
Central Jurisdictions 27.9 12.8 16.7 18.4 24.2 378,144
=========================================================================================
Fairfax County 8.5 6.6 12.5 26.2 46.1 331,334
- -----------------------------------------------------------------------------------------
City of Fairfax 13.4 10.2 15.3 30.7 30.4 7,775
- -----------------------------------------------------------------------------------------
City of Falls Church 15.5 8.7 15.0 23.8 37.0 4,284
- -----------------------------------------------------------------------------------------
Montgomery 13.0 8.7 14.6 22.8 40.9 304,627
- -----------------------------------------------------------------------------------------
Prince George's 18.2 13.2 20.0 26.4 22.6 281,732
=========================================================================================
Inner Suburban Area 12.9 9.3 15.5 25.2 37.1 929,752
=========================================================================================
Loudoun County 10.8 8.0 17.0 32.6 31.5 35,267
- -----------------------------------------------------------------------------------------
Prince William County 10.4 9.2 19.8 33.6 27.1 81,669
- -----------------------------------------------------------------------------------------
Cities of Manassas/ 27.5 28.4 53.3 57.4 33.5 14,340
Manassas Park
- -----------------------------------------------------------------------------------------
Frederick County 20.4 13.0 22.6 26.6 17.4 59,763
- -----------------------------------------------------------------------------------------
Calvert County 15.7 10.5 18.4 29.3 26.2 20,596
- -----------------------------------------------------------------------------------------
Charles County 17.0 9.9 20.1 28.5 24.4 37,600
- -----------------------------------------------------------------------------------------
Stafford County 15.1 11.4 22.3 29.7 21.5 24,312
=========================================================================================
Outer Suburban Area 15.3 11.0 20.0 30.8 22.9 273,547
=========================================================================================
Totals 16.8 10.5 16.1 24.7 31.9 1,581,443
=========================================================================================
</TABLE>
Source: Equifax National Decision Systems, Inc.
The metropolitan area as a whole shows a heavy distribution of households
with incomes on the high end of the range. Over 55 percent of the households
have an annual income over $50,000 per year and the highest grouping is those at
$75,000 per year or higher (31.9 percent).
This relationship is not true of the central jurisdictions and the outer
suburban areas where the highest concentration of households is in the $50,000
to $75,000 per year range. The inner
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Regional Analysis
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suburban areas, however have an overwhelming percentage of households - 37.1
percent in the over $75,000 per year range.
Summary
The long-term outlook for the metropolitan Washington area continues to be
good. The expanding population of the area indicates an increase in demand for
goods and services. The trend toward smaller household sizes provides additional
demand pressures for new housing. The major factors affecting real property
values are sound, and future trends appear to point toward continued economic
vitality for the region.
In the short term, the region has experienced the effects of the recent
recession. Total employment in the region declined during the recent recession.
However, unemployment levels were moderated by the influence of federal and
local government employment and contracts for services. The Washington region
continues to have one of the lowest unemployment levels in the United States.
Overall, we believe that 1995 will be a period of slow growth and steady
improvement in the underlying factors affecting the real estate markets. More
importantly, we do not anticipate any further downturn in the local economy on
the scale of what has occurred in other regions of the country. Many local
economists and developers are signaling their belief that the real estate market
is strengthening.
Real estate values are volatile in this climate, with some property values
on the increase while other areas remain stable. For the short-term, we expect
that real estate values will show improvement in value in certain sectors. For
the long-term, the market appears to be sound, with strong demographics and
reasonable prospects for increasing values in the future.
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NEIGHBORHOOD ANALYSIS
================================================================================
Area Definition
The subject property is located on the north side of Campus Commons Drive
in Reston, Virginia within the 34 acre Campus Commons Corporate Park. Reston is
located in northwest Fairfax County approximately fifteen miles west of
Washington, D.C.. The town is located west of Interstate 495 (The Capital
Beltway), which is an area considered "outside the beltway". Tysons Corner,
which is often referred to as Fairfax County's Central Business District, is
located approximately four miles west of the subject.
Reston is a self-contained community of 57,000 residents in western
Fairfax County. It is one of the HUD sponsored "new communities" of the 1960s
and was developed by Robert E. Simon, a visionary developer from New England who
gave the town its name (RES -his initials- ton). The concept of Reston is to
have a fully functioning city rather than just a suburban aggregation of homes
surrounding a shopping center. The master plan for Reston envisions a community
of 62,000 residents, 3,000 businesses employing some 50,000 people, 20 million
square feet of office space and 20,000 housing units. The community is built
around five village centers: Lake Anne, Hunters Woods, Tall Oaks, South Lakes
and North Point. All development in Reston should be completed by the late-1
990s.
Compared with other cities of its population size, Reston would be on a
par with Casper Wyoming, Enid Oklahoma, Grand Forks North Dakota and similar
small cities. However, if the commercial base of Reston is compared with other
cities, it ranks ahead of such cities as Richmond, Cincinatti, Cleveland,
Memphis, Nashville, Milwaukee, Tampa, Albany, Buffalo and other similar
second-tier cities. Ironically, Reston is the second largest business center in
Virginia, second only to Tysons Corner.
Perhaps the two greatest contributing factors to the success of Reston are
its master plan, providing a balanced mixture of residential and commercial uses
in a self-contained city, and the ownership -first Gulf Oil then Mobil Oil-
which has had the financial strength to stay the course of the master plan.
Reston has become a key population center within Fairfax County. In 1970,
when the community was just beginning to be settled, there were less than 6,000
residents. As of 1992, Reston's population has escalated to over 54,000. When
fully developed by the year 2000, its projected population will be approximately
62,000 persons or abovt 8 percent of the Fairfax County's population. Between
1970 an 1986, the number of households in Reston increased at an average rate
of 15 percent per year. However, from 1986 to 1993, the rate of growth slowed.
There are now 18,570 single-family homes, townhouses and condominiums and 3,700
rental apartments.
There are a wide variety of social, educational and recreational amenities
in Reston which help make it an attractive place to live. Recreational
facilities include sixteen public and six private swimming pools, 46 public and
11 private tennis courts, two golf courses, 42 ball fields, an indoor tennis
and racquet ball club, a roller skating rink, a 32-lane bowling center, a
private country club, 970 acres of open space, four lakes, five miles of bridle
paths, fifty miles of walkways and bike paths and a community center with a
theater and banquet and meeting rooms. Public schools include seven elementary,
two intermediate
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and two high schools. Reston also features an 11-screen cinema, two hotels,
night clubs, three libraries and 30 restaurants, an acute-care hospital,
satellite governmental center and over 25 churches and synagogues.
Reston is an established employment center in Fairfax County. The number
of businesses in Reston has increased on average by 15 to 20 percent per year.
This impressive growth is being lead by high technology companies, such as
Advanced Technology, AT&T, US Sprint, MCI, Compucare, Rolls-Royce, Molson
Breweries USA, Inc., Ford Aerospace, NASA Space Station project, UNISYS,
General Electric, GTE, Tandem Computers, Inc., Software AG, and XMCO, to name
only a few. As of today, Reston is a mature community with over 2,100
businesses.
The Reston Town Center forms the urban core of the community. It is a
designated 460-acre district which was identified in Reston's original master
plan. It currently contains a library, child-care facility, hospital, satellite
governmental center, professional offices, retail shopping, restaurants and a
515-room Hyatt Regency hotel. It is located approximately two blocks north of
the Dulles Toll Road (Reston Parkway exit) and extends from the Toll Road, north
to Baron Cameron Avenue. Its east and west boundaries are Reston Parkway on the
east and Fairfax County Parkway on the west. The center will contain several
internal roadways forming a grid pattern and ultimate development will include
2.15 million square feet of office uses, 315,000 square feet of retail uses,
1,200 hotel rooms and 600 housing units.
The Reston area is easily accessible via the Dulles Toll Road which
provides three interchanges in the local; Hunter Mill Road, Wiehle Avenue and
Reston Avenue. Reston is now a 20-minute drive from downtown Washington via the
Dulles Toll Road and I-66. The Dulles Toll Road also provides quick access to
the Capital Beltway (I-495). Additional transportation corridors are provided by
Leesburg Pike (Route 7), Hunter Mill Road (Route 674) and Reston Avenue (Route
602).
Major north/south highways include State Route 28. The Virginia Department
of Highways and Transportation recently expanded Route 28 into a six-lane
highway connecting I-66 on the south with Route 7 on the north. The major
east/west highways include U.S. Route 50, I-66 and the Dulles Access/Toll Road.
Route 50 provides a direct link with I-66 which allows easy access to downtown
Washington, D.C. Sunset Hills Road and Sunrise Valley Drive parallel the Dulles
Toll Road and are the major east/west routes for local traffic.
A light rail system has been proposed for additional transportation along
the Reston/Herndon corridor. Under the proposed plan, MetroRail or an
alternative light rail system would be constructed connecting the existing West
Falls Church Metro Station, which is just south of Tysons Corner, to Dulles
International Airport with several stops in between. This proposition has won
considerable private and public support. However, official planning has not even
begun and completion of any such system would be years away.
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Surface transportation has been a major focus, however. During the 1980s,
western Fairfax and eastern Loudon County experienced an extraordinary amount of
road construction in reaction to and in anticipation of explosive growth in
residential, office, and flex industrial space in this part of the metropolitan
area. A summary of the transportation improvements affecting the Reston area are
as follows:
The Dulles Toll Road is a newly constructed commuter road to Leesburg
(Route 15), past Dulles Airport and was opened in October, 1995. Known
as the Dulles Greenway, the extension is the county's first privately
financed new road development project. The Virginia Department of
Transportation (VDOT) approved a plan to allow privately funded
development of a twelve-mile extension of the Dulles Access and Toll Road
and construction on the project began in September 1993. Ten institutional
lenders, including Cigna Investments, John Hancock, and Prudential Power
Funding Associates, have committed $285 million, while Barclay's,
Nationsbank, and Deutsche Bank have established $40 million of revolving
credit. The extension is expected to open up new employment and
residential corridors in Loudoun County all the way to Leesburg, Virginia.
Work in widening the existing portion of the Dulles Toll Road from four-
to six lanes was completed in early 1993 and now one lane in each
direction is dedicated to HOV-3 (3 passenger minimum) car pools.
Route 28 Masterplanned as a six- to eight-lane, north/south artery.
Construction has been completed to widen Route 28 to six lanes between
I-66 on the south and Route 7 on the north.
Route 28 Highway Transportation Improvement District (HTID) Loudoun and
Fairfax Counties have successfully joined forces to fund the Route 28 HTID
by way of $160 million, 30-year revenue bond financing issued by the
Virginia Commonwealth Transportation board in August, 1988. Eighty-percent
of the financing costs will be paid by an additional $0.20 surcharge per
$100 assessed value real estate tax on commercial property in the Route
HTID. The remaining twenty-percent of the cost will be paid out of
Virginia highway construction funds. Initial phase improvements of the
HTID included widening Route 28 to a six-lane divided highway between I-66
on the south and Route 7 on the north, and completing grade separated
interchanges at Route 50, the Dulles Access Road and Route 7. Future phase
improvements will include grade separated interchanges at all major
crossings, including Route 606, Sterling Boulevard, Route 625 and Route
647 in eastern Loudoun County.
Route 606 (Old Ox Road) is a four-lane divided roadway which will be
widened to a six-lane divided roadway west to Route 28. Specific
construction plans are still under review by VDOT.
Route 636 (Shaw Road) is a two-lane roadway masterplanned to be a
four-lane undivided roadway.
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In addition, construction of the Fairfax County Parkway (formerly known as
the Springfield Bypass) is nearly complete and currently connects Interstate 66
at the Fair Lakes development by Hazel/Peterson to the Dulles Toll Road at the
north. When completed, the Fairfax County Parkway will connect Route 7 on the
north in Loudoun County to Fair Oaks, Fairfax City, Burke, and Springfield to
the south. Construction of the Parkway is being completed in Reston and an
interchange is located at the Dulles Access Road just west of the U.S.
Geological Survey building and about one half mile west of Reston Parkway.
On December 11, 1989, the Fairfax County Board of Supervisors unanimously
approved a zoning amendment to downzone approximately 13,500 acres of
commercially- and industrially-zoned land, effective December 12, 1989, within
the County. The changes mostly affect the C-3 through C-8 and 1-1 through 1-6
districts. The changes reduce the permitted floor area ratio (FAR) in these
districts by as much as 50 percent and reduce permitted building heights. In
addition, the construction of offices within the Industrial Districts, once
permitted by right, will now require a special exception.
Over 269 lawsuits were promptly filed against Fairfax County, challenging
the downzoning, prior to the January 10, 1990, deadline for appeals. In
addition, on March 2, 1990, the Virginia General Assembly passed Senate Bill No.
170 which, in relevant parts, prohibits downzoning of the Route 28 Taxing
District properties after December 1, 1987. The Governor approved the Bill which
took effect July 1, 1990. On October 10, 1990, Circuit Judge William G. Plummer
ruled that the Board of Supervisors violated landowners' rights of due process
because it did not follow procedures mandated by Virginia law. Subsequently, the
State Supreme Court overturned Judge Plummer's ruling so the downzoning stands.
Notwithstanding, the December, 1989 zoning amendment contains certain
grandfather provisions, which among others, exempted properties which had site
plans filed on or before September 18, 1989, and which are approved within 24
months, as well as properties with proffered rezoning applications approved on
or before December 12, 1989.
The presumable effect of the downzoning could be to enhance the value of
grandfathered properties, while reducing the value of non-grandfathered parcels.
The action could also result in increased costs of development, since the County
would allow special exceptions if the property owner agreed to exactions,
thereby "proffering back into" the pre-December downzoning. Because of the
downturn in the office market, however, it remains to be seen if that actually
occurs. Reston should be less affected than most areas because much of the area
is zoned as a planned community, with development subject to site plan approval,
and because most of Reston's commercial land, other than the Town Center Urban
Core, is already built out.
In summary, the Reston community contains a variety of well planned land
uses which create a viable, well-balanced community. During the decade of the
1980s, the greater western Fairfax/eastern Loudoun County area experienced a
strong growth from many who were looking for a "country" atmosphere or just for
lower housing costs. From mid-1990 until recently, development in Reston was
non-existent. Many buildings
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constructed prior to the start of the recession stood vacant for a number of
years. In 1995, however, there is a renewed interest in the area which has put
Reston near the top of the list of growth markets. The Reston Town Center has
been the focal point of this extraordinary growth during a period of overall
retrenchment. We believe this is because of the amenities offered, the
well-balanced mixture of land uses, and the commitment to quality shown by
Reston Land Corporation and its related companies responsible for the
development of Reston.
Reston is located 15 to 20 miles west of Washington, D.C. and 7 miles
east of Washington's Dulles International Airport. It enjoys a combination of
social, economic and cultural advantages which combine to make Reston a
resort-like environment in which to work and live. Reston has achieved a
critical mass of population, employment and recreation to help support a
self-perpetuating growth even in the face of an economic downturn as we are
experiencing now. We believe Reston will continue to prosper for the foreseeable
future, out-pacing the rest of Fairfax County and will continue to be a viable
community. Overall, the neighborhood has good demographics and highway access,
and a stable employment base.
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Office Market Analysis
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Investment Market
The investment market in the metropolitan Washington area has been active
as 21 office buildings sold for more than $10 million in 1996 following 25
buildings during 1995. Within Washington, D.C. itself, seven buildings sold for
over $10 million at an average price of $202 per square foot. The composition of
investors in the metropolitan Washington area is largely institutional,
consisting mainly of insurance companies, pension funds and fund advisors. In
addition, the market has seen increased investment activity from offshore
capital sources and individual syndicates.
With a higher concentration of available capital, the metropolitan market
has experienced rising prices on average. For example, most recently, a true
trophy property developed by Copley and Prentiss Properties (1301 K Street) sold
for $306 per square foot. Another similar quality building built by Manulife
(1350 Eye Street) was purchased for almost $350 per square foot. In 1994, the
Government of Singapore Investment Corporation purchased the 242,000-square foot
office building at 901 E Street, NW, for $66 million, or $272 per square foot.
These sales provide evidence that the metropolitan Washington office market
continues to be among the more desirable markets in the nation for institutional
investment.
Metropolitan Office Market
Supply and Demand Factors
In order to report on the state of the office market and to project future
trends, we have collected information on the metropolitan Washington Office
Market, the relevant submarket and the office projects that compete directly
with the subject. Cushman & Wakefield of Washington, D.C., maintains a database
comprised of multi-tenant office buildings of at least 20,000 square feet. The
following categories of buildings are specifically not included in our survey:
medical and professional buildings, government buildings, owner-occupied
projects and office/ showroom/ warehouse complexes. Cushman & Wakefield also
produces a quarterly Office Market Survey entitled Metropolitan Washington, D.C.
Office Market Report. Additional information was obtained through conversations
with knowledgeable market participants.
The metropolitan Washington, D.C. office market includes the following
jurisdictions: the District of Columbia, Arlington and Fairfax Counties and the
City of Alexandria in Northern Virginia and Montgomery and Prince George's
Counties in Suburban Maryland. The market contains over 200 million square feet
of privately owned office space distributed among 31 submarkets within the seven
jurisdictions. The District of Columbia contains 39 percent of the metro area's
total square footage. The following table presents the geographic distribution
of the office inventory in the metropolitan area, along with other statistical
data:
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<TABLE>
<CAPTION>
=========================================================================================================
Geographic Distribution of Inventory
Metropolitan Washington Office Market
First Quarter 1997
=========================================================================================================
Jurisdiction Inventory Overall SF Under Weighted Avg. Y-T-D Net
SF (000) Vacancy Construction Class A Absorption
Rental Rate
=========================================================================================================
<S> <C> <C> <C> <C> <C>
Washington, D.C. 80,523 12.7% 1,983,260 $35.09 55,852
Arlington County 24,995 6.3% 153,000 $26.34 239,351
Alexandria 12,120 5.4% 0 $22.49 1,791
Fairfax County 48,090 6.4% 510,000 $23.15 512.052
Loudoun County 2,355 4.9% 73,500 $17.75 (3,120)
Montgomery County 32,140 10.2% 0 $19.80 512,059
Prince George's County 10,128 18.2% 0 $18.85 73,603
- ---------------------------------------------------------------------------------------------------------
Total 210,350 9.9% 2,033,016 $28.00 1,391,588
=========================================================================================================
</TABLE>
As of the end of 1996, the overall vacancy rate stood at 9.9 percent,
reflecting both direct vacancies and sublet space, continuing a slow recovery
from the end of year 1992 vacancy of 14.7 percent. Although the Washington
region is now and has over the past experienced generally higher overall
occupancies levels than most major metropolitan areas in the United States, the
current statistics, as presented in this section, reflect recent trends which in
general, support only limited optimism for an overall improving market as a
whole. Specifically, the Class A market appears sound, but there are unsettling
currents affecting older buildings throughout the city.
Furthermore, build-to-suit activity on the part of the World Bank and the
International Monetary Fund (IMF) will likely prove problematic over the next
couple of years, particularly in the Class B and C properties in the city's
Central Business District office submarket (submarket boundaries will be defined
later in this section). Also, the issue of government downsizing, both locally
and nationally, cannot be dismissed lightly. The 1994 Congressional election
brought the first change in the control of both Houses of Congress in 40 years.
Thus, it is difficult to reliably predict the upshot. Accordingly, at the very
least, caution is in order as we are traveling uncharted territory. These issues
are discussed in greater detail later in this section.
As noted above, there are positives in the market. We do expect Class A
properties to fair well over the near term. Further, the suburban market,
starting with Northern Virginia, are showing considerable strengthening with
occupancies improving dramatically and rent spikes occurring in most submarkets.
We also see similar trends in portions of suburban Maryland, particularly
Montgomery County. As will be repeatedly indicated in the following discussion,
there appears to be a continuing shortage of Class A office space in all
submarkets throughout the region, but a plethora of Class B and C space, in at
least some areas, namely the District.
The following table presents the historical vacancy, rental rate and
absorption data, showing a steadily declining vacancy rate and a possible
increase in rents:
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<TABLE>
<CAPTION>
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Historical Data
Metropolitan Washington Office Market
1992 - 1996
================================================================================================================
Year Inventory SF (000) Vacancy SF Under Rental Rate Net Absorption SF
Construction
================================================================================================================
<C> <C> <C> <C> <C> <C>
1992 204,427 14.7% 2,301,986 $22.80 2,833,422
1993 205,629 13.5% 874,631 $21.38 3,763,144
1994 206,337 12.7% 2,124,631 $21.44 2,319,175
1995 206,794 12.3% 1,004,272 $21.75 2,642,126
1996 212,389 10.8% 1,878,016 Class A 2,921,573
$27.35
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Annual Averages 1,636,707 2,895,888
================================================================================================================
</TABLE>
The above table presents several important changes: the inventory
increased by the inclusion of Loudoun County in the first quarter 1996; the
square footage under construction jumped dramatically as new build to suits
commenced. As the economy continues to improve, we anticipate a slow return to
development.
Demand for Office Space
As shown above, the overall vacancy has been gradually declining. The
office market is demonstrating improvement, although it varies from market to
market. Northern Virginia and Fairfax County specifically continue to be the
strongest submarkets with low vacancies and strong absorption. In contrast,
Washington, D.C. has demonstrated weak absorption and stable vacancy rates.
Traditionally, the office market's vigorous leasing activity has been
supported by the growth of the white collar employment base. Additionally, one
of the major players in the local market is the federal government (largely the
General Services Administration or GSA) which leases just over 20 percent of the
office space in the metropolitan area. Government leasing has historically
accounted for about 40 percent of gross leasing activity, but dropped to the 25
percent range in 1993 before falling to less than ten percent in 1994 and 1995
and then rising above ten percent in 1996. Furthermore, due to the new political
climate in Washington and continuing efforts to cut the size of the federal
government, future absorption projections are uncertain.
In July 1996, GSA announced that government agencies will be allowed to
control their own leasing using outside third party vendors, if they prefer. It
is too early to tell what effect this will have on overall government leasing,
but the change in the status quo is worth noting.
Government activity notwithstanding, the primary influence on net office
absorption is job formation, in particular, white collar employment. An
historical summary of office type employment is shown in the following table,
encompassing the categories of Government, Finance, Insurance, Real Estate
(FIRE), Transportation, Communications, Utilities (TCU) and Services. The
compound annual growth rate from 1984 to 1994 was 3.0 percent. However, real
growth occurred only in the 1984 to 1989 time frame with 5.0 percent compound
growth rate while there was very modest compounded job growth of 1.6 percent
from 1989 to 1994. In contrast, the future job growth over the next ten years is
expected to be 6.6 percent for the Service sector, 1.3 percent for the Finance,
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insurance & Real Estate sector and 1.4 percent for the Government sector.
Obviously, the projection for growth in the Government sector merits caution as
previously addressed.
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Metropolitan Washington
Office Related Employment
1987-2004
================================================================================
Year Total New Jobs Created Over Net Office
Employment Previous Period Absorption
(000s) (000s) (000s Square Feet)
================================================================================
1987 1,500.6 N/A N/A
1988 1,545.5 44.9 N/A
1989 1,604.3 58.8 N/A
1990 1,639.1 34.8 N/A
1991 1,641.0 1.9 3,317
1992 1,661.0 20.0 2,733
1993 1,686.5 25.5 3,753
1994 1,739.8 53.5 2,319
1995 1,812.6 72.8 2,642
1999 2,155.3 342.7 or 68.5/yr
2004 2,688.6 533.3 or 106.7/yr
================================================================================
Source: The WEFA Group - Regional Economic Service, Spring 1994; Net Absorption
data from C&W
* Service, FIRE, TCU and Government sectors
================================================================================
For the years for which data is available, the table also shows the
historical relationship between job formation and office absorption in the
metropolitan area. Coinciding with the depths of the recession, the 1991 job
growth of only 1,900 jobs corresponded with a healthy absorption of 3.3 million
square feet. We would typically expect lower absorption in years with little job
growth. Possibly the low absorption was due in part to the high level of job
growth in the immediate preceding years.
In the following years, net absorption fluctuated between 2,319,000 to
3,753,000 square feet against a steadily growing job formation trend. Perhaps
having some effect on the data is the national and local pattern of corporate
down-sizing and consolidation, leaving less office space per employee. As one
observer recently put it, "historically, 250 square feet per office employee was
the standard rule-of-thumb ratio. Today, this ratio is working itself down to
160 feet per employee." A recent market example of this trend is AT&T's current
target of 180 square feet of net rentable area per employee, down from 200
square feet a few years ago. Also, the federal government is now targeting less
than 150 feet per employee.
Although the above statistics produce unclear trends, the relationship
between white collar job formation and net office space absorption, while not
always obvious, is a key component of the demand side of the office space
equation. With regular job growth, net absorption will occur and gradually draw
down the supply of vacant office space, albeit probably at a slower pace than
history would suggest.
The number of years' supply of available space is one method of evaluating
the relative health of a market. If one defines market equilibrium to be
occupancy in the 95 percent range,
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then about 5.0 percent of the total inventory needs to be absorbed in order to
achieve equilibrium (or about 10.2 million square feet). This is calculated by
subtracting from the overall vacancy rate the defined 5.0 percent stabilized
vacancy. Assuming a future absorption rate equal to the past five year average
annual net absorption of 2.9 million square feet, an approximate 3.5 year supply
of vacant office space (all classes) is indicated. This issue is discussed in
greater detail once we look at the more distinct Washington, D.C., market versus
the metropolitan area as a whole.
Until recently, an exodus of businesses from the District to the suburbs
compounded the recent downward absorption cycle. The exodus was attributable to
the continuing cost cutting in large regional and national firms which fled the
higher rates of the downtown market. Even so, the overall strength of the
Washington area, based primarily on the influence of the federal government,
should not be ignored. In addition, as occupancies increase and asking rental
rates in the preferred close-in suburbs rose dramatically, the cost spread
between downtown and the suburbs narrowed and seemingly stanched the outflow of
major tenants.
Nevertheless, within the Central Business District Submarket (CBD) of the
downtown office district in Washington, D.C., an ominous cloud threatens
prospective leasing for the next several years. This is particularly true for
Class B and C buildings. As previously alluded to, the World Bank and IMF will
have new headquarters buildings operational by 1997 and 1998. As these and other
related tenants leave their CBD space, most of which is Class B, an additional
1.5 million square feet will become available, just within the next 12 months.
While this is not expected to severely impact Class A buildings, it will
definitely prove problematic for the Class B sector and likely disastrous for
Class C and D buildings, over the short term at least.
In the final analysis, we anticipate a return to equilibrium in the
metropolitan Washington office market only after the turn of the century. We
have defined this equilibrium in terms of occupancy and market rents with
stabilized occupancy in the 95 percent range, and market rents at sufficient
levels to support new construction. We expect the phenomena of free rent and
above standard concessions to generally disappear over the next several years
with market rents and the overall level of economic growth again achieving some
sort of parity prior to the turn of the century. The exception may be the older
Class C and D product, assuming it will rent at all.
Rental Rates
Based on Cushman & Wakefield's survey of market rents, the weighted
average asking rental rate drifted downward from 1991 to 1993 when it appears to
have reversed directions. The following chart demonstrates the trend in overall
rental rates since 1991. Note that Class A rates have been steadily rising as a
result of the shrinking inventory of available space.
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===================================================
Overall Weighted Average Rental Rates
Washington Metropolitan Area Office Market
1991 - 1997
===================================================
Year Class A Rental Overall Rental
Rates per SF Rates Per SF
===================================================
1991 N/A $23.34
1992 N/A $22.80
1993 $21.88 $21.38
1994 $23.25 $21.44
1995 $25.07 $21.75
1996 $27.35 $23.07
1997Q1 $28.00 $23.89
===================================================
Recent rental trends show signs of improvement in many submarkets,
particularly in Northern Virginia. Further, an increasing portion of the
remaining available Class A and B space is commonly referred to as back space,
including inferior back office space with poor or no window lines, encumbered
space, and less desirable configurations. The encumbered space includes Class A
premises that are encumbered by existing tenants through expansion options.
Overall, this back space is less desirable, has lower asking rates, and tends to
be the last areas leased, all of which tends to skew the average asking rents
downward. The reality is that the better Class A space is likely achieving
higher rates than the statistics indicate.
The lack of significant new construction, coupled with positive, albeit
slower absorption, has led to a shortage of large blocks of Class A office space
in the preferred submarkets. The emergence of back space is one indicator of
this trend as is the recently completed speculative building at 1900 K Street in
the CBD and other build to suits in the downtown area. Given the lack of overall
speculative development, coupled with overall positive absorption, we do not
anticipate any further decline in rental rates.
Regarding the issue of rent spikes, we have recently observed above
average rent jumps in some Northern Virginia submarkets and may be seeing the
start of a similar occurrence in portions of Montgomery County, Maryland.
Therefore, we believe real increases in market rental rates are likely over the
next two to three years in selective markets as existing office inventory is
absorbed and before funds for new speculative development become available and
new construction begins. Again, due to the tight supply in some submarkets,
there may be rent spikes for newer space within the next twelve month period.
However, in only some instances has it been clear that investors were willing to
pay for prospective rent spikes.
Land Values
With the decrease in effective rents in the early 1990s, before the
apparent turn-around noted above, land values had been depressed dramatically.
Reportedly, values for downtown commercial land had decreased up to 25 percent
or more since 1990. Secondary parcels have probably dropped even more
precipitously. Nevertheless, we believe that this downward trend in vacant land
prices has stopped and that it will reverse itself in the next few years,
provided the economy continues to improve, the financial institutions resume
lending, and the overall market psychology and investor expectations improve.
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Office Market Analysis
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The most recent office land sale in downtown Washington was a 23,218
square foot site at the southwest corner of 13th and G Streets in the East End
which sold in March 1996 at approximately $76 per FAR foot. Since this sale was
subject to the buyer lining up the lead tenant and obtaining all necessary
approvals, the price is probably higher than a pure speculative purchase would
have been. General market indications point to a range of $40 to $70 for typical
downtown development sites.
Summary of Metropolitan Office Market
Although some submarkets remain soft, the overall vacancy rate continues
to decline, and the remaining available space tends to be less desirable.
Northern Virginia, in particular, is leading the region in net absorption, and
has shown above average increases in rental rates. We believe that over the next
several years, the metropolitan office market should reach a more stabilized
position both from an occupancy and lease rate standpoint. Until equilibrium is
reached, however, overall rental rates for all classes of space will probably
not grow at a compound rate that exceeds the rate of inflation.
In contrast, Class A space has demonstrated strength in the overall
market, absorbing clearly more than its fair share of the total market
absorption. While some Class B product may mirror the growth rates for Class A
space, the majority will most likely only experience marginal growth given the
excessive supply of Class B space compared to the demand for it. Finally, most
Class C and D buildings will have difficulty renting at any rate.
Fairfax County/Reston Submarket
The subject property is located in the Reston/Herndon area of the Fairfax
County submarket of Northern Virginia. According to the First Quarter 1997
Metropolitan Washington, D.C. Office Market Report, published by Cushman and
Wakefield, Northern Virginia has about 87.6 million square feet of privately
owned office space distributed in four large submarkets, stretching from
Arlington to Dulles International Airport. Fairfax County has about 48.1 million
square feet, of which the subject's competitive arena (Reston/Herndon) has 10.0
million square feet. The Reston/Herndon market is the third largest submarket in
Northern Virginia and is the sixth largest submarket in the entire metropolitan
area following closely behind the Crystal City/Pentagon City submarket of
Fairfax County. Reston/Herndon accounts for approximately 20.8 percent of the
Fairfax County market inventory and 11.4 percent of the entire Northern Virginia
market inventory.
Taken as a whole, the Northern Virginia office market exhibited an overall
vacancy rate of 6.2 percent as of the first quarter 1997. This is down from 13.8
percent at end of 1993, 11.2 percent at the end of 1994, 9.2 percent at the end
of 1995 and still decreasing after following 7.5 percent at the end of 1996.
Based on First Quarter 1997 Metropolitian Washington D.C. Office Market Report,
published by Cushman and Wakefield, by submarket within Northern Virginia, the
highest vacancy rates are found in Fairfax County with an overall vacancy rate
of 6.4 percent, though individual submarkets within the county range from 4.8
percent to 15.4 percent. Fairfax County has improved from year-end 1992 when the
vacancy was 21.0 percent and from year-end 1993 when the vacancy was 18.4
percent. The strongest Northern Virginia submarket continues to be the Arlington
County sector, where vacancy rates have been below 10.0 percent since the end of
1992.
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Office Market Analysis
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One of the major factors in the strong 1995 leasing activity is the
Pentagon requirement for approximately 750,000 square feet of swing space over
the next ten years due to a massive renovation of the Pentagon building. The
Defense Department executed three leases in the first quarter of 1995 that
totaled 600,000 square feet in Crystal City, Arlington and Alexandria.
Within Fairfax County, there are six smaller markets:
Springfield/Seven-Corners/Baileys-, Merrifield/Route 50; Fairfax/OaktonNienna;
Tysons Corner/McLean; Reston/Herndon; and Route 28 Corridor/Dulles. Each of
these submarket competes predominantly within its own boundaries. The following
table presents the geographic distribution of the office inventory in Fairfax
County, along with other statistical data.
<TABLE>
<CAPTION>
==========================================================================================================
Geographic Distribution of Inventory
Fairfax County Office Market
First Quarter 1997
==========================================================================================================
Direct Overall Under Y-T-D Net
Submarket Inventory Vacancy Vacancy Construction Absorption
==========================================================================================================
<S> <C> <C> <C> <C> <C>
Springfield/ 7 Corners/ Baileys 3,446,524 14.8% 15.4% 0 42,568
Merrifield/Rt. 50 4,163,635 4.4% 4.8% 150,000 37,290
Fairfax/OaktonNienna 8,705,608 6.2% 6.3% 0 195,130
Tysons Corner/McLean 17,964,680 4.3% 5.2% 0 (71,478)
Reston/Herndon 9,999,213 6.1% 6.7% 0 70,381
Route 28 Corridor/Dulles 3,810,532 4.1% 5.5% 360,000 8,161
==========================================================================================================
Total 48,090,202 5.8% 6.4% 510,000 512,052
==========================================================================================================
</TABLE>
The subject is located within the Reston/Herndon submarket of Fairfax
County. This submarket, with about 10 million square feet of space, had a 6.7
percent vacancy rate in the first quarter of 1997. The rate is down slightly
from an 7.8 vacancy rate in 1996 (year end), 11.8 percent vacancy rate in 1995
14.8 percent in 1994, 18.6 percent in 1993, and a 22.0 percent vacancy rate in
1992. The continued decline in vacancy rates is a source of encouragement, and a
sign of the strengthening market.
================================================================================
Reston/Herdon Historic Market Activity
================================================================================
Year Vacancy Rental Rate Net Absorption SF
================================================================================
1990 22.9% $21.44 N/A
1991 20.1% $18.43 (37,467)
1992 22.0% $14.58 (332,235)
1993 18.6% $14.71 265,722
1994 14.8% $14.53 98,735
1995 11.8% $15.56 482,709
1996 7.8% $18.92 65,807
1 Qtr 1997* 6.7% $20.02 70,381
================================================================================
As shown in the preceding chart, this submarket experienced the strongest
absorption in 1995, the best year since prior to the recession. During 1996, the
market turned sluggish as space availabilities outpaced absorption. The primary
cause was from nearly 100,000 square feet coming on line from the former
Lockheed Martin space at Parkridge 11. This space, coupled with
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Office Market Analysis
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about 101,000 square feet located at the Reston Executive III building and
approximately 50,000 square feet available in the President's Plaza that is
under construction represent the few choices for large space users. Tthe market
appears to be regaining strenth as of first quarter 1997, with positive net
absorption exceeding year-end 1996 totals.
Current Construction Activity
Since the end of 1991, very little new speculative construction has
occurred in Northern Virginia. However, with continued tenant demand for quality
office space and the desire of many tenants to locate to Northern Virginia, the
area is experiencing some speculative development. In the Dulles Corridor
submarket, there are currently two projects slated for speculative development.
One is a- six-story 135,000 square foot building scheduled to break ground in
September of this year. This project is adjacent to BDM's build-to-suit located
at Reston Parkway and Sunset Hills Road, which is also scheduled to start
construction during September. The other is a 160,000 square foot six-story
building located at McLearen Road and Route 28, which will break ground in
August of this year and deliver in September 1998. This will be phase one of a
four phase project developed by the Peter Lawrence Company. The total project
will contain 600,000 square feet. There are no speculative office buildings
currently planned or under construction in the subject's submarket.
Rental Rate Trends
Based on Cushman & Wakefield's survey of market rents, the average asking
rental rate for Class A space in Reston decreased from $25.01 in 1996 to $23.17
in the first quarter of 1997; however, this is a result of limited availabilites
and the less- desirable space available on the market. Average asking rents for
all space increased from $18.92 to $20.02 during the same period. Cushman &
Wakefield started to track Class A office space separately in this submarket in
1993. Both data groups are tabled below.
================================================================================
Reston/Herndon Rental Rates
1990- 1st: Quarter 1997
================================================================================
Average Class A
Year Rental Rates Rental Rates
================================================================================
1990 $21.44 N/A
1991 $18.43 N/A
1992 $14.58 N/A
1993 $14.71 $15.18
1994 $14.53 $17.02
1995 $15.56 $17.47
1996 $18.92 $25.01
1st quarter 1997 $20.02 $23.17
================================================================================
The evidence suggests that rental rates languished for two years after
bottoming out in 1992. The activity shown for 1994 through first quarter of 1997
suggests that the market is indeed pulling up. Data for the first quarter 1997
is reflecting a rapid gain of over $1.00 per square foot in average rents. Since
1994, rents have spiked between $1.00 to $3.00 per square foot, with an average
annual increase of 12.6 percent.
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Office Market Analysis
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Landlords recognize the increasingly limited amount of quality space
available, and have begun testing the market by raising their asking rates.
Effective rental rates, inclusive of concessions such as free rent and above
standard tenant improvements, used to be 15 to 25 percent below those figures,
but most recent leasing activity has shown little or no free rent concessions
and average tenant improvement allowances of $1.00 to $20.00 per square foot.
Many tenants are currently taking space in as is condition. Based on our
interviews of brokers active in this submarket, rents appear to have firmed and
increases in base rents and effective rents are anticipated.
Our overall market expectation is that rents will contiue to climb as the
market showes continued improves, particularly as large space becomes scarce.
Whatever concessions were being given will be modest. Our scenario calls for a
return toward equilibrium between construction costs and rents by the end of
this decade.
Summary
The Washington, D.C. area office market is experiencing increased leasing
and investment activity, particularly in the suburban markets. Vacancy rates are
generally lower and some markets are enjoying rental rate increases. The
Northern Virginia office market is the strongest, with lower vacancy, higher
rents, and rent spikes in certain submarkets.
Micro Market Survey
We conducted a micro-market analysis, concentrating on several competing
office buildings containing a total of 1,800,000 square feet. These projects,
presented on the table on the following page, are more indicative of the
subject's competition than the entire suburban market as previously examined.
The competition for the subject comes from other Class A/B office
buildings in Reston. These buildings are generally low or mid-rise suburban
office projects, built in the mid-1980s, with surface or structured parking in
similar settings.
A discussion involving market rental rates and other economic factors
relative to the subject and its micro-market is presented in the Income
Approach. However, the information is summarized below.
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Competing Office Buildings
Micro Market Survey
<TABLE>
<CAPTION>
====================================================================================================================================
Rental Name Year Available Average Quoted
No. Address Size (SF) Built Square Feet Occupancy Floor Plate Rental Rates
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
1 Parkridge IV 125,000 1988 55,098 55.9% 16,000 $21.50 FS
10700 Parkridge Blvd.
- ------------------------------------------------------------------------------------------------------------------------------------
2 Van Buren Bus. Park III 108,300 1987 34,233 68.4% 27,354 $16.50-$17.00 FS
516 Herndon Parkway
- ------------------------------------------------------------------------------------------------------------------------------------
3 Reston Executive Ctr. III 135,928 1989 32,759 75.9% 18,878 $22.00 FS
12120 Sunset Hills Road
- ------------------------------------------------------------------------------------------------------------------------------------
4 Commerce Executive Pk III 104,822 1985 7,795 92.6% 19,000 $18.50 FS
1850 Centennial Park Dr.
- ------------------------------------------------------------------------------------------------------------------------------------
5 Commerce Executive Pk IV 138,980 1987 11,881 91.4% 20,317 $16.50-$20.50 FS
11400 Commerce Park Drive
- ------------------------------------------------------------------------------------------------------------------------------------
6 Commerce Executive Pk V 167,755 1988 0 100.0% 18,103 $19.00 FS
11440 Commerce Park Drive
- ------------------------------------------------------------------------------------------------------------------------------------
7 Executive Center I 70,000 1985 0 100.0% 17,500 N/A
1851 Alexander Bell Drive
- ------------------------------------------------------------------------------------------------------------------------------------
8 Executive Center II 72,000 1987 18,445 74.4% 18,000 $17.50-$19.50
1835 Alexander Bell Drive
- ------------------------------------------------------------------------------------------------------------------------------------
9 Fairbrook Business Park I 80,174 1985 40,612 49.3% 40,000 $17.50 FS
200 Fairbrook Drive, Herndon
- ------------------------------------------------------------------------------------------------------------------------------------
10 Lake Fairfax Business Ctr IV 95,000 1985 11,173 88.2% 21,636 $16.00 FS
1761 Business Center Drive
- ------------------------------------------------------------------------------------------------------------------------------------
11 Lake Fairfax Business Ctr VII 275,000 1988 0 100.0% 21,600 $17.50-$19.50 FS
1760 Business Center Drive
- ------------------------------------------------------------------------------------------------------------------------------------
12 11720 Sunrise Valley Drive 67,252 1985 29,668 55.9% 10,439 $18.00-$20.00 FS
11720 Sunrise Valley Drive
- ------------------------------------------------------------------------------------------------------------------------------------
13 Corporate Oaks II 78,000 1987 4,751 93.9% 26,000 $18.00 FS
607 Herndon Parkway
- ------------------------------------------------------------------------------------------------------------------------------------
14 Reston Plaza I 80,000 1985 10,409 87.0% 20,000 $15.00-$16.00 FS
12030 Sunrise Valley Drive
- ------------------------------------------------------------------------------------------------------------------------------------
15 Reston Plaza II 50,000 1986 0 100.0% 16,600 $17.00 FS
12020 Sunrise Valley Drive
- ------------------------------------------------------------------------------------------------------------------------------------
16 Reston Sunrise 58,598 1985 1,551 97.4% 19,483 $19.00S
1200 Sunrise Valley Drive
- ------------------------------------------------------------------------------------------------------------------------------------
17 Sunrise Plaza I 139,479 1986 1,700 98.8% 16,750 $18.00-$20.00 FS
12355 Sunrise Valley Drive
- ------------------------------------------------------------------------------------------------------------------------------------
Totals 1,786,890 1985-1988 258,524 85.5% - $15.00-$22.00 FS
- ------------------------------------------------------------------------------------------------------------------------------------
Subject Campus Point 172,448 1985 0 100.0% 86,224 $13.25 NNN
1880 Campus Commons Drive
====================================================================================================================================
</TABLE>
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Office Market Analysis
================================================================================
The buildings in the micro-market range in size from 50,000 square feet to
275,000 square feet. Asking rental rates range from $15.00 to $22.00 per square
foot, full service. The overall occupancy in the submarket is 85 percent. This
occupancy level is pertinent to these buildings only as we have not included
several other fully or near fully-occupied builidngs that make up the bulk of
this submarket.
Relative to its competition, the subject property is analogous. It is of
similar age and size of the competitive buildings and is considered to be Class
A/B with a Class B location. A further discussion the micro-market is presented
in the Income Approach.
Summary
Notwithstanding the recent decline, we anticipate that the local real
estate market will show signs of continued improvement over the next twelve
months. Following the recent rent spike, we expect this movement to be moderate
but gradually build to a sustainable equilibrium during the 1998 to 1999 time
frame. Unfortunately, much of this depends on the investment posture of the
financial institutions and the lending position of the Federal Reserve. Also,
the downsizing of the federal government, which has been embraced by the Clinton
administration and Congress certainly merits concern. If the federal government
successfully downsizes, it will have an impact on the local office market with
slower absorption and construction.
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PROPERTY DESCRIPTION
================================================================================
Site Description
Location: North side of Campus Commons Drive. The street address
is 1880 Campus Commons Drive, Reston, Fairfax County,
Virginia
Shape: Basically rectangular
Area: 10.5 acres
Frontage: The site has frontage along the north side of Campus
Commons Drive.
Topography/Terrain: Basically level and at street grade.
Street Improvements
Campus Commons Drive: Two lane in each direction with grass median, asphalt
paved, concrete curbs and sidewalks, street lighting and
storm drains
Soil Conditions: We not receive or review a soil report. However, we
assume that the soil's load-bearing capacity is
sufficient to support the existing structures. We did
not observe any evidence to the contrary during our
physical inspection of the property. The tract's
drainage appears to be adequate.
Utilities
Water & Sewer: Fairfax County Water Authority
Electricity: Virginia Power Company
Gas: Washington Gas
Telephone: Bell Atlantic Telephone
Access: Primary access is from Campus Commons Drive
Land Use Restrictions: We were
not given a current title
report to review. We do not
know of any easements,
encroachments, or
restrictions that would
adversely affect the site's
use. However, we recommend
a title search to determine
whether any adverse
conditions exist.
Flood Hazard: According to FEMA, March 5, 1990, Community Panel No.
515525C 0050 D, National Flood Insurance Rate Map, the
subject property appears to be in Zone C, an area
outside the 500 year flood plain where flood insurance
is not required.
Wetlands: We were not given a Wetlands survey. If a subsequent
engineering survey reveals the presence of regulated
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Property Description
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Wetlands areas, we
reserve the right to
amend this valuation.
Site Improvements: Concrete curbs and sidewalks and surface parking for
vehicles
Hazardous Substances: We were not given a Wetlands survey. If subsequent
engineering data reveal the presence of regulated
wetlands, it could materially affect property value. We
recommend a wetlands survey by a competent engineering
firm
Comments: Good site for office development due to location, size
and exposure.
Improvements Description
The site is improved with a two story precast steel frame Class A/B office
building, that is centered around a courtyard. The building was constructed in
1985 and contains a total of 172,448 square feet of rentable area. The existing
tenant upgraded approximately 70 percent of the building and has invested
heavily in capital improvements. Upgrades have been made to the mechanical,
plumbing, electrical, HVAC, and fire protection systems.
We were not provided with any plans or construction specifications for
this property. The following description is based on our visual inspection and
discussions with the building manager. We inspected several, but not all areas
of the building. We noted the finish to be average quality, but in good
condition, in those areas. Following are the construction details for the
subject improvements based on our inspection of the property.
General Data
Year Built: 1985
Building Area
Gross Building Area (GBA): 180,000 square feet.
Net Rentable Area (NRA): 172,448 square feet
Number of Stories: 2
Construction Detail
Foundations: Concrete slab
Framing: Steel
Floors: Concrete slab
Exterior Walls: Precast concrete panels with ribbon glass
window line
Roof Structure: Concrete deck
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Property Description
================================================================================
Roof Cover: Insulated membrane roofing
Windows: Metal frame, insulated double glaze
Pedestrian Doors: Double set of double glass in metal frame doors
Mechanical Detail
Heating and Cooling: All electric, VAV boxes, roof mounted air
handlers. Two chilled water air handling units at
northeast and southeast quadrants.
Electrical Service: Recently upgraded and assumed to meet code
Elevator Service: Two hydraulic cabs at each end of the building.
Fire Protection: Sprinklered
Interior Detail
Layout: The building is separated into four quadrants via
a central courtyard, two loading docks and two
lobby entrances.
Floor Covering: Primarily carpet in the office areas and ceramic
tile in the restrooms.
Walls: Painted gypsum board.
Ceilings: Ceilings in office and hall areas are suspended
acoustical tile.
Lighting: Recessed fluorescent
Rest Rooms: Each quadrant of the building has a set of men's
and women's rest rooms.
Americans with
Disabilities Act (ADA): The Americans With Disabilities Act (ADA) became
effective January 26, 1992. We have not made,
nor are we qualified by training to make, a
specific compliance survey and analysis of this
property to determine whether or not it is in
conformity with the various detailed requirements
of the ADA. It is possible that a compliance
survey and a detailed analysis of the
requirements of the ADA could reveal that the
property is not in compliance with one or more of
the requirements of the Act. If so, this fact
could have a negative effect upon the value of
the property.
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Property Description
================================================================================
Hazardous Substances: We are not aware of any potentially hazardous
materials (such as formaldehyde foam insulation,
asbestos insulation, radon gas emitting
materials, or other potentially hazardous
materials) which may be used in the construction
of the improvements. If concerns exist in this
area, we recommend that a professional engineer
be engaged.
Other Site Improvements
On-Site Parking: 648 surface parking spaces, or 3.6 spaces per
1,000 square feet of gross building area
Landscaping: Good, mature trees, shrubbery around the
building and parking lot perimeter
Comments: The quality of the subject improvements is rated
good. The layout and functional plan are
considered good, although the floor plates are
large relative to similar buildings in the
market. No deferred maintenance was encountered.
The normal life expectancy of a building of this
type is 45 years. We consider the effective age
to be equal to 5 years, due to apparently good
maintenance, leaving an estimated remaining
economic life of about 40 years.
We did not inspect the roof of the building or
make a detailed inspection of the mechanical
systems. The appraisers, however, are not
qualified to render an opinion as to the
adequacy or condition of these components. The
client is urged to retain an expert in this
field if detailed information is needed about
the adequacy and condition of mechanical systems
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<PAGE>
REAL ESTATE TAXES AND ASSESSMENTS
The subject property is identified for real estate assessment and taxation
purposes by Fairfax County, Virginia as parcel 26-2-01-990D. The Fairfax County
tax year extends from January 1st through December 31st and properties are
reassessed annually. The assessment ratio is 100 percent of estimated market
value for reai estate tax purposes.
Tax Rates
The 1997 tax rate for Fairfax County is $1.29 per $100 of assessed value.
The following chart depicts a three-year prior history:
================================================================================
Tax Rates Per $100 of Assess Value
================================================================================
1993 1994 1995 1996
================================================================================
Taxing Authority Tax Rate Tax Rate Tax Rate Tax Rate
Fairfax County, Virginia $1.1828 $1.1828 $1.2214 $1.2910
================================================================================
The historical tax rate chart above indicates that rates had been flat
from 1993 through 1994. However, falling property values, thus lower tax
assessments, have added upward pressure to tax rates as indicated in 1995 and
1996. The change equates to 3.3 and 5.7 percent, respectively. The compound rate
of growth from 1993 to 1997 was 2.3 percent. It is difficult, at best, to judge
the likelihood of future tax rate increases when viewing only a brief history.
Tax rates tend to increase or decrease based upon increasing governmental
budgets and the total tax base, and over the longer term, seven to ten years,
they tend to fall in line with inflationary trends, except in fast growing areas
where new services are required.
Tax Assessment
The subject's 1997 full cash value and subsequent assessment is outlined
in the following table.
================================================================================
Campus Point
Full Cash Value and Assessment
================================================================================
Land Value $ 2,744,400
Improvement Value $14,816,170
-----------
Total Value $17,560,570
Taxable Assessment $17,560,570
Tax Rate x .0129
-----------
Taxes Due $226,531.35
================================================================================
Ad Valorem Tax Conclusions
As developed above, the net tax associated with the subject property is
$226,531, or $1.32 per square foot for the 1996 tax year. Taking into
consideration future tax rate increases and the potential for increases in the
assessed value of the subject, we have projected that taxes for the subject
property will increase at 3.5 percent annually.
In an effort to evaluate the fairness of the subject's current assessed
value and future prospects for a change in the assessment, we have compared the
assessment to the
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Real Estate Taxes and Assessments
market value estimate concluded in this report, and considered the potential for
future changes in the assessed value of the subject brought about by changing
market conditions.
The full cash value for the subject property is about 30 percent below our
value conclusion. We anticipate that the subject will experience a tax increase
during the next reassesment cycle in January 1998 based on our value conclusion.
Thereafter, we are projecting growth in real estate taxes consistent with
inflationary expectations, or about 3.5 percent per year.
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ZONING
================================================================================
The governing agency for zoning is the Fairfax County Planning and Zoning
Commission. The site is zoned 1-3, a light industrial zone of Fairfax County.
The 1-3 district is established to provide areas for scientific research,
offices, development and training, manufacture and assembly of products, and
related supply activities. This district is designed to accommodate a broad
spectrum of uses including establishments for scientific research, development
and training, general office, financial institutions, private schools of general
and/or special education, and warehouses. The subject represents a permitted
use.
The restrictions imposed by this classification are as follows:
Height Restriction: 75 feet
Front Yard: A minimum of 40 feet
Side Yard: None required
Rear Yard: None required
Minimum Lot Size: 40,000 square feet
Minimum Lot Width: 100 feet
Maximum Floor Area Ratio: 0.30
Open Space: 15%
Off Street Parking: For buildings with more than 125,000
square feet of gross floor area
(GFA): 2.6 spaces for each 1,000
square feet of GFA.
Based upon our visual inspection, the subject appears to conform to the
applicable zoning regulations, including parking requirements. However, we are
not experts in the interpretation of complex zoning ordinances. The
determination of compliance is beyond the scope of a real estate appraisal.
To the best of our knowledge other deed restrictions (private or public)
further limit the subject property's use. We cannot guarantee that no such
restrictions exist. Deed restrictions are a legal matter and only a title
examination by an attorney or title company can usually uncover such restrictive
covenants. Thus, we recommend a title search to determine if any such
restrictions do exist.
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HIGHESTAND BEST USE
================================================================================
According to the Dicionary of Real Estate Appraisal, Third Edition (1993),
a publication of the Appraisal Institute , the highest and best use of real
property is defined as:
The reasonably probable and legal use of vacant land or an improved
property, which is physically possible, appropriately supported,
financially feasible, and that results in the highest value. The four
criteria the highest and best use must meet are legal permissibility,
physical possibility, financial feasibility, and maximum profitability.
We evaluated the sites' highest and best use as if vacant. In this case,
the highest and best use must meet the aforementioned criteria. The use must be
(1) legally permissible, (2) physically possible, (3) financially feasible, and
(4) maximally productive.
Highest and Best Use, As If Vacant
The first test concerns permitted uses. According to our understanding of
the zoning ordinance noted earlier in this report, the site could be developed
with research and development, general office, financial institutions, and
warehouses uses. Residential and retail uses are not permitted.
The second test is what is physically possible. As discussed in the
Property Description section, the site's shape, soil, available utilities,
topography, etc. do not physically limit its use given its suburban location.
Additionally, we know of no easements which adversely impact the property. Thus,
the site has no physical limiting conditions, other than size, to restrict its
development.
The third and fourth tests are, respectively, what is feasible and what
will produce the highest net return. After determining those uses which are
physically possible and legally permissible, the remaining uses must be analyzed
in light of their financial feasibility. That is, for a potential use to be
seriously considered, it must have the potential to provide a sufficient return
to attract investment capital from alternative forms of investments.
As stated earlier, the subject lies in the midst of office development.
Additional office use would be logical and consistent with surrounding uses.
Other successful office developments have been developed in the area, leading to
the conclusion that another similar use may also succeed. With the site's
exposure and good access, prospective tenants would likely be interested in this
location. While some light industrial uses can be found in the area, office uses
usually provided more value than this use. Therefore, we conclude that the
highest and best use of the subject would be to develop an office building.
As depicted in the Office Market Analysis section, some new speculative
construction is occurring in the adjacent Route 28/Dulles submarket; however,
the office submarket in which the subject is located continues to experience
rental rates that are below what would be considered economic for new
speculative construction. In addition, overall occupancies have also not quite
reached the point of stabilization. However, both occupancies and rental rates
are showing signs of improvement, particularly for high quality buildings.
Supply of and demand for new office development would have to return to
equilibrium before development would be justified. In
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Highest and Best Use
================================================================================
addition, there is little financial or debt support for any speculative
development. Thus, development of this site, if it were vacant, appears unlikely
at this time.
Given all factors, we conclude that the highest and best use of the
subject site as if vacant is office use; however, market conditions preclude
immediate development, necessitating that the property be held until market
conditions improve. Consequently, we anticipate that it may be several more
years before rental rates and occupancies will support new speculative office
construction in the subject's locale. Build-to-suit construction, however, could
conceivably begin much sooner given a lease with terms considered acceptable to
the financial community.
In summary, given the income producing product alternatives, it is our
opinion that the highest and best use of the subject site, as though vacant
today, would be for the eventual development of a mid- density office project,
as a speculative multi-tenant building, once rental rates have recovered to a
level that would support new construction. Overall, a holding period would
probably be required for the site until such time as market demand would dictate
a need for additional speculative office development or a user could be secured.
This inherently assumes that once the market imbalance is corrected, the
cost/benefit equation, i.e., cost versus value, would support additional
construction.
As Improved
According to the Dictionary of Real Estate Appraisal, highest and best use
of the property as improved is defined as:
The use that should be made of a property as it exists. An existing
property should be renovated or retained as is so long as it continues to
contribute to the total market value of the property, or until the return
from a new improvement would more than offset the cost of demolishing the
existing building and constructing a new one.
The highest and best use "as vacant" and "as improved" must be compatible.
If the site value as though vacant is greater than the property as improved
(less demolition cost), then existing improvements have no value. Sometimes,
however, existing improvements have interim use value. If the highest and best
use of the site as though vacant is holding for future development, then the
improvements might make a short term contribution to property value.
As noted in the Property Description section of this report, the subject
site is improved with a two-story building totaling 172,448 net rentable square
feet. Completed in 1985, the improvements are functional in design and are of
good quality when compared to suburban office developments in Fairfax County.
The building is currently 100 percent occupied by a single tenant.
The data within the Office Market Analysis section revealed that the
submarket in which the subject competes is recovering from the overbuilding and
the soft economy of the 1980s and early 1990s. Our survey of the direct
competition indicated an average occupancy of 85 percent. As improved, the
subject is capable of providing an adequate return to the land both on an
intermediate and long-term basis. This conclusion is supported by the data and
analysis presented in the balance of this report. This premise is obviously
contingent upon property management utilizing a course of action which will be
conducive to maximizing occupancy and
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Highest and Best Use
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rent levels. For these reasons, it is our opinion that the highest and best use
of this site, as improved, is for continued use as a single-tenant office
project.
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VALUATION PROCESS
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Appraisers typically use three approaches in valuing improved property.
These include the Cost Approach, the Sales Comparison Approach and the Income
Approach. The type and age of the property and the quantity and quality of data
affect the applicability of each approach in a specific appraisal situation. The
strengths and weaknesses of each approach utilized are weighed in the final
analysis with the approach or approaches offering the greatest quantity and
quality of supporting data given most consideration in the final analysis. In
this appraisal, we have used the Sales Comparison Approach and the Income
Capitalization Approach to develop a market value estimate. In addition, we have
provided a replacement cost estimate in the Addenda.
The Cost Approach was not performed for the following reasons:
|_| This approach is more relevant for new construction or where
sufficient information is available to reasonably estimate the
replacement cost new of the improvements and land.
|_| The investment marketplace does not typically trade buildings such
as the subject on a cost/value basis, particularly in markets where
it is generally perceived that cost exceeds value.
|_| The subjectivity of accurately estimating accrued depreciation of
the existing improvements significantly limits the reliability of
this approach.
In the Sales Comparison Approach, we performed the following steps:
|_| Searched the market for recent office building sales;
|_| Analyzed those sales on the basis of the sales price per square foot
(net rentable area); and
|_| Correlated the various value indications into a point value estimate
from within the range.
In developing the Income Capitalization Approach, we:
|_| Studied rents in effect in the immediate and competing areas to
estimate potential rental income at market levels for office, and
industrial uses.
|_| Studied the recent history of operating expenses at the subject
property and competing properties to estimate an appropriate level
of stabilized expenses and reserves for replacement.
|_| Estimated net operating income by subtracting stabilized expenses
from potential gross income after deduction for vacancy and
collection loss.
|_| Prepared a discounted cash flow analysis in which the estimated
income and expenses over a projected holding period, and the
estimated property value at the time of reversion, are discounted at
an appropriate rate to estimate present market value.
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Valuation Process
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In estimating the final value, we performed the following:
o Reviewed and re-examined each of the approaches to value which were
employed.
o Considered the type and reliability of the data used and
applicability of each approach.
o Reconciled the approaches to a final value conclusion.
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SALES COMPARISON APPROACH
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Methodology
Inherent in the Sales Comparison Approach is the principle of
substitution, which holds that when a property is replaceable in the market, its
value tends to be set at the cost of acquiring an equally desirable substitute
property, assuming that no costly delay is encountered in making the
substitution. We have compared the subject property to several relevant property
sales.
By analyzing sales which qualify as arm's-length transactions between
willing and knowledgeable buyers and sellers, we can identify value and price
trends. Comparability in physical, locational and economic characteristics are
important criteria when selecting the sales for comparison with the subject
property. The basic steps involved in the application of this approach are as
follows:
(1) researching recent, relevant property sales and current offerings
throughout the competitive area;
(2) selecting and analyzing those properties considered most similar to
the subject, considering changes in economic conditions that may
have occurred between the s7ale date and the date of value, and
other physical, functional or locational factors;
(3) identifying the sales which include favorable financing and
calculate the cash equivalent price;
(4) reducing the sale prices to common units of comparison, such as
price per square foot of building area (in this net rentable area);
(5) making appropriate adjustment between the comparable properties and
the property appraised; and
(6) interpreting the adjusted results and drawing a logical value
conclusion.
In this instance, the sale prices inherent in the comparables were reduced
to those common units of comparison that can be used to analyze improved
properties that are similar to the subject. Considering the available units of
comparison, one of the most important benchmarks used by buyers and sellers of
office building is price per square foot of net rentable area (NRA).
The following summary chart includes recent transactions of suburban
office buildings from which price trends can be identified for the extraction of
value parameters. The complete survey results on each property appear in detain
in the Addenda of the report.
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Sales Comparison Approach
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Campus Point
1880 Campus Commons Drive
Reston, Virginia
Summary of Building Sales
<TABLE>
<CAPTION>
=================================================================================================================================
Year Built Net Cash Sale Price Overall
Sale ---------- Rentable Percent Equivalent Per SF Rate
No. Name/Location Sale Date Renovated Area (SF) Occupied Sale Price (NRA)
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
1 Intergraph March 1997 1985 67,900 100% $8,425,000 $124.08 10.30%
2051 Mercator Drive
Reston, Virginia
- ---------------------------------------------------------------------------------------------------------------------------------
2 Sprint December 1983 553,362 100% $76,300,000 $137.88 N/A
12490-12526 Sunrise Valley Drive 1996
Reston, Virginia
- ---------------------------------------------------------------------------------------------------------------------------------
3 Dulles Corner December 1990 280,672 100% $41,100,000 $146.43 8.54%
2411 Dulles Corner Blvd 1996
Herndon, Virginia
- ---------------------------------------------------------------------------------------------------------------------------------
4 Commerce Park IV & V December 1986 308,690 95% $40,750,000 $132.01 9.2%
11400 & 40 Commerce Park Drive 1996
Reston, Virginia
- ---------------------------------------------------------------------------------------------------------------------------------
Subj Campus Point Date of 1985 172,448 100%
Reston, VirgInIa Value
=================================================================================================================================
</TABLE>
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Sales Comparison Approach
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Sales Price Per Square Foot Analysis
The four comparables indicate sales prices ranging from $124.08 to $146.43
per square foot of net rentable area on a cash equivalent basis. The prices per
square foot have been influenced by differences in construction quality,
condition of the premises, character of the tenancy, and location. Nevertheless,
it is important to address each property in terms of the conventional sequence
of adjustments. Following are those considerations which are relevant to the
subject. The first three elements must be considered in advance of applying any
other compensating factors to derive value conclusions via the sales price per
square foot methodology. These same three factors must also be addressed before
the selection of an effective gross income multiplier.
Property Rights Conveyed
As shown in the summary table, all of the comparables are encumbered by
existing leases; therefore, the leased fee estate was conveyed in each case.
Consequently, no adjustments are warranted for differences in property rights
conveyed.
Seller Financing/Cash Equivalency
All of the comparables were sold on the basis of cash to the seller or
cash equivalent financing. Thus, we have made no adjustments to the comparables
for seller financing.
Conditions of Sale
We identified no special motivational conditions concerning the
comparables; therefore, no adjustments for conditions of sale were made.
Date of Sale
As shown in the summary table, the transactions occurred between December
1996 and March 1997. Given that these sales occurred within the last seven
months, no adjustments were deemed necessary for date of sale.
Other
Most of the additional considerations for the comparables involve
locational issues, design and quality elements, and economic factors. It is
noted that the subject property is 100% leased to a single tenant at a rental
rate of $13.65 per square foot, triple net. In the following discussion, we
compare each of the improved sales to the subject property and conclude if the
comparable is similar, inferior or superior.
Comparable 1-1, the Intergraph Building, is located at 2051 Mercator Drive
within a few miles west of the subject within the Reston/Hemdon submarket. This
locale is considered comparable to the subject's. The building was constructed
in 1985 and is of similar to the subject from a physical standpoint. The sale
involved a 20 year leaseback to the tenant at a rental rate of $13.20 per square
foot, triple net. Reportedly, the property sold at a high overall rate due to
the poor credit rating of the tenant. This property is considered basically
equivalent to the subject from a locational and physical standpoint, but
somewhat inferior from an economic (credit rating) standpoint. Overall, we have
labeled the sale of this building as slightly inferior to the subject.
Comparable 1-2, the Sprint Building, located at 12490-12526 Sunrise Valley
Drive is also located a few miles west of the subject and is considered similar
in terms of location. Constructed in 1983, the building is similar in
age/condition to the subject. The property was acquired by the
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Sales Comparison Approach
tenant, who had leased the entire building since the mid-1980s. This property is
considered basically equivalent to the subject from a locational, physical and
economic standpoint and does not require any adjustments.
Comparable 1-3, Dulles Comer, is located several miles west of the subject
on Dulles Comer Boulevard in the Route 28/Dulles submarket. This area is
considered slightly superior to the Reston submarket due to its lower vacancy
and proximity to Route 28 and the Dulles Airport. The building was constructed
in 1990 and represents slightly newer construction than the subject. At the time
of sale, the property was 100 percent leased to multi-tenants at an average
rental rate of MM per square foot, full service. This property is considered
similar to the subject from an economic standpoint, but superior from a
locational and physical standpoint.
Comparable 1-4, Commerce Center IV and V, is located off of Commerce Park
Drive immediately west of the subject. These buildings were construction in 1988
and 1989 and are slightly newer in age/condition than the subject. The buildings
contain some lower level (basement) space that is leased at a low rental rate.
The buildings were 100 percent leased to various tenants at the time of sale, at
an average rental rate of $16.84 per square foot, full service. There is a
significant proportion of older below market leases. The largest tenant is
Cordant, who occupies 136,798 square feet or 45 percent of the building through
the year 2000 and occupies most of the lower level space. The property has
minimal rollover until the year 2002, when 53 percent of the leases expire. This
sale is similar to the subject from a locational standpoint, slightly superior
from a physical standpoint, and inferior from an economic standpoint due to the
large number of below market leases. Overall, this sale is rated slightly
inferior to the subject due to the significant number of below market leases.
The following chart summarizes how each sale compares to the subject
property from a physical, locations[ and economic (occupancy and rental rate)
standpoint.
========================================================
Improved Sales Comparison
========================================================
Overall Rating
Sale Price Relative to
No. Per SIF the Subject
========================================================
1-1 $124.08 Inferior
1-2 $137.88 Basically Equivalent
1-3 $146.43 Superior
1-4 $132.01 Slightly Inferior
========================================================
Because of the multiple differences inherent in office properties with
respect to quality and design, location, and economics, not to mention the
quality of the tenant base, mathematical adjustments for the reasoning noted
above would be extremely difficult, at best.
Comparables 1-1 and 1-4, with sale prices of $124.08 to $132.01 per square
foot, are considered inferior to the subject, while Comparable 1-3, with a sale
price of $146-43 per square foot, is considered superior. Thus, the subject's
value should most likely fall within the range of $132.01 and $146.43 per square
foot, and probably nearer the low end because it is considered
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Sales Comparison Approach
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only slightly superior to Sale I-4 at $132.01 per square foot and basically
equivalent to Sale I-2 at $137.88 per square foot.
Based on the information presented, we have concluded at a value range for
the subject of $135 to $137 per net rentable square foot. When applied to the
net rentable area, our estimated value range by the sales price per square foot
method is presented as follows:
=====================================================================
Sales Price Per Square Foot Unit Analysis
=====================================================================
172,448 SF x $135.00/SF = $23,280,480
172,448 SF x $137.00/SF = $23,625,376
=====================================================================
Concluded to: $23,500,000
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INCOME APPROACH
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Methodology
The income approach is a method of converting the anticipated economic
benefits of owning property into a value estimate through capitalization. The
principle of anticipation underlies this approach in that investors recognize
the relationship between an asset's income and its value. In order to value the
anticipated economic benefits of a particular property, potential income and
expenses must be estimated, and the most appropriate capitalization method must
be selected.
The two most common methods of converting net income into value are direct
capitalization and discounted cash flow analysis. In direct capitalization, net
operating income is divided by an overall rate extracted from market sales to
indicate a value. In the discounted cash flow method, anticipated future net
income streams and a reversionary value are discounted to an estimate of net
present value at a chosen yield rate (internal rate of return).
The direct capitalization method is an effective technique when stable
conditions exist both in the marketplace and for the property; however, when
market conditions are either changing or likely to change in a fairly dramatic
manner over time, direct capitalization becomes a difficult technique to
administer. The subject property is leased to a single tenant whose lease
expires in the year 2000. Thus, the property has the potential to experience
significant rollover in the near future. It is our opinion that the majority of
investors for a property like the subject would utilize the discounted cash flow
method, in an attempt to mirror this potential rollover. In addition, overall,
office market conditions are continuing to strengthen. Consequently, the
discounted cash flow method affords the most realistic method of reflecting
investor expectations of the current period, as well as the projected continued
recovery. For this reason, it is our opinion that the discounted cash flow
method is the most appropriate method in the valuation of the subject property.
As such, the direct capitalization method will not be used in this analysis but
at the conclusion of the income approach, we will analyze the resulting overall
capitalization rate derived from the discounted cash flow analysis as a check
for reasonableness.
Following is an analysis of the current market rental rates, existing
leases in place, other revenue, vacancy and collection loss projections, and
historical/future operating and fixed expenses for the subject property.
Potential Gross Income
Summary of Existing Leases
The object of this appraisal is to estimate the value of the leased fee
estate in the subject property. Accordingly, consideration must be given to the
leases in place at the time of appraised valuation. The actual leases for the
subject's tenants are incorporated in the following discounted cash flow
analysis. We utilize Pro-Ject +plus, a software program designed to analysis
multi-tenant properties, in this analysis and several of the computer generated
reports are included in the Addenda.
The subject is fully leased to Bell Atlantic through April 2001 at a
rental rate of $13.65 per square foot, triple net. The rent will remain stable
for the remainder of the lease term. Bell Atlantic has a sublease with Perot
Systems.
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Income Approach
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Assumptions Regarding the Existing Leases
Information provided by management indicates that the tenant is not in
default of their lease. We assume that the existing tenant will continue to pay
rent under the terms of their lease obligations. We address renewal probability
in the Vacancy and Collection Loss section.
Lease Expirations
In our analysis, consideration is also given to lease expiration schedule.
The timing of lease expiration is an important element and a prospective buyer
would attempt to assess the risk relative to upcoming turnover. For example, a
large lease expiring in the near future would indicate the possibility of a
significant drop in income and consequently a higher risk factor might be
appropriate.
As previously indicated, the property is 100 percent leased to a single
tenant whose lease expires in April 2001. Thus, the risk associated with lease
expirations at the subject property are considered to be a significant factor.
Estimate of Current Market Rent
In order to gauge the reasonableness of the quoted rent and form a
conclusion as to the current market rent for the subject property, , we have
analyzed actual lease data. The tables on the following pages highlights several
competitive office buildings in the subject submarket.
Comparable Building Leases
The competitive projects reflect a rental range of $15.00 to $16.42 per
square foot, triple net and $23.75 per square foot, full service. Adjusting the
full service lease to a triple net basis by deducting approximately $5.00 per
square foot for expenses, indicates an adjusted triple net rent of $18.75 per
square foot. Rental R-1, which was adjusted to $18.75 per square foot, triple
net, is located in a superior market relative to the subject due to its
closer-in location to Washington D.C. and the Capital Beltway. Thus, the
subject's rent should be lower than this rental. Rental R-5, at $16.42 per
square foot, triple net, also enjoys a closer-in location and is considered
superior. Rentals R-2 through R-4 are located in the subject's general vicinity
and are considered most similar to the subject from a locational standpoint.
Rental R-3, at $15.60 per square foot, represents a build-to-suit slated for
delivery in February 1999; thus, it is substantially newer than the subject and
is considered superior from a physical standpoint. Overall, Rental R-3 is
considered most similar to the subject given its location and size. Placing most
emphasis on this rental, we have estimated the subject's market rent at $15.00
per square foot, triple net.
The comparables indicated tenant improvement allowances of $0.00 to $30.00
per square foot for new and second generation space, with the majority in the
$10.00 to $20.00 per square foot range. No free rent concessions were indicated
for any of the comparables. Annual rent escalations were generally 2.5 to 3.0
percent per year. Lease terms ranged from 10 to 20 years.
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Campus Point
1880 Campus Commons Drive
Reston, Fairfax County, Virginia
Summary of Rent Comparables
<TABLE>
<CAPTION>
===========================================================================================================
Comp. Area Lease Rental Rate Term
No. Name/Location Tenant Leased (SF) Date ($/SF) Recoveries (Yrs)
===========================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
R-1 l945 Old Gallows Road UUNET 139,155 05/97 $23.75 Full Service 10.0
Tysons Corner, Virginia
R-2 4795 Meadow Wood Lane MCI 153,674 02/97 $15.00 Triple Net 10.0
Chantilly, Virginia
R-3 Sunset Hills Road BDM 310,000 01/97 $15.60 Triple Net 12.0
& Reston Pkwy
Reston, Virginia
R-4 14225 Newbrook Drive American 248,000 12/96 $15.80 Triple Net 20.0
Chantilly, Virginia Medical
Laboratories
R-5 4114 Legato Road AMS 214,214 12/96 $16.42 Triple Net 12.0
Fairfax, Virginia
===========================================================================================================
</TABLE>
====================================================================
Comp. Free Rent/
No. Name/Location Escalations Tenant Improvements
====================================================================
R-1 l945 Old Gallows Road 2.5% + $1.50 50% rent
Tysons Corner, Virginia bump Yr 6 thru
construction
$17.00 sf
R-2 4795 Meadow Wood Lane 2.75% None
Chantilly, Virginia $10.00 sf
R-3 Sunset Hills Road 2.50% None
& Reston Pkwy Build-to-suit
Reston, Virginia
R-4 14225 Newbrook Drive 2.50% None
Chantilly, Virginia As is
R-5 4114 Legato Road 3.0% None
Fairfax, Virginia $30.00 sf
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Income Approach
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Based on the foregoing, we have estimated the following market rental
parameters for the subject:
=====================================================
Market Rental Rate Parameters
=====================================================
Base Rent $15.00/SF, Triple Net
Free Rent None
Expense Recoveries Triple Net
Annual Escalations 3.0%
Term 10 years
Office TIs per SF
New Tenants $10.00
Renewal Tenants $5.00
=====================================================
Market Rent Forecast
In addition to estimating the market rent for the subject, it is
appropriate to analyze what the rental growth rate will be in forecasting the
cash flows over the prescribed holding period. It is our contention that the
submarket will continue to experience an increase in rents over the next several
years. As discussed in the Market Analysis, rental rates for Class A space in
Reston have increased at a steady pace over the past four years. We anticipate
that this trend will continue. With new speculative construction occurring along
the Route 28 Corridor, we did not consider future rent spikes. Overall, we
anticpate that rent growth will pace the rate of inflation, or 3.5 percent per
year.
Obviously, the timing and the amount of rent growth is somewhat
speculative and subjective on our part; however, we have attempted to measure
the effects of future occupancy changes in the market and the potential for
renewed speculative development once the rental rates for newer properties again
justify new office construction. As rental rates increase, newer properties and
those being renovated should benefit.
Again, while not verifiable directly from the market, our projected future
market rent schedule attempts to recognize knowledgeable investors' long-term
growth expectations and is further supported by the Cushman & Wakefield Investor
Survey included in the Addenda.
Free Rent Concessions
Free rent is not a factor in this environment. Interviews with leasing
agents and a review of the comparable leases indicated that free rent is
non-existent. Thus, we have not provided for any free rent and have selected a
rental rate that is net of any possible rent abatement.
Expense Recovery Income
The existing tenant pays a complete pass through of all operating expenses
at the subject property, excluding structural repairs, leasing commissions and
alterations. This is typical of triple net leases in the marketplace.
Parking and Other Income
Based on our survey of competitive office buildings, it is not common
practice to charge for parking in the subject's submarket. Only those buildings
with parking structures in central business district locations typically have
parking fees. Thus, parking income is not a factor at the subject.
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Income Approach
Based on a review of the financial statements, the subject does not have a
history of receiving other income. Thus, we have not considered it in our
analysis.
Vacancy and Collection Loss
Our cash flow projection assumes a tenant vacancy of 12 months upon lease
expiration set against our probability of renewal estimated at 60 percent. This
results in a weighted average downtime of approximately five months. in addition
to a vacancy/global credit loss provision applied to the gross rental income.
Given the strength of the existing tenant, we applied a vacancy/global credit
loss of 0.5 percent throughout the holding period.
Based on the subject's weighted average downtime between leases, the
overall average occupancy rate of the subject property over the ten year holding
period is 4.0 percent, assuming an average ten year lease term. Including our
overall vacancy/global credit loss allowance, the implied overall occupancy rate
of the subject property over the ten year holding period is 4.5 percent.
Operating Expenses
We based our estimate of operating expenses for the subject on a review of
the actual 1994 through 1996 expenses, as well as the 1997 budget. This data was
compared with expense comparables at similar suburban office buildings as well
as industry studies. In addition, we have consulted Cushman & Wakefield's
Management Services staff for further support. The Historical and Budget
Operating Statements for the subject property provided by property management
can be found in the Addenda.
We have analyzed each item of expense individually and attempted to
project what the typical investor would consider reasonable. Increases in the
expenses during subsequent years are projected at 3.5 percent per annum. Based
on historical CPl trends, we conclude that our selected growth rate reflects an
overall inflationary rate over the long term. The forecast of growth rates in
all categories of expenses reflect typical investor expectations as noted in the
Cushman & Wakefield Investor Survey , a copy of which is in the Addenda. Except
where noted, our forecasted growth rate for the various expense categories
generally does not attempt to reflect growth rates for any individual year, but
rather the long term trend over the projected holding period.
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Income Approach
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Real Estate Taxes
Real estate taxes are based on the actual assessment and tax rate reported
in the Real Estate Taxes and Assessment section. The Year One real estate taxes
are equal to $226,531, or $1.32 per square foot of net rentable area. As
previously discussed, the subject's current assessment is 30 percent below our
final value conclusion. We anticipate that the subject will experience a
sizeable tax increase during the next reassesment cycle in January 1998 based on
our estimated value conclusion.
Operating Expenses
Operating expenses include utilities, repairs and maintenance, janitorial
and service contracts, insurance, etc. The building's actual costs have average
$0.90 to $1.24 per square foot. The 1997 budgeted expense is in line with the
historicals at $1.23 per square foot and is considered reasonable. Thus, we have
estimated this expense consistent with the budget, or $1.23 per square foot.
General & Administrative
These expenses are directly connected to the administration of the
building, including office payroll, general office expense, advertising and
other miscellaneous expenses. The building's actual costs have average $0.04 to
$0.08 per square foot. The 1997 budgeted expense is slightly higher than
historicals at $0.11 per square foot. A review of the budget indicated that the
largest increase within this expense category is for maintenance salaries. The
overall budgeted salaries of $11,964 per year does not appear reasonable for a
building of the subject's size; thus, we have estimated this expense consistent
with the budget, or $0.11 per square foot.
Management Fees
This expense represents the fee for management responsibilities, whether
provided by an outside company or ownership. This includes rent collection,
property supervision and budget preparation. Cushman & Wakefield Property
Management personnel reported that typical management agreements range from 2.5
to 3.0 percent of effective gross income. The management fee charged at the
subject is 3.0 percent of effective gross income. It is our opinion that this
rate is reflective of market parameters and as such, a management fee equal to
3.0 percent of effective gross income is estimated for the subject.
Leasing Commissions
New leases will require a leasing commission equivalent to 4.0 percent of
total rental income and 2.0 percent on renewal leases. The new lease commission
rate reflects the fact that a landlord will typically be charged a commission of
3.0 to 4.0 percent by the tenant's agent and 2.0 to 3.0 percent by the
landlord's agent. Upon renewal, landlords resist paying leasing commissions, but
typically pay a portion of the full commission rate or a partial fee to the
management company for its assistance in working with the tenant. This expense
item is not passed through to the tenant. The probability factor is used for
speculative renewals.
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Income Approach
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Tenant Improvements/Finish
The tenant improvement allowance was previously discussed and is projected
to be $10.00 per square foot for new tenants and $5.00 per square foot for
renewals. This expense is also not passed through to the tenants. The
probability factor applies to speculative renewals. Tenant improvements/finish
costs are projected to increase at the rate of 3.5 percent per year through the
projection period.
Capital Replacements/Reserves
Reserves for replacements should be (though as a practical matter, they
may not be) set aside to accumulate an amount sufficient to replace and/or
repair certain major building components, i.e., roof, HVAC system, etc. during
the period under analysis. Taking into consideration the subject's age, we have
estimated capital reserves of $0.25 per net rentable square foot for Year One,
increasing by 3.5 percent per year throughout our analysis.
Our projected expenses are predicated on the assumption that the property
will be prudently managed, while maintaining the improvements at a competitive
level to preserve value. The preceding cumulative annual operating expense
estimate for fiscal year 1998 equates to $579,820 or $3.36 per square foot of
gross leasable area, excluding capital replacements, tenant alterations and
leasing commissions. These expenses appear low for an office building; however,
the tenant pays their own electric, janitorial, and repairs and maintenance
expenses. The growth rates incorporated in our projections result in a 4.6
percent annual compound growth rate over the holding period, which is higher
than our estimate due to the anticipated increase in real estate taxes after
year one.
Discounted Cash Flow Analysis
Based on the assumptions and projects discussed, we employed the Pro-Ject
+plus computer program, which has the flexibility to allow for a tenant by
tenant analysis, to calculate the subject's forecasted cash flow. It also allows
for a variety of assumptions regarding future income streams and expenses. On
the following page is our pro forma of annual cash flows for the property over a
10 year holding period. An 11th year was used to calculate the reversion. We
used the following figures and assumptions in the computer model.
Years in Forecast: 11
Holding Period: 10
Starting Date: July 1, 1997
Market Rental Rate (Year 1) $15.00 per SF, Triple Net
Miscellaneous Income: N/A
Growth in Market Rental Rate: 3.5% per annum
Expense and Tax Pass-Throughs: Tenants pay pro-rata share
of all operating expenses.
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Campus Point
1880 Campus Commons Drive
Reston, Fairfax County, Virginia
Cash Flow Analysis
<TABLE>
<CAPTION>
==================================================================================================================================
Calendar Calendar Calendar Calendar Calendar Calendar Calendar Calendar
Year Year Year Year Year Year Year Year
1998 1999 2000 2001 2002 2003 2004 2005
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUE FROM OPERATIONS
Rental Income $2,353,915 $2,353,915 $2,353,915 $2,157,756 $1,978,880 $3,017,792 $3,093,238 $3,170,569
Total Recoveries $579,819 $637,327 $657,099 $608,798 $468,479 $741,096 $766,105 $791,967
Less: Credit Loss ($14,669) ($14,956) ($15,055) ($13,833) ($12,237) ($18,794) ($19,297) ($19,813)
-------------------------------------------------------------------------------------------------------
Effective Gross Income $2,919,065 $2,976,286 $2,995,959 $2,752,721 $2,435,122 $3,740,094 $3,840,046 $3,942,723
EXPENSES
Real Estate Taxes $257,381 $304,953 $315,627 $326,674 $338,107 $349,941 $362,189 $374,865
Operating Expenses $215,018 $222,543 $230,332 $238,394 $246,738 $255,373 $264,312 $273,562
General & Administrative $19,849 $20,544 $21,263 $22,007 $22,778 $23,575 $24,400 $25,254
Management $87,572 $89,289 $89,879 $82,582 $73,054 $112,203 $115,201 $118,282
-------------------------------------------------------------------------------------------------------
TOTAL EXPENSES $579,820 $637,329 $657,101 $669,657 $680,677 $741,092 $766,102 $791,963
=======================================================================================================
Net Operating Income $2,339,245 $2,338,957 $2,338,858 $2,083,064 $1,754,445 $2,999,002 $3,073,944 $3,150,760
=======================================================================================================
Commissions $0 $0 $0 $0 $1,064,168 $0 $0 $0
Capital Reserves $43,112 $44,621 $46,183 $47,799 $49,472 $51,204 $52,996 $54,851
Alterations $0 $0 $0 $0 $1,385,216 $0 $0 $0
-------------------------------------------------------------------------------------------------------
$2,296,133 $2,294,336 $2,292,675 $2,035,265 ($744,411) $2,947,798 $3,020,948 $3,095,909
==================================================================================================================================
</TABLE>
=================================================================
Calendar Calendar Calendar
Year Year Year
2006 2007 2008
=================================================================
REVENUE FROM OPERATIONS
Rental Income $3,249,833 $3,331,079 $3,414,355
Total Recoveries $818,711 $846,365 $874,983
Less: Credit Loss ($20,343) ($20,887) ($21,447)
--------------------------------------
Effective Gross Income $4,048,201 $4,156,557 $4,267,871
EXPENSES
Real Estate Taxes $387,986 $401,565 $415,620
Operating Expenses $283,137 $293,047 $303,304
General & Administrative $26,138 $27,053 $27,999
Management $121,446 $124,697 $128,036
--------------------------------------
TOTAL EXPENSES $818,707 $846,362 $874,959
======================================
Net Operating Income $3,229,494 $3,310,195 $3,392,912
======================================
Commissions $0 $0 $0
Capital Reserves $56,770 $58,757 $60,814
Alterations $0 $0 $0
--------------------------------------
$3,172,724 $3,251,438 $3,332,098
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WAKEFIELD(R)
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Income Approach
================================================================================
Expense Growth Rate: 3.5% per annum
Consumer Price Index: 3.5% per annum
Free Rent: None
Lease Term (Typical): 10 years
Renewal Probability: 60%
Tenant Improvements - New Leases $10.00 per SF
Tenant Improvements - Renewing Leases $5.00 per SF
Leasing Commissions: 4% new leases; 2% for renewals.
All payable in year 1 of the
lease.
Vacancy Between Leases: 12 months (prior to renewal
probability of 60%; effective
vacancy is 5 months
Credit Loss: 0.5%
Reversion Cap Rate: 10% (applied to net operating
income).
Reversion Selling Expenses: 3% (includes brokerage, legal fees
and estimated transfer taxes).
Discount Rate (IRR): 12.0% (see Discount Rate
Analysis).
Derivation of Terminal Value
The sale of the property is projected to occur in the final year of our
analysis. We estimated the terminal value using the direct capitalization method
wherein an overall rate is applied directly to the net operating income from the
eleventh year of the projection.
We derived the terminal capitalization rate from an analysis of the actual
market sales in the Sales Comparison Approach and information noted in the real
estate investment market. The capitalization rate (OAR) is computed by dividing
net operating income by the sales price. The market derived overall
capitalization rates from the comparable sales are as follows:
====================================================
Summary of Capitalization Rates
====================================================
Sale Capitalization
No. Rate
====================================================
1 10.30%
2 N/A
3 8.54%
4 9.20%
====================================================
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Income Approach
The OARs for the comparable sales from which we were able to derive
capitalization rates ranged from 8.30 to 10.30 percent. A premium was added to
today's rate to allow for the risk of unforeseen events or trends which might
affect our estimate of net operating income during the holding period, including
a possible deterioration in market conditions for the property. Investors
typically add 50 to 100 basis points to the "going-in" rate to arrive at a
terminal capitalization rate, according to Cushman & Wakefield's periodic
investor surveys.
Discount Rate Analysis
We estimated future cash flows, including property value at reversion, and
discounted that income stream at an internal rate of return (yield rates)
currently required by investors for similar-quality real property. The yield
rate (internal rate of return or IRR) is the single rate that discounts all
future equity benefits (cash flows and equity reversion) to an estimate of net
present value.
Cushman & Wakefield Valuation Advisory Services periodically surveys
national real estate investors to determine their investment objectives.
Following is a brief review of internal rates of return, overall rates, and
income and expense growth rates considered acceptable by respondents.
======================================================================
Autumn 1996 Investor Survey
Suburban Office Buildings
======================================================================
Going-In Terminal IRR
----------------------------------------------------------------------
Low High Low High Low High
======================================================================
Mean 8.80% 9.50% 9.30% 9.90% 11.2% 11.6%
----------------------------------------------------------------------
Range 8.00% 11.0% 8.00% 11.0% 10.0% 13.0%
======================================================================
The preceding table summarizes the investment parameters of some of the
most prominent investors currently acquiring high-grade investment properties in
the United States. Generally speaking, our survey reveals terminal
capitalization rates of 8.0 to 11.0 percent with the average low and high
responses of 9.3 and 9.9 percent for investment grade offices in non-CBD
suburban locations.
The wide range of investment parameters indicates that property risk and
yield are assessed to a particular investment property based on a variety of
variables. Risk is the primary determinant, and the risk variables include
whether current contract rents are significantly above or below current market
rents; the amount and timing of tenant roll-overs; the risk to lease-up the
property and the strength of the market during the lease-up period; the
durability of the cash flow, and its ability to increase with inflation along
with the creditworthiness of the existing tenancy; investor demand for the
property type; the diversification of the metropolitan area; the property's
location within the local market and the supply and demand for the property type
within the market; and the effective age of the property.
The internal rate of return and terminal capitalization rate selected for
this analysis were strongly influenced by our recent Investor Survey. We realize
that this type of survey reflects target rather than transactional rates.
Transactional rates are usually difficult to obtain in the verification process
and are actually only target rates of the buyer at the time of sale. The
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<PAGE>
Income Approach
property's performance will ultimately determine the actual yield and
capitalization rate at the time of sale after a specific holding period. We have
found that, in improving markets or with above average properties, demand will
be high and transactional rates may be lower than target rates that are quoted
in surveys. We have tried to recognize this factor in our choice of these two
rates for our cash flow model.
The Washington, D.C. area has been consistently cited as one of the top
office investment markets in the country. With the strength of the office demand
created by the federal government and the national and international entities
that must locate in close proximity to the seat of government, this market is
highly regarded among investors. With the persistent questions about future
federal employment, and hence office space demand, some caution is warranted.
Even so, the capitalization rates and yield rates required by investors for
quality properties in the metropolitan area are consistently among the lowest in
the nation.
In our DCF model, we selected a terminal capitalization rate that
accounted for the anticipated holding period and reflected the subject's
tenancy, quality and location. This rate also reflected the risk involved in our
DCF analysis based on the income and expense projections that were modeled, as
well as the approximate age of the property at the end of the holding period.
The rate we selected reflects the significant rollover risk in year four of the
analysis when 100 percent of the bulding expires due to Bell Atlantics lease
expiration.
Conclusion
Using a 10.0 percent terminal rate and a 12.0 percent discount rate, our
cash flow model indicated a value of $23,300,000 or $135.11 per square foot, as
shown on the following page. This value estimate produces an implied going-in
capitalization rate of 10.0 percent, which falls toward the upper end of the
range generally required by investors as noted in the Cushman & Wakefield
Investor Survey. We deem this reasonable because of the property has a relative
flat income stream during the first four years of the analysis due to the flat
Bell Atlantic lease.
Regarding the composition of the yield, as analyzed in the Discounted Cash
Flow Analysis chart, 55 percent of the subject's ultimate yield is derived from
the cash flow of the property with the balance attributable to the reversion or
resale of the property at the conclusion of the holding period. Typical investor
requirements dictate that a substantial amount of the value be derived from the
cash flow. Greater risk is evident when the reversion provides a larger
percentage of the overall return than the cash flows. The average cash on cash
return is 10.2 percent, based on this value conclusion. This rate would generate
investor interest because the yields are appropriate relative to the risks
involved.
Thus, it is our opinion that the market value of the property by the
Income Approach, is $23,300,000.
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Campus Point
1880 Campus Commons Drive
Reston, Fairfax County, Virginia
Discounted Cash Flow Analysis
================================================================================
NET DISCOUNT PRESENT ANNUAL
CALENDAR CASH FACTOR @ VALUE OF COMPOSITION CASH ON CASH
YEAR FLOW 12.00% CASH FLOWS OF YIELD RETURN
================================================================================
1998 $2,296,133 X 0.89286 = $2,050,119 8.81% 9.85%
1999 $2,294,336 X 0.79719 = $1,829,031 7.86% 9.85%
2000 $2,292,675 X 0.71178 = $1,631,881 7.01% 9.84%
2001 $2,035,265 X 0.63552 = $1,293,448 5.56% 8.74%
2002 ($744,411) X 0.56743 = ($422,399) -1.81% -3.19%
2003 $2,947,798 X 0.50663 = $1,493,446 6.42% 12.65%
2004 $3,020,948 X 0.45235 = $1,366,523 5.87% 12.97%
2005 $3,095,909 X 0.40388 = $1,250,386 5.37% 13.29%
2006 $3,172,724 X 0.36061 = $1,144,116 4.91% 13.62%
2007 $3,251,438 X 0.32197 = $1,046,876 4.50% 13.95%
----------- ------
Total Present Value of Cash Flows $12,683,427 54.48% 10.16%
Average
Reversion:
2008 $3,392,912 (1) / 10.00% = $33,929,120
Less: Cost of Sale @ 3.00% $1,017,874
-----------
Net Reversion $32,911,246
X Discount Factor 0.32197
-----------
Total Present Value of Reversion $10,596,541 45.52%
Total Present Value of Cash Flow $23,279,967 100.00%
ROUNDED: $23,300,000
===========
-------------------------------------------------------
Gross Leasable Area (S.F.): 172,448
Per Square Foot of Gross Leasable Area: $135.11
Implicit Going-In Capitalization Rate:
Year One NOI $2,339,245
Going-In Capitalization Rate: 10.0%
-------------------------------------------------------
Note: (1) Net Operating Income
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RECONCILIATION AND FINAL VALUE ESTIMATE
================================================================================
We employed all three approaches to value in our analysis. The indicated
values are shown below:
Sales Comparison Approach $23,500,000
Income Approach $23,300,000
The three traditional methods of estimating the market value of commercial
real estate are not mutually exclusive approaches to deriving an estimate of
most probable selling price, but are inter-dependent methodologies, each relying
on components from at least one of the other approaches. Hence, the Cost
Approach requires extensive market data to derive estimates of depreciation and
to determine the value of land as if vacant. This approach may also require
income data in order to make adjustments for functional and economic
obsolescence. The Sales Comparison Approach requires application of methods from
the Income Capitalization Approach in order to make adjustments for differences
in income that have influenced the sale price. Consideration of market data is
also required for the Income Capitalization Approach in the selection and
application of equity, capitalization and discount rates, and estimation of
income and expenses. Consequently, it is our opinion that purchasers and
sellers, at least intuitively, consider components of all three approaches in
the process of negotiating an acceptable price for a particular property.
It is the Income Capitalization Approach, however, that is logically
considered the most appropriate technique for estimating the value of
income-producing property. Not only does this approach represent the most direct
and accurate simulation of market behavior, it is the method explicitly employed
by buyers and sellers in acquisition and disposition decisions. Therefore,
following the implied dictum of the market, we have used an approach based
primarily on projected income as the foundation for our valuation of the subject
property.
There are several additional reasons why the Sales Comparison Approach
does not form the basis of our value estimate for the subject property. The
quantity and quality of market information inhibits the use of the Sales
Comparison Approach. Inadequacy of information regarding gross and net income,
lease details and expenses of comparable sales often deters accurate and
relevant adjustments of unit price indicators. Comparison at a dollar per square
foot level precludes the analysis of those key factors which form the basis for
projections on which the purchase decision was made.
Based on the above discussion, we have formed an opinion that the market
value of the leased fee estate in the subject property, subject to the
assumptions, limiting conditions, certifications and definitions as of July 1,
1997, was:
TWENTY THREE MILLION THREE HUNDRED THOUSAND DOLLARS
$23,300,000
Marketing Time
Marketing time is an estimate of the time that might be required to sell a
real property interest at the appraised value. Marketing time is presumed to
start on the effective date of the appraisal, whereas exposure time is presumed
to precede the effective date of appraisal. The
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Reconciliation and Final Value Conclusion
================================================================================
estimate of marketing time uses some of the same data analyzed in the process of
estimating the reasonable exposure time and is not intended to be a prediction
of a date of sale.
Our estimate of an appropriate marketing time for the subject relates to a
sale of the property in its As Is condition. Based on our discussions with local
brokers and buyer/sellers of office projects like the subject, as well as our
assessment of the local real estate market and economic forces in general, we
have concluded that the probable marketing period for the subject property in
today's environment would be about 12 months.
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ASSUMPTIONS AND LIMITING CONDITIONS
================================================================================
"Appraisal" means the appraisal report and opinion of value stated therein; or
the letter opinion of value, to which these Assumptions and Limiting Conditions
are annexed.
"Property" means the subject of the Appraisal.
"C&W" means Cushman & Wakefield, Inc. or its subsidiary which issued the
Appraisal.
"Appraiser(s)" means the employee(s) of C&W who prepared and signed the
Appraisal.
This appraisal is made subject to the following assumptions and limiting
conditions:
1. No opinion is intended to be expressed and no responsibility is assumed
for the legal description or for any matters which are legal in nature or
require legal expertise or specialized knowledge beyond that of a real
estate appraiser. Title to the Property is assumed to be good and
marketable and the Property is assumed to be free and clear of all liens
unless otherwise stated. No survey of the Property was undertaken.
2. The information contained in the Appraisal or upon which the Appraisal is
based has been gathered from sources the Appraiser assumes to be reliable
and accurate. Some of such information may have been provided by the owner
of the Property. Neither the Appraiser nor C&W shall be responsible for
the accuracy or completeness of such information, including the
correctness of estimates, opinions, dimensions, sketches, exhibits and
factual matters.
3. The opinion of value is only as of the date stated in the Appraisal.
Changes since that date in external and market factors or in the Property
itself can significantly affect property value.
4. The Appraisal is to be used in whole and not in part. No part of the
Appraisal shall be used in conjunction with any other appraisal.
Publication of the Appraisal or any portion thereof without the prior
written consent of C&W is prohibited. Except as may be otherwise stated in
the letter of engagement, the Appraisal may not be used by any person
other than the party to whom it is addressed or for purposes other than
that for which it was prepared. No part of the Appraisal shall be conveyed
to the public through advertising, or used in any sales or promotional
material without C&W's prior written consent. Reference to the Appraisal
Institute or to the MAI designation is prohibited.
5. Except as may be otherwise stated in the letter of engagement, the
Appraiser shall not be required to give testimony in any court or
administrative proceeding relating to the Property or the Appraisal.
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Assumptions and Limiting Conditions
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6. The Appraisal assumes (a) responsible ownership and competent management
of the Property; (b) there are no hidden or unapparent conditions of the
Property, subsoil or structures that render the Property more or less
valuable (no responsibility is assumed for such conditions or for
arranging for engineering studies that may be required to discover them);
(c) full compliance with all applicable federal, state and local zoning
and environmental regulations and laws, unless noncompliance is stated,
defined and considered in the Appraisal; and (d) all required licenses,
certificates of occupancy and other governmental consents have been or can
be obtained and renewed for any use on which the value estimate contained
in the Appraisal is based.
7. The physical condition of the improvements considered by the Appraisal is
based on visual inspection by the Appraiser or other person identified in
the Appraisal. C&W assumes no responsibility for the soundness of
structural members nor for the condition of mechanical equipment, plumbing
or electrical components.
8. In preparing this appraisal, we have relied on the rent roll and the
history of income and expenses furnished by the owner or the management
company representing the owner. We have not reviewed actual tenant leases.
9. The forecasts of income and expenses are not predictions of the future.
Rather, they are the Appraiser's best estimates of current market thinking
on future income and expenses. The Appraiser and C&W make no warranty or
representation that these forecasts will materialize. The real estate
market is constantly fluctuating and changing. It is not the Appraiser's
task to predict or in any way warrant the conditions of a future real
estate market; the Appraiser can only reflect what the investment
community, as of the date of the Appraisal, envisages for the future in
terms of rental rates, expenses, supply and demand.
10. Unless otherwise stated in the Appraisal, the existence of potentially
hazardous or toxic materials which may have been used in the construction
or maintenance of the improvements or may be located at or about the
Property was not considered in arriving at the opinion of value. These
materials (such as formaldehyde foam insulation, asbestos insulation and
other potentially hazardous materials) may adversely affect the value of
the Property. The Appraisers are not qualified to detect such substances.
C&W recommends that an environmental expert be employed to determine the
impact of these matters on the opinion of value.
11. Unless otherwise stated in the Appraisal, compliance with the requirements
of the Americans With Disabilities Act of 1990 (ADA) has not been
considered in arriving at the opinion of value. Failure to comply with the
requirements of the ADA may adversely affect the value of the property.
C&W recommends that an expert in this field be employed.
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CERTIFICATION OF APPRAISAL
================================================================================
We certify that, to the best of our knowledge and belief:
1. Kelly J. Small inspected the property and prepared the report, and Donald
R. Morris, MAI, Manager, Cushman & Wakefield of Washington D.C., Valuation
Advisory Services, reviewed and approved the report.
2. The statements of fact contained in this report are true and correct.
3. The reported analyses, opinions, and conclusions are limited only by the
reported assumptions and limiting conditions, and are our personal,
unbiased professional analyses, opinions, and conclusions.
4. We have no present or prospective interest in the property that is the
subject of this report, and we have no personal interest or bias with
respect to the parties involved.
5. Our compensation is not contingent upon the reporting of a predetermined
value or direction in value that favors the cause of the client, the
amount of the value estimate, the attainment of a stipulated result, or
the occurrence of a subsequent event. The appraisal assignment was not
based on a requested minimum valuation, a specific valuation or the
approval of a loan.
6. No one provided significant professional assistance to the persons signing
this report.
7. Our analyses, opinions and conclusions were developed, and this report has
been prepared, in conformity with the Uniform Standards of Professional
Appraisal Practice of the Appraisal Foundation and the Code of
Professional Ethics and the Standards of Professional Appraisal Practice
of the Appraisal Institute.
8. The use of this report is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives.
9. As of the date of this report, Donald R. Morris, MAI, has completed the
requirements of the continuing education program of the Appraisal
Institute.
10. We estimate that the prospective market value of the leased fee estate in
the existing office building, subject to the assumptions, limiting
conditions, certifications and definitions as of July 1, 1997, is
$23,300,000.
/s/ Kelly J. Small /s/ Donald R. Morris
Kelly J. Small Donald R. Morris, MA
Appraiser Manager, Director
Valuation Advisory Services Washington, D.C. Valuation Advisory Services
Virginia Certified General Appraisal
==========================================
COMMONWEALTH OF VIRGINIA
Donald R. Morris
No. 40001-002465
Advisory Services
[ILLEGIBLE]
Appraiser
==========================================
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ADDENDA
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Addenda
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Improved Sales Comparables
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<PAGE>
OFFICE BUILDING SALE
================================================================================
[GRAPHIC OMITTED]
[PHOTO]
[SINGLE TENANT OFFICE BUILDING]
I-1 Sale
Building Name: Single Tenant Office Building
Location: 2051 Mercator
Reston, Fairfax, VA
Parcel Number: 017-3-08-3A-0003-A
Grantor: Intergraph Corporation
Grantee: Inter Rest LLC
Date of Sale: 03/13/97
Recording Date: 03/13/97
Physical Description:
Land Area: 5.23 Acres
Net Rentable Area: 67,900 Square Feet
Year Built: 1985
<PAGE>
OFFICE BUILDING SALE
================================================================================
I-1 Continued
Occupancy at Sale: 100 %
Parking: Adjacent Lot
Quality: Good
Construction: Concrete & Steel Frame
Zoning: 14, Fairfax County
Stories: 1
Sale Price: $8,425,000
Terms of Sale: All Cash Sale
Economic Indicators:
Gross Annual Income: $894,922
Less: Operating Expenses: $26,848
Net Operating Income: $868,074
Sale Price/Square Foot (RSF): $124.08
COMMENTS:
This transaction involves a 20 year leaseback with
four 5-year options. The lease rate starts at $13.18
per square foot NNN with a 2 percent
escalator. Vacancy and expense are estimated.
Confirmation Data:
Date: 06/20/97
By: APPRAISER
DCA4-4288
<PAGE>
OFFICE BUILDING SALE
================================================================================
[GRAPHIC OMITTED]
[PHOTO]
I-2 Sale
Building Name: 3 Office Buildings
Location: 12490-12526 Sunrise Valley Dr.
Reston, Fairfax, VA
Parcel Number: 16-4-001-0014B,0028,0029
Grantor: Technology Park Associates
(et al)
Grantee: Spring Communications Company
Date of Sale: 12/31/96
Recording Data: Book 9894, Pages 551-552
Recording Date: 12/31/96
Physical Description:
Land Area: 40.45 Acres
<PAGE>
OFFICE BUILDING SALE
================================================================================
I-2 Continued
Net Rentable Area: 553,362 Square Feet
Year Built: 1983
Occupancy at Sale: 100 %
Parking: Parking Lot, 1200 Spaces
Quality: Good
Construction: Concrete & Steel Frame
Zoning: 14, Fairfax County
Stories: 3
Sale Price: $76,300,000
Terms of Sale: First Lincoln National
Life $11,158,855
Sale Price/Square Foot (RSF): $137.88
COMMENTS:
The buyer has leased the subject property since
the mid 1980s and will continue to do so.
Confirmation Data:
Date: 06/20/97
By: APPRAISER
DCA4-4289
<PAGE>
OFFICE BUILDING SALE
================================================================================
[GRAPHIC OMITTED]
[PHOTO]
I-3 Sale
Building Name: Dulles Corner-2 Office Bldgs
Location: 2411 Dulles Corner Blvd
Reston, Fairfax, VA
Parcel Number: 015-4-02-0006-A,0015-A
Grantor: Dulles Corner Properties II LP
Grantee: Prentiss Properties
Acquisition
Date of Sale: 12/31/96
Recording Data: Liber 9893 Folio 822
Recording Date: 12/31/96
Physical Description:
Land Area: 10.11 Acres
<PAGE>
OFFICE BUILDING SALE
================================================================================
I-3 Continued
Net Rentable Area: 280,672 Square Feet
Year Built: 1990
Occupancy at Sale: 100 %
Parking: 374 Open, 561 Covered
Quality: Good
Construction: Concrete & Steel Frame
Zoning: PDC, Fairfax County
Stories: 12
Sale Price: $41,100,000
Terms of Sale: All Cash Sale
Economic Indicators:
Gross Annual Income: $5,613,440
Effective Gross Income: $5,613,440
Less: Operating Expenses: $1,824,368
Net Operating Income: $3,789,072
Sale Price/Square Foot (RSF): $146.43
COMMENTS:
The average lease rate from existing tenants was
reported at $20 per square foot with operating
expenses of $6.50 per square foot per year.
Confirmation Data:
Date: 06/20/97
By: APPRAISER
DCA4-4290
<PAGE>
OFFICE BUILDING SALE
================================================================================
[GRAPHIC OMITTED]
[PHOTO]
I-4 Sale
Building Name: Commerce Executive IV & V
Location: 11400, 11440 Commerce Park Dr
Reston, Fairfax, VA
Parcel Number: 017-4-12-0011-D5,D7
Grantor: Cornerstone Suburban Office LP
Grantee: Commerce Executive Park IV,Inc
Date of Sale: 12/19/96
Recording Data: Liber 9883 Folio 1880, 1883
Recording Date: 12/19/96
Physical Description:
Land Area: 6.47 Acres
Net Rentable Area: 306,690 Square Feet
<PAGE>
OFFICE BUILDING SALE
================================================================================
I-4 Continued
Year Built: 1988
Occupancy at Sale: 100 %
Parking: 18 Open, 767 Covered Spaces
Quality: Excellent
Construction: Steel Frame
Zoning: 13, Fairfax County
Stories: 6
Sale Price: $40,750,000
Terms of Sale: All Cash Sale
Economic Indicators:
Gross Annual Income: $5,272,381
Effective Gross Income: $5,410,012
Less: Operating Expenses: $1,625,000
Net Operating Income: $3,732,417
Sale Price/Square Foot (RSF): $132.87
COMMENTS:
The building was 100 percent leased to 22 tenants at the
time of the sale. Minimal rollover is expected until 2002
when 53% of the leases will expire. The average
rent was $16.84 per square foot. The largest
tenant is Cordant who occupies 137,000 square feet.
The building has a significant number of below
market leases.
Confirmation Data:
Date: 06/20/97
By: APPRAISER
DCA4-4291
<PAGE>
Addenda
================================================================================
Replacement Cost Estimate
================================================================================
<PAGE>
================================================================================
Estimating Replacement Cost New-Office
================================================================================
Steel Frame, Good Quality (Class A, Good) GBA (SF) Unit Cost Total
-----------------------------------
Base Cost (Section 15, Page 17, June 1997) 172,448 $108.89
Floor Area - Perimeter Adjustment
(Section 15, Page 34) 1.0 $18,777,863
Add Sprinklers (Section 15, Page 33) 172,448 $1.34 $231,080
-----------
Replacement Cost New $110.23 $19,008,943
Current Cost Multiplier 1.00
Local Cost Multiplier 1.00
Adjusted Replacement Cost New-Building $19,008,943
Site Improvements
Paving - @ 80% land area (Section 66) 365,904 $2.00 $731,808
Landscaping - Lumps Sum $25,000
Lighting - Lump Sum $10,000
-----------
Base Site Improvements New $766,808
Current Cost Multiplier 1.00
Local Cost Multiplier 1.00
Replacement Cost New - Site Improvements $4.45 $766,808
Total Replacement Cost - Building plus
Site Improvements $114.68 $19,775,751
Indirect Construction Costs
Developer's Profit (See Note 1) $3,070,613
Permanent Loan Fees and Closing Costs
(See Note 2) 353,120
Construction Loan Fee (See Note 3) $99,000
Leasing Commissions (See Note 4) $596,000
Total Indirect Costs $23.88 $4,118,733
Replacement Cost New, rounded $138.56 $23,894,484
Notes:
Note 1: Developer's Profit calculated at 15 percent of direct and indirect
costs.
Note 2: Permanent loan fees and closing costs calculated at 2.0 percent of
direct and indirect costs using a 75% L/V (loan to value ratio)
Note 3: Construction loan fee is calculated at 0.5 percent of a 75% L/V for
direct costs
Note 4: Leasing commission calculated 4% based on 95% occpuancy at market rent
================================================================================
<PAGE>
Addenda
================================================================================
Income and Expense Statements
================================================================================
<PAGE>
Historical and Budget Operating Statements
Campus Point
Building NRA 172,448 SF
<TABLE>
<CAPTION>
1994 Actual 1995 Actual 1996 Actual Budget 1997
------------------- ------------------- ------------------- -------------------
Item Amount Per SF Amount Per SF Amount Per SF Amount Per SF
=========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME
Gross Income $2,223,513 $12.89 $2,284,219 $13.25 $2,284,936 $13.25 $2,284,936 $13.25
Reimbursements 358,559 2.08 412,191 2.39 560,093 3.25 567,675 $3.29
-------------------------------------------------------------------------------------------
Total Income $2,582,072 $14.97 $2,696,410 $15.64 $2,845,029 $16.50 $2,852,611 $16.54
-------------------------------------------------------------------------------------------
EXPENSES
Real Estate Taxes $182,340 $1.06 $192,858 $1.12 $216,964 $1.26 $258,200 1.50
Operating Expense 157,348 0.91 155,837 0.90 213,214 1.24 211,927 1.23
General & Administrative 6,965 0.14 13,770 0.08 8,249 0.05 19,564 0.11
Management Fee 29,552 0.17 53,486 0.31 85,869 0.50 85,584 0.50
-------------------------------------------------------------------------------------------
Total Expenses $376,205 $2.18 $415,950 $2.41 $524,296 $3.04 $575,275 $3.34
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
NET OPERATING INCOME $2,205,867 $12.79 $2,280,460 $13.22 $2,320,733 $13.46 $2,277,336 $13.21
===========================================================================================
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Addenda
================================================================================
Pro-ject Reports
================================================================================
<PAGE>
CAMPUS POINT
PROJECT DESIGNATOR: CAMP
REVISION: 6/20/97 o 14:15
TENANT REGISTER
6/20/97 @ 14:15
TENANT SQUARE FEET BEGIN DATE END DATE
- --------------------------------------- ----------- ---------- --------
# 1 BELL ATLANTIC 172,448 2/1994 4/2001
-----------
1 TENANTS 172,448
===========
<PAGE>
CAMPUS POINT
PROJECT DESIGNATOR: CAMP
REVISION: 6/20/97 @ 14:15
AVERAGE OCCUPANCY REPORT
FOR ALL TENANTS
6/20/97 @ 14:15
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001 2002 2003 2004 2005
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
JANUARY 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448
FEBRUARY 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448
MARCH 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448
APRIL 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448
MAY 172,448 172,448 172,448 172,448 - 172,448 172,448 172,448 172,448
JUNE 172,448 172,448 172,448 172,448 - 172,448 172,448 172,448 172,448
JULY 172,448 172,448 172,448 172,448 - 172,448 172,448 172,448 172,448
AUGUST 172,448 172,448 172,448 172,448 - 172,448 172,448 172,448 172,448
SEPTEMBER 172,448 172,448 172,448 172,448 - 172,448 172,448 172,448 172,448
OCTOBER 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448
NOVEMBER 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448
DECEMBER 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448
------- ------- ------- ------- ------- ------- ------- ------- -------
AVERAGE SF
OCCUPIED-OCCA 172,448 172,448 172,448 172,448 100,595 172,448 172,448 172,448 172,448
TOTAL SF-NRA 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448
------- ------- ------- ------- ------- ------- ------- ------- -------
OCCUPANCY % 100.00 100.00 100.00 100.00 58.33 100.00 100.00 100.00 100.00
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
2006 2007 2008 2009 2010 2011 2012 2013 2014
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
JANUARY 172,448 172,448 172,448 172,448 172,448 172,448 - 172,448 172,448
FEBRUARY 172,448 172,448 172,448 172,448 172,448 172,448 - 172,448 172,448
MARCH 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448
APRIL 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448
MAY 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448
JUNE 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448
JULY 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448
AUGUST 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448
SEPTEMBER 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448
OCTOBER 172,448 172,448 172,448 172,448 172,448 - 172,448 172,448 172,448
NOVEMBER 172,448 172,448 172,448 172,448 172,448 - 172,448 172,448 172,448
DECEMBER 172,448 172,448 172,448 172,448 172,448 - 172,448 172,448 172,448
------- ------- ------- ------- ------- ------- ------- ------- -------
AVERAGE SF
OCCUPIED-OCCA 172,448 172,448 172,448 172,448 172,448 129,336 143,707 172,448 172,448
TOTAL SF-NRA 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448
------- ------- ------- ------- ------- ------- ------- ------- -------
OCCUPANCY % 100.00 100.00 100.00 100.00 100.00 75.00 83.33 100.00 100.00
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
2015 2016 2017 2018 2019 2020 2021 2022 2023
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
JANUARY 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448
FEBRUARY 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448
MARCH 172,448 172,448 172,448 172,448 172,448 172,448 172,448 - 172,448
APRIL 172,448 172,448 172,448 172,448 172,448 172,448 172,448 - 172,448
MAY 172,448 172,448 172,448 172,448 172,448 172,448 172,448 - 172,448
JUNE 172,448 172,448 172,448 172,448 172,448 172,448 172,448 - 172,448
JULY 172,448 172,448 172,448 172,448 172,448 172,448 172,448 - 172,448
AUGUST 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448
SEPTEMBER 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448
OCTOBER 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448
NOVEMBER 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448
DECEMBER 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448
------- ------- ------- ------- ------- ------- ------- ------- -------
</TABLE>
<PAGE>
PAGE 2
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AVERAGE SF
OCCUPIED-OCCA 172,448 172,448 172,448 172,448 172,448 172,448 172,448 100,595 172,448
TOTAL SF-NRA 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448 172,448
------- ------- ------- ------- ------- ------- ------- ------- -------
OCCUPANCY % 100.00 100.00 100.00 100.00 100.00 100.00 100.00 58.33 100.00
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
2024 2025 2026 2027
------- ------- ------- -------
JANUARY 172,448 172,448 172,448 172,448
FEBRUARY 172,448 172,448 172,448 172,448
MARCH 172,448 172,448 172,448 172,448
APRIL 172,448 172,448 172,448 172,448
MAY 172,448 172,448 172,448 172,448
JUNE 172,448 172,448 172,448 172,448
JULY 172,446 172,448 172,448 172,448
AUGUST 172,448 172,448 172,448 172,448
SEPTEMBER 172,448 172,448 172,448 172,448
OCTOBER 172,448 172,448 172,448 172,448
NOVEMBER 172,448 172,448 172,448 172,448
DECEMBER 172,448 172,448 172,448 172,448
------- ------- ------- -------
AVERAGE SF
OCCUPIED-OCCA 172,448 172,448 172,448 172,448
TOTAL SF-NRA 172,448 172,448 172,448 172,448
------- ------- ------- -------
OCCUPANCY % 100.00 100.00 100.00 100.00
======= ======= ======= =======
<PAGE>
CAMPUS POINT
PROJECT DESIGNATOR: CAMP
REVISION: 6/20/97 @ 14:15
ANNUAL CASH FLOW REPORT
BEGINNING 6/1/97 FOR 31 YEARS
6/20/97 @ 14:15
<TABLE>
<CAPTION>
FY1998 FY1999 FY2000 FY2001 FY2002 FY2003 FY2004 FY2005 FY2006
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME
- ------
MINIMUM RENT:
ALL TENANTS 2,353,915 2,353,915 2,353,915 2,157,756 1,978,880 3,017,792 3,093,238 3,170,569 3,249,833
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL MINIMUM RENT 2,353,915 2,353,915 2,353,915 2,157,756 1,978,880 3,017,792 3,093,238 3,170,569 3,249,833
RECOVERIES:
RECOVERIES 579,819 637,327 657,099 608,798 468,479 741,096 766,105 791,967 818,711
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL RECOVERIES 579,819 637,327 657,099 608,798 468,479 741,096 766,105 791,967 818,711
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
GROSS RENTAL
INCOME 2,933,734 2,991,242 3,011,014 2,766,554 2,447,359 3,758,888 3,859,343 3,962,536 4,068,544
VACANCY ALLOWANCE (14,669) (14,956) (15,055) (13,833) (12,237) (18,794) (19,297) (19,813) (20,343)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL INCOME 2,919,065 2,976,286 2,995,959 2,752,721 2,435,122 3,740,094 3,840,046 3,942,723 4,048,201
EXPENSES
- --------
PROPERTY TAXES 257,381 304,953 315,627 326,674 338,107 349,941 362,189 374,865 387,986
OPERATING EXPENSES 215,018 222,543 230,332 238,394 246,738 255,373 264,312 273,562 283,137
G&A EXPENSES 19,849 20,544 21,263 22,007 22,778 23,575 24,400 25,254 26,138
MANAGEMENT FEE 87,572 89,289 89,879 82,582 73,054 112,203 115,201 118,282 121,446
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL EXPENSES 579,820 637,329 657,101 669,657 680,677 741,092 766,102 791,963 818,707
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
NET OPERATING
INCOME 2,339,245 2,338,957 2,338,858 2,083,064 1,754,445 2,999,002 3,073,944 3,150,760 3,229,494
ALTERATIONS 0 0 0 0 1,385,216 0 0 0 0
COMMISSIONS 0 0 0 0 1,064,168 0 0 0 0
RESERVES 43,112 44,621 46,183 47,799 49,472 51,204 52,996 54,851 56,770
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
CASH FLOW 2,296,133 2,294,336 2,292,675 2,035,265 (744,411) 2,947,798 3,020,948 3,095,909 3,172,724
</TABLE>
<PAGE>
CAMPUS POINT PAGE 2
PROJECT DESIGNATOR: CAMP
REVISION: 6/20/97 @ 14:15
ANNUAL CASH FLOW REPORT
BEGINNING 6/1/97 FOR 31 YEARS
6/20/97 @ 14:15
<TABLE>
<CAPTION>
FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME
- ------
MINIMUM RENT:
ALL TENANTS 3,331,079 3,414,355 3,499,715 3,587,208 3,676,887 2,319,090 4,360,744 4,469,762 4,581,506
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL MINIMUM RENT 3,331,079 3,414,355 3,499,715 3,587,208 3,676,887 2,319,090 4,360,744 4,469,762 4,581,506
RECOVERIES:
RECOVERIES 846,365 874,963 904,536 935,118 951,524 568,146 1,032,924 1,083,942 1,120,505
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL RECOVERIES 846,365 874,963 904,536 935,118 951,524 568,146 1,032,924 1,083,942 1,120,505
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
GROSS RENTAL
INCOME 4,177,444 4,289,318 4,404,251 4,522,326 4,628,411 2,887,236 5,393,668 5,553,704 5,702,011
VACANCY ALLOWANCE (20,887) (21,447) (22,021) (22,612) (23,142) (14,436) (26,968) (27,769) (28,510)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL INCOME 4,156,557 4,267,871 4,382,230 4,499,714 4,605,269 2,872,800 5,366,700 5,525,935 5,673,501
EXPENSES
- --------
PROPERTY TAXES 401,565 415,620 430,167 445,223 460,805 476,934 493,626 510,903 528,785
OPERATING EXPENSES 293,047 303,304 313,919 324,906 336,278 348,048 360,229 372,838 385,887
G&A EXPENSES 27,053 27,999 28,979 29,994 31,043 32,130 33,255 34,418 35,623
MANAGEMENT FEE 124,697 128,036 131,467 134,991 138,158 86,184 161,001 165,778 170,205
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL EXPENSES 846,362 874,959 904,532 935,114 966,284 943,296 1,048,111 1,083,937 1,120,500
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
NET OPERATING
INCOME 3,310,195 3,392,912 3,477,698 3,564,600 3,638,985 1,929,504 4,318,589 4,441,998 4,553,001
ALTERATIONS 0 0 0 0 0 2,022,374 0 0 0
COMMISSIONS 0 0 0 0 0 1,553,652 0 0 0
RESERVES 58,757 60,814 62,942 65,145 67,425 69,785 72,228 74,756 77,372
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
CASH FLOW 3,251,438 3,332,098 3,414,756 3,499,455 3,571,560 (1,716,307) 4,246,361 4,367,242 4,475,629
</TABLE>
<PAGE>
CAMPUS POINT PAGE 3
PROJECT DESIGNATOR: CAMP
REVISION: 6/20/97 @ 14:15
ANNUAL CASH FLOW REPORT
BEGINNING 6/1/97 FOR 31 YEARS
6/20/97 @ 14:15
<TABLE>
<CAPTION>
FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME
- ------
MINIMUM RENT:
ALL TENANTS 4,696,044 4,813,445 4,933,781 5,057,126 5,183,554 5,313,142 4,059,109 5,094,211 6,240,408
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL MINIMUM RENT 4,696,044 4,813,445 4,933,781 5,057,126 5,183,554 5,313,142 4,059,109 5,094,211 6,240,408
RECOVERIES:
RECOVERIES 1,158,313 1,197,409 1,237,837 1,279,643 1,322,874 1,367,580 1,039,933 1,194,111 1,527,028
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL RECOVERIES 1,158,313 1,197,409 1,237,837 1,279,643 1,322,874 1,367,580 1,039,933 1,194,111 1,527,028
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
GROSS RENTAL
INCOME 5,854,357 6,010,854 6,171,618 6,336,769 6,506,428 6,680,722 5,099,042 6,288,322 7,767,436
VACANCY ALLOWANCE (29,272) (30,054) (30,858) (31,684) (32,532) (33,404) (25,495) (31,442) (38,837)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL INCOME 5,825,085 5,980,800 6,140,760 6,305,085 6,473,896 6,647,318 5,073,547 6,256,880 7,728,599
EXPENSES
- ----------
PROPERTY TAXES 547,292 566,448 586,273 606,793 628,031 650,012 672,762 696,309 720,679
OPERATING EXPENSES 399,393 413,372 427,840 442,814 458,312 474,353 490,956 508,139 525,924
G&A EXPENSES 36,870 38,160 39,496 40,878 42,309 43,790 45,322 46,909 48,551
MANAGEMENT FEE 174,753 179,424 184,223 189,153 194,217 199,420 152,206 187,706 231,858
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL EXPENSES 1,158,308 1,197,404 1,237,832 1,279,638 1,322,869 1,367,575 1,361,246 1,439,063 1,527,012
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
NET OPERATING
INCOME 4,666,777 4,783,396 4,902,928 5,025,447 5,151,027 5,279,743 3,712,301 4,817,817 6,201,587
ALTERATIONS 0 0 0 0 0 0 0 2,852,759 0
COMMISSIONS 0 0 0 0 0 0 0 2,134,850 0
RESERVES 80,080 82,883 85,784 88,786 91,894 95,110 98,439 101,884 105,450
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
CASH FLOW 4,586,697 4,700,513 4,817,144 4,936,661 5,059,133 5,184,633 3,613,862 (271,676) 6,096,137
</TABLE>
<PAGE>
CAMPUS POINT PAGE 4
PROJECT DESIGNATOR: CAMP
REVISION: 6/20/97 @ 14:15
ANNUAL CASH FLOW REPORT
BEGINNING 6/1/97 FOR 31 YEARS
6/20/97 @ 14:15
FY2025 FY2026 FY2027 FY2028
INCOME
- ------
MINIMUM RENT:
ALL TENANTS 6,396,418 6,556,327 6,720,236 4,006,426
--------- --------- --------- ---------
TOTAL MINIMUM RENT 6,396,418 6,556,327 6,720,236 4,006,426
RECOVERIES:
RECOVERIES 1,578,553 1,631,834 1,686,931 1,003,159
--------- --------- --------- ---------
TOTAL RECOVERIES 1,578,553 1,631,834 1,686,931 1,003,159
--------- --------- --------- ---------
GROSS RENTAL
INCOME 7,974,971 8,188,161 8,407,167 5,009,585
VACANCY ALLOWANCE (39,875) (40,941) (42,036) (25,048)
--------- --------- --------- ---------
TOTAL INCOME 7,935,096 8,147,220 8,365,131 4,984,537
EXPENSES
- --------
PROPERTY TAXES 745,903 772,010 799,030 815,109
OPERATING EXPENSES 544,331 563,383 583,101 594,835
G&A EXPENSES 50,250 52,009 53,829 54,912
MANAGEMENT FEE 238,053 244,417 250,954 149,536
--------- --------- --------- ---------
TOTAL EXPENSES 1,578,537 1,631,819 1,686,914 1,614,392
--------- --------- --------- ---------
NET OPERATING
INCOME 6,356,559 6,515,401 6,678,217 3,370,145
ALTERATIONS 0 0 0 0
COMMISSIONS 0 0 0 0
RESERVES 109,141 112,961 116,914 121,006
--------- --------- --------- ---------
CASH FLOW 6,247,418 6,402,440 6,561,303 3,249,139
<PAGE>
CAMPUS POINT
PROJECT DESIGNATOR: CAMP
REVISION: 6/20/97 @ 14:15
PROJECT ASSUMPIONS REPORT
INCLUDING ALL TENANTS
6/20/97 @ 14:16
BUILDING PROLOGUE
- -----------------
LEASEHOLD ANALYSIS OF CAMPUS POINT BEGINNING 6/1997
FOR 31 YEARS ON A FISCAL YEAR BASIS
AREA MEASURES
- -------------
NRA
1997 VALUE - 172,448
THEREAFTER - CONSTANT
OCCA
1997 VALUE - 172,448
1998 VALUE - 172,448
1999 VALUE - 172,448
2000 VALUE - 172,448
2001 VALUE - 100,595
2002 VALUE - 172,448
2003 VALUE - 172,448
2004 VALUE - 172,448
2005 VALUE - 172,448
2006 VALUE - 172,448
2007 VALUE - 172,448
2008 VALUE - 172,448
2009 VALUE - 172,448
2010 VALUE - 172,448
2011 VALUE - 129,336
2012 VALUE - 143,707
2013 VALUE - 172,448
2014 VALUE - 172,448
2015 VALUE - 172,448
2016 VALUE - 172,448
2017 VALUE - 172,448
2018 VALUE - 172,448
2019 VALUE - 172,448
2020 VALUE - 172,448
2021 VALUE - 172,448
2022 VALUE - 100,595
2023 VALUE - 172,448
2024 VALUE - 172,448
2025 VALUE - 172,448
2026 VALUE - 172,448
2027 VALUE - 172,448
THEREAFTER - CONSTANT
GROWTH RATES
- ------------
INC1
1997 VALUE - 3.50
THEREAFTER - CONSTANT
EXP
1997 VALUE - 3.50
THEREAFTER - CONSTANT
ESCL
1997 VALUE - 2.50
THEREAFTER - CONSTANT
<PAGE>
PAGE 2
MARKET RATES
- ------------
MKT1
1997 VALUE - 15.00
THEREAFTER - GROWING AT GROWTH RATE INC1
TINW
1997 VALUE - 10.00
THEREAFTER - GROWING AT GROWTH RATE EXP
TIRN
+50.0% OF TINW
TIWA
+40.0% OF TINW +60.0% OF TIRN
RESR
1997 VALUE - 0.25
THEREAFTER - GROWING AT GROWTH RATE EXP
MISCELLANEOUS INCOMES
- ---------------------
NONE
EXPENSES
- --------
PROPERTY TAXES , REFERRED TO AS TAX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 226,531
1998 VALUE - 300,570
THEREAFTER - GROWING AT GROWTH RATE EXP
OPERATING EXPENSES, REFERRED TO AS OPEX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 211,927
THEREAFTER - GROWING AT GROWTH RATE EXP
G&A EXPENSES , REFERRED TO AS G&A
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 19,564
THEREAFTER - GROWING AT GROWTH RATE EXP
MANAGEMENT FEES , REFERRED TO AS MGMT
AN INFORMATIONAL EXPENSE
1997 VALUE - 86,519
1998 VALUE - 89,046
1999 VALUE - 89,628
2000 VALUE - 90,230
2001 VALUE - 56,993
2002 VALUE - 110,973
2003 VALUE 113,938
2004 VALUE - 116,984
2005 VALUE - 120,113
2006 VALUE - 123,327
2007 VALUE - 126,629
2008 VALUE - 130,022
2009 VALUE - 133,507
2010 VALUE - 137,087
2011 VALUE - 104,237
2012 VALUE - 132,854
2013 VALUE - 163,962
2014 VALUE - 168,339
2015 VALUE 172,836
<PAGE>
PAGE 3
2016 VALUE - 177,455
2017 VALUE - 182,200
2018 VALUE - 187,075
2019 VALUE - 192,083
2020 VALUE - 197,227
2021 VALUE - 202,512
2022 VALUE - 126,638
2023 VALUE - 229,325
2024 VALUE - 235,451
2025 VALUE - 241,744
2026 VALUE - 248,208
2027 VALUE - 254,849
THEREAFTER - CONSTANT
RECOVERIES , REFERRED TO AS RECV
AN INFORMATIONAL EXPENSE
+100.0% OF TAX +100.0% OF OPEX
+100.0% OF G&A +100.0% OF MGMT
RECOVERIES , REFERRED TO AS 0001
AN INFORMATIONAL EXPENSE
1997 VALUE - 0.00
THEREAFTER - CONSTANT
NOT USED , REFERRED TO AS 0000
AN INFORMATIONAL EXPENSE
ZERO
VACANCY ALLOWANCE
- -----------------
PERCENTAGE OF POTENTIAL GROSS INCOME
FOR ALL TENANTS SUBJECT TO VACANCY
1997 VALUE - 0.50
THEREAFTER - CONSTANT
MANAGEMENT FEE
- --------------
PERCENTAGE OF EFFECTIVE GROSS INCOME
FOR ALL TENANTS
PASSED THROUGH TO TENANTS USING EXPENSE MGMT
1997 VALUE - 3.00
THEREAFTER - CONSTANT
COMMISSION CALCULATIONS
- -----------------------
STANDARD METHOD #1 - 4.000% OF TOTAL RENT
STANDARD METHOD #2 - 2.000% OF TOTAL RENT
STANDARD METHOD #3 - 3.200% OF TOTAL RENT
STANDARD METHOD #4 - 0.000% OF TOTAL RENT
STANDARD METHOD #5 - 0.000% OF TOTAL RENT
COMMISSION PAYOUTS
- ------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - CASHED OUT
<PAGE>
PAGE 4
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
ALTERATION CALCULATION
- ----------------------
1997 VALUE - 0.00
1998 VALUE - 0.00
1999 VALUE - 0.00
2000 VALUE - 0.00
2001 VALUE - 0.00
2002 VALUE - 0.00
2003 VALUE - 0.00
2004 VALUE - 0.00
2005 VALUE - 0.00
2006 VALUE - 0.00
2007 VALUE - 0.00
2008 VALUE - 0.00
2009 VALUE - 0.00
2010 VALUE - 0.00
2011 VALUE - 0.00
THEREAFTER - CONSTANT
ALTERATION PAYOUTS
- ------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - CASHED OUT
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
COMMON AREA MAINTENANCE POOL
- ----------------------------
NONE
CAPITAL EXPENDITURES
- --------------------
RESERVES
MARKET RATE RESR MULTIPLIED BY AREA MEASURE NRA
PRIMARY CLASSIFICATION CODES
- ----------------------------
NONE
SECONDARY CLASSIFICATION CODES
- ------------------------------
NONE
<PAGE>
PAGE 5
COST CENTERS
- ------------
NONE
SALES VOLUME PROFILE
- --------------------
PERCENT OF RELATIVE
MONTH ANNUAL SALES VOLUME
- ----- ------------ --------
JAN 8.33% 1.00
FEB 8.33% 1.00
MAR 8.33% 1,00
APR 8.33% 1.00
MAY 8.33% 1.00
JUN 8.33% 1.00
JUL 8.33% 1.00
AUG 8.33% 1.00
SEP 8.33% 1.00
OCT 8.33% 1.00
NOV 8.33% 1.00
DEC 8.33% 1.00
------- -------
TOTALS 100.00% 12.00
GLOBAL RECOVERIES
- -----------------
[ILLEGIBLE] Year Expense , REFERRED TO AS BYES
PRO RATA SHARE RECOVERY OF EXPENSE 0001
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
, REFERRED TO AS INGR
PRO RATA SHARE RECOVERY OF EXPENSE 0000
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
TENANT PROLOGUE
- ---------------
MINIMUM RENTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
SALES VOLUMES AND BREAKPOINTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
RENEWAL RENTS ARE COMPOUNDED ANNUALLY
RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET
REFERENCE TENANTS
- -----------------
NONE
<PAGE>
PAGE 6
TENANTS
- -------
THERE ARE A TOTAL OF 1 LEASEHOLD TENANT(S):
- --------------------------------------------------------------------------------
# 1 - BELL ATLANTIC
BASE LEASE DATES: 2/1994 TO 4/2001
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 172,448
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 13.65/SF/YR
THEREAFTER GROWING AT 0.00%
RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE RECV
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 10.00 5 NONE NONE YES YES
2 10.00 5 NONE NONE YES YES
3 10.00 5 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE ESCL PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE RECV
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NBA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT CASHED OUT
<PAGE>
Addenda
================================================================================
Investor Survey
================================================================================
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET OFFICE MARKET - URBAN/CBD
- ------------------------------------------------------------------------------------------------------------------------------------
9.5% 10.0% 10.0% 10.0% 11.5% 11.5% 3.0% 3.0% 3.0% 4.0% 10.0 10.0
9.5% 10.0% 10.0% 10.5% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
8.0% 9.0% 8.5% 8.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
13.0% 13.0% -- -- 14.0% 14.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
8.0% 8.0% 8.5% 8.5% 10.5% 10.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.3% 9.3% 10.3% 10.3% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 9.0% 8.5% 9.0% 10.5% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
10.0% 10.0% 10.0% 10.0% 12.5% 12.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
9.0% 9.0% 9.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.0% 9.0% 8.0% 9.0% 10.0% 12.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
Responses 11 11 10 10 11 11 11 11 11 11 11 11
Average (%) 9.2% 9.6% 9.2% 9.7% 11.7% 12.0% 3.3% 4.2% 3.4% 3.9% 8.5 9.5
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 9.0% 9.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 12.0% 12.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.5% 9.5% 10.5% 10.5% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 10.0% 10.0% 11.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
15.0% 15.0% -- -- 20.0% 20.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
9.0% 10.0% -- -- -- -- -- -- -- -- -- --
9.0% 10.0% 9.0% 10.0% 12.0% 13.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
Responses 8 8 6 6 7 7 7 7 7 7 7 7
Average (%) 10.0% 10.4% 9.7% 10.3% 12.8% 13.1% 3.3% 4.7% 3.5% 4.0% 8.3 9.7
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
8.0% 9.0% 9.5% 10.0% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
8.0% 10.0% 8.5% 9.0% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0 10.0 10.0
10.0% 10.0% 10.0% 10.0% 13.0% 13.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.5% 9.5% 10.5% 10.5% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
12.0% 12.0% -- -- 13.0% 13.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
-- -- -- -- 12.0% 13.0% 4.0% 4.0% 4.0% 4.0 5.0 10.0
Responses 8 8 7 7 9 9 9 9 9 9 9 9
Average (%) 9.4% 10.0% 9.6% 10.2% 12.8% 13.5% 3.5% 4.6% 3.5% 3.9% 7.6 8.9
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
12.0% 12.0% 12.0% 12.0% 15.0% 15.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.8% 9.8% 10.8% 10.8% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
14.0% 14.0% -- -- 20.0% 20.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 11.0% 14.0% 14.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 6 6 5 5 6 6 6 6 6 6 6 6
Average (%) 10.7% 11.0% 10.5% 11.2% 14.6% 15.3% 3.2% 4.6% 3.3% 3.9% 8.0 8.8
--------------------------------------------------------------------------------------------------------
Total Responses 33 33 28 28 33 33 33 33 33 33 33 33
Weighted Average (%) 9.8% 10.3% 9.7% 10.3% 13.0% 13.5% 3.3% 4.6% 3.4% 3.9% 8.1 9.2
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
8 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET OFFICE MARKET - SUBURBAN/NON - CBD
- ------------------------------------------------------------------------------------------------------------------------------------
9.5% 9.5% 10.5% 10.5% 10.5% 10.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.5% 8.5% 9.3% 9.3% 11.3% 11.3% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
11.0% 11.0% -- -- 12.0% 12.0% 5.0% 3.0% 3.0% 3.0% 5.0 7.0
8.5% 10.0% 9.0% 10.5% 11.0% 12.5% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
8.0% 10.0% 9.5% 10.0% 11.5% 12.0% 4.0% 6.0% 4.0% 4.0% 10.0 10.0
l0.0% 11.0% 10.5% 11.0% 12.0% 12.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.0% 9.0% 8.5% 8.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
8.0% 8.0% 8.5% 8.5% 10.5% 10.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.1% 9.1% 10.1% l0.1% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 10.0% 9.0% 10.5% 11.0% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
9.0% 9.0% 10.0% 10.0% 11.5% 11.5% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.0% 9.0% 9.0% 9.0% 12.0% 13.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.0% 10.0% -- -- -- -- -- -- -- -- --
8.0% 9.0% 8.0% 9.0% 10.0% 12.0% 5.0% 5.0% 4.0% 4.0% 5.0 10.0
Responses 16 16 14 14 15 15 15 15 15 15 15 15
Average (%) 8.8% 9.5% 9.3% 9.9% 11.2% 11.6% 3.5% 4.4% 3.6% 3.8% 8.9 9.7
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
9.5% 9.5% 10.5% 10.5% 10.5% 10.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.8% 8.8% 9.5% 9.5% 11.8% 11.8% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
12.0% 12.0% -- -- 18.0% 18.0% 5.0% 3.0% 3.0% 3.0% 5.0 7.0
10.5% 10.5% 10.0% 10.0% 11.0% 13.0% 2.0% 2.0% 2.0% 2.0% 10.0 10.0
8.0% 10.0% 9.5% 10.0% 11.0% 12.0% 4.0% 6.0% 4.0% 4.0% 10.0 10.0
9.0% 10.0% 9.0% 9.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.0% 11.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.4% 9.4% 10.4% 10.4% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 10.0% 14.0% 15.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
10.0% 11.0% -- -- -- -- -- -- -- -- -- --
10.0% 11.0% 10.0% 11.0% 12.0% 13.0% 5.0% 5.0% 4.0% 4.0% 5.0 10.0
Responses 13 13 11 11 12 12 12 12 12 12 12 12
Average (%) 9.5% 10.0% 9.8% 10.2% 12.0% 12.5% 3.4% 4.5% 3.4% 3.7% 8.6 9.6
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% -- -- 13.0% 13.0% 3.0% 3.0% 3.0% 3.0% 5.0 7.0
8.0% 10.0% 8.5% 9.0% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
10.0% 10.0% 10.0% 10.0% 12.5% 12.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.4% 9.4% 10.4% 10.4% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
6.0% 6.0% 9.0% 9.0% 17.0% 20.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.0% 10.0% -- -- -- -- -- -- -- -- -- --
12.0% 12.0% 10.0% 10.0% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 2.0 2.0
Responses 10 10 8 8 9 9 9 9 9 9 9 9
Average (%) 9.1% 9.7% 9.5% 10.0% 13.4% 14.3% 3.1% 4.6% 3.4% 3.8% 7.2 8.0
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% -- -- 18.0% 18.0% 3.0% 3.0% 3.0% 3.0% 5.0 7.0
10.5% 10.5% 10.0% 10.0% 11.0% 13.0% 2.0% 2.0% 2.0% 2.0% 10.0 10.0
11.0% 11.0% 11.0% 11.0% 14.0% 14.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.6% 9.6% 10.6% 10.6% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
6.0% 6.0% 10.0% 10.0% 20.0% 20.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.0% 10.0% -- -- -- -- -- -- -- -- -- --
12.0% 12.0% 10.0% 10.0% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 2.0 2.0
Responses 10 10 8 8 9 9 9 9 9 9 9 9
Average (%) 9.7% 10.0% 10.0% 10.5% 14.5% 15.2% 2.9% 4.3% 3.2% 3.6% 7.2 8.0
--------------------------------------------------------------------------------------------------------
Total Responses 49 49 41 41 45 45 45 45 45 45 45 45
Weighted Average (%) 9.3% 9.8% 9.7% 10.1% 12.8% 13.4% 3.2% 4.4% 3.4% 3.7% 8.0 8.8
--------------------------------------------------------------------------------------------------------
</TABLE>
AUTUMN 1996 9
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET INDUSTRIAL MARKET - WAREHOUSE/DISTRIBUTION
- ------------------------------------------------------------------------------------------------------------------------------------
9.2% 9.2% 9.5% 9.5% 10.0% 10.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.5% 8.5% 9.3% 9.3% 11.0% 11.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
8.5% 10.0% 9.5% 10.0% 11.0% 12.0% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
9.0% 9.0% 9.5% 9.5% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
8.0% 8.0% 8.5% 8.5% 10.5% 10.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 10.0% 9.0% 10.5% 11.0% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
9.0% 9.0% 10.0% 10.0% 11.0% 11.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
9.0% 9.0% 9.5% 9.5% 10.5% 10.5% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 10 10 10 10 10 10 10 10 10 10 10 10
Average (%) 8.8% 9.2% 9.4% 9.8% 10.9% 11.0% 2.9% 4.0% 3.3% 3.8% 9.8 10.1
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
9.2% 9.2% 9.5% 9.5% 10.0% 10.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.8% 8.8% 9.5% 9.5% 11.3% 11.3% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.5% 11.5% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
10.0% 10.0% 11.0% 11.0% 12.0% 12.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.8% 9.8% 10.3% 10.3% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 7 7 7 7 7 7 7 7 7 7 7 7
Average (%) 9.3% 9.5% 10.0% 10.2% 11.2% 11.2% 2.8% 4.3% 3.2% 3.9% 9.7 10.1
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 12.0% 12.0% 13.0% 13.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.8% 9.8% 10.3% 10.3% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 9.7% 9.9% 10.4% 10.8% 11.9% 11.9% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
12.0% 12.0% 13.0% 13.0% 14.0% 14.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 10.0% 10.5% 10.5% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.5% 10.5% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 10.1% 10.4% 10.9% 11.3% 12.4% 12.4% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
--------------------------------------------------------------------------------------------------------
Total Responses 25 25 25 25 25 25 25 25 25 25 25 25
Weighted Average (%) 9.5% 9.7% 10.2% 10.5% 11.6% 11.6% 2.6% 4.5% 3.2% 4.0% 9.6 10.2
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
10 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET INDUSTRIAL MARKET - BUSINESS PARKS, OTHER INDUSTRIAL & MANUFACTURING
- ------------------------------------------------------------------------------------------------------------------------------------
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 10.0 10.0
9.0% 9.0% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 3 3 4 4 4 4 4 4 4 4
Average (%) 8.9% 9.4% 9.7% 10.7% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.8 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.5% 10.5% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 10.0 10.0
10.0% 10.0% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 3 3 4 4 4 4 4 4 4 4
Average (%) 9.3% 9.8% 9.8% 10.8% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.8 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.5% 10.5% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 5 5 4 4 5 5 5 5 5 5 5 5
Average (%) 9.4% 10.0% 9.9% 10.9% 12.4% 13.2% 3.4% 4.0% 3.2% 3.8% 8.2 9.4
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.5% 10.5% 11.0% 11.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.5% 10.5% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 5 5 4 4 5 5 5 5 5 5 5 5
Average (%) 9.6% 10.2% 10.0% 11.0% 12.4% 13.2% 3.4% 4.0% 3.2% 3.8% 8.2 9.4
--------------------------------------------------------------------------------------------------------
Total Responses 18 18 14 14 18 18 18 18 18 18 18 18
Weighted Average(%) 9.3% 9.8% 9.8% 10.8% 12.0% 12.4% 3.3% 4.0% 3.2% 3.9% 8.5 9.8
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
AUTUMN 1996 11
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET RETAIL MARKET - NEIGHBORHOOD & COMMUNITY CENTERS
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 10.5% 9.5% 10.5% 11.0% 12.5% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
9.5% 10.0% 10.0% 10.0% 12.5% 12.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
10.0% 10.0% 10.5% 10.5% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
10.3% 10.3% 10.8% 10.8% 13.0% 13.0% 2.0% 2.0% 4.0% 4.0% 7.0 7.0
9.0% 9.0% 10.0% 10.0% 10.0% 10.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
9.8% 9.8% 10.3% 10.3% 11.5% 11.5% 3.8% 4.0% 4.0% 4.0% 10.0 10.0
9.0% 10.0% -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
9.0% 9.0% 9.5% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
Responses 9 9 8 8 8 8 9 9 9 9 9 9
Average (%) 9.3% 9.8% 10.0% 10.4% 11.9% 12.1% 2.9% 3.7% 3.4% 3.9% 8.9 9.4
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
10.8% 10.8% 11.3% 11.3% 14.0% 14.0% 2.0% 2.0% 4.0% 4.0% 7.0 7.0
10.0% 10.0% 11.0% 11.0% 12.0% 12.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
9.0% 10.0% -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 11.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.5% 10.5% -- -- -- -- -- -- -- -- -- --
Responses 6 6 4 4 4 4 5 5 5 5 5 5
Average (%) 9.5% 10.0% 10.4% 11.1% 12.3% 12.3% 2.3% 3.8% 3.3% 4.2% 9.0 9.6
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 12.0% 12.0% 13.0% 13.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 10.0 10.0
9.0% 10.0% -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 9.5% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.0% 10.0% -- -- -- -- -- -- -- --
11.0% 11.0% 9.5% 9.5% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 3.0 3.0
Responses 7 7 5 5 5 5 6 6 6 6 6 6
Average (%) 9.7% 10.3% 10.1% 10.7% 13.8% 14.6% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
13.0% 13.0% 14.0% 14.0% 14.0% 14.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 10.0 10.0
9.0% 10.0% -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 11.0% 14.0% 14.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
11.0% 11.0% 10.5% 10.5% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 3.0 3.0
Responses 6 6 5 5 5 5 6 6 6 6 6 6
Average (%) 10.3% 10.8% 10.8% 11.5% 14.2% 15.0% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
--------------------------------------------------------------------------------------------------------
Total Responses 28 28 22 22 22 22 26 26 26 26 26 26
Weighted Average (%) 9.7% 10.2% 10.3% 10.9% 13.0% 13.5% 2.7% 3.9% 3.2% 4.0% 8.7 9.3
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
12 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET RETAIL MARKET - POWER CENTERS & "BIG BOX"
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 9.0% 9.5% 9.5% 11.0% 11.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
10.0% 10.0% 9.5% 9.5% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
10.5% 10.5% 10.5% 10.5% 11.0% 12.0% 2.0% 2.0% 3.0% 3.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.4% 11.4% 3.8% 3.8% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 9.5% 10.0% 11.0% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
9.3% 9.3% 9.5% 10.0% 10.5% 10.5% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.0% 9.0% -- -- -- -- -- -- -- -- -- --
9.0% 9.5% 9.5% 10.0% 11.0% 11.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
Responses 9 9 8 8 8 8 8 8 8 8 8 8
Average (%) 9.4% 9.5% 9.7% 10.1% 11.5% 11.7% 3.3% 3.5% 3.4% 3.7% 9.1 10.1
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
10.8% 10.8% 10.8% 10.8% 11.0% 12.0% 2.0% 3.0% 3.0% 3.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 3 3 3 3 3 3 3 3 3 3 3 3
Average (%) 9.8% 10.1% 10.1% 10.6% 11.0% 11.3% 2.8% 3.7% 3.2% 3.7% 9.3 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.8% 10.8% 10.8% 10.8% 12.0% 12.0% 2.0% 2.0% 3.0% 3.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 3 3 3 3 3 3 3 3 3 3 3 3
Average (%) 9.6% 9.9% 10.1% 10.6% 12.0% 12.0% 2.8% 3.3% 3.2% 3.7% 9.3 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 10.8% 10.8% 12.0% 12.0% 2.0% 2.0% 3.0% 3.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
-- -- -- -- 15.0% 15.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 2 2 2 2 3 3 3 3 3 3 3 3
Average (%) 9.8% 10.3% 10.1% 10.9% 12.7% 12.7% 2.8% 3.3% 3.2% 3.7% 9.3 10.3
--------------------------------------------------------------------------------------------------------
Total Responses 17 17 16 16 17 17 17 17 17 17 17 17
Weighted Average (%) 9.6% 9.9% 10.0% 10.5% 11.8% 11.9% 2.9% 3.5% 3.2% 3.7% 9.3 10.3
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
AUTUMN 1996 13
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET RETAIL MARKET - REGIONAL MALLS
- ------------------------------------------------------------------------------------------------------------------------------------
7.5% 7.5% 8.0% 8.0% 11.3% 11.3% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.0% 9.0% 9.0% 9.0% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
7.5% 7.5% 7.8% 7.8% 12.0% 12.0% 1.5% 2.0% 3.0% 3.0% 10.0 10.0
7.0% 8.0% 8.0% 8.0% 10.5% 11.5% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
9.0% -- -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.0% 8.0% 9.0% 10.5% 11.0% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
8.0% 8.0% 8.5% 8.5% 11.0% 11.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
7.8% 8.0% 8.3% 8.5% 11.0% 12.0% 2.5% 3.0% 2.5% 3.0% 10.0 10.0
7.0% 8.0% 7.0% 8.0% 10.0% 11.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
Responses 10 9 9 9 9 9 10 10 10 10 10 10
Average (%) 7.9% 8.2% 8.2% 8.6% 11.4% 11.8% 3.0% 3.6% 3.5% 3.8% 9.1 9.6
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 10.0% 10.0% 17.0% 17.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
9.0% 9.0% 9.0% 9.0% 13.5% 13.5% 2.0% 2.0% 4.0% 4.0% 7.0 7.0
9.0% 10.0% 10.0% 10.0% 12.0% 14.0% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
10.0% -- -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
Responses 5 4 4 4 4 4 5 5 5 5 5 5
Average (%) 9.3% 9.6% 9.6% 10.0% 13.4% 13.9% 2.5% 3.4% 3.7% 4.0% 8.6 8.6
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 10.0% 10.0% 18.0% 18.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
11.0% 11.0% 11.0% 11.0% 13.0% 14.0% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
9.0% -- -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.5% 8.5% 9.0% 11.5% 12.5% 2.5% 3.0% 2.5% 3.0% 10.0 10.0
Responses 5 4 4 4 4 4 5 5 5 5 5 5
Average (%) 9.3% 9.8% 9.8% 10.3% 13.4% 13.9% 2.6% 3.6% 3.4% 3.8% 9.2 9.2
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 11.0% 11.0% 20.0% 20.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
12.5% 12.5% 12.0% 12.0% 14.0% 15.0% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
10.0% -- -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 9.0% 9.3% 9.8% 12.0% 13.0% 2.5% 3.0% 2.5% 3.0% 10.0 10.0
13.0% 13.0% 11.0% 11.0% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 3.0 3.0
Responses 6 5 5 5 5 5 6 6 6 6 6 6
Average (%) 10.6% 11.0% 10.6% 11.0% 14.6% 15.0% 2.7% 3.5% 3.3% 3.7% 8.2 8.2
--------------------------------------------------------------------------------------------------------
Total Responses 26 22 22 22 22 22 26 26 26 26 26 26
Weighted Average (%) 9.3% 9.6% 9.5% 10.0% 13.2% 13.6% 2.7% 3.5% 3.5% 3.8% 8.8 8.9
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
14 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET RESIDENTIAL - APARTMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
8.5% 10.0% 9.0% 10.5% -- -- -- -- 3.5% 3.5% 1.0 1.0
8.5% 9.0% 9.0% 9.0% 11.0% 11.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
9.8% 9.8% 10.0% 10.0% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
8.3% 9.0% 9.0% 9.5% 10.5% 11.5% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
7.5% 8.5% 8.0% 9.0% 10.0% 11.0% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.8% 8.8% 9.0% 9.0% 11.3% 11.3% 3.8% 4.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 9.0% 9.0% 9.5% 10.0% 11.5% 3.0% 4.0% 3.0% 3.0% 10.0 10.0
8.5% 9.0% 8.5% 9.0% -- -- 3.0% 3.5% 3.0% 3.5% 10.0 10.0
8.8% 9.0% 9.0% 9.5% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 10 10 10 10 8 8 9 9 10 l0 l0 10
Average (%) 8.6% 9.2% 9.0% 9.6% 11.2% 11.7% 2.9% 3.9% 3.3% 3.8% 8.4 8.9
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 9.5% 9.5% 10.0% 11.0% 12.0% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
9.0% 10.0% 10.0% 10.0% 11.0% 12.5% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.0% 10.0% 10.0% 10.5% 10.5% 12.0% 3.0% 4.0% 3.0% 3.0% 10.0 10.0
9.0% 9.5% 9.5% 10.0% 11.5% 11.5% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 5 5 5 5 5 5 5 5 5 5 5 5
Average (%) 8.9% 9.7% 9.7% 10.3% 11.0% 11.8% 2.5% 4.2% 3.1% 4.0% 9.6 10.2
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 11.0% 11.0% 11.0% 12.5% 13.5% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.0% 9.0% 9.0% 11.0% 12.0% 4.0% 6.0% 3.0% 3.0% 3.0 5.0
9.0% 9.0% 9.5% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 8.9% 9.4% 9.8% 10.3% 11.6% 12.1% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
12.0% 13.0% 13.0% 13.0% 13.0% 15.0% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.0% 10.0% 10.0% 11.0% 13.0% 4.0% 6.0% 3.0% 3.0% 3.0 5.0
9.5% 10.0% 10.0% 11.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 9.5% 10.1% 10.6% 11.3% 12.0% 13.0% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
Total Responses 23 23 23 23 21 21 22 22 23 23 23 23
Weighted Average (%) 9.0% 9.6% 9.8% 10.4% 11.5% 12.1% 2.7% 4.4% 3.2% 4.0% 8.4 9.3
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical
issues
AUTUMN 1996 15
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICE SUMMARY OF WEIGHTED AVERAGE
- ------------------------------------------------------------------------------------------------------------------------------------
Urban/CBD 9.8% 10.3% 9.7% 10.3% 13.0% 13.5% 3.3% 4.6% 3.4% 3.9% 8.1 9.2
Class A - Leased Asset 9.2% 9.6% 9.2% 9.7% 11.7% 12.0% 3.3% 4.2% 3.4% 3.9% 8.5 9.5
Class B - Leased Asset 10.0% 10.4% 9.7% 10.3% 12.8% 13.1% 3.3% 4.7% 3.5% 4.0% 8.3 9.7
Class A - Value Added 9.4% 10.0% 9.6% 10.2% 12.8% 13.5% 3.5% 4.6% 3.5% 3.9 7.6 8.9
Class B - Value Added 10.7% 11.0% 10.5% 11.2% 14.6% 15.3% 3.2% 4.8% 3.3% 3.9% 8.0 8.8
Suburban 9.3% 9.8% 9.7% 10.1% 12.8% 13.4% 3.2% 4.4% 3.4% 3.7% 8.0 8.8
Class A - Leased Asset 8.8% 9.5% 9.3% 9.9% 11.2% 11.6% 3.5% 4.4% 3.6% 3.8% 8.9 9.7
Class B - Leased Asset 9.5% 10.0% 9.8% 10.2% 12.0% 12.5% 3.4% 4.5% 3.4% 3.7% 8.6 9.6
Class A - Value Added 9.1% 9.7% 9.5% 10.0% 13.4% 14.3% 3.1% 4.6% 3.4% 3.8% 7.2 8.0
Class B - Value Added 9.7% 10.0% 10.0% 10.5% 14.5% 15.2% 2.9% 4.3% 3.2% 3.6% 7.2 8.0
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL
- ------------------------------------------------------------------------------------------------------------------------------------
Warehouse/Distribution 9.5% 9.7% 10.2% 10.5% 11.6% 11.6% 2.6% 4.5% 3.2% 4.0% 9.6 10.2
Class A - Leased Asset 8.8% 9.2% 9.4% 9.8% 10.9% 11.0% 2.9% 4.0% 3.3% 3.8% 9.8 10.1
Class B - Leased Asset 9.3% 9.5% 10.0% 10.2% 11.2% 11.2% 2.8% 4.3% 3.2% 3.9% 9.7 10.1
Class A - Value Added 9.7% 9.9% 10.4% 10.8% 11.9% 11.9% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
Class 8 - Value Added 10.1% 10.4% 10.9% 11.3% 12.4% 12.4% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
Business Parks 9.4% 9.9% 10.0% 10.8% 12.3% 12.9% 3.4% 4.0% 3.2% 3.8% 8.3 9.6
Class A - Leased Asset 9.0% 9.5% 9.8% 10.5% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
Class B - Leased Asset 9.3% 9.8% 10.0% 10.8% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
Class A - Value Added 9.5% 10.2% 10.0% 10.8% 13.0% 14.3% 3.5% 4.0% 3.2% 3.7% 7.7 8.7
Class B - Value Added 9.7% 10.3% 10.2% 11.0% 13.0% 14.3% 3.5% 4.0% 3.2% 3.7% 7.7 8.7
0ther Industrial/
Manufacturing 9.2% 9.7% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.8 10.3
Class A - Leased Asset 8.8% 9.3% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.5 10.0
Class B - Leased Asset 9.3% 9.8% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.5 10.0
Class A - Value Added 9.3% 9.8% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
Class B - Value Added 9.5% 10.0% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
- ------------------------------------------------------------------------------------------------------------------------------------
RETAIL
- ------------------------------------------------------------------------------------------------------------------------------------
Neighborhood & Community
Centers 9.7% 10.2% 10.3% 10.9% 13.0% 13.5% 2.7% 3.9% 3.2% 4.0% 8.7 9.3
Class A - Leased Asset 9.3% 9.8% 10.0% 10.4% 11.9% 12.1% 2.9% 3.7% 3.4% 3.9% 8.9 9.4
Class B - Leased Asset 9.5% 10.0% 10.4% 11.1% 12.3% 12.3% 2.3% 3.8% 3.3% 4.2% 9.0 9.6
Class A - Value Added 9.7% 10.3% 10.1% 10.7% 13.8% 14.6% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
Class B - Value Added 10.3% 10.8% 10.8% 11.5% 14.2% 15.0% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
Power Center & "Big Box" 9.6% 9.9% 10.0% 10.5% 11.8% 11.9% 2.9% 3.5% 3.2% 3.7% 9.3 10.3
Class A - Leased Asset 9.4% 9.5% 9.7% 10.1% 11.5% 11.7% 3.3% 3.5% 3.4% 3.7% 9.1 10.1
Class B - Leased Asset 9.8% 10.1% 10.1% 10.6% 11.0% 11.3% 2.8% 3.7% 3.2% 3.7% 9.3 10.3
Class A - Value Added 9.6% 9.9% 10.1% 10.6% 12.0% 12.0% 2.8% 3.3% 3.2% 3.7% 9.3 10.3
Class B - Value Added 9.8% 10.3% 10.1% 10.9% 12.7% 12.7% 2.8% 3.3 3.2% 3.7% 9.3 10.3
Regional Malls 9.3% 9.6% 9.5% 10.0% 13.2% 13.6% 2.7% 3.5% 3.5% 3.8% 8.8 8.9
Class A - Leased Asset 7.9% 8.2% 8.2% 8.6% 11.4% 11.8% 3.0% 3.6% 3.5% 3.8% 9.1 9.6
Class B - Leased Asset 9.3% 9.6% 9.6% 10.0% 13.4% 13.9% 2.5% 3.4% 3.7% 4.0% 8.6 8.6
Class A - Value Added 9.3% 9.8% 9.8% 10.3% 13.4% 13.9% 2.6% 3.6% 3.4% 3.8% 9.2 9.2
Class B - Value Added 10.6% 11.0% 10.6% 11.0% 14.6% 15.0% 2.7% 3.5% 3.3% 3.7% 8.2 8.2
Specialty Retail 9.5% 10.5% 10.8% 11.5% 12.0% 12.6 1.9% 4.0% 3.3% 4.0% 10.0 10.5
Class A - Leased Asset 8.2% 9.0% 8.8% 9.7% 10.7% 11.3% 2.5% 4.0% 3.5% 4.0% 8.7 10.3
Class B - Leased Asset 9.3% 10.3% 10.8% 11.5% 11.5% 12.5% 1.8% 4.0% 3.3% 4.0% 10.5 10.5
Class A - Value Added 10.0% 11.0% 11.3% 12.0% 12.5% 13.0% 1.8% 4.0% 3.3% 4.0% 10.5 10.5
Class B - Value Added 10.8% 11.8% 12.3% 13.0% 13.5% 13.5% 1.8% 4.0% 3.3% 4.0% 10.5 10.5
- ------------------------------------------------------------------------------------------------------------------------------------
RESIDENTIAL
- ------------------------------------------------------------------------------------------------------------------------------------
Apartments 9.0% 9.6% 9.8% 10.4% 11.5% 12.1% 2.7% 4.4% 3.2% 4.0% 8.4 9.3
Class A - Leased Asset 8.6% 9.2% 9.0% 9.6% 11.2% 11.7% 2.9% 3.9% 3.3% 3.8% 8.4 8.9
Class B - Leased Asset 8.9% 9.7% 9.7% 10.3% 11.0% 11.8% 2.5% 4.2% 3.1% 4.0% 9.6 10.2
Class A - Value Added 8.9% 9.4% 9.8% 10.3% 11.6% 12.1% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
Class B - Value Added 9.5% 10.1% 10.6% 11.3% 12.0% 13.0% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
</TABLE>
16 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
Single-Tenant NNN Leased Properties
(Excludes "Bondable" Leases)
Minimum No. Going-In Cap Rate Internal Rate of Return
of Years Low High Low High
Investment Grade Tenant
- --------------------------------------------------------------------------------
4.0 9.0% 9.0% 10.0% 12.0%
----------------------------------------------------------
10.0 8.0 9.0 10.5 11.5
----------------------------------------------------------
5.0 10.5 10.5 13.0 13.0
----------------------------------------------------------
10.0 9.0 10.5 13.0 15.0
----------------------------------------------------------
10.0 8.5 9.0 10.5 12.0
----------------------------------------------------------
10.0 9.5 10.0 10.5 11.5
----------------------------------------------------------
10.0 8.5 11.0 10.8 12.0
----------------------------------------------------------
10.0 9.5 9.5 11.0 11.0
----------------------------------------------------------
20.0 9.0 9.0 N/A N/A
----------------------------------------------------------
10.0 8.0 10.0 N/A N/A
- --------------------------------------------------------------------------------
Responses 10.0 10.0 10.0 8.0 8.0
Average 9.9 9.0% 9.8% 11.2% 12.3%
Non-Investment Grade
Tenant
- --------------------------------------------------------------------------------
4.0 9.5% 9.5% 10.5% 13.0%
----------------------------------------------------------
10.0 9.0 10.0 11.5 12.5
----------------------------------------------------------
5.0 13.0 13.0 15.0 15.0
----------------------------------------------------------
10.0 10.0 12.0 17.0 20.0
----------------------------------------------------------
10.0 9.0 10.0 11.0 13.0
----------------------------------------------------------
10.0 11.0 12.0 13.0 15.0
----------------------------------------------------------
10.0 10.5 10.5 13.0 13.0
----------------------------------------------------------
20.0 11.0 11.0 N/A N/A
----------------------------------------------------------
10.0 10.0 12.5 N/A N/A
----------------------------------------------------------
Responses 9.0 9.0 9.0 7.0 7.0
Average 9.9 10.3% 11.2% 13.0% 14.5%
AUTUMN 1996 17
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES BLENDED INTERNAL EQUITY INTERNAL GROWTH RATES TYPICAL PROJECTION MANAGEMENT RESERVES FOR
GOING-IN TERMINAL RATE OF RETURN RATE OF RETURN INCOME EXPENSES PERIOD (YEARS) FEES* REPLACEMENT*
----------------------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
LUXURY
- ------------------------------------------------------------------------------------------------------------------------------------
8.0% 8.0% 10.0% 10.0% 18.0% 18.0% 25.0% 25.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 5.0% 5.0%
7.0% 7.0% 10.0% 10.0% 15.0% 15.0% 20.0% 20.0% 7.0% 7.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
6.0% 9.5% 10.0% 10.0% 12.0% 15.0% 15.0% 18.0% 3.0% 3.0% 3.0% 3.0% 5.0 5.0 2.0% 4.0% 4.0% 4.0%
8.0% 11.0% 8.5% 12.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
9.5% 9.5% 10.5% 10.5% 15.0% 15.0% 18.0% 18.0% 4.5% 4.5% 4.0% 4.0% 10.0 10.0 3.5% 3.5% 4.0% 4.0%
-- -- 11.0% 13.0% 15.0% 15.0% 18.0% 18.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0 3.0% 3.0% 4.0% 4.0%
6.0% 8.0% 10.0% 12.0% 13.0% 14.0% 20.0% 22.0% 3.0% 4.0% 3.0% 4.0% 5.0 5.0 2.0% 3.0% 4.0% 5.0%
8.0% 12.0% 8.0% 10.0% 15.0% 15.0% 20.0% 20.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0 3.0% 4.0% 4.0% 5.0%
Responses 7 7 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8
Average (%) 7.5% 9.3% 9.8% 10.9% 14.5% 15.3% 19.5% 20.1% 4.1% 4.3% 3.8% 3.9% 6.5 6.9 2.8% 3.3% 4.1% 4.4%
- ------------------------------------------------------------------------------------------------------------------------------------
FIRST CLASS
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 9.0% 11.0% 11.0% 12.0% 12.0% 20.0% 20.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
10.0% 10.0% 10.0% 10.0% -- -- 13.0% 13.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0 3.0% 3.0% 4.0% 5.0%
9.0% 9.0% 11.0% 11.0% 14.0% 14.0% 18.0% 18.0% 6.0% 6.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
9.5% 11.0% 11.0% 11.0% 15.0% 20.0% 18.0% 22.0% 3.0% 3.0% 2.0% 2.0% 5.0 5.0 2.0% 3.0% 4.0% 4.0%
10.0% 12.0% 10.5% 13.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
7.0% 9.0% 10.0% 11.0% 11.5% 12.0% 14.0% 16.0% 4.0% 5.0% 3.0% 4.0% 5.0 5.0 2.5% 2.5% 5.0% 5.0%
9.5% 9.5% 10.5% 10.5% 15.0% 15.0% 18.0% 18.0% 4.5% 4.5% 4.0% 4.0% 10.0 10.0 3.5% 3.5% 4.0% 4.0%
9.0% 9.0% 10.5% 10.5% 21.0% 21.0% 14.0% 14.0% 4.0% 4.0% 3.0% 3.0% 7.0 7.0 3.0% 3.0% 4.0% 4.0%
10.0% 12.0% 11.0% 11.0% -- -- -- -- 3.5% 3.5% 3.5% 3.5% 5.0 10.0 2.0% 3.0% 4.0% 4.0%
10.0% 10.0% 9.0% 9.5% 19.0% 19.0% 15.0% 15.0% 8.0% 8.0% 6.0% 6.0% -- -- 2.5% 2.5% 4.0% 4.0%
10.0% 13.0% 12.0% 13.0% 25.0% 25.0% 20.0% 20.0% 3.5% 4.0% 3.5% 4.0% 5.0 5.0 3.5% 3.5% 4.0% 4.0%
10.5% 10.5% 10.5% 10.5% 13.5% 13.5% -- -- 3.5% 3.5% 3.5% 3.5% 10.0 10.0 3.0% 3.0% 5.0% 5.0%
8.0% 12.0% 8.0% 10.0% 15.0% 15.0% 20.0% 20.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0 3.0% 4.0% 4.0% 5.0%
Responses 13 13 13 13 11 11 11 11 13 13 13 13 12 12 13 13 13 13
Average (%) 9.3% 10.5% 10.4% 10.9% 15.8% 16.5% 17.3% 17.8% 4.2% 4.3% 3.7% 3.8% 6.6 7.3 2.8% 3.1% 4.2% 4.3%
- ------------------------------------------------------------------------------------------------------------------------------------
MID-RATE
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 12.0% 12.0% 15.0% 15.0% 18.0% 18.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
11.0% 11.0% 11.0% 11.0% 13.0% 13.0% 17.0% 17.0% 6.0% 6.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
9.5% 11.0% 11.0% 11.0% 15.0% 18.0% 17.0% 20.0% 3.0% 3.0% 2.0% 2.0% 5.0 5.0 2.0% 3.0% 4.0% 4.0%
10.0% 12.0% 10.5% 13.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
9.5% 9.5% 10.5% 10.5% 15.0% 15.0% 18.0% 18.0% 4.5% 4.5% 4.0% 4.0% 10.0 10.0 3.5% 3.5% 4.0% 4.0%
Responses 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5
Average (%) 10.0% 10.7% 11.0% 11.5% 14.2% 15.2% 18.0% 18.6% 4.2% 4.2% 3.7% 3.7% 6.4 7.0 2.9% 3.1% 4.0% 4.0%
----------------------------------------------------------------------------------------------------------------------
Total
Responses 25 25 26 26 24 24 24 24 26 26 26 26 25 25 26 26 26 26
Weighted
Average (%) 8.9% 10.1% 10.4% 11.1% 14.8% 15.7% 18.3% 18.8% 4.2% 4.3% 3.7% 3.8% 6.5 7.0 2.9% 3.2% 4.1% 4.2%
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</TABLE>
*as percent of total revenues
18 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES BLENDED INTERNAL EQUITY INTERNAL GROWTH RATES TYPICAL PROJECTION MANAGEMENT RESERVES FOR
GOING-IN TERMINAL RATE OF RETURN RATE OF RETURN INCOME EXPENSES PERIOD (YEARS) FEES* REPLACEMENT*
----------------------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
MID-RATE HOTEL - LIMITED SERVICE
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 12.0% 12.0% 15.0% 15.0% 15.0% 15.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
12.0% 12.0% 12.0% 12.0% 13.0% 13.0% 17.0% 17.0% 3.0% 3.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
8.0% 10.0% 10.0% 10.0% 12.0% 15.0% 14.0% 16.0% 3.0% 3.0% 2.0% 2.0% 5.0 5.0 3.0% 4.0% 4.0% 5.0%
11.0% 13.0% 11.5% 14.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
11.0% 11.0% 11.8% 11.8% 16.0% 16.0% 19.0% 19.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0 4.0% 4.0% 4.5% 4.5%
10.0% 13.0% 12.0% 13.0% 25.0% 25.0% 20.0% 20.0% 3.5% 4.0% 3.5% 4.0% 5.0 5.0 4.0% 4.0% 5.0% 5.0%
Responses 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6
Average (%) 10.3% 11.5% 11.5% 12.1% 15.7% 16.5% 17.5% 17.8% 3.5% 3.6% 3.7% 3.8% 6.2 6.7 3.3% 3.5% 4.3% 4.4%
- ------------------------------------------------------------------------------------------------------------------------------------
ECONOMY
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 12.0% 12.0% 15.0% 15.0% 15.0% 15.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
13.0% 13.0% 13.0% 13.0% 13.0% 13.0% 17.0% 17.0% 3.0% 3.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
9.0% 11.0% 10.0% 10.0% 12.0% 15.0% 14.0% 16.0% 3.0% 3.0% 3.0% 3.0% 5.0 5.0 4.0% 5.0% 5.0% 5.0%
11.0% 13.0% 11.5% 14.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
11.0% 11.0% 11.8% 11.8% 16.0% 16.0% 19.0% 19.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0 4.0% 4.0% 4.5% 4.5%
Responses 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5
Average (%) 10.8% 11.6% 11.7% 12.2% 13.8% 14.8% 17.0% 17.4% 3.5% 3.5% 3.9% 3.9% 6.4 7.0 3.4% 3.6% 4.3% 4.3%
Total
Responses 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11
Weighted
Average(%) 10.6% 11.6% 11.6% 12.1% 14.7% 15.7% 17.3% 17.6% 3.5% 3.5% 3.8% 3.8% 6.3 6.8 3.4% 3.6% 4.3% 4.4%
</TABLE>
*as percent of total revenues
AUTUMN 1996 19
<PAGE>
Addenda
================================================================================
Appraiser Qualifications
================================================================================
<PAGE>
QUALIFICATIONS
================================================================================
Donald R. Morris, MAI
Professional Affiliations:
Member of the Appraisal Institute (MAI Designations #9812) District of
Columbia Certified General Real Estate Appraiser (#GA00010267)
Commonwealth of Virginia Certified General Real Estate Appraiser
(#4001002465) State of Maryland Certified General Real Estate Appraiser
(#7220) State of West Virginia Certified General Real Estate Appraiser
(#237)
Appraisal/Real Estate Experience:
Director/Manager, Cushman & Wakefield of Washington, D.C. and Assistant
Manager, Cushman & Wakefield of Texas, Inc., Dallas, Texas, Valuation
Advisory Services, a full service real estate organization specializing in
appraisal and consultation. April 1990 to present.
Associate Appraiser, Joseph A. Dengel & Company, Dallas, Texas, May 1977
to April 1990.
Other real estate experience includes work as a residential listing and
selling agent preparing market analyses and origination contracts.
Experience includes appraisal of the following types of property:
Office Buildings Medical Office Buildings
Regional Malls Power Centers
Outlet Centers Community & Neighborhood Shopping Centers
Department Stores Industrial Buildings
Residential Subdivisions Single Family Residences
Multi-Family Properties Condominiums/Duplexes
Subdivision Analysis Farm/Ranch
Mixed Use Properties Golf Courses
Grape Vineyards Special Purpose Facilities
Commercial Land Hotel/Motel
Ad Valorem Tax Appeals
Appraisal and consulting services used for mortgage loans, relocations,
gift and estate tax, condemnation and litigation purposes.
Qualified as an expert witness in state and federal real estate court
cases.
Education:
Bachelor of Arts (Political Science), 1981
University of Texas at Arlington, Arlington, Texas.
<PAGE>
QUALIFICATIONS
================================================================================
Donald R. Morris, MAI
Professional Affifliations:
Member of the Appraisal Institute (MAI Designations #9812) District of
Columbia Certified General Real Estate Appraiser (#GA00010267)
Commonwealth of Virginia Certified General Real Estate Appraiser
(#4001002465) State of Maryland Certified General Real Estate Appraiser
(#7220) State of West Virginia Certified General Real Estate Appraiser
(#237)
Appraisal/Real Estate Experience:
Director/Manager, Cushman & Wakefield of Washington, D.C. and Assistant
Manager, Cushman & Wakefield of Texas, Inc., Dallas, Texas, Valuation
Advisory Services, a full service real estate organization specializing in
appraisal and consultation. April 1990 to present.
Associate Appraiser, Joseph A. Dengel & Company, Dallas, Texas, May 1977
to April 1990.
Other real estate experience includes work as a residential listing and
selling agent preparing market analyses and origination contracts.
Experience includes appraisal of the following types of property:
Office Buildings Medical Office Buildings
Regional Malls Power Centers
Outlet Centers Community & Neighborhood Shopping Centers
Department Stores Industrial Buildings
Residential Subdivisions Single Family Residences
Multi-Family Properties Condominiums/Duplexes
Subdivision Analysis Farm/Ranch
Mixed Use Properties Golf Courses
Grape Vineyards Special Purpose Facilities
Commercial Land Hotel/Motel
Ad Valorem Tax Appeals
Appraisal and consulting services used for mortgage loans, relocations,
gift and estate tax, condemnation and litigation purposes.
Qualified as an expert witness in state and federal real estate court
cases.
Education:
Bachelor of Arts (Political Science), 1981
University of Texas at Arlington, Arlington, Texas.
<PAGE>
QUALIFICATIONS
================================================================================
Donald R. Morris, MAI
Appraisal Institute Courses:
#1Al - Real Estate Appraisal Principles
#1A2 - Basic Valuation Procedures
#1Bl - Capitalization Theory & Techniques, Part A
#1B2 - Capitalization Theory & Techniques, Part B
#410 - Standards of Professional Appraisal Practice, Part A (USPAP)
#420 - Standards of Professional Appraisal Practice, Part B (AI)
#21 - Case Studies in Real Estate Valuation
#22 - Report Writing and Valuation Analysis
#82 - Residential Valuation Procedures
Additional Accredited Real Estate Courses:
Real Estate Appraisal
Principles of Real Estate
Real Estate Marketing
Real Estate Finance
Property Management
Federal National Mortgage Corporation (Fannie Mae) - Appraisal
Training
Certified in the Appraisal's Institute's voluntary program of continuing
education for its designated members.
<PAGE>
QUALIFICATIONS
================================================================================
Kelly J. Small
Professional Affiliations:
Candidate Member of the Appraisal Institute (#M921847) State of Maryland
Certified General Real Estate Appraiser (#20143) Maryland Salesperson
License (#313081)
Appraisal/Real Estate Experience:
Appraiser, Cushman & Wakefield of Washington, D.C., Inc., Valuation
Advisory Services, a full service real estate organization specializing in
appraisal and consultation. Member of National Affordable Housing Group.
October, 1995 to present.
Staff Appraiser, Legg Mason Realty Group, Inc., Baltimore, Maryland.
February, 1990, through October, 1995.
Other work experience includes financial analyst, market research analyst
and real estate settlement work.
Experience includes appraisal of the following types of property:
Office Buildings Shopping Centers
Subdivision Development Analysies Industrial Facilities
Commercial Land Multi-Family Properties
Single Family Residences Leasehold/Leased Fee Interests
Hotel Special Purpose Facilities
Manufacturing Facilities Warehouse Facilities
Education:
Bachelor of Science (Finance), 1990
University of Baltimore, Baltimore, Maryland
Masters of Science (Real Estate Development), 1996
The Johns Hopkins University, Baltimore, Maryland
Appraisal Institute Courses:
#1Al - Real Estate Appraisal Principles
#1A2 - Basic Valuation Procedures
#1B1 - Capitalization Theory & Techniques, Part A
#1B2 - Capitalization Theory & Techniques, Part B
#410 - Standards of Professional Appraisal Practice, Part A (USPAP)
<PAGE>
QUALIFICATIONS
================================================================================
Kelly J. Small
#420 - Standards of Professional Appraisal Practice, Part B (Al)
#540 - Report Writing and Valuation Analysis
#550 - Advanced Applications
Specific course work and seminars:
The new URAR Appraisal Reports, Emerging Trends
Affordable Housing Tax Credit Coalition seminars
This CD ROM contains an electronic version of appraisals for the Mortgaged
Properties in PDF format and forms part of the paper version of the Prospectus
Supplement. The information contained in this CD ROM does not appear elsewhere
in paper form in this Prospectus Supplement and must be considered as part of,
and together with, the information contained elsewhere in this Prospectus
Supplement and the Prospectus. The information contained in this CD ROM has
been filed by the Seller with the Securities and Exchange Commission as part
of a Current Report on Form 8-K, which is incorporated by reference in this
Prospectus Supplement, and is also available through the public reference
branch of the Securities and Exchange Commission. Defined terms used in this CD
ROM but not otherwise defined therein shall have the respective meanings
assigned to them in the paper portion of the Prospectus Supplement and the
Prospectus. All of the information contained in this CD ROM is subject to the
same limitations and qualifications contained in this Prospectus Supplement and
the Prospectus. Prospective investors are strongly urged to read the paper
portion of this Prospectus Supplement and the Prospectus in its entirety prior
to accessing this CD ROM. If this CD ROM was not received in a sealed package,
there can be no assurances that it remains in its original format and should
not be relied upon for any purpose. Prospective investors may contact J.
Theodore Borter of Goldman, Sachs Co. at (212)902-3857 to receive an original
copy of the CD ROM.
<PAGE>
------------------------------------------
COMPLETE APPRAISAL OF REAL PROPERTY
Century Plaza Towers
2029 & 2049 Century Park East
Los Angeles, California
------------------------------------------
IN A SELF-CONTAINED REPORT
As of: December 6, 1996
Prepared For
Goldman Sachs Mortgage Company
85 Broad Street
New York, New York 10004
AMRESCO Capital Corp
700 North Pearl Street, Suite 2400
Dallas, Texas 75201
Prepared By:
Cushman & Wakefield of California, Inc.
Valuation Advisory Services
555 S. Flower Street, Suite 4200
Los Angeles, CA 90071
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
CUSHMAN &
WAKEFIELD
A ROCKEFELLER GROUP COMPANY
Cushman & Wakefield of California, Inc.
555 South Flower Street, Suite 4200
Los Angeles, CA 90071-2418
Tel: (213) 955-5100
Fax: (213) 627-4044
January 20, 1997
Goldman Sachs Mortgage Company AMRESCO Capital Corp
Attn: John McGuire Attn: Ted Norman
85 Broad Street 700 North Pearl Street, Suite 2400
New York, New York 10004 Dallas,Texas 75201
Re: Appraisal of Real Property
Century Plaza Towers
2029 & 2049 Century Park East
Los Angeles, California
Excluding Leased Fee Interest in ABC Entertainment Center
Gentlemen:
In conformance with your request, we have completed an appraisal of the
above referenced property. The appraisal states our opinion of the property's
Market Value subject to various Assumptions and Limiting Conditions set forth
in the accompanying report. The physical inspection and analysis that form the
basis of the report have been conducted by James W. Myers, MAI, with
assistance from Miles Loo, Jr.
The accompanying report includes pertinent data secured in our
investigation, exhibits and the details of the process used to arrive at our
conclusion of value. The appraisal conforms to Standards of Professional
Practice and Code of Professional Ethics of Appraisal Institute, which
incorporates the Uniform Standards of Professional Appraisal Practice (USPAP),
of the Appraisal Foundation. This appraisal report complies fully with FIRREA
requirements.
Based on the analysis and data contained in this appraisal it is our
opinion that the Market Value of the leased fee interest in the subject
property, as of December 6, 1996, was:
FOUR HUNDRED SIXTY MILLION DOLLARS
----------------------------------
$460,000,000
<PAGE>
This appraisal is invalid as an opinion of value if detached from the
report, which includes the text, exhibits and an Addenda.
Respectfully submitted,
CUSHMAN & WAKEFIELD OF CALIFORNIA, INC.
/s/ James W. Myers /s/ Miles Loo, Jr.
James W. Myers, MAI Miles Loo, Jr.
Senior Director Associate Appraiser
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
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<PAGE>
SUMMARY OF SALIENT FACTS AND CONCLUSIONS
================================================================================
Property Name: Century Plaza Towers
Location: 2029 & 2049 Century Park East
Los Angeles, California
Assessor's Parcel Number: 4319-02-61
Interest Appraised: Leased Fee
Date of Value: December 6, 1996
Date of Inspection: December 6, 1996
Ownership: Delta Towers Joint Venture
Land Area: 12.04+/- acres
Zoning: C2-2-0
Highest and Best Use
If Vacant: Hold for future development
As Improved: Existing development
Improvements
Type: Two 44-story Class "A" Office Buildings,
Lower Level Retail Concourse,
Subterranean Parking Garage
Year Built: 1975
Size: 2,282,381 Rentable SF*
Parking: 6,169 spaces"
* Includes: 1,125,888 SF North Tower
1,126,769 SF South Tower
29,724 SF B-Level Concourse
** Includes 451 spaces in Century Park West garage covenanted to the subject
property
Value Indicators
Sales Comparison Approach: $480,000,000
Income Approach: $460,000,000
Value Conclusion: $460,000,000
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Summary Of Salient Facts And Conclusions
================================================================================
Special Assumptions:
Please refer to the complete list of
assumptions and limiting conditions
included at the end of this report.
1) We have relied on cost estimates
provided by representatives of the
buying entity relating to capital
improvements planned for the property.
These costs should be independently
verified by qualified third party
consultants prior to finalizing any
loan or purchase involving the
property. Refer to Income Approach for
discussion of capital costs.
2) The value conclusion in this
appraisal excludes the leased fee
interest (air rights) in the ABC
Entertainment Center, which is
currently a component of the larger
property. It is our understanding a
Parcel Map is to be filed which will
create a separate legal parcel for
this portion of the property. We
assume this filing has been completed.
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
CENTURY PLAZA TOWERS
[GRAPHIC OMITTED]
[PHOTO OF CENTURY PLAZA TOWERS-SIDE VIEW]
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
CENTURY PLAZA TOWERS
[GRAPHIC OMITTED]
[PHOTO OF CENTURY PLAZA TOWERS-FRONT VIEW]
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
TABLE OF CONTENTS
================================================================================
Page
INTRODUCTION ............................................................ 1
Identification of Property ............................................ 1
Property Ownership and Recent History ................................. 1
Purpose and Function of the Appraisal ................................. 1
Scope of the Appraisal ................................................ 1
Date of Value and Property Inspection ................................. 1
Property Rights Appraised ............................................. 1
Definitions of Value, Interest
Appraised, and Other Pertinent Terms ................................ 2
Legal Description ..................................................... 2
REGIONAL ANALYSIS ....................................................... 3
Physical Boundaries ................................................... 3
Demographics .......................................................... 3
Population ............................................................ 3
Income ................................................................ 4
Economic Overview ..................................................... 4
Employment ............................................................ 5
Services .............................................................. 6
Trade ................................................................. 7
Manufacturing ......................................................... 7
Transportation ........................................................ 8
Conclusion ............................................................ 9
LOCATION ANALYSIS ....................................................... 10
Century City .......................................................... 10
Century City History .................................................. 12
Building Chronology ................................................... 12
Westside Los Angeles Area Planning Issues ............................. 13
Demographic Profile ................................................... 16
New Construction Trends ............................................... 17
Employment and Labor Base ............................................. 17
Conclusions ........................................................... 18
LOS ANGELES OFFICE MARKET ANALYSIS ...................................... 19
Office Market Analysis ................................................ 19
Los Angeles County Office Market Overview ............................. 19
WEST LOS ANGELES OFFICE MARKET ANALYSIS ................................. 27
Primary Competitive Supply - Century City ............................. 28
Secondary Competitive Supply - Beverly Hills .......................... 37
Proposed Development .................................................. 38
Gross Leasing Activity and New Absorption ............................. 41
Westside Tenant Base .................................................. 41
Conclusions ........................................................... 41
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
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<PAGE>
TABLE OF CONTENTS
================================================================================
PROPERTY DESCRIPTION .................................................... 42
Site Description ...................................................... 42
General Data .......................................................... 45
Site Improvements ..................................................... 47
REAL PROPERTY TAXES AND ASSESSMENTS ..................................... 49
ZONING .................................................................. 50
HIGHEST AND BEST USE .................................................... 51
VALUATION PROCESS ....................................................... 52
SALES COMPARISON APPROACH ............................................... 53
Methodology ........................................................... 53
Adjustment Considerations ............................................. 58
INCOME APPROACH ......................................................... 60
Methodology ........................................................... 60
Potential Gross Income ................................................ 60
Market Rent ........................................................... 62
Century City - Quoted Rental Survey ................................... 63
Other Income Sources .................................................. 71
Operating Expenses .................................................... 74
Vacancy and Collection ................................................ 83
Discounted Cash Flow Analysis ......................................... 85
Derivation of Discount Rate ........................................... 87
RECONCILIATION AND FINAL VALUE ESTIMATE ................................. 91
ASSUMPTIONS AND LIMITING CONDITIONS ..................................... 92
CERTIFICATION OF APPRAISAL .............................................. 94
ADDENDA ................................................................. 95
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
INTRODUCTION
================================================================================
Identification of Property
The subject property consists of a 12.04+/- acre site covering an entire
block bounded by Constellation Boulevard to the northwest, Century Park East
to the northeast, Olympic Boulevard to the southeast, and Avenue of the Stars
to the southwest, in the Century City district of Los Angeles, California. The
property is improved with two 44-story office buildings containing a total
rentable area of 2,282,381 square feet, (including 1,125,888 square feet in
the 44-story "North" Tower, 1,126,769 square feet in the 44-story "South"
Tower, and 29,724 square feet in the "B-Level" retail concourse), in addition
to a six-level subterranean parking garage containing 6,169 spaces, (including
surface and covenanted off site parking spaces.)
The Los Angeles County Assessor identifies the subject property as Parcel
Number 4319-02-61, and the street address is 2029 and 2049 Century Park East,
in Los Angeles, California.
Property Ownership and Recent History
According to Assessor's records, title to the subject property is vested
in Delta Towers Joint Venture, which acquired title to the property in June of
1986. The property is currently under contract to an ownership entity
comprised of General Motors Pension Trust Fund, A.T. & T. Pension Fund and
J.P. Morgan Real Estate Fund. The reported contract price of $480 million
includes the air rights leased fee interest in the ABC Entertainment Center,
which is not a subject of this appraisal. To our knowledge, no further arms'
length transfers of this property have occurred within the past three years.
Purpose and Function of the Appraisal
The purpose of this appraisal is to estimate the market value of the
leased fee interest subject property, as of December 6, 1996. The function of
the appraisal is to provide a value basis for the contemplated financing of
the property.
Scope of the Appraisal
The scope of the appraisal is to inspect the property, consider market
characteristics and trends, collect and analyze pertinent data, and develop a
conclusion about the property's market value. We have analyzed the subject
property as of the date of our inspection, December 6, 1996. All forecasts are
based on facts, conditions, and trends that exist and are known on the
appraisal date.
Date of Value and Property Inspection
The 'as is' date of value in this appraisal coincides with the date of
our final inspection of the subject property, December 6, 1996.
Property Rights Appraised
Leased Fee Interest
================================================================================
1
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Introduction
================================================================================
Definitions of Value, Interest Appraised, and Other Pertinent Terms
The Comptroller of the currency of the United States defines Market Value
as follows:
Market Value
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 the definition is
the consummation of a sale as of a specified date and the passing of
title from seller to buyer under conditions whereby:
1. Buyer and seller are typically motivated;
2. Both parties are well informed or well advised and acting in what
they consider their own best interests;
3. A reasonable time is allowed for exposure in the open market;
4. Payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
5. 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.
Definitions of pertinent terms taken from the Dictionary of Real Estate
Appraisal, Second Edition (1989), published by the American Institute of Real
Estate Appraisers, are as follows:
Leased Fee Estate
An ownership interest held by a landlord with the right of use and
occupancy conveyed by lease to others; usually consists of the right to
receive rent and the right to repossession at the termination of the
lease.
Legal Description
An abbreviated legal description of the property is as follows:
A portion of Lot 8, Tract No. 26196, in the City of Los Angeles, County
of Los Angeles, State of California, as per Map Book 664, Pages 78-86, in the
Office of the County Recorder of said County.
================================================================================
2
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WAKEFIELD(R)
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<PAGE>
REGIONAL ANALYSIS
================================================================================
The subject property is located in the Century City district of the City
of Los Angeles, in the western portion of Los Angeles County, California. Los
Angeles County is a densely populated and extensively developed region which
comprises one of the more significant commercial property markets in the State
of California and the United States. The following pages provide a brief
overview of Los Angeles County in terms of its physical/geographical layout,
population, and business/economic activity, as trends in the countywide area
provide a significant influence on the subject's value.
Physical Boundaries
Los Angeles County is located in the southwestern portion of the State of
California, and comprises the commercial center of the Southern California
region. The county lies along approximately 70 miles of the Pacific Coast and
extends for nearly 70 miles from east to west and for 75 miles from north to
south. The county has a total land area of approximately 3,970 square miles,
and roughly 50 percent of the county land is comprised of mountainous terrain
which is neither densely populated nor extensively developed. Los Angeles
County is bordered by Ventura County to the northwest, Kern County to the
north, San Bernardino County to the east, Orange County to the south, and the
Pacific Ocean to the west. Los Angeles County has approximately 90
incorporated cities with a total land area of 1,390 square miles or 35 percent
of the total land area within the county. The remaining 65 percent of the
county land area is unincorporated and the majority of this land area is
located north of the San Gabriel Mountains which run in an east/west direction
through the middle of the county. Los Angeles County's civic center is located
in downtown Los Angeles, which is situated at the approximate center of the
region's extensive freeway system and expanding mass transit network.
Demographics
Population
Los Angeles County is the largest county in the State of California in
terms of residential population and comprises an important target market for
retailers and service providers. The chart on an accompanying page summarizes
demographic information for the State of California and the six major counties
in Southern California. Los Angeles County's 1996 population of 9,255,048
residents comprised 29 percent of the statewide population and 50 percent of
the residential population within the six major counties in Southern
California.
Los Angeles County experienced relatively modest population growth from
1980 to 1996 in comparison to the larger statewide population and the major
counties in Southern California. From 1990 to 1996, the county's average
population growth slowed to less than one percent per year, as compared to 1.3
percent per year on average compounded from 1980 to 1996. The relatively
slower pace of population growth in Los Angeles County over the past several
years reflects the more established nature of the residential and commercial
development within the county as well as the downturn in employment
opportunities within the county from approximately mid 1990 to 1994.
The Los Angeles County population is projected to increase by less than
one percent per year (on average compounded) from 1996 to 2001, which lags the
projected population
================================================================================
3
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Regional Analysis
================================================================================
growth for the state and the other major counties in Southern California. The
pace of population growth in the county is projected to be similar to the rate
of household formations, which continues the historical trend of an increasing
household size for the countywide population. The most significant population
growth in Southern California is projected to occur in the Inland Empire
counties of Riverside and San Bernardino, due in large part to the relatively
lower cost of housing in these areas as compared to the other major counties
in the region
Income
Los Angeles County's household income and per capita incomes levels are
similar to the statewide figures and generally compare favorably to the
corresponding figures for most of the major counties in Southern California.
Within the Southern California region, only Orange County and Ventura County
have higher household and per capita incomes than Los Angeles County. From
1980 to 1996, the median household income in Los Angeles County increased at
an average rate of 8.2 percent per year, prior to any adjustment for
inflation. The pace of household income growth for the county was only 3.0
percent per year from 1990 to 1996, but is projected to increase to an average
growth rate of 5.5 percent per year from 1996 to 2001, also prior to
adjustment for inflation.
The Los Angeles-Long Beach metropolitan area, consisting of Los Angeles
County, is the top ranked retail market in the United States according to the
most recent survey of buying power by Sales and Marketing Management Magazine.
The Los Angeles-Long Beach area's Buying Power Index was ranked first among
the 317 metropolitan areas included in the survey, and was the only California
metropolitan area ranked among the ten strongest retail markets. The Buying
Power Index is a weighted index that converts the survey's three basic
elements of population, effective buying income, and retail sales into a
measurement of a market's "ability to buy". The Los Angeles-Long Beach area
was ranked among the top three metropolitan markets in the country in terms of
population (1st), total effective buying income (3rd), and retail sales (2nd).
A January 1996 survey by the Los Angeles Times of housing prices in the
greater Los Angeles area indicated that the median price for a home in Los
Angeles County was $170,300, which represented a decrease of 5.9 percent from
the January 1995 median price. The same survey indicated that approximately 40
percent of the households in the county could afford the median priced home.
This "affordability index" of 40 percent has increased significantly from the
26 percent level of mid-1992, due in large part to the decline in housing
values over the past few years. Los Angeles County's affordability index of 40
percent was towards the low end of the range exhibited by the major counties
in Southern California, which had affordability index figures in the range of
39 percent (San Diego County) to 54 percent (Riverside/San Bernardino
Counties).
Economic Overview
Over the past few years the Los Angeles County economy has endured a
recession and undergone a significant restructuring. The aerospace/defense
sector has downsized, with major companies either merging, consolidating, or
going out of business, while the entertainment, international trade, and
business services segments have emerged as major
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Regional Analysis
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sources of employment and catalysts for growth. The increasing number of
distribution channels for entertainment and educational programming, and the
growing demand for interactive media, has created new marketing opportunities
for the television, motion picture, and computer software industries in the
greater Los Angeles area. The Ports of Los Angeles and Long Beach have
solidified their position as the busiest ports in the country in terms of
annual cargo volumes, which in turn has driven employment gains in
trade-related sectors of the economy. As will be discussed in greater detail
below, the countywide unemployment rate has decreased notably from the peak
levels of the early 1990s, total employment within the county is forecast to
increase during 1996 at a stronger pace than for the United States as a whole,
and housing prices on a countywide basis are projected to post modest gains
for the first time since 1990.
Employment
The chart on an accompanying page summarizes the employment base for the
six major counties in the Southern California area. Los Angeles County had an
average total employment of 4,979,800 positions in 1995, which accounted for
53 percent of the total employment within the six-county area. The most
significant employment sectors in the county include services (36.2 percent),
wholesale/retail trade (20.0 percent), and manufacturing (14.6 percent). Los
Angeles County has a notably higher percentage of employment within the
services and manufacturing sectors as compared to the other major counties in
Southern California, which reflects the important concentration of film,
television, and musical production/distribution companies in the region as
well as the ongoing work by major aerospace/defense companies in the Los
Angeles area.
From 1990 to 1995, Los Angeles County endured a 7.5 percent decline in
total employment, due in large part to the decrease of 18.8 percent in the
manufacturing sector which reflected the consolidation within the
aerospace/defense industry. Of the six major counties in Southern California,
only Los Angeles and Orange Counties suffered a decline in total employment
over this five-year period. Total employment in Los Angeles County is
projected to increase at a compound rate of 0.45 percent per year from 1995 to
2000, which is notably improved from the past few years but lags the projected
employment growth for the other major counties in Southern California.
However, the forecasted employment growth by Woods & Poole for Los Angeles
County is fairly conservative in comparison to recent projections by the
California Employment Development Department and the Los Angeles County
Economic Development Corporation. Each of these organizations has forecast job
growth for Los Angeles County in the range of 2.0 to 2.5 percent during 1996,
with growth during the period from 1995 to 2000 expected to slightly outpace
the national average employment growth rate.
The U.S. Labor Department reported the May 1996 national unemployment
rate at 5.4 percent, which was down slightly from the 5.5 percent rate as of
May 1995. The unemployment rate in Los Angeles County was 7.5 percent in
September, 1996, which was down slightly from the year prior level of 8.0
percent. Regional economists project that the unemployment rate on a
countywide basis will decline over the next few years. This decline in the
unemployment rate is based on the fact that the downsizing by major
aerospace/defense companies has been largely completed and the growth in the
services sector is expected to continue over the next
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Regional Analysis
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several years. Despite the recent improvement in Los Angeles County
unemployment, however, the county's September, 1996 unemployment figure of
7.5% is less favorable than the State of California (6.7%) and the United
States (5.0%) during the same period. Unemployment in the City of Los Angeles
during September, 1996 was 8.5%
The following paragraphs provide a brief discussion of the three major
employment sectors in the county: 1) services; 2) trade; and 3) manufacturing.
Services
The services sector has shown the only significant growth in terms of
total employment from 1990 to 1995 in Los Angeles County and Southern
California as a whole. The services sector includes entertainment, healthcare,
business services, lodging, and personal services.
Within the services sector, the entertainment industry has experienced
significant growth over the past few years, both in terms of the worldwide
demand for television/film product and the level of employment. The
entertainment industry has emerged as a growing source of relatively high wage
employment within the Los Angeles area and has surpassed the defense industry
in terms of countywide employment. Projections for August, 1996 by the
California Employment Development Department indicated that the total
countywide employment in the motion picture industry (including movie
production) is estimated at 135,600 jobs. A similar report by the California
Department of Finance estimated the entertainment industry employment figure
at 172,000 positions. The disparity in the reported entertainment employment
figures provided by these two agencies reflects the different methodologies
used in collecting the employment data. However, both sources of data support
the very significant growth within this industry and its increasing role as a
catalyst for economic growth in the Los Angeles area.
The local entertainment industry has recently been investing in new
production facilities in the Hollywood area, West Los Angeles, and the City of
Burbank, in an effort to meet the growing demand for multi-media products and
services. Such leading companies as Walt Disney Company and NBC Studios in
Burbank, MCA in Universal City, Sony Pictures in Santa Monica, and DreamWorks
creating multi-media divisions which will increase the demand for
computer/high technology-oriented positions in the Los Angeles area. The level
of entertainment employment is expected to increase due to the strong
international demand for film product and the ongoing evolution of the cable
television industry.
The second largest category of employment within the services sector is
the health services segment. The field of healthcare has been one of the more
stable industry segments in terms of employment changes over the past few
years. The Los Angeles area is home to some of the most advanced medical and
medical teaching facilities in the country, including Cedars-Sinai Medical
Center, the City of Hope, and the University of Southern California and the
University of California at Los Angeles schools of medicine. Reports by
industry experts suggest that the Los Angeles area has an overcapacity problem
with regard to local hospital facilities, which will result in more
consolidation within the industry and/or the closure of underperforming
hospitals over the next few years. However, the impact on total employment
within the county stemming from the anticipated consolidations is uncertain at
the present time.
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Regional Analysis
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According to the California State Employment Development Department health
services employment in Los Angeles County totaled 267,300 jobs as of
September, 1996.
Trade
The trade sector consists of both wholesale and retail trade. Employment
within this sector has been relatively stable over the past several years,
both in terms of total employment and as a percentage of employment within the
county.
One of the primary catalysts for growth within the trade sector has been
the growing volume of international trade. The value of imports and exports
passing through the Los Angeles Customs District, which includes the Port of
Los Angeles, the Port of Long Beach, and Los Angeles International Airport,
reached $165 billion in 1995, an increase of nearly 15 percent from 1994.
During the past two years (1994 and 1995), the Los Angeles Customs District
comprised the largest customs district in the country in terms of the dollar
value of annual two-way trade. Significant factors behind the growth in
international trade through the Ports of Los Angeles and Long Beach has been
the port operators' focus on technological advancements such as larger cargo
cranes and dockside rail connections as well as the steady growth in trade
with the growing countries of the Pacific Rim. The value of two-way trade is
expected by Los Angeles County officials to increase by ten to 15 percent by
year-end 1996.
Within the retail trade sector, total employment within the county
decreased by approximately ten percent from 1990 to 1995. The decline in
retail employment reflects the downturn in retail sales from 1990 to 1994 and
the consolidation within the retail industry by several major retailers. In
addition, new retail development has been more limited on a countywide basis
over the past few years with the exception of "big box" type retailers which
have opened new free-standing stores and/or stores in larger power centers or
community shopping centers. As discussed previously, Los Angeles County is
considered to be a very attractive retail market on a nationwide basis as it
compares favorably to other metropolitan areas in terms of total population,
total effective buying income, and total retail sales. The retail trade
employment sector experienced an increase in the number of jobs during the
past year, with total employment increasing from 266,600 to 276,100 (3.6%)
from September, 1995 to September, 1996.
Manufacturing
Manufacturing has historically provided a strong base for the Los Angeles
area economy and the county continues to hold its position as the nation's
largest manufacturing center. However, manufacturing employment decreased by
18.8 percent from 1990 to 1995 which largely reflected the major cutbacks
within the aerospace/defense industry. Seattle-based Boeing Company's recent
(December, 1996) announcement it will acquire ("merge") McDonnell Douglas
Corporation, with approximately 10,000 employees in its Long Beach plant, has
been generally perceived as a positive sign for employment in Los Angeles
County. McDonnell Douglas has recently failed to be awarded a number of major
contracts, while Boeing has been successful in several recent significant
commercial and defense contracts. Boeing had recently acquired Rockwell
International's aerospace subsidiary, with approximately 14,500 employees in
several plants spread from Canoga Park in northwestern
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Regional Analysis
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Los Angeles County to Anaheim in central Orange County. With the addition of
27,420 McDonnell Douglas employees in California and the former Rockwell
employees, Boeing is expected to have approximately 200,000 total employees
nationally and a projected $50 billion in annual revenues. While the impact of
the merger on employment in southern California has not been established, most
analysts view the merger as a positive factor for the area. Consolidations in
the aerospace industry are expected to continue, and some unofficial
"speculation" suggests that Northrop Grumman, also headquartered in Los
Angeles County, must either acquire another major aerospace firm or become a
takeover target. Major defense programs currently in progress in the Los
Angeles County area include the B-2 Bomber (Northrop in Pico Rivera), the C-17
Transport jet (McDonnell Douglas in Long Beach), and the F/A18 Fighter
aircraft (Northrop in El Segundo). Manufacturing employment has stabilized
during the past year, increasing from 632,800 to 635,000 from September, 1995
to September, 1996.
One of the more important trends within the manufacturing sector has been
the recent recovery of employment within the "high tech" sector. Hughes
Electronic's Corporation and TRW have both achieved significant business gains
in the field of satellite communications which have resulted in increased
employment within the non-defense divisions of these firms. TRW has recently
completed the development and testing phases on a new communications satellite
called Odyssey, which represents the company's first venture into the
commercial satellite business. The project is expected to employ up to 1,000
people at TRW's Redondo Beach facilities, as the company goes into full
production over the next few years. In October 1995, Hughes Electronic's
Corporation announced that it had received an order from ICO Global
Communications of London to build a network of satellites which will be used
in a worldwide mobile telephone system which is being developed by ICO. The
agreement with ICO represents the largest single contract for commercial
satellites in Hughes Electronics' history.
Transportation
The Los Angeles area is served by an extensive freeway system, an
expanding mass transit system, and several airport facilities. The Southern
California freeway network, and specifically the network in the Los Angeles
area, is one of the most extensive systems in the world. Major north/south
freeways in the county include the San Diego Freeway (1-405), the Golden State
Freeway (1-5), the Long Beach Freeway (1-710), and the San Gabriel River
Freeway (1-605). Major east/west freeways in Los Angeles County include the
Pasadena Freeway (1-210), the Ventura freeway (SH-101/SH-134), the Santa
Monica Freeway (1-10), the Pomona Freeway (SH-60), and the Artesia Freeway
(SH-91).
The Metro System is a multi-modal transit system consisting of freeway
car-pool lanes, buses, light rail lines, and heavy rail lines. At the present
time, seven rail lines are in operation, including three Metro Rail commuter
lines and four Metrolink commuter lines. The Metro Rail lines which are
currently in operation include: 1) the Metro Blue Line, which extends for 22
miles from downtown Los Angeles to Long Beach; 2) the Metro Red Line, which
extends for approximately 4.4 miles from downtown Los Angeles to the
Westlake/MacArthur Park area; and 3) the Metro Green Line, which extends for
approximately 20 miles from El Segundo (near Los Angeles International
Airport) eastward to Norwalk in central Los Angeles County. The
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Metrolink system has commuter rail lines in operation at the present time from
downtown Los Angeles to the following areas: 1) Moorpark in Ventura County (47
miles); 2) Lancaster/Palmdale in north Los Angeles County (60 miles); 3) San
Bernardino (57 miles); and 4) Downtown Riverside (5.8 miles).
Public transportation is also available by bus service which is provided
by the Metropolitan Transit Authority and by train service provided by AMTRAK.
Air transportation is available at several airports in the Los Angeles area.
The Los Angeles International Airport, located in the southwestern portion of
the county, handles domestic and international carriers and is one of the five
busiest airports in the world. Three smaller regional airports also service
the Los Angeles area including: 1) the Burbank-Glendale-Pasadena Airport in
the City of Burbank; 2) the Long Beach Municipal Airport in the City of Long
Beach; and 3) the Van Nuys Airport in the community of Van Nuys in the West
San Fernando Valley.
Conclusion
Los Angeles County is a major commercial center in Southern California
and the larger United States. The region's natural and man-made attractions,
together with a diversified and highly skilled employment base, have a
significant role in establishing Los Angeles County as the focal point for
commercial activity in the western United States. The county has a significant
residential population, with household and per capita income levels which are
comparable to the corresponding figures for the State of California. Over the
past few years, the employment base in Los Angeles County has changed as the
aerospace/defense industry has downsized while the sectors of entertainment,
healthcare, and international trade have experienced significant new growth.
After several years of recessionary conditions, during the first portion
of this decade economic activity in Los Angeles County improved and is
projected to increase steadily over the near term. Total employment within the
county is forecast by the Los Angeles County Economic Development Corporation
to increase by 2.1 percent in 1996 and outpace the nation as a whole in terms
of new job creation. Actual employment increase from September, 1995 to
September, 1996 totaled 64,000 jobs, or an increase of 1.6%. Retail sales are
projected to increase by six percent in 1996 from the year prior level,
following a five percent increase in 1995. The anticipated firming of home
prices in Los Angeles County, after four consecutive years of declining
prices, is expected to have a favorable impact on business activity within the
county. Over the longer term, the ongoing and anticipated future expansions by
the entertainment, international trade, and services sectors are projected to
increase employment opportunities within the region. As the economic recovery
in Los Angeles County progresses, the subject property should be favorably
impacted by its location within this region.
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LOCATION ANALYSIS
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Century City
Overview
The subject property is located in the Century City district of the City
of Los Angeles. Century City is a major component of the West Los Angeles
area, which comprises one of the more important commercial and retail centers
in the greater Los Angeles region. The West Los Angeles area is generally
bordered by Venice Boulevard to the south, Bundy Drive/Centinela Avenue to the
west, Sunset Boulevard to the north, and La Cienega Boulevard to the east.
West Los Angeles incorporates the relatively affluent residential
cities/communities of Bel Air, Beverly Hills, Brentwood, and West Hollywood,
as well as the important commercial centers of Century City, Santa Monica, and
Westwood Village. The subject is located approximately ten miles west of
downtown Los Angeles, five miles east of the Pacific Ocean at Santa Monica,
and seven miles north of Los Angeles International Airport. The subject area
is extensively developed with a mix of major office buildings, multi-family
residential properties, and a major shopping center.
Location and Boundaries
Century City is a master planned commercial, retail and residential
community located in the prime westside area of Los Angeles. Century is
bordered to the north by the prestigious Los Angeles Country Club, to the
south by the Hillcrest County Club and Rancho Park Golf Course, to the east by
the City of Beverly Hills, and to the west by the communities of West Los
Angeles, Westwood, and Brentwood.
Land Uses
The subject property is located in the Century City North Specific Plan
area. Century City is intensively developed. Adjacent and nearby uses are
predominately major high-rise office buildings, including the 2.3 million
square-foot subject Century Plaza Towers (Theme Towers) and the ABC
Entertainment Center. The newest high-rise building in this market (SunAmerica
Tower, or 1999 Avenue of the Stars), is located one block west across Avenue
of the Stars from the subject. An older, 28-story high-rise office building,
1900 Avenue of the Stars, is located directly north of this parcel, and the
twin "Watt Towers" high-rise office buildings are located directly north
across Constellation Boulevard of the subject, at the northeast corner of
Constellation Boulevard and Century Park East. Improvements on the parcels
northerly of the subject, are improved with high-rise office buildings and
related parking structures.
Century City Shopping Center is located one block northwest of the
subject. This regional mail is one of the premiere retail properties in Los
Angeles County, and contains 768,760 square feet of gross leaseable area
(GLA). The mail is currently anchored by Bullock's, The Broadway, Gelson's
Market, and AMC Theaters, but the 222,726 square-foot Broadway was converted
to a Bloomingdales and the 132,614 square-foot Bullocks will be converted to a
Macy's during 1996. The mall was originally developed in 1964, and was
renovated and expanded most recently in 1987. There are approximately 140 mall
shops containing 325,000 square feet of GLA, and the mall shops are about 95
percent leased. The center has 3,180 onsite parking spaces, or a 4.2/1,000 SF
parking ratio.
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Location Analysis
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The parcels located one block west of the subject are improved with the
Century Plaza Hotel and adjacent Towers, which together comprise a 1,070-room
luxury hotel
The area immediately east and north of the subject across Century Park
East is improved with two low-rise office buildings and four high-rise
properties, and development further south toward Olympic Boulevard includes
the Central Plants facility, a to the immediate east. This utility plant is a
ground [eased parcel with a (reported) term through December, 2013. The
utility plant provides services (chilled and heated water and steam) to
several major Century City properties on a contract basis, including Century
Plaza Towers and the Century Plaza Hotel. The Century City Medical Plaza and
Hospital property is located directly south of the plant, at the northeast
corner of Century Park East and Olympic Boulevard. This property consists of
two separate structures: 1) a 9-story, 200-bed hospital containing
approximately 163,000 rentable square feet; and 2) an 18-story medical
building containing approximately 175,000 rentable square feet. Much of the
property is master-leased to NME (now Tenet Healthcare). The buildings share a
subterranean parking garage serving about 800 cars on 4 and 1/2 levels
(2.4/1,000 SF).
Access and Transportation
The primary east/west surface streets through Century City and adjacent
areas include Santa Monica Boulevard, which forms the northern boundary of the
Century City District, Olympic Boulevard, which bisects the North and South
Plan areas of Century City, and Pico Boulevard, which forms the southerly
boundary of Century City. Constellation Boulevard extends only two blocks in
an east/west direction through the center of the North Plan area from Century
Park West to Century Park East. The north/south streets through Century City
are Century Park East and Avenue of the Stars, which extend from Santa Monica
Boulevard to Pico Boulevard, and Century Park West, which extends two blocks
from Santa Monica Boulevard to Olympic Boulevard.
Century City does not have direct access to the regional freeway system,
but ramp service is available to the San Diego Freeway (Interstate 405) about
three miles west along Santa Monica Boulevard, and Interstate 10 is accessible
via surface streets about three miles southerly of the subject.
Mass transit in the West Los Angeles area is available with bus service
provided by the Metropolitan Transit Authority (MTA), which operates a fleet
of over 2,500 vehicles and handles approximately 1.2 million passengers per
day from Monday through Friday. The MTA system provides service to most of the
incorporated cities in Los Angeles County and is the third largest municipal
transit authority in the country. Air transportation for residents of West Los
Angeles and visitors to the area is available at Los Angeles International
Airport, Burbank-Glendale-Pasadena Airport, and Long Beach Municipal Airport.
Los Angeles International Airport is located approximately seven miles
southwest of the subject and is one of the busiest airports in the country in
terms of annual passenger volumes. Los Angeles International Airport handles
over 80 airlines providing domestic and/or international air service. The
Burbank-Glendale-Pasadena Airport is located approximately 15 miles northeast
of the subject and provides domestic air service. The
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Location Analysis
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Long Beach Municipal Airport is located approximately 25 miles southeast of
the subject and provides domestic air service.
Century City History
The original development concept for Century City began with the purchase
of 260 acres by a partnership of the Aluminum Company of America (Alcoa) and
William Zeckendorf, a New York developer. Twentieth Century Fox Film
Corporation sold the property to the partnership in 1961, with an immediate
leaseback of 80 acres for use as sound stages and film production buildings.
The remaining "back lot' area was masterplanned for Zeckendorf into a
miniature city, complete with offices, retail shopping and private residences.
Alcoa purchased Zeckendorf's interest in Century City in 1963, after just
two office buildings had been developed. Century City, Inc., a wholly owned
subsidiary of Alcoa, assumed control over development of the remaining land.
In 1973, Twentieth Century Fox repurchased the underlying fee interest in the
80 acres it had been leasing, with the intention of redeveloping the property.
AP Ventures, Inc., an affiliate of JMB Realty Corporation, purchased the
outstanding common stock of several subsidiaries of Alcoa in December, 1986.
These subsidiaries owned interests in many of the real estate assets in
Century City. Portions of AP Ventures, Inc. subsequently transferred most of
these assets to AP Properties, Ltd., another JMB Realty affiliate. Portions of
AP Properties' Century City portfolio were acquired during 1994 by a lender's
consortium led by Citicorp. This lenders consortium is currently selling major
assets included in the AP Properties portfolio, including its interest in the
subject property.
Building Chronology
The development of Century City began in 1961 with the start of grading
and roadwork. Development continued for three decades, and has included over 8
million square feet of office space, a regional shopping mail and multi-family
residential buildings. The following chart details the development history of
the major commercial properties in Century City.
Map Year Building Description
1 1963 Gateway East 14 story office
2 1964 Gateway West 14 story office
3 1964 Century City Mall Regional shopping center
4 1966 Century Plaza Hotel 16 story hotel
5 1968 1901 Avenue of the Stars Building 19 story office
6 1969 1900 Avenue of the Stars Building 27 story office
7 1969 Century City Medical Plaza & Hospital 9 & 18 story medical center
8 1970 Northrop Plaza 1 20 story office
9 1970 Orion Building 20 story office
10 1970 1880 Century Park East 15 story office
11 1971 Century City North 26 story office
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Location Analysis
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12 1972 ABC Entertainment Center 5 story office/retail center
13 1973 Century Park Plaza 26 story office
14 1975 Century Plaza Towers 44 story office towers
15 1981 Watt Plaza 23 story office towers
16 1984 Northrop Plaza 11 19 story office
17 1987 Fox Plaza 34 story office
18 1990 1999 Ave. of the Stars 39 story office
Westside Los Angeles Area Planning Issues
The subject is located in the West Los Angeles Planning area, which is
controlled by several district and community plans including the Westwood
Community Plan, the West Los Angeles and the Brentwood-Pacific Palisades
District Plans, and the Century City North and South Specific Plans. These
plans deal with land uses and a number of other factors, with vehicular
traffic congestion representing one of the most important considerations
throughout this area. The following discussions provide an overview of the
general and specific plans, both existing and proposed, affecting Century City
and adjacent westside markets.
Century City Specific Plans
Development in Century City was governed by the general West Los Angeles
District Plan until it was determined that specific development guidelines
were necessary for Century City to manage its growth. The City of Los Angeles
authorized the Century City Specific Plan in 1974, repealing the District Plan
and putting into effect a new, detailed development plan. The Specific Plan
was expanded in 1981 to include the 80-acre Fox studios, following Marvin
Davis' purchase of the Twentieth Century Fox Film Corporation.
The purpose of the Century City Specific Plan is to assure orderly
development and to provide street capacity and other public facilities
necessary to support development of the area. The Specific Plan is divided
into two separate city ordinances. The Century City North Specific Plan
details the development requirements for sites located north and east of the
Twentieth Century Fox property. The Century City South Specific Plan governs
development of the Twentieth Century Fox property. The plans are discussed
below.
Century City North Specific Plan
The specific plan for Century City North is detailed in the Los Angeles
City Ordinance No. 156,122, and was approved on November 20, 1981. Century
City North is bounded by Beverly Hills to the east, Santa Monica Boulevard to
the north, Century Park West to the west, and Century City South and Pico
Boulevard to the south. The area includes both commercial and residential
components, with residential development located south of Olympic Boulevard.
The plan controls development by regulating the total number of
automobile trips which can be generated by a new project. The plan also
increases street capacity by requiring developers to complete public
improvement projects for traffic mitigation and pedestrian flow. The Specific
Plan assigned trip limits to the Century City Shopping
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TRIP ALLOCATION MAP
[GRAPHIC OMITTED]
[MAP OF CENTURY CITY COMMERCIAL DISTRICT]
CENTURY CITY
COMMERCIAL DISTRICT
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<TABLE>
<CAPTION>
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Area
Ref Description/ Parcel Land Improvements No. of
No. Address Ownership No. SF/Acres SF Stories
=====================================================================================================
=====================================================================================================
<C> <S> <C> <C> <C> <C> <C>
23 VacantLand AP Properties. Ltd. 4319-002-059 55,510 vacant none
NEC/Constellation Blvd 1.27 land
and Avenue of the Stars
- -----------------------------------------------------------------------------------------------------
24 Watt PLaza I & II Watt Industries 4319-002-060 189,050 855,000 23
1875-1925 Century Park East 4.34
- -----------------------------------------------------------------------------------------------------
25 1901 Ave. of Stars Shuwa Investments 4319-003-055 96,268 470,000 20
1901 Avenue of the Stars 2.21
- -----------------------------------------------------------------------------------------------------
26 Gateway West Pine Realty 4319-003-061 104,980 250,500 14
1801 Avenue ofthe Stars 2.41
- -----------------------------------------------------------------------------------------------------
27 4-Story Office Building Fresnodale, Inc. 4319-003-063 32.670 50,000 4
10265 Constellation Boulevard 0.75
- -----------------------------------------------------------------------------------------------------
28 Century City Shopping Ctr RREEF USA Fund II 4319-003-064 814.572 768,760 N/A
10250 Santa Monica Boulevard 18.70
- -----------------------------------------------------------------------------------------------------
29 Sunamerica Center Constellation Land 4319-003-065 1,220,660 774,274 39
1999 Avenue of the Stars Ltd. Pamership 28.02
- -----------------------------------------------------------------------------------------------------
30 Plaza Walkway Delta Towers JV 4319-004-022 47,916 N/A N/A
2025 Avenue of the Stars #ZZ 1.10
- -----------------------------------------------------------------------------------------------------
31 Vacant Land - Moat Lot AP Properties. Ltd. 4319-004-035 60,410 vacant none
NE/Century Park W and between 1.39 land
Constellation & Olympic Blvds
- -----------------------------------------------------------------------------------------------------
32 Century Plaza Hotel Century Plaza Hotel 4319-004-109 250,906 803,989 750 rooms
2025 Avenue of the Stars Ltd. Partnership 5.76
- -----------------------------------------------------------------------------------------------------
33 Surface Parking - Lot7b AP Properties. Ltd. 4319-004-108 286,625 N/A N/A
SEC/Constellation Blvd and 6.58
Century Park West
- -----------------------------------------------------------------------------------------------------
34 Century Plaza Hotel - Tower Century Plaza Hotel 4319-004-038 165,528 373,697 322 rooms
2055 Avenue of the Stars Ltd. Partnership 3.80
- -----------------------------------------------------------------------------------------------------
35 Parking Garage AP Properties, Ltd. 4319-004-039 135,907 945,387 3,566 sp
2030 Century Park West 3.12
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</TABLE>
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Estimated
Ref Description/ Year Unused Trips Replacement
No. Address Built Phase I Phase II Trips
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==============================================================================
23 VacantLand none ** ** N/A
NEC/Constellation Blvd Included with site #18
and Avenue of the Stars
- ------------------------------------------------------------------------------
24 Watt PLaza I & II 1981 0 0 11,970
1875-1925 Century Park East
- ------------------------------------------------------------------------------
25 1901 Ave. of Stars 1968 0 0 6,580
1901 Avenue of the Stars
- ------------------------------------------------------------------------------
26 Gateway West 1963 0 0 3,507
1801 Avenue ofthe Stars
- ------------------------------------------------------------------------------
27 4-Story Office Building 1966 0 0 700
10265 Constellation Boulevard
- ------------------------------------------------------------------------------
28 Century City Shopping Ctr 1964 1.794.90 0 0
10250 Santa Monica Boulevard Phase I
--------
233.30
Unused
replacement
trips
- ------------------------------------------------------------------------------
29 Sunamerica Center 1990 0 0 10.840
1999 Avenue of the Stars
- ------------------------------------------------------------------------------
30 Plaza Walkway 1973 0 0 0
2025 Avenue of the Stars #ZZ
- ------------------------------------------------------------------------------
31 Vacant Land - Moat Lot none 0 0 0
NE/Century Park W and between
Constellation & Olympic Blvds
- ------------------------------------------------------------------------------
32 Century Plaza Hotel 1965 0 0 7,500
2025 Avenue of the Stars
- ------------------------------------------------------------------------------
33 Surface Parking - Lot7b N/A 0 319.9 0
SEC/Constellation Blvd and
Century Park West
- ------------------------------------------------------------------------------
34 Century Plaza Hotel - Tower 1984 0 0 3,220
2055 Avenue of the Stars
- ------------------------------------------------------------------------------
35 Parking Garage . 1984 0 0 0
2030 Century Park West
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* - Transferred Trips
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Center, vacant properties and underutilized sites. The number of trips
generated by projects are calculated according to the following schedule:
Usage Trips per 1,000 sq. ft. FAR
----- ---------------------------
Commercial:
Office 14 trips
Medical Office 75 trips
Drive-thru Bank 192 trips
Retail:
Non-mall retail 35 trips
Restaurant 45 trips
Fast Food Restaurant 553 trips
Hotel 10 trips/room
Residential 7.55 trips/unit
The plan requires that development be phased and regulates development
based on the number of trips generated by the "Cumulative Automobile Trip
Generation Potential" (CATGP). According to the Plan "Trip" constitutes a unit
of real property development rights pursuant to the Specific Plan and means "a
calculation of daily arrivals at and daily departures from a building or
structure by motor vehicles of four or more wheels".
The Specific Plan is divided into two phases. Phase I has been in effect
since 1981. A total of 20,000 trips are allocated for developments in Phase 1,
with 4,200 trips allocated to the Century City Shopping Center and 15,800
trips assigned to vacant parcels. Projects developed during Phase I are
required to complete specific traffic mitigation projects or to contribute
proportionate funds toward the completion of such projects. These required
traffic projects are assigned according to the following ratio: trips
generated by the project/20,000 trips. The Department of Transportation is
responsible for assigning the improvement projects.
The Century City North Specific Plan specifies 30 public improvements to
be completed on a pro rata basis during Phase 1. According to a City of Los
Angeles interdepartmental memo dated June 20, 1990, there are three remaining
public improvements to be completed as part of the 30 improvements originally
assigned to Phase 1.
Phase II of the Specific Plan begins when all Phase I public improvement
projects are completed and when building permits for Projects generating
15,225,606 Trips, excluding the Century City Shopping Center, have been
issued. Approximately 1,077 un-utilized Phase I Trips remain (refer to
subsequent detailed discussions of remaining Trips). Phase II developments may
not exceed a combined total of 30,156 trips (including the 20,000 Phase I
trips). These Phase II trips are allocated to additional vacant sites and to
underutilized sites. The actual commencement date of Phase II is not specified
in the city ordinance. The required street or other infrastructure
improvements coinciding with
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Phase II trip rights are not specified in the plan, and have not been
established as of the date of this appraisal. According to the Specific Plan,
Phase II projects are discretionary and require a Project Permit from the
Planning Commission and are appealable to the City Council. A number of
conditions must be satisfied prior to approval of a Phase II project,
including appropriate consideration by the Planning Commission of the
project's impact on the vehicular circulation system.
Century City South Specific Plan
The Century City South Specific Plan area corresponds to the original
property purchased by 20th Century Fox Corporation. The plan area is bounded
by Pico Boulevard on the south, Century Park West on the west, Avenue of the
Stars on the east, and the Century City North Specific Plan area to the north.
The Century City South Specific plan (ordinance number 156,121),
originally approved in November, 1981, was amended effective as of August 10,
1993 by ordinance number 168,862. Plan area "B" is further amended by
Ordinance No. 168,859. The boundaries of the plan are shown on the
accompanying exhibit, and include plan areas A and B, with area B restricted
to studio uses only. The 1993 amendment with the specific plan was approved to
accommodate 20th Century Fox, which sought approval to consolidate its
operations to the 53-acre site outlined on the map as area B. The plan
amendment effectively rezoned the studio site to permit commercial rather than
residential development. The plan allows the studio to renovate and expand the
existing studio facilities to include a maximum addition of 771,000 square
feet of new motion picture and television studios and studio-related
facilities to the existing 1,124,000 square feet of development current on the
property, for a maximum development of 1,895,000 square feet. The accompanying
exhibits from the amended specific plan summarize the approved development on
the studio property. The Studio plan area approved development is based on two
phases of trip rights, with 11,500 trips allocated to Phase I and 14,310 trips
allocated to Phase II. The studio ownership is required to complete specified
street improvements in conjunction with the phased development of the site.
The specific plan permits a maximum of 5,000 trips to be transferred from
sites in Century City South to Century City North.
The Century City Specific Plans provide flexibility to developers by
allowing unused trips to be transferred from one site to another. Trips can be
transferred between commercial sites or from residential sites to commercial
sites. Trips cannot be shifted from commercial sites to residential sites.
With two exceptions, properties which were developed prior to 1981 have
not been allocated trips. If an existing project is demolished, however,
"replacement" trips are available for new development. Replacement trips for a
demolished site are approximately equal to the number of trips which would be
used by an identical project developed today. The replacement trips may then
be used for new development on the existing site or transferred to another
site.
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Location Analysis
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West Los Angeles Traffic Mitigation
The Department of Transportation (DOT) of the City of Los Angeles
coordinates traffic studies and planning, and releases an environmental impact
report (EIR) of a new traffic control plan for West Los Angeles. The new plan
is to replace the current Westwood/West Los Angeles Interim Traffic Control
Ordinance No. 170389 (ICO). The new plan is based on extensive studies of
traffic flows which will require mitigation through different measures
including street improvements, ride sharing, and public transportation plans.
The pending new traffic control ordinance will include the Century City
district, and is to incorporate a comprehensive plan for traffic circulation
throughout the westside. The ICO currently addresses traffic issues in West
Los Angeles, Westwood, Brentwood, and Pacific Palisades (excludes Century
City). The existing ICO and pending new ordinance assess fees for new
development based on trip generation (Trips under this ordinance are
calculated differently from Trips under the Century City Specific Plan), with
revenues to pay for mitigation measures.
The mitigation measures and the costs for traffic mitigation represent
one of the most significant "hurdles" in the entitlement process for proposed
new developments in the subject's market area. Although a planned development
may conform to existing zoning requirements in terms of use, density, and
other physical characteristics, the existing physical infrastructure,
particularly for vehicular traffic, is not considered sufficient to support
major new projects. Developers of larger-scale projects in this area are
almost routinely required to file Environmental Impact Reports (EIR), which,
in addition to many other factors, must identify negative "significant"
traffic impacts from the proposed project and related projects, and to include
measures which will reduce the impacts to an "insignificant"' level.
Demographic Profile
We analyzed the demographics and other characteristics for the
surrounding three- and five-mile radii from Century city. The accompanying
exhibit summarizes the most pertinent characteristics within these radii,
including population, households, and income characteristics. The data is
based on information provided by Equifax National Decisions Systems.
Additional exhibits summarize the trends in commercial and residential
development in the cities in westside Los Angeles, the City of Los Angeles,
and Los Angeles County.
Of particular interest in the surrounding trade area data is the direct
correlation between income levels and distance from the subject properties. As
the chart suggests, the household and per capita income levels decline
directly with the increasing distance from the properties (per capita income
declines from $50,188 within a three-mile radius to $30,051 within a five-mile
radius). the education level and the corresponding income levels for residents
within a one-mile radius of the property are substantially above the levels
for the three- and five-mile radii. The percentages of owner occupied housing
within the different radii also decrease in direct proportion to the distance
from the properties.
According to Equifax Data, the median price for existing homes within the
five-mile radii ranges from $405,420 to $499,608, and 80 percent of all
owner-occupied housing
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Location Analysis
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within a one-mile radius of the subject is value at more than $500,000. By
comparison, the median home price for all of Los Angeles county is estimated
at $226,400. The median rental rates within the one, three, and five-mile
radii are $915, $764, and $674, respectively.
As shown on the exhibit the subject's primary trade area, as defined by
one to five-mile radii from Century City, has 'considerably more favorable
economic characteristics than all of Los Angeles County. The subject's prime
westside Los Angeles location is recognized as one of the most desirable
residential and commercial markets in southern California.
New Construction Trends
The accompanying exhibit summarizes residential construction activity
during the period 1989 through 1995 (annualized) in the City and County of Los
Angeles, as well as in the incorporated cities (excluding Los Angeles) within
the westside market area (including Beverly Hills, Culver City, Santa Monica,
and West Hollywood). A second exhibit summarizes non-residential construction
activity in the same markets. The data and accompanying graphs show the sharp
decline in new construction, both in terms of number of permits and total
dollar volume, for all types of construction since 1989-1990. The decline in
new construction corresponds to the onset of the severe economic recession in
southern California. Although real estate values in many markets in Los
Angeles County have stabilized and improved during the past two years,
economic demand levels have not yet increased sufficiently to justify new
construction in most areas.
Employment and Labor Base
A recent survey by Equifax National Decision Systems indicates that
within a three mile radius of the subject property, the total daytime
employment is approximately 250,000 persons. The daytime employment population
is greater than the working age population (residents aged 18 to 64 years)
within the subject's three mile trade area, which indicates that the
businesses within the three mile trade area provide a significant source of
employment for the local population and draw a large number of employees from
outside the three mile area.
The most significant employment group within the three mile trade area is
the services segment, which comprises approximately 50 percent of the total
employment within this area. The major employment categories within the
services group include business services, health services, and legal services.
The finance/insurance/real estate sector comprises approximately 13.5 percent
of the employment base within the five mile trade area. Within the larger five
mile trade area, the most significant employment groups include services (48.1
percent), retail trade (20.1 percent), and finance/insurance/real estate (11.4
percent). The services sector includes significant concentrations of
employment in the areas of business services, health services, and legal
services. The entertainment industry has a major presence in the westside
market area.
A survey by the Los Angeles Times indicated that the Los Angeles
metropolitan area had the largest concentration of corporate headquarters in
the State of California. The survey reported that 122 corporate headquarters
are located in the Los Angeles
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BUSINESS-FACTS: Daytime Employment Report
West Los Angeles
- --------------------------------------------------------------------------------
1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Business Employment by Type No. of Businesses No. of Employees Employees per Business
- --------------------------- ----------------- ---------------- ----------------------
<S> <C> <C> <C>
1 RETAIL TRADE 7,600 79,743 10.5%
Home Improvement Stores 171 1,756 10.3%
General Merchandise Stores 62 5,766 93.0%
Food Stores 528 7,994 15.1%
Auto Dealers & Gas Stations 392 5,780 14.7%
Apparel & Accessory Stores 1,076 6,204 5.8%
Furniture / Home Furnishings 1,131 8,953 7.9%
Eating & Drinking Places 1,926 30,508 15.8%
Miscellaneous Retail Stores 2,314 12,782 5.5%
2 FINANCE-INSURANCE-REAL ESTATE 3,402 41,432 12.2%
Banks, Savings & Lending Institutions 549 6,988 12.7%
Securities Brokers & Investors 505 7,689 15.2%
Insurance Carriers & Agencies 646 10,410 16.1%
Real Estate - Trust - Holding Co. 1,702 16,345 9.6%
3 SERVICES 20,057 200,091 10.0%
Hotels & Lodging 188 9,716 51.7%
Personal Services 3,136 16,485 5.3%
Business Services 5,543 51,691 9.3%
Motion Picture & Amusement 1,515 19,264 12.7%
Health Services 4,348 50,073 11.5%
Legal Services 3,037 24,176 8.0%
Education Services 436 13,449 30.8%
Social Services 813 6,180 7.6%
Other Services 1,041 9,057 8.7%
4 AGRICULTURE 178 1,385 7.8%
5 MINING 31 563 18.2%
6 CONSTRUCTION 957 8,475 8.9%
7 MANUFACTURING 1,513 29,517 19.5%
8 TRANSPORTATION, COMMUN/PUBLIC UTIL 820 12,382 15.1%
9 WHOLESALE TRADE 1,754 18,209 10.4%
10 GOVERNMENT 305 7,352 24.1%
- -----------------------------------------------------------------------------------------------------------------
TOTAL BUSINESSES 36,617 399,149 10.9%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
Daytime Population 399,149
Residential Population 522,540
Daytime Population per Business 10.9%
Residential Population per Business 14.3%
================================================================================
Number of Businesses per Sector
[GRAPHIC OMITTED]
Number of Employees per Sector
[GRAPHIC OMITTED]
================================================================================
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Location Analysis
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metropolitan area, with 36 corporate headquarters located in the West Los
Angeles area. The chart on the accompanying page summarizes the major
employers in the West Los Angeles area based on the employment figures
provided in the Los Angeles Times survey. The major employers in the local
area include a mix of entertainment, finance, healthcare, and manufacturing
oriented companies. A significant portion of the employment base in the West
Los Angeles area is comprised of private sector companies in the fields of
finance, law, medicine, and other relatively high paying sectors. In most of
these fields, pay increases are closely tied to the performance of the company
and/or the individual rather than being based on the rate of inflation as
measured by the Consumer Price Index or some other such standard. As a result,
the rate of increase in discretionary spending in the West Los Angeles area is
not overly dependent upon continued growth in the local residential
population.
Conclusions
The West Los Angeles area contains a significant concentration of retail,
commercial and institutional development which is geared toward the local and
regional populations. The Century City, Beverly Hills, West Los Angeles, and
Santa Monica markets represent arguably the most desirable residential, retail
and professional business locations in southern California. The subject trade
area benefits from the highest per capita and household income levels in the
region, and the area contains a positive mix of employers, including the
expanding entertainment industry.
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LOS ANGELES OFFICE MARKET ANALYSIS
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Office Market Analysis
Los Angeles County Office Market Overview
Supply and Tenant Demand
According to Cushman & Wakefield's second-quarter, 1996 surveys the
combined Los Angeles County office market contained a total inventory of
167,525,977 square feet. This figure excludes owner user, medical, and
government office buildings.
The accompanying exhibit provides a statistical overview of the office
inventory for Los Angeles County, including a breakdown by markets. The
markets included in the sectors used in this report are summarized below.
Sector Markets
- ------ -------
Los Angeles Central/Downtown: Downtown Los Angeles
Mid-Wilshire Corridor
San Gabriel Valley
Los Angeles West: Hollywood/West Hollywood
Beverly Hills/Century City
Westwood/West L.A./Santa Monica
Marina Area/Culver City
Los Angeles South Bay: El Segundo/LAX
Long Beach
Torrance
Los Angeles North: Simi/Conejo Valleys
West San Fernando Valley
Central San Fernando Valley
East San Fernando Valley/Tri-Cities
Each market within the larger markets is comprised of a series of
submarkets. Although the markets and individual office markets compete to
varying degrees on a larger scale for the Los Angeles County tenant base, each
market is characterized independently in general terms by a typical targeted
tenant or industry type. The table below presents a general overview of the
tenant base for the markets.
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Los Angeles Office Market Analysis
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Sector Tenant Base
- ------ -----------
Los Angeles Central/Downtown Financial
Legal
Telecommunications
Energy
Accounting
Real Estate
Government/Quasi-Government
Los Angeles West: Legal
Accounting
Entertainment
Insurance
Real Estate
Financial Services
Advertising
Los Angeles South: Aerospace
High-Tech
Research & Development
Los Angeles North: Entertainment
Insurance
Legal
Accounting
Engineering
Considerable duplication exists within the office tenant base for the Los
Angeles County office markets. However, the office markets maintain separate
identities in terms of the primary tenancies and relative prestige and
corresponding relative rental rate structures for comparable buildings within
the separate markets. Legal and accounting firms provide considerable tenant
demand within each of the markets, for example, but the type and focus of
these professional firms is directed toward the business base within the
sector. Downtown Los Angeles law and accounting firms consist primarily of
larger national or regional firms oriented toward corporations and government
for example, while westside Los Angeles firms typically are smaller and
specialize in a particular field, such as entertainment law.
Historical Office Development
Fundamental shifts occurred in the greater Los Angeles office market
during the past decade. The most significant changes include the exodus of
major insurance companies and corporations from the Mid-Wilshire District to
more suburban locations such as Warner Center and Glendale during the 1980s,
and the movement of some entertainment firms from Hollywood and Beverly Hills
to areas such as Burbank (North Los Angeles), Woodland Hills/Warner Center
(North Los Angeles), or Culver City and Santa
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Los Angeles Office Market Analysis
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Monica (West Los Angeles). These shifts have involved relocations within the
Los Angeles County marketplace, and most of the current markets have emerged
as separate, viable office locations during the past decade. The established
Los Angeles County office markets as of 1980 consisted of downtown Los
Angeles, the Mid-Wilshire sector, Pasadena, Beverly Hills, Century City, and
the Ventura Boulevard corridor in the San Fernando Valley. Approximately 55%
of the total existing office development in Los Angeles County has been
completed during the period since 1982.
A number of the current major office markets or submarkets were
effectively created during roughly the past decade. Most of the development in
the following markets (total current supply in parenthesis) has been completed
since 1980: Warner Center (5,349,550 square feet) Burbank/Universal City
(5,517,729 square feet), Glendale (5,051,341 square feet), Brentwood
(3,254,337 square feet), Culver City/Westchester (3,643,649 square feet), and
Long Beach (7,351,695 square feet). Much of the development in the Glendale,
Burbank, Culver City, and downtown Long Beach office markets was assisted to
varying degrees by government agencies, including redevelopment agencies.
Significant assistance (political and/or financial) by government agencies has
also increased the office development in previously established markets such
as downtown Los Angeles and Pasadena. Prior to about 1980 several of these
alternative office locations either did not exist or the available supply in
the market was not sufficient to represent serious competition for the
established office markets. The existence of a number of alternative office
market locations within the Los Angeles basin is a significant consideration
in analyzing historical vacancy and rental trends in the individual markets
prior to 1982 for the purpose of projecting future performance.
Future Competitive Supply
Future competitive office development in the Los Angeles County markets
is restricted by two primary factors: 1) economic conditions - the current
financial infeasibility of most new development and the absence of available
financing for office development of new office properties; and 2) political
conditions - the governmental restrictions limiting new development. Although
the economic factors limiting development, which are based on lending
restrictions and economic infeasibility under current leasing conditions and
effective rental rates, represent the primary reason for limited new
development in the recent, past and near future, the political constraints on
new development as the most significant factor limiting new competitive office
supply in a number of the markets and market for the long term.
1) Economic Constraints
Market rental rates in Los Angeles County submarkets are currently below
(to varying degrees) the levels required to justify new Class A office
development. The current (2nd Quarter 1996) weighted average asking rental
rate for all direct office space availabilities in Los Angeles County is
$19.47 per-square-foot annually, full service gross. The individual markets
have weighted average rental rates (asking) from $15.72 to $24.48
per-square-foot.
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Los Angeles Office Market Analysis
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New construction costs for mid to high-rise office buildings vary by market
location and underlying land cost. The relative strength of the markets in
terms of tenant demand and the "spread" between the rents required support new
development and the current market rental levels in the various markets
fluctuates considerably, but virtually no new speculative office construction
has occurred in Los Angeles County markets since 1992. Refer to accompanying
exhibit for historical construction activity since 1980.
2) Political Constraints
Other than the downtown market and the South Los Angeles market area,
nearly every sector of the City of Los Angeles and adjacent suburban cities
with a meaningful office market has implemented restrictions on new
development, tied to political factors, traffic mitigation and other
infrastructure issues. These restrictions will negatively impact the political
feasibility of significant amounts of new office construction under any future
economic office market scenario. The accompanying exhibit summarizes Los
Angeles area markets with meaningful political constraints on development
currently in place or pending. The specific plans are based on automobile
"trips" (costs associated with traffic mitigation costs) or other criteria
(typically tied to infrastructure). The political influence of the homeowner's
groups, which typically have active slow- or no-growth philosophies toward new
development, is strong and has increased considerably during the past decade.
In addition to typical zoning and planning issues, new development of
significant size and scope within specific plan areas will require substantial
additional entitlement fees to be paid prior to approval for new development.
The fees are usually based on the anticipated new traffic generated by a
proposed project, and the costs are assessed based on square footage and use.
The "prime" westside markets, including Westwood, Century City, Brentwood, and
Santa Monica have substantial fees for new development, as does the Miracle
Mile District, and the Ventura Boulevard corridor of the San Fernando Valley
(including Encino and Woodland Hills).
The most significant political constraint on new competitive office
supply in the City of Los Angeles markets has been Proposition U, which was
passed in 1986 and down-zoned all Height District I properties in the City of
Los Angeles. Known also as Ordinance No. 161684, Proposition "U" amended the
zoning code for all areas of the City of Los Angeles to include height
district designations ranging from 1 to 4, with much of the city downzoned to
height district No. 1. Properties within this designation are limited to a
maximum of 3 stories or 45 feet in height. The "wave" in new high-rise
construction during the latter portion of the last decade (the 1980's) was in
part accelerated by developers and lenders who hurried high-rise office
developments through the planning and development stages before the sites were
downzoned. Properties in the downtown Los Angeles market area are not within
this height classification, but most other areas of the City have been
impacted, including West Los Angeles and the Ventura Boulevard corridor of the
San Fernando Valley. The portions of the City most directly effected by
Proposition U and the specific plans summarized on the chart are generally the
most affluent, prestigious residential areas, and office buildings in these
locations have typically commanded some
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Los Angeles Office Market Analysis
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of the highest rental rates in the County. These areas also experienced some
of the greatest levels of new development during the previous decade (1980's).
The concerns of the surrounding residential communities over the increasing
traffic and the decline in the overall quality of life has led to the
formation of a number of politically influential homeowners groups that can be
described as actively anti-development. Although there are some political and
governmental controls on future development in the downtown market area, the
number of projects currently entitled for development or "in the pipeline" for
approval is substantial, and the surrounding residential base is not as
organized, active, or apparently as influential as the more affluent
communities situated in the west and north Los Angeles County markets.
Probable Future Development Activity
As discussed above the economic and political constraints on new office
development have resulted in virtually no new office construction in Los
Angeles County markets since 1992. The "spread" between current market rental
rates and the rents required to justify new development varies from submarket
to submarket. The highest rental rates in the county are currently achieved in
the "Tri-Cities" markets and the "prime" westside Los Angeles markets. There
are two "prime" development sites in the Glendale and Burbank markets which
are proposed for near-term multi-tenant office development. Owner-user
projects such as the proposed Dreamworks animation facility in Glendale or
"redevelopment" projects such as the former Lockheed "Skunkworks" facility in
Burbank for a major entertainment industry tenant are commencing during the
second half of 1996. Build-to-suit activity for Dreamworks studios and related
businesses in the Playa Vista area of west Los Angeles may occur during
1998-1999. Rental rates for office space in selected westside markets such as
Santa Monica are "approaching" replacement cost levels, and new developments
on entitled sites such as the Arboretum and Water Garden Phase II may occur in
the foreseeable future. In terms of speculative office development potential,
however, substantial market rental "spikes" will be required before new
speculative office development can occur in most Los Angeles County markets.
Vacancy
The landlord-direct vacancy rate for Los Angeles County office markets
was 18.4 percent, based on 30,844,871 square feet available for lease at the
end of 2nd quarter, 1996. Our review of the data on a submarket by submarket
basis indicates there are isolated submarkets that experienced considerably
lower direct vacancy levels than the countywide figure, such as Universal City
and the Burbank Media District. Most markets within Los Angeles County, with
the exception of the Tri-Cities area, have direct vacancy rates above 15
percent, and several have current direct vacancy levels in the range of 20
percent. The previous Los Angeles County Office Market Statistics chart
illustrates the vacancy breakdown by sector.
Including sublease availabilities the overall Los Angeles County office
market vacancy level was 20.8 percent as of 2nd quarter, 1996, which compares
with 21.0 percent as of year-end, 1995 and the 21.8 percent overall vacancy
level at the end of 1994. The sublease marketplace became a more important
component of the overall office leasing
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market during the first few years of this decade, particularly within the
downtown Los Angeles market, as the national economic recession and other
factors led to business consolidation and mergers. Many types of businesses
were affected, including major law and accounting firms, aerospace firms,
high-tech firms, energy firms, telecommunications companies, financial
services firms, insurance companies, and banks and savings and loans. The
oversupply of office space during the first portion of this decade led to
additional sublease availabilities as developers assumed existing tenant
obligations for space in other buildings prior to the termination of the
tenants previous lease. Although sublease space was previously a secondary
competitive marketplace for short-term lease requirements or tenants with
questionable credit ratings, a few office markets in Los Angeles County
continue to have sublease markets that compete effectively with landlord
direct space, which in turn applies additional downward pressure on rents for
direct office space. As shown the exhibit, "Office Market Vacancy Trends", the
overall Los Angeles County market has experienced a slow, gradual improvement
in direct and sublease vacancy levels during the period from fourth quarter,
1991 through second quarter, 1996.
Near-Term Vacancy Trends
The Los Angeles Central office sector, which includes the downtown and
Mid-Wilshire areas, experienced negative net absorption of 711,752 square feet
during 1995. The total Los Angeles County net absorption during 1995 was
positive 272,154 square feet including the impact of the negative absorption
in the Central Los Angeles sector. Excluding Los Angeles Central, the
remainder of the county (the West, South, and North markets) experienced
positive absorption of 983,906 square feet for an inventory of 116,707,590
square feet.
The chart shows the potential for a continued, gradual decrease in
vacancy levels for the three markets of the county (excluding the Central
sector). As vacancy levels decline overall and within the most desirable
submarkets, rental rates for office space in these markets should logically
increase.
The Los Angeles Central Sector, which includes downtown Los Angeles and
the Mid-Wilshire corridor, have experienced generally higher vacancy levels
and lower absorption during the past several years than the remainder of the
county. The historical vacancy trends exhibit includes a column which adjusts
the inventory and availabilities as of year-end 1991 through 1995 to exclude
the Los Angeles Central sector.
Gross Leasing Activity
Cushman & Wakefield defines gross leasing activity as the sum of all
completed leasing transactions including subleasing but excluding renewals.
The accompanying graph illustrates the pattern in net absorption and gross
leasing activity for the combined Los Angeles County office marketplace on a
annual basis since 1990. Over the past six years (1990 through 1995), gross
leasing activity has been relatively stable on an annual basis, averaging
approximately 18 million square feet. The leasing activity includes assumed
leases and other factors, and does not represent net absorption, which is one
indication of new demand.
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Los Angeles Office Market Analysis
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Net Absorption
Cushman & Wakefield calculates net absorption based on net change in
directly occupied office space. The chart on the accompanying page summarizes
the annual trends in net office absorption for Los Angeles County during the
period 1990 through 1995. A graph compares net office absorption with the
gross leasing activity summarized previously. Net absorption declined sharply
from 1990 to 1992, from positive absorption of 2.3 million square feet in 1991
to negative absorption in 1992. Following negative absorption in 1993 and 1994
county-wide net absorption increased to 272,154 square feet during 1995. The
Los Angeles Central office markets posted substantial negative net absorption
from 1992 to 1995. Excluding Los Angeles Central, the three remaining areas
(West, North and South County), experienced positive net absorption of 983,906
square feet during 1995.
The net absorption figures discussed above are based on the net change in
direct occupied office space. This calculation does not include changes in the
sublease availabilities. The current (2nd quarter 1996) sublease
availabilities in Los Angeles County total 3,922,943 square feet, or 11.3
percent of the Los Angeles County available (for lease) office supply.
Although several submarkets have substantial sublease availabilities, the
downtown Los Angeles Central Business District represents the greatest single
component of this supply, with approximately 760,000 square feet or 19 percent
of the countywide sublease space. The El Segundo and Santa Monica markets also
have significant sublease availabilities. As noted previously, however, the
sublease supply has decreased gradually from 3.6 percent at the end of fourth
quarter, 1991 to 2.4 percent at the end of 2nd quarter, 1996.
The chart below shows the cumulative oversupply of office space added to
the Los Angeles County office market since 1990.
=========================================================================
SF SF SF
Year New Construction Net Absorption Oversupply
-------------------------------------------------------------------------
1990 6,690,483 8,258,928 (1,568,455)
-------------------------------------------------------------------------
1991 7,977,729 2,261,311 5,716,418
-------------------------------------------------------------------------
1992 1,897,805 (5,207) 1,903,012
-------------------------------------------------------------------------
1993 0 (248,158) 248,158
-------------------------------------------------------------------------
1994 0 (997,235) 997,235
-------------------------------------------------------------------------
1995 180,700 272,154 (91,454)
-------------------------------------------------------------------------
Totals 16,746,717 9,541,793 7,204,924
-------------------------------------------------------------------------
1996 (2 Qtrs.) 0 101,109 (101,109)
=========================================================================
Conclusions - Los Angeles County Office Market
The commercial office real estate market in Los Angeles has experienced a
significant transformation during roughly the past 20-year period. Los Angeles
has grown from a regional (southern California) business center to a financial
center for the western
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OFFICE MARKET
Net Absorption Trends
Los Angeles County
========================================================================
Including Los Angeles Excluding Los Angeles
Central / Downtown Central / Downtown
Net Absorption (SF) Net Absorption (SF)
Year YTD YTD
=============== ==================== =====================
1991 2,261,311 882,518
- --------------- -------------------- ---------------------
1992 (5,207) 251,057
- --------------- -------------------- ---------------------
1993 (248,158) 55,268
- --------------- -------------------- ---------------------
1994 (997,235) 234,566
- --------------- -------------------- ---------------------
1995 272,154 983,906
- --------------- -------------------- ---------------------
1996* 101,109 (6,562)
=============== ==================== =====================
Net Absorption Bar Chart
Excluding Los Angeles Central / Downtown
[GRAPHIC OMITTED]
* - As of mid-year 1996
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Los Angeles Office Market Analysis
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United States and the international focus for trade and financial relations
with the Pacific Rim countries. The factors influencing this transformation
include global, national, and regional trends and events.
The national and regional economic recession during the period from
roughly the third quarter, 1990 through 1993 exacerbated the oversupply
conditions established during the past decade. The historically strong net new
demand for office space declined significantly, with most office markets
experiencing flat or negative office space absorption during the past few
years. Financing for new speculative developments was virtually unavailable,
but new development continued to 1992 based upon previous construction lending
commitments. About 10 million square feet of new office supply was completed
during 1991 and 1992.
Several submarkets in Los Angeles County office market provided signs of
recovery during 1993 and 1994, and have tightened during 1995 and
year-to-date, 1996, particularly the Tri-Cities and prime westside markets.
The level of office building investment activity increased substantially
during the past 24 months in Los Angeles County. Many submarkets experienced
declining direct and overall vacancy rates during 1994 and 1995. Gross leasing
activity remained stable on a countywide basis, and all markets excluding the
Los Angeles Central Sector experienced positive absorption during 1995. On a
submarket by submarket basis several individual markets appear to be steadily
improving and may experience relatively strong absorption, occupancy and value
increases in the near future.
As shown in previous charts, the Los Angeles County office market,
particularly when the Central sector is isolated from the remainder of the
county, appears positioned for a continued, stable improvement in occupancy
levels. Modest absorption levels combined with minimal new construction has
resulted in a gradual decline in vacancy levels over the past four years.
Including all markets the direct vacancy level in the country has declined
from 19.4 percent as of year-end 1992 to 18.4 percent as of 2nd quarter, 1996.
Excluding the central Los Angeles Sector, direct vacancy has declined from
19.2 percent at year-end 1991 to 16.2 percent as of 2nd quarter, 1996. The
employment growth in several markets, particularly the entertainment industry
(including the film and recording industries), has enabled several submarkets
to outperform the county as a whole during the past several years. The
submarkets which have most directly benefited from the growth of the
entertainment industry include Burbank and Glendale in the North Los Angeles
sector, and the westside markets of Beverly Hills, the Miracle Mile, Century
City, Santa Monica, West Los Angeles, and Culver City. The office locations
adjacent to these submarkets and Class "B" buildings in these submarkets have
benefited from "overflow" demand from entertainment industry tenants, and have
also attracted tenants from other businesses who have been driven from Class A
buildings in the prime submarkets by higher rental rates.
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WEST LOS ANGELES OFFICE MARKET ANALYSIS
================================================================================
The subject property is located in the Century City district of the City
of Los Angeles, which is the largest component of the West Los Angeles office
market. The West Los Angeles market is composed of 13 distinct submarkets
within four separate sectors. These sectors function, to a degree,
independently of one another, despite their close proximity.
The following chart shows the division of the four sectors into the 13
submarkets.
Sector 1:
---------
1 - Park Mile
2 - Miracle Mile
3 - Hollywood
4 - West Hollywood
Sector 2:
---------
5 - Beverly Hills
6 - Century City
Sector 3:
---------
7 - Westwood
8 - Brentwood
9 - Santa Monica
10 - Pacific Palisades
11 - West Los Angeles
Sector 4:
---------
12 - Marina Del Rey\Venice
13 - Culver City\Westchester
These sectors are differentiated according to location and access, market
perception and tenant appeal, improvement quality, and rental rates. According
to Cushman & Wakefield's West Los Angeles Market Research Group, the combined
West Los Angeles market contained 45,826,374 square feet of office area as of
the end of third quarter, 1996. There were 7,140,501 square feet available for
direct lease in the overall West Los Angeles office market, equating to a 15.6
percent vacancy rate. Including sublease availabilities, the overall vacancy
rate is 18.5 percent. The chart below summarizes the direct and overall
vacancy trends as of year-end 1989 through 1995 and third quarter, 1996.
==============================================================================
Year-end Direct Vacancy Overall Vacancy
==============================================================================
1989 12.1% 15.1%
- ------------------------------------------------------------------------------
1990 15.9% 19.6%
- ------------------------------------------------------------------------------
1991 19.3% 23.7%
- ------------------------------------------------------------------------------
1992 19.7% 22.1
- ------------------------------------------------------------------------------
1993 19.0% 21.4%
- ------------------------------------------------------------------------------
1994 17.4% 19.2%
- ------------------------------------------------------------------------------
1995 17.6% 19.4%
- ------------------------------------------------------------------------------
1995 - 3rd Quarter 15.6% 18.5%
==============================================================================
The seven full years summarized above cover the period prior to and
following the major economic recession which commenced during approximately
the third quarter, 1990 (in
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[GRAPHIC OMITTED]
[LOS ANGELES STREET MAP]
<PAGE>
West Los Angeles Office Market Analysis
================================================================================
the Los Angeles area). Direct vacancy levels increased from 12.1 percent as of
the end of 1989 to 19.7 percent as of year-end 1992. Direct vacancy rates were
relatively flat at or near their peak levels from 1991 through 1993, ranging
from 19.0 percent to 19.7 percent prior to declining to the most recent 15.6
percent level as of third quarter, 1996. The absence of new development and
the modest positive absorption levels during the past few years have resulted
in a 4.1 percent decline in the vacancy rate in the combined westside markets
since year-end 1992.
The subject property is located in the Century City submarket. Office
buildings in the subject's market compete most directly with buildings in
Century City and to a lesser degree with buildings in other westside Los
Angeles office markets. The primary and secondary competitive office markets
are discussed on the following pages. Refer to the map for submarket location.
Primary Competitive Supply - Century City
Century City is a master planned commercial, retail and residential
community located in the prime Westside area of Los Angeles. Century City is
bordered to the north by the prestigious Los Angeles Country Club, to the
south by the Hillcrest Country Club and Rancho Park Golf Course, to the east
by Beverly Hills and to the west by the communities of West Los Angeles,
Westwood, and Brentwood.
Century City Office Supply and Trends
The Century City market is the largest office market in the westside Los
Angeles sector, with a total rentable area of 8,852,055 square feet in 26
buildings, or 19 percent of the total west Los Angeles market area. The
Century City direct and overall vacancy rates as of the end of third quarter,
1996 were 1 1.0% and 12.8%, respectively. These third quarter vacancy rates v/
represent significant improvement over year-end 1995 figures, and are the
lowest vacancy levels in the Century City market since 1989. The following
chart summarizes the vacancy trends and weighted average rental rates (for
available direct space) in the Century City market during the past 7.75 years.
Century City - Vacancy Trends
Vacancy Vacancy Weighted Average
Year End Direct Overall PSF Annual Rent*
- -------- ------ ------- ----------------
1989 9.1% 12.5% $30.84
1990 14.4% 19.3% $34.20
1991 14.0% 17.2% $32.88
1992 16.9% 19.7% $30.60
1993 16.8% 18.7% $25.56
1994 16.4% 17.8% $22.56
1995 14.0% 16.1% $23.28
3rd Qtr 1996 11.0% 12.8% $23.40
*Based on asking rental rate for available direct space
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West Los Angeles Office Market Analysis
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West Los Angeles Office Market Analysis
The direct vacancy level has decreased by a full three percentage points
during the first three quarters of 1996, while the overall vacancy rate, which
includes sublease availabilities, has declined by 3.3 percentage points, The
changes in weighted average rental rates for direct availabilities is not as
meaningful for trend analysis since the figures are based on quoted rents for
space offered for lease. The decline in rental rates from 1990 to 1993
reflects changing market conditions, for example, but the higher rates from
1990 through 1992 consider the completion of the 775,000 square-foot "trophy"
quality new building 1999 Avenue of the Stars, which achieved the highest
rental rates in Los Angeles County. This building and Fox Plaza, the second
"trophy" office property in Century City, have had little or no available
space for several years, and the lower rental rates shown for available
Century City space reflects to a degree the quality of space available for
lease.
Building Categories
The Century City office market contains a considerable range in building
quality and market perception. The market can be divided into three basic
"tiers", or classes of building: 1) Top Tier Class "A" properties; 2) Second
Tier Class "B" properties; and 3) Third Tier Class "B" properties. The
exhibits on the accompanying pages summarize the primary components of the
Century City office market, presented by asset category. A consolidated
exhibit summarizes the characteristics of the office supply by category. The
most competitive properties are discussed in detail in the income Approach.
The "Top Tier" of the Century City market consists of five buildings
totaling 4.35 million square feet. The two premiere properties in the Century
City market, and in all of Los Angeles County are included in this category:
SunAmerica Center and Fox Plaza. These two buildings achieve generally the
highest rents of any office properties in the county, are currently 99 percent
leased on a direct basis, and have historically been at or near full
occupancy.
The subject development is included in this category of asset, although
it is positioned below SunAmerica Center and Fox Plaza in terms of market
perception and achievable rental rates. Item C-3 on the survey, Century City
North, is considered one of the premiere buildings in this market despite its
age (1971 built) and the fact the building requires capital work for fire
sprinklers and asbestos abatement. These factors are offset by the excellent,
unobstructed north-facing views from the building. This property transferred
ownership during November, 1996 (refer to Sales Comparison Approach).
As shown on the Summary exhibit, the five buildings ranked in the upper
tier of the Century City market have a combined direct vacancy rate of only
4.5 percent, and an overall vacancy level (including sublease space) of 5.8
percent (as of November, 1996). The following chart summarizes the vacancy and
asking rental rates for the three asset categories.
Direct Overall Annual Rent PSF
Asset Category Vacancy Vacancy Weighted Avg. Rent
-------------- ------- ------- ------------------
Top Tier 4.5% 5.8% $22.59-$28.13
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<TABLE>
<CAPTION>
Century City
Rental and Occupancy Survey of Competitive Office Buildings
====================================================================================================================================
Building Information Overall Quoted
Item Building Name/ No. of Area Avg.Flr. Year Availability Space (SF) Availability Annual Rent
No. Location Stories (SF) Area (SF) Built Floor(s) Direct Sublease (SF) PSF PSF
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
C-11 Century Park Building 15 310,000 20,667 1970 Ground 6,720 0 $22.20 - $22.20
1880 Century Park East 2-15 147,702 0 Total $22.20 - $22.20
---- ------- -
154,422 0 154,422
- ------------------------------------------------------------------------------------------------------------------------------------
C-12 The 1888 Building 21 487,177 23,199 1970 17 3,618 0 $21.00 - $21.00
1888 Century Park East 2-21 110,568 0 Total $19.20 - $25.20
---- ------- -
114,186 0 114,186
- ------------------------------------------------------------------------------------------------------------------------------------
C-13 Gateway East 14 308,000 22,000 1964 Ground 1,308 0 $20.40 - $24.00
1800 Avenue of the Stars 4-14 13,427 0 Total $20.40 - $24.00
---- ------ -
14,735 0 14,735
- ------------------------------------------------------------------------------------------------------------------------------------
C-14 Gateway West 14 242,900 17,350 1963 Ground 1,346 0 $21.60 - $26.40
1801 Avenue of the Stars 2-14 68,374 0 Total $21.60 - $26.40
---- ------ -
69,720 0 69,720
- ------------------------------------------------------------------------------------------------------------------------------------
C-15 1900 Avenue of the Stars 28 551,819 19,708 1969 Ground 0 21,427 $20.40 - $20.40
1900 Avenue of the Stars 2-27 86,196 0 Total $22.20 - $28.20
---- ------ -
86,196 21,427 107,623
- ------------------------------------------------------------------------------------------------------------------------------------
C-16 1901 Avenue of the Stars 20 450,699 22,535 1968 5 & 19 0 11,256 $19.80 - $24.00
1901 Avenue of the Stars 2-17 90,703 0 Total $22.20 - $26.40
---- ------ -
90,703 11,256 101,959
- ------------------------------------------------------------------------------------------------------------------------------------
Second Tier Totals 218 4,040,873 18,536 Occupied 674,652 107,490 Vacant $21.10 - $24.99
--------------------
782,142 Wtd. Avg. Rental Rate
Total SF
====================================================================================================================================
<CAPTION>
=================================================================================================================
Occupancy Parking Monthly 1996
Item Building Name/ Lease Ratio Ratio/ Parking Rentable Taxes/
No. Location Type (Incl.SL) 1,000 SF Rates Factor Exp PSF
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
C-11 Century Park Building FSG 50.2% 3.00 $99 1.13 $8.70
1880 Century Park East FSG $165
- -----------------------------------------------------------------------------------------------------------------
C-12 The 1888 Building FSG 76.6% 2.00 $121 1.20 $9.00
1888 Century Park East FSG $143
$258
- -----------------------------------------------------------------------------------------------------------------
C-13 Gateway East FSG 95.2% 2.00 $100 1.14 $8.50
1800 Avenue of the Stars FSG $185
- -----------------------------------------------------------------------------------------------------------------
C-14 Gateway West FSG 71.3% 2.00 $85 1.14 $7.50
1801 Avenue of the Stars FSG $117
$155
- -----------------------------------------------------------------------------------------------------------------
C-15 1900 Avenue of the Stars FSG 80.5% 3.00 $100 1.14 $10.50
1900 Avenue of the Stars FSG $250
- -----------------------------------------------------------------------------------------------------------------
C-16 1901 Avenue of the Stars FSG 77.4% 3.00 $100 1.14 $10.50
1901 Avenue of the Stars FSG $250
- -----------------------------------------------------------------------------------------------------------------
Second Tier Totals Averages 2.64 $106 1.14 $9.50
80.6% $179
$239
=================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Third Tier - Class "B" Buildings November 1996
====================================================================================================================================
Building Information Overall Quoted
Item Building Name/ No. of Area Avg.Flr. Year Availability Space (SF) Availability Annual Rent
No. Location Stories (SF) Area (SF) Built Floor(s) Direct Sublease (SF) PSF PSF
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
C-17 ABC Entertainment 5 180,000 36,000 1975 Conc 18,258 0 $19.20 - $19.20
Center 3 2,400 0 Total $19.20 - $19.20
2020 Avenue of the Stars - ------ -
20,658 0 20,258
- ------------------------------------------------------------------------------------------------------------------------------------
C-18 ABC Entertainment Center 5 180,000 36,000 1975 Plaza-Conc 14,250 0 $19.20 - $19.20
2040 Avenue of the Stars 4 37,236 0 Total $19.20 - $19.20
- ------ -
51,486 0 51,486
- ------------------------------------------------------------------------------------------------------------------------------------
C-19 1930 Century Park West 4 56,265 14,066 1972 Ground 0 0 --- - ---
1930 Century Park West 0 0 0 Total --- - ---
- - -
0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
C-20 Fox Sports Building 5 115,000 23,000 1970 Ground 0 0 --- - ---
10000 Santa Monica Blvd. 0 0 0 Total --- - ---
- - -
0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Third Tier Totals 19 31,265 27,961 Occupied 72,144 0 Vacant $19.20 - $19.20
-------------
72,144 Wtd. Avg. Rental Rate
Total SF
====================================================================================================================================
<CAPTION>
=================================================================================================================
Occupancy Parking Monthly 1996
Item Building Name/ Lease Ratio Ratio/ Parking Rentable Taxes/
No. Location Type (Incl.SL) 1,000 SF Rates Factor Exp PSF
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
C-17 ABC Entertainment Center FSG 86.5% 3.00 $121 1.14 $13.74
2020 Avenue of the Stars FSG $225
- -----------------------------------------------------------------------------------------------------------------
C-18 ABC Entertainment Center FSG 71.4% 3.00 $121 1.14 $13.74
2040 Avenue of the Stars FSG $225
- -----------------------------------------------------------------------------------------------------------------
C-19 1930 Century Park West --- 100.0% 3.00 $100 1.13 $9.00
1930 Century Park West --- $150
- -----------------------------------------------------------------------------------------------------------------
C-20 Fox Sports Building --- 100.0% 3.00 $110 1.16 $9.00
10000 Santa Monica Blvd. --- $125
$150
- -----------------------------------------------------------------------------------------------------------------
Third Tier Totals Average 3.00 $113 1.14 $11.37
86.4% $181
$150
=================================================================================================================
</TABLE>
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West Los Angeles Office Market Analysis
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Second Tier 16.7% 19.4% $21.10-$24.99
Third Tier 13.6% 13.6% $19.20
The chart shows that the five premiere buildings in the Century City
market achieve higher rental rates and occupancy levels than the remainder of
the market. Four of the buildings have occupancy levels from about 95 percent
to 99 percent. Century City North, with a direct occupancy level of 86
percent, was marketed for sale during much of 1996 prior to closing escrow
during fourth quarter (refer to Sales Comparison Approach), and the prior
ownership, who lost the building through foreclosure, did not have funds for
tenant improvements. The weighted average rental rate range for this category
also does not include asking rents for the two best assets (San America and
Fox Plaza) since these tow building have virtually no space available for
lease.
Historical Construction Activity and Absorption - Century City
The chart on an accompanying page summarizes the historical construction
activity for major office buildings in Century City since 1963. The majority
of the current office supply was developed during the period from 1970 to
1984, with only two projects completed during the past decade (Fox Plaza and
SunAmerica Tower). No new office development has occurred in this market since
the completion of SunAmerica Tower in 1990. The specific plan and zoning
issues discussed previously will limit future new speculative office
development in the Century City market to (at most) the proposed high-rise
791,000 square-foot "Century City Project" development.
An exhibit on the accompanying page summarizes the historical net
absorption activity in the Century City market during the 10.75-year period
from 1986 through third quarter, 1996. Despite the downturn in the southern
California economy during the first portion of this decade, the Century City
office market has experienced only two years of negative absorption during
this timeframe. The substantial positive absorption during 1990 is
attributable almost exclusively to the leasing of the new 1999 Avenue of the
Stars (SunAmerica Tower), which captured a significant percentage of the
market. The most recent periods included in the analysis (1995 and three
quarters of 1996) suggest a strong recovery in tenant demand is occurring in
the Century City market. Continued demand for space considered with the
tightening of the top tier, which has a direct vacancy rate of 4.5 percent,
should benefit the second tier buildings in the market.
Tenant Profile- Century City
Century City is generally considered the "Hub", or center of the westside
market. The tenant base has historically consisted of entertainment industry
tenants and small to medium sized financial, legal, and professional firms,
particularly those related to the entertainment industry. Legal services (law
firms) provide the most significant demand for office space, with reportedly
more than 80 different law firms of at least 5,000 square feet leasing space
in Century City buildings. Although several large national firms which have
offices in downtown Los Angeles also lease space in Century City, there are
also a number of smaller, local firms in this market.
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CENTURY CITY
Office Building Construction History
- ------------------------------------------------------------------------------
No. of Total Occupied
Year Buildings Area (SF) Area (SF)
- ------------------------------------------------------------------------------
1963-1969 5 1,603,418 1,302,825
1970-1979 12 4,398,778 3,545,067
1981-1989 7 2,040,087 1,800,611
1990-1995 2 809,772 777,924
- ------------------------------------------------------------------------------
Total 26 8,852,055 7,426,42
- ------------------------------------------------------------------------------
Average per period:
1963 - 1979 5.8 1,878,342 1,524,392
1980 - 1995 7.1 2,094,072 1,852,473
- ------------------------------------------------------------------------------
Proposed 1 875,000 0
Construction Activity Chart
[GRAPHIC OMITTED]
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West Los Angeles Office Market Analysis
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The entertainment industry maintains a substantial presence in the
westside markets, and there are a number of smaller "boutique" law firms
specializing in a particular area of law, such as entertainment law.
Significant law firms in the Century City market include O'Melveney & Meyers,
Gibson Dunn & Crutcher, Greenberg & Glusker, Proskauer, Rose, et al, Jeffer,
Mangels Butler, Cox, Castle & Nicholson, Kaye Scholer, Troy & Gould, Armstrong
& Hirsch, Sidley & Austin, and Christensen, White, et al.
Entertainment industry tenants in the Century City market include Fox,
Turner, Orion, HBO, and Imagine. Fox is the anchor tenant in Fox Plaza, and is
also developing additional facilities on its studio property in the Century
City South Plan area. Through the acquisition of Prime Ticket, Fox has also
become the major tenant in 10000 Santa Monica Boulevard in Century City
(formerly the Prime Ticket Building). Although the merger with Time Warner is
expected to have a negative impact on the space requirements for Turner, a
major tenant in 1888 Century Park East, Orion Pictures recently agreed to
renew and expand its premises in this building for seven years.
Other important components of the tenant base in Century City include
financial services (such as SunAmerica, the anchor tenant in 1999 Avenue of
the Stars, and Bear Stearns), accounting and real estate firms, and corporate
firms such as Princess Cruises, the major tenant in 10100 Santa Monica
Boulevard and Herbalife, the anchor tenant in Northrop Plaza 1, or Northrop
Corporation in Northrop Plaza II. Although the banking industry has a number
of retail locations in Century City, there is not a current significant
concentration of office requirements from banking tenants in this market.
The average annual net absorption for Century City offer the last 10
years is (122,549) square feet. This average figure includes negative net
absorption during 1989 and 1992. The historical net absorption for the Century
City market is summarized on an accompanying page. The able indicates that
other than the success of 1999 Avenue of the Stars (1990 absorption data), the
overall Century City market experienced negative or minimal net absorption
from 1989 through 1994. This trend has improved measurably during the last
seven quarters, however with positive net absorption of 173,451 square feet
during 1995, and year-to-date 1996 absorption (third quarter) of 262,227
square feet.
Secondary competitive Supply - Westwood/West Los Angeles Sector
The Westwood/West Los Angeles office sector includes the following
submarkets: Westwood, Brentwood, Santa Monica, West Los Angeles, and Pacific
Palisades. Quoted annual per-square-foot rents for available direct space
within this sector have an overall weighted average of $24.48. Of the total
17,304,476 square feet of existing office space in the Westwood/West Los
Angeles office market sector, 2,632,460 square feet of space was available for
lease as of the end of third quarter, 1996, or a 15.2 percent direct vacancy
rate. The overall vacancy rate including sublease space was 18.8 percent.
The breakdown of the current overall vacancy rates for the competitive
submarkets (all classes of office buildings) in this sector is summarized
below.
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West Los Angeles Office Market Analysis
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Vacancy Rates
Competitive Submarkets
Third Quarter 1996
Direct Overall
------ -------
Westwood: 10.8% 13.6%
Brentwood: 12.1% 14.4%
Santa Monica: 15.2% 21.3%
Pacific Palisades: 22.4% 32.4%
West Los Angeles: 22.4% 23.9%
---------------- ----- -----
Total Market: 15.2% 18.8%
The combined direct and overall vacancy levels of 15.2 percent and 18.8
percent for these competitive westside markets compare with the following
historical vacancy levels for these markets during the past five years
(year-end figures).
Westwood/West Los Angeles Sector
Year End Direct Vacancy Overall Vacancy
-------- -------------- ---------------
1991 19.9% 24.4%
1992 19.1% 21.0%
1993 17.0% 19.3%
1994 16.0% 18.0%
1995 16.9% 19.6%
1996
(3rd Qtr) 15.2% 18.8%
The markets in the Westwood/West Los Angeles sector have experienced
lower vacancy levels since 1991 in comparison with the larger westside office
market statistics summarized previously. The Santa Monica submarket
experienced some of the lowest vacancy levels of any Los Angeles County
submarket during the period 1992 through 1994. The higher vacancy levels
during 1991 in Santa Monica are attributable to the completion of Phase I of
Santa Monica Water Garden, and the sharp decline in vacancy during 1992
reflects the rapid lease-up of this major new project.
The vacancy rates for Westwood and Brentwood have declined steadily
during the past two years, but the Santa Monica vacancy level increased during
1995 and year-to-date, 1996. The third quarter, 1996 direct vacancy rate of
15.2 percent for Santa Monica compares with the year-end 1994 figure of 10.4
percent. This increase is somewhat misleading, however, as the data includes
the addition of the former NME headquarters building (2700 Colorado Avenue) to
the supply. This approximately 300,000 square-foot building was previously
excluded from the inventory as it was fully occupied by the ownership
(National Medical Enterprises, now Tenet Healthcare). The additional 300,000
square feet of vacant space to the
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existing inventory represents approximately a 5.3 percent increase in direct
vacancy to the prior years figures (using the prior year inventory base).
This building was purchased (vacant) in August, 1996, and the buyer (an
entity related to M. David Paul) leased approximately 100,000 square feet in
the property to Viacom prior to the close of escrow for a 10-year term. This
lease represents positive absorption to the Santa Monica market (the tenant
will relocate from Universal City). Large blocks of space which have recently
been marketed for lease in two other properties currently have a significant
impact on the direct vacancy levels, and a third property has substantially
impacted the sublease availabilities in Santa Monica. These availabilities are
briefly discussed below.
First Federal Square, located at 401 Wilshire Boulevard in the downtown
Santa Monica submarket, contains about 220,000 rentable square feet, and was
acquired by Douglas Emmet Realty Advisors in June, 1996. Although fully leased
at sale, the major tenant in the building is J. Paul Getty Trust, with 142,234
total square feet under lease. The tenant will be relocating all its employees
to the new museum and related space in the Brentwood area, and exercised an
early termination option for the 401 Wilshire Boulevard space shortly after
the close of sale. This space is now offered for lease (although the tenant
will not vacate until 1997, and this single availability adds 2.4 percent to
the Santa Monica direct vacancy rate.
Santa Monica Business Park is a Class "B", approximate one million square
foot office development located in the southerly portion of Santa Monica.
Although currently substantially leased, the major tenant's (Citibank) lease
expires in the first quarter, 1997, and the 150,000_+ square-foot premises is
offered for lease. This single availability also adds about 2.5 percent to the
Santa Monica vacancy rate.
Santa Monica Water Garden is a Class A office development containing
about 650,000 square feet of rentable area. The project is located about two
miles northeasterly of the downtown Santa Monica submarket. Although nearly
100 percent leased on a direct basis, two major tenants (Candle Corporation
with 150,000 square feet and Rand Corporation with 50,000 square feet) are
offering their premises for sublease. These 200,000 square feet of sublease
availabilities represent 3.3 percent of the total Santa Monica office supply.
The availabilities in the three projects discussed above and the addition
of the vacant, former NME headquarters property during the past six to 12
months has resulted in a substantial increase in both direct and overall
vacancy rates in the Santa Monica office market. The 600,000 (approximately)
square feet of new direct availabilities (including a new building to the
inventory) and an additional 200,000 square feet of new sublease space results
in about 800,000 square feet of new additional space in a six million square
foot submarket. The total impact on vacancy rates is in excess of 13 percent.
Santa Monica Market
The primary professional office locations for Class A buildings in Santa
Monica are the downtown submarket and the special office district. The
Wilshire Boulevard corridor extends through a portion of the downtown market,
and there is additional office supply along this
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corridor to the north and east of the downtown submarket. The Airport
submarket is located at the southeasterly extent of Santa Monica, about four
miles easterly of the downtown market, adjacent to the Santa Monica Airport.
Office supply in this market consists of Class "B" low-rise buildings. A
single development of a number of low-rise buildings ("Santa Monica Business
Park") represents most of the supply in this submarket. The downtown Santa
Monica office district is located generally south of Wilshire Boulevard and
north of Pico Boulevard, between Ocean Avenue on the west and Lincoln
Boulevard on the east. This area includes several larger Class A buildings as
well as a number of "boutique" buildings that have attracted entertainment,
advertising, and law firm tenants. This submarket benefits from the excellent
retail and restaurant amenities in downtown Santa Monica. The special office
district has developed from a primarily industrial neighborhood to a submarket
that is dominated by major low- to mid-rise office developments including -the
multi-phased 1 million square foot MGM Plaza (Formerly Colorado Place) and the
665,000 square foot Phase I of Water Garden. This district is located about
one mile northeasterly of the downtown submarket and the Pacific Ocean, in an
area generally northwest of the Santa Monica Freeway (1-10), and north of
Olympic Boulevard between 14th and 26th Streets. The Class A buildings in this
submarket have successfully attracted a number of larger entertainment, law
firm, and corporate tenants such as Aurora (formerly Executive Life), Candle
Corporation (150,000 square feet in Water Garden), Microsoft (50,000 square
feet in Water Garden) and Haight Brown and Bonesteel (100,000 square feet in
Water Garden). The floorplates are generally larger in this submarket, and the
buildings are competitive primarily for the larger tenants in the market
(typically in excess of 5,000 square feet). Entertainment industry tenants in
particular have recently located in the Santa Monica market, including MGM
(250,000 square feet in MGM Plaza), Sony Music (100,000 square feet in the
Arboretum), Viacom (100,000 square feet at 3700 Colorado Avenue), Savoy
Pictures (50,000 square feet in Water Garden), and Rysher Entertainment
(60,000 square feet in MGM Plaza). The expansion of the movie industry and the
tightening of the office markets in entertainment-dominated locations such as
the Burbank Media District has created substantial "overflow" demand for
office space in desirable demographic locations. The primary beneficiaries of
this demand have been the office markets of Burbank and Glendale in the north
Los Angeles market area, and several of the competitive westside markets,
including Santa Monica, West Los Angeles, Culver City, Westwood, Century City,
Beverly Hills, and the Miracle Mile.
Westwood Market
The Westwood office market has historically been perceived as a
prestigious submarket within the overall Westwood\West Los Angeles office
market sector. As of 3rd quarter, 1996, Westwood contained a total office
supply of 4,084,735 square feet and was experiencing direct and overall
vacancy levels of 10.8 percent and 13.6 percent. These figures represent
continued improvement in comparison with recent years, and compare with a
year-end 1993 overall vacancy rate of approximately 26 percent, and a year-end
1994 overall vacancy rate of 23.0 percent. The weighted average asking rental
rate for direct availabilities was $28.56 per-square foot, or the highest
figure for any Los Angeles West submarket.
Recent new tenants in the Westwood submarket include Saban Entertainment,
who relocated to 110,000 square feet in 10880 Wilshire Boulevard (renamed
"Saban Plaza" from
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the Burbank Media District in 1995. Other significant tenants in the Westwood
market area include Showtime, Americast, Polygram Records, the Jefferies Group,
The Capital Group, Kaufman Broad, and Oppenheimer, as well as a number of law
firms and tenancies related the University of California at Los Angeles (UCLA),
which is located in the Westwood submarket. UCLA purchased a major high rise
building in this market during 1993 for its own use.
Brentwood Market
The Brentwood market is a relatively new office market located directly
west of Westwood and east of Santa Monica. The majority of the 3,254,337
square-foot office inventory has been completed since 1980. Most of the
development is situated along the Wilshire and San Vicente Boulevard corridors.
There were 393,567 square feet available for direct lease in this office market
as of third quarter, 1996, indicating a 12.1 percent overall vacancy level. The
overall vacancy rate was 14.4 percent.
Class A buildings in the Brentwood submarket has attracted a number of
advertising tenants, including Needham Harper, Ketchem, and Tracey Locke, and
foreign consulate offices including the Swiss, British, German, Irish, and
Austrian consulates. United Paramount Network (UPN) also located in the
Brentwood market during 1995.
West Los Angeles Market
The West Los Angeles office submarket (distinguished from the overall Los
Angeles West office market sector) consists primarily of the Olympic Boulevard
corridor, which extends westward from the San Diego Freeway to Santa Monica. The
direct and overall vacancy level in this submarket as of 3rd quarter, 1996 were
22.4 and 23.9 percent. The increase in vacancy during the past year is partially
attributable to the loss of a major tenant in this submarket (Executive Life,
now known as Aurora, which relocated to Santa Monica), who previously occupied
roughly 300,000 square feet in two Olympic corridor office buildings. In
addition, a 150,000 square-foot building along this corridor was vacated for a
significant period due to earthquake damage, but is still included in the data
base for vacancy calculations.
Also included in this submarket by Cushman & Wakefield's Market Research
Services are office buildings located along the north/south corridors of Bundy
Drive and Sawtelle Boulevard, which are situated west of the San Diego Freeway,
south of the Brentwood submarket. Sawtelle Boulevard parallels the San Diego
Freeway, and is situated between the Olympic Boulevard corridor of West Los
Angeles and the Wilshire Boulevard corridor of the Brentwood submarket. The West
Los Angeles office submarket also includes a number of buildings located east of
the San Diego Freeway, westerly and south of the Century City and Beverly Hills
submarkets.
The office supply along the Olympic corridor consists of a range of Class A
and Class B office product, while the Sawtelle and Bundy corridors contain
primarily Class B supply. Several of the Olympic Boulevard Class A buildings
were developed during the 1980's with commitments from "equity" tenants, who
signed long term leases in exchange for future participation in building value
increases. The tenant base in this market includes law firms (including several
larger equity tenants) and computer software firms such as Novell,
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entertainment-related firms, and financial, real estate, and professional
tenants. Fox acquired a 175,000 square-foot building located on Bundy Drive in
West Los Angeles (formerly occupied by Candle Corporation) during 1994 in order
to relocate their television studios from Hollywood.
Several buildings in this submarket have experienced volatile changes in
occupancy and re-classification in the past two years, which has had a
corresponding impact on the vacancy and absorption figures. Some of the more
pertinent activity is discussed below.
Executive Life Insurance was a joint venture development partner and anchor
tenant in two major Class A office buildings along the Olympic Boulevard
corridor. Executive Life was seized by regulators during 1994, and subsequently
vacated its premises in the two buildings. This activity resulted in net
negative absorption for these buildings of approximately 175,000 square feet.
The building is currently undergoing extensive renovation, and is expected to be
ready for occupancy in fourth quarter, 1996.
Olympic Center, which is situated on Olympic Boulevard immediately east of
the San Diego Freeway, was damaged in the Northridge earthquake of January, 1994
and was vacated for repairs during 1995. The 150,000 square-foot building
experienced an occupancy decline due to tenant loss during the repair period
from about 80 percent to 13 percent, or a net negative absorption of nearly
100,000 square feet.
The activity discussed above resulted in a negative absorption of roughly
275,000 square feet for these three buildings. The impact on the West Los
Angeles submarket 2nd quarter, 1996 statistics from this activity was
substantial. These three major buildings represent about 16 percent of the total
supply in the West Los Angeles submarket, and the 1995 tenant loss due to a
major bankruptcy and earthquake damage resulted in negative absorption of
approximately 275,000 square feet, or about 7.2 percent of the total market
supply.
Demand/Absorption-Westwood/West Los Angeles
The charts on the accompanying pages summarize the office building
construction history for the competitive submarkets in this office sector. The
exhibits illustrate the dramatic increase in new office development that has
occurred in these submarkets since 1980. Prior to 1980 only 33 buildings with a
combined rentable area approximately 4.2 million square feet were completed in
these markets. These figures compare with about 100 buildings totaling
approximately 13 million square feet that have been completed since 1980. This
dramatic increase in new office construction coincided with a period of similar
new office construction in secondary competitive submarkets throughout the Los
Angeles area. This office sector and several other markets emerged as separate,
identifiable office submarkets during the past decade.
The chart on the accompanying page summarizes the net office space
absorption for the Westwood/West Los Angeles submarket since 1984. While
absorption levels slowed considerably during the first portion of the current
decade, the cessation in new construction
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BEVERLY HILLS
Office Building Construction History
================================================================================
Year Buildings Area (SF) Area (SF)
================================================================================
1900 1 182,000 147.000
1920 1 40,000 40,000
1950-1958 7 265,078 218,163
1960-1969 18 1,341,759 971,277
1971-1978 14 2,024,498 1,644,262
1980-1989 18 1,307,025 998,852
1990-1995 4 339,325 305,122
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Total 63 5,499,685 4,324,676
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Average per period:
1980 - 1989 2.0 145,225 110,984
1990 - 1995 0.8 67,865 61,024
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Proposed 4 118,810 10
Construction Activity Chart
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has resulted in a gradual improvement in the supply and demand balance during
this period, particularly during 1995 and year-to date 1996.
Secondary Competitive Supply - Beverly Hills
The existing Beverly Hills office inventory is situated in four primary
submarkets, delineated according to location.
o The Golden Triangle-buildings located in the area bordered by
Wilshire Boulevard, Canon Drive and Santa Monica Boulevard, especially
in the "Wilshire Corridor" between 9301 and 9777 Wilshire Boulevard.
This is considered the most prestigious location in Beverly Hills.
o The East Wilshire area-buildings located between 8380 and 8920
Wilshire Boulevard.
o The Central Wilshire area-buildings located between 8920 and 9301
Wilshire Boulevard.
o The Beverly Hills-Peripheral area-buildings not located in the Golden
Triangle or on Wilshire Boulevard, primarily in the northeast portion
of the Beverly Hills commercial market.
The Beverly Hills office market contains 5,511,137 square feet, and has an
overall vacancy rate of 19.3 percent (as of third quarter 1996). The direct
vacancy rate (excluding sublease space) is 17.5 percent.
These figures compare with the historical trends in the Beverly Hills
market summarized in the chart below.
Beverly Hills - Vacancy Trends
Direct Overall Weighted Average
Year End Vacancy Vacancy PSF Annual Rent*
-------- ------- ------- ----------------
1989 9.9% 12.0% $31.20
1990 18.3% 19.8% $31.92
1991 23.8% 25.7% $31.20
1992 22.8% 23.6% $28.92
1993 22.0% 23.7% $25.20
1994 21.3% 23.4% $24.24
1995 20.0% 21.4% $25.08
3rd Qtr 1996 17.5% 19.3% $25.68
*Based on asking rental rate for available direct space
The chart shows that the Beverly Hills market, which includes the prime
"Triangle" submarket as well as the less desirable East Beverly Hills submarket,
has begun to experience
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improving vacancy rates since year-end 1994. The most significant improvement in
this market has occurred during the first three quarters of 1996, however, with
a 2.5 percent decline in direct vacancy.
The chart on an accompanying page summarizes the historical construction
activity for office buildings in Beverly Hills. Another accompanying chart,
summarizes the net absorption figures for the total Beverly Hills office market
for the most recent 10 year period 1986 through 1995. When compared with the
construction history exhibit, the chart indicates the recent decline in demand
for new office space in Beverly Hills during the first portion of this decade
followed a relatively significant amount of new construction. The total
oversupply of new space from 1990 through 1995 resulting from new construction
and negative absorption was 489,647 square feet. Beverly Hills experienced
positive net absorption of 143,812 square feet during 1995, and 135,229 square
feet during the first three quarters of 1996.
Proposed Development
The accompanying exhibit summarizes the proposed office developments in the
competitive westside markets. Although there are a number of potential sites for
new office development, distressed market conditions for office use during the
first half of this decade altered the highest and best use from office
development to alternative uses for most development sites. Several entitled
office development sites along the Olympic Boulevard corridor of West Los
Angeles have been developed, or are planned for development with lower density
retail projects, including supermarkets. The Arboretum ownership in Santa
Monica, for example, is developing a new 50,000 square-foot Ralphs supermarket
on a 125,000 squarefoot portion of the larger 10+/- acre site entitled for 2.0:1
office use. The achievable rental rates for office tenants, even within the
desirable westside market area, are not currently sufficient to justify new
Class A construction in this strong Santa Monica location. The most significant
office developments in the westside market area involves the proposed "Century
City Project" development in Century City the Water Garden Phase II parcel, and
future phases of the Arboretum site. These projects are described below.
Water Garden - Phase II is the second phase of the larger Water Garden
development, and represents basically a "mirror" project of Phase I on the
adjacent parcel. The project is approved for two buildings similar in terms
of size, quality and design to the excellent quality, Class A Phase I
buildings, and the preleasing efforts are based on a 5-story, 275,000
square-foot "Colorado" building and a 6-story, 325,000 square-foot
"Cloverfield" building. The owners of the site, a partnership which
includes the original developer of Phase I, is currently obligated under
the development agreement to construct a project similar to Phase 1. This
group has reportedly discussed altering this plan, subject to payments to
and approvals from the phase I ownership. The preferred new development
would include more of a "campus" style development in lieu of the
corporate/institutional office improvements of Phase I. An alternative
development would most likely have lower density and lower construction
costs. The quoted rental rates for Phase II, as currently designed, range
from $33.00 to $36.00 per-square-foot full service gross. This rental range
is reportedly required in order to justify new construction of this type.
The Phase II marketing materials suggest
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construction is anticipated during the next year, but market sources and
current rental rates indicate this timing is somewhat optimistic.
Arboretum is a master-planned mixed-use development located on a 10+/-
acres site directly westerly across Cloverfield Boulevard from Phase II of
the Santa Monica Water Garden. Originally entitled under a specific plan
agreement with the City of Santa Monica for a 1.05 million square-foot
project to include office and hotel uses, the subsequent ownership (in a
1993 purchase) received approvals for a revised development plan. The
property is currently improved with a build-to-suit 80,000 square-foot Sony
Music Campus headquarters building and a number of older one-story concrete
or brick industrial or loft buildings developed from 1950 to 1960.
Excluding the Sony building, the original development scheme has been
changed to eliminate the hotel component, develop a 50,000 square-foot
Alpha Beta (now merged with Ralphs) supermarket, and allow "flexible"
future development of up to 670,000 square feet of office uses or
alternative multi-family residential uses. The Ralph's supermarket
construction will remove approximately three acres from the development
site, and may have a negative impact on the future desirability of the
office uses. The developer was reportedly nearing finalization of a
build-to-suit agreement with Turner during late 1995, but the deal was
canceled due to the merger with Time/Warner.
A major entertainment-industry driven development located in Playa Vista,
expected to commence during the next two years, has recently encountered
well-publicized difficulties relating to partnership issues, equity
investors, and financings. The project is to be anchored by the Dreamworks
Studio, led by the partnership of Steven Spielberg, Jeffrey Katzenberg, and
David Geffen. The development is planned for the approximate 1,000 acre
Playa Vista site located about 10 miles southwest of the subject property,
on the former site of Hughes Aircraft. The project will be a phased
master-planned mixed use development to include residential and commercial
uses. Rob Maguire has recently been the focus of significant from other
partners, including Dreamworks, and the consortium of banks which hold
debt of the property to relinquish control and equity in the project.
Substantial capital from new investors is needed for the project to
commence. The Dreamworks component of the development will occur on about
100 acres of the larger site, and is expected to create a "critical mass"
of entertainment and related high-tech uses. The development partnership
includes the Dreamworks team and the property partnership comprised of
Maguire Thomas Partners and Howard Hughes Corp. The Dreamworks portion of
the project will include a new "state of the art" movie studio, including
15 to 20 sound stages, a worldwide headquarters of 350,000 square feet, and
an additional 725,000 square feet of studio and production facilities. The
related tenants are to include IBM (100,000 square feet), GTE (50,000
square feet), Digital Domain (400,000 square feet of motion picture and
special effects uses), and Silicon Graphics (115,000 square feet). Other
potential tenants include Media Ventures (75,000 square feet) Casey Werner
(150,000 square feet), and Todd AO (75,000 square feet). The related
business generated for these tenants by the Dreamworks studio and the
technical requirements of Playa Vista project itself are expected to
generate substantial tenant demand for this development. The
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reported "proforma" rental rates for the build-to-suit buildings for these
tenants is $21.00 per-square-foot annually on a NNN basis. The NNN expenses
will also include Mello-Roos bond costs to finance the required
infrastructure. The development is planned to occur in phase over a number
of years, and employment is anticipated to grow to 10,000.
Future Development-Century City North
As discussed previously, further development in Century City North is
governed by the Century City Specific Plan. A maximum of 30,156 total trips are
allowed under Phase I and Phase II, which corresponds to approximately 2,150,000
square feet of office space, including replacement trips for underutilized
sites.
Excluding replacement trip rights, there are currently 2,872.2 unused Phase
I trips and 10,242.4 unused Phase II trips. Of the remaining Phase I trips,
1,794.9 are allocated to the Century City Shopping Center, which also has an
additional 233.3 interior replacement trips from interior changes to the mall.
The only other Phase I trips, (1077.3 trips) are currently allocated to the AP
Properties' parcel which is located at the northeast corner of Constellation
Boulevard and Avenue of the Stars. Refer to detailed exhibit in the Location
Analysis for current allocations of trips in Century City.
Of the unused 10,242.4 Phase II trips, 242.2 are allocated to sites that
are currently improved with other buildings. The remaining 10,000 Phase II trips
are also allocated to the AP Properties parcel.
The ownership of this and other parcels in Century City have recently
submitted an Environmental Impact Report (EIR) to the city of Los Angeles in
support of approvals for a 38-story Class A office tower to contain 791,000
square feet. The ownership proposes to transfer the remaining trips to a
6.04-acre parcel located about one block westerly of the subject, at the
southeast corner of Century Park West and Constellation Boulevard. The proposed
project site is shown on the accompanying exhibit (taken from the EIR). There
are numerous obstacles to obtaining approvals for this project, including
traffic mitigation, shadows and privacy issues for the homeowners to the west
across Century Park West. The property ownership controls sufficient rights to
develop a substantial commercial property on this or another Century City
property, however, and it is reasonable to project some significant commercial
project will eventually be developed in the Century City market. There are no
other potential high-rise office development sites in any of the primary
westside Los Angeles office markets.
Gross Leasing Activity and New Absorption
The net absorption figures for the primary competitive Westwood/West Los
Angeles sector were summarized previously. The accompanying chart compares the
net office absorption for the six primary competitive submarkets from 1992
through 3rd Quarter, 1996, with the gross leasing activity during the same
timeframe. Gross leasing activity slowed during 1994 to an annual rate of 3.6
million square feet, while net absorption levels declined overall to 81,052
square feet. The data for 1995 and 1996 shows substantial improvement both in
net absorption levels and gross leasing.
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BUSINESS-FACTS: Daytime Employment Report
West Los Angeles
- --------------------------------------------------------------------------------
1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Business Employment by Type No. of Businesses No. of Employees Employees per Business
--------------------------- ----------------- ---------------- ----------------------
<S> <C> <C> <C>
1 RETAIL TRADE 7,600 79,743 10.5%
Home Improvement Stores 171 1,756 10.3%
General Merchandise Stores 62 5,766 93.0%
Food Stores 528 7,994 15.1%
Auto Dealers & Gas Stations 392 5,780 14.7%
Apparel & Accessory Stores 1,076 6,204 5.8%
Furniture / Home Furnishings 1,131 8,953 7.9%
Eating & Drinking Places 1,926 30,508 15.8%
Miscellaneous Retail Stores 2,314 12,782 5.5%
2 FINANCE-INSURANCE-REAL ESTATE 3,402 41,432 12.2%
Banks, Savings & Lending Institutions 549 6,988 12.7%
Securities Brokers & Investors 505 7,689 15.2%
Insurance Carriers & Agencies 646 10,410 16.1%
Real Estate - Trust - Holding Co. 1,702 16,345 9.6%
3 SERVICES 20,057 200,091 10.0%
Hotels & Lodging 188 9,716 51.7%
Personal Services 3,136 16,465 5.3%
Business Services 5,543 51,691 9.3%
Motion Picture & Amusement 1,515 19,264 12.7%
Health Services 4,348 50.073 11.5%
Legal Services 3,037 24,176 8.0%
Education Services 436 13,449 30.8%
Social Services 813 6,180 7.6%
Other Services 1,041 9,057 8.7%
4 AGRICULTURE 178 1,385 7.8%
5 MINING 31 563 18.2%
6 CONSTRUCTION 957 8,475 8.9%
7 MANUFACTURING 1,513 29,517 19.5%
8 TRANSPORTION, COMMUN/PUBLIC UTIL 820 12,382 15.1%
9 WHOLESALE TRADE 1,754 18,209 10.4%
10 GOVERNMENT 305 7,352 24.1%
=======================================================================================================================
TOTAL BUSINESSES 36,617 399,149 10.9%
=======================================================================================================================
Daytime Population 399,149
Residential Population 522,540
Daytime Population per Business 10.9%
Residential Population per Business 14.3%
=======================================================================================================================
</TABLE>
Number of Businesses per Sector Number of Employees per Sector
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Property Description
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Century Park East is a commercial
roadway varying in width from 86 feet to
96 feet. The street is three lanes wide
in each direction, with a center turn
lane. A delivery turn out runs parallel
to Century Park East. The intersection
of Olympic Boulevard and Century Park
East is signalized.
Olympic Boulevard is a major east/west
thoroughfare stretching from Santa
Monica to downtown Los Angeles. The road
is 100 feet wide, with three eastbound
lanes and four westbound lanes. Olympic
Boulevard passes underneath Avenue of
the Stars without intersecting the
street. Access between Avenue of the
Stars and Olympic Boulevard is provided
by freeway-like on/off ramps.
Soil Conditions: We did not receive or review a soil
report. However, we assume that the
soil's load-bearing capacity is
sufficient to support the existing
structures. We observed no evidence to
the contrary during our physical
inspection of the property. The tract's
drainage appears to be adequate.
Utilities: All standard utilities are available to
the site. The Century City central plant
is on a (cancelable) long term contract
to provide hot and chilled water to the
site.
Access: The subject site has full pedestrian
access from all four surrounding
streets. Vehicular access to the
subterranean garage is available from
east and westbound traffic on
Constellation Boulevard, from southbound
traffic on Century Park East and
westbound traffic on Olympic Boulevard.
Traffic can exit the garage onto
Constellation Boulevard or Avenue of the
Stars.
Land Use Restrictions: No report of title was available for our
review. We are not aware of any adverse
easements or conditions which would
affect the utility of
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Property Description
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the subject site, other than the
pedestrian easement required of all
properties in Century city.
We recommend a title search to determine
whether any adverse conditions exist.
Flood Hazard: The subject property is not located
within an area designated as a flood
zone by the Federal Emergency Management
Agency.
Seismic Hazard: The site is not located in a Special
Study Zone as established by the
Alquist-Priolo Geological Hazards Act.
Site Improvements: The site is improved with a large
central plaza, and is extensively
landscaped with mature trees, grass and
flowers. A large glass skylight is
located at ground level between the two
towers. The skylight provides natural
light to the Concourse B shopping level.
Comments: The site is very well located in the
heart of Century City, and benefits from
street frontage on all four sides of the
site. The site is well suited for office
and retail uses. Other retail businesses
are less well located because of the
distance from the Century City Shopping
Center.
Improvements Description
The subject site is improved with two 44-story office buildings, a
six-level subterranean parking structure, and a large central plaza. Excluding
the concourse (B-Level) retail space which contains 29,724 square feet of
rentable area, the two towers contain 2,252,657 square feet of rentable office
space (per reconciled lease abstracts space plans, and rent rolls). The ABC
Entertainment Center is located on a 5.43 acre air rights lease parcel which
extends over the subjects subterranean parking garage. Tentative Tract Map No.
51450 (to be approved) will separate this portion of the property from the
existing ownership. The ABC Entertainment Center improvements or the lease fee
ownership interest are not considered within this appraisal.
The following improvement description is based on our physical inspection
of the property, and information provided by the client.
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Property Description
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General Data
Year Built: 1975
Building Area:
Office Area:
North Tower 1,125,888
South Tower 1,126,769
Total Towers 2,252,657
Retail Area (B-level) 29,724
Storage Space 105,527
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Total Project 2,387,908
Parking: Century Plaza Towers Parking Garage is a six-level
reinforced concrete subterranean structure
containing 5,671 parking spaces. An additional 47
surface spaces are available at grade level for
short term parking, and 451 spaces located in the
Century Park West garage are covenanted to the
subject property. Total Parking: 6,169 spaces (2.5
spaces per 1,000 RSF)
Building Height: 44 Stories (Each Tower)
Construction Detail
Structure: Steel frame with three exterior columns at the
three corners of the triangular shaped buildings.
Top two floors have solid exterior walls (no
windows) to provide rigidity and eliminate
building torque. Additional perimeter columns are
centered 10 feet 2 inches apart.
Ceiling Height: Clear height is 13 feet, and ceiling height is 9
feet.
Exterior Walls: Exterior skin of bronze solar glass and bronze
anodized aluminum panels. The three building
edges, the top two floors (43-44), and the
perimeter columns are clad in polished aluminum.
At ground level, columns are covered with marble.
Lobby is enclosed with full height clear glass
panels.
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Property Description
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Roof: Reinforced concrete slab with protective BUR and
membrane coverings.
Windows: Window glass is bisected between perimeter columns
by bronze anodized mullions.
Mechanical Detail
HVAC: System includes two double duct air handlers per
floor supplying hot or cold air to 80 (average)
individually controlled zones per floor, chilled
and hot water are provided by Century City Central
Plant.
Electrical Service: Three phase, 480/277-volt three phase four wire
system. Electrical usage is monitored with a
computer management system.
Elevator Service: Four banks of elevators service each tower.
Elevator speed ranges from 500 to 1,200 feet per
minute. In addition to freight elevators,
passenger service is provided as follows:
Floors Served Elevators
2-13 6
14-24 6
25-33 5
34-42 5
--
Total 22 (per Tower)
Four elevators, one in each elevator bank, access
the B Concourse. Floors 43 and 44 are served by
two elevators which run between floor 41 and floor
44. One freight elevator serves floors F through
42.
Fire Protection: Fully sprinklered.
Asbestos: Asbestos abatement was completed in 1996. Any
remaining asbestos material is believed to be
limited to inaccessible areas of the A and B
garage level areas surrounding the tower's core,
and in the elevator shafts.
ADA Compliance: Although 172 restrooms on office levels have been
modified to address "readily achievable ADA and
California accessibility requirements," complete
compliance is deemed not feasible due to
structural limitations. In addition, 67
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Property Description
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handicap accessible stalls are required by the
ADA, and only 49 have been provided following
expansion of the plaza level surface parking area
and a reconfiguration of the garage parking.
Seismic Issues: We reviewed a Structural/Seismic Risk Assessment
prepared by EQE dated November, 1996 covering the
subject property, in order to estimate the
probable damage to the structures in the event of
a major earthquake. The "aggregate loss exposure"
was estimated at approximately 15.4 percent.
Interior Detail
Layout: Both towers are equilateral triangles, with a
triangular building core located in the center of
each building.
Lobby Area: Two-story ceiling height featuring Travertine
marble flooring and are polished marble walls.
Elevator landings are finished with Travertine
marble, polished black granite and polished dark
green and red marble.
Floor Covering: Tenant spaces and upper level hallways have
commercial grade carpet and ceramic tile flooring.
Walls: Painted or vinyl covered drywall.
Ceilings: Suspended acoustical tile ceilings with concealed
spline and inset fluorescent lighting,
Restrooms: One women's and one men's restroom is located on
each office level, each containing eight fixtures.
Walls and floors are covered with ceramic file.
Interior Doors: Full height, solid. core tenant doors are building
standard.
Site Improvements
On-Site Parking: 5,671 parking spaces are provided by an on-site,
subterranean parking garage, in addition to 47
surface spaces at Plaza level, and 451 covenanted
spaces located in the Century Park West garage.
Total Parking: 6,169 spaces.
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FOLIO 48 IS MISSING
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REAL PROPERTY TAXES AND ASSESSMENTS
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Under the provisions of Article XIIIA of the California Tax and Revenue
Code, properties are assessed on their market value as of March 1, 1975, the
base year lien date. This value may be increased only 2 percent per year until
the property is sold, substantial new construction occurs, or the property's use
changes significantly. In such cases, the property may be reassessed to its
market value.
The 1996-1997 fiscal year is the most recent year for which assessed
valuation and property tax information is available. The assessed value and
taxes for the property are shown below.
Assessor's Parcel No.: 4319-02-61
Assessed Value:
Land $ 24,912,874
Improvements 264,257,671
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Total $289,170,545
Estimated Taxes: $ 3,179,098
If the property were sold, it would be reassessed according to the
Assessor's opinion of its market value, which is the sale price, in most cases.
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ZONING
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The subject site is located within the City of Los Angeles and was
controlled by city zoning regulations until the Century City Specific Plan was
approved in 1981. Development in Century City is now governed by the North and
South Specific Plans, discussed in detail in previous sections of this report.
The map on the facing page details the zoning for parcels within the Century
City North Specific Plan.
The area north of Olympic Boulevard is the commercial district of Century
City. The zoning restrictions for this area include: 1) C2-2-0, which allows a
floor area ratio of 6.0:1; and 2) C2-1VL-0, which allows a floor area ratio of
4.5:1. Under the terms of Proposition U (discussed in the Regional Analysis)
properties located in Height District No. 1 (C2-1) are further limited to a
1.5:1 FAR. Buildings which are developed subsequent to 1981 must also be
designed so as not to cast shadows on nearby homes for more than two hours a day
(between 8:00 AM and 8:00 PM).
"Core" and "buffer' areas have been defined to further protect the rights
of neighboring home owners. These areas are shown on the map on the following
page and correspond to the zoning restrictions listed above. The west "buffer"
zone composes the 210 feet eastward set back from Century Park West, and the
east "buffer' zone composes the area between Century Park East and the Beverly
Hills city boundary line. The "core" area is between the east and west "buffer"
zones. The Specific Plan also restricts development through the allocation of
"trips," which were discussed previously.
The subject property is zoned C2-2-0 which restricts the building floor
area ratio (FAR) to not more than 6:1. The existing improvements include two 44
story office towers and the (not appraised) ABC Entertainment Center. All
improvements are approved uses. The total square footage of the improvements,
when considered over the entire site, is within the FAR restrictions. The two
towers, when considered over the 6.7 acres which are not part of the ABC Center
air rights lease, are a non-conforming use with an FAR of 7.75:1. The ABC Center
has an FAR of approximately 2.5:1 when considered over the 5.4 acres covered by
the air rights lease.
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HIGHEST AND BEST USE
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According to the Dictionary of Real Estate Appraisal, Second Edition
(1989), a publication of the American Institute of Real Estate Appraisers, the
highest and best use is defined as:
1. The reasonable and probable use that supports the highest present
value of vacant land or improved property, as defined, as of the date
of the appraisal.
2. The reasonably probable and legal use of land or sites as though
vacant, found to be physically possible, appropriately supported,
financially feasible, and that results in the highest present land
value.
3. The most profitable use.
We evaluated the site's highest and best use in it's current condition and
as if vacant. The highest and best use must meet four criteria. The use must be
(1) physically possible, (2) legally permissible, (3) financially feasible, and
(4) maximally productive.
As discussed under Zoning the subject property is zoned C2-2-0, for
commercial development with a 6.0:1 FAR development density. The total square
footage of the existing two towers, when considered over the 6.7 acres which are
not part of the ABC Center air rights lease, exceed maximum density requirements
with an FAR of 7.75:1. Considered as if vacant and assuming the original trips
allocated to the property, the subject site is suitably zoned and could
conceivably be entitled for a commercial development of roughly 1,750,000 square
feet (or 638.000 square feet less than the existing total project, excluding ABC
Entertainment Center.)
The subject site is located in a prime commercial district in the
prestigious westside Los Angeles market area. A new office project of
significant size and scope is not considered economically feasible in the
current leasing and investment environment. The highest and best use of the
subject site, considered as if vacant, is to hold the site until market
conditions improve sufficiently to warrant new construction according to the
limitations of the plan and trip rights discussed previously.
Considered as improved, the subject represents a substantial office
development. There is no alternative potential use that would result in a higher
value for the property as if vacant. We concluded the existing development
represents the highest and best use of the property as currently improved.
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VALUATION PROCESS
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Appraisers typically use three approaches in valuing real property: The
Cost Approach, the Income Approach, and the Sales Comparison Approach. The type
and age of the property and the quantity and quality of data affect the
applicability of each approach in a specific appraisal situation.
The Cost Approach is considered by investors only to ensure the property is
acquired for less than replacement cost. The subject is an income-producing
property, and investors in buildings of similar size and quality typically use
both the Income and Sales Comparison Approaches. We have accordingly used both
approaches in this appraisal. The Cost Approach was not included because of the
age of the improvements and the economic obsolescence which results in rental
rates below levels required to justify new construction.
We concluded the appraisal process by reviewing each of the approaches to
value. We considered the type and reliability of data and the applicability of
each approach. Finally, we reconciled the approaches and estimated the final
value.
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SALES COMPARISON APPROACH
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Methodology
In the Sales Comparison Approach, we estimated the value of the subject by
comparing it with similar, recently sold properties in the surrounding or
competing area. Inherent in this approach is the principle of substitution,
which holds that when a property is replaceable in the market, its value tends
to be set at the cost of acquiring an equally desirable substitute property,
assuming that no costly delay is encountered in making the substitution.
By analyzing sales that qualify as arms-length transactions between willing
and knowledgeable buyers and sellers, we can identify value and price trends.
The sold properties must be comparable to the subject in physical, locational,
and economic characteristics. The basic steps of this approach are:
1. Research recent, relevant property sales and current offerings
throughout the competitive area;
2. Select and analyze those properties considered most similar to the
subject, giving consideration to the time of sale, any change in
economic conditions which may have occurred since the date of sale,
and other physical, functional or locational factors;
3. Reducing the sales price to common units of comparison, such as price
per-square-foot of building area;
4. Make appropriate adjustments between the comparable properties and the
property appraised;
5. Identify sales which include favorable financing and calculate the
cash equivalent price;
6. Interpret the adjusted sales data and draw a logical value conclusion.
The most widely-used and market-oriented units of comparison for office
properties is the sales price per-square-foot of building area. All comparable
sales have been analyzed on this basis.
Cushman & Wakefield tracks office building transactions in Los Angeles
County involving sales or arm's length "creative" acquisitions of properties in
excess of 50,000 square feet. The table below summarizes the activity in this
category during the past three years and the first three quarters of 1996.
Los Angeles County Office Building Transactions
Greater Than 50,000 SF
No. of Aggregate Average
Year Transactions Sales Price Price/Sale
---- ------------ ----------- ----------
1993 35 $480 million $13.7 million
1994 38 $305 million $ 8.0 million
1995 49 $910 million $18.6 million
1996 32 $758 million $23.7 million
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Sales Comparison Approach
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The sales activity during each year included a wide cross section of
buildings in terms of quality, size, tenancy, and market location. The pace and
average pricing for transactions during 1995 demonstrated a substantial increase
above the two prior years, which accurately reflects the growth in the number of
well-capitalized investors interested in Los Angeles County office product.
The subject is a top-tier office building in a highly desirable suburban
westside Los Angeles office market. The level of investment activity in this
market and for this property type has increased during 1996, and a number of
office properties have recently traded, are currently in escrow, or have
recently been marketed for sale. The pricing for westside office properties has
increased in recent months. The subject contains in excess of two million
rentable square feet, and the current contract price for the project is
approximately $480 million (including the air rights leased fee interest in the
ABC Entertainment Center). There have been no transactions of this magnitude
involving a single asset in recent years. As discussed above, however, the
number of office building sales in Los Angeles County has increased during the
past two years. The quality of the assets sold or currently being marketed for
sale has increased as well, as more well-capitalized institutional buyers have
entered the market.
Considering the larger size of the subject property and the
location-specific parameters of investors in this caliber of office building
asset, we have included sales of office properties in the most desirable
westside Los Angeles markets with sales prices in excess of $80,000,000. The
exhibit on the accompanying page summarizes the terms of five transactions based
on this criteria. The sales occurred during the period from July, 1995 through
November, 1996, and involve properties ranging in size from roughly 260,000
square feet to just over one million square feet. The data is discussed and
analyzed below.
Item I-1 is the November, 1996 sale of Century City North, a 1972-built
26-story office tower located one block northerly of the subject property in
Century City. The tower offers excellent northern views, including the nearby
country club across Santa Monica Boulevard. The property was marketed for sale
for approximately six months by the prior lender on the asset, who acquired the
property through foreclosure (Aetna Life Insurance Co.). The property attracted
a number of qualified bidders, and the pricing increased from the initial
bidding level of just over $100 million to more than the prior debt amount of
roughly $110 million, with the contract purchase price reaching $119,750,000,
or nearly $200 per-square-foot of rentable area (including storage). Bidders for
the property included Cornerstone, Gerald Hines, Lowe, Douglas Emmet and
Yarmouth, with the top two offers from Equitable and Heitman. Heitman (Financial
Ltd.) was the successful high bidder.
The property was completed in 1972, and the building is only in partial
conformance with current fire/life safety ordinances. The building also contains
asbestos materials which have been partially abated, and the building only
partially complies with ADA requirements. No cost estimate to complete proposed
cosmetic and code improvements was provided by the seller, but the buyer
"reportedly" plans to spend roughly $25 million, or about $40 per-square-foot of
rentable area to upgrade the common areas, abate asbestos, complete the
fire/life safety system, and bring the property into conformance with other code
issues. Based on the
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Comparable Sales
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[MAP OF AREA]
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Sales Comparison Approach
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"as is" price of about $200 per-square-foot, the "adjusted" price with all
capital work completed equals about $240 per-square-foot of rentable area.
The major tenants in the building include Princess Cruises (95,000 SIF
expiring in 2001) and Loeb & Loeb (39,000 SF expiring 1999), as well as a number
of full-floor tenants in the 23,000 square-foot size category. Most of the
Princess Cruises space is leased at substantially above-market rents ($41.40
per-square-foot full service gross), which compares with the most recent leasing
activity in the building of approximately $24.00 per-square-foot. The relatively
high implied overall capitalization rate of 11.4 percent based on the 1996
budgeted net operating income considers the above-market net income of about $22
per-square-foot annually and the required capital investment for the code issues
described above.
Item I-2 is the November, 1996 purchase by Beacon Properties (an east coast
REIT) of 10960 Wilshire Boulevard in Westwood. The property consists of a
23-story, 1971-built office property located in the heart of the Westwood
submarket, about two miles northwesterly of the subject property. The property
was acquired by the current owners and seller (Swiss Bank) through foreclosure
during 1991. The property was subsequently extensively renovated and re-leased,
with capital renovation including asbestos abatement, installation of a new
fire/life safety system, complete common area upgrades, and
mechanical/electrical system upgrades. The reported cost was $36,785,000 over
four years, and the seller will "hold back" an additional $2.1 million from the
purchase price for the remaining work. The major tenants in the building include
Saban Entertainment (111,225 SF expiring in 2006), Philips Interactive
(95,000 SF expiring in 2000), BBDO Worldwide (48,000 SF expiring in 2002), and
Saltzburg, Ray & Bergman (31,000 SF expiring in 2002). The landlord provided
fairly substantial free rent concessions (in one-half month increments) for the
major tenants, and the cash flow proforma includes free rent concessions of
approximately $2.7 million in 1997 and $2.5 million in 1998. The resulting net
operating income after these deductions is below market for the first two years.
The property has been marketed for sale during the second half of 1996 on a
"bid" basis, with initial bids due in August, and revised/final bids submitted
during September, 1996. The successful bidder was Beacon Properties, who also
submitted (unsuccessfully) bids for several other westside office buildings
during 1996. The reported sales price is approximately $133,000,000, or about
$245 per-square-foot of rentable area. The implied overall capitalization rate
prior to free rent concessions is 8.5 percent based on projected 1997 net
operating income. After deductions for free rent the implied overall rate based
on the seller's projected first-year (1997) NOI was 6.5 percent.
Item I-3 is the November, 1996 acquisition of MGM Plaza by Douglas Emmet
through a note purchase/foreclosure. The $235 million price represented a
discount of approximately 22 percent from the existing note of $300 million in
favor of a consortium of lenders led by Chase Manhattan (an additional $11
million note was in favor of Chase exclusively). The note acquisition was
structured with new financing by Chase of approximately $150 million. The buyer
competed with several other qualified investors, including Beacon Properties,
the REIT buyer of 10960 Wilshire Boulevard (refer to I-2).
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Sales Comparison Approach
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MGM Plaza is a six-building office complex completed in phases from 1983
through 1991. The buildings contain a combined rentable area of 1,038,757 square
feet, and range from three to six stories in height. Parking facilities include
a subterranean garage and parking structure containing 3,220 spaces (3.1 spaces
per 1,000 SF). The property was previously owned by a joint venture between
Maguire Thomas and IBM, with IBM as a major equity tenant. The borrower retains
an option to repurchase the property at a reported price of approximately $250
million within a specified timeframe. The IBM premises had been subleased,
including portions to the major current tenants MGM, with 200,000 square feet
(IBM remains as the primary tenant under the lease). Other major tenants in the
project include Aurora National Life, with 135,000 square feet (formerly
Executive Life), Value Health, Symantec Corp, Focus Media, and Rysher
Entertainment. The project is considered a Class A development in the Santa
Monica market although the quality of the improvements are inferior to Water
Garden, which is located just south of MGM Plaza. The estimated overall
capitalization rate based on the first year projected net operating income was
about 9.8 percent. The relatively high overall rate in comparison with other
recent sales considers the somewhat above-market income stream attributable to
IBM subsidy payments (supporting the underlying subleases) and to somewhat
irregular mid-term rental adjustments for some tenants.
Item I-4 is the December, 1995 sale of Wilshire Rodeo Plaza, the former
headquarters of Drexel Burnham Lambert. The property consists of three separate,
interconnected buildings containing a combined rentable area of 262,162 square
feet situated on a 1.9-acre site. The property is located in the heart of the
Beverly Hills "Golden Triangle" market, at the southwesterly corner of Wilshire
Boulevard and South Rodeo Drive. The improvements include two older four and
five-story buildings located along the Wilshire Boulevard frontage (9536 and
9560 Wilshire), and a 1986-built three-story office building developed over
subterranean parking. The Wilshire Boulevard buildings were originally developed
as department stores (this is the former Bonwit Teller and Gumps location) prior
to being converted to office use by Drexel in 1986. Following the bankruptcy of
this tenant in 1990, the building was acquired through foreclosure by the lender
in 1992, and was substantially renovated and retenanted prior to being marketed
for sale during 1995.
The property was 93 percent leased overall at the time of sale, with retail
tenancies occupying the lower floors of the prime Wilshire Boulevard frontage,
and the remainder of the space leased to office tenants. The retail tenancies
include recently signed leases for Niketown (28,000 SF for 15 years), Planet
Hollywood (18,000 SF for 15 years), and the Pace Wildestein Gallery (12,000 SF
for 15 years). The Limited also leases 8,400 SF for a remaining term to 2003.
Office tenants include Merrill Lynch (33,000 SF), United Talent (34,000 SF),
Paine Weber (18,000 SF), and Equity Marketing (28,000 SF). The rental rates for
several of the existing tenants are above market, including The Limited, Paine
Weber, and United Talent. Recent office leasing activity prior to sale had been
in the range of $26.00 per-square-foot on an effective basis, and the retail
leases ranged from approximately $36 PSF net to $90 PSF net for the older
Limited lease.
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Sales Comparison Approach
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The property was acquired by a pension fund advised by Heitman in December,
1995 for a cash price of $81,000,000. There were several other qualified bidders
at prices within approximately five percent of the final sales price. The
implied overall rate based on projected first-year net operating income was 8.0
percent. The net income return increase to approximately 8.8 percent during the
second year due to the scheduled rental increases for several of the more recent
tenancies.
The sales price equaled $308.97 per-square-foot of rentable area. The
tenancies included 66,395 square feet of retail space, or 25 percent of the
total rentable area. Although no specific allocation was reported, the overall
per-square-foot price paid was higher than for 100 percent office due to the
excellent retail location of this property, the quality of the retail leases,
and the substantially higher rental rates for retail space in the Beverly Hills
Triangle.
Item I-5 is the July, 1995 acquisition through a discounted note purchase
with cooperation from the debtor of Phase I of Santa Monica Water Garden. This
property is located directly south across Colorado Avenue from MGM Plaza (I-3).
Water Garden Phase I consists of two 6-story Class "A'. office buildings
containing a total rentable area of 665,720 square feet. The project was
completed in 1991 and was 97 percent leased at sale, including major tenants
Candle Corporation (150,000 SF), Haight, Brown & Boonesteele (110,000 SF),
Rand Corporation (50,000 SF), Microsoft Corporation (45,000 SF), and Savoy
Pictures (40,000 SF). This phase of the larger two-phased project (Phase II
consists of a vacant, entitled site) includes a 9.7-acre parcel with a 1.4-acre
man-made lake and three levels of underground parking for 2,300 cars. The
transaction consisted of the acquisition of the property (with the borrower
remaining as a partner with a potential future residual interest) for a price of
$165.8 million. The sellers consisted of the lending group, headed by Citibank
and Bank of America, and the buying entity was J.P. Morgan. The lenders received
the $165.8 million cash consideration for a note with a balance of approximately
$230 million (72% of the balance), with additional considerations from the
borrower, who negotiated a release of a personal guarantee in exchange for a
cash payment and a new note. The total consideration received by the bank group
for the note secured by the real estate and the personal guarantee was slightly
over $190 million. The clear real estate-related component of the transaction
equaled $165.8 million, or $249 per-square-foot of rentable area. Based on this
price the implied overall rate for the transaction (based on the projected first
year net operating income) was 8.9 percent. The first-year cash-on-cash return
(following leasing commissions and tenant costs) was 8.5 percent. The reported
IRR was just under 11 percent.
Analysis and Conclusions
Summary of the Data
-------------------
The preceding data included five closed transactions involving office
building purchases in the competitive westside markets in excess of
$80,000,000. The sales occurred during the period from July, 1995 through
November, 1996, with three of the transactions closing during November, 1996.
The properties ranged in size from 262,162 to 1,038,757 rentable square feet.
Occupancy levels at sale ranged from 90 percent to 99 percent, which compares
with the subject occupancy of 94 percent. The per-square-foot price indications
from the data range from $196.68 to $308.97, with four of the five data items in
a tighter range
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Sales Comparison Approach
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from $196.68 to $249.05 per-square-foot. The highest price per-square-foot
(item I-4) corresponds to a property with a significant retail component which
is leased at higher rents than typical office space due to the Beverly Hills
Triangle submarket location.
Buyer Profile and Investment Indications
----------------------------------------
The chart on the accompanying page summarizes the type of investor and the
investment criteria derived from the analysis of each of the data items
discussed previously. The buyers included institutional investment advisors and
REITs. The influx of capital to the real estate markets in southern California
during the past two years has increased pricing in general, and has also changed
the dominant buyer profile for suburban office buildings from local participants
to well-capitalized institutional investors.
Adjustment Considerations
Time and Market Conditions
--------------------------
The investment market for suburban office properties in the westside market
area has improved since 1995. The number of well capitalized investors has
increased and the competition for good quality assets has intensified. The
per-square-foot indications from the two more dated transactions designated as
I-4 and I-5 should be adjusted upward to consider the improvement in the
investment and leasing market during the past 18 months.
Improvement Quality, Condition, Age
------------------------------------
The subject was completed in 1975, which compares with the completion dates
for the comparable properties ranging from 1971 to 1991, or a mixed completion
ranging from 1935 to 1986 for I-4. Items I-2 and I-4 have been extensively
renovated recently, and the subject has also been upgraded for a number of
capital issues included ADA and fire/life safety. The property requiring the
most significant additional capital investment by the buyer is I-1, which has
been partially abated of asbestos and partially fire sprinklered. The subject is
of superior quality (prior to condition considerations) to I-3 and I-4.
Location and Environs
---------------------
The subject and the comparable data are all located in favorable westside
Los Angeles office markets. The subject's Century City location is obviously
most similar to I-1, and is inferior to I-4, which is located in the heart of
Beverly Hills. Items I-2, I-3, and I-5 are generally similar in terms of market
perception and achievable rental rates, although we note that the highest office
rental rates in Los Angeles County are achieved by the two "trophy" Century City
assets Fox Plaza and 1999 Avenue of the Stars.
Occupancy and Rollover Profile
------------------------------
The subject is 94 percent leased, which compares with occupancy levels at
sale for the data items from 90 percent to 99 percent. Investors in leased
office properties evaluate the current occupancy level and the rollover profile
(or the timing for the scheduled lease expirations) for the existing tenant. the
anticipated costs and risks associated with new and renewal leasing, including
tenant improvements, leasing commissions and vacancy loss, will impact the cash
flow and the property value. If current contract rents are substantially above
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Sales Comparison Approach
================================================================================
or below the buyer's estimate of market rent, the lease expiration schedule can
represent either a potential erosion of the cash flow or "upside" in comparison
to current income.
The chart on an accompanying page summarizes the "Rollover Profile" for
each of the comparable properties as well as the subject. The chart includes the
occupancy levels at sale as well as the lease expirations (expressed as a
percentage of the total rentable area). The "Total Vacancy & 5-Year Rollover"
column represents the total leasing exposure an investor will anticipate during
the 5-year period following acquisition including the current vacant space. This
comparison considers both the characteristics of the current occupancy of the
property and the impact of pending lease expirations during the near term.
The chart illustrates that although the five data items and the subject
have occupancy levels at sale of 90 percent or greater, the scheduled lease
expirations from the existing tenant based present substantially different risk
profiles. The 53 percent rollover exposure for I-1 during the first three years
of the holding period, for example, is considerably higher than the other data
items or the subject.
Analysis and Conclusions
------------------------
The investors in office properties of the subject's size and quality base
purchase decisions on the analyses contained in the Income Approach, including
discounted cash flow analysis and direct capitalization. The per-square-foot
pricing from the comparable sales data is relevant as a test of the
reasonableness of the value indications from the Income Approach.
The rounded $197 per-square-foot pricing for I-1 provides an indication of
the lower end of the range in probable value for the subject. This asset is a
directly competitive building in the subject's submarket, and the property has
excellent views and similar achievable rental rates as the subject. The buyer
will invest more capital (on a per-square-foot basis) following acquisition than
an investor in the subject because of remaining fire sprinkler, asbestos
abatement and other costs. The additional capital costs are partially offset by
above market rental rates for several tenants, however. The significant retail
component and superior location for I-4 suggests that the $309 (rounded)
per-square-foot price is above the achievable range for the subject. Items I-1,
I-3, and I-5 have rounded per-square-foot prices within a range from $226 to
$249. Each asset has superior leasing profiles in comparison with the subject
(including consideration of near-term rollover).
We concluded the data supports a range in per-square-foot value for the
subject from approximately $200 to $220 per-square-foot, or a price between I-1
as the low end of the range and I-2, I-3, and I-5 as the upper end of the range.
We reconciled at the middle of this supported range, or approximately $210
per-square-foot for the subject property by the Sales Comparison Approach, as
shown below.
2,282,381 SF x $210 PSF = $479,300,010
Rounded value by Sales Comparison Approach: $480,000,000
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INCOME APPROACH
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Methodology
The Income Approach is a method of converting the anticipated economic
benefits of owning property into a value estimate through capitalization. The
principle of "anticipation" underlies this approach in that investors recognize
the relationship between an assets income and its value. In order to value the
anticipated economic benefits of a particular property, potential income and
expenses must be estimated, and the most appropriate capitalization method must
be selected.
The two most common methods of converting net income into value are direct
capitalization and discounted cash-flow analysis. In direct capitalization, net
operating income is divided by an overall rate extracted from market sales to
indicate a value. In the discounted cash-flow method, anticipated future net
income streams and a reversionary value are discounted to an estimate of net
present value at a selected yield rate (internal rate of return). We used both
methods to estimate a value for the subject property.
Potential Gross Income
Occupancy and Tenant Profile
----------------------------
We reviewed rent rolls, tenant lease abstracts, and actual lease documents
for 20 of the largest subject tenants, as well as a summary of recently
negotiated and signed subject leases. The accompanying stacking plans were
prepared by Cushman & Wakefield based on the data we reviewed. Detailed rent
rolls are included in the Addenda. There are three basic "components" for the
subject property: 1) the North Tower (2029 Century Park East); 2) the South
Tower (2049 Century Park East); and 3) the Concourse or Retail Level, which is
situated below grade extending between the two towers and above portions of the
parking garage. The tenant exhibits on the accompanying pages are presented by
property component. The rentable areas and current occupancy for each component
and the total property are summarized below. The occupancy levels include some
tenants who have signed leases but may not yet be in physical occupancy.
Century Plaza Towers
Occupancy Overview
Component Total RSF Leased SF Occupancy
--------- --------- --------- ---------
North Tower 1,125,888 1.065,837 94.6%
South Tower 1,126,769 1,047,027 92.9%
Concourse 29,724 25,865 87.0%
--------- --------- ----
Totals 2,282,381 2,138,729 93.7%
As noted on the accompanying Stacking Plan exhibits for the two towers,
some discrepancies in rentable areas exist between the rent roll data and the
Space Plan (dated 9/1996) we reviewed. We recommend a prospective lender or
investor conduct an independent analysis of the "as built" rentable areas. We
note, however, that the total discrepancies are relatively minor in light of the
overall size of the property.
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<TABLE>
<CAPTION>
====================================================================================================================================
Tenant Name/ Square Feet Total Space Occupancy
Fir. No. Description Suite Vacant Occupied Floor (SF) Plan (9/96) Variance Ratio(%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10th 39 Paul Ray Company 1000 5,531 5,531
40 Aaron Cushman 1010 3,540 3,540
41 Zolla & Meyer 1020 4,296 4,296
42 Kopple & Klinger 1040 3,426 3,426
43 Federman, Grdiley 1060 5,751 5,751
44 Rosenstein 1080 2,692 2,692
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 0 25,236 25,236 25,236 0 100.0%
- ------------------------------------------------------------------------------------------------------------------------------------
11th 45 Neumeyer & Boyd 1100 5,765 5,765
46 Vacant-ISS-MTM 1105-V 339 339
47 Vacant 1110-V 1,164 779
48 Martin & Klein 1112-E 1,997 1,997
49 Alsace Development 1115 1,636 1,636
50 Frederick Cook 1130 2,842 2,842
51 Alexander Capital 1140 2,194 2,194
52 Toho 1150 1,598 1,598
53 GDC 1160 3,036 3,036
54 L & S Advisors 1180 2,823 2,823
55 Freddie MAC 1190 1,884 1,884
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 1,503 23,775 25,278 24,893 385 94.1%
- ------------------------------------------------------------------------------------------------------------------------------------
12th 56 Wasser Rosenson et al 1200 13,084
Vacant 1210 3,241
57 GE Investment 1230-E 2,023 2,023
58 Stan Rosenfield 1240 1,377 1,377
59 Alexander, Hallora 1260 5,392 5,392
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 3,241 21,876 25,117 8,792 16,325 87.1%
- ------------------------------------------------------------------------------------------------------------------------------------
13th 60 Cohen & Johnson 1300-E 17,126 19,950
61 Source Services 1350-T 8,091 5,250
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 0 25,217 25,217 25,200 17 100.0%
- ------------------------------------------------------------------------------------------------------------------------------------
14th 62 Johnson & Higgins 1400 25,157 25,157
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 0 25,157 25,157 25,157 0 100.0%
- ------------------------------------------------------------------------------------------------------------------------------------
15th 63 Valuation Counselor 1500 6,948 6,948
64 Valuation Couselor 1510 2,183 2,138
65 Kessler & Kessler 1520 3,657 3,657
66 Moreno Schlicht 1530 2,912 2,912
67 Singapore EcDvBank 1540 1,354 1,354
68 Realty Administati 1550 8,081 8,081
6 9 Johnson & Higgins (N/A) 1550
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 0 25,135 25,135 25,090 45 100.0%
- ------------------------------------------------------------------------------------------------------------------------------------
16th 70 Strook & Strook 1600 20,542 20,542
71 Snipper Wainer Markoff 1690 4,431 4,431
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 0 24,973 24,973 24,973 0 100.0%
- ------------------------------------------------------------------------------------------------------------------------------------
17th 72 Tax Consulting Group 1700 15,311 15,311
73 Sitrick 1750 8,963 8,963
74 Sitrick & Company 1760 1,526 1,526
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 0 25,800 25,800 25,800 0 100.0%
- ------------------------------------------------------------------------------------------------------------------------------------
18th 75 Strook & Strook 1800 25,615 25,615
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 0 25,615 25,615 25,615 0 100.0%
- ------------------------------------------------------------------------------------------------------------------------------------
19th 76 Danning Gill 1900-T 18,892 18,892
77 Dwyer Curlett 1950 6,870 6,870
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 0 25,762 25,762 5,762 0 100.0%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<TABLE>
<CAPTION>
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Tenant Name/ Square Feet Total Space Occupancy
Fir. No. Description Suite Vacant Occupied Floor (SF) Plan (9/96) Variance Ratio(%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
33rd 115 Seyfarth Shaw 3300 26,720 26,720
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 0 26,720 26,720 26,720 0 100.0%
- ------------------------------------------------------------------------------------------------------------------------------------
34th 116 Gibbs, Giden 3400 26,720 26,720 0 100.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 0 6,720 26,720
- ------------------------------------------------------------------------------------------------------------------------------------
35th 117 Foley, Lardner, Weisbur 3500 26,720 26,720
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 0 26,720 26,720 26,720 0 100.0%
- ------------------------------------------------------------------------------------------------------------------------------------
36th 118 Foley, Lardner, Weisbur 3600 26,720 26,720
119 Foley, Lardner, Weisbur 3600 0 100.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 0 26,720 26,720 26,720
- ------------------------------------------------------------------------------------------------------------------------------------
37th 120 Vacant 3700-V 9,319 9,319
121 TBG Financial 3720 13,030 13,030
122 Poms, Smith, Lande 3760 4,418 4,418
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 9,319 17,448 26,767 26,767 0 65.2%
- ------------------------------------------------------------------------------------------------------------------------------------
38th 123 Poms, Smith, Lande 3800 27,143 27,142 100.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 0 27,143 27,143 27,142 1 100.0%
- ------------------------------------------------------------------------------------------------------------------------------------
39th 124 Banque de Paribas 3900 10,712 10,712
125 Del Rubel 3910 8,489 8,489
126 Hitachi 3940 2,224 2,224
127 AMC 3945 2,124 2,124
128 Alan Goldman 3950-E 3,176 3,220
Vacant 3999 417 3,220
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 0 27,142 27,142 29,989 -2,847 100.0%
- ------------------------------------------------------------------------------------------------------------------------------------
40th 129 Gibson Dunn & Crut 4000 26,888 26,888 0 100.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 0 26,888 26,888 26,888
- ------------------------------------------------------------------------------------------------------------------------------------
41st 130 California Commerce Bank 4100 27,023 26,970
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 0 27,023 27,023 26,970 53 100.0%
- ------------------------------------------------------------------------------------------------------------------------------------
42nd 131 California Commerce Bank 4200 10,480 10,408
132 Vacant 4200-V 16,562 16,526
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 16,562 10,480 27,042 26,934 108 38.8%
- ------------------------------------------------------------------------------------------------------------------------------------
43rd 133 Johnson & Higgins 4300 9,432 9,432
134 Redev 43rd Floor 4300
135 Gibson Dunn (Expired) 4330-E 2,728 2,728
136 Vacant 4380-V 3,404 3,904
137 California Commerce Ban 4380 500
138 Vacant 4383-V 1,279 799
139 Vacant 4385-V 995 995
140 Poms, Smith, Lande 4390-E 2,359 2,359
141 Sarah Milliken 4392 919 919
142 Vacant 4393-V 1,951 1,845
Vacant 4394 178
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 7,629 15,938 23,567 23,159 408 67.6%
- ------------------------------------------------------------------------------------------------------------------------------------
44th 143 Redev 44th Floor 4400
144 Transit Casualty 4400 19,169 19,169
145 Vacant 4450-V 4,788 4,514
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 4,788 19,169 23,957 23,683 274 80.0%
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
-------------------------------------------------------------------------------------------------------
Century Plaza Towers Rent Roll Space Plan
NORTH TOWER Vacant Occupied Total SF Total SF Variance
-------------------------------------------------------------------------------------------------------
Totals (SF), 60,051 1,065,837 1,125,888 1,111,003 7,443
=======================================================================================================
-------------------------------------------------------------------------------------------------------
</TABLE>
Stacking Plan for North Tower
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<TABLE>
<CAPTION>
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Tenant Name/ Square Feet Total Space Occupancy
Fir. No. Description Suite Vacant Occupied Floor (SF) Plan (9/96) Variance Ratio(%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10th 36 Amer, Multi-Cine 1010 2,649 2,656
37 Amer, Multi-Cine 1020 8,718 8,718
38 Amer, Multi-Cine 1050 4,518 4,518
39 Arant Kleinberg 1080 9,336 9,336
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 0 25,221 25,221 25,228 7 100.0%
- ------------------------------------------------------------------------------------------------------------------------------------
11th 40 Barrister Executiv 1100 25,221 25,221
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 0 25,221 25,221 25,221 0 100.0%
- ------------------------------------------------------------------------------------------------------------------------------------
12th 41 Barrister Executiv 1200 25,221 25,221
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 0 25,221 25,221 25,221 0 100.0%
- ------------------------------------------------------------------------------------------------------------------------------------
13th 42 Prudential Securit 1300 15,085 15,085
43 Kutack Rock 1330-E 3,179 3,179
44 Prudential 1350 6,935 6,935
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 0 25,199 25,199 25,199 0 100.0%
- ------------------------------------------------------------------------------------------------------------------------------------
14th 45 Teledyne 1400-T 25,157 25,157
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 0 25,157 25,157 25,157 0 100.0%
- ------------------------------------------------------------------------------------------------------------------------------------
15th 46 Teledyne 1500-T 25,135 25,135
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 0 25,135 25,135 25,135 1 100.0%
- ------------------------------------------------------------------------------------------------------------------------------------
16th 47 Kelco Realty 1600 25,164 25,058
48 Unallocated Space 1699 64
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 64 25,164 25,228 25,058 170 99.7%
- ------------------------------------------------------------------------------------------------------------------------------------
17th 49 Kelco Realty 1700 25,694 25,800 -106 100.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 0 25,694 25,694 25,800
- ------------------------------------------------------------------------------------------------------------------------------------
18th 50 Barrister Executiv 1800 25,800 25,800
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 0 25,800 25,800 25,800 0 100.0%
- ------------------------------------------------------------------------------------------------------------------------------------
19th 51 Commonwealth of AS 1900 25,800 25,800
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 0 25,800 25,800 25,800 0 100.0%
- ------------------------------------------------------------------------------------------------------------------------------------
20th 52 Saudi Arabian Air 2000 5,361 5,361
53 Smylie & Selman 2060 18,674 18,674
54 Video Conference 2090 1,631 1,630
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 0 25,666 25,666 25,665 1 100.0%
- ------------------------------------------------------------------------------------------------------------------------------------
21st 55 Murphy Weir 2100 18,594 18,594
56 David Rosen 2120 2,523 2,523
57 Queensland Trade Bureau 2130 2,444 2,444
58 Tressler et al. 2140 2,248 2,248
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 0 25,809 25,809 25,809 0 100.0%
- ------------------------------------------------------------------------------------------------------------------------------------
22nd 59 Quisenberry 2200 10,909 10,909
60 Quisenbury & Barnanbel 2250 4,081 4,081
61 Mark Rosenberg 2270 2,032 1,980
62 Tsugawa Investment 2280 1,397 1,397
63 Gems Television 2290 2,557 2,557
64 Comedy Partners 2295 4,824 4,824
65 Unallocated Space 2299 52 0
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 52 25,800 25,852 25,748 104 99.8%
- ------------------------------------------------------------------------------------------------------------------------------------
23rd 66 Economic Analysis 2310 6,490 6,490
67 Anglo American 2330-T 1,732 1,732
68 Vacant 2350-V 17,452 17,452
69 Unallocated Space 2399 126 0
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 17,578 8,222 25,800 25,674 126 31.9%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Stacking Plan for South Tower
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<TABLE>
<CAPTION>
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Tenant Name/ Square Feet Total Space Occupancy
Fir. No. Description Suite Vacant Occupied Floor (SF) Plan (9/96) Variance Ratio(%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
33rd 112 Weissburg & Aronso 3300 11,126 11,126
113 Vacant 3301-V 3,045 3,045
114 Shamrock Investmen 3330 7,407
115 Vacant 3350-V 7,395 1,570
116 Vacant 3380-V 1,569 3,521
117 Vacant 3390-V 3,505
118 Unallocated Space 3399 80
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 12,549 14,171 26,720 26,669 51 63.0%
- ------------------------------------------------------------------------------------------------------------------------------------
34th 119 Sidley & Austin 3400 26,528 26,528
120 Unallocated Space 3499 192
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 192 26,528 26,720 26,528 192 99.3%
- ------------------------------------------------------------------------------------------------------------------------------------
35th 121 Sidley & Austin 3500 26,528 26,528
122 Unallocated Space 3599 192
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 192 26,528 26,720 26,528 192 99.3%
- ------------------------------------------------------------------------------------------------------------------------------------
36th 123 City National Bank 3600 26,720 26,720
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 0 26,720 26,720 26,720 0 100.0%
- ------------------------------------------------------------------------------------------------------------------------------------
37th 124 Robins, Kaplan etc 3700-T 12,464 12,464
125 McDonald & Company 3720 3,559 3,559
126 Career Images 3730 1,599 2,433
127 Hoi Tak 3750 5,150 5,150
128 Hoi Tak Expansion 3760 1,695 1,695
129 KIA Intertrade 3770 2,475 2,475
130 Unallocated Space 3799 234
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 234 6,942 27,176 27,776 -600 99.1%
- ------------------------------------------------------------------------------------------------------------------------------------
38th 131 Aetna Life Insuran 3800 26,948 26,948
132 Unallocated Space 3899 194
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF) 194 26,948 27,142 26,948 194 99.3%
- ------------------------------------------------------------------------------------------------------------------------------------
39th 133 Sidley & Austin 3900 26,528 26,528
134 Unallocated Space 3999 614
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 514 26,528 27,142 26,528 614 97.7%
- ------------------------------------------------------------------------------------------------------------------------------------
40th 135 Sidley & Austin 4000 14,423 14,423
136 HBO 4010 12,214 12,214
137 HBO 4098 240 240
138 Unallocated Space 4099 169
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 169 26,877 27,046 26,877 169 99.4%
- ------------------------------------------------------------------------------------------------------------------------------------
41st 139 HBO 4100 26,970 26,970
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 0 26,970 26,970 26,970 0 100.0%
- ------------------------------------------------------------------------------------------------------------------------------------
42nd 140 HBO 4200 26,970 26,970 0 100.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 0 26,970 26,970 26,970
- ------------------------------------------------------------------------------------------------------------------------------------
43rd 141 HBO 4300 6,717 6,717
142 No Redevelop - 43rd Flr 4300-V 3,367
143 Vacant 4320-V 3,367 3,037
144 Afschuler Grossman 4350 3,037
145 Vacant (EXCLUDED) 4350-V 3,393
146 HBO 4360 3,393 1,400
147 HBO 4370 1,400 2,841
148 Teledyne 4385 2,841 2,724
149 Vacant 4390-V 2,384 178
-- Vacant 4398
150 Unallocated Space 4399 36
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 5,787 17,388 23,175 23,657 -482 75.0%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Stacking Plan for South Tower
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<TABLE>
<CAPTION>
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Tenant Name/ Square Feet Total Space Occupancy
Fir. No. Description Suite Vacant Occupied Floor (SF) Plan (9/96) Variance Ratio(%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
44th 151 Alschuler Grossman 4400 9,657 9,657
152 No Redevelop - 44th Fir 4400-V
153 Vacant 4450-V 14,300 12,155
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 14,300 9,657 23,957 21,812 2,145 40.3%
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
------------------------------------------------------------------------------------------------------
Century Plaza Towers Rent Roll Space Plan
SOUTH TOWER Vacant Occupied Total SF Total SF Variance
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Totals (SF): 79,742 1,047,027 1,126,769 1,124,186 1,292
======================================================================================================
------------------------------------------------------------------------------------------------------
</TABLE>
Stacking Plan Chart
South Tower
[GRAPHIC OMITTED]
[DATA POINTS TO BE SUPPLIED]
Stacking Plan for South Tower
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<PAGE>
Stacking Plan [LOGO]
CENTURY PLAZA TOWERS CENTURY PLAZA TOWERS
2029 and 2049 Century Park East * Concourse (Retail) Level
<TABLE>
<CAPTION>
================================================================================================
Tenant Name/ Square Feet Total Occupancy
Fir. No. Description Suite Vacant Occupied Floor (SF) Ratio (%)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1st 1 Kalousdian BLC-01 562
2 RealComm BLC-02 500
3 Always Vacant BLC-03 788
4 First L. A. Bank BLC-04 5,724
5 Pasqua BLC-07 1,062
6 Wall Street Deli BLC-08 8,500
7 Unallocated 247
8 Omega Travel BLC-10 650
9 Vacant BLC-11 631
10 Samaha Celeb. Clrs BLC-12 590
11 David Hunter BLC-13 1,020
12 Emack & Bolio's BLC-14 850
13 Vacant BLC-15 1,675
14 Emporium Plus BLC-16 2,070
15 Office Supplies BLC-17 1,475
16 Sutherland BLC-18 1,468
17 Always Vacant BLC-19 518
18 Kourash Bakhshayandeh BLC-24 1,394
- ------------------------------------------------------------------------------------------------
Totals (SF): 3,859 25,865 29,724 87.0%
================================================================================================
</TABLE>
Stacking Plan for Concourse Level
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Major Tenant Roster [LOGO]
CENTURY PLAZA TOWERS CENTURY PLAZA TOWERS
2049 Century Park East * South Tower
<TABLE>
<CAPTION>
====================================================================================================================
Tenant Name/ Occupied Lease Dates Minimum Adjust
No. Description Suite Sqft Begin Ending Rent/PSF Date
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
2 Bank Of America 100 14,190 34,608 Sep-04 $18.00 Oct-94
(45,391 square feet) $30.95 Oct-99
- --------------------------------------------------------------------------------------------------------------------
3 200 25,221 34,608 Sep-04 $22.80 Oct-94
$24.00 Oct-99
- --------------------------------------------------------------------------------------------------------------------
4 300 5,980 34,608 Sep-04 $22.80 Oct-94
$24.00 Oct-99
- --------------------------------------------------------------------------------------------------------------------
40 Barrister Executive Suites 1100 25,221 33,970 Jun-00 $19.92 Jan-93
(76,242 square feet) $21.60 Jan-96
$27.36 Jan-97
$28.44 Jan-98
$29.52 Jan-99
$30.60 Jan-00
- --------------------------------------------------------------------------------------------------------------------
41 1200 25,221 33,970 Jun-00 $19.92 Jan-93
$21.60 Jan-96
$27.36 Jan-97
$28.44 Jan-98
$29.52 Jan-99
$30.60 Jan-00
- --------------------------------------------------------------------------------------------------------------------
50 1800 25,800 Jan-93 Jun-00 $19.47 Jan-93
$21.12 Jan-96
$26.75 Jan-97
$27.80 Jan-98
$28.86 Jan-99
$29.91 Jan-00
- --------------------------------------------------------------------------------------------------------------------
99 Century Park Investments 2800 52,414 Jan-93 Dec-00 $19.20 Jan-93
(52,414 square feet) $21.20 Jan-95
$25.20 Jan-97
$27.50 Jan-99
$29.50 Jan-01
$33.50 Jan-03
- --------------------------------------------------------------------------------------------------------------------
136 HBO - Home Box Office 4010 12,214 Jan-96 Apr-03 $22.80 Jan-96
(77,904 square feet) $25.20 Mar-98
- --------------------------------------------------------------------------------------------------------------------
137 4098 240 Jan-96 Apr-03 $12.00
- --------------------------------------------------------------------------------------------------------------------
139 4100 26,970 Mar-93 Feb-98 $22.80 Mar-93
$25.20 Mar-98
Option Apr-03 $22.80 Mar-93
$25.20 Mar-98
- --------------------------------------------------------------------------------------------------------------------
140 4200 26,970 Mar-93 Feb-98 $22.80
Option Apr-03 $25.20
- --------------------------------------------------------------------------------------------------------------------
141 4300 6,717 Mar-93 Feb-98 $13.20
Option Apr-03 $14.40
- --------------------------------------------------------------------------------------------------------------------
146 4360 3,393 Jan-96 Apr-03 $13.20 Jan-96
$14.40 Mar-98
- --------------------------------------------------------------------------------------------------------------------
147 4370 1,400 Mar-93 Feb-98 $13.20
Option Apr-03 $14.40
- --------------------------------------------------------------------------------------------------------------------
47 Kelco Realty 1600 25,164 Jan-93 Dec-04 $15.50 Jan-93
(50,858 square feet) $17.43 Jan-95
$21.41 Jan-97
$23.40 Jan-99
$25.39 Jan-01
$29.38 Jan-03
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Major Tenant Roster for South Tower
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Income Approach
================================================================================
The weighted average 1997 annual per-square-foot rental rates for the two
office towers are shown below. The figures include projected expense
reimbursements based on the discounted cash flow presented subsequently.
1997 PSF Ann.
Component Wtd Avg. Rent*
--------- --------------
North Tower $23.70
South Tower $25.15
Total $24.45
*including projected expense reimbursements
Major Tenants
The exhibit on the following pages summarizes the subject office tenants
with premises in excess of 40,000 square feet. As shown there are 12 tenants in
this category, ranging from 44,390 square feet (Transit Casualty) to 137,789
square feet (Johnson & Higgins). The business for the major tenants include
insurance firms (Johnson & Higgins), law firms (Sidley & Austin, Strook &
Strook, Foley, Lardner), entertainment (HBO), real estate (Kelco), and finance
(Bank of America). One of the major tenants, Barrister, is an executive suite
operator with several other westside locations. The 12 largest tenants have a
combined rentable area of 775,917 square feet, or about 34 percent of the total
office area for the two towers.
Rollover Profile
The accompanying charts detail the rollover profile for the existing
subject leases for the two subject office towers. The annual rollover is
summarized below.
Square Feet Expiring % of Total Office
Year North Tower South Tower Total Area (2,252,657 SF)
- ---- ----------- ----------- ----- -------------------
1997* 94,498 165,491 259,989 11.5%
1998 144,228 96,419 240,647 10.7%
1999 136,121 66,647 202,768 9.0%
2000 49,150 200,777 249,927 11.1%
2001 119,016 28,481 147,497 6.5%
2002 67,381 19,867 87,248 3.9%
2003 116,671 24,111 140,782 6.2%
2004 26,828 253,639 280,467 12.4%
2005 19,226 32,003 51,229 2.3%
2006 0 44,322 44,322 2.0%
2007 18,877 92,006 110,883 4.9%
2008 38,003 0 38,003 1.7%
2009 191,229 0 191,229 8.5%
2010 44,192 0 44,192 2.0%
2011 0 53,133 55,133 2.4%
--------- --------- --------- ----
1,065,420 1,080,896 2,144,316 95.3%
*includes portion of 1996
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<TABLE>
<CAPTION>
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Tenant Name/ Occupied Lease Dates Minimum Adjust
No. Description Suite Sqft Begin Ending Rent/PSF Date
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
49 1700 25,694 Jan-93 Dec-04 $15.50 Jan-93
$17.57 Jan-95
$21.59 Jan-97
$23.60 Jan-99
$25.61 Jan-01
$29.62 Jan-03
- --------------------------------------------------------------------------------------------------------------------
119 Sidley & Austin 3400 26,528 Feb-89 Jan-04 $0.00 Feb-89
(94,007 square feet) $0.00 Feb-93
$0.00 Feb-94
$34.35 Feb-96
$35.38 Feb-97
$36.44 Feb-98
$37.54 Feb-99
$38.66 Feb-00
$39.82 Feb-01
$41.02 Feb-02
$42.25 Feb-03
- --------------------------------------------------------------------------------------------------------------------
121 3500 26,528 Feb-89 Jan-04 $0.00 Feb-89
$0.00 Feb-93
$0.00 Feb-94
$34.35 Feb-96
$35.38 Feb-97
$36.44 Feb-98
$37.54 Feb-99
$38.66 Feb-00
$39.82 Feb-01
$41.02 Feb-02
$42.25 Feb-03
- --------------------------------------------------------------------------------------------------------------------
133 3900 26,528 Feb-89 Jan-04 $0.00 Feb-89
$0.00 Feb-93
$0.00 Feb-94
$34.35 Feb-96
$35.38 Feb-97
$36.44 Feb-98
$37.54 Feb-99
$38.66 Feb-00
$39.82 Feb-01
$41.02 Feb-02
$42.25 Feb-03
- --------------------------------------------------------------------------------------------------------------------
135 4000 14,423 Feb-89 Jan-04 $0.00 Feb-89
$0.00 Feb-93
$0.00 Feb-94
$34.35 Feb-96
$35.38 Feb-97
$36.44 Feb-98
$37.54 Feb-99
$38.66 Feb-00
$39.82 Feb-01
$41.02 Feb-02
$42.25 Feb-03
- --------------------------------------------------------------------------------------------------------------------
148 Teledyne 4385 2,841 Jul-11 $7.20 Aug-95
(53,133 square feet) $14.40 Aug-97
- --------------------------------------------------------------------------------------------------------------------
45 1400-T 25,157 Aug-95 Jul-11 $23.40 Aug-95
$25.80 Aug-02
$30.00 Aug-06
- --------------------------------------------------------------------------------------------------------------------
46 1500-T 25,135 Aug-95 Jul-11 $23.40 Aug-95
$25.80 Aug-02
$30.00 Aug-06
- --------------------------------------------------------------------------------------------------------------------
SOUTH TOWER Totals (SF): 449,949 449,949 Total
====================================================================================================================
</TABLE>
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<CAPTION>
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Rollover Tenant Name/ Occupied Percentage Expiry Cumulative Rollover
Year No. Description Suite Area (SF) of Building Date SQFT Percent
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
2000 72 Rubenstein/Justman 2460 5,187 0.5% Jan-00
79 USA Network 2530 2,566 0.2% Apr-00
80 USA Network 2550 8,338 0.7% Apr-00
86 Centennial Federal 2670 1,793 0.2% Apr-00
18 Transamerica 700 7,831 0.7% May-00
95 Ken Linder 2750 5,040 0.4% May-00
21 Tisdale Nicholson 755 5,495 0.5% Jun-00
40 Barrister Executiv 1100 25,221 2.2% Jun-00
41 Barrister Executiv 1200 25,221 2.2% Jun-00
50 Barrister Executiv 1800 25,800 2.3% Jun-00
105 Loepold Petrich 3110-T 9,840 0.9% Aug-00
26 COMP USA 810 5,580 0.5% Sep-00
58 Tressler et al. 2140 2,248 0.2% Oct-00
66 Economic Analysis 2310 6,490 0.6% Oct-00
88 Behr & Robinson 2690 6,114 0.5% Oct-00
16 Co-Counsel 690 3,076 0.3% Nov-00
56 David Rosen 2120 2,523 0.2% Dec-00
99 Century Park Inves 2800 52,414 4.7% Dec-00
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 200,777 17.8% 533,334 47.3%
- ------------------------------------------------------------------------------------------------------------------------------------
2001 33 Lennar Partners 920-T 5,863 0.5% Mar-01
67 Anglo American 2330-T 1,732 0.2% Jul-01
57 Queensland Trade Bureau 2130 2,444 0.2% Aug-01
63 Gems Television 2290 2,557 0.2% Sep-01
36 Amer. Multi-Cine 1010 2,649 0.2% Nov-01
37 Amer. Multi-Cine 1020 8,718 0.8% Nov-01
38 Amer. Multi-Cine 1050 4,518 0.4% Nov-01
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 28,481 2.5% 561,815 49.9%
- ------------------------------------------------------------------------------------------------------------------------------------
2002 30 Lifetime Entertainment 840 10,070 0.9% Jan-02
126 Career Images 1599 1,599 0.1% Oct-02
103 Prudential Insuran 3090 8,198 0.7% Dec-02
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 19,867 1.8% 581,682 51.6%
- ------------------------------------------------------------------------------------------------------------------------------------
2003 107 Kleinberg & Lange 3180 8,264 0.7% Feb-03
136 HBO 4010 12,214 1.1% Apr-03
137 HBO 4098 240 0.0% Apr-03
146 HBO 4360 3,393 0.3% Apr-03
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 24,111 2.1% 605,793 53.8%
- ------------------------------------------------------------------------------------------------------------------------------------
2004 119 Sidley & Austin 3400 26,528 2.4% Jan-04
121 Sidley & Austin 3500 26,528 2.4% Jan-04
133 Sidley & Austin 3900 26,528 2.4% Jan-04
135 Sidley & Austin 4000 14,423 1.3% Jan-04
59 Quisenberry 2200 10,909 1.0% Feb-04
60 Quisenbury & Bamanbel 2250 4,081 0.4% Feb-04
15 Search West 650 7,170 0.6% Mar-04
123 City National Bank 3600 26,720 2.4% Apr-04
75 Kaufman & Bernstei 2500 7,722 0.7% May-04
2 Bank Of America 100 14,190 1.3% Sep-04
3 Bank of America 200 25,221 2.2% Sep-04
4 Bank of America 300 5,980 0.5% Sep-04
73 Mahoney Coppenrath 2490 5,575 0.5% Oct-04
74 Mahoney (Must Take) 2490 1,206 0.1% Oct-04
47 Kelco Realty 1600 25,164 2.2% Dec-98
49 Kelco Realty 1700 25,694 2.3% Dec-98
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 253,639 22.5% 859,432 76.3%
- ------------------------------------------------------------------------------------------------------------------------------------
2005 127 Hoi Tak 3750 5,150 0.5% Jul-05
128 Hoi Tak Expansion 3760 1,695 0.2% Jul-05
124 Robins, Kaplan etc 3700-T 12,464 1.1% Aug-05
144 Alschuler Grossman 4350 3.037 0.3% Dec-05
151 Alschuler Grossman 4400 9,657 0.9% Dec-05
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 32,003 2.8% 891,435 79.1%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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Rollover Tenant Name/ Occupied Percentage Expiry Cumulative Rollover
Year No. Description Suite Area (SF) of Building Date SQFT Percent
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
2006 102 The Boston Group 3000-T 18,522 1.6% Jun-06
51 Commonwealth of AS 1900 25,800 2.3% Aug-06
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 3.9% 935,757 83.0%
- ------------------------------------------------------------------------------------------------------------------------------------
2007 7 NWQ Investment 400 20,700 1.8% Jun-07
109 Proskauer Rose (26,720 sf) 3200 26,720 2.4% Aug-07
112 Proskauer Rose (8,780 sf) 3300 8,780 0.8% Aug-07
9 Littler Mendelson 500 25,221 2.2% Oct-07
11 Littler Mendelson 610 5,384 0.5% Oct-07
12 Littler Mendelson 620 2,216 0.2% Oct-07
13 Littler Mendelson 630 1,400 0.1% Oct-07
14 Littler Mendelson 640 1,585 0.1% Oct-07
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 92,006 8.2% 1,027,763 91.2%
- ------------------------------------------------------------------------------------------------------------------------------------
2011 148 Teledyne 4385 2,841 0.3% Jul-11
45 Teledyne 1400-T 25,157 2.2% Jul-11
46 Teledyne 1500-T 25,135 2.2% Jul-11
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 53,133 4.7% 1,080,896 95.9%
- ------------------------------------------------------------------------------------------------------------------------------------
2025 54 Video Conference 2090 1,631 0.1% Dec-25
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 1,631 0.1% 1,082,527 96.1%
- ------------------------------------------------------------------------------------------------------------------------------------
8 Vacant 405 4,521
27 Vacant 820-V 746
17 Unallocated Space 699 72
31 Unallocated Space 899 373
48 Unallocated Space 1699 64
65 Unallocated Space 2299 52
69 Unallocated Space 2399 126
82 Unallocated Space 2599 283
100 Unallocated Space 2899 513
101 Unallocated Space 2999 513
108 Unallocated Space 3199 22
111 Unallocated Space 3299 192
118 Unallocated Space 3399 80
120 Unallocated Space 3499 192
122 Unallocated Space 3599 192
130 Unallocated Space 3799 234
132 Unallocated Space 3899 194
134 Unallocated Space 3999 614
138 Unallocated Space 4099 169
150 Unallocated Space 4399 36
68 Vacant 2350-V 17,452
97 Vacant 2770-V 1,341
5 Vacant-Unisys 305-V 8,937
6 Vacant 310-V 10,304
113 Vacant 3301-V
115 Vacant 3350-V 7,395
116 Vacant 3380-V 1,569
117 Vacant 3390-V 3,505
143 Vacant 4320-V 3,367
145 Vacant 4350-V
149 Vacant 4390-V 2,384
153 Vacant 4450-V 14,300
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 79,742 7.1% 1,162,269 103.2%
- ------------------------------------------------------------------------------------------------------------------------------------
Adjust 109 Proskauer Rose (26,720 sf) 3200 -25,720 -2.4% Aug-07
112 Proskauer Rose (8,780 sf) 3300 -8,780 -0.8% Aug-07
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): -35,500 -3.2% 1,126,769 100.0%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Total Building NRA (SF): 1,126,769 Cumulative Rollover: 100.0%
====================================================================================================================================
</TABLE>
Rollover Chart
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Rollover Tenant Name/ Occupied Percentage Expiry Cumulative Rollover
Year No. Description Suite Area (SF) of Building Date SQFT Percent
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
33 Neilsen Elggren 900 & 8,289 0.7% Apr-99
19 Century Hospital 520 8,677 0.8% May-99
29 Gallizio 830 1,168 0.1% May-99
31 Freid & Goldsman 860 5,664 0.5% May-99
67 Singapore EcDvBank 1540 1,354 0.1% Jun-99
107 Incas France 3160 1,129 0.1% Jun-99
96 Exclusive Toy Company 2870 1,371 0.1% Aug-99
68 Realty Administati 1550 8,081 0.7% Sep-99
35 Norwest Mortgage 930 934 0.1% Oct-99
66 Moreno Schlicht 1530 2,912 0.3% Nov-99
101 Winkler Securities 2980 1,278 0.1% Nov-99
2 Transit Casualty 200 25,221 2.2% Dec-99
144 Transit Casualty 4400 19,169 1.7% Dec-99
76 Danning Gill 1900-T 18,892 1.7% Dec-99
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 136,121 12.1% 374,847 33.3%
- ------------------------------------------------------------------------------------------------------------------------------------
2000 36 Westmount Managemt 940 2,691 0.2% Mar-00
77 Dwyer Curlett 1950 6,870 0.6% Apr-00
14 Suzy Vaughan (Must Take) 448 0.0% Jun-00
15 Suzy Vaughan 450 1,752 0.2% Jun-00
51 Alexander Capital 1140 2,194 0.2% Jul-00
1 United CA Bank 100 14,190 1.3% Aug-00
52 Toho 1150 1,598 0.1% Sep-00
65 Kessler & Kessler 1520 3,657 0.3% Sep-00
17 Bernstein & Fox 500 6,168 0.5% Nov-00
18 Bernstein & Fox 510 2,179 0.2% Nov-00
21 Licker & Ozurivich 590 2,921 0.3% Nov-00
81 Jose Eber 2080 4,930 0.4% Dec-00
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 49,150 4.4% 423,997 37.7%
- ------------------------------------------------------------------------------------------------------------------------------------
2001 69 McCambridge 2700 22,616 2.0% Feb-01
97 Garlick & Tack 2890 1,925 0.2% Feb-01
104 Altschuler Melvoin 3100 13,029 1.2% May-01
124 Banque de Paribas 3900 10,712 1.0% Jun-01
116 Gibbs. Giden 3400 26,720 2.4% Sep-01
86 JVC 2500 11,156 1.0% Oct-01
64 Valuation Couselor 1510 2,183 0.2% Oct-01
63 Valuation Counslor 1500 6,948 0.6% Oct-01
28 Phoenix, Duff & Phelps 620 5,843 0.5% Nov-01
98 Societe Generale 2900 9,793 0.9% Nov-01
61 Source Services 1350-T 8,091 0.7% Dec-01
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 119,016 10.6% 543,013 48.2%
- ------------------------------------------------------------------------------------------------------------------------------------
2002 20 Promax 555-T 5,275 0.5% Mar-02
122 Poms, Smith, Lande 3760 4,418 0.4% May-02
123 Poms, Smith, Lande 3800 27,143 2.4% May-02
56 Wasser Rosenson et al 1200 13,084 1.2% Sep-02
71 Snipper Wainer Markoff 1690 4,431 0.4% Sep-02
121 TBG Financial 3720 13,030 1.2% Dec-02
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 67,381 6.0% 610,394 54.2%
- ------------------------------------------------------------------------------------------------------------------------------------
2003 129 Gibson Dunn & Crut 4000 26,888 2.4% Feb-03
16 Cohen & Primiani 480 7,214 0.6% Mar-03
4 Cohen, Primiani & Fost 400 5,545 0.5% Apr-03
103 Paine Webber 3000 26,720 2.4% May-03
80 Prudential 2050-T 12,403 1.1% May-03
99 Paterson Capital 2920 12,627 1.1% Aug-03
87 Klein & Martin 2550 14,785 1.3% Sep-03
73 Sitrick 1750 8,963 0.8% Nov-03
74 Sitrick & Company 1760 1,526 0.1% Nov-03
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 116,671 10.4% 727,065 64.6%
- ------------------------------------------------------------------------------------------------------------------------------------
2004 72 Tax Consulting Group 1700 15,311 1.4% Feb-04
53 GDC 1160 3,036 0.3% Jun-04
105 Murphey Marsilles 3110 8,481 0.8% Dec-04
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 26,828 2.4% 753,893 67.0%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
StackIng Plan for North Tower
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Rollover Tenant Name/ Occupied Percentage Expiry Cumulative Rollover
Year No. Description Suite Area (SF) of Building Date SQFT Percent
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
2005 24 Xerox Expansion 720-T 1,833 0.2% Oct-05
23 Xerox Corporation 700-T 17,393 1.5% Oct-05
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 19.226 1.7% 773,119 68.7%
- ------------------------------------------------------------------------------------------------------------------------------------
2007 93 Merrill Lynch 2800 18,877 1.7% Jun-07
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 18.877 1.7% 791,996 70.3%
- ------------------------------------------------------------------------------------------------------------------------------------
2008 130 California Commerce Bank 4100 27,023 2.4% Jan-08
131 California Commerce Bank 4200 10,480 0.9% Jan-08
137 California Commerce Ban 4380 500 0.0% Jan-08
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 38.003 3.4% 829,999 73.7%
- ------------------------------------------------------------------------------------------------------------------------------------
2009 117 Foley, Lardner, Weisbur 3500 26.720 2.4% Feb-09
118 Foley, Lardner, Weisbur 3600 26,720 2.4% Feb-09
119 Foley, Lardner, Weisbur 3600 0.0% Feb-09
62 Johnson & Higgins 1400 25,157 2.2% Mar-09
82 Johnson & Higgins 2100 25,800 2.3% Mar-09
83 Johnson & Higgins 2200 25,800 2.3% Mar-09
84 Johnson & Higgins 2300 25,800 2.3% Mar-09
85 Johnson & Higgins 2400 25,800 2.3% Mar-09
133 Johnson & Higgins 4300 9,432 0.8% Mar-09
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 191,229 17.0% 1,021,228 90.7%
- ------------------------------------------------------------------------------------------------------------------------------------
2010 113 Seyfarth Shaw 3270 1,523 0.1% Dec-10
114 Seyfarth Shaw 3280 1,687 0.1% Dec-10
109 Seyfarth 3210 6,957 0.6% Dec-10
108 Seyfarth Shaw 3200 7,305 0.6% Dec-10
115 Seyfarth Shaw 3300 26,720 2.4% Dec-10
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 44,192 3.9% 1,065,420 94.6%
- ------------------------------------------------------------------------------------------------------------------------------------
6 Conference Center 410 2,420 0.2%
25 Vacant 750-V 5,995 0.5%
27 Vacant 0810-V 2,367 0.2%
46 Vacant-ISS-MTM 1105-V 339 0.0%
47 Vacant 1110-V 1,164 0.1%
Vacant 1210 3,241 0.3%
69 Johnson & Higgins (N/A) 1550 0.0%
78 Vacant 2000-V 3,805 0.3%
94 Vacant 2850-V 853 0.1%
111 Vacant 3240-V 1,569 0.1%
120 Vacant 3700-V 9,319 0.8%
Vacant 3999 417 0.0%
132 Vacant 4200-V 16,562 1.5%
136 Vacant 4380-V 3,404 0.3%
138 Vacant 4383-V 1,279 0.1%
139 Vacant 4385-V 995 0.1%
142 Vacant 4393-V 1,951 0.2%
145 Vacant 4450-V 4,788 0.4%
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 60,468 5.4% 1,125,888 100.0%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Total Building NRA (SF): 1,125,888 Cumulative Rollover: 100.0%
====================================================================================================================================
</TABLE>
Rollover Chart
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Stacking Plan for North Tower
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Rollover Exposure [LOGO]
CENTURY PLAZA TOWERS CENTURY PLAZA TOWERS
2029 and 2049 Century Park East * Concourse (Retail) Level
<TABLE>
<CAPTION>
====================================================================================================================================
Rollover Tenant Name/ Occupied Percentage Expiry Cumulative Rollover
Year No. Description Suite Area (SF) of Building Date SQFT Percent
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1995 6 Wall Street Deli BLC-08 8,500 28.6% Oct-96
2 RealComm BLC-02 500 1.7% Dec-96
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 9,000 30.3% 9,000 30.3%
- ------------------------------------------------------------------------------------------------------------------------------------
1997 10 Samaha Celeb. Ctrs BLC-12 590 2.0% Aug-97
11 David Hunter BLC-13 1,020 3.4% Oct-97
8 Omega Travel BLC-10 650 2.2% Nov-97
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 2,260 7.6% 11,260 37.9%
- ------------------------------------------------------------------------------------------------------------------------------------
1998 16 Sutherland BLC-18 1,468 4.9% Jun-98
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 1,468 4.9% 12,728 42.8%
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1 Kalousdian BLC-01 562 1.9% Feb-99
14 Emporium Plus BLC-16 2,070 7.0% Oct-99
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 2,632 8.9% 15,360 51.7%
- ------------------------------------------------------------------------------------------------------------------------------------
2000 15 Office Supplies BLC-17 1,475 5.0% Mar-00
5 Pasqua BLC-07 1,062 3.6% Oct-00
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 2,537 8.5% 17,897 60.2%
- ------------------------------------------------------------------------------------------------------------------------------------
2002 4 First L. A. Bank BLC-04 5,724 19.3% Jun-02
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 5,724 19.3% 23,621 79.5%
- ------------------------------------------------------------------------------------------------------------------------------------
2006 12 Emack & Bolio's BLC-14 850 2.9% Jun-06
18 Kourash Bakhshayandeh BLC-24 1,394 4.7% Nov-06
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 2,244 7.5% 25,865 87.0%
- ------------------------------------------------------------------------------------------------------------------------------------
7 Unallocated 247 0.8%
3 Always Vacant BLC-03 788 2.7%
9 Vacant BLC-11 631 2.1%
13 Vacant BLC-15 1,675 5.6%
17 Always Vacant BLC-19 518 1.7%
- ------------------------------------------------------------------------------------------------------------------------------------
Sub-Total (SF): 3,859 13.0% 29,724 100.0%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Total Building NRA (SF): 29,724 Cumulative Rollover: 100.0%
====================================================================================================================================
</TABLE>
Rollover Chart
Rollover Chart
[GRAPHIC OMITTED]
[DATA POINTS TO BE SUPPLIED]
Stacking Plan for Concourse Level
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<PAGE>
Income Approach
================================================================================
The rollover profile for the subject during the first three years and five
years of the holding period totals 33 percent and 51 percent, respectively. As
shown in the chart, the maximum lease expirations during any single year totals
12.9 percent of the property, and the overall expiration schedule is distributed
fairly favorably. The subject expiration schedule for the first three and five
years was compared with the comparable sales data in the Sales Comparison
Approach. Excluding items I-1 (Century City North) the subject is positioned
generally below the comparable sales data when considered on total releasing
exposure during the first five years of the investment.
Market Rent
The subject is located in Century City, and competes most directly with
other high-rise office properties in this submarket. The subject also competes
directly and indirectly with other buildings located in the adjacent westside
submarkets of Beverly Hills, Westwood, Brentwood, and Santa Monica. There is
also some secondary competition on the basis of cost from buildings located in
the Olympic corridor of West Los Angeles, the Miracle Mile, and Culver City.
Westside Los Angeles Market Rent Overview
A general range in five-year effective rental rates for buildings in the
competitive westside markets is summarized below. The range is based on our
extensive office building appraisal experience in this market area. "Effective
Rental Rate" as used in this chart is defined as the average per-square-foot
rental rate received over the term of the lease by the landlord. The effective
rent incorporates adjustments for free rent received by the tenant. The figures
do not include deductions for variances in tenant allowances, and do not include
any adjustments for the "time value" of funds received over the term of the
lease. Actual rents for office buildings fluctuate considerably within each
submarket based on building quality, specific location within the submarket and
numerous other factors. Rental rates are also "dynamic" and can increase or
decrease with changes in market conditions.
Typical 5-Year Effective FSG Rental Rates( Annual PSF)
Competitive Trophy
Submarkets Class Class A Class B
- ---------- ----- ------- -------
Century City $36.00-$45.00 $24.00-$28.00 $21.00-$24.00
Santa Monica $30.00-$33.00 $27.00-$30.00 $21.00-$24.00
Olympic Corridor/West L.A. $26.00 $24.00 $17.00
Miracle Mile/East Bev. Hills N/A $22.00 $16.00
Westwood $30.00-$33.00 $24.00-$27.00 $21.00
Brentwood $25.00 $24.00 $21.00
Bev. Hills Triangle N/A $27.00-$30.00 $22.00
Culver City (Fox Hills) N/A $17.00-$22.00 $15.00
The chart provides an overview of the "typical" 5-year market rental rates
for office buildings located in the competitive westside submarkets. The highest
rental rates for Class A buildings are achieved in the Century City, Beverly
Hills Triangle, Santa Monica, and
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Income Approach
================================================================================
Westwood submarkets. The peripheral submarket locations in Culver City or the
adjacent Howard Hughes Center, or along the Olympic Boulevard corridor in West
Los Angeles achieve proportionately lower rental rates. The Miracle Mile
district located immediately east of Beverly Hills also includes several newer,
very good quality Class A buildings.
The subject is a landmark property in a desirable westside market. Within
the Century City market the subject office towers are positioned in the upper
tier of the marketplace in terms of quality and appeal. There are two "trophy"
caliber buildings in Century City, the SunAmerica Tower (1999 Avenue of the
Stars) and Fox Plaza (2121 Avenue of the Stars.) These two properties have
historically been at or near full occupancy and achieve a rental premium above
all other buildings in the marketplace. The subject Century Plaza Towers are
positioned below these trophy properties, but are ranked as an upper tier Class
A property, with the remaining buildings in the market positioned to varying
degrees below the subject.
We based market rent estimates for the subject on an analysis of current
quoted terms for currently available space in competitive Century City
buildings, a comparison with pending and signed leases for space in directly and
indirectly competitive properties, discussions with landlords and brokers
currently active in the market, and an analysis of recently signed subject
leases. The data is summarized on the accompanying pages and discussed below.
Century City - Quoted Rental Survey
The asking rental survey on the following pages, conducted during November
and December, 1996 covers 20 competitive office properties located in the
Century City marketplace (including the subject). The survey summarizes the
current availabilities both a direct and sublease basis, and the quoted annual
per-square-foot rental rates. The competitive buildings are presented according
to name and location, building size, height, and age, parking facilities and
rates, and current availabilities and asking rental rates.
The comparable rental data is categorized by ranking within the Century
City submarket, based on qualitative ratings, and is restated from the Market
Analysis section of this appraisal. The three "tiers", or categories of
properties were discussed in the Market Analysis. The discussion below provides
an overview of the competitive properties. Refer to accompanying aerial
photograph for locations.
Item C-1 is the SunAmerica (formerly Broad Inc.) headquarters building
located at 1999 Avenue of the Stars. This is the most recent development in
Century City and one of the newest projects in Los Angeles, and represents
the premier office property in southern California. The property was
developed by JMB, who subsequently placed a participating mortgage on the
property during January, 1991. The property is fully leased excluding
sublease space. The major tenants include SunAmerica, (100,000 SF) which
relocated to this building from Brentwood during the fourth quarter of
1993, O'Melveny & Meyers (60,000 SF), Bear Stearns (50,000 SF), Morgan
Stanley (25,000 SF), Perkins Coie (30,000 SF), Pircher Nichols & Meeks
(40,000 SF), Ernst & Young (50,000 SF), Katten Muchin Zavis (60,000 SF),
and Kaye Scholer (60,000 SF). Many of the leases were structured with
initial contract rental rates in the range of $35 to $40
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CENTURY CITY
Rental and Occupancy Survey of Competitive Office Buildings
====================================================================================================================================
Building Information Overall
Item Building Name I No.of Area Avg. Fir. Year Available Space (SF) Availability
No. Location Stories (SF) Area (SF) Built Floor(s) Direct Sublease (SF)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
C-11 Century Park Building 15 310,000 20,667 1970 Ground 8,720 0
1800 Century Park East 2-15 147,702 0 Total
---- ------- -
154,422 0 154,422
- ------------------------------------------------------------------------------------------------------------------------------------
C-12 The 1008 Building 21 487,177 23,199 1970 17 3,618 0
I Soft Century Park East 2-21 110,568 0 Total
---- ------- -
114,186 0 114,186
- ------------------------------------------------------------------------------------------------------------------------------------
C-13 Gateway East 14 308,000 22,000 1964 Ground 1,308 0
1800 Avenue of the Stars 4-14 13,427 0 Total
---- ------- -
14,735 0 14,735
- ------------------------------------------------------------------------------------------------------------------------------------
C-14 Gateway West 14 242,900 17,350 1963 Ground 1,348 0
1 801 Avenue of the Stars 2-14 68,374 0 Total
---- ------- -
60,720 0 69,720
- ------------------------------------------------------------------------------------------------------------------------------------
C-15 1900 Avenue of the Stars 28 551,819 19.708 1969 Ground 0 21,427
1900 Avenue of the Stars 2-27 86,198 0 Total
---- ------- -
86,198 21,427 107,623
- ------------------------------------------------------------------------------------------------------------------------------------
C-18 1901 Avenue of the Stars 20 450,699 22.535 1968 5 & 19 0 11,256
1901 Avenue of the Stars 2-17 90,703 0 Total
---- ------- -
90,703 11,258 101,959
- ------------------------------------------------------------------------------------------------------------------------------------
Second Tier Totals 210 4,040,073 18.536 Occupied 674,652 107,420 Vacant
--------------------------
782,142
Total SF
====================================================================================================================================
<CAPTION>
====================================================================================================================================
Quoted Occupancy Parking Monthly 1996
Item Building Name/ Annual Rent Lease Ratio Ratio/ Parking Rentable Taxes/
No. Location PSF PSF Type Incl. SL) 1,000 SF Rates Factor Exp PSF
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
C-11 Century Park Building $22.20 - $22.20 FSG 50.2% 3.00 $99 1.13 $8.70
1800 Century Park East $22.20 - $22.20 FSG $105
- ------------------------------------------------------------------------------------------------------------------------------------
C-12 The 1008 Building $21.00 - $21.00 FSG 75.6% 2.00 $121 1.20 $9.00
I Soft Century Park East $19.20 - $25.20 FSG $143
$258
- ------------------------------------------------------------------------------------------------------------------------------------
C-13 Gateway East $20.40 - $24.00 FSG 95.2% 2.00 $100 1.14 $8.50
1800 Avenue of the Stars $20.40 - $24.00 FSG $185
- ------------------------------------------------------------------------------------------------------------------------------------
C-14 Gateway West $21.60 - $26,40 FSG 71.3% 2.00 $85 1.14 $7.50
1 801 Avenue of the Stars $21.60 - $28,40 FSG $117
$155
- ------------------------------------------------------------------------------------------------------------------------------------
C-15 1900 Avenue of the Stars $20.40 - $20.40 FSG 80.5% 3.00 $100 1.14 $10.50
1900 Avenue of the Stars $22.20 - $28.20 FSG $250
- ------------------------------------------------------------------------------------------------------------------------------------
C-18 1901 Avenue of the Stars $19.00 - $24.00 FSG 77.4% 3.00 $100 1.14 $10.50
1901 Avenue of the Stars $22.20 - $26.40 FSG $250
- ------------------------------------------------------------------------------------------------------------------------------------
Second Tier Totals $21.10 $24.99 Averages 2.64 $106 1.14 $9.30
Wtd. Avg. Rental Rate 80.6% $170
$239
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</TABLE>
<TABLE>
<CAPTION>
Third Tier - Class "B" Buildings November 1996
====================================================================================================================================
Building Information Overall
Item Building Name/ No.of Area Avg. Fir. Year Available Space (SF) Availability
No. Location Stories (SF) Area (SF) Built Floor(s) Direct Sublease (SF)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
C-17 ABC Entertainment Center 5 180,000 36,000 1975 Conc 18,258 0
2020 Avenue of the Stars 3 2,400 0 Total
- ----- -
20,658 0 20,558
- ------------------------------------------------------------------------------------------------------------------------------------
C-16 ABC Entertainment Center 5 180,000 38,000 1975 Plaza-Conc 14,250 0
2040 Avenue of the Stars 4 37,238 0 Total
- ------ -
51,406 0 51,486
- ------------------------------------------------------------------------------------------------------------------------------------
C-19 1930 century Park West 4 58,285 14,068 1972 Ground 0 0
1930 Century Park West 0 9 0 Total
- - -
0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
C-20 Fox Sports Building 5 115,000 23,000 1970 Ground 0 0
10000 Santa Monica Blvd. 0 2 0 Total
- - -
0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Third Tier Totals 19 331,265 27,901 Occupied 72,144 0 Vacant
--------------------
72,144
Total SF
====================================================================================================================================
<CAPTION>
====================================================================================================================================
Quoted Occupancy Parking Monthly 1996
Item Building Name/ Annual Rent Lease Ratio Ratio/ Parking Rentable Taxes/
No. Location PSF PSF Type Incl. SL) 1,000 SF Rates Factor Exp PSF
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
C-17 ABC Entertainment Center $19.20 - $19.20 FSG 88.5% 3.00 $121 1.14 $13.74
2020 Avenue of the Stars $19.20 - $19.10 FSG $225
- ------------------------------------------------------------------------------------------------------------------------------------
C-16 ABC Entertainment Center $10.20 - $19.20 FSG 71.4% 3.00 $121 1.14 $13.74
2040 Avenue of the Stars $19.20 - $19.20 FSG $225
- ------------------------------------------------------------------------------------------------------------------------------------
C-19 1930 century Park West --- - --- --- 100.0% 3.00 $100 1.13 $9.00
1930 Century Park West --- - --- --- $150
- ------------------------------------------------------------------------------------------------------------------------------------
C-20 Fox Sports Building --- - --- --- 100.0% 3.00 $110 1.18 $9.00
10000 Santa Monica Blvd. --- - --- --- $125
$150
- ------------------------------------------------------------------------------------------------------------------------------------
Third Tier Totals $19.20 - $19.20 Averages 3.00 $113 1.14 $11.37
Wtd. Avg. Rental Rate 86.4% $161
$150
====================================================================================================================================
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Survey
<PAGE>
Income Approach
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per-square-foot annually, and most included annually or periodic increases.
This building essentially re-established an upper tier to the westside
marketplace. The location adjacent to the Century City Shopping Center is
considered a locational advantage in term of amenities. Much of the recent
leasing activity has involved subleasing. As shown on the subsequent
comparable lease chart, leases signed for space in this building during
1995 and 1996 have contract rental rates of $35 per-square-foot or
greater, and include annual increases. These leases also included
relatively minimal tenant allowances. Recent leasing in this property has
included Canadian Imperial Bank (3,700 SF), and Harvey Entertainment
(7,200).
Item C-2 is Fox Plaza, a "trophy" office tower located in the southerly
portion of Century City, adjacent to the existing 20th Century Fox studio
property. This 34-story building was developed in 1986 by Marvin Davis'
group (Miller-Klutznick-Davis-Gray Company), who subsequently sold the
property to a LaSalle fund in 1988 for about $450 per-square-foot. The
building is currently 99 percent leased, and major tenants include 20th
Century Fox, Christensen, White (65,000 square feet), Jeffers, Mangels
Butler (65,000 square feet) Marvin Davis (45,000 square feet), and
Proskaur, Rose, et al (40,000 square feet). Fox recently renewed its lease
in this building for a 10-year term, covering 210,000 square feet at a
reported effective rental rate of $27.00 per-square-foot (no tenant
improvements). Jeffer, Mangels, et al, recently signed a 10,000 square foot
lease for a 5 year term at an effective rent of $38 per-square-foot.
Proskaur recently signed a lease to relocate to Century Plaza Towers during
third quarter 1997.
Item C-3 is the Century City North building, which recently sold to a fund
advised by Heitman (refer to Sales Comparison Approach). This building
enjoys unobstructed views to the north, and although completed in 1971 the
property competes with the "upper tier" properties in the market. The
building contains asbestos and is currently only partially fire
sprinklered. Major tenants include Loeb & Loeb (38,000 SF), Princess
Cruises (25,000 SF), Sitmar Cruises (60,000 SF), and Triad Artists (45,000
SF). The contract rental rates for many of these tenants are above current
market levels, and the rollover exposure for the building during 1997 is
significant. There has been relatively little leasing in this property
during the past two years due primarily to ownership issues. The quoted
rental rates for currently available direct space is from $24.00 to $30.00
per-square-foot annually. The new ownership is expected to invest
significant additional capital in the property and to increase rental
rates.
Items C-6 and C-7 represent the Northrop Plaza project, a two-building
development located at the adjacent to the southeast corner of Century Park
East and Santa Monica Boulevard. The buildings were completed in 1970 and
1984 by Northrop Corporation, who sold the buildings in February, 1990 to
CalSTRS for approximately $400 PSF of rentable area, subject to a 10-year
leaseback for a significant portion of the space to Northrop (130,000 SF).
Several of the major tenants in these buildings at the time of sale,
including O'Melveny and Meyers and Bear Sterns, subsequently relocated
(prior to the end of their lease terms) to the new 1999 Avenue of the Stars
development (refer to C-1). The project is currently 95 percent leased on a
direct basis. The quoted
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rental rate for the available space is from $21.60 to $24.00
per-square-foot annually. A major lease for an 80,000 square-foot premises
and building top signage was signed during 1995 with Herbalife. The tenant
relocated from a portion of its premises in an LAX building. The 10-year
lease has an initial per-square-foot rent of $21.60, with an increase to
$25.20 in year six. The tenant received a $50 per-square-foot buildout
allowance. Leasing activity during 1996 has included Near North Insurance
(16,000 SF), Inter Office (17,000 SF) and Korn Ferry (30,000 SF).
Item C-8 is the Century Park Plaza building, which was completed in 1973,
and contains asbestos materials. A fire sprinkler/life safety system is
currently being installed. The property is currently 88 percent leased. The
major tenants include Barrister's Executive Suites (30,000 SF), Troy &
Gould (30,000 SF), Admarketing (25,000 SF), Daniels & Baretta (20,000 SF),
Goldman & Kagon (15,000 SF), and Caesars World (15,000 SF). The rollover
exposure from existing tenants in this building includes nearly 40 percent
of the property during 1997-1998. Recent leasing activity in this building
has been structured at effective rents from about $20 to $24
per-square-foot with relatively minimal tenant allowances. The building has
relatively small floorplates and offers excellent views.
Items C-9 and C-10 are the Watt Towers, "twin" 23-story office towers
completed in 1982 and containing a combined rentable area of 824,000 SF.
The major tenants in these buildings include entertainment, law, and
accounting firms, including Price, Raffel and Associates Cineplex Odeon,
Imagine Films, Towers, Perrin, Foster, and Crosby. The project is currently
91 percent leased on a direct basis, and the quoted rental rate for
available office space is from $19.20 to $25.20 per-square-foot annually.
Recent leases for tenants in the 2,000 to 20,000 SF range have been
structured at three- and five-year effective rental rates in the $19.00 to
$21.00 per-square-foot range with minimal tenant allowance. The landlord
has reportedly experienced difficulty funding tenant improvements, and the
lease transactions (refer to comparable lease chart) reflect low rental
rates due to "as is" or minimal buildout.
Item C-11 is the Century Park building, which has recently been
aggressively leasing space. A capital program for fire sprinkler
installation and related asbestos abatement was recently completed. The
landlord reportedly has sufficient capital and has been negotiating
"build-to-suit" leases with significant tenant improvements for raw space
(which has been abated). The building is currently 50 percent leased on a
direct basis, and the quoted asking rental rate for available space is
$22.20 per-square-foot annually. As shown on the subsequent comparable
lease exhibit there has been significant new leasing in the building during
1996, including major leases to Price Waterhouse (37,000 SF) and Coopers &
Lybrand (21,000 SF), Electric Ideas (30,000 SF) and Left Bank Advertising
(10,000 SF). Effective rental rates for recent leases have ranged from
approximately $21.00 to $25.50 per-square-foot for 5- to 10-year lease
terms. This building has contiguous space available up to approximately
40,000 square feet.
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Item C-12 is 1888 Century Park East, formerly the Orion Pictures Building.
The property was completed during 1970, is partially fire sprinklerd and
partially abated of asbestos. The major tenants include Turner
Broadcasting (75,000 SF), Orion Pictures (50,000 SF), and Armstrong &
Hirsch (25,000 SF). Turner recently merged with Time Warner and has begun
to reduce its staffing level at this and other locations in the westside
market. Orion recently agreed to terms for a renewal and expansion of its
premises to about 85,000 square feet for a 7-year term. The tenant will
achieve a low effective rental rate of about $18.00 over the term, but the
space is considered the least desirable in the building and the landlord
will provide minimal tenant improvements. The property is currently 77
percent leased on a direct basis, excluding the Orion renewal and expected
future downsizing by Turner. Available space is being marketed at asking
rents from $19.20 to $25.20 per-square-foot.
Items C-15 and C-16 are assets of Shuwa Corporation, who acquired the
properties in 1986. The buildings contain asbestos and have been in the
process of abatement and fire/life safety retrofit during the past several
years. Other capital work involving upgrading the mechanical and elevator
systems and common areas has also been in progress. The two properties have
a combined rentable area of 1,002,518 square feet. Major tenants include
Greenberg, Glusker, which renewed in 1995 for approximately 75,000 SF,
Sonnenblick Goldman, Winberg Zipser, and Gipson Hoffman. The buildings are
currently 82 percent leased on a direct basis. Other new and renewal
leasing in these buildings during the past two years included Fenigstein &
Kaufman (12,000 SF), Folger & Levin (8,600 SF), and Sanders, Barnet (15,000
SF), as well as, several smaller tenants including City News Service (3,400
SF). The landlord (Shuwa) has experienced capital problems in recent years,
and reportedly does not have funds for tenant improvements or leasing
commissions, so the property has not been "actively" marketed for lease.
Comparable Century City Lease Data
The exhibit on the accompanying pages summarizes the terms of 43 leases
signed for space in seven Century City office buildings during roughly the past
18 months. The data includes leases in a range from "top tier" to "second tier'
buildings, as categorized previously. The subject is rated in the "top tier' of
Century City buildings, positioned within this category below SunAmerica Center
(CC-1) and Fox Plaza, and above Century City North (CC-5) on the comparable
lease exhibit.
The leases cover a range in tenant sizes, rental rates, and concessions
packages. While the structure of the leases in the market can. vary
significantly in terms of tenant allowances and other concessions, the overall
lease packages are fairly consistent based on the relationship between the
relative appeal of the building and the discounted value of the lease to the
landlord. "Raw" space, or suites that have not been previously improved
represent a frequent exception, however, as the landlord must compete
economically in some cases in which second generation space can be used "as is"
or redemised at substantially reduced costs. The comparable lease chart includes
detail of the tenant sizes, contract rental
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====================================================================================================================================
Annual PSF Rent
- ------- -------------------- ----- ----------- -------- --------- --------------- --------- ------------- ------------ ------------
Effective
Item Property Location Lease Area Term Initial Adjustments Expense Concessions/ Effective Rent
No. Date Leased (SF) Basis Comments FSG Rent Adjusted
PSF for Tls
- ------- -------------------- ----- ----------- -------- --------- --------------- --------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$28 psf TI 5.5 years
d) 1996 16,700 120 mos. $28.32 Avg. Over term FSG None free $28.32 $25.62
$27 psf TI 5 years
e) 1996 17,000 60 mos. $21.12 Flat FSG None free; $21.12 $16.72
$22 psf TI 5 years
f) 1996 16,500 120 mos. $24.00 Year 6: $26.40 FSG 9 mos. Free rent; $23.40 $19.60
$38 psf TI 10 years
g) 1996 13,000 60 mos. $19.80 Flat FSG None free; $19.80 18.40
$7 psf TI 5 years
h) 1996 2,800 60 mos. $20.40 Flat FSG None free; $20.40 $19.40
$5 psf TI 5 years
i) 1995 80,000 120 mos. $21.60 Year 6: $25.20 FSG None free; $23.40
$50 psf TI 10 years
Building Signage
j) 1995 2,500 60 mos. $19.80 Yr 3: $22.80 FSG $30 psf TI $21.60 $15.60
5 years
k) 1995 1,500 48 mos. $19.80 Flat FSG $10 psf TI $19.80 $17.30
4 years
l) 1995 4,500 60 mos. $20.40 Flat FSG $8 psf TI $20.40 $18.80
5 years
- ------- -------------------- ----- ----------- -------- --------- --------------- --------- ------------- ------------ ------------
Watt Plaza
1875 Century Park East
1925 Century Park East
a) 1996 6,000 36 mos. $21.00 Flat FSG None free; $21.00 $20.00
$3 psf TI 3 years
b) 1996 9,200 60 mos. $20.76 Flat FSG 1 mo. Free rent; $20.41 $16.81
$18 psf TI 5 years
c) 1996 10,000 60 mos. $20.40 Flat FSG None free; $20.40 $19.40
$5 psf TI 5 years
d) 1996 19,000 66 mos. $19.80 Flat FSG None free; $19.80 $18.71
$6 psf TI 5 years
e) 1996 4,200 36 mos. $20.88 Flat FSG $9 psf TI $20.88 $17.88
3 years
====================================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Annual PSF Rent
- ------- -------------------- ----- ----------- -------- --------- --------------- --------- ------------- ------------ ------------
Effective
Item Property Location Lease Area Term Initial Adjustments Expense Concessions/ Effective Rent
No. Date Leased (SF) Basis Comments FSG Rent Adjusted
PSF for Tls
- ------- -------------------- ----- ----------- -------- --------- --------------- --------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
c) 1996 15,000 60 mos. $24.00 Flat FSG None $24.00 $24.00
5 years
d) 1996 1,100 38 mos. $21.60 Flat FSG 2 mos. Free rent; $20.46 $18.79
$5 psf TI 3 years
e) 1995 8,000 60 mos. $19.56 Flat FSG $20 psf TI $19.56 $15.56
5 years
====================================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DISCOUNTED CASH FLOW ANALYSIS
Century Plaza Towers * 2029 & 2049 Century Park East * 12 year holding period
=====================================================================================================
12-year holding period beginning 1/1/97 1 2 3 4
CY 1997 CY 1998 CY 1999 CY 2000
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCOME
Potential Rental Revenue 53,288,604 57,678,506 59,223,958 60,829,894
Absorption & Turnover Vacancy (896,166) (1,473,101) (869,441) (2,000,132)
Base Rent Abatements (846,300) (48,265) 0 0
Miscellaneous Rental Revenue 533,804 342,027 199,661 176,828
CPI & Other Adjustment Revenue 671,042 420,247 240,186 251,737
Retail Sales Percent Revenue 44,366 46,634 48,844 42,775
Expense Reimbursement Revenue 1,640,733 2,079,975 2,567,658 2,997,562
Miscellaneous Revenue 13,355,840 13,984,580 14,817,026 16,468,205
- -----------------------------------------------------------------------------------------------------
Potential Gross Income 67,791,923 73,030,603 76,227,892 78,766,869
- -----------------------------------------------------------------------------------------------------
Vacancy/ Collection Loss (3,389,597) (3,651,530) (3,811,394) (3,938,344)
Average 13-yr Vacancy (%) is 7.4% 6.3% 7.0% 6.1% 7.5%
- -----------------------------------------------------------------------------------------------------
Effective Gross Income 64,402,326 69,379,073 72,416,498 74,828,525
=====================================================================================================
EXPENSES
Reimbursable Expenses 22,834,447 23,726,827 24,540,151 25,282,122
Office & Retail Expenses 3,331,128 3,447,718 3,568,388 3,693,281
- -----------------------------------------------------------------------------------------------------
Operating Expenses 26,165,575 27,174,545 28,108,539 28,975,403
- -----------------------------------------------------------------------------------------------------
Operating Expense Ratio 40.8% 39.2% 38.8% 38.7%
- -----------------------------------------------------------------------------------------------------
NET OPERATING INCOME 33,236,751 42,204,528 44,307,959 45,853,122
=====================================================================================================
DEDUCTIONS
Tenant Improvements 5,283,032 3,886,214 2,685,925 3,893,783
Leasing Commissions 2,250,355 1,414,174 966,032 1,403,373
Capital Costs & Reserves 8,140,477 703,333 488,989 506,103
- -----------------------------------------------------------------------------------------------------
Total Deductions 15,673,864 6,003,721 4,140,946 5,803,259
- -----------------------------------------------------------------------------------------------------
=====================================================================================================
NET CASH FLOW 22,562,887 36,200,807 40,167,013 40,049,863
=====================================================================================================
- -----------------------------------------------------------------------------------------------------
CASH ON CASH 4.8% 7.7% 8.6% 8.6%
- -----------------------------------------------------------------------------------------------------
<CAPTION>
=====================================================================================================
5 6 7 8
CY 2001 CY 2002 CY 2003 CY 2004
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCOME
Potential Rental Revenue 61,991,627 63,116,000 65,715,369 66,983,676
Absorption & Turnover Vacancy (1,012,062) (1,643,350) (2,643,335) (2,989,967)
Base Rent Abatements 0 0 0 0
Miscellaneous Rental Revenue 110,897 79,558 78,865 66,288
CPI & Other Adjustment Revenue 150,996 188,746 425,148 588,005
Retail Sales Percent Revenue 72,578 76,218 79,985 83,884
Expense Reimbursement Revenue 3,543,792 3,949,168 4,229,498 4,126,460
Miscellaneous Revenue 17,033,325 17,618,223 18,223,592 18,850,149
- -----------------------------------------------------------------------------------------------------
Potential Gross Income 81,890,353 83,384,563 86,109,122 87,708,495
- -----------------------------------------------------------------------------------------------------
Vacancy/ Collection Loss (4,094,518) (4,169,228) (4,305,456) (4,385,425)
Average 13-yr Vacancy (%) is 7.4% 6.2% 7.0% 0.1% 8.4%
- -----------------------------------------------------------------------------------------------------
Effective Gross Income 77,795,835 79,215,335 81,803,666 83,323,070
=====================================================================================================
EXPENSES
Reimbursable Expenses 26,146,674 26,949,726 27,779,556 28,648,952
Office & Retail Expenses 3,822,548 3,956,336 4,094,807 4,238,126
- -----------------------------------------------------------------------------------------------------
Operating Expenses 29,969,222 30,906,062 31,874,363 32,887,078
- -----------------------------------------------------------------------------------------------------
Operating Expense Ratio 36.5% 39.0% 39.0% 39.5%
- -----------------------------------------------------------------------------------------------------
NET OPERATING INCOME 47.826,613 48,309,273 49,929,303 50,435,992
=====================================================================================================
DEDUCTIONS
Tenant Improvements 2,157,564 4,248,378 4,802,702 5,848,227
Leasing Commissions 722,538 1,909,067 2,104,034 2,230,783
Capital Costs & Reserves 523,817 542,151 561,126 580,765
- -----------------------------------------------------------------------------------------------------
Total Deductions 3,403,919 6,699,596 7,467,862 8,659,775
- -----------------------------------------------------------------------------------------------------
=====================================================================================================
NET CASH FLOW 44,422,694 41,609,677 42,461,441 41,776,217
=====================================================================================================
- -----------------------------------------------------------------------------------------------------
CASH ON CASH 9.5% 8.9% 9.1% 8.9%
- -----------------------------------------------------------------------------------------------------
<CAPTION>
=======================================================================================================================
9 10 11 12 13
CY 2005 CY 2006 CY 2007 CY 2008 CY 2009
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCOME
Potential Rental Revenue 68,722,996 70,642,963 72,815,038 76,890,842 81,374,161
Absorption & Turnover Vacancy (2,344,820) (1,168,811) (3,347,980) (3,409,998) (4,446,164)
Base Rent Abatements 0 0 0 0 0
Miscellaneous Rental Revenue 45,000 0 0 0 0
CPI & Other Adjustment Revenue 733,900 1,063,393 1,245,476 1,281,145 1,612,954
Retail Sales Percent Revenue 87,920 71,833 90,523 94,997 99,628
Expense Reimbursement Revenue 4,143,034 4,690,617 5,171,225 4,923,941 4,591,552
Miscellaneous Revenue 19,498,637 20,169,821 20,864,496 21,583,486 22,327,639
- -----------------------------------------------------------------------------------------------------------------------
Potential Gross Income 90,886,667 95,469,816 96,838,778 101,364,413 105,559,770
- -----------------------------------------------------------------------------------------------------------------------
Vacancy/ Collection Loss (4,544,333) (4,773,491) (4,841,940) (5,068,221) (5,277,989)
Average 13-yr Vacancy (%) is 7.4% 7.6% 6.2% 8.5% 0.4% 9.2%
- -----------------------------------------------------------------------------------------------------------------------
Effective Gross Income 86,342,334 90,696,325 91,996,833 96,296,192 100,281,781
=======================================================================================================================
EXPENSES
Reimbursable Expenses 29,604,813 30,626,456 31,508,479 32,545,319 33,568,297
Office & Retail Expenses 4,386,460 4,539,987 4,698,887 4,863,347 5,033,565
- -----------------------------------------------------------------------------------------------------------------------
Operating Expenses 33,991,273 35,166,443 36,207,366 37,408,666 38,601,862
- -----------------------------------------------------------------------------------------------------------------------
Operating Expense Ratio 39.4% 38.6% 39.4% 38.8% 38.5%
- -----------------------------------------------------------------------------------------------------------------------
NET OPERATING INCOME 52,351,061 55,529,882 55,789,472 58,887,526 61,679,919
=======================================================================================================================
DEDUCTIONS
Tenant Improvements 5,235,768 2,416,851 4,812,694 8,807,143 10,548,638
Leasing Commissions 1,970,041 1,042,216 2,111,308 3,521,865 3,673,884
Capital Costs & Reserves 601,092 622,130 643,905 666,441 689,767
- -----------------------------------------------------------------------------------------------------------------------
Total Deductions 7,806,901 4,081,197 7,567,907 12,995,449 14,912,289
- -----------------------------------------------------------------------------------------------------------------------
=======================================================================================================================
NET CASH FLOW 44,544,160 51,448,685 48,221,565 724,371,186
=======================================================================================================================
- -----------------------------------------------------------------------------------------------------------------------
CASH ON CASH 9.5% 11.0% 10.3% 9.8% --
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
AVG. CASH ON CASH 8.9%
FIVE YEAR AVERAGE 7.8%
INITIAL CAP. RATE 8.2%
- ------------------------------------------------
TERMINAL CAP. RATE 9.0%
1.0%
TRANSACTION COST
DISCOUNT RATE 10.5%
- ------------------------------------------------
REVERSIONARY VALUE $678,479,109
- ------------------------------------------------
NET PRESENT VALUE (NPV) $468,176,963
- ------------------------------------------------
NPV - Per Square Foot $205.13
===================================================================
VALUE MATRIX
Low-Range Mid-Range Hi-Range
Discount Rate 10.0% 10.5% 11.0%
- -------------------------------------------------------------------
Net Present Value $486,746,442 $468,176,963 $450,536,426
NPV (PSF) $213.26 $205.13 $197.40
===================================================================
Total Bldg (SF): 2,282,381
Net Operating Income (NOI) vs Net Cash Flow (NCF)
[GRAPHIC OMITTED]
[DATA POINTS TO BE SUPPLIED]
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Income Approach
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rates and adjustments, and concessions (including tenant improvements and free
rent). The "Effective FSG Rent PSF column shows the average annual rent over the
term of the lease after deducting for free rent. The "Effective Rent Adjusted
for TI's" column represents the previous effective rent adjusted for tenant
improvement allowances (not discounted) divided by the number of years in the
lease term.
The comparable leases include several transactions which have relatively
lower rents due to the inability (in some cases) of the landlords to fund tenant
improvements. These leases are typically structured for relatively shorter terms
(three to four years) and have effective rents which generally bracket $20
per-square-foot. Watt Plaza (item CC-3) includes a number of these lower rental
rates in conjunction with minimal capital outlays by the landlord.
Recent Subject Leasing Activity.
The exhibit on the accompanying pages summarizes the terms of 19 recent
(1996) subject leases. The data is presented in order of elevation within the
buildings, with lowest floors presented first. The data excludes short-term
leases (generally three years of less).
The 19 subject leases cover a range in premises sizes from 1,526 square
feet to 53,440 square feet, and have lease terms from five to 15 years in
length. The "effective" and "effective adjusted for TI" rents for the subject
leases are summarized below.
Range in Range in PSF
Lease Length PSF Effective Rent Effective Rent Adjusted for TI
------------ ------------------ ------------------------------
5 Years $22.80 - $28.92 $18.48 - $26.24
Predominant: $22.80 - $25.80 $20.54 - $23.20
8-12 Years $24.00 - $27.00 $20.71 - $22.39
Predominant: $25.80 - $26.52 $20.71 - $22.39
The ranges in effective and adjusted effective subject rental rates
compares with the comparable lease data presented previously, and summarized
below.
Top Tier Buildings
------------------
Item CC-1 - SunAmerica
Range in Range in PSF
Lease Length PSF Effective Rent Effective Rent Adjusted for TI
------------ ------------------ ------------------------------
5 Years $31.83 - $39.92 $28.23 - $38.92
Second Tier Buildings
Item CC-2 - Northrop Plaza
Range in Range in PSF
Lease Length PSF Effective Rent Effective Rent Adjusted for TI
------------ ------------------ ------------------------------
5 Years $19.80 - $21.60 $15.60 - $19.40
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10 Years $23.40 - $28.32 $18.40 - $25.62
Item CC-3 - Watt Plaza
Range in Range in PSF
Lease Length PSF Effective Rent Effective Rent Adjusted for TI
------------ ------------------ ------------------------------
5 Years $19.80 - $20.41 $16.81 - $19.40
Item CC-4 - 1880 Century Park East
Range in Range in PSF
Lease Length PSF Effective Rent Effective Rent Adjusted for TI
------------ ------------------ ------------------------------
5 Years $21.00 $14.00 - $14.40
10 Years $22.20 - $25.56 $18.00 - $19.90
Item CC-7 - 1801 Century Park East
Range in Range in PSF
Lease Length PSF Effective Rent Effective Rent Adjusted for TI
------------ ------------------ ------------------------------
5 Years $19.56-$24.00 $15.56 - $24.00
The subject is rated in the "Top Tier" of the Century City market, but is
positioned in a "subclass" below 1999 Avenue of the Stars and Fox Plaza. The
comparison summarized in the tables above shows a strong trend in the
relationship between achievable market rents for the subject in comparison with
the other buildings in the market. The 1999 Avenue of the Stars data obviously
positions this property in a class well above the remaining buildings included
in this summary, while the recent subject lease data places the subject below
this premiere property but above the remainder of the properties.
The subject lease data was presented in order of level, or floor within the
property. The lease dates for the subject lease data and the comparable leases
in the competitive properties cover a range of roughly 18 months prior to the
date of value for this appraisal. As discussed previously the vacancy rates in
the westside market in general and Century City in particularly have declined
measurably during this timeframe, including a decline in direct vacancy from
14.0 percent to 11.0 percent in the Century City market from year-end 1995 to
the end of third quarter, 1996. The top tier buildings throughout the westside
market area have very little space available for lease, and rental rates have
increased during the past six months. A shortage of "contiguous" blocks of large
space in the current market is another factor influencing rental rates upward.
within the Century City market only two buildings (1880 and 1888 Century Park
East) offered two full floors of contiguous space for direct lease during
November, 1996. The shortage of larger blocks of space suggests in conjunction
with
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declining vacancy rates (including 3 full percentage points during the first
three quarters of 1996 in Century City) is creating market rent "spikes"
currently. The degree of these spikes and the duration of the market tightening
is not conclusively established as of the date of this appraisal.
The terms of a market lease can vary substantially based on the tenant
allowance or other concessions requested by the tenant, the size of the
premises, creditworthiness of the tenant, level (floor) within the building, and
the length of the lease.
Based on our analysis of the comparable data, including quoted terms and
actual leases for competitive buildings, recent subject leasing activity, and
discussions with market participants, we concluded the following average market
rental rates for the subject building.
Floors 1-24
FSG Mos. Per Rentable SF
Annual Rent Free Tenant Improvements
Lease Term Initial PSF Adjustments Rent New Renew
- ---------------------- ----------- ---- --- -----
5 Years $24.00 Flat None $17.50 $5.00
Effective Rent Over Term (net of free rent): $24.00
Effective Rent Adjusted for New TI: $20.50
Effective Rent Adjusted for Renewal TI: $23.00
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FSG Mos. Per Rentable SF
Annual Rent Free Tenant Improvements
Lease Term Initial PSF Adjustments Rent New Renew
- ---------- ----------- ----------- ---- --- -----
10 Years $24.00 10% Year 6 None $25 $15
($26.40)
Effective Rent Over Term (net of free rent): $25.20
Effective Rent Adjusted for New TI: $22.70
Effective Rent Adjusted for Renewal TI: $23.70
Floors 25-42
FSG Mos. Per Rentable SF
Annual Rent Free Tenant Improvements
Lease Term Initial PSF Adjustments Rent New Renew
- ---------- ----------- ----------- ---- --- -----
5 Years $26.40 Flat None $17.50 $5.00
Effective Rent Over Term (net of free rent): $26.40
Effective Rent Adjusted for New TI: $22.90
Effective Rent Adjusted for Renewal TI: $25.40
FSG Mos. Per Rentable SF
Annual Rent Free Tenant Improvements
Lease Term Initial PSF Adjustments Rent New Renew
- ---------- ----------- ----------- ---- --- -----
10 Years $26.40 10% Year 6 None $25 $15
($29.04)
Effective Rent Over Term (net of free rent): $27.72
Effective Rent Adjusted for New TI: $25.22
Effective Rent Adjusted for Renewal TI: $26.22
Floors 43-44
FSG Mos. Per Rentable SF
Annual Rent Free Tenant Improvements
Lease Term Initial PSF Adjustments Rent New Renew
- ---------- ----------- ----------- ---- --- -----
5 Years $21.00 Flat None $17.50 $5.00
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Other Income Sources
Other revenue sources for the subject property have included parking
income, storage income, and miscellaneous other income sources including tenant
charges and direct HVAC and utility reimbursements. Projections for these
categories are discussed below.
Parking Income
We reviewed summaries of, operating statements submitted by Standard
Parking for the subject parking garage operation covering the period 1991
through 1995 (year end actual) and year-to-date (through June) 1996, as well as
a 1996 parking budget. The data is summarized on the accompanying page,
including a breakdown of revenues by category (monthly, validations, transient,
etc.). The "Total Expenses" line item includes only the parking operator's
expenses, and does not include expenses allocated to the subject garage by the
ownership, such as real estate taxes, insurance, repairs and maintenance and
other expenses discussed in more detail under the Expense section of the Income
Approach.
The chart below summarizes the total "gross" parking revenues during the
period 1991 through budgeted 1996. We note that the figures below do not
coincide with the (single line item entry) parking revenues reported on the
financial statements we reviewed for comparable periods for the total property
(refer to subsequent exhibits for consolidated property operations).
Period Total Parking Revenues
------ ----------------------
1991 $10,785,212
1992 $10,015,983
1993 $ 9,579,171
1994 $10,294,005
1995 $ 9,331,484
1996 Budget $10,513,600
1996 Annualized (6 months) $10,681,184
The subject occupancy level has increased during 1996 in comparison with
1993 through 1995 occupancy levels. Based on the 1996 actual and annualized data
for the first six months and the actual parking revenues over the past five
years we projected 1997 gross parking revenue at $10,700,000.
Storage Revenues
We reviewed a detailed storage analysis prepared by the anticipated future
property management (to be retained by new ownership). Storage space is
currently located in the parking garage, the lower level "core" of the two
towers, B-level area and below the ABC Entertainment Center. According to the
detailed analysis we reviewed (a copy is included in the Addenda), the property
contains 134,783 square feet of total storage area. The space is categorized as
1) leased subject to written agreements, 2) leased on month-to-month agreements,
3) vacant storage space, 4) potential storage space not currently leased, and 5)
storage space currently used (but not charged for) by contractors who have been
engaged in
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subject construction projects (such as tenant improvement buildout). The
breakdown of the space is briefly summarized below.
Storage Space Category Area (SF)
---------------------- ---------
Leased with Agreements 51,477
Leased Short-term 18,188
-------
Subtotal Leased 69,665
Vacant Storage 27,951
Potential Storage* 29,256
Contractor's Storage 7,911
-------
Subtotal Not Leased 65,118
Total Storage 134,783
Total excluding "Potential" 105,527
Current Occupancy (based on total) 51.7%
Current Occupancy (excluding "potential) 66.0%
*Subject to some minor reconfiguration or enclosure costs
The historical and budgeted storage revenues (refer to subsequent exhibits
for detail) for the subject are summarized below.
Annual PSF Based on
Year Total Storage Revenue Total (105,527 SF) Current Occupied (69,665 SF)
- ---- --------------------- ------------------ ----------------------------
1993 $752,437 $7.13 $10.80
1994 $703,995 $6.67 $10.11
1995 $725,169 $6.87 $10.41
It is our understanding the per-square-foot rental rate range for current
storage agreements is general from $0.75 to $1.25 per-square-foot annually. As
shown by the chart above the most recent storage revenue rates were
approximately $10.40 per-square-foot annually on average based on occupied (and
leased) square feet. It is our understanding based on discussions with the
property management that the contractors currently using storage area are not
charged for the space, and the new ownership reported it plans to begin this
charge.
We surveyed competitive Century City office buildings for current storage
charges and available space for lease as storage. The chart below summarizes the
data.
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Annual
Building Available Storage(SF) Quoted SF Charge
- -------- --------------------- ----------------
1999 Avenue of Stars none available-waiting list $21.00-$22.20 (most recent)
Fox Plaza 240 SF $22.80
10100 S. M. Blvd. 80-600 SF $15.00
Northrop Plaza none available $18.00 (most recent)
Waft Plaza none available $16.20 (most recent)
1801 Cent. Park E. none available $15.00 (most recent)
Our investigations confirm that the storage space market in Century City is
"tight", and the subject storage space appears to be leased below market rents
on average. The space has reportedly not been aggressively marketed or managed,
and we concluded market conditions support projecting higher revenues from this
source. The subject should command rates at the upper end of the "second tier"
market and below 1999 Avenue of the Stars and Fox Plaza. We concluded a market
storage rent of $18.00 per-square-foot annually (gross) is reasonable for the
storage space, which results in the following "static" potential storage income
at full occupancy (based on current area of 105,527 square feet).
105,527 SF x $18.00 PSF = $ 1,899,486
1995 Storage (Actual) (725,169)
-----------
Shortfall $ 1,174,317
We projected subject storage revenue to increase to "market" levels over a
four-year period, as summarized below.
Inflated (3.5% Annually)
Year Stabilized Storage Income Projected Storage Income
---- ------------------------- ------------------------
1997 $1,900,000 $1,021,748
1998 $1,966,500 $1,361,363
1999 $2,035,327 $1,723,500
2000 $2,106,563 $2,106,563
Miscellaneous Income
Excluding ABC Entertainment Center base) and percentage ground rent (not
included in this appraisal), expense reimbursements, which are calculated in the
cash flow model, and interest income, which has been excluded from this
analysis, the historical "Other" (miscellaneous) income for the subject is
summarized below.
Year Other Income
---- ------------
1993 $2.049,783
1994 $1,296,785
1995 $1,424,797
1996 No allocation available (included with other income sources)
1997 No estimate
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We projected miscellaneous "other income" at $1,400,000 annually based on
the most recent available statements.
Operating Expenses
Overview of the Statements Reviewed
Copies of the expense data for the subject property we received for review
are included in the Addenda. We were provided with copies of the "Statement of
Operations" for the subject property, including a breakdown by property
component, covering full years 1993, 1994, and 1995. These statements includes
details for each income component and each expense category for the following
"components" of the larger Century Plaza Towers development:
Summary of Detail for 1993 through 1995 Statements
North Tower
South Tower
ABC Entertainment Center NOT A SUBJECT OF THIS APPRAISAL
"B-Level" (Retail)
Parking Garage
Storage
"Other"
"Consolidated" (revenues and expenses all components in a consolidated
statement)
We also received a copy of a 1995 expense statement which included an
allocation of "Recoverable" and "non-Recoverable" expenses (as determined by the
property management), by property component. A breakdown of expenses by this
type of classification (recoverable or non-recoverable) was not available for
other years.
The available actual and projected year-end 1996 and budgeted 1997 data was
provided in a different format from the 1993 through 1995 data summarized above.
The 1996 data was provided as a single-page summary by income and expense
category for the property on a CONSOLIDATED basis only, with no breakdown of the
expense categories by subcategory or by property component. The 1997 budgeted
data was provided on a consolidated basis only, but included detail for each
category of income and expense (excluding other income, which was not included).
The 1997 budget was prepared by Tooley & Company, while the historical data and
the 1996 data was prepared by the current property management Premysis, an
entity related to the current ownership.
Historical and Budgeted Expenses
The subject income and expense exhibits on the following pages were
prepared by Cushman & Wakefield from the statements we reviewed. Due to the
inconsistent levels of detail, the data is presented with separated statements
for the years 1993 through 1995, 1996, and budgeted 1997. No detailed budget for
1996 was available for review. Copies of the statements summarized are included
in the Addenda.
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<TABLE>
1993 Income & Expense Statements
[LOGO] CENTURY PLAZA TOWERS
2029 and 2049 Century Park East * Century City, CA
<CAPTION>
====================================================================================================================================
2,282,381 SF Consolidation
Storage (%) Other (%) Totals PSF Report PSF Variance PSF
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross Income
Rent Office. Apt. Indust $7,447 0.0% $0 0.0% $42,411,374 $18.58 $42,411,374 $18.58 $0 $0.00
Rent Commercial $0 0.0% $0 0.0% $707,422 $0.31 $707,422 $0.31 $0 $0.00
Temporary Tenant Rent $0 0.0% $0 0.0% $62,909 $0.03 $23,616 $O.O1 $39,293 $0.02
Rent Percentage $206 0.0% $0 0.0% $878,140 $0.38 $917,433 $0.40 ($39,293) ($O.02)
Rent Parking / Garage $0 0.0% $0 0.0% $9,800,536 $4.29 $9,800,536 $4.29 $0 $0.00
Rent Storage $368,322 49.0% $0 0.0% $752,437 $0.33 $752,437 $0.33 $0 $0.00
Marketing Fund Revenue $0 0.0% $0 0.0% $1,200 $0.00 $1,200 $0.00 $0 $0.00
Rent Rey (Free Rent) $0 0.0% $0 0.0% $261,952 $0.11 $261,952 $0.11 $0 $0.00
Recovery of Expenses ($1,315) 0.0% $0 0.0% $2,729,338 $1.20 $2,729,338 $1.20 $0 $0.00
Rent Net Lease Taxes $0 #DIV/0! $0 #DIV/0! $0 $0.00 $0 $0.00 $0 $0.00
Misc. Tenant Charges $19.800 2.2% $0 0.0% $910,825 $0.40 $910,825 $0.40 $0 $0.00
Misc. Income $6,191 0.5% $206,190 18.1% $1,138,958 $0.50 $1,138,959 $0.50 ($1) ($O.00)
Interest Income $0 0.0% $63,233 19.6% $323,163 $0.14 $323,163 $0.14 $0 $0.00
Blanket Insur. Proceeds $0 0.0% $0 0.0% $110,058 $0.05 $110,058 $0.05 $0 $0.00
- ------------------------------------------------------------------------------------------------------------------------------------
Total Revenue $400,651 0.7% $269,423 0.4% $60,068,312 $26.33 $60,088,313 $26.33 ($1) ($0.00)
Operating Expenses
Cleaning $0 0.0% ($88,669) -3.5% $2,499,352 $1.10 $2,499,352 $1.10 $0 $0.00
Utilities $0 0.0% $0 0.0% $7,526,712 $3.30 $7,526,711 $3.30 $1 $0.00
Repairs & Maintenance $1,934 0.1% ($137,383) -3.8% $3,578,491 $1.57 $3,578,490 $1.57 $1 $0.00
General Building $0 0.0% ($62,465) -1.7% $3,749,714 $1.64 $3,749,716 $1.64 ($2) ($O.00)
Administrative $15,068 0.7% ($33,328) -1.7% $2,011,157 $0.88 $2,011,154 $0.88 $3 $0.00
Management Fee $9,532 0.7% ($270,803) -18.7% $1,451,566 $0.64 $1,451,565 $0.64 $1 $0.00
Properly Insurance $0 0.0% $0 0.0% $875,924 $0.38 $875,925 $0.38 ($1) ($0.00)
Real Estate Taxes $0 0.0% $0 0.0% $2,889,013 $1.27 $2,689,814 $1.27 ($1) ($0.00)
Other $282 0.2% $0 0.0% $164,698 $0.07 $164,699 $0.07 ($1) ($0.00)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Expenses $26,816 0.1 % ($592,648) -2.4% $24,747,427 $10.84 $24,747,426 $10.84 $1 $0.00
====================================================================================================================================
Net operating Income $373,835 1.1% $862,071 2.4% $35,340,885 $15.48 $35,340,887 $15.48 ($2) ($O.00)
====================================================================================================================================
Deductions
Interest on Encumbrances $0 0.0% $9,949,713 99.9% $9,956,849 $4.36 $9,956,849 $4.36 $0 $0.00
Depreciation Expense $0 0.0% $8,177,599 99.6% $8,206,387 $3.60 $8,206,388 $3.60 ($1) ($0.00)
Amort. Tenant Alterations $0 0.0% $0 0.0% $3,699,789 $1.62 $3,699,789 $1.62 $0 $0.00
Amort. Leasing Commissions $0 0.0% $0 0.0% $762,064 $0.33 $762,064 $0.33 $0 $0.00
Other Amortization $0 0.0% $0 0.0% $6,924 $0.00 $6,924 $0.00 $0 $0.00
Amort. Mortg. Discount $0 0.0% $71,806 100.0% $71,806 $0.03 $71,806 $0.03 $0 $0.00
- ------------------------------------------------------------------------------------------------------------------------------------
Total Deductions $0 0.0% $18,199,118 80.2% $22,703,819 $9.95 $22,703,820 $9.95 ($1) ($O.00)
====================================================================================================================================
Net Cash Flow $373,835 3.0% ($17,337,047) -137.2% $12,637,066 $5.54 $12,637,067 $5.54 ($1) ($0.00)
====================================================================================================================================
EXP_CCPT.XLS
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1994 Income & Expense Statements
[LOGO] CENTURY PLAZA TOWERS
2029 and 2049 Century Park East * Century CIty, CA
<CAPTION>
====================================================================================================================================
2,282,381 SF Consolidation
Storage (%) Other (%) Totals PSF Report PSF Variance PSF
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross Income
Rent Office, Apt, Indust $10,778 0.0% $0 0.0% $41,020,266 $17.97 $40,540,266 $17.76 $480,000 $0.21
Rent Commercial $0 0.0% $0 0.0% $1,550,196 $0.68 $1,097,219 $0.48 $452,977 $0.20
Temporary Tenant Rent $0 0.0% $0 0.0% ($6,165)($O.00) ($6,165) ($0.00) $0 $0.00
Rent Percentage $40 0.1% $0 0.0% $45,566 $0.02 $978,543 $0.43 ($932,977) ($0.41)
Rent Parking / Garage $375,732 3.6% $0 0.0% $10,541,647 $4.62 $10,165,915 $4.45 $375,732 $0.16
Rent Storage $0 0.0% $0 0.0% $328,263 $0.14 $703,995 $0.31 ($375,732) ($0.16)
Marketing Fund Revenue $0 0.0% $0 0.0% $13,985 $0.01 $13,985 $0.01 $0 $0.00
Rent Rev (Free Rent) $0 0.0% $0 0.0% $3.003,482 $1.32 $3,003,482 $1.32 $0 $0.00
Recovery of Expenses $0 0.0% $0 0.0% $1,637,158 $0.72 $1,637,158 $0.72 $0 $0.00
Rent Net Lease Taxes $0 0.0% $0 0.0% $510,655 $0.22 $510,655 $0.22 $0 $0.00
Misc. Tenant Charges $19,808 2.2% $0 0.0% $919,213 $0.40 $919,213 $0.40 $0 $0.00
Misc. Income $36,338 9.6% ($8) 0.0% $377,572 $0.17 $372,173 $0.16 $5,399 $0.00
Interest Income $0 0.0% $0 0.0% $675,979 $0.30 $681,377 $0.30 ($5,398) ($O.00)
Blanket Insur. Proceeds $0 0.0% $0 0.0% $1,734 $0.00 $1,735 $0.00 ($1) ($0.00)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Revenue $442,696 0.7% ($8) 0.0% $60,619,551 $26.56 $60,619,551 $26.66 $0 $0.00
Operating Expenses
Cleaning $314 0.0% $0 0.0% $2,462,618 $1.08 $2,462,618 $1.08 $0 $0.00
Utilities $0 0.0% $0 0.0% $7,546,048 $3.31 $7,546,048 $3.31 $0 $0.00
Repairs & Maintenance $134 0.0% $15,887 0.4% $3,815,233 $1.67 $3.815,232 $1.67 $1 $0.00
General Building $0 0.0% $0 0.0% $4,166,649 $1.83 $4,166,648 $1.83 $1 $0.00
Administrative ($8,686)-0.4% ($912) 0.0% $2,226,942 $0.98 $2,226,939 $0.98 $3 $0.00
Management Fee $11,458 0.8% $0 0.0% $1,474,663 $0.65 $1.474,663 $0.65 $0 $0.00
Property Insurance $0 0.0% $0 0.0% $1,458,020 $0.64 $1,458,019 $0.64 $1 $0.00
Real Estate Taxes $0 0.0% $0 0.0% $2,999,758 $1.31 $2,999,757 $1.31 $1 $0.00
Other $0 0.0% $0 0.0% $152,036 $0.07 $152,036 $0.07 $0 $0.00
- ------------------------------------------------------------------------------------------------------------------------------------
Total Expenses $3,220 0.0% $14,975 0.1% $26,301,967 $11.52 $26,301.960 $11.52 $7 $0.00
====================================================================================================================================
Net Operating income $439,476 1.3% ($14,963) 0.0% $34,317,584 $15.04 $34,317,591 $15.04 ($7) ($0.00)
====================================================================================================================================
Deductions
Interest on Encumbrances $0 0.0% $10,920,367 33.2% $32,858,790 $14.40 $10,920,367 $4.78 $21,938,423 $9.61
Depreciation Expense $0 0.0% ($70,512,130) 545.1% ($12,935,123)($5.67) $5,258,940 $2.30 ($18,194,063) ($7.97)
Amort. Tenant Alterations $0 0.0% $0 0.0% $3,071,816 $1.35 $6,007,260 $2.63 ($2,935,444) ($1.29)
Amort. Leasing Commissions $0 0.0% $0 0.0% $890,272 $0.39 $1,699,188 $0.74 ($808,916) ($0.35)
Other Amortization $0 0.0% $0 0.0% ($6,924)($0.00) ($6,924)($0.00) $0 $0.00
Amort. Mortg. Discount $0 0.0% $71,806 100.0% $71,806 $0.03 $71,806 $0.03 $0 $0.00
- ------------------------------------------------------------------------------------------------------------------------------------
Total Deductions $0 0.0% ($59,519,957) -248.5% $23,950,637 $10.49 $23,950,637 $10.49 $0 $0.00
====================================================================================================================================
Net Cash Flow $439,476 4.2% $59,504,974 574.0% $10,366,947 $4.54 $iO,366,954 $4.54 ($7) ($O.00)
====================================================================================================================================
EXP_CCPT.XLS
</TABLE>
CUSHMAN &
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<PAGE>
<TABLE>
1995 Income & Expense Statements
[LOGO] CENTURY PLAZA TOWERS
2029 and 2049 Century Park East * Century City, CA
<CAPTION>
====================================================================================================================================
2,282,381 SF Consolidation
Storage (%) Other (%) Totals PSF Report PSF Variance PSF
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross Income
Rent Office, Apt, Indust $14,050 0.0% $0 0.0% $43,699,133 $19.15 $43,219,133 $18.94 $480,000 $0.21
Rent Commercial $0 0.0% $0 0.0% $592,445 $0.26 $1,072,445 $0.47 ($480,000) ($0.21)
Temporary Tenant Rent $0 #DIV/0! $0 #DIV/0! $0 $0.00 $0 $0.00 $0 $0.00
Rent Percentage $0 0.0% $0 0.0% $1,104,532 $0.48 $1,104,531 $0.48 $1 $0.00
Rent Parking / Garage $0 0.0% $0 0.0% $10,014,278 $4.39 $10.014,278 $4.39 $0 $0.00
Rent Storage $359,766 49.6% $0 0.0% $725,169 $0.32 $725,169 $0.32 $0 $0.00
Marketing Fund Revenue $0 #DIV/0! $0 #DIV/0! $0 $0.00 $0 $0.00 $0 $0.00
Rent Rev (Free Rent) $2.083 0.4% $0 0.0% $511,917 $0.22 $511,916 $0.22 $1 $0.00
Recovery of Expenses $0 0.0% $0 0.0% $2,146,490 $0.94 $2,146,490 $0.94 $0 $0.00
Rent Net Lease Taxes $0 0.0% $0 0.0% $525,694 $0.23 $525,694 $0.23 $0 $0.00
Misc. Tenant Charges $20.130 2.6% $0 0.0% $784,188 $0.34 $784,188 $0.34 $0 $0.00
Misc. Income $46,147 7.2% $0 0.0% $640,609 $0.28 $640,609 $0.28 $0 $0.00
Interest Income $0 0.0% $0 0.0% $930,646 $0.41 $930,647 $0.41 ($1) ($O.00)
Blanket Insur. Proceeds $0 0.0% $0 0.0% $145,000 $0.06 $145,000 $0.06 $0 $0.00
- ------------------------------------------------------------------------------------------------------------------------------------
Total Revenue $442.176 0.7% $0 0.0% $61,020,101 $27.09 $61,820,100 $27.09 $1 $0.00
Operating Expenses
Cleaning $0 0.0% $0 0.0% $2,459,905 $1.08 $2,459,907 $1.08 ($2) ($O.00)
Utilities $4,563 0.1% $0 0.0% $7,140,903 $3.13 $7,140,902 $3.13 $1 $0.00
Repairs & Maintenance $0 0.0% $0 0.0% $3,100,066 $1.36 $3,100,066 $1.36 $0 $0.00
General Building $0 0.0% $0 0.0% $4,221,748 $1.85 $4.221,748 $1.85 $0 $0.00
Administrative $5,734 0.4% $805 0.1% $1,464,360 $0.64 $1,464,360 $0.64 $0 $0.00
Management Fee $10.739 0.7% $0 0.0% $1,438,079 $0.63 $1,438,079 $0.63 $0 $0.00
Property Insurance $0 0.0% $0 0.0% $2,437,847 $1.07 $2,437,847 $1.07 $0 $0.00
Real Estate Taxes $0 0.0% $0 0.0% $3,072,789 $1.35 $3,072,788 $1.35 $1 $0.00
Other $1.317 0.9% $329 0.2% $141,615 $0.06 $141,816 $0.06 ($1) ($0.00)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Expenses $22,353 0.1% $1,134 0.0% $25,477,512 $11.16 $25,477,513 $11.16 ($1) ($0.00)
====================================================================================================================================
Net Operating Income $419,823 1.2% ($1,134) 0.0% $36,342,589 $15.92 $36,342,587 $15.92 $2 $0.00
====================================================================================================================================
Deductions
Interest on Encumbrances $0 0.0% $10,717,862 100.0% $10,717,862 $4.70 $10,717,862 $4.70 $0 $0.00
Depreciation Expense $0 0.0% ($181,734) -3.6% $5,041,885 $2.21 $5,041,885 $2.21 $0 $0.00
Amort. Tenant Alterations $0 0.0% $0 0.0% $4,304,536 $1.89 $4,304,536 $1.89 $0 $0.00
Amort. Leasing Commissions $0 0.0% $0 0.0% $1.526,376 $0.67 $67,923 $0.03 $1,458,453 $0.64
Other Amortization $0 0.0% $0 0.0% $67,923 $0.03 $1,526,376 $0.67 ($1,458,453) ($0.64)
Amort. Mortg. Discount $0 0.0% $71,806 100.0% $71,806 $0.03 $71,806 $0.03 $0 $0.00
- ------------------------------------------------------------------------------------------------------------------------------------
Total Deductions $0 0.0% $10.607,934 48.8% $21.730,388 $9.52 $21,730,388 $9.52 $0 $0.00
====================================================================================================================================
Net Cash Flow $419,823 2.9% ($10,609,068) -72.6% $14,612,201 $6.40 $14,612,199 $6.40 $2 $0.00
====================================================================================================================================
EXP_CCPT.XLS
</TABLE>
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VALUATION ADVISORY SERVICES
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<PAGE>
<TABLE>
1997 Budget for Income & Expenses
CENTURY PLAZA TOWERS
2029 and 2049 Century Park East * Century City, CA
Total NRA (SF) 2,282,381 [LOGO]
<CAPTION>
====================================================================================================================================
Jan-97 Feb-97 Mar-97 Apr-97 May-97 Jun-97 Jul-97
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Gross Income
Base Rents $4,107,848 $4,189,124 $4,394,824 $4,485,720 $4,491,611 $4,467,922 $4,451,399
Current Escalation $138,101 $137,731 $137,525 $137,525 $114,176 $113,596 $111,629
Base Rents - Retail $39,758 $39,758 $39,758 $39,758 $39,758 $39,758 $39,758
Rental Income - Ground $40,000 $40,000 $40,000 $40,000 $40,000 $40,000 $40,000
Parking Revenue $611,916 $611,916 $611,916 $611,916 $611,917 $611,917 $611,917
- ------------------------------------------------------------------------------------------------------------------------------------
Total Revenue $4,937,623 $5,018,529 $5,224,023 $5,314,919 $5,297,462 $5,273,193 $5,254,703
Operating Expenses
Cleaning $208,100 $208,400 $216,600 $213,500 $218,600 $220,900 $239,400
Utilities $562,332 $544,340 $537,538 $586,854 $572,915 $571,554 $565,368
Repairs & Maintenance $136,000 $126,000 $145,000 $151,000 $133,000 $130,700 $128,000
Landscaping / Grounds $15,800 $15,800 $15,800 $20,800 $25,800 $15,800 $15,800
General Building $146,505 $127,030 $126,030 $126,030 $126,030 $126,030 $126,150
Security $112,937 $112,937 $112,937 $112,937 $112,937 $112,937 $112,937
Administrative $114,522 $103,522 $103,522 $106,722 $101,122 $101,122 $101,122
Management Fee $61,720 $62,732 $65,300 $66,436 $66,218 $65,915 $65,684
Property Insurance $193,864 $193,864 $193,864 $193,864 $193,864 $193,864 $193,864
Real Estate Taxes $380,375 $380,375 $380,375 $380,375 $380,375 $380,375 $380,375
Business Tax & License $0 $0 $0 $0 $0 $0 $66,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total Expenses $1,932,155 $1,875,000 $1,897,166 $1,958,518 $1,930,861 $1,919,197 $1,994,700
====================================================================================================================================
Net Operating Income $3,005,468 $3,143,529 $3,326,857 $3,356,401 $3,366,601 $3,353,996 $3,260,003
====================================================================================================================================
Non-Reimburseable
Legal & Accounting $16,250 $16,250 $16,250 $41,250 $16,250 $31,250 $16,250
Outside Services $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000
Labor $19,333 $19,333 $19,333 $19,333 $19,333 $19,333 $19,333
Lost Tenant Expense $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000
Tenant Alterations $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000
Travel & Promotion $1,000 $11,000 $1,000 $1,000 $1,000 $1,000 $1,000
Marketing Expense $20,833 $20,833 $20,833 $20,833 $20,833 $20,833 $20,833
Professional Fees $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total Non-Reimb, Exp, $69,416 $69,416 $69,416 $94,416 $69,416 $84,416 $69,416
Deductions
Tenant Improvements $64,088 $32,044 $32,049 $737,022 $320,444 $224,322 $256,355
Leasing Commissions $26,325 $9,991 $0 $334,677 $145,395 $114,945 $124,576
Building $609,000 $609,000 $609,000 $609,000 $609,000 $609,000 $609,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total Deductions $699,413 $651,035 $641,049 $1,680,699 $1,074,839 $948,267 $989,931
====================================================================================================================================
Net Cash Flow $2,236,639 $2,423,078 $2,616,392 $1,581,286 $2,222,346 $2,321,313 $2,200,656
====================================================================================================================================
<CAPTION>
====================================================================================================================================
Aug-97 Sep-97 Oct-97 Nov-97 Dec-97 Totals PSF
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Gross Income
Base Rents $4,467,158 $4,589,682 $4,526,160 $4,609,489 $4,649,802 $53,430,739 $23.41
Current Escalation $111,618 $111,370 $104,665 $104,448 $103,083 $1,425,467 $0.62
Base Rents - Retail $39,758 $37,628 $35,607 $32,824 $32,824 $456,947 $0.20
Rental Income - Ground $40,000 $40,000 $40,000 $40,000 $40,000 $480,000 $0.21
Parking Revenue $611,917 $611,917 $611,917 $611,917 $611,917 $7,343,000 $3.22
- ------------------------------------------------------------------------------------------------------------------------------------
Total Revenue $5,270,451 $5,390,597 $5,318,349 $5,398,678 $5,437,626 $63,136,153 $27.66
Operating Expenses
Cleaning $214,300 $212,800 $218,300 $229,250 $215,700 $2,616,050 $1.15
Utilities $576,557 $561,181 $539,146 $515,058 $511,499 $6,644,342 $2.91
Repairs & Maintenance $130,000 $154,000 $138,100 $129,000 $146,000 $1,646,800 $0.72
Landscaping / Grounds $15,800 $20,800 $15,800 $15,800 $20,800 $214,600 $0.09
General Building $126,150 $126,150 $126,150 $126,150 $126,150 $1,534,555 $0.67
Security $112,937 $112,937 $112,937 $112,937 $112,937 $1,355,244 $0.59
Administrative $101,122 $101,122 $101,122 $101,122 $101,122 $1,237,264 $0.54
Management Fee $65,881 $67,382 $66,479 $67,483 $67,970 $789,200 $0.35
Property Insurance $193,864 $193,864 $193,864 $193,864 $193,864 $2,326,368 $1.02
Real Estate Taxes $380,375 $380,375 $380,375 $380,376 $380,376 $4,564,502 $2.00
Business Tax & License $0 $0 $0 $0 $0 $66,000 $0.03
- ------------------------------------------------------------------------------------------------------------------------------------
Total Expenses $1,916,986 $1,930,611 $1,892,273 $1,871,040 $1,876,418 $22,994,925 $10.07
====================================================================================================================================
Net Operating Income $3,353,465 $3,459,986 $3,426,076 $3,527,638 $3,561,208 $40,141,228 $17.59
====================================================================================================================================
Non-Reimburseable
Legal & Accounting $16,250 $16,250 $16,250 $16,250 $16,250 $235,000 $0.10
Outside Services $2,000 $2,000 $2,000 $2,000 $2,000 $24,000 $0.01
Labor $19,333 $19,334 $19,334 $19,334 $19,334 $232,000 $0.10
Lost Tenant Expense $3,000 $3,000 $3,000 $3,000 $3,000 $36,000 $0.02
Tenant Alterations $2,000 $2,000 $2,000 $2,000 $2,000 $24,000 $0.01
Travel & Promotion $1,000 $1,000 $1,000 $1,000 $1,000 $12,000 $0.01
Marketing Expense $20,833 $20,833 $20,833 $21,000 $21,000 $250,330 $0.11
Professional Fees $5,000 $5,000 $5,000 $5,000 $5,000 $60,000 $0.03
- ------------------------------------------------------------------------------------------------------------------------------------
Total Non-Reimb, Exp, $69,416 $69,417 $69,417 $69,584 $69,584 $873,330 $0.38
Deductions
Tenant Improvements $96,133 $512,711 $256,355 $192,266 $480,666 $3,204,455 $1.40
Leasing Commissions $43,608 $230,067 $122,841 $82,798 $220,059 $1,455,282 $0.64
Building $609,000 $609,000 $609,000 $609,000 $609,000 $7,308,000 $3.20
- ------------------------------------------------------------------------------------------------------------------------------------
Total Deductions $748,741 $1,351,776 $988,196 $884,064 $1,309,725 $11,967,737 $5.24
====================================================================================================================================
Net Cash Flow $2,535,308 $2,038,791 $2,380,463 $2,573,990 $2,181,099 $27,300,161 $11.96
====================================================================================================================================
EXP-CCPT,XLS
</TABLE>
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Approach
================================================================================
The summarized data includes percentage allocations between the property
components for the years 1993 through 1995. The percentages are based on the
total consolidated expenses for each category. We analyzed the data and
projected the following expenses for the subject property. The conclusions are
presented by property component, allocated between recoverable and
non-recoverable expenses within each category, and a corresponding consolidated
(overall total for the towers, retail level, parking garage, and storage) total.
The "PSF Total" figures included in this analysis are based on the rentable
areas of the North and South Towers and B-Level retail (2,282,381 SF)
Cleaning - This category has included the costs for contract cleaning,
supplies, and waste removal. The largest component of this cost has been
contract cleaning services, which include night cleaning and day porters.
Century City office buildings are "unionized", and contract cleaning
services are above the levels for non-union buildings in other submarkets.
Historical and budgeted cleaning expenses for the subject are summarized
below.
Year Cleaning Expense PSF Totals
---- ---------------- ----------
1993 $2,499,352 $1.10
1994 $2,462,618 $1.08
1995 $2,459,905 $1.08
1996 (projected) $2,667,214 $1.17
1997 (budget) $2,616,050 $1.15
The 1993-1995 allocation between the property components (expressed as a
percentage of the total) are summarized below. Totals equal more than 100%
in some cases due to negative allocations to "other' category.
Year North Tower South Tower ABC B-Level Garage Storage Total
---- ----------- ----------- --- ------- ------ ------- -----
1993 47.4% 51.7% 0 2.5% 2.0% 0 104%
1994 50.6% 48.0% 0 0.6% 0.8% 0 100%
1995 51.2% 47.4% 0 0.6% 0.8% 0 100%
The cleaning expenses allocated to the garage have been included in
recoverable expenses based on our analysis of the 1995 information. We
projected 1997 cleaning expenses based on full occupancy at $1.20
per-square-foot annually, with 30% of this figure as variable. We modeled
100% of these costs as recoverable expenses allocated to the two towers and
the B-level retail. The indicated total cleaning expense at 100% occupancy
is $2,738,857. We projected 100% of this expense as recoverable, allocated
as follows:
Total Annual Expense PSF Totals
-------------------- ----------
Total Cleaning Expense: $2,738,857 (at 100% occ) $1.20
Recoverable (100%) $2,738,857 $1.20
================================================================================
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Income Approach
================================================================================
Allocated:
North Tower $1.361,212 (49.7% of Rec) $1.21 (NT Area)
South Tower: $1,361,212 (49.7% of Rec) $1.21 (ST Area)
B-Level: $ 16,433 (0.6% of Rec) $0.55 (B-Level)
Utilities - This category has included electricity, oil, water, and
chilled water, with "district" chilled water supplied by the Central Plants
facility per the terms of a contract in effect since 1979. This contract
can be canceled with 24 months notice, and (based on discussions with
property consultants), the Central Plants ownership has offered a reduction
in chargers for this service. Electricity and chilled water represent
the largest components of utilities expenses for the subject. The
historical and budgeted utilities expenses are summarized in the following
chart.
Year Utilities Expense PSF Totals
---- ----------------- ----------
1993 $7,526,712 $3.30
1994 $7,546,048 $3.31
1995 $7,140,903 $3.13
1996 (projected) $6,940,068 $3.04
1997 (budget) $6,644,342 $2.91
The 1993-1995 allocation between the property components (expressed as a
percentage of the total) are summarized below.
Year North Tower South Tower ABC B-Level Garage Storage Total
---- ----------- ----------- --- ------- ------ ------- -----
1993 45.5% 40.4% 0.1% 2.8% 11.2% 0 100%
1994 45.6% 39.1% 0 2.8% 12.5% 0 100%
1995 45.6% 40.3% 0 2.6% 11.4% 0.1% 100%
Based on a review of the 1995 detail (only year available) for recoverable
expenses, approximately $523,000, or 7.3% of total utilities expenses were
not included in the recovery pool for the office towers and retail tenants.
Nearly all the non-recoverable utilities expense was allocated to the
parking garage. The deregulation of utility companies and the
pending/active discussions with the Central Plants ownership (the subject
development represents the single largest client) suggest a savings can be
achieved in utilities expenses during the first two years of the analysis.
We estimated 1997 utilities expenses at $7,000,000 based on full occupancy,
with 25% of the recoverable utilities expenses as variable with occupancy.
We estimated 95% of the total (or $6,650,000) would be recoverable, and
allocated the costs as follows.
Total Annual Expense PSF Totals
-------------------- ----------
Total Utilities Expense: $7,000,000 (at 100% occ) $3.07
Recoverable (95%): $6,650,000 $2.91
================================================================================
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Income Approach
================================================================================
Allocated:
North Tower $3,225,250 (48.5% of Rec) $2.86 (NT Area)
South Tower: $3,225,250 (48.5% of Rec) $2.86 (ST Area)
B-Level: $ 199,500 (3.0% of Rec) $6.71 (B-Level)
Garage/Non-Recoverable: $ 350,000
Repairs and Maintenance - This category includes labor (engineers) and
benefits, supplies, HVAC, elevator, other mechanical and electrical systems
contract maintenance and supplies, general property repairs and maintenance
including fire/life safety painting, locks, and miscellaneous other costs.
The historical and budgeted repairs and maintenance expenses for the
property are summarized below.
Year Repairs/Maintenance Expense PSF Totals
---- --------------------------- ----------
1993 $3,578,491 $1.57
1994 $3,815,233 $1.67
1995 $3,100,066 $1.36
1996 (projected) $2,870,541 $1.26
1997 (budget) $1,646,800 $0.72
According to written data we reviewed the higher repairs and maintenance
expenses during 1994 are attributable to (in part) approximately $700,000
(or $0.31 SF total) in earthquake-related repairs due to the Northridge
earthquake. The 1997 budgeted repairs figure appears to be based on
different categories and allocations than prior years (different
management). The 1993-1995 allocation between the property components
(expressed as a percentage of the total) are summarized below. Negative
allocations to "Other" result in differences between totals and 100%.
Year North Tower South Tower ABC B-Level Garage Storage Total
---- ----------- ----------- --- ------- ------ ------- -----
1993 46.6% 51.7% 0 2.5% 3.6% 0.1% 105%
1994 48.1% 45.7% 0.1% 1.3% 4.4% 0 100%
1995 48.0% 47.2% 0 1.1% 3.8% 0 100%
Based on a review of the 1995 detail (only year available) for recoverable
expenses, approximately $210,000, or 6.8% of total repairs/maintenance
expenses were not included in the recovery pool for the office towers and
retail tenants. The garage-allocated costs for this category was included
in the recovery pool for the towers. Nearly all the non-recoverable repairs
expense was attributable to tenant suite alterations costs. Potions of
these non-recoverable costs are typically reimbursed from the tenants, and
we have considered this reimbursement in the Other Income categories
discussed previously. We estimated 1997 repairs and maintenance
================================================================================
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<PAGE>
Income Approach
================================================================================
expenses at $1.35 per-square-foot of total area, or $3,031,214. We
estimated 94% of the total (or $2,896,341) would be recoverable, and
allocated the costs as follows.
Total Annual Expense PSF Totals
-------------------- ----------
Total R&M Expense: $3,081,214 $1.35
Recoverable (94%): $2,896,341 $1.27
Allocated:
North Tower $1,433,689 (49.5% of Rec) $1.27 (NT Area)
South Tower: $1,433,689 (49.5% of Rec) $1.27 (ST Area)
B-Level: $ 28,963 (1.0% of Rec) $0.97 (B-Level)
Non-Recoverable: $ 184,873 (allocated to North and
South Towers at $0.08 PSF annually)
General Building Expenses - This category has included costs for parking
garage management and operation, security, landscaping, and miscellaneous
building services including concierge and conference room expenses.
Security costs have represented the largest component of this expense
category. We allocated 1997 budgeted costs for three categories to General
Building expenses for consistency reasons: General Building, Security, and
Landscaping/Grounds. The 1997 budgeted parking revenues were expressed
"net" of expenses, so the general building expenses for 1997 do not include
garage expenses (and are accordingly lower). The historical and budgeted
costs for this category are summarized below.
Year General Building Expense PSF Total
---- ------------------------ ---------
1993 $3,749,714 $1.64
1994 $4,166,649 $1.83
1995 $4,221,743 $1.85
1996 (projected) $3,922,549 $1.72
1997 (budget) $3,104,399 $1.36
The 1993-1995 allocation between the Property components (expressed as a
percentage of the total) are summarized below. Totals equal more than 100%
in some cases due to negative allocations to "other' category.
Year North Tower South Tower ABC B-Level Garage Storage Total
---- ----------- ----------- --- ------- ------ ------- -----
1993 14.7% 15.0% 0 6.3% 65.7% 0 102%
1994 14.6% 14.4% 0 5.1% 65.9% 0 100%
1995 16.9% 16.9% 0 5.1% 61.1% 0 100%
The parking garage expenses have represented the largest component of this
category. We projected general building expenses for 1997 at $4,100,000.
The garage operating expenses were assumed to be non-recoverable. The 1995
data we
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<PAGE>
Income Approach
================================================================================
reviewed indicated approximately $90,000 in "non-recoverable" security
expenses had been allocated to the garage. We assumed these expenses would
be included in the recovery pool for the office towers, however, based on
typical practice for other office properties in this market. We modeled 49%
of general building costs as recoverable expenses allocated to the two
towers and the B-level retail.
Total Annual Expense PSF Totals
-------------------- ----------
Total Gen. Bid. Expense: $4,100,000 $1.80
Recoverable (49%) $2,009,000 $0.88
Allocated:
North Tower $875,000 (43.6% of Rec) $0.78 (NT Area)
South Tower: $875,000 (43.6% of Rec) $0.78 (ST Area)
B-Level: $259,000 (12.9% of Rec) $8,71 (B-Level)
Garage/Non-Recoverable: $2,091,000
Administrative - This category has included management office expenses
including payroll and benefits for onsite personnel, professional and legal
fees, accounting costs, advertising and promotion, and various
miscellaneous expenses. The historical and budgeted costs for this category
are summarized below.
Year Administrative Expense PSF Total
---- ---------------------- ---------
1993 $2,011,157 $0.88
1994 $2,226,942 $0.98
1995 $1,464,360 $0.64
1996 (projected) $3,671,211 $1.61
(includes Management)
1997 (budget) $1,237,264 $0.54
The 1997 budget includes separate categories for non-recoverable components
of expense which were included in the overall Administrative category for
the prior years. The non-recoverable budgeted 1997 expenses (refer to
"Non-Reimbursable" categories of previously summarized budget) $673,330,
which provides an "adjusted" total administrative cost for budgeted 1997 of
$1,237,264 + $673,330 = $1,910,594, or $0.84 per-square-foot of total
rentable area. According to written text in a marketing package for the
subject, a portion of the management fees for the property have
historically been used to cover some administrative expenses relating to
building personnel salaries and benefits.
The 1993-1995 allocation between the property components (expressed as a
percentage of the total) are summarized below. Totals equal more than 100%
in some cases due to negative allocations to "other" category.
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Year North Tower South Tower ABC B-Level Garage Storage Total
---- ----------- ----------- --- ------- ------ ------- -----
1993 54.1% 17.2% 26.0% 1.4% 2.2% 0.7% 102%
1994 32.9% 50.1% 12.1% 4.2% 1.3% -0.4% 100%
1995 40.4% 50.7% -16.4% 16.3% 8.5% 0.4% 100%
The detailed back-up provided for 1995 indicated there were approximately
$1 million in non-recoverable administrative expenses, including a
significant portion of this cost ($393,000) in administrative labor. It is
our understanding the ownership has also incurred significant legal fees in
recent years due to litigation (now reported as resolved) with the
leasehold ownership of the ABC Entertainment Center (not included in this
appraisal). We concluded the proposed 1997 budgeted costs are supportable
based on market costs for large office properties in this market.
We projected administrative expenses for 1997 at a rounded $2,000,000,
including $700,000 in non-recoverable costs, as detailed below. The
non-recoverable administrative expenses were allocated to the two towers.
Total Annual Expense PSF Totals
-------------------- ----------
Total Admin. Expense: $2,000,000 $0.88
Recoverable (65%) $1,300,000 $0.57
Allocated:
North Tower $ 640,900 (49.3% of Rec) $0.57 (NT Area)
South Tower: $ 640,900 (49.3% of Rec) $0.57 (ST Area)
B-Level: $ 18,200 (1.4% of Rec) $0.61 (B-Level)
Towers/Non-Recoverable: $700,000 ($0.31 PSF)
Management Fees - This category considers the costs for offsite
professional management services. Management fees can be based upon a
percentage of effective gross income or a fixed per-square-foot cost. The
historical and budgeted costs for the subject are summarized below.
Year Management Fee Expense PSF Total
---- ---------------------- ---------
1993 $1,451,566 $0.64
1994 $1,474,663 $0.65
1995 $1,438,079 $0.63
1996 (projected) N/A (included in Administration)
1997 (budget) $ 789,200 $0.35
The historical management fees have been approximately 2.5% of effective
gross income, which is well above market costs for office properties of
this size. The market management costs for a property of the subject's
size, complexity, and total revenues is
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in the range of 1.0% to 1.5% of total effective gross income. We
accordingly projected management fees at 1.25% of effective gross income.
Insurance Expenses - This category includes insurance costs for general
liability, property, and earthquake insurance. The chart below summarizes
the historical and budgeted insurance expenses for the subject.
Year Insurance Expense PSF Total
---- ----------------- ---------
1993 $ 875,924 $0.38
1994 $1,458,020 $0.64
1995 $2,437,847 $1.07
1996 (projected) N/A (includes R.E. Taxes)
1997 (budget) $2,326,368 $1.02
The earthquake component of insurance expenses for southern California
office building has increased dramatically since the January, 1994
Northridge earthquake. This increase is reflected in the data summarized
above.
The 1993-1995 allocation of insurance expenses between the property
components (expressed as a percentage of the total) are summarized below.
Totals equal more than 100% in some cases due to negative allocations to
"other" category.
Year North Tower South Tower ABC B-Level Garage Storage Total
---- ----------- ----------- --- ------- ------ ------- -----
1993 38.8% 40.8% 0.0% 0.0% 20.4% 0.0% 102%
1994 45.3% 45.3% 0.2% 2.8% 6.3% 0.0% 100%
1995 46.4% 46.1% 0 3.3% 4.3% 0.4% 100%
We concluded the proposed 1997 budgeted insurance costs are supportable
based on market costs for large office properties in this market, including
earthquake expenses. We projected insurance expenses for 1997 at a rounded
$2,350,000, as detailed below. The garage insurance expenses are
recoverable, and the chart allocates these costs to the two towers for
recovery purposes.
Total Annual Expense PSF Totals
-------------------- ----------
Total Insurance Expense: $2,350,000 $1.03
Recoverable (100%) $2,350,000 $1.03
Allocated:
North Tower $1,128,000 (48.0% of Rec) $1.00 (NT Area)
South Tower: $1,128,000 (48.0% of Rec) $1.00 (ST Area)
B-Level: $ 94,000 (4.0% of Rec) $3.16 (B-Level)
Real Estate Taxes - Taxes were estimated based on an assumed transfer of
the property at the value conclusion in this appraisal (applied to the
subject's tax rate). The historical and budgeted real estate taxes for the
subject are summarized below.
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Year Real Estate Tax Expense PSF Totals
---- ----------------------- ----------
1993 $2,889,813 $1.27
1994 $2,999,758 $1.31
1995 $3,072,789 $1.35
1996 (projected) N/A (includes Insurance)
1997 (budget) $4,564,502 $2.00
The ABC Entertainment Center leasehold ownership is responsible for real
estate taxes based on 21.025% of the land value, 1.25% of the garage value,
and 100% of the leasehold improvements value. We excluded the leasehold
improvements from this appraisal, and estimated that the Assessor will
allocate assessed value (and accordingly taxes) in a manner consistent with
historical percentages.
The 1993-1995 allocation of real estate tax expenses between the property
components (expressed as a percentage of the total) are summarized below.
Year North Tower South Tower ABC B-Level Garage Storage Total
---- ----------- ----------- --- ------- ------ ------- -----
1993 27.1% 26.9% 16.2% 1.6% 28.1% 0.0% 100%
1994 27.1% 27.1% 16.2% 1.6% 28.0% 0.0% 100%
1995 25.9% 28.2% 16.2% 1.6% 28.0% 0.4% 100%
We concluded the proposed 1997 budgeted real estate tax costs are
supportable based on the value conclusion in this appraisal and the
proposed transfer price for the subject (excluding the taxes allocated to
the ABC leasehold ownership). We projected real estate taxes for 1997 at a
rounded $4,500,000, as detailed below. The garage real estate tax expenses
are recoverable, and the chart allocates these costs to the two towers for
recovery purposes.
Total Annual Expense PSF Totals
-------------------- ----------
Total R.E. Tax Expense: $4,500,000 $1.97
Recoverable (100%) $4,500,000 $1.97
Allocated:
North Tower $2,205,000 (49.0% of Rec) $1.96 (NT Area)
South Tower: $2,205,000 (49.0% of Rec) $1.96 (ST Area)
B-Level: $ 90,000 (2.0% of Rec) $3.03 (B-Level)
Reserves for Replacement - We included a deduction of $0.20 per-square-foot
annually for ongoing replacement or short-lived capital items.
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Capital Expenditures - We relied upon information provided by the buyer of
the subject development in order to project appropriate capital deductions
for capital work to be completed. We are not qualified to determine the
costs, and we were not provided with specific estimates or bids for the
costs. We recommend a prospective investor or lender conduct appropriate
due-diligence, including retaining qualified consultants, in order to
verify the reasonableness of the costs listed below.
Based on discussions with representatives of the new property management
firm we deducted the following costs for capital investment during the
first year of the holding period (1997). The costs may actually be incurred
over a longer period, but the deduction during the initial year will reduce
the level of "discounting", and represents a more conservative method of
considering these costs.
Restroom Upgrades - We have been informed that the restrooms in the towers
are in conformance with current codes, subject to variances in cases where
full compliance is not reasonable. We note, however, that no independent
report has been provided. Although restrooms on several floors have also
been upgraded with new tiling and other improvements, it is our
understanding that the restrooms on 77 of the floors in the two towers have
not been upgraded with these "cosmetic" improvements. The estimated cost to
complete the cosmetic improvements to the remaining restrooms is $50,000
per floor, or a total cost of $3,850,000. Although not required under city
codes, this upgrade will be important from a marketing perspective to
enhance the property's position in the marketplace.
Mechanical Upgrades - We deducted $916,000 for costs to upgrade mechanical
systems, including (primarily) replacement of chilled water pumps and
retrofitting of all air handling units.
Fire/Life Safety - Although the buildings are reported as in compliance
with codes for properties of the subject's age, newer buildings which
compete with the subject typically have additional fire/life safety
enhancements such as pressurized stairshafts. We deducted the estimated
(per management-provided costs) of $704,000 for these improvements.
Parking Garage Renovations - Based on costs provided by the management we
deducted $2,214,000 to complete a number of improvements to the subject
parking garage. These improvements include removing and replacing parking
elevators, refurbishing escalator and elevator lobbies, painting columns
and walls, upgrading lighting, and improving signage and circulation.
The capital items summarized above total $7,684,000, which we deducted
during the first year of the holding period.
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Vacancy and Collection
Investors are primarily interested in the annual revenues an income
property is likely to produce over a specified period of time rather than
the income it could produce if it were always 100 percent occupied and all
the tenants were paying their rent in full and on time. It is normally a
prudent practice to expect some income loss as tenants vacate, fail to pay
rent, or pay rent late.
Including signed leases for tenants not yet in occupancy the three
components of the subject property have current vacancy rates of 7.1
percent (South Tower), 5.3 percent (North Tower) and 13.0 percent (B-Level
Retail). The overall property has a vacancy level of 6.3 percent, or an
implied occupancy of 93.7 percent. The rollover profile for current tenants
is relatively favorable (refer to Occupancy discussions for detail). The
exhibit on the accompanying page summarizes the vacancy levels by asset
category (or "tier") for competitive office market survey for the 20
Century City office buildings discussed in detail previously. As shown on
the exhibit the overall competitive market has a current vacancy rate of
10.6 percent on a direct basis, and 12.4 percent when sublease
availabilites are included in the analysis. The subject is ranked in the
"top tier" of the Century City market, and the five buildings (including
the subject) in this category have a total area of 4,346,495 square feet.
The direct and overall vacancy levels for this category are 4.5 percent and
5.8 percent, respectively.
As discussed in some detail in the Market Analysis the vacancy levels
in the subjects westside Los Angeles office market have declined during the
past two years, and several submarkets, including Century City, have
experienced rather significant declines in vacancy during the first three
quarters of 1996. The absence of new development during the first portion
of this decade in conjunction with increasing net absorption during the
past 24 months has resulted in improving market conditions.
The subject development is ranked third in terms of overall quality
and appeal in the Century City market (after 1999 Avenue of the Stars and
Fox Plaza), and the two superior buildings have virtually no space
available for lease. We concluded current market conditions support the
following vacancy and collection deductions over the term of the holding
period. Note that Parking revenues were based on actual historical income
figures net of vacancy, so no additional vacancy deductions were applied to
the parking revenue projections.
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Vacancy and Collection Conclusions
"Global" deduction: 5.0% against all revenues excluding parking
"Lag" vacancy between leases:
5-Year terms: 5 months (prior to weighting
for renewal probability)
10-year terms: 10 month (prior to weighting
for renewal probability)
Renewal Probability: 65%
Implied weighted lag vacancy:
5-Year terms: 2 months (rounded), or 3.3% based
on 60-month term
1O-Year terms: 4 months (rounded), or 3.3% based
on 120-month terms
Total vacancy deduction equals approximately 8.3% over term.
Discounted Cash Flow Analysis
Investors in office properties typically forecast net operating income and
cash flows over a period of time which ranges from five to 15 years. This
projection is used to determine a purchase price justified by the degree of risk
inherent in the proposed investment.
We modeled the following specific assumptions within the cash flow
projections for the property.
1) Holding Period - The cash flow projections were modeled on a calendar
year basis beginning January 1, 1997. We modeled alternative 10
through 12 year holding periods for the property to consider lag
vacancy due to the rollover profile in the respective reversion years
and the impact on the value of the property.
2) Income Projections - Existing tenants were modeled according to the
terms of their leases. Current vacancies and all future rollover
tenancies were modeled according to the market rent conclusions
established previously.
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3) Growth Projections - Income and Expense growth rate assumptions are
summarized below.
Assumed CPI: 3.5% Annually
Operating Expenses: 3.5% Annually
Real Estate Taxes: 2.0% Annually
Tenant Improvements: 3.5% Annually
Parking and Other Income: 3.5% Annually
Market Rents:
1997: 0
1998-2000: 6.0% Annually
2001 and after: 3.5% Annually
4) Expense Passthrough - Expense reimbursements were modeled for the
current tenants based on the base year data provided by the
management.
5) Vacancy and Collection Loss - As discussed previously we modeled the
following vacancy and collection deductions within the cash flow
projections:
Global Vacancy &
Collection Loss: 5%
Lag Vacancy Upon Rollover:
5-Yr. Terms: 5 months
10-Yr. Terms: 10 months
Lag Vacancy, Leasing Commissions, and Tenant Improvement Allowances
were weighted for a 65% renewal probability:
6) Leasing Commissions - We modeled leasing commissions at 6% and 3%
respectively for new 5- and 10-year tenants. Renewing tenants were
modeled with one-half commission.
7) Reversion - The reversion was calculated by applying a reversion
capitalization rate of 9.0 percent to the 11th, 12th, or 13th year's
net operating income. Following a deduction for a 1.0 percent cost of
sale, the reversion price was added to the previous years net cash
flow prior to discounting.
We used the Argus and Excel software programs to simulate the projected
operating characteristics for the subject property under the preceding
assumptions. The cash flows are presented on the following pages.
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<TABLE>
DISCOUNTED CASH FLOW ANALYSIS
Century Plaza Towers * 2029 & 2049 Century Park East * 11 year holding period
<CAPTION>
====================================================================================================================================
11-year holding period beginning 1/1/97 1 2 3 4 5 6
CY 1997 CY 1998 CY 1999 CY 2000 CY 2001 CY 2002
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCOME
Potential Rental Revenue 53,288,604 57,678,506 59,223,958 60,829,894 61,991,627 63,116,000
Absorption & Tumover Vacancy (896,166) (1,473,101) (869,441) (2,000,132) (1,012,862) (1,643,350)
Base Rent Abatements (846,300) (48,265) 0 0 0 0
Miscellaneous Rental Revenue 533,804 342,027 199,661 176,828 110,897 79,558
CPI & Other Adjustment Revenue 671,042 420,247 240,186 251,737 150,996 188,746
Retail Sales Percent Revenue 44,366 46,634 48,844 42,775 72,578 76,218
Expense Reimbursement Revenue 1,640,733 2,079,975 2,567,658 2,997,562 3,543,792 3,949,168
Miscellaneous Revenue 13,355,840 13,984,580 14,817,026 16,468,205 17,033,325 17,618,223
- ------------------------------------------------------------------------------------------------------------------------------------
Potential Gross Income 67,791,923 73,030,603 76,227,892 78,766,869 81,890,353 83,384,563
- ------------------------------------------------------------------------------------------------------------------------------------
Vacancy / Collection Loss (3,389,597) (3,651,530) (3,811,394) (3,938,344) (4,094,518) (4,169,228)
Average vacancy (%) is 9.5% 8.0% 8.9% 7.9% 9.8% 8.2% 9.2%
- ------------------------------------------------------------------------------------------------------------------------------------
Effective Gross Income 64,402,326 69,379,073 72,416,498 74,828,525 77,795,835 79,215,335
====================================================================================================================================
EXPENSES
Reimbursable Expenses 22,834,447 23,726,827 24,540,151 25,282,122 26,146,674 26,949,726
Office & Retail Expenses 3,331,128 3,447,718 3,568,388 3,693,281 3,822,548 3,956,336
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Expenses 26,165,575 27,174,545 28,108,539 28,975,403 29,969,222 30,906,062
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Expense Ratio 40.6% 39.2% 38.8% 38.7% 30.5% 39.0%
- ------------------------------------------------------------------------------------------------------------------------------------
NET OPERATING INCOME 38,236,751 42,204,528 44,307,959 45,853,122 47,826,613 48,309,273
====================================================================================================================================
DEDUCTIONS
Tenant Improvements 5,283,032 3,886,214 2,685,925 3,893,783 2,157,564 4,248,378
Leasing Commissions 2,250,355 1,414,174 966,032 1,403,373 722,538 1,909,067
Capital Costs & Rerserves 8,140,477 703,333 488,989 506,103 523,817 542,151
- ------------------------------------------------------------------------------------------------------------------------------------
Total Deductions 15,673,864 6,003,721 4,140,946 5,803,259 3,403,919 6,699,596
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
NET CASH FLOW 22,562,887 36,200,807 40,167,013 40,049,863 44,422,694 41,609,677
====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
CASH ON CASH 4.8% 7.8% 8.6% 8.6% 9.5% 8.9%
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
====================================================================================================================================
7 8 9 l0 11 12
CY 2003 CY 2004 CY 2005 CY 2006 CY 2007 CY 2008
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCOME
Potential Rental Revenue 65,715,369 66,983,676 68,722,996 70,642,963 72,815,038 76,890,842
Absorption & Tumover Vacancy (2,643,335) (2,989,967) (2,344,820) (1,168,811) (3,347,980) (3,409,998)
Base Rent Abatements 0 0 0 0 0 0
Miscellaneous Rental Revenue 78,865 66,288 45,000 0 0 0
CPI & Other Adjustment Revenue 425,148 588,005 733,900 1,063,393 1,245,476 1,281,145
Retail Sales Percent Revenue 79,985 83,884 87,920 71,833 90,523 94,997
Expense Reimbursement Revenue 4,229,498 4,126,460 4,143,034 4,690,617 5,171,225 4,923,941
Miscellaneous Revenue 18,223,592 18,850,149 19,498,637 20,169,821 20,864,496 21,583,486
- ------------------------------------------------------------------------------------------------------------------------------------
Potential Gross Income 86,109,122 87,708,495 90,886,667 95,469,816 96,838,778 101,364,413
- ------------------------------------------------------------------------------------------------------------------------------------
Vacancy / Collection Loss (4,305,456) (4,385,425) (4,544,333) (4,773,491) (4,841,940) (5,068,221)
Average vacancy (%) is 9.5 10.6% 11.0% 10.0% 8.4% 11.2% 11.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Effective Gross Income 81,803,666 83,323,070 86,342,334 90,696,325 91,996,838 96,296,192
====================================================================================================================================
EXPENSES
Reimbursable Expenses 27,779,556 28,648,952 29,604,813 30,626,456 31,508,479 32,545,319
Office & Retail Expenses 4,094,807 4,238,126 4,386,460 4,539,987 4,698,887 4,863,347
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Expenses 31,874,363 32,887,078 33,991,273 35,166,443 36,207,366 37,408,666
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Expense Ratio 39.0% 39.5% 39.4% 38.8% 39.4% 38.8%
- ------------------------------------------------------------------------------------------------------------------------------------
NET OPERATING INCOME 49,929,303 50,435,992 52,351,061 55,529,882 55,789,472 58,887,526
====================================================================================================================================
DEDUCTIONS
Tenant Improvements 4,802,702 5,848,227 5,235,768 2,416,851 4,812,694 8,807,143
Leasing Commissions 2,104,034 2,230,783 1,970,041 1,042,216 2,111,308 3,521,865
Capital Costs & Rerserves 561,126 580,765 601,092 622,130 643,905 666,441
- ------------------------------------------------------------------------------------------------------------------------------------
Total Deductions 7,467,862 8,659,775 7,806,901 4,081,197 7,567,907 12,995,449
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================
NET CASH FLOW 42,461,441 41,776,217 44,544,160 51,448,685 695,984,351
====================================================================================================================
- --------------------------------------------------------------------------------------------------------------------
CASH ON CASH 9.1% 9.0% 9.6% 11.1% 10.4%
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AVG. CASH ON CASH 8.9%
FIVE YEAR AVERAGE 7.9%
INITIAL CAP. RATE 8.2% =====================================================================
- -------------------------------------------- VALUE MATRIX
TERMINAL CAP. RATE 9.0% Low-Range Mid-Range HI-Range
TRANSACTION COST 1.0% ---------------------------------------------------------------------
DISCOUNT RATE 10.5% Discount Rate 10.0% 10.5% 11.0%
- -------------------------------------------- Net Present Value $482,976,364 $465,583,900 $449,005,894
REVERSIONARY VALUE $647,762,786 NPV (PSF) $211.61 $203.99 $196.73
- -------------------------------------------- =====================================================================
NETPRESENTVALUE(NPV) $465,583,900 Total Bldg (SF): 2,282,381
- --------------------------------------------
NPV - Per Square Foot $203.99
- ---------------------------------------------------
Net Opening Income (NOI) vs Net Cash Flow (NCF)
[LINE CHART OMITTED]
- ---------------------------------------------------
11-yr DCF of DCF_CPT5.XLS
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Derivation of Discount Rate
We forecasted and discounted the cash flows and future reversion to a
present value at various internal rates of return (yield rates) currently
anticipated by investors in similar quality properties. The yield rate, or
internal rate of return, is the single rate that discounts all future equity
benefits (cash flows and equity reversion) to an estimated present value.
The accompanying exhibit entitled "Comparative Analysis of U.S. Treasuries
and REITs" provides an overview of the alternative marketplaces for capital
investment during the period from August, 1995 through July, 1996. The graph and
accompanying data show that equity REIT yields are not necessarily sensitive to
changes in interest rates. Although yields for intermediate Treasuries increased
by nearly 50 basis points during the 12-month period, yields for equity REITs
(on average) decreased by 30 basis points during the same period. Investor
concerns of higher inflation can increase Treasury yield requirements, but the
real estate market can represent a "hedge" against inflation due to pricing
increases. The yields for REITs are below levels required for single asset real
estate investments, however, due (in part) to liquidity issues and the diversity
and management levels of multi-property portfolios.
The most recently published Cushman & Wakefield survey of investors' return
requirements was published in Autumn, 1996, and a copy is included in the
Addenda e reviewed current reported return requirements for a cross section of
office investors. The data for suburban office properties is summarized in the
following chart.
Capitalization Internal Rate
Rate Range of Return Range
Property Category Low High Average Low High Average
- ----------------- --- ---- ------- --- ---- -------
Office - Suburban/Non CBD
Class A-Leased Asset(1) 8.0% 11.0% 8.8%-9.5% 10.5% 13.0% 11.2%-11.6%
(1) "Leased Asset" refers to predominately "passive" investments involving
substantially leased properties
The subject is an "upper tier" office building located within a desirable
westside Los Angeles suburban office market. The property is substantially
leased, and is recognized as a "trophy" asset in Los Angeles County. The
property would be acquired base don internal rate of return requirements at the
low end of the acceptable range for investors with sufficient resources to
purchase an asset of this size. We concluded a range in discount rates (or
internal rates of return) from 10.5 percent to 11.0 percent is appropriate for
the subject cash flow and reversion. The resulting value indications for the
property by discounted cash flow analysis are summarized below.
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Rounded Value Indications
Holding Period 10 Years 11 Years 12 Years
10.5% IRR $460,000,000 $466,000,000 $468,000,000
11.0% IRR $444,000,000 $449,000,000 $451,000,000
Total Range: $444,000,000 to $468,000,000
We reconciled at a rounded $460,000,000 for the property by discounted cash
flow analysis.
Direct Capitalization
In the direct capitalization method we estimated a value by dividing the
subject's first-year net operating income by an overall capitalization rate.
This overall rate (OAR) is selected based on an analysis of market sales and
reported return requirements from the category of investor most representative
of the potential buyers for this asset. The overall rate is calculated by
dividing the net operating income from the sale by their respective sales
prices.
The overall capitalization rates for the comparable data in the' Sales
Comparison Approach and the occupancy levels at sale used as the basis for the
overall rate calculations are summarized below.
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SUMMARY OF OVERALL RATES
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Item Date of Overall Rate/
No. Property Sale Occupancy Sale
-----------------------------------------------------------------------
1-1 Century City North 11/96 11.4% @ 90%
Century City occupancy-above-market
rents
-----------------------------------------------------------------------
1-2 10960 Wilshire Blvd. 11/96 8.5% @ 92% occupancy
Westwood 6.5% after free rent
deductions
-----------------------------------------------------------------------
1-3 MGM Plaza 11/96 9.8% @ 99% occupancy
Santa Monica
-----------------------------------------------------------------------
1-4 Wilshire Rodeo Plaza 12/95 8.0-8.8%
Beverly Hills (1996 & 1997 NOI)
@ 93% occupancy
-----------------------------------------------------------------------
1-5 Santa Monica Water Garden 7/95 8.9% @ 97% occupancy
Santa Monica
=======================================================================
The overall rates for the five sales of westside office properties ranged
from 8.0 percent to 1 1.4 percent, with four of the overall rates in a tighter
range from 8.0 percent to 9.8 percent. The net income levels used to calculate
the overall rate indications were based on occupancy levels from 90 percent to
99 percent.
A significant portion of the variance in overall rates can be attributed to
the differences in the tenant profiles for the respective properties. The
highest overall rate corresponds to item 1-1, which is current leased at
above-market rental rates (on average), and has the highest percentage of
near-term rollover of any of the comparable data (refer to Sales Comparison for
details exhibit). The higher capitalization rate for this asset is attributable
to the above-market income stream which is capitalized, the near-term "erosion"
of this income stream due to tenant expirations, and the substantial capital
improvements to be completed at the buyer's expense (refer to Sales Comparison
Approach).
The first year (1997) income and expense proforma for the subject property
is on an accompanying page. The average rental rate of $23.35 per-square-foot
annually for the property is below the market rent conclusions presented
previously (from $24.00 to $26.40 for the office floors - 5-year effective
terms). Based on the mid-point of the 5-year effective rental conclusion for the
office towers (or $25.20 per-square-foot), the first-year average rental rate is
approximately seven percent below market. Projected lease-up during 1997 and
tenants leased but not yet in occupancy result in an increase of slightly more
than 10 percent in net operating income during the second year of the analysis
(1998). The potential increases in net income due to below market rental rates
and near-term lease-up, considered with the anticipated increases in market rent
resulting from tightening market conditions suggest an overall rate at the low
end of the range for suburban office buildings is appropriate for the subject.
The low end of the range from the Investor Survey data summarized previously for
suburban office buildings in the Class A - Leased Assets category is 8.0
percent, and the
================================================================================
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Approach
================================================================================
range from the comparable data suggests an overall capitalization rate near the
low end of the range, from 8.0 to 8.5 percent, is appropriate for the subject.
This range considers the income upside attributable to the current below market
contract rents and the anticipated "spikes" in market rent during the near term.
The subject's first-year income and expense proforma includes $846,300 in
deductions for contractual free rent, however, and the overall rates for the
comparable properties have been "adjusted" for remaining free rent from existing
tenants. The capitalized value of the free rent is approximately $10 million,
rounded based on the mid-point of the 8.0 to 8.5 percent range ($846,300 / .0825
= $10,258,182). We accordingly capitalized the net operating income adjusted for
free rent, and deducted the capital improvement costs of $7,684,000 and the
$846,300 free rent as a lump sum deduction. The resulting value indication by
direct capitalization is shown below.
$39,083,057 (adjusted for free rent) / .0825 = $473,734,024
Less: Capital Improvements: ($ 7,684,000)
1997 Rent Abatements: ($ 846,300)
Adjusted "As Is" Value: $465,203,274
Rounded Value by Direct Capitalization: $465,000,000
Conclusions Income Approach
The two indications of value for the property by the two methods of
capitalization were within a tight range from $460,000,000 to $465,000,000 (or
by 1.1%). Each method is relevant for this category of office building asset,
but discounted cash flow analysis is perhaps the most appropriate for the
subject in light of the number of tenants and specific lease terms. The
discounted cash flow conclusion of $460,000,000 is supported as reasonable by
direct capitalization, and we concluded the property has a value by the Income
Approach of $460,000,000.
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<PAGE>
RECONCILIATION AND FINAL VALUE ESTIMATE
================================================================================
The indicated values for the subject property by the two approaches we used
are summarized below.
Sales Comparison Approach: $480,000,000
Income Approach: $460,000,000
The value indications by the two approaches were within a range of 4.3
percent from $460,000,000 to $480,000,000.
The Sales Comparison Approach included a number of recent sales involving
competitive westside Los Angeles area properties. The sales effectively
"bracketed" the appropriate per-square-foot conclusion for the subject in our
opinion, and the conclusion from this approach is quite relevant in the
valuation of the property.
The Income Approach provides the most relevant indication of value for the
subject property, and this indication was supported as reasonable by the
comparable improved sales data. We relied on this approach, and concluded the
subject property had a market value as of December 6, 1996, of:
FOUR HUNDRED SIXTY MILLION DOLLARS
----------------------------------
$460,000,000
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<PAGE>
SPECIAL ASSUMPTIONS AND LIMITING CONDITIONS
================================================================================
1) We have relied on cost estimates provided by representatives of the buying
entity relating to capital improvements planned for the property. These
costs should be independently verified by qualified third party consultants
prior to finalizing any loan or purchase involving the property. Refer to
Income Approach for discussion of capital costs.
2) The value conclusion in this appraisal EXCLUDES the leased fee interest
(air rights) in the ABC Entertainment Center, which is currently a
component of the larger property. It is our understanding a Parcel Map is
to be filed which will create a separate legal parcel for this portion of
the property. We assume this filing has been completed.
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<PAGE>
ASSUMPTIONS AND LIMITING CONDITIONS
================================================================================
"Appraisal" means the appraisal report and opinion of value stated therein; or
the letter opinion of value, to which these Assumptions and Limiting Conditions
are annexed.
"Property" means the subject of the Appraisal.
"C&W" means Cushman & Wakefield, Inc. or its subsidiary which issued the
Appraisal.
"Appraiser(s)" means the employee(s) of C&W who prepared and signed the
Appraisal.
This appraisal is made subject to the following assumptions and limiting
conditions:
1. No responsibility is assumed for the legal description or for any matters
which are legal in nature. Title to the Property is assumed to be good and
marketable and the Property is assumed to be free and clear of all liens
unless otherwise stated. No survey of the Property was undertaken.
2. The information contained in the Appraisal or upon which the Appraisal is
based has been gathered from sources the Appraiser assumes to be reliable
and accurate. Some of such information may have been provided by the owner
of the Property. Neither the Appraisers nor C&W shall be responsible for
the accuracy or completeness of such information, including the correctness
of estimates, opinions, dimensions, sketches, exhibits and other factual
matters.
3. The opinion of value is effective as of the date stated in the Appraisal.
Changes since that date in external and market factors or in the property
itself can significantly affect property value.
4. The appraisal is to be used in whole and not in part. No part of the
Appraisal shall be used in conjunction with any other appraisal. Possession
of the Appraisal, or a copy thereof, does not carry with it the right of
publication. Publication of the Appraisal or any portion thereof without
the prior written consent of C&W is prohibited. Except as may be otherwise
expressly stated in the letter of engagement to prepare the Appraisal, C&W
does not permit use of the Appraisal by any person other than the party to
whom it is addressed or for purposes other than those for which it was
prepared. If written permission is given by C&W to use the Appraisal, the
Appraisal must be used in its entirety and only with proper written
qualification as approved by C&W. No part of the Appraisal or the identity
of the Appraiser shall be conveyed to the public through advertising,
public relations, news, sales or other media or used in any material
without C&Ws prior written consent. Reference to the Appraisal Institute or
to the MAI designation is prohibited.
5. The Appraiser shall not be required to give testimony in any court or
administrative proceedings relating to the Property or the Appraisal.
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<PAGE>
Assumptions and Limiting Conditions
================================================================================
6. The Appraisal assumes (a) responsible ownership and competent management of
the Property; (b) there are no hidden or unapparent conditions of the
Property, subsoil or structures that render the Property more or less
valuable (no responsibility is assumed for such conditions or for arranging
for engineering studies that may be required to discover them); (c) full
compliance with all applicable federal, state and local zoning and
environmental regulations and laws, unless noncompliance is stated, defined
and considered in the Appraisal; and (d) all required licenses,
certificates of occupancy and other governmental consents have been or can
be obtained and renewed for any use on which the value estimate contained
in the Appraisal is based.
7. The physical condition of the improvements considered by the Appraisal is
based on visual inspection by the Appraiser or other person identified in
the Appraisal. C&W assumes no responsibility for the soundness of
structural members nor for the condition of mechanical equipment, plumbing
or electrical components.
8. The forecasted potential gross income referred to in the Appraisal may be
based on lease summaries provided by the owner or third parties. The
Appraiser assumes no responsibility for the authenticity or completeness of
lease information provided by others or the bona fides of actual lease. C&W
suggests that legal advice be obtained regarding the interpretation of
lease provisions and the contractual rights of parties.
9. The forecasts of income and expenses are not predictions of the future.
Rather, they are the Appraiser's best estimates of current market thinking
on future income and expenses. The Appraiser and C&W make no warranty or
representation that these forecasts will materialize. The real estate
market is constantly fluctuating and changing. It is not the Appraisers'
task to predict or in any way warrant the conditions of a future real
estate market; the Appraisers can only reflect what the investment
community, as of the date of the Appraisal, envisions for the future in
terms of rental rates, expenses, supply, and demand.
10. Unless otherwise stated in the Appraisal, the existence of potentially
hazardous or toxic materials which may have been used in the construction
or maintenance or operation of the improvements or may be located at or
about the Property was not considered in arriving at the opinion of value
stated in the Appraisal. These materials (such as formaldehyde foam
insulation, asbestos insulation, various soil contaminants, and other
potentially hazardous materials) may affect the value of the Property. The
Appraisers are not qualified to detect such substances and C&W urges that
an expert in this field be employed to determine the economic impact of
these matters on the opinion of value stated in the Appraisal.
11. If the Appraisal is submitted to a lender or investor with the prior
approval of C&W, such party should consider the Appraisal as one factor,
together with its independent investment considerations and underwriting
criteria, in its overall investment decision.
================================================================================
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<PAGE>
CERTIFICATION OF APPRAISAL
================================================================================
We certify that, to the best of our knowledge and belief:
1. James W. Myers, MAI and Miles Loo Jr. inspected the property.
2. The statements of fact contained in this report are true and correct.
3. The reported analyses, opinions, and conclusions are limited only by the
reported assumptions and limiting conditions, and are our personal,
unbiased professional analyses, opinions, and conclusions.
4. We have no present or prospective interest in the property that is the
subject of this report, and we have no personal interest or bias with
respect to the parties involved.
5. Our compensation is not contingent on an action or event (such as the
approval of a loan) resulting from the analyses, opinions, or conclusions
in, or the use of, this report. The appraisal is not based on a requested
minimum or specific estimated value.
6. Our analyses, opinions, and conclusions were developed, and this report has
been prepared, in conformity with the Uniform Standards of Professional
Practice of the Appraisal Institute.
7. No one provided significant professional assistance to the persons 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 Practice of the
Appraisal Institute.
9. The use of this report is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives.
10. As of the date of this report, James W. Myers, MAI has completed the
requirements of the continuing education program of the Appraisal
Institute,
/s/ James W. Myers /s/ Miles Loo, Jr.
------------------------------- -------------------------------
James W. Myers, MAI Miles Loo, Jr.
Senior Director Appraiser
Valuation Advisory Services
================================================================================
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<PAGE>
ADDENDA
================================================================================
================================================================================
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<PAGE>
Rent Roll [LOGO]
CENTURY PLAZA TOWERS CENTURY PLAZA TOWERS
2029 Century Park East, North Tower
<TABLE>
<CAPTION>
============================================================================================================================
Tenant Name/ Square Feet Lease Dates Minimum Adjust Annual
No. Description Suite Vacant Occupied Begin Ending Rent/PSF Date Rent
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 United CA Bank 100 14,190 Jan-75 Aug-00 $15.86 $225,035
- ----------------------------------------------------------------------------------------------------------------------------
2 Transit Casualty 200 25,221 Dec-94 Dec-99 $19.20 $484,243
- ----------------------------------------------------------------------------------------------------------------------------
3 Deloitte & Touche 300 25,221 Sep-88 Aug-98 $27.43 $691,709
- ----------------------------------------------------------------------------------------------------------------------------
4 Cohen, Primiani & Fost 400 5,545 May-97 Apr-03 $24.00 $133,080
- ----------------------------------------------------------------------------------------------------------------------------
5 World Cup USA (EXPIRED) 400 Jan-96 Dec-96 $20.40 $113,118
- ----------------------------------------------------------------------------------------------------------------------------
6 Conference Center 410 2,240
- ----------------------------------------------------------------------------------------------------------------------------
7 Jane Teis 415-E 849 Jan-93 Dec-96 $21.24 $18,032
- ----------------------------------------------------------------------------------------------------------------------------
8 Envirotech 420-E 826 Dec-93 Dec-96 $19.20 $15,859
- ----------------------------------------------------------------------------------------------------------------------------
9 Brentnall Turley 422-E 1,754 Feb-90 Dec-96 $20.40 $35,782
- ----------------------------------------------------------------------------------------------------------------------------
10 Concorde Capital 430 1,338 Jul-95 Jun-98 $20.40 $27,295
- ----------------------------------------------------------------------------------------------------------------------------
11 Warner Inc 433 827 Nov-95 Nov-98 $21.00 $17,367
- ----------------------------------------------------------------------------------------------------------------------------
12 Paul Livadry 437 1,306 Sep-93 Sep-98 $19.80 $25,858
- ----------------------------------------------------------------------------------------------------------------------------
13 Pacific Properties 448-E 1,390 Jul-94 Jun-97 $20.40 Jul-94 $28,356
Jun-97
- ----------------------------------------------------------------------------------------------------------------------------
14 Suzy Vaughan (Must Take) 448 Dec-97 Jun-00 $20.40 $28,356
- ----------------------------------------------------------------------------------------------------------------------------
15 Suzy Vaughan 450 1,752 Jul-94 Jun-00 $20.40 $35,741
- ----------------------------------------------------------------------------------------------------------------------------
16 Cohen & Primiani 480 7,214 Jul-94 Mar-03 $20.40 Jul-94 $147,165
$0.00 Jul-97 $0
$20.40 Aug-97 $147,165
$24.00 Jul-00 $173,136
- ----------------------------------------------------------------------------------------------------------------------------
17 Bernstein & Fox 500 6,168 Dec-95 Nov-00 $20.40 $125,827
- ----------------------------------------------------------------------------------------------------------------------------
18 Bernstein & Fox 510 2,179 Apr-96 Nov-00 $20.40 $44,452
- ----------------------------------------------------------------------------------------------------------------------------
19 Century Hospital 520 8,677 Mar-94 May-99 $21.60 $187,423
- ----------------------------------------------------------------------------------------------------------------------------
20 Promax 555-T 5,275 Apr-95 Mar-02 $23.40 Apr-95 $123,435
$23.88 Apr-00 $125,967
- ----------------------------------------------------------------------------------------------------------------------------
21 Licker & Ozurivich 590 2,921 Dec-95 Nov-00 $20.40 $59,588
- ----------------------------------------------------------------------------------------------------------------------------
22 Barrister Suites 600-E 25,221 May-92 Apr-97 $11.89 $300,000
- ----------------------------------------------------------------------------------------------------------------------------
23 Xerox Corporation 700-T 17,393 Nov-95 Oct-97 $22.80 $396,560
- ----------------------------------------------------------------------------------------------------------------------------
24 Xerox Expansion 720-T 1,833 Jun-96 Oct-97 $22.80 $41,792
- ----------------------------------------------------------------------------------------------------------------------------
25 Vacant 750-V 5,995
- ----------------------------------------------------------------------------------------------------------------------------
26 National Rx 800 6,914 Jan-94 Sep-98 $8.63 Jan-94 $59,693
$21.84 Aug-94 $151,002
- ----------------------------------------------------------------------------------------------------------------------------
27 Vacant 0810-V 2,367
- ----------------------------------------------------------------------------------------------------------------------------
28 Phoenix, Duff & Pheips 820 5,843 May-96 Nov-01 $22.80 $133,220
- ----------------------------------------------------------------------------------------------------------------------------
29 Gallizio 830 1,168 Jun-94 May-99 $19.80 $23,126
- ----------------------------------------------------------------------------------------------------------------------------
30 Kenyon Company 840 1,479 Jan-95 Dec-97 $21.00 $31,059
- ----------------------------------------------------------------------------------------------------------------------------
31 Freid & Goldsman 860 5,664 May-94 May-99 $21.72 $123,022
- ----------------------------------------------------------------------------------------------------------------------------
32 Pegasus Property 880-E 1,786 Mar-92 Feb-97 $30.00 $53,580
- ----------------------------------------------------------------------------------------------------------------------------
33 Neilsen Elggren 900 & 8,289 Nov-93 Apr-99 $25.09 $208,000
- ----------------------------------------------------------------------------------------------------------------------------
34 Largo 920-E 6,459 May-94 Apr-97 $21.48 $138,739
- ----------------------------------------------------------------------------------------------------------------------------
35 Norwest Mortgage 930 934 Nov-96 Oct-99
- ----------------------------------------------------------------------------------------------------------------------------
36 Westmount Management 940 2,691 Mar-95 Mar-00 $22.80 $61,355
- ----------------------------------------------------------------------------------------------------------------------------
37 Cruise Fairs 950 4,758 Jan-94 Jan-99 $25.20 $119,902
- ----------------------------------------------------------------------------------------------------------------------------
38 JVC Entertainment 970 2,170 May-94 May-97 $21.48 $46,612
- ----------------------------------------------------------------------------------------------------------------------------
39 Paul Ray Company 1000 5,531 Feb-89 Jan-99 $27.00 $149,337
- ----------------------------------------------------------------------------------------------------------------------------
40 Aaron Cushman 1010 3,540 Jun-94 Apr-98 $20.40 $72,216
- ----------------------------------------------------------------------------------------------------------------------------
41 Zolla & Meyer 1020 4,296 Mar-94 Apr-99 $19.68 Mar-94 $84,545
$22.54 Sep-95 $96,818
- ----------------------------------------------------------------------------------------------------------------------------
42 Kopple & Klinger 1040 3,426 Jan-93 Dec-97 $21.60 $74,001
- ----------------------------------------------------------------------------------------------------------------------------
43 Federman, Grdiley 1060 5,751 Aug-95 Aug-98 $23.40 $134,573
- ----------------------------------------------------------------------------------------------------------------------------
44 Rosentein 1080 2,692 Dec-94 Nov-97 $21.00 $56,532
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
============================================================================================================================
Tenant Name/ Other Rent Escalations Reimbur- Free Rent TI's
No. Description Category Amount Misc./Other sements (mos.) (psf)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 United CA Bank United CA Bank 94 Base 0
- ----------------------------------------------------------------------------------------------------------------------------
2 Transit Casualty 94 Prop 13-1 3
- ----------------------------------------------------------------------------------------------------------------------------
3 Deloitte & Touche 65% CPI 97,956 $/YR 94 Base 0
- ----------------------------------------------------------------------------------------------------------------------------
4 Cohen, Primiani & Fost 96 Prop 13-1 0 $30.24
- ----------------------------------------------------------------------------------------------------------------------------
5 World Cup USA (EXPIRED) None 0
- ----------------------------------------------------------------------------------------------------------------------------
6 Conference Center None 0
- ----------------------------------------------------------------------------------------------------------------------------
7 Jane Teis Base Year 0
- ----------------------------------------------------------------------------------------------------------------------------
8 Envirotech Base Year 0
- ----------------------------------------------------------------------------------------------------------------------------
9 Brentnall Turley Base Year 0
- ----------------------------------------------------------------------------------------------------------------------------
10 Concorde Capital 95 Base 0
- ----------------------------------------------------------------------------------------------------------------------------
11 Warner Inc Base Year 0
- ----------------------------------------------------------------------------------------------------------------------------
12 Paul Livadry 94 Base 0
- ----------------------------------------------------------------------------------------------------------------------------
13 Pacific Properties 94 Prop 13-1 3
- ----------------------------------------------------------------------------------------------------------------------------
14 Suzy Vaughan (Must Take) 94 Base $15.00
- ----------------------------------------------------------------------------------------------------------------------------
15 Suzy Vaughan 94 Base 0
- ----------------------------------------------------------------------------------------------------------------------------
16 Cohen & Primiani 94 Base 0
- ----------------------------------------------------------------------------------------------------------------------------
17 Bernstein & Fox 96 Prop 13-1 0
- ----------------------------------------------------------------------------------------------------------------------------
18 Bernstein & Fox 96 Prop 13-1 0
- ----------------------------------------------------------------------------------------------------------------------------
19 Century Hospital 97 Prop 13-1 0
- ----------------------------------------------------------------------------------------------------------------------------
20 Promax Promax-3 8
- ----------------------------------------------------------------------------------------------------------------------------
21 Licker & Ozurivich 96 Prop 13-1 0
- ----------------------------------------------------------------------------------------------------------------------------
22 Barrister Suites Barrister 6
- ----------------------------------------------------------------------------------------------------------------------------
23 Xerox Corporation 95 Base 0
- ----------------------------------------------------------------------------------------------------------------------------
24 Xerox Expansion 95 Base 0 1st 5 YR
- ----------------------------------------------------------------------------------------------------------------------------
25 Vacant Base Year 0
- ----------------------------------------------------------------------------------------------------------------------------
26 National Rx 94 Base 0
- ----------------------------------------------------------------------------------------------------------------------------
27 Vacant Base Year 0
- ----------------------------------------------------------------------------------------------------------------------------
28 Phoenix, Duff & Pheips Base Year 0
- ----------------------------------------------------------------------------------------------------------------------------
29 Gallizio 94 Base 0
- ----------------------------------------------------------------------------------------------------------------------------
30 Kenyon Company 95 Base 0
- ----------------------------------------------------------------------------------------------------------------------------
31 Freid & Goldsman 94 Prop 13-1 2
- ----------------------------------------------------------------------------------------------------------------------------
32 Pegasus Property 65% CPI 2,754 $YR Pegasus 94 Base 12
- ----------------------------------------------------------------------------------------------------------------------------
33 Neilsen Elggren 93 Base 6
- ----------------------------------------------------------------------------------------------------------------------------
34 Largo 94 Base 0
- ----------------------------------------------------------------------------------------------------------------------------
35 Norwest Mortgage 96 Prop 13-1 $5.00
- ----------------------------------------------------------------------------------------------------------------------------
36 Westmount Management 95 Prop 13-1 0
- ----------------------------------------------------------------------------------------------------------------------------
37 Cruise Fairs 65% CPI 2,458 $/YR 94 Base 0
- ----------------------------------------------------------------------------------------------------------------------------
38 JVC Entertainment 94 Base 8
- ----------------------------------------------------------------------------------------------------------------------------
39 Paul Ray Company 65% CPI 25,328 $/YR Paul Ray 94 Base 0
- ----------------------------------------------------------------------------------------------------------------------------
40 Aaron Cushman 94 Base 0
- ----------------------------------------------------------------------------------------------------------------------------
41 Zolla & Meyer 94 Prop 13-1 5
- ----------------------------------------------------------------------------------------------------------------------------
42 Kopple & Klinger Kopple 94 Base 4
- ----------------------------------------------------------------------------------------------------------------------------
43 Federman, Grdiley 95 Base 0
- ----------------------------------------------------------------------------------------------------------------------------
44 Rosentein 95 Base 0
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 of 5
Rent Roll for North Tower CUSHMAN &
NORTH5.XLS WAKEFIELD
<PAGE>
<TABLE>
<CAPTION>
============================================================================================================================
Tenant Name/ Square Feet Lease Dates Minimum Adjust Annual
No. Description Suite Vacant Occupied Begin Ending Rent/PSF Date Rent
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
45 Neumeyer & Boyd 1100 5,765 Apr-94 Mar-99 $21.60 $124,524
- ----------------------------------------------------------------------------------------------------------------------------
46 Vacant-ISS-MTM 1105-V 339
- ----------------------------------------------------------------------------------------------------------------------------
47 Vacant 1110-V 1,164
- ----------------------------------------------------------------------------------------------------------------------------
48 Martin & Klein 1112-E 1,997 Jul-94 Jun-97 $20.40 $40,739
- ----------------------------------------------------------------------------------------------------------------------------
49 Alsace Development 1115 1,636 Dec-92 Nov-97 $24.00 $39,264
- ----------------------------------------------------------------------------------------------------------------------------
50 Frederick Cook 1130 2,842 Apr-93 Mar-98 $22.20 $63,092
- ----------------------------------------------------------------------------------------------------------------------------
51 Alexander Capital 1140 2,194 Aug-96 Jul-00 $22.20 $48,707
- ----------------------------------------------------------------------------------------------------------------------------
52 Toho 1150 1,598 Sep-95 Sep-00 $20.40 $32,599
- ----------------------------------------------------------------------------------------------------------------------------
53 GDC 1160 3,036 Jul-94 Jun-04 $0 Jul-94 $0
$19.80 Aug-94 $60,113
$0 Jul-95 $0
$19.80 Aug-95 $60,113
$0 Jul-96 $0
$19.80 Aug-96 $60,113
$0 Jul-97 $0
$19.80 Aug-97 $60,113
$0 Jul-98 $0
$19.80 Aug-98 $60,113
$25.80 Jul-99 $78,329
- ----------------------------------------------------------------------------------------------------------------------------
54 L & S Advisors 1180 2,823 Dec-92 Nov-97 $21.60 $60,976
- ----------------------------------------------------------------------------------------------------------------------------
55 Freddie MAC 1190 1,884 Sep-95 Aug-98 $21.60 $40,694
- ----------------------------------------------------------------------------------------------------------------------------
56 Wasser Rosenson et al 1200 13,084 Oct-96 Sep-02 $24.00 $314,016
- ----------------------------------------------------------------------------------------------------------------------------
-- Vacant 1210 3,241
- ----------------------------------------------------------------------------------------------------------------------------
57 GE Investment 1230-E 2,023 Jul-94 Jun-97 $21.00 $42,480
- ----------------------------------------------------------------------------------------------------------------------------
58 Stan Rosenfield 1240 1,377 Jul-93 Jun-98 $20.64 $28,421
- ----------------------------------------------------------------------------------------------------------------------------
59 Alexander, Hallora 1260 5,392 Sep-92 May-98 $28.20 Sep-92 $152,054
$29.05 Sep-93 $156,616
$29.92 Sep-94 $161,314
$30.81 Nov-95 $166,153
$31.74 Nov-96 $171,142
$32.69 Nov-97 $176,276
- ----------------------------------------------------------------------------------------------------------------------------
60 Cohen & Johnson 1300-E 17,126 May-92 Jun-97 $17.12 May-92 $293,265
$34.25 Aug-92 $586,530
$35.28 May-93 $604,125
$36.33 May-94 $622,249
$37.42 May-95 $640,917
$22.81 Jan-96 $390,588
$23.74 May-96 $406,571
$33.09 Jan-97 $566,699
$34.08 May-97 $583,654
- ----------------------------------------------------------------------------------------------------------------------------
61 Source Services 1350-T 8,091 Jan-97 Dec-01 $22.80 $184,475
- ----------------------------------------------------------------------------------------------------------------------------
62 Johnson & Higgins 1400 25,157 Jan-94 Mar-09 $19.36 Jan-94 $486,923
$21.23 Jan-99 $534,205
$23.63 Jan-04 $594,582
$27.00 Dec-05 $679,239
- ----------------------------------------------------------------------------------------------------------------------------
63 Valuation Councelor 1500 6,948 Nov-94 Oct-96 $21.00 Nov-94 $145,908
$22.20 Nov-95 $154,246
$23.40 Nov-96 $162,583
$24.60 Nov-97 $170,921
$25.80 Nov-98 $179,258
$27.00 Nov-99 $187,596
- ----------------------------------------------------------------------------------------------------------------------------
64 Valuation Councelor 1510 2,183 Mar-95 Oct-96 $21.00 Mar-95 $45,843
$22.20 Mar-96 $48,462
$23.40 Mar-97 $51,082
$24.60 Mar-98 $53,702
$25.80 Mar-99 $56,321
$27.00 Mar-00 $58,941
- ----------------------------------------------------------------------------------------------------------------------------
65 Kessler & Kessler 1520 3,657 Oct-96 Sep-00 $25.32 $92,595
- ----------------------------------------------------------------------------------------------------------------------------
66 Moreno Schlicht 1530 2,912 Dec-94 Nov-99 $22.80 $66,394
- ----------------------------------------------------------------------------------------------------------------------------
67 Singapore EcDvBank 1540 1,354 Jul-95 Jun-99 $22.80 $30,871
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
============================================================================================================================
Tenant Name/ Other Rent Escalations Reimbur- Free Rent TI's
No. Description Category Amount Misc./Other sements (mos.) (psf)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
45 Neumeyer & Boyd 94 Prop 13-1 0
- ----------------------------------------------------------------------------------------------------------------------------
46 Vacant-ISS-MTM
- ----------------------------------------------------------------------------------------------------------------------------
47 Vacant
- ----------------------------------------------------------------------------------------------------------------------------
48 Martin & Klein 94 Base 0
- ----------------------------------------------------------------------------------------------------------------------------
49 Alsace Development Alsace 93 Base 0
- ----------------------------------------------------------------------------------------------------------------------------
50 Frederick Cook 93 Base 0
- ----------------------------------------------------------------------------------------------------------------------------
51 Alexander Capital 96 Prop 13-1 0
- ----------------------------------------------------------------------------------------------------------------------------
52 Toho Base Year 0
- ----------------------------------------------------------------------------------------------------------------------------
53 GDC 94 Base 0
- ----------------------------------------------------------------------------------------------------------------------------
54 L & S Advisors L & S 93 Base
- ----------------------------------------------------------------------------------------------------------------------------
55 Freddie MAC 95 Base
- ----------------------------------------------------------------------------------------------------------------------------
56 Wasser Rosenson et al 96 Prop 13-1 $17.28
- ----------------------------------------------------------------------------------------------------------------------------
-- Vacant
- ----------------------------------------------------------------------------------------------------------------------------
57 GE Investment 94 Base 4
- ----------------------------------------------------------------------------------------------------------------------------
58 Stan Rosenfield 93 Base 0
- ----------------------------------------------------------------------------------------------------------------------------
59 Alexander, Hallora Alexander 94 Base 9
- ----------------------------------------------------------------------------------------------------------------------------
60 Cohen & Johnson 94 Prop 13-1 12
- ----------------------------------------------------------------------------------------------------------------------------
61 Source Services 96 Prop 13-1 0 $16.65
- ----------------------------------------------------------------------------------------------------------------------------
62 Johnson & Higgins 94 Prop 13-1 0
- ----------------------------------------------------------------------------------------------------------------------------
63 Valuation Councelor 95 Base 12
- ----------------------------------------------------------------------------------------------------------------------------
64 Valuation Councelor 95 Base 12
- ----------------------------------------------------------------------------------------------------------------------------
65 Kessler & Kessler 96 Prop 13-1 0
- ----------------------------------------------------------------------------------------------------------------------------
66 Moreno Schlicht 95 Prop 13-1 0
- ----------------------------------------------------------------------------------------------------------------------------
67 Singapore EcDvBank 95 Base 0
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
2 of 5
Rent Roll for North Tower CUSHMAN &
NORTH5.XLS WAKEFIELD
<PAGE>
<TABLE>
<CAPTION>
============================================================================================================================
Tenant Name/ Square Feet Lease Dates Minimum Adjust Annual
No. Description Suite Vacant Occupied Begin Ending Rent/PSF Date Rent
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
68 Really Administati 1550 8,081 Oct-94 Sep-99 $15.00 Oct-94 $121,215
$20.40 Oct-96 $164,852
$0 Sep-97 $0
$22.20 Oct-97 $179,398
$0 Sep-98 $0
$22.20 Oct-98 $179,398
$0 Sep-98 $0
- ----------------------------------------------------------------------------------------------------------------------------
69 Johnson & Higgins (N/A) 1550
- ----------------------------------------------------------------------------------------------------------------------------
70 Strook & Strook 1600 20,542 Jun-88 May-98 $25.80 $529,983
- ----------------------------------------------------------------------------------------------------------------------------
71 Snipper Wainer Markoff 1690 4,431 Oct-95 Sep-02 $21.00 $93,051
- ----------------------------------------------------------------------------------------------------------------------------
72 Tax Consulting Group 1700 15,311 Mar-96 Feb-97 $20.70 Mar-96 $316,938
$21.60 Dec-96 $330,718
- ----------------------------------------------------------------------------------------------------------------------------
73 Sitrick 1750 8,963 Dec-96 Nov-03 $22.20 $198,979
- ----------------------------------------------------------------------------------------------------------------------------
74 Sitrick & Company 1760 1,526 Dec-96 Nov-03 $24.60 $37,540
- ----------------------------------------------------------------------------------------------------------------------------
75 Strook & Strook 1800 25,615 Jun-88 May-98 $25.80 $660,867
- ----------------------------------------------------------------------------------------------------------------------------
76 Danning Gill 1900-T 18,892 Oct-94 Dec-99 $19.80 $374,062
- ----------------------------------------------------------------------------------------------------------------------------
77 Dwyer Curett 1950 6,870 May-95 Apr-00 $21.00 $144,270
- ----------------------------------------------------------------------------------------------------------------------------
78 Vacant 2000-V 3,805
- ----------------------------------------------------------------------------------------------------------------------------
79 Kagan Insurance 2010 4,651 Jun-93 May-98 $24.00 $111,624
- ----------------------------------------------------------------------------------------------------------------------------
80 Prudential 2050-T 12,403 Jun-96 May-03 $24.00 Jun-96 $267,672
$26.40 Jul-99 $327,439
$28.20 Jul-01 $349,765
- ----------------------------------------------------------------------------------------------------------------------------
81 Jose Eber 2080 4,930 Jul-96 Dec-00 $22.20 $109,446
- ----------------------------------------------------------------------------------------------------------------------------
82 Johnson & Higgins 2100 25,800 Jan-94 Jan-94 $19.43 Jan-94 $501,419
$21.23 Jan-99 $547,859
$22.76 Jan-04 $587,279
$27.00 Dec-05 $696,600
- ----------------------------------------------------------------------------------------------------------------------------
83 Johnson & Higgins 2200 25,800 Jan-94 Mar-09 $19.43 Jan-94 $501,419
$21.23 Jan-99 $547,859
$22.76 Jan-04 $587,279
$27.00 Dec-05 $696,600
- ----------------------------------------------------------------------------------------------------------------------------
84 Johnson & Higgins 2300 25,800 Jan-94 Mar-09 $19.43 Jan-94 $501,419
$21.23 Jan-99 $547,859
$22.76 Jan-04 $587,279
$27.00 Dec-05 $696,600
- ----------------------------------------------------------------------------------------------------------------------------
85 Johnson & Higgins 2400 25,800 Jan-94 Mar-09 $19.43 Jan-94 $501,419
$21.23 Jan-99 $547,859
$22.76 Jan-04 $587,279
$27.00 Dec-05 $696,600
- ----------------------------------------------------------------------------------------------------------------------------
86 JVC 2500 11,156 Nov-96 Oct-01 $25.80 $287,825
- ----------------------------------------------------------------------------------------------------------------------------
87 Klien & Martin 2550 14,785 Oct-96 Sep-03 $25.80 $381,453
- ----------------------------------------------------------------------------------------------------------------------------
88 Shapiro Rosell 2600 25,800 Jul-88 Jun-98 $26.62 $686,921
- ----------------------------------------------------------------------------------------------------------------------------
89 McCambridge 2700 22,616 Mar-91 Feb-01 $36.00 $814,176
- ----------------------------------------------------------------------------------------------------------------------------
90 Jack Samuels 2718 1,841 Jan-95 Dec-97 $22.80 $41,975
- ----------------------------------------------------------------------------------------------------------------------------
91 Tranquest 2730-E 1,504 Dec-93 Nov-96 $21.00 $31,584
- ----------------------------------------------------------------------------------------------------------------------------
92 Health & Tennis (EXPIRED) 2800 Aug-95 Jul-96 $22.56 $404,975
- ----------------------------------------------------------------------------------------------------------------------------
93 Merrill Lynch 2800 18,877 Jul-97 Jun-07 $26.16 $493,822
- ----------------------------------------------------------------------------------------------------------------------------
94 Vacant 2850-V 853
- ----------------------------------------------------------------------------------------------------------------------------
95 Joseph Tabak 2860 3,694 Oct-92 Sep-97 $31.20 Oct-92 $115,253
$32.14 Oct-93 $118,710
$33.10 Oct-94 $122,271
$34.09 Oct-95 $125,939
$35.12 Oct-96 $129,718
- ----------------------------------------------------------------------------------------------------------------------------
96 Exclusive Toy Company 2870 1,371 Aug-96 Aug-99 $24.60 $33,727
- ----------------------------------------------------------------------------------------------------------------------------
97 Garick & Tack 2890 1,925 Apr-96 Feb-01 $21.96 $42,273
- ----------------------------------------------------------------------------------------------------------------------------
98 Societe Generale 2900 9,793 Nov-92 Nov-01 $31.80 Nov-92 $311,417
$32.83 Dec-92 $321,538
$32.88 Dec-93 $321,988
$35.00 Dec-94 $342,778
$36.14 Dec-95 $353,918
</TABLE>
3 of 5
Rent Roll for North Tower CUSHMAN &
NORTH5.XLS WAKEFIELD
<TABLE>
<CAPTION>
============================================================================================================================
Tenant Name/ Other Rent Escalations Reimbur- Free Rent TI's
No. Description Category Amount Misc./Other sements (mos.) (psf)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
68 Really Administati 94 Base 9
- ----------------------------------------------------------------------------------------------------------------------------
69 Johnson & Higgins (N/A) None 0
- ----------------------------------------------------------------------------------------------------------------------------
70 Strook & Strook 50% CPI 171,006 $/YR Strook 94 Base 0
- ----------------------------------------------------------------------------------------------------------------------------
71 Snipper Wainer Markoff 95 Prop 13-1 0
- ----------------------------------------------------------------------------------------------------------------------------
72 Tax Consulting Group Tax-2 0
- ----------------------------------------------------------------------------------------------------------------------------
73 Sitrick 96 Prop 13-1 1 5Yr
- ----------------------------------------------------------------------------------------------------------------------------
74 Sitrick & Company 96 Prop 13-1 0 $7.00
- ----------------------------------------------------------------------------------------------------------------------------
75 Strook & Strook See Suite 1600 94 Base 9
- ----------------------------------------------------------------------------------------------------------------------------
76 Danning Gill 95 Prop 13-1 0
- ----------------------------------------------------------------------------------------------------------------------------
77 Dwyer Curett 95 Prop 13-1 0
- ----------------------------------------------------------------------------------------------------------------------------
78 Vacant
- ----------------------------------------------------------------------------------------------------------------------------
79 Kagan Insurance 93 Base 0
- ----------------------------------------------------------------------------------------------------------------------------
80 Prudential 96 Prop 13-1 0
- ----------------------------------------------------------------------------------------------------------------------------
81 Jose Eber 96 Prop 13-1 0
- ----------------------------------------------------------------------------------------------------------------------------
82 Johnson & Higgins 94 Prop 13-1 0
- ----------------------------------------------------------------------------------------------------------------------------
83 Johnson & Higgins 94 Prop 13-1 0
- ----------------------------------------------------------------------------------------------------------------------------
84 Johnson & Higgins 94 Prop 13-1 0
- ----------------------------------------------------------------------------------------------------------------------------
85 Johnson & Higgins 94 Prop 13-1 0
- ----------------------------------------------------------------------------------------------------------------------------
86 JVC 96 Prop 13-1 0
- ----------------------------------------------------------------------------------------------------------------------------
87 Klien & Martin Klien&Martin-3 0
- ----------------------------------------------------------------------------------------------------------------------------
88 Shapiro Rosell 50% CPI 98,161 $/YR Shapiro 94 Base 0
- ----------------------------------------------------------------------------------------------------------------------------
89 McCambridge 65% CPI 65,541 $/YR McCambridge 94 Base 16
- ----------------------------------------------------------------------------------------------------------------------------
90 Jack Samuels 95 Base 0
- ----------------------------------------------------------------------------------------------------------------------------
91 Tranquest 94 Base 0
- ----------------------------------------------------------------------------------------------------------------------------
92 Health & Tennis (EXPIRED) Base Year 1
- ----------------------------------------------------------------------------------------------------------------------------
93 Merrill Lynch Base Year 0
- ----------------------------------------------------------------------------------------------------------------------------
94 Vacant Base Year 0 Yes
- ----------------------------------------------------------------------------------------------------------------------------
95 Joseph Tabak Tabak 94 Base 10
- ----------------------------------------------------------------------------------------------------------------------------
96 Exclusive Toy Company 96 Prop 13-1 0
- ----------------------------------------------------------------------------------------------------------------------------
97 Garick & Tack 96 Prop 13-1 0
- ----------------------------------------------------------------------------------------------------------------------------
98 Societe Generale Societe General Societe General 19
</TABLE>
3 of 5
Rent Roll for North Tower CUSHMAN &
NORTH5.XLS WAKEFIELD
<PAGE>
<TABLE>
<CAPTION>
============================================================================================================================
Tenant Name/ Square Feet Lease Dates Minimum Adjust Annual
No. Description Suite Vacant Occupied Begin Ending Rent/PSF Date Rent
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$37.31 Dec-96 $365,420
$38.53 Dec-97 $377,296
$39.78 Dec-98 $389,559
$41.07 Dec-99 $402,219
$42.41 Dec-00 $415,291
- ----------------------------------------------------------------------------------------------------------------------------
99 Paterson Capital 2920 12,627 Sep-93 Aug-03 $29.40 Sep-93 $371,234
$32.40 Apr-96 $409,115
$33.00 Oct-98 $416,691
$33.60 Oct-99 $424,267
$34.20 Oct-00 $431,843
$34.80 Oct-01 $439,420
$35.40 Oct-02 $446,996
- ----------------------------------------------------------------------------------------------------------------------------
100 DT Joint Venture 2970-E 1,500 Jun-95 Dec-96 $12.69 $19,035
- ----------------------------------------------------------------------------------------------------------------------------
101 Winkler Securities 2980 1,278 Nov-95 Nov-99 $24.00 $30,672
- ----------------------------------------------------------------------------------------------------------------------------
102 Kenneth Shellan 2990 1,425 Oct-96 Dec-98 $25.20 $35,910
- ----------------------------------------------------------------------------------------------------------------------------
103 Paine Webber 3000 26,720 May-93 May-03 $23.39 May-95 $624,981
$18.74 Jun-96 $500,677
$35.11 Sep-96 $938,037
$37.48 Oct-96 $1,001,353
$38.41 Jun-97 $1,026,367
$39.37 Jun-98 $1,052,047
$40.36 Jun-99 $1,078,348
$41.37 Jun-00 $1,105,307
$42.40 Jun-01 $1,132,939
$43.46 Jun-02 $1,161,263
- ----------------------------------------------------------------------------------------------------------------------------
104 Altschuler Melvoin 3100 13,029 Feb-96 May-01 $31.74 Feb-96 $413,540
$32.52 Jun-96 $423,703
$33.34 Jun-97 $434,387
$34.18 Jun-98 $445,331
$35.06 Jun-99 $456,797
$35.98 Jun-00 $468,783
- ----------------------------------------------------------------------------------------------------------------------------
105 Murphey Marsilles 3110 8,481 Dec-96 Dec-04 $26.40 $223,898
- ----------------------------------------------------------------------------------------------------------------------------
106 Norris Bishton 3150 4,039 Dec-93 Dec-97 $21.60 $87,242
- ----------------------------------------------------------------------------------------------------------------------------
107 Incas France 3160 1,129 Jun-94 Jun-99 $25.80 $29,128
- ----------------------------------------------------------------------------------------------------------------------------
108 Seyfarth Shaw 3200 7,305 Jan-96 Dec-10 $25.20 Jan-96 $184,086
$27.72 Jan-06 $202,495
- ----------------------------------------------------------------------------------------------------------------------------
109 Seyfarth 3210 6,957 Jan-96 Dec-10 $25.20 Jan-96 $175,316
$27.72 Jan-06 $192,848
- ----------------------------------------------------------------------------------------------------------------------------
110 Barlow & Kabata 3230 1,803 Oct-95 Oct-98 $24.00 $43,272
- ----------------------------------------------------------------------------------------------------------------------------
111 Vacant 3240-V 1,569
- ----------------------------------------------------------------------------------------------------------------------------
112 Wyman Isaccs 3250 5,876 Feb-90 Dec-98 $38.93 Feb-90 $276,715
$39.93 Jan-94 $234,650
$41.33 Jan-95 $242,863
$42.78 Jan-96 $251,363
$44.28 Jan-97 $260,161
$45.82 Jan-98 $269,266
- ----------------------------------------------------------------------------------------------------------------------------
113 Seyfarth Shaw 3270 1,523 Jan-96 Dec-10 $25.20 Jan-96 $38,380
$27.72 Jan-06 $42,218
- ----------------------------------------------------------------------------------------------------------------------------
114 Seyfarth Shaw 3280 1,689 Jan-96 Dec-10 $25.20 Jan-96 $42,512
$27.72 Jan-06 $46,764
- ----------------------------------------------------------------------------------------------------------------------------
115 Seyfarth Shaw 3300 26,720 Jan-96 Dec-10 $25.20 Jan-96 $673,344
$27.72 Jan-06 $740,678
- ----------------------------------------------------------------------------------------------------------------------------
116 Gibbs, Giden 3400 26,720 Jan-95 Sep-01 $25.20 Jan-95 $673,344
$25.80 Jul-98 $689,376
- ----------------------------------------------------------------------------------------------------------------------------
117 Foley, Lardner, Weisbur 3500 26,720 Mar-97 Feb-09 $25.80 $689,376
- ----------------------------------------------------------------------------------------------------------------------------
118 Foley, Lardner, Weisbur 3600 26,720 Apr-93 Feb-09 $19.20 $513,024
- ----------------------------------------------------------------------------------------------------------------------------
119 Foley, Lardner, Weisbur 3600 Mar-97 Feb-09 $25.80 $689,376
- ----------------------------------------------------------------------------------------------------------------------------
120 Vacant 3700-V 9,319
- ----------------------------------------------------------------------------------------------------------------------------
121 TBG Financial 3720 13,030 Jan-96 Dec-02 $24.00 $312,720
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
4 of 5
Rent Roll for North Tower CUSHMAN &
NORTH5.XLS WAKEFIELD
<TABLE>
<CAPTION>
============================================================================================================================
Tenant Name/ Other Rent Escalations Reimbur- Free Rent TI's
No. Description Category Amount Misc./Other sements (mos.) (psf)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
99 Paterson Capital Paterson-6 1
- ----------------------------------------------------------------------------------------------------------------------------
100 DT Joint Venture Base Year 0
- ----------------------------------------------------------------------------------------------------------------------------
101 Winkler Securities Base Year 0
- ----------------------------------------------------------------------------------------------------------------------------
102 Kenneth Shellan Base Year 0 $5.00
- ----------------------------------------------------------------------------------------------------------------------------
103 Paine Webber Paine-3 0
- ----------------------------------------------------------------------------------------------------------------------------
104 Altschuler Melvoin Base Year 0
- ----------------------------------------------------------------------------------------------------------------------------
105 Murphey Marsilles Base Stop 1 1/2
- ----------------------------------------------------------------------------------------------------------------------------
106 Norris Bishton 94 Base 0
- ----------------------------------------------------------------------------------------------------------------------------
107 Incas France 94 Base 1
- ----------------------------------------------------------------------------------------------------------------------------
108 Seyfarth Shaw 94 Base 0
- ----------------------------------------------------------------------------------------------------------------------------
109 Seyfarth 96 Prop 13-1 0
- ----------------------------------------------------------------------------------------------------------------------------
110 Barlow & Kabata Base Year 0
- ----------------------------------------------------------------------------------------------------------------------------
111 Vacant Base Year 0 Yes
- ----------------------------------------------------------------------------------------------------------------------------
112 Wyman Isaccs 94 Prop 13-1 0
- ----------------------------------------------------------------------------------------------------------------------------
113 Seyfarth Shaw 96 Prop 13-1 0
- ----------------------------------------------------------------------------------------------------------------------------
114 Seyfarth Shaw 96 Prop 13-1 0
- ----------------------------------------------------------------------------------------------------------------------------
115 Seyfarth Shaw 96 Prop 13-1 0
- ----------------------------------------------------------------------------------------------------------------------------
116 Gibbs, Giden 96 Prop 13-1 0
- ----------------------------------------------------------------------------------------------------------------------------
117 Foley, Lardner, Weisbur Base Year 0 10 YR
- ----------------------------------------------------------------------------------------------------------------------------
118 Foley, Lardner, Weisbur Base Year 0
- ----------------------------------------------------------------------------------------------------------------------------
119 Foley, Lardner, Weisbur Base Year 0
- ----------------------------------------------------------------------------------------------------------------------------
120 Vacant Base Year 0
- ----------------------------------------------------------------------------------------------------------------------------
121 TBG Financial 96 Prop 13-1 0
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
4 of 5
Rent Roll for North Tower CUSHMAN &
NORTH5.XLS WAKEFIELD
<PAGE>
<TABLE>
<CAPTION>
============================================================================================================================
Tenant Name/ Square Feet Lease Dates Minimum Adjust Annual
No. Description Suite Vacant Occupied Begin Ending Rent/PSF Date Rent
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
122 Poms, Smith, Lande 3760 4,418 Jun-98 May-02 $25.27 Jun-98 $111,661
$30.00 Feb-99 $132,540
$32.40 Feb-01 $143,143
- ----------------------------------------------------------------------------------------------------------------------------
123 Poms, Smith, Lande 3800 27,143 Feb-94 May-02 $7.04 Feb-94 $191,079
$27.60 Apr-97 $749,119
$30.00 Feb-99 $814,260
$32.40 Feb-01 $879,400
- ----------------------------------------------------------------------------------------------------------------------------
124 Banque de Paribas 3900 10,712 Oct-84 Jun-01 $39.31 Oct-84 $421,110
$40.88 Sep-93 $437,906
$42.52 Sep-94 $455,472
$44.22 Sep-95 $473,691
$45.99 Sep-96 $492,639
$20.78 Aug-97 $222,595
$22.63 Sep-97 $242,413
$47.83 Dec-97 $512,355
$49.74 Sep-98 $532,815
$51.73 Sep-99 $554,132
$53.80 Sep-00 $576,306
- ----------------------------------------------------------------------------------------------------------------------------
125 Del Rubel 3910 8,489 May-93 Apr-99 $14.04 May-93 $119,186
$28.08 May-94 $238,371
- ----------------------------------------------------------------------------------------------------------------------------
126 Hitachi 3940 2,224 Feb-94 Jan-99 $24.00 $53,376
- ----------------------------------------------------------------------------------------------------------------------------
127 AMC 3945 2,124 Jan-96 Dec-98 $24.00 $50,976
- ----------------------------------------------------------------------------------------------------------------------------
128 Alan Goldman 3950-E 3,176 Nov-92 Jun-96 $23.61 Nov-92 $75,000
$34.01 Sep-94 $108,000
$23.61 Oct-95 $75,000
- ----------------------------------------------------------------------------------------------------------------------------
-- Vacant 3999 417
- ----------------------------------------------------------------------------------------------------------------------------
129 Gibson Dunn & Crut 4000 26,888 Apr-96 Feb-03 $49.02 Mar-93 $1,318,122
$51.01 Mar-94 $1,371,476
$80.70 Jan-95 $2,169,985
$33.84 Jan-96 $909,890
- ----------------------------------------------------------------------------------------------------------------------------
130 California Commerce Bank 4100 27,023 Feb-97 Jan-08 $26.52 $716,650
- ----------------------------------------------------------------------------------------------------------------------------
131 California Commerce Bank 4200 10,480 Feb-97 Jan-08 $26.52 $277,930
- ----------------------------------------------------------------------------------------------------------------------------
132 Vacant 4200-V 16,562
- ----------------------------------------------------------------------------------------------------------------------------
133 Johnson & Higgins 4300 9,432 Jan-96 Mar-09 $14.04 Jan-96 $132,425
$16.15 Jan-99 $152,327
$18.57 Jan-04 $175,152
- ----------------------------------------------------------------------------------------------------------------------------
134 Redev 43rd Floor 4300 Jan-20 Dec-20
- ----------------------------------------------------------------------------------------------------------------------------
135 Gibson Dunn (Expired) 4330-E 2,728 Jan-93 Apr-96 $15.95 $43,512
- ----------------------------------------------------------------------------------------------------------------------------
136 Vacant 4380-V 3,404
- ----------------------------------------------------------------------------------------------------------------------------
137 California Commerce Bank 4380 500 Feb-97 Jan-08 $14.40 $7,200
- ----------------------------------------------------------------------------------------------------------------------------
138 Vacant 4383-V 1,279
- ----------------------------------------------------------------------------------------------------------------------------
139 Vacant 4385-V 995
- ----------------------------------------------------------------------------------------------------------------------------
140 Poms, Smith, Lande 4390-E 2,359 Feb-94 Jan-97 $14.40 $33,969
- ----------------------------------------------------------------------------------------------------------------------------
141 Sarah Milliken 4392 919 Mar-94 Jan-99 $0 Mar-94 $0
$13.20 Feb-95 $12,131
$0 Jan-96 $0
$13.20 Feb-96 $12,131
$0 Jan-97 $0
$13.20 Feb-97 $12,131
$0 Jan-98 $0
$13.20 Feb-98 $12,131
$0 Jan-99
- ----------------------------------------------------------------------------------------------------------------------------
142 Vacant 4393-V 1,951
- ----------------------------------------------------------------------------------------------------------------------------
143 Redev 44th Floor 4400 Jan-20 Dec-20
- ----------------------------------------------------------------------------------------------------------------------------
144 Transit Casualty 4400 19,169 Dec-94 Dec-99 $12.00 $230,028
- ----------------------------------------------------------------------------------------------------------------------------
145 Vacant 4450-V 4,788
- ----------------------------------------------------------------------------------------------------------------------------
NORTH TOWER Totals (SF): 60,468 1,065,420 1,125,888 Total
============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
============================================================================================================================
Tenant Name/ Other Rent Escalations Reimbur- Free Rent TI's
No. Description Category Amount Misc./Other sements (mos.) (psf)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
122 Poms, Smith, Lande Base Year 0 $31.11
- ----------------------------------------------------------------------------------------------------------------------------
123 Poms, Smith, Lande 94 Prop 13-1 0
- ----------------------------------------------------------------------------------------------------------------------------
124 Banque de Paribas Banque de Parib Banque Par-10 0
- ----------------------------------------------------------------------------------------------------------------------------
125 Del Rubel l Rubel-4 0
- ----------------------------------------------------------------------------------------------------------------------------
126 Hitachi 94 Base 0
- ----------------------------------------------------------------------------------------------------------------------------
127 AMC Base Year 0
- ----------------------------------------------------------------------------------------------------------------------------
128 Alan Goldman Base Year 3
- ----------------------------------------------------------------------------------------------------------------------------
-- Vacant
- ----------------------------------------------------------------------------------------------------------------------------
129 Gibson Dunn & Crut 93 Prop 13-1 0
- ----------------------------------------------------------------------------------------------------------------------------
130 California Commerce Bank Base Year 0
- ----------------------------------------------------------------------------------------------------------------------------
131 California Commerce Bank Base Year 0
- ----------------------------------------------------------------------------------------------------------------------------
132 Vacant Base Year 0
- ----------------------------------------------------------------------------------------------------------------------------
133 Johnson & Higgins 94 Prop 13-1 0
- ----------------------------------------------------------------------------------------------------------------------------
134 Redev 43rd Floor None
- ----------------------------------------------------------------------------------------------------------------------------
135 Gibson Dunn (Expired) Base Year 0
- ----------------------------------------------------------------------------------------------------------------------------
136 Vacant Base Year 0
- ----------------------------------------------------------------------------------------------------------------------------
137 California Commerce Bank Base Year
- ----------------------------------------------------------------------------------------------------------------------------
138 Vacant Base Year 0
- ----------------------------------------------------------------------------------------------------------------------------
139 Vacant Base Year 0
- ----------------------------------------------------------------------------------------------------------------------------
140 Poms, Smith, Lande 94 Base 0
- ----------------------------------------------------------------------------------------------------------------------------
141 Sarah Milliken 94 Base 0
- ----------------------------------------------------------------------------------------------------------------------------
142 Vacant Base Year 0
- ----------------------------------------------------------------------------------------------------------------------------
143 Redev 44th Floor None
- ----------------------------------------------------------------------------------------------------------------------------
144 Transit Casualty 94 Prop 13-1 2
- ----------------------------------------------------------------------------------------------------------------------------
145 Vacant Base Year 0
- ----------------------------------------------------------------------------------------------------------------------------
NORTH TOWER Totals (SF): 94.6% Occupancy 5.4% Vacancy Century Plaza Towers
============================================================================================================================
</TABLE>
5 of 5
Rent Roll for North Tower CUSHMAN &
NORTH5.XLS WAKEFIELD
<PAGE>
Rent Roll [LOGO]
CENTURY PLAZA TOWERS CENTURY PLAZA TOWERS
2049 Century Park East, North Tower
<TABLE>
<CAPTION>
============================================================================================================================
Tenant Name/ Square Feet Lease Dates Minimum Adjust Annual
No. Description Suite Vacant Occupied Begin Ending Rent/PSF Date Rent
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 William McGarry (3,325 sf) 0 Sep-93 Aug-15 $11.40 $37,905
- ----------------------------------------------------------------------------------------------------------------------------
2 Bank of America 100 14,190 Oct-94 Sep-04 $18.00 Oct-94 $255,420
$30.95 Oct-99 $439,222
- ----------------------------------------------------------------------------------------------------------------------------
3 Bank of America 200 25,221 Oct-94 Sep-04 $22.80 Oct-94 $575,039
$24.00 Oct-99 $605,304
- ----------------------------------------------------------------------------------------------------------------------------
4 Bank of America 300 5,980 Oct-94 Sep-04 $22.80 Oct-94 $136,344
$24.00 Oct-99 $143,520
- ----------------------------------------------------------------------------------------------------------------------------
5 Vacant-Unisys 305-V 8,937
- ----------------------------------------------------------------------------------------------------------------------------
6 Vacant 310-V 10,304
- ----------------------------------------------------------------------------------------------------------------------------
7 NWQ Investment 400 20,700 Jul-97 Jun-07 $25.20 Jun-97 $521,640
$30.00 Jun-02 $621,000
- ----------------------------------------------------------------------------------------------------------------------------
8 Vacant 405 4,521
- ----------------------------------------------------------------------------------------------------------------------------
9 Littler Mendelson 500 25,221 Sep-96 Oct-07 $27.80 Sep-96 $702,153
$29.40 Nov-01 $741,497
- ----------------------------------------------------------------------------------------------------------------------------
10 Rosenfeld Lindsey 600 4,318 Jul-93 Jul-98 $21.00 $90,678
- ----------------------------------------------------------------------------------------------------------------------------
11 Littler Mendelson 610 5,384 Sep-96 Oct-07 $27.84 Sep-96 $149,891
$29.40 Nov-01 $158,290
- ----------------------------------------------------------------------------------------------------------------------------
12 Littler Mendelson 620 2,216 Mar-97 Oct-07 $27.84 Sep-96 $61,693
$29.40 Nov-01 $65,150
- ----------------------------------------------------------------------------------------------------------------------------
13 Littler Mendelson 630 1,400 Mar-97 Oct-07 $27.84 Mar-97 $38,976
$29.40 Nov-01 $41,160
- ----------------------------------------------------------------------------------------------------------------------------
14 Littler Mendelson 640 1,585 Mar-97 Oct-07 $27.84 Mar-97 $44,126
$29.40 Nov-01 $46,599
- ----------------------------------------------------------------------------------------------------------------------------
15 Search West 650 7,170 Jan-96 Mar-04 $20.40 $146,268
- ----------------------------------------------------------------------------------------------------------------------------
16 Co-Counsel 690 3,076 Nov-95 Nov-00 $21.60 $66,442
- ----------------------------------------------------------------------------------------------------------------------------
17 Unallocated Space 699 72
- ----------------------------------------------------------------------------------------------------------------------------
18 Transamerica 700 7,831 Jun-95 May-00 $20.40 $159,752
- ----------------------------------------------------------------------------------------------------------------------------
19 Jerome Levine 710 4,181 Feb-95 Jan-98 $21.00 $87,801
- ----------------------------------------------------------------------------------------------------------------------------
20 Shahrokh 720 958 Nov-95 Oct-97 $21.00 $20,118
- ----------------------------------------------------------------------------------------------------------------------------
21 Tisdale Nicholson 755 5,495 Aug-95 Jun-00 $21.60 $118,692
- ----------------------------------------------------------------------------------------------------------------------------
22 Laskl & Gordon 760 3,232 Jan-94 Dec-98 $24.00 $77,568
- ----------------------------------------------------------------------------------------------------------------------------
23 Marcus Prajogi 780 1,253 Mar-93 Feb-98 $21.00 $26,313
- ----------------------------------------------------------------------------------------------------------------------------
24 Transamerica 790 2,276 Dec-95 Nov-97 $20.40 $46,431
- ----------------------------------------------------------------------------------------------------------------------------
25 McGee Willis 800-T 6,086 Jul-94 Sep-99 $21.00 $127,806
- ----------------------------------------------------------------------------------------------------------------------------
26 COMP USA 810 5,580 Oct-95 Sep-00 $22.20 $123,876
- ----------------------------------------------------------------------------------------------------------------------------
27 Vacant 820-V 746
- ----------------------------------------------------------------------------------------------------------------------------
28 Int'l Inst Business 825 1,209 May-95 Apr-98 $21.00 $25,389
- ----------------------------------------------------------------------------------------------------------------------------
29 GEMS Int'l TV 830 1,157 Jan-95 Jan-98 $21.00 $24,297
- ----------------------------------------------------------------------------------------------------------------------------
30 Lifetime Entertainment 840 10,070 Jan-92 Jan-02 $30.00 Jan-92 $302,100
$31.20 Feb-93 $314,184
$32.45 Feb-94 $326,751
$33.75 Feb-95 $339,821
$35.10 Feb-96 $353,414
$36.50 Feb-97 $367,550
$37.96 Feb-98 $382,252
$39.48 Feb-99 $397,542
$41.06 Feb-00 $413,444
$42.70 Feb-01 $429,982
- ----------------------------------------------------------------------------------------------------------------------------
31 Unallocated Space 899 373
- ----------------------------------------------------------------------------------------------------------------------------
32 King Weiser 900 16,032 Jun-87 Dec-97 $24.00 $384,768
Option Dec-99 $24.00 $384,768
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
============================================================================================================================
Tenant Name/ Other Rent Escalations Reimbur- Free Rent TI's
No. Description Category Amount Misc./Other sements (mos.) (psf)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 William McGarry (3,325 sf) CPI 2 1/2% None 0
- ----------------------------------------------------------------------------------------------------------------------------
2 Bank of America Type 2 1995 0
- ----------------------------------------------------------------------------------------------------------------------------
3 Bank of America Type 2 1995 0
- ----------------------------------------------------------------------------------------------------------------------------
4 Bank of America Type 2 1995 0
- ----------------------------------------------------------------------------------------------------------------------------
5 Vacant-Unisys Base Year 0 < 12K
- ----------------------------------------------------------------------------------------------------------------------------
6 Vacant Base Year 0 1st>12K
- ----------------------------------------------------------------------------------------------------------------------------
7 NWQ Investment Base Year 0 $38.88
- ----------------------------------------------------------------------------------------------------------------------------
8 Vacant Base Year
- ----------------------------------------------------------------------------------------------------------------------------
9 Littler Mendelson Type 1-1996 14
- ----------------------------------------------------------------------------------------------------------------------------
10 Rosenfeld Lindsey BY-1994 1
- ----------------------------------------------------------------------------------------------------------------------------
11 Littler Mendelson Type 1-1996 14
- ----------------------------------------------------------------------------------------------------------------------------
12 Littler Mendelson Type 1-1996 14
- ----------------------------------------------------------------------------------------------------------------------------
13 Littler Mendelson Type 1-1996 14
- ----------------------------------------------------------------------------------------------------------------------------
14 Littler Mendelson Type 1-1996 14
- ----------------------------------------------------------------------------------------------------------------------------
15 Search West BY-1996 0
- ----------------------------------------------------------------------------------------------------------------------------
16 Co-Counsel BY-1996 0
- ----------------------------------------------------------------------------------------------------------------------------
17 Unallocated Space None
- ----------------------------------------------------------------------------------------------------------------------------
18 Transamerica Type 1-1995 0
- ----------------------------------------------------------------------------------------------------------------------------
19 Jerome Levine BY-1995 0
- ----------------------------------------------------------------------------------------------------------------------------
20 Shahrokh BY-1996 0
- ----------------------------------------------------------------------------------------------------------------------------
21 Tisdale Nicholson BY-1994 0
- ----------------------------------------------------------------------------------------------------------------------------
22 Laskl & Gordon Type 1-1994 0
- ----------------------------------------------------------------------------------------------------------------------------
23 Marcus Prajogi BY-1993 0
- ----------------------------------------------------------------------------------------------------------------------------
24 Transamerica Type1-1995 0
- ----------------------------------------------------------------------------------------------------------------------------
25 McGee Willis Type 1-1994 0
- ----------------------------------------------------------------------------------------------------------------------------
26 COMP USA Type 1-1995 0
- ----------------------------------------------------------------------------------------------------------------------------
27 Vacant Base Year 0 1st<12K
- ----------------------------------------------------------------------------------------------------------------------------
28 Int'l Inst Business BY-1995 0
- ----------------------------------------------------------------------------------------------------------------------------
29 GEMS Int'l TV BY-1995 0
- ----------------------------------------------------------------------------------------------------------------------------
30 Lifetime Entertainment Lifetime Rolling BY 16
- ----------------------------------------------------------------------------------------------------------------------------
31 Unallocated Space None
- ----------------------------------------------------------------------------------------------------------------------------
32 King Weiser BY-1994 0
BY-1994 0 Yes
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rent Roll for South Tower CUSHMAN &
SOUTH5.XLS WAKEFIELD
<PAGE>
<TABLE>
<CAPTION>
============================================================================================================================
Tenant Name/ Square Feet Lease Dates Minimum Adjust Annual
No. Description Suite Vacant Occupied Begin Ending Rent/PSF Date Rent
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
33 Lennar Partners 920-T 5,863 Apr-96 Mar-01 $22.68 $132,973
- ----------------------------------------------------------------------------------------------------------------------------
34 Thompson Trading 940 1,192 Nov-95 Dec-97 $22.80 $27,178
- ----------------------------------------------------------------------------------------------------------------------------
35 Berry & Callahan 950-T 2,229 Jul-94 Jul-99 $21.72 $48,414
- ----------------------------------------------------------------------------------------------------------------------------
36 Amer. Multi-Cine 1010 2,649 Aug-95 Nov-01 $24.60 $65,165
- ----------------------------------------------------------------------------------------------------------------------------
37 Amer. Multi-Cine 1020 8,718 Dec-94 Nov-01 $24.60 $214,463
- ----------------------------------------------------------------------------------------------------------------------------
38 Amer. Multi-Cine 1050 4,518 Aug-95 Nov-01 $24.60 $111,143
- ----------------------------------------------------------------------------------------------------------------------------
39 Arant Kleinberg 1080 9,336 Dec-92 Jul-98 $21.36 Dec-92 $199,417
$23.40 Dec-93 $218,462
$21.72 Aug-94 $202,784
$22.53 Feb-95 $210,301
$23.40 Mar-95 $218,462
$24.60 Aug-95 $229,656
$25.80 Aug-96 $240,869
$27.00 Aug-97 $252,072
- ----------------------------------------------------------------------------------------------------------------------------
40 Barrister Executiv 1100 25,221 Jan-93 Jun-00 $19.92 Jan-93 $502,402
$21.60 Jan-96 $544,774
$27.36 Jan-97 $690,047
$28.44 Jan-98 $717,285
$29.52 Jan-99 $744,524
$30.60 Jan-00 $771,763
- ----------------------------------------------------------------------------------------------------------------------------
41 Barrister Executiv 1200 25,221 Jan-93 Jun-00 $19.92 Jan-93 $502,402
$21.60 Jan-96 $544,774
$27.36 Jan-97 $690,047
$28.44 Jan-98 $717,285
$29.52 Jan-99 $744,524
$30.60 Jan-00 $771,763
- ----------------------------------------------------------------------------------------------------------------------------
42 Prudential Securit 1300 15,085 Feb-89 Dec-96 $26.40 $398,244
Option Dec-96 $26.40 $398,244
Option Dec-06 $26.40 $398,244
- ----------------------------------------------------------------------------------------------------------------------------
43 Kutack Rock 1330-E 3,179 Oct-94 Dec-96 $21.00 $66,759
- ----------------------------------------------------------------------------------------------------------------------------
44 Prudential 1350 6,935 Mar-95 Dec-96 $26.40 $183,084
Option Dec-06 $26.40 $183,084
- ----------------------------------------------------------------------------------------------------------------------------
45 Teledyne 1400-T 25,157 Aug-95 Jul-11 $23.40 Aug-95 $588,159
$25.80 Aug-02 $649,051
$30.00 Aug-06 $754,710
- ----------------------------------------------------------------------------------------------------------------------------
46 Teledyne 1500-T 25,135 Aug-95 Jul-11 $23.40 Aug-95 $588,159
$649,051
$754,710
- ----------------------------------------------------------------------------------------------------------------------------
47 Kelco Realty 1600 25,164 Jan-93 Dec-98 $15.50 Jan-93 $390,042
$17.43 Jan-95 $438,515
$21.41 Jan-97 $538,747
$23.40 Jan-99 $588,863
$25.39 Jan-01 $638,979
$29.38 Jan-03 $739,211
Option Dec-04 $15.50 Jan-93 $390,042
$17.43 Jan-95 $438,515
$21.41 Jan-97 $538,747
$23.40 Jan-99 $588,863
$25.39 Jan-01 $638,979
$29.38 Jan-03 $739,211
- ----------------------------------------------------------------------------------------------------------------------------
48 Unallocated Space 1600 64
- ----------------------------------------------------------------------------------------------------------------------------
49 Kelco Realty 1700 25,694 Jan-93 $15.50 Jan-93 $398,257
$17.57 Jan-95 $451,500
$21.59 Jan-97 $554,700
$23.60 Jan-99 $606,300
$25.61 Jan-01 $657,900
$29.62 Jan-03 $761,000
Option Dec-04 $15.50 Jan-93 $398,257
$17.57 Jan-95 $451,500
$21.59 Jan-97 $554,700
</TABLE>
<TABLE>
<CAPTION>
============================================================================================================================
Tenant Name/ Other Rent Escalations Reimbur- Free Rent TI's
No. Description Category Amount Misc./Other sements (mos.) (psf)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
33 Lennar Partners By-1996 0
- ----------------------------------------------------------------------------------------------------------------------------
34 Thompson Trading By-1996 0
- ----------------------------------------------------------------------------------------------------------------------------
35 Berry & Callahan Type 1-1994 2
- ----------------------------------------------------------------------------------------------------------------------------
36 Amer. Multi-Cine Type 3-1995 0
- ----------------------------------------------------------------------------------------------------------------------------
37 Amer. Multi-Cine Type 3-1995 0
- ----------------------------------------------------------------------------------------------------------------------------
38 Amer. Multi-Cine Type 3-1995 0
- ----------------------------------------------------------------------------------------------------------------------------
39 Arant Kleinberg By-1993 4
- ----------------------------------------------------------------------------------------------------------------------------
40 Barrister Executiv By-1993 4
- ----------------------------------------------------------------------------------------------------------------------------
41 Barrister Executiv By-1993 0
- ----------------------------------------------------------------------------------------------------------------------------
42 Prudential Securit Type 1-1995 0
Type 1-1995 0 $8.64
Type 1-1995 0 $4.32
- ----------------------------------------------------------------------------------------------------------------------------
43 Kutack Rock BY-1994 0
- ----------------------------------------------------------------------------------------------------------------------------
44 Prudential Type 1-1995 0
Type 1-1995 0 $4.32
- ----------------------------------------------------------------------------------------------------------------------------
45 Teledyne Type 2-1995 0
- ----------------------------------------------------------------------------------------------------------------------------
46 Teledyne Type 2-1995 0
- ----------------------------------------------------------------------------------------------------------------------------
47 Kelco Realty Type 8-1993 0
Type 8-1993 0 $7.50
- ----------------------------------------------------------------------------------------------------------------------------
48 Unallocated Space None
- ----------------------------------------------------------------------------------------------------------------------------
49 Kelco Realty Type 8-1993 0
Type 8-1993 0 $7.50
</TABLE>
Rent Roll for South Tower CUSHMAN &
SOUTH5.XLS WAKEFIELD
<PAGE>
<TABLE>
<CAPTION>
============================================================================================================================
Tenant Name/ Square Feet Lease Dates Minimum Adjust Annual
No. Description Suite Vacant Occupied Begin Ending Rent/PSF Date Rent
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$23.60 Jan-99 $606,300
$25.61 Jan-01 $657,900
$29.62 Jan-03 $761,000
50 Barrister Executiv 1800 25,800 Jan-93 Jun-00 $19.47 Jan-93 $502,402
$21.12 Jan-96 $544,774
$26.75 Jan-97 $690,047
$27.80 Jan-98 $717,285
$28.86 Jan-99 $744,524
$29.91 Jan-00 $771,763
- ----------------------------------------------------------------------------------------------------------------------------
51 Commonwealth of AS 1900 25,800 Sep-96 Aug-06 $22.20 Sep-96 $572,760
$24.60 Sep-01 $634,680
- ----------------------------------------------------------------------------------------------------------------------------
52 Saudi Arabian Air 2000 5,361 Dec-90 Nov-97 $32.40 $173,696
- ----------------------------------------------------------------------------------------------------------------------------
53 Smylie & Selman 2060 18,674 Jan-88 Dec-97 $24.60 $459,380
- ----------------------------------------------------------------------------------------------------------------------------
54 Video Conference 2090 1,631 Jan-96 Dec-25 $0.00 $0
- ----------------------------------------------------------------------------------------------------------------------------
55 Murphy Weir 2100 18,594 Feb-92 Jan-99 $31.47 Feb-95 $585,153
$32.41 Feb-96 $602,632
$33.39 Feb-97 $620,854
$34.39 Feb-98 $639,448
- ----------------------------------------------------------------------------------------------------------------------------
56 David Rosen 2120 2,523 Nov-95 Dec-00 $24.48 $61,763
- ----------------------------------------------------------------------------------------------------------------------------
57 Queensland Trade Bureau 2130 2,444 Sep-96 Aug-01 $27.00 $65,988
- ----------------------------------------------------------------------------------------------------------------------------
58 Tressler et al. 2140 2,248 Nov-95 Oct-00 $24.48 $55,031
- ----------------------------------------------------------------------------------------------------------------------------
59 Quisenberry 2200 10,909 Feb-94 Feb-04 $24.00 $261,816
$31.20 $340,361
- ----------------------------------------------------------------------------------------------------------------------------
60 Quisenbury & Barnanbel 2250 4,081 Aug-96 Feb-04 $24.00 $97,944
$31.20 $127,327
- ----------------------------------------------------------------------------------------------------------------------------
61 Mark Rosenberg 2270 2,032 Oct-95 Aug-99 $24.56 $49,896
- ----------------------------------------------------------------------------------------------------------------------------
62 Tsugawa Investment 2280 1,397 Apr-96 Dec-98 $24.00 $33,528
- ----------------------------------------------------------------------------------------------------------------------------
63 Gems Television 2290 2,557 Oct-96 Sep-01 $25.20 $64,436
- ----------------------------------------------------------------------------------------------------------------------------
64 Comedy Partners 2295 4,824 Oct-94 Oct-99 $22.80 $109,987
- ----------------------------------------------------------------------------------------------------------------------------
65 Unallocated Space 2299 52
- ----------------------------------------------------------------------------------------------------------------------------
66 Economic Analysis 2310 6,490 Jan-95 Oct-00 $24.26 Jan-95 $157,437
$24.60 Jan-97 $159,654
- ----------------------------------------------------------------------------------------------------------------------------
67 Anglo American 2330-T 1,732 Jun-96 Jul-01 $21.24 Jun-96 $36,788
$22.80 Jun-99 $39,490
- ----------------------------------------------------------------------------------------------------------------------------
68 Vacant 2350-V 17,452
- ----------------------------------------------------------------------------------------------------------------------------
69 Unallocated Space 2399 126
- ----------------------------------------------------------------------------------------------------------------------------
70 Lavely & Singer 2400 12,119 Jul-93 Jun-99 $27.00 $327,213
- ----------------------------------------------------------------------------------------------------------------------------
71 Brenner & Glassbur 2450 1,771 Apr-94 Mar-99 $11.70 Apr-94 $20,720
$23.40 Sep-94 $41,441
- ----------------------------------------------------------------------------------------------------------------------------
72 Rubenstein/Justman 2460 5,187 Jan-95 Jan-00 $23.28 $120,753
- ----------------------------------------------------------------------------------------------------------------------------
73 Mahoney Coppenrath 2490 5,575 Nov-96 Oct-04 $13.50 Nov-96 $75,263
$0.00 May-97 $0
$27.00 Jun-97 $150,525
- ----------------------------------------------------------------------------------------------------------------------------
74 Mahoney (Must Take) 2490 1,206 Nov-96 Oct-04 $13.50 Nov-96 $16,281
$0.00 May-97 $0
$27.00 Jun-97 $32,562
- ----------------------------------------------------------------------------------------------------------------------------
75 Kaufman & Bernstel 2500 7,722 Jun-94 May-04 $24.00 Jun-94 $185,328
$25.80 Jun-99 $199,228
- ----------------------------------------------------------------------------------------------------------------------------
76 Army Times Publish 2515 989 Nov-93 Oct-99 $28.08 Jan-93 $27,771
$21.48 Nov-94 $21,244
$22.56 Nov-95 $22,312
$23.52 Nov-96 $23,261
$24.60 Nov-97 $24,329
$25.56 Nov-98 $25,279
- ----------------------------------------------------------------------------------------------------------------------------
77 Shin Han Superior 2518 1,000 Oct-94 Dec-97 $22.20 $22,200
- ----------------------------------------------------------------------------------------------------------------------------
78 Noemi Pollack 2520 3,067 Jan-93 Dec-97 $21.60 $66,247
- ----------------------------------------------------------------------------------------------------------------------------
79 USA Network 2530 2,566 May-95 Apr-00 $24.00 $61,584
- ----------------------------------------------------------------------------------------------------------------------------
80 USA Network 2550 8,338 May-90 Apr-00 $35.40 May-90 $295,165
$17.70 Jun-90 $147,583
$35.40 Mar-92 $295,165
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
============================================================================================================================
Tenant Name/ Other Rent Escalations Reimbur- Free Rent TI's
No. Description Category Amount Misc./Other sements (mos.) (psf)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
50 Barrister Executiv By-1993 0
- ----------------------------------------------------------------------------------------------------------------------------
51 Commonwealth of AS
- ----------------------------------------------------------------------------------------------------------------------------
52 Saudi Arabian Air 65% CPI 14,436 $/YR Saudi Air Rolling BY 0
- ----------------------------------------------------------------------------------------------------------------------------
53 Smylie & Selman 50% CPI Rolling BY 0
- ----------------------------------------------------------------------------------------------------------------------------
54 Video Conference None 0
- ----------------------------------------------------------------------------------------------------------------------------
55 Murphy Weir Murphy/Weir Type 11-1992 15
- ----------------------------------------------------------------------------------------------------------------------------
56 David Rosen Type 1-1996 0
- ----------------------------------------------------------------------------------------------------------------------------
57 Queensland Trade Bureau Type 1-1995 0
- ----------------------------------------------------------------------------------------------------------------------------
58 Tressler et al. BY-1996 0
- ----------------------------------------------------------------------------------------------------------------------------
59 Quisenberry Type 1-1994
- ----------------------------------------------------------------------------------------------------------------------------
60 Quisenbury & Barnanbel Type 1-1996 0
- ----------------------------------------------------------------------------------------------------------------------------
61 Mark Rosenberg BY-1996 0
- ----------------------------------------------------------------------------------------------------------------------------
62 Tsugawa Investment BY-1996 0
- ----------------------------------------------------------------------------------------------------------------------------
63 Gems Television Type 1-1996 0 $10.00
- ----------------------------------------------------------------------------------------------------------------------------
64 Comedy Partners BY-1994 0
- ----------------------------------------------------------------------------------------------------------------------------
65 Unallocated Space None
- ----------------------------------------------------------------------------------------------------------------------------
66 Economic Analysis BY-1995 0
- ----------------------------------------------------------------------------------------------------------------------------
67 Anglo American Type 1-1996 0
- ----------------------------------------------------------------------------------------------------------------------------
68 Vacant Base Year 0 1st>12K
- ----------------------------------------------------------------------------------------------------------------------------
69 Unallocated Space None
- ----------------------------------------------------------------------------------------------------------------------------
70 Lavely & Singer Type 4-1993 4
- ----------------------------------------------------------------------------------------------------------------------------
71 Brenner & Glassbur BY-1994 0
- ----------------------------------------------------------------------------------------------------------------------------
72 Rubenstein/Justman Type 1-1994 0
- ----------------------------------------------------------------------------------------------------------------------------
73 Mahoney Coppenrath Type 1-1996 3
- ----------------------------------------------------------------------------------------------------------------------------
74 Mahoney (Must Take) Type 1-1996 0
- ----------------------------------------------------------------------------------------------------------------------------
75 Kaufman & Bernstel Type 3-1994 0
- ----------------------------------------------------------------------------------------------------------------------------
76 Army Times Publish BY-1993 3
- ----------------------------------------------------------------------------------------------------------------------------
77 Shin Han Superior BY-1994 0
- ----------------------------------------------------------------------------------------------------------------------------
78 Noemi Pollack BY-1993 0
- ----------------------------------------------------------------------------------------------------------------------------
79 USA Network BY-1995 0
- ----------------------------------------------------------------------------------------------------------------------------
80 USA Network 65% CPI 31,932 $/1YR USA Network Rolling BY 0
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rent Roll for South Tower CUSHMAN &
SOUTH5.XLS WAKEFIELD
<PAGE>
<TABLE>
<CAPTION>
============================================================================================================================
Tenant Name/ Square Feet Lease Dates Minimum Adjust Annual
No. Description Suite Vacant Occupied Begin Ending Rent/PSF Date Rent
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
81 M.G. Young 2580 2,068 Nov-94 Oct-97 $22.20 $45,865
- ----------------------------------------------------------------------------------------------------------------------------
82 Unallocated Space 2599 283
- ----------------------------------------------------------------------------------------------------------------------------
83 Century City Chamber 2610-E 2,254 Dec-95 Dec-96 $24.00 $54,096
- ----------------------------------------------------------------------------------------------------------------------------
84 Premisys (Building Mgmt) 2650-E 10,860 Mar-94 Dec-96 $24.58 $266,983
- ----------------------------------------------------------------------------------------------------------------------------
85 Legal Research 2660 3,611 Sep-94 Aug-97 $22.20 $80,164
- ----------------------------------------------------------------------------------------------------------------------------
86 Centennial Federal 2670 1,793 May-95 Apr-00 $22.20 $39,805
- ----------------------------------------------------------------------------------------------------------------------------
87 Mike Manesh 2680 1,354 Apr-94 Mar-99 $21.00 $28,434
- ----------------------------------------------------------------------------------------------------------------------------
88 Behr & Robinson 2690 6,114 Jan-95 Oct-00 $11.46 Jan-95 $70,065
$22.92 Feb-95 $140,133
- ----------------------------------------------------------------------------------------------------------------------------
89 Joseph Blake 2700 3,119 Jun-93 May-98 $24.60 Jun-93 $76,727
$25.34 Jun-94 $79,035
$26.10 Jun-95 $81,406
$26.88 Jun-96 $83,839
$27.69 Jun-97 $86,365
- ----------------------------------------------------------------------------------------------------------------------------
90 Cheung Am Corp. 2710-P 3,317 Jul-96 Jun-99 $24.60 $81,598
- ----------------------------------------------------------------------------------------------------------------------------
91 Fujisankei 2720 3,350 Oct-92 Sep-97 $34.80 $116,580
- ----------------------------------------------------------------------------------------------------------------------------
92 Davis Management 2725 635 Sep-94 Nov-98 $22.80 $14,478
- ----------------------------------------------------------------------------------------------------------------------------
93 Academy of Teutsch 2730 968 Dec-93 Dec-98 $21.60 $20,866
- ----------------------------------------------------------------------------------------------------------------------------
94 Metropolitan Life 2740-E 1,123 Jun-92 May-97 $34.80 Jun-92 $39,080
$35.84 Jun-93 $40,252
$36.92 Jun-94 $41,460
$36.03 Jun-95 $42,704
$39.17 Jun-96 $43,985
- ----------------------------------------------------------------------------------------------------------------------------
95 Ken Linder 2750 5,040 Jul-94 May-00 $18.48 Jul-94 $93,139
$21.60 Nov-94 $108,864
$24.00 May-97 $120,960
- ----------------------------------------------------------------------------------------------------------------------------
96 Dr. Norman Sprague 2760-E 803 Jan-96 Dec-96 $24.00 $19,272
- ----------------------------------------------------------------------------------------------------------------------------
97 Vacant 2770-V 1,341
- ----------------------------------------------------------------------------------------------------------------------------
98 Epstein Reed 2790 6,281 Oct-89 Sep-99 $25.80 $162,050
- ----------------------------------------------------------------------------------------------------------------------------
99 Century Park Inves 2800 52,414 Jan-93 Dec-00 $19.20 Jan-93 $1,006,349
$21.20 Jan-95 $1,111,177
$25.20 Jan-97 $1,320,832
$25.70 Jan-99 $1,441,385
$29.50 Jan-01 $1,546,213
$33.50 Jan-03 $1,755,869
- ----------------------------------------------------------------------------------------------------------------------------
100 Unallocated Space 2899 513
- ----------------------------------------------------------------------------------------------------------------------------
101 Unallocated Space 2999 513
- ----------------------------------------------------------------------------------------------------------------------------
102 The Boston Group 3000-T 18,522 Jul-96 Jun-06 $21.00 Jul-96 $388,962
$25.80 Jan-99 $477,868
$28.20 Jul-01 $522,320
- ----------------------------------------------------------------------------------------------------------------------------
103 Prudential Insurance 3090 8,198 Jan-93 Dec-02 $26.40 Jan-93 $216,427
$28.20 Jan-98 $231,183
- ----------------------------------------------------------------------------------------------------------------------------
104 Lebovits & David 3100 4,576 Apr-94 Apr-99 $22.00 $100,672
- ----------------------------------------------------------------------------------------------------------------------------
105 Loepold Petrich 3110-T 9,840 Aug-95 Aug-00 $22.20 $218,448
- ----------------------------------------------------------------------------------------------------------------------------
106 Barry Fisher 3160-E 4,018 Feb-92 Jan-97 $34.80 $139,826
- ----------------------------------------------------------------------------------------------------------------------------
107 Kleinberg & Lange 3180 8,264 Mar-96 Feb-03 $23.16 $191,394
- ----------------------------------------------------------------------------------------------------------------------------
108 Unallocated Space 3199 22
- ----------------------------------------------------------------------------------------------------------------------------
109 Proskauer Rose (26,720 sf) 3200 Sep-97 Aug-07 $27.00 $721,440
- ----------------------------------------------------------------------------------------------------------------------------
110 Weissburg & Aronso 3200+ 26,528 Sep-86 Feb-97 $25.20 $668,506
- ----------------------------------------------------------------------------------------------------------------------------
111 Unallocated Space 3299 192
- ----------------------------------------------------------------------------------------------------------------------------
112 Proskauer Rose (8,780 sf) 3300 Sep-97 Aug-07 $27.00 $237,060
- ----------------------------------------------------------------------------------------------------------------------------
-- Weissburg & Aronso 3300+ 11,126 Sep-86 Feb-97 $25.20 $280,375
- ----------------------------------------------------------------------------------------------------------------------------
113 Vacant 3301-V
- ----------------------------------------------------------------------------------------------------------------------------
114 Shamrock Investmen 3330 3,045 Jun-94 Aug-97 $23.75 Jun-94 $72,320
$25.20 Jan-97 $76,734
- ----------------------------------------------------------------------------------------------------------------------------
115 Vacant 3350-V 7,395
- ----------------------------------------------------------------------------------------------------------------------------
116 Vacant 3380-V 1,569
- ----------------------------------------------------------------------------------------------------------------------------
117 Vacant 3390-V 3,505
- ----------------------------------------------------------------------------------------------------------------------------
118 Unallocated Space 3399 80
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rent Roll for South Tower CUSHMAN &
SOUTH5.XLS WAKEFIELD
<TABLE>
<CAPTION>
============================================================================================================================
Tenant Name/ Other Rent Escalations Reimbur- Free Rent TI's
No. Description Category Amount Misc./Other sements (mos.) (psf)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
81 M.G. Young BY-1994 0
- ----------------------------------------------------------------------------------------------------------------------------
82 Unallocated Space None
- ----------------------------------------------------------------------------------------------------------------------------
83 Century City Chamber None 0
- ----------------------------------------------------------------------------------------------------------------------------
84 Premisys (Building Mgmt) BY-1993 0
- ----------------------------------------------------------------------------------------------------------------------------
85 Legal Research BY-1994 0
- ----------------------------------------------------------------------------------------------------------------------------
86 Centennial Federal BY-1995 0
- ----------------------------------------------------------------------------------------------------------------------------
87 Mike Manesh By-1994 0
- ----------------------------------------------------------------------------------------------------------------------------
88 Behr & Robinson Type 2-1995 0
- ----------------------------------------------------------------------------------------------------------------------------
89 Joseph Blake BY-1993 0
- ----------------------------------------------------------------------------------------------------------------------------
90 Cheung Am Corp. Type 1-1996 0
- ----------------------------------------------------------------------------------------------------------------------------
91 Fujisankei 65% CPI 4,932 $/YR Fujisankei Rolling BY 10
- ----------------------------------------------------------------------------------------------------------------------------
92 Davis Management BY-1994 0
- ----------------------------------------------------------------------------------------------------------------------------
93 Academy of Teutsch BY-1994 0
- ----------------------------------------------------------------------------------------------------------------------------
94 Metropolitan Life Metlife Rolling BY 9
- ----------------------------------------------------------------------------------------------------------------------------
95 Ken Linder BY-1994 0
- ----------------------------------------------------------------------------------------------------------------------------
96 Dr. Norman Sprague BY-1996 0
- ----------------------------------------------------------------------------------------------------------------------------
97 Vacant Base Year 0 1st<12K
- ----------------------------------------------------------------------------------------------------------------------------
98 Epstein Reed BY-1994 0
- ----------------------------------------------------------------------------------------------------------------------------
99 Century Park Inves Type 1-1993 0
- ----------------------------------------------------------------------------------------------------------------------------
100 Unallocated Space None
- ----------------------------------------------------------------------------------------------------------------------------
101 Unallocated Space None
- ----------------------------------------------------------------------------------------------------------------------------
102 The Boston Group Type 2-1996 0
- ----------------------------------------------------------------------------------------------------------------------------
103 Prudential Insurance Type 2-1993 0
- ----------------------------------------------------------------------------------------------------------------------------
104 Lebovits & David BY-1994 2
- ----------------------------------------------------------------------------------------------------------------------------
105 Loepold Petrich Type 1-1995 0
- ----------------------------------------------------------------------------------------------------------------------------
106 Barry Fisher 65% CPI 7,596 $/YR Barry Fisher Rolling BY 15
- ----------------------------------------------------------------------------------------------------------------------------
107 Kleinberg & Lange Type 2-1996 0
- ----------------------------------------------------------------------------------------------------------------------------
108 Unallocated Space None
- ----------------------------------------------------------------------------------------------------------------------------
109 Proskauer Rose (26,720 sf) Type 1-1996 0
- ----------------------------------------------------------------------------------------------------------------------------
110 Weissburg & Aronso 100% CPI 45,679 $/YR Weissburg Rolling BY 6
- ----------------------------------------------------------------------------------------------------------------------------
111 Unallocated Space None
- ----------------------------------------------------------------------------------------------------------------------------
112 Proskauer Rose (8,780 sf) Type 1-1996 0
- ----------------------------------------------------------------------------------------------------------------------------
-- Weissburg & Aronso 100% CPI 45,679 S/YR Weissburg Rolling BY 6
- ----------------------------------------------------------------------------------------------------------------------------
113 Vacant Base Stop
- ----------------------------------------------------------------------------------------------------------------------------
114 Shamrock Investmen Type 1-1994 6
- ----------------------------------------------------------------------------------------------------------------------------
115 Vacant Base Year 0 1st<12K
- ----------------------------------------------------------------------------------------------------------------------------
116 Vacant Base Year 0 1st<12K
- ----------------------------------------------------------------------------------------------------------------------------
117 Vacant Base Year 0 1st<12K
- ----------------------------------------------------------------------------------------------------------------------------
118 Unallocated Space None
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Rent Roll for South Tower CUSHMAN &
SOUTH5.XLS WAKEFIELD
<TABLE>
<CAPTION>
============================================================================================================================
Tenant Name/ Square Feet Lease Dates Minimum Adjust Annual
No. Description Suite Vacant Occupied Begin Ending Rent/PSF Date Rent
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
119 Sidley & Austin 3400 26,528 Feb-89 Jan-04 $0.00 Feb-89 $0
$0.00 Feb-93 $0
$0.00 Feb-94 $0
$34.35 Feb-96 $911,237
$35.38 Feb-97 $938,561
$36.44 Feb-98 $966,680
$37.54 Feb-99 $995,861
$38.66 Feb-00 $1,025,572
$39.82 Feb-01 $1,056,345
$41.02 Feb-02 $1,088,179
$42.25 Feb-03 $1,120,808
- ----------------------------------------------------------------------------------------------------------------------------
120 Unallocated Space 3499 192
- ----------------------------------------------------------------------------------------------------------------------------
121 Sidley & Austin 3500 26,528 Feb-89 Jan-04 $0.00 Feb-89 $0
$0.00 Feb-93 $0
$0.00 Feb-94 $0
$34.35 Feb-96 $911,237
$35.38 Feb-97 $938,561
$36.44 Feb-98 $966,680
$37.54 Feb-99 $995,861
$38.66 Feb-00 $1,025,572
$39.82 Feb-01 $1,056,345
$41.02 Feb-02 $1,088,179
$42.25 Feb-03 $1,120,808
- ----------------------------------------------------------------------------------------------------------------------------
122 Unallocated Space 3599 192
- ----------------------------------------------------------------------------------------------------------------------------
123 City National Bank 3600 26,720 May-89 Apr-04 $17.65 May-89 $471,588
$35.30 Jan-96 $943,164
- ----------------------------------------------------------------------------------------------------------------------------
124 Robins, Kaplan etc 3700-T 12,464 Sep-95 Aug-05 $20.79 Sep-95 $259,146
$22.80 Jan-97 $284,179
$26.40 Sep-00 $329,050
- ----------------------------------------------------------------------------------------------------------------------------
125 McDonald & Company 3720 3,559 Oct-93 Sep-98 $25.20 $89,687
- ----------------------------------------------------------------------------------------------------------------------------
126 Career Images 3730 1,599 Nov-97 Oct-02 $28.92 $46,243
- ----------------------------------------------------------------------------------------------------------------------------
127 Hoi Tak 3750 5,150 Aug-96 Jul-05 $24.00 $123,600
- ----------------------------------------------------------------------------------------------------------------------------
128 Hoi Tak Expansion 3760 1,695 Aug-96 Jul-05 $24.00 $40,680
- ----------------------------------------------------------------------------------------------------------------------------
129 KIA Intertrade 3770 2,475 Aug-96 Jun-99 $24.00 $59,400
- ----------------------------------------------------------------------------------------------------------------------------
130 Unallocated Space 3799 234
- ----------------------------------------------------------------------------------------------------------------------------
131 Aetna Life Insuranc 3800 26,948 Oct-87 Sep-97 $27.60 $743,764
- ----------------------------------------------------------------------------------------------------------------------------
132 Unallocated Space 3899 194
- ----------------------------------------------------------------------------------------------------------------------------
133 Sidley & Austin 3900 26,528 Feb-89 Jan-04 $0.00 Feb-89 $0
$0.00 Feb-93 $0
$0.00 Feb-94 $0
$34.35 Feb-96 $911,237
$35.38 Feb-97 $938,561
$36.44 Feb-98 $966,680
$37.54 Feb-99 $995,861
$38.66 Feb-00 $1,025,572
$39.82 Feb-01 $1,056,345
$41.02 Feb-02 $1,088,179
$42.25 Feb-03 $1,120,808
- ----------------------------------------------------------------------------------------------------------------------------
134 Unallocated Space 3999 614
- ----------------------------------------------------------------------------------------------------------------------------
135 Sidley & Austin 4000 14,423 Feb-89 Jan-04 $0.00 Feb-89 $0
$0.00 Feb-93 $0
$0.00 Feb-94 $0
$34.35 Feb-96 $495,430
$35.38 Feb-97 $510,286
$36.44 Feb-98 $525,574
$37.54 Feb-99 $541,439
$38.66 Feb-00 $557,593
$39.82 Feb-01 $574,324
$41.02 Feb-02 $591,631
$42.25 Feb-03 $609,372
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
============================================================================================================================
Tenant Name/ Other Rent Escalations Reimbur- Free Rent TI's
No. Description Category Amount Misc./Other sements (mos.) (psf)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
119 Sidley & Austin Type 2-1994 0
- ----------------------------------------------------------------------------------------------------------------------------
120 Unallocated Space None
- ----------------------------------------------------------------------------------------------------------------------------
121 Sidley & Austin Type 2-1994 0
- ----------------------------------------------------------------------------------------------------------------------------
122 Unallocated Space None
- ----------------------------------------------------------------------------------------------------------------------------
123 City National Bank 65% CPI 32,064 $/YR Rolling BY 0 $8.64
- ----------------------------------------------------------------------------------------------------------------------------
124 Robins, Kaplan etc Type 3-1995 0
- ----------------------------------------------------------------------------------------------------------------------------
125 McDonald & Company BY-1994 0
- ----------------------------------------------------------------------------------------------------------------------------
126 Career Images Base Year 0 $13.41
- ----------------------------------------------------------------------------------------------------------------------------
127 Hoi Tak BY-1996 0
- ----------------------------------------------------------------------------------------------------------------------------
128 Hoi Tak Expansion BY-1996 0
- ----------------------------------------------------------------------------------------------------------------------------
129 KIA Intertrade Type 1-1996 0
- ----------------------------------------------------------------------------------------------------------------------------
130 Unallocated Space None
- ----------------------------------------------------------------------------------------------------------------------------
131 Aetna Life Insurance 50% CPI 120,564 $/YR Aetna Rolling BY 0
- ----------------------------------------------------------------------------------------------------------------------------
132 Unallocated Space None
- ----------------------------------------------------------------------------------------------------------------------------
133 Sidley & Austin Type 2-1994 0
- ----------------------------------------------------------------------------------------------------------------------------
134 Unallocated Space None
- ----------------------------------------------------------------------------------------------------------------------------
135 Sidley & Austin Type 2-1994 0
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rent Roll for South Tower CUSHMAN &
SOUTH5.XLS WAKEFIELD
<PAGE>
<TABLE>
<CAPTION>
============================================================================================================================
Tenant Name/ Square Feet Lease Dates Minimum Adjust Annual
No. Description Suite Vacant Occupied Begin Ending Rent/PSF Date Rent
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
136 HBO 4010 12,214 Jan-96 Apr-03 $22.80 Jan-96 $278,479
$25.20 Mar-98 $307,793
- ----------------------------------------------------------------------------------------------------------------------------
137 HBO 4098 240 Jan-96 Apr-03 $12.00 $2,880
- ----------------------------------------------------------------------------------------------------------------------------
138 Unallocated Space 4099 169
- ----------------------------------------------------------------------------------------------------------------------------
139 HBO 4100 26,970 Mar-93 Feb-98 $22.80 Mar-93 $614,916
$25.20 Mar-98 $679,644
Option Apr-03 $22.80 Mar-93 $614,916
$25.20 Mar-98 $679,644
- ----------------------------------------------------------------------------------------------------------------------------
140 HBO 4200 26,970 Mar-93 Feb-98 $22.80 $614,916
Option Apr-03 $25.20 $679,644
- ----------------------------------------------------------------------------------------------------------------------------
141 HBO 4300 6,717 Mar-93 Feb-98 $13.20 $88,664
Option Apr-03 $14.40 $96,724
- ----------------------------------------------------------------------------------------------------------------------------
142 No Redevelop-43rd Flr 4300-V
- ----------------------------------------------------------------------------------------------------------------------------
143 Vacant 4320-V 3,367
- ----------------------------------------------------------------------------------------------------------------------------
144 Alschuler Grossman 4350 3,037 Jul-95 Dec-05 $15.60 $47,377
- ----------------------------------------------------------------------------------------------------------------------------
145 Vacant 4350-V
- ----------------------------------------------------------------------------------------------------------------------------
146 HBO 4360 3,393 Jan-96 Apr-03 $13.20 Jan-96 $44,788
$14.40 Mar-96 $48,859
- ----------------------------------------------------------------------------------------------------------------------------
147 HBO 4370 1,400 Mar-93 Feb-98 $13.20 $18,480
Option Apr-03 $14.40 $20,160
- ----------------------------------------------------------------------------------------------------------------------------
148 Teledyne 4385 2,841 Aug-95 Jul-11 $7.20 Aug-95 $20,455
- ----------------------------------------------------------------------------------------------------------------------------
149 Vacant 4390-V 2,384 $14.40 Aug-97 $40,910
- ----------------------------------------------------------------------------------------------------------------------------
150 Unallocated Space 4399 36
- ----------------------------------------------------------------------------------------------------------------------------
151 Alschuler Grossman 4400 9,657 Jan-97 Dec-05 $15.60 $150,649
- ----------------------------------------------------------------------------------------------------------------------------
152 No Redevelop-44th Flr 4400-V
- ----------------------------------------------------------------------------------------------------------------------------
153 Vacant 4450-V 14,300
- ----------------------------------------------------------------------------------------------------------------------------
SOUTH TOWER Totals (SF): 79,742 1,047,027 1,126,769 Total 92.9% O
============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
============================================================================================================================
Tenant Name/ Other Rent Escalations Reimbur- Free Rent TI's
No. Description Category Amount Misc./Other sements (mos.) (psf)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
136 HBO Type 2-1996 0
- ----------------------------------------------------------------------------------------------------------------------------
137 HBO Type 2-1996 0
- ----------------------------------------------------------------------------------------------------------------------------
138 Unallocated Space None
- ----------------------------------------------------------------------------------------------------------------------------
139 HBO Type 2-1994 0
Base Year 0
- ----------------------------------------------------------------------------------------------------------------------------
140 HBO Type 2-1994 0
Base Year 0
- ----------------------------------------------------------------------------------------------------------------------------
141 HBO Type 2-1994 0
Base Year 0
- ----------------------------------------------------------------------------------------------------------------------------
142 No Redevelop-43rd Flr None 0
- ----------------------------------------------------------------------------------------------------------------------------
143 Vacant Base Year 0 Yes
- ----------------------------------------------------------------------------------------------------------------------------
144 Alschuler Grossman BY-1995 0
- ----------------------------------------------------------------------------------------------------------------------------
145 Vacant Base Stop 0
- ----------------------------------------------------------------------------------------------------------------------------
146 HBO Type 2-1996 0
- ----------------------------------------------------------------------------------------------------------------------------
147 HBO Type 2-1994 0
- ----------------------------------------------------------------------------------------------------------------------------
148 Teledyne Type 3-1995 0
- ----------------------------------------------------------------------------------------------------------------------------
149 Vacant Base Year 0 $0.00
- ----------------------------------------------------------------------------------------------------------------------------
150 Unallocated Space None
- ----------------------------------------------------------------------------------------------------------------------------
151 Alschuler Grossman BY-1995
- ----------------------------------------------------------------------------------------------------------------------------
152 No Redevelop-44rd Flr None 0
- ----------------------------------------------------------------------------------------------------------------------------
153 Vacant Base Year 0 $0.00
- ----------------------------------------------------------------------------------------------------------------------------
SOUTH TOWER Totals (SF): Occupancy 92.7.1% Vacancy Century Plaza Towers
============================================================================================================================
</TABLE>
Rent Roll for South Tower
SOUTH5.XLS
Occupancy/Vacancy Ratio
South Tower
[THE FOLLOWING TABLE WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL]
Vacancy 7%
Occupancy 93%
CUSHMAN &
WAKEFIELD
<PAGE>
Rent Roll [LOGO]
CENTURY PLAZA TOWERS CENTURY PLAZA TOWERS
2029 and 2049 Century Park East - Concourse (Retail) Level
<TABLE>
<CAPTION>
==================================================================================================================
No. Tenant Name/ Square Feet Lease Dates Minimum Adjust Annual
Description Suite Vacant Occupied Begin Ending Rent/PSF Date Rent
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Kalousdian BLC-01 562 Mar-92 Feb-99 $21.60 Mar-92 $12,139
$10.80 Apr-92 $6,070
$21.60 Dec-92 $12,139
- ------------------------------------------------------------------------------------------------------------------
2 RealComm BLC-02 500 Jan-95 Dec-96 $30.00 Jan-95 $15,000
$30.48 Jan-96 $15,240
$30.96 Jan-97 $15,480
$31.56 Jan-98 $15,780
$32.04 Jan-99 $16,020
$32.52 Jan-00 $16,260
$33.00 Jan-01 $16,500
$33.48 Jan-02 $16,740
- ------------------------------------------------------------------------------------------------------------------
3 Always Vacant BLC-03 788
- ------------------------------------------------------------------------------------------------------------------
4 First L.A. Bank BLC-04 5,724 Jan-87 Jun-02 $33.00 Jan-87 $188,892
$33.99 Jan-94 $194,558
$35.01 Jan-95 $200,395
$36.06 Jan-96 $206,407
$37.14 Jan-97 $212,599
$38.26 Jan-98 $218,977
$39.40 Jan-99 $255,546
$40.59 Jan-00 $232,313
$41.80 Jan-01 $239,282
$43.06 Jan-02 $246,460
- ------------------------------------------------------------------------------------------------------------------
5 Pasqua BLC-07 1,062 Nov-90 Oct-00 $42.00 $44,604
- ------------------------------------------------------------------------------------------------------------------
6 Wall Street Deli BLC-08 8,500 Nov-96 Oct-96 $12.99 $110,415
- ------------------------------------------------------------------------------------------------------------------
7 Unallocated 247
- ------------------------------------------------------------------------------------------------------------------
8 Omega Travel BLC-10 650 Dec-92 Nov-97 $34.80 Dec-92 $22,620
$36.92 Dec-94 $23,998
$38.03 Dec-95 $24,717
$39.17 Dec-96 $25,459
- ------------------------------------------------------------------------------------------------------------------
9 Vacant BLC-11 631
- ------------------------------------------------------------------------------------------------------------------
10 Samaha Celeb. Clrs BLC-12 590 Sep-90 Aug-97 $42.00 Sep-90 $24,780
$20.96 Oct-90 $12,365
$42.00 May-91 $24,780
- ------------------------------------------------------------------------------------------------------------------
11 David Hunter BLC-13 1,020 Nov-90 Oct-97 $33.00 $33,660
- ------------------------------------------------------------------------------------------------------------------
12 Emack & Bolio's BLC-14 850 Jul-96 Jun-06 $20.40 Jul-96 $17,340
$24.00 Jul-01 $20,400
- ------------------------------------------------------------------------------------------------------------------
13 Vacant BLC-15 1,675
- ------------------------------------------------------------------------------------------------------------------
14 Emporium Plus BLC-16 2,070 Nov-92 Oct-99 $39.00 Nov-92 $80,730
$40.17 Nov-93 $83,151
$41.38 Nov-94 $85,647
$42.62 Nov-95 $88,216
$43.81 Nov-96 $90,682
$45.21 Nov-97 $93,588
$45.12 Nov-98 $93,396
- ------------------------------------------------------------------------------------------------------------------
15 Office Supplies BLC-17 1,475 Mar-95 Mar-00 $33.89 Mar-95 $49,988
$35.52 Sep-97 $52,392
- ------------------------------------------------------------------------------------------------------------------
16 Sutherland BLC-18 1,468 Jul-91 Jun-98 $28.61 $41,999
- ------------------------------------------------------------------------------------------------------------------
17 Always Vacant BLC-19 518 $0
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
====================================================================================================================================
No. Tenant Name/ Other Rent Escalations Retail Sales Reimbur- Free Rent TI's
Description Category Amount Misc./Other %Rent Sales Volume sements (mos.) (psf)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Kalousdian 65% CPI 624 $/YR 4.30 4 mos.
- ------------------------------------------------------------------------------------------------------------------------------------
2 RealComm 5.09 0
- ------------------------------------------------------------------------------------------------------------------------------------
3 Always Vacant Base Stop 0
- ------------------------------------------------------------------------------------------------------------------------------------
4 First L.A. Bank 4.84 3 mos.
- ------------------------------------------------------------------------------------------------------------------------------------
5 Pasqua 65% CPI 1,512 $/YR 8% $1,132,844 3.67 3 mos.
- ------------------------------------------------------------------------------------------------------------------------------------
6 Wall Street Deli Wall St. Prop 13-1 0
- ------------------------------------------------------------------------------------------------------------------------------------
7 Unallocated Base Stop
- ------------------------------------------------------------------------------------------------------------------------------------
8 Omega Travel
- ------------------------------------------------------------------------------------------------------------------------------------
9 Vacant Base Stop 0
- ------------------------------------------------------------------------------------------------------------------------------------
10 Samaha Celeb. Clrs 65% CPI 2,256 $/YR Samaha 4.84 0
- ------------------------------------------------------------------------------------------------------------------------------------
11 David Hunter 65% CPI 2,856 $/YR Hunter 0% $137,368 4.84 0
- ------------------------------------------------------------------------------------------------------------------------------------
12 Emack & Bolio's 8% Base Stop 4 mos.
- ------------------------------------------------------------------------------------------------------------------------------------
13 Vacant Base Stop 0
- ------------------------------------------------------------------------------------------------------------------------------------
14 Emporium Plus 0% $415,067 4.30 0
- ------------------------------------------------------------------------------------------------------------------------------------
15 Office Supplies 4.58 0
- ------------------------------------------------------------------------------------------------------------------------------------
16 Sutherland 65% CPI 2,988 $/YR 3.67 0
- ------------------------------------------------------------------------------------------------------------------------------------
17 Always Vacant Base Stop
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rent Roll for Concourse Level CUSHMAN &
RETAIL5.XLS WAKEFIELD
<PAGE>
<TABLE>
<CAPTION>
==================================================================================================================
No. Tenant Name/ Square Feet Lease Dates Minimum Adjust Annual
Description Suite Vacant Occupied Begin Ending Rent/PSF Date Rent
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
18 Kourash Bakhshayandeh BLC-24 1,394 Dec-96 Nov-08 $24.00 Dec-96 $33,456
$24.60 Jan-98 $34,292
$25.20 Jan-99 $35,129
$25.80 Jan-00 $35,965
$26.52 Jan-01 $36,969
$27.12 Jan-02 $37,805
$27.84 Jan-03 $38,809
$28.56 Jan-04 $39,813
$29.28 Jan-05 $40,816
$30.00 Jan-06 $41,820
- ------------------------------------------------------------------------------------------------------------------
CONCOURSE LEVEL Totals (SF) 3,859 25,865 29,724 Total 87.0% Oc
==================================================================================================================
</TABLE>
Occupancy/Vacancy Radio
Concourse Level
[THE FOLLOWING TABLE WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL]
Vacancy 13%
Occupancy 87%
Rent Roll for Concourse Level CUSHMAN &
RETAIL5.\XLS WAKEFIELD
<PAGE>
09-Dec-96
<TABLE>
<CAPTION>
DELTA TOWERS JOINT VENTURE
1995 ACTUAL OPERATING EXPENSES BY PROFIT CENTER
NOT TRENDED
NORTH SOUTH ABC
TOWER TOWER GARAGE CENTER RETAIL STORAGE OTHER TOTAL
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
7112-000 JANITORIAL/CLEANING 1,153,060 1,067,409 15,391 10,857 2,246,717
7114-000 CLEANING SUPPLIES 70,867 70,867 552 0 142,286
7116-000 TRASH REMOVAL 28,179 28,179 0 3,586 59,944
--------------------------------------------------------------------------------------------
TOTAL CLEANING 1,252,106 1,166,455 15,943 0 14,443 0 0 2,448,947
--------------------------------------------------------------------------------------------
7520-0000 ELEVATOR R&M 284,797 279,949 0 (1,258) 0 563,488
7518-0000 R&M HVAC 60,217 48,395 23,199 2,970 134,781
7518-0000 HVAC CONTRACT 25,915 25,915 14,515 928 67,273
7518-4662 R&M HVAC FILTERS 16,601 16,170 154 154 33,079
7518-0002 R&M EQUIPMENT 1,732 1,732 1,784 7 5,255
--------------------------------------------------------------------------------------------
TOTAL HVAC 104,465 92,212 39,652 0 4,059 0 0 240,388
7514-0000 ELECTRICAL R&M 52,394 57,658 6,508 1,140 117,700
7522-0000 STRUCTURE & ROOF 87,065 80,347 0 0 167,412
7516-0000 PLUMBING R&M 58,352 56,190 18,176 6,271 138,989
7142-0006 FIRE/LIFE SAFETY 80,918 76,858 22,171 1,349 181,296
7526-4610 PAINTING/DECORATING 86,063 88,944 2,696 177,703
7512-0000 R&M SUPPLIES 8,044 9,016 1,487 57 18,604
7526-0000 R&M OTHER BLDG MAINT 26,569 20,554 0 0 47,123
7526-0002 EARTHQUAKE REPAIRS 414 114 584 0 1,112
7526-0003 LIGHTING SUPPLIES 17,713 19,258 680 695 38,346
7526-0004 MAINTENANCE UNIFORMS 3,830 3,830 230 55 7,945
7526-0005 R&M MECHANICAL 20,032 28,353 5,412 295 54,092
7526-4612 R&M OBM CARPET CLEANING 24,083 24,975 0 0 49,058
7526-4616 R&M EXTERMINATOR 2,695 2,610 135 45 5,485
7526-4623 R&M KEYS & LOCKS 11,548 7,467 102 508 19,625
7526-4631 R&M MISCELLANEOUS 9,732 5,326 377 0 15,435
7526-4930 R&M FIRE/SMOKE ALARMS 21,865 23,409 0 0 45,274
--------------------------------------------------------------------------------------------
TOTAL OTHER BLDG M 146,525 144,912 9,007 0 1,655 0 0 302,099
7510-0000 R&M LABOR 470,365 470,365 28,286 10,732 979,748
7510-4602 R&M LABOR - DIRECT 83,100 83,100 7,276 10,913 184,389
--------------------------------------------------------------------------------------------
TOTAL LABOR ALLOCATION 553,465 553,465 35,562 0 21,645 0 0 1,164,137
--------------------------------------------------------------------------------------------
TOTAL R&M 1,454,044 1,430,535 133,772 (1,258) 36,119 0 0 3,053,212
--------------------------------------------------------------------------------------------
7122-0000 ELECTRICITY 1,809,877 1,559,668 293,965 102,999 4,041 3,770,550
6128-0005 LESS REIMBURSEMENT (43,377) (1,730) 0 (27,753) (72,860)
--------------------------------------------------------------------------------------------
NET ELECTRICITY 1,766,500 1,557,938 293,965 0 75,246 4,041 0 3,697,690
7136-0000 CHILLED WATER 1,390,056 1,261,444 0 78,404 2,729,904
6128-0002 LESS REIMBURSEMENT (319,080) (319,433) 0 (37,484) (675,997)
--------------------------------------------------------------------------------------------
NET CHILLED WATER 1,070,976 942,011 0 0 40,920 0 0 2,053,907
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NORTH SOUTH ABC
TOWER TOWER GARAGE CENTER RETAIL STORAGE OTHER TOTAL
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
7130-0000 WATER 57,790 57,790 5,717 3,599 3 124,899
--------------------------------------------------------------------------------------------
TOTAL UTILITIES 2,895,266 2,557,739 299,682 0 119,765 4,044 0 5,876,496
--------------------------------------------------------------------------------------------
7150-0000 LANDSCAPING/GROUNDS 72,985 71,072 0 0 144,057
7142-0008 CONCIERGE 60,477 56,084 0 0 116,561
7142-0000 SECURITY CONTRACT SVC 399,934 399,179 390,775 204,858 1,394,746
7146-0000 OTHER SECURITY EXPENSE 27,179 27,319 13,205 2,490 70,193
--------------------------------------------------------------------------------------------
TOTAL GRNDS/SECURITY 560,575 553,654 403,980 0 207,348 0 0 1,725,557
--------------------------------------------------------------------------------------------
7210-0000 MANAGEMENT FEES 616,426 560,884 208,357 26,546 15,127 10,739 0 1,438,079
7944-0000 PROF FEES - AUDIT 13,585 15,248 1,250 4,935 625 35,643
7526-0006 OFFICE EQUIP R&M 7,118 7,118 569 9 72 14,886
7938-4221 OFFICE FURN/EQUIP RENT 20,171 20,171 0 70 40,412
7938-4220 OFFICE SUPPLIES 34,566 34,416 0 622 69,604
7938-4221 PRINTING/FORMS 7,311 7,337 68 38 114 14,868
--------------------------------------------------------------------------------------------
TOTAL OFFICE SUPPLIES 41,877 41,753 68 38 736 0 0 84,472
--------------------------------------------------------------------------------------------
7938-4212 TELEPHONE 26,266 26,208 6 54 845 53,379
7938-4223 POSTAGE 1,312 1,312 0 0 2,624
7934-0000 OFFICE RENT ONLY 82,231 82,231 1,874 8,918 175,254
--------------------------------------------------------------------------------------------
TOTAL ADMINISTRATIVE 808,986 754,925 212,124 31,582 26,393 10,739 0 1,844,749
--------------------------------------------------------------------------------------------
7626-0000 REAL ESTATE TAXES 796,359 866,936 508,187 498,024 50,203 2,719,709
6124-0000 LESS REIMBURSEMENT (4,605) (15,067) 0 (498,024) (7,998) (525,694)
--------------------------------------------------------------------------------------------
NET REAL ESTATE TAXES 791,754 851,869 508,187 0 42,205 0 0 2,194,015
7612-0000 LIABILITY INSURANCE 131,080 131,080 3,551 8,549 274,260
7622-0000 EARTHQUAKE INSURANCE 987,829 981,861 69,622 69,225 2,108,537
7616-0000 MISC INSURANCE COVERAGE 11,088 11,088 3,776 1,331 27,283
7628-0000 PERSONAL PROP TAXES 5,013 5,013 264 0 10,290
7632-0000 OTHER TAXES (G.R.T.) 36,234 33,487 0 243 1,289 1,260 329 72,842
--------------------------------------------------------------------------------------------
TOTAL FIXED EXPENSE 1,962,998 2,014,398 585,400 243 122,599 1,260 329 4,687,227
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
^ AMORITIZATION 0
--------------------------------------------------------------------------------------------
TOTAL ESCALATABLE EXP 8,933,975 8,477,706 1,650,901 30,567 526,667 16,043 329 19,636,188
============================================================================================
^ AMORTIZATION NUMBERS ARE ON A SEPARATE SCHEDULE.
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
DELTA TOWERS JOINT VENTURE
1995 ACTUAL OPERATING EXPENSES BY PROFIT CENTER
NOT TRENDED
NON-ESCALATED EXPENSES
<TABLE>
<CAPTION>
NORTH SOUTH ABC
TOWER TOWER GARAGE CENTER
------------------------------------------------------
<S> <C> <C> <C> <C>
TOTAL ESCALATABLE EXP. 8,933,975 8,477,706 1,650,901 30,567
WINDOW CLEANING 8,274 0 0 0
CONTRACT CLEANING EX 0 0 2,686 0
ELECTRICITY EX 0 0 510,490 0
OIL AND GAS 1,503 1,503 623 0
WATER EX 0 0 874 0
SEWER TREATMENT 0 0 5,278 0
R/M STRUCUTRAL AND ROOF 225 0 0 0
ALTERATIONS TENANT SUITE 90,109 64,584 0 0
ALTERATIONS TENANT SUITE 4,121 23,736 0 0
SIGNS AND GRAPHICS 11,983 12,912 314 0
SECURITY LABOR 46,479 46,479 4,742 0
SECURITY CONTRACT SERVE E 0 0 84,438 0
GARDEN AND GROUNDS 70 70 0 0
PARKING/GARAGE GEN 31 31 136 0
PARKING/GARAGE GEN - EXP 0 0 2,062,088 0
LEASING COMMISSION EXP 4,436 0 0 0
CASUALTY LOSS EXP 2,558 2,913 0 0
CASUALTY LOSS EXP EX 253 0 0 0
PROVISION BAD DEBT (181,643) (56,819) 13,293 74,212
CHARITABLE CONTRIB 100 100 0 0
ASSOCIATION DUES 6,693 6,721 0 0
OTHER ADMINISTRATIVE 2,770 2,770 3,489 0
OTHER ADMINISTRATIVE EXP 0 0 0 0
GENERAL LEASING EXP 4,296 5,461 0 0
OTHER ADM MISCELLANEOUS 18,216 17,345 2,049 0
ADMINISTRATIVE LABOR 180,784 180,784 10,979 0
TEMPORARY LABOR 11,399 13,899 0 0
OFFICE EXPENSES 4,727 (28,680) 0 0
OFFICE EXPENSES EX 1,328 1,328 568 0
MESSENGER SERVICE 4,292 4,227 0 0
ADVERTISING AND PROMO (8,878) (8,236) 0 0
AGENCY FEES 4,294 4,294 0 0
AD PRODUCTION 767 767 0 0
AD PLACEMENT 32,079 31,215 0 0
NEWSLETTER 5,107 5,106 0 0
PRINTED MATERIAL 18,618 18,618 0 0
TENANT EVENTS 63,236 63,397 0 0
BROKER EVENTS 26,183 25,584 0 0
GIFTS 27,911 29,097 0 0
TICKETS 4,394 4,394 0 0
COMMUNITY RELATIONS 9,849 9,849 0 0
<CAPTION>
RETAIL STORAGE OTHER TOTAL
------------------------------------------------------
<S> <C> <C> <C> <C>
TOTAL ESCALATABLE EXP. 526,667 16,043 329 19,636,188
WINDOW CLEANING 0 0 0 8,274
CONTRACT CLEANING EX 0 0 0 2,686
ELECTRICITY EX 0 520 0 511,010
OIL AND GAS 37 0 0 3,666
WATER EX 0 0 0 874
SEWER TREATMENT 0 0 0 5,278
R/M STRUCUTRAL AND ROOF 0 0 0 225
ALTERATIONS TENANT SUITE 0 0 0 154,693
ALTERATIONS TENANT SUITE 0 0 0 27,857
SIGNS AND GRAPHICS 0 0 0 25,209
SECURITY LABOR 5,530 0 0 103,230
SECURITY CONTRACT SERVE E 0 0 0 84,438
GARDEN AND GROUNDS 0 0 0 140
PARKING/GARAGE GEN 0 0 0 198
PARKING/GARAGE - EXP 0 0 0 2,062,088
LEASING COMMISSION EXP 0 0 0 4,436
CASUALTY LOSS EXP 0 0 0 5,471
CASUALTY LOSS EXP EX 0 0 0 253
PROVISION BAD DEBT 198,164 5,734 0 52,941
CHARITABLE CONTRIB 0 0 0 200
ASSOCIATION DUES 0 0 0 13,414
OTHER ADMINISTRATIVE 0 0 0 9,029
OTHER ADMINISTRATIVE EXP 0 0 0 0
GENERAL LEASING EXP 0 0 0 9,757
OTHER ADM MISCELLANEOUS 0 0 0 37,610
ADMINISTRATIVE LABOR 20,785 0 0 393,332
TEMPORARY LABOR 0 0 0 25,298
OFFICE EXPENSES 0 0 0 (23,953)
OFFICE EXPENSES EX 0 0 805 4,029
MESSENGER SERVICE 0 0 0 8,521
ADVERTISING AND PROMO 0 0 0 (17,114)
AGENCY FEES 0 0 0 8,588
AD PRODUCTION 0 0 0 1,534
AD PLACEMENT 0 0 0 63,294
NEWSLETTER 0 0 0 10,213
PRINTED MATERIAL 0 0 0 37,236
TENANT EVENTS 0 0 0 126,633
BROKER EVENTS 0 0 0 51,767
GIFTS 0 0 0 57,008
TICKETS 0 0 0 8,788
COMMUNITY RELATIONS 0 0 0 19,698
</TABLE>
CUSHMAN &
WAKEFIELD (R)
<PAGE>
DELTA TOWERS JOINT VENTURE
1995 ACTUAL OPERATING EXPENSES BY PROFIT CENTER
NOT TRENDED
NON-ESCALATED EXPENSES
<TABLE>
<CAPTION>
NORTH SOUTH ABC
TOWER TOWER GARAGE CENTER
------------------------------------------------------
<S> <C> <C> <C> <C>
MERCHANT ASSOCIATION 132 132 0 0
CONTINGENCY 700 700 0 0
MARKETING CENTER 13 13 0 0
ADV/PRO PRINTED MATERIALS 876 1,809 0 0
A/P TENANT RELATIONS 95 95 0 0
A/P MISC MARKETING 4,579 4,579 0 0
A/P GENERAL ADVERTISING 830 830 0 0
A/P NATIONAL ADVERTISING 7 7 0 0
LEGAL FEES 80,991 134,270 1,514 (390,410)
LEGAL FEES - EX 0 0 163 34,333
AUDIT FEES EX 1,439 0 0 0
OTHER PROFESSIONALD FEES 64,287 69,687 79,834 421
PROFESSIONAL FEES EX 7,632 7,633 9,600 12,912
PROF FEES CONSULTING 175 175 0 24,000
COMMON AREA EXPENSES 26,319 34,644 0 0
COMMON AREA EXPENSES EX 388 3,451 0 0
GENERAL LIABILITY INSURANCE 0 0 10,697 0
INSURANCE - EX 0 0 17,070 0
RE TAXES NON ESCALATABLE 0 0 353,080 0
PERSONAL PROPERTY & OCCUP 0 0 1,368 0
OTHER TAXES NON-ESCALATABL 0 0 54,618 2,241
EXCISE TAX NEHO 0 0 399 0
7134-0000 DIFFERENCE IN ACCOUNT 524 1,342 0 0
NON-ESCALATED EXP TOTAL 595,551 742,816 3,230,390 (242,291)
TOTAL EXCALATABLE PLUS EXCLUSIONS 9,529,526 9,220,522 4,881,291 (211,724)
PER FINANCIAL STATEMENTS
TOTAL OPERATING COSTS 7,928,995 7,527,286 3,858,659 (214,209)
TOTAL FIXED EXPENSES 1,967,603 2,029,465 1,022,631 500,508
LESS R.E. TAX REIMBURSEMENT (4,605) (15,067) 0 (498,024)
LESS UTILITY INCOME (362,457) (321,163) 0 0
TOTAL 9,529,536 9,220,521 4,881,290 (211,725)
<CAPTION>
RETAIL STORAGE OTHER TOTAL
------------------------------------------------------
<S> <C> <C> <C> <C>
MERCHANT ASSOCIATION 0 0 0 264
CONTINGENCY 0 0 0 1,400
MARKETING CENTER 0 0 0 26
ADV/PRO PRINTED MATERIALS 0 0 0 2,685
A/P TENANT RELATIONS 0 0 0 190
A/P MISC MARKETING 0 0 0 9,158
A/P GENERAL ADVERTISING 0 0 0 1,660
A/P NATIONAL ADVERTISING 0 0 0 14
LEGAL FEES (2,220) 0 0 (175,855)
LEGAL FEES - EX 0 0 0 34,496
AUDIT FEES EX 0 0 0 1,439
OTHER PROFESSIONALD FEES 10,867 0 0 225,096
PROFESSIONAL FEES EX 0 0 0 37,777
PROF FEES CONSULTING 0 0 0 24,350
COMMON AREA EXPENSES 0 0 0 60,963
COMMON AREA EXPENSES EX 0 0 0 3,839
GENERAL LIABILITY INSURANCE 0 0 0 10,697
INSURANCE - EX 0 0 0 17,070
RE TAXES NON ESCALATABLE 0 0 0 353,080
PERSONAL PROPERTY & OCCUP 0 0 0 1,368
OTHER TAXES NON-ESCALATABL 0 57 0 56,916
EXCISE TAX NEHO 0 0 0 399
7134-0000 DIFFERENCE IN ACCOUNT 20 0 0 1,886
0
NON-ESCALATED EXP TOTAL 233,185 6,311 805 4,566,767
TOTAL EXCALATABLE PLUS EXCLUSIONS 759,852 22,354 1,134 24,202,960
PER FINANCIAL STATEMENTS
TOTAL OPERATING COSTS 702,490 21,036 805 19,825,062
TOTAL FIXED EXPENSES 130,596 1,317 329 5,652,449
LESS R.E. TAX REIMBURSEMENT (7,998) 0 0 (525,694)
LESS UTILITY INCOME (65,237) 0 0 (748,857)
- ----------------------------------------------------------------------------------------------
TOTAL 759,851 22,353 1,134 24,202,955
- ----------------------------------------------------------------------------------------------
</TABLE>
CUSHMAN &
WAKEFIELD (R)
<PAGE>
<TABLE>
<CAPTION>
GL20R0 1997 BUDGET REPORT Page: 1
26 - CENTURY PLAZA TOWERS Date: 11-15-96
Square footage: 2,279,885 Time: 02:47 PM
JAN FEB MAR APR MAY JUN JUL
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME
51100 BASE RENTS 4,107,848 4,189,124 4,394,824 4,485,720 4,491,611 4,467,922 4,451,399
51300 CURRENT ESCALATION 138,101 117,711 139,525 137,525 114,176 113,596 111,629
51500 BASE RENTS - RETAIL 39,758 39,758 39,758 39,758 39,758 39,758 39,758
51000 RENTAL INCOME - GROUND 40,000 40,000 40,000 40,000 40,000 40,000 40,000
52400 FREE RENT 97,002 92,071 104,117 92,926 92,926 95,289 92,926
LESS FREE RENT
52900 LESS FREE RENT 97,002- 92,071- 104,137- 92,926 92,926 95,280 97,915-
------------------------------------------------------------------------------------------
TOTAL LESS FREE RENT 97,002- 92,071- 104,137- 92,926 92,926 95,280 97,915-
------------------------------------------------------------------------------------------
TOTAL ACTUAL RENTS 4,325,707 4,406,613 4,612,107 4,703,003 4,685,545 4,661,276 4,642,786
PARKING
53100 PARKING - MONTHLY 611,916 611,916 611,916 611,916 611,917 611,917 611,917
------------------------------------------------------------------------------------------
TOTAL PARKING 611,916 611,916 611,916 611,916 611,917 611,917 611,917
------------------------------------------------------------------------------------------
TOTAL INCOME 4,937,623 5,018,529 5,224,023 5,314,919 5,297,462 5,273,192 5,254,703
OPERATING EXPENSES
BUILDING ADMINISTRATION
61100 LABOR - ADMINISTRATION 66,916 66,916 66,916 66,916 66,916 66,916 66,916
61200 MANAGEMENT FEE 61,720 62,712 65,300 66,436 66,218 65,915 65,684
61300 OFFICE RENTAL 28,506 20,506 20,506 20,506 20,506 28,506 28,506
61400 OFFICE EXPENSE 15,900 4,900 4,900 4,900 4,900 4,900 4,900
61600 OFFICE EQUIPMENT MAINTENANCE 2,000 2,000 2,000 2,000 2,000 2,000 2,000
61700 COMMUNICATIONS 3,500 3,500 3,500 3,500 3,500 3,500 3,500
61800 OUTSIDE SERVICES 1,000 1,000 1,000 1,000 1,000 1,000 1,000
61900 ADVERTISING & PROMOTION 500 500 500 500 500 500 500
62000 MEALS & ENTERTAINMENT 500 500 500 500 500 500 500
62300 DUES AND SUBSCRIPTIONS 2,500 2,500 2,500 5,700 100 100 100
<CAPTION>
AUG SEP OCT NOV DEC TOTAL $/SF
------------------------------------------------------------------------------------------
INCOME
<S> <C> <C> <C> <C> <C> <C> <C>
51100 BASE RENTS 4,467,158 4,509,682 4,526,160 4,609,480 4,649,802 53,430,739 23.44
51300 CURRENT ESCALATION 111,619 111,370 104,665 104,448 103,083 1,425,467 0.63
51500 BASE RENTS - RETAIL 39,758 37,628 35,607 32,824 32,824 456,947 0.20
51000 RENTAL INCOME - GROUND 40,000 40,000 40,000 40,000 40,000 480,000 0.21
52400 FREE RENT 92,926 92,926 92,926 21,922 21,922 994,908 0.44
LESS FREE RENT
52900 LESS FREE RENT 92,926 92,926- 92,926- 21,922- 21,922- 994,908- 0.44-
------------------------------------------------------------------------------------------
TOTAL LESS FREE RENT 92,926 92,926- 92,926- 21,922- 21,922- 994,908- 0.44-
------------------------------------------------------------------------------------------
TOTAL ACTUAL RENTS 4,658,534 4,778,680 4,706,432 4,786,761 4,825,709 55,793,153 24.47
PARKING
53100 PARKING - MONTHLY 611,917 611,917 611,917 611,917 611,917 7,343,000 3.22
TOTAL PARKING 611,917 611,917 611,917 611,917 611,917 7,343,000 3.22
------------------------------------------------------------------------------------------
TOTAL INCOME 5,270,451 5,390,597 5,318,349 5,398,678 5,437,626 63,136,153 27.69
OPERATING EXPENSES
BUILDING ADMINISTRATION
61100 LABOR - ADMINISTRATION 66,916 66,916 66,916 66,916 66,916 802,992 0.35
61200 MANAGEMENT FEE 65,881 67,382 66,479 67,483 67,970 789,200 0.35
61300 OFFICE RENTAL 20,506 20,506 28,506 20,506 28,506 246,072 0.11
61400 OFFICE EXPENSE 4,900 4,900 4,900 4,900 4,900 69,800 0.03
61600 OFFICE EQUIPMENT MAINTENANCE 2,000 2,000 2,000 2,000 2,000 24,000 0.01
61700 COMMUNICATIONS 3,500 3,500 3,500 3,500 3,500 42,000 0.02
61800 OUTSIDE SERVICES 1,000 1,000 1,000 1,000 1,000 12,000 0.01
61900 ADVERTISING & PROMOTION 500 500 500 500 500 6,000 0.00
62000 MEALS & ENTERTAINMENT 500 500 500 500 500 6,000 0.00
62300 DUES AND SUBSCRIPTIONS 100 100 100 100 100 14,000 0.01
</TABLE>
CUSHMAN &
WAKEFIELD (R)
<PAGE>
<TABLE>
<CAPTION>
GL20R0 1997 BUDGET REPORT Page: 2
26 - CENTURY PLAZA TOWERS Date: 11-15-96
Square footage: 2,279,885 Time: 02:47 PM
JAN FEB MAR APR MAY JUN JUL
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BUILDING ADMINISTRATION
62600 POSTAGE/DELIVERY 1,000 1,000 1,000 1,000 1,000 1,000 1,000
63000 MISCELLANEOUS 200 200 200 200 200 200 200
-------------------------------------------------------------------------------
TOTAL BUILDING ADMINISTRATION 176,242 166,254 168,822 171,158 167,140 167,017 166,806
GENERAL BUILDING
63600 LABOR - ENGINEERING 83,500 83,500 83,500 83,500 83,500 83,500 83,500
63800 TOOLS & SUPPLIES 2,500 2,500 2,500 2,500 2,500 2,500 2,500
63900 TENANT SERVICES 15,000 10,000 10,000 10,000 10,000 10,000 10,000
64000 BUILDING SERVICE/SUPPLIES 12,880 12,880 13,880 13,880 13,880 13,880 14,000
64100 UNIFORMS 1,800 1,000 1,000 1,000 1,000 1,000 1,000
64200 PEST CONTROL 600 600 600 600 600 600 600
64400 RUBBISH/TRASH REMOVAL 6,500 6,500 6,500 6,500 6,500 6,500 6,500
64500 LAMPING 5,000 5,000 5,000 5,000 5,000 5,000 5,000
64700 SIGNAGE 10,000 3,000 1,000 1,000 1,000 1,000 1,000
64800 COMMUNICATIONS 8,475 1,800 1,800 1,800 1,800 1,800 1,800
65400 MISCELLANEOUS 250 250 250 250 250 250 250
-------------------------------------------------------------------------------
TOTAL GENERAL BUILDING 146,505 127,830 126,030 126,030 126,030 126,030 126,150
LANDSCAPING/GROUNDS
65600 GROUNDS 12,000 12,000 12,000 17,000 22,000 12,000 12,000
65700 INTERIOR 3,800 3,800 3,800 3,800 3,800 3,800 3,800
-------------------------------------------------------------------------------
TOTAL LANDSCAPING/GROUNDS 15,800 15,800 15,800 20,800 25,800 15,800 15,800
CLEANING
66600 INTERIOR JANITORIAL 198,100 198,400 202,800 201,500 202,500 210,900 204,400
66700 BUILDING EXTERIOR 5,000 5,000 5,000 5,000 5,000 5,000 30,000
66900 JANITORIAL/CLEANING SUPPLY 500 500 500 500 500 500 500
67000 CARPETS & DRAPES 2,500 2,500 2,500 2,500 2,500 2,500 2,500
67100 WINDOW WASHING 1,000 1,000 5,000 1,000 7,100 1,000 1,000
67400 MISCELLANEOUS CLEANING 1,000 1,000 1,000 1,000 1,000 1,000 1,000
-------------------------------------------------------------------------------
TOTAL CLEANING 208,100 208,400 216,800 213,500 218,600 220,900 239,400
<CAPTION>
AUG SEP OCT NOV DEC TOTAL $/SF
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BUILDING ADMINISTRATION
62600 POSTAGE/DELIVERY 1,000 1,000 1,000 1,000 1,000 12,000 0.01
63000 MISCELLANEOUS 200 200 200 200 200 2,400 0.00
-------------------------------------------------------------------------------
TOTAL BUILDING ADMINISTRATION 167,003 168,504 167,601 168,605 169,092 2,026,464 0.89
GENERAL BUILDING
63600 LABOR - ENGINEERING 83,500 83,500 83,500 83,500 83,500 1,002,000 0.44
63800 TOOLS & SUPPLIES 2,500 2,500 2,500 2,500 2,500 30,000 0.01
63900 TENANT SERVICES 10,000 10,000 10,000 10,000 10,000 125,000 0.05
64000 BUILDING SERVICE/SUPPLIES 14,000 14,000 14,000 14,000 14,000 165,280 0.07
64100 UNIFORMS 1,000 1,000 1,000 1,000 1,000 12,800 0.01
64200 PEST CONTROL 600 600 600 600 600 7,200 0.00
64400 RUBBISH/TRASH REMOVAL 6,500 6,500 6,500 6,500 6,500 78,000 0.01
64500 LAMPING 5,000 5,000 5,000 5,000 5,000 60,000 0.01
64700 SIGNAGE 1,000 1,000 1,000 1,000 1,000 23,000 0.01
64800 COMMUNICATIONS 1,800 1,800 1,800 1,800 1,800 28,275 0.01
65400 MISCELLANEOUS 250 250 250 250 250 3,000 0.00
-------------------------------------------------------------------------------
TOTAL GENERAL BUILDING 126,150 126,150 126,150 126,150 126,150 1,534,555 0.67
LANDSCAPING/GROUNDS
65600 GROUNDS 12,000 17,000 12,000 12,000 17,000 169,000 0.07
65700 INTERIOR 3,800 3,800 3,800 3,800 3,800 45,600 0.02
-------------------------------------------------------------------------------
TOTAL LANDSCAPING/GROUNDS 15,800 20,800 15,800 15,800 20,800 214,600 0.09
CLEANING
66600 INTERIOR JANITORIAL 204,300 202,800 204,300 205,250 205,700 2,442,950 1.07
66700 BUILDING EXTERIOR 5,000 5,000 5,000 5,000 5,000 85,000 0.04
66900 JANITORIAL/CLEANING SUPPLY 500 500 500 500 500 6,000 0.00
67000 CARPETS & DRAPES 2,500 2,500 2,500 2,500 2,500 30,000 0.01
67100 WINDOW WASHING 1,000 1,000 1,000 15,000 1,000 40,100 0.02
67400 MISCELLANEOUS CLEANING 1,000 1,000 1,000 1,000 1,000 12,000 0.01
-------------------------------------------------------------------------------
TOTAL CLEANING 214,300 212,800 218,300 229,250 215,700 2,616,050 1.15
</TABLE>
CUSHMAN &
WAKEFIELD (R)
<PAGE>
<TABLE>
<CAPTION>
GL20R0 1997 BUDGET REPORT Page: 3
26 - CENTURY PLAZA TOWERS Date: 11-15-96
Square footage: 2,279,885 Time: 02:47 PM
JAN FEB MAR APR MAY JUN JUL
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SECURITY
68600 GUARDS 109,937 109,937 109,937 109,937 109,937 109,937 109,937
68700 SPECIAL SERVICES/MONITORING 3,000 3,000 3,000 3,000 3,000 3,000 3,000
-------------------------------------------------------------------------------
TOTAL SECURITY 112,937 112,937 112,937 112,937 112,937 112,937 112,937
ENERGY
69600 ELECTRICITY 551,218 536,084 529,082 577,724 560,988 557,125 552,971
69800 WATER/SEWER 9,114 8,256 8,456 9,130 11,927 14,159 12,197
-------------------------------------------------------------------------------
TOTAL ENERGY 562,332 544,340 517,538 586,854 572,915 531,554 565,368
MAINTENANCE & REPAIRS
70600 HVAC REPAIRS 15,000 15,000 15,000 15,000 15,000 15,000 15,000
70700 ELECTRIC REPAIRS 16,000 16,000 16,000 16,000 16,000 16,000 16,000
70800 ELEVATOR CONTRACT/REPAIRS 65,300 53,300 53,300 53,300 53,300 53,300 53,300
70900 PLUMBING 12,000 12,000 12,000 12,000 12,000 12,000 12,000
71000 ALTERATIONS/DECORATIONS 3,000 5,000 5,000 3,000 3,000 3,000 3,000
71100 STRUCTURAL & ROOF 2,000 2,000 2,000 10,000 2,000 2,000 2,000
71300 GROUNDS/LOADING DOCK 3,000 3,000 3,000 3,000 3,000 3,000 3,000
71500 INTERIOR PAINTING/CARPET 10,000 10,000 10,000 10,000 10,000 10,000 10,000
71600 LIFE SAFETY SYSTEM 8,700 8,700 27,700 17,700 17,700 15,400 12,700
71800 GLASS REPAIR/REPLACEMENT 1,000 1,000 1,000 1,000 1,000 1,000 1,000
-------------------------------------------------------------------------------
TOTAL MAINTENANCE & REPAIRS 136,000 126,000 145,000 151,000 133,000 130,700 128,000
FIXED CHARGES
77100 INSURANCE 193,863 193,864 193,864 193,864 193,864 193,864 193,864
77200 BUSINESS TAX & LICENSE 0 0 0 0 0 0 66,000
-------------------------------------------------------------------------------
TOTAL FIXED CHARGES 193,863 193,864 193,864 193,864 193,864 193,864 259,864
<CAPTION>
AUG SEP OCT NOV DEC TOTAL $/SF
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SECURITY
68600 GUARDS 109,937 109,937 109,937 109,937 109,937 1,319,244 0.58
68700 SPECIAL SERVICES/MONITORING 3,000 3,000 3,000 3,000 3,000 36,000 0.02
-------------------------------------------------------------------------------
TOTAL SECURITY 112,937 112,937 112,937 112,937 112,937 1,355,244 0.59
ENERGY
69600 ELECTRICITY 564,689 547,228 522,961 505,000 502,385 6,509,445 2.86
69800 WATER/SEWER 11,948 13,953 16,185 10,058 9,114 134,897 0.06
-------------------------------------------------------------------------------
TOTAL ENERGY 576,557 561,181 539,146 515,058 511,499 6,644,342 2.91
MAINTENANCE & REPAIRS
70600 HVAC REPAIRS 15,000 15,000 15,000 15,000 15,000 180,000 0.08
70700 ELECTRIC REPAIRS 16,000 16,000 16,000 16,000 16,000 192,000 0.08
70800 ELEVATOR CONTRACT/REPAIRS 53,300 53,300 61,400 53,300 53,300 659,700 0.29
70900 PLUMBING 12,000 12,000 12,000 12,000 12,000 144,000 0.06
71000 ALTERATIONS/DECORATIONS 3,000 21,000 5,000 5,000 21,000 80,000 0.04
71100 STRUCTURAL & ROOF 2,000 10,000 2,000 2,000 2,000 40,000 0.02
71300 GROUNDS/LOADING DOCK 3,000 3,000 3,000 3,000 3,000 36,000 0.02
71500 INTERIOR PAINTING/CARPET 10,000 10,000 10,000 10,000 10,000 120,000 0.05
71600 LIFE SAFETY SYSTEM 14,700 12,700 12,700 11,700 12,700 183,100 0.08
71800 GLASS REPAIR/REPLACEMENT 1,000 1,000 1,000 1,000 1,000 12,000 0.01
-------------------------------------------------------------------------------
TOTAL MAINTENANCE & REPAIRS 130,000 154,000 138,100 129,000 146,000 1,646,800 0.72
FIXED CHARGES
77100 INSURANCE 193,864 193,864 193,864 193,864 193,864 2,326,367 1.02
77200 BUSINESS TAX & LICENSE 0 0 0 0 0 66,000 0.03
-------------------------------------------------------------------------------
TOTAL FIXED CHARGES 193,864 193,864 193,864 193,864 193,864 2,392,367 1.05
</TABLE>
CUSHMAN &
WAKEFIELD (R)
<PAGE>
<TABLE>
<CAPTION>
GL20R0 1997 BUDGET REPORT Page: 4
26 - CENTURY PLAZA TOWERS Date: 11-15-96
Square footage: 2,279,885 Time: 02:47 PM
JAN FEB MAR APR MAY JUN JUL
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PROPERTY TAXES
78100 REAL PROPERTY TAXES 380,375 380,375 380,375 380,375 380,375 380,375 380,375
----------------------------------------------------------------------------------------------
TOTAL REAL PROPERTY TAXES 380,375 380,375 380,375 380,375 380,375 380,375 380,375
----------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 1,932,154 1,875,000 1,897,166 1,958,518 1,930,861 1,919,197 1,994,700
NET OPERATING INCOME 1,005,469 3,143,529 1,126,857 1,353,996 3,456,401 1,151,996 1,260,001
BUILDING OPERATING INCOME 3,005,469 3,143,520 3,326,857 3,356,401 3,366,601 1,353,996 3,260,001
GENERAL & ADMIN EXPENSES
85100 LEGAL AND ACCOUNTING 16,250 16,250 16,250 16,250 16,250 16,250 16,250
85600 OUTSIDE SERVICES 2,000 2,000 2,000 2,000 2,000 2,000 2,000
85900 LABOR 19,333 19,333 19,333 19,333 19,333 19,333 19,333
86000 LOST TENANT EXPENSE 3,000 3,000 3,000 3,000 3,000 3,000 3,000
86100 TENANT ALTERATIONS 2,000 2,000 2,000 2,000 2,000 2,000 2,000
87000 TRAVEL AND PROMOTION 1,000 1,000 1,000 1,000 1,000 1,000 1,000
87500 MARKETING EXPENSE 20,833 20,833 20,833 20,833 20,833 20,833 20,833
88900 PROFESSIONAL/DESIGN FEES 5,000 5,000 5,000 5,000 5,000 5,000 5,000
----------------------------------------------------------------------------------------------
TOTAL GENERAL & ADMIN EXPENSES 69,416 69,416 69,416 94,416 69,416 84,416 69,416
PARTNERSHIP INCOME 2,936,053 3,074,113 3,257,441 3,261,985 3,297,385 3,269,580 3,190,587
----------------------------------------------------------------------------------------------
CASH FLOW FROM OPER. 2,916,053 3,074,113 3,257,441 3,264,985 3,297,185 1,269,580 3,190,587
CAPITAL EXPENDITURES
99101 TENANT IMPROVEMENTS 64,088- 32,044- 32,049- 737,022- 320,444- 224,322- 265,355-
99201 LEASING COMMISSION 26,325- 9,991- 0- 334,677- 145,395- 114,945- 124,576-
99401 BUILDING 609,000- 69,000- 609,000- 609,000- 609,000- 609,000- 609,000-
----------------------------------------------------------------------------------------------
NET CASH FLOW 2,236,640 2,423,078 2,616,392 1,581,286 2,222,346 2,321,313 2,200,656
<CAPTION>
AUG SEP OCT NOV DEC TOTAL $/SF
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PROPERTY TAXES
78100 REAL PROPERTY TAXES 380,375 380,375 380,375 380,376 380,376 4,564,502 2.02
----------------------------------------------------------------------------------------------
TOTAL REAL PROPERTY TAXES 380,375 380,375 380,375 380,376 380,376 4,564,502 2.02
----------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 1,916,986 1,930,611 1,892,273 1,871,040 1,876,418 22,994,924 10.09
NET OPERATING INCOME 1,353,465 3,459,986 1,426,076 3,527,638 3,561,208 40,141,229 17.61
BUILDING OPERATING INCOME 1,353,465 3,459,986 3,426,076 3,527,638 3,561,208 40,141,229 17.61
GENERAL & ADMIN EXPENSES
85100 LEGAL AND ACCOUNTING 16,250 16,250 16,250 16,250 16,250 235,000 0.10
85600 OUTSIDE SERVICES 2,000 2,000 2,000 2,000 2,000 24,000 0.01
85900 LABOR 19,333 19,334 19,334 19,334 19,334 232,000 0.10
86000 LOST TENANT EXPENSE 3,000 3,000 3,000 3,000 3,000 36,000 0.02
86100 TENANT ALTERATIONS 2,000 2,000 2,000 2,000 2,000 24,000 0.01
87000 TRAVEL AND PROMOTION 1,000 1,000 1,000 1,000 1,000 12,000 0.01
87500 MARKETING EXPENSE 20,833 20,833 20,833 21,000 21,000 250,330 0.11
88900 PROFESSIONAL/DESIGN FEES 5,000 5,000 5,000 5,000 5,000 60,000 0.03
----------------------------------------------------------------------------------------------
TOTAL GENERAL & ADMIN EXPENSES 69,416 69,417 69,417 69,584 69,584 873,330 0.38
PARTNERSHIP INCOME 3,284,049 3,390,569 3,356,659 3,458,054 3,491,624 3,926,899 17.22
----------------------------------------------------------------------------------------------
CASH FLOW FROM OPER. 3,284,049 3,390,569 3,356,659 3,458,054 3,491,624 3,926,899 17.22
CAPITAL EXPENDITURES
99101 TENANT IMPROVEMENTS 96,333- 512,711- 265,355- 192,266- 480,666- 3,204,455- 1.41-
99201 LEASING COMMISSION 43,608- 230,067- 122,841- 82,798- 220,059- 1,455,282- 0.64-
99401 BUILDING 609,000- 609,000- 609,000- 609,000- 609,000- 7,308,000- 3.21-
----------------------------------------------------------------------------------------------
NET CASH FLOW 2,535,308 2,038,791 2,368,463 2,573,990 2,181,899 27,300,162 11.97
</TABLE>
CUSHMAN &
WAKEFIELD (R)
<PAGE>
<TABLE>
<CAPTION>
GL20R0 1997 BUDGET LIST Page: 1
26: CENTURY PLAZA TOWERS Date: 11-15-96
Time: 02:50 PM
Acct # January February March April May June July
- ------ ------- -------- ----- ----- --- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
61100 LABOR - ADMINISTRATION 66,916 66,916 66,916 66,916 66,916 66,916 66,916
*GEN MANAGER
*SR. PROP MANAGER
*OPS MANAGER
*ACCOUNTANT
*2 ACCOUNTING ASSETS
*LEASE ADMINISTRATION
*2 BLDG SECRETARIES
*RECEPTIONIST
61200 MANGEMENT FEE 61,720 62,712 65,300 66,436 66,218 65,915 65,684
61300 OFFICE RENTAL 20,506 20,506 20,506 20,506 20,506 20,506 20,506
*ASSUM 8.544 SQUARE FEET
*CHARGED TO MGT OFFICE
*$2.40 PER SQUARE FEET
61400 OFFICE EXPENSE 15,900 4,900 4,900 4,900 4,900 4,900 4,900
*$1300 COPIER RENT & SUPPLIES
*$2000 OFFICE SUPPLIES
*$4000 BUSINESS CARDS
*400 COMPUTER SUPPLIES
*$800 HOST SUPPLIES
*400 MISCELLANEOUS
*$7000 STATIONARY IN JANUARY
61600 OFFICE EQUIPMENT MAINTENANCE 2,000 2,000 2,000 2,000 2,000 2,000 2,000
*600 COPIER
*$800 COPIERS
*$100 FAX
*$500 COMPUTERS
61700 COMMUNICATIONS 3,500 3,500 3,500 3,500 3,500 3,500 3,500
*$1700 PHONES
*$100 ANS. SERVICE
*$100 FAX
*$100 CELLULAR
*$1500 PHONE EQUIPMENT
61800 OUTSIDE SERVICESS 1,000 1,000 1,000 1,000 1,000 1,000 1,000
*TEMPORARY HELP
*MISCELLANEOUS CONSULTANTS
<CAPTION>
August September October November December Total Forecast
------ --------- ------- -------- -------- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C>
61100 LABOR - ADMINISTRATION 66,916 66,916 66,916 66,916 66,916 802,992 802,992
*GEN MANAGER
*SR. PROP MANAGER
*OPS MANAGER
*ACCOUNTANT
*2 ACCOUNTING ASSETS
*LEASE ADMINISTRATION
*2 BLDG SECRETARIES
*RECEPTIONIST
61200 MANGEMENT FEE 65,881 67,382 66,479 64,483 67,970 789,200 789,200
61300 OFFICE RENTAL 20,506 20,506 20,506 20,506 20,506 246,072 246,072
*ASSUM 8.544 SQUARE FEET
*CHARGED TO MGT OFFICE
*$2.40 PER SQUARE FEET
61400 OFFICE EXPENSE 4,900 4,900 4,900 4,900 4,900 69,800 69,800
*$1300 COPIER RENT & SUPPLIES
*$2000 OFFICE SUPPLIES
*$4000 BUSINESS CARDS
*400 COMPUTER SUPPLIES
*$800 HOST SUPPLIES
*400 MISCELLANEOUS
*$7000 STATIONARY IN JANUARY
61600 OFFICE EQUIPMENT MAINTENANCE 2,000 2,000 2,000 2,000 2,000 24,000 24,000
*600 COPIER
*$800 COPIERS
*$100 FAX
*$500 COMPUTERS
61700 COMMUNICATIONS 3,500 3,500 3,500 3,500 3,500 42,000 42,000
*$1700 PHONES
*$100 ANS. SERVICE
*$100 FAX
*$100 CELLULAR
*$1500 PHONE EQUIPMENT
61800 OUTSIDE SERVICESS 1,000 1,000 1,000 1,000 1,000 12,000 12,000
*TEMPORARY HELP
*MISCELLANEOUS CONSULTANTS
</TABLE>
CUSHMAN &
WAKEFIELD (R)
<PAGE>
<TABLE>
<CAPTION>
GL20R0 1997 GET LIST Page: 2
26: CENTURY PLAZA TOWERS Date: 11-15-96
Time: 02:50 PM
Acct # January February March April May June July
- ------ ------- -------- ----- ----- --- ---- ----
<C> <C> <C> <C> <C> <C> <C> <C>
61900 ADVERTISING & PROMOTION 500 500 500 500 500 500 500
62000 MEALS & ENTERTAINMENT 500 500 500 500 500 500 500
62300 DUES AND SUBCRIPTIONS 2,500 2,500 2,500 5,700 100 100 100
*BOMA
*CENTURY CITY CHAMBER
*LA TIMES
*WALL STREET JOURNAL
*(CURRENT EXPENSE $14000)
62600 POSTAGE/DELIVERY 1,000 1,000 1,000 1,000 1,000 1,000 1,000
*$340 POSTAGE
*$360 ($180 EA) 2 TRICOR
*POUCHES
*$300 POSTAGE MACHINE/SCALE
63000 MISCELLANEOUS 200 200 200 200 200 200 200
63600 LABOR - ENGINEERING 83,500 83,500 83,500 83,500 83,500 83,500 83,500
*1 PROJECT ENGINEER
*1 CHIEF ENGINEER
*2 ASST CHIEFS
*4 WATCH ENGINEERS
*4 UTILITY ENGINEERS
63800 TOOLS & SUPPLIES 2,500 2,500 2,500 2,500 2,500 2,500 2,500
*$500 RESTROOM FIXTURES
*$300 HARDWARE
*$300 SHOP TOOLS
*$200 MISCELLANEOUS
*$700 LOCKS & KEYS
63900 TENANT SERVICES 15,000 10,000 10,000 10,000 10,000 10,000 10,000
*$4200 VIDEO COMP EQUIP & ROOM
*EXPENSE
*$5000 CONCIERGE
*$500 MISC. TENANT SERVICES
*$5000 PURCHASE TSR SYSTEM
*$300 CONF. COPIER RENTAL
<CAPTION>
August September October November December Total Forecast
------ --------- ------- -------- -------- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C>
61900 ADVERTISING & PROMOTION 500 500 500 500 500 6,000 6,000
62000 MEALS & ENTERTAINMENT 500 500 500 500 500 6,000 6,000
62300 DUES AND SUBCRIPTIONS 100 100 100 100 100 14,000 14,000
*BOMA
*CENTURY CITY CHAMBER
*LA TIMES
*WALL STREET JOURNAL
*(CURRENT EXPENSE $14000)
62600 POSTAGE/DELIVERY 1,000 1,000 1,000 1,000 1,000 12,000 12,000
*$340 POSTAGE
*$360 ($180 EA) 2 TRICOR
*POUCHES
*$300 POSTAGE MACHINE/SCALE
63000 MISCELLANEOUS 200 200 200 200 200 2,400 2,400
63600 LABOR - ENGINEERING 83,500 83,500 83,500 83,500 83,500 1,002,000 1,002,000
*1 PROJECT ENGINEER
*1 CHIEF ENGINEER
*2 ASST CHIEFS
*4 WATCH ENGINEERS
*4 UTILITY ENGINEERS
63800 TOOLS & SUPPLIES 2,500 2,500 2,500 2,500 2,500 30,000 30,000
*$500 RESTROOM FIXTURES
*$300 HARDWARE
*$300 SHOP TOOLS
*$200 MISCELLANEOUS
*$700 LOCKS & KEYS
63900 TENANT SERVICES 10,000 10,000 10,000 10,000 10,000 125,000 125,000
*$4200 VIDEO COMP EQUIP & ROOM
*EXPENSE
*$5000 CONCIERGE
*$500 MISC. TENANT SERVICES
*$5000 PURCHASE TSR SYSTEM
*$300 CONF. COPIER RENTAL
</TABLE>
CUSHMAN &
WAKEFIELD (R)
<PAGE>
<TABLE>
<CAPTION>
GL20R0 1997 GET LIST Page: 3
26: CENTURY PLAZA TOWERS Date: 11-15-96
Time: 02:50 PM
Acct # January February March April May June July
- ------ ------- -------- ----- ----- --- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
64000 BUILDING SERVICES/SUPPLIES 12,880 12,880 11,880 11,880 11,880 11,880 14,000
*BASED ON EXISTING USEAGE
*INCREASED FOR PROJECTED
*OCCUPANCY
64100 UNIFORMS 1,800 1,000 1,000 1,000 1,000 1,000 1,000
*NEW LOGOS IN JANUARY, ASSUME
*UNIFORMS RENTED FOR 12
*ENGINEERS
64200 PEST CONTROL 600 600 600 600 600 600 600
*EXISTING CONTRACT
64400 RUBBISH/TRASH REMOVAL 6,500 6,500 6,500 6,500 6,500 6,500 6,500
*BASED ON EXISTING BUDGET AND
*COSTS IN RECYCLING PROPOSAL
64500 LAMPING 5,000 5,000 5,000 5,000 5,000 5,000 5,000
64700 SIGNAGE 10,000 3,000 1,000 1,000 1,000 1,000 1,000
*INITIAL MGT. CO SIGNAGE CHANGE
*IN JANUARY & FEBRUARY
*NO SMOKING & HANDICAP SIGNAGE
*UPGRADES AT LOBBIES
*MISCELLANEOUS SIGNAGE MONTHLY
*THEREAFTER
64800 COMMUNICATONS 8,475 1,800 1,800 1,800 1,800 1,800 1,800
*$300 ENGINEERING PHONES
*$150 MISC. PROPERTY PHONES
*$100 PAGERS
*$500 RADIO REPAIRS/SUPPLIES
*$6,675 PAC BELL CABLE MAINT
*$300 SECURITY PHONES
*$400 UNIVERSAL MAIL
*$50 CELLULAR
65400 MICELLANEOUS 250 250 250 250 250 250 250
65600 GROUNDS 12,000 12,000 12,000 17,000 22,000 12,000 12,000
*$7,400 EXISTING CONTRACT
*$4,600 ADDITIONAL COSTS BASED
*ON EXISTING EXPENSES
*$5,000 SEASONAL COLOR IN
*APRIL, SEPTEMBER, DECEMBER
*$10,000 ADDITIONAL PLAZA
*PLANTING
<CAPTION>
August September October November December Total Forecast
------ --------- ------- -------- -------- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C>
64000 BUILDING SERVICES/SUPPLIES 14,000 14,000 14,000 14,000 14,000 165,280 165,280
*BASED ON EXISTING USEAGE
*INCREASED FOR PROJECTED
*OCCUPANCY
64100 UNIFORMS 1,000 1,000 1,000 1,000 1,000 12,800 12,800
*NEW LOGOS IN JANUARY, ASSUME
*UNIFORMS RENTED FOR 12
*ENGINEERS
64200 PEST CONTROL 600 600 600 600 600 7,200 7,200
*EXISTING CONTRACT
64400 RUBBISH/TRASH REMOVAL 6,500 6,500 6,500 6,500 6,500 78,000 78,000
*BASED ON EXISTING BUDGET AND
*COSTS IN RECYCLING PROPOSAL
64500 LAMPING 5,000 5,000 5,000 5,000 5,000 60,000 60,000
64700 SIGNAGE 1,000 1,000 1,000 1,000 1,000 23,000 23,000
*INITIAL MGT. CO SIGNAGE CHANGE
*IN JANUARY & FEBRUARY
*NO SMOKING & HANDICAP SIGNAGE
*UPGRADES AT LOBBIES
*MISCELLANEOUS SIGNAGE MONTHLY
*THEREAFTER
64800 COMMUNICATONS 1,800 1,800 1,800 1,800 1,800 28,275 28,275
*$300 ENGINEERING PHONES
*$150 MISC. PROPERTY PHONES
*$100 PAGERS
*$500 RADIO REPAIRS/SUPPLIES
*$6,675 PAC BELL CABLE MAINT
*$300 SECURITY PHONES
*$400 UNIVERSAL MAIL
*$50 CELLULAR
65400 MICELLANEOUS 250 250 250 250 250 3,000 3,000
65600 GROUNDS 12,000 17,000 12,000 12,000 17,000 169,000 169,000
*$7,400 EXISTING CONTRACT
*$4,600 ADDITIONAL COSTS BASED
*ON EXISTING EXPENSES
*$5,000 SEASONAL COLOR IN
*APRIL, SEPTEMBER, DECEMBER
*$10,000 ADDITIONAL PLAZA
*PLANTING
</TABLE>
CUSHMAN &
WAKEFIELD (R)
<PAGE>
<TABLE>
<CAPTION>
GL20R0 1997 BUDGET LIST Page: 4
26: CENTURY PLAZA TOWERS Date: 11-15-96
Time: 02:50 PM
Acct # January February March April May June July
- ------ ------- -------- ----- ----- --- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
65700 INTERIOR 3,800 3,800 3,800 3,800 3,800 3,800 3,800
*$1800 CURRENT CONTRACT
*$500 ADDITIONAL ON CONTRACT
*$1500 ADDITIONAL PLANTS
66600 INTERIOR JANITORIAL 198,100 198,400 202,800 201,500 202,500 210,000 204,400
*$188,622 NIGHT FULL BUILDING
*$.071 VACANY CREDIT
*10 DAY STAFF @ $20,000
*$5,000 ADDITIONAL SPECIAL
*CLEANING
66700 BUILDING EXTERIOR 5,000 5,000 5,000 5,000 5,000 5,000 30,000
*$2,000 PLAZA MAINTENANCE
*$3,000 METAL MAINTENANCE
*$25,000 CLEAN & SEAL PLAZA
66900 JANITORIAL/CLEANING SUPPLY 500 500 500 500 500 500 500
67000 CARPET & DRAPES 2,500 2,500 2,500 2,500 2,500 2,500 2,500
*CARPET CLEANING
*WINDOW COVERING REPAIR
67100 WINDOW WASHING 1,000 1,000 5,000 1,000 7,100 1,000 1,000
*$1,000 INTERIOR LOBBY GLASS
*6100 ANNUAL INSPECTION
*$15000 INTERIOR CLEANING IN
*NOVEMBER
*$5,000 MARCH & OCTOBER 1ST &
*2ND FLOOR EXTERIOR GLASS
67400 MISCELLANEOUS CLEANING 1,000 1,000 1,000 1,000 1,000 1,000 1,000
68600 GUARDS 109,937 109,937 109,937 109,937 109,937 109,937 109,937
*BLDG POST 144 HRS/DAY @ 11.60
*MONITORING 24 HRS/DAY @ 11.60
*CARD ADMIN 8 HRS/DAY @ 11.60
*ROVERS 43 HRS/DAY @ 11.60
*= $927,246
*SPECIAL SECURITY $ 36,000
*SECURITY DIRECTOR $90,000
*GARAGE 63 HRS X 365 @ 11.60
*= $266,000
<CAPTION>
August September October November December Total Forecast
------ --------- ------- -------- -------- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C>
65700 INTERIOR 3,800 3,800 3,800 3,800 3,800 45,600 45,600
*$1800 CURRENT CONTRACT
*$500 ADDITIONAL ON CONTRACT
*$1500 ADDITIONAL PLANTS
66600 INTERIOR JANITORIAL 204,100 202,800 204,300 205,250 205,700 2,442,950 2,442,950
*$188,622 NIGHT FULL BUILDING
*$.071 VACANY CREDIT
*10 DAY STAFF @ $20,000
*$5,000 ADDITIONAL SPECIAL
*CLEANING
66700 BUILDING EXTERIOR 5,000 5,000 5,000 5,000 5,000 85,000 85,000
*$2,000 PLAZA MAINTENANCE
*$3,000 METAL MAINTENANCE
*$25,000 CLEAN & SEAL PLAZA
66900 JANITORIAL/CLEANING SUPPLY 500 500 500 500 500 6,000 6,000
67000 CARPET & DRAPES 2,500 2,500 2,500 2,500 2,500 30,000 30,000
*CARPET CLEANING
*WINDOW COVERING REPAIR
67100 WINDOW WASHING 1,000 1,000 5,000 15,000 1,000 40,100 40,100
*$1,000 INTERIOR LOBBY GLASS
*6100 ANNUAL INSPECTION
*$15000 INTERIOR CLEANING IN
*NOVEMBER
*$5,000 MARCH & OCTOBER 1ST &
*2ND FLOOR EXTERIOR GLASS
67400 MISCELLANEOUS CLEANING 1,000 1,000 1,000 1,000 1,000 12,000 12,000
68600 GUARDS 109,937 109,937 109,937 109,937 109,937 1,319,244 1,319,244
*BLDG POST 144 HRS/DAY @ 11.60
*MONITORING 24 HRS/DAY @ 11.60
*CARD ADMIN 8 HRS/DAY @ 11.60
*ROVERS 43 HRS/DAY @ 11.60
*= $927,246
*SPECIAL SECURITY $ 36,000
*SECURITY DIRECTOR $90,000
*GARAGE 63 HRS X 365 @ 11.60
*= $266,000
</TABLE>
CUSHMAN &
WAKEFIELD (R)
<PAGE>
<TABLE>
<CAPTION>
GL20R0 1997 BUDGET LIST Page: 5
26: CENTURY PLAZA TOWERS Date: 11-15-96
Time: 02:50 PM
Acct # January February March April May June July
- ------ ------- -------- ----- ----- --- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
68700 SPECIAL SERVICES/MONITORING 3,000 3,000 3,000 3,000 3,000 3,000 3,000
*$1000 CCTV ELEVATORS
*$300 CCTV GARAGE
*$1000 SPECIAL SERVICES
*$700 CART MAINT. & REPAIR
69600 ELECTRICITY 553,218 536,084 529,082 577,724 560,988 557,195 552,971
*1996 ACTUAL/EST + PROJ OCC
*INCREASE + CENTRAL PLANT, LESS
*ON CREDIT 6500/MO; LIGHTING;
*RETROFIT 2500/MO
*AIR HANDLERS & OUTSIDE AIR
*SYSTEM & BLDG AUTOMATION
*SYSTEMS IN JULY 35,700/MO
*SAVINGS
*REBILLED HVAC @ 8666/MO
69800 WATER/SEWER 9,114 8,256 8,456 9,130 11,927 14,359 12,397
*BASED ON 1 YEARS EXISTING
*INCREASED BY 3% DUE TO 2 - TIER
*RATE SYSTEM
*INCLUDES MAIN BILL; FIRE
*SERVICE METER AND IRRIGATION
*METER
70600 HVAC REPAIRS 15,000 15,000 15,000 15,000 15,000 15,000 15,000
*BASED ON 5 MONTHS OF 1996
*ACTUAL
70700 ELECTRIC REPAIRS 16,000 16,000 16,000 16,000 16,000 16,000 16,000
*BASED ON 9 MONTHS OF 1996
*EXPENSES
70800 ELEVATOR CONTRACT/REPAIRS 65,300 53,300 53,300 53,300 53,300 53,300 53,300
*$50,000 OTIS
*$300 CALL BACKS
*$8000 REG 4 IN OCTOBER
*$12,000 PERMITS IN JANUARY
*$2,000 METAL MAINTENANCE
*$1,000 MISC REPAIRS
<CAPTION>
August September October November December Total Forecast
------ --------- ------- -------- -------- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C>
68700 SPECIAL SERVICES/MONITORING 3,000 3,000 3,000 3,000 3,000 36,000 36,000
*$1000 CCTV ELEVATORS
*$300 CCTV GARAGE
*$1000 SPECIAL SERVICES
*$700 CART MAINT. & REPAIR
69600 ELECTRICITY 564,609 547,228 522,961 505,000 502,385 6,509,445 6,509,445
*1996 ACTUAL/EST + PROJ OCC
*INCREASE + CENTRAL PLANT, LESS
*ON CREDIT 6500/MO; LIGHTING;
*RETROFIT 2500/MO
*AIR HANDLERS & OUTSIDE AIR
*SYSTEM & BLDG AUTOMATION
*SYSTEMS IN JULY 35,700/MO
*SAVINGS
*REBILLED HVAC @ 8666/MO
69800 WATER/SEWER 11,948 13,953 16,185 10,058 9,114 134,897 134,897
*BASED ON 1 YEARS EXISTING
*INCREASED BY 3% DUE TO 2 - TIER
*RATE SYSTEM
*INCLUDES MAIN BILL; FIRE
*SERVICE METER AND IRRIGATION
*METER
70600 HVAC REPAIRS 15,000 15,000 15,000 15,000 15,000 180,000 180,000
*BASED ON 5 MONTHS OF 1996
*EXPENSES
70700 ELECTRIC REPAIRS 16,000 16,000 16,000 16,000 16,000 192,000 192,000
*BASED ON 9 MONTHS OF 1996
*ACTUAL
70800 ELEVATOR CONTRACT/REPAIRS 53,300 53,300 61,400 53,300 53,300 659,700 659,700
*$50,000 OTIS
*$300 CALL BACKS
*$8000 REG 4 IN OCTOBER
*$12,000 PERMITS IN JANUARY
*$2,000 METAL MAINTENANCE
*$1,000 MISC REPAIRS
</TABLE>
CUSHMAN &
WAKEFIELD (R)
<PAGE>
<TABLE>
<CAPTION>
GL20R0 1997 BUDGET LIST Page: 6
26: CENTURY PLAZA TOWERS Date: 11-15-96
Time: 02:50 PM
Acct # January February March April May June July
- ------ ------- -------- ----- ----- --- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
70900 PLUMBING 12,000 12,000 12,000 12,000 12,000 12,000 12,000
*BASED ON 5 MONTHS OF 1996
*EXPENSES
7100 ALTERATIONS/DECORATING 3,000 5,000 5,000 3,000 3,000 3,000 3,000
*$3,000/MONTH
*$3,000 SEASONAL DECORATING IN
*FEB, MAR, APR, OCT, NOV & DEC
*$18,000 XMAS DEPOSIT IN SEPT
*BALANCE IN DECEMBER
71100 STRUCTURAL & ROOF 2,000 2,000 2,000 2,000 2,000 2,000 2,000
71300 GROUNDS/LOADING DOCK 3,000 3,000 3,000 3,000 3,000 3,000 3,000
71500 INTERIOR PAINTING/CARPET 10,000 10,000 10,000 10,000 10,000 10,000 10,000
*9 MONTHS OF 1996 - 14,000/MO
71600 LIFE SAFETY SYSTEM
*$55,000 REG 4 TESTING
*$7,000 ANNUAL FIRE DRILL
*$5,000 EMERGENCY GENERATOR
*$4,000 FIRE EXTINGUISHERS
*$5,000 PARTS & EQUIPMENT
*$5,000 FIRE PUMP SERVICE
*$2,000 PRV REPLACEMENT
*$5,000 SPRINKLER TESTING
*$5,000 MISC PARTS & REPAIRS
*$7,700/MO SIMPLEX CONTRACT
71800 GLASS REPAIR/REPLACEMENT 1,000 1,000 1,000 1,000 1,000 1,000 1,000
77100 INSURANCE 193,863 193,864 193,864 193,864 193,864 193,864 193,864
77200 BUSINESS TAX & LICENSE 0 0 0 0 0 0 66,000
*ESTIMATED BASED ON 1.0375% OF
*GROSS INCOME
78100 REAL PROPERTY TAXES 380,375 380,375 380,375 380,375 380,375 380,375 380,375
85100 LEGAL AND ACCOUNTING 16,250 16,250 16,250 16,250 16,250 16,250 16,250
*BASED ON 196,000 YEAR LEGAL
*FEES, PLUS 40,788 FOR AUDIT
*FEES IN APRIL & JUNE
<CAPTION>
August September October November December Total Forecast
------ --------- ------- -------- -------- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C>
70900 PLUMBING 12,000 12,000 12,000 12,000 12,000 144,000 144,000
*BASED ON 5 MONTHS OF 1996
*EXPENSES
7100 ALTERATIONS/DECORATING 3,000 21,000 5,000 5,000 21,000 80,000 80,000
*$3,000/MONTH
*$3,000 SEASONAL DECORATING IN
*FEB, MAR, APR, OCT, NOV & DEC
*$18,000 XMAS DEPOSIT IN SEPT
*BALANCE IN DECEMBER
*$1,000 MISC REPAIRS
71100 STRUCTURAL & ROOF 2,000 10,000 2,000 2,000 2,000 40,000 40,000
71300 GROUNDS/LOADING DOCK 3,000 3,000 3,000 3,000 3,000 36,000 36,000
71500 INTERIOR PAINTING/CARPET 10,000 10,000 10,000 10,000 10,000 120,000 120,000
*9 MONTHS OF 1996 - 14,000/MO
71600 LIFE SAFETY SYSTEM
*$55,000 REG 4 TESTING
*$7,000 ANNUAL FIRE DRILL
*$5,000 EMERGENCY GENERATOR
*$4,000 FIRE EXTINGUISHERS
*$5,000 PARTS & EQUIPMENT
*$5,000 FIRE PUMP SERVICE
*$2,000 PRV REPLACEMENT
*$5,000 SPRINKLER TESTING
*$5,000 MISC PARTS & REPAIRS
*$7,700/MO SIMPLEX CONTRACT
71800 GLASS REPAIR/REPLACEMENT 1,000 1,000 1,000 1,000 1,000 12,000 12,000
77100 INSURANCE 193,864 193,864 193,864 193,864 193,864 2,326,367 2,326,367
77200 BUSINESS TAX & LICENSE 0 0 0 0 0 66,000 66,000
*ESTIMATED BASED ON 1.0375% OF
*GROSS INCOME
78100 REAL PROPERTY TAXES 380,375 380,375 380,375 380,375 380,375 4,564,502 4,564,502
85100 LEGAL AND ACCOUNTING 16,250 16,250 16,250 16,250 16,250 235,000 235,000
*BASED ON 196,000 YEAR LEGAL
*FEES, PLUS 40,788 FOR AUDIT
*FEES IN APRIL & JUNE
</TABLE>
CUSHMAN &
WAKEFIELD (R)
<PAGE>
<TABLE>
<CAPTION>
GL20R0 1997 BUDGET LIST Page: 7
26: CENTURY PLAZA TOWERS Date: 11-15-96
Time: 02:50 PM
Acct # January February March April May June July
- ------ ------- -------- ----- ----- --- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
85600 OUTSIDE SERVICES 2,000 2,000 2,000 2,000 2,000 2,000 2,000
85900 LABOR 19,333 19,333 19,333 19,333 19,333 19,333 19,333
*BASED ON MARKETING PAYROLL OF
*23,000/YEAR
86000 LOST TENANT EXPENSE 3,000 3,000 3,000 3,000 3,000 3,000 3,000
*ASSUEM 20,000 SF/MO @ .15
*PER SF
86100 TENANT ALTERATIONS 2,000 2,000 2,000 2,000 2,000 2,000 2,000
87000 TRAVEL AND PROMOTION 1,000 1,000 1,000 1,000 1,000 1,000 1,000
87500 MARKETING EXPENSE 20,833 20,833 20,833 20,833 20,833 20,833 20,833
88900 PROFESSIONAL/DESIGN FEES 5,000 5,000 5,000 5,000 5,000 5,000 5,000
<CAPTION>
August September October November December Total Forecast
------ --------- ------- -------- -------- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C>
85600 OUTSIDE SERVICES 2,000 2,000 2,000 2,000 2,000 24,000 24,000
85900 LABOR 19,333 19,334 19,334 19,334 19,334 232,000 232,000
*BASED ON MARKETING PAYROLL OF
*223,000/YEAR
86000 LOST TENANT EXPENSE 3,000 3,000 3,000 3,000 3,000 36,000 36,000
*ASSUEM 20,000 SF/MO @ .15
*PER SF
86100 TENANT ALTERATIONS 2,000 2,000 2,000 2,000 2,000 24,000 24,000
87000 TRAVEL AND PROMOTION 1,000 1,000 1,000 1,000 1,000 12,000 12,000
87500 MARKETING EXPENSE 20,833 20,833 20,833 21,000 21,000 250,330 250,330
88900 PROFESSIONAL/DESIGN FEES 5,000 5,000 5,000 5,000 5,000 60,000 60,000
</TABLE>
CUSHMAN &
WAKEFIELD (R)
<PAGE>
<TABLE>
<CAPTION>
DELTA TOWERS JOINT VENTURE
ACTUAL ACTUAL ESTIMATE ESTIMATE TOTAL
THRU 9/30/96 OCT. NOV. DEC.
---------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
REVENUE
-------
OFFICE RENT 31,305,972 3,769,025 4,031,098 3,631,539 42,737,634
RETAIL RENT 787,533 85,195 101,883 101,883 1,076,494
PERCENTAGE RENT 970,527 91,480 90,733 90,733 1,243,473
PARKING REVENUE 8,125,722 861,621 848,960 849,840 10,686,143
ESCALATION RECOVERY 1,648,657 186,731 216,146 216,146 2,267,680
SETTLEMENT FEES 2,580,862 0 0 0 2,580,862
OTHER REVENUE 1,720,314 229,528 174,204 174,198 2,298,244
---------- --------- --------- --------- ----------
TOTAL REVENUE 47,139,587 5,223,580 5,463,024 5,064,339 62,890,530
========== ========= ========= ========= ==========
EXPENSES
--------
CLEANING EXPENSES 1,965,158 244,763 244,283 233,010 2,667,214
UTILITIES 5,189,345 623,289 553,074 574,360 6,940,068
REPAIRS & MAINT. 2,126,105 226,150 251,876 266,410 2,870,541
GEN. OPERATING EXP. 3,046,329 266,652 311,504 298,064 3,922,549
ADMINISTRATIVE 2,708,083 321,472 258,674 382,982 3,671,211
FIXED EXPENSES 4,822,687 539,348 562,515 562,599 6,487,149
INTEREST EXPENSE 7,893,485 868,934 867,262 865,578 10,495,259
---------- --------- --------- --------- ----------
TOTAL EXPENSES 27,751,192 3,090,608 3,029,188 3,183,003 37,053,991
========== ========= ========= ========= ==========
NET OPER. INCOME 19,388,395 2,132,972 2,433,836 1,881,336 25,836,539
========== ========= ========= ========= ==========
</TABLE>
CUSHMAN &
WAKEFIELD (R)
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY - AUTUMN 1996
====================================================================================================================================
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
CLASS A - LEASED ASSET OFFICE MARKET - URBAN/CBD
====================================================================================================================================
9.5% 10.0% 10.0% 10.0% 11.5% 11.5% 3.0% 3.0% 3.0% 4.0% 10.0 10.0
9.5% 10.0% 10.0% 10.5% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
8.0% 9.0% 8.5% 8.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
13.0% 13.0% - - 14.0% 14.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
8.0% 8.0% 8.5% 8.5% 10.5% 10.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.3% 9.3% 10.3% 10.3% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 9.0% 8.5% 9.0% 10.5% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
10.0% 10.0% 10.0% 10.0% 12.5% 12.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
9.0% 9.0% 9.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.0% 9.0% 8.0% 9.0% 10.0% 12.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
Responses 11 11 10 11 11 11 11 11 11 11 11 11
Average (%) 9.2% 9.6% 9.2% 9.7% 11.7% 12.0% 3.3% 4.2% 3.4% 3.9% 8.5 9.5
====================================================================================================================================
CLASS B - LEASED ASSET
====================================================================================================================================
10.0% 10.0% 9.0% 9.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 12.0% 12.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.5% 9.5% 10.5% 10.5% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 10.0% 10.0% 11.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
15.0% 15.0% - - 20.0% 20.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
9.0% 10.0% - - - - - - - - - -
9.0% 10.0% 9.0% 10.0% 12.0% 13.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
Responses 8 8 6 6 7 7 7 7 7 7 7 7
Average (%) 10.0% 10.4% 9.7% 10.3% 12.8% 13.1% 3.3% 4.7% 3.5% 4.0% 8.3 9.7
====================================================================================================================================
CLASS A - VALUE ADDED
====================================================================================================================================
8.0% 9.0% 9.5% 10.0% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
8.0% 10.0% 8.5% 9.0% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
10.0% 10.0% 10.0% 10.0% 13.0% 13.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.5% 9.5% 10.5% 10.5% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
12.0% 12.0% - - 13.0% 13.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
- - - - 12.0% 13.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
Responses 8 8 7 7 9 9 9 9 9 9 9 9
Average (%) 9.4% 10.0% 9.6% 10.2% 12.8% 13.5% 3.5% 4.6% 3.5% 3.9% 7.6 8.9
====================================================================================================================================
CLASS B - VALUE ADDED
====================================================================================================================================
12.0% 12.0% 12.0% 12.0% 15.0% 15.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.8% 9.8% 10.8% 10.8% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
14.0% 14.0% - - 20.0% 20.0% 5.0% 5.0% 3.0% 3.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 7.0
10.0% 10.0% 10.0% 11.0% 14.0% 14.0% 3.0% 4.0% 3.0% 4.0% 10.0 11.0
Responses 6 6 5 5 6 6 6 6 6 6 6 6
Average (%) 10.7% 11.0% 10.5% 11.2% 14.6% 15.3% 3.2% 4.8% 3.3% 3.9% 8.0 8.8
=========================================================================================================
Total Responses 33 33 28 33 33 33 33 33 33 33 33 33
Weighted Average (%) 9.8% 10.3% 9.7% 10.3% 13.0% 13.5% 3.3% 4.6% 3.4% 3.9% 8.1% 9.2
=========================================================================================================
</TABLE>
"Leased Asset" refers to predominately "passive" investments involving
substantially lease Properties
"Value Added" denotes properties which require more active management due to
leasing issues and/or additional capital investment for physical issues
CUSHMAN &
WAKEFIELD (R)
3 REAL ESTATE OUTLOOK
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY - AUTUMN 1996
====================================================================================================================================
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
CLASS A - LEASED ASSET OFFICE MARKET - SUBURBAN/NON-CBD
====================================================================================================================================
9.5% 9.5% 10.5% 10.5% 10.5% 10.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.5% 8.5% 9.3% 9.3% 11.3% 11.3% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
11.0% 11.0% - - 12.0% 12.0% 5.0% 3.0% 3.0% 3.0% 5.0 7.0
8.5% 10.0% 9.0% 10.5% 11.0% 12.5% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
8.0% 10.0% 9.5% 10.0% 11.5% 12.0% 4.0% 6.0% 4.0% 4.0% 10.0 10.0
10.0% 11.0% 10.5% 11.0% 12.0% 12.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.0% 9.0% 8.5% 8.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
8.0% 8.0% 8.5% 8.5% 10.5% 10.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.1% 9.1% 10.1% 10.1% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 10.0% 9.0% 10.5% 11.0% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
9.0% 9.0% 10.0% 10.0% 11.5% 11.5% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.0% 9.0% 9.0% 9.0% 12.0% 13.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.0% 10.0% - - - - - - - - - -
8.0% 9.0% 8.0% 9.0% 10.0% 12.0% 5.0% 5.0% 4.0% 4.0% 5.0 10.0
Responses 16 16 14 14 15 15 15 15 15 15 15 15
Average % 8.8% 9.5% 9.3% 9.9% 11.2% 11.6% 3.5% 4.4% 3.6% 3.8% 8.9 9.7
====================================================================================================================================
CLASS B-LEASED ASSET
====================================================================================================================================
9.5% 9.5% 10.5% 10.5% 10.5% 10.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.8% 8.8% 9.5% 9.5% 11.8% 11.8% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
12.0% 12.0% - - 18.0% 18.0% 5.0% 3.0% 3.0% 3.0% 5.0 7.0
10.5% 10.5% 10.0% 10.0% 11.0% 13.0% 2.0% 2.0% 2.0% 2.0% 10.0 10.0
8.0% 10.0% 9.5% 10.0% 11.0% 12.0% 4.0% 6.0% 4.0% 4.0% 10.0 10.0
9.0% 10.0% 9.0% 9.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.0% 11.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.4% 9.4% 10.4% 10.4% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 10.0% 14.0% 15.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
10.0% 11.0% - - - - - - - - - -
10.0% 11.0% 10.0% 11.0% 12.0% 13.0% 5.0% 5.0% 4.0% 4.0% 5.0 10.0
Responses 13 13 11 11 12 12 12 12 12 12 12 12
Average % 9.5% 10.0% 9.8% 10.2% 12.0% 12.5% 3.4% 4.5% 3.4% 3.7% 8.6 9.6
====================================================================================================================================
CLASS A-VALUE ADDED
====================================================================================================================================
10.0% 10.0% - - 13.0% 13.0% 3.0% 3.0% 3.0% 3.0% 5.0 7.0
8.0% 10.0% 8.5% 9.0% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
10.0% 10.0% 10.0% 10.0% 12.5% 12.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.4% 9.4% 10.4% 10.4% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
6.0% 6.0% 9.0% 9.0% 17.0% 20.0% 4.0% 7.00% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.0% 10.0% - - - - - - - - - -
12.0% 12.0% 10.0% 10.0% 16.0% 10.6% 3.0% 3.0% 3.0% 3.0% 2.0 2.0
Responses 10 10 8 8 9 9 9 9 9 9 9 9
Average (%) 9.1% 9.7% 9.5% 10.0% 13.4% 14.3% 3.1% 4.6% 3.4% 3.8% 7.2 8.0
====================================================================================================================================
CLASS B-VALUE ADDED
====================================================================================================================================
11.0% 11.0% - - 18.0% 18.0% 3.0% 3.0% 3.0% 3.0% 5.0 7.0
10.5% 10.5% 10.0% 10.0% 11.0% 13.0% 2.0% 2.0% 2.0% 2.0% 10.0 10.0
11.0% 11.0% 11.0% 11.0% 14.0% 14.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.6% 9.6% 10.6% 10.6% 11.5% 1.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
6.0% 6.0% 10.0% 11.0% 20.0% 20.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.0% 10.0% - - - - - - - - - -
12.0% 12.0% 10.0% 10.0% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 2.0 2.0
Responses 10 10 8 8 9 9 9 9 9 9 9 9
Average (%) 9.7% 10.0% 10.0% 10.5% 14.5% 15.2% 2.9% 4.3% 3.2% 3.6% 7.2 8.0
=============================================================================================================
Total responses 49 49 41 41 45 45 45 45 45 45 45 45
Weighted Average (%) 9.3% 9.8% 9.7% 10.1% 12.8% 13.4% 3.2% 4.4% 3.4% 3.7% 8.0 8.8
=============================================================================================================
</TABLE>
CUSHMAN &
WAKEFIELD (R)
AUTUMN 1996
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY - AUTUMN 1996
====================================================================================================================================
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
CLASS A-LEASED ASSET INDUSTRIAL MARKET-WAREHOUSE/DISTRIBUTION
====================================================================================================================================
9.2% 9.2% 9.5% 9.5% 10.0% 10.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.5% 8.5% 9.3% 9.3% 11.0% 11.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
8.5% 10.0% 9.5% 10.0% 11.0% 12.0% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
9.0% 9.0% 9.5% 9.5% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
8.0% 8.0% 8.5% 8.5% 10.5% 10.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 10.0% 9.0% 10.5% 11.0% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
9.0% 9.0% 10.0% 10.0% 11.0% 11.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
9.0% 9.0% 9.5% 9.5% 10.5% 10.5% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 10 10 10 10 10 10 10 10 10 10 10 10
Average (%) 8.8% 9.2% 9.4% 9.8% 10.9% 11.0% 2.9% 4.0% 3.3% 3.8% 9.8 10.1
====================================================================================================================================
CLASS B-LEASED ASSET
====================================================================================================================================
9.2% 9.2% 9.5% 9.5% 10.0% 10.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.8% 8.8% 9.5% 9.5% 11.3% 11.3% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.5% 11.5% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
10.0% 10.0% 11.0% 11.0% 12.0% 12.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.8% 9.8% 10.3% 10.3% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 7 7 7 7 7 7 7 7 7 7 7 7
Average(%) 9.3% 9.5% 10.0% 10.2% 11.2% 11.2% 2.8% 4.3% 3.2% 3.9% 9.7 10.1
====================================================================================================================================
CLASS A-VALUE ADDED
====================================================================================================================================
11.0% 11.0% 12.0% 12.0% 13.0% 13.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.8% 9.8% 10.3% 10.3% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 9.7% 9.9% 10.4% 10.8% 11.9% 11.9% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
====================================================================================================================================
CLASS B-VALUE ADDED
====================================================================================================================================
12.0% 12.0% 13.0% 13.0% 14.0% 14.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 10.0% 10.5% 10.5% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.5% 10.5% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 10.1% 10.4% 10.9% 11.3% 12.4% 12.4% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
=============================================================================================================
Total Responses 25 25 25 25 25 25 25 25 25 25 25 25
Weighted Average (%) 9.5% 9.7% 10.2% 10.5% 11.6% 11.6% 2.6% 4.5% 3.2% 4.0% 9.6 10.2
=============================================================================================================
</TABLE>
"Leased Asset" refers to predominately "passive" investments involving
substantially leased Properties.
"Value Added" denotes properties which require more active management due to
leasing issued and/or additional capital investment for physical issues
10 REAL ESTATE OUTLOOK
CUSHMAN &
WAKEFIELD (R)
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY - AUTUMN 1996
====================================================================================================================================
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
CLASS A - LEASED ASSET INDUSTRIAL MARKET - BUSINESS PARKS, OTHER INDUSTRIAL & MANUFACTURING
====================================================================================================================================
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 10.0 10.0
9.0% 9.0% - - 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 3 3 4 4 4 4 4 4 4 4
Average (%) 8.9% 9.4% 9.7% 10.7% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.8 10.3
====================================================================================================================================
CLASS B-LEASED ASSET
====================================================================================================================================
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.5% 10.5% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 10.0 10.0
10.0% 10.0% - - 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 3 3 4 4 4 4 4 4 4 4
Average (%) 9.3% 9.8% 9.8% 10.8% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.8 10.3
====================================================================================================================================
CLASS A-VALUE ADDED
====================================================================================================================================
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.5% 10.0% 10.5% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% - - 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 5 5 4 4 5 5 5 5 5 5 5 5
Average (%) 9.4% 10.0% 9.9% 10.9% 12.4% 13.2% 3.4% 4.0% 3.2% 3.8% 8.2 9.4
====================================================================================================================================
CLASS B-VALUE ADDED
====================================================================================================================================
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.5% 10.5% 11.0% 11.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.5% 10.5% - - 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 5 5 4 4 5 5 5 5 5 5 5 5
Average (%) 9.6% 10.2% 10.0% 11.0% 12.4% 13.2% 3.4% 4.0% 3.2% 3.8% 8.2 9.4
=============================================================================================================
Total Responses 18 18 14 14 18 18 18 18 18 18 18 18
Weighted Average (%) 9.3% 9.8% 9.8% 10.8% 12.0% 12.4% 3.3% 4.0% 3.2% 3.9% 8.5 9.8
=============================================================================================================
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require mor active management due to
leasing issues and/or additional capital investment for physical issues.
AUTUMN 1996
CUSHMAN &
WAKEFIELD (R)
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY - AUTUMN 1996
====================================================================================================================================
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
CLASS A-LEASED ASSET RETAIL MARKET-NEIGHBORHOOD & COMMUNITY CENTERS
====================================================================================================================================
9.0% 10.5% 9.5% 10.5% 11.0% 12.5% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
9.5% 10.0% 10.0% 10.0% 12.5% 12.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
10.0% 10.0% 10.5% 10.5% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
10.3% 10.3% 10.8% 10.8% 13.0% 13.0% 2.0% 2.0% 4.0% 4.0% 7.0 7.0
9.0% 9.0% 10.0% 10.0% 10.0% 10.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
9.8% 9.8% 10.3% 10.3% 11.5% 11.5% 3.8% 4.0% 4.0% 4.0% 10.0 10.0
9.0% 10.0% - - - - 3.0% 3.0% 4.0% 4.0% 10.0 10.0
9.0% 9.0% 9.5% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
Responses 9 9 8 8 8 8 9 9 9 9 9 9
Average (%) 9.3% 9.8% 10.0% 10.4% 11.9% 12.1% 2.9% 3.7% 3.4% 3.9% 8.9 9.4
====================================================================================================================================
CLASS B-LEASED ASSET
====================================================================================================================================
10.8% 10.8% 11.3% 11.3% 14.0% 14.0% 2.0% 2.0% 4.0% 4.0% 7.0 7.0
10.0% 10.0% 11.0% 11.0% 12.0% 12.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
9.0% 10.0% - - - - 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 11.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.5% 10.5% - - - - - - - - - -
Responses 6 6 4 4 4 4 5 5 5 5 5 5
Average (%) 9.5% 10.0% 10.4% 11.1% 12.3% 12.3% 2.3% 3.8% 3.3% 4.2% 9.0 9.6
====================================================================================================================================
CLASS A-VALUE ADDED
====================================================================================================================================
11.0% 11.0% 12.0% 12.0% 13.0% 13.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 10.0 10.0
9.0% 10.0% - - - - 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 9.5% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.0% 10.0% - - - - - - - - - -
11.0% 11.0% 9.5% 9.5% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 3.0 3.0
Responses 7 7 5 5 5 5 6 6 6 6 6 6
Average (%) 9.7% 10.3% 10.1% 10.7% 13.8% 14.6% 2.8% 4.0% 3.1% 3.8% 8.5% 9.0%
====================================================================================================================================
CLASS B-VALUE ADDED
====================================================================================================================================
13.0% 13.0% 14.0% 14.0% 14.0% 14.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 10.0 10.0
9.0% 10.0% - - - - 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 11.0% 14.0% 14.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
11.0% 11.0% 10.5% 10.5% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 3.0 3.0
Responses 6 6 5 5 5 5 6 6 6 6 6 6
Average (%) 10.3% 10.8% 10.8% 11.5% 14.2% 15.0% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
=============================================================================================================
Total Responses 28 28 22 22 22 22 26 26 26 26 26 26
Weighted Average (%) 9.7% 10.2% 10.3% 10.9% 13.0% 13.5% 2.7% 3.9% 3.2% 4.0% 8.7 9.3
=============================================================================================================
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due to
leasing issues and/or additional capital investment for physical issues
12 REAL ESTATE OUTLOOK
CUSHMAN &
WAKEFIELD (R)
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY - AUTUMN 1996
====================================================================================================================================
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
CLASS A-LEASED ASSET RETAIL MARKET-POWER CENTERS & "BIG BOX"
====================================================================================================================================
9.0% 9.0% 9.5% 9.5% 11.0% 11.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
10.0% 10.0% 9.5% 9.5% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
10.5% 10.5% 10.5% 10.5% 11.0% 12.0% 2.0% 2.0% 3.0% 3.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.4% 11.4% 3.8% 3.8% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 9.5% 10.0% 11.0% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
9.3% 9.3% 9.5% 10.0% 10.5% 10.5% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.0% 9.0% - - - - - - - - - -
9.0% 9.5% 9.5% 10.0% 11.0% 11.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
Responses 9 9 8 8 8 8 8 8 8 8 8 8
Average (%) 9.4% 9.5% 9.7% 10.1% 11.5% 11.7% 3.3% 3.5% 3.4% 3.7% 9.1 10.1
====================================================================================================================================
CLASS B-LEASED ASSET
====================================================================================================================================
10.8% 10.8% 10.8% 10.8% 11.0% 12.0% 2.0% 3.0% 3.0% 3.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Response 3 3 3 3 3 3 3 3 3 3 3 3
Average (%) 9.8% 10.1% 10.1% 10.6% 11.0% 11.3% 2.8% 3.7% 3.2% 3.7% 9.3 10.3
====================================================================================================================================
CLASS A-VALUE ADDED
====================================================================================================================================
10.8% 10.8% 10.8% 10.8% 12.0% 12.0% 2.0% 2.0% 3.0% 3.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Response 3 3 3 3 3 3 3 3 3 3 3 3
Average (%) 9.6% 10.1% 10.6% 10.6% 12.0% 12.0% 2.8% 3.3% 3.2% 3.7% 9.3 10.3
====================================================================================================================================
CLASS B-VALUE ADDED
====================================================================================================================================
11.0% 11.0% 10.8% 10.8% 12.0% 12.0% 2.0% 2.0% 3.0% 3.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
- - - - 15.0% 15.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 2 2 2 2 3 3 3 3 3 3 3 3
Average (%) 9.8% 10.3% 10.1% 10.9% 12.7% 12.7% 2.8% 3.3% 3.2% 3.7% 9.3 10.3
=============================================================================================================
Total Responses 17 17 16 16 17 17 17 17 17 17 17 17
Weighted Average (%) 9.6% 9.9% 10.0% 10.5% 11.8% 11.9% 2.9% 3.5% 3.2% 3.7% 9.3 10.3
=============================================================================================================
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due to
leasing issues and/or additional capital investment for physical issues
AUTUMN 1996
CUSHMAN &
WAKEFIELD (R)
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY - AUTUMN 1996
====================================================================================================================================
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
CLASS A-LEASED ASSET RETAIL MARKET-REGIONAL MALLS
====================================================================================================================================
7.5% 7.5% 8.0% 8.0% 11.3% 11.3% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.0% 9.0% 9.0% 9.0% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
7.5% 7.5% 7.8% 7.8% 12.0% 12.0% 1.5% 2.0% 3.0% 3.0% 10.0 10.0
7.0% 8.0% 8.0% 8.0% 10.5% 11.5% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
9.0% - - - - - 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.0% 8.0% 9.0% 10.5% 11.0% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
8.0% 8.0% 8.5% 8.5% 11.0% 11.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
7.8% 8.0% 8.3% 8.5% 11.0% 12.0% 2.5% 3.0% 2.5% 3.0% 10.0 10.0
7.0% 8.0% 7.0% 8.0% 10.0% 11.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
Responses 10 9 9 9 9 9 10 10 10 10 10 10
Average (%) 7.9% 8.2% 8.2% 8.6% 11.4% 11.8% 3.0% 3.6% 3.5% 3.8% 9.1 9.6
====================================================================================================================================
CLASS B-LEASED ASSET
====================================================================================================================================
10.0% 10.0% 10.0% 10.0% 17.0% 17.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
9.0% 9.0% 9.0% 9.0% 13.5% 13.5% 2.0% 2.0% 4.0% 4.0% 7.0 7.0
9.0% 10.0% 10.0% 10.0% 12.0% 14.0% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
10.0% - - - - - 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
Responses 5 4 4 4 4 4 5 5 5 5 5 5
Average (%) 9.3% 9.6% 9.6% 10.0% 13.4% 13.9% 2.5% 3.4% 3.7% 4.0% 8.6 8.6
====================================================================================================================================
CLASS A-VALUE ADDED
====================================================================================================================================
10.0% 10.0% 10.0% 10.0% 18.0% 18.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
11.0% 11.0% 11.0% 11.0% 13.0% 14.0% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
9.0% - - - - - 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.5% 8.5% 9.0% 11.5% 12.5% 2.5% 3.0% 2.5% 3.0% 10.0 10.0
Responses 5 4 4 4 4 4 5 5 5 5 5 5
Average (%) 9.3% 9.8% 9.8% 10.3% 13.4% 13.9% 2.6% 3.6% 3.4% 3.8% 9.2 9.2
====================================================================================================================================
CLASS B-VALUE ADDED
====================================================================================================================================
11.0% 11.0% 11.0% 11.0% 20.0% 20.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
12.5% 12.5% 12.0% 12.0% 14.0% 15.0% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
10.0% - - - - - 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 9.0% 9.3% 9.8% 12.0% 13.0% 2.5% 3.0% 2.5% 3.0% 10.0 10.0
13.0% 13.0% 11.0% 11.0% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 3.0 3.0
Responses 6 5 5 5 5 5 6 6 6 6 6 6
Average (%) 10.6% 11.0% 10.6% 11.0% 14.6% 15.0% 2.7% 3.5% 3.3% 3.7% 8.2 8.2
=============================================================================================================
TOTAL RESPONSES 28 22 22 22 22 22 26 26 26 26 26 26
WEIGHTED AVERAGE (%) 9.3% 9.6% 9.5% 10.0% 13.2% 13.6% 2.7% 3.5% 3.5% 3.8% 8.8 8.9
=============================================================================================================
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due to
leasing issues and/or additional capital investment for physical issues
14 REAL ESTATE OUTLOOK
CUSHMAN &
WAKEFIELD (R)
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY - AUTUMN 1996
====================================================================================================================================
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
CLASS A-LEASED ASSET RESIDENTIAL - APARTMENTS
====================================================================================================================================
8.5% 10.0% 9.0% 10.5% - - - - 3.5% 3.5% 1.0 1.0
8.5% 9.0% 9.0% 9.0% 11.0% 11.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
9.8% 9.8% 10.0% 10.0% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
8.3% 9.0% 9.0% 9.5% 10.5% 11.5% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
7.5% 8.5% 8.0% 9.0% 10.0% 11.0% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.8% 8.8% 9.0% 9.0% 11.3% 11.3% 3.8% 4.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 9.0% 9.0% 9.5% 11.5% 11.5% 3.0% 4.0% 3.0% 3.0% 10.0 10.0
8.5% 9.0% 8.5% 9.0% - - 3.0% 3.5% 3.0% 3.5% 10.0 10.0
8.8% 9.0% 9.0% 9.5% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 10 10 10 10 8 8 9 9 10 10 10 10
Average (%) 8.6% 9.2% 9.0% 9.6% 11.2% 11.7% 2.9% 3.9% 3.3% 3.8% 8.4 8.9
====================================================================================================================================
CLASS B-LEASED ASSET
====================================================================================================================================
9.0% 9.5% 9.5% 10.0% 11.0% 12.0% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
9.0% 10.0% 10.0% 10.0% 11.0% 12.5% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.0% 10.0% 10.0% 10.5% 10.5% 12.0% 3.0% 4.0% 3.0% 3.0% 10.0 10.0
9.0% 9.5% 9.5% 10.0% 11.5% 11.5% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 5 5 5 5 5 5 5 5 5 5 5 5
Average (%) 8.9% 9.7% 9.7% 10.3% 11.0% 11.8% 2.5% 4.2% 3.1% 4.0% 9.6 10.2
====================================================================================================================================
CLASS A-VALUE ADDED
====================================================================================================================================
10.0% 11.0% 11.0% 11.0% 12.5% 13.5% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.0% 9.0% 9.0% 11.0% 12.0% 4.0% 6.0% 3.0% 3.0% 3.0 5.0
9.0% 9.0% 9.5% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 8.9% 9.4% 9.8% 10.3% 11.6% 12.1% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
====================================================================================================================================
CLASS B-VALUE ADDED
====================================================================================================================================
12.0% 13.0% 13.0% 13.0% 13.0% 15.0% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 4.0% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.0% 10.0% 10.0% 11.0% 13.0% 6.0% 6.0% 3.0% 3.0% 3.0 5.0
9.5% 10.0% 10.0% 11.0% 13.0% 13.0% 4.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 9.5% 10.1% 10.6% 11.3% 12.0% 13.0% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
=============================================================================================================
TOTAL RESPONSES 23 23 23 23 21 21 22 22 23 23 23 23
WEIGHTED AVERAGE (%) 9.0% 9.6% 9.8% 10.4% 11.5% 12.1% 2.7% 4.4% 3.2% 4.0% 8.4 9.3
=============================================================================================================
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due to
leasing issues and/or additional capital investment for physical issues
AUTUMN 1996
CUSHMAN &
WAKEFIELD (R)
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY - AUTUMN 1996
====================================================================================================================================
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
===================================================================================================================================
OFFICE SUMMARY OF WEIGHTED AVERAGES
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Urban/CBD 9.8% 10.3% 9.7% 10.3% 13.0% 13.5% 3.3% 4.6% 3.4% 3.9% 8.1 9.2
Class A-Leased Asset 9.2% 9.6% 9.2% 9.7% 11.7% 12.0% 3.3% 4.2% 3.4% 3.9% 8.5 9.5
Class B-Leased Asset 10.0% 10.4% 9.7% 10.3% 12.8% 13.1% 3.3% 4.7% 3.5% 4.0% 8.3 9.7
Class A-Value Added 9.4% 10.0% 9.6% 10.2% 12.8% 13.5% 3.5% 4.6% 3.5% 3.9% 7.6 8.9
Class B-Value Added 10.7% 11.0% 10.5% 11.2% 14.6% 15.3% 3.2% 4.8% 3.3% 3.9% 8.0 8.8
Suburban 9.3% 9.8% 9.7% 10.1% 12.8% 13.4% 3.2% 4.4% 3.4% 3.7% 8.0 8.8
Class A-Leased Asset 8.8% 9.5% 9.3% 9.9% 11.2% 11.6% 3.5% 4.4% 3.6% 3.8% 8.9 9.7
Class B-Leased Asset 9.5% 10.0% 9.8% 10.2% 12.0% 12.5% 3.4% 4.5% 3.4% 3.7% 8.6 9.6
Class A-Value Added 9.1% 9.7% 9.5% 10.0% 13.4% 14.3% 3.1% 4.6% 3.4% 3.8% 7.2 8.0
Class B-Value Added 9.7% 10.0% 10.0% 10.5% 14.5% 15.2% 2.9% 4.3% 3.2% 3.6% 7.2 8.0
===================================================================================================================================
INDUSTRIAL
===================================================================================================================================
Warehouse/Distribution 9.5% 9.7% 10.2% 10.5% 11.6% 11.6% 2.6% 4.5% 3.2% 4.0% 9.6 10.2
Class A-Leased Asset 8.8% 9.2% 9.4% 9.8% 10.9% 11.0% 2.9% 4.0% 3.3% 3.8% 9.8 10.1
Class B-Leased Asset 9.3% 9.5% 10.0% 10.2% 11.2% 11.2% 2.8% 4.3% 3.2% 3.9% 9.7 10.1
Class A-Value Added 9.7% 9.9% 10.4% 10.8% 11.9% 11.9% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
Class B-Value Added 10.1% 10.4% 10.9% 11.3% 12.4% 12.4% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
Business Parks 9.4% 9.9% 10.0% 10.8% 12.3% 12.9% 3.4% 4.0% 3.2% 3.8% 8.3 9.6
Class A-Leased Asset 9.0% 9.5% 9.8% 10.5% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
Class B-Leased Asset 9.3% 9.8% 10.0% 10.8% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
Class A-Value Added 9.5% 10.2% 10.0% 10.8% 13.0% 14.3% 3.5% 4.0% 3.2% 3.7% 7.7 8.7
Class B-Value Added 9.7% 10.3% 10.2% 11.0% 13.0% 14.3% 3.5% 4.0% 3.2% 3.7% 7.7 8.7
Other Industrial/Manufacturing 9.2% 9.7% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.8 10.3
Class A-Leased Asset 8.8% 9.3% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.5 10.0
Class B-Leased Asset 9.3% 9.8% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.5 10.0
Class A-Value Added 9.3% 9.8% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
Class B-Value Added 9.5% 10.0% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
===================================================================================================================================
RETAIL
===================================================================================================================================
Neighborhood & Community Centers 9.7% 10.2% 10.3% 10.9% 13.0% 13.5% 2.7% 3.9% 3.2% 4.0% 8.7 9.3
Class A-Leased Asset 9.3% 9.8% 10.0% 10.4% 11.9% 11.9% 2.9% 3.7% 3.4% 3.9% 8.9 9.4
Class B-Leased Asset 9.5% 10.0% 10.4% 11.1% 12.3% 12.3% 2.3% 3.8% 3.3% 4.2% 9.0 9.6
Class A-Value Added 9.7% 10.3% 10.1% 10.7% 13.8% 14.6% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
Class B-Value Added 10.3% 10.8% 10.8% 11.5% 14.2% 15.0% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
Power Center & "Big Box" 9.6% 9.9% 10.0% 10.5% 11.8% 11.9% 2.9% 3.5% 3.2% 3.7% 9.1 10.3
Class A-Leased Asset 9.4% 9.5% 9.7% 10.1% 11.5% 11.7% 3.3% 3.5% 3.4% 3.7% 9.3 10.1
Class B-Leased Asset 9.8% 10.1% 10.1% 10.6% 11.0% 11.3% 2.8% 3.7% 3.2% 3.7% 9.3 10.3
Class A-Value Added 9.6% 9.9% 10.1% 10.6% 12.0% 12.0% 2.8% 3.3% 3.2% 3.7% 9.3 10.3
Class B-Value Added 9.8% 10.3% 10.1% 10.9% 12.7% 12.7% 2.8% 3.3% 3.2% 3.7% 9.3 10.3
Regional Malls 9.3% 9.6% 9.5% 10.0% 13.2% 13.6% 2.7% 3.5% 3.5% 3.8% 8.8 8.9
Class A-Leased Asset 7.9% 8.2% 8.2% 8.6% 11.4% 11.8% 3.0% 3.6% 3.5% 3.8% 9.1 9.6
Class B-Leased Asset 9.3% 9.6% 9.6% 10.0% 13.4% 13.9% 2.5% 3.4% 3.7% 4.0% 8.6 8.6
Class A-Value Added 9.3% 99.8% 9.8% 10.3% 13.4% 13.9% 2.6% 3.6% 3.4% 3.8% 9.2 9.2
Class B-Value Added 10.6% 11.0% 10.6% 11.0% 14.6% 15.0% 2.7% 3.5% 3.3% 3.7% 8.2 8.2
Specialty Retail 9.5% 10.5% 10.8% 11.5% 12.0% 12.6% 1.9% 4.0% 3.3% 4.0% 10.0 10.5
Class A-Leased Asset 8.2% 9.0% 8.8% 9.7% 10.7% 11.3% 2.5% 4.0% 3.5% 4.0% 8.7 10.3
Class B-Leased Asset 9.3% 10.3% 10.8% 11.5% 11.5% 12.5% 1.8% 4.0% 3.3% 4.0% 10.5 10.5
Class A-Value Added 9.3% 11.0% 11.3% 12.0% 12.5% 112.0% 1.8% 4.0% 3.3% 4.0% 10.5 10.5
Class B-Value Added 10.6% 11.8% 12.3% 13.0% 13.5% 13.5% 1.8% 4.0% 3.3% 4.0% 10.5 10.5
===================================================================================================================================
RESIDENTIAL
===================================================================================================================================
Apartments 9.0% 9.6% 9.8% 10.4% 11.5% 12.1% 2.7% 4.4% 3.2% 4.0% 8.4 9.3
Class A-Leased Asset 8.6% 9.2% 9.0% 9.6% 11.2% 11.7% 2.9% 3.9% 3.3% 3.8% 8.4 8.9
Class B-Leased Asset 8.9% 9.7% 9.7% 10.3% 11.0% 11.8% 2.5% 4.2% 3.1% 4.0% 9.6 10.2
Class A-Value Added 8.9% 9.4% 9.8% 10.3% 11.6% 12.1% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
Class B-Value Added 9.5% 10.1% 10.6% 11.3% 12.0% 13.0% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
</TABLE>
16 REAL ESTATE OUTLOOK
CUSHMAN &
WAKFEFIELD (R)
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY - AUTUMN 1996
====================================================================================================================================
Single-Tenant NNN Leased Properties
(Excluded "Bondable" Leases)
Minimum No. Going-in Cap Rate Internal Rate of Return
of Years Low High Low High
<S> <C> <C> <C> <C> <C>
Investment Grade Tenant
- ------------------------------------------------------------------------------------
4.0 9.0% 9.0% 10.0% 12.0%
--------------------------------------------------------------
10.0 8.0 9.0 10.5 11.5
--------------------------------------------------------------
5.0 10.5 10.5 13.0 13.0
--------------------------------------------------------------
10.0 9.0 10.5 13.0 15.0
--------------------------------------------------------------
10.0 8.5 9.0 10.5 12.0
--------------------------------------------------------------
10.0 9.5 10.0 10.5 11.5
--------------------------------------------------------------
10.0 8.5 11.0 10.8 12.0
--------------------------------------------------------------
10.0 9.5 9.5 11.0 11.0
--------------------------------------------------------------
20.0 9.0 9.0 N/A N/A
--------------------------------------------------------------
10.0 8.0 10.0 N/A N/A
- ------------------------------------------------------------------------------------
Responses 10.0 10.0 10.0 8.0 8.0
Average 9.9 9.0% 9.8% 11.2% 12.3%
Non-Investment Grade Tenant
- ------------------------------------------------------------------------------------
4.0 9.5 9.5 10.5 13.0
--------------------------------------------------------------
10.0 9.0 10.0 11.5 12.5
--------------------------------------------------------------
5.0 13.0 13.0 15.0 15.0
--------------------------------------------------------------
10.0 10.0 12.0 17.0 20.0
--------------------------------------------------------------
10.0 9.0 10.0 11.0 13.0
--------------------------------------------------------------
10.0 11.0 12.0 13.0 15.0
--------------------------------------------------------------
10.0 10.5 10.5 13.0 13.0
--------------------------------------------------------------
20.0 11.0 11.0 N/A N/A
--------------------------------------------------------------
10.0 10.0 12.5 N/A N/A
--------------------------------------------------------------
Responses 9.0 9.0 9.0 7.0 7.0
Average 9.9 10.3% 11.2% 13.0% 14.5%
</TABLE>
AUTUMN 1996
CUSHMAN &
WAKEFIELD (R)
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY - AUTUMN 1996
====================================================================================================================================
CAPITALIZATION RATES BLENDED INTERNAL EQUITY INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
LUXURY HOTEL - FULL SERVICE
====================================================================================================================================
8.0% 8.0% 10.0% 10.0% 18.0% 18.0% 25.0% 25.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0
7.0% 7.0% 10.0% 10.0% 15.0% 15.0% 20.0% 20.0% 7.0% 7.0% 4.0% 5.0% 5.0 5.0
6.0% 9.5% 10.0% 10.0% 12.0% 15.0% 15.0% 18.0% 3.0% 3.0% 3.0% 3.0% 5.0 5.0
8.0% 11.0% 8.5% 12.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 7.0
9.5% 9.5% 10.5% 10.5% 15.0% 15.0% 18.0% 18.0% 4.5% 4.5% 4.0% 4.0% 10.0 10.0
- - 11.0% 13.0% 15.0% 15.0% 18.0% 18.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
6.0% 8.0% 10.0% 12.0% 13.0% 14.0% 20.0% 22.0% 5.0% 4.0% 3.0% 4.0% 5.0 5.0
8.0% 12.0% 8.0% 10.0% 15.0% 15.0% 15.0% 20.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
Responses 7 7 8 8 8 8 8 8 8 8 8 8 8.0 8.0
Average (%) 7.5% 9.3% 9.8% 10.9% 14.5% 15.3% 19.5% 20.1% 4.1% 4.3% 3.8% 3.9% 6.5 6.0
====================================================================================================================================
FIRST CLASS
====================================================================================================================================
9.0% 9.0% 11.0% 11.0% 12.0% 12.0% 20.0% 20.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0
10.0% 10.0% 10.0% 10.0% - - 13.0% 13.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
9.0% 9.0% 11.0% 11.0% 14.0% 14.0% 13.0% 18.0% 6.0% 6.0% 4.0% 4.0% 5.0 5.0
9.5% 11.0% 11.0% 11.0% 15.0% 20.0% 18.0% 22.0% 3.0% 3.0% 2.0% 2.0% 5.0 5.0
10.0% 12.0% 10.5% 13.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0
7.0% 9.0% 10.0% 11.0% 11.5% 12.0% 14.0% 16.0% 4.0% 5.0% 3.0% 4.0% 5.0 5.0
9.5% 9.5% 10.5% 10.5% 15.0% 15.0% 18.0% 18.0% 4.5% 4.5% 4.0% 4.0% 10.0 10.0
9.0% 9.0% 10.5% 10.5% 21.0% 21.0% 14.0% 14.0% 4.0% 4.0% 3.5% 3.0% 7.0 7.0
10.0% 12.0% 11.0% 11.0% - - - - 3.5% 3.5% 3.0% 3.5% 5.0 10.0
10.0% 10.0% 9.0% 9.5% 19.0% 19.0% 15.0% 15.0% 8.0% 8.0% 6.0% 6.0% - -
10.0% 13.0% 12.0% 13.0% 25.0% 25.0% 20.0% 20.0% 3.5% 4.0% 3.5% 4.0% 5.0 5.0
10.5% 10.5% 10.5% 10.5% 13.5% 13.5% - - 3.5% 3.5% 3.5% 3.5% 10.0 10.0
8.0% 12.0% 8.0% 10.0% 15.0% 15.0% 20.0% 20.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
Responses 13 13 13 13 11 11 11 11 13 13 13 12 12 12
Average% 9.3% 10.5% 10.4% 10.9% 15.8% 16.5% 17.3% 17.8% 4.2% 4.3% 3.7% 3.8% 6.6 7.3
====================================================================================================================================
MID-RATE
====================================================================================================================================
10.0% 10.0% 12.0% 12.0% 15.0% 15.0% 18.0% 18.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0
11.0% 11.0% 11.0% 11.0% 13.0% 13.0% 17.0% 17.0% 6.0% 6.0% 4.0% 4.0% 5.0 5.0
9.5% 11.0% 11.0% 11.0% 15.0% 18.0% 17.0% 20.0% 3.0% 3.0% 2.0% 2.0% 5.0 5.0
10.0% 12.0% 10.5% 13.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0
9.5% 9.5% 10.5% 10.5% 15.0% 15.0% 18.0% 18.0% 4.5% 4.5% 4.0% 4.0% 10.0 10.0
Responses 5 5 5 5 5 5 5 5 5 5 5 5 5 5
Average(%) 10.0% 10.7% 11.0% 11.5% 14.2% 15.2% 18.0% 18.6% 4.2% 4.2% 3.7% 3.7% 6.4 7.0
=========================================================================================================================
Total
Responses 25 25 26 26 24 24 24 24 26 26 26 26 25 25
Weighted
Average (%) 8.9% 10.1% 10.4% 11.1% 14.8% 15.7% 18.3% 18.8% 4.2% 4.3% 3.7% 3.8% 6.5 7.0
=========================================================================================================================
<CAPTION>
MANAGEMENT RESERVES FOR
FEES* REPLACEMENT
--------------------------------
LOW HIGH LOW HIGH
--------------------------------
<S> <C> <C> <C> <C>
======================================================
LUXURY HOTEL - FULL SERVICE
======================================================
3.0% 3.0% 5.0% 5.0%
3.0% 3.0% 4.0% 4.0%
2.0% 4.0% 4.0% 4.0%
3.0% 3.0% 4.0% 4.0%
3.5% 3.5% 4.0% 4.0%
3.0% 3.0% 4.0% 4.0%
2.0% 3.0% 4.0% 5.0%
3.0% 2.0% 4.0% 5.0%
Responses 8 8 8 8
Average (%) 2.8% 3.3% 4.1% 4.4%
======================================================
FIRST CLASS
======================================================
3.0% 3.0% 4.0% 4.0%
3.0% 3.0% 4.0% 5.0%
3.0% 3.0% 4.0% 4.0%
2.0% 3.0% 4.0% 4.0%
3.0% 3.0% 4.0% 4.0%
2.5% 2.5% 5.0% 4.0%
3.5% 3.5% 4.0% 5.0%
3.0% 3.0% 4.0% 4.0%
2.0% 3.0% 4.0% 4.0%
2.5% 2.5% 4.0% 4.0%
3.5% 3.5% 4.0% 4.0%
3.0% 3.0% 5.0% 5.0%
3.0% 4.0% 4.0% 5.0%
Responses 13 13 13 13
Average% 2.8% 3.1% 4.2% 4.3%
======================================================
MID-RATE
======================================================
3.0% 3.0% 4.0% 4.0%
3.0% 3.0% 4.0% 4.0%
2.0% 3.0% 4.0% 4.0%
3.0% 3.0% 4.0% 4.0%
3.5% 3.5% 4.0% 4.0%
Responses 5 5 5 5
Average(%) 2.9% 3.1% 4.0% 4.0%
===========================================
Total
Responses 26 26 26 26
Weighted
Average (%) 2.9% 3.2% 4.1% 4.2%
===========================================
</TABLE>
*as percent of total revenues
13 REAL ESTATE OUTLOOK
CUSHMAN &
WAKEFIELD (R)
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY - AUTUMN 1996
====================================================================================================================================
CAPITALIZATION RATES BLENDED INTERNAL EQUITY INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
MID-RATE HOTEL - LIMITED SERVICE
====================================================================================================================================
10.0% 10.0% 12.0% 12.0% 15.0% 15.0% 15.0% 15.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0
12.0% 12.0% 12.0% 12.0% 13.0% 13.0% 17.0% 17.0% 3.0% 3.0% 4.0% 4.0% 5.0 5.0
8.0% 10.0% 10.0% 10.0% 15.0% 15.0% 14.0% 16.0% 3.0% 3.0% 2.0% 2.0% 5.0 5.0
11.0% 13.0% 11.5% 14.0% 15.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0
11.0% 11.0% 11.8% 11.8% 16.0% 16.0% 19.0% 19.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
10.0% 13.0% 12.0% 13.0% 25.0% 25.0% 20.0% 20.0% 3.5% 4.0% 3.5% 4.0% 5.0 5.0
Responses 6 6 6 6 6 6 6 6 6 6 6 6 6 6
Average(%) 10.3% 11.5% 11.5% 12.1% 15.7% 16.5% 17.5% 17.8% 3.5% 3.6% 3.7% 3.8% 6.2 6.7
====================================================================================================================================
ECONOMY
====================================================================================================================================
10.0% 10.0% 12.0% 12.0% 15.0% 15.0% 15.0% 15.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0
13.0% 13.0% 13.0% 13.0% 13.0% 13.0% 17.0% 17.0% 3.0% 3.0% 4.0% 4.0% 5.0 5.0
9.0% 11.0% 10.0% 10.0% 12.0% 15.0% 14.0% 16.0% 3.0% 3.0% 3.0% 3.0% 5.0 5.0
11.0% 13.0% 14.0% 14.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0
11.0% 11.0% 11.8% 11.8% 16.0% 16.0% 19.0% 19.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
5 5 5 5 5 5 5 5 5 5 5 5 5 5
10.8% 11.6% 11.7% 12.2% 13.8% 14.8% 17.0% 17.4% 3.5% 3.5% 3.9% 3.9% 6.4 7.0
=========================================================================================================================
Total
Responses 11 11 11 11 11 11 11 11 11 11 11 11 11 11
Weighted
Average (%) 10.6% 11.6% 11.6% 12.1% 14.7% 15.7% 17.3% 17.6% 3.5% 3.5% 3.8% 3.8% 6.3 6.8
=========================================================================================================================
<CAPTION>
MANAGEMENT RESERVES FOR
FEES* REPLACEMENT
--------------------------------
LOW HIGH LOW HIGH
--------------------------------
<S> <C> <C> <C> <C>
======================================================
MID-RATE HOTEL - LIMITED SERVICE
======================================================
3.0% 3.0% 4.0% 4.0%
3.0% 3.0% 4.0% 4.0%
3.0% 4.0% 4.0% 5.0%
3.0% 3.0% 4.0% 4.0%
4.0% 3.0% 4.5% 4.5%
4.0% 4.0% 5.0% 5.0%
Responses 6 6 6 6
Average(%) 3.3% 3.5% 4.3% 4.4%
======================================================
ECONOMY
======================================================
3.0% 3.0% 4.0% 4.0%
3.0% 3.0% 4.0% 4.0%
4.0% 5.0% 5.0% 5.0%
3.0% 3.0% 4.0% 4.0%
4.0% 4.0% 4.5% 4.5%
5 5 5 5
3.4% 3.6% 4.3% 4.3%
===========================================
Total
Responses 11 11 11 11
Weighted
Average (%) 3.4% 3.6% 4.3% 4.4%
===========================================
</TABLE>
*as percent of total revenues
AUTUMN 1996
CUSHMAN &
WAKEFIELD (R)
<PAGE>
QUALIFICATIONS OF APPRAISER
================================================================================
James W. Myers, MAI
Cushman & Wakefield - Senior Director
March 1994 to Present
Professional Affiliations
Member of the Appraisal Institute (MAI Designation No. 09296)
Certified Real Estate Appraiser - (ID# AGO02662)
Real Estate Experience
Cushman & Wakefield - Director
May 1992 - April 1994
Cushman & Wakefield - Associate Director
January 1989 - May 1992
Cushman & Wakefield - Appraiser October 1986 to January 1989. Property
types appraised include office, retail, and industrial developments,
hotels, residential income, and special purpose properties.
Donahue and Company, Inc. - Newport Beach - Appraiser January, 1985 - 1986.
Appraiser emphasis on eminent domain litigation, special purpose and
problem properties, easement valuation, and full and partial property
damages.
Experience includes appraisal of the following types of property:
Office Buildings Medical Buildings
Apartment Buildings Residential Subdivisions
Shopping Centers Vacant Land
Hotels Industrial Warehouses
Department Stores Industrial Parks
Auto Sales Facilities Condominium Complexes
Multi-Use Buildings
Primary area of specialization has been major office buildings throughout
southern California, with particular emphasis on appraising office
buildings located along the Wilshire Boulevard corridor, extending from
downtown Los Angeles to West Los Angeles.
Education
Bachelor of Arts (English Literature), 1975
Kenyon College, Gambier, Ohio
American Institute of Real Estate Appraisers Courses:
Real Estate Appraisal Principles
Basic Valuation Procedures
Capitalization Theory and Techniques, Parts A & B
Standards of Professional Practice
Valuation Analysis and Report Writing
Case Studies in Real Estate Valuation
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
QUALIFICATIONS OF APPRAISER
================================================================================
Miles Loo, Jr
Professional Affiliations
State of California Provisional Real Estate Appraiser (ID #AP 023313)
Associate Member of the Appraisal Institute (ID# M950226)
State of California Real Estate Broker License (ID #01115873)
Real Estate Experience
Associate Real Estate Appraiser - Cushman & Wakefield of California, Inc.,
Los Angeles Valuation Advisory Services
May 1995 to Present
Real Estate Broker - Good Land Realty Corporation, Los Angeles
August 1991 to Present
Experience includes appraisal of the following types of property:
Office Buildings Medical Buildings
Regional Shopping Centers Commercial Land
Neighborhood Shopping Centers Subdivision Lots
Specialty Retail Centers Special Purpose
Education
California State University of Los Angeles, Los Angeles, CA
Bachelor of Science, Business Administration 1995
Emphasis in Business Arts / Pre-Legal
University Programs, Inc., Oxnard, CA
Certificate for Real Estate Broker License 1994
Certificate for Real Estate Appraisal License 1993
Glendale Community College, Glendale, CA
Associate Arts Degree 1991
Graduated with a Business Curriculum
Real Estate Courses:
Real Estate Appraisal I Real Estate Finance
Real Estate Appraisal II Real Estate Law
Real Estate Escrow Real Estate Principles
Appraisal Institute Courses:
1-310 - Basic Income Capitalization
1-410 - Standards of Professional Practice, Part A
1-420 - Standards of Professional Practice, Part B
1-510 - Advanced Income Capitalization
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
This CD ROM contains an electronic version of appraisals for the Mortgaged
Properties in PDF format and forms part of the paper version of the Prospectus
Supplement. The information contained in this CD ROM does not appear elsewhere
in paper form in this Prospectus Supplement and must be considered as part of,
and together with, the information contained elsewhere in this Prospectus
Supplement and the Prospectus. The information contained in this CD ROM has
been filed by the Seller with the Securities and Exchange Commission as part
of a Current Report on Form 8-K, which is incorporated by reference in this
Prospectus Supplement, and is also available through the public reference
branch of the Securities and Exchange Commission. Defined terms used in this CD
ROM but not otherwise defined therein shall have the respective meanings
assigned to them in the paper portion of the Prospectus Supplement and the
Prospectus. All of the information contained in this CD ROM is subject to the
same limitations and qualifications contained in this Prospectus Supplement and
the Prospectus. Prospective investors are strongly urged to read the paper
portion of this Prospectus Supplement and the Prospectus in its entirety prior
to accessing this CD ROM. If this CD ROM was not received in a sealed package,
there can be no assurances that it remains in its original format and should
not be relied upon for any purpose. Prospective investors may contact J.
Theodore Borter of Goldman, Sachs Co. at (212)902-3857 to receive an original
copy of the CD ROM.
<PAGE>
================================================================
COMPLETE APPRAISAL
OF REAL PROPERTY
City Center Square
1100 Main Street
Kansas City, Jackson County, Missouri
================================================================
IN A SUMMARY REPORT
As of July 31,1996
Prepared For
GMAC Commercial Mortgage Corporation
650 Dresher Road
P.O. Box 1015
Horsham, PA 19044-8015
Prepared By:
Cushman & Wakefield, Inc.
Valuation Advisory Services
51 West 52nd Street, 9th Floor
New York, NY 10019
<PAGE>
August 2, 1996
Mr. Dan Kesich
GMAC Commercial Mortgage Corporation
650 Dresher Road
P.O. Box 1015
Horsham, PA 19044-8015
RE: Appraisal of Real Property
City Center Square
1100 Main Street
Kansas City, Jackson County, Missouri
Dear Mr. Kesich:
In fulfillment of our agreement as outlined in the Letter of Engagement,
Cushman & Wakefield, Inc. is pleased to transmit our summary report estimating
the market value of the leased fee estate in the referenced property.
As specified in the Letter of Engagement, the value opinion reported below
is qualified by certain assumptions, limiting conditions, certifications, and
definitions, which are set forth in the report.
This is a complete appraisal prepared in accordance with the Uniform
Standards of Professional Appraisal Practice of The Appraisal Foundation. The
results of the appraisal are being conveyed in a Summary report according to our
agreement. Because this is a summary report, the level of detail of presentation
is less than that found in a self-contained report.
This report was prepared for GMAC Commercial Mortgage Corporation and it is
intended only for the specified use of said Client. It may not be distributed to
or relied upon by other persons or entities without written permission of the
Appraiser.
The property was inspected by David F. McArdle. The report was prepared by
David F. McArdle and Travis W. Walsh, MAI, CRE.
As a result of our analysis, we have formed an opinion that the market
value of the leased fee estate in the subject property, subject to the
assumptions, limiting conditions, certifications, and definitions, as of July
31, 1996 was:
THIRTY SIX MILLION DOLLARS
$36,000,000
<PAGE>
Mr. Dan Kesich.
GMAC Commercial
Mortgage Corporation Page 2 August 2, 1996
The preceding estimate of market value are based upon a forecasted
marketing period of approximately 12 months, which we believe (through a review
of recent office building sale activity, as well as with conversations with
local office/investment brokers) is reasonably representative for this product
type.
This letter is invalid as an opinion of value if detached from the report,
which contains the text, exhibits, and an Addenda.
Respectfully submitted,
CUSHMAN & WAKEFIELD, INC.
David F. McArdle
Director
Valuation Advisory Services
Travis W. Walsh, MAI, CRE
Director
Valuation Advisory Services
DFM:TWW:sjr
<PAGE>
SUMMARY OF SALIENT FACTS AND CONCLUSIONS
================================================================================
Property Name: City Center Square
Location: The subject property occupies an entire city
block in downtown Kansas City, Missouri with
primary frontage along Main Street and
Baltimore Avenue. The street address is 1100
Main Street, Kansas City, Jackson County,
Missouri.
Jackson County Assessors
Tax I.D. No.: 29-220-47-03
Interest Appraised: Leased fee estate
Date of Value: July 31, 1996
Date of Inspection: July 31, 1996
Ownership: WHC - Six Real Estate Limited Partnership
Land Area: 1.56 acres or 68,088 square feet
1996 Property Assessment
Land: $ 5,106,525
Building: $18,893,475
-----------
Total: $24,000,000
1996 Estimated Ad Valorem Taxes: $595,968
Zoning: C-4, Commercial
Highest and Best Use
If Vacant: Commercial development, such as a single-
tenant or multi-tenant office building;
however, current market conditions are not
conducive to speculative, multi-tenant office
development at the present time, thus a
holding period would be required before
development of this type would likely occur.
As Improved: As developed, with a multi-tenant, office
building.
Improvements
Type: A 30-story, Class B+ office building of
concrete frame, with grade level retail uses,
plus a two level underground parking garage
and related site improvements. The exterior of
the building is finished with concrete panels
and smoked glass.
<PAGE>
Summary of Salient Facts and Conclusions
================================================================================
Year Built: 1978
Size
Gross Building Area: 633,179+/- square feet
Net Rentable Office Area: 607,497+/- square feet
Common Area Factor: 15+/- percent
Condition: Good
Operating Data and Forecasts
Current Occupancy: 89+/-%
Forecasted First Year
Occupancy (Calendar
Year 1997): 92+/-%
Forecasted Average
Occupancy: 92+/-%
Average Annual Rental Rate
Actual: $12.27 per square foot
Forecasted
Multi-Tenant Space: $14.00 per square foot
Large Block Space: $14.00 per square foot
Operating Expenses
Last Full Year (1995): $5.12 per net rentable square foot
Budget (1996): $4.99 per net rentable square foot
Forecasted (1996): $5.23 per net rentable square foot
Value Indicators
Sales Comparison Approach: $35,000,000 ($57.57 per square foot of net
rentable area)
Income Approach: $36,000,000 ($59.26 per square foot of net
rentable area)
Discounted Cash Flow Assumptions
Market Rental Growth Rate
1996: $14.00 per square foot or 3%
1997: $14.42 per square foot or 3%
1998: $14.85 per square foot or 3%
1999: $15.29 per square foot or 3%
Thereafter: 3%
Expense Growth Rates 3%
Utilities: 3%
All others: 3%
Credit Loss Allowance: 5%
Projected Term of
Future Leases: 5 years
Vacancy Between Tenants: 2 months
Renewal Probability: 50%
<PAGE>
Summary of Salient Facts and Conclusions
================================================================================
Tenant Improvements
New Tenants: $12.00 per square foot
Renewal Tenants: $6.00 per square foot
Terminal Capitalization
Rate: 10.5%
Cost of Sale at Reversion: 4.0%
Discount Rate: 12.5%
Implicit Year 1 Overall
Capitalization Rate: 10.9%
Value Conclusion
As Is Value Estimate: $36,000,000
Resulting Indicators
Going-in Capitalization Rate
(Overall Capitalization
Rate): 10.9%
Price Per Square Foot
(Net Rentable Area): $59.26
Estimated Marketing Time: 6 to 9 months
Special Assumption:
1. We were provided documentation stating the gross building and net
rentable areas of the building. However, building plans were not
provided. Our estimates of the gross building and net rentable areas
were obtained from a representative of ownership. Any deviation from
these building areas could impact the value conclusions contained
herein.
<PAGE>
PHOTOGRAPHS OF SUBJECT PROPERTY
================================================================================
[PHOTO -- STREET VIEW OF BUILDING]
View of the main entrance along Main Street facing west.
[PHOTO -- STREET VIEW OF BUILDING]
View of the entrance along Baltimore Avenue facing east.
<PAGE>
PHOTOGRAPHS OF SUBJECT PROPERTY
================================================================================
[PHOTO -- STREET VIEW OF BUILDING, DOWN STREET]
View of frontage along 11th Street.
[PHOTO -- STREET VIEW OF BUILDING, DOWN STREET]
View of frontage along 12th Street.
<PAGE>
PHOTOGRAPHS OF SUBJECT PROPERTY
================================================================================
[PHOTO -- STREET VIEW OF BUILDING, DOWN STREET]
View south along Main Street.
[PHOTO -- STREET VIEW OF BUILDING, DOWN STREET]
View north along Baltimore Avenue.
<PAGE>
PHOTOGRAPHS OF SUBJECT PROPERTY
================================================================================
[PHOTO -- INTERIOR VIEW]
Interior view of first floor food court.
[PHOTO -- INTERIOR VIEW]
Interior view of second floor tenant spaces.
<PAGE>
PHOTOGRAPHS OF SUBJECT PROPERTY
================================================================================
[PHOTO -- INTERIOR VIEW, OFFICE SPACE]
Sample view of office interiors.
[PHOTO -- INTERIOR VIEW, OFFICE SPACE]
Sample view of office interiors.
<PAGE>
TABLE OF CONTENTS
================================================================================
Page
INTRODUCTION .............................................................. 1
Identification of Property .............................................. 1
Property Ownership and Recent History ................................... 1
Purpose and Function of the Appraisal ................................... 1
Extent of the Appraisal Process ......................................... 1
Date of Value and Property Inspection ................................... 2
Property Rights Appraised ............................................... 2
Definitions of Value, Interest Appraised, and Other Pertinent Terms ..... 2
Legal Description ....................................................... 3
REGIONAL ANALYSIS ......................................................... 4
NEIGHBORHOOD ANALYSIS ..................................................... 9
OFFICE MARKET ANALYSIS .................................................... 11
PROPERTY DESCRIPTION ...................................................... 12
Site Description ....................................................... 12
Improvements Description ............................................... 12
REAL PROPERTY TAXES AND ASSESSMENTS ....................................... 14
ZONING .................................................................... 15
HIGHEST AND BEST USE ...................................................... 16
VALUATION PROCESS ......................................................... 17
SALES COMPARISON APPROACH ................................................. 19
INCOME APPROACH ........................................................... 23
RECONCILIATION AND FINAL ESTIMATE OF VALUE ................................ 33
ASSUMPTIONS AND LIMITING CONDITIONS ....................................... 35
CERTIFICATION OF APPRAISAL ................................................ 37
ADDENDA ................................................................... 38
<PAGE>
INTRODUCTION
================================================================================
Identification of Property
The subject property, which is known as City Center Square, is a
thirty-story, Class B+ concrete and glass office building containing
approximately 607,947+/- square feet of net rentable area. The building is
situated on a 1.56 acre tract of land that occupies an entire city block
fronting Main Street, Baltimore Avenue, 11th Street and 12th Street in downtown
Kansas City. The common address is 1100 Main Street, Kansas City, Jackson
County, Missouri. The building was constructed in 1978 and is 89.4 percent
occupied by 73 tenants as of the appraisal date.
Property Ownership and Recent History
Ownership to the property is currently vested in WHC - Six Real Estate
Limited Partnership. To the best of our knowledge, the property is not currently
being offered for sale, nor have there been any subsequent ownership transfers.
Purpose and Function of the Appraisal
The purpose of the appraisal is to provide an estimate of market value of
the leased fee estate in the property. The function of this report is to assist
GMAC Commercial Mortgage Corporation in an evaluation of the property for loan
underwriting purposes.
Extent of the Appraisal Process
In the process of preparing this appraisal, we:
o Inspected the exterior of the building and site improvements and a
representative sample of tenant spaces with Nick Claussen, a building
engineer and Patricia J. Nelson, property manager,
o Reviewed the leasing policy, tenant build-out allowances and history
of recent rental rates and occupancy with the property manager;
o Reviewed a detailed history of the income and expenses and a budget
forecast for 1996, including the budget for planned capital
expenditures and repairs;
o Conducted market research into occupancies, asking rents, and
operating expenses at competing buildings including interviews with
on-site managers and a review of our own data base from previous
appraisal files;
o Conducted market inquiries into recent sales of similar buildings to
ascertain the sales prices per square foot, effective gross income
multipliers and capitalization rates. This process involved telephone
interviews with sellers, buyers and/or participating brokers; and
o Prepared Sales Comparison and Income Approaches to value. The Cost
Approach was not used.
<PAGE>
Introduction
================================================================================
Date of Value and Property Inspection
The date of value is July 31, 1996, with our date of our last inspection
being the same.
Property Rights Appraised
We valued the leased fee estate, which in a legal conveyance through sale
represent the fee simple title, subject to the existing encumbrances, i.e., the
tenant leases, etc., in the improvements and corresponding land area.
Definitions of Value, Interest Appraised, and Other Pertinent Terms
The definition of market value taken from the Uniform Standards of
Professional Appraisal Practice, 1994 Edition, published by The Appraisal
Foundation, is as follows:
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 is the
consummation of a sale as of a specified date and the passing of title from
seller to buyer under conditions whereby:
1. Buyer and seller are typically motivated;
2. Both parties are well informed or well advised, and acting in
what they consider their own best interests;
3. A reasonable time is allowed for exposure in the open market;
4. Payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
5. 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.
Exposure Time
Under Paragraph 3 of the Definition of Market Value, the value estimate
presumes that A reasonable time is allowed for exposure in the open market.
Exposure time is defined as the estimated length of time the property
interest being appraised would have been offered on the market prior to the
hypothetical consummation of a sale at the market value on the effective
date of the appraisal. Exposure time is presumed to precede the effective
date of the appraisal.
Based upon the available sales data in the marketplace, as well as our
discussions six to nine months would appear to have been reasonably
appropriate for the subject property as the date of valuation.
Definitions of pertinent terms taken from the Dictionary of Real Estate
Appraisal, Third Edition (1993), published by The Appraisal Institute, are as
follows:
================================================================================
-2-
<PAGE>
Introduction
================================================================================
Fee Simple Estate
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.
Leased Fee Estate
An ownership interest held by a landlord with the rights of use and
occupancy conveyed by lease to others. The rights of the lessor (the leased
fee owner) and the leased fee are specified by contract terms contained
within the lease.
Market Rent
The rental income that a property would most probably command on the open
market; indicated by the current rents paid and asked for comparable space
as of the date of the appraisal.
Cash Equivalent
A price expressed in terms of cash, as distinguished from a price expressed
totally or partly in terms of the face amounts of notes or other securities
that cannot be sold at their face amounts.
Discounted Cash Flow (DCF) Analysis
The procedure in which a discount rate is applied to a set of projected
income streams and a reversion. The analyst specifies the quantity,
variability, timing, and duration of the income streams as well as the
quantity and timing of the reversion and discounts each to its present
value at a specified yield rate. DCF analysis can be applied with any yield
capitalization technique and may be performed on either a lease-by-lease or
aggregate basis.
Legal Description
The property, which contains 1.56 acres of land, is described by the
Jackson County assessors office as parcel no. 29-220-47-03. A metes and bounds
description was not provided and has not been included within this report.
================================================================================
-3-
<PAGE>
[MULTI-STATE MAP OF THE INTERIOR U.S. SHOWING THE
LOCATION OF THE SUBJECT PROPERTY
LOCATED IN KANSAS CITY IN RELATION TO MAJOR REGIONAL CITIES,
HIGHWAYS, STATE CAPITOLS AND RIVERS]
[MAP (c) 1993 DeLorme Mapping]
<PAGE>
REGIONAL ANALYSIS
================================================================================
Introduction
The market value of real property is influenced by the economic, political,
physical and social characteristics of the overall economic region of which it
is a part. Following is an overview of the Kansas City region focusing on some
of its more important characteristics.
Definition of the Region
o Kansas City is located along the state boundary of Kansas and Missouri, at
the junction of the Missouri and Kansas Rivers. The Kansas City
Metropolitan Statistical Area consists of eleven counties. Clay, Platte,
Ray and Clinton Counties are all located north of the Missouri River while
Jackson, Cass and Lafayette counties are south of the river on the Missouri
side of the state line. Leavenworth, Wyandotte, Johnson and Miami Counties
are all located in the State of Kansas.
o The subject property is located in the heart of downtown Kansas City,
Jackson County, Missouri.
o Kansas City is the most centrally located city of any major U.S. city, and
is within 250 miles of the geographic and population centers of the United
States. The subject is located in the center of Kansas City's Central
Business District.
Population
o The Kansas City MSA had a 1990 census of 1,566,280 and is ranked as the
25th largest U.S. city based on this figure. There was a 9.30 percent
increase in population from 1980 to 1990. The metropolitan area is ranked
125th in growth based on this change in population. Clinton County was
added to the MSA in 1993, and is therefore not included in these figures.
The 1990 census including Clinton County was 1,582,875. The subject
property is located in the Jackson County portion of the Kansas City MSA.
The 1995 population count for Jackson County was 635,300. This is an
increase of 1,906 residents or .3 percent from the 1990 population of
633,394.
o Jackson, Johnson and Clay Counties form the central core of the
metropolitan area. Population trends in the Kansas City Area are typical of
an expanding metropolitan area. As the development density of the central
core increases and the relative affordability decreases, the population
migrates to the outlying areas. The population shift from the city to the
suburban areas is common among most major cities located throughout the
Great Lakes and Midwestern regions, and is expected to continue into the
foreseeable future.
Income
In 1994, out of 317 cities, the Kansas City MSA was ranked 59th for median
household effective buying income (EBI). EBI, also known as disposable personal
income, is personal income less personal taxes and non-tax payments. The
declines in median household EBI in 1985 and 1988 are the result of changes in
calculation and definition of EBI by Sales and Marketing Management. In each
case there was an average of 11.0 to 12.0 percent reduction in total EBI.
================================================================================
-4-
<PAGE>
Regional Analysis
================================================================================
Employment
o The historical long-term trend for Kansas City employment is that the
increase in the number of jobs has come from the expansion of the service
sector, while the number of manufacturing jobs has remained relatively
constant. The number of service producing jobs has increased 30.8 percent
since 1983, following a decline during the recessionary period between 1979
and 1982. Total employment has increased 24.3 percent over the same time
period.
o The unemployment rate for the Kansas City MSA in early 1996 was 3.4 percent
as compared to 4.6 percent for the same period in 1995. The unemployment
rate was at 5.2 percent in 1994, compared to 5.4 percent in 1993 and 5.0
percent in 1992.
Major Employers
o Government is the largest employer in the Kansas City Metropolitan Area,
followed by the health care industry, which employs approximately 52,000
workers. Other significant industries in the area include agribusiness and
food, telecommunications, banking and finance, engineering, transportation
and manufacturing. Eight organizations recently reported employing over
5,000 workers each. These organizations are: AT&T, the federal government,
Hallmark Cards, Inc., Health Midwest, Kansas City Southern Industries,
Sprint, Transworld Airlines and the University of Kansas Medical Center.
Transportation
o Kansas City's extensive highway network is considered a significant asset.
The city is located at the junction of three interstate highways
(Interstates 29, 35 and 70) which are interconnected by four interstate
linkages (Interstates 435, 470, 670 and 635). Interstate 35 is a
north-south travel route providing Kansas City with direct access to
Wichita, Kansas to the south and Des Moines, Iowa to the north. Interstate
29 originates in Kansas City and stems northward providing direct access to
Omaha, Nebraska. Interstate 70 is the area's primary east-west travel route
and provides direct access to St. Louis, Missouri to the east and Topeka,
Kansas to the west. In addition, eight federal highways and forty-nine
state roads round out the efficient highway system which has contributed to
Kansas City's rank among the top ten trucking centers in the United States.
The metropolitan area is served by 313 motor freight carriers, several of
which are headquartered in Kansas City.
o The Kansas City Area Transportation Authority provides the largest public
transportation system in the metropolitan area. Land based shuttle bus
service is available to residents of the subject property. In addition,
Kansas City is currently reviewing the possibility of a light rail system,
which would link the central business district with major residential and
business centers throughout the metropolitan area.
o The Kansas City Metropolitan Area is the second leading rail center in the
nation, based on the number of rail car movements. Kansas City has
approximately 300 freight movements and six Amtrak movements per day.
Overall, there are eleven on-line railroads which provide daily service to
the Kansas City Area. Due to its spacious railroad and intermodal system,
which provides efficient interchange services between main line rail
carriers, Kansas City enjoys the nation's most flexible storage and transit
combinations.
================================================================================
-5-
<PAGE>
Regional Analysis
================================================================================
o Due to Kansas City's location at the confluence of the Missouri and Kansas
Rivers, river barge traffic offers an affordable alternative in
transporting goods. The Kansas City Metropolitan Area has eight grain and
bulk terminals and two full service terminals with high capacity cranes to
handle a wide range of cargo loads. Currently, the area is served by six
regulated barge lines and containerized shipping continues to expand.
o The Kansas City International Airport (KCI), which opened in 1972,
established Kansas City as a center of the nation's transportation network,
but the unique passenger friendly design is inefficient for today's airline
hub operation market. In addition, the airport has suffered from
unprofitable companies selecting the city for hub operations subsequent to
deregulation. Today, the airport does not serve as a hub for any airlines.
Southwest Airlines leads the way with 22.71 market share. A total of
sixteen passenger airlines serve KCI with more than 230 flights daily. In
addition to KCI, the Kansas City Metropolitan Area has 21 public and 73
private general aviation airports.
Economic Development
o From 1983 to 1994, there was a 196.44 percent increase in total retail
sales and a 60.96 percent increase in retail sales per household in the
Kansas City MSA. In 1994, the Kansas City MSA's retail sales per household
figure was $25,359. From 317 United States cities surveyed, the metro area
was ranked 29th in total retail sales.
o Of the total retail sales for the Kansas City MSA in 1994, 31.97 percent
occurred in Johnson County.
o Retail sales in Johnson increased 130 percent from 1984 to 1994. This
compares to 19.0 percent, 30.0 percent, 100.0 percent, 207 percent and 94.0
percent increases for Wyandotte, Jackson, Cass, Platte and Clay counties,
respectively. Total retail sales for Jackson County in 1994 were
$6,171,171.
Culture/Recreation/Education/Health
Community services found in the Kansas City Metropolitan Area consist of
approximately 50 hospitals and 234 nursing homes. The city is also served with
59 public libraries and several university libraries. Kansas City is also home
to the Linda Hall Library of Science and Technology, the largest privately
endowed scientific and technological library in the country. Cultural and social
activities in the Kansas City Area include the American Royal Museum, the NCAA
Visitors Center, the Woodlands Race Track and Worlds of Fun and Oceans of Fun.
Kansas City is also home to a professional football team and a professional
baseball team, both of which host local events in side-by-side baseball and
football stadiums referred to as the Truman Sports Complex. In addition, three
riverboat gambling casinos have opened along the Missouri River. Other
recreational amenities include 57 private and public golf courses, 109 tennis
facilities, 22 country clubs, 600 parks, 24 public lakes, 20 art galleries and
more than 40 museums.
================================================================================
-6-
<PAGE>
Regional Analysis
================================================================================
Conclusion
o Although the Kansas City Metropolitan Area will continue to be subject to
national economic trends and conditions, the diversity of the local economy
will insulate the area from volatile economic shifts.
o The continuation of the Kansas City Metropolitan Area's healthy business
climate, as well as its economic stability, should ensure a favorable
environment for real estate development and investment over the long-term.
================================================================================
-7-
<PAGE>
[NEIGHBORHOOD/STREET MAP OF THE LOCAL AREA SHOWING THE
LOCATION OF THE SUBJECT PROPERTY
IN RELATION TO STREETS, MAJOR HIGHWAYS AND RAILROADS]
[MAP (c) 1993 DeLorme Mapping]
<PAGE>
NEIGHBORHOOD ANALYSIS
================================================================================
The subject property is located in the heart of the Central Business
District (CBD) of Kansas City, Missouri. The CBD is located just north of the
convergence of the Missouri River and the Kansas River. This intersection of
waterways also serves as the state line which divides Missouri and Kansas. As
such, the subject property is only 13 blocks from the Kansas state border.
A majority of the subjects' neighborhood is developed with midrise and
highrise office buildings. The subject is across the street from the AT&T Town
Pavillion, a 30-story tower, and is one block north of One Kansas City Place a
42-story tower. Together with the subject these two towers mark the center of
the CBD and the area generally recognized as the center of downtown Kansas City.
The subject neighborhood is fully developed with some new construction
taking place. In the second quarter of 1996, Investors Fiduciary Trust Company
broke ground on their new 150,000 square foot headquarters building. It is
anticipated that IFTC will occupy the entire building upon completion in June,
1997. Additionally, Unitog announced their intention to begin construction of a
new 75,000 square foot headquarters building in the spring of 1997. The
Fashionbilt Building (approximately 70,000 square feet) opened in the first
quarter of 1996, and is now approximately 50% leased. Broadway Square II
(approximately 90,000 square feet) is scheduled to open in the third quarter of
1996 and has approximately 25,000 square feet of remaining vacant space. Gateway
2000 is currently relocating from the Town Pavilion into their new 200,000
square foot structure in the West Bottoms. The New York Life Building
(approximately 200,000 square feet) is scheduled to open in the third quarter of
1996 and is anticipated to be fully leased when it opens. No new projects have
been announced or are anticipated to begin through the remainder of 1996. The
remainder of the neighborhood is comprised of a dense concentration of Class B
and Class C office products with a moderate amount of retail uses occupying
grade level space.
Access to the neighborhood is excellent. Interstate highway 70, 71 and 35
intersect in the downtown areas. The city also benefits from an outer beltway
identified as Interstate 435 which serves the outlying areas of Missouri and
Kansas.
Locally, the CBD is served by three bridges which span the Missouri River
just to the north. The downtown CBD is developed with one directional roadways
in a grid pattern which easily connect to the Interstate highway system.
The Kansas City CBD is presently going through a healthy state of slow
economic growth. As the city and country emerge from the recession of the early
1990's, absorption of office space in Kansas City rose rapidly and appears to
now have reached a point of stability. The CBD is home to many financial
institutions, and law firms.
Like most Midwestern cities, the Kansas City CBD is essentially a 9 to 5
city, populated on a daily basis by its Workforce who reside in the outlying
bedroom communities of Missouri and Kansas.
================================================================================
-9-
<PAGE>
Neighborhood Analysis
================================================================================
In conclusion, the neighborhood surrounding the subject property which is
known as the downtown submarket has experienced a dramatic resurgence with the
rising occupancy rates since 1993. Occupancy rates from the Downtown Submarket
as of 1995 for Class A, B, C, and D buildings was 12.23 percent versus 15.86%
for the year prior. We anticipate continued strong occupancy rates into the
foreseeable future.
================================================================================
-l0-
<PAGE>
CITY CENTER OFFICE MARKET ANALYSIS
================================================================================
The Class A Office Market is comprised of 14 structures built between 1971
and 1996 with a total inventory of 5,351,000+/- square feet. Of this total
availabilities amount to 510,015+/- square feet indicating a vacancy rate of
9.53 percent. This includes 200,000 square feet of space offered on a sublet
basis by Gateway 2000. It is noted that the terms of this sublease is 7+/-
years and that the space is not easily. subdividable. Class A rents range
between $16.00 and $22.00 per square foot.
The Class B Office Market is comprised of 44 structures and encompasses a
total of 6,259,601+/- square feet. At present, there are total availabilities
of 1,239,613+/- square feet indicating a vacancy rate of 19.8 percent.
The Class B buildings include structures built between 1900+/- and 1989
with rentable areas ranging between 15,000+/- square feet to 600,000+/- square
feet located throughout this downtown area. It is noted that many of these
structures are significantly inferior to the subject are not considered to be
competitive properties. The most competitive properties include Boatmen's
Center, a 290,000+/- square foot property built in 1968, the Centennial
Building, a 162,400+/- square feet property built in 1951 and Commerce Tower, a
400,000+/- square feet built in 1964. These properties provide the following
indications of rental activity.
<TABLE>
<CAPTION>
====================================================================================================================================
Location Size (SF) Floors SF Available Current Rentals Comments
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Boatmen's Center 290,000 20 50,000 $13.50 Current rentals of
920 Main Street approximately $13.50
with expense stop and
$10 - $12 T.I.
- ------------------------------------------------------------------------------------------------------------------------------------
Centennial Building 162,400 4 -- $12.00 - $13.00 Most recent leases
210 W. 1Oth Street reflect $12 - $13 rent
with minimal T.I.
- ------------------------------------------------------------------------------------------------------------------------------------
Commerce Tower 400,000 30 18,500 $12.00 - $14.00 Current activity reflects
911 Main Street rents of $12 - $14 with
expense stop and $8 -
$10 in T.I.
====================================================================================================================================
</TABLE>
The subject property is well positioned in a prime CBD location. This
location and the renovation of the space within the property has contributed to
an improved position in the market. The primary drawbacks of the subject are
limited on site parking in relation to the competition and its age, even though
it remains in good condition. Considering the above, the property is classified
as a B+ property in that it is superior to the B properties but inferior to the
A properties, most of which are less than 10 years old.
The market is improving as illustrated by the declining vacancy rate, 21.1
percent in 1994, 14.6 percent in 1995 and 14.4 percent in 1996 and effective
rental rates which have been increasing.
In conclusion, the subject is well positioned to compete with the Class B
market due to its condition and location and with the Class A market due to more
attractive rentals. The subject should continue to achieve a strong market share
into the foreseeable future.
================================================================================
-11-
<PAGE>
PROPERTY DESCRIPTION
================================================================================
Site Description
The subject site comprises an entire city block in the downtown CBD of
Kansas City, Missouri. The common street address is 1100 Main Street, Kansas
City, Missouri. The site contains 1.56 acres or 68,088 square feet of land area.
The topography slopes upward slightly from east to west. We have assumed that
the soil's load-bearing capacity is sufficient to support the existing
structures. All essential utilities including electricity, water, sewer, and
telephone are currently serving the site.
Site dimensions are as follows:
267.79 feet along Main Street (east side)
267.00 feet along Baltimore Avenue (west side)
254.79 feet along 11th Street (north side)
254.47 feet along 12th Street (south side)
According to Community Panel No. 290173 0090 B, effective August 5, 1986,
the subject property appears to be situated in Zone C, an area designated as
being outside of the floodplain.
Improvements Description
The City Center Square building consists of a thirty story office tower
containing 633,179+/- gross square feet and two subteranium levels of
underground parking containing 325 spaces. Floors range in size from 20,550
square feet to 26,915 square feet. The total net area equates to 607,947+/-
square feet. The property was constructed in 1978.
Construction is a typical commercial structure with a precast concrete
panel construction and oversized insulated windows. The property was designed by
the architectural firm of Skidmore, Owings and Merrill.
There is a four-story atrium lobby. Newly reconstructed common areas and
public spaces include a first floor food court. Finishes include granite, brass
and mahogany.
Heating, ventilation and air conditioning are controlled by an electric
variable air volume distribution system. Heating is supplied via a perimeter
baseboard system while cooling is produced from three chiller units.
Two banks of elevators containing six elevators per bank service the upper
floors. Two shuttle elevators provide service to the parking garage. One freight
elevator exclusively services the two loading docks.
The property manager reports that the building is fully ADA compliant with
a complete sprinkler system, audio and video strobe fire alarm system and
back-up generators. A 24 hour security staff equipped with 42 high tech monitors
man the building. Key card access allows entry into the building during off
hours.
================================================================================
-12-
<PAGE>
Property Description
================================================================================
The first floors of the property were recently redesigned to eliminate
unsuccessful retail space on floors 2,3, and 4. Escalators were recently
reconfigured to now service the first and second floors only. The first floor
now contains retail space mainly consisting of fast food restaurants. The second
floor contains service oriented tenants involved in banking, travel, personnel
and postal services.
The previously mentioned parking garage contains 325 spaces which equates
to roughly one half space per 1000 square feet of building area. Within the
Kansas City downtown office submarket, competitive properties typically provide
1 to 1.5 spaces per 1000 square feet. Our discussions with the property manager
confirmed the fact that the subject property contains substandard on-site
parking, a problem which continues to remain problematic for the subject
property.
We have specifically assumed that the property complies with the Americans
With Disabilities Act, and that potentially hazardous materials have not been
used in the construction or maintenance of the property. Overall, the
improvements are in very good condition. No evidence of structural damage was
observed on our inspection of the improvements. Further, we are not aware of any
major items of deferred maintenance. The only significant capital expenditure
required over the short term is the replacement of one of three air conditioning
chiller units. Because the freon refrigerant needed to fuel the system is no
longer manufactured, the cost of this product is presently very expensive while
it lasts on the market. Management has indicated that a plan to replace one
chiller at a cost of $330,000 is in place. This same plan suggests that within 5
to 7 years of the initial replacement, a second chiller must be replaced at a
similar cost (plus inflation). Aside from normal tenant build-outs, and routine
Maintenance, this appears to be the only area requiring a substantial capital
expenditure.
================================================================================
-13-
<PAGE>
REAL PROPERTY TAXES AND ASSESSMENTS
================================================================================
The subject property is under the taxing jurisdictions of the Kansas City
and Jackson County. Taxes are levied against all real property in this locale
for the purpose of providing funding for the various municipalities. The amount
of ad valorem taxes is determined by the current assessed value for the property
in conjunction with the total combined tax rates of the taxing jurisdiction.
Tax Rates
The 1996 effective combined tax rate for the subject property is $7.76 per
$100 of assessed value.
Tax Assessment
The Jackson County Assessors office establishes the assessed value on real
property for taxing jurisdictions. By state law, the appraisal district is
required to re-evaluate all real property every two years. The subject
property's parcel identification number is 29-220-47-03. Following is the
subject's total current assessment.
=============================================================
1996 Property Assessment Summary
=============================================================
Full Value Taxable Value
=============================================================
Land $ 5,106,525 $1,634,088
Building $18,893,475 $6,045,912
-------------------------------------------------------------
Total $24,000,000 $7,680,000
=============================================================
The subject's aggregate assessment remained unchanged from 1993 to 1996.
The market value for the subject, as concluded in this report is $36,000,000 and
thus, the subject appears to be fairly assessed. The commercial appraisal
division of the City Assessors Office indicated that a change of assessment in
1997 was unlikely for the subject property.
Ad Valorem Tax Conclusions
Applying the aggregate 1996 taxable assessment for the subject, to the
total estimated 1996 tax rate results in a combined tax burden of $595,968, as
follows:
=============================================================
1996 Estimated Tax Burden
=============================================================
$7,680,000 x $7.76 + 100 = $595,968
=============================================================
As previously stated, taking into consideration future tax rate increases
and the potential for increases in the assessed value of the subject, we have
projected that taxes for the subject property after 1996 will increase at 3
percent annually.
================================================================================
-14-
<PAGE>
ZONING
================================================================================
The subject property is zoned C-4, Commercial under the Zoning Code of the
City of Kansas City. The C-4 District was established to provide for
professional and organization office needs. This classification primarily
permits office uses, with some limited retail uses allowed. No industrial or
residential uses are allowed.
This zoning classification does not require any off street parking. We were
provided an estimate of 325 total parking spaces; based upon our physical
inspection and upon conversations with the City of Kansas City, the property
appears to be in compliance with the current parking requirements despite the
fact that it contains less parking than several of the competitive buildings in
the downtown office market. We are not experts in the interpretation of complex
zoning ordinances but the property appears to be a conforming use based on our
review of public information. However, the determination of compliance is beyond
the scope of a real estate appraisal.
We know of no deed restrictions, private or public, that further limit the
subject property's use. The research required to determine whether or not such
restrictions exist, however, is beyond the scope of this appraisal assignment.
Deed restrictions are a legal matter and only a title examination by an attorney
or title company can usually uncover such restrictive covenants. Thus, we
recommend a title search to determine if any such restrictions do exist.
================================================================================
-15-
<PAGE>
HIGHEST AND BEST USE
================================================================================
Highest and Best Use of Site As Though Vacant
The highest and best use must be (1) legally permissible, (2) physically
possible, (3) financially feasible, and (4) maximally productive. The size,
shape, and physical attributes of the site are considered sufficient to
accommodate most forms of development. Given the existing office zoning and the
surrounding development (which consists of a relatively equal mixture of office,
retail, industrial, and vacant land), some type of commercial use would be most
compatible with surrounding development. Further, as discussed in the Office
Market Analysis section of this report, the entire Kansas City downtown office
submarket has continued its recovery with a Year-End 1995 occupancy level of
approximately 88 percent. Rental rates for Class A space ranges from $16.00 to
$22.00 per square foot while Class B space ranges from $8.50 to $15.00 per
square foot. Further, the office market, for Class A and Class B product, is
maintaining an average occupancy rate of 85 percent. Therefore, it is our
opinion the highest and best use of the site is for some type of office
development.
Highest and Best Use, As Improved
As noted in the Property Description section of this report, the subject
site is improved with a thirty-story, 633,179 square foot (GBA) office building
and related site improvements. Constructed in 1976, the project is in very good
condition. Further, the design and layout are considered to be very functional
for its current use.
The office submarket in which the subject competes is stable with
increasing occupancy levels and rental rates, as will be supported by the data
and analysis presented in the balance of this report. Therefore, it is our
opinion that the subject property, as improved, is capable of providing an
adequate return to the land over the foreseeable future. This conclusion is
supported by the data and analysis presented in the balance of this report. For
these reasons, it is our opinion that the highest and best use of this site, as
improved, is for continued use as a high-rise office building.
================================================================================
-16-
<PAGE>
VALUATION PROCESS
================================================================================
In this appraisal, we have used the Cost Approach, the Sales Comparison
Approach, and the Income Approach to develop market value estimates for the
subject properties. Because this is a summary report, the level of detail of
presentation is less than that found in a self-contained report.
The Cost Approach, was eliminated for the following reasons:
o Relevant land sales are a necessary component of the cost approach. Over
the last several years there has been a dearth of comparable land sales in
the downtown market.
o The Cost Approach is a more effective method of valuation for newer
properties where depreciation is less significant. As this property was
erected in 1976, estimates of depreciation are very subjective, thus
weakening the value conclusion.
o Market participants typically do not analyze properties like the subject on
a cost/value basis.
In the Sales Comparison Approach, we performed the following steps:
o Investigated the market for recent sales of similar industrial properties.
o Analyzed those sales on the basis of the sales price per square foot; and
o Correlated the value indications into a point value estimate from within
the range.
In developing the Income Approach we:
o Studied the rents in effect in this and competing properties to estimate
the potential rental income at market levels;
o Studied the recent history of operating expenses at this and competing
properties to estimate an appropriate level of expenses and reserves for
replacement;
o Estimated net operating income and cash flow by subtracting the operating,
fixed, and other expenses from the effective gross income; and
o Prepared a discounted cash flow analysis in which the cash flow and
property value at reversion are discounted to an estimate of current market
value at a market-derived discount rate. Potential gross revenues are
estimated based on a modeling of the actual rents and recovery provisions
in effect through the term of existing leases. As the existing leases
expire, the space is estimated to rent at the then current market rental
rate with appropriate allowances for downtime. Spaces now vacant will be
rented at market rates and at the time intervals discussed in the Income
Approach section of this report. From potential gross revenues, we subtract
vacancy and expenses (operating, fixed, and other) to arrive at an
estimate of cash flow over an 11 year forecast.
================================================================================
-17-
<PAGE>
Valuation Process
================================================================================
The appraisal process is concluded by a review and re-examination of each
of the approaches to value that have been employed. Consideration is given to
the type and reliability of data used, and the applicability of each approach.
Finally, the approaches are reconciled and a final value conclusion is
estimated.
================================================================================
-18-
<PAGE>
SALES COMPARISON APPROACH
================================================================================
Methodology
In the Sales Comparison Approach, we estimated the value by comparing this
property with similar, recently sold properties in the surrounding or competing
area. Inherent in this approach is the principle of substitution, which holds
that when a property is replaceable in the market, its value tends to be set at
the cost of acquiring an equally desirable substitute property, assuming that no
costly delay is encountered in making the substitution.
By analyzing sales which qualify as arms-length transactions between
willing, knowledgeable buyers and sellers, we can identify value and price
trends. The basic steps involved in the application of this approach are:
1. researching recent, relevant property sales and current offerings
throughout the competitive area;
2. selecting and analyzing those properties considered most similar to
the subject, considering changes in economic conditions that may have
occurred between the sale date and the date of value, and other
physical, functional, or locational factors;
3. Identifying Sales which include favorable financing and calculate the
cash equivalent price;
4. reducing the sale prices to common units of comparison, such as price
per square foot of building area (in this case net rentable area) and
net operating income (NOI) per square feet;
5. making appropriate comparative adjustments to the prices of the
comparable properties to relate them to the property appraised; and
6. interpreting the adjusted sales data and draw a logical value
conclusion.
The subject property is a modern 30-story class B+ office building which is
located in the Kansas City CBD. The building has a rentable area of 607,947
square feet.
There have been no arms length transactions involving comparable office
building properties over the past several years. This has been the result of
poor market conditions which existed in Kansas City between 1990 and 1995 as
well as the weak performance of many of the CBD office buildings. Accordingly,
we have relied upon sales data from other urban areas which have similar
economics.
In analyzing the leased fee estate (or fee simple estate, subject to the
existing building tenant leases), the sale prices inherent in the comparables
were reduced to those common units of comparison used to analyze improved
properties that are generally similar to the subject. The most widely use and
market oriented unit of comparison for properties such as the subject is the
sale price per square foot. All comparable sales were analyzed on this basis. We
have also referenced the net operating income per square foot of the comparable
sales when the information was available.
================================================================================
-19-
<PAGE>
Sales Comparison Approach
================================================================================
The chart exhibited on the facing page show a wide variety of prices on a
unit basis ranging from approximately $45.00 to $144.64 per square foot. The
sales were transacted between March 1994 and December 1995. All the comparables
consists of multi-level office buildings. The comparables range in size from a
low of 196,000+/- per square feet to a high of 504,906+/- square feet.
The prices per square foot are influenced by the differences in
construction quality, occupancy levels, character of the tenancy, economics, and
location. Nevertheless, it is important to address each property in terms of the
conventional sequence of adjustments. Following are those considerations which
are relevant to the subject. The first three elements must be considered in
advance of applying any other compensating factors to derive value conclusions
via the sales price per square foot methodology.
Property Rights Conveyed
As shown in the summary table, all of the comparables are encumbered by
leases, therefore, the leased fee estate was conveyed in each of these cases. In
the final analysis we have made no adjustments for the comparables for
differences in property rights conveyed.
Seller Financing/Cash Equivalency
All of the comparables were sold on a basis of all cash to the seller.
Thus, we have made no adjustments to these comparables for seller financing.
Conditions of Sale
We identified no special motivational conditions concerning the
comparables. Therefore, no adjustments for conditions of sale were warranted.
Other
Because of the multiple differences inherent in office properties with
respect to quality and design, location, and, in this case economics, not to
mention the quality of the tenant base, mathematical adjustments for the
reasoning noted above would be extremely difficult, at best. Comparable No. 4
reflects a unit value of $144.64 per square foot, representing this high end of
the sales prices per square foot. This sale has a fairly unique location near a
major economic center and is considered superior to the subject. Comparable No.
5 reflects the low end of this sales with a unit value of $45.00 per square
foot. This property is located in Cincinnati and had an occupancy of
approximately 65 percent at this time of sale. The remaining comparables ranged
between $47.14 per square foot and $101.35 per square foot with an average unit
value of $65.07 per square foot and a median unit value of $62.50 per square
foot.
In our opinion, comparable Nos. 1, 2, 5, 6 and 7 are most similar to the
subject in terms of either size or location. Comparable Nos. 1, 2, 5, 6 and 7
form a more narrow range of unit values of approximately $47.14 to $62.69 per
square foot, with a median of $62.60. After giving consideration to the
physical, locational and economic aspects of the subject property as compared to
the exhibited comparables we feel a unit value of $60.00 per square foot of net
rentable area is approximate for the subject property. By applying this to the
607,947 net
================================================================================
-20-
<PAGE>
Sales Comparison Approach
================================================================================
square rentable feet contained within the subject, a value of $36,476,820 is
indicated. The following table demonstrates this calculation.
========================================================================
Sales Price Per Square Foot Summary
========================================================================
Net Rentable Area Sales Price Per Indicated Value
(SF) Square Foot
========================================================================
607,947 X $60.00 = $36,500,000
========================================================================
Net Income Multiplier Analysis
In addition to an adjusted price per square foot analysis, we have analyzed
the investment parameters of four of the sales to investors. As stated earlier,
most income producing properties are purchased based on expected income, rather
than leaseable area, making unit prices a somewhat subjective reflection of
investment behavior. In our opinion, a buyers criteria for the purchase of a
retail/commercial property is predicated primary on the property's income
characteristics. Thus, we have identified a relationship between the operating
income and a sale price of the property.
Isolating these investor transactions reflects the following relationship
between net operating income per square foot and sale price.
======================================================================
Summary of NOI
Price Per Square Foot and Net income
Multiplier
======================================================================
Sale No. NO/USF Price/SF N.I.M.
======================================================================
1 $6.02 $62.69 10.35
----------------------------------------------------------------------
2 $5.94 $51.66 8.70
----------------------------------------------------------------------
4 $14.64 $144.64 10.0
----------------------------------------------------------------------
6 $5.56 $47.14 8.48
======================================================================
The sale prices per square foot increase as the productivity (NOI per
square foot of net rentable area) of a particular property increases. As will be
discussed subsequently in the Income Approach of the report, the subject
property is projected to have a fiscal year 1997 net operating income of
approximately $5.72 per square foot. This level of income is generally
consistent with sales No. 1, 2 and 6. As such, based upon the presented data we
have concluded that a net income multiplier of 10 is appropriate for the
subject property.
Applying a net income multiplier of 10 to the forecast FY1996 net operating
income results in a value for the subject property as follows:
1996 NOI ($000) $3,324
N.I.M. 10.0
Value based upon N.I.M. Analysis $33,240,000
================================================================================
-21-
<PAGE>
Sales Comparison Approach
================================================================================
Sales Comparison Approach Conclusion
The two units of comparison utilized in the sales comparison approach
produce similar value indications for the subject property. The sale price per
square foot analysis indicated a value conclusion of $36,500,000, while the net
operating income analysis indicates a value of $33,240,000. After considering
the strengths of each, we have concluded at a final value estimate of the
subject property as indicated by the Sales Comparison Approach, as of August 1,
1996 of $35,000,000. This conclusion equates to $57.57 per square foot of net
rentable area.
================================================================================
-22-
<PAGE>
INCOME APPROACH
================================================================================
Methodology
The Income Approach is a method of converting the anticipated economic
benefits of owning property into a value estimate through capitalization. The
principle of "anticipation" underlies this approach is that investors recognize
the relationship between an asset's income and its value. In order to value the
anticipated economic benefits of a particular property, potential income and
expenses must be estimated and the most appropriate capitalization method
selected.
The two most common methods of converting net income into value are through
direct capitalization and a discounted cash flow analysis. In direct
capitalization the net operating income is divided by an overall capitalization
rate extracted from market sales to indicate the value. In the discounted cash
flow method, anticipated future income streams and a revisionary value are
discounted to a net present value at a chosen yield rate (internal rate of
return)
The direct capitalization method is an effective technique when stable
conditions exist both in the marketplace and for the property. However, when
market conditions are either changing or likely to change in a fairly dramatic
manner over time, direct capitalization becomes a more difficult technique to
administer. Direct capitalization is further inhibited by the numerous variables
that exist with multi-tenanted office buildings i.e. multiple leases with
staggered lease terms and varying structures, the lease up vacant space and
different tenant finish allowances, depending upon whether the space is in shell
or second generation state. Case in point, direct capitalization can not realize
the anticipated continued strengthening that will occur in the CBD Kansas City
area over the next several years.
Given the numerous variables, coupled with our inquiries of participants in
the marketplace, we feel that the majority of investors for property like the
subject will utilize the discounted cash flow method, in an attempt to mirror
expectations relative to those variables. Overall, office market conditions are
still below normalized levels (although the subject submarket and direct
competition have strengthen). Consequently, the discounted cash flow method
affords the most realistic method of reflecting investor expectations of the
current market, as well as the projected recovery (primary and secondary rental
rates in the subject's case). Also, the discounted cash flow methodology can
better quantify the impact of multi-tenant leases with staggered lease terms and
varying rental structures than the direct capitalization technique. Therefore,
it is our opinion that the discounted cash flow method is the most appropriate
method in the valuation of the subject property. As such, the direct
capitalization method will not be used in the analysis. However, at the
conclusion of the income approach we will analyze the resulting overall
capitalization rate derived from the discount cash flow analysis as a check for
reasonableness.
In the following sections, we will first analyze the subject's existing
leases and market rents before discussing the subject's operating expenses and
preparing the discounted cash flow analysis. As of the effective date of
appraisal, there were 79 leased suites totaling 607,947+/- square feet of
rentable area. The retail tenants range in size from approximately 273 square
feet to approximately 4,766 square feet. The retail tenants have leases which
expire over the next five years and have rents that range between approximately
$8.50 per square foot to approximately $20.00 per square foot. The most recent
leasing of retail space within the
================================================================================
-23-
<PAGE>
Income Approach
================================================================================
subject reflects retail rents of approximately $20.00 per square foot. Retail
tenants in addition to paying base rent are responsible for a C.A.M. charge
which amounts to $6.81 per square foot and all utilities, which are directly
metered.
The office tenants occupy spaces which range between 1,000+/- square feet
and 120,000+/- square feet. The smaller tenants tend to range between 1,000 and
4,000 square feet in size. The building is occupied predominantly by tenants
with rentable areas of less than 5,000 square feet. The major tenants within the
property include Chicago Title on the 5th floor. This tenant occupies 26,179
square feet under a lease which expires in March 2002. The General Services
Administration occupies several floors totaling 120,221 square feet under a
lease signed in April 1995 and which expires in March 2001. Dickenson Financial
occupies space on the 3rd and 4th floors amounting to 52,606 square feet. This
lease expires in April 2003. Baird Kurtz Dobson occupies 39,854 square feet
under a lease which expires in October 2003. The most recent leases within the
office space reflect base rentals of approximately $14.00 per square foot have
work allowances which range between $6 and $12 per square foot for second
generation space and allow for up to 2 months of free rent. At the present time
the 14th floor amounting to 19,423 square feet is vacant, as is the 17th floor
which amounts to 19,204 feet. The remaining vacant space in the building is
located in various spaces and ranges in size from 978 to 6,834 square feet.
Occupancy within the property is currently 89.9 percent.
A rent roll of the subject property abstracting the existing leases is
located in the addenda. Our analysis specifically assumes the existing tenants
will remain in the property and will continue paying rent under the terms of the
leases. Information provided by the management indicates that no tenants are
currently in default of their lease and the tenant base which includes a number
of regional credit tenants generally appears to be stable.
Lease Expirations
As part of our risk analysis we reviewed the tenant expiration dates (shown
on the facing page). With respect to current lease structure, there are three
tenants expiring through the balance of 1996 representing 1.27 percent of the
space within the building. There are 12 tenants representing 39,558 square feet
or 6.57 percent of the building during 1997, 10 tenants amounting to a total of
33,539 square feet or 5.2 percent of the building in 1998, 17 tenants amounting
to 79,735 square feet or 13.12 percent of the building in 1999, 10 tenants
amounting to 30,538 square feet or 5.02 percent of the building expiring in the
year 2000 and 13 tenants representing 67,991 square feet or 11.18 percent of the
building expiring in the year 2001. Between 1996 and the year 2001 approximately
42.69 percent of the leases in the building will have expired. The largest
leases will expire in 2003 and 2004, during these years 17.34 percent and 20.82
percent of the building will expire, respectively.
Since the bulk of the leases expiring represent spaces of less than 5,000
square feet and since there are no below market renewal options, we have assumed
a normal probability for renewal as leases expire. Due to the significant amount
of space currently available in the market, we have assumed that a 50 percent
renewal probability is reasonable.
================================================================================
-24-
<PAGE>
Income Approach
================================================================================
Estimate of Current Market Rents
According to management quoted rental rates of the subject property have
increased over the past two years. At the present time, office space is being
quoted at between $14.00 and $15.00 per square foot and leases are being
seriously negotiated at approximately $14.00 per square foot on a full service
basis. Quoted tenant finish allowances range from $6.00 to $12.00 per square
foot depending on the condition of the second generation space. Typically, first
generation space will require approximately $17.00 to $18.00 per square foot
plus $6.00 of base building work. In order to gauge the reasonableness of quoted
rent and form of conclusion as to the current market rent for the subject
property as of the appraisal date, we conducted a survey of several office
buildings totaling 7 million square feet of rentable area in the Kansas City
CBD. All these comparables are considered generally similar to respect to
location and amenities by comparison with the subject property. A summary of the
properties utilized in our rent comparables analysis is presented on this facing
page.
The rates summarized indicate the quoted rent for the comparable
properties. In some cases, the actual effective rates being achieved for recent
leases were not available however, the four nearest competitors provide a good
indication of the actual effective rents and are used to gauge the
competitiveness of the subject property.
The closest comparables as related to the subject property include the
following:
Boatman's Center is located at 920 Main Street. This property contains
290,000 square feet and is 20-stories in height. The property was built in 1968
and currently has 50,000 available for lease. Quoted rents in this building are
$13.50 per square foot, signed transaction range between $12.50 to $13.50 per
square foot. This property is considered a B building and has superior parking
available to the subject property. However, the subject has a better market
image and is considered to be a more thoroughly renovated and upgraded property.
The Centennial Building is located at 210 West 10th Street. This property
contains 162,400 square feet on four floors, it was built in 1951. The property
has 42,600 square feet currently available and the quoted rent is $12.00 per
square foot. This property is inferior to the subject property in terms of its
age and condition.
Commerce Tower is located at 911 Main Street. It contains 400,000 square
feet on 30-stories. Property was built in 1964 and currently has 18,500 square
feet available for lease. Rents within the building are quoted between $12.00 to
$14.00 per square foot. This property has superior parking to the subject
property but is perceived as an inferior property within the marketplace.
The Mercantile Tower is located at 1101 Walnut Street. It contains 215,000
square feet on 20-stories. The property was built in 1975. The property has
80,890 square feet currently available for lease, rents within the property
range between $12.00 and $14.00 per square foot and the current quoted lease
rates in the property are $14.25 per square foot. This property provides a
reasonably good indication and comparison for the subject property.
================================================================================
-25-
<PAGE>
Income Approach
================================================================================
In summary, there is a relatively narrow range in rental rates and tenant
finish allowances. The quoted rental rated from $12.00 to $15.00 per square foot
on full service basis. The comparables are quoted on base year operating stops
and range in tenant finish allowances of up to approximately $12.00 per square
foot for second generation space.
All comparables have garage parking. All of the comparable properties
charge for covered parking at the present time. There is a shortage of parking
at the subject property relative to the comparables however, there is
significant covered parking available within close proximity of the subject
property.
In addition to the comparison with the surveyed property noted above, we
have also taken into consideration recent leases which have been executed in the
subject property. Most of the recent leases average at approximately $14.00 per
square foot on a full service basis. Tenant finish allowances range from $6.00
to $12.00 per square foot for new tenants, and from $0 to $6.00 for renewing
tenants. The majority of recent leases have terms of approximately 5 years and
reflect expense stops at the time of occupancy. There is some allowance for free
rent within the property however, free rent is generally not offered at the
level of rent quoted at the subject property or the competitive properties. We
have made an allowance for two months of free rent, which appears to be on line
with the recent office leases signed within the subject property.
After considering the competitive properties, it is our opinion that the
following parameters are representative of a market lease for the subject
property as of the effective date of the appraisal.
1. Market rental rate for the subject is estimated to equate to $14.00
per square foot of rentable area, full service including electricity.
This is at the lower end of the range of the quoted rents at the
subject property.
2. In future leases the base year expense stop is tied to the projected
year that the lease commences.
3. Future leases are assumed to have a five year lease term which is
consistent with most of the activity within the subject property.
4. Tenant improvement allowance are projected to be $12.00 per square
foot for new tenants and $6.00 per square foot for renewal tenants for
second generation space. The fourteenth floor and seventeenth floor
are currently vacant and require a full build-out. We have accordingly
projected a build-out for both floors averaging $24.00 per square foot
to accommodate demolition full build-out and the construction of base
building improvements. Rental rates forecast, several brokers that we
interviewed indicated that the rental market for the subject property
has improved significantly over the past three to four years. Overall
occupancy in the building has risen to 50 percent to almost 90 percent
and the perception of the subject property in the marketplace has
improved. Since additional improvement in the downtown market is
expected, we have allowed for an average growth of rental rates of 3
percent annually throughout the holding period.
================================================================================
-26-
<PAGE>
Income Approach
================================================================================
Expense Recovery Income
Most of the existing leases have provisions for expense past throughs above
the base year or stated expense stop. The allowable expenses included in the
expense recoveries for leases include all items of expense other than leasing
and promoting expenses and some other miscellaneous cost as well as capital
replacements, tenants improvements, and leasing commissions. The recovery income
reflected in our cash slow analysis is based upon the terms of the existing
leases plus a base year expense stop applied to all future lease contracts.
Parking Income
As mentioned earlier, parking is relatively tight in the downtown market.
At the subject property the space is offered on a monthly basis plus there is a
portion of the garage which is offered on a transient basis. Monthly spaces are
available at the rate of $85.00 per month, while full day parking is
approximately $10.00. The projection of parking revenue is based upon the
historic collection of parking revenues. We have assumed an increase in parking
revenue averaging 3 percent per annum over the course of our investment holding
period.
Miscellaneous Income
Historically the subject property has generated miscellaneous income from a
variety of sources. Primarily this income is attributed from storage charges and
charges to tenants for keys, lock charges, security cards and miscellaneous
work. The miscellaneous income has ranged between approximately $200,000 and
$250,000. We have projected this income to increase of the rate of approximately
3 percent per year through the remaining term or our projection.
Vacancy and Collection Loss
Both the investor and the appraiser are primarily interested in the cash
flow revenue that an income property is likely to produce annually over
specified period of time, rather than what it could produce if it were always
100 percent occupied and all tenants were actually paying in full and on time.
It is normally a prudent practice to expect some income loss, either in the form
of actual vacancy or in the form of turn-over , non-payment, or slow payment of
rent. Regarding collection loss specifically, we have applied 2 percent of loss
factor through the holding period primarily as a contingency for potential
collection problems and tenant defaults. This collection loss factor is applied
to rental income from all tenants.
We have projected a 3 month vacancy period at the expiration of every lease
with an average lease term of five years. This equated to a vacancy factor of
approximately 4.4 percent. Our analysis includes a 50 percent probability of
renewal and a 50 percent probability of vacancy. Based upon on our conversations
with the property manager this renewal probability is considered to be
reasonable. The resulting occupancy level for the subject property within the
cash flow is approximately 95.6 percent. This includes both three month
down-time and the 2 percent credit loss factor. Given the overall occupancy of
the subject property and the character of the tenancies, this level of
collection is considered to be reasonable.
================================================================================
-27-
<PAGE>
Income Approach
================================================================================
Operating Expenses and Fixed Expenses
On the facing page is our income and expense summary for the subject
property. We based our operating expenses upon a review of the 1994 and 1995
actual expenses for the subject property. In addition we were provided with the
1996 budget. Finally we compared this data with operating statements from
similar buildings and consultations with local property management personnel as
well as Cushman & Wakefield's management staff. Total operating expenses
amounted to $4.91 in 1994, and $5.33 in 1995. The 1996 budget allowed for $5.20
per square foot. We have projected the 1996 budget to be $5.44 per square foot,
which is approximately 2 percent greater than the budgeted expenses prepared by
management. Our primary area of difference relates to the utility cost which we
believe will exceed the amount of budgeted by management for the subject
property. In addition, we have allowed for a greater cost in insurance and
security based upon the actual operating history of the subject property.
As illustrated on the chart, those expenses considered to trend in a
reasonable manner over the period for which we have historical operating and
data include, insurance, utilities, building services and supplies, security,
grounds and maintenance, payroll and benefits, management, repairs and
maintenance, on-site office administration and non-reimbursable expenses.
Insurance Operating Expenses
The insurance cost has ranged from between $72,000 and approximately
$97,000. The amount budgeted for 1996 amounts to $87,556. We have forecasted a
insurance expense of $95,000 and believe it to be more reflective of the
character and operation of the subject property.
Utilities
The utilities expenses which include electrical costs, heating costs, water
and sewer costs have ranged between $936,000 in 1994 to $1,361,000 in 1995. The
amount budgeted in 1996 was set at $1,241,000. Management has indicated the
utility cost was underestimated for the 1996 budget and given the actual
experience, we anticipate that the first year utility expense will amount to
$1,370,000.
Building Services and Supplies
This expense has varied between $235,000 and $655,000. The amount budgeted
for 1996 amounts to $688,000. We view this as a reasonable projection of the
costs for this item.
Security
The security expense is estimated to be $200,000. This is consistent with
the actual experience in 1995 and is slightly greater than the amount budgeted
for 1996.
================================================================================
-28-
<PAGE>
Income Approach
================================================================================
Payroll and Benefits
The payroll and benefits costs is consistent with that budgeted for 1996
and amounts to $338,940.
Management
The management cost is reflective of two percent of collected rents on an
annual basis and amounts to $150,000 for 1996.
Repairs and Maintenance
Repairing and Maintaining is estimated to be $323,700 for 1996. This is
consistent with the level of condition reflected in the subject property and
also considers the character of tenancy and the age of the property.
Administration
On site office and building administration is estimated to be $73,550. This
is consistent with the amount budgeted by management to cover this expense
category.
Non-Reimbursable Expenses
Non-reimbursable expenses are estimated to be $58,600, which is consistent
with the budget for the property. Non-reimbursable expenses include marketing
and promotion expenses related to the building.
Other Expenses
Other expenses include tenant improvements and leasing commissions. The
probability of incurring future leasing commissions and tenants alterations is
based upon a 50 percent renewal probability.
Tenant Improvements
We factor a $12.00 per square foot allowance for second generation space
with an allowance of $6.00 per square foot for tenant renewals.
Leasing Commissions
Leasing commissions for the period under this analysis leasing commissions
for all new leases are estimated to be consistent with the renewal rates with
the commission rates in place in Kansas City.
Capital Replacement/Reserves
Reserves for replacement are or should be set aside to accumulate an amount
efficient to replace and/or repair certain major building components over time,
i.e. roof, major parking lot repairs, HVAC systems, etc. during the period of
the analysis. Based on the expense behavior of other comparable properties and
the age of the subject property is estimated at capital replacement/reserves of
$.25 per square foot, increasing by 3 percent annually over the period of our
analysis.
================================================================================
-29-
<PAGE>
Income Approach
================================================================================
Our projected expenses are predicated on the assumption that the property
will be prudently managed, while maintaining the improvement at a competitive
level to preserve value. The proceeding commutative annual operating expenses
equate to $5.44 per square foot or $3,308,540.
Cash Flow Model
In the calculation of the cash flow forecasts and investment results
produced under these assumptions, projections and parameters, we employed the
Pro-Ject + computer program. Pro-Ject + has flexibility to allow for tenant by
tenant analysis of the subject as encumbered by existing leases. Pro-Ject Plus +
also allows for variety of assumptions regarding future income streams and
expenses. Our eleven year analysis can be found on the following page.
Terminal Capitalization Rates Selection
A terminal capitalization rate was used to estimate the market value of the
property, at the end of the assumed investment holding period. The rate is
applied to the eleventh year estimate of net operating income before making
deductions for leasing commissions, tenant improvements allowances, or capital
reserves. We estimated an appropriate terminal rate based on the indicated
capitalization rates of improved property sales in today's market.
A premium is generally added to today's rate to allow for the risk of
unforeseen events or trends which might effect our estimate of net operating
income during the holding period, including possible changes in the market
conditions for the property. Investors typically add 50 to 100 basis points to
the going-in rate to arrive at a terminal capitalization rate, according to
Cushman & Wakefield investor surveys.
Considering the survey results and comparing the subject property to the
comparables included in the Sales Comparison Approach, but also tempered by the
fact that capitalization rates are falling which are not reflected in the sales,
we are of the opinion that a 10.5 percent terminal capitalization rate is
appropriate to apply to the subject property's projected net operating income in
the eleventh year. This results in an estimated terminal value for the property
at the end of the tenth year of $53,987,000.
Discount Rate Analysis
We estimated future cash flows, including property value at reversion, and
discounted the income stream at a rate of return currently required by investors
for similar quality real property. The yield rate is the single rate that
discounts all future equity benefits to an estimate of net present value.
Cushman & Wakefield's Valuation Advisory Services periodically surveys
national real estate investors to determine their investment objectives.
Following is a brief review of internal rates of return, overall rates and
income and expense growth rates considered acceptable by the respondents.
================================================================================
-30-
<PAGE>
<TABLE>
CITY CENTER SQUARE, KANSAS CITY MO
PROJECT DESIGNATOR: CITY
REVISION: 7/31/96 @ 14:50
ANNUAL CASH FLOW REPORT (OOO'S)
BEGINNING 1/1/96 FOR 11 YEARS
8/ 6/96 @ 9:57
<CAPTION>
CY1956 CY1997 CY1998 CY1999 CY2000 CY2001 CY2002 CY2003 CY2004 CY2005 CY2006
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME
- ------
MINIMUM RENT:
ALL TENANTS 7,373 8,116 8,427 8,471 8,663 8,628 8,898 8,989 9,470 10,331 10,502
FREE RENT (61) (142) (96) (148) (176) (208) (306) (348) (678) (229) (235)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------- -------
TOTAL MINIMUM RENT 7,311 7,974 8,331 8,322 8,487 6,420 8,592 8,641 8,791 10,101 10,266
RECOVERIES:
EXPENSE ESCAL 205 317 429 528 587 662 675 670 468 505 613
------ ------ ------ ------ ------ ------ ------ ------ ------ ------- -------
TOTAL RECOVERIES 205 317 429 528 587 662 675 670 468 505 613
------ ------ ------ ------ ------ ------ ------ ------ ------ ------- -------
GROSS RENTAL
INCOME 7,517 8,292 8,761 8,851 9,074 9,083 9,268 9,311 9,260 10,606 10,880
CREDIT LOSS (75) (165) (175) (177) (181) (181) (185) (186) (185) (212) (217)
OTHER INCOME 237 244 252 259 267 275 283 292 301 310 319
PERCENTAGE RENTS 40 41 42 43 46 46 47 49 50 52 53
PARKING REVENUES 326 335 345 356 367 378 389 401 413 425 438
------ ------ ------ ------ ------ ------ ------ ------ ------ ------- -------
TOTAL INCOME 8,046 8,748 9,226 9,333 9,572 9,601 9,803 9,867 9,839 11,182 11,474
EXPENSES
- --------
NON-REIMB. EXPENSE 58 60 62 64 65 67 69 72 74 76 78
OPERATING EXPENSES 3,249 3,347 3,447 3,551 3,657 3,767 3,880 3,997 4,116 4,240 4,367
REAL ESTATE TAXES 730 751 774 797 821 846 871 897 924 952 981
------ ------ ------ ------ ------ ------ ------ ------ ------ ------- -------
TOTAL EXPENSES 4,038 4,159 4,284 4,413 4,545 4,681 4,822 4,966 5,115 5,269 5,427
------ ------ ------ ------ ------ ------ ------ ------ ------ ------- -------
NET OPERATING
INCOME 4,007 4,588 4,942 4,920 5,026 4,920 4,981 4,901 4,724 5,912 6,046
ALTERATIONS 429 716 354 465 606 792 1,081 1,308 2,487 794 840
COMMISSIONS 95 122 80 126 149 183 252 296 574 210 195
CAPITAL RESERVES 158 162 167 172 177 183 188 194 200 206 212
------ ------ ------ ------ ------ ------ ------ ------ ------ ------- -------
CASH FLOW 3,324 3,587 4,339 4,156 4,092 3,760 3,459 3,101 1,461 4,700 4,797
</TABLE>
<PAGE>
Income Approach
================================================================================
=====================================================================
1995/96 WINTER INVESTOR SURVEY
FOR URBAN CLASS A OFFICE BUILDINGS
=====================================================================
GOING-IN TERMINAL IRR
---------------------------------------------------------------------
Low High Low High Low High
=====================================================================
Mean 9.16% 9.84% 9.51% 10 04% 11.82% 12.59%
---------------------------------------------------------------------
Range 7.50% 12.00% 8.00% 12.00% 10.50% 15.00%
=====================================================================
=====================================================================
1995/96 WINTER INVESTOR SURVEY
FOR SUBURBAN OFFICE BUILDINGS
=====================================================================
GOING-IN TERMINAL IRR
---------------------------------------------------------------------
Low High Low High Low High
=====================================================================
Mean 9.25% 9.90% 9.43% 10.04% 12.11% 12.59%
---------------------------------------------------------------------
Range 8.00% 12.00% 9.00% 12.00% 11.00% 15.00%
=====================================================================
This table summarizes the investment parameters of some of the most
prominent investors currently inquiring good quality office building properties
in the United States. The entire survey is included in the Addenda of this
report.
The investors rates of return sighted a range from 10 percent to 13
percent. We have selected a 12.5 percent discount rate for the subject
property. The internal rate of return and terminal capitalization rates selected
for this analysis were strongly influenced by our recent investor survey, but we
also relied very heavily on data from Cushman & Wakefield's Financial Services
Group. Furthermore, we realize that the surveys reflect target rates rather than
transactional rates. Transactional rates are usually difficult to obtain in the
verification process and are actually only target rates of the buyer at the time
of sale. The properties performance will ultimately determine the actual yield
and capitalization rate at the time of sale after a specific holding period. We
found that, in improving markets or with above average properties, demand will
be high and transactional rates may be lower than the target rates that are
quoted in the surveys. We have tried to recognize this factor in our choice of
rate for our cash flow model. The discounted cash matrix can be found on the
following page.
================================================================================
-31-
<PAGE>
Income Approach
================================================================================
Discounted Cash Flow
Value Matrix
($000)
Terminal Capitalization Rate 10.0% 10.5% 11.0%
Discount Rate
12.0% $38,532 $37,660 $36,867
12.5% $37,336 $36,502 $35,743
13.0% $36,190 $35,392 $34,667
Conclusions
The resulting value estimate is $36,000,000 or $59.22 per square foot of
building area this translates into a capitalization rate of 9.23 percent after
capital costs are considered.
As previously noted, there have been no sales of comparables office
building properties in Kansas City over the last several years. However, sales
of office properties on a regional and national basis indicate that the
investment parameters employed in the appraisal process are appropriate and that
the value indication is reasonable.
================================================================================
-32-
<PAGE>
RECONCILIATION AND FINAL ESTIMATE OF VALUE
================================================================================
We have considered all of the traditional approaches to estimating market
value of commercial real estate in our analysis. Two of the three traditional
approaches were utilized, indicating the following values for the subject
property.
Sales Comparison Approach $35,000,000
Income Approach $36,000,000
The Cost Approach has not been utilized in this report. The Cost Approach
requires an estimation of the cost to reproduce or replace the existing
improvements of the property. From this cost new of improvements accrued
depreciation from physical, functional and economic sources is deducted to
arrive at a cost less depreciation. The estimated land value is then added to
arrive at total value. The Cost Approach was not utilized in this report due to
the lack of available data to estimate the site's land value. The subjectivity
of estimating accrued depreciation of aged existing improvements also limits the
reliability of this approach. In addition, we know of few investors who utilize
replacement cost as the basis for their investment decisions.
The Sales Comparison Approach consists of the collection and analysis of
data relevant to actual sales of properties deemed comparable to the subject
property. Properties which have been sold are compared to the property under
appraisal and adjustments to the sale prices are made based on differences
between the subject property and the comparable sales. We specifically compared
net operating income levels and the sales price per square foot of the
comparables.
The Income Approach converts anticipated future cash flows into a present
value estimate. This method is based on the premise that the motivation for a
property purchase is a function of the anticipation of future benefits to be
gained from the investment. The potential purchaser, in essence, will trade the
purchase price of the property for a projected income stream to be received in
the future. Conversion of the anticipated cash flow into a value indication
commonly occurs in the form of discounted cash flow analysis or application of a
single capitalization rate to a stabilized income estimate.
It is the Income Approach, however, that is logically considered the most
appropriate technique for estimating the value of income-producing property. Not
only does this approach represent the most direct and accurate simulation of
market behavior, it is the method explicitly employed by buyers and sellers in
acquisition and disposition decisions. Therefore, following the implied dictum
of the market, we have used an approach based primarily on projected income as
the foundation for our valuation of the subject property.
In light of the above, we are of the opinion that the market value of the
leased fee estate in the property, as of July 31, 1996, was:
THIRTY SIX MILLION DOLLARS
$36,000,000
================================================================================
-33-
<PAGE>
Reconciliation and Final Estimate of Value
================================================================================
Marketing Time
Marketing time is an estimate of the time that might be required to sell a
real property interest at the appraised value. Marketing time is presumed to
start on the effective date of the appraisal. Marketing time occurs subsequent
to the effective date of the appraisal and exposure time is presumed to precede
the effective date of the appraisal. The estimate of marketing time uses some of
the same data analyzed in the process of estimating reasonable exposure time and
it is not intended to be a prediction of a date of sale.
We believe, based on the assumptions employed in our analysis, as well as
our selection of investment parameters for the subject, our value conclusions
represent a price achievable within six to nine months marketing time on the
open market.
================================================================================
-34-
<PAGE>
ASSUMPTIONS AND LIMITING CONDITIONS
================================================================================
Appraisal means the appraisal report and opinion of value stated therein; or the
letter opinion of value, to which these Assumptions and Limiting Conditions are
annexed.
Property means the subject of the Appraisal.
C&W means Cushman & Wakefield, Inc. or its subsidiary which issued the
Appraisal.
Appraiser(s) means the employee(s) of C&W who prepared and signed the Appraisal.
The Appraisal has been made subject to the following assumptions and limiting
conditions:
1. No opinion is intended to be expressed and no responsibility is
assumed for the legal description or for any matters which are legal
in nature or require legal expertise or specialized knowledge beyond
that of a real estate appraiser. Title to the Property is assumed to
be good and marketable and the Property is assumed to be free and
clear of all liens unless otherwise stated. No survey of the Property
was undertaken.
2. The information contained in the Appraisal or upon which the Appraisal
is based has been gathered from sources the Appraiser assumes to be
reliable and accurate. Some of such information may have been provided
by the owner of the Property. Neither the Appraiser nor C&W shall be
responsible for the accuracy or completeness of such information,
including the correctness of estimates, opinions, dimensions,
sketches, exhibits and factual matters.
3. The opinion of value is only as of the date stated in the Appraisal.
Changes since that date in external and market factors or in the
Property itself can significantly affect property value.
4. The Appraisal is to be used in whole and not in part. No part of the
Appraisal shall be used in conjunction with any other appraisal.
Publication of the Appraisal or any portion thereof without the prior
written consent of C&W is prohibited. Except as may be otherwise
stated in the letter of engagement, the Appraisal may not be used by
any person other than the party to whom it is addressed or for
purposes other than that for which it was prepared. No part of the
Appraisal shall be conveyed to the public through advertising, or used
in any sales or promotional material without C&W's prior written
consent. Reference to the Appraisal Institute or to the MAI
designation is prohibited.
5. Except as may be otherwise stated in the letter of engagement, the
Appraiser shall not be required to give testimony in any court or
administrative proceeding relating to the Property or the Appraisal.
================================================================================
-35-
<PAGE>
Assumptions and Limiting Conditions
================================================================================
6. The Appraisal assumes (a) responsible ownership and competent
management of the Property; (b) there are no hidden or unapparent
conditions of the Property, subsoil or structures that render the
Property more or less valuable (no responsibility is assumed for such
conditions or for arranging for engineering studies that may be
required to discover them); (c) full compliance with all applicable
federal, state and local zoning and environmental regulations and
laws, unless noncompliance is stated, defined and considered in the
Appraisal; and (d) all required licenses, certificates of occupancy
and other governmental consents have been or can be obtained and
renewed for any use on which the value estimate contained in the
Appraisal is based.
7. The physical condition of the improvements considered by the Appraisal
is based on visual inspection by the Appraiser or other person
identified in the Appraisal. C&W assumes no responsibility for the
soundness of structural members nor for the condition of mechanical
equipment, plumbing or electrical components.
8. The forecasted potential gross income referred to in the Appraisal may
be based on lease summaries provided by the owner or third parties.
The Appraiser assumes no responsibility for the authenticity or
completeness of lease information provided by others. C&W recommends
that legal advice be obtained regarding the interpretation of lease
provisions and the contractual rights of parties.
9. The forecasts of income and expenses are not predictions of the
future. Rather, they are the Appraiser's best estimates of current
market thinking on future income and expenses. The Appraiser and C&W
make no warranty or representation that these forecasts will
materialize. The real estate market is constantly fluctuating and
changing. It is not the Appraiser's task to predict or in any way
warrant the conditions of a future real estate market; the Appraiser
can only reflect what the investment community, as of the date of the
Appraisal, envisages for the future in terms of rental rates,
expenses, supply and demand.
10. Unless otherwise stated in the Appraisal, the existence of potentially
hazardous or toxic materials which may have been used in the
construction or maintenance of the improvements or may be located at
or about the Property was not considered in arriving at the opinion of
value. These materials (such as formaldehyde foam insulation, asbestos
insulation and other potentially hazardous materials) may adversely
affect the value of the Property. The Appraisers are not qualified to
detect such substances. C&W recommends that an environmental expert be
employed to determine the impact of these matters on the opinion of
value.
11. Unless otherwise stated in the Appraisal, compliance with the
requirements of the Americans With Disabilities Act of 1990 (ADA) has
not been considered in arriving at the opinion of value. Failure to
comply with the requirements of the ADA may adversely affect the value
of the Property. C&W recommends that an expert in this field be
employed.
================================================================================
-36-
<PAGE>
CERTIFICATION OF APPRAISAL
================================================================================
We certify that, to the best of our knowledge and belief:
1) The property was inspected by David F. McArdle. The report was
prepared by David F. McArdle and Travis W. Walsh, MAI, CRE. and concur
with the findings contained herein.
2) The statements of fact contained in this report are true and correct.
3) The reported analyses, opinions, and conclusions are limited only by
the reported assumptions and limiting conditions, and are our
personal, unbiased professional analyses, opinions, and conclusions.
4) We have no present or prospective interest in the property that is the
subject of this report, and we have no personal interest or bias with
respect to the parties involved.
5) Our compensation is not contingent upon the reporting of a
predetermined value or direction in value that favors the cause of the
client, the amount of the value estimate, the attainment of a
stipulated result, or the occurrence of a subsequent event. The
appraisal assignment was not based on a requested minimum valuation, a
specific valuation or the approval of a loan.
6) No one provided significant professional assistance to the persons
signing this report.
7) Our analyses, opinions, and conclusions were developed, and this
report has been prepared, in conformity with the Uniform Standards of
Professional Appraisal Practice of the Appraisal Foundation and the
Code of Professional Ethics and the Standards of Professional
Appraisal Practice of the Appraisal Institute.
8) The use of this report is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives.
9) As of the date of this report, Travis W. Walsh, MAI, CRE has completed
the requirements of the continuing education program of the Appraisal
Institute.
David F. McArdle
Director
Valuation Advisory Services
Travis W. Walsh, MAI, CRE
Director
Valuation Advisory Services
================================================================================
-37-
<PAGE>
OFFICE BUILDING SALE
================================================================================
I-1
Building Name: Seven Penn Center
Location: N/E/C 17th S & Market Streets
Philadelphia, PA
Grantor: Corestates Bank, N.A.
Grantee: The Arden Group
Date of Sale: 12/16/95
Physical Description:
Land Area: 21.61 Acres
Gross Building Area: 340,000 Square Feet
Net Rentable Area: 295,095 Square Feet
Year Built: 1964
Occupancy at Sale: 52 %
Parking: None
Quality: Good
Construction: Steel and concrete
Zoning: C-5
Stories: 30
Sale Price: $18,500,000
Terms of Sale: All cash to seller
Economic Indicators:
Net Operating Income: $1,777,600 Actual
Appraisal Indicators:
Overall Rate (OAR): 9.61 %
Sale Price/Square Foot (GSF): $54.41
Sale Price/Square Foot (RSF): $62.69
COMMENTS:
One tenant, The Turf Club occupied 20% of the occupied area but
produced 35% of the in-place income. The existing retail area of 11 %
produces 26% of the in place income. Buyer received $18 million of
participating debt from Mass Mutual and invested $3.5 million of
equity to close the transaction and fund the lease up.
<PAGE>
OFFICE BUILDING SALE
================================================================================
I-2
Building Name: Allianz Financial Centre
Location: 2323 Bryan Street
Dallas, TX
Parcel Number: D45-L
Grantor: The Equitable Life Assurance
Society of the United States
Grantee: Beverly Hills Center, LLC
Date of Sale: 11/21/95
Recording Data: Volume 95227, Page 1348
Physical Description:
Land Area: 36,753 Square Feet
0.84 Acres
Gross Building Area: 506,149 Square Feet
Net Rentable Area: 464,542 Square Feet
Year Built: 1982
Occupancy at Sale: 71 %
Parking: 1,076 spaces
Quality: Good
Construction: Pink granite spandrels
Stories: 26
Sale Price: $24,000,000
Terms of Sale: All cash to seller
Economic Indicators:
Gross Annual Income: $5,780,000
Less: Operating Expenses: $3,030,000
Net Operating Income: $2,750,000
Appraisal Indicators:
Overall Rate (OAR): 11.5%
Sale Price/Square Foot (GSF): $47.42
Sale Price/Square Foot (RSF): $51.66
COMMENTS:
This is a Class A downtown office building that includes
<PAGE>
OFFICE BUILDING SALE
================================================================================
I-2 Continued
1,076 parking spaces. There was 9,276 (2%) of the building in shell
condition.
Confirmation Data:
Date: 05/16/96
By: APPRAISER
With: C&W
NYC4-2809
<PAGE>
OFFICE BUILDING SALE
================================================================================
I-3
Building Name: Lakeside Commons
Location: 990 Hammond Drive
Atlanta, GA
Grantor: Lakeside Commons Partners, Ltd
Grantee: YCP Lakeside, LP
Date of Sale: 04/28/95
Physical Description:
Land Area: 392,476 Square Feet
9.01 Acres
Gross Building Area: 232,000 Square Feet
Net Rentable Area: 222,000 Square Feet
Year Built: 1986
Occupancy at Sale: 90 %
Quality: Good
Construction: Class A, sprinklered
Stories: 11
Sale Price: $22,500,000
Terms of Sale: (excluding vacant pad site)
Pad site estimated at an
additional $2,000,000
All cash to seller
Economic Indicators:
Effective Gross Income: $3,211,800
Less: Operating Expenses: $1,705,000
Net Operating Income: $1,506,800
Appraisal Indicators:
Effective Gross Inc. Mult.: 7.0
Overall Rated (OAR): 6.7%
Sale Price/Square Foot (GSF): $96.98
Sale Price/Square Foot (RSF): $101.35
COMMENTS:
Economic indicators above are 1994 (actual) numbers. The 1995 budget
numbers are:
Effective Gross Annual Income: $3,279,000
<PAGE>
OFFICE BUILDING SALE
================================================================================
I-3 Continued
Less: Operating Expenses: $1,405,000
Net Operating Income: $1,875,000
EGIM: 6.9
OAR: 8.3%
The seller estimated the vacant pad site value at $2,000,000. Actual
price was adjusted by this figure to calculate the appraisal
indicators.
Property is located in the North Central suburban submarket near the
intersection of 1-285 and Georgia 400.
The rentable area includes 7,000 SF of common use, non-revenue
producing space such as conference room, post office, club and
management office.
Amenities include a two-acre lake, full service cafe with an outdoor
plaza, health club and conference room, and free covered parking. Most
leases are structured with a base rent plus escalations that are based
on a portion of the annual CPI change and pass-through of operating
expenses over a base year stop.
The seller's pro forma yields an imputed 12.3% IRR if a 9.5% terminal
rate and a 10-year hold is assumed.
This property was purchased in November 1991 for $16,300,000
($73.42/Sf of NRA) excluding a value allocation to the land.
Confirmation Data:
Date: 06/20/95
By: APPRAISER
With: C&W
NYC4-2429
<PAGE>
OFFICE BUILDING SALE
================================================================================
I-4
Building Name: Tower Center II
Location: Tower Center Boulevard
New Jersey Turnpike Exit 9
East Brunswick, Middlesex, NJ
Parcel Number: Block 202, Lot 2
Grantor: Tower Center Associates
Grantee: Confidential
Date of Sale: 03/06/95
Recording Data: N/A
Physical Description:
Land Area: 199,505 Square Feet
4.58 Acres
Gross Building Area: 417,159 Square Feet
Net Rentable Area: 407,918 Square Feet
Year Built: 1988
Occupancy at Sale: 81 %
Parking: Parking Deck - 1,267 cars
Quality: Excellent
Construction: Granite and glass
Stories: 23
Sale Price: $59,000,000
Terms of Sale: All cash to seller
Economic Indicators:
Gross Annual Income: $9,542,000 Actual
Less: Operating Expenses: $3,639,000 Actual
Net Operating Income: $5,903,000 Actual
Appraisal Indicators:
Overall Rate (OAR): 10.00%
Sale Price/Square Foot (GSF): $141.43
Sale Price/Square Foot (RSF): $144.64
COMMENTS:
Property consists of a 23-story office building plus a
<PAGE>
OFFICE BUILDING SALE
================================================================================
I-4 Continued
parking deck for 1,267 cars. The facility was occupied by 14 tenants
ranging in size from 2,053 to 107,080 square feet. Tower Center II is
part of a larger complex which also includes a twin building plus a
405-room Hilton hotel. The property has excellent accessibility to
Exit 9 of the New Jersey Turnpike.
Confirmation Data:
Date: 01/15/96
By: APPRAISER
With: C&W
NYC4-2685
<PAGE>
OFFICE BUILDING SALE
================================================================================
I-5
Building Name: Centennial Plaza I & II
Location: 705 & 895 Central Avenue
Cincinnati, Hamilton County, OH
Parcel Number: Block 146-6, Lot 121
Grantor: N/A
Grantee: CALPERS
Date of Sale: 02/03/95
Recording Data: N/A
Physical Description:
Land Area: 2.13 Acres
Gross Building Area: 235,439 Square Feet
Net Rentable Area: 224,203 Square Feet
Year Built: 1986
Occupancy at Sale: 90%
Parking: 200 spaces
Quality: Good
Construction: Structural steel
Zoning: Commercial
Stories: 11
Sale Price: $10,089,136
Terms of Sale: All cash to seller
Sale Price/Square Foot (GSF): $42.85
Sale Price/Square Foot (RSF): $45.00
Number of Stories: 5 and 11
Renovated: 1990
COMMENTS:
The property consists of a two tower complex. The statistics are based
on the combined size. The location is in a peripheral area of the
central business district.
Confirmation Data:
Date: 09/13/95
By: APPRAISER
<PAGE>
OFFICE BUILDING SALE
================================================================================
I-6
Location: 444 North Michigan Avenue
Chicago, IL
Grantor: Northwest Mutual Life
Insurance Company
Grantee: Equitable Realty
Date of Sale: 07/01/94
Physical Description:
Land Area: 20,000 Square Feet
Gross Building Area: 504,906 Square Feet
Net Rentable Area: 504,906 Square Feet
Year Built: 1976
Occupancy at Sale: 75 %
Parking: None
Quality: Good
Construction: Steel frame and glass exterior
Zoning: Commercial
Stories: 36
Sale Price: $23,800,000
Terms of Sale: All cash to seller
Economic Indicators:
Net Operating Income: $2,808,400
Appraisal Indicators:
Overall Rate (OAR): 11.80%
Sale Price/Square Foot (GSF): $47.14
Sale Price/Square Foot (RSF): $47.14
Asking Rents at Sale: $3.00 - $9.00/SF - Net
COMMENTS:
A total of eleven participants submitted bids to purchase the
property. The building was on the market for approximately two months
prior to accepting Equitable's offer. The above information was
verified by Equitable Realty. According to Equitable Realty,
approximately $430,000 in capital expenses will be incurred during the
first year. The above net operating income represents the
<PAGE>
OFFICE BUILDING SALE
================================================================================
I-6 Continued
buyer's first year projection.
Confirmation Data:
Date: 08/11/94
By: APPRAISER
With: C&W
NYC4-1567
<PAGE>
OFFICE BUILDING SALE
================================================================================
I-7
Building Name: NBD Bank Building
Location: 175 South Third Street
S/W/C Town Street
Columbus, Franklin County, OH
Parcel Number: 184812
Grantor. Aetna Life & Casualty Company
Grantee: Columbus Third L.P.
c/o Box One Capital Corp.
Date of Sale: 03/01/94
Recording Data: N/A
Physical Description:
Land Area: 21,600 Square Feet
Gross Building Area: 210,000 Square Feet
Net Rentable Area: 196,000 Square Feet
Year Built; 1981
Occupancy at Sale: 89 %
Parking: None
Quality: Good
Construction: Concrete
Zoning: C3, Commercial District
Stories: 12
Sale Price: $12,250,000
Terms of Sale: All cash to seller
Economic Indicators:
Gross Annual Income: $3,699,506
Less: Vacancy: $295,960
Less: Operating Expenses: $1,261,537
Net Operating Income: $2,142,009
Appraisal Indicators:
Gross Income Multiplier: 3.31
Overall Rate (OAR): 17.49%
Sale Price/Square Foot (GSF): $58.33
Sale Price/Square Foot (RSF): $62.50
Major Office Tenants: National Bank of
Columbus & Columbus Bar
<PAGE>
OFFICE BUILDING SALE
================================================================================
I-7 (Continued)
COMMENTS:
This Class B+ office building is located in downtown Columbus, Ohio,
the state capital. The property is subject to a long term ground lease
which expires in the Year 2029 with two 15-year renewal options. NBD
Bank of Columbus is the major tenant in the building and their lease
is due to expire in 1996. The high overall rate was reported to be a
result of the high lease turnover and expiration of its tax abatement
as well as the ground lease. Approximately 50 percent of the
building's leases roll over through 1996. In addition, the tax
abatement on the building is due to expire in January 1997 and since
the property's leases are triple net, the tenants would receive large
increases in their occupancy costs if they renew.
Confirmation Data:
Date: 06/03/94
By: BROKER
With: C&W - Detroit
<PAGE>
CITY CENTER SQUARE, KANSAS CITY MO
PROJECT DESIGNATOR: CITY
REVISION: 8/ 6/96 @ 17:22
PROJECT ASSUMPTIONS REPORT
EXCLUDING TENANTS
8/ 6/96 @ 17:38
BUILDING PROLOGUE
- -----------------
LEASEHOLD ANALYSIS OF CITY CENTER SQUARE, KANSAS CITY MO BEGINNING 1/1996
FOR 20 YEARS ON A CALENDAR YEAR BASIS
AREA MEASURES
- -------------
RETL
DESCRIBED AS RETAIL AREA
1996 VALUE - 23,154
THEREAFTER - CONSTANT
OFFA
DESCRIBED AS OFFICE AREA
1996 VALUE - 584,793
THEREAFTER - CONSTANT
AREA
DESCRIBED AS TOTAL RENTABLE AREA
+100.0% OF RETL+100.0% OF OFFA
GROWTH RATES
- ------------
MKT1
DESCRIBED AS MARKET GROWTH RATE
1996 VALUE - 3.00
THEREAFTER - CONSTANT
CPIG
DESCRIBED AS EXPENSE GROWTH RATE
1996 VALUE - 3.00
THEREAFTER - CONSTANT
COMN
DESCRIBED AS FULL COMMISSION RATE-5 YEAR LEASE
1996 VALUE - 3.90
THEREAFTER - CONSTANT
COMR
DESCRIBED AS RENEWAL COMMISSION RATE-FIVE YEAR LEASE
1996 VALUE - 1.95
THEREAFTER - CONSTANT
COMB
<PAGE>
PAGE 2
DESCRIBED AS BLENDED COMMISSION RATE REFLECTING RENEWAL PROBABILITY
+50.0% OF COMN +50.0% OF COMR
MARKET RATES
- ------------
RETL
DESCRIBED AS RETAIL MARKET RENT
1996 VALUE - 20.00
THEREAFTER - GROWING AT GROWTH RATE MKT1
OFF1
DESCRIBED AS OFFICE MARKET RENT-UNDER 5,000 SF
1996 VALUE - 14.00
THEREAFTER - GROWING AT GROWTH RATE MXTI
OFF2
DESCRIBED AS OFFICE MARKET RENT-OVER 5,000 SF
1996 VALUE - 14.00
THEREAFTER - GROWING AT GROWTH RATE MKT1
ALTV
DESCRIBED AS ALTERATION FOR VACANT SPACE
1996 VALUE - 12.00
THEREAFTER - GROWING AT GROWTH RATE CPIG
ALTR
DESCRIBED AS ALTERATION FOR RENEWAL SPACE
+50.0% OF ALTV
ALTS
DESCRIBED AS BLENDED ALTERATION COST REFLECTING PROBABILITY
+50.0% OF ALTV +50.0% OF ALTR
DESCRIBED AS BLENDED FREE RENT
1996 VALUE - 2.00
THEREAFTER - CONSTANT
CAM
1996 VALUE - 6.81
THEREAFTER - GROWING AT GROWTH RATE CPIG
MISCELLANEOUS INCOMES
- ---------------------
OTHER INCOME
1996 VALUE - 237,652
THEREAFTER - GROWING AT GROWTH RATE CPIG
PERCENTAGE RENTS
1996 VALUE - 40,000
<PAGE>
PAGE 3
THEREAFTER - GROWING AT GROWTH RATE CPIG
PARKING REVENUES
1996 VALUE - 326,124
THEREAFTER - GROWING AT GROWTH RATE CPIG
EXPENSES
- --------
INSURANCE , REFERRED TO AS INSR
DESCRIBED AS INSURANCE
AN INFORMATIONAL EXPENSE
1996 VALUE 95,000
THEREAFTER - GROWING AT GROWTH RATE CPIG
UTILITIES , REFERRED TO AS UTIL
DESCRIBED AS ELECTRIC & WATER/SEWER
AN INFORMATIONAL EXPENSE
1996 VALUE - 1,370,000
THEREAFTER - GROWING AT GROWTH RATE CPIG
BLDG SERV. & SUPP., REFERRED TO AS SERV
DESCRIBED AS BUILDING SERVICES
AN INFORMATIONAL EXPENSE
1996 VALUE - 688,000
THEREAFTER - GROWING AT GROWTH RATE CPIG
SECURITY , REFERRED TO AS SECU
AN INFORMATIONAL EXPENSE
1996 VALUE - 200,000
THEREAFTER - GROWING AT GROWTH RATE CPIG
GRNDS. & MAINT. , REFERRED TO AS GNDS
DESCRIBED AS GROUNDS
AN INFORMATIONAL EXPENSE
1996 VALUE - 10,750
THEREAFTER - GROWING AT GROWTH RATE CPIG
PAYROLL/BENEFITS , REFERRED TO AS BENE
DESCRIBED AS PAYROLL/BENEFITS
AN INFORMATIONAL EXPENSE
1996 VALUE - 338,940
THEREAFTER - GROWING AT GROWTH RATE CPIG
MANAGEMENT , REFERRED TO AS MGNT
DESCRIBED AS MANAGEMENT
AN INFORMATIONAL EXPENSE
1996 VALUE - 150,000
THEREAFTER - GROWING AT GROWTH RATE CPIG
ON SITE OFFADMIN , REFERRED TO AS ADMN
DESCRIBED AS ON SITE OFFICE/ADMINISTRATION
AN INFORMATIONAL EXPENSE
<PAGE>
PAGE 4
1996 VALUE - 73,550
THEREAFTER - GROWING AT GROWTH RATE CPIG
REAL ESTATE TAXES , REFERRED TO AS RETX
DESCRIBED AS REAL ESTATE TAXES
AN INFORMATIONAL EXPENSE
1996 VALUE - 730,000
THEREAFTER - GROWING AT GROWTH RATE CPIG
NON-REIMB. EXPENSE, REFERRED TO AS NONR
DESCRIBED AS NON REIMBURSABLE EXPENSES-MARKETING/OTHER
CHARGED AGAINST NET OPERATING INCOME
1996 VALUE - 58,600
THEREAFTER - GROWING AT GROWTH RATE CPIG
REIMBURSABLE EXP. , REFERRED TO AS REIM
DESCRIBED AS TOTAL REIMBURSABLE EXPENSES
AN INFORMATIONAL EXPENSE
+100.0% OF INSR+100.0% OF UTIL
+100.0% OF SERV+100.0% OF SECU
+100.0% OF GNDS+100.0% OF BENE
+100.0% OF MGNT+100.0% OF ADMN
+100.0% OF RETX+100.0% OF REPR
REPAIRS & MAINT. , REFERRED TO AS REPR
DESCRIBED AS MAINT. & REPAIRS
AN INFORMATIONAL EXPENSE
1996 VALUE - 323,700
THEREAFTER - GROWING AT GROWTH RATE CPIG
OPERATING EXPENSES, REFERRED TO AS OPER
DESCRIBED AS NET OPERATING EXPENSES
CHARGED AGAINST NET OPERATING INCOME
+100.0% OF REIM-100.0% OF RETX
REAL ESTATE TAXES , REFERRED TO AS RTAX
DESCRIBED AS NET TAXES
CHARGED AGAINST NET OPERATING INCOME
+100.0% OF RETX
VACANCY ALLOWANCE
- -----------------
PERCENTAGE OF POTENTIAL GROSS INCOME
FOR ALL TENANTS SUBJECT TO VACANCY
1996 VALUE - 1.00
1997 VALUE - 2.00
THEREAFTER - CONSTANT
<PAGE>
PAGE 5
MANAGEMENT FEE
- --------------
NONE
COMMISSION CALCULATIONS
- -----------------------
STANDARD METHOD #1 - 0.000% OF TOTAL RENT
STANDARD METHOD #2 - 0.000% OF TOTAL RENT
STANDARD METHOD #3 - 0.000% OF TOTAL RENT
STANDARD METHOD #4 - 0.000% OF TOTAL RENT
STANDARD METHOD #5 - 0.000% OF TOTAL RENT
COMMISSION PAYOUTS
- ------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - CASHED OUT
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
ALTERATION CALCULATION
- ----------------------
NONE
ALTERATION PAYOUTS
- ------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - CASHED OUT
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
<PAGE>
PAGE 6
COMMON AREA MAINTENANCE POOL
- ----------------------------
NONE
CAPITAL EXPENDITURES
- --------------------
CAPITAL RESERVES
1996 VALUE - 158,000
THEREAFTER - GROWING AT GROWTH RATE CPIG
PRIMARY CLASSIFICATION CODES
- ----------------------------
1 - RETAIL
2 - OFFICE
SECONDARY CLASSIFICATION CODES
- ------------------------------
1 - 1ST LEVEL RETAIL
2 - 2ND LEVEL RETAIL
3 - OFFICE < 5,000 SF
4 - OFFICE > 5,000 SF
COST CENTERS
- ------------
1 - EXPENSE ESCAL.
SALES VOLUME PROFILE
- --------------------
PERCENT OF RELATIVE
MONTH ANNUAL SALES VOLUME
- ----- ------------ --------
JAN 8.33% 1.00
FEB 8.33% 1.00
MAR 8.33% 1.00
APR 8.33% 1.00
MAY 8.33% 1.00
JUN 8.33% 1.00
JUL 8.33% 1.00
AUG 8.33% 1.00
SEP 8.33% 1.00
OCT 8.33% 1.00
NOV 8.33% 1.00
DEC 8.33% 1.00
------- -------
<PAGE>
PAGE 7
TOTALS 100.00% 12.00
GLOBAL RECOVERIES
- -----------------
COMM AREA MAINT , REFERRED TO AS CAM
ASSIGNED TO COST CENTER 1 - EXPENSE ESCAL.
RECOVERY OF AMOUNTS OR RATES GROWING AT A RATE
YEAR 1 VALUE - 5.80/SF
THEREAFTER - GROWING AT GROWTH RATE CPIG
CAP - NONE
REIMBURSABLE EXP. , REFERRED TO AS OPEX
ASSIGNED TO COST CENTER 1 - EXPENSE ESCAL.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE OFFA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
TENANT PROLOGUE
- ---------------
MINIMUM RENTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SOUARE FOOT/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
SALES VOLUMES AND BREAKPOINTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
RENEWAL RENTS ARE COMPOUNDED ANNUALLY
RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET
REFERENCE TENANTS
- -----------------
THERE ARE A TOTAL OF 3 REFERENCE TENANT(S):
- -------------------------------------------------------------------------------
# 1 - FORMAT
BASE LEASE DATES: 1/1995 TO 1/1996
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE- 10
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
RECOVERIES: NONE
<PAGE>
PAGE 8
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE FREE YES YES
2 5.00 3 NONE FREE YES YES
3 5.00 3 NONE FREE YES YES
4 5.00 3 NONE FREE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE OFF1 MULTIPLIED BY 1.000
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY OPEX
RENEWAL COMMISSIONS: GROWTH RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 2 - RETAIL FORMAT
BASE LEASE DATES: 1/1995 TO 12/1996
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 10
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE FREE YES NO
2 5.00 3 NONE FREE YES NO
3 5.00 3 NONE FREE YES NO
4 5.00 3 NONE FREE YES NO
<PAGE>
PAGE 9
RENEWAL MINIMUM RENT:
MARKET RATE RETL MULTIPLIED BY 1.000
RENEWAL RECOVERIES:
CAM
ASSIGNED TO COST CENTER 1 - EXPENSE ESCAL.
RECOVERY OF AMOUNTS OR RATES GROWING AT A RATE
YEAR 1 VALUE - MARKET RATE CAM
THEREAFTER - GROWING AT GROWTH RATE CPIG
CAP - NONE
RENEWAL COMMISSIONS: GROWTH RATE COME
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 3 - SUITE 2 , 1
BASE LEASE DATES: 10/1996 TO 9/2001
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 11,190
PRIMARY CODE: 2 - OFFICE
SECONDARY CODE: 3 - OFFICE < 5,000 SF
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - MARKET RATE OFF1
WITH FREE MONTHS FREE RENT
RECOVERIES.
GLOBAL GROUPING
GLOBAL RECOVERY OPEX
COMMISSIONS: GROWTH RATE COMN
PAYOUT: CASHED OUT
ALTERATIONS: MARKET RATE ALTV
PAYOUT: CASHED OUT
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE FREE YES YES
2 5.00 3 NONE FREE YES YES
3 5.00 3 NONE FREE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE OFF1 MULTIPLIED BY 1.000
<PAGE>
PAGE 10
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY OPEX
RENEWAL COMMISSIONS: GROWTH RATE CCMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
<PAGE>
OFFICES-URBAN, CLASS A
<TABLE>
<CAPTION>
Projec-
tion
Going In Cap Rate Terminal Capital Rate IRR Income Growth Expense Growth Period
====================================================================================================================================
Low High Low High Low High Low High Low High Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10.00% 10.50% 10.00% 10.00% 12.00% 13.00% 3.00% 3.00% 4.00% 4.00% 10
9.50% 9.75% 9.75% 10.00% 11.75% 12.25% 3.00% 3.50% 3.50% 3.50% 10
9.00% 9.00% 9.00% 9.00% 12.00% 12.00% 0.00% 10.00% 4.00% 4.00% 10
8.00% 10.00% 9.00% 11.00% 10.00% 13.00% 0.00% 4.00% 4.00% 4.00% 10
8.00% 10.00% 9.00% 9.00% 11.00% 13.00% 4.00% 5.00% 4.00% 4.00% 10
7.50% 9.00% 8.00% 9.50% 10.50% 11.50% 2.00% 3.50% 3.50% 3.50% 10
9.00% 10.00% 10.00% 11.00% 11.00% 13.00% 4.00% 4.00% 4.00% 4.00% 10
9.50% 10.00% 10.00% 10.50% 11.40% 11.70% 3.00% 4.00% 3.50% 4.50% 10
12.00% 12.00% 10.00% 10.00% 15.00% 15.00% 3.00% 4.00% 2.00% 4.00% 5
12.00% 12.00% 12.00% 12.00% 14.00% 14.00% 3.00% 3.00% 3.00% 3.00% 10
8.50% 9.00% 9.00% 9.50% 12.00% 12.50% 2.00% 3.00% 2.00% 3.00% 10
9.50% 10.00% 10.00% 11.00% 12.00% 13.00% 3.00% 3.00% 3.00% 3.00% 10
8.00% 9.00%
10.00% 10.00% 10.00% 10.00% 12.50% 12.50% 2.00% 3.00% 3.00% 3.00% 10
7.00% 8.00% 9.00% 9.00% 11.00% 11.00% 6.00% 6.00% 4.00% 4.00% 10
8.00% 9.00% 9.00% 10.00% 11.00% 12.00% 3.00% 3.00% 3.00% 3.00% 10
9.00% 9.25% 10.00% 10.25% 12.00% 12.00% 4.00% 4.00% 4.00% 4.00% 10
===========================================================================================================================
No. of Responses 16 16 17 17 16 16 16 16 16 16
Average 9.16% 9.84% 9.51% 10.04% 11.82% 12.59% 2.81% 4.13% 3.41% 3.66%
===========================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Projec-
tion
Going In Cap Rate Terminal Capital Rate IRR Income Growth Expense Growth Period
====================================================================================================================================
Low High Low High Low High Low High Low High Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9.50% 11.00% 9.00% 10.50% 14.00% 14.00% 3.25% 3.25% 4.00% 4.00% 5
9.00% 9.00% 9.00% 9.50% 11.00% 11.00% 5.00% 5.00% 4.00% 4.00% 10
9.00% 10.00% 9.50% 10.00% 11.50% 12.50% 3.50% 3.50% 10
9.50% 9.75% 9.75% 10.00% 11.75% 12.25% 3.50% 4.00% 3.50% 3.50% 10
9.00% 9.00% 9.00% 9.00% 12.00% 12.00% 4.00% 15.00% 4.00% 4.00% 10
9.00% 11.00% 9.75% 12.00% 11.00% 14.00% 0.00% 4.00% 4.00% 4.00% 10
9.00% 10.50% 9.50% 11.00% 11.50% 12.00% 2.00% 3.50% 3.50% 3.50% 10
8.00% 9.50% 9.00% 10.50% 11.00% 12.00% 4.00% 4.00% 4.00% 4.00% 10
9.50% 9.75% 9.75% 10.50% 11.40% 11.70% 3.00% 4.00% 3.50% 4.50% 5
12.00% 12.00% 10.00% 10.00% 15.00% 15.00% 3.00% 4.00% 2.00% 4.00% 10
10.00% 10.00% 10.00% 10.00% 12.00% 12.00% 4.00% 4.00% 3.00% 3.00% 10
8.50% 9.00% 9.00% 9.50% 12.00% 12.50% 3.00% 5.00% 3.00% 4.00% 10
9.00% 10.00% 9.50% 10.50% 12.00% 12.50% 3.00% 3.00% 3.00% 3.00%
9.00% 9.00%
10.50% 10.50% 10.50% 10.50% 12.50% 12.50% 2.00% 2.00% 3.00% 3.00% 10
9.00% 10.00% 9.00% 9.00% 15.00% 15.50% 5.00% 5.00% 3.00% 3.00% 5-7
9.00% 9.00% 9.00% 9.00% 11.25% 11.25% 5.00% 5.00% 4.00% 4.00% 10
8.00% 9.00% 9.00% 10.00% 11.00% 12.00% 3.00% 3.00% 3.00% 3.00% 10
9.00% 9.25% 10.00% 10.25% 12.00% 12.00% 4.00% 4.00% 4.00% 4.00% 10
==========================================================================================================================
No. of Responses 18 18 19 19 18 18 17 17 18 18
Average 9.25% 9.90% 9.43% 10.04% 12.11% 12.59% 3.34% 4.63% 3.44% 3.67%
==========================================================================================================================
</TABLE>
<PAGE>
QUALIFICATIONS OF DAVID F. MCARDLE
================================================================================
Background
David F. McArdle is a Director with Cushman & Wakefield, Inc., Valuation
Advisory Services. He joined Cushman & Wakefield in March, 1993 as a staff
appraiser and was promoted to Associate Director in January, 1995. In July, 1996
he was promoted to Director. He entered the real estate business in 1980 with
Oakwood Realty in Huntington, New York and participated as a real estate broker
and property manager. In 1985 he became an officer of Oakwood Builders
Corporation a residential construction firm specializing in single family homes
and townhouses.
Appraisal Experience
From 1987 to 1991 he was affiliated with Breslin Appraisal Company of
Huntington, New York as a fee appraiser.
From July 1991 to March 1993 he was employed with Ray Brower Associates in
Seaford, New York as a staff appraiser.
Since joining the division Mr. McArdle has performed appraisal and
consulting assignments in over 25 states across the country which have included
office buildings, shopping centers, hotels, industrial buildings, apartment
buildings, marinas, restaurants, golf courses, residential subdivisions and
various special use properties. A list of properties appraised by Mr. McArdle
is available on request.
Memberships, Licenses and Professional Affiliations
STATE OF NEW YORK CERTIFIED GENERAL R.E. APPRAISER-No. 46000009231
STATE OF NEW HAMPSHIRE CERTIFIED GENERAL APPRAISER-No. NHCG-432
STATE OF OHIO CERTIFIED GENERAL REAL ESTATE APPRAISER-No. 412262
CANDIDATE, APPRAISAL INSTITUTE
Education
Fairfield University 1974-1975
University of South Florida 1976-1978
Degree: Bachelor of Science in Business Administration
Graduated: June 1978
Appraisal Education
Appraisal Institute and American Institute of Real Estate Appraisers
courses successfully completed.
#101 - An Introduction to Appraising Real Property October 1987
#102 - Applied Residential Property Valuation; January 1987
SPPA - Standards of Professional Practice Part A; November 1991
SPPB - Standards of Professional Practice Part B; August 1993
1B-A - Capitalization Theory & Techniques, Part A; April 1989
1B-B - Capitalization Theory & Techniques, Part B; August 1992
2-1 - Case Studies in Real Estate Valuation; October 1992
11540 - Report Writing and Valuation Analysis; July 1994
<PAGE>
QUALIFICATIONS OF TRAVIS W. WALSH
================================================================================
Background
Actively involved in the analysis and appraisal of real estate since 1972.
Entered the real estate business in 1972 with The Equitable Life Assurance
Society of the United States. Subsequently held positions with Security Mortgage
Investors and with the Franklin Savings Bank of New York as a Staff Appraiser.
In 1977 joined the Appraisal Division of Cushman & Wakefield, Inc. as a Staff
Appraiser; commenced employment as an Appraiser and Consultant with Henry
Boeckmann, Jr. and Associates, Inc. in 1979; subsequently became Vice President
and was appointed Manager of the Stamford, Connecticut office. Joined Cushman &
Wakefield, Inc., New York Appraisal Services 1983 as Assistant Manager of the
New York Office with responsibilities that include the supervision of
professional staff. Elected Assistant Vice President of Cushman & Wakefield,
Inc. in 1988. Named Director of Cushman & Wakefield, Inc. in 1990.
Experience
Assignments have involved a wide variety of existing and proposed real
properties, including: office complexes, shopping centers, industrial
properties, hotels and multifamily housing. Assignments have been completed for
mortgage purposes, estates, certiorari proceedings and arbitration hearings, to
aid in the decision making process in the acquisition, disposition and marketing
of real estate and to determine a property's most profitable use.
Memberships
Appraisal Institute (MAI Certificate No. 6260)
New York Metropolitan Chapter
Finance Committee - 1982
Education Committee - 1983
Candidate Guidance Committee - 1983, Vice Chairman
Continuing Education Committee - 1983, Associate Member
Admissions Committee - 1988 to date.
American Society of Real Estate Counselors (CRE Certificate No. 1391) New York
Chapter
State Certification and Licenses
New York State Certified as a Real Estate General Appraiser
(Certificate No. 46000005074)
New York State Licensed Real Estate Broker
State of Massachusetts License No. 2707-449686 (Expiration 5/96)
State of Maryland License No. 10450 (Expiration 6/96)
Other Memberships
The Real Estate Board of New York, Inc.
<PAGE>
Qualifications of Travis W. Walsh
================================================================================
Education Background
Lectured - New York University - Real Estate Institute
Income Capitalization: Advanced Theory & Applications
Fairfield University - School of Graduate & Continuing
Education
Real Estate Investment Analysis
American Institute of Real Estate Appraisers courses successfully completed.
Investment Analysis (Course VI)
Urban Properties (Course II)
Capitalization Theory & Techniques (Course 1B)
Basic Appraisal Principles, Methods & Techniques (Course 1A)
Society of Real Estate Appraisers credit awarded.
Case Study - single family dwelling (Exam R-2)
Principles of Income Property Appraising (Course 201)
Basic Principles of Real Estate Appraising (Course 101)
Columbia Society of Real Estate Appraisers course successfully completed.
Real Estate Appraising & Valuations
Real Estate Institute, New York University School of Continuing Education
courses successfully completed.
Creative Financing
Real Estate Law
Principles & Practices of Real Estate
Manhattan College, Bronx, New York, Bachelor of Science, (Business
Administration), 1972
Other Activities
Member - Greenacres Civic Group
Scarsdale, New York
This CD ROM contains an electronic version of appraisals for the Mortgaged
Properties in PDF format and forms part of the paper version of the Prospectus
Supplement. The information contained in this CD ROM does not appear elsewhere
in paper form in this Prospectus Supplement and must be considered as part of,
and together with, the information contained elsewhere in this Prospectus
Supplement and the Prospectus. The information contained in this CD ROM has
been filed by the Seller with the Securities and Exchange Commission as part
of a Current Report on Form 8-K, which is incorporated by reference in this
Prospectus Supplement, and is also available through the public reference
branch of the Securities and Exchange Commission. Defined terms used in this CD
ROM but not otherwise defined therein shall have the respective meanings
assigned to them in the paper portion of the Prospectus Supplement and the
Prospectus. All of the information contained in this CD ROM is subject to the
same limitations and qualifications contained in this Prospectus Supplement and
the Prospectus. Prospective investors are strongly urged to read the paper
portion of this Prospectus Supplement and the Prospectus in its entirety prior
to accessing this CD ROM. If this CD ROM was not received in a sealed package,
there can be no assurances that it remains in its original format and should
not be relied upon for any purpose. Prospective investors may contact J.
Theodore Borter of Goldman, Sachs Co. at (212)902-3857 to receive an original
copy of the CD ROM.
<PAGE>
==============================================
COMPLETE APPRAISAL
OF REAL PROPERTY
Commerce Center
2812 Emerywood Parkway
Henrico County, Virginia
==============================================
IN A SELF-CONTAINED REPORT
As of July 1, 1997
Prepared For:
Goldman Sachs Mortgage Company
85 Broad Street
New York, New York 10004
Prepared By:
Cushman & Wakefield of Washington, D.C., Inc.
Valuation Advisory Services
1875 Eye Street, NW
Suite 700
Washington, D.C. 20006
<PAGE>
Cushman & Wakefield of Washington, D.C., Inc. CUSHMAN &
1875 Eye Street, N.W., Suite 700 WAKEFIELD(R)
Washington, D.C. 20006 A ROCKEFELLER GROUP COMPANY
(202) 467-0600
June 18, 1997
Mr. Sheridan Schechner
Managing Partner
Goldman Sachs Mortgage Company
85 Broad Street
New York, New York 10004
RE: Complete Appraisal of Real Property
Commerce Center
2812 Emerywood Parkway
Henrico County, Virginia
Dear Mr. Schechner:
In fulfillment of our agreement as outlined in the Letter of Engagement,
Cushman & Wakefield of Washington, D.C., Inc. is pleased to transmit our
appraisal report estimating the market value of the leased fee estate in the
referenced real property.
As specified in the Letter of Engagement, the value opinion reported below
is qualified by certain assumptions, limiting conditions, certifications, and
definitions, which are set forth in the report. We particularly call to your
attention to the following special assumption.
1. Pursuant to your request, the date of value is July 1, 1997. We
specifically assumed that no value affecting changes occur between
the date of inspection, which was June 15, 1997, and the prospective
date of value.
This report was prepared for Goldman Sachs Mortgage Company and is
intended only for the specified use of the Client. It may not be distributed to
or relied upon by other persons or entities without the written permission of
the Cushman & Wakefield of Washington, D.C., Inc.
This appraisal report has been prepared in accordance with our
interpretation of your institution's guidelines, the regulations of OCC and the
Uniform Standards of Professional Appraisal Practice, including the Competency
Provision and The Financial Institutions Reform, Recovery and Enforcement Act
(FIRREA) and the guidelines of federal regulatory agencies.
The property was inspected and the report prepared by Kelly J. Small under
the supervision of Donald R. Morris, MAI.
As a result of our analysis, we estimate the prospective market value of
the leased fee estate in the referenced property and subject to the assumptions,
limiting conditions, certifications and definitions set forth herein, as of July
1, 1997, to be:
FIVE MILLION SEVEN HUNDRED THOUSAND DOLLARS
$5,700,000
<PAGE>
Mr. Sheridan Schechner
June 18, 1997 Page 2
This letter is invalid as an opinion of value if detached from the report,
which contains the text, exhibits, and an Addenda.
Respectfully submitted,
CUSHMAN & WAKEFIELD OF WASHINGTON, D.C. INC.
/s/ Kelly J. Small
Kelly J. Small
Appraiser
Valuation Advisory Services
[STAMP]
/s/ Donald R. Morris
Donald R. Morris, MAI COMMONWEALTH OF VIRGINIA
Manager, Director DONALD R. MORRIS
Valuation Advisory Services
State of Virginia Certified General Appraiser
No. 4001-002465
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
SUMMARY OF SALIENT FACTS AND CONCLUSIONS
================================================================================
Property Name: Commerce Center
Location: 2812 Emerywood Parkway
General Overview: The project comprises a two-story
office building containing a total
of 56,076 square feet of net
rentable area. The improvements were
constructed in 1980 and are situated
on a 4.163 acre site. On the
effective date of appraisal, the
building was 100 percent occupied by
a single tenant (American Home
Funding) through the year 2003.
Interest Appraised: Leased fee estate
Date of Value: July 1, 1997
Date of Inspection: June 15, 1997
Ownership: RF&P Land Corporation
Highest and Best Use: Office development, as market
conditions permit
Value Indicators
Sales Comparison Approach: $5,400,000 to $5,600,000 (rounded)
Value Per Square Foot: $97 to $99
Indicated Value: $5,500,000
Income Capitalization Approach
Estimated Market Rental Rate: $15.00 SF, Full Service
Stabilized Vacancy Rate: 4.0%
Effective Gross Income: $606,445
Operating Expenses $134,885
Real Estate Taxes: $40,672
Net Operating Income: $471,560
Estimated Vacancy Between Tenants: 9 months
Free Rent: None
Probability of Renewal: 65%
Tenant Improvement Allowance
Shell Space: N/A
New Tenants in Previously
Occupied Space $8.00 per square foot
Renewal Tenants in Same Space: $4.00 per square foot
Estimated Market Rental Growth Rate 3.5%
Estimated Expense Growth Rate: 3.5%
Estimated Real Estate Tax Growth Rate: 3.5%
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Summary Of Salient Facts And Conclusions
================================================================================
Reversion Year Capitalization Rate: 10.5%
Transaction Costs in Reversion Sale: 3.0%
Discount Rate: 12.0%
Indicated Value: $5,700,000
Value Conclusion: $5,700,000
Value Per Square Foot: $101.65 (Net Rentable Area)
Implicit Capitalization Rate: 8.3%
Special Assumptions Affecting Valuation:
1. Pursuant to your request, the date of value is July 1, 1997. We specifically
assumed that no value affecting changes occur between the date of
inspection, which was June 15, 1997, and the prospective date of value.
2. Please refer to the complete list of assumptions and limiting conditions
included at the end of this report.
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
PHOTOGRAPHS OF SUBJECT PROPERTY
================================================================================
[GRAPHIC OMITTED]
[PHOTO]
Front View of the Subject
[GRAPHIC OMITTED]
[PHOTO]
Interior View of Subject
<PAGE>
Photographs of Subject Property
================================================================================
[GRAPHIC OMITTED]
[PHOTO]
Looking Southeast Along West Broad Street
[GRAPHIC OMITTED]
[PHOTO]
Looking Northwest Along West Broad Street
<PAGE>
TABLE OF CONTENTS
================================================================================
Page
INTRODUCTION ............................................................... 1
Identification of Property .......................................... 1
Property Ownership and Recent History ............................... 1
Purpose and Function of Appraisal ................................... 1
Extent of the Appraisal Process ..................................... 1
Date of Value and Property Inspection ............................... 1
Property Rights Appraised ........................................... 1
Definitions of Value, Interest Appraised, and Other Pertinent Terms . 2
Legal Description ................................................... 3
REGIONAL ANALYSIS .......................................................... 4
NEIGHBORHOOD ANALYSIS ...................................................... 19
OFFICE MARKET ANALYSIS ..................................................... 24
PROPERTY DESCRIPTION ....................................................... 35
Site Description .................................................... 35
Improvements Description ............................................ 36
REAL ESTATE TAXES AND ASSESSMENTS .......................................... 39
ZONING ..................................................................... 41
HIGHEST AND BEST USE ANALYSIS .............................................. 43
VALUATION PROCESS .......................................................... 45
SALES COMPARISON APPROACH .................................................. 46
INCOME APPROACH ............................................................ 51
RECONCILIATION AND FINAL VALUE ESTIMATE .................................... 64
ASSUMPTIONS AND LIMITING CONDITIONS ........................................ 66
CERTIFICATION OF APPRAISAL ................................................. 68
ADDENDA .................................................................... 69
<PAGE>
INTRODUCTION
================================================================================
Identification of Property
The subject property comprises a two-story office building known as the
Commerce Center, which is located at 2812 Emerywood Parkway in Henrico County,
Virginia. The improvements contains 56,076 net rentable square feet and are
situated on a 4.163 acre parcel. The building is modern in appearance and
functional in design. As of the date of inspection, the property was 100 percent
leased to a single tenant through the year 2003.
Property Ownership and Recent History
The property is owned by RF&P Land Corporation, who acquired the site in
August 1993 from Manufacturers Life Insurance Company for $3,690,000. We
attribute the difference between the price paid for the property and our value
conclusion to improving market conditions (as discussed in the Office Market
Analysis). According to property management, the building was constructed for
Aetna, who vacated the building in 1989. The building sat vacant for four years
before it was leased to American Home Funding.
We have reason to believe that the property may now be under contract of
sale; however, after discussing the matter with the owner, we have been unable
to obtain any details of the pending transaction. The present owner considers
this information to be confidential and was not willing to provide details for
our analysis.
Purpose and Function of Appraisal
The purpose of the appraisal is to estimate the market value of the
leased fee estate. The appraisal is to be used to monitor the performance of a
portfolio asset.
Extent of the Appraisal Process
In the process of preparing this appraisal, we:
o Inspected the exterior of the building and the site improvements and a
representative sample of tenant spaces with property management.
o Reviewed leasing policy, concessions, tenant build-out allowances, and
history of recent rental rates and occupancy with the building
manager.
o Reviewed a detailed history of income and expense and a budget
forecast for 1997.
o Conducted market research of occupancies, asking rents, concessions
and operating expenses at competing buildings which involved
interviews with on-site managers and a review of our own data base
from previous appraisal files.
o Prepared an estimate of stabilized income and expense (for
capitalization purposes).
o Conducted market inquiries into recent sales of similar buildings to
ascertain sales price per square foot, effective gross income
multipliers and capitalization rates. This process involved telephone
interviews with sellers, buyers and/or participating brokers. (See
detailed sales write-ups in Addenda for more complete information on
the verification process.)
o prepared the Sales Comparison and Income Approaches to value.
<PAGE>
Introduction
================================================================================
Date of Value and Property Inspection
The date of value is July 1, 1997. We inspected the property on June 15,
1997.
Property Rights Appraised
The rights being valued are the leased fee estate.
Definitions of Value, Interest Appraised, and Other Pertinent Terms
The definition of market value taken from the Uniform Standards of
Professional Appraisal Practice, 1994 Edition, published by The Appraisal
Foundation, is as follows:
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 is the
consummation of a sale as of a specified date and the passing of title
from seller to buyer under conditions whereby:
(1) Buyer and seller are typically motivated;
(2) Both parties are well informed or well advised, and acting in
what they consider their own best interests;
(3) A reasonable time is allowed for exposure in the open market;
(4) Payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
(5) 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.
Exposure Time
Under Paragraph 3 of the Definition of Market Value, the value estimate
presumes that "A reasonable time is allowed for exposure in the open
market." Exposure time is defined as the estimated length of time the
property interest being appraised would have been offered on the market
prior to the hypothetical consummation of a sale at the market value on
the effective date of the appraisal. Exposure time is presumed to precede
the effective date of the appraisal.
Based on the improved sales data presented in this document, coupled with
our conversations with local property owners, brokers and management
firms, we have estimated the appropriate exposure time would have been 12
months for the property.
Marketing Time
Marketing time is an estimate of the time that might be required to sell a
real property interest at the appraised value. Marketing time is presumed
to start on the effective date of the appraisal. Marketing time is
subsequent to the effective date of the appraisal and exposure time is
presumed to precede the effective date of the appraisal. The estimate of
marketing time uses some of the same data analyzed in the process of
estimating reasonable exposure time and it is not intended to be a
prediction of a date of sale. We estimated marketing time to be
approximately 12 months.
================================================================================
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WAKEFIELD(R)
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<PAGE>
Introduction
================================================================================
Definitions of pertinent terms taken from the Dictionary of Real Estate
Appraisal, Third Edition (1993), published by The Appraisal Institute, are as
follows:
Leased Fee Estate
An ownership interest held by a landlord with the right of use and
occupancy conveyed by lease to others. The rights of the lessor (the
leased fee owner) and the leased fee are specified by contract terms
contained within the lease.
Leasehold Estate
The right to use and occupy real estate for a stated term and under
certain conditions; conveyed by a lease.
Market Rent
The rental income that a property would most probably command on the open
market; indicated by the current rents paid and asked for comparable space
as of the date of the appraisal.
Cash Equivalent
A price expressed in terms of cash, as distinguished from a price
expressed totally or partly in terms of the face amounts of notes or other
securities that cannot be sold at their face amounts.
Discounted Cash Flow (DCF) Analysis
The procedure in which a discount rate is applied to a set of projected
income streams and a reversion. The analyst specifies the quantity,
variability, timing and duration of the income streams as well as the
quantity and timing of the reversion and discounts each to its present
values at a specified yield rate: DCF analysis can be applied with any
yield capitalization rate and may be performed on either a lease-by-lease
or aggregate basis.
Legal Description
The subject is identified as being a portion of Block A, Commerce Center,
among the land records of Henrico County, Virginia. A copy of the metes and
bounds description of the site can be found in the Addenda.
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WAKEFIELD(R)
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<PAGE>
REGIONAL ANALYSIS
================================================================================
The dynamic nature of economic relationships within a market area have a
direct bearing on real estate values and the long-term quality of a real estate
investment. In the market, the value of a property is not based on the price
paid for it in the past or the cost of its creation, but on what buyers and
sellers perceive it will provide in the future. Consequently, the attitude of
the market toward a property within a specific neighborhood or market area
reflects the probable future trend of that area.
Since real estate is an immobile asset, economic trends affecting its
locational quality in relation to other competing properties within its market
area will also have a direct effect on its value as an investment. To accurately
reflect such influences, it is necessary to examine the past and probable future
trends which may affect the economic structure of the market and evaluate their
impact on the market potential of the subject. This section of the report is
designed to isolate and examine the discernible economic trends in the region
and neighborhood which influence and create value for the subject property. A
regional map indicating the location of the subject is presented on the
following page.
Location
The subject property is located in Henrico County, within the
Richmond-Petersburg Metropolitan Statistical Area (MSA). For statistical
purposes, this area includes Chesterfield, Dinwiddie, Goochland, Hanover,
Henrico, New Kent, Powhatan and Prince George Counties. In addition, this MSA
also includes Charles, Colonial Heights, Hopewell, Petersburg and Richmond
Cities.
Richmond is located approximately 100 miles south of Washington, D.C. and
is midway between Atlanta and Boston. The City of Richmond is situated at the
end of the navigable portion of the James River, which bisects the city. Founded
in 1737 as a central marketplace of inland Virginia, it linked the piedmont and
mountain areas of Virginia with the seaports at Hampton Roads. In 1779, Richmond
became the state capital which has had a profound effect upon the growth of the
region. Richmond is the home of the Virginia General Assembly, state and federal
courts, and Virginia's capital. The success of the Richmond area is evidenced by
the influx and growth of local businesses, immigration to and population growth
in the area, as well as expansion of the employment base.
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<PAGE>
[GRAPHIC OMITTED]
METRO RICHMOND, VA
Regional Map
<PAGE>
Regional Analysis
================================================================================
Demographics
Demographic statistics for the Richmond MSA are summarized in the
following table.
================================================================================
SELECTED AREA DEMOGRAPHICS
RICHMOND MSA
================================================================================
Population
2001 Projection 1,000,848
1996 Estimate 942,346
1990 Census 865,640
1980 Census 761,304
1980-1990 % Change 13.70%
1990-1996 % Change 8.86%
1996-2001 % Change 6.21%
Households
2001 Projection 386,777
1996 Estimate 362,848
1990 Census 331,824
1980 Census 269,289
1980-1990 % Change 23.22%
1990-1996 % Change 9.35%
1996-2001 % Change 6.59%
Median Household Income
2001 Projection $46,784
1996 Estimate $40,118
1990 Census $33,489
1980 Census $18,293
1980-1990 % Change 86.07%
1990-1996 % Change 19.79%
1996-2001 % Change 16.62%
1990 Average Home Value $78,111
1990 % College Graduates 18.3%
================================================================================
Source: Strategic Mapping, Inc.
================================================================================
Population
According to Strategic Mapping, Inc., the population in the Richmond MSA
has increased dramatically slightly since 1980. In 1980 the population for the
entire MSA was 761,304 which then increased to 865,640 or 13.70 percent in 1990,
The population estimate for 1996 shows a slight slowing trend in the population
as the estimate increased from the 1990 figure to 942,346 or 8.86 percent.
Projections for the year 2001 show an increase expected over the next five year
period of 6.21 percent. This trend shows strong growth across the region.
Households
The total number of households in the MSA has increased approximately
23.22 percent from 1980 to 1990. The 1990 household figure of 331,824 households
has increased to an estimated figure of 362,848 in 1996 which indicates an
increase of 9.35 percent over the six year period since 1990. Similar to the
overall population growth, the average annual increase
================================================================================
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WAKEFIELD(R)
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<PAGE>
Regional Analysis
================================================================================
has decelerated from the previous ten year period to a more normalized basis,
which is still above the national averages. The number of households has been
increasing since 1980, even during periods when the population was shrinking.
This has been possible due to the declining household size which has dropped
from 2.72 persons in 1980 to 2.52 persons in 1996. The number of households is
expected to increase to 386,777 in the year 2001, an increase of 6.59 percent
from the 1996 estimate. The steadily increasing number of households should have
a positive impact on the local economic condition.
Income
The median income per household in the MSA has increased considerably
since 1980. In 1980 the median household income was $18,293, which increased by
86.07 percent or 8.61 percent per annum to $33,489 in 1990. Based on estimates
from Strategic Mapping, Inc., the 1996 median household income was $40,118. The
1996 estimate indicates that overall growth in the median household income
slowed to 19.79 percent from 1990 to 1996 or a still strong 3.30 percent per
annum. The area is expected to continue in this income growth trend through
2001. A breakdown of the household income characteristics for the MSA is shown
as follows:
================================================================================
HOUSEHOLD INCOME CHARACTERISTICS - RICHMOND MSA
================================================================================
1980 1990 1996 Est. 2001 Proj.
================================================================================
$0 - $9,999 25.6% 12.0% 9.6% 8.1%
$10,000 - $14,999 15.0% 7.5% 6.1% 4.8%
$15,000 - $24,999 28.3% 16.5% 13.3% 10.9%
$25,000 - $34,999 17.5% 16.1% 13.9% 12.1%
$35,000 - $49,999 9.4% 20.0% 19.5% 17.5%
$50,000 - $74,999 2.8% 18.1% 20.9% 22.1%
$75,000 - $99,999 1.4% 5.7% 8.9% 11.5%
$100,000 - $149,999 -- 2.7% 5.6% 9.3%
$150,000+ -- 1.5% 2.2% 3.7%
TOTAL 100.0% 100.0% 100.0% 100.0%
================================================================================
Source: Strategic Mapping, Inc.
================================================================================
Unemployment Rate
Over the past year, the overall unemployment rate in the Richmond MSA
remained flat. Henrico County had a lower unemployment rate of 3.0 percent as of
year end 1996. The most recent unemployment figure as of March 1997 for Henrico
County was 2.6 percent, which is slightly below the 2.7 percent figure twelve
months earlier. The March 1997 rate for the metro area of 3.3 percent was the
same for the previous period. The metropolitan area has been experiencing an
improvement in the economy. The Richmond MSA has outperformed the nation and the
state in terms of employment over the past few years; and it is anticipated
that it will continue to do so in the future.
The following tables compare the unemployment rate for the area to that of
the state and national average for the year end averages and the current month
figures.
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WAKEFIELD(R)
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<PAGE>
Regional Analysis
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================================================================================
UNEMPLOYMENT RATE
COMPARISON BY COUNTY, MSA, STATE, AND U.S.
================================================================================
Year Henrico Richmond Virginia U.S.
County MSA
================================================================================
1996 3.0% 3.7% 4.4% 5.4%
1995 2.9% 3.7% 4.5% 5.6%
1994 3.3% 4.4% 4.9% 6.1%
1993 3.9% 4.9% 5.1% 6.9%
1992 5.4% 6.7% 6.4% 7.5%
================================================================================
Source: U.S. Department of Labor and Employment Security, Bureau of Labor Market
Information.
================================================================================
================================================================================
CURRENT MONTH - UNEMPLOYMENT RATE
================================================================================
Geographic Area March 1996 March 1997
================================================================================
Henrico County 2.7% 2.6%
Richmond MSA 3.3% 3.3%
Virginia 4.6% 4.4%
U.S. 6.0% 5.9%
================================================================================
Source: U.S. Department of Labor and Employment Security
================================================================================
As population in the Richmond area has increased, employment has grown as
existing businesses expanded and new companies located in the area. Local
businesses are attracted to the convenient location between Atlanta and Boston,
competitive tax policies, and excellent transportation systems. In Richmond,
there is no sales tax on raw materials, and no state or local inventory tax on
manufacturing. Furthermore, sales and use tax, corporate income tax, and
unemployment insurance tax rates are low compared to national averages of other
cities. In fact, Richmond has the lowest unemployment insurance tax rate in the
nation, while the worker's compensation rate is seventh in the U.S. The labor
force has an education level as high or higher than other metro areas of
Richmond's size, or larger. Furthermore, Richmond area workers are reportedly 43
percent more productive per worker hour than U.S. workers as a whole, according
to the Metropolitan Economic Development Council. In addition, less than 11
percent of Richmond area workers are unionized, compared to the national average
of 20 percent. These factors have contributed to the influx of employers into
the Richmond area. Richmond's business climate has attracted and retained some
of the most prestigious businesses in the U.S., helping to boost the local
employment base.
As shown in the following table, with the exception of manufacturing all
industry segments witnessed steady growth. The largest increases came from
services at 3.24 percent followed by T.C.P.U. at 2.87 percent, and construction
at 2.67 percent. The following table illustrates the five year trend for
employment by sector for the Richmond MSA.
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<PAGE>
Regional Analysis
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<TABLE>
<CAPTION>
================================================================================================
At-place Employment in the Richmond, Virginia MSA
1992 - 1996
================================================================================================
Category 1992 1993 1994 1995 1996 Percent
================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Manufacturing 62,900 61,400 61,100 60,600 59,700 -1.04
Mining 7,000 7,000 7,000 8,000 8,000 2.71
Construction 27,000 27,500 27,900 29,300 30,800 2.67
T.C.P.U 23,000 24,100 25,000 26,000 26,500 2.87
Wholesale & Retail Trade
106,300 108,700 115,000 119,700 120,400 2.52
F.I.R.E. 38,700 39,700 42,000 42,400 42,900 2.08
Services 109,200 113,100 118,700 125,000 128,100 3.24
Federal, State & Local 96,300 99,100 100,900 98,300 96,800 0.10
Government
================================================================================================
Total 464,100 474,300 491,200 502,100 506,000 1.74
================================================================================================
Unemployment Rate - 6.7 4.9 4.4 3.7 3.7 --
Richmond MSA
Unemployment Rate - 7.5 6.9 6.1 5.6 5.4 --
USA
================================================================================================
Source: Bureau of Labor Static's
================================================================================================
</TABLE>
Total employment increased by 0.78 percent over the past year and 1.74
percent over the past five years, in combination with a declining unemployment
rate (as of March 1997), indicates economic stability in the area. We anticipate
slow growth in employment during the next few years and possibly accelerated
growth towards the end of the decade. The largest increases are anticipated in
the services and construction categories with the strengthening economy, with
growth expected from all areas with the exception of government which is
expected to decline. Shown below is the most recent employment by industry in
the subject's area.
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<PAGE>
Regional Analysis
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================================================================================
NON-AGRICULTURAL INSURED EMPLOYMENT BY MAJOR INDUSTRY DIVISION
April 1996 to 1997 Comparison - Not Seasonally Adjusted
RICHMOND AREA MSA
================================================================================
INDUSTRY Average Employment SHARE Average Employment SHARE CHANGE
April 1996 (000's) April 1997 (000's)
================================================================================
Manufacturing 59.3 11.7% 59.8 11.7% 0.84%
Construction 30.2 6.0% 31.6 6.2% 4.64%
Mining 0.8 0.2% 0.7 0.1% -12.50%
T.C.P.U.* 26.2 5.2% 26.5 5.2% 1.15%
Trade 118.4 23.4% 120.1 23.5% 1.44%
F.I.R.E** 42.6 8.4% 43.1 8.4% 1.17%
Services 130.1 25.7% 130.6 25.5% 0.38%
Government 98.5 19.5% 98.9 19.3% 0.41%
================================================================================
TOTALS 506.1 100.0% 511.3 100.0% 1.03%
================================================================================
* Transportation, & Public Utilities
** Finance/Insurance/Real Estate
================================================================================
Over the past year, total employment witnessed a small increase of 1.03
percent. Construction and Retail Trade were the leading industries with an
overall increase of 4.64 percent and 1.44 percent respectively. This offset the
small losses in the mining industry.
The appraisers have outlined both the major employers in the local market
of Henrico County and the macro market of metropolitan Richmond, Virginia. It
should be noted that in both the metropolitan rankings and the county rankings
the top employment lists include private industry only. As can be seen, the
majority of the employment is trade and service oriented in nature for both
areas. The following charts summarize the major employers within the county and
the MSA.
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Regional Analysis
================================================================================
================================================================================
MAJOR AREA EMPLOYERS
HENRICO COUNTY (1997)
================================================================================
Employer Number of Employees
================================================================================
Circuit City 5,000-6,000
Reynolds Metal 4,000-5,000
Crestar Financial 3,000-4,000
Secours 3,000-4,000
Tri-Son Health Care 2,000-3,000
Via Systems Technology 2,000-3,000
American Home Products 1,000-2,000
United Parcel Service 1,000-2,000
Tysons Ford 900-1,000
Stone Container 800-900
================================================================================
Source: Henrico County Office of Economic Development
================================================================================
================================================================================
MAJOR AREA EMPLOYERS
RICHMOND, VIRGINIA METRO AREA (1997)
================================================================================
Employer Number of Employees
================================================================================
Philip Morris USA 8,000
Columbia/HCA Healthcare Corp. 6.340
Circuit City Stores 5,194
Reynolds Metals Co. 4,300
Capital One Financial Corp. 4,064
Dominion Resources Inc. 3,803
Ukrops Super Markets Inc. 3,585
Allied Signal Corp. 3,400
Crestar Financial Corp. 3,252
Bon Secours Richmond Health 3,051
NationsBank Corp. 2,726
Trigon Blue Cross/Blue Shield 2,705
Signet Banking Corp. 2,501
DuPont Co. 2,500
Bell Atlantic-Virginia 2,445
Viasystems Technologies Corp. 2,100
Food Lion Inc. 1,621
Central Fidelity Banks, Inc. 1,595
Richfood Holdings Inc. 1,583
Wal-Mart Stores Inc. 1,512
================================================================================
Source Richmond Times Dispatch
================================================================================
Transportation
The Richmond area is served by four interstate highways creating an
excellent network for entering and exiting the vicinity. Interstate routes 95,
64, 195 and 295 are within the City and serve the metropolitan area. Interstate
95 is the most important north-south highway on the
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Regional Analysis
================================================================================
eastern seaboard. To the north, it connects Richmond with Washington, D.C. and
other cities in the northeast corridor; to the south, it reaches to Miami,
Florida. Route 95 also traverses downtown Richmond and serves as an expressway
in the local vicinity. Interstate 64, which runs principally east to west, lends
access to Hampton Roads and the Tidewater area of Virginia. To the west, it
intersects with Interstate 81 in the Shenandoah Valley before continuing to West
Virginia and Kentucky. Locally, I-295 forms a semicircle around the metropolitan
area, with an eventual extension south to Prince George County and a southern
connector to Interstate 95 is proposed. Interstate Route 195 gives access to the
portion of Richmond located along the James River. Yet another local expressway
is the Powhite Parkway which links the two halves of the city of Richmond (the
north and south banks of the James River). The Powhite has been extended to the
emerging suburban areas of central Chesterfield County. Several U.S. highways
converge in Richmond, namely, Routes 1, 33, 60, 250, 301 and 360.
Richmond International Airport has recently undergone a $38 million
expansion, making it a modern state-of-the-art airport. The expansion includes
all-weather second level boarding courses and a new entrance roadway connecting
with Interstate 64. The airport is located 12 miles east of Richmond in Henrico
County. There are over 200 flights daily by American, Delta, Eastern, United and
U.S. Air, plus six regional carriers. Air time to New York is only 60 minutes.
The Richmond area is a major East Coast rail center. Passenger railways
are utilized by AMTRAK while the major freight railway companies are CSX
Transportation; Richmond, Fredericksburg and Potomac; and Norfolk-Southern.
The port of Richmond provides an excellent water transportation system for
cargo to Europe, Africa, South America, Canada and the Caribbean. The deep water
port is the westernmost on the north Atlantic and handles over 413,000 tons of
bulk and container cargo annually.
The Greater Richmond Transit Company (GRTC) provides transportation
services to commuters. The system offers several transit routes in Henrico
County as well as downtown service connecting the financial and retail
districts. Trailways, Greyhound and Groome Transportation charter buses to other
cities.
Education/Recreation
The Richmond area boasts of numerous colleges and universities in the
vicinity. Among these educational institutions are Randolf-Macon College,
University of Richmond, Virginia Commonwealth University, Medical College of
Virginia, Virginia Union College, etc. Many of the area's public secondary
school systems allocate higher per student expenditures than the national
average. Area school systems have also adopted progressive measures over the
past decade to improve and enhance the normal school criteria. In addition,
there are many prestigious private secondary schools including St.
Christopher's, St. Catherine's, Collegiate, and Benedictine.
The city of Richmond serves as the cultural and recreational heart of
Central Virginia. There are many museums including the Virginia Museum of Fine
Arts, The Valentine Museum, Museum of the Confederacy, and the Science Museum of
Virginia.
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Regional Analysis
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In addition, Richmond serves as a center for the performing arts at
locations including the Carpenter Center and the Theater Virginia. Local area
residents can also enjoy numerous parklands including James River Park, Bryan
Park and Pocohontas State Park.
Conclusion
Richmond is centrally located along the East Coast at the northern end of
the Sun Belt. This location contributed to its growth as a business and
industrial area over the last decade. While population and employment growth in
the region have recently diminished, both are expected to continue growing at
moderate rates during the 1990s. The moderate cost of living, low taxes and
strong economics appeal to Richmond businesses. Transportation networks and
waterways that make Richmond attractive to corporations also make it attractive
to individuals. Overall, the Richmond area is expected to prosper moderately in
the future.
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<PAGE>
OFFICE MARKET ANALYSIS
================================================================================
Richmond Metropolitan Office Market
Richmond is the capitol of Virginia and is headquarters to 14 Fortune 500
Companies. The office market is segmented by location within the metropolitan
area, with the Central Business District (CBD) of Richmond being the oldest
segment. As the office market expanded around the CBD, new development was
categorized into four quadrants: northwest, northeast, southwest and southeast.
Most of the growth in past decade occurred in the northwest and southwest
quadrants. Although many firms prefer to be located in downtown Richmond,
Henrico County has become a new growth area for office park development. The
campus style office development became increasingly popular in the 1980s.
Development has generally expanded away from the urban core into northwest
Henrico County (just south of Interstate 295). The amount of office space in the
eastern quadrants is so insignificant that reliable statistics for these areas
were not available.
According to Harrison & Bates, Inc. 1997 Office Market Report, total
inventory of office space in the Richmond metropolitan area in 1996 was
approximately 18.1 million square feet, with approximately 6.1 million square
feet in the Richmond CBD and 11.9 million square feet in the suburban markets.
The following table presents the geographic distribution of the office inventory
in the metropolitan area, along with other statistical data:
================================================================================
Geographic Distribution of Inventory
Metropolitan Richmond Office Market
Year-End 1996
================================================================================
Jurisdiction Inventory SF Overall SF Under Y-T-D Net
(000) Vacancy Construction Absorption
================================================================================
Central Business District 6,131,500 16.36% 0 200,407
Northwest Quadrant 8,048,248 6.23% 80,000 316,002
Southwest Quadrant 3,890,710 9.46% 157,788 68,171
- --------------------------------------------------------------------------------
Total 18,070,458 10.36% 237,788 584,580
================================================================================
As of year-end 1996, the overall vacancy rate stood at 10.36 percent,
continuing a slow recovery from the year-end 1994 vacancy of 12.43 percent. The
continued decline in vacancy is a result of minimal pure speculative office
space brought on the market in recent years. Vacancy was higher in the CBD at
16.4 percent than in the suburbs at 7.3 percent. The Northwest submarket
demonstrated the lowest vacancy rate of 6.2 percent, where it has generally
remained for the past three years. The Southwest Quadrant demonstrated the most
improvement, with vacancy decreasing from 14.44 percent in 1994 to the current
level of 9.46 percent. This is the first decline below ten percent since the
early 1980s. The following table presents the historical vacancy, rental rate
and absorption data, showing a steadily declining vacancy rate and increased
absorption:
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Office Market Analysis
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================================================================================
Historical Data
Metropolitan Richmond Office Market
1994 - 1996
================================================================================
Year Inventory SF Vacancy SF Under Net Absorption
(000) Construction (SF)
================================================================================
1994 17,430,591 12.43% 62,000 407,215
1995 17,655,281 11.56% 352,000 344,077
1996 18,070,458 10.36% 237,788 584,580
================================================================================
Annual Averages 11.44% 217,263 445,291
================================================================================
Lenders' strict underwriting criteria, limited market demand, and the
increase in sublet market space as a result of corporate consolidations and
downsizing all contributed to the lack of office construction in 1994. In 1995
and 1996, construction of office space increased, with a total of 352,000 and
237,788 square feet of space completed, respectively. Most of the new
construction in 1996 occurred in the Southwest Quadrant, accounting for 157,788
square feet or 66 percent of total new construction. The remaining 80,000 square
feet of new space was delivered in the Northwest Quadrant and included five
build-to-suits within the Innsbrook Office Park, some of which included
speculative office space (minimal). No new construction was delivered in the
CBD, as it continues it slow recovery with a glut of Class C space.
The market absorbed 584,580 square feet in 1996, an increase of 70 percent
over the 1995 figure. This level approximates the average annual absorption
between 1992 and 1996 of 541,159 square feet. The Northwest Quadrant absorbed
the largest amount of space in 1996 totaling 316,002, or 54 percent of total
absorption.
Current Construction Activity
Only build-to-suit construction is expected through 1997 and 1998, as
developers are still having difficulty financing purely speculative projects.
According to numerous sources throughout the market, one of the most important
and far reaching commercial real estate developments over the past two years was
the announcement by Motorola's plans to build a major semi-conductor plant in
Goochland County. The company exercised an option to purchase 230 acres in the
West Creek Corporate Center. Long term plans call for construction of several
million square feet of buildings and the creation of an initial 5,000 jobs. This
location is only minutes from the subject area and will likely increase demand
from semi-conductor clients and associated firms.
Discussions with local market participants indicated that Northwest
Richmond is a developers market, given the lack of available space. A number of
major corporations, such as Wheat First, Circuit City, Virginia Mutual Insurance
Company and Heilig Meyers, have built or are starting construction of their own
buildings. The Innsbrook area appears to be the most attractive site for office
development, with several deliveries expected by year-end 1997. A summary of
buildings currently under construction is highlighted below.
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Office Market Analysis
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================================================================================
Buildings Under Construction
Northwest Quadrant
================================================================================
Building Size (SF) SF Available Asking Rental
Available Rate (SF)
================================================================================
Glen Forest Medical 40,000 0 0% N/A
Virginia Mutual 64,000 35,000 54.7% $17.25
Wheat First 100,000 70,000 70.0% $17.00
================================================================================
Investment Market
The investment market in the metropolitan Richmond area has been active.
Since 1995, there has been a marked turnaround in property sales in the office
market, with buyers motivated by the turnaround in the market and the potential
appreciation of property values. Sellers are no longer lenders, as many of the
distressed situations have been resolved. Buyers returning to the market include
REITS, pension funds, insurance companies and local or regional investors. With
a higher concentration of available capital, the metropolitan market has
experienced rising prices on average. The table on the following page depicts
historical and recent office building sales that have occurred in the suburban
Richmond market.
The sales indicate a wide range in unit values from a low of $30.58 to a
high of $114.94 per square foot of rentable area. As depicted, real estate
values have stabilized throughout suburban Richmond over the past two years.
Class A and B properties located in highly desirable office parks with high
occupancy sold in the range of $85.00 to $110.00 per square foot. The Southwest
Quadrant office sales were generally lower than those in the Northwest Quadrant,
selling in the $80.00 to $90.00 per square foot range. Property values in the
downtown market continue to be depressed, with few sales occurring.
Apartment communities joined by suburban office properties as currently
the most desirable investment property type. In the office market, the few
downtown building sales were dwarfed by activities within the suburbs, with the
strongest action in the Northwest Quadrant. Highwoods REIT was the most active
buyer, purchasing a number of buildings in Innsbrook. In the Southwest Quadrant,
Brookdale Investors purchased two buildings in Moorefield, while two other
buildings were purchased by Commonwealth Atlantic Properties (formerly RF&P) in
The Arboretum.
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Office Market Analysis
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================================================================================
Office Building Sales Summary
Suburban Richmond
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Bldg. Address Size(SF) Yr Built Occup. Sale Date Price (SF)
================================================================================
Vistas at Brookfield 70,582 1985 95% 05/97 $82.74
Pioneer Building 49,019 1987 100% 05/97 $76.50
Moorefield V 42,000 1986 96% 04/97 $86.67
4101 Cox Road 58,184 1990 95% 12/96 $103.12
804 Moorefield Park Dr. 51,307 1985 97.5% 12/96 $83.81
808 Moorefield Park Dr. 47,230 1987 100% 11/96 $69.87
4701 Cox Road 100,178 1990 99% 06/96 $106.90
Arboretum VI and VII 103,986 1990 95% 06/96 $85.54
4881 Cox Road 108,000 1996 100% 02/96 $101.16
Vantage Place 55,374 1986-88 96% 09/95 $79.28
Vantage Pointe 63,867 1990 95% 09/95 $84.71
Owens & Minor 63,000 1989 100% 09/95 $114.94
Markel & Mercer Buildings 197,260 1987/90 100% 07/95 $98.35
Proctor-Silex 97,253 1988 99% 07/95 $85.53
Colonnade at Innsbrook 65,757 1986 98% 12/94 $88.36
Aetna Office Building 101,293 1990 98% 12/94 $83.91
Markel Building 71,745 1988 95% 09/94 $100.36
Koger Southside 131,000 1986 84% 09/94 $55.00
Progressive Building 70,260 1987 90% 06/94 $83.09
Allstate Building 39,281 1985 100% 03/94 $77.65
10710 Midlothian Tnpk. 152,000 1989 64% 07/93 $36.98
2820 Waterford Lake Dr. 42,718 1989 69% 05/93 $40.97
9321-27 Midlothian Tnpk 63,770 1984 64% 03/93 $30.58
================================================================================
Land Values
Over the past year, there has been an increased level of sales activity
for vacant office sites. However, tightened credit, a drop in new construction
and poor performance among improved properties has limited the pool of potential
buyers of office land. In addition to poor demand for office sites, there is a
glut of land available for development and for sale. Some of these projects
include Gateway, Boulders, Bellgrade, Stony Point, Westerre, Innsbrook,
Moorefield, West Creek, etc. At present, there are over 1,000 acres of office
land available for development in established office parks throughout the
region. In addition to these sites available in park developments, there are
many single office tracts dispersed throughout the Richmond suburbs available
for sale.
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Office Market Analysis
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As with the improved sales, the land sale price trend is upward. The
primary hub of activity is located several miles northwest of the subject in the
Innsbrook Office Park, where property values have increased as demand for office
space in this park continues to strengthen. Prior to 1994, land tracts were sold
from former lenders or institutions regulated by the Resolution Trust
Corporation (RTC), and buyers would only purchase land at cut-rate prices. As
noted in the following table, recent activity includes a clear increase in the
demand for and price of office land.
================================================================================
Office Land Sales Summary
Metropolitan Richmond Office Market
================================================================================
Location Net Area Sale Date Sale Price Price/Acre
(Acres)
================================================================================
Innslake Drive 2.90 02/97 $555,500 $191,552
Innsbrook, VA
Lake Brook Drive 8.00 11/95 $1,200,000 $150,000
Innsbrook, VA
North Park Drive 7.97 07/95 $995,625 $125,000
Innsbrook, VA
North Park Drive 12.84 07/95 $1,605,000 $125,000
Innsbrook, VA
Cox Road and Nuckols Road 5.00 01/95 $750,000 $150,000
Innsbrook, VA
Innsbrook Drive @ The Overlook 52.00 12/94 $5,096,000 $98,000
Innsbrook, VA
Lakebrook Drive 5.50 11/94 $808,500 $147,000
Innsbrook, VA
Westerre Office Park @ Gaskin Road 10.67 05/94 $880,400 $82,511
Innsbrook, VA
Polo Parkway/Bellgrade 4.14 10/93 $372,877 $90,165
Chesterfield County, VA
Cherokee Road/Stony Point 40.28 07/93 $2,202,483 $54,723
City of Richmond, VA
Waterfront Dr/Innsbrook 6.60 03/93 $485,000 $73,484
Henrico County, VA
================================================================================
The appropriate unit of comparison in suburban Richmond is the price per
usable acre. The preceding sales represent both speculative investors and
build-to-suit/owner-occupant sales. The most recent sale, however, involved the
purchase of a site within Innsbrook for development of a Homewood Suites hotel.
These sales represent a trading range from $54,723 per usable acre to $191,500
per usable acre. Market participants indicated that, due to the limited
availability of space, the market is shifting to a development market. This is
expected to continue to place upward pressure on land prices within the market.
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Office Market Analysis
================================================================================
Summary of Metropolitan Office Market
Although some submarkets remain soft, the overall vacancy rate continues
to decline, and the remaining available space tends to be less desirable. The
Northwest Quadrant, in particular, is leading the region in net absorption and
vacancy. We believe that over the next several years, the metropolitan office
market should reach a more stabilized position both from an occupancy and lease
rate standpoint.
Northwest Quadrant Office Market
The subject property is located in Henrico County within the Northwest
Quadrant. This quadrant is the largest submarket in terms of total rentable
area, with 8.0 million square feet of office space, or 45 percent of total
inventory. The Southwest Quadrant and CBD have 3.8 million square feet and 6.1
million square feet, respectively. Within the Northwest Quadrant, the Innsbrook
Office Park is considered the prime office location within the greater Richmond
area. The Innsbrook Office Park includes a total of 3.5 million square feet of
space, or approximately 44 percent of the entire Northwest Quadrant. The
following table presents the historical vacancy and absorption data for the
Northwest Quadrant.
================================================================================
Historical Data
Northwest Quadrant
1994 - 1996
================================================================================
Year Inventory SF Vacancy SF Under Net Absorption
(000) Construction (SF)
================================================================================
1994 7,535,932 6.20% 52,000 241,525
1995 7,744,618 6.64% 332,000 161,764
1996 8,048,248 6.23% 80,000 316,002
================================================================================
Annual Averages 6.35% 154,667 239,764
================================================================================
Taken as a whole, the Northwest Quadrant office market exhibited an
overall vacancy rate of 6.23 percent as of year-end 1996. As depicted, vacancy
has remained relatively stable over the past three years despite new deliveries
and increased absorption. However, the vacancy rate has improved significantly
in this submarket over the past six to seven years, with the current vacancy
rate representing an 11.0+/- percent decline from year-end 1990, when it was
17.20 percent.
Although vacancy for the submarket as a whole has remained relatively
stable, a breakdown by Class indicates that vacancy for Class A space has
continued to decline, with minimal Class A space availability. The lack of
significant new construction, coupled with positive absorption, has led to a
shortage of large blocks of Class A office space. According to Morton G.
Thalhimer, Inc.'s April 1997 Office Market Survey, Class A vacancy was 1.70
percent, compared to 9.20 and 24.66 percent for Class B and C space,
respectively. The most significant vacancy remains within the Class C market,
which increased its vacancy from 19.0 percent at year-end 1995 to the current
level of 24.66 percent. The following table illustrates the historical vacancy
for Class A space within the Northwest Quadrant.
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<PAGE>
Office Market Analysis
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================================================================================
Historical Data
Class A Space Northwest Quadrant
1992 - 1996
================================================================================
Year Inventory SF Vacancy
(000)
4/92 4,609,013 16.45%
4/93 4,609,013 7.83%
4/94 5,086,263 5.61%
4/95 5,341,839 4.58%
4/96 5,545,839 3.88%
4/97 6,698,886 1.70%
================================================================================
Source: Morton G. Thalhimer, Inc. (April 1997)
================================================================================
Despite tight market conditions within the Northwest Quadrant for the past
three years, rental rates for Class A space have edged up only slightly, while
rates for Class B and C remained flat, keeping those properties competitive with
Class A product. Due to the lack of space availability within the Class A
market, brokers anticipate continued upward pressure on rental rates. Free rent
and tenant improvement allowances are currently limited in the Northwest
Quadrant, as tenants generally prefer the lowest possible base rental rate.
The general consensus is that tenants will have to sign concession free
leases at a rate of $16.50 to $17.00 per square foot for multi-tenant Class-A
buildings in the Northwest Quadrant by year-end 1997. These figures do not
reflect that, while face rents have increased somewhat, concession packages have
diminished significantly. Many landlords in the market depicted limited tenant
improvement packages and no free rent allowances in recent deals. Furthermore,
landlords have been able to obtain an expense reimbursement from some tenants,
which has been absent from Richmond office leases for some time.
Brokers and investors were surveyed as to their opinions of rent spikes,
given the lack of available Class A space within the market. Several brokers
indicated that there would be a potential for rent spikes; however, this notion
has not come to fruition over the past two years and is not likely to occur
because of the large amounts of vacant land available for development. Moreover,
with continued construction of space (even build-to-suits), the potential for
rent spikes lessens. Over the past year, rental rates edged up only slightly
from an average of $15.75 per square foot to $16.25 per square foot, an increase
of about 3.0 percent. Investors surveyed indicated that rent spikes were highly
speculative and generally not incorporated into their purchase decisions.
Although many investors felt that rental rates may in fact grow at a rate
greater than inflation over the short term, they are typically unwilling to make
this assumption in their investment projections.
As can be seen, the forces of supply and demand have pushed the Northwest
Quadrant Class A office market toward a landlord's market, with a shortage of
supply as evidenced by the declining vacancy factor, increased rental rates, and
declining concessions. Market participants expect rents to continue to increase
and reach a level which will justify speculative development in the near term.
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Neighborhood Map
<PAGE>
Office Market Analysis
================================================================================
Micro Market Survey
The subject property is located on Emerywood Parkway, just north of the
intersection of West Broad Street and Interstate 64 (I-64). Both I-64 and West
Broad Street provide convenient access to the Central Business District (CBD) of
Richmond about five miles southeast. I-64 also provides direct access to I-295
about six miles northwest. These interstates provide accessibility and
convenience throughout the metropolitan area and provides direct access to
Interstate 95, which is the main north/south artery on the east coast.
Predominant land uses in the area consist of a mixture of commercial
development, including retail centers and office buildings, single-family
attached and detached, and multi-family residential developments, as well as a
wide variety of highway commercial uses along the major roadways.
The subject is located within Commerce Center, an office park comprising
primarily single tenant users and owner-occupants including the Christian
Children's Fund, the Baptist Board, and Crestar Operations Center. We conducted
a micro-market analysis, concentrating on competing office buildings, containing
a total of 317,000+/- square feet. These projects, presented on the following
table, are more indicative of the subject's competition than the entire suburban
market as previously examined. The competition for the subject comes from other
Class A and good quality Class B office buildings in Commerce Center and the
surrounding areas along West Broad Street. These buildings are generally low to
mid-rise suburban office buildings, built in the 1980s, with surface or
structured parking in similar settings.
The buildings in the micro-market range in size from 43,300 to 84,681
square feet. Asking rental rates range from $15.00 to $16.50 per square foot,
full service, for conventional office space. The overall vacancy indicated by
the surveyed buildings was 0 to 5.0 percent, with three of the competitive
projects fully occupied. Relative to its competition, the subject represents an
older building in the market. It is typical in terms of quality and finishes for
most of the competitive buildings and is considered to be Class A/B building in
this market.
================================================================================
Competitive Properties
================================================================================
Name/Location Year Built Total SF Vacancy % Quoted Rents
================================================================================
Vistas @ Brookfield 1985 70,582 5.0% $15.50 - $16.50
5516 and 5540 Falmouth Avenue
Allstate Building 1986 43,300 0% $16.00
4191 Innslake Dr.
Commerce Plaza 1981 84,681 2.0% $15.50
2809 Emerywood Parkway
Cigna Building 1984 46,914 0% $15.50
4198 Cox Rd.
AT&T Building 1985 71,490 0% $15.00 - $15.50
4121 Cox Road
================================================================================
TOTAL N/A 1.4% $15.00 - $16.50
================================================================================
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Office Market Analysis
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Summary
The Northwest Quadrant is continuing its strong absorption and rental rate
growth trends. Investment activity in the office market has also continued to be
active. With healthy absorption in the Northwest Quadrant, the vacancy rate has
remained near 6.0 percent over the past three years. Recent trends in the market
include increasing rental rates, lower vacancy rates, and the potential for new
speculative or build-to-suit construction.
The subject property benefits from its location at an easily accessible
intersection in western Henrico County. The neighborhood bodes well for the
subject property in terms of demand generated for office space due to the
excellent access and transportation arteries.
Based on the characteristics of the neighborhood, we believe continued
investment in stabilized properties is warranted. The area appears stable and
improving. We project that growth will continue to be positive.
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<PAGE>
SCHEDULE "A-I"
Plat
[GRAPHIC OMITTED]
[MAP]
[Property Name: 2812 Emerywood Parkway, Richmond, Virginia]
<PAGE>
PROPERTY DESCRIPTION
================================================================================
Site Description
Location: North side of Emerywood Parkway, west of
Broad Street. The street address is 2812
Emerywood Parkway, Henrico County, Virginia
Shape: Basically rectangular
Area: 4.163 acres (181,340 square feet)
Frontage: The site has frontage along the north side
of Emerywood Parkway.
Topography/Terrain: Basically level and at street grade.
Street Improvements
Emerywood Parkway: Asphalt paved, concrete curbs and sidewalks,
street lighting and storm drains. Emerywood
Parkway is the main roadway through the
office park.
Soil Conditions: We not receive or review a soil report.
However, we assume that the soil's
load-bearing capacity is sufficient to
support the existing structures. We did not
observe any evidence to the contrary during
our physical inspection of the property. The
tract's drainage appears to be adequate.
Utilities
Water & Sewer: Henrico County
Electricity: Virginia Power Company
Telephone: Bell Atlantic Telephone
Access: Primary access is from Emerywood Parkway.
Land Use Restrictions: We were not given a current title report to
review. We do not know of any easements,
encroachments, or restrictions that would
adversely affect the site's use. However, we
recommend a title search to determine
whether any adverse conditions exist.
Flood Hazard: According to FEMA Community Panel No.
510077-0050 B National Flood Insurance Rate
Map, dated February 4, 1981, the subject
property appears to be in Zone C, an area
outside the 500 year flood plain where flood
insurance is not required.
Wetlands: We were not given a Wetlands survey. If a
subsequent engineering survey reveals the
presence of regulated Wetlands areas, we
reserve the right to amend this valuation.
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Property Description
================================================================================
Site Improvements: Concrete curbs and sidewalks and surface
parking for 218 vehicles.
Hazardous Substances: We were not given a Wetlands survey. If
subsequent engineering data reveal the
presence of regulated wetlands, it could
materially affect property value. We
recommend a wetlands survey by a competent
engineering firm
Comments: Good site for office development due to
location and size.
Improvements Description
The site is improved with a two-story office building known as Commerce
Center, which is located at 2812 Emerywood Parkway in Henrico County, Virginia.
The improvements comprise a Class A/B office building that was constructed in
1980 and contain 56,076 square feet of net rentable area. As of the date of
appraisal, the building was 100 percent occupied by a single tenant (American
Home Funding). According to property management, the building recently underwent
some maintenance including HVAC repairs, new thermostats, etc. at a cost of
approximately $85,000. There is approximately $10.000 remaining in deferred
maintenance for roof and parking lot repairs. We have deducted this amount in
year one of the discounted cash flow analysis.
We were not provided with any plans or construction specifications for
this property. The following description is based on our visual inspection and
discussions with the building manager. We inspected several, but not all areas
of the building. We noted the finish to be good quality and in good condition,
in those areas. Following are the construction details for the subject
improvements based on our inspection of the property.
General Data
Year Built: 1980
Building Area
Net Rentable Area (NRA): 56,076 square feet
Number of Stories: 2
Construction Detail
Foundations: Concrete slab
Framing: Steel
Floors: Concrete slab
Exterior Walls: Brick
Roof Structure: Flat built-up tar and gravel
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Property Description
================================================================================
Roof Cover: Insulated membrane roofing
Windows: Metal frame, insulated double glaze
Pedestrian Doors: Double set of double glass in metal frame
doors
Mechanical Detail
Heating and Cooling: Two rooftop compressors.
Electrical Service: Assumed to meet code
Elevator Service: The building is served by a small 2,500
pound elevator.
Fire Protection: Sprinklered
Interior Detail
Layout: The building is served by a central
lobby/reception area with an open stairwell
and two-story glass atrium. The office area
comprises primarily open space, with some
perimeter offices.
Floor Covering: Primarily carpet in the office areas and
ceramic tile in the restrooms. The main
lobby contains marble flooring.
Walls: Painted gypsum wall board on metal studs.
Ceilings: Ceilings are suspended acoustical tile.
Lighting: Recessed fluorescent
Rest Rooms: Each floor has a set of men's and women's
restrooms.
Americans with
Disabilities Act (ADA): The Americans With Disabilities Act (ADA)
became effective January 26, 1992. We have
not made, nor are we qualified by training
to make, a specific compliance survey and
analysis of this property to determine
whether or not it is in conformity with the
various detailed requirements of the ADA. It
is possible that a compliance survey and a
detailed analysis of the requirements of the
ADA could reveal that the property is not in
compliance with one or more of the
requirements of the Act. If so, this fact
could have a negative effect upon the value
of the property.
Hazardous Substances: We are not aware of any potentially
hazardous materials (such as formaldehyde
foam insulation, asbestos insulation, radon
gas emitting materials, or other
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Property Description
================================================================================
potentially hazardous materials) which may
be used in the construction of the
improvements. If concerns exist in this
area, we recommend that a professional
engineer be engaged.
Other Site Improvements
On-Site Parking: 28 surface parking spaces, or 3.9 spaces per
1,000 square feet of building area
Landscaping: Good, mature trees, shrubbery around the
building and parking lot perimeter
Comments: The quality of the subject improvements is
rated good. The layout and functional plan
are considered good for a single tenant
user. Deferred maintenance items include
roof and parking lot repairs estimated by
property management at $10,000. The normal
life expectancy of a building of this type
is 45 years. We consider the effective age
to be equal to be 12 years, leaving an
estimated remaining economic life of 33
years.
We did not inspect the roof of the building
or make a detailed inspection of the
mechanical systems. The appraisers, however,
are not qualified to render an opinion as to
the adequacy or condition of these
components. The client is urged to retain an
expert in this field if detailed information
is needed about the adequacy and condition
of mechanical systems
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REAL ESTATE TAXES AND ASSESSMENTS
================================================================================
The subject property is identified for real estate assessment and taxation
purposes by Henrico County, Virginia as parcel 81-8-A-2. Henrico County assesses
commercial property annually through a computer analysis of comparable sales.
The assessed values reflect full market value. Every two to five years, the
County will physically inspect each property. Present rules do not call for
automatic reassessment upon sale or transfer of ownership. The assessments and
tax bills are based on a calendar year basis. The subject property was last
assessed in January 1995.
Tax Rates
The 1997 tax rate for Henrico County is $0.94 per $100 of assessed
value. The following chart depicts a four-year prior history:
================================================================================
Tax Rate Per $100 of Assessed Value
================================================================================
Taxing Authority 1993 1994 1995 1996 1997
Tax Rate Tax Rate Tax Rate Tax Rate Tax Rate
================================================================================
Henrico County $0.98 $0.98 $0.98 $0.96 $0.94
================================================================================
Between 1980 and 1995, the tax rate for Henrico County remained unchanged
at $0.98 per $100 of assessed value. As depicted, the 1996 and 1997 rates
decreased slightly to $0.96 and $0.94 per $100 of assessed value, respectively.
Tax rates tend to increase or decrease based upon the combined influences of
changes in property values and increasing governmental budgetary needs as the
jurisdiction tries to maintain a pace with inflationary pressures. Over the long
term the county tax rates show an upward trend and we would expect tax rates to
increase in incremental bumps. Given the relative flatness of tax rates over the
past decade, we anticipate future increases in the tax rate to be minimal.
Tax Assessment
The subject's 1997 full cash value and subsequent assessment is outlined
in the following table.
================================================================================
Commerce Center
Full Cash Value and Assessment
================================================================================
Land Value $498,700
Improvement Value $3,765,900
----------
Total Value $4,264,600
Taxable Assessment $4,264,600
Tax Rate x .094
----------
Taxes Due $40,087.24
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Ad Valorem Tax Conclusions
As developed above, the net tax associated with the subject property is
$40,087, or $0.72 per square foot. To measure whether the property's taxes are
market oriented, we analyzed the tax liabilities of comparable properties in the
area, as summarized on the following table.
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Real Estate Taxes and Assessments
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Real Estate Tax Comparables
Innsbrook Office Park
================================================================================
Building Size (SF) Yr Built R.E. R.E. Taxes (SF)
Taxes
================================================================================
The Colonade 65,758 1986 $53,035 $0.81
4050 Innslake Drive
AETNA Building 101,293 1990 $76,982 $0.76
4701 Cox Road
Liberty Mutual Building 58,325 1990 $50,112 $0.86
4101 Cox Road
Allstate Building 43,300 1986 $34,158 $0.79
4191 Innslake Drive
================================================================================
The real estate taxes of comparable office buildings range from $0.76 to
$0.86 per square foot. The subject property's 1997 actual taxes of $0.72 per
square foot is slightly lower than the range indicated by the comparable
properties; however, the subject property is slightly older than these projects.
The full cash value for the subject property is 33 percent lower than our
value conclusion. Because present assessment rules do not call for automatic
reassessment upon sale or transfer of ownership, and the tax rate has remained
relatively flat over the past decade, we have not forecast a substantial
increase in real estate taxes in our analysis of the property. Overall, we are
projecting growth in real estate taxes consistent with inflationary
expectations, or about 3.5 percent per year.
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ZONING
================================================================================
The subject property is zoned M-1, a light industrial zoning district of
Henrico County, Virginia. The purpose of this zoning classifications is to
provide areas for industrial and manufacturing uses. A wide range of uses are
permitted including manufacturing, fabricating, processing, wholesale
distribution and warehousing facilities, as well as office and retail. The
Henrico Zoning Ordinance is pyramidal with respect to business, industrial and
office zones and essentially, most use allowed in the business and office zone
is permitted in the M-1 district. The following restrictions apply:
Minimum Lot Area: None Specified
Minimum Lot Width: None Specified
Maximum Height: 45 Feet
Minimum Setbacks:
Front: 25 Feet
Side: None, Unless adjacent to a residential
district then 25 feet
Rear: 30 Feet
Off-Street Parking: One space for every 250 square
feet of floor area. Given the gross
building area of 56,076 square feet, a
total of 224 parking spaces are
required.
We are not experts in the interpretation of complex zoning ordinances, but
the building appears to conform to current parking requirements. The subject
site has 218 surface parking spaces, which is below the minimum required. As the
building went through the approval process at the time of construction, we
assume that the parking variance was approved and that it is a legal,
non-conforming use. The formal determination of compliance is beyond the scope
of a real estate appraisal.
To the best of our knowledge, there are no known deed restrictions
(private or public) which would further limit the use of the subject property.
This statement should not be taken as a guarantee or warranty that no such
restrictions exist. Deed restrictions are a legal matter and only a title
examination by an attorney would normally uncover such restrictive covenants.
Thus, an examination by a title attorney is recommended on the subject property
if any questions regarding such restrictions arise.
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HIGHEST AND BEST USE
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According to the Dictionary of Real Estate Appraisal, Third Edition
(1993), a publication of the Appraisal Institute , the highest and best use of
real property is defined as:
The reasonably probable and legal use of vacant land or an improved
property, which is physically possible, appropriately supported,
financially feasible, and that results in the highest value. The four
criteria the highest and best use must meet are legal permissibility,
physical possibility, financial feasibility, and maximum profitability.
We evaluated the sites' highest and best use as if vacant. In this case,
the highest and best use must meet the aforementioned criteria. The use must be
(1) legally permissible, (2) physically possible. (3) financially feasible, and
(4) maximally productive.
Highest and Best Use, As If Vacant
The first test concerns permitted uses. According to our understanding of
the zoning ordinance noted earlier in this report, the site could be developed
with general office and financial institutions uses. Residential, retail and
industrial uses are not permitted.
The second test is what is physically possible. As discussed in the
Property Description section, the site's shape, soil, available utilities,
topography, etc. do not physically limit its use given its suburban location.
Additionally, we know of no easements which adversely impact the property. Thus,
the site has no physical limiting conditions, other than size, to restrict its
development.
The third and fourth tests are, respectively, what is feasible and what
will produce the highest net return. After determining those uses which are
physically possible and legally permissible, the remaining uses must be analyzed
in light of their financial feasibility. That is, for a potential use to be
seriously considered, it must have the potential to provide a sufficient return
to attract investment capital from alternative forms of investments.
The subject lies in the midst of office development. Additional office use
would be logical and consistent with surrounding uses. Other successful office
developments have been developed in the area, leading to the conclusion that
another similar use may also succeed. With the site's good access and excellent
location within the Northwest Quadrant office market, prospective tenants would
likely be interested in this location. Accordingly, we conclude that the highest
and best use of the subject would be to develop an office building.
Although the office market in which the subject competes is showing
improvement in vacancy and rental rates, the rent level is still insufficient to
support the cost of new speculative construction. Currently, with the exception
of the pre-leased office space, there are no speculative buildings underway in
the subject neighborhood. Furthermore, this has been the case for the past five
years. This attests to the limited feasibility of new construction in the
subject market, however, as rental rates continue to increase, new construction
is anticipated to be feasible in the near future. A recent survey by the Morton
G. Thalhimer brokerage firm indicated that new speculative construction may be
seen in the market within one to two years.
Based on the foregoing, development of the site, as if vacant, with a
speculative office building appears unlikely at the present time. Nevertheless,
there are a number of larger
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Highest and Best Use
================================================================================
tenants in the marketplace and a distinct lack of large availabilities.
Therefore, development of the site on a build-to-suit basis could begin soon.
As Improved
According to the Dictionary of Real Estate Appraisal, highest and best use
of the property as improved is defined as:
The use that should be made of a property as it exists. An existing
property should be renovated or retained as is so long as it continues to
contribute to the total market value of the property, or until the return
from a new improvement would more than offset the cost of demolishing the
existing building and constructing a new one.
The highest and best use "as vacant" and "as improved" must be compatible.
If the site value as though vacant is greater than the property as improved
(less demolition cost), then existing improvements have no value. Sometimes,
however, existing improvements have interim use value. If the highest and best
use of the site as though vacant is holding for future development, then the
improvements might make a short term contribution to property value.
As noted in the Property Description section of this report, the subject
site is improved with a two-story buildings totaling 56,076 net rentable square
feet. Completed in 1980, the improvements are functional in design for a single
tenant user and are of good quality when compared to suburban office
developments in Henrico County. The building is currently 100 percent occupied
by a single tenant.
The data within the Office Market Analysis section revealed that the
submarket in which the subject competes has a vacancy rate of less than five
percent and steadily increasing rents. As improved, the subject is capable of
providing an adequate return to the land both on an intermediate and long-term
basis. This conclusion is supported by the data and analysis presented in the
balance of this report. This premise is obviously contingent upon property
management utilizing a course of action which will be conducive to maximizing
occupancy and rent levels. For these reasons, it is our opinion that the highest
and best use of this site, as improved, is for continued use as a single-tenant
office project.
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VALUATION PROCESS
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Appraisers typically use three approaches in valuing improved property.
These include the Cost Approach, the Sales Comparison Approach and the Income
Approach. The type and age of the property and the quantity and quality of data
affect the applicability of each approach in a specific appraisal situation. The
strengths and weaknesses of each approach utilized are weighed in the final
analysis with the approach or approaches offering the greatest quantity and
quality of supporting data given most consideration in the final analysis. In
this appraisal, we have used the Sales Comparison Approach and the Income
Capitalization Approach to develop a market value estimate. In addition, we have
provided a replacement cost estimate in the Addenda.
The Cost Approach was not performed for the following reasons:
o As discussed in the Highest and Best Use section, new construction is
not feasible in the subject market at the present time. Consequently,
some external/economic obsolescence is inherent in the
reproduction/replacement cost new of the subject improvements.
Quantifying this form of obsolescence is highly subjective and very
theoretical. As a result, the reliability of this approach becomes
very suspect under these circumstances.
o The investment marketplace does not typically trade buildings such as
the subject on a cost/value basis.
o The value being sought is the leased fee estate, whereas the Cost
Approach normally depicts the fee simple estate. Therefore, the
interest being appraised cannot be reflected by the Cost Approach in
its traditional form.
o Market participants do not typically use this approach as a
determinant of value but rather as a reasonableness test that they
are paying less than replacement cost. While not justification in
itself to omit the approach, it does underscore its overall lack of
relevance in the market place.
o This approach is more relevant for new construction or where
sufficient information is available to reasonably estimate the
replacement cost new of the improvements and land,
o The subjectivity of accurately estimating accrued depreciation of the
existing improvements significantly limits the reliability of this
approach.
In the Sales Comparison Approach, we performed the following steps:
o Searched the market for recent office building sales;
o Analyzed those sales on the basis of the sales price per square foot
(net rentable area); and
o Correlated the various value indications into a point value estimate
from within the range.
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Valuation Process
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In developing the Income Capitalization Approach, we:
o Studied rents in effect in the immediate and competing areas to
estimate potential rental income at market levels for office, and
industrial uses.
o Studied the recent history of operating expenses at the subject
property and competing properties to estimate an appropriate level of
stabilized expenses and reserves for replacement.
o Estimated net operating income by subtracting stabilized expenses
from potential gross income after deduction for vacancy and
collection loss. Prepared a discounted cash flow analysis in which
the estimated income and expenses over a projected holding period,
and the estimated property value at the time of reversion, are
discounted at an appropriate rate to estimate present market value.
In estimating the final value, we performed the following:
o Reviewed and re-examined each of the approaches to value which were
employed.
o Considered the type and reliability of the data used and
applicability of each approach.
o Reconciled the approaches to a final value conclusion.
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[GRAPHIC OMITTED]
[MAP]
[GRAPHIC OMITTED]
[MAP]
Comparable Sales
<PAGE>
SALES COMPARISON APPROACH
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Methodology
Inherent in the Sales Comparison Approach is the principle of
substitution, which holds that when a property is replaceable in the market, its
value tends to be set at the cost of acquiring an equally desirable substitute
property, assuming that no costly delay is encountered in making the
substitution. We have compared the subject property to several relevant property
sales.
By analyzing sales which qualify as arm's-length transactions between
willing and knowledgeable buyers and sellers, we can identify value and price
trends. Comparability in physical, locational and economic characteristics are
important criteria when selecting the sales for comparison with the subject
property. The basic steps involved in the application of this approach are as
follows:
(1) researching recent, relevant property sales and current offerings
throughout the competitive area;
(2) selecting and analyzing those properties considered most similar to
the subject, considering changes in economic conditions that may have
occurred between the sale date and the date of value, and other
physical, functional or locational factors;
(3) identifying the sales which include favorable financing and calculate
the cash equivalent price;
(4) reducing the sale prices to common units of comparison, such as price
per square foot of building area (in this net rentable area);
(5) making appropriate adjustment between the comparable properties and
the property appraised; and
(6) interpreting the adjusted results and drawing a logical value
conclusion.
In this instance, the sale prices inherent in the comparables were reduced
to those common units of comparison that can be used to analyze improved
properties that are similar to the subject. Considering the available units of
comparison, one of the most important benchmarks used by buyers and sellers of
office building is price per square foot of net rentable area (NRA).
The following summary chart includes recent transactions of suburban
office buildings from which price trends can be identified for the extraction of
value parameters. The complete survey results on each property appear in detain
in the Addenda of the report.
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<PAGE>
Sales Comparison Approach
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Commerce Center
2812 Emerywood Parkway
Henrico County, Virginia
Summary of Building Sales
<TABLE>
<CAPTION>
======================================================================================================================
Net Cash Sale Price Overall
Sale Year Built Rentable Percent Equivalent Per SF Rate
No. Name/Location Sale Date Renovated Area (SF) Occupied Sale Price (NRA)
======================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
1 Vistas at Brookfield May 1997 1985 70,582 95% $5,840,000 $82.74 10.66%
5516 and 5540 Falmouth Street
Richmond, Virginia
- ----------------------------------------------------------------------------------------------------------------------
2 Liberty Mutual Building Dec 1996 1990 58,184 95% $6,000,000 $103.12 10.83%
4101 Cox Road
Innsbrook, Virginia
- ----------------------------------------------------------------------------------------------------------------------
3 Aetna Building June 1996 1990 100,178 99% $10,750,000 $107.31 10.20%
4701 Cox Road
Innsbrook, Virginia
- ----------------------------------------------------------------------------------------------------------------------
4 Capitol One Feb 1996 1996 108,000 100% $10,914,000 $101.06 10.26%
4881 Cox Road
Innsbrook, Virginia
- ----------------------------------------------------------------------------------------------------------------------
Subj Commerce Center Date of 1980 56,076 100% -- -- --
Henrico County, Virginia Value
======================================================================================================================
</TABLE>
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Sales Comparison Approach
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Sales Price Per Square Foot Analysis
The four comparables indicate sales prices ranging from $82.74 to $107.31
per square foot of net rentable area. The prices per square foot have been
influenced by differences in construction quality, condition of the premises,
character of the tenancy, and location. Nevertheless, it is important to address
each property in terms of the conventional sequence of adjustments. Following
are those considerations which are relevant to the subject. The first three
elements must be considered in advance of applying any other compensating
factors to derive value conclusions via the sales price per square foot
methodology. These same three factors must also be addressed before the
selection of an effective gross income multiplier.
Property Rights Conveyed
As shown in the summary table, all of the comparables are encumbered by
existing leases; therefore, the leased fee estate was conveyed in each case.
Consequently, no adjustments are warranted for differences in property rights
conveyed.
Seller Financing/Cash Equivalency
All of the comparables were sold on the basis of cash to the seller or
cash equivalent financing. Thus, we have made no adjustments to the comparables
for seller financing.
Conditions of Sale
We identified no special motivational conditions concerning the
comparables; therefore, no adjustments for conditions of sale were made.
Date of Sale
As shown in the summary table, the transactions occurred between September
1995 and May 1997. As indicated in the Office Market Analysis section, the
suburban Richmond office market, as well as the Innsbrook submarket, has
strengthened over the past year, with declining vacancy and increasing rents.
With the exception of Sale I-1, which occurred in May 1997, all of the sales
require upward adjustments for the date of sale to reflect the improved market
conditions.
Other
Most of the additional considerations for the comparables involve
locational issues, design and quality elements, and economic factors. It is
noted that the subject property is 100 percent leased to a single tenant through
the year 2003 at a rental rate of $9.85 per square foot, modified full service.
The tenant pays increases in real estate taxes and operating expenses over the
base year; however, they pay for their own janitorial and utilities separately.
In the following discussion, we compare each of the improved sales to the
subject property and conclude if the comparable is similar, inferior or
superior.
Comparable I-1, Vistas at Brookfield, is located immediately east of the
subject in the Brookfield Office Park. The buildings were constructed in 1985
and are slightly newer than the subject. A broker familiar with the sale
indicated that this building has high expenses caused by an inefficient
floorplate. At the time of sale, the building was 95 percent leased to various
tenants, with limited rollover over the next two years. Existing leases range
from $15.50 to $16.50 per square foot. This property is considered similar to
the subject from a locational standpoint, and slightly inferior from an economic
(occupancy) standpoint. Although the building represents newer construction than
the subject, it is considered inferior from a
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Sales Comparison Approach
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physical standpoint due to the inefficient floorplates. Overall, we have labeled
the sale of this building as inferior to the subject.
Comparable I-2, the Liberty Mutual Building, is located east of the
subject within the Innsbrook Office Park at 4101 Cox Road. Innsbrook is
considered the premier office location in Henrico County due to the vast amount
of amenities offered, as well as the excellent transportation network. Thus,
this property is considered superior to the subject from a locational
standpoint. Constructed in 1990, the building is superior to the subject in
terms of age/condition. At the time of sale, the property was 100 percent
occupied by five tenants. This sale is considered superior to the subject from a
locational and physical standpoint, similar from an economic (occupancy)
standpoint and inferior in date of sale. Overall, this comparable is ranked
superior to the subject.
Comparable I-3, the Aetna Building, is also located in Innsbrook and is
considered superior in location. Constructed in 1990, the building is superior
to the subject from a physical standpoint. At the time of sale, the property was
99 percent leased, with the most recent rents at $16.00 to $16.50 per square
foot. Aetna, the lead tenant, downsized and vacated 56,000 square feet or 56
percent of the building. The purchaser considered the loss of Aetna as a lead
tenant a minimal risk given the low vacancy in Innsbrook. This sale is
considered superior to the subject from a locational and physical standpoint,
similar from an economic (occupancy) standpoint and inferior in date of sale.
The overall rating is considered superior.
Comparable I-4, Capitol One Customer Service Center, is located within the
Innsbrook Office Park at 4881 Cox Road. The building was constructed in 1996 and
considered superior to the subject in terms of age/condition. The property was a
build-to-suit for which a purchase option was exercised upon completion of
construction. At the time of sale, the building was 100 percent leased to the
lead tenant at $10.91 per square foot, triple net. This property is considered
superior to the subject from a locational and physical standpoint, similar in
terms of occupancy, and inferior in date of sale. Although the building
represents newer construction than the subject, this sale is rated only slightly
superior to the subject given its older sale date and the similar market rent of
the existing tenant.
The following chart summarizes how each sale compares to the subject
property from a physical, locational and economic standpoint.
================================================================================
Improved Sales Comparison
================================================================================
Overall Rating
Sale Price Relative to
No. Per SF the Subject
================================================================================
I-1 $82.74 Inferior
I-2 $103.12 Superior
I-3 $107.31 Superior
I-4 $101.06 Slightly Superior
================================================================================
Because of the multiple differences inherent in office properties with
respect to quality and design, location, and economics, not to mention the
quality of the tenant base, mathematical adjustments for the reasoning noted
above would be extremely difficult, at best.
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Sales Comparison Approach
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Comparable I-1, with a sale price of $82.74 per square foot, is considered
inferior to the subject, while Comparables I-2 through I-4, with sale prices of
$101.06 to $107.31 per square foot, are considered superior. Thus, the subject's
value should most likely fall within the range of $82.74 and $101.06 per square
foot, and probably nearer the high end of the range because it is considered
only slightly inferior to Sale I-4 at $101.06 per square foot.
Based on the information presented, we have concluded at a value range for
the subject of $97 to $99 per net rentable square foot. When applied to the net
rentable area, our estimated value range by the sales price per square foot
method is presented as follows:
================================================================================
Sales Price Per Square Foot Unit Analysis
================================================================================
56,076 SF x $97/SF = $5,439,372
56,076 SF x $99/SF = $5,551,524
================================================================================
Concluded to: $5,500,000
================================================================================
================================================================================
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
INCOME APPROACH
================================================================================
Methodology
The income approach is a method of converting the anticipated economic
benefits of owning property into a value estimate through capitalization. The
principle of anticipation underlies this approach in that investors recognize
the relationship between an asset's income and its value. In order to value the
anticipated economic benefits of a particular property, potential income and
expenses must be estimated, and the most appropriate capitalization method must
be selected.
The two most common methods of converting net income into value are direct
capitalization and discounted cash flow analysis. In direct capitalization, net
operating income is divided by an overall rate extracted from market sales to
indicate a value. In the discounted cash flow method, anticipated future net
income streams and a reversionary value are discounted to an estimate of net
present value at a chosen yield rate (internal rate of return).
The direct capitalization method is an effective technique when stable
conditions exist both in the marketplace and for the property; however, when
market conditions are either changing or likely to change in a fairly dramatic
manner over time, direct capitalization becomes a difficult technique to
administer.
As previously discussed, the subject is located in a strengthening market,
with increasing rents and declining vacancy. It is our opinion that the
discounted cash flow method affords the most realistic method of reflecting
investor expectations of the current period, as well as the projected continued
office market recovery. For this reason, it is our opinion that the discounted
cash flow method is also appropriate method in the valuation of the subject
property. As such, the direct capitalization method will not be used in this
analysis but at the conclusion of the income approach, we will analyze the
resulting overall capitalization rate derived from the discounted cash flow
analysis as a check for reasonableness.
Following is an analysis of the current market rental rates, existing
leases in place, other revenue, vacancy and collection loss projections, and
historical/future operating and fixed expenses for the subject property.
Potential Gross Income
Summary of Existing Leases
The object of this appraisal is to estimate the value of the leased fee
estate in the subject property. Accordingly, consideration must be given to the
leases in place at the time of appraised valuation. The actual leases for the
subject's tenants are incorporated in the following discounted cash flow
analysis. We utilize Pro-Ject +plus, a software program designed to analysis
multi-tenant properties, in this analysis and several of the computer generated
reports are included in the Addenda.
The subject is 100 percent leased to a single tenant (American Home
Funding) at rental rate of $9.85 per square foot, modified full service. The
tenant pays increases in real estate taxes and operating expenses over a base of
$1.22 per square foot; however, they pay their own janitorial and utilities
expenses.
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-39-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Approach
================================================================================
Assumptions Regarding the Existing Leases
Information provided by management indicates that the tenant is not in
default of their lease. We assume that the existing tenant will continue to pay
rent under the terms of their lease obligations. We address renewal probability
in the Vacancy and Collection Loss section.
Lease Expirations
In our analysis, consideration is also given to lease expiration schedule.
The timing of lease expiration is an important element and a prospective buyer
would attempt to assess the risk relative to upcoming turnover. For example, a
large lease expiring in the near future would indicate the possibility of a
significant drop in income and consequently a higher risk factor might be
appropriate.
The subject is 100 percent leased to a single tenant until the year 2003,
or year five of the projection period. Thus, expirations are considered to be a
significant factor in the analysis of the subject.
Market Rental Rate
Market rent for the property has been estimated by analyzing comparable
leases exhibited on the summary chart on the following page.
Prior to adjustment, the comparables reflect a rental range of $10.50 per
square foot, triple net, and $15.00 to $16.25 per square foot, full service, for
larger leases in excess of 20,000 square feet. After adjustment for rent
concessions, the range was unchanged. The newer buildings (Rentals R-1 and R-2)
constructed in 1996 indicate rents of $15.25 to $16.25 per square foot. The
subject property represents older construction than these rentals and thus,
should achieve a lower rent, Rental R-4, which was built in 1985 had a rent of
$15.00 per square foot.
There are few concessions being granted in today's market. None of the
rentals included above standard tenant improvement allowances. Allowances ranged
from $8.00 to $12.00 per square foot for new and second generation space. Annual
rent escalations were generally 3.0 to 4.0 percent per year. Lease terms ranged
from five to ten years.
As shown in the Micro Market summary table presented in the Market
Analysis section of the report, asking rents at competing properties are in the
range of $15.00 to $16.50 per square foot. Thus, it appears that actual lease
rates are within the range of asking levels.
Recent leases within the market include few concessions, either in the
form of free rent or above standard tenant improvement allowances. Most brokers
interviewed were of the opinion that rental concessions were not being granted.
Several brokers indicated that the market has continued to improve over
the last 12 to 24 months, with rents increasing and concessions remaining almost
non-existent. In the view of many, the leasing market has generally reached
stabilization and delivery of new office buildings to the market will be the
primary influence on rental rate and occupancy trends. In keeping with these
observations, we have assumed that market rent will increase at an average rate
of 3.5 percent per annum through the projection period.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
<TABLE>
<CAPTION>
================================================================================
COMPARABLE OFFICE RENTALS
================================================================================
Minimum Effective
Comp Lease Lease Size Rent Rent
No. Building Name/Address Date Yr Built (SF) ($/SF) ($/SF)
================================================================================
<S> <C> <C> <C> <C> <C>
1 Virginia Mutual Building 1996 1996 20,000 $16.25 $16.25
Innsbrook, Henrico County
2 Lakebrooke Pointe Nov-95 1996 20,835 $15.25 $15.25
Innsbrook, Henrico County
3 Saxon Mortgage Aug-95 N/A 50,000 $l0.50 $10.50
Innsbrook, Henrico County
4 Boulders Office Park 1995 1985 63,000 $15.00 $15.00
Chesterfield County
===========================================================================
Totals 153,835 $14.25
===========================================================================
<CAPTION>
=============================================================================================
COMPARABLE OFFICE RENTALS
=============================================================================================
Expense Tenant
Comp Term Stop Annual Improvement
No. Building Name/Address (Yrs) ($/SF) Escalations Concessions Allowance (SF)
=============================================================================================
<S> <C> <C> <C> <C> <C>
1 Virginia Mutual Building 5 Base Year 4.00% None $8.00
Innsbrook, Henrico County
2 Lakebrooke Pointe 7 Base Year 3.0% None $10.50
Innsbrook, Henrico County
3 Saxon Mortgage 10 Triple Net 3.0% None $12.00
Innsbrook, Henrico County
4 Boulders Office Park 10 $4.85 sf stop 3.0% N/A N/A
Chesterfield County
========================================================================================
Totals 8 Varies 3.0% - 4.0% None $8.00 - $12.00
========================================================================================
</TABLE>
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Approach
================================================================================
As discussed in the Office Market Analysis section, rent spikes are not
anticipated to occur in the minds of market participants due primarily to the
large amounts of vacant land available for development. Investors surveyed
indicated that rent spikes were highly speculative and generally not
incorporated into their purchase decisions. Although many investors felt that
rental rates may in fact grow at a rate greater than inflation over the short
term, they are unwilling to make this assumption in their investment
projections. Although it is not inconceivable that rent spikes could occur, we
believe the prudent approach at this stage is level rent growth. Finally, free
rent and tenant workletter concessions will remain consistent with current
levels.
The subject's existing lease at $9.85 per square foot appears to be below
the rents for new leases in the market of $15.00 to $16.25 per square foot. In
our opinion, market rents for space within the subject property will be $15.00
per square foot, recognizing that some leasing will be done above and below this
rate.
The above estimated market rents assume the following concession package.
================================================================================
Free Rent Tenant Improvements
================================================================================
New Leases 1997 0 months 1997 $8.00
Thereafter 0 months Growing Thereafter at 3.5%
- --------------------------------------------------------------------------------
Renewing Leases 1997 0 months 1997 $4.00
Thereafter 0 months Growing Thereafter at 3.5%
================================================================================
Assumptions Regarding Existing and Proposed Leases
Our analysis specifically assumes that all of the existing tenants will
remain in the property and continue to pay rent under the terms of their leases.
Information provided by management indicates that the tenant is not currently in
default. The tenant appears to be stable and management has indicated that
defaults are not anticipated.
Given the low vacancy for Class A/B space within the market, the lack of
large blocks of contiguous space currently available, as well as the lack of new
speculative construction, we have projected a 65 percent renewal probability for
the property.
An examination of the comparable leases shows typical lease terms of five
to ten years, with most at ten years. Accordingly, we have assumed ten year
terms for speculative tenants, which is typical of a large single tenant
property, especially given the lack of large blocks of contiguous space
availability.
Vacancy between leases includes the period of actual downtime and the
construction period to build-out tenant spaces. Consistent with our experience,
we have assumed a stabilized vacancy and construction period of nine months. We
acknowledge that current time between tenants may be shorter, though a long term
trend may reflect fluctuations. Vacancy between leases is weighted for the 35
renewal probability, resulting in an effective downtime of three months
(rounded) upon each lease expiration. On a ten year average lease term, this
equates to 2.4 percent average physical vacancy (downtime of 3 months divided by
the downtime plus the 120 month average lease term).
================================================================================
-42-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Approach
================================================================================
Reimbursable Expenses (Escalations)
As previously discussed, American Home Funding is responsible for their pro-rata
share of operating expenses (including real estate taxes) over a base year
amount of $1.22 per square foot. In addition, they pays their own janitorial and
utility expenses separately.
Prior market performance has indicated that landlords were unable to
receive any reimbursement from tenants. However, as the market has strengthened
in recent months, expense recovery by the landlord have been market oriented,
with tenants responsible for the increase in all operating expenses over the
base year of occupancy. We have assumed that future leases at the subject
property will be on a full service basis with tenants responsible for the
increase in all operating expenses over the base calendar year amount.
Vacancy and Collection Loss
Our cash flow projection assumes a tenant vacancy of nine months upon each
lease expiration set against our probability of renewal estimated at 65 percent,
in addition to a global credit loss provision applied to the gross rental
income. The global credit loss provision is applied to the gross rental income
and is estimated at 2.0 percent throughout the holding period. Our renewal
probability is based on the lack of large blocks of space available within the
market and the lack of new speculative construction.
Based on the subject's weighted average downtime between leases, the
overall average occupancy rate of the subject property over the 10 year holding
period is 97.5 percent. Including our overall credit loss allowance estimated at
2.0 percent, the implied overall vacancy and credit loss factor for the subject
property is 4.5 percent, which is in-line with our estimated vacancy and
collection loss of 4.5 percent.
Operating Expenses
We based our estimate of operating expenses for the subject on a review of
the actual 1994 through 1996 expenses, as well as the 1997 budget. This data was
compared with expense comparables at similar suburban office buildings as well
as industry studies. In addition, we have consulted Cushman & Wakefield's
Management Services staff for further support. The Historical and Budget
Operating Statements for the subject property provided by property management
can be found in the Addenda.
We have analyzed each item of expense individually and attempted to
project what the typical investor would consider reasonable. Increases in the
expenses during subsequent years are projected at 3.5 percent per annum. Based
on historical CPI trends, we conclude that our selected growth rate reflects an
overall inflationary rate over the long term. The forecast of growth rates in
all categories of expenses reflect typical investor expectations as noted in the
Cushman & Wakefield Investor Survey, a copy of which is in the Addenda. Except
where noted, our forecasted growth rate for the various expense categories
generally does not attempt to reflect growth rates for any individual year, but
rather the long term trend over the projected holding period.
================================================================================
-43-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Approach
================================================================================
Real Estate Taxes
Real estate taxes are based on the actual assessment and tax rate reported
in the Real Estate Taxes and Assessment section. The Year One real estate
taxes are equal to $40,087, or $0.72 per square foot of net rentable area.
Operating Expenses
Operating expenses include repairs and maintenance, service contracts,
insurance, etc. The building's actual cost has increased from $0.72 in
1994 to $0.95 per square foot in 1996. The 1997 budgeted expense is $0.96
per square foot. Typical charges at similar building are in the $3.50 to
$3.80 per square foot range; however, as previously discussed, the tenant
pays their own janitorial and utility expenses separately; accounting for
the lower expense. We have estimated this expense consistent with the 1997
budget, or $0.96 per square foot.
General & Administrative
These expenses are directly connected to the administration of the
building, including office payroll, general office expense, advertising
and other miscellaneous expenses. The building's actual cost increased
from $0.01 in 1994 to $0.09 per square foot in 1996. The 1997 budgeted
expense is substantially higher at $0.38 per square foot. A review of the
budget indicated that the large increase was attributable to property
management and maintenance salaries. The subject's 1997 budgeted expense
in in-line with expenses at similar projects; thus, we have estimated this
expense consistent with the budget, or $0.38 per square foot.
Management Fees
This expense represents the fee for management responsibilities, whether
provided by an outside company or ownership. This includes rent
collection, property supervision and budget preparation. Cushman. &
Wakefield Property Management personnel reported that typical management
agreements range from 2.5 to 3.0 percent of effective gross income. The
current management fee charged at the subject is 3.0 percent of effective
gross income. It is our opinion that this rate is reflective of market
parameters and as such, a management fee equal to 3.0 percent of effective
gross income is estimated for the subject.
Leasing Commissions
New leases will require a leasing commission equivalent to 4.0 percent of
total rental income and 2.0 percent on renewal leases. The new lease
commission rate reflects the fact that a landlord will typically be
charged a commission of 3.0 to 4.0 percent by the tenant's agent and 2.0
to 3.0 percent by the landlord's agent. Upon renewal, landlords resist
paying leasing commissions, but typically pay a portion of the full
commission rate or a partial fee to the management company for its
assistance in working with the tenant. This expense item is not passed
through to the tenant. The probability factor is used for speculative
renewals.
Tenant Improvements/Finish
The tenant improvement allowance was previously discussed and is projected
to be $8.00 per square foot for new tenants and $4.00 per square foot for
renewals. This expense is also not passed through to the tenants. The
probability factor applies to
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CUSHMAN &
WAKEFIELD(R)
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<PAGE>
Income Approach
================================================================================
speculative renewals. Tenant improvements/finish costs are projected to
increase at the rate of 3.5 percent per year through the projection
period.
Capital Replacements/Reserves
Reserves for replacements should be (though as a practical matter, they
may not be) set aside to accumulate an amount sufficient to replace and/or
repair certain major building components, i.e., roof, HVAC system, etc.
during the period under analysis. Taking into consideration the subject's
age, we have estimated capital reserves of $0.25 per net rentable square
foot for Year One, increasing by 3.5 percent per year throughout our
analysis. As previously indicated, we deducted $10,000 in year one of the
cash flow for deferred maintenance.
Our projected expenses are predicated on the assumption that the property
will be prudently managed, while maintaining the improvements at a competitive
level to preserve value. The preceding cumulative annual operating expense
estimate for fiscal year 1998 equates to $134,885 or $2.41 per square foot of
gross leasable area, excluding capital replacements, tenant alterations and
leasing commissions. The growth rates incorporated in our projections result in
a 4.02 percent annual compound growth rate over the holding period, which is
higher than our projection of 3.5 percent because of the increase in management
fees, which is a function of revenue.
Discounted Cash Flow Analysis
In the discounted cash flow analysis, we employed the PRO-JECT+ plus
software which allowed us to simulate the operating characteristics of the
property and to make a variety of operating assumptions. We attempted to reflect
the most likely investment assumptions of typical buyers and sellers in this
particular market segment. We used the following figures and assumptions in the
computer model.
Years in Forecast: 11
Holding Period: 10
Starting Date: July 1, 1997
Market Rental Rate (Year 1) $15.00 per SF, Full Service
Miscellaneous Income: N/A
Growth in Market Rental Rate: 3.5% percent
Expense and Tax Pass-Throughs: The tenant pay increases in
operating expenses over $1.22
per square foot plus janitorial
and utility expenses separately.
Expense Growth Rate: 3.5% per annum
Consumer Price Index: 3.5% per annum
-45-
CUSHMAN &
WAKEFIELD(R)
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<PAGE>
Income Approach
================================================================================
Free Rent: None
Lease Term (Typical): 10 years
Renewal Probability: 65%
Tenant Improvements - New Leases $8.00 per SF
Tenant Improvements - Renewing Leases $4.00 per SF
Leasing Commissions: 4% new leases; 2% for
renewals. All payable in year
1 of the lease.
Vacancy Between Leases: 9 months (prior to renewal
probability of 65%; effective
vacancy is 3 months
Credit Loss: 2.0%
Reversion Cap Rate: 10.5% (applied to net
operating income).
Reversion Selling Expenses: 3% (includes brokerage, legal
fees and estimated transfer
taxes).
Discount Rate (IRR): 12.0% (see Discount Rate
Analysis).
Cash Flow Projection
On the following page is our 11 year cash flow projections which include
our 10 year holding period and 11th year reversion. The cash flow reflects the
results of the PRO-JECT+ plus projection.
================================================================================
-46-
CUSHMAN &
WAKEFIELD(R)
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<PAGE>
Commerce Center
2812 Emerywood Parkway
Henrico County, Virginia
Cash Flow Analysis
<TABLE>
<CAPTION>
=========================================================================================================
Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year
1998 1999 2000 2001 2002 2003
=========================================================================================================
REVENUE FROM OPERATIONS
<S> <C> <C> <C> <C> <C> <C>
Rental Income $552,349 $552,349 $552,349 $552,349 $552,349 $454,397
Total Recoveries $66,472 $70,680 $75,035 $79,543 $84,208 $58,643
Less: Credit Loss ($12,376) ($12,461) ($12,548) ($12,638) ($12,731) ($10,261)
-------------------------------------------------------------------------------
Effective Gross income $606,445 $610,568 $614,836 $619,254 $623,826 $502,779
EXPENSES
Real Estate Taxes $40,672 $42,095 $43,568 $45,093 $46,672 $48,305
Operating Expenses $54,251 $56,150 $58,115 $60,149 $62,254 $64,433
General & Administrative $21,769 $22,531 $23,319 $24,136 $24,980 $25,855
Management $18,193 $18,317 $18,445 $18,578 $18,715 $15,083
-------------------------------------------------------------------------------
TOTAL EXPENSES $134,885 $139,093 $143,447 $147,956 $152,621 $153,676
===============================================================================
Net Operating Income $471,560 $471,475 $471,389 $471,298 $471,205 $349,103
===============================================================================
Commissions $0 $0 $0 $0 $0 $391,161
Capital Reserves $14,019 $14,510 $15,018 $15,543 $16,087 $16,650
Deferred Maintenance $10,000 $0 $0 $0 $0 $0
Alterations $0 $0 $0 $0 $0 $372,231
-------------------------------------------------------------------------------
$447,541 $456,965 $456,371 $455,755 $455,118 ($430,939)
=========================================================================================================
<CAPTION>
============================================================================================
Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year
2004 2005 2006 2007 2008
============================================================================================
REVENUE FROM OPERATIONS
<S> <C> <C> <C> <C> <C>
Rental Income $1,036,561 $1,067,658 $1,099,687 $1,132,678 $1,166,658
Total Recoveries $6,055 $17,129 $23,453 $29,993 $36,758
Less: Credit Loss ($20,852) ($21,696) ($22,463) ($23,253) ($24,068)
-----------------------------------------------------------------
Effective Gross income $1,021,764 $1,063,091 $1,100,677 $1,139,418 $1,179,348
EXPENSES
Real Estate Taxes $49,996 $51,746 $53,557 $55,431 $57,371
Operating Expenses $66,688 $69,022 $71,438 $73,938 $76,526
General & Administrative $26,760 $27,696 $28,665 $29,669 $30,707
Management $30,653 $31,893 $33,020 $34,183 $35,380
-----------------------------------------------------------------
TOTAL EXPENSES $174,097 $180,357 $186,680 $193,221 $199,984
=================================================================
Net Operating Income $847,667 $882,734 $913,997 $946,197 $978,364
=================================================================
Commissions $0 $0 $0 $0 $0
Capital Reserves $17,233 $17,836 $18,460 $19,106 $19,775
Deferred Maintenance $0 $0 $0 $0 $0
Alterations $0 $0 $0 $0 $0
-----------------------------------------------------------------
$830,434 $864,898 $895,537 $927,091 $959,589
============================================================================================
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Approach
================================================================================
Derivation of Terminal Value
A terminal capitalization rate was used to estimate the market value of
the property at the end of the assumed investment holding period. We estimated
an appropriate terminal rate based on indicated rates in today's market.
================================================================================
Summary of Capitalization Rates
================================================================================
Sale Capitalization
No. Rate
================================================================================
1 10.66%
2 10.83%
3 10.20%
4 10.26%
================================================================================
The OARs for the comparable sales from which we were able to derive
capitalization rates ranged from 10.20 to 10.83 percent. A premium was added to
today's rate to allow for the risk of unforeseen events or trends which might
affect our estimate of net operating income during the holding period, including
a possible deterioration in market conditions for the property. Investors
typically add 50 to 100 basis points to the "going-in" rate to arrive at a
terminal capitalization rate, according to Cushman & Wakefield's periodic
investor surveys.
Discount Rate Analysis
We estimated future cash flows, including property value at reversion, and
discounted that income stream at an internal rate of return (yield rates)
currently required by investors for similar-quality real property. The yield
rate (internal rate of return or IRR) is the single rate that discounts all
future equity benefits (cash flows and equity reversion) to an estimate of net
present value.
Cushman & Wakefield Valuation Advisory Services periodically surveys
national real estate investors to determine their investment objectives.
Following is a brief review of internal rates of return, overall rates, and
income and expense growth rates considered acceptable by respondents.
================================================================================
Autumn 1996 Investor Survey
Suburban Office Buildings
================================================================================
Going-In Terminal IRR
- --------------------------------------------------------------------------------
Low High Low High Low High
================================================================================
Mean 8.80% 9.50% 9.30% 9.90% 11.2% 11.6
- --------------------------------------------------------------------------------
Range 8.00% 11.0% 8.00% 11.0% 10.0% 13.0%
================================================================================
The preceding table summarizes the investment parameters of some of the
most prominent investors currently acquiring high-grade investment properties in
the United States. Generally speaking, our survey reveals terminal
capitalization rates of 8.0 to 11.0 percent with the average low and high
responses of 9.3 and 9.9 percent for investment grade offices in non-CBD
suburban locations.
================================================================================
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Approach
================================================================================
The wide range of investment parameters indicates that property risk and
yield are assessed to a particular investment property based on a variety of
variables. Risk is the primary determinant, and the risk variables include
whether current contract rents are significantly above or below current market
rents; the amount and timing of tenant rollovers; the risk to lease-up the
property and the strength of the market during the lease-up period; the
durability of the cash flow, and its ability to increase with inflation along
with the creditworthiness of the existing tenancy; investor demand for the
property type; the diversification of the metropolitan area; the property's
location within the local market and the supply and demand for the property type
within the market; and the effective age of the property.
The internal rate of return and terminal capitalization rate selected for
this analysis were strongly influenced by our recent Investor Survey. We realize
that this type of survey reflects target rather than transactional rates.
Transactional rates are usually difficult to obtain in the verification process
and are actually only target rates of the buyer at the time of sale. The
property's performance will ultimately determine the actual yield and
capitalization rate at the time of sale after a specific holding period. We have
found that, in improving markets or with above average properties, demand will
be high and transactional rates may be lower than target rates that are quoted
in surveys. We have tried to recognize this factor in our choice of these two
rates for our cash flow model.
Discussions with local investors and brokers including Morton G.
Thalhimer, Harrison and Bates, Innsbrook Development Company and the Joyner
Company, to name a few, indicated a yield rate range of 12.0 to 13.0 percent for
suburban Richmond office properties and a terminal capitalization rate of 10.0
to 10.5 percent. One investor familiar with the Richmond market noted that,
given the second-tier orientation of the Richmond market (on a national scale),
the subject's discount rate would be above the mean indicated in our national
survey. Another broker indicated that an investor purchasing a building recently
within Innsbrook utilized as discount rate of 12.5 percent and a terminal rate
of 10.0 percent.
In our DCF model, we selected a terminal capitalization rate that
accounted for the anticipated holding period and reflected the subject's
tenancy, quality and location. This rate also reflected the risk involved in our
DCF analysis based on the income and expense projections that were modeled, as
well as the approximate age of the property at the end of the holding period.
The rate we selected reflects the rollover risk over the holding period, the
property's upside potential due to the existing below market lease, as well as
the strength of the subject's office market.
Conclusion
Using a 10.5 percent terminal rate and a 12.0 percent discount rate, our
cash flow model indicated a value of $5,700,000 or $101.65 per square foot, as
shown on the following page. This value estimate produces an implied going-in
capitalization rate of 8.3 percent, which is significantly lower than the range
generally required by investors as noted in the Cushman & Wakefield Investor
Survey. This is attributable to the subject's below market lease. As depicted in
the cash flow, net operating income increases substantially in the year 2004,
when the existing lease expires.
================================================================================
-49-
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<PAGE>
Income Approach
================================================================================
Regarding the composition of the yield, as analyzed in the Discounted Cash
Flow Analysis chart, 49 percent of the subject's ultimate yield is derived from
the cash flow of the property with the balance attributable to the reversion or
resale of the property at the conclusion of the holding period. Typical investor
requirements dictate that a substantial amount of the value be derived from the
cash flow. Greater risk is evident when the reversion provides a larger
percentage of the overall return than the cash flows. The average cash on cash
return is 9.4 percent, based on this value conclusion. This rate would generate
investor interest because the yields are appropriate relative to the risks
involved.
Thus, it is our opinion that the market value of the property by the
Income Approach, is $5,700,000.
================================================================================
-50-
CUSHMAN &
WAKEFIELD(R)
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<PAGE>
Commerce Center
2812 Emerywood Parkway
Henrico County, Virginia
Discounted Cash Flow Analysis
================================================================================
NET DISCOUNT PRESENT ANNUAL
CALENDAR CASH FACTOR @ VALUE OF COMPOSITION CASH ON CASH
YEAR FLOW 12.00% CASH FLOWS OF YIELD RETURN
================================================================================
1998 $447,541 x 0.89286 = $399,590 7.04% 7.85%
1999 $456,965 x 0.79719 = $364,290 6.42% 8.02%
2000 $456,371 x 0.71178 = $324,836 5.72% 8.01%
2001 $455,755 x 0.63552 = $289,641 5.10% 8.00%
2002 $455,118 x 0.56743 = $258,246 4.55% 7.98%
2003 ($430,939) x 0.50663 = ($218,327) -3.85% -7.56%
2004 $830,434 x 0.45235 = $375,646 6.62% 14.57%
2005 $864,898 x 0.40388 = $349,318 6.15% 15.17%
2006 $895,537 x 0.36061 = $322,940 5.69% 15.71%
2007 $927,091 x 0.32197 = $298,498 5.26% 16.26%
Total Present Value of Cash Flows $2,764,677 48.69% 9.40%
Average
Reversion:
2008 $979,364(1) 10.50% = $9,327,276
Less: Cost of Sale @ 3.00% $279,818
--------
Net Reversion $9,047,458
X Discount Factor 0.32197
-------
Total Present Value of Reversion $2,913,039 51.31%
Total Present Value of Cash Flow $5,677,717 100.00%
ROUNDED: $5,700,000
---------------------------------------------------------
Gross Leasable Area (S.F.) 56,076
Per Square Foot of Gross Leasable Area: $101.65
Implicit Going-In Capitalization Rate:
Year One NOI $471.560
Going-In Capitalization Rate: 8.3%
---------------------------------------------------------
Note: (1) Net Operating Income
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
RECONCILIATION AND FINAL VALUE ESTIMATE
================================================================================
We employed two of the three approaches to value in our analysis. The
indicated values are shown below:
Sales Comparison Approach $5,500,000
Income Approach $5,700,000
The three traditional methods of estimating the market value of commercial
real estate are not mutually exclusive approaches to deriving an estimate of
most probable selling price, but are inter-dependent methodologies, each relying
on components from at least one of the other approaches. Hence, the Cost
Approach requires extensive market data to derive estimates of depreciation and
to determine the value of land as if vacant. This approach may also require
income data in order to make adjustments for functional and economic
obsolescence. The Sales Comparison Approach requires application of methods from
the Income Capitalization Approach in order to make adjustments for differences
in income that have influenced the sale price. Consideration of market data is
also required for the Income Capitalization Approach in the selection and
application of equity, capitalization and discount rates, and estimation of
income and expenses. Consequently, it is our opinion that purchasers and
sellers, at least intuitively, consider components of all three approaches in
the process of negotiating an acceptable price for a particular property.
It is the Income Capitalization Approach, however, that is logically
considered the most appropriate technique for estimating the value of
income-producing property. Not only does this approach represent the most direct
and accurate simulation of market behavior, it is the method explicitly employed
by buyers and sellers in acquisition and disposition decisions. Therefore,
following the implied dictum of the market, we have used an approach based
primarily on projected income as the foundation for our valuation of the subject
property.
There are several additional reasons why the Sales Comparison Approach
does not form the basis of our value estimate for the subject property. The
quantity and quality of market information inhibits the use of the Sales
Comparison Approach. Inadequacy of information regarding gross and net income,
lease details and expenses of comparable sales often deters accurate and
relevant adjustments of unit price indicators. Comparison at a dollar per square
foot level precludes the analysis of those key factors which form the basis for
projections on which the purchase decision was made.
Based on the above discussion, we have formed an opinion that the
prospective market value of the leased fee estate in the subject property,
subject to the assumptions, limiting conditions, certifications and definitions
as of July 1, 1997, was:
FIVE MILLION SEVEN HUNDRED THOUSAND DOLLARS
$5,700,000
Marketing Time
Marketing time is an estimate of the time that might be required to sell a
real property interest at the appraised value. Marketing time is presumed to
start on the effective date of the appraisal, whereas exposure time is presumed
to precede the effective date of appraisal. The estimate of marketing time uses
some of the same data analyzed in the process of estimating the reasonable
exposure time and is not intended to be a prediction of a date of sale.
================================================================================
-52-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Reconciliation and Final Value Conclusion
================================================================================
Our estimate of an appropriate marketing time for the subject relates to a
sale of the property in its As Is condition. Based on our discussions with local
brokers and buyer/sellers of office projects like the subject, as well as our
assessment of the local real estate market and economic forces in general, we
have concluded that the probable marketing period for the subject property in
today's environment would be about 12 months.
================================================================================
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CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
ASSUMPTIONS AND LIMITING CONDITIONS
================================================================================
"Appraisal" means the appraisal report and opinion of value stated therein; or
the letter opinion of value, to which these Assumptions and Limiting Conditions
are annexed.
"Property" means the subject of the Appraisal.
"C&W" means Cushman & Wakefield, Inc. or its subsidiary which issued the
Appraisal.
"Appraiser(s)" means the employee(s) of C&W who prepared and signed the
Appraisal.
This appraisal is made subject to the following assumptions and limiting
conditions:
1. No opinion is intended to be expressed and no responsibility is assumed
for the legal description or for any matters which are legal in nature or
require legal expertise or specialized knowledge beyond that of a real
estate appraiser. Title to the Property is assumed to be good and marketable
and the Property is assumed to be free and clear of all liens unless
otherwise stated. No survey of the Property was undertaken.
2. The information contained in the Appraisal or upon which the Appraisal is
based has been gathered from sources the Appraiser assumes to be reliable
and accurate. Some of such information may have been provided by the owner
of the Property. Neither the Appraiser nor C&W shall be responsible for the
accuracy or completeness of such information, including the correctness of
estimates, opinions, dimensions, sketches, exhibits and factual matters.
3. The opinion of value is only as of the date stated in the Appraisal. Changes
since that date in external and market factors or in the Property itself can
significantly affect property value.
4. The Appraisal is to be used in whole and not in part. No part of the
Appraisal shall be used in conjunction with any other appraisal. Publication
of the Appraisal or any portion thereof without the prior written consent of
C&W is prohibited. Except as may be otherwise stated in the letter of
engagement, the Appraisal may not be used by any person other than the party
to whom it is addressed or for purposes other than that for which it was
prepared. No part of the Appraisal shall be conveyed to the public through
advertising, or used in any sales or promotional material without C&W's
prior written consent. Reference to the Appraisal Institute or to the MAI
designation is prohibited.
5. Except as may be otherwise stated in the letter of engagement, the Appraiser
shall not be required to give testimony in any court or administrative
proceeding relating to the Property or the Appraisal.
================================================================================
-54-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Assumptions and Limiting Conditions
================================================================================
6. The Appraisal assumes (a) responsible ownership and competent management of
the Property; (b) there are no hidden or unapparent conditions of the
Property, subsoil or structures that render the Property more or less
valuable (no responsibility is assumed for such conditions or for arranging
for engineering studies that may be required to discover them); (c) full
compliance with all applicable federal, state and local zoning and
environmental regulations and laws, unless noncompliance is stated, defined
and considered in the Appraisal; and (d) all required licenses, certificates
of occupancy and other governmental consents have been or can be obtained
and renewed for any use on which the value estimate contained in the
Appraisal is based.
7. The physical condition of the improvements considered by the Appraisal is
based on visual inspection by the Appraiser or other person identified in
the Appraisal. C&W assumes no responsibility for the soundness of structural
members nor for the condition of mechanical equipment, plumbing or
electrical components.
8. In preparing this appraisal, we have relied on the rent roll and the history
of income and expenses furnished by the owner or the management company
representing the owner. We have not reviewed actual tenant leases.
9. The forecasts of income and expenses are not predictions of the future.
Rather, they are the Appraiser's best estimates of current market thinking
on future income and expenses. The Appraiser and C&W make no warranty or
representation that these forecasts will materialize. The real estate market
is constantly fluctuating and changing. It is not the Appraisers task to
predict or in any way warrant the conditions of a future real estate market;
the Appraiser can only reflect what the investment community, as of the date
of the Appraisal, envisages for the future in terms of rental rates,
expenses, supply and demand.
10. Unless otherwise stated in the Appraisal, the existence of potentially
hazardous or toxic materials which may have been used in the construction or
maintenance of the improvements or may be located at or about the Property
was not considered in arriving at the opinion of value. These materials
(such as formaldehyde foam insulation, asbestos insulation and other
potentially hazardous materials) may adversely affect the value of the
Property. The Appraisers are not qualified to detect such substances. C&W
recommends that an environmental expert be employed to determine the impact
of these matters on the opinion of value.
11. Unless otherwise stated in the Appraisal, compliance with the requirements
of the Americans With Disabilities Act of 1990 (ADA) has not been considered
in arriving at the opinion of value. Failure to comply with the requirements
of the ADA may adversely affect the value of the property. C&W recommends
that an expert in this field be employed.
================================================================================
-55-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
CERTIFICATION OF APPRAISAL
================================================================================
We certify that, to the best of our knowledge and belief:
1. Kelly J. Small inspected the property and prepared the report, and Donald
R. Morris, MAI, Manager, Cushman & Wakefield of Washington D.C., Valuation
Advisory Services, reviewed and approved the report.
2. The statements of fact contained in this report are true and correct.
3. The reported analyses, opinions, and conclusions are limited only by the
reported assumptions and limiting conditions, and are our personal,
unbiased professional analyses, opinions, and conclusions.
4. We have no present or prospective interest in the property that is the
subject of this report, and we have no personal interest or bias with
respect to the parties involved.
5. Our compensation is not contingent upon the reporting of a predetermined
value or direction in value that favors the cause of the client, the
amount of the value estimate, the attainment of a stipulated result, or
the occurrence of a subsequent event. The appraisal assignment was not
based on a requested minimum valuation, a specific valuation or the
approval of a loan.
6. No one provided significant professional assistance to the persons signing
this report.
7. Our analyses, opinions and conclusions were developed, and this report has
been prepared, in conformity with the Uniform Standards of Professional
Appraisal Practice of the Appraisal Foundation and the Code of
Professional Ethics and the Standards of Professional Appraisal Practice
of the Appraisal Institute.
8. The use of this report is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives.
9. As of the date of this report, Donald R. Morris, MAI, has completed the
requirements of the continuing education program of the Appraisal
Institute.
10. We estimate that the prospective market value of the leased fee estate in
the existing office building, subject to the assumptions, limiting
conditions, certifications and definitions as of July 1, 1997, is
$5,700,000.
/s/ Kelly J. Small /s/ Donald R. Morris [STAMP OF
Kelly J. Small Donald R. Morris, MAI DONALD R. MORRIS]
Appraiser Manager, Director
Valuation Advisory Services Washington, D.C. Valuation Advisory Services
Virginia Certified General [Illegible]
================================================================================
-56-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
ADDENDA
================================================================================
================================================================================
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CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Addenda
================================================================================
Legal Description
<PAGE>
SCHEDULE "A"
(Legal Description of Property)
ALL that certain lot, piece or parcel of land, lying and being in Henrico
County, Virginia, containing 4.163 acres as shown on plat dated November 1,
1978, by LaPrade Bros. Civil Engineers and Surveyors, being a Portion of Block
A, Commerce, Center, dated July 24, 1978 (attached as Schedule "A-1"), and
recorded July 27, 1978, Clerk's Office, Circuit Court, Henrico County, Virginia,
in Plat Book 68, pages 42-45, also being more particularly described as follows:
BEGINNING at a rod on northern line of Emerywood Parkway 1251.57 feet west of
the western line of Broad Street Road (Rt. 250) Extended; thence following the
northern line of Emerywood Parkway along a curve to the right, the radius of
which curve is 717.00, with a central angle of 12 degrees 11' 13", an arc
distance of 152.51 feet to a point; thence S 73 degrees 52' 00" W 141.5 feet to
a point; thence continuing along the northern line of Emerywood Parkway along a
curve to the right, the radius of which curve is 347.00 feet, with a central
angle of 32 degrees 37' 51", the arc distance of 197.62 feet to a point; thence
N 12 degrees 17' 05" W 342.30 feet to a rod; thence N 62 degrees 00' 45" E
369.16 feet to a rod; thence S 27 degrees 59' 15" E 465.91 feet to the rod
marking the point and place of beginning.
Property Name: 2812 Emerywood Parkway
Richmond, Virginia
INITIAL
Landlord Tenant
/s/ TR /s/ WJV
<PAGE>
Addenda
================================================================================
Floor Plans
<PAGE>
SCHEDULE "B"
FIRST FLOOR PLAN
[GRAPHIC OMITTED]
[FLOOR PLAN]
Building Name: 2812 Emerywood Parkway
Richmond, Virginia
INITIAL
Landlord Tenant
/s/ TR /s/ WJV
<PAGE>
SCHEDULE "B-1"
SECOND FLOOR PLAN
[GRAPHIC OMITTED]
[FLOOR PLAN]
Building Name: 2812 Emerywood Parkway
Richmond, Virginia
INITIAL
Landlord Tenant
/s/ TR /s/ WJV
<PAGE>
Addenda
================================================================================
Improved Sales Comparables
<PAGE>
================================================================================
[GRAPHIC OMITTED]
[PHOTO]
================================================================================
Building Name: Vistas at Brookfield
Location: Vistas I - 5540 Falmouth Street
Vistas 11 - 5516 Falmouth Street
Brookfield Office Park
Richmond, Virginia
Grantor: Continental Properties, Inc.
Grantee: Brookfield Holdings, L.P.
Date of Sale: May, 1997
Deed Book/Page: Not Available
Consideration: $5,840,000
Financing All cash
<PAGE>
Building Size (NRA): 70,582 square feet total (Both Buildings)
Unit Price: $82.74/SF of net rentable area
Financial Estimates (Seller's 1997 Budget)
Effective Gross Income: $1,149,812 ($16.29/SF)
Operating Expenses: $527,000 ($7.47/SF)
Net Operating Income: $622,812 ($8.82/SF)
Ro: 10.66%
EGIM: 5.08
Expense Ratio: 45.8%
Comments
These four-story, Class B office buildings are located within the Brookfield
Office Park, just south of the intersection of Interstate 64 and West Broad
Street The buildings are adjoining, and were completed in 1985. The buildings
were 95% leased at the time of sale to numerous medium sized tenants including
AEC Engineering, Brian Brothers and Kelsum and Lee. A broker of the sale noted
that there was limited tenant rollover over the next two years. Rental rates
within the building typically range from $15.50/SF to $16.50/SF
A broker familiar with the sale indicated that the expenses are above typical
suburban office buildings due to a high utilities expense. This increased
expense is caused by an "inefficient floorplate". It should also be noted that
one broker reported a sale price of $5,890,000, however, this price was reduced
slightly by commissions ($40,000) and a $10,000 credit to the buyer for physical
items
<PAGE>
================================================================================
[GRAPHIC OMITTED]
[PHOTO]
================================================================================
Building Name: Liberty Mutual Building
Location: 4101 Cox Road
Innsbrook Corporate Park
Richmond, Virginia
Grantor: Home Beneficial Life Insurance Company
Grantee: Highwoods - Forsythe L.P.
Date of Sale: December, 1996
Deed Book/Page: 2691/2034
Consideration: $6,000,000
Financing: All cash
Building Size (NRA): 58,184 SF
<PAGE>
Unit Price: $103.12
Financial Data:
Effective Gross Income: $940,000 ($16.16/SF)
Operating Expenses: $290,000 ($4.98/SF)
Net Operating Income: $650,000 ($11.17/SF)
Ro: 10.83%
EGIM: 6.38
Expense Ratio: 30.9%
Comments:
This Class A office building was completed in 1990 and delivered to the market
during the beginning of the recession, with subsequent poor absorption history.
The lender ultimately foreclosed on the owner. The property was then purchased
by Home Beneficial Life Insurance Company in December of 1993 for $5,050,000 and
was 95% leased at the time of sale. The sale generated a 10.96% cap rate and an
EGIM of 6.01. The 1993 sale included 2.9 acres of residual land which had a POD
for another 42,000 SF office building. The residual land was allocated a value
of $252,000. The most recent sale did not include the 2.9 acres of
residual/undeveloped land. The parcel has been subdivided and is under separate
contract for sale to a hotel developer for $550,000
As of the most recent sale date, the building, was 100% occupied to five
tenants. Capitol One had 35,000 SF and Liberty Mutual leased 18,000 SF. The
property had been marketed for six months prior to the sale. It should be noted
that the seller's pro forma included a lower EGI and slightly higher expense
estimate, which resulted in a cap rate of 10.0%.
This acquisition by Highwoods is part of Highwoods Property's massive move into
the suburban Richmond office market. Highwoods is a Raleigh, N.C. based real
estate investment trust (REIT) which has purchased over $45 million of assets in
the Richmond area during the past year (1995).
<PAGE>
================================================================================
[GRAPHIC OMITTED]
================================================================================
Building Name: Aetna Building
Location: 4701 Cox Road
Innsbrook Corporate Park
Richmond, Virginia
Grantor: 4701 Cox Road, L.P.
Grantee: Highwoods - Forsythe L.P.
Date of Sale: June, 1996
Deed Book/Page: 2656/1793
Consideration: $10,750,000
Financing: All cash
<PAGE>
Building Size (NRA): 100,178 SF
Unit Price: $107.31/SF of net rentable area
Financial Data:
Effective Gross income: $1,546,763 ($15.44/SF)
Operating Expenses: $451,338 ($4.50/SF)
Net Operating Income: $1,095,425 ($10.93/SF)
Ro: 10.2%
EGIM: 6.95
Expense Ratio: 29.2%
Comments
This is a high quality four-story building that was built in 1990 with Aetna as
the lead tenant. Aetna subsequently downsized, thus reducing their office space
needs and vacating 56,000 SF in this building. The space has since been
released.
The property was acquired in July of 1993 by several local investors for
speculative investment. The Initial owner, Rowe Development, experienced
company-wide financial problems and lost most of its extensive office holdings.
The previous purchaser was a Dutch group who viewed the property as a long term
investment with good upside potential. They considered the loss of Aetna as a
lead tenant as minimal risk, given the low vacancy in Innsbrook.
The building was 99% leased at the time of sale, and was completed in 1990.
Recent rental rates at the property ranged from $16.00/SF to $16.50 per square
foot. The building is leased on a multi-tenant basis. Expenses noted above do
not include reserves, leasing or tenant improvement costs. All income data is
estimated by the buyer based upon the existing leases and expenses.
<PAGE>
================================================================================
[GRAPHIC OMITTED]
[PHOTO]
================================================================================
Building Name: Capitol One Customer Service Center
Location: 4881 Cox Road
Innsbrook Corporate Park
Richmond, Virginia
Grantor: Liberty Property, L.P.
Grantee: First Security Bank of Utah
Date of Sale: February, 1996
Deed Book/Page: 2633/402
Consideration: $10,914,000
Financing: Cash to seller, funded by $15.5 million
Deed of Trust note with NationsBank of
Texas.
<PAGE>
Building Size (NRA): 108,000 SF
Unit Price: $101.06/SF of net rentable area
Financial Data:
Effective Gross Income: $1,178,500 ($10.91/SF)
(Triple net lease in place)
Operating Expenses: $58,925 ($0.55/SF)
Net Operating Income: $1,119,575 ($10.37/SF)
Ro: 10.26%
EGIM: 9.26
Expense Ratio: 5.0%
Comments:
This is a high quality four-story building that was completed in 1996. The
property is located on the east side of Cox Road, north of Nuckols Road within
Innsbrook. It represents a build-to-suit project for which a purchase option was
exercised immediately upon completion of construction. Projected operating data
is based upon the terms of the triple net lease in place at the time of sale.
The ground floor contains a small lobby, substantial computer and mechanical
areas, a loading dock and receiving area, and multi-purpose/training areas. The
upper floors are largely open work space with private perimeter offices.
<PAGE>
Addenda
================================================================================
Income and Expense Statements
<PAGE>
Historical Operating Statements
Commerce Center/Emerywood
Building NRA 56,076 SF
<TABLE>
<CAPTION>
1994 Actual 1995 Actual 1996 Actual 1997 Budget
------------------ ------------------- ------------------ -------------------
Item Amount Per SF Amount Per SF Amount Per SF Amount Per SF
==================================================================== ================== ===================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME
Gross Income $ 545,493 $ 9.73 $ 555,708 $ 9.91 $ 540,010 $ 9.63 $ 552,348 $ 9.85
Reimbursements 0 0.00 0 0.00 56,542 1.01 66,306 1.18
------------------ ------------------- ------------------ -------------------
Total Income $ 545,493 $ 9.73 $ 555,708 $ 9.91 $ 596,552 $ 10.64 $ 618,654 $ 11.03
------------------ ------------------- ------------------ -------------------
EXPENSES
Real Estate Taxes $ 21,841 $ 0.39 $ 41,793 $ 0.75 $ 40,940 $ 0.73 $ 40,940 $ 0.73
Operating Expense 40,654 0.72 44,875 0.80 53,435 0.95 53,741 0.96
General & Administrative 340 0.01 1,181 0.02 5,301 0.09 21,456 0.38
Management Fee 18,351 0.33 18,061 0.32 16,507 0.29 18,072 0.32
------------------ ------------------- ------------------ -------------------
Total Expenses $ 81,186 $ 1.45 $ 105,910 $ 1.89 $ 116,183 $ 2.07 $ 134,209 $ 2.39
------------------ ------------------- ------------------ -------------------
NET OPERATING INCOME $ 464,307 $ 8.28 $ 449,798 $ 8.02 $ 480,369 $ 8.57 $ 484,445 $ 8.64
================== =================== ================== ===================
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Addenda
================================================================================
Project Reports
<PAGE>
COMMERCE CENTER (EMERYWOOD PKWY)
PROJECT DESIGNATOR: COMM
REVISION: 7/ 3/97 @ 8:26
PROJECT ASSUMPTIONS REPORT
INCLUDING ALL TENANTS
7/3/97 @ 14:57
BUILDING PROLOGUE
LEASEHOLD ANALYSIS OF COMMERCE CENTER (EMERYWOOD PKWY) BEGINNING 6/1997
FOR 31 YEARS ON A FISCAL YEAR BASIS
AREA MEASURES
NRA
1997 VALUE - 56,076
THEREAFTER - CONSTANT
OCCA
1997 VALUE - 56,076
1998 VALUE - 56,076
1999 VALUE - 56,076
2000 VALUE - 56,076
2001 VALUE - 56,076
2002 VALUE - 56,076
2003 VALUE - 42,057
2004 VALUE - 56,076
2005 VALUE - 56,076
2006 VALUE - 56,076
2007 VALUE - 56,076
2008 VALUE - 56,076
2009 VALUE - 56,076
2010 VALUE - 56,076
2011 VALUE - 56,076
2012 VALUE - 56,076
2013 VALUE - 42,057
2014 VALUE - 56,076
2015 VALUE - 56,076
2016 VALUE - 56,076
2017 VALUE - 56,076
2018 VALUE - 56,076
2019 VALUE - 56,076
2020 VALUE - 56,076
2021 VALUE - 56,076
2022 VALUE - 56,076
2023 VALUE - 42,057
2024 VALUE - 56,076
2025 VALUE - 56,076
2026 VALUE - 56,076
2027 VALUE - 56,076
THEREAFTER - CONSTANT
GROWTH RATES
INC1
1997 VALUE - 3.50
THEREAFTER - CONSTANT
EXP
1997 VALUE - 3.50
THEREAFTER - CONSTANT
ESCL
1997 VALUE - 3.00
THEREAFTER - CONSTANT
<PAGE>
PAGE 2
MARKET RATES
MKTI
1997 VALUE - 15.00
THEREAFTER - GROWING AT GROWTH RATE INCI
TINW
1997 VALUE - 8.00
THEREAFTER - GROWING AT GROWTH RATE EXP
TIRN
[Illegible] OF TINW
TIWA
[Illegible] OF TINW +65.0% OF TIRN
RESR
1997 VALUE - 0.25
THEREAFTER - GROWING AT GROWTH RATE EXP
MISCELLANEOUS INCOMES
NONE
EXPENSES
PROPERTY TAXES , REFERRED TO AS TAX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 40,087
THEREAFTER - GROWING AT GROWTH RATE EXP
OPERATING EXPENSES, REFERRED TO AS OPEX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 53,471
THEREAFTER - GROWING AT GROWTH RATE EXP
G&A EXPENSES , REFERRED TO AS G&A
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 21,456
THEREAFTER - GROWING AT GROWTH RATE EXP
MANAGEMENT FEES , REFERRED TO AS MGMT
AN INFORMATIONAL EXPENSE
1997 VALUE - 18,143
1998 VALUE - 18,264
1999 VALUE - 18,391
2000 VALUE - 18,521
2001 VALUE - 18,656
2002 VALUE - 18,796
2003 VALUE - 21,851
2004 VALUE - 31,434
2005 VALUE - 32,548
2006 VALUE - 33,695
2007 VALUE - 34,878
2008 VALUE - 36,097
2009 VALUE - 37,354
2010 VALUE - 38,649
2011 VALUE - 39,984
2012 VALUE - 41,361
2013 VALUE - 31,754
2014 VALUE - 43,981
2015 VALUE - 45,542
2016 VALUE - 47,151
<PAGE>
PAGE 3
2017 VALUE - 48,809
2018 VALUE - 50,518
2019 VALUE - 52,279
2020 VALUE - 54,095
2021 VALUE - 55,966
2022 VALUE - 57,895
2023 VALUE - 44,339
2024 VALUE - 61,586
2025 VALUE - 63,774
2026 VALUE - 66,029
2027 VALUE - 68,353
THEREAFTER - CONSTANT
OPERATING EXPENSES, REFERRED TO AS REC1
AN INFORMATIONAL EXPENSE
+100.0% OF TAX +100.0% OF OPEX
+100.0% OF G&A +100.0%, OF MGMT
Base Year Expense , REFERRED TO AS Base
AN INFORMATIONAL EXPENSE
+100.0% OF TAX +100.O% OF OPEX
+100.0% OF G&A +100.O% OF MGMT
VACANCY ALLOWANCE
PERCENTAGE OF POTENTIAL GROSS INCOME
FOR ALL TENANTS SUBJECT TO VACANCY
1997 VALUE - 2.00
THEREAFTER - CONSTANT
MANAGEMENT FEE
PERCENTAGE OF EFFECTIVE GROSS INCOME
FOR ALL TENANTS
PASSED THROUGH TO TENANTS USING EXPENSE MGMT
1997, VALUE - 3.00
THEREAFTER - CONSTANT
COMMISSION CALCULATIONS
STANDARD METHOD #1 - 4.000% OF TOTAL RENT
STANDARD METHOD #2 - 2.000% OF TOTAL RENT
STANDARD METHOD #3 - 3.300% OF TOTAL RENT
STANDARD METHOD #4 - 0.000% OF TOTAL RENT
STANDARD METHOD #5 - 0.000% OF TOTAL RENT
COMMISSION PAYOUTS
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - CASHED OUT
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
<PAGE>
PAGE 4
STANDARD METHOD #5 - CASHED OUT
ALTERATION CALCULATION
1997 VALUE - 0.00
1998 VALUE - 0.00
1999 VALUE - 0.00
2000 VALUE - 0.00
2001 VALUE - 0.00
2002 VALUE - 0.00
2003 VALUE - 0.00
2004 VALUE - 0.00
2005 VALUE - 0.00
2006 VALUE - 0.00
2007 VALUE - 0.00
2008 VALUE - 0.00
2009 VALUE - 0.00
2010 VALUE - 0.00
2011 VALUE - 0.00
THEREAFTER - CONSTANT
ALTERATION PAYOUTS
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - CASHED OUT
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
COMMON AREA MAINTENANCE POOL
NONE
CAPITAL EXPENDITURES
MARKET RATE RESR MULTIPLIED BY AREA MEASURE NRA
DEFERRED MAINT
1997 VALUE - 10,000
1998 VALUE - 0.00
THEREAFTER - CONSTANT
PRIMARY CLASSIFICATION CODES
NONE
SECONDARY CLASSIFICATION CODES
NONE
<PAGE>
PAGE 5
COST CENTERS
NONE
SALES VOLUME PROFILE
PERCENT OF RELATIVE
MONTH ANNUAL SALES VOLUME
- ----- ------------ --------
JAN 8.33% 1.00
FEB 8.33% 1.00
MAR 8.33% 1.00
APR 8.33% 1.00
MAY 8.33% 1.00
JUN 8.33% 1.00
JUL 8.33% 1.00
AUG 6.33% 1.00
SEP 8.33% 1.00
OCT 8.33% 1.00
NOV 8.33% 1.00
DEC 8.33% 1.00
------- -------
TOTALS 100.00% 12.00
GLOBAL RECOVERIES
Base Year Expense , REFERRED TO AS BYES
PRO RATA SHARE RECOVERY OF EXPENSE Base
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
TENANT PROLOGUE
MINIMUM RENTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
SALES VOLUMES AND BREAKPOINTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
RENEWAL RENTS ARE COMPOUNDED ANNUALLY
RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET
REFERENCE TENANTS
NONE
TENANTS
THERE ARE A TOTAL OF 1 LEASEHOLD TENANT(S):
- --------------------------------------------------------------------------------
1 - AMERICAN HOME FUND
<PAGE>
PAGE 6
BASE LEASE DATES: 2/1993 TO 1/2003
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 56,076
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 9.85/SF/YR
THEREAFTER - GROWING AT 0.00%
RECOVERIES:
OPERATING EXPENSES
PRO RATA SHARE RECOVERY OF EXPENSE REC1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF 1.22/SF MULTIPLIED BY AREA MEASURE NRA
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 3 NONE NONE YES YES
2 10.00 3 NONE NONE YES YES
3 10.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE ESCL PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
Base Year Expense
PRO RATA SHARE RECOVERY OF EXPENSE Base
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
<PAGE>
COMMERCE CENTER (EMERYWOOD PKWY)
PROJECT DESIGNATOR: COMM
REVISION: 7/ 3/97 @ 9 8:26
EXPIRATION REPORT
YEARS 1998 TO 2028, ALL TENANTS,
INCLUDING OPTIONS, INCLUDING RENEWALS,
EXCLUDING BASE LEASES AND PRIOR OPTIONS,
BASE RENTS INCLUDING CPI ADJUSTMENTS,
INCLUDING PERCENTAGE RENTS
7/ 3/97 @ 14:58
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- ------------------- --------- -------- ------- ------- ------- -------
# 1 INITIAL
AMERICAN HOME FUND 56,076 1/2003 9.85 1.69 11.54 18.44
------- ----- ----- ----- ------
1 FY103 EXPIRATIONS 56,076 9.85 1.69 11.54 18.44
# 1 RENEWAL 1
AMERICAN HOME FUND 56,076 4/2013 24.06 1.21 25.27 26.01
------- ----- ----- ----- ------
1 FY113 EXPIRATIONS 56,076 24.06 1.21 25.27 26.01
------- ----- ----- ----- ------
2 CUMULATIVE EXPS 112,152 16.95 1.45 18.41 22.22
# 1 RENEWAL 2
AMERICAN HOME FUND 56,076 7/2023 33.94 1.68 35.62 36.69
------- ----- ----- ----- ------
1 FY124 EXPIRATIONS 56,076 33.94 1.68 35.62 36.69
------- ----- ----- ----- ------
3 CUMULATIVE EXPS 168,228 22.62 1.53 24.14 27.O5
<PAGE>
COMMERCE CENTER (EMERYWOOD PKWY)
PROJECT DESIGNATOR: COMM
REVISION: 7/ 3/97 @ 4 8:26
RENT ROLL AS OF 7/1997
(FISCAL YEAR BASIS)
7/ 3/97 @ 14:58
TENANT/
LEASE TYPE AND DATES/ BASE RENT/ COVERAGE/ SALES(000)/ RECOVERIES/ REVENUE/
SQUARE FEET PER SF PER SF PER SF PER SF PER SF
- ---------------------- ---------- --------- ---------- ---------- --------
# 1
AMERICAN HOME FUND
BASE LEASE 2/93- 1/03 552,349 0 0 66,472 618,821
56,076 SF 9.85 0.00 0.00 1.19 11.04
---------- --------- ---------- ---------- ---------
TOTALS 552,349 0 0 66,472 618,821
56,076 SF 9.85 0.00 0.00 1.19 11.04
========== ========= ========== ========== =========
<PAGE>
COMMERCE CENTER (EMERYWOOD PKWY)
PROJECT DESIGNATOR: COMM
REVISION: 6/27/97 @ 17:38
TENANT REGISTER
6/27/97 0 17:39
TENANT SQUARE FEET BEGIN DATE END DATE
- ------------------------------- ----------- ---------- --------
#1 - AMERICAN HOME FUND 56,076 2/1993 1/2003
-----------
1 TENANTS 56,076
===========
<PAGE>
COMMERCE CENTER (EMERYWOOD PKKY)
PROJECT DESIGNATOR: COMM
REVISION: 6/27/97 @ 17:38
AVERAGE OCCUPANCY REPORT
FOR ALL TENANTS
6/27/97 @ 17:38
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001 2002 2003 2004 2005
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
JANUARY 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076
FEBRUARY 56,076 56,076 56,076 56,076 56,076 56,076 - 56,076 56,076
MARCH 56,076 56,076 56,076 56,076 56,076 56,076 - 56,076 56,076
APRIL 56,076 56,076 56,076 56,076 56,076 56,076 - 56,076 56,076
MAY 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076
JUNE 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076
JULY 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076
AUGUST 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076
SEPTEMBER 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076
OCTOBER 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076
NOVEMBER 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076
DECEMBER 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076
------- ------- ------- ------- ------- ------- ------- ------- -------
AVERAGE SF
OCCUPIED-OCCA 56,076 56,076 56,076 56,076 56,076 56,076 42,057 56,076 56,076
TOTAL SF-NRA 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076
------- ------- ------- ------- ------- ------- ------- ------- -------
OCCUPANCY % 100.00 100.00 100.00 100.00 100.00 100.00 75.00 100.00 100.00
======= ======= ======= ======= ======= ======= ======= ======= =======
2006 2007 2008 2009 2010 2011 2012 2013 2014
------- ------- ------- ------- ------- ------- ------- ------- -------
JANUARY 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076
FEBRUARY 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076
MARCH 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076
APRIL 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076
MAY 56,076 56,076 56,076 56,076 56,076 56,076 56,076 - 56,076
JUNE 56,076 56,076 56,076 56,076 56,076 56,076 56,076 - 56,076
JULY 56,076 56,076 56,076 56,076 56,076 56,076 56,076 - 56,076
AUGUST 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076
SEPTEMBER 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076
OCTOBER 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,C76
NOVEMBER 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076
DECEMBER 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076
------- ------- ------- ------- ------- ------- ------- ------- -------
AVERAGE SF
OCCUPIED-OCCA 56,076 56,076 56,076 56,076 56,076 56,076 56,076 42,O57 56,076
TOTAL SF-NRA 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076
------- ------- ------- ------- ------- ------- ------- ------- -------
OCCUPANCY % 100.00 100.00 100.00 100.00 100.00 100.00 100.00 75.00 100.00
======= ======= ======= ======= ======= ======= ======= ======= =======
2015 2016 2017 2018 2019 2020 2021 2022 2023
------- ------- ------- ------- ------- ------- ------- ------- -------
JANUARY 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076
FEBRUARY 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076
MARCH 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076
APRIL 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076
MAY 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076
JUNE 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076
JULY 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076
AUGUST 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076 -
SEPTEMBER 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076 -
OCTOBER 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076 -
NOVEMBER 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076
DECEMBER 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076
------- ------- ------- ------- ------- ------- ------- ------- -------
<PAGE>
PAGE 2
AVERAGE SF
OCCUPIED-OCCA 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076 42,057
TOTAL SF-NRA 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076 56,076
------- ------- ------- ------- ------- ------- ------- ------- -------
OCCUPANCY % 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 75.00
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
2024 2025 2026 2027
------- ------- ------- -------
JANUARY 56,076 56,076 56,076 56,076
FEBRUARY 56,076 56,076 56,076 56,076
MARCH 56,076 56,076 56,076 56,076
APRIL 56,076 56,076 56,076 56,076
MAY 56,076 56,076 56,076 56,076
JUNE 56,076 56,076 56,076 56,076
JULY 56,076 56,076 56,076 56,076
AUGUST 56,076 56,076 56,076 56,076
SEPTEMBER 56,076 56,076 56,076 56,076
OCT0BER 56,076 56,076 56,076 56,076
NOVEMBER 56,076 56,076 56,076 56,076
DECEMBER 56,076 56,076 56,076 56,076
------- ------- ------- -------
AVERAGE SF
OCCUPIED-OCCA 56,076 56,076 56,076 56,076
TOTAL SF-NRA 56,076 56,076 56,076 56,076
------- ------- ------- -------
OCCUPANCY % 100.00 100.00 100.00 100.00
======= ======= ======= =======
<PAGE>
Addenda
================================================================================
Investor Survey
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET OFFICE MARKET - URBAN/CBD
- ------------------------------------------------------------------------------------------------------------------------------------
9.5% 10.0% 10.0% 10.0% 11.5% 11.5% 3.0% 3.0% 3.0% 4.0% 10.0 10.0
9.5% 10.0% 10.0% 10.5% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
8.0% 9.0% 8.5% 8.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
13.0% 13.0% -- -- 14.0% 14.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
8.0% 8.0% 8.5% 8.5% 10.5% 10.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.3% 9.3% 10.3% 10.3% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 9.0% 8.5% 9.0% 10.5% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
10.0% 10.0% 10.0% 10.0% 12.5% 12.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
9.0% 9.0% 9.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.0% 9.0% 8.0% 9.0% 10.0% 12.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
Responses 11 11 10 10 11 11 11 11 11 11 11 11
Average (%) 9.2% 9.6% 9.2% 9.7% 11.7% 12.0% 3.3% 4.2% 3.4% 3.9% 8.5 9.5
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 9.0% 9.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 12.0% 12.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.5% 9.5% 10.5% 10.5% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 10.0% 10.0% 11.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
15.0% 15.0% -- -- 20.0% 20.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
9.0% 10.0% -- -- -- -- -- -- -- -- -- --
9.0% 10.0% 9.0% 10.0% 12.0% 13.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
Responses 8 8 6 6 7 7 7 7 7 7 7 7
Average (%) 10.0% 10.4% 9.7% 10.3% 12.8% 13.1% 3.3% 4.7% 3.5% 4.0% 8.3 9.7
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
8.0% 9.0% 9.5% 10.0% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
8.0% 10.0% 8.5% 9.0% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0 10.0 10.0
10.0% 10.0% 10.0% 10.0% 13.0% 13.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.5% 9.5% 10.5% 10.5% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
12.0% 12.0% -- -- 13.0% 13.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
-- -- -- -- 12.0% 13.0% 4.0% 4.0% 4.0% 4.0 5.0 10.0
Responses 8 8 7 7 9 9 9 9 9 9 9 9
Average (%) 9.4% 10.0% 9.6% 10.2% 12.8% 13.5% 3.5% 4.6% 3.5% 3.9% 7.6 8.9
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
12.0% 12.0% 12.0% 12.0% 15.0% 15.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.8% 9.8% 10.8% 10.8% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
14.0% 14.0% -- -- 20.0% 20.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 11.0% 14.0% 14.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 6 6 5 5 6 6 6 6 6 6 6 6
Average (%) 10.7% 11.0% 10.5% 11.2% 14.6% 15.3% 3.2% 4.6% 3.3% 3.9% 8.0 8.8
--------------------------------------------------------------------------------------------------------
Total Responses 33 33 28 28 33 33 33 33 33 33 33 33
Weighted Average (%) 9.8% 10.3% 9.7% 10.3% 13.0% 13.5% 3.3% 4.6% 3.4% 3.9% 8.1 9.2
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
8 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET OFFICE MARKET - SUBURBAN/NON - CBD
- ------------------------------------------------------------------------------------------------------------------------------------
9.5% 9.5% 10.5% 10.5% 10.5% 10.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.5% 8.5% 9.3% 9.3% 11.3% 11.3% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
11.0% 11.0% -- -- 12.0% 12.0% 5.0% 3.0% 3.0% 3.0% 5.0 7.0
8.5% 10.0% 9.0% 10.5% 11.0% 12.5% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
8.0% 10.0% 9.5% 10.0% 11.5% 12.0% 4.0% 6.0% 4.0% 4.0% 10.0 10.0
l0.0% 11.0% 10.5% 11.0% 12.0% 12.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.0% 9.0% 8.5% 8.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
8.0% 8.0% 8.5% 8.5% 10.5% 10.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.1% 9.1% 10.1% l0.1% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 10.0% 9.0% 10.5% 11.0% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
9.0% 9.0% 10.0% 10.0% 11.5% 11.5% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.0% 9.0% 9.0% 9.0% 12.0% 13.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.0% 10.0% -- -- -- -- -- -- -- -- --
8.0% 9.0% 8.0% 9.0% 10.0% 12.0% 5.0% 5.0% 4.0% 4.0% 5.0 10.0
Responses 16 16 14 14 15 15 15 15 15 15 15 15
Average (%) 8.8% 9.5% 9.3% 9.9% 11.2% 11.6% 3.5% 4.4% 3.6% 3.8% 8.9 9.7
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
9.5% 9.5% 10.5% 10.5% 10.5% 10.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.8% 8.8% 9.5% 9.5% 11.8% 11.8% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
12.0% 12.0% -- -- 18.0% 18.0% 5.0% 3.0% 3.0% 3.0% 5.0 7.0
10.5% 10.5% 10.0% 10.0% 11.0% 13.0% 2.0% 2.0% 2.0% 2.0% 10.0 10.0
8.0% 10.0% 9.5% 10.0% 11.0% 12.0% 4.0% 6.0% 4.0% 4.0% 10.0 10.0
9.0% 10.0% 9.0% 9.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.0% 11.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.4% 9.4% 10.4% 10.4% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 10.0% 14.0% 15.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
10.0% 11.0% -- -- -- -- -- -- -- -- -- --
10.0% 11.0% 10.0% 11.0% 12.0% 13.0% 5.0% 5.0% 4.0% 4.0% 5.0 10.0
Responses 13 13 11 11 12 12 12 12 12 12 12 12
Average (%) 9.5% 10.0% 9.8% 10.2% 12.0% 12.5% 3.4% 4.5% 3.4% 3.7% 8.6 9.6
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% -- -- 13.0% 13.0% 3.0% 3.0% 3.0% 3.0% 5.0 7.0
8.0% 10.0% 8.5% 9.0% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
10.0% 10.0% 10.0% 10.0% 12.5% 12.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.4% 9.4% 10.4% 10.4% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
6.0% 6.0% 9.0% 9.0% 17.0% 20.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.0% 10.0% -- -- -- -- -- -- -- -- -- --
12.0% 12.0% 10.0% 10.0% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 2.0 2.0
Responses 10 10 8 8 9 9 9 9 9 9 9 9
Average (%) 9.1% 9.7% 9.5% 10.0% 13.4% 14.3% 3.1% 4.6% 3.4% 3.8% 7.2 8.0
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% -- -- 18.0% 18.0% 3.0% 3.0% 3.0% 3.0% 5.0 7.0
10.5% 10.5% 10.0% 10.0% 11.0% 13.0% 2.0% 2.0% 2.0% 2.0% 10.0 10.0
11.0% 11.0% 11.0% 11.0% 14.0% 14.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.6% 9.6% 10.6% 10.6% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
6.0% 6.0% 10.0% 10.0% 20.0% 20.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.0% 10.0% -- -- -- -- -- -- -- -- -- --
12.0% 12.0% 10.0% 10.0% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 2.0 2.0
Responses 10 10 8 8 9 9 9 9 9 9 9 9
Average (%) 9.7% 10.0% 10.0% 10.5% 14.5% 15.2% 2.9% 4.3% 3.2% 3.6% 7.2 8.0
--------------------------------------------------------------------------------------------------------
Total Responses 49 49 41 41 45 45 45 45 45 45 45 45
Weighted Average (%) 9.3% 9.8% 9.7% 10.1% 12.8% 13.4% 3.2% 4.4% 3.4% 3.7% 8.0 8.8
--------------------------------------------------------------------------------------------------------
</TABLE>
AUTUMN 1996 9
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET INDUSTRIAL MARKET - WAREHOUSE/DISTRIBUTION
- ------------------------------------------------------------------------------------------------------------------------------------
9.2% 9.2% 9.5% 9.5% 10.0% 10.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.5% 8.5% 9.3% 9.3% 11.0% 11.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
8.5% 10.0% 9.5% 10.0% 11.0% 12.0% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
9.0% 9.0% 9.5% 9.5% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
8.0% 8.0% 8.5% 8.5% 10.5% 10.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 10.0% 9.0% 10.5% 11.0% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
9.0% 9.0% 10.0% 10.0% 11.0% 11.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
9.0% 9.0% 9.5% 9.5% 10.5% 10.5% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 10 10 10 10 10 10 10 10 10 10 10 10
Average (%) 8.8% 9.2% 9.4% 9.8% 10.9% 11.0% 2.9% 4.0% 3.3% 3.8% 9.8 10.1
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
9.2% 9.2% 9.5% 9.5% 10.0% 10.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.8% 8.8% 9.5% 9.5% 11.3% 11.3% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.5% 11.5% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
10.0% 10.0% 11.0% 11.0% 12.0% 12.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.8% 9.8% 10.3% 10.3% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 7 7 7 7 7 7 7 7 7 7 7 7
Average (%) 9.3% 9.5% 10.0% 10.2% 11.2% 11.2% 2.8% 4.3% 3.2% 3.9% 9.7 10.1
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 12.0% 12.0% 13.0% 13.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.8% 9.8% 10.3% 10.3% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 9.7% 9.9% 10.4% 10.8% 11.9% 11.9% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
12.0% 12.0% 13.0% 13.0% 14.0% 14.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 10.0% 10.5% 10.5% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.5% 10.5% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 10.1% 10.4% 10.9% 11.3% 12.4% 12.4% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
--------------------------------------------------------------------------------------------------------
Total Responses 25 25 25 25 25 25 25 25 25 25 25 25
Weighted Average (%) 9.5% 9.7% 10.2% 10.5% 11.6% 11.6% 2.6% 4.5% 3.2% 4.0% 9.6 10.2
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
10 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET INDUSTRIAL MARKET - BUSINESS PARKS, OTHER INDUSTRIAL & MANUFACTURING
- ------------------------------------------------------------------------------------------------------------------------------------
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 10.0 10.0
9.0% 9.0% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 3 3 4 4 4 4 4 4 4 4
Average (%) 8.9% 9.4% 9.7% 10.7% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.8 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.5% 10.5% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 10.0 10.0
10.0% 10.0% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 3 3 4 4 4 4 4 4 4 4
Average (%) 9.3% 9.8% 9.8% 10.8% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.8 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.5% 10.5% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 5 5 4 4 5 5 5 5 5 5 5 5
Average (%) 9.4% 10.0% 9.9% 10.9% 12.4% 13.2% 3.4% 4.0% 3.2% 3.8% 8.2 9.4
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.5% 10.5% 11.0% 11.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.5% 10.5% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 5 5 4 4 5 5 5 5 5 5 5 5
Average (%) 9.6% 10.2% 10.0% 11.0% 12.4% 13.2% 3.4% 4.0% 3.2% 3.8% 8.2 9.4
--------------------------------------------------------------------------------------------------------
Total Responses 18 18 14 14 18 18 18 18 18 18 18 18
Weighted Average(%) 9.3% 9.8% 9.8% 10.8% 12.0% 12.4% 3.3% 4.0% 3.2% 3.9% 8.5 9.8
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
AUTUMN 1996 11
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET RETAIL MARKET - NEIGHBORHOOD & COMMUNITY CENTERS
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 10.5% 9.5% 10.5% 11.0% 12.5% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
9.5% 10.0% 10.0% 10.0% 12.5% 12.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
10.0% 10.0% 10.5% 10.5% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
10.3% 10.3% 10.8% 10.8% 13.0% 13.0% 2.0% 2.0% 4.0% 4.0% 7.0 7.0
9.0% 9.0% 10.0% 10.0% 10.0% 10.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
9.8% 9.8% 10.3% 10.3% 11.5% 11.5% 3.8% 4.0% 4.0% 4.0% 10.0 10.0
9.0% 10.0% -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
9.0% 9.0% 9.5% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
Responses 9 9 8 8 8 8 9 9 9 9 9 9
Average (%) 9.3% 9.8% 10.0% 10.4% 11.9% 12.1% 2.9% 3.7% 3.4% 3.9% 8.9 9.4
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
10.8% 10.8% 11.3% 11.3% 14.0% 14.0% 2.0% 2.0% 4.0% 4.0% 7.0 7.0
10.0% 10.0% 11.0% 11.0% 12.0% 12.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
9.0% 10.0% -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 11.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.5% 10.5% -- -- -- -- -- -- -- -- -- --
Responses 6 6 4 4 4 4 5 5 5 5 5 5
Average (%) 9.5% 10.0% 10.4% 11.1% 12.3% 12.3% 2.3% 3.8% 3.3% 4.2% 9.0 9.6
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 12.0% 12.0% 13.0% 13.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 10.0 10.0
9.0% 10.0% -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 9.5% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.0% 10.0% -- -- -- -- -- -- -- --
11.0% 11.0% 9.5% 9.5% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 3.0 3.0
Responses 7 7 5 5 5 5 6 6 6 6 6 6
Average (%) 9.7% 10.3% 10.1% 10.7% 13.8% 14.6% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
13.0% 13.0% 14.0% 14.0% 14.0% 14.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 10.0 10.0
9.0% 10.0% -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 11.0% 14.0% 14.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
11.0% 11.0% 10.5% 10.5% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 3.0 3.0
Responses 6 6 5 5 5 5 6 6 6 6 6 6
Average (%) 10.3% 10.8% 10.8% 11.5% 14.2% 15.0% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
--------------------------------------------------------------------------------------------------------
Total Responses 28 28 22 22 22 22 26 26 26 26 26 26
Weighted Average (%) 9.7% 10.2% 10.3% 10.9% 13.0% 13.5% 2.7% 3.9% 3.2% 4.0% 8.7 9.3
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
12 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET RETAIL MARKET - POWER CENTERS & "BIG BOX"
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 9.0% 9.5% 9.5% 11.0% 11.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
10.0% 10.0% 9.5% 9.5% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
10.5% 10.5% 10.5% 10.5% 11.0% 12.0% 2.0% 2.0% 3.0% 3.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.4% 11.4% 3.8% 3.8% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 9.5% 10.0% 11.0% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
9.3% 9.3% 9.5% 10.0% 10.5% 10.5% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.0% 9.0% -- -- -- -- -- -- -- -- -- --
9.0% 9.5% 9.5% 10.0% 11.0% 11.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
Responses 9 9 8 8 8 8 8 8 8 8 8 8
Average (%) 9.4% 9.5% 9.7% 10.1% 11.5% 11.7% 3.3% 3.5% 3.4% 3.7% 9.1 10.1
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
10.8% 10.8% 10.8% 10.8% 11.0% 12.0% 2.0% 3.0% 3.0% 3.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 3 3 3 3 3 3 3 3 3 3 3 3
Average (%) 9.8% 10.1% 10.1% 10.6% 11.0% 11.3% 2.8% 3.7% 3.2% 3.7% 9.3 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.8% 10.8% 10.8% 10.8% 12.0% 12.0% 2.0% 2.0% 3.0% 3.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 3 3 3 3 3 3 3 3 3 3 3 3
Average (%) 9.6% 9.9% 10.1% 10.6% 12.0% 12.0% 2.8% 3.3% 3.2% 3.7% 9.3 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 10.8% 10.8% 12.0% 12.0% 2.0% 2.0% 3.0% 3.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
-- -- -- -- 15.0% 15.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 2 2 2 2 3 3 3 3 3 3 3 3
Average (%) 9.8% 10.3% 10.1% 10.9% 12.7% 12.7% 2.8% 3.3% 3.2% 3.7% 9.3 10.3
--------------------------------------------------------------------------------------------------------
Total Responses 17 17 16 16 17 17 17 17 17 17 17 17
Weighted Average (%) 9.6% 9.9% 10.0% 10.5% 11.8% 11.9% 2.9% 3.5% 3.2% 3.7% 9.3 10.3
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
AUTUMN 1996 13
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET RETAIL MARKET - REGIONAL MALLS
- ------------------------------------------------------------------------------------------------------------------------------------
7.5% 7.5% 8.0% 8.0% 11.3% 11.3% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.0% 9.0% 9.0% 9.0% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
7.5% 7.5% 7.8% 7.8% 12.0% 12.0% 1.5% 2.0% 3.0% 3.0% 10.0 10.0
7.0% 8.0% 8.0% 8.0% 10.5% 11.5% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
9.0% -- -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.0% 8.0% 9.0% 10.5% 11.0% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
8.0% 8.0% 8.5% 8.5% 11.0% 11.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
7.8% 8.0% 8.3% 8.5% 11.0% 12.0% 2.5% 3.0% 2.5% 3.0% 10.0 10.0
7.0% 8.0% 7.0% 8.0% 10.0% 11.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
Responses 10 9 9 9 9 9 10 10 10 10 10 10
Average (%) 7.9% 8.2% 8.2% 8.6% 11.4% 11.8% 3.0% 3.6% 3.5% 3.8% 9.1 9.6
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 10.0% 10.0% 17.0% 17.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
9.0% 9.0% 9.0% 9.0% 13.5% 13.5% 2.0% 2.0% 4.0% 4.0% 7.0 7.0
9.0% 10.0% 10.0% 10.0% 12.0% 14.0% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
10.0% -- -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
Responses 5 4 4 4 4 4 5 5 5 5 5 5
Average (%) 9.3% 9.6% 9.6% 10.0% 13.4% 13.9% 2.5% 3.4% 3.7% 4.0% 8.6 8.6
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 10.0% 10.0% 18.0% 18.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
11.0% 11.0% 11.0% 11.0% 13.0% 14.0% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
9.0% -- -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.5% 8.5% 9.0% 11.5% 12.5% 2.5% 3.0% 2.5% 3.0% 10.0 10.0
Responses 5 4 4 4 4 4 5 5 5 5 5 5
Average (%) 9.3% 9.8% 9.8% 10.3% 13.4% 13.9% 2.6% 3.6% 3.4% 3.8% 9.2 9.2
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 11.0% 11.0% 20.0% 20.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
12.5% 12.5% 12.0% 12.0% 14.0% 15.0% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
10.0% -- -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 9.0% 9.3% 9.8% 12.0% 13.0% 2.5% 3.0% 2.5% 3.0% 10.0 10.0
13.0% 13.0% 11.0% 11.0% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 3.0 3.0
Responses 6 5 5 5 5 5 6 6 6 6 6 6
Average (%) 10.6% 11.0% 10.6% 11.0% 14.6% 15.0% 2.7% 3.5% 3.3% 3.7% 8.2 8.2
--------------------------------------------------------------------------------------------------------
Total Responses 26 22 22 22 22 22 26 26 26 26 26 26
Weighted Average (%) 9.3% 9.6% 9.5% 10.0% 13.2% 13.6% 2.7% 3.5% 3.5% 3.8% 8.8 8.9
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
14 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET RESIDENTIAL - APARTMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
8.5% 10.0% 9.0% 10.5% -- -- -- -- 3.5% 3.5% 1.0 1.0
8.5% 9.0% 9.0% 9.0% 11.0% 11.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
9.8% 9.8% 10.0% 10.0% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
8.3% 9.0% 9.0% 9.5% 10.5% 11.5% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
7.5% 8.5% 8.0% 9.0% 10.0% 11.0% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.8% 8.8% 9.0% 9.0% 11.3% 11.3% 3.8% 4.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 9.0% 9.0% 9.5% 10.0% 11.5% 3.0% 4.0% 3.0% 3.0% 10.0 10.0
8.5% 9.0% 8.5% 9.0% -- -- 3.0% 3.5% 3.0% 3.5% 10.0 10.0
8.8% 9.0% 9.0% 9.5% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 10 10 10 10 8 8 9 9 10 l0 l0 10
Average (%) 8.6% 9.2% 9.0% 9.6% 11.2% 11.7% 2.9% 3.9% 3.3% 3.8% 8.4 8.9
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 9.5% 9.5% 10.0% 11.0% 12.0% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
9.0% 10.0% 10.0% 10.0% 11.0% 12.5% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.0% 10.0% 10.0% 10.5% 10.5% 12.0% 3.0% 4.0% 3.0% 3.0% 10.0 10.0
9.0% 9.5% 9.5% 10.0% 11.5% 11.5% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 5 5 5 5 5 5 5 5 5 5 5 5
Average (%) 8.9% 9.7% 9.7% 10.3% 11.0% 11.8% 2.5% 4.2% 3.1% 4.0% 9.6 10.2
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 11.0% 11.0% 11.0% 12.5% 13.5% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.0% 9.0% 9.0% 11.0% 12.0% 4.0% 6.0% 3.0% 3.0% 3.0 5.0
9.0% 9.0% 9.5% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 8.9% 9.4% 9.8% 10.3% 11.6% 12.1% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
12.0% 13.0% 13.0% 13.0% 13.0% 15.0% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.0% 10.0% 10.0% 11.0% 13.0% 4.0% 6.0% 3.0% 3.0% 3.0 5.0
9.5% 10.0% 10.0% 11.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 9.5% 10.1% 10.6% 11.3% 12.0% 13.0% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
Total Responses 23 23 23 23 21 21 22 22 23 23 23 23
Weighted Average (%) 9.0% 9.6% 9.8% 10.4% 11.5% 12.1% 2.7% 4.4% 3.2% 4.0% 8.4 9.3
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical
issues
AUTUMN 1996 15
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICE SUMMARY OF WEIGHTED AVERAGE
- ------------------------------------------------------------------------------------------------------------------------------------
Urban/CBD 9.8% 10.3% 9.7% 10.3% 13.0% 13.5% 3.3% 4.6% 3.4% 3.9% 8.1 9.2
Class A - Leased Asset 9.2% 9.6% 9.2% 9.7% 11.7% 12.0% 3.3% 4.2% 3.4% 3.9% 8.5 9.5
Class B - Leased Asset 10.0% 10.4% 9.7% 10.3% 12.8% 13.1% 3.3% 4.7% 3.5% 4.0% 8.3 9.7
Class A - Value Added 9.4% 10.0% 9.6% 10.2% 12.8% 13.5% 3.5% 4.6% 3.5% 3.9 7.6 8.9
Class B - Value Added 10.7% 11.0% 10.5% 11.2% 14.6% 15.3% 3.2% 4.8% 3.3% 3.9% 8.0 8.8
Suburban 9.3% 9.8% 9.7% 10.1% 12.8% 13.4% 3.2% 4.4% 3.4% 3.7% 8.0 8.8
Class A - Leased Asset 8.8% 9.5% 9.3% 9.9% 11.2% 11.6% 3.5% 4.4% 3.6% 3.8% 8.9 9.7
Class B - Leased Asset 9.5% 10.0% 9.8% 10.2% 12.0% 12.5% 3.4% 4.5% 3.4% 3.7% 8.6 9.6
Class A - Value Added 9.1% 9.7% 9.5% 10.0% 13.4% 14.3% 3.1% 4.6% 3.4% 3.8% 7.2 8.0
Class B - Value Added 9.7% 10.0% 10.0% 10.5% 14.5% 15.2% 2.9% 4.3% 3.2% 3.6% 7.2 8.0
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL
- ------------------------------------------------------------------------------------------------------------------------------------
Warehouse/Distribution 9.5% 9.7% 10.2% 10.5% 11.6% 11.6% 2.6% 4.5% 3.2% 4.0% 9.6 10.2
Class A - Leased Asset 8.8% 9.2% 9.4% 9.8% 10.9% 11.0% 2.9% 4.0% 3.3% 3.8% 9.8 10.1
Class B - Leased Asset 9.3% 9.5% 10.0% 10.2% 11.2% 11.2% 2.8% 4.3% 3.2% 3.9% 9.7 10.1
Class A - Value Added 9.7% 9.9% 10.4% 10.8% 11.9% 11.9% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
Class 8 - Value Added 10.1% 10.4% 10.9% 11.3% 12.4% 12.4% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
Business Parks 9.4% 9.9% 10.0% 10.8% 12.3% 12.9% 3.4% 4.0% 3.2% 3.8% 8.3 9.6
Class A - Leased Asset 9.0% 9.5% 9.8% 10.5% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
Class B - Leased Asset 9.3% 9.8% 10.0% 10.8% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
Class A - Value Added 9.5% 10.2% 10.0% 10.8% 13.0% 14.3% 3.5% 4.0% 3.2% 3.7% 7.7 8.7
Class B - Value Added 9.7% 10.3% 10.2% 11.0% 13.0% 14.3% 3.5% 4.0% 3.2% 3.7% 7.7 8.7
0ther Industrial/
Manufacturing 9.2% 9.7% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.8 10.3
Class A - Leased Asset 8.8% 9.3% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.5 10.0
Class B - Leased Asset 9.3% 9.8% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.5 10.0
Class A - Value Added 9.3% 9.8% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
Class B - Value Added 9.5% 10.0% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
- ------------------------------------------------------------------------------------------------------------------------------------
RETAIL
- ------------------------------------------------------------------------------------------------------------------------------------
Neighborhood & Community
Centers 9.7% 10.2% 10.3% 10.9% 13.0% 13.5% 2.7% 3.9% 3.2% 4.0% 8.7 9.3
Class A - Leased Asset 9.3% 9.8% 10.0% 10.4% 11.9% 12.1% 2.9% 3.7% 3.4% 3.9% 8.9 9.4
Class B - Leased Asset 9.5% 10.0% 10.4% 11.1% 12.3% 12.3% 2.3% 3.8% 3.3% 4.2% 9.0 9.6
Class A - Value Added 9.7% 10.3% 10.1% 10.7% 13.8% 14.6% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
Class B - Value Added 10.3% 10.8% 10.8% 11.5% 14.2% 15.0% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
Power Center & "Big Box" 9.6% 9.9% 10.0% 10.5% 11.8% 11.9% 2.9% 3.5% 3.2% 3.7% 9.3 10.3
Class A - Leased Asset 9.4% 9.5% 9.7% 10.1% 11.5% 11.7% 3.3% 3.5% 3.4% 3.7% 9.1 10.1
Class B - Leased Asset 9.8% 10.1% 10.1% 10.6% 11.0% 11.3% 2.8% 3.7% 3.2% 3.7% 9.3 10.3
Class A - Value Added 9.6% 9.9% 10.1% 10.6% 12.0% 12.0% 2.8% 3.3% 3.2% 3.7% 9.3 10.3
Class B - Value Added 9.8% 10.3% 10.1% 10.9% 12.7% 12.7% 2.8% 3.3 3.2% 3.7% 9.3 10.3
Regional Malls 9.3% 9.6% 9.5% 10.0% 13.2% 13.6% 2.7% 3.5% 3.5% 3.8% 8.8 8.9
Class A - Leased Asset 7.9% 8.2% 8.2% 8.6% 11.4% 11.8% 3.0% 3.6% 3.5% 3.8% 9.1 9.6
Class B - Leased Asset 9.3% 9.6% 9.6% 10.0% 13.4% 13.9% 2.5% 3.4% 3.7% 4.0% 8.6 8.6
Class A - Value Added 9.3% 9.8% 9.8% 10.3% 13.4% 13.9% 2.6% 3.6% 3.4% 3.8% 9.2 9.2
Class B - Value Added 10.6% 11.0% 10.6% 11.0% 14.6% 15.0% 2.7% 3.5% 3.3% 3.7% 8.2 8.2
Specialty Retail 9.5% 10.5% 10.8% 11.5% 12.0% 12.6 1.9% 4.0% 3.3% 4.0% 10.0 10.5
Class A - Leased Asset 8.2% 9.0% 8.8% 9.7% 10.7% 11.3% 2.5% 4.0% 3.5% 4.0% 8.7 10.3
Class B - Leased Asset 9.3% 10.3% 10.8% 11.5% 11.5% 12.5% 1.8% 4.0% 3.3% 4.0% 10.5 10.5
Class A - Value Added 10.0% 11.0% 11.3% 12.0% 12.5% 13.0% 1.8% 4.0% 3.3% 4.0% 10.5 10.5
Class B - Value Added 10.8% 11.8% 12.3% 13.0% 13.5% 13.5% 1.8% 4.0% 3.3% 4.0% 10.5 10.5
- ------------------------------------------------------------------------------------------------------------------------------------
RESIDENTIAL
- ------------------------------------------------------------------------------------------------------------------------------------
Apartments 9.0% 9.6% 9.8% 10.4% 11.5% 12.1% 2.7% 4.4% 3.2% 4.0% 8.4 9.3
Class A - Leased Asset 8.6% 9.2% 9.0% 9.6% 11.2% 11.7% 2.9% 3.9% 3.3% 3.8% 8.4 8.9
Class B - Leased Asset 8.9% 9.7% 9.7% 10.3% 11.0% 11.8% 2.5% 4.2% 3.1% 4.0% 9.6 10.2
Class A - Value Added 8.9% 9.4% 9.8% 10.3% 11.6% 12.1% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
Class B - Value Added 9.5% 10.1% 10.6% 11.3% 12.0% 13.0% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
</TABLE>
16 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
Single-Tenant NNN Leased Properties
(Excludes "Bondable" Leases)
Minimum No. Going-In Cap Rate Internal Rate of Return
of Years Low High Low High
Investment Grade Tenant
- --------------------------------------------------------------------------------
4.0 9.0% 9.0% 10.0% 12.0%
----------------------------------------------------------
10.0 8.0 9.0 10.5 11.5
----------------------------------------------------------
5.0 10.5 10.5 13.0 13.0
----------------------------------------------------------
10.0 9.0 10.5 13.0 15.0
----------------------------------------------------------
10.0 8.5 9.0 10.5 12.0
----------------------------------------------------------
10.0 9.5 10.0 10.5 11.5
----------------------------------------------------------
10.0 8.5 11.0 10.8 12.0
----------------------------------------------------------
10.0 9.5 9.5 11.0 11.0
----------------------------------------------------------
20.0 9.0 9.0 N/A N/A
----------------------------------------------------------
10.0 8.0 10.0 N/A N/A
- --------------------------------------------------------------------------------
Responses 10.0 10.0 10.0 8.0 8.0
Average 9.9 9.0% 9.8% 11.2% 12.3%
Non-Investment Grade
Tenant
- --------------------------------------------------------------------------------
4.0 9.5% 9.5% 10.5% 13.0%
----------------------------------------------------------
10.0 9.0 10.0 11.5 12.5
----------------------------------------------------------
5.0 13.0 13.0 15.0 15.0
----------------------------------------------------------
10.0 10.0 12.0 17.0 20.0
----------------------------------------------------------
10.0 9.0 10.0 11.0 13.0
----------------------------------------------------------
10.0 11.0 12.0 13.0 15.0
----------------------------------------------------------
10.0 10.5 10.5 13.0 13.0
----------------------------------------------------------
20.0 11.0 11.0 N/A N/A
----------------------------------------------------------
10.0 10.0 12.5 N/A N/A
----------------------------------------------------------
Responses 9.0 9.0 9.0 7.0 7.0
Average 9.9 10.3% 11.2% 13.0% 14.5%
AUTUMN 1996 17
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES BLENDED INTERNAL EQUITY INTERNAL GROWTH RATES TYPICAL PROJECTION MANAGEMENT RESERVES FOR
GOING-IN TERMINAL RATE OF RETURN RATE OF RETURN INCOME EXPENSES PERIOD (YEARS) FEES* REPLACEMENT*
----------------------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
LUXURY
- ------------------------------------------------------------------------------------------------------------------------------------
8.0% 8.0% 10.0% 10.0% 18.0% 18.0% 25.0% 25.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 5.0% 5.0%
7.0% 7.0% 10.0% 10.0% 15.0% 15.0% 20.0% 20.0% 7.0% 7.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
6.0% 9.5% 10.0% 10.0% 12.0% 15.0% 15.0% 18.0% 3.0% 3.0% 3.0% 3.0% 5.0 5.0 2.0% 4.0% 4.0% 4.0%
8.0% 11.0% 8.5% 12.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
9.5% 9.5% 10.5% 10.5% 15.0% 15.0% 18.0% 18.0% 4.5% 4.5% 4.0% 4.0% 10.0 10.0 3.5% 3.5% 4.0% 4.0%
-- -- 11.0% 13.0% 15.0% 15.0% 18.0% 18.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0 3.0% 3.0% 4.0% 4.0%
6.0% 8.0% 10.0% 12.0% 13.0% 14.0% 20.0% 22.0% 3.0% 4.0% 3.0% 4.0% 5.0 5.0 2.0% 3.0% 4.0% 5.0%
8.0% 12.0% 8.0% 10.0% 15.0% 15.0% 20.0% 20.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0 3.0% 4.0% 4.0% 5.0%
Responses 7 7 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8
Average (%) 7.5% 9.3% 9.8% 10.9% 14.5% 15.3% 19.5% 20.1% 4.1% 4.3% 3.8% 3.9% 6.5 6.9 2.8% 3.3% 4.1% 4.4%
- ------------------------------------------------------------------------------------------------------------------------------------
FIRST CLASS
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 9.0% 11.0% 11.0% 12.0% 12.0% 20.0% 20.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
10.0% 10.0% 10.0% 10.0% -- -- 13.0% 13.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0 3.0% 3.0% 4.0% 5.0%
9.0% 9.0% 11.0% 11.0% 14.0% 14.0% 18.0% 18.0% 6.0% 6.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
9.5% 11.0% 11.0% 11.0% 15.0% 20.0% 18.0% 22.0% 3.0% 3.0% 2.0% 2.0% 5.0 5.0 2.0% 3.0% 4.0% 4.0%
10.0% 12.0% 10.5% 13.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
7.0% 9.0% 10.0% 11.0% 11.5% 12.0% 14.0% 16.0% 4.0% 5.0% 3.0% 4.0% 5.0 5.0 2.5% 2.5% 5.0% 5.0%
9.5% 9.5% 10.5% 10.5% 15.0% 15.0% 18.0% 18.0% 4.5% 4.5% 4.0% 4.0% 10.0 10.0 3.5% 3.5% 4.0% 4.0%
9.0% 9.0% 10.5% 10.5% 21.0% 21.0% 14.0% 14.0% 4.0% 4.0% 3.0% 3.0% 7.0 7.0 3.0% 3.0% 4.0% 4.0%
10.0% 12.0% 11.0% 11.0% -- -- -- -- 3.5% 3.5% 3.5% 3.5% 5.0 10.0 2.0% 3.0% 4.0% 4.0%
10.0% 10.0% 9.0% 9.5% 19.0% 19.0% 15.0% 15.0% 8.0% 8.0% 6.0% 6.0% -- -- 2.5% 2.5% 4.0% 4.0%
10.0% 13.0% 12.0% 13.0% 25.0% 25.0% 20.0% 20.0% 3.5% 4.0% 3.5% 4.0% 5.0 5.0 3.5% 3.5% 4.0% 4.0%
10.5% 10.5% 10.5% 10.5% 13.5% 13.5% -- -- 3.5% 3.5% 3.5% 3.5% 10.0 10.0 3.0% 3.0% 5.0% 5.0%
8.0% 12.0% 8.0% 10.0% 15.0% 15.0% 20.0% 20.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0 3.0% 4.0% 4.0% 5.0%
Responses 13 13 13 13 11 11 11 11 13 13 13 13 12 12 13 13 13 13
Average (%) 9.3% 10.5% 10.4% 10.9% 15.8% 16.5% 17.3% 17.8% 4.2% 4.3% 3.7% 3.8% 6.6 7.3 2.8% 3.1% 4.2% 4.3%
- ------------------------------------------------------------------------------------------------------------------------------------
MID-RATE
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 12.0% 12.0% 15.0% 15.0% 18.0% 18.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
11.0% 11.0% 11.0% 11.0% 13.0% 13.0% 17.0% 17.0% 6.0% 6.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
9.5% 11.0% 11.0% 11.0% 15.0% 18.0% 17.0% 20.0% 3.0% 3.0% 2.0% 2.0% 5.0 5.0 2.0% 3.0% 4.0% 4.0%
10.0% 12.0% 10.5% 13.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
9.5% 9.5% 10.5% 10.5% 15.0% 15.0% 18.0% 18.0% 4.5% 4.5% 4.0% 4.0% 10.0 10.0 3.5% 3.5% 4.0% 4.0%
Responses 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5
Average (%) 10.0% 10.7% 11.0% 11.5% 14.2% 15.2% 18.0% 18.6% 4.2% 4.2% 3.7% 3.7% 6.4 7.0 2.9% 3.1% 4.0% 4.0%
----------------------------------------------------------------------------------------------------------------------
Total
Responses 25 25 26 26 24 24 24 24 26 26 26 26 25 25 26 26 26 26
Weighted
Average (%) 8.9% 10.1% 10.4% 11.1% 14.8% 15.7% 18.3% 18.8% 4.2% 4.3% 3.7% 3.8% 6.5 7.0 2.9% 3.2% 4.1% 4.2%
----------------------------------------------------------------------------------------------------------------------
</TABLE>
*as percent of total revenues
18 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES BLENDED INTERNAL EQUITY INTERNAL GROWTH RATES TYPICAL PROJECTION MANAGEMENT RESERVES FOR
GOING-IN TERMINAL RATE OF RETURN RATE OF RETURN INCOME EXPENSES PERIOD (YEARS) FEES* REPLACEMENT*
----------------------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
MID-RATE HOTEL - LIMITED SERVICE
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 12.0% 12.0% 15.0% 15.0% 15.0% 15.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
12.0% 12.0% 12.0% 12.0% 13.0% 13.0% 17.0% 17.0% 3.0% 3.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
8.0% 10.0% 10.0% 10.0% 12.0% 15.0% 14.0% 16.0% 3.0% 3.0% 2.0% 2.0% 5.0 5.0 3.0% 4.0% 4.0% 5.0%
11.0% 13.0% 11.5% 14.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
11.0% 11.0% 11.8% 11.8% 16.0% 16.0% 19.0% 19.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0 4.0% 4.0% 4.5% 4.5%
10.0% 13.0% 12.0% 13.0% 25.0% 25.0% 20.0% 20.0% 3.5% 4.0% 3.5% 4.0% 5.0 5.0 4.0% 4.0% 5.0% 5.0%
Responses 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6
Average (%) 10.3% 11.5% 11.5% 12.1% 15.7% 16.5% 17.5% 17.8% 3.5% 3.6% 3.7% 3.8% 6.2 6.7 3.3% 3.5% 4.3% 4.4%
- ------------------------------------------------------------------------------------------------------------------------------------
ECONOMY
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 12.0% 12.0% 15.0% 15.0% 15.0% 15.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
13.0% 13.0% 13.0% 13.0% 13.0% 13.0% 17.0% 17.0% 3.0% 3.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
9.0% 11.0% 10.0% 10.0% 12.0% 15.0% 14.0% 16.0% 3.0% 3.0% 3.0% 3.0% 5.0 5.0 4.0% 5.0% 5.0% 5.0%
11.0% 13.0% 11.5% 14.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
11.0% 11.0% 11.8% 11.8% 16.0% 16.0% 19.0% 19.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0 4.0% 4.0% 4.5% 4.5%
Responses 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5
Average (%) 10.8% 11.6% 11.7% 12.2% 13.8% 14.8% 17.0% 17.4% 3.5% 3.5% 3.9% 3.9% 6.4 7.0 3.4% 3.6% 4.3% 4.3%
Total
Responses 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11
Weighted
Average(%) 10.6% 11.6% 11.6% 12.1% 14.7% 15.7% 17.3% 17.6% 3.5% 3.5% 3.8% 3.8% 6.3 6.8 3.4% 3.6% 4.3% 4.4%
</TABLE>
*as percent of total revenues
AUTUMN 1996 19
<PAGE>
Addenda
================================================================================
Appraiser Qualifications
<PAGE>
QUALIFICATIONS
================================================================================
Donald R. Morris, MAI
Professional Affiliations:
Member of the Appraisal Institute (MAI Designations #9812)
District of Columbia Certified General Real Estate Appraiser (#GA00010267)
Commonwealth of Virginia Certified General Real Estate Appraiser
(#4001002465)
State of Maryland Certified General Real Estate Appraiser (#7220)
State of West Virginia Certified General Real Estate Appraiser (#237)
Appraisal/Real Estate Experience:
Director/Manager, Cushman & Wakefield of Washington, D.C. and Assistant
Manager, Cushman & Wakefield of Texas, Inc., Dallas, Texas, Valuation
Advisory Services, a full service real estate organization specializing in
appraisal and consultation. April 1990 to present.
Associate Appraiser, Joseph A. Dengel & Company, Dallas, Texas, May 1977
to April 1990.
Other real estate experience includes work as a residential listing and
selling agent preparing market analyses and origination contracts.
Experience includes appraisal of the following types of property.
Office Buildings Medical Office Buildings
Regional Malls Power Centers
Outlet Centers Community & Neighborhood Shopping Centers
Department Stores Industrial Buildings
Residential Subdivisions Single Family Residences
Multi-Family Properties Condominiums/Duplexes
Subdivision Analysis Farm/Ranch
Mixed Use Properties Golf Courses
Grape Vineyards Special Purpose Facilities
Commercial Land Hotel/Motel
Ad Valorem Tax Appeals
Appraisal and consulting services used for mortgage loans, relocations,
gift and estate tax, condemnation and litigation purposes.
Qualified as an expert witness in state and federal real estate court
cases.
Education:
Bachelor of Arts (Political Science), 1981
University of Texas at Arlington, Arlington, Texas.
<PAGE>
QUALIFICATIONS
================================================================================
Donald R. Morris, MAI
Appraisal Institute Courses:
#1Al - Real Estate Appraisal Principles
#1A2 - Basic Valuation Procedures
#1Bl - Capitalization Theory & Techniques, Part A
#1B2 - Capitalization Theory & Techniques, Part B
#410 - Standards of Professional Appraisal Practice, Part A (USPAP)
#420 - Standards of Professional Appraisal Practice, Part B (Al)
#21 - Case Studies in Real Estate Valuation
#22 - Report Writing and Valuation Analysis
#82 - Residential Valuation Procedures
Additional Accredited Real Estate Courses:
Real Estate Appraisal
Principles of Real Estate
Real Estate Marketing
Real Estate Finance
Property Management
Federal National Mortgage Corporation (Fannie Mae) - Appraisal Training
Certified in the Appraisal's Institute's voluntary program of continuing
education for its designated members.
<PAGE>
QUALIFICATIONS
================================================================================
Kelly J. Small
Professional Affiliations:
Candidate Member of the Appraisal Institute (#M921847)
State of Maryland Certified General Real Estate Appraiser (#20143)
Maryland Salesperson License (#313081)
Appraisal/Real Estate Experience:
Appraiser, Cushman & Wakefield of Washington, D.C., Inc., Valuation
Advisory Services, a full service real estate organization specializing in
appraisal and consultation. Member of National Affordable Housing Group.
October, 1995 to present.
Staff Appraiser, Legg Mason Realty Group, Inc., Baltimore, Maryland.
February, 1990, through October, 1995.
Other work experience includes financial analyst, market research analyst
and real estate settlement work.
Experience includes appraisal of the following types of property:
Office Buildings Shopping Centers
Subdivision Development Analysies Industrial Facilities
Commercial Land Multi-Family Properties
Single Family Residences Leasehold/Leased Fee Interests
Hotel Special Purpose Facilities
Manufacturing Facilities Warehouse Facilities
Education:
Bachelor of Science (Finance), 1990
University of Baltimore, Baltimore, Maryland
Masters of Science (Real Estate Development), 1996
The Johns Hopkins University, Baltimore, Maryland
Appraisal Institute Courses:
#1Al - Real Estate Appraisal Principles
#1A2 - Basic Valuation Procedures
#1Bl - Capitalization Theory & Techniques, Part A
#1B2 - Capitalization Theory & Techniques, Part B
#410 - Standards of Professional Appraisal Practice, Part A (USPAP)
<PAGE>
QUALIFICATIONS
================================================================================
Kelly J. Small
#420 - Standards of Professional Appraisal Practice, Part B (Al)
#540 - Report Writing and Valuation Analysis
#550 - Advanced Applications
Specific course work and seminars:
The new URAR Appraisal Reports, Emerging Trends
Affordable Housing Tax Credit Coalition seminars
This CD ROM contains an electronic version of appraisals for the Mortgaged
Properties in PDF format and forms part of the paper version of the Prospectus
Supplement. The information contained in this CD ROM does not appear elsewhere
in paper form in this Prospectus Supplement and must be considered as part of,
and together with, the information contained elsewhere in this Prospectus
Supplement and the Prospectus. The information contained in this CD ROM has
been filed by the Seller with the Securities and Exchange Commission as part
of a Current Report on Form 8-K, which is incorporated by reference in this
Prospectus Supplement, and is also available through the public reference
branch of the Securities and Exchange Commission. Defined terms used in this CD
ROM but not otherwise defined therein shall have the respective meanings
assigned to them in the paper portion of the Prospectus Supplement and the
Prospectus. All of the information contained in this CD ROM is subject to the
same limitations and qualifications contained in this Prospectus Supplement and
the Prospectus. Prospective investors are strongly urged to read the paper
portion of this Prospectus Supplement and the Prospectus in its entirety prior
to accessing this CD ROM. If this CD ROM was not received in a sealed package,
there can be no assurances that it remains in its original format and should
not be relied upon for any purpose. Prospective investors may contact J.
Theodore Borter of Goldman, Sachs Co. at (212)902-3857 to receive an original
copy of the CD ROM.
<PAGE>
-----------------------------------------
COMPLETE APPRAISAL
OF REAL PROPERTY
East Gate Corporate Center
Various Locations
Mount Laurel and Moorestown Townships
Burlington County, Pennsylvania
-----------------------------------------
IN A SELF-CONTAINED REPORT
As of July 1, 1997
Prepared For:
Goldman Sachs Mortgage Company
85 Broad Street
New York, New York 10004
Prepared By:
Cushman & Wakefield of Pennsylvania, Inc.
Valuation Advisory Services
Two Logan Square - 20th Floor
Philadelphia, Pennsylvania 19103
<PAGE>
================================================================================
[LETTERHEAD OF CUSHMAN & WAKEFIELD]
July 1, 1997
Mr. Sheridan Schechner
Managing Partner
Goldman Sachs Mortgage Company
85 Broad Street
New York, New York 10004
Re: Complete Appraisal of Real Property
East Gate Corporate Center
Various Locations
Mount Laurel and Moorestown Townships
Burlington County, Pennsylvania
Dear Mr. Schechner:
In fulfillment of our agreement as outlined in the Letter of Engagement, Cushman
& Wakefield, Inc. is pleased to transmit our self-contained appraisal report
estimating the market value of the leased fee estate in the subject property.
The value opinion reported below is qualified by certain assumptions, limiting
conditions, certifications, and definitions, which are set forth in the report.
This report was prepared for Goldman Sachs Mortgage Company and is intended only
for its specified use. It may not be distributed to or relied upon by other
persons or entities without written permission of Cushman & Wakefield, Inc.
This appraisal report has been prepared in accordance with our interpretation of
your institution's guidelines, the regulations of OCC and the Uniform Standards
of Professional Appraisal Practice, including the Competency Provision and The
Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) and the
guidelines of federal regulatory agencies.
The property was inspected by and the report was prepared by John J. Lynch, MAI
and Joseph Vizza under the supervision of John B. Rush, MAI.
<PAGE>
Mr. Sheridan Schechner
Goldman Sachs Mortgage Company Page 2 July 1, 1997
Based on our complete appraisal as defined by the Uniform Standards of
Professional Appraisal Practice, we have formed an opinion that the market value
of the leased fee estate in the referenced property, subject to the assumptions,
limiting conditions, certifications, and definitions, as of July 1, 1997, was:
FORTY SEVEN MILLION THREE HUNDRED TWENTY FIVE THOUSAND DOLLARS
$47,325,000
The East Gate Corporate Center includes ten separate improved parcels and four
vacant development parcels more fully described within the body of this report.
Individual cash flow projections have been prepared on each building leading to
a conclusion of value on a building by building basis. The individual values are
as follows:
700 East Gate Drive $ 11,200,000
701 East Gate Drive $ 6,800,000
303 Fellowship Drive $ 4,300,000
305 Fellowship Drive $ 5,100,000
307 Fellowship Drive $ 4,300,000
309 Fellowship Drive $ 4,500,000
815 East Gate Drive $ 1,675,000
817 East Gate Drive $ 1,600,000
304 Harper Drive $ 1,850,000
305 Harper Drive $ 900,000
4 Development Parcels $ 5,100,000
------------
Total $ 47,325,000
This letter is invalid as an opinion of value if detached from the report, which
contains the text, exhibits, and an Addenda.
Respectfully submitted,
Cushman & Wakefield of Pennsylvania, Inc.
/s/ John J. Lynch, MAI
- -----------------------------------
John J. Lynch, MAI
State Certified Appraiser #RG-01269
/s/ Joseph G. Vizza
- -----------------------------------
Joseph G. Vizza
State Certified Appraiser #RG-01426
/s/ John B. Rush, MAI
- -----------------------------------
State Certified Appraiser #RG-00808
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PHOTOGRAPHS OF SUBJECT PROPERTY
================================================================================
[graphic omitted]
700 East Gate Drive
[graphic omitted]
701 East Gate Drive
<PAGE>
Photographs of Subject Property
================================================================================
[graphic omitted]
303 Fellowship Road
[graphic omitted]
305 Fellowship Road
<PAGE>
Photographs of Subject Property
================================================================================
[graphic omitted]
307 Fellowship Road
[graphic omitted]
309 Fellowship Road
<PAGE>
Photographs of Subject Property
================================================================================
[graphic omitted]
815 East Gate Drive
[graphic omitted]
817 East Gate Drive
<PAGE>
Photographs of Subject Property
================================================================================
[graphic omitted]
304 Harper Drive
[graphic omitted]
305 Harper Drive
<PAGE>
Photographs of Subject Property
================================================================================
[graphic omitted]
View of Developmental Lands Along Nixon Drive
[graphic omitted]
View of Development Land Along Nixon Drive
<PAGE>
INTRODUCTION
================================================================================
Identification of Property
This is a portfolio of single story office/flex and mid-rise office buildings
which form a part of East Gate Corporate Center. Located in Mount Laurel and
Moorestown Townships, Burlington County, New Jersey, it is an attractive and
modern corporate complex which is bordered by the New Jersey Turnpike to the
south, Route 38 to the north, and Route 73 to the west. Interstate 295
essentially bi-sects the complex from east to west. Additionally, the property
includes four vacant retail development parcels in the East Gate Square complex.
The street addresses of the properties which comprise the subject are as
follows:
<TABLE>
<CAPTION>
===================================================================================================================
Land Rentable Year
Address Property Type Area Bldg. Area Constructed Occupancy # Tenants
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
700 East Gate Drive Mid-rise office 6.855 acs. 118,071 s.f 1984 93% 14
701 East Gate Drive Mid-rise office 11.250 acs. 61,477 s.f. 1986 100% 10
303 Fellowship Road Mid-rise office 4.710 acs. 53,208 s.f. 1979 90% 6
305 Fellowship Road Mid-rise office 4.207 acs. 55,649 s.f. 1980 90% 6
307 Fellowship Road Mid-rise office 5.000 acs. 54,577 s.f. 1981 87% 18
309 Fellowship Road Mid-rise office 5.102 acs. 55,351 s.f. 1982 76% 7
815 East Gate Drive Single story office 5.980 acs. 25,500 s.f. 1986 88% 2
817 East Gate Drive Single story office See Note 25,351 s.f. 1986 100% 2
304 Harper Drive Two story office 2.510 acs. 29,537 s.f. 1975 91% 8
305 Harper Drive Single story office/flex 2.000 acs. 14,980 s.f. 1979 100% 1
Vacant Parcels Retail land 48.087 acs. N/A N/A N/A N/A
===================================================================================================================
</TABLE>
Note: 815-817 East Gate Drive represents two buildings supported by one site.
Property Ownership and Recent History
The properties were constructed by an affiliated entity of its current owner,
Atlantic American Properties. The subject is part of a portfolio of property
previously owned by Bell Atlantic Properties. Atlantic American Properties
acquired Bell Atlantic Properties as a going concern.
Purpose and Intended Use of the Appraisal
The purpose of this appraisal is to estimate the market value of the appropriate
leased fee/fee simple estate on July 1, 1997. The appraisal is to be used in
conjunction with a proposed mortgage financing of the subject property.
================================================================================
-1-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
INTRODUCTION
================================================================================
Extent of the Appraisal Process
In the process of preparing this appraisal, we:
o Inspected the exterior of the building and the site improvements and
a representative sample of tenant spaces with Peter Corcoran,
Director of Portfolio Management for Atlantic American Properties at
East Gate Center.
o Reviewed leasing policy, concessions, tenant build-out allowances,
and history of recent rental rates and occupancy with the building
manager.
o Reviewed a detailed history of income and expense and a budget
forecast for 1997 including the budget for planned capital
expenditures and repairs.
o Conducted market research of occupancies, asking rents, concessions
and operating expenses at competing buildings which involved
interviews with on-site managers and a review of our own data base
from previous appraisal files.
o Prepared an estimate of stabilized income and expense (for
capitalization purposes).
o Conducted market inquiries into recent sales of similar buildings to
ascertain sales price per square foot, effective gross income
multipliers and capitalization rates. This process involved
telephone interviews with sellers, buyers and/or participating
brokers. (See detailed sales write-ups in Addenda for more complete
information on the verification process.)
o Prepared Sales Comparison and Income Approaches to value for the
improved properties.
o Prepared Sales Comparison Approaches to value for the vacant
properties.
Date of Value and Property Inspection
The date of value is July 1, 1997. We inspected the property on May 27, 1997.
Property Rights Appraised
Leased fee estate for improved properties; fee simple estate for vacant land.
Definitions of Value, Interest Appraised, and Other Pertinent Terms
The definition of market value taken from the Uniform Standards of Professional
Appraisal Practice of the Appraisal Foundation, is as follows:
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 is the
consummation of a sale as of a specified date and the passing of title
from seller to buyer under conditions whereby:
================================================================================
-2-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
[graphic omitted]
[Regional Map]
<PAGE>
Introduction
================================================================================
1. Buyer and seller are typically motivated;
2. Both parties are well informed or well advised, and acting in what
they consider their own best interests;
3. A reasonable time is allowed for exposure in the open market;
4. Payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
5. 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.
Exposure Time
Under Paragraph 3 of the Definition of Market Value, the value estimate
presumes that "A reasonable time is allowed for exposure in the open
market". Exposure time is defined as the estimated length of time the
property interest being appraised would have been offered on the market
prior to the hypothetical consummation of a sale at the market value on
the effective date of the appraisal. Exposure time is presumed to precede
the effective date of the appraisal. Based our analysis of market data, as
well as the fact that the subject consists of a well maintained and
located portfolio of modern facilities, we estimate a reasonable Exposure
Time to have been six to nine months for the subject at the concluded
opinion of value reported.
The following definitions of pertinent terms are taken from the Dictionary of
Real Estate Appraisal, Third Edition (1993), published by the Appraisal
Institute.
Leased Fee Estate
An ownership interest held by a landlord with the rights of use and
occupancy conveyed by lease to others. The rights of the lessor (the
leased fee owner) and the leased fee are specified by contract terms
contained within the lease.
Fee Simple
Absolute ownership unencumbered by any other interest or estate; subject
only to the limitations of eminent domain, escheat, police power, and
taxation.
Value As Is
The value of specific ownership rights to an identified parcel of real
estate as of the effective date of the appraisal; relates to what
physically exists and is legally permissible and excludes all assumptions
concerning hypothetical market conditions or possible rezoning.
Legal Description
The properties which comprise the subject are legally identified by the
Mount Laurel and Moorestown Township Assessor's Office as described in the
chart on the following page. We have not been provided with the metes and
bounds legal description of the sites, therefore, none is exhibited.
================================================================================
-3-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
INTRODUCTION
================================================================================
================================================================================
Address Township County Block Lot
- --------------------------------------------------------------------------------
700 East Gate Drive Mount Laurel Burlington 1201.02 4
701 East Gate Drive Mount Laurel Burlington 1201.01 1
303 Fellowship Road Mount Laurel Burlington 1201.02 1.2
305 Fellowship Road Mount Laurel Burlington 1201.02 3
307 Fellowship Road Mount Laurel Burlington 1201.02 2
309 Fellowship Road Mount Laurel Burlington 1201.02 1
815-17 East Gate Drive Mount Laurel Burlington 1201.04 1.1
304 Harper Drive Moorestown Burlington 3202 2
305 Harper Drive Moorestown Burlington 3201 2
East Side Nixon Dr. (vacant land) Moorestown Burlington 3003 1
East Side Nixon Dr. (vacant land) Moorestown Burlington 3200 1
East Side Nixon Dr. (vacant land) Moorestown Burlington 3200 2
East Side Nixon Dr. (vacant land) Moorestown Burlington 3002 1
East Side Nixon Dr. (vacant land) Mount Laurel Burlington 1200 1.04
================================================================================
================================================================================
-4-
CUSHMAN &
WAKEFIELD(R)
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REGIONAL ANALYSIS
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Philadelphia Metropolitan Area
The subject property is located on the eastern side of the Philadelphia
Metropolitan Area in Burlington County, New Jersey. The Philadelphia
Metropolitan Area, itself, encompasses over 3,500 square miles through the
counties immediately surrounding the city in both Pennsylvania and New Jersey.
The greater metropolitan area is actually part of a larger economic and
geographic entity known as the Delaware Valley, which extends from Trenton, New
Jersey at the north to Wilmington, Delaware at the south. The Delaware Valley is
a closely integrated market which pervades the many political subdivisions
incorporated in it.
Population
According to the most recent estimate of the Federal Census Bureau, the
Philadelphia Metropolitan Area has the fourth largest population in the nation
after Los Angeles, New York, and Chicago. The currently reported population of
about five million represents a .4 percent increase over that counted in 1990.
The statistics indicated population growth in the suburban counties surrounding
Philadelphia, with a decline in the city itself. The current population of
Burlington County is reported to be about 408,800, an increase of approximately
1.4 percent since 1990. These statistics are significant in that demographers
believe population growth is directly tied to employment growth.
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Population Statistics
Philadelphia Metropolitan Area
(in Thousands)
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County 1980 1990 % Change 1995 % Change
================================================================================
Bucks 483.8 541.2 + 11.9% 570.6 + 5.4%
- --------------------------------------------------------------------------------
Chester 320.1 376.4 + 17.6% 399.7 + 6.2%
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Delaware 552.2 547.7 - 0.8% 548.2 + 0.1%
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Montgomery 644.6 678.1 + 5.2% 703.2 + 3.7%
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Philadelphia 1,668.2 1,585.6 - 5.0% 1,521.5 - 4.0%
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Burlington 366.0 395.1 + 8.0% 400.8 + 1.4%
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Camden 472.8 502.8 + 6.4% 506.6 + 0.8%
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Gloucester 202.1 230.1 + 13.9% 243.1 + 5.7%
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Salem 65.0 65.3 + 0.5% 64.6 - 1.1%
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Total Metro Area 4,774.8 4,922.3 + 3.1% 4,958.3 + .7%
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Source: U.S. Census Bureau
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Employment
The traditional economic base of the region was once heavy manufacturing.
Concurrent with national trends, the regional economy has now shifted toward a
skilled/service oriented base. Approximately 35 percent of the region's 2.2+/-
million in the wage and salary workforce is now employed in the service
industries, as contrasted with the approximate 14 percent employed in
manufacturing. Furthermore, another 23 percent of the region's workforce is
employed in the wholesale and retail trades, while only 14 percent is employed
by government.
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Regional Analysis
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Philadelphia Metropolitan Area
January Employment Statistics
(In Thousands)
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Industry Classification 1990 1995 (delta) 1997 (delta)
================================================================================
Manufacturing 358.6 311.8 -2.6% 305.6 -2.0%
Construction & Mining 95.4 73.9 +6.0% 73.2 -1.0%
Transportation, Communication 99.0 104.5 +3.3% 104.7 +1.9%
& Utilities
Wholesale & Retail Trades 508.0 482.8 -2.3% 494.6 +2.4%
Finance, Insurance & Real Estate 167.6 155.1 -1.3% 154.2 -0.6%
Services 659.1 717.5 +4.3% 765.4 +6.7%
Government 308.4 303.3 +0.6% 298.7 -1.5%
------------------------------------------------
Total Wage & Salary Employment 2,196.1 2,148.9 +0.8% 2,196.4 +2.2%
================================================
Total Civilian Labor Force 2,409.0 2,397.6 -0.9% 2,450.3 +2.2%
================================================
Unemployment 114.1 143.5 123.3
Unemployment Rate 4.7% 6.0% 5.0%
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Source: Pennsylvania Department of Labor and Industry
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According to statistics prepared by the Pennsylvania Department of
Industry and Labor, wage and salary employment in the Philadelphia Metropolitan
Area increased by 47,500 jobs or 2.2 percent between 1995 and 1997.
Additionally, the total civilian labor force which includes wage and salary
employment plus those who are self-employed increased by 52,700 workers. As can
be seen, a vast majority of this growth in employment is in the service
industries and the wholesale and retail trades. The continued growth in the
service industries as well as the relative stability in the finance, insurance
and real estate classification is significant to real property like the subject
as it is from these groups that the occupants of office space come.
The state Department of Industry and Labor reports that, within the
service industries, business services, particularly temporary help agencies and
accounting firms, led this employment classification with a growth of 27,900
jobs created since 1992. Second place goes to medical services with 12,600 new
jobs created in the Philadelphia Metropolitan Area over the past four years.
Private sector education was third growing by 19,900 jobs. A listing of the ten
largest employers in Burlington County alone bears out these statistics.
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Largest Non-Public Employers
Burlington County
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Employer Local Employees Product or Service
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Martin Marietta Government 3,000 Air Defense Systems
Electronic Systems Radar
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Memorial Health Alliance 1,372 Community Nursing
Services
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Computer Sciences Corp. 1,206 Technology Systems
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Graduate Health System 995 Health Care
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Deborah Heart and Lung Center 970 Heart and Lung
Specialization
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PHH US Mortgage Corp. 858 Mortgage Banker
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Inductotherm Industries, Inc. 807 Metals Distributor
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Automatic Data Processing, Inc. 650 Financial Information
Services
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West Jersey Hospital-Marlton 592 Medical/Surgical
Hospital
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JCI Data Processing, Inc. 500 Data Processing
Services
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Source: Philadelphia Business Journal
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Regional Analysis
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According to the Pennsylvania Department of Labor and Industry, the March,
1997 unemployment rate in the nine county Philadelphia Metropolitan Area was 4.9
percent as compared to 5.8 percent for the State of New Jersey and 5.5 percent
for the U.S. as a whole. At the same time, the unemployment rate for Burlington
County was reported to be 4.5 percent.
Income
The median effective household buying income or disposable income after
federal taxes in the Philadelphia Metropolitan Area is currently estimated to be
$39,470 or 28th of the 320 metro markets surveyed. This compares to $33,333 for
the Commonwealth of Pennsylvania, $42,247 for the State of New Jersey and
$32,238 for the United States as a whole. Burlington County ranks fourth in
current median household income level in the Metropolitan Area at $44,967 per
dwelling unit.
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Income Statistics
Philadelphia Metropolitan Area
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Effective
Buying Income Median Household
County Households (in Thousands) EBI
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Bucks 203,700 $11,424,599 $48,814
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Chester 143,400 9,732,884 55,798
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Delaware 202,900 10,359,964 42,366
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Montgomery 269,700 16,369,926 47,723
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Philadelphia 571,500 20,080,366 27,542
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Burlington 140,600 7,341,632 44,967
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Camden 178,900 8,049,714 37,788
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Gloucester 83,900 3,700,926 39,978
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Salem 23,500 1,019,275 38,123
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Total 1,818,100 $88,079,286 $39,470
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Source: Sales & Marketing Management 1996
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Retail Sales
Retail sales in the Philadelphia Metropolitan Area are currently estimated
to approach $44 billion annually. The Philadelphia area ranked fifth nationally
behind Chicago, Los Angeles, New York and Washington, D.C. in total retail sales
for 1995, the last year for which statistics are currently available. Retail
sales in this metropolitan area have increased at a compound annual rate of 4.2
percent since 1990. Within Burlington County, the annual retail sales for 1995
were estimated to be about $4.03 billion, up 5.5 percent from the previous year
sales. Retail sales in Burlington County have increased at a compound annual
rate of 3.5 since 1990.
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Regional Analysis
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Retail Sales
Philadelphia Metropolitan Area and Burlington County
(in Thousands)
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Metropolitan Burlington
Year Philadelphia % Change County % Change
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1990 $36,033,312 $3,386,918
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1991 $35,120,446 - 2.5% $3,484,868 + 2.9%
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1992 $39,811,716 +12.2% $3,749,545 + 7.6%
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1993 $40,858,286 + 2.6% $3,801,449 + 1.4%
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1994 $43,480,561 + 6.4% $3,820,845 + 0.5%
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1995 $44,309,612 + 1.9% $4,029,369 + 5.5%
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Compound Annual Change + 4.2% + 3.5%
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Source: Sales & Marketing Management 1991-1996
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Linkages
The Philadelphia Metropolitan Area benefits from an admirable
transportation system linking the region to the rest of the nation and points
throughout the world. The Port of Philadelphia is one of the largest fresh water
ports in the country. The Philadelphia International Airport provides service to
most major North American cities and many European destinations. From its
central location in the heart of the eastern megalopolis, excellent highway and
rail accessibility is also available.
Cultural, Educational and Recreational Resources
Educational opportunities abound throughout the region, with twelve major
colleges and universities located here. There are also four teaching medical
college hospitals in the Philadelphia area. As the nation's fourth largest urban
center and first capital, cultural and recreational activities available to the
populace are widely diverse.
Conclusions
The central core of this metropolitan area, the City of Philadelphia,
continues to experience a fiscal crisis precipitated by a diminishing tax base
and the increased need for new and costly municipal services. However, the
current administration and council are now cooperating to promote fiscal
responsibility which has created the city's first operating surplus in years. On
the other hand, the surrounding suburban counties have been the focus of the
region's population and job growth over the last decade. This trend is expected
to continue into the next century.
Overall, the Philadelphia Metropolitan Area is an older, densely developed
region with a mature economy which can only be expected to grow less and at a
slower pace in the months and years to come. Taxes and labor costs throughout
the Northeastern United States are higher than elsewhere so that the
opportunities for low cost start-up companies are less. Fortunately, the
patchwork of existing small to mid-sized companies in the Philadelphia
Metropolitan Area should protect this region from the severe economic shocks
seen in many single industry towns.
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<PAGE>
Regional Analysis
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Thus, over the long term, the Philadelphia Metropolitan Area benefits from
a diversified economic base which should protect the region from the effects of
wide swings in the economy. The region's strategic location along the eastern
seaboard and its reputation as a major business center should further enhance
the area's long term outlook. The region's real estate market is giving way to
optimism as availabilities are absorbed through the current economic expansion.
It is our conclusion that the long term trends of the region should eventually
exert positive influences on the values of well located and well designed real
property.
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<PAGE>
[GRAPHIC OMITTED]
Neighborhood Map
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CUSHMAN &
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<PAGE>
MARKET ANALYSIS
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Moorestown and Mt. Laurel, New Jersey
The subject property is located within Moorestown Township, a short
distance north of its border with Mt. Laurel Township. These communities lie
approximately ten miles northeast of Philadelphia's central business district.
Together, Moorestown and Mount Laurel townships function as a single
neighborhood by virtue of the highway system linking them to the rest of the
metropolitan region as well as a similarity in land uses and types of
development. The townships are mainly characterized by a complementary mixture
of commercial, office, industrial and residential land uses in an attractive
suburban setting.
According to the latest figures available, the Moorestown/Mount Laurel
Area has a current population of approximately 46,400. Since 1980, the
population of these communities has increased approximately 92 percent. During
the decade of the Eighty's, this area had been the fastest growing portion of
Burlington County. As available land for development in both Moorestown and
Mount Laurel Townships diminish, we anticipate that the focus of future
development will shift to the more rural, outlying areas of the county.
The growth and development of both townships is directly related to the
excellent transportation system serving the immediate area. The subject property
is located less than one mile north of Route 38 and south of Route 130.
Additionally, both Interstate 295 and the New Jersey Turnpike can be accessed
within two miles of the subject property. The road network provides access to
points throughout the Philadelphia Metropolitan Area and beyond.
The nearest major retail commercial development is the Moorestown Mall, a
1.2 million square foot regional mall anchored by Strawbridge's, Sears and
Boscov's. Immediately to the rear of the mall is East Gate Square, a power
center which is being constructed in four phases. Phase I and 11 were
constructed in 1993 and 1995, respectively. Phase I is a 241,000 square foot
center, plus a separately owned 130,000 square foot freestanding Home Depot.
Phase 11 is a 154,000 square foot center. Phase III is currently under
development and will contain 119,000 square feet when completed in July, 1997.
Phase IV will contain 100,386 square feet of retail area when completed.
Including the Home Depot store adjoining Phase 1, East Gate will contain a total
of approximately 744,000 square feet of retail area by July 1997. Finally, there
is vacant land available for an additional 120,000 square feet of future retail
area. There is additional retail and commercial development along Route 38, west
of the Moorestown Mall, as well as along Route 73. Main Street in the town of
Moorestown also features a wide variety of retail and office uses.
Residential development in the Moorestown/Mount Laurel area is attractive
and quite diverse. Moorestown is one of the most desirable residential locations
in all of South Jersey with prices of single family dwellings ranging between
$175,000 to upwards of $1,000,000. The township also offers a good inventory of
multi-family rental properties. Both townships also benefit from all of the
cultural, educational, and recreational facilities which the fourth largest
metropolitan center in the country can offer.
Office and industrial activity in Mount Laurel in the East Gate Center,
and in Moorestown in three projects; Moorestown Corporate Center, Moorestown
Techni-Park, and the Moorestown Industrial Park. Occupants in these developments
include General Motors Training Center, Advanced Technology Laboratories,
Raytheon Commercial Credit, Merrill Lynch, Semcor, and Computer Sciences
Corporation, among others.
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Market Analysis
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In summary, the Moorestown/Mount Laurel area witnessed significant
development activity in the Eighty's. Moorestown, itself, is known as one of the
most desirable residential communities in Southern New Jersey. Along with this
residential base, the township offers a broad mix of commercial and
non-offensive light industrial uses. Both Moorestown and Mount Laurel Township
are affluent communities which offer a full range of residential housing
alternatives, commercial services, excellent schools and recreational areas. The
long term trend for these communities is considered positive.
General Office Market Overview
Office buildings, as an asset class, are attracting renewed interest from
investors in the current market. Many believe suburban office buildings offer
the greatest upside potential among the various property types. Prices for the
best quality suburban office buildings have increased due to buyer demand.
In most suburban markets, office vacancies have declined reflecting the
expansions of small business. Most acknowledge that the market has
"bottomed-out" as rents are generally stabilizing. More recently, as buyer
demand pushes prices up, some investors are more willing to pay for "future"
dollars, when only 18 months ago purchase decisions were based solely on revenue
in place.
The lack of new construction is also viewed as a positive in the office
market. Though firms are leasing less space per employee than ever before, once
the current economic recovery solidifies, office building owners are now in a
stronger negotiating position as demand outpaces supply. Still, in most
communities, there is plenty of land available for new competition.
The job growth which is occurring now comes from small and mid-sized
technologically sophisticated firms. These, more than most, seek suburban
locations which are close to their employees. By moving closer to their
employees, commuting time is less which, some say, creates a more productive
workforce. Frequently, occupancy costs are lower in the suburbs than in the
urban core which translates back into corporate profitability. The subject
property benefits from such trends, particularly due to its location outside the
Philadelphia city limits.
The subject property shares in these macro-market observations and trends.
More importantly, the subject competes in its own micro-market for tenants,
users and ultimately, investment returns. The following is a detailed
description of this local marketplace.
Market Supply
The subject improvements include a series of single story and multi-story
office buildings. These properties compete for tenants in what Cushman &
Wakefield designates the Burlington submarket area of the eastern suburbs of
Philadelphia. There are approximately 4.6 million square feet of existing
commercial office space in the Burlington marketplace. The following chart is an
overview of this marketplace as of the 1st Quarter of 1997. 11
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Market Analysis
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Office Market Overview
Burlington County
March 31, 1997
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Class of Space Total Rentable Area Total Area Available Vacancy Rate
================================================================================
A 1,251,569 SF 113,261 SF 9.0%
B 2,980,203 SF 496,851 SF 16.7%
C 350,000 SF 42,499 SF 12.1%
-------------------------------------------------------------
Total Inventory 4,581,772 SF 652,611 SF 14.2%
================================================================================
As of March 31, 1997, total vacancy in this marketplace was reported to be
approximately 14.2 percent, down from 19.5 percent at the same time last year.
In any type of market,there must be an inventory of goods maintained in order to
satisfy demand. Within the commercial office market, some space must be
maintained at all times to accommodate the constant shifting of tenants. The
following is a listing of blocks of contiguous space in the Burlington County
marketplace.
================================================================================
Blocks of Contiguous Space
20,000 Square Feet or Greater
Burlington County Market
March 31, 1997
================================================================================
Location Rentable Contiguous Area
================================================================================
Moorestown Corporate Center 11 75,000 SF
Moorestown Corporate Center 1 75,000 SF
4000 Midlantic Drive 45,432 SF
Marlton Executive Park 24,935 SF
701 East Gate Drive 21,000 SF
================================================================================
A shortage in available inventory is indicated in the market when there is
a discernible lack of prime contiguous office space for larger users. Under
these conditions, new construction is stimulated. At present, there are no
projects under construction in the Southern New Jersey market area.
Additionally, there are five blocks of space in excess of 20,000 contiguous
square feet. Land does exist in this marketplace for new competition. However,
given these sets of circumstances, we do not foresee new construction for some
time to come.
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Market Analysis
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Over the last 24 months, the vacancy rate in the Burlington County
marketplace has declined dramatically from 19.8 percent at the end of the 1st
Quarter of 1995 down to its current level of 14.2 percent. Interestingly, the
vacancy that does exist in this market is concentrated in the average and below
average buildings, much of which should not have ever been built or renovated.
Older, lesser quality office space cannot compare against newer, functional
buildings. The aggregate amount of these spaces is such that many analysts are
now suggesting structural vacancy to be well above the conventional five percent
utilized in past years. On a relative basis, most of the vacancy in the current
market is in the older lesser grades of space. The following chart summarizes
overall vacancy and total availabilities in the local market over the past 24
months.
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Office Market Vacancy and Availabilities
Burlington County
================================================================================
Period Space Available Vacancy Rate
================================================================================
1st Quarter, 1997 652,611 SF 14.2%
Year End, 1996 632,093 SF 13.8%
1st Quarter, 1996 894,065 SF 19.5%
Year End. 1995 913,126 SF 19.5%
1st Quarter, 1995 925,380 SF 19.8%
================================================================================
Nonetheless, a dis-equilibrium continues in this marketplace. With a 14
percent vacancy rate, a user has several alternatives before considering a
build-to-suit transaction. In light of the current costs of construction
relative to market rental rates, this alternative is not entirely feasible at
the current time. For these reasons, we anticipate that rental rates in this
market will not escalate as rapidly as rental rates in the Pennsylvania suburbs
where vacancies are lower.
Market Demand
Market demand for office space is primarily measured by absorption
statistics. Demand for office space in the Burlington County market has
historically come from the movement of users outward from within the City of
Philadelphia and from the formation of new high tech/service oriented
businesses. There was a substantial increase in positive absorption in 1996 as
compared to 1995, increasing from approximately 15,000 in 1995 to approximately
69,000 in 1996. For the first quarter of 1997, there has been negative
absorption of 21,000+/- square feet. Leasing activity averaged 399,000+/- square
feet annually in 1995 and 1996, with an additional 27,000+/- square feet in the
first quarter of 1997.
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Market Analysis
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Office Market Absorption and Leasing
Burlington County
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Period Absorption Leasing
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1st Quarter, 1997 -20,518 SF 27,274 SF
Year End, 1996 68,916 SF 388,649 SF
1st Quarter, 1996 -91,906 SF 72,881 SF
Year End, 1995 14,978 SF 408,958 SF
1st Quarter, 1995 -1,342 SF 87,866 SF
================================================================================
From an overall market perspective, absorption statistics are highly
indicative of long term growth or decline. Among the various properties which
compete for tenants, leasing activity serves as an indication of movement around
a specific marketplace. Where absorption is the net change in occupied space
over a period of time, leasing is the sum of all completed transactions in a
given time period. Leasing statistics are an important consideration in an
office market analysis as they can show the amount of continued interest in a
specific marketplace and product type. Typically, new construction benefits in a
market with strong leasing statistics as tenants "trade-up" to the latest
buildings from older complexes.
Office occupancies are now being affected by American business' need to
compete globally and an application of new technologies to the way white collar
employment is conducted. In order to compete, many corporations are downsizing
their operations, forcing fewer employees to do more in less space. Also,
technologies like portable phone systems and voice mail enable many to work for
extended periods outside their base of operations. Many of these new jobs are
frequently held by workers who can perform their services from home offices,
clients' offices or under "hoteling" arrangements.
The job growth which is occurring now comes from small and mid-sized
technologically sophisticated firms. These, more than most, seek suburban
locations which are close to their employees. By moving closer to their
employers, commuting time is less which, some say, creates a more productive
workforce. Frequently, occupancy costs are lower in the suburbs than in the
urban core which translates back into corporate profitability.
Given current market dynamics, it would appear that new office space will
not be needed in the short term, although some semi-speculative development is
occurring on a small scale. While Burlington County is anticipated to continue
its growth cycle, it would appear that long term upside potential exists in well
located and functionally designed office properties like the subject.
Rental Rates
The average face rental rate for Class A office space in the Burlington
County marketplace as of the 1st Quarter of 1997 was $20.47 per square foot of
rentable building area on a full service basis. This represents a 3.5 percent
increase from that reported one year ago reflecting the dynamics of the Class A
segment of the market versus the Class B and C portions. In the local
marketplace, Class B space leases at an approximate 15 to 20 percent discount
from Class A space. The following is a presentation of average face office
rental rates in this market over the past twenty four months.
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Market Analysis
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Average Face Office Rental Rates
Full Service Basis
Burlington County Market
================================================================================
Average Average
Period Ending Class A Change Class B Change CP1 Change
Rent Rent
================================================================================
1st Qtr 1997 $2b.47/SF -0.2% $16.57/SF +0.7% 166.0 +0.5%
Year End 1996 $20.51/SF +3.7% $16.46/SF -1.3% 165.1 +3.0%
1st Qtr 1 996 $19.78/SF +.04% $16.68/SF -1.4% 162.1 +1.9%
Year End 1995 $19.71/SF +7.6% $16.91/SF +11.0% 159.1 -0.7%
1st Qtr 1 995 $18.32/SF -- $16.88/SF -- 158.0 --%
================================================================================
Compound Annual Rate: 5.7% 0.9% +2.5%
================================================================================
As can be seen from this presentation, the average rental rate for Class A
office space in the Burlington County marketplace has increased at an annual
compound rate of 5.7 percent over the past two years. By comparison, the
region's Consumer Price Index has increased at a compound annual rate of 2.5
percent over the same time period. This suggests the continued interest in Class
A over Class B and C office space in Burlington County.
Eventually, a tight Class A office market will precipitate new
construction. However, the current supply of inventory, including some
dysfunctional Class B and Class C space, will either have to be absorbed or
eliminated in order to economically justify new construction. At that point in
time, users will have to be willing to pay higher rents than are now being
achieved in the competitive open market. Overall, this bodes well for
functionally designed and capably maintained real property like the subject. We
conclude that current forces will facilitate a stabilizing in rents which should
match inflation in the general economy.
Concessions
Rent abatement had been a standard inducement to tenants during the late
Eighties and very early Nineties, but are now not frequently being granted. In
order to win new tenants, landlords had been paying for tenant requested office
finishes well over the standard work letter. In some instances, landlords were
also paying the tenants' moving charges, assuming the rental payments on the
tenants' existing leases, and even making cash bonus payments to the tenants in
order to entice them to a new project. Most of these types of concessions have
ceased though as capital for such items has all but effectively been removed
from the current market. While there are still instances of free rent being
quoted, the current trend is definitely toward effective rents.
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Market Analysis
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Tenant Improvements' Costs
In the leasing of brand new professional office space, a building standard
for interior finishes is established. Should a particular tenant desire interior
office finishes which exceed the established building standard, then that tenant
must reimburse the landlord for constructing them. The standard work letter for
brand new first generation office space in suburban Philadelphia is
approximately $20.00 to $25.00 per square foot of rentable area. The cost for
tenant requested interior office finishes which exceed these standards are borne
by the lessee. In relet, second generation space like the subject, however, the
cost of tenant alterations is considerably less as many materials can be
recycled.
The trend of the current marketplace, particularly in second generation
space, has been to work with what is in place. From ownership's perspective,
cash for tenant improvements is scarce so that avoiding demolition and
reconstruction costs is important. We are informed that tenants are also less
demanding in their space improvements needs in order to secure a more favorable
rental rate in these competitive times for American business.
In general terms, a simple re-painting and re-carpeting and cleaning of
ceiling tiles can cost from $5.00 to $8.00 per square foot of rentable area.
When some demolition and reconstruction is necessary, tenant improvement costs
easily escalate to the $10.00 to $15.00 per square foot range. A complete
demolition and reconstruction of a major tenant area or full floor will cost
from $18.00 to $22.00 per square foot in the current market. The amortization of
these costs over the term of the lease is expensive and can further lower
ownership's return from its already depressed levels.
Leasing Commissions
The standard market practice for leasing commissions at office space in
suburban Philadelphia is six percent of the first year's negotiated rent, five
percent of the second, four percent of the third, and three percent of each
successive year's gross rent - all payable at initial occupancy. On a weighted
average basis for a five year lease, commissions would amount to 4.2 percent of
the aggregate rent negotiated. For a renewal, half that amount is customary but
open to negotiation between ownership and the brokerage community. In any event,
the cost of leasing commissions is an expense to ownership beyond the general
operations of the real estate.
Direct Competition
Cushman & Wakefield identifies eighteen mid-rise office buildings,
including several of the subject buildings, which we believe directly compete
for tenants within this sub-market. This direct competition is summarized on the
opposing page. As can be seen from this presentation, there are approximately
1.3 million square feet of office space in these eighteen complexes. While there
are numerous commercial office buildings in Burlington County, these eighteen
directly compete due to location, design and professional management.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Market Analysis
================================================================================
As of the 1st Quarter of 1997, total vacancy at the competition was
computed to be 18.1 percent as compared to 14.2 percent for the entire market.
This direct vacancy is skewed dramatically by the two Moorestown Corporate
Center Buildings which are entirely vacant. These Class B complexes were
recently purchased by a local investor who intends to renovate and re-position
the properties. Excluding these two properties from direct competition reduces
the overall vacancy rate to less than 8 percent. Rental rates range from $16.50
per square foot on a full service basis with a base year expense stop up to
$21.75 per square foot on a full service basis with a base year expense stop.
We have also identified several single story office buildings which we
believe directly compete for tenants within the Mount Laurel/Moorestown/Marlton
sub-market. This direct competition is summarized on the following chart.
<TABLE>
<CAPTION>
========================================================================================
Mount Laurel/Marlton
Single Story Office Competition
========================================================================================
Building Name Size Available Vacancy Average Rental
========================================================================================
<S> <C> <C> <C> <C>
100 Century Parkway 60,000 s.f. 7,000 s.f. 11.7% $16.50/sf gross
East Gate Business Ctr. 115,000 s.f. 11,314 s.f. 9.8% $13.00/sf gross
Metropolitan Bus. Ctr. 115,000 s.f. 23,785 s.f. 20.7% $11.00/sf net
Greentree Place 78,435 s.f. 4,950 s.f. 6.3% $11.00/sf net
8-14 Stow Road 101,451 s.f. 14,622 s.f. 14.4% $10.00/sf net
9 Stow Road 54,945 s.f 43,745 s.f. 79.6% $ 7.50/sf net
1-3 Eves Drive 33,792 s.f. 0 0 $13.00/sf gross
Greentree North Business Ctr. 299,498 s.f. 35,939 s.f. 12.0% $ 7.50/sf net
4 Eves Drive 53,000 s.f. 1,300 s.f. 2.4% $13.00/sf gross
Marlton Crossing Garden 81,882 s.f. 29,141 s.f. 35.6% $12.50/sf gross
Greentree Commons 95,235 s.f. 2,980 s.f. 3.1% $13.75/sf gross
Greentree Exec. Campus 120,000 s.f. 7,400 s.f. 0.6% $13.00/sf gross
Marlton Executive Center 50,000 s.f. 4,000 S.f. 8.0% $16.00/sf gross
===============
Total 1,248,238 s.f. 174,776 s.f. 14.0%%
========================================================================================
</TABLE>
As can be seen from this presentation, there are approximately 1.25
million square feet of single story office space in these complexes. As of the
1st Quarter of 1997, total vacancy at the competition was computed to be 14.0
percent which is similar to the 14.2 percent for the entire market. Rental rates
range from $7.50 per square foot on a net basis up to $16.50 per square foot on
a full service basis with a base year expense stop.
815 and 817 East Gate Drive, including 305 Harper Drive of the subject
property would technically be classified as "Flex" buildings, we have included
an overview of the Burlington County flex market.. The term "flex" signifies
that the building's overall design is flexible in accommodating users with needs
of between ten percent and 100 percent of the demised area finished as office
area or laboratories. Flex buildings or research and development facilities
offer lower ceiling heights than typically found in the traditional industrial
property, limited loading, typically air conditioning throughout, and a
generally higher quality of construction. The subject buildings, due to their
high level of finish are considered to compete more in the single story office
sector. Nevertheless, we present the following overview for informational
purposes.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Market Analysis
================================================================================
Market Supply and Demand
Throughout the three main suburban counties which are adjacent to the City
of Philadelphia on the New Jersey side of the Delaware River, there are an
estimated 4.7 million square feet of flex space. As of 1st Quarter of 1997,
vacancy in this market is reported to be only 5.1 % percent. The following is an
overview of this market:
================================================================================
Flex Market Overview
Southern New Jersey
March 31, 1997
================================================================================
Existing Inventory Area Available Vacancy Rate
================================================================================
4,727,477 SF 239,192 SF 5.1 %
================================================================================
Construction of new flex space has been at a veritable halt throughout the
Nineties as historic demand has lagged supply. The only exception to this has
been build-to-suit situations where the credit of the user or lead tenant is
tied to the financing of construction. Over the past 24 months, however,
market-wide vacancy has declined by 530 basis points as demand has absorbed
existing supply. The following chart reflects this market absorption over the
last 24 months.
================================================================================
Historic Flex Market Vacancy and Availabilities
Southern New Jersey (Suburban Philadelphia Market)
New Jersey Side
================================================================================
Date Space Available Vacancy
================================================================================
1st Quarter, 1997 239,192 SF 5.1%
- --------------------------------------------------------------------------------
Year End, 1996 284,073 SF 6.0%
- --------------------------------------------------------------------------------
1st Quarter, 1996 444,101 SF 9.2%
- --------------------------------------------------------------------------------
Year End, 1995 415,445 SF 8.7%
- --------------------------------------------------------------------------------
1st Quarter, 1995 477,157 SF 10.4%
================================================================================
Within this sub-market area, there are approximately 2.3 million square
feet of flex space. As of the 1st Quarter of 1997, the vacancy rate for this
product is computed to be 6.5 percent which is above the current regional
standard.
================================================================================
Flex Market Overview
Burlington County Market
March 31, 1997
================================================================================
Existing Inventory Area Available Vacancy Rate
================================================================================
2,276,059 SF 147,898 SF 6.5%
================================================================================
The current vacancy rate for the flex space in the Burlington County
sub-market area is greater than that of the suburban market at large. A vast
proportion of existing inventory for flex space in Southern New Jersey is
centered in Burlington County. Thus, Burlington County skews the overall market
vacancy rate of 5.1 percent.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Market Analysis
================================================================================
================================================================================
Flex Market Vacancy and Avallabilities
Burlington County Market
================================================================================
Date Space Available Vacancy
================================================================================
1st Quarter, 1997 147,898 SF 6.5%
- --------------------------------------------------------------------------------
Year End, 1996 169,779 SF 7.5%
- --------------------------------------------------------------------------------
1st Quarter, 1996 328,407 SF 14.4%
- --------------------------------------------------------------------------------
Year End, 1995 296,840 SF 13.0%
- --------------------------------------------------------------------------------
1st Quarter, 1995 253,938 SF 11.3%
================================================================================
There are no reliable absorption statistics available on the flex real
estate market in the Philadelphia Metropolitan Area as there are in office or
retail space. This is due to the manner in which this type of property is
presented to the market. Availabilities in the flex market are: for sale, for
lease, and, for sale or lease. When a flex property sells that had been for
lease, apples and oranges are created which cannot validly be put together into
one statistic titled absorption.
Participants do measure the strengths/weaknesses of the market by the
aggregate amount of overall vacancy and the amount of sales and leasing which
has occurred. Vacancy trends in the Burlington County market area are discussed
above. Sales and leasing activity in this market over the last 24 months is
presented below:
================================================================================
Flex Market Sales and Leasing
Burlington County Market
================================================================================
Year Sales Leasing
================================================================================
1st Quarter, 1997 17,215 SF 40,215 SF
- --------------------------------------------------------------------------------
Year End, 1996 51,422 SF 154,600 SF
- --------------------------------------------------------------------------------
1st Quarter, 1996 33,500 SF 66,826 SF
- --------------------------------------------------------------------------------
Year End, 1995 102,800 SF 20,500 SF
- --------------------------------------------------------------------------------
1st Quarter, 1995 102,800 SF 10,000 SF
================================================================================
As noted, there has been an increase in sales activity in the county since
the first quarter of 1996 after almost three quarters with no transactions. Over
the last 24 months, leasing activity has amounted to approximately 175,000
square feet of flex space or 21,900 square feet per quarter.
Rental Rates
The rental rate for flex space is a function of physical condition,
location, and degree of interior finish. The office component will lease for
$7.00 to $12.00 per square foot on a net basis, while the warehouse portion will
lease from $2.75 to $5.00 per square foot on a net basis. The actual lease terms
for a facility will be a weighted average of the rental rates which the office
and warehouse components can command in the marketplace. Also, the cost of any
specialized space, particularly laboratory areas, will be amortized as an
extra-ordinary increase to the rent paid.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Market Analysis
================================================================================
Tenant Improvements' Costs
By its nature, office/flex space is leased with varying amounts of
finished office area. For second generation space, the trend of the current
marketplace is to work with what is in place. From ownership's perspective, cash
for tenant improvements is scarce so that avoiding demolition and reconstruction
costs is important. Tenants are now realizing that making do with what is in
place also makes good business sense to the extent possible in order to moderate
rental rates.
Due to its "flexible" nature, the costs of tenant improvements at a
property are highly variable. These can be as high as $15 to $18 for a heavy
office user down to only a few dollars where the degree of interior finish is
weighted toward production space. The final workletter will reflect the ratio of
finished areas to the total demised space.
Leasing Commissions
Leasing commissions for flex space are similar to those for office
buildings previously described. Also, in the case of a tenant of questionable
credit, commissions are sometimes paid as rent is collected. When this is the
case, brokers typically attempt to obtain a full 6.0 percent commission. In any
event, the cost of leasing commissions is an expense to ownership beyond the
general operations of the real estate.
Concessions
Just as in other real estate product types, rent abatements, above
standard workletters, moving allowances, rental assumptions and cash payments
were granted in the late Eighties and early Nineties for flex buildings. Most of
those types of concessions have ceased though, as capital for such items has all
but effectively been removed from the current market. Though there are still
instances of free rent being quoted, the current trend is definitely toward
effective rents in the flex building market.
Conclusions
In conclusion, the local rental market has improved dramatically over the
past year. The Class A segment, however, is showing a current vacancy rate of
only 9.0 percent. The average rental rate for office space in the Class A market
segment is $20.47 per square foot on a gross basis which is 3.5 percent higher
than the $19.78 per square foot reported a year ago. There are currently four
buildings in the market which can provide over 20,000 square feet or greater of
contiguous space at mid-year.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Market Analysis
================================================================================
Flex products also compete in the Burlington County market. On a macro
level, the vacancy rate for flex space in Southern New Jersey is 5.1 percent as
of the 1st Quarter of 1997. During the past 3 to 4 years, overall absorption has
been positive, vacancy has declined and rental rates have increased modestly in
the subject's marketplace. Suburban areas like the Mount
Laurel/Moorestown/Marlton area are expected to be the focus of job creation well
into the next century.
However, while forecasts call for an expansion in office type employment,
the absolute amount of that will be less than previously experienced in the boom
years of the Eighties. Nevertheless, East Gates's proximity to the New Jersey
Turnpike and Interstate 295 and its desirable residential neighborhoods should
ensure a continued demand for office space in this sector. With efficient
management and aggressive promotion, we believe the subject should continue to
meet with market acceptance in the long term.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
EXPOSURE TIME
================================================================================
Exposure Time is defined as the estimated length of time the property
interest being appraised would have been offered on the market prior to the
hypothetical consummation of a sale at the estimated market value on the
effective date of the appraisal. It is a retrospective estimate based upon an
analysis of past events assuming a competitive and open market. Thus, Exposure
Time is presumed to precede the effective date of the appraisal.
Our analysis of comparable sales indicates that an Exposure Time of
between 6 and 9 months was typical for office facilities. Therefore, based upon
our analysis of comparable sales in conjunction with the physical, locational
and economic characteristics of the subject property, it is our opinion that an
Exposure Time of approximately nine months would be typical prior to our market
value conclusion as of the date of valuation.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
PROPERTYDESCRIPTION
================================================================================
The Subject Property
The subject property consists of 14 separate parcels of real estate. Of
this total,10 are improved with buildings; the remaining 4 are vacant sites
awaiting future development. Among those parcels which are now improved with
buildings: two are modern, Class A multi-story office buildings, five are
multi-story Class B office buildings; and the remaining three are single story
office and office/flex buildings. The following is more detailed description of
the 14 parcels which comprise the subject property:
Site Descriptions
On the opposing page is a presentation of site specific characteristics
for the 14 parcels which comprise the subject property. In our appraisals of
these parcels, we did not receive nor review a soil report. However, we assume
that the soil's load-bearing capacity is sufficient to support all existing
structures and any which might eventually be constructed on the now vacant
parcels. The sites' drainage appears to be adequate.
We were not given a title report to review. We do not know of any other
easements, encroachments or restrictions, other than normal utility easements
that would adversely affect the sites' uses. However, we recommend a title
search to determine whether any adverse conditions exist.
We were not given a Wetlands survey to review either. However, according
to site plans provided by ownership, it is noted that portions of the vacant
development parcels are impacted by wetlands and wetlands buffers. If subsequent
engineering data reveal the presence of other regulated wetlands areas, it could
materially affect property value. We recommend a wetlands survey by a competent
engineering firm.
According to Community Panel #340107-0010D, National Flood Insurance Rate
Map, effective October 16, 1987, a minor area of 701 East Gate Drive is located
in Flood Hazard Zone B, an area between the 100 and 500 year.flood plain of
Pennsauken Creek, The building on this site is outside this flood plain.
Further, according to Community Panel #340105-0005C, National Flood Insurance
Rate Map, effective January 19, 1996, each of the development parcels are
impacted by flood plain areas of Pennsauken Creek. These flood plain and
previously described wetlands, limit the overall buildable areas of these
parcels. The remaining parcels are not within a designated flood plain and,
therefore, do not require flood hazard insurance.
No evidence of toxic or hazardous substances were observed during our
inspection of the sites. However, we are not trained to perform technical
environmental inspections. A professional study is recommended for final
determination of any presence of toxic substances.
Overall, the improved sites are typical of business campus development in
the area, functionally adequate and well suited for that use. The vacant
development sites are situated within the East Gate Square retail development
and are suited for a wide range of commercial uses.
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-23-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Property Description
================================================================================
Descriptions of Improvements
On the opposing page is a presentation of general physical characteristics
for the 10 buildings which are part of the subject property. The reader will
note that we have not made, nor are we qualified by training to make, a
compliance survey of the properties with the American with Disabilities Act
(ADA). Since we have not been provided with the results of a professional
survey, we did not consider possible non-compliance with the requirements of ADA
in estimating the value of the real estate.
Additionally, we are not aware of any potentially hazardous materials
which may have been used in the construction of the improvements to the subject
site. Again, we are not qualified to detect such materials and urge the client
to employ an expert in the field to determine if any exist. Finally, no personal
property is included in our analysis of the subject property The following
paragraphs describe specific important attributes for each building:
700 East Gate Drive - This is a modern, five story office complex
containing approximately 130,000 square feet of gross building area.
Constructed in 1984 with steel frame and alternating bands of earth toned
brick and gray solar-tinted glass, 700 East Gate Drive features a dramatic
full height atrium lobby with granite floors, and open balconies on the
upper four floors. Heating and cooling are provided by electrically fired
roof-top units. There are men's and women's restrooms on each floor. The
building is sprinklered for fire protection and is served by three
elevators.
Functionally, the common areas of the complex were upgraded in 1991 and
are considered desirable and aesthetically appealing. Locationally, there
are no deleterious influences emanating from outside this property which
would create external obsolescence. Adequate on-site parking areas are
provided and low maintenance shrubbery and green areas present an
aesthetic appeal to the building.
701 East Gate Drive - This is a modern, three story office complex
containing approximately 60,000 square feet of gross building area.
Constructed in 1986 with steel frame with dark mahogany brick and tinted
glass and mirrored curtainwall, 701 East Gate Drive features a dramatic
curved rotunda lobby. Heating and cooling are provided by electrically
fired, water source heat pumps with individual controls. There are men's
and women's restrooms on each floor. The building is sprinklered for fire
protection and is served by two elevators.
Functionally, the common areas of the complex were upgraded in 1991 and
are considered desirable and aesthetically appealing. Locationally, there
are no deleterious influences emanating from outside this property which
would create external obsolescence. Adequate on-site parking areas are
provided and low maintenance shrubbery and green areas present an
aesthetic appeal to the building.
================================================================================
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CUSHMAN &
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<PAGE>
Property Description
================================================================================
303-305-307-309 Fellowship Road - These are a series of four, compatibly
designed, modern, three story office complexes each containing
approximately 57,000 square feet of gross building area. Constructed in
phases between 1979 and 1982 with steel frame and alternating bands of
earth toned brick and bronze-tinted glass, these four buildings feature
new open atrium entrances. Heating and cooling are provided by
electrically fired, roof top units with a recently installed energy
management system supplemented by baseboard units. There are men's and
women's restrooms on each floor. The buildings are sprinklered for fire
protection and each is served by two elevators.
Functionally, the common areas of the complexes were recently upgraded
with new carpet and vinyl and are considered desirable and aesthetically
appealing. Locationally, there are no deleterious influences emanating
from outside this property which would create external obsolescence.
Adequate on-site parking areas are provided and low maintenance shrubbery
and expansive green areas enhanced by a pond with fountain present an
aesthetic appeal to the building.
815 East Gate Drive - This is a one story office/flex building containing
a gross building area of 25,500 square feet. Constructed in 1986, the
property consists of masonry and steel construction and is 87 percent
occupied by a two tenants. The available unit is comprised of 3,310 square
feet. The office areas feature carpeted floors, painted sheetrock walls
and suspended acoustical tile ceilings with recessed fluorescent lighting.
In each unit there is a ceramic tile lavatory and a small employee
kitchen. Heating and cooling to office areas are provided by electrically
fired roof-top units.
Functionally, the floor plan is generally versatile with open areas with
some private offices. Overall the condition was good. Locationally, there
are no deleterious influences emanating from outside this property which
would create external obsolescence. Adequate on-site parking are provided
and low maintenance shrubbery and green areas present an aesthetic appeal
to the building.
817 East Gate Drive - This is a one story office/flex building that is 100
percent occupied two tenants. The building, which was constructed in
1986, consists of masonry and steel construction featuring an 80 percent
office finish. The gross building area was reportedly 25,351 square feet.
The office areas feature carpeted floors, painted sheetrock walls and
suspended acoustical tile ceilings with recessed fluorescent lighting. In
each unit there is a ceramic tile lavatory and a small employee kitchen.
Heating and cooling to office areas are provided by electrically fired
roof-top units.
Functionally, the floor plan is generally versatile with open areas with
some private offices. Overall the condition was good. Locationally, there
are no deleterious influences emanating from outside this property which
would create external obsolescence. Adequate on-site parking are provided
and low maintenance shrubbery and green areas present an aesthetic appeal
to the building.
================================================================================
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Property Description
================================================================================
304 Harper Drive - This is a two story office complex containing
approximately 30,000 square feet of gross building area. Constructed in
1975 with steel frame and dark mahogany brick, glass and metal clad
curtainwall, 304 Harper Drive represents the oldest building on the
portfolio. Heating and cooling are provided by electrically fired, roof
top units. There are men's and women's restrooms on each floor. The
building is sprinklered for fire protection and is served by two
elevators.
Functionally, the common areas of the complex were upgraded in 1991 and
are considered aesthetically appealing. The restrooms feature older color
schemes and are in need of upgrade. Locationally, there are no deleterious
influences emanating from outside this property which would create
external obsolescence. Adequate on-site parking areas are provided and low
maintenance shrubbery and green areas present an aesthetic appeal to the
building.
305 Harper Drive - This is a single story office/flex complex containing
approximately 15,000 square feet of gross building area. Constructed in
1979 with steel frame and brick, 305 Harper Drive is 100 percent air
conditioned and features approximately 47 percent office area and 53
percent semi-finished assembly area. Heating and cooling are provided by
electrically fired, roof top units. There are adequate men's and women's
restrooms. The building is sprinklered for fire protection.
Functionally, the building is designed for single tenancy and considered
to be functionally efficient and aesthetically appealing. Locationally,
there are no deleterious influences emanating from outside this property
which would create external obsolescence. Adequate on-site parking areas
are provided and low maintenance shrubbery and green areas present an
aesthetic appeal to the building.
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
================================================================================
EAST GATE CENTER
130,000 Sq. Ft. Office Building
700 East Gate Drive
Mount Laurel, Burlington County, NJ
[GRAPHIC OMITTED]
[PHOTOGRAPH OF PROPERTY]
[MAP OF AREA]
o Distinctive five-story, 130,000 square foot structure featuring
impressive new entrance, full-height atrium lobby with granite floor, and
open balconies on Upper four floors
o Strategic location adjacent to New Jersey Turnpike (Exit 4"), I-295 and NJ
Routes 73 and 38; new I-295 on/off ramps- expanded road network for more
direct access to all major routes
o Outstanding area amenities include excellent school systems, prestigious
residential communities, major support services, and diversified labor
resources
o Responsive on-site property management
<PAGE>
East Gate Center
701 East Gate Drive
Mount Laurel, Burlington County, NJ
First Quality Office Space
Available in units from 2,000 to 40,000 Sq. Ft.
[GRAPHIC OMITTED]
[PHOTOGRAPH OF PROPERTY]
Construction: Three-story, steel
framed structure with dark
mahogany brick, tinted glass and
mirrored curtainwall: exlerior
balconies on upper two floors:
full-height curved glass rotunda
lobby.
Size: 60,000 square feet total:
up to 20,000 square feet per
floor; elevator served.
Design: Two rectangular wings
provide flexible interior layout
with high ratio of useable to
rentable space: up to 12 corner
offices per floor.
Systems: State-of-the-art energy
management stytem: water
source heat pump with individual
controls: fully sprinklered; digital
access system.
Standards: Quality finishes
throughout; full-height doors,
thinline, horizontal blinds; meets
ADA compliance
Site: 12/acre, wooded and
landscaped site; adjacent, well-lit
parking area.
Environment: Service oriented
management and stable,
innovative ownership by
Bell Atlantic Properties.
Bell Atlantic
Properties
<PAGE>
================================================================================
EAST GATE CENTER
57,000 Sq. Ft. Office Buildings
303-305-307-309 Fellowship Road
Mount Laurel, Burlington County, NJ
[GRAPHIC OMITTED]
[PHOTOGRAPH OF PROPERTY]
[MAP OF AREA]
o Four compatibly designed, 57,000 square foot buildings set on wide sloping
lawns enhanced hy extensive landscaping, reflective pond with fountain,
and a trio of commissioned sculptures
o Strategic location adjacent to New Jersey Turnpike (Exit 4), I-295 and
NJ Routes 73 and 38; new I-295 on/off ramps; expanded road network for
more direct access to all major routes
o Outstanding area amenities include excellent school systems, prestigious
residential communities, major support services. and diversified
labor resources
o Responsive on-site property management
<PAGE>
EAST GATE CENTER
Officel Flex Building
815 East Gate Drive
Mount Laurel, Burlington County, NJ
[GRAPHIC OMITTED]
[PHOTOGRAPH OF PROPERTY]
CONSTRUCTION: Steel-framed construction, tronspot brick exterior with dark
reflective windows, anodized aluminum trim
SIZE: 25,000 sq. ft. one-story building with units from 5,000
sq. ft.
BAY SPACE: 48' x 42'
CEILING HEIGHT: 18' clear
TRUCK LOADING: Provision for tailgate loading
FIRE PROTECTION: Fully sprinklered
INTERIORS: Finished to specification
SITE: Well-landscaped site; adjacent parking for 100 cars
<PAGE>
EAST GATE CENTER
25,500 Sq. Ft. Officel Flex Building
817 East Gate Drive
Mount Laurel, Burlington County, NJ
[GRAPHIC OMITTED]
[PHOTOGRAPH OF PROPERTY]
[MAP OF AREA]
o This handsome, 25,500 sq. ft. office/ Flex building offers efficient,
flexible space to accommodate the growth potential of corporate users for
office or a combination of office/service space.
o Strategically positioned in the highly respected East Gate Center, it has
immediate access to a superb network of interconnecting highways including
New Jersey Turnpike (Exit 4), I-295 and NJ Routes 73 and 38.
o Philadelphia, Trenton, Princeton and the Philadelphia International
Airport are all within 3O minutes drive; New York is 90 minutes away and
Wilmington, less than one hour.
<PAGE>
REAL PROPERTY TAXES AND ASSESSMENTS
================================================================================
The subject property is under the taxing jurisdiction of both Mount Laurel and
Moorestown Townships. Taxes are levied against all real and personal property in
this locale for the purpose of providing funding for the various municipalities.
The amount of ad valorem taxes is determined by the current assessed value for
the real and personal property, in conjunction with the total combined tax rates
of the taxing jurisdiction. In an effort to project the future tax liability for
the subject's real and personal property, we have reviewed both the present and
historical tax rates combined with a forecast of the assessments.
Tax Rates
The following is a chart displaying the five and ten year trend in tax rates
levied by the above noted taxing jurisdictions:
================================================================================
Tax Rates Per $100 of Assessed Value
================================================================================
Taxing Authority 1987 Tax Rate 1992 Tax Rate 1997 Tax Rate
================================================================================
Mount Laurel Twp. $1.780 $2.653 $2.362
- --------------------------------------------------------------------------------
Moorestown Twp. $2.842 $2.503 $2.933
- --------------------------------------------------------------------------------
================================================================================
As the preceding chart indicates, the tax rates affecting the Mount Laurel
properties have declined by approximately 2.3 percent per year over the past
five years (since 1992), but increased 2.6 percent per year over the past eleven
years (since 1997). The tax rates affecting the Moorestown properties have
increased by approximately 3.2 percent per year over the past five years (since
1992), but increased less than 0.3 percent per year over the past eleven years
(since 1997). Typically, over the long term, tax rates will mirror inflationary
trends, with average compound growth rates of 3.0 to 4.0 percent.
Tax rates increase or decrease annually based upon changes in municipal budgets
and the total tax base. Again, over the longer term, tax rate increases tend to
mirror inflationary trends, except during periods of economic decline or in fast
growing areas where new services are required. With the likely stabilization of
real estate values and the tax base, we are of the opinion that more normal
increases in tax rates, of say 3.0 to 4.0 percent, will be the trend over the
intermediate term.
Tax Assessment
The foregoing Mount Laurel and Moorestown township assessment offices establish
the assessed value on real property for the previously noted taxing
jurisdictions. The 1997 assessment, as well as the historical assessments for
1995 and 1996 are as follows:
================================================================================
Historical Assessed Value
================================================================================
1995 1996 1997
================================================================================
Land $10,151,000 $10,151,000 $10,151,000
- --------------------------------------------------------------------------------
Building $21,957,000 $21,957,000 $21,957,000
- --------------------------------------------------------------------------------
Total $32,108,000 $32,108,000 $32,108,000
================================================================================
================================================================================
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<PAGE>
Real Property Taxes And Assessments
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As can be seen from the above charts, the 1995 through 1997 tax assessment for
the subject properties has remained stable. In an effort to evaluate the
fairness of the subject's current assessed value and future prospects for a
change in the assessment, we have compared the assessment to estimated value of
the subject property as concluded in this report.
According to Burlington County, the current assessment-to-value ratio in Mount
Laurel Township is 99.49 percent. Thus, for those improved properties situated
in Mount Laurel, the estimated total assessment of $25,051,000 implies a market
value, for tax purposes, of $25,180,000. Based upon our subsequent aggregate
value conclusion for these parcels of $42,375,000, it appears that these
properties are under assessed and an appeal for a reduction should not be
pursued.
According to Burlington County, the current assessment-to-value ratio in
Moorestown Township is 85.41 percent. Thus, for those improved properties
situated in Moorestown, the estimated total assessment of $2,490,000 implies a
market value, for tax purposes, of $2,915,000. Based upon our subsequent
aggregate value conclusion for these parcels of $2,750,000, it appears that
these properties are reasonably assessed and an appeal for a reduction should
not be pursued.
Further, a review of the current assessments on the vacant development parcels
indicates an implied market value of $4,880,000 relative to our subsequent value
conclusion for these properties of $5,100,000. Again, the current assessments
on these parcels appear reasonable.
Ad Valorem Tax Conclusions Applying the 1997 assessment for the individual
properties to the appropriate 1997 tax rate results in a combined tax burden of
approximately $782,600 in that year as calculated on the following page.
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East Gate Center
Tax Summary
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Annual
Address Township Tax Rate/$100 Assessment Tax
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700 East Gate Drive Mount Laurel $2.362 $7,136,600 $168,567
701 East Gate Drive Mount Laurel $2.362 $3,668,100 $ 86,640
303 Fellowship Road Mount Laurel $2.362 $2,923,100 $ 69,044
305 Fellowship Road Mount Laurel $2.362 $2,923,100 $ 69,044
307 Fellowship Road Mount Laurel $2.362 $2,923,100 $ 69,044
309 Fellowship Road Mount Laurel $2.362 $2,923,100 $ 69,044
815-17 East Gate Drive Mount Laurel $2.362 $2,553,800 $ 60,321
304 Harper Drive Moorestown $2.933 $1,650,000 $ 48,395
305 Harper Drive Moorestown $2.933 $ 840,000 $ 24,637
East Side Nixon Dr.
(vacant land) Moorestown $2.933 $1,750,000 $ 51,327
East Side Nixon Dr.
(vacant land) Mount Laurel $2.362 $2,817,100 $ 66,540
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The above taxes have been paid for 1997.
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The improved properties in Mount Laurel Township are currently zoned 1,
Industrial by Mount Laurel Township. The use regulations in this district permit
most light industrial type land uses. In addition, offices are a permitted use
within this zoning classification. The developmental requirements of this zone
are summarized as follows:
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Development Requirements
I-Industrial
Mount Laurel Township
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Minimum Lot Area:
Interior Lot 40,000 square feet
Corner Lot 60,000 square feet
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Minimum Lot Width at Building Line 100 feet
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Minimum Lot Frontage 150 feet
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Minimum Front Yard: 50 feet
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Minimum Side Yard: 20 feet; 50 feet combined
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Minimum Rear Yard: 50 feet
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Maximum Building Height: 60 feet
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Maximum Lot Coverage 50 percent
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Minimum Building Area
1 Story 1,100 feet
1 1/2 Story of more 1,300 feet
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Minimum Parking 1 space for each 250 feet of floor
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The portion of the vacant development sites situated in Moorestown
Township is currently zoned SRC, Specially Restricted Commercial. This zoning
designation provides for integrated uses such as shopping centers, campus type
office parks, corporate headquarters and similar large site, low density
development. Developmental requirements include the following.
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SRC - Specially Restricted Commercial
Moorestown Township
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Lot Area 60,000 s.f.
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Lot Width 200'
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Maximum Lot Coverage Structural - 50%
Impervious - 80%
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Minimum Front Yard 75 Feet
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Minimum Side Yard 25 Feet
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Minimum Rear Yard 25 Feet
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Maximum Building Height 45 Feet
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Parking Requirements 6 spaces per 1,000 S.f.
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The portion of the vacant development sites situated in Mt. Laurel
Township is currently zoned MCD, Major Commercial District. This zoning
designation provides for multi-facility structures used for commercial,
cultural, entertainment and recreational purposes and includes shopping centers.
Developmental requirements include the following.
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Zoning
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MCD Major Commercial District
Mt. Laurel Township
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Lot Area 50 acres
Maximum Lot Coverage Structural - 30%
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Minimum Front Yard 75 Feet
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Minimum Side Yard 75 Feet
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Minimum Rear Yard 75 Feet
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Maximum Building Height 1 10 Feet
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Parking Requirements 5.5 spaces per 1.000 s.f. (Retail)
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We have been informed by local zoning officials that the improved properties
within this portfolio have been accepted as legal, conforming uses. Further, it
is noted that the vacant development parcels are subject to an approved
conceptual plan which will permit approximately 110,000 square feet of building
area, plus a 240 room, 10 story hotel.
We know of no deed restrictions (private or public) which would further limit
the use of the subject property. However, this statement should not be taken as
a guarantee or warranty that no such restrictions exist. Deed restrictions are a
legal matter and only a title examination by an attorney would normally uncover
such restrictive covenants. Thus, an updated title search of the subject
property is recommended to determine the existence of such restrictions.
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HIGHEST AND BEST USE
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Highest and Best Use of Site as Though Vacant
According to the Dictionary of Real Estate Appraisal, Third Edition (1 993), a
publication of the Appraisal Institute, the highest and best use of the site as
though vacant is defined as:
Among all reasonable, alternative uses, the use that yields the highest
present land value, after payments are made for labor, capital, and
coordination. The use of a property based on the assumption that the
parcel of land is vacant or can be made vacant by demolishing any
improvements.
Physically Possible
The subject sites situated within the East Gate Corporate Center vary in size
from approximately 2.0 acres to 11.25 acres, with excellent frontage along East
Gate Drive, Fellowship Road and Harper Drive. The size and configuration of
these sites is felt to provide a suitable land use and/or development potential
for a wide variety of possible and ordinary business park land uses. Municipal
utilities would adequately provide for nearly all uses. Street improvements are
also adequate. The vacant development parcels total 48.087 acres and offer
excellent frontage along Nixon Drive and exposure along Interstate 295. These
parcels however, are negatively impacted by the existence of flood plain and
wetlands areas, and the total buildable area is less than typical..
Legally Permissible
The subject's zoning classification permits a wide range of office, retail, and
light industrial uses. As previously mentioned, we are not experts in the
interpretation of complex zoning ordinances. Additionally, there are no private
restrictions which are known to adversely affect the utilization of the land.
Thus, a planned office utilization of the subject parcels is legally
permissible. Further, retail and lodging uses are permitted uses according to
the approved conceptual plan for the vacant development sites.
Financially Feasible
The Regional Analysis section of this report presents demographic and general
economic trends which are now favorable for real estate ownership and
development. This is particularly true for the suburban communities surrounding
Philadelphia and in Southern New Jersey where population growth and employment
creation are expected to positively continue into the foreseeable future. In
spite of this optimism, real estate owners and investors must be cognizant of
the fact that the region is densely developed on a relative basis with a mature
economy which serves to limit opportunities. Thus, only those properties with a
desirable location and functional design are expected to out perform inflation
in the general economy.
In the local real estate market, occupancies among office properties are now the
highest in several years with a- moderate increase in rental rates being
achieved. Additionally, the industrial sector has witnessed a steady decline in
vacancies since reaching a peak of 18.2 percent in 1992. Financing is now
available when sufficiently supported by the credit of an owner or major tenant.
Considering the strength of the market, permitted uses by zoning and the site's
physical traits, it is our opinion that the highest and best use of the land
within the East Gate Corporate Center on a vacant basis is office development.
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Highest and Best Use
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Further, based upon the on-going market acceptance and support of the East Gate
Square retail development, we believe the highest and best use of the vacant
development parcels is for continued commercial development compatible with this
major retail complex.
Highest and Best Use of Property as Improved
According to the Dictionary of Real Estate Appraisal, highest and best use of
the property as improved is defined as:
The use that should be made of a property as it exists. An existing
property should be renovated or retained so long as it continues to
contribute to the total market value of the property, or until the return
from a new improvement would more than offset the cost of demolishing the
existing building and constructing a new one.
Unlike the previous analysis of the subject site as vacant, this analysis
considers the subject property as currently improved with an evaluation as to
the physical, legal, and financial appropriateness of the existing land use.
Physical Considerations
The subject sites have been improved with the existing office and office/flex
structures and, based upon our observation, there are no apparent physical
factors such as soils, drainage, or other site characteristics that would
adversely affect the continued utility and/or existence of the subject
improvements.
Legal Considerations
The subject sites, as presently improved, represents a legal, conforming use.
Financially Feasible
The use of the subject improvements is considered to contribute in an economic
manner to the subject sites. Occupancy levels at the subject property are
generally consistent with competing office and office/flex buildings in Southern
New Jersey. We believe the occupancy levels of the those buildings comprising
the subject property which are currently below 90 percent will increase steadily
to a stabilized occupancy of 97 percent over the course of the holding period, a
level considered to indicate market feasibility.
Therefore, based on the subject's historical performance and the prospect for
continued growth, it is our opinion that the subject property, as presently
developed, represents the highest and best use of the site as improved.
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VALUATION PROCESS
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In this appraisal, we have used the Sales Comparison Approach and the Income
Capitalization Approach to develop a market value estimate.
The Cost Approach was not performed for the following reasons:
o This approach is more relevant for new construction or where
sufficient information is available to reasonably estimate the
replacement cost new of the improvements and land.
o The investment marketplace does not typically trade buildings such
as the subject on a cost/value basis, particularly in markets where
it is generally perceived that cost exceeds value.
o The subjectivity of accurately estimating accrued depreciation of
the existing improvements significantly limits the reliability of
this approach.
In the Sales Comparison Approach, we performed the following steps:
o Searched the market for recent office and office/flex building sales
within the subject's market area, which contain similar physical and
economic characteristics to the subject property.
o Analyzed differences between those sales and the subject on the
basis of the sale price per square foot and extracted overall
capitalization rates.
o Correlated the various value indications into a point value estimate
from within the range.
In developing the Income Capitalization Approach, we:
o Studied rents in effect in the immediate and competing areas to
estimate potential rental income at market levels for office and
office/flex uses.
o Studied the recent history of operating expenses at the subject
property and competing properties to estimate an appropriate level
of stabilized expenses and reserves for replacement.
o Estimated net operating income by subtracting stabilized expenses
from potential gross income after deduction for vacancy and
collection loss.
o Prepared a discounted cash flow analysis in which the estimated
income and expenses over a projected holding period, and the
estimated property value at the time of reversion, are discounted at
an appropriate rate to estimate present market value.
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Valuation Process
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In estimating the final value, we performed the following:
o Reviewed and re-examined each of the approaches to value which were
employed.
o Considered the type and reliability of the data used and
applicability of each approach.
o Reconciled the approaches to a final value conclusion.
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SALES COMPARISON APPROACH
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Methodology
In the Sales Comparison Approach, we estimated value by comparing this property
with similar, recently sold properties in the surrounding or competing area.
Inherent in this approach is the principle of substitution, which holds that
when a property is replaceable in the market, its value tends to be set at the
cost of acquiring an equally desirable substitute property, assuming that no
costly delay is encountered in making the substitution.
By analyzing sales that qualify as arms-length transactions between willing and
knowledgeable buyers and sellers, we can identify value and price trends. The
basic steps of this approach are:
1. research recent, relevant property sales and current offerings
throughout the competitive area;
2. select and analyze properties that are similar to the property
appraised, considering changes in economic conditions that may
have occurred between the sale date and the date of value, and
other physical, functional, or locational factors;
3. identify sales that include favorable financing and calculate
the cash equivalent price;
4. reduce the sale prices to a common unit of comparison such as
price per square foot of net rentable area, effective gross
income multiplier, and overall capitalization rate;
5. make appropriate comparative adjustments to the prices of the
comparable properties to relate them to the property being
appraised; and
6. interpret the adjusted sales data and draw a logical value
conclusion.
Analysis of Sales
Over the past 12 months, the market has shown signs of improvement. Rents have
increased and concession packages have dissipated while positive net absorption
is taking place. In terms of the investment market, demand is primarily being
generated by institutional investors including several large pension
funds/European and Asian investors/opportunistic investors such as Vulture Funds
stimulated in an effort to capture "bottom of the market" sale prices. In recent
months, several local REITs have been very active in office and light
industrial acquisitions.
The subject property consists of a portfolio of seven multi-story office
buildings, as well as three single story office/flex buildings.
Mid-Rise Improved Sales
On the opposing page is a presentation of the comparable property sales which
were analyzed for the valuation of the multi-story office buildings in this
portfolio. The most widely-used and market-oriented unit of comparison for
properties such as the subject is the sales price per square foot of building
area. All comparable sales were analyzed on this basis. Detail sheets describing
these and all the sales employed in this analysis can be found among the Addenda
to this report.
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Sales Comparison Approach
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It is noted that Comparable Sales #1 through #3 represent Class A properties
which were analyzed relative to 700 and 701 East Gate Drive. Comparable Sales #4
through #6 represent Class B properties which were analyzed relative to the
303-309 Fellowship Road buildings and the 304 Harper Drive building.
700 East Gate Drive
This property is a 118,071 square foot, multi-story, Class A office
building on 6.855 acres of land which was constructed in 1984. It is now 93
percent occupied by 14 tenants. On the date of inspection, the building was in
very good condition having benefited from an on-going maintenance program. This
complex presents excellent interior office finishes and a dramatic central
atrium. The property possesses good "curb appeal" and features good quality
construction materials. With regard to the market data assembled for this
analysis, the following comparisons are made:
Comparable Property Sale #1 was an arm's length transaction accomplished
with market oriented financing. It is also a relatively recent transfer
without any adverse leasehold interests. Locationally, Sale #1 exhibits
superior attributes due to its proximity to King of Prussia and the Route
202 corridor.
Physically, this property was constructed during 1988 and 1990 and was in
excellent condition at the time of sale which is superior in terms of age
and condition of the subject. Economically, Sale #1 was 97 percent leased
at the time of conveyance which is slightly superior to the 93 percent
occupancy now experienced by the subject. No non-realty items of property
were reported to be included in the price for this property. Overall, a
negative adjustment is warranted for Sale #1.
Comparable Property Sale #2 was an arm's length transaction accomplished
with market oriented financing. It is also a relatively recent transfer
without any adverse leasehold interests. Locationally, Sale #2 exhibits
similar attributes to the subject due to its proximity to the airport and
the regional highway system.
Physically, this property was constructed during 1988 and was in very good
condition at the time of sale which is slightly superior in terms of age
and condition of the subject. Economically, Sale #2 was 100 percent leased
at the time of conveyance which is superior to the 93 percent occupancy
now experienced by the subject. It is noted however, that the major tenant
in the complex, PNC Bank, will be vacating the property in the
intermediate term. No non-realty items of property were reported to be
included in the price for this property. Overall, a negative adjustment is
also warranted for Sale #2.
Comparable Property Sale #3 was an arm's length transaction accomplished
with market oriented financing and without any adverse leasehold
interests. Relative changes in the supply and demand for real property
between specified dates will affect the prices which will be paid in a
competitive and open market. Investor interest in product like the subject
has been limited, particularly in Southern New Jersey. Up until recently,
the marketplace was characterized by an over-supply of space and a
diminishing demand for it. Rental rates were declining, concessions were
plentiful, and tenant work-letters were overly generous in order to secure
tenants. As an asset class, real estate had fallen out of favor due to the
perceived high risks associated with it.
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Sales Comparison Approach
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Within the last twelve months or so, these market characteristics have shifted
dramatically, as market participants with significant capital compete for high
quality assets. Still, the New Jersey side of the suburban office and
office/flex market has not attracted the same investor interest as is the
Pennsylvania side. Recent activity by Liberty Property Trust, Brandywine Realty
Trust, and Preferred Properties in this market suggests more investor focus on
Southern New Jersey. Thus, an upward adjustment for improved market conditions
is appropriate to Comparable Sale #3. Locationally, Sale #3 exhibits superior
attributes to the subject due to its Cherry Hill location near Route 38.
Physically, this property represents a seven story office complex containing
121,737 square feet situated on a 6.32 acre site. The property features superior
access and visibility relative to the subject and a no adjustment is considered
appropriate for this characteristic. The improvements were constructed in 1990
and considered in very good overall condition, which is superior to the subject.
Economically, Sale #3 was only 67 percent leased at the time of conveyance which
is inferior to the 93 percent occupancy now experienced by the subject. No
non-realty items of property were reported to be included in the price for this
property. Overall, a positive adjustment is warranted for Sale #3.
Conclusion - The three sales assembled for this analysis of 700 East Gate Drive
reflect a range in unit value from $88.03 to $163.29 per square foot of building
area. The adjustments discussed above are presented to outline the logic of our
thought processes with the ultimate result being a plausible market value
conclusion for the subject property. Based on our analysis of these data on a
price per square foot basis, we have concluded an appropriate adjusted range of
$90.00 to $100.00 per square foot of building area. From within this adjusted
range, we conclude the Sales Comparison Approach to indicate a current market
value of $11,200,000 for 700 East Gate Drive. This indication of value is equal
to $94.86 per square foot of building area.
701 East Gate Drive
This property is a 61,477 square foot, multi-story, Class A office
building on 11.25 acres of land which was constructed in 1986. It is now 100
percent occupied by 10 tenants. On the date of inspection, the building was in
very good condition having benefited from an on-going maintenance program. This
complex presents excellent interior office finishes and a dramatic central
rotunda lobby. The property possesses good "curb appeal" and features good
quality construction materials. With regard to the market data assembled for
this analysis, the following comparisons are made:
Comparable Property Sale #1 was an arm's length transaction accomplished
with market oriented financing. It is also a relatively recent transfer
without any adverse leasehold interests. Locationally, Sale #1 exhibits
superior attributes due to its proximity to King of Prussia and the Route
202 corridor.
Physically, this property was constructed during 1988 and 1990 and was in
excellent condition at the time of sale which is superior in terms of age
and condition of the subject. Economically, Sale #1 was 97 percent leased
at the time of conveyance which is slightly inferior to the 100 percent
occupancy now experienced by the subject. No non-realty items of property
were reported to be included in the price for this property. Overall, a
negative adjustment is warranted for Sale #1.
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Sales Comparison Approach
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Comparable Property Sale #2 was an arm's length transaction accomplished
with market oriented financing. It is also a relatively recent transfer
without any adverse leasehold interests. Locationally, Sale #2 exhibits
similar attributes to the subject due to its proximity to the airport and
the regional highway system.
Physically, this property was constructed during 1988 and was in very good
condition at the time of sale which is slightly superior in terms of age
and condition of the subject. Economically, Sale #2 was 100 percent leased
at the time of conveyance which is consistent with the 100 percent
occupancy now experienced by the subject. It is noted however, that the
major tenant in the complex, PNC Bank, will be vacating the property in
the intermediate term. No non-realty items of property were reported to be
included in the price for this property. Overall, a slight negative
adjustment is also warranted for Sale #2.
Comparable Property Sale #3 was an arm's length transaction accomplished
with market oriented financing and without any adverse leasehold
interests. As this property transferred in mid 1996, an upward adjustment
for improved market conditions is appropriate to Comparable Sale #3.
Locationally, Sale #3 exhibits superior attributes to the subject due to
its Cherry Hill location near Route 38.
Physically, this property represents a seven story office complex
containing 121,737 square feet situated on a 6.32 acre site. The property
features superior access and visibility relative to the subject and an
upward adjustment is considered appropriate for this characteristic. The
improvements were constructed in 1990 and considered in very good overall
condition, which is superior to the subject. Economically, Sale #3 was
only 67 percent leased at the time of conveyance which is inferior to the
100 percent occupancy now experienced by the subject. No non-realty items
of property were reported to be included in the price for this property.
Overall, a positive adjustment is warranted for Sale #3.
Conclusion - The three sales assembled for this analysis of 701 East Gate
Drive reflect a range in unit value from $88.03 to $163.29 per square foot
of building area. The adjustments discussed above are presented to outline
the logic of our thought processes with the ultimate result being a
plausible market value conclusion for the subject property. Based on our
analysis of these data on a price per square foot basis, we have concluded
an appropriate adjusted range of $100.00 to $110.00 per square foot of
building area. From within this adjusted range, we conclude the Sales
Comparison Approach to indicate a current market value of $6,500,000 for
701 East Gate Drive. This indication of value is equal to $105.73 per
square foot of building area.
303-305-307-309 Fellowship Road
This component of the property are a series of four, compatibly designed,
modern, three story office complexes each containing approximately 57,000 square
feet of gross building area. Constructed in phases between 1979 and 1982, the
buildings are classified as Class B buildings but are nevertheless in good
condition. 303 and 305 Fellowship Road are both now 90 percent occupied by 6
tenants each. 307 Fellowship Road is 87 percent occupied by 18 tenants and 309
Fellowship Road is only 76 percent occupied by 7 tenants. This complex presents
quality interior office finishes and possesses good "curb appeal". With regard
to the market data assembled for this analysis, the following comparisons are
made:
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Sales Comparison Approach
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Comparable Property Sale #4 was acquired by deed-in-lieu of foreclosure with the
seller considered somewhat motivated to sell. It was transferred without any
adverse leasehold interests, however an upward adjustment is considered
appropriate to reflect improved market conditions since the date of sale.
Locationally, Sale #4 exhibits similar attributes as the subject.
Physically, this property represents a four story office complex containing
62,069 square feet situated on a 4.34 acre site. The property features superior
access and visibility relative to the subject and a negative adjustment is
considered appropriate for this characteristic. The improvements were
constructed in 1985 and considered in average overall condition, which is
consistent with the average to good condition of 303-309 Fellowship Road.
Overall, this property is considered physically comparable to the subject
property. Economically, Sale #4 was only 63 percent leased at the time of
conveyance which is far inferior to the 87 to 90 percent occupancy now
experienced by the 303-307 Fellowship Road properties and somewhat inferior to
the 309 Fellowship Road property. No non-realty items of property were reported
to be included in the price for this property. Overall, a positive adjustment is
warranted for Sale #4, relative to each of the Fellowship Road properties.
Comparable Property Sale #5 was an arms length transaction acquired with market
oriented financing. It was transferred without any adverse leasehold interests,
however an upward adjustment is considered appropriate to reflect improved
market conditions since the date of sale. Locationally, Sale #5 exhibits similar
attributes as the subject.
Physically, this property represents a three story office complex containing
38,500 square feet situated on a 2.52 acre site. The property features superior
access and visibility relative to the subject and a negative adjustment is
considered appropriate for this characteristic. The improvements were
constructed in 1984 and considered in average overall condition, which is
consistent with the average to good condition of 303-309 Fellowship Road.
Overall, this property is considered physically comparable to the subject
property. Economically, Sale #5 was 100 percent leased at the time of conveyance
which is somewhat superior to the 87 to 90 percent occupancy now experienced by
the 303-307 Fellowship Road properties and far superior to the 309 Fellowship
Road property. No non-realty items of property were reported to be included in
the price for this property. Overall, a positive adjustment is warranted for
Sale #4, relative to each of the Fellowship Road properties.
Comparable Property Sale #6 was an arm's length transaction accomplished with
market oriented financing and without any adverse leasehold interests. As this
property transferred recently, no adjustment for market conditions is
appropriate to Comparable Sale #6. Locationally, Sale #6 exhibits similar
attributes to the subject due to its Greentree Corporate Center location in
nearby Marlton.
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Sales Comparison Approach
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Physically, this property represents a three story office complex containing
45,889 square feet situated on a 4.29 acre site. The property features similar
access and visibility relative to the subject and a no adjustment is considered
appropriate for this characteristic. The improvements were constructed in 1986
and considered in average overall condition, which is similar to the subject.
Economically, Sale #6 was 65 percent leased at the time of conveyance which is
inferior to the occupancy levels now experienced by the subject, No non-realty
items of property were reported to be included in the price for this property.
Overall, a positive adjustment is warranted for Sale #6.
Conclusion - The three sales assembled for this analysis of 303-309 Fellowship
Road reflect a range in unit value from $54.78 to $79.22 per square foot of
building area. The adjustments discussed above are presented to outline the
logic of our thought processes with the ultimate result being a plausible market
value conclusion for the subject property. Based on our analysis of these data
on a price per square foot basis, we have concluded an appropriate adjusted
range of $75.00 to $85.00 per square foot of building area. From within this
adjusted range, we conclude the Sales Comparison Approach to indicate a current
average market value indication equal to $80.00 to $85.00 per square foot of
building area, depending upon the economic characteristics of each building.
Therefore, the following conclusions would be appropriate for the Fellowship
Road properties.
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303 Fellowship Road $4,300,000 $80.81/s.f.
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305 Fellowship Road $4,700,000 $84.45/s.f.
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307 Fellowship Road $4,400,000 $80.62/s.f.
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309 Fellowship Road $4,450,000 $80.39/s.f.
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304 Harper Drive
This property is a 29,537 square foot two story office building on 2.51
acres of land which was constructed in 1975. It is now 91 percent occupied by 8
tenants. On the date of inspection, the building was in fair to average
condition having benefited from an on-going maintenance program, but featuring
dated restrooms. The data previously analyzed for the Fellowship Road properties
are applicable to this property as well.
Comparable Property Sale #4 is adjusted upward for the special
motivations of the seller and the superior current market conditions. This
adjustment is mitigated by the inferior access, visibility, age and
physical condition of the subject. A positive adjustment to Sale #4 is
considered due to its 63 percent occupancy at the time of conveyance which
is inferior to the subject's 91 percent occupancy. Overall, a positive
adjustment is felt warranted to Comparable Sale #4.
A positive adjustment is made to Comparable Property Sale #5 due to the
superior current market conditions relative to the date of sale. A
negative adjustment is appropriate for its superior access and visibility
relative to that of the subject. An additional negative adjustment is
taken to recognize the superior condition afforded by Sale #2.
Economically, Sale #5 was 100 percent leased at the time of conveyance.
Overall, a negative adjustment is warranted for Sale #5
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Sales Comparison Approach
================================================================================
Comparable Property Sale #6 has a comparable location but is physically
superior to the subject. Economically, Sale #6 was 65 percent leased at
the time of conveyance. Overall, despite the current occupancy, a negative
adjustment is warranted for Sale #6
Conclusion - As before, the adjustments discussed above are presented to
outline the logic of our thought processes with the ultimate result being
a plausible market value conclusion for the subject property. Based on our
analysis of these data on a price per square foot basis, we have concluded
an appropriate adjusted range of $60.00 to $70.00 per square foot of
building area. From within this adjusted range, we conclude the Sales
Comparison Approach to indicate a current market value of $1,900,000 for
304 Harper Drive. This indication of value is equal to $64.32 per square
foot of building area.
Single Story Office/Flex Improved Sales
On the opposing page is a presentation of the comparable property sales which
were analyzed for the valuation of the single-story office/flex buildings in
this portfolio. Again, the most widely-used and market-oriented unit of
comparison for properties such as the subject is the sales price per square foot
of building area. All comparable sales were analyzed on this basis. Detail
sheets describing these and all the sales employed in this analysis can be found
among the Addenda to this report.
815 East Gate Drive
This property is a 25,500 square foot single story office/flex building
situated on 5.98 acres of land. This site also supports 817 East Gate Drive
which will be subsequently valued independently. The building was constructed
circa 1986. It is now 87.7 percent occupied by 2 tenants. The vacant space
consists of 3,310 square feet. On the date of inspection, the building was in
good condition having benefited from an on-going maintenance program. This
facility provides 100 percent interior office finishes on an overall basis. The
property possesses good "curb appeal" and features good quality construction
materials. With regard to the market data assembled for this analysis, the
following comparisons are made:
Comparable Property Sale #7 was an arm's length transaction accomplished
with market oriented financing. It is also a relatively recent transfer
without any adverse leasehold interests. Locationally, Sale #7 exhibits a
slightly inferior location to that of the subject property.
Physically, this property was in good condition at the time of sale
similar to that of the subject property, however the property exhibited
only 85 percent finished offices. Economically, however, Sale #7 was 95
percent leased at the time of conveyance which is superior to the 87
percent occupancy now experienced by the subject. No non-realty items of
property were reported to be included in the price for this property.
Overall, a slight positive adjustment is warranted for Sale #1.
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VALUATION ADVISORY SERVICES
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<PAGE>
Sales Comparison Approach
================================================================================
Comparable Property Sale #8 and #9 were both arms length transactions
achieved with market oriented financing and without any adverse
leaseholds. Both comparables were situated within the Cambridge Crossing
Business Park which is regarded as similar in terms of overall locational
attributes. Physically, these properties were in good condition at the
time of sale which is comparable to that of the subject. Similarly, both
buildings consisted of 100 percent finished offices. Economically, Sale #8
and #9 were 100 percent leased at the time of conveyance. Thus a slight
negative adjustment was applied. Overall, a negative adjustment is
warranted for Sales #8 and #9.
Finally, Comparable Property Sale #10, also took place between two
unrelated parties and was achieved with market oriented financing and
without adverse leaseholds. The property benefits from a similar
campus-like setting to that of the subject property. Physically, this
property was in good condition at the time of sale, having also benefited
from an on-going maintenance program. Economically, Sale #10 was 89
percent leased at the time of conveyance which is also similar to the
subject. Overall, a nominal adjustment was warranted to Sale #1 0.
Conclusion - The four sales assembled for this analysis of 815 East Gate
Drive reflect a range in unit value from $59.89 to $69.14 per square foot
of building area. The adjustments discussed above are presented to outline
the logic of our thought processes with the ultimate result being a
plausible market value conclusion for the subject property. Based on our
analysis of these data on a price per square foot basis, we have concluded
an appropriate adjusted range of $62.00 to $67.00 per square foot of
building area. From within this adjusted range, we conclude the Sales
Comparison Approach to indicate a current market value of $1,675,000 for
815 East Gate Drive. This indication of value is equal to $65.68 per
square foot of building area.
817 East Gate Drive
This property is a 25,351 square foot single story office/flex building
situated on 5.98 acres of land. This site also supports 815 East Gate Drive. The
building was constructed circa 1986. It is now 100 percent occupied by 2
tenants. On the date of inspection, the building was in good condition having
benefited from an on-going maintenance program. This facility provides 80
percent interior office finishes on an overall basis. The property possesses
good "curb appeal" and features good quality construction materials. The data
previously analyzed for 815 East Gate Drive are applicable to this property as
well.
Comparable Property Sale #7 was an arm's length transaction accomplished
with market oriented financing. It is also a relatively recent transfer
without any adverse leasehold interests. Locationally, Sale #7 exhibits a
slightly inferior location to that of the subject.
Physically, this property was in good condition at the time of sale
similar to that of the subject property and exhibited 85 percent finished
offices. Economically, Sale #1 was 95 percent leased at the time of
conveyance which is slightly inferior to the 100 percent occupancy now
experienced by the subject. However, given the short term of EMTEC, who
occupies 15,596 square feet and expires March 1998, no adjustment was
considered necessary. No non-realty items of property were reported to be
included in the price for this property. Thus, an overall positive
adjustment is warranted for Sale #7.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Sales Comparison Approach
================================================================================
Comparable Property Sale #8 and #9 were both arms length transactions
achieved with market oriented financing. Both comparables were situated
within the Cambridge Crossing Business Park which is regarded as similar
in terms of overall locational attributes. Physically, these properties
were similarly in good condition at the time of sale. However, both
comparable buildings consisted of 100 percent finished offices which
warranted negative adjustments. Economically, Sale #8 and #9 were 100
percent leased at the time of conveyance. Thus a slight negative
adjustment was applied. As a result of our comparison, an overall negative
adjustment is warranted for Sales #8 and #9.
Finally, Comparable Property Sale #10, also took place between two
unrelated parties and was achieved with market oriented financing. The
property benefits from a similar campus-like setting to that of the
subject property. Physically, this property was in good condition at the
time of sale, having also benefited from an on-going maintenance program.
However, the property consisted of 100 percent finished offices and a
negative adjustment was applied as a result. Although Sale #10 was 89
percent leased at the time of conveyance, the short term nature of the
lead tenant at the subject property resulted in a nominal adjustment.
Overall, a negative adjustment was warranted to Sale #100.
Conclusion - The four sales assembled for this analysis of 817 East Gate
Drive reflect a range in unit value from $59.89 to $69.14 per square foot
of building area. The adjustments discussed above are presented to outline
the logic of our thought processes with the ultimate result being a
plausible market value conclusion for the subject property. Based on our
analysis of these data on a price per square foot basis, we have concluded
an appropriate adjusted range of $62.00 to $67.00 per square foot of
building area. From within this adjusted range, we conclude the Sales
Comparison Approach to indicate a current market value of $1,600,000 for
817 East Gate Drive. This indication of value is equal to $63.11 per
square foot of building area.
305 Harper Drive
This property is a 14,980 square foot single story office/flex building on
2.00 acres of land which was constructed in 1979. It is now 100 percent occupied
by 1 tenant. On the date of inspection, the building was in good condition
having benefited from an on-going maintenance program. The current configuration
of the complex is approximately 47 percent finished office space with the
remainder semi-finished assembly space. The facility is 100 percent sprinklered.
The property possesses good "curb appeal" and features good quality construction
materials. On the opposing page is a presentation of the market data assembled
for our analysis of this property.
Comparable Property Sale #7 is considered to possess a slightly inferior
location to that of the subject. Physically, this property was in good
condition at the time of sale similar to that of the subject property and
exhibited 85 percent finished offices, which is a superior physical
characteristic. Economically, Sale #7 was 95 percent leased at the time of
conveyance which is slightly inferior to the 100 percent occupancy now
experienced by the subject. No non-realty items of property were reported
to be included in the price for this property. Overall, a slight positive
adjustment is warranted for Sale #1.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Sales Comparison Approach
================================================================================
Comparable Property Sale #8 and #9 were both arms length transactions
achieved with market oriented financing. Both comparables were situated
within the Cambridge Crossing Business Park which is regarded as similar
in terms of overall locational attributes. Physically, these properties
were similarly in good condition at the time of sale. However, both
comparable buildings consisted of 100 percent finished offices which
warranted negative adjustments. Economically, Sale #8 and #9 were 100
percent leased at the time of conveyance. Thus no adjustment was applied
for economic characteristics. As a result of our comparison, an overall
negative adjustment is warranted for Sales #8 and #9.
Finally, Comparable Property Sale #10, also took place between two
unrelated parties and was achieved with market oriented financing. The
property benefits from a similar campus-like setting to that of the
subject property. Physically, this property was in good condition at the
time of sale, having also benefited from an on-going maintenance program.
However, the property consisted of 100 percent finished offices and a
negative adjustment was applied as a result. Sale #10 was 89 percent
leased at the time of conveyance, resulted in a nominal positive
adjustment. Overall, a negative adjustment was warranted to Sale #100.
Conclusion - The four sales assembled for this analysis of 305 Harper
Drive reflect a range in unit value from $59.89 to $69.14 per square foot
of building area. The adjustments discussed above are presented to outline
the logic of our thought processes with the ultimate result being a
plausible market value conclusion for the subject property. Based on our
analysis of these data on a price per square foot basis, we have concluded
an appropriate adjusted range of $60.00 to $65.00 per square foot of
building area. From within this adjusted range, we conclude the Sales
Comparison Approach to indicate a current market value of $925,000 for 305
Harper Drive. This indication of value is equal to $61.75 per square foot
of building area.
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WAKEFIELD(R)
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<PAGE>
Sales Comparison Approach
================================================================================
Final Conclusions
The subject property consists of both mid-rise office buildings and single
story office/flex buildings. Due to differences among these, two sets of data
were necessary for this comparative analysis of the real estate. Based upon
these analyses, it is our conclusion that the Sales Comparison Approach
indicates a total market value of FORTY ONE MILLION SIX HUNDRED FIFTY THOUSAND
DOLLARS ($41,650,000) for the entire subject property. This total value is
comprised as follows:
================================================================================
Final Conclusions
================================================================================
Indicated Market
Property Value
================================================================================
700 East Gate Drive $11,200,000
701 East Gate Drive $ 6,500,000
303 Fellowship Road $ 4,300,000
305 Fellowship Road $ 4,700,000
307 Fellowship Road $ 4,400,000
309 Fellowship Road $ 4,450,000
304 Harper Drive $ 1,900,000
815 East Gate Drive $ 1,675,000
817 East Gate Drive $ 1,600,000
305 Harper Drive $ 925,000
------------
TOTAL $41,650,000
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<PAGE>
INCOME CAPITALIZATION APPROACH
================================================================================
Methodology
The Income Capitalization Approach is a method of converting the
anticipated economic benefits of owning property into a value estimate through
capitalization. The principle of "anticipation" underlies this approach in that
investors recognize the relationship between an asset's income and its value. In
order to value the anticipated economic benefits of a particular property,
potential income and expenses must be estimated, and the most appropriate
capitalization method must be selected.
The two most common methods of converting net income into value are direct
capitalization and discounted cash flow analysis. In direct capitalization, net
operating income is divided by an overall rate extracted from market sales to
indicate a value. In the discounted cash flow method, anticipated future net
income streams and a reversionary value are discounted to an estimate of net
present value at a chosen yield rate (internal rate of return).
In our opinion, the discounted cash flow method is the more appropriate
capitalization technique as the subject property consists of ten separate
parcels occupied by a number of tenants at differing rental rates for varying
lease durations. Direct capitalization does not adequately account for the
subtlties of all those variables. The following is a discussion of our
discounted cash flow analysis for each parcel which comprises the subject
property.
700 East Gate Drive
This property is a 118,071 square foot, five story, multi-tenant, Class A
office building which is now 93 percent occupied by 14 tenants. On the opposing
page is a presentation of the cash flows which an informed investor could
reasonably expect 700 East Gate Drive to generate over a ten year time horizon.
These cash flows are based upon the following analysis:
Base Rental Income - The base rental income which an asset such as the
subject property will generate for an investor reflects a review of the
existing rent roll in conjunction with the rent now being paid for
comparable space and services in the competitive open market. A copy of
the rent roll over the subject property is included among the Addenda to
this report. As can be noted from the current rent roll, existing
contracts provide for base rental income of $16.49 per square foot in the
coming 12 months.
Two major tenants in the subject, Copelco and HBO, occupy 39,000 square
feet and 24,857 square feet, respectively, which equates to approximately
54 percent of the property. Their annual rent is equivalent to $16.50 and
$18.75 per square foot, respectively. The credit quality for the minor
tenants ranges from average to good within the context of their mostly
unrated status.
There are two short term lease expirations which will result in vacancies
of 2,140 square feet and 6,680 square feet. Given the current vacancy
rate, as well as the decreasing supply of available space within the
marketplace, we have projected that this space can be absorbed by the
market within nine months. The term of the spec tenant will be for five
years at a market derived rental rate of $19.67 per square foot.
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
At the subject property, three leases were negotiated in the past year at
average rental rates ranging from $15.08 per square foot to $21.51 per square
foot on a full service basis. Tenant areas range from about 359+/- square feet
up to 2,115+/- square feet. The following summarizes this recent leasing
activity.
================================================================================
Recent Leasing
700 East Gate Drive
================================================================================
Tenant Rentable Area Contract Rent
================================================================================
Phoenix Home Life 1,805 SF $15.08/SF - gross
News Nook 359 SF $21.51/SF - gross
Union Labor Life 2,115 SF $19.00/SF - gross
================================================================================
On the opposing page is a presentation of recent rental rates on mid-rise office
space in the market area of the subject property. As can be seen from this
summary, rental rates on space comparable to the subject range from $13.82 per
square foot on a net basis up to $21.00 per square foot on a gross basis plus
electricity.
Comparable Lease #1 is in the Century Corporate Center a short distance from
East Gate. This facility is not as physically desirable as the subject, and it
was written on a plus electric basis. Overall, a positive adjustment is made to
this comparable. Comparable Lease #2 is within the Laurel Corporate Center,
approximately two miles east of the subject. This complex is considered slightly
superior to East Gate. Further, this lease was written on a net basis. With
expenses averaging approximately $7.00 per square foot, the gross rent would be
equivalent to approximately $20.82 per square foot. Overall, a positive
adjustment is appropriate to this comparable. Comparable Lease #3 is within the
901 Route 73 building. Although providing superior visibility to the subject,
the complex is a Class B building considered less desirable than the subject. An
overall positive adjustment is considered warranted to this comparable.
Comparable Lease #4 is within the LibertyView Building, a seven story building
representing the newest multi-tenant building in the market. The lease was
structured at $21.00 per square foot plus electric. These costs can equal $2.00
per square foot, making the full service rate $23.00 per square foot. This
facility is located along Haddonfield Road in Cherry Hill and is generally
perceived as superior in terms of location. The project is considered one of the
premier developments in South Jersey and is physically superior to 700 East Gate
Drive. Overall, a negative adjustment is made to this lease. Comparable Lease #5
is also within the LibertyView Building. The lease was structured at $20.35 per
square foot plus electric. Overall, a negative adjustment is made to this lease.
Comparable Lease #6 is within Woodland Falls IV, a three story multi-tenant
building in the Woodland Falls Corporate Center. The lease was structured at
$19.40 per square foot plus electric. These costs can be as much as $2.00 per
square foot making the full service rate $21.40 per square foot. This facility
is located along Route 38 in Cherry Hill and is generally perceived as superior
in terms of location. The project was constructed in 1989 and is considered one
of the premier developments in South Jersey. Woodland Falls IV is physically
superior to the subject. Overall, a negative adjustment is made to this lease.
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Income Capitalization Approach
================================================================================
In addition to analyzing actual lease transactions inside and outside the
property, leasing brokers were interviewed in an effort to ascertain competitive
packages available in the marketplace today. Most brokers interviewed were of
the opinion that free rent was no longer being given in the local marketplace.
Tenant workletters, however, are a standard and felt to range from $10.00 to
$20.00 per square foot depending on the size of the tenant, the quality of the
building, and the duration of the lease.
After considering the most recent leasing achieved at the subject property in
conjunction with the rents now being paid for comparable space and services in
the competitive open market, it is our conclusion that the current average
economic rent for it is $19.00 per square foot on a full service basis. This
rent would be adjusted annually by 50 percent of the increase in the Consumer
Price Index over an average five year term. Additionally, the tenants would also
be responsible for increases in operating expenses over those incurred during
the first year of occupancy.
Market rent is forecasted to increase by 3.5 percent throughout the holding
period. This forecast of income growth rates reflects typical investor
expectations as noted in the Cushman & Wakefield Investor Survey which is among
the Addenda to this report. More importantly, we are of the opinion that these
growth rates reflect the current supply/demand relationship of space in the
local market which, all other factors being equal, will move toward equilibrium
over time.
Expense Reimbursements - Consistent with market leasing practice for this type
of real estate, the tenants in a property like the subject are responsible for a
proportionate share of certain expenses incurred annually in the operation and
ownership of the investment above an established base amount. These expenses
include real estate taxes, insurance premiums, utilities, maintenance,
administration, cleaning, management fees, contract fees, and miscellaneous fees
incurred. Future leases in the subject property are projected to be structured
in a similar fashion.
Allowance for Vacancy and Credit Loss - A deduction must be made from the total
gross revenues due an investor in the subject property to account for the
possibility of vacancy and/or non-collection of rent. We have, therefore,
deducted 3 percent from gross revenues as a global allowance for the non-payment
of rent or expenses by a lessee. This rate has considered the creditworthiness
of the tenant roster and long-term market conditions.
Additionally, our analysis over time has incorporated a lag vacancy allowance
which provides for "down time" between the expiration of an existing lease and
the commencement of a new lease. Upon the expiration of a lease, it is our best
estimate that there is a 65 percent probability that the tenant will renew and a
35 percent probability that the tenant will vacate. At renewal, no down time is
recognized; should this tenant vacate, then it is our expectation that an
average down time of approximately six months time would be reasonable to
re-lease the space. Therefore, the weighted average lag vacancy utilized between
lease expirations in this report is two months.
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<PAGE>
Income Capitalization Approach
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================================================================================
Lag Vacancy Allowance
================================================================================
Event Probability X Down Time = Weighted Time
================================================================================
Rollover 65% X - 0 - = - 0 -
Turnover 35% X 6 months = 2 months
- --------------------------------------------------------------------------------
Total 100% Average Weighted Time = 2 months
================================================================================
Based on the subject's weighted average downtime between leases, the overall
average occupancy rate of the subject property over the ten year holding period
is 97.1 percent. Including our overall vacancy/global credit loss allowance
estimated at 3.0 percent, the implied overall occupancy rate of the subject
property over the ten year holding period is 94.1 percent.
Operating Expenses - We were provided with historic operating expense data for
the subject property. We have also been provided with current ownership's
operating pro forma. On the opposing page is a presentation of these data sets.
As can be seen, historic operating expenses at the subject property from 1994
through 1996 ranged from $5.85 to $6.83 per square foot. Current ownership
budgets operating expenses at $7.37 per square foot for 1997. In the initial
year of the investment holding period, we project operating expenses to be $7.23
per square foot at the subject property based upon the following:
Real Estate Taxes - This item is sensitive to a specific local
jurisdiction so that a direct comparison with those expense data available
from the market is not possible. However, in the Real Estate Tax and
Assessments section of this report, we document the level of assessment on
the subject building. In the initial year of the investment, the cost of
real estate taxes associated with 700 East Gate Drive, was projected to be
$173,231.
Insurance - The history of the subject and the data available from our
files indicate an extremely tight range for this expense item on a square
foot basis. Therefore, we have stabilized the insurance expense at $26,760
or $0.23 per square foot for this analysis.
Repairs & Maintenance - This expense category includes the annual cost to
maintain the facility with supplies and labor. Historically, these costs
have ranged from $0.42 to 0.49 per square foot. In the initial year of
investment, repairs and maintenance expense is stabilized at $0.47 per
square foot.
Utilities - This expense category typically includes energy to operate the
facility plus water and sewer charges. Historically, utilities expense has
ranged from $1.65 to $2.09 per square foot. The owner's 1997 projection
for the utilities expense was $2.54 per square foot. In the initial year
of the investment, a utilities expense was projected to be $2.54 per
occupied square foot.
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<PAGE>
Income Capitalization Approach
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Cleaning - This expense category typically includes the cost for daily
janitorial services including supplies. From 1994 through 1996, the cost
associated with cleaning has varied due to changes in occupancy from $0.57
to $0.87 per square foot. We have projected within the initial year of the
analysis, a cleaning expense of $0.87 per occupied square foot or $101,295
in aggregate.
Outside Contracts - At properties like the subject, it is necessary to
engage outside contractors for services that include landscaping, snow
removal and trash removal. According to ownership, costs associated with
outside contracts has historically ranged from $0.52 to $79 per square
foot of building area. In addition, ownership has budgeted $0.67 for 1997.
In the initial year of the investment, we have projected outside contracts
to be $0.69 per square foot.
Management and Administrative - The fee for providing professional
management services includes collections, supervision and the preparation
of all budgets. According to the historical operating expenses, the cost
for professional management has ranged from $0.29 to $0.60 per square foot
of rentable building area. As a "stand alone" property in the initial
fiscal year, this amount is forecasted to be $.65 per square foot of
building area respectively. Additionally, ownership in course of
operations, will incur administrative cost such as salaries, legal and
auditing fees etc. As a result we have projected in addition to a
management burden, $0.31 per square foot in the initial year of the
investment for general administrative costs.
Miscellaneous - Invariably, miscellaneous expenses occur in the operation
of a property such as the subject. These include advertising and
promotional expenses, space planning, brochures, and a contingency for the
unknown. The data available from the market indicate allowances for
miscellaneous expenses ranging from $0.01 to $0.08 per square foot of
rentable area. For this analysis, miscellaneous operating expenses are
stabilized at $0.05 per rentable square foot of building area.
Operating expenses are forecasted to increase at an average annual rate of 3.5
percent over the investment holding period. The forecast of projected growth
rates in all categories of expense reflect typical investor expectations as
noted in the Cushman & Wakefield Investor Survey, which has been placed among
the Addenda to this report. Except where noted, our projected growth rates for
the various types of expense categories generally do not attempt to reflect
growth rates for any individual year, but rather the long term trend over the
period of analysis.
Other Non-Operating Expenses - Other, non-operating expenses of the
subject property are projected in this analysis from prevailing commission
schedules, construction costs, and accepted practices. We have analyzed
each item of capital expenditure in an attempt to project what the typical
investor in a property like the subject would consider reasonable, based
upon informed opinion and experience. The following is a discussion of the
other, non-operating expenses incorporated into this analysis of the
subject property.
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<PAGE>
Income Capitalization Approach
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Tenant Alterations - Upon the expiration of a lease, it is our best estimate
that there is a 65 percent probability of the existing tenant renewing their
lease and a 35 percent probability that the existing tenant will vacate. The
current cost to alter and re-decorate office space for a rollover tenant is
estimated to be $9.00 per square foot while that to prepare space for a new
turnover tenant is estimated to be $15.00 per square foot. On average, then, the
weighted cost of tenant alterations is projected to be $11.10 per square foot
in the initial year of the investment holding period. The following is a
presentation of these computations.
================================================================================
Tenant Improvement Costs
================================================================================
Event Probability X Unit Cost = Weighted Cost
================================================================================
Rollover 65% X $ 9.00/SF = $ 5.85/SF
Turnover 35% X $15.00/SF = $ 5.25/SF
- --------------------------------------------------------------------------------
Total 100% Average Weighted Cost = $ 11.10/SF
================================================================================
Leasing Commissions - In estimating the appropriate stabilized leasing expense
for the subject property, the same rollover/turnover probabilities as described
above are utilized. The standard leasing commission for new tenants is 6 percent
of the first year's rent, 5 percent of the second, 4 percent of the third and 3
percent of each succeeding year's contract rent, payable at lease commencement.
Based upon an average five year lease term, leasing commissions are equal to 4.2
percent of total base rental income. The following is a summary of these
computations.
================================================================================
Effective Leasing Commissions
Average Five Year Lease Term
Turnover Tenant
================================================================================
Lease Year % x Commission = Weighted Rate
================================================================================
1 20% X 6% = 1.20%
2 20% X 5% = 1.00%
3 20% X 4% = .80%
4 20% X 3% = .60%
5 20 X 3% = .60%
- --------------------------------------------------------------------------------
Total 100% Effective Commission Rate = 4.20%
================================================================================
For a tenant who elects to renew a lease, half of a commission is payable.
On a weighted average basis, then, leasing commissions are equal to 2.84
percent of total effective base rental income over the term. The following
is a presentation of these computations.
================================================================================
Leasing Commission Expense
================================================================================
Event Probability X Commission = Weighted Cost
================================================================================
Rollover 65% X 2.1% = 1.37%
Turnover 35% X 4.2% = 1.47%
- --------------------------------------------------------------------------------
Total 100% Average Weighted Rate = 2.84%
================================================================================
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<PAGE>
Income Capitalization Approach
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Reserves - It is customary and prudent to set aside an amount annually for
the replacement of short lived capital items such as roofs, parking lots,
or mechanical equipment. In this analysis, we have projected an allowance
for reserves of $0.10 per square foot of rentable building area which is
typical in the local market place for a property like the subject.
Reserves for replacements are therefore stabilized at $11,807.
Other non-operating expenses are also forecasted to increase at an average
annual rate of 3.5 percent over the investment holding period. This too is
consistent with the Cushman & Wakefield Investor Survey. Again, our projected
growth rates for the various types of expense categories generally do not
attempt to reflect growth rates for any individual year, but rather the long
term trend over the period of analysis.
Terminal Capitalization Rate - The residual cash flows annually generated by the
subject property comprise only the first part of the return which an investor
will receive. The second component of this investment return is the pre-tax cash
proceeds from the resale of the property at the end of a projected investment
holding period. A terminal capitalization rate was used to estimate the market
value of the property at the end of the assumed investment holding period. We
estimated an appropriate terminal rate based on indicated rates in today's
market. A premium was added to today's rate to allow for the risk of unforeseen
events or trends which might affect our estimate of net operating income during
the holding period.
================================================================================
Summary of Capitalization Rates
================================================================================
Sale # Location Capitalization Rate
================================================================================
1 Westlakes Corporate Center 9.00%
Tredyffrin Township, PA
2 Airport Business Center 10.00%
Essington Borough, PA
8 1025 Briggs Road 11.00%
Cambridge Crossing
Mount Laurel Township, NJ
9 1000 Briggs Road 11.00%
Cambridge Crossing
Mount Laurel Township, NJ
10 9001 Lincoln Drive West 11.46
Greentree Commons
Evesham Township, NJ
================================================================================
Terminal Capitalization Rate Selected 10.50%
================================================================================
================================================================================
-53-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
Investors typically add 50 to 100 basis points to the "going-in" rate to arrive
at a terminal capitalization rate, according to Cushman & Wakefield's periodic
investor surveys. Our survey indicates that terminal capitalization rates have
ranged from 8.0 to 11.0 percent. Based on our most recent experience, we have
found little variance between going in and terminal rates. For this analysis, it
is our projection that the subject property would most likely be sold at the end
of the 10th year of the holding period for an amount equal to what would be the
next year's net operating income capitalized at an overall rate of 10.5 percent.
The 11th year's computed net operating income is employed at this point as it
would be the first received by a new purchaser of the subject property. It is
projected, then, that a current investor would dispose of the subject property
at the end of the projected holding period for an amount equal to $16,860,000 or
$142.80 per square foot of building area.
Transaction Costs - From the projected $16,860,600 reversion to an investor in
the subject property, we have deducted a total of $506,000 to account for the
various transaction costs associated with the sale of an asset of this type.
These costs consist of 3 percent of the total disposition price of the subject
property as an allowance for transfer taxes, professional fees, and other
miscellaneous expenses that the seller pays at final closing. Deducting these
transaction costs from the computed reversion renders pre-tax net proceeds of
sale equal to $16,354,000 to be received by an investor in the subject property
at the end of the holding period.
Discount Rate - In our valuation, we endeavored to reflect the most likely
actions of typical buyers and sellers in this market. We forecasted cash flows
and discounted them and the future property value at reversion to a present
value at various rates of return (yield rates) currently required by investors
for similar quality real property. The yield rate (internal rate of return or
IRR) is the single rate that discounts all future benefits (cash flow and
reversion) to an estimate of net present value.
Cushman & Wakefield Valuation Advisory Services periodically surveys national
real estate investors to determine their investment objectives. Following is a
brief review of internal rates of return, overall rates, and income and expense
growth rates considered acceptable by respondents. The entire survey is included
among the Addenda to this report.
================================================================================
AUTUMN 1996 INVESTOR SURVEY
FOR SUBURBAN OFFICE BUILDINGS
================================================================================
GOING-IN TERMINAL IRR
- --------------------------------------------------------------------------------
Low High Low High Low High
- --------------------------------------------------------------------------------
Mean 8.80% 9.50% 9.30% 9.90% 11.2% 11.6%
- --------------------------------------------------------------------------------
Range 8.00% 11.0% 8.00% 11.0% 10.0% 13.0%
================================================================================
================================================================================
-54-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
The wide range of investment parameters indicates that property risk and yield
are assessed to a particular investment property based on a variety of
variables. Risk is the primary determinant, and the risk variables include
whether current contract rents are significantly above or below current market
rents; the amount and timing of tenant roll-overs; the risk to lease-up the
property and the strength of the market during the lease-up period; the
durability of the cash flow, and its ability to increase with inflation along
with the creditworthiness of the existing tenancy. Risk is also dependent on
investor demand for the property type; the diversification of the metropolitan
area; the property's location within the local market; the supply and demand for
the property type within the market; and the effective age of the property.
The internal rate of return and terminal capitalization rate selected for this
analysis were strongly influenced by our recent Investor Survey. We realize that
this type of survey reflects target rather than transactional rates.
Transactional rates are usually difficult to obtain in the verification process
and are actually only target rates of the buyer at the time of sale. The
property's performance will ultimately determine the actual yield and
capitalization rate at the time of sale after a specific holding period. We have
found that, in improving markets or with above average properties, demand will
be high and transactional rates may be lower than target rates that are quoted
in surveys. We have tried to recognize this factor in our choice of these two
rates for our cash flow model.
Considering the locational attributes, physical traits and economic
characteristics of the subject property, we believe a discount rate ranging from
11.0 percent to 12.0 percent would be appropriate for the subject property in
light of the investment criteria presented here. Thus, we have discounted the
projected future pre-tax cash flows to be received by an investor in the subject
property to a present value so as to yield 11.0 percent to 12.0 percent on
capital at 25 basis point intervals over the holding period. This discounting
process is summarized as follows:
================================================================================
Investment Summary
================================================================================
Discount Rate Present Worth Unit Rate Overall Rate
================================================================================
11.00% $11,592,000 $98.18/SF 9.58%
11.25% $11,400,000 $96.55/SF 9.75%
11.50% $11,211,000 $94.95/SF 9.91%
11.75% $11,027,000 $93.39/SF 10.08%
12.00% $10,847,000 $91.87/SF 10.24%
================================================================================
Through such a sensitivity analysis, it can be seen that the present value of
the subject property varies from approximately $10,847,000 to $11,592,000.
Considering the quality of the tenant roster in place at the subject, we believe
a discount rate which falls toward the mid-point of the range now required in
the marketplace to be appropriate in this case. Using an 11.50 percent internal
rate of return, our discounted cash flow model computes to a present worth of
$11,211,000 which we round to $11,200,000 as an indication of market value for
700 East Gate Drive via the Income Capitalization Approach.
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-55-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
This indication of value produces an implied "going-in" overall
capitalization rate of 9.92 percent based upon the initial year's net
operating income of $1,110,983. Additionally, based upon a market value of
$11,200,000 and a projected future gross reversionary value of
approximately $16,860,000, a compound annual rate of appreciation of 4.17
percent is computed. Finally, with regard to the composition of the
internal rate of return employed here, approximately 51 percent of the
expected yield is from cash flows while the balance is attributable to
property reversion. These percentages fall within the generally accepted
relevant range of most current real estate investors.
701 East Gate Drive
This property is a 61,477 square foot, three story, multi-tenant, Class A
office building which is now 100 percent occupied by 10 tenants. On the opposing
page is a presentation of the cash flows which an informed investor could
reasonably expect 701 East Gate Drive to generate over a ten year time horizon.
These cash flows are based upon the following analysis:
Base Rental Income - Existing lease contracts at the subject property
provide an average base rental income of $17.27 per square foot of
occupied space in the coming 12 months. A copy of the rent roll over the
subject property is included among the Addenda to this report. As can be
noted from the current rent roll, four leases were negotiated in the past
year at rental rates ranging from $17.35 per square foot to $18.55 per
square foot on a full service basis plus electric. The following
summarizes this recent leasing activity.
================================================================================
Recent Leasing
701 East Gate Drive
================================================================================
Tenant Rentable Area Contract Rent
================================================================================
Today's Temporary 1,588 SF $18.41/SF - gross + electric
Digital 6,369 SF $17.35/SF - gross + electric
Lockheed Martin 4,619 SF $18.38/SF - gross + electric
American International 1,214 SF $18.55/SF - gross + electric
================================================================================
The rental data previously analyzed for 700 East Gate Drive are applicable
to this property as well. As noted, rental rates on space comparable to
the subject range from $13.82 per square foot on a net basis up to $21.00
per square foot on a gross basis plus electricity. After considering the
most recent leasing achieved at the subject property in conjunction with
the rents now being paid for comparable space and services in the
competitive open market, it is our conclusion that the current average
economic rent for it is $18.50 per square foot on a full service basis
plus electric. Economic rent is forecasted to increase by 3.5 percent
throughout the projection period.
Expense Reimbursements - The tenants in a property like the subject are
responsible for a proportionate share of certain expenses incurred
annually in the operation and ownership of the investment above an
established base amount. These expenses include real estate taxes,
insurance premiums, utilities, maintenance, administration, cleaning,
management fees, contract fees, and miscellaneous fees incurred. Future
leases in the subject property are projected to be structured in a similar
fashion.
================================================================================
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
Allowance for Vacancy and Credit Loss - We have deducted 3 percent from
gross revenues as a global allowance for the non-payment of rent or
expenses by a lessee. Additionally, our analysis over time has
incorporated a lag vacancy allowance which provides for "down time"
between the expiration of an existing lease and the commencement of a new
lease. The weighted average lag vacancy utilized between lease expirations
in this report is two months as previously described.
Operating Expenses - On the opposing page is a presentation of historic
operating expense data for the subject property and current ownership's
operating pro forma expense data. As can be seen, historic operating
expenses at the subject property have ranged from $5.09 to $5.61 per
square foot of building area. Current ownership budgets operating expenses
at $5.51 per square foot for 1997. In the initial year of the investment
holding period, we project operating expenses to be $5.36 per square foot
at the subject property. Operating expenses are forecasted to increase at
an average annual rate of 3.5 percent over the investment holding period.
Other Non-Operating Expenses - As previously described herein, the
weighted cost of tenant alterations is projected to be $11.10 per square
foot in the initial year of the investment holding period. On a weighted
average basis, leasing commissions are equal to 2.84 percent of total
effective base rental income over the term as well. Reserves for
replacements are stabilized at $0.10 per square foot of rentable building
area. Other non-operating expenses are forecasted to increase at an
average annual rate of 3.5 percent over the investment holding period.
Terminal Capitalization Rate - At the end of the assumed investment
holding period, it is our projection that the subject property would
most likely be sold at the end of the 10th year of the holding period
for an amount equal to what would be the next year's net operating income
capitalized at an overall rate of 10.50 percent. A 10.50 percent terminal
capitalization rate is utilized in this analysis as it reflects current
local market levels for an asset of this type plus a premium for the risk
of unforeseen events or trends over time. The 11th year's computed net
operating income is employed at this point as it would be the first
received by a new purchaser of the subject property. In this analysis,
then, a current investor would dispose of the subject property at the end
of the projected holding period for an amount equal to $9,312,000 or
$151.47 per square foot of building area.
Transaction Costs - From the projected $9,312,000 reversion to an investor
in the subject property, we have deducted a total of $372,000 to account
for the various transaction costs associated with the sale of an asset of
this type. These costs consist of 4 percent of the total disposition price
of the subject property as an allowance for transfer taxes, professional
fees, and other miscellaneous expenses that the seller pays at final
closing. Deducting these transaction costs from the computed reversion
renders pre-tax net proceeds of sale equal to $8,940,000 to be received by
an investor in the subject property at the end of the holding period.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
Discount Rate - Considering the locational attributes, physical traits and
economic characteristics of the subject property, we believe a discount
rate ranging from 11.0 percent to 12.0 percent would be appropriate for
the subject property in light of the investment criteria previously
presented herein. Through such a sensitivity analysis, it can be seen that
the present value of the subject property varies from approximately
$6,604,000 to $7,036,000. This discounting process is summarized as
follows:
================================================================================
Investment Summary
================================================================================
Discount Rate Present Worth Unit Rate Overall Rate
================================================================================
11.00% $7,036,000 $114.45/SF 10.35%
11.25% $6,924,000 $112.63/SF 10.52%
11.50% $6,815,000 $110.85/SF 10.69%
11.75% $6,708,000 $109.11/SF 10.86%
12.00% $6,604,000 $107.42/SF 11.03%
================================================================================
Considering the tenant roster in place at the subject property, we believe
a discount rate which falls toward the mid-point of the range now required
in the marketplace to be appropriate in this case. Using an 11.50 percent
internal rate of return, our discounted cash flow model computes to a
present worth of $6,815,000 which we round to $6,800,000 for an indication
of market value for 701 East Gate Drive via the Income Capitalization
Approach. This indication of value produces an implied "going-in" overall
capitalization rate of 10.71 percent based upon the initial year's net
operating income of $728,467.
Additionally, based upon a market value of $6,800,000 and a projected
future gross reversionary value of approximately $9,312,000, a compound
annual rate of appreciation of 3.19 percent is computed. Finally, with
regard to the composition of the internal rate of return employed here,
approximately 56 percent of the expected yield is from cash flows while
the balance is attributable to property reversion. These percentages fall
within the generally accepted relevant range of most current real estate
investors.
303 Fellowship Road
This property is a 53,208 square foot, three story, multi-tenant, Class B
office building which is now 90 percent occupied by 6 tenants. On the opposing
page is a presentation of the cash flows which an informed investor could
reasonably expect 303 Fellowship Road to generate over a ten year time horizon.
These cash flows are based upon the following analysis:
Base Rental Income - Existing lease contracts at the subject property
provide an average base rental income of $16.77 per square foot of
occupied space in the coming 12 months. A copy of the rent roll over the
subject property is included among the Addenda to this report. As can be
noted from the current rent roll, two leases were negotiated in the past
year at rental rates ranging from $16.68 per square foot to $17.24 per
square foot on a full service basis. No tenant improvement allowance was
provided on the lower rental rate and only $4.00 per square foot on the
higher rental rate. The following summarizes this recent leasing activity.
================================================================================
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
================================================================================
Recent Leasing
303 Fellowship Road
================================================================================
Tenant Rentable Area Contract Rent
================================================================================
Star 17,596 SF $17.24/SF - gross
Hasbro 11,682 SF $16.68/SF - gross
================================================================================
The rental data previously analyzed for are again applicable to this
property as well. So as not to be redundant in the remainder of this
analysis, the following discussion relates to all of the Fellowship Road
properties. As noted, rental rates on space comparable to the subject
range from $13.82 per square foot on a net basis up to $21.00 per square
foot on a gross basis plus electricity. After considering the most recent
leasing achieved at the subject property in conjunction with the rents now
being paid for comparable space and services in the competitive open
market, it is our conclusion that the current average economic rent for it
is $17.75 per square foot on a full service basis. Economic rent is
forecasted to increase by 3.5 percent per annum throughout the projection
period.
Expense Reimbursements - The tenants in a property like the subject are
responsible for a proportionate share of certain expenses incurred
annually in the operation and ownership of the investment above an
established base amount. These expenses include real estate taxes,
insurance premiums, utilities, maintenance, administration, cleaning,
management fees, contract fees, and miscellaneous fees incurred. Future
leases in the subject property are projected to be structured in a similar
fashion.
Allowance for Vacancy and Credit Loss - We have deducted 3 percent from
gross revenues as a global allowance for the non-payment of rent or
expenses by a lessee. Additionally, our analysis over time has
incorporated a lag vacancy allowance which provides for "down time"
between the expiration of an existing lease and the commencement of a new
lease. The weighted average lag vacancy utilized between lease expirations
in this report is two months as previously described.
Operating Expenses - On the opposing page is a presentation of historic
operating expense data for the subject property and current ownership's
operating pro forma expense data. As can be seen, historic operating
expenses at the subject property have ranged from $6.11 to $6.67 per
square foot of building area. Current ownership budgets operating expenses
at $7.25 per square foot for 1997. In the initial year of the investment
holding period, we project operating expenses to be $6.71 per square foot
at the subject property. Operating expenses are forecasted to increase at
an average annual rate of 3.5 percent over the investment holding period.
Other Non-Operating Expenses - Upon the expiration of a lease, it is our
best estimate that there is a 65 percent probability of the existing
tenant renewing their lease and a 35 percent probability that the existing
tenant will vacate. The current cost to alter and re-decorate office space
for a rollover tenant is estimated to be $7.00 per square foot while that
to prepare space for a new turnover tenant is estimated to be $12.00 per
square foot. On average, then, the weighted cost of tenant alterations is
projected to be $8.75 per square foot in the initial year of the
investment holding period. The following is a presentation of these
computations.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
================================================================================
Tenant Improvements Costs
================================================================================
Event Probability X Unit Cost = Weighted Cost
================================================================================
Rollover 65% X $ 7.00/SF = $ 4.55/SF
Turnover 35% X $12.00/SF = $ 4.20/SF
- --------------------------------------------------------------------------------
Total 100% Average Weighted Cost = $ 8.75/SF
================================================================================
As previously described, on a weighted average basis, leasing commissions
are equal to 2.84 percent of total effective base rental income over the
term as well. Reserves for replacements are stabilized at $0.10 per square
foot of rentable building area. Other non-operating expenses are
forecasted to increase at an average annual rate of 3.5 percent over the
investment holding period.
Terminal Capitalization Rate - At the end of the assumed investment
holding period, it is our projection that the subject property would most
likely be sold at the end of the 10th year of the holding period for an
amount equal to what would be the next year's net operating income
capitalized at an overall rate of 11.00 percent. An 11.00 percent
terminal capitalization rate is utilized in this analysis as it reflects
current local market levels for an asset of this type plus a premium for
the risk of unforeseen events or trends over time, The 11th year's
computed net operating income is employed at this point as it would be the
first received by a new purchaser of the subject property. In this
analysis, then, a current investor would dispose of the subject property
at the end of the projected holding period for an amount equal to
$6,441,000 or $121.05 per square foot of building area.
Transaction Costs - From the projected $6,441,000 reversion to an investor
in the subject property, we have deducted a total of $257,000 to account
for the various transaction costs associated with the sale of an asset of
this type. These costs consist of 4 percent of the total disposition price
of the subject property as an allowance for transfer taxes, professional
fees, and other miscellaneous expenses that the seller pays at final
closing. Deducting these transaction costs from the computed reversion
renders pre-tax net proceeds of sale equal to $6,184,000 to be received
by an investor in the subject property at the end of the holding period.
Discount Rate - Considering the locational attributes, physical traits and
economic characteristics of the subject property, we believe a discount
rate ranging from 11.0 percent to 12.0 percent would be appropriate for
the subject property in light of the investment criteria previously
presented herein. Through such a sensitivity analysis, it can be seen that
the present value of the subject property varies from approximately
$4,266,000 to $4,558,000. This discounting process is summarized as
follows:
================================================================================
Investment Summary
================================================================================
Discount Rate Present Worth Unit Rate Overall Rate
================================================================================
11.00%, $4,558,000 $85.66/SF 9.82%
11.25% $4,482,000 $84.24/SF 9.98%
11.50% $4,409,000 $82.86/SF 10.15%
11.75% $4,336,000 $81.49/SF 10.32%
12.00% $4,266,000 $80.18/SF 10.49%
================================================================================
-60-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
Considering the existing tenant roster at the subject property, we believe
a discount rate which falls above the middle of the range now required in
the marketplace to be appropriate in this case. Using an 11.75 percent
internal rate of return, our discounted cash flow model computes to a
present worth of $4,409,000 which we round to $4,400,000 for an indication
of market value for 303 Fellowship Road via the Income Capitalization
Approach. This indication of value produces an implied "going-in" overall
capitalization rate of 10.17 percent based upon the initial year's net
operating income of $447,357.
Additionally, based upon a market value of $4,400,000 and a projected
future gross reversionary value of approximately $6,441,000, a compound
annual rate of appreciation of 3.88 percent is computed. Finally, with
regard to the composition of the internal rate of return employed here,
approximately 54 percent of the expected yield is from cash flows while
the balance is attributable to property reversion. These percentages fall
within the generally accepted relevant range of most current real estate
investors.
305 Fellowship Road
This property is a 55,619 square foot, three story, multi-tenant, Class B
office building which is now 90 percent occupied by 6 tenants. On the opposing
page is a presentation of the cash flows which an informed investor could
reasonably expect 305 Fellowship Road to generate over a ten year time horizon.
These cash flows are based upon the following analysis:
Base Rental Income - Existing lease contracts at the subject property provide an
average base rental income of $17.29 per square foot of occupied space in the
coming 12 months. A copy of the rent roll over the subject property is included
among the Addenda to this report. As can be noted from the current rent roll, no
leases were negotiated in the past year.
After considering the rents now being paid for comparable space and services in
the competitive open market, it is our conclusion that the current average
economic rent for it is $17.75 per square foot on a full service basis. Economic
rent is forecasted to increase by 3.5 percent per annum throughout the
projection period.
Expense Reimbursements - The tenants in a property like the subject are
responsible for a proportionate share of certain expenses incurred annually in
the operation and ownership of the investment above an established base amount.
These expenses include real estate taxes, insurance premiums, utilities,
maintenance, administration, cleaning, management fees, contract fees, and
miscellaneous fees incurred. Future leases in the subject property are projected
to be structured in a similar fashion.
Allowance for Vacancy and Credit Loss - We have deducted 3 percent from gross
revenues as a global allowance for the non-payment of rent or expenses by a
lessee. Additionally, our analysis over time has incorporated a lag vacancy
allowance which provides for "down time" between the expiration of an existing
lease and the commencement of a new lease. The weighted average lag vacancy
utilized between lease expirations in this report is two months as previously
described.
================================================================================
-61-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
Operating Expenses - On the opposing page is a presentation of historic
operating expense data for the subject property and current ownership's
operating pro forma expense data. As can be seen, historic operating
expenses at the subject property have ranged from $5.09 to $5.71 per
square foot of building area. Current ownership budgets operating expenses
at $6.14 per square foot for 1997. In the initial year of the investment
holding period, we project operating expenses to be $6.33 per square foot
at the subject property. Operating expenses are forecasted to increase at
an average annual rate of 3.5 percent over the investment'holding period.
Other Non-Operating Expenses - As previously described herein, the
weighted cost of tenant alterations is projected to be $8.75 per square
foot in the initial year of the investment holding period. On a weighted
average basis, leasing commissions are equal to 2.84 percent of total
effective base rental income over the term as well. Reserves for
replacements are stabilized at $0.10 per square foot of rentable building
area. Other non-operating expenses are forecasted to increase at an
average annual rate of 3.5 percent over the investment holding period.
Terminal Capitalization Rate - At the end of the assumed investment
holding period, it is our projection that the subject property would most
likely be sold at the end of the 10th year of the holding period for an
amount equal to what would be the next year's net operating income
capitalized at an overall rate of 11.00 percent. An 11.00 percent terminal
capitalization rate is utilized in this analysis as it reflects current
local market levels for an asset of this type plus a premium for the risk
of unforeseen events or trends over time. The 11th year's computed net
operating income is employed at this point as it would be the first
received by a new purchaser of the subject property. In this analysis,
then, a current investor would dispose of the subject property at the end
of the projected holding period for an amount equal to $7,376,000 or
$132.62 per square foot of building area.
Transaction Costs - From the projected $7,376,000 reversion to an
investor in the subject property, we have deducted a total of $295,000 to
account for the various transaction costs associated with the sale of an
asset of this type. These costs consist of 4 percent of the total
disposition price of the subject property as an allowance for transfer
taxes, professional fees, and other miscellaneous expenses that the seller
pays at final closing. Deducting these transaction costs from the computed
reversion renders pre-tax net proceeds of sale equal to $7,081,000 to be
received by an investor in the subject property at the end of the holding
period.
Discount Rate - Considering the locational attributes, physical traits and
economic characteristics of the subject property, we believe a discount
rate ranging from 11.0 percent to 12.0 percent would be appropriate for
the subject property in light of the investment criteria previously
presented herein. Through such a sensitivity analysis, it can be seen that
the present value of the subject property varies from approximately
$4,993,000 to $5,332,000. This discounting process is summarized as
follows:
================================================================================
-62-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
================================================================================
Investment Summary
================================================================================
Discount Rate Present Worth Unit Rate Overall Rate
================================================================================
11.00% $5,332,000 $95.87/SF 10.67%
11.25% $5,244,000 $94.28/SF 10.85%
11.50% $5,159,000 $92.76/SF 11.03%
11.75% $5,075,000 $91.25/SF 11.21%
12.00% $4,993,000 $89.77/SF 11.39%
================================================================================
Considering the tenant roster currently in place at the subject property,
we believe a discount rate which falls above the middle of the range now
required in the marketplace to be appropriate in this case. Using an 11.75
percent internal rate of return, our discounted cash flow model computes
to a present worth of $5,075,000 which we round to $5,100,000 for an
indication of market value for 305 Fellowship Road via the Income
Capitalization Approach. This indication of value produces an implied
"going- in" overall capitalization rate of 11.16 percent based upon the
initial year's net operating income of $568,949. While this overall rate
is, higher than what is typically required, there are several leases
within this property structured at or above our estimate of market rent.
Additionally, based upon a market value of $5,100,000 and a projected
future gross reversionary value of approximately $7,376,000, a compound
annual rate of appreciation of 3.75 percent is computed. Finally, with
regard to the composition of the internal rate of return employed here,
approximately 54 percent of the expected yield is from cash flows while
the balance is attributable to property reversion. These percentages fall
within the generally accepted relevant range of most current real estate
investors.
307 Fellowship Road
This property is a 54,577 square foot, three story, multi-tenant, Class B
office building which is now 87 percent occupied by 18 tenants. On the opposing
page is a presentation of the cash flows which an informed investor could
reasonably expect 307 Fellowship Road to generate over a ten year time horizon.
These cash flows are based upon the following analysis:
Base Rental Income - Existing lease contracts at the subject property provide an
average base rental income of $16.62 per square foot of occupied space in the
coming 12 months. A copy of the rent roll over the subject property is included
among the Addenda to this report. As can be noted from the current rent roll,
five leases were negotiated in the past year at rental rates ranging from $14.50
per square foot to $22.00 per square foot on a full service basis. The following
summarizes this recent leasing activity.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
====================================================================
Recent Leasing
307 Fellowship Road
====================================================================
Tenant Rentable Area Contract Rent
====================================================================
Intercraft 798 SF $16.83/SF - gross
Mellon Mortgage 1,063 SF $22.00/SF - gross
Robert Half 2,736 SF $16.50/SF - gross
Ultronix 2,125 SF $14.50/SF - gross
Garden State Cable 4,182 SF $17.75/SF - gross
====================================================================
After considering the rents now being paid for comparable space and
services in the competitive open market, it is our conclusion that the
current average economic rent for it is $17.75 per square foot on a full
service basis. Economic rent is forecasted to increase by 3.5 percent per
annum throughout the projection period.
Expense Reimbursements - The tenants in a property like the subject are
responsible for a proportionate share of certain expenses incurred
annually in the operation and ownership of the investment above an
established base amount. These expenses include real estate taxes,
insurance premiums, utilities, maintenance, administration, cleaning,
management fees, contract fees, and miscellaneous fees incurred. Future
leases in the subject property are projected to be structured in a similar
fashion.
Allowance for Vacancy and Credit Loss - We have deducted 3 percent from
gross revenues as a global allowance for the non-payment of rent or
expenses by a lessee. Additionally, our analysis over time has
incorporated a lag vacancy allowance which provides for "down time"
between the expiration of an existing lease and the commencement of a new
lease. The weighted average lag vacancy utilized between lease expirations
in this report is two months as previously described.
Operating Expenses - On the opposing page is a presentation of historic
operating expense data for the subject property and current ownership's
operating pro forma expense data. As can be seen, historic operating
expenses at the subject property have ranged from $6.28 to $6.73 per
square foot of building area. Current ownership budgets operating expenses
at $6.96 per square foot for 1997. In the initial year of the investment
holding period, we project operating expenses to be $7.07 per square foot
at the subject property. Operating expenses are forecasted to increase at
an average annual rate of 3.5 percent over the investment holding period.
Other Non-Operating Expenses - As previously described herein, the
weighted cost of tenant alterations is projected to be $8.75 per square
foot in the initial year of the investment holding period. On a weighted
average basis, leasing commissions are equal to 2.84 percent of total
effective base rental income over the term as well. Reserves for
replacements are stabilized at $0.10 per square foot of rentable building
area. Other non-operating expenses are forecasted to increase at an
average annual rate of 3.5 percent over the investment holding period.
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-64-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
Terminal Capitalization Rate - At the end of the assumed investment
holding period, it is our projection that the subject property would most
likely be sold at the end of the 10th year of the holding period for an
amount equal to what would be the next year's net operating income
capitalized at an overall rate of 11.00 percent. An 11.00 percent terminal
capitalization rate is utilized in this analysis as it reflects current
local market levels for an asset of this type plus a premium for the risk
of unforeseen events or trends over time. The 11th year's computed net
operating income is employed at this point as it would be the first
received by a new purchaser of the subject property. In this analysis,
then, a current investor would dispose of the subject property at the end
of the projected holding period for an amount equal to $6,614,000 or
$121.19 per square foot of building area.
Transaction Costs - From the projected $6,614,000 reversion to an investor
in the subject property, we have deducted a total of $265,000 to account
for the various transaction costs associated with the sale of an asset of
this type. These costs consist of 4 percent of the total disposition price
of the subject property as an allowance for transfer taxes, professional
fees, and other miscellaneous expenses that the seller pays at final
closing. Deducting these transaction costs from the computed reversion
renders pre-tax net proceeds of sale equal to $6,349,000 to be received by
an investor in the subject property at the end of the holding period.
Discount Rate - Considering the locational attributes, physical traits and
economic characteristics of the subject property, we believe a discount
rate ranging from 11.0 percent to 12.0 percent would be appropriate for
the subject property in light of the investment criteria previously
presented herein. Through such a sensitivity analysis, it can be seen that
the present value of the subject property varies from approximately
$4,325,000 to $4,627,000. This discounting process is summarized as
follows:
==========================================================================
Investment Summary
==========================================================================
Discount Rate Present Worth Unit Rate Overall Rate
==========================================================================
11.00% $4,627,000 $84.78/SF 9.40%
11.25% $4,549,000 $83.35/SF 9.56%
11.50% $4,473,000 $81.96/SF 9.72%
11.75% $4,398,000 $80.58/SF 9.89%
12.00% $4,325,000 $79.25/SF 10.05%
==========================================================================
Considering the tenant roster currently in place at the subject property,
including the short term lease turnover and current vacancy, we believe a
discount rate which falls at the upper end of the range now required in
the marketplace to be appropriate in this case. Using a 12.00 percent
internal rate of return, our discounted cash flow model computes to a
present worth of $4,325,000 which we round to $4,300,000 for an indication
of market value for 307 Fellowship Road via the Income Capitalization
Approach. This indication of value produces an implied "going-in" overall
capitalization rate of 10.11 percent based upon the initial years net
operating income of $434,859.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
Additionally, based upon a market value of $4,300,000 and a projected
future gross reversionary value of approximately $6,614,000, a compound
annual rate of appreciation of 4.40 percent is computed. Finally, with
regard to the composition of the internal rate of return employed here,
approximately 52 percent of the expected yield is from cash flows while
the balance is attributable to property reversion. These percentages fall
within the generally accepted relevant range of most current real estate
investors.
309 Fellowship Road
This property is a 55,351 square foot, three story, multi-tenant, Class B
office building which is now 76 percent occupied by 7 tenants. On the opposing
page is a presentation of the cash flows which an informed investor could
reasonably expect 309 Fellowship Road to generate over a ten year time horizon.
These cash flows are based upon the following analysis:
Base Rental Income - Existing lease contracts at the subject property
provide an average base rental income of $16.97 per square foot of
occupied space in the coming 12 months. A copy of the rent roll over the
subject property is included among the Addenda to this report. As can be
noted from the current rent roll, five leases were negotiated in the past
year at rental rates ranging from $17.45 per square foot on a full service
basis to $17.92 per square foot on a full service basis plus electric. The
following summarizes this recent leasing activity.
==========================================================================
Recent Leasing
309 Fellowship Road
==========================================================================
Tenant Rentable Area Contract Rent
==========================================================================
Merchants Insurance 7,076 SF $17.60/SF - gross
PSE & G 8,000 SF $17.45/SF - gross
NY Life Insurance 8,000 SF $17.92/SF - gross + elec.
==========================================================================
After considering the rents now being paid for comparable space and
services in the competitive open market, it is our conclusion that the
current average economic rent for it is $17.75 per square foot on a full
service basis. Economic rent is forecasted to increase by 3.5 percent per
annum throughout the projection period.
Expense Reimbursements - The tenants in a property like the subject are
responsible for a proportionate share of certain expenses incurred
annually in the operation and ownership of the investment above an
established base amount. These expenses include real estate taxes,
insurance premiums, utilities, maintenance, administration, cleaning,
management fees, contract fees, and miscellaneous fees incurred. Future
leases in the subject property are projected to be structured in a similar
fashion.
Allowance for Vacancy and Credit Loss - We have deducted 3 percent from
gross revenues as a global allowance for the non-payment of rent or
expenses by a lessee. Additionally, our analysis over time has
incorporated a lag vacancy allowance which provides for "down time"
between the expiration of an existing lease and the commencement of a new
lease. The weighted average lag vacancy utilized between lease expirations
in this report is two months as previously described.
================================================================================
-66-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Operating Expenses - On the opposing page is a presentation of historic
operating expense data for the subject property and current ownership's
operating pro forma expense data. As can be seen, historic operating
expenses at the subject property have ranged from $5.83 to $6.39 per
square foot of building area. Current ownership budgets operating expenses
at $6.79 per square foot for 1997. In the initial year of the investment
holding period, we project operating expenses to be $6.36 per square foot
at the subject property. Operating expenses are forecasted to increase at
an average annual rate of 3.5 percent over the investment holding period.
Other Non-Operating Expenses - As previously described herein, the
weighted cost of tenant alterations is projected to be $8.75 per square
foot in the initial year of the investment holding period. On a weighted
average basis, leasing commissions are equal to 2.84 percent of total
effective base rental income over the term as well. Reserves for
replacements are stabilized at $0.10 per square foot of rentable building
area. Other non-operating expenses are forecasted to increase at an
average annual rate of 3.5 percent over the investment holding period.
Terminal Capitalization Rate - At the end of the assumed investment
holding period, it is our projection that the subject property would
most likely be sold at the end of the 10th year of the holding period for
an amount equal to what would be the next years net operating income
capitalized at an overall rate of 11.00 percent. An 11.00 percent terminal
capitalization rate is utilized in this analysis as it reflects current
local market levels for an asset of this type plus a premium for the risk
of unforeseen events or trends over time. The 11th year's computed net
operating income is employed at this point as it would be the first
received by a new purchaser of the subject property. In this analysis,
then, a current investor would dispose of the subject property at the end
of the projected holding period for an amount equal to $6,853,000 or
$123.81 per square foot of building area.
Transaction Costs - From the projected $6,853,000 reversion to an investor
in the subject property, we have deducted a total of $274,000 to account
for the various transaction costs associated with the sale of an asset of
this type. These costs consist of 4 percent of the total disposition price
of the subject property as an allowance for transfer taxes, professional
fees, and other miscellaneous expenses that the seller pays at final
closing. Deducting these transaction costs from the computed reversion
renders pre-tax net proceeds of sale equal to $6,579,000 to be received by
an investor in the subject property at the end of the holding period.
Discount Rate - Considering the locational attributes, physical traits and
economic characteristics of the subject property, we believe a discount
rate ranging from 11.0 percent to 12.0 percent would be appropriate for
the subject property in light of the investment criteria previously
presented herein. Through such a sensitivity analysis, it can be seen that
the present value of the subject property varies from approximately
$4,526,000 to $4,843,000. This discounting process is summarized as
follows:
================================================================================
-67-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
==========================================================================
Investment Summary
==========================================================================
Discount Rate Present Worth Unit Rate Overall Rate
==========================================================================
11.00% $4,843,000 $87.50/SF 8.70%
11.25% $4,761,000 $86.01/SF 8.85%
11.50% $4,681,000 $84.57/SF 9.00%
11.75% $4,602,000 $83.14/SF 9.16%
12.00% $4,525,000 $81.75/SF 9.31%
==========================================================================
Considering the tenant roster currently in place at the subject property,
including the current vacancy, we believe a discount rate which falls at
the upper end of the range now required in the marketplace to be
appropriate in this case. Using a 12.00 percent internal rate of return,
our discounted cash flow model computes to a present worth of $4,525,000
which we round to $4,500,000 for an indication of market value for 309
Fellowship Road via the Income Capitalization Approach. This indication of
value produces an implied "going-in" overall capitalization rate of 9.36
percent based upon the initial year's net operating income of $421,423.
While this overall rate is lower than what is typically required, the
complex features upside potential in the currently vacant space.
Additionally, based upon a market value of $4,500,000 and a projected
future gross reversionary value of approximately $6,853,000, a compound
annual rate of appreciation of 4.29 percent is computed. Finally, with
regard to the composition of the internal rate of return employed here,
approximately 53 percent of the expected yield is from cash flows while
the balance is attributable to property reversion. These percentages fall
within the generally accepted relevant range of most current real estate
investors.
304 Harper Drive
This property is a 29,537 square foot, three story, multi-tenant, Class B
office building which is now 91 percent occupied by 8 tenants. On the opposing
page is a presentation of the cash flows which an informed investor could
reasonably expect 304 Harper Drive to generate over a ten year time horizon.
These cash flows are based upon the following analysis:
Base Rental Income - Existing lease contracts at the subject property
provide an average base rental income of $15.80 per square foot of
occupied space in the coming 12 months. A copy of the rent roll over the
subject property is included among the Addenda to this report. As can be
noted from the current rent roll, three leases were negotiated in the past
year at rental rates ranging from $14.75 per square foot on a full service
basis to $19.65 per square foot on a full service basis. The upper limit
of the range is a recently negotiated transaction with Legg Mason which
included an unusually high $30.00 per square foot in tenant improvements.
The following summarizes this recent leasing activity.
==========================================================================
Recent Leasing
304 Harper Drive
==========================================================================
Tenant Rentable Area Contract Rent
==========================================================================
Semcor 6,740 SF $14.75/SF - gross
TAB Products 3,180 SF $18.15/SF - gross
Legg-Mason 5,915 SF $19.65/SF - gross
==========================================================================
================================================================================
-68-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
After considering the rents now being paid for comparable space and
services in the competitive open market, and the overall age and quality
of 304 Harper Drive, it is our conclusion that the current average
economic rent for it is $16.75 per square foot on a full service basis.
Economic rent is forecasted to increase by 3.5 percent per annum
throughout the projection period.
Expense Reimbursements - The tenants in a property like the subject are
responsible for a proportionate share of certain expenses incurred
annually in the operation and ownership of the investment above an
established base amount. These expenses include real estate taxes,
insurance premiums, utilities, maintenance, administration, cleaning,
management fees, contract fees, and miscellaneous fees incurred. Future
leases in the subject property are projected to be structured in a similar
fashion.
Allowance for Vacancy and Credit Loss - We have deducted 3 percent from
gross revenues as a global allowance for the non-payment of rent or
expenses by a lessee. Additionally, our analysis over time has
incorporated a lag vacancy allowance which provides for "down time"
between the expiration of an existing lease and the commencement of a new
lease. The weighted average lag vacancy utilized between lease expirations
in this report is two months as previously described.
Operating Expenses - On the opposing page is a presentation of historic
operating expense data for the subject property and current ownership's
operating pro forma expense data. As can be seen, historic operating
expenses at the subject property have ranged from $6.95 to $8.34 per
square foot of building area. Current ownership budgets operating expenses
at $7.12 per square foot for 1997. In the initial year of the investment
holding period, we project operating expenses to be $7.98 per square foot
at the subject property. Operating expenses are forecasted to increase at
an average annual rate of 3.5 percent over the investment holding period.
Other Non-Operating Expenses - As previously described herein, the
weighted cost of tenant alterations is projected to be $8.75 per square
foot in the initial year of the investment holding period. On a weighted
average basis, leasing commissions are equal to 2.84 percent of total
effective base rental income over the term as well. Reserves for
replacements are stabilized at $0.10 per square foot of rentable building
area. Other non-operating expenses are forecasted to increase at an
average annual rate of 3.5 percent over the investment holding period.
Terminal Capitalization Rate - At the end of the assumed investment
holding period, it is our projection that the subject property would most
likely be sold at the end of the 10th year of the holding period for an
amount equal to what would be the next year's net operating income
capitalized at an overall rate of 11.00 percent. An 11.00 percent
terminal capitalization rate is utilized in this analysis as it reflects
current local market levels for an asset of this type plus a premium for
the risk of unforeseen events or trends over time. The 11th year's
computed net operating income is employed at this point as it would be the
first received by a new purchaser of the subject property. In this
analysis, then, a current investor would dispose of the subject property
at the end of the projected holding period for an amount equal to
$2,684,000 or $90.87 per square foot of building area.
================================================================================
-69-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Transaction Costs - From the projected $2,684,000 reversion to an investor
in the subject property, we have deducted a total of $107,000 to account
for the various transaction costs associated with the sale of an asset of
this type. These costs consist of 4 percent of the total disposition price
of the subject property as an allowance for transfer taxes, professional
fees, and other miscellaneous expenses that the seller pays at final
closing. Deducting these transaction costs from the computed reversion
renders pre-tax net proceeds of sale equal to $2,577,000 to be received by
an investor in the subject property at the end of the holding period.
Discount Rate - Considering the locational attributes, physical traits and
economic characteristics of the subject property, we believe a discount
rate ranging from 11.50 percent to 12.50 percent would be appropriate for
the subject property in light of the investment criteria previously
presented herein. Through such a sensitivity analysis, it can be seen that
the present value of the subject property varies from approximately
$1,809,000 to $1,929,000. This discounting process is summarized as
follows:
Investment Summary
==========================================================================
Discount Rate Present Worth Unit Rate Overall Rate
==========================================================================
11.50% $1,929,000 $65.31/SF 11.80%
11.75% $1,898,000 $64.26/SF 11.99%
12.00% $1,868,000 $63.24/SF 12.18%
12.25% $1,838,000 $62.23/SF 12.38%
12.50% $1,809,000 $61.25/SF 12.58%
==========================================================================
Considering the tenant roster currently in place at the subject property,
including the current vacancy, we believe a discount rate which falls at
the upper end of the range now required in the marketplace to be
appropriate in this case. Using a 12.00 percent internal rate of return,
our discounted cash flow model computes to a present worth of $1,868,000
which we round to $1,850,000 for an indication of market value for 304
Harper Drive via the Income Capitalization Approach. This indication of
value produces an implied "going-in" overall capitalization rate of 12.30
percent based upon the initial years net operating income of $227,598.
While this overall rate is higher than what is typically required, the
recent lease with Legg Mason was structured to amortize above standard
tenant improvements at a higher level than our projection of market rent.
Additionally, based upon a market value of $1,850,000 and a projected
future gross reversionary value of approximately $2,684,000, a compound
annual rate of appreciation of 3.79 percent is computed. Finally, with
regard to the composition of the internal rate of return employed here,
approximately 55 percent of the expected yield is from cash flows while
the balance is attributable to property reversion. These percentages fall
within the generally accepted relevant range of most current real estate
investors.
815 East Gate Drive
This property is a 25,500 square foot single story office/flex building
that was 87 percent occupied as of the date of the inspection. On the opposing
page is a presentation of the cash flows which an informed investor could
reasonably expect 815 East Gate Drive to generate over a ten year time horizon.
These cash flows are based upon the following analysis:
================================================================================
-70-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
Base Rental Income - The base rental income which an asset such as the
subject property will generate for an investor reflects a review of the
existing rent roll in conjunction with the rent now being paid for
comparable space and services in the competitive open market. A copy of
the rent roll over the subject property is included among the Addenda to
this report. As can be noted from the current rent roll, existing
contracts provide for base rental income of $12.29 per square foot in the
coming 12 months.
The major tenant in the subject, Semcor, occupies 13,690 square feet which
equates to approximately 53 percent of the property. Their annual rent is
equivalent to $12.60 per square foot. In approximately sixteen months,
their lease will expire which creates lag vacancy and leasing costs within
the second year of the analysis. The remaining tenant, Wyle Labs, who
occupies 8,500 square feet, or 33 percent of the property also pays $12.60
per square foot annually. Wyle Labs also has little term left on their
existing lease, creating lag vacancy and leasing costs in the second year
of the investment. The credit quality for the minor tenants ranges from
average to good within the context of their mostly unrated status.
There is one unit that is currently vacant, containing 3,310 square feet.
Given the current vacancy rate, as well as the decreasing supply of
available space within the marketplace, we have projected that this space
can be absorbed by the market within three months. The term of the spec
tenant will be for five years at a market derived rental rate of $13.00.
On the opposing page is a presentation of recent rental rates on one story
office/flex space in the market area of the subject property. As can be
seen from this summary, rental rates on space comparable to the subject
range from $8.25 per square foot to $9.25 on a triple net basis.
Typically, operating expenses for buildings like the subject range from
$3.50 to $4.50 per square foot. Thus, on a gross basis, the adjusted rage
for the comparables is from $12.25 to $13.25 per square foot of building
area.
Comparable Lease #1 in Greentree North and is within a short distance from
the subject. The space is slightly larger that the average space found at
the subject property. Additionally, the leases there are structured on a
net basis. As explained, expenses could be as much as $4.00 per square
foot, which indicates an overall positive adjustment to this comparable
lease. Comparable Lease #2 is situated within the Evesham Corporate
Center, which is less desirable than the subject location. Physically, the
comparable rental featured only 90 percent finish office space, while the
subject contained 100 percent. Thus, a slight positive adjustment.
Finally, the lease was written on a triple net basis. Therefor, as overall
positive adjustment was applied to the comparable lease. Comparable Lease
#3 is situated within Greentree Place, an equally desirable campus.
Physically, the comparable rental was similar as well as the lease was
written on a gross basis. A nominal adjustment was applied to the datum.
Comparable Lease #4 was situated with East Gate Business Center, however
was much larger than was is typical at the subject property. Moreover, the
lease was written on a triple net basis, thus, an overall positive
adjustment was applied to the subject property.
================================================================================
-71-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
In addition to analyzing actual lease transactions inside and outside the
property, leasing brokers were interviewed in an effort to ascertain
competitive packages available in the marketplace today. Most brokers
interviewed were of the opinion that free rent was no longer being given
in the local marketplace. Tenant workletters, however, are a standard and
felt to range from $10.00 to $15.00 per square foot depending on the size
of the tenant and the duration of the lease.
After considering the most recent leasing achieved at the subject property
in conjunction with the rents now being paid for comparable space and
services in the competitive open market, it is our conclusion that the
current average economic rent for it is $13.00 per square foot on a full
service basis. This rent would be fixed over an average five year term.
Additionally, the tenants would also be responsible for increases in
operating expenses over those incurred during the first year of occupancy.
Market rent is forecasted to increase 3.5 percent throughout the holding
period. This forecast of income growth rates reflects typical investor
expectations as noted in the Cushman & Wakefield Investor Survey which is
among the Addenda to this report. More importantly, we are of the opinion
that these growth rates reflect the current under supply of space in the
local market which, all other factors being equal, will move toward
equilibrium over time.
Expense Reimbursements - Consistent with market leasing practice for this
type of real estate, the tenants in a property like the subject are
responsible for a proportionate share of certain expenses incurred
annually in the operation and ownership of the investment above an
established base amount. These expenses include real estate taxes,
insurance premiums, utilities, maintenance, administration, cleaning,
management fees, contract fees, and miscellaneous fees incurred. Future
leases in the subject property are projected to be structured in a similar
fashion.
Allowance for Vacancy and Credit Loss - A deduction must be made from the
total gross revenues due an investor in the subject property to account
for the possibility of vacancy and/or non-collection of rent. We have,
therefore, deducted 5 percent from gross revenues as a global allowance
for the non-payment of rent or expenses by a lessee. This rate has
considered the creditworthiness of the tenant roster and long-term market
conditions.
Additionally, our analysis over time has incorporated a lag vacancy
allowance which provides for "down time" between the expiration of an
existing lease and the commencement of a new lease. Upon the expiration of
a lease, it is our best estimate that there is a 65 percent probability
that the tenant will renew and a 35 percent probability that the tenant
will vacate. At renewal, no down time is recognized; should this tenant
vacate, then it is our expectation that an average down time of
approximately six months time would be reasonable to re-lease the space.
Therefore, the weighted average lag vacancy utilized between lease
expirations in this report is two months.
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-72-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
==========================================================================
Lag Vacancy Allaowance
==========================================================================
Event Probability X Down Time = Weighted Time
==========================================================================
Rollover 65% X - 0 - = - 0 -
Turnover 35% X 6 months = 2 months
Total 100% Average Weighted Time = 2 months
==========================================================================
Based on the subject's weighted average downtime between leases, the
overall average occupancy rate of the subject property over the ten year
holding period is 96.8 percent. Including our overall vacancy/global
credit loss allowance estimated at 5 percent, the implied overall
occupancy rate of the subject property over the ten year holding period is
92.10 percent.
Operating Expenses - On the opposing page is a presentation of historic
operating expense data for the subject property and current ownership's
operating pro forma expense data. As can be seen, historic operating
expenses at the subject property have ranged from $4.01 to $5.06 per
square foot of building area. Current ownership budgets operating expenses
at $4.24 per square foot for 1997. In the initial year of the investment
holding period, we project operating expenses to be $4.23 per square foot
at the subject property. Operating expenses are forecasted to increase at
an average annual rate of 3.5 percent over the investment holding period.
Other Non-Operating Expenses - Upon the expiration of a lease, it is our
best estimate that there is a 65 percent probability of the existing
tenant renewing their lease and a 35 percent probability that the existing
tenant will vacate. The current cost to alter and re-decorate office space
for a rollover tenant is estimated to be $5.00 per square foot while that
to prepare space for a new turnover tenant is estimated to be $10.00 per
square foot. On average, then, the weighted cost of tenant alterations is
projected to be $6.75 per square foot in the initial year of the
investment holding period. The following is a presentation of these
computations.
==========================================================================
Tenant Improvements Costs
==========================================================================
Event Probability X Unit Cost = Weighted Cost
==========================================================================
Rollover 65% X $ 5.00/SF = $ 3.25/SF
Turnover 35% X $10.OO/SF = $ 3.50/SF
==========================================================================
Total 100% Average Weighted Cost = $ 6.75/SF
==========================================================================
On a weighted average basis, leasing commissions are equal to 2.84 percent
of total effective base rental income over the term as well. Reserves for
replacements are stabilized at $0.10 per square foot of rentable building
area. Other non-operating expenses are forecasted to increase at an
average annual rate of 3.5 percent over the investment holding period.
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
Terminal Capitalization Rate - At the end of the assumed investment
holding period, it is our projection that the subject property would most
likely be sold at the end of the 10th year of the holding period for an
amount equal to what would be the next years net operating income
capitalized at an overall rate of 11.00 percent. An 11.00 percent terminal
capitalization rate is utilized in this analysis as it reflects current
local market levels for an asset of this type plus a premium for the risk
of unforeseen events or trends over time. The 11th years computed net
operating income is employed at this point as it would be the first
received by a new purchaser of the subject property. In this analysis,
then, a current investor would dispose of the subject property at the end
of the projected holding period for an amount equal to $2,505,000 or
$98.23 per square foot of building area.
Transaction Costs - From the projected $2,505,000 reversion to an investor
in the subject property, we have deducted a total of $100,000 to account
for the various transaction costs associated with the sale of an asset of
this type. These costs consist of 4 percent of the total disposition price
of the subject property as an allowance for transfer taxes, professional
fees, and other miscellaneous expenses that the seller pays at final
closing. Deducting these transaction costs from the computed reversion
renders pre-tax net proceeds of sale equal to $2,405,000 to be received by
an investor in the subject property at the end of the holding period.
Discount Rate - Considering the locational attributes, physical traits and
economic characteristics of the subject property, we believe a discount
rate ranging from 11.0 percent to 12.0 percent would be appropriate for
the subject property in light of the investment criteria previously
presented herein. Through such a sensitivity analysis, it can be seen that
the present value of the subject property varies from approximately
$1,809,000 to $1,929,000. This discounting process is summarized as
follows:
==========================================================================
Investment Summary
==========================================================================
Discount Rate Present Worth Unit Rate Overall Rate
==========================================================================
11.00% $1,788,000 $70.11/SF 10.87%
11.25% $1,757,000 $68.90/SF 11.06%
11.50% $1,728,000 $67.76/SF 11.25%
11.75% $1,699,000 $66.62/SF 11.44%
12.00% $1,671,000 $65.53/SF 11.63%
==========================================================================
Through such a sensitivity analysis, it can be seen that the present value
of the subject property varies from approximately $1,671,000 to
$1,788,000. Considering the relatively short remaining term of the
existing lease in place at the subject, we believe a discount rate which
falls toward the upper end of the range now required in the marketplace to
be appropriate in this case. Using an 12.00 percent internal rate of
return, our discounted cash flow model computes to a present worth of
$1,671,000 which we round to $1,675,000 as an indication of market value
for 815 East Gate Drive via the Income Capitalization Approach.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
This indication of value produces an implied "going-in" overall
capitalization rate of 11.60 percent based upon the initial year's net
operating income of $194,326. An inversion is indicated due to the
relatively short term of the existing leases. Tenant turnover within the
first two years of the investment creates lag vacancy as well as excessive
leasing costs which results in negative cash flow in the second year of
the investment. Based upon a market value of $1,675,000 and a projected
future gross reversionary value of approximately $2,504,963, a compound
annual rate of appreciation of 4.10 percent is computed. Finally, with
regard to the composition of the internal rate of return employed here,
approximately 51 percent of the expected yield is from cash flows while
the balance is attributable to property reversion. These percentages fall
within the generally accepted relevant range of most current real estate
investors.
817 East Gate Drive
This property is a 25,351 square foot single story office/flex building
that was 100 percent occupied as of the date of the inspection. On the opposing
page is a presentation of the cash flows which an informed investor could
reasonably expect 817 East Gate Drive to generate over a ten year time horizon.
These cash flows are based upon the following analysis:
Base Rental Income - Existing lease contracts at the subject property
provide an average base rental income of $12.02 per square foot of
occupied space in the coming 12 months. A copy of the rent roll over the
subject property is included among the Addenda to this report. As can be
noted from the current rent roll, EMTEC, which is the largest tenant, is
scheduled to expire within the first year of the holding period.
Annually, their rental rate is $11.50 per square foot on a gross basis
with a base year stop. PRIZM, which the remaining tenant, is not scheduled
to expire until August of 2004. Their current annual rental is $12.50 per
square foot, while in August 1998, the rent increases to $13.00 per square
foot of building area.
The rental data previously analyzed for 815 East Gate Drive are applicable
to this property as well. As can be seen from this summary, rental rates
on space comparable to the subject range from $8.25 per square foot to
$9.25 on a triple net basis. Typically, operating expenses for buildings
like the subject range from $3.50 to $4.50 per square foot. Thus, on a
gross basis, the adjusted rage for the comparable is from $12.25 to $13.25
per square foot of building area. After considering the rents now being
paid for comparable space and services in the competitive open market, it
is our conclusion that the current average economic rent for the space now
occupied by EMTEC to be $12.00 per square foot on a full service basis.
With regard to the space that is now occupied by PRIZM, economic rental
was projected to be $13.00 per square feet. The value differential is
attributable to the degree of finished office space found respectively.
Economic rent is forecasted to increase by 3.5 percent throughout the
holding period.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
Expense Reimbursements - Consistent with market leasing practice for this
type of real estate, the tenants in a property like the subject are
responsible for a proportionate share of certain expenses incurred
annually in the operation and ownership of the investment above an
established base amount. These expenses include real estate taxes,
insurance premiums, utilities, maintenance, administration, cleaning,
management fees, contract fees, and miscellaneous fees incurred. Future
leases in the subject property are projected to be structured in a similar
fashion.
Allowance for Vacancy and Credit Loss - We have deducted 5 percent from
gross revenues as a global allowance for the non-payment of rent or
expenses by a lessee. Additionally, our analysis over time has
incorporated a lag vacancy allowance which provides for "down time"
between the expiration of an existing lease and the commencement of a new
lease. The weighted average lag vacancy utilized between lease expirations
in this report is two months as previously described.
Operating Expenses - On the opposing page is a presentation of historic
operating expense data for the subject property and current ownership's
operating pro forma expense data. As can be seen, historic operating
expenses at the subject property have ranged from $3.55 to $4.40 per
square foot of building area. Current ownership budgets operating expenses
at $4.55 per square foot for 1997. In the initial year of the investment
holding period, we project operating expenses to be $4.31 per square foot
at the subject property. Operating expenses are forecasted to increase at
an average annual rate of 3.5 percent over the investment holding period.
Other Non-Operating Expenses - As previously described herein, the
weighted cost of tenant alterations is projected to be $6.75 per square
foot in the initial year of the investment holding period. On a weighted
average basis, leasing commissions are equal to 2.84 percent of total
effective base rental income over the term as well. Reserves for
replacements are stabilized at $0.10 per square foot of rentable building
area. Other non-operating expenses are forecasted to increase at an
average annual rate of 3.5 percent over the investment holding period.
Terminal Capitalization Rate - At the end of the assumed investment
holding period, it is our projection that the subject property would most
likely be sold at the end of the 10th year of the holding period for an
amount equal to what would be the next year's net operating income
capitalized at an overall rate of 11.0 percent. An 11.0 percent terminal
capitalization rate is utilized in this analysis as it reflects current
local market levels for an asset of this type plus a premium for the risk
of unforeseen events or trends over time. The 11th year's computed net
operating income is employed at this point as it would be the first
received by a new purchaser of the subject property. In this analysis,
then, a current investor would dispose of the subject property at the end
of the projected holding period for an amount equal to $2,361,000 or
$93.13 per square foot of building area.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
Transaction Costs - From the projected $2,361,000 reversion to an investor
in the subject property, we have deducted a total of $95,000 to account
for the various transaction costs associated with the sale of an asset of
this type. These costs consist of 4 percent of the total disposition price
of the subject property as an allowance for transfer taxes, professional
fees, and other miscellaneous expenses that the seller pays at final
closing. Deducting these transaction costs from the computed reversion
renders pre-tax net proceeds of sale equal to $2,266,000 to be received by
an investor in the subject property at the end of the holding period.
Discount Rate - Considering the locational attributes, physical traits and
economic characteristics of the subject property, we believe a discount
rate ranging from 11.0 percent to 12.0 percent would be appropriate for
the subject property in light of the investment criteria previously
presented herein. Through such a sensitivity analysis, it can be seen that
the present value of the subject property varies from approximately
$1,598,000 to $1,707,000. This discounting process is summarized as
follows:
==========================================================================
Investment Summary
==========================================================================
Discount Rate Present Worth Unit Rate Overall Rate
11.00% $1,707,000 $67.33/SF 9.28%
11.25% $1,679,000 $66.23/SF 9.44%
11.50% $1,652,000 $65.16/SF 9.60%
11.75% $1,625,000 $64.1O/SF 9.76%
12.00% $1,598,000 $63.03/SF 9.92%
==========================================================================
Mindful of the relatively short remaining term of the existing lease in
place at the subject, we believe a discount rate which falls toward the
upper end of the range now required in the marketplace to be appropriate
in this case. Using an 12 percent internal rate of return, our discounted
cash flow model computes to a present worth of $1,598,000 which we round
to $1,600,000 for an indication of market value for 817 East Gate Drive
via the Income Capitalization Approach. This indication of value produces
an implied "going-in" overall capitalization rate of 9.92 percent based
upon the initial year's net operating income of $158,479. While this
overall rate is lower than what is typically required, the complex
features upside potential in the leasing of the currently vacant space.
Additionally, based upon a market value of $1,600,000 and a projected
future gross reversionary value of approximately $2,360,663, a compound
annual rate of appreciation of 3.96 percent is computed. Finally, with
regard to the composition of the internal rate of return employed here,
approximately 52 percent of the expected yield is from cash flows while
the balance is attributable to property reversion. These percentages fall
within the generally accepted relevant range of most current real estate
investors.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
305 Harper Drive
This property is a 14,980 square foot single story office/flex building
that was 100 percent occupied as of the date of the inspection by a single
tenant. On the opposing page is a presentation of the cash flows which an
informed investor could reasonably expect 305 Harper Drive to generate over a
ten year time horizon. These cash flows are based upon the following analysis:
Base Rental Income - The existing lease contract at the subject property
provide an average base rental income of $6.31 per square foot of occupied
space in the coming 12 months. A copy of the rent roll over the subject
property is included among the Addenda to this report. As can be noted
from the current rent roll, the Jerome Group is scheduled to expire within
the third year of the holding period.
The rental data previously analyzed for 815 and 817 East Gate Drive are
applicable to this property as well. As can be seen from this summary,
rental rates on space comparable to the subject range from $8.25 per
square foot to $9.25 on a triple net basis. However, these lease data are
reflective of a higher level of overall finish than that exhibited at 305
Harper Drive. Thus, a negative adjustment is appropriate to the data.
After considering the rents now being paid for comparable space and
services in the competitive open market, it is our conclusion that the
current average economic rent for the space now occupied by Jerome to be
$7.50 per square foot on a net basis. Economic rent is forecasted to
increase by 3.5 percent throughout the holding period.
Expense Reimbursements - Consistent with market leasing practice for this
type of real estate, the tenants in a property like the subject are
responsible for a proportionate share of certain expenses incurred
annually in the operation and ownership of the investment. These expenses
include real estate taxes, insurance premiums, maintenance, management
fees, and miscellaneous fees incurred. Future leases in the subject
property are projected to be structured in a similar fashion.
Allowance for Vacancy and Credit Loss - We have deducted 3 percent
from.gross revenues as a global allowance for the non-payment of rent or
expenses by a lessee. Additionally, our analysis over time has
incorporated a lag vacancy allowance which provides for "down time"
between the expiration of an existing lease and the commencement of a new
lease. The weighted average lag vacancy utilized between lease expirations
in this report is two months as previously described.
Operating Expenses - On the opposing page is a presentation of historic
operating expense data for the subject property and current ownership's
operating pro forma expense data. As can be seen, historic operating
expenses at the subject property have excluded taxes (billed directly to
the tenant), but ranged from $.52 to $1.13 per square foot of building
area. Current ownership budgets operating expenses at $.98 per square foot
for 1997. In the initial year of the investment holding period, we project
operating expenses, including taxes to be $2.87 per square foot at the
subject property. Operating expenses are forecasted to increase at an
average annual rate of 3.5 percent over the investment holding period.
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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Income Capitalization Approach
================================================================================
Other Non-Operating Expenses - Upon the expiration of a lease, it is our
best estimate that there is a 65 percent probability of the existing
tenant renewing their lease and a 35 percent probability that the existing
tenant will vacate. The current cost to alter and re-decorate space for a
rollover tenant is estimated to be $3.50 per square foot while that to
prepare space for a new turnover tenant is estimated to be $7.00 per
square foot. On average, then, the weighted cost of tenant alterations is
projected to be $6.75 per square foot in the initial year of the
investment holding period. The following is a presentation of these
computations.
==========================================================================
Tenant Improvement Costs
==========================================================================
Event Probability X Unit Cost = Weighted Cost
==========================================================================
Rollover 65% X $3.50/SF = $ 2.28/SF
Turnover 35% X $7.00/SF = $ 2.45/SF
==========================================================================
Total 1OO% Average Weighted Cost = $ 4.73/SF
==========================================================================
On a weighted average basis, leasing commissions are equal to 2.84 percent
of total effective base rental income over the term as well. Reserves for
replacements are stabilized at $0.10 per square foot of rentable building
area. Other non-operating expenses are forecasted to increase at an
average annual rate of 3.5 percent over the investment holding period.
Terminal Capitalization Rate - At the end of the assumed investment
holding period, it is our projection that the subject property would most
likely be sold at the end of the 10th year of the holding period for an
amount equal to what would be the next years net operating income
capitalized at an overall rate of 11.0 percent. An 11.0 percent terminal
capitalization rate is utilized in this analysis as it reflects current
local market levels for an asset of this type plus a premium for the risk
of unforeseen events or trends over time. The 11th years computed net
operating income is employed at this point as it would be the first
received by a new purchaser of the subject property. In this analysis,
then, a current investor would dispose of the subject property at the end
of the projected holding period for an amountequal to $1,335,000 or $89.12
per square foot of building area.
Transaction Costs - From the projected $1,335,000 reversion to an investor
in the subject property, we have deducted a total of $54,000 to account
for the various transaction costs associated with the sale of an asset of
this type. These costs consist of 4 percent of the total disposition price
of the subject property as an allowance for transfer taxes, professional
fees, and other miscellaneous expenses that the seller pays at final
closing. Deducting these transaction costs from the computed reversion
renders pre-tax net proceeds of sale equal to $1,281,000 to be received by
an investor in the subject property at the end of the holding period.
Discount Rate - Considering the locational attributes, physical traits and
economic characteristics of the subject property, we believe a discount
rate ranging from 11.0 percent to 12.0 percent would be appropriate for
the subject property in light of the investment criteria previously
presented herein. Through such a sensitivity analysis, it can be seen that
the present value of the subject property varies from approximately
$896,000 to $957,000. This discounting process is summarized as follows:
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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Income Capitalization Approach
================================================================================
==========================================================================
Investment Summary
==========================================================================
Discount Rate Present Worth Unit Rate Overall Rate
==========================================================================
11.00% $957,000 $63.89/SF 9.37%
11.25% $942,000 $62.88/SF 9.52%
11.50% $926,000 $61.82/SF 9.68%
11.75% $911,000 $60.81/SF 9.84%
12.00% $896,000 $59.81/SF 10.00%
==========================================================================
Mindful of the relatively short remaining term of the existing lease in
place at the subject, we believe a discount rate which falls toward the
upper end of the range now required in the marketplace to be appropriate
in this case. Using an 12 percent internal rate of return, our discounted
cash flow model computes to a present worth of $896,000 which we round to
$900,000 for an indication of market value for 305 Harper Drive via the
Income Capitalization Approach. This indication of value produces an
implied "going-in" overall capitalization rate of 9.97 percent based upon
the initial years net operating income of $89,695. While this overall rate
is lower than what is typically required, the complex features upside
potential in the re-leasing of the building in an advancing market.
Additionally, based upon a market value of $900,000 and a projected future
gross reversionary value of approximately $1,335,000, a compound annual
rate of appreciation of 4.02 percent is computed. Finally, with regard to
the composition of the internal rate of return employed here,
approximately 54 percent of the expected yield is from cash flows while
the balance is attributable to property reversion. These percentages fall
within the generally accepted relevant range of most current real estate
investors.
Final Conclusions - Improved Properties
The subject property consists of both mid-rise office buildings and single
story office/flex buildings. Due to differences among these, two sets of rental
data were necessary for this comparative analysis of the real estate. Based upon
these analyses, it is our conclusion that the Income Approach Approach indicates
a total market value of FORTY TWO MILLION TWO HUNDRED TWENTY FIVE THOUSAND
DOLLARS ($42,225,000) for the entire subject property. This total value is
comprised as follows:
===================================================================
Final Conclusions
===================================================================
Property Indicated Market
Value
===================================================================
700 East Gate Drive $11,200,000
701 East Gate Drive $ 6,800,000
303 Fellowship Road $ 4,300,000
305 Fellowship Road $ 5,100,000
307 Fellowship Road $ 4,300,000
309 Fellowship Road $ 4,500,000
304 Harper Drive $ 1,850,000
815 East Gate Drive $ 1,675,000
817 East Gate Drive $ 1,600,000
305 Harper Drive $ 900,000
---------------
TOTAL $42,225,000
===================================================================
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
VACANT DEVELOPMENT PARCELS
================================================================================
Four Development Parcels
These four parcels are situated within the East Gate Square Power Center.
According to an interview with ownership, the four parcels are subject to an
option agreement at a stated release price of $5,100,000. The various parcels
are impacted in varying degrees by flood prone soils and wetlands. Thus,
ownership has provided us with the maximum building area of parcels 1,2 and 3.
As such, our valuation of parcels 1,2, and 3 are based on the Price Per Square
Foot of Proposed Building Area (FAR).
Parcel 1, which is situated along the northeast side of Nixon and Harper
Drives will support a building area of 30,000 square feet. Parcels 2 and 3, will
support a building area of 40,000 square feet, respectively. Finally, Parcel 4
is severely impacted by wetlands, but nevertheless features excellent exposure,
and fair to average accessibility. We have not been provided with the maximum
permitted building area of Parcel 4, although it is conceptually planned for a
10 story, 240 room hotel. Thus utilizing the same market data, we have valued
this parcel based on price per acre of land.
Provided on the opposing page are the Comparable Land Sales that were
assembled for this analysis. As a result, the following comparisons are made:
Comparable Land Sale #1 was also situated within East Gate Square and was
reportedly an arm's length transaction accomplished with market oriented
financing. While the land transaction of this sale occurred in July 1995,
the agreement of sale was negotiated during 1993-94. This delay between
final negotiations and closing is typical in land development transactions
while the buyer attempts necessary approvals. Thus a slight positive
adjustment was made to this land transaction. The maximum FAR was
reportedly 129,000 square foot of building area. All utilities were
available to the site with necessary infrastructure in place.
Comparable Property Sale #2 was also situated within East Gate Square and
was considered to be an arms length transactions achieve with market
oriented financing. This sale took place approximately one year ago thus
no adjustment for changes in market conditions was necessary. The maximum
FAR was reportedly 100,086 square foot of building area. All utilities
were available to the site with necessary infrastructure in place
Finally, Comparable Property Sale #3, which took place between two
unrelated parties and was achieved with market oriented financing, took
place approximately eight months ago. The property benefits from a
superior commercial/retail setting to that of the subject property, given
the comparables' close proximity to the Cherry Hill Mall. The maximum FAR
was reportedly 340,000 square foot of building area. All utilities were
available to the site with necessary infrastructure in place.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Vacant Development Parcels
================================================================================
Conclusion - As stated earlier, the four subject parcels are subject to a
release price of $5,100,000. Accordingly, an allocation of the sale price
is as follows:
Four Development Parcel
East Gate Square
==========================================================================
Parcel Sale Price Unit Rate
==========================================================================
1 $ 900,000 $30.00/FAR
2 $1,200,000 $30.00/FAR
3 $1,200,000 $30.00/FAR
4 $1,800,000 $300,000/Acre
==========================================================================
Total $5,100,000
==========================================================================
Based on our comparison between the comparable land sales and the subject
parcels the three sales assembled for this analysis of the four remaining
development parcels at East Gate Square strongly support the
aforementioned option sale prices. The comments discussed above are
presented to outline the logic of our thought processes with the ultimate
result being a plausible market value conclusion for the subject property.
As a result of our analysis, with emphasis on the fact that the subject
parcels are subject to an option sale price, we conclude that the
aggregate market value of the four parcels to be FIVE MILLION ONE HUNDRED
THOUSAND DOLLARS $5,100,000.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
RECONCILIATION AND FINAL VALUE ESTIMATE
================================================================================
We have considered all of the traditional approaches to estimating market value
of commercial real estate in our analysis. Two of the three traditional
approaches were utilized, indicating the following values for the improved
components of subject property:
================================================================================
Property Sales Comparison Approach Income Capitalization Approach
700 East Gate Drive $11,200,000 $11,200,000
701 East Gate Drive $ 6,500,000 $ 6,800,000
303 Fellowship Road $ 4,300,000 $ 4,300,000
305 Fellowship Road $ 4,700,000 $ 5,100,000
307 Fellowship Road $ 4,400,000 $ 4,300,000
309 Fellowship Road $ 4,450,000 $ 4,500,000
815 East Gate Drive $ 1,675,000 $ 1,675,000
817 East Gate Drive $ 1,600,000 $ 1,600,000
304 Harper Drive $ 1,900,000 $ 1,850,000
305 Harper Drive $ 925,000 $ 900,000
TOTAL $41,650,000 $42,225,000
The three traditional methods of estimating the market value of commercial real
estate are not mutually exclusive approaches to deriving an estimate of most
probable selling price, but are inter-dependent methodologies, each relying on
components from at least one of the other approaches. Hence, the Cost Approach
requires extensive market data to derive estimates of depreciation and to
determine the value of land as if vacant. This approach may also require income
data in order to make adjustments for functional and economic obsolescence. The
Sales Comparison Approach requires application of methods from the Income
Capitalization Approach in order to make adjustments for differences in income
that have influenced the sale price. Consideration of market data is also
required for the Income Capitalization Approach in the selection and application
of equity, capitalization and discount rates, and estimation of income and
expenses. Consequently, it is our opinion that purchasers and sellers, at least
intuitively, consider components of all three approaches in the process of
negotiating an acceptable price for a particular property.
It is the Income Capitalization Approach, however, that is logically considered
the most appropriate technique for estimating the value of income-producing
property. Not only does this approach represent the most direct and accurate
simulation of market behavior, it is the method explicitly employed by buyers
and sellers in acquisition and disposition decisions. Therefore, following the
implied dictum of the market, we have used an approach based primarily on
projected income as the foundation for our valuation of the subject property.
There are several additional reasons why the Sales Comparison Approach does not
form the basis of our value estimate for the subject property. The quantity and
quality of market information inhibits the use of the Sales Comparison Approach.
Inadequacy of information regarding gross and net income, lease details and
expenses of comparable sales often deters accurate and relevant adjustments of
unit price indicators. Comparison at a dollar per square foot level precludes
the analysis of those key factors which form the basis for projections on which
the purchase decision was made.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Reconciliation and Final Value Estimate
================================================================================
Our analysis has also considered the value of four remaining vacant development
parcels within the East Gate Square retail complex. These four parcels are
subject to an option agreement with Berwind Realty. Our analysis of these
parcels via the Sales Comparison Approach has affirmed the option prices
totalling $5,100,000 as market oriented.
In light of the above, we are of the opinion that the market value of the
appropriate leased fee/fee simple estate in the property, as of July 1, 1997,
was:
FORTY SEVEN MILLION THREE HUNDRED TWENTY FIVE THOUSAND DOLLARS
$47,325,000
The individual values are as follows:
700 East Gate Drive $11,200,000
701 East Gate Drive $ 6,800,000
303 Fellowship Drive $ 4,300,000
305 Fellowship Drive $ 5,100,000
307 Fellowship Drive $ 4,300,000
309 Fellowship Drive $ 4,500,000
815 East Gate Drive $ 1,675,000
817 East Gate Drive $ 1,600,000
304 Harper Drive $ 1,850,000
305 Harper Drive $ 900,000
4 Development Parcels $ 5,100,000
Total $47,325,000
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
ASSUMPTIONS AND LIMITING CONDITIONS
================================================================================
"Appraisal" means the appraisal report and opinion of value stated therein; or
the letter opinion of value, to which these Assumptions and Limiting Conditions
are annexed.
"Property" means the subject of the Appraisal.
"C&W" means Cushman & Wakefield, Inc. or its subsidiary which issued the
Appraisal.
"Appraiser(s)" means the employee(s) of C&W who prepared and signed the
Appraisal.
This appraisal is made subject to the following assumptions and limiting
conditions:
1. No opinion is intended to be expressed and no responsibility is assumed
for the legal description or for any matters which are legal in nature or
require legal expertise or specialized knowledge beyond that of a real
estate appraiser. Title to the Property is assumed to be good and
marketable and the Property is assumed to be free and clear of all liens
unless otherwise stated. No survey of the Property was undertaken.
2. The information contained in the Appraisal or upon which the Appraisal is
based has been gathered from sources the Appraiser assumes to be reliable
and accurate. Some of such information may have been provided by the owner
of the Property. Neither the Appraiser nor C&W shall be responsible for
the accuracy or completeness of such information, including the
correctness of estimates, opinions, dimensions, sketches, exhibits and
factual matters.
3. The opinion of value is only as of the date stated in the Appraisal.
Changes since that date in external and market factors or in the Property
itself can significantly affect property value.
4. The Appraisal is to be used in whole and not in part. No part of the
Appraisal shall be used in conjunction with any other appraisal.
Publication of the Appraisal or any portion thereof without the prior
written consent of C&W is prohibited. Except as may be otherwise stated in
the letter of engagement, the Appraisal may not be used by any person
other than the party to whom it is addressed or for purposes other than
that for which it was prepared. No part of the Appraisal shall be conveyed
to the public through advertising, or used in any sales or promotional
material without C&W's prior written consent. Reference to the Appraisal
Institute or to the MAI designation is prohibited.
5. Except as may be otherwise stated in the letter of engagement, the
Appraiser shall not be required to give testimony in any court or
administrative proceeding relating to the Property or the Appraisal.
================================================================================
-85-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Assumptions and Limiting Conditions
================================================================================
6. The Appraisal assumes (a) responsible ownership and competent management
of the Property; (b) there are no hidden or unapparent conditions of the
Property, subsoil or structures that render the Property more or less
valuable (no responsibility is assumed for such conditions or for
arranging for engineering studies that may be required to discover them);
(c) full compliance with all applicable federal, state and local zoning
and environmental regulations and laws, unless noncompliance is stated,
defined and considered in the Appraisal; and (d) all required licenses,
certificates of occupancy and other governmental consents have been or can
be obtained and renewed for any use on which the value estimate contained
in the Appraisal is based.
7. The physical condition of the improvements considered by the Appraisal is
based on visual inspection by the Appraiser or other person identified in
the Appraisal. C&W assumes no responsibility for the soundness of
structural members nor for the condition of mechanical equipment, plumbing
or electrical components.
8. The forecasted potential gross income referred to in the Appraisal may be
based on lease summaries provided by the owner or third parties. The
Appraiser has not reviewed lease documents and assumes no responsibility
for the authenticity or completeness of lease information provided by
others. C&W recommends that legal advice be obtained regarding the
interpretation of lease provisions and the contractual rights of parties.
9. The forecasts of income and expenses are not predictions of the future.
Rather, they are the Appraisees best estimates of current market thinking
on future income and expenses. The Appraiser and C&W make no warranty or
representation that these forecasts will materialize. The real estate
market is constantly fluctuating and changing. It is not the Appraiser's
task to predict or in any way warrant the conditions of a future real
estate market, the Appraiser can only reflect what the investment
community, as of the date of the Appraisal, envisages for the future in
terms of rental rates, expenses, supply and demand.
10. Unless otherwise stated in the Appraisal, the existence of potentially
hazardous or toxic materials which may have been used in the construction
or maintenance of the improvements or may be located at or about the
Property was not considered in arriving at the opinion of value. These
materials (such as formaldehyde foam insulation, asbestos insulation and
other potentially hazardous materials) may adversely affect the value of
the Property. The Appraisers are not qualified to detect such substances.
C&W recommends that an environmental expert be employed to determine the
impact of these matters on the opinion of value.
Unless otherwise stated in the Appraisal, compliance with the requirements
of the Americans With Disabilities Act of 1990 (ADA) has not been
considered in arriving at the opinion of value. Failure to comply with the
requirements of the ADA may adversely affect the value of the property.
C&W recommends that an expert in this field be employed.
================================================================================
-86-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
CERTIFICATION OF APPRAISAL
We certify that, to the best of our knowledge and belief:
1 John J. Lynch, MAI and Joseph Vizza inspected the property, and John B.
Rush, MAI, Manager, Valuation Advisory Services, has reviewed and approved
the report but did not inspect the property.
2. The statements of fact contained in this report are true and correct.
3. The reported analyses, opinions, and conclusions are limited only by the
reported assumptions and limiting conditions, and are our personal,
unbiased professional analyses, opinions, and conclusions.
4. We have no present or prospective interest in the property that is the
subject of this report, and we have no personal interest or bias with
respect to the parties involved.
5. Our compensation is not contingent upon the reporting of a predetermined
value or direction in value that favors the cause of the client, the
amount of the value estimate, the attainment of a stipulated result, or
the occurrence of a subsequent event. The appraisal assignment was not
based on a requested minimum valuation, a specific valuation or the
approval of a loan.
6. No one provided significant professional assistance to the persons signing
this report.
7. Our analyses, opinions, and conclusions were developed, and this report
has been prepared, in conformity with the Uniform Standards of
Professional Appraisal Practice of the Appraisal Foundation and the Code
of Professional Ethics and the Standards of Professional Appraisal
Practice of the Appraisal Institute.
8. The use of this report is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives.
9. As of the date of this report, John J. Lynch, MAI and John B. Rush, MAI
have completed the requirements of the continuing education program of the
Appraisal Institute.
/s/ John J. Lynch
-----------------------------------------------
John J. Lynch,
State-Certified Appraiser No. RG-01269
/s/ Joseph G. Vizza
-----------------------------------------------
Joseph G. Vizza
State Certified Appraiser No. RG-01426
/s/ John B. Rush, MAI
-----------------------------------------------
John B. Rush, MAI
State Certified Appraiser No. RG-00808
Reviewed and Approved
================================================================================
-87-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
ADDENDA
================================================================================
RENT ROLL
INVESTOR SURVEY
IMPROVED SALES
LAND SALES
APPRAISERS' QUALIFICATIONS
================================================================================
-88-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
700 EAST GATE DRIVE
LEASE ABSTRACT REPORT
FOR ALL TENANTS
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE CEILING BREAKPOINT
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) (000'S)
- ------------------ --------- --------- ----- ----- ------ ------------ --------- ------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 1 -- 3,475 12/93 11/98 -- 17.00 59,075 -- -- --
COUNTRYWIDE FUNDIN -- 12/96 17.25 59,944
12/97 17.50 60,813
# 2 -- 2,115 4/96 3/99 -- 19.00 40,185 -- -- --
UNION LABOR LIFE --
# 3 -- 600 2/94 1/99 -- 17.15 10,290 -- -- --
BAP MAINT OFFICE --
# 4 -- 6,583 5/93 10/99 -- 19.00 125,077 -- -- --
PHOENIX HOME LIFE -- 5/97 19.25 126,723
# 5 -- 1,805 5/96 10/99 -- 7.75 13,989 -- -- --
PHOENIX HOME LIFE -- 5/97 18.25 32,941
5/98 19.25 34,746
# 6 -- 400 2/94 10/99 -- 19.00 7,600 -- -- --
PHOENIX HOME LIFE -- 5/97 19.25 7,700
# 7 -- 2,475 2/95 1/00 -- 19.36 47,916 -- -- --
LEGG MASON WOOD -- 2/97 19.85 49,129
2/98 20.35 50,366
2/99 20.85 51,604
# 8 -- 16,041 3/95 5/00 -- 17.75 284,728 -- -- --
LMC PROPERTIES -- 3/97 18.00 288,738
# 9 -- 685 5/96 5/00 -- 10.51 7,199 -- -- --
LMC PROPERTIES --
# 10 -- 2,140 6/94 7/97 -- 18.75 40,125 -- -- --
ROI SYSTEMS --
# 11 -- 3,407 8/94 7/99 -- 18.50 63,030 -- -- --
FIREMAN'S FUND -- 8/96 18.75 63,881
8/97 19.00 64,733
8/98 19.25 65,585
# 12 -- 2,650 10/94 1/98 -- 18.75 49,688 -- -- --
CONTINENTAL BANK -- 10/96 19.00 50,350
# 13 -- 3,957 12/94 11/97 -- 18.50 73,205 -- -- --
KENWORTH TRUCK CO -- 12/96 18.75 74,194
# 14 -- 6,680 3/94 8/97 -- 18.00 120,240 -- -- --
</TABLE>
PRO RATA % OF RENT
TENANT RECOVERIES SHARE BASE SUBJ TO CPI
- ------------------ ------------------ ---------- -----------
# 1 OPERATING EXPENSES 903,243
COUNTRYWIDE FUNDIN
# 2 OPERATING EXPENSES 915,050
UNION LABOR LIFE
# 3 NONE
BAP MAINT OFFICE
# 4 OPERATING EXPENSES 826,497
PHOENIX HOME LIFE
# 5 OPERATING EXPENSES 915,050
PHOENIX HOME LIFE
# 6 OPERATING EXPENSES 826,497
PHOENIX HOME LIFE
# 7 OPERATING EXPENSES 830,039
LEGG MASON WOOD
# 8 OPERATING EXPENSES 830,039
LMC PROPERTIES
# 9 OPERATING EXPENSES 915,050
LMC PROPERTIES
# 10 OPERATING EXPENSES 897,340
ROI SYSTEMS
# 11 OPERATING EXPENSES 897,340
FIREMAN'S FUND
# 12 OPERATING EXPENSES 903,243
CONTINENTAL BANK
# 13 OPERATING EXPENSES 915,050
KENWORTH TRUCK CO
# 14 OPERATION EXPENSES 913,870
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GALLAGHER BASSETT --
# 15 -- 14,487 4/95 3/05 -- 16.00 231,792 -- -- --
COPELCO CAPITAL -- 4/97 16.50 239,036
4/99 17.00 246,279
4/01 17.50 253,523
4/03 18.00 260,766
</TABLE>
GALLAGHER BASSETT
# 15 OPERATING EXPENSES 802,883
COPELCO CAPITAL
PAGE 2
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE CEILING BREAKPOINT
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) (000'S)
- ------------------ --------- --------- ----- ----- ------ ------------ --------- ------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 16 -- 24,513 4/95 3/05 -- 16.00 392,208 -- -- --
COPELCO -- 4/97 16.50 404,465
4/99 17.00 416,721
4/01 17.50 428,978
4/03 18.00 441,234
# 17 -- 24,857 9/93 8/99 -- 18.25 453,640 -- -- --
HBO & COMPANY -- 9/96 18.50 459,855
9/97 18.75 466,069
9/98 19.00 472,283
# 18-SUITE 23 -- 359 11/96 7/02 -- 20.06 7,202 -- -- --
NEWS NOOK -- 8/98 20.76 7,453
8/99 21.48 7,711
8/00 22.24 7,984
8/01 23.01 8,261
# 19 -- 2,140 1/98 12/02 -- 19.67 42,083 -- -- --
FORMER ROI --
# 20 6,680 3/98 2/03 -- 19.67 131,362 -- -- --
FORMER GALLAGHER --
---------
126,049
=========
</TABLE>
PRO RATA % OF RENT
TENANT RECOVERIES SHARE BASE SUBJ TO CPI
- ------------------ ------------------ ---------- -----------
# 16 OPERATING EXPENSES 802,883
COPELCO
# 17 OPERATING EXPENSES 897,340
HBO & COMPANY
# 18-SUITE 23 OPERATING EXPENSES 459,140
NEWS NOOK
# 19 OPERATING EXPENSES 875,169
FORMER ROI
# 20 OPERATING EXPENSES 875,169
FORMER GALLAGHER
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
701 Eastgate Drive
LEASE ABSTRACT REPORT
FOR ALL TENANTS
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE CEILING BREAKPOINT
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) (000'S)
- ------------------ --------- --------- ----- ----- ------ ------------ --------- ------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 1 -- 9,967 6/97 6/00 -- 16.75 166,947 -- -- --
DIGITAL EQUIPMENT -- 6/98 17.35 172,927
6/99 17.95 178,908
# 2 -- 3,738 2/93 1/99 -- 17.50 65,415 -- -- --
GENESIS REALTY -- 2/97 17.75 66,350
# 3 -- 1,588 7/97 6/02 -- 17.00 26,996 -- -- --
TODAY'S TEMPORARY -- 7/98 17.65 28,028
7/99 18.40 29,219
7/00 19.10 30,331
7/01 19.90 31,601
# 4 -- 1,588 9/94 12/99 -- 16.50 26,202 -- -- --
TRANSOUTH FIN. -- 9/96 17.00 26,996
9/97 17.50 27,790
9/98 18.00 28,584
# 5 -- 2,409 3/95 2/98 -- 15.00 36,135 -- -- --
S. FREEDMAN --
# 6 -- 2,878 9/96 11/99 -- 17.00 48,926 -- -- --
TIN PLATE PARTNERS -- 9/97 17.25 49,646
9/98 17.75 51,085
# 7 -- 20,959 5/97 4/02 -- 17.30 362,591 -- -- --
LOCKHEED-MARTIN -- 5/98 17.85 374,118
5/99 18.35 384,598
5/00 18.90 396,125
5/01 19.50 408,701
# 8 -- 9,795 6/96 5/01 -- 17.00 166,515 -- -- --
BAY NETWORKS -- 6/97 17.20 168,474
6/98 17.50 171,413
6/99 17.90 175,331
6/00 18.40 180,228
# 9 -- 1,800 10/96 9/99 -- 19.25 34,650 -- -- --
WEYERHAEUSER -- 10/97 19.85 35,730
10/98 20.45 36,810
# 10 -- 6,755 2/97 1/00 -- 18.00 121,590 -- -- --
AMERICAN INTL REAL -- 2/98 18.55 125,305
2/99 19.10 129,021
---------
61,477
</TABLE>
PRO RATA % OF RENT
TENANT RECOVERIES SHARE BASE SUBJ TO CPI
- ------------------ ------------------ ---------- -----------
# 1 OPERATING EXPENSES 307,385
DIGITAL EQUIPMENT
# 2 OPERATING EXPENSES 338,124
GENESIS REALTY
# 3 OPERATING EXPENSES 307,385
TODAY'S TEMPORARY
# 4 OPERATING EXPENSES 338,124
TRANSOUTH FIN.
# 5 OPERATING EXPENSES 319,680
S. FREEDMAN
# 6 OPERATING EXPENSES 307,385
TIN PLATE PARTNERS
# 7 OPERATING EXPENSES 307,385
LOCKHEED-MARTIN
# 8 OPERATING EXPENSES 296,319
BAY NETWORKS
# 9 OPERATING EXPENSES 307,385
WEYERHAEUSER
# 10 OPERATING EXPENSES 307,385
AMERICAN INTL REAL
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
303 FELLOWSHIP DRIVE
LEASE ABSTRACT REPORT
FOR ALL TENANTS
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE CEILING BREAKPOINT
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) (000'S)
- ------------------ --------- --------- ----- ----- ------ ------------ --------- ------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 1 -- 17,596 7/97 2/01 -- 16.30 286,815 -- -- --
STAR ENTERPRISES -- 7/98 17.00 299,132
7/99 17.55 308,810
7/00 18.10 318,488
# 2 -- 11,682 7/97 3/00 -- 14.00 163,548 -- -- --
HASBRO -- 1/98 16.50 192,753
1/99 17.10 199,762
1/00 17.70 206,771
# 3 -- 2,412 11/95 10/97 -- 15.80 38,110 -- -- --
TEXACO LUBRICANTS --
# 4 -- 1,468 11/92 10/97 -- 15.80 23,194 -- -- --
HUNTSMAN CORP --
# 5 5,975 3/94 2/99 -- 17.25 103,069 -- -- --
PRUDENTIAL INSURAN -- 3/97 17.75 106,056
# 6 7,501 6/92 5/99 -- 17.00 127,517 -- -- --
PRUDENTIAL PROP --
# 7 1,430 5/94 2/99 -- 17.25 24,668 -- -- --
PRUDENTIAL INSURAN -- 3/97 17.75 25,383
# 8 3,072 1/98 12/02 -- 18.37 56,436 -- -- --
SPEC TENANT --
# 9 2,072 4/98 3/03 -- 18.37 38,065 -- -- --
SPEC TENANT --
---------
53,208
=========
</TABLE>
PRO RATA % OF RENT
TENANT RECOVERIES SHARE BASE SUBJ TO CPI
- ------------------ ------------------ ---------- -----------
# 1 OPERATING EXPENSES 372,456
STAR ENTERPRISES
# 2 OPERATING EXPENSES 372,456
HASBRO
# 3 OPERATING EXPENSES 345,852
TEXACO LUBRICANTS
# 4 OPERATING EXPENSES 345,852
HUNTSMAN CORP
# 5 OPERATING EXPENSES 354,897
PRUDENTIAL INSURAN
# 6 OPERATING EXPENSES 392,675
PRUDENTIAL PROP
# 7 OPERATING EXPENSES 354,897
PRUDENTIAL INSURAN
# 8 OPERATING EXPENSES 391,450
SPEC TENANT
# 9 OPERATING EXPENSES 391,450
SPEC TENANT
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
305 FELLOWSHIP DRIVE
LEASE ABSTRACT REPORT
FOR ALL TENANTS
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE CEILING BREAKPOINT
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) (000'S)
- ------------------ --------- --------- ----- ----- ------ ------------ --------- ------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 1 -- 10,671 11/94 4/00 -- 17.00 181,407 -- -- --
PAYCHEX -- 11/96 17.25 184,075
11/97 17.50 186,743
# 2 -- 1,702 9/91 10/97 -- 17.75 30,211 -- -- --
LEVER BROTHERS CO --
# 3 -- 463 3/95 10/97 -- 17.75 8,218 -- -- --
LEVER BROTHERS --
# 4 -- 19,204 2/95 9/99 -- 16.50 316,866 -- -- --
GOLDER ASSOCIATES -- 10/96 16.75 321,667
10/97 17.00 326,468
# 5 -- 2,781 6/95 8/98 -- 17.00 47,277 -- -- --
METRO COMMERCIAL -- 9/96 17.50 48,668
9/97 18.00 50,058
# 6 -- 3,480 4/93 9/98 -- 17.50 60,900 -- -- --
METRO COMMERCIAL -- 4/97 18.00 62,640
# 7 -- 8,472 6/94 2/00 -- 17.25 146,142 -- -- --
RETAIL PUBLICATION -- 6/97 17.75 150,378
# 8 -- 3,158 3/94 9/99 -- 17.50 55,265 -- -- --
NEW HARBOR ENTER. -- 3/97 18.00 56,844
# 9 -- 2,800 10/97 9/02 -- 17.75 49,700 -- -- --
SPEC TENANT --
# 10 -- 2,918 1/98 12/02 -- 18.37 53,607 -- -- --
SPEC TENANT --
---------
55,649
=========
</TABLE>
PRO RATA % OF RENT
TENANT RECOVERIES SHARE BASE SUBJ TO CPI
- ------------------ ------------------ ---------- -----------
# 1 OPERATING EXPENSES 378,413
PAYCHEX
# 2 OPERATING EXPENSES 389,543
LEVER BROTHERS CO
# 3 OPERATING EXPENSES 389,543
LEVER BROTHERS
# 4 OPERATING EXPENSES 294,940
GOLDER ASSOCIATES
# 5 OPERATING EXPENSES 389,543
METRO COMMERCIAL
# 6 OPERATING EXPENSES 403,455
METRO COMMERCIAL
# 7 OPERATING EXPENSES 381,752
RETAIL PUBLICATION
# 8 OPERATING EXPENSES 406,238
NEW HARBOR ENTER.
# 9 OPERATING EXPENSES 352,043
SPEC TENANT
# 10 OPERATING EXPENSES 364,364
SPEC TENANT
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
307 FELLOWSHIP DRIVE
LEASE ABSTRACT REPORT
FOR ALL TENANTS
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE CEILING BREAKPOINT
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) (000'S)
- ------------------ --------- --------- ----- ----- ------ ------------ --------- ------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 1 -- 2,779 1/93 5/98 -- 17.00 47,243 -- -- --
THE PAUL REVERE CO -- 1/97 17.25 47,938
# 2 -- 2,345 12/92 5/98 -- 15.65 36,699 -- -- --
SPECTOR GADON ROSE -- 12/96 16.00 37,520
# 3 -- 1,985 7/95 6/00 -- 16.50 32,753 -- -- --
ARAMARK -- 7/97 16.75 33,249
7/98 17.00 33,745
# 4 -- 4,182 9/96 9/98 -- 17.75 74,231 -- -- --
GARDEN ST. CABLE --
# 5 -- 1,227 10/94 9/97 -- 17.00 20,859 -- -- --
SIEMENS --
# 6 -- 798 6/97 5/00 -- 16.00 12,768 -- -- --
INTERCRAFT -- 6/98 16.80 13,406
6/99 17.70 14,125
# 7 -- 1,049 3/95 8/97 -- 17.75 18,620 -- -- --
POLICY MGMT SYSTEM --
# 8 3,479 8/92 4/99 -- 16.17 56,255 -- -- --
MONUMENTAL LIFE --
# 9 -- 1,848 5/96 4/99 -- 14.20 26,242 -- -- --
ACUMEN RE-MGMT -- 5/97 14.30 26,426
5/98 14.50 26,796
# 10 -- 2,475 3/96 2/99 -- 17.15 42,446 -- -- - --
BELL ATLANTIC PROP --
# 11 -- 2,308 1/93 6/98 -- 17.00 39,236 -- --- --
UOP --
# 12 -- 917 1/96 12/97 -- 18.00 16,506 -- -- - --
HK SYSTEMS --
# 13 -- 2,067 1/96 6/00 -- 16.50 34,106 -- -- - --
ARAMARK -- 7/97 16.75 34,622
7/98 17.00 35,139
# 14 -- 4,894 9/96 8/00 -- 16.73 81,877 -- -- - --
[ILLEGIBLE]FF & COHEN -- 9/97 17.25 84,422
9/98 17.75 86,869
</TABLE>
PRO RATA % OF RENT
TENANT RECOVERIES SHARE BASE SUBJ TO CPI
- ------------------ ------------------ ---------- -----------
# 1 OPERATING EXPENSES 379,183
THE PAUL REVERE CO
# 2 OPERATING EXPENSES 379,183
SPECTOR GADON ROSE
# 3 OPERATING EXPENSES 379,183
ARAMARK
# 4 OPERATING EXPENSES 379,183
GARDEN ST. CABLE
# 5 OPERATING EXPENSES 381,891
SIEMENS
# 6 OPERATING EXPENSES 379,183
INTERCRAFT
# 7 OPERATING EXPENSES 376,475
POLICY MGMT SYSTEM
# 8 OPERATING EXPENSES 316,889
MONUMENTAL LIFE
# 9 OPERATING EXPENSES 398,142
ACUMEN RE-MGMT
# 10 OPERATING EXPENSES 381,891
BELL ATLANTIC PROP
# 11 OPERATING EXPENSES 379,183
UOP
# 12 OPERATING EXPENSES 379,183
HK SYSTEMS
# 13 OPERATING EXPENSES 379,183
ARAMARK
# 14 OPERATING EXPENSES 379,183
[ILLEGIBLE]FF & COHEN
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9/99 18.28 89,462
# 15 -- 5,293 1/97 12/98 -- 18.25 96,597 -- -- --
PRC INC. -- 1/98 18.90 100,038
# 16 -- 2,125 5/96 4/98 -- 14.50 30,813 -- -- --
UNITRONIX -- 5/97 15.70 33,363
</TABLE>
PRO RATA % OF RENT
TENANT RECOVERIES SHARE BASE SUBJ TO CPI
- ------------------ ------------------ ---------- -----------
# 15 OPERATING EXPENSES 379,183
PRC INC.
# 16 OPERATING EXPENSES 379,183
UNITRONIX
PAGE 2
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE CEILING BREAKPOINT
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) (000'S)
- ------------------ --------- --------- ----- ----- ------ ------------ --------- ------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 17 -- 4,028 1/97 12/99 -- 17.75 71,497 -- -- --
MCC BEHAVIORAL -- 1/98 18.00 72,504
# 18 -- 1,063 1/97 12/97 -- 22.00 23,386 -- -- --
MELLON MORTGAGE --
# 19 -- 2,736 1/97 12/01 -- 16.50 45,144 -- -- --
ROBERT HALF INT'L -- 1/98 17.00 46,512
1/99 17.50 47,880
1/00 18.00 49,248
1/01 18.60 50,890
# 20 -- 6,979 4/98 3/03 -- 18.37 128,213 -- -- --
SPEC TENANT --
---------
54,577
=========
</TABLE>
PRO RATA % OF RENT
TENANT RECOVERIES SHARE BASE SUBJ TO CPI
- ------------------ ------------------ ---------- -----------
# 17 OPERATING EXPENSES 379,183
MCC BEHAVIORAL
# 18 OPERATING EXPENSES 379,183
MELLON MORTGAGE
# 19 OPERATING EXPENSES 392,725
ROBERT HALF INT'L
# 20 OPERATING EXPENSES 410,853
SPEC TENANT
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
309 FELLOWSHIP DRIVE
LEASE ABSTRACT REPORT
FOR ALL TENANTS
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE CEILING BREAKPOINT
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) (000'S)
- ------------------ --------- --------- ----- ----- ------ ------------ --------- ------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 1 -- 3,205 8/95 7/98 -- 17.00 54,485 -- -- --
COLKATE -- 8/96 17.25 55,286
8/97 17.50 56,088
# 2 -- 9,803 12/91 7/98 -- 15.00 147,045 -- -- --
ALLIED BOND & COLL -- 8/97 15.25 149,496
# 3 -- 8,000 8/92 7/00 -- 39.21 313,680 -- -- --
PSE&G -- 8/97 16.85 134,800
8/98 17.45 139,600
8/99 18.05 144,400
# 4 -- 7,076 7/96 6/01 -- 17.60 124,538 -- -- --
MERCHANTS INSUR -- 7/98 17.85 126,307
7/99 18.25 129,137
# 5 -- 6,321 5/94 4/99 -- 17.25 109,037 -- -- --
GENERAL ACCIDENT -- 5/97 17.50 110,618
5/98 17.75 112,198
# 6 -- 5,008 7/97 7/02 -- 17.75 88,892 -- -- --
NY LIFE MEDICAL -- 8/97 18.50 92,648
8/98 19.15 95,903
8/99 19.90 99,659
8/00 20.65 103,415
8/01 21.40 107,171
# 7 -- 2,620 11/95 10/97 -- 15.75 41,265 -- -- --
CISCO --
# 8 -- 5,254 1/98 12/02 -- 18.37 96,523 -- -- --
SPEC TENANT --
# 9 -- 2,810 4/98 3/03 -- 18.37 51,623 -- -- --
SPEC TENANT --
# 10 -- 5,254 7/98 6/03 -- 18.37 96,523 -- -- --
SPEC TENANT --
---------
55,351
=========
</TABLE>
PRO RATA % OF RENT
TENANT RECOVERIES SHARE BASE SUBJ TO CPI
- ------------------ ------------------ ---------- -----------
# 1 OPERATING EXPENSES 387,457
COLKATE
# 2 OPERATING EXPENSES 304,431
ALLIED BOND & COLL
# 3 OPERATING EXPENSES 387,457
PSE&G
# 4 OPERATING EXPENSES 387,457
MERCHANTS INSUR
# 5 OPERATING EXPENSES 383,029
GENERAL ACCIDENT
# 6 OPERATING EXPENSES 415,133
NY LIFE MEDICAL
# 7 OPERATING EXPENSES 373,619
CISCO
# 8 OPERATING EXPENSES 391,454
SPEC TENANT
# 9 OPERATING EXPENSES 391,454
SPEC TENANT
# 10 OPERATING EXPENSES 391,454
SPEC TENANT
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
304 HARPER DRIVE
LEASE ABSTRACT REPORT
FOR ALL TENANTS
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE CEILING BREAKPOINT
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) (000'S)
- ------------------ --------- --------- ----- ----- ------ ------------ --------- ------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 1 -- 910 8/95 7/97 -- 14.75 13,423 -- -- --
BUILDING CTRCTRS --
# 2 -- 910 8/95 7/98 -- 13.00 11,830 -- -- --
BASIC COMMERCE -- 8/96 14.00 12,740
8/97 15.00 13,650
# 3 -- 3,088 9/92 8/98 -- 15.70 48,482 -- -- --
COZTANZA SPECTOR --
# 4 -- 3,180 7/96 6/99 -- 18.15 57,717 -- -- --
TAB PRODUCTS -- 7/97 18.65 59,307
7/98 19.05 60,579
# 5 -- 3,616 6/94 5/99 -- 15.65 56,590 -- -- --
PRO-TECH RESOURCE -- 6/97 16.15 58,398
# 6 -- 1,315 10/94 5/99 -- 15.65 20,580 -- -- --
PRO-TECH RESOURCES -- 5/97 16.15 21,237
# 7 -- 1,125 11/96 10/97 -- 15.00 16,875 -- -- --
DELTA MANAGEMENT --
# 8 -- 6,740 1/97 12/99 -- 14.75 99,415 -- -- --
SEMCOR INC. -- 1/98 15.25 102,785
1/99 15.85 106,829
# 9 -- 5,915 7/97 6/02 -- 18.50 109,428 -- -- --
LEGG-MASON -- 7/98 19.05 112,681
7/99 19.65 116,230
7/00 20.20 119,483
7/01 20.85 123,328
# 10 -- 2,738 4/98 3/03 -- 17.34 47,467 -- -- --
SPEC TENANT --
---------
29,537
=========
</TABLE>
PRO RATA % OF RENT
TENANT RECOVERIES SHARE BASE SUBJ TO CPI
- ------------------ ------------------ ---------- -----------
# 1 OPERATING EXPENSES 228,912
BUILDING CTRCTRS
# 2 OPERATING EXPENSES 228,912
BASIC COMMERCE
# 3 OPERATING EXPENSES 206,759
COZTANZA SPECTOR
# 4 OPERATING EXPENSES 228,912
TAB PRODUCTS
# 5 OPERATING EXPENSES 221,528
PRO-TECH RESOURCE
# 6 OPERATING EXPENSES 221,528
PRO-TECH RESOURCES
# 7 OPERATING EXPENSES 221,528
DELTA MANAGEMENT
# 8 OPERATING EXPENSES 221,528
SEMCOR INC.
# 9 OPERATING EXPENSES 221,528
LEGG-MASON
# 10 OPERATING EXPENSES 256,161
SPEC TENANT
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
815 EAST GATE DRIVE
LEASE ABSTRACT REPORT
FOR ALL TENANTS
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE CEILING BREAKPOINT
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) (000'S)
- ------------------ --------- --------- ----- ----- ------ ------------ --------- ------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 1 -- 11,786 11/95 10/98 -- 12.10 142,611 -- -- --
SEMCOR -- 11/96 12.60 148,504
# 2 -- 1,904 2/96 10/98 -- 12.10 23,038 -- -- --
SEMCOR -- 11/96 12.60 23,990
# 3 -- 8,500 12/93 11/98 -- 12.40 105,400 -- -- --
WYLE LABS -- 12/96 12.65 107,525
12/97 12.90 109,650
# 4 2 3,310 10/97 9/02 -- 13.00 43,030 -- -- --
SPEC TENANT -- 10/98 13.23 43,783
10/99 13.46 44,549
10/00 13.69 45,329
10/01 13.93 46,122
---------
25,500
=========
</TABLE>
PRO RATA % OF RENT
TENANT RECOVERIES SHARE BASE SUBJ TO CPI
- ------------------ ------------------ ---------- -----------
# 1 OPERATING EXPENSES 104,550
SEMCOR
# 2 OPERATING EXPENSES 104,550
SEMCOR
# 3 OPERATING EXPENSES 104,550
WYLE LABS
# 4 OPERATING EXPENSES 107,690
SPEC TENANT
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
817 EAST GATE DRIVE
LEASE ABSTRACT REPORT
FOR ALL TENANTS
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE CEILING BREAKPOINT
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) (000'S)
- ------------------ --------- --------- ----- ----- ------ ------------ --------- ------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 1 -- 15,596 7/92 3/98 -- 11.50 179,354 -- -- --
EMTEC --
# 2 -- 9,755 9/94 8/04 -- 12.00 117,060 -- -- --
PRIZM -- 8/96 12.50 121,938
8/98 13.00 126,815
8/00 13.50 131,693
8/02 14.00 136,570
---------
25,351
=========
</TABLE>
PRO RATA % OF RENT
TENANT RECOVERIES SHARE BASE SUBJ TO CPI
- ------------------ ------------------ ---------- -----------
# 1 OPERATING EXPENSES 88,729
EMTEC
# 2 OPERATING EXPENSES 114,080
PRIZM
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
305 HARPER DRIVE
LEASE ABSTRACT REPORT
FOR ALL TENANTS
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE CEILING BREAKPOINT
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) (000'S)
- ------------------ --------- --------- ----- ----- ------ ------------ --------- ------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 1 -- 14,980 10/93 9/99 -- 6.25 93,625 -- -- --
JEROME GROUP -- 4/98 6.50 97,370
------
14,980
======
</TABLE>
PRO RATA % OF RENT
TENANT RECOVERIES SHARE BASE SUBJ TO CPI
- ------------------ ------------------ ---------- -----------
# 1 OPERATING EXPENSES ZERO
JEROME GROUP
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET OFFICE MARKET - URBAN/CBD
- ------------------------------------------------------------------------------------------------------------------------------------
9.5% 10.0% 10.0% 10.0% 11.5% 11.5% 3.0% 3.0% 3.0% 4.0% 10.0 10.0
9.5% 10.0% 10.0% 10.5% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
8.0% 9.0% 8.5% 8.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
13.0% 13.0% -- -- 14.0% 14.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
8.0% 8.0% 8.5% 8.5% 10.5% 10.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.3% 9.3% 10.3% 10.3% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 9.0% 8.5% 9.0% 10.5% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
10.0% 10.0% 10.0% 10.0% 12.5% 12.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
9.0% 9.0% 9.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.0% 9.0% 8.0% 9.0% 10.0% 12.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
Responses 11 11 10 10 11 11 11 11 11 11 11 11
Average (%) 9.2% 9.6% 9.2% 9.7% 11.7% 12.0% 3.3% 4.2% 3.4% 3.9% 8.5 9.5
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 9.0% 9.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 12.0% 12.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.5% 9.5% 10.5% 10.5% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 10.0% 10.0% 11.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
15.0% 15.0% -- -- 20.0% 20.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
9.0% 10.0% -- -- -- -- -- -- -- -- -- --
9.0% 10.0% 9.0% 10.0% 12.0% 13.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
Responses 8 8 6 6 7 7 7 7 7 7 7 7
Average (%) 10.0% 10.4% 9.7% 10.3% 12.8% 13.1% 3.3% 4.7% 3.5% 4.0% 8.3 9.7
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
8.0% 9.0% 9.5% 10.0% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
8.0% 10.0% 8.5% 9.0% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0 10.0 10.0
10.0% 10.0% 10.0% 10.0% 13.0% 13.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.5% 9.5% 10.5% 10.5% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
12.0% 12.0% -- -- 13.0% 13.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
-- -- -- -- 12.0% 13.0% 4.0% 4.0% 4.0% 4.0 5.0 10.0
Responses 8 8 7 7 9 9 9 9 9 9 9 9
Average (%) 9.4% 10.0% 9.6% 10.2% 12.8% 13.5% 3.5% 4.6% 3.5% 3.9% 7.6 8.9
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
12.0% 12.0% 12.0% 12.0% 15.0% 15.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.8% 9.8% 10.8% 10.8% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
14.0% 14.0% -- -- 20.0% 20.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 11.0% 14.0% 14.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 6 6 5 5 6 6 6 6 6 6 6 6
Average (%) 10.7% 11.0% 10.5% 11.2% 14.6% 15.3% 3.2% 4.6% 3.3% 3.9% 8.0 8.8
--------------------------------------------------------------------------------------------------------
Total Responses 33 33 28 28 33 33 33 33 33 33 33 33
Weighted Average (%) 9.8% 10.3% 9.7% 10.3% 13.0% 13.5% 3.3% 4.6% 3.4% 3.9% 8.1 9.2
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
8 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET OFFICE MARKET - SUBURBAN/NON - CBD
- ------------------------------------------------------------------------------------------------------------------------------------
9.5% 9.5% 10.5% 10.5% 10.5% 10.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.5% 8.5% 9.3% 9.3% 11.3% 11.3% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
11.0% 11.0% -- -- 12.0% 12.0% 5.0% 3.0% 3.0% 3.0% 5.0 7.0
8.5% 10.0% 9.0% 10.5% 11.0% 12.5% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
8.0% 10.0% 9.5% 10.0% 11.5% 12.0% 4.0% 6.0% 4.0% 4.0% 10.0 10.0
l0.0% 11.0% 10.5% 11.0% 12.0% 12.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.0% 9.0% 8.5% 8.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
8.0% 8.0% 8.5% 8.5% 10.5% 10.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.1% 9.1% 10.1% l0.1% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 10.0% 9.0% 10.5% 11.0% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
9.0% 9.0% 10.0% 10.0% 11.5% 11.5% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.0% 9.0% 9.0% 9.0% 12.0% 13.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.0% 10.0% -- -- -- -- -- -- -- -- --
8.0% 9.0% 8.0% 9.0% 10.0% 12.0% 5.0% 5.0% 4.0% 4.0% 5.0 10.0
Responses 16 16 14 14 15 15 15 15 15 15 15 15
Average (%) 8.8% 9.5% 9.3% 9.9% 11.2% 11.6% 3.5% 4.4% 3.6% 3.8% 8.9 9.7
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
9.5% 9.5% 10.5% 10.5% 10.5% 10.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.8% 8.8% 9.5% 9.5% 11.8% 11.8% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
12.0% 12.0% -- -- 18.0% 18.0% 5.0% 3.0% 3.0% 3.0% 5.0 7.0
10.5% 10.5% 10.0% 10.0% 11.0% 13.0% 2.0% 2.0% 2.0% 2.0% 10.0 10.0
8.0% 10.0% 9.5% 10.0% 11.0% 12.0% 4.0% 6.0% 4.0% 4.0% 10.0 10.0
9.0% 10.0% 9.0% 9.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.0% 11.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.4% 9.4% 10.4% 10.4% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 10.0% 14.0% 15.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
10.0% 11.0% -- -- -- -- -- -- -- -- -- --
10.0% 11.0% 10.0% 11.0% 12.0% 13.0% 5.0% 5.0% 4.0% 4.0% 5.0 10.0
Responses 13 13 11 11 12 12 12 12 12 12 12 12
Average (%) 9.5% 10.0% 9.8% 10.2% 12.0% 12.5% 3.4% 4.5% 3.4% 3.7% 8.6 9.6
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% -- -- 13.0% 13.0% 3.0% 3.0% 3.0% 3.0% 5.0 7.0
8.0% 10.0% 8.5% 9.0% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
10.0% 10.0% 10.0% 10.0% 12.5% 12.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.4% 9.4% 10.4% 10.4% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
6.0% 6.0% 9.0% 9.0% 17.0% 20.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.0% 10.0% -- -- -- -- -- -- -- -- -- --
12.0% 12.0% 10.0% 10.0% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 2.0 2.0
Responses 10 10 8 8 9 9 9 9 9 9 9 9
Average (%) 9.1% 9.7% 9.5% 10.0% 13.4% 14.3% 3.1% 4.6% 3.4% 3.8% 7.2 8.0
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% -- -- 18.0% 18.0% 3.0% 3.0% 3.0% 3.0% 5.0 7.0
10.5% 10.5% 10.0% 10.0% 11.0% 13.0% 2.0% 2.0% 2.0% 2.0% 10.0 10.0
11.0% 11.0% 11.0% 11.0% 14.0% 14.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.6% 9.6% 10.6% 10.6% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
6.0% 6.0% 10.0% 10.0% 20.0% 20.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.0% 10.0% -- -- -- -- -- -- -- -- -- --
12.0% 12.0% 10.0% 10.0% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 2.0 2.0
Responses 10 10 8 8 9 9 9 9 9 9 9 9
Average (%) 9.7% 10.0% 10.0% 10.5% 14.5% 15.2% 2.9% 4.3% 3.2% 3.6% 7.2 8.0
--------------------------------------------------------------------------------------------------------
Total Responses 49 49 41 41 45 45 45 45 45 45 45 45
Weighted Average (%) 9.3% 9.8% 9.7% 10.1% 12.8% 13.4% 3.2% 4.4% 3.4% 3.7% 8.0 8.8
--------------------------------------------------------------------------------------------------------
</TABLE>
AUTUMN 1996 9
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET INDUSTRIAL MARKET - WAREHOUSE/DISTRIBUTION
- ------------------------------------------------------------------------------------------------------------------------------------
9.2% 9.2% 9.5% 9.5% 10.0% 10.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.5% 8.5% 9.3% 9.3% 11.0% 11.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
8.5% 10.0% 9.5% 10.0% 11.0% 12.0% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
9.0% 9.0% 9.5% 9.5% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
8.0% 8.0% 8.5% 8.5% 10.5% 10.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 10.0% 9.0% 10.5% 11.0% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
9.0% 9.0% 10.0% 10.0% 11.0% 11.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
9.0% 9.0% 9.5% 9.5% 10.5% 10.5% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 10 10 10 10 10 10 10 10 10 10 10 10
Average (%) 8.8% 9.2% 9.4% 9.8% 10.9% 11.0% 2.9% 4.0% 3.3% 3.8% 9.8 10.1
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
9.2% 9.2% 9.5% 9.5% 10.0% 10.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.8% 8.8% 9.5% 9.5% 11.3% 11.3% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.5% 11.5% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
10.0% 10.0% 11.0% 11.0% 12.0% 12.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.8% 9.8% 10.3% 10.3% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 7 7 7 7 7 7 7 7 7 7 7 7
Average (%) 9.3% 9.5% 10.0% 10.2% 11.2% 11.2% 2.8% 4.3% 3.2% 3.9% 9.7 10.1
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 12.0% 12.0% 13.0% 13.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.8% 9.8% 10.3% 10.3% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 9.7% 9.9% 10.4% 10.8% 11.9% 11.9% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
12.0% 12.0% 13.0% 13.0% 14.0% 14.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 10.0% 10.5% 10.5% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.5% 10.5% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 10.1% 10.4% 10.9% 11.3% 12.4% 12.4% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
--------------------------------------------------------------------------------------------------------
Total Responses 25 25 25 25 25 25 25 25 25 25 25 25
Weighted Average (%) 9.5% 9.7% 10.2% 10.5% 11.6% 11.6% 2.6% 4.5% 3.2% 4.0% 9.6 10.2
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
10 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET INDUSTRIAL MARKET - BUSINESS PARKS, OTHER INDUSTRIAL & MANUFACTURING
- ------------------------------------------------------------------------------------------------------------------------------------
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 10.0 10.0
9.0% 9.0% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 3 3 4 4 4 4 4 4 4 4
Average (%) 8.9% 9.4% 9.7% 10.7% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.8 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.5% 10.5% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 10.0 10.0
10.0% 10.0% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 3 3 4 4 4 4 4 4 4 4
Average (%) 9.3% 9.8% 9.8% 10.8% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.8 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.5% 10.5% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 5 5 4 4 5 5 5 5 5 5 5 5
Average (%) 9.4% 10.0% 9.9% 10.9% 12.4% 13.2% 3.4% 4.0% 3.2% 3.8% 8.2 9.4
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.5% 10.5% 11.0% 11.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.5% 10.5% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 5 5 4 4 5 5 5 5 5 5 5 5
Average (%) 9.6% 10.2% 10.0% 11.0% 12.4% 13.2% 3.4% 4.0% 3.2% 3.8% 8.2 9.4
--------------------------------------------------------------------------------------------------------
Total Responses 18 18 14 14 18 18 18 18 18 18 18 18
Weighted Average(%) 9.3% 9.8% 9.8% 10.8% 12.0% 12.4% 3.3% 4.0% 3.2% 3.9% 8.5 9.8
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
AUTUMN 1996 11
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET RETAIL MARKET - NEIGHBORHOOD & COMMUNITY CENTERS
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 10.5% 9.5% 10.5% 11.0% 12.5% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
9.5% 10.0% 10.0% 10.0% 12.5% 12.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
10.0% 10.0% 10.5% 10.5% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
10.3% 10.3% 10.8% 10.8% 13.0% 13.0% 2.0% 2.0% 4.0% 4.0% 7.0 7.0
9.0% 9.0% 10.0% 10.0% 10.0% 10.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
9.8% 9.8% 10.3% 10.3% 11.5% 11.5% 3.8% 4.0% 4.0% 4.0% 10.0 10.0
9.0% 10.0% -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
9.0% 9.0% 9.5% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
Responses 9 9 8 8 8 8 9 9 9 9 9 9
Average (%) 9.3% 9.8% 10.0% 10.4% 11.9% 12.1% 2.9% 3.7% 3.4% 3.9% 8.9 9.4
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
10.8% 10.8% 11.3% 11.3% 14.0% 14.0% 2.0% 2.0% 4.0% 4.0% 7.0 7.0
10.0% 10.0% 11.0% 11.0% 12.0% 12.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
9.0% 10.0% -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 11.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.5% 10.5% -- -- -- -- -- -- -- -- -- --
Responses 6 6 4 4 4 4 5 5 5 5 5 5
Average (%) 9.5% 10.0% 10.4% 11.1% 12.3% 12.3% 2.3% 3.8% 3.3% 4.2% 9.0 9.6
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 12.0% 12.0% 13.0% 13.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 10.0 10.0
9.0% 10.0% -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 9.5% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.0% 10.0% -- -- -- -- -- -- -- --
11.0% 11.0% 9.5% 9.5% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 3.0 3.0
Responses 7 7 5 5 5 5 6 6 6 6 6 6
Average (%) 9.7% 10.3% 10.1% 10.7% 13.8% 14.6% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
13.0% 13.0% 14.0% 14.0% 14.0% 14.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 10.0 10.0
9.0% 10.0% -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 11.0% 14.0% 14.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
11.0% 11.0% 10.5% 10.5% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 3.0 3.0
Responses 6 6 5 5 5 5 6 6 6 6 6 6
Average (%) 10.3% 10.8% 10.8% 11.5% 14.2% 15.0% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
--------------------------------------------------------------------------------------------------------
Total Responses 28 28 22 22 22 22 26 26 26 26 26 26
Weighted Average (%) 9.7% 10.2% 10.3% 10.9% 13.0% 13.5% 2.7% 3.9% 3.2% 4.0% 8.7 9.3
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
12 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET RETAIL MARKET - POWER CENTERS & "BIG BOX"
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 9.0% 9.5% 9.5% 11.0% 11.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
10.0% 10.0% 9.5% 9.5% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
10.5% 10.5% 10.5% 10.5% 11.0% 12.0% 2.0% 2.0% 3.0% 3.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.4% 11.4% 3.8% 3.8% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 9.5% 10.0% 11.0% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
9.3% 9.3% 9.5% 10.0% 10.5% 10.5% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.0% 9.0% -- -- -- -- -- -- -- -- -- --
9.0% 9.5% 9.5% 10.0% 11.0% 11.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
Responses 9 9 8 8 8 8 8 8 8 8 8 8
Average (%) 9.4% 9.5% 9.7% 10.1% 11.5% 11.7% 3.3% 3.5% 3.4% 3.7% 9.1 10.1
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
10.8% 10.8% 10.8% 10.8% 11.0% 12.0% 2.0% 3.0% 3.0% 3.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 3 3 3 3 3 3 3 3 3 3 3 3
Average (%) 9.8% 10.1% 10.1% 10.6% 11.0% 11.3% 2.8% 3.7% 3.2% 3.7% 9.3 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.8% 10.8% 10.8% 10.8% 12.0% 12.0% 2.0% 2.0% 3.0% 3.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 3 3 3 3 3 3 3 3 3 3 3 3
Average (%) 9.6% 9.9% 10.1% 10.6% 12.0% 12.0% 2.8% 3.3% 3.2% 3.7% 9.3 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 10.8% 10.8% 12.0% 12.0% 2.0% 2.0% 3.0% 3.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
-- -- -- -- 15.0% 15.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 2 2 2 2 3 3 3 3 3 3 3 3
Average (%) 9.8% 10.3% 10.1% 10.9% 12.7% 12.7% 2.8% 3.3% 3.2% 3.7% 9.3 10.3
--------------------------------------------------------------------------------------------------------
Total Responses 17 17 16 16 17 17 17 17 17 17 17 17
Weighted Average (%) 9.6% 9.9% 10.0% 10.5% 11.8% 11.9% 2.9% 3.5% 3.2% 3.7% 9.3 10.3
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
AUTUMN 1996 13
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET RETAIL MARKET - REGIONAL MALLS
- ------------------------------------------------------------------------------------------------------------------------------------
7.5% 7.5% 8.0% 8.0% 11.3% 11.3% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.0% 9.0% 9.0% 9.0% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
7.5% 7.5% 7.8% 7.8% 12.0% 12.0% 1.5% 2.0% 3.0% 3.0% 10.0 10.0
7.0% 8.0% 8.0% 8.0% 10.5% 11.5% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
9.0% -- -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.0% 8.0% 9.0% 10.5% 11.0% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
8.0% 8.0% 8.5% 8.5% 11.0% 11.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
7.8% 8.0% 8.3% 8.5% 11.0% 12.0% 2.5% 3.0% 2.5% 3.0% 10.0 10.0
7.0% 8.0% 7.0% 8.0% 10.0% 11.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
Responses 10 9 9 9 9 9 10 10 10 10 10 10
Average (%) 7.9% 8.2% 8.2% 8.6% 11.4% 11.8% 3.0% 3.6% 3.5% 3.8% 9.1 9.6
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 10.0% 10.0% 17.0% 17.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
9.0% 9.0% 9.0% 9.0% 13.5% 13.5% 2.0% 2.0% 4.0% 4.0% 7.0 7.0
9.0% 10.0% 10.0% 10.0% 12.0% 14.0% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
10.0% -- -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
Responses 5 4 4 4 4 4 5 5 5 5 5 5
Average (%) 9.3% 9.6% 9.6% 10.0% 13.4% 13.9% 2.5% 3.4% 3.7% 4.0% 8.6 8.6
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 10.0% 10.0% 18.0% 18.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
11.0% 11.0% 11.0% 11.0% 13.0% 14.0% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
9.0% -- -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.5% 8.5% 9.0% 11.5% 12.5% 2.5% 3.0% 2.5% 3.0% 10.0 10.0
Responses 5 4 4 4 4 4 5 5 5 5 5 5
Average (%) 9.3% 9.8% 9.8% 10.3% 13.4% 13.9% 2.6% 3.6% 3.4% 3.8% 9.2 9.2
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 11.0% 11.0% 20.0% 20.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
12.5% 12.5% 12.0% 12.0% 14.0% 15.0% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
10.0% -- -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 9.0% 9.3% 9.8% 12.0% 13.0% 2.5% 3.0% 2.5% 3.0% 10.0 10.0
13.0% 13.0% 11.0% 11.0% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 3.0 3.0
Responses 6 5 5 5 5 5 6 6 6 6 6 6
Average (%) 10.6% 11.0% 10.6% 11.0% 14.6% 15.0% 2.7% 3.5% 3.3% 3.7% 8.2 8.2
--------------------------------------------------------------------------------------------------------
Total Responses 26 22 22 22 22 22 26 26 26 26 26 26
Weighted Average (%) 9.3% 9.6% 9.5% 10.0% 13.2% 13.6% 2.7% 3.5% 3.5% 3.8% 8.8 8.9
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
14 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET RESIDENTIAL - APARTMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
8.5% 10.0% 9.0% 10.5% -- -- -- -- 3.5% 3.5% 1.0 1.0
8.5% 9.0% 9.0% 9.0% 11.0% 11.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
9.8% 9.8% 10.0% 10.0% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
8.3% 9.0% 9.0% 9.5% 10.5% 11.5% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
7.5% 8.5% 8.0% 9.0% 10.0% 11.0% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.8% 8.8% 9.0% 9.0% 11.3% 11.3% 3.8% 4.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 9.0% 9.0% 9.5% 10.0% 11.5% 3.0% 4.0% 3.0% 3.0% 10.0 10.0
8.5% 9.0% 8.5% 9.0% -- -- 3.0% 3.5% 3.0% 3.5% 10.0 10.0
8.8% 9.0% 9.0% 9.5% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 10 10 10 10 8 8 9 9 10 l0 l0 10
Average (%) 8.6% 9.2% 9.0% 9.6% 11.2% 11.7% 2.9% 3.9% 3.3% 3.8% 8.4 8.9
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 9.5% 9.5% 10.0% 11.0% 12.0% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
9.0% 10.0% 10.0% 10.0% 11.0% 12.5% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.0% 10.0% 10.0% 10.5% 10.5% 12.0% 3.0% 4.0% 3.0% 3.0% 10.0 10.0
9.0% 9.5% 9.5% 10.0% 11.5% 11.5% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 5 5 5 5 5 5 5 5 5 5 5 5
Average (%) 8.9% 9.7% 9.7% 10.3% 11.0% 11.8% 2.5% 4.2% 3.1% 4.0% 9.6 10.2
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 11.0% 11.0% 11.0% 12.5% 13.5% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.0% 9.0% 9.0% 11.0% 12.0% 4.0% 6.0% 3.0% 3.0% 3.0 5.0
9.0% 9.0% 9.5% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 8.9% 9.4% 9.8% 10.3% 11.6% 12.1% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
12.0% 13.0% 13.0% 13.0% 13.0% 15.0% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.0% 10.0% 10.0% 11.0% 13.0% 4.0% 6.0% 3.0% 3.0% 3.0 5.0
9.5% 10.0% 10.0% 11.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 9.5% 10.1% 10.6% 11.3% 12.0% 13.0% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
Total Responses 23 23 23 23 21 21 22 22 23 23 23 23
Weighted Average (%) 9.0% 9.6% 9.8% 10.4% 11.5% 12.1% 2.7% 4.4% 3.2% 4.0% 8.4 9.3
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical
issues
AUTUMN 1996 15
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICE SUMMARY OF WEIGHTED AVERAGE
- ------------------------------------------------------------------------------------------------------------------------------------
Urban/CBD 9.8% 10.3% 9.7% 10.3% 13.0% 13.5% 3.3% 4.6% 3.4% 3.9% 8.1 9.2
Class A - Leased Asset 9.2% 9.6% 9.2% 9.7% 11.7% 12.0% 3.3% 4.2% 3.4% 3.9% 8.5 9.5
Class B - Leased Asset 10.0% 10.4% 9.7% 10.3% 12.8% 13.1% 3.3% 4.7% 3.5% 4.0% 8.3 9.7
Class A - Value Added 9.4% 10.0% 9.6% 10.2% 12.8% 13.5% 3.5% 4.6% 3.5% 3.9 7.6 8.9
Class B - Value Added 10.7% 11.0% 10.5% 11.2% 14.6% 15.3% 3.2% 4.8% 3.3% 3.9% 8.0 8.8
Suburban 9.3% 9.8% 9.7% 10.1% 12.8% 13.4% 3.2% 4.4% 3.4% 3.7% 8.0 8.8
Class A - Leased Asset 8.8% 9.5% 9.3% 9.9% 11.2% 11.6% 3.5% 4.4% 3.6% 3.8% 8.9 9.7
Class B - Leased Asset 9.5% 10.0% 9.8% 10.2% 12.0% 12.5% 3.4% 4.5% 3.4% 3.7% 8.6 9.6
Class A - Value Added 9.1% 9.7% 9.5% 10.0% 13.4% 14.3% 3.1% 4.6% 3.4% 3.8% 7.2 8.0
Class B - Value Added 9.7% 10.0% 10.0% 10.5% 14.5% 15.2% 2.9% 4.3% 3.2% 3.6% 7.2 8.0
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL
- ------------------------------------------------------------------------------------------------------------------------------------
Warehouse/Distribution 9.5% 9.7% 10.2% 10.5% 11.6% 11.6% 2.6% 4.5% 3.2% 4.0% 9.6 10.2
Class A - Leased Asset 8.8% 9.2% 9.4% 9.8% 10.9% 11.0% 2.9% 4.0% 3.3% 3.8% 9.8 10.1
Class B - Leased Asset 9.3% 9.5% 10.0% 10.2% 11.2% 11.2% 2.8% 4.3% 3.2% 3.9% 9.7 10.1
Class A - Value Added 9.7% 9.9% 10.4% 10.8% 11.9% 11.9% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
Class 8 - Value Added 10.1% 10.4% 10.9% 11.3% 12.4% 12.4% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
Business Parks 9.4% 9.9% 10.0% 10.8% 12.3% 12.9% 3.4% 4.0% 3.2% 3.8% 8.3 9.6
Class A - Leased Asset 9.0% 9.5% 9.8% 10.5% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
Class B - Leased Asset 9.3% 9.8% 10.0% 10.8% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
Class A - Value Added 9.5% 10.2% 10.0% 10.8% 13.0% 14.3% 3.5% 4.0% 3.2% 3.7% 7.7 8.7
Class B - Value Added 9.7% 10.3% 10.2% 11.0% 13.0% 14.3% 3.5% 4.0% 3.2% 3.7% 7.7 8.7
0ther Industrial/
Manufacturing 9.2% 9.7% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.8 10.3
Class A - Leased Asset 8.8% 9.3% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.5 10.0
Class B - Leased Asset 9.3% 9.8% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.5 10.0
Class A - Value Added 9.3% 9.8% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
Class B - Value Added 9.5% 10.0% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
- ------------------------------------------------------------------------------------------------------------------------------------
RETAIL
- ------------------------------------------------------------------------------------------------------------------------------------
Neighborhood & Community
Centers 9.7% 10.2% 10.3% 10.9% 13.0% 13.5% 2.7% 3.9% 3.2% 4.0% 8.7 9.3
Class A - Leased Asset 9.3% 9.8% 10.0% 10.4% 11.9% 12.1% 2.9% 3.7% 3.4% 3.9% 8.9 9.4
Class B - Leased Asset 9.5% 10.0% 10.4% 11.1% 12.3% 12.3% 2.3% 3.8% 3.3% 4.2% 9.0 9.6
Class A - Value Added 9.7% 10.3% 10.1% 10.7% 13.8% 14.6% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
Class B - Value Added 10.3% 10.8% 10.8% 11.5% 14.2% 15.0% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
Power Center & "Big Box" 9.6% 9.9% 10.0% 10.5% 11.8% 11.9% 2.9% 3.5% 3.2% 3.7% 9.3 10.3
Class A - Leased Asset 9.4% 9.5% 9.7% 10.1% 11.5% 11.7% 3.3% 3.5% 3.4% 3.7% 9.1 10.1
Class B - Leased Asset 9.8% 10.1% 10.1% 10.6% 11.0% 11.3% 2.8% 3.7% 3.2% 3.7% 9.3 10.3
Class A - Value Added 9.6% 9.9% 10.1% 10.6% 12.0% 12.0% 2.8% 3.3% 3.2% 3.7% 9.3 10.3
Class B - Value Added 9.8% 10.3% 10.1% 10.9% 12.7% 12.7% 2.8% 3.3 3.2% 3.7% 9.3 10.3
Regional Malls 9.3% 9.6% 9.5% 10.0% 13.2% 13.6% 2.7% 3.5% 3.5% 3.8% 8.8 8.9
Class A - Leased Asset 7.9% 8.2% 8.2% 8.6% 11.4% 11.8% 3.0% 3.6% 3.5% 3.8% 9.1 9.6
Class B - Leased Asset 9.3% 9.6% 9.6% 10.0% 13.4% 13.9% 2.5% 3.4% 3.7% 4.0% 8.6 8.6
Class A - Value Added 9.3% 9.8% 9.8% 10.3% 13.4% 13.9% 2.6% 3.6% 3.4% 3.8% 9.2 9.2
Class B - Value Added 10.6% 11.0% 10.6% 11.0% 14.6% 15.0% 2.7% 3.5% 3.3% 3.7% 8.2 8.2
Specialty Retail 9.5% 10.5% 10.8% 11.5% 12.0% 12.6 1.9% 4.0% 3.3% 4.0% 10.0 10.5
Class A - Leased Asset 8.2% 9.0% 8.8% 9.7% 10.7% 11.3% 2.5% 4.0% 3.5% 4.0% 8.7 10.3
Class B - Leased Asset 9.3% 10.3% 10.8% 11.5% 11.5% 12.5% 1.8% 4.0% 3.3% 4.0% 10.5 10.5
Class A - Value Added 10.0% 11.0% 11.3% 12.0% 12.5% 13.0% 1.8% 4.0% 3.3% 4.0% 10.5 10.5
Class B - Value Added 10.8% 11.8% 12.3% 13.0% 13.5% 13.5% 1.8% 4.0% 3.3% 4.0% 10.5 10.5
- ------------------------------------------------------------------------------------------------------------------------------------
RESIDENTIAL
- ------------------------------------------------------------------------------------------------------------------------------------
Apartments 9.0% 9.6% 9.8% 10.4% 11.5% 12.1% 2.7% 4.4% 3.2% 4.0% 8.4 9.3
Class A - Leased Asset 8.6% 9.2% 9.0% 9.6% 11.2% 11.7% 2.9% 3.9% 3.3% 3.8% 8.4 8.9
Class B - Leased Asset 8.9% 9.7% 9.7% 10.3% 11.0% 11.8% 2.5% 4.2% 3.1% 4.0% 9.6 10.2
Class A - Value Added 8.9% 9.4% 9.8% 10.3% 11.6% 12.1% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
Class B - Value Added 9.5% 10.1% 10.6% 11.3% 12.0% 13.0% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
</TABLE>
16 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
Single-Tenant NNN Leased Properties
(Excludes "Bondable" Leases)
Minimum No. Going-In Cap Rate Internal Rate of Return
of Years Low High Low High
Investment Grade Tenant
- --------------------------------------------------------------------------------
4.0 9.0% 9.0% 10.0% 12.0%
----------------------------------------------------------
10.0 8.0 9.0 10.5 11.5
----------------------------------------------------------
5.0 10.5 10.5 13.0 13.0
----------------------------------------------------------
10.0 9.0 10.5 13.0 15.0
----------------------------------------------------------
10.0 8.5 9.0 10.5 12.0
----------------------------------------------------------
10.0 9.5 10.0 10.5 11.5
----------------------------------------------------------
10.0 8.5 11.0 10.8 12.0
----------------------------------------------------------
10.0 9.5 9.5 11.0 11.0
----------------------------------------------------------
20.0 9.0 9.0 N/A N/A
----------------------------------------------------------
10.0 8.0 10.0 N/A N/A
- --------------------------------------------------------------------------------
Responses 10.0 10.0 10.0 8.0 8.0
Average 9.9 9.0% 9.8% 11.2% 12.3%
Non-Investment Grade
Tenant
- --------------------------------------------------------------------------------
4.0 9.5% 9.5% 10.5% 13.0%
----------------------------------------------------------
10.0 9.0 10.0 11.5 12.5
----------------------------------------------------------
5.0 13.0 13.0 15.0 15.0
----------------------------------------------------------
10.0 10.0 12.0 17.0 20.0
----------------------------------------------------------
10.0 9.0 10.0 11.0 13.0
----------------------------------------------------------
10.0 11.0 12.0 13.0 15.0
----------------------------------------------------------
10.0 10.5 10.5 13.0 13.0
----------------------------------------------------------
20.0 11.0 11.0 N/A N/A
----------------------------------------------------------
10.0 10.0 12.5 N/A N/A
----------------------------------------------------------
Responses 9.0 9.0 9.0 7.0 7.0
Average 9.9 10.3% 11.2% 13.0% 14.5%
AUTUMN 1996 17
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES BLENDED INTERNAL EQUITY INTERNAL GROWTH RATES TYPICAL PROJECTION MANAGEMENT RESERVES FOR
GOING-IN TERMINAL RATE OF RETURN RATE OF RETURN INCOME EXPENSES PERIOD (YEARS) FEES* REPLACEMENT*
----------------------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
LUXURY
- ------------------------------------------------------------------------------------------------------------------------------------
8.0% 8.0% 10.0% 10.0% 18.0% 18.0% 25.0% 25.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 5.0% 5.0%
7.0% 7.0% 10.0% 10.0% 15.0% 15.0% 20.0% 20.0% 7.0% 7.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
6.0% 9.5% 10.0% 10.0% 12.0% 15.0% 15.0% 18.0% 3.0% 3.0% 3.0% 3.0% 5.0 5.0 2.0% 4.0% 4.0% 4.0%
8.0% 11.0% 8.5% 12.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
9.5% 9.5% 10.5% 10.5% 15.0% 15.0% 18.0% 18.0% 4.5% 4.5% 4.0% 4.0% 10.0 10.0 3.5% 3.5% 4.0% 4.0%
-- -- 11.0% 13.0% 15.0% 15.0% 18.0% 18.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0 3.0% 3.0% 4.0% 4.0%
6.0% 8.0% 10.0% 12.0% 13.0% 14.0% 20.0% 22.0% 3.0% 4.0% 3.0% 4.0% 5.0 5.0 2.0% 3.0% 4.0% 5.0%
8.0% 12.0% 8.0% 10.0% 15.0% 15.0% 20.0% 20.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0 3.0% 4.0% 4.0% 5.0%
Responses 7 7 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8
Average (%) 7.5% 9.3% 9.8% 10.9% 14.5% 15.3% 19.5% 20.1% 4.1% 4.3% 3.8% 3.9% 6.5 6.9 2.8% 3.3% 4.1% 4.4%
- ------------------------------------------------------------------------------------------------------------------------------------
FIRST CLASS
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 9.0% 11.0% 11.0% 12.0% 12.0% 20.0% 20.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
10.0% 10.0% 10.0% 10.0% -- -- 13.0% 13.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0 3.0% 3.0% 4.0% 5.0%
9.0% 9.0% 11.0% 11.0% 14.0% 14.0% 18.0% 18.0% 6.0% 6.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
9.5% 11.0% 11.0% 11.0% 15.0% 20.0% 18.0% 22.0% 3.0% 3.0% 2.0% 2.0% 5.0 5.0 2.0% 3.0% 4.0% 4.0%
10.0% 12.0% 10.5% 13.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
7.0% 9.0% 10.0% 11.0% 11.5% 12.0% 14.0% 16.0% 4.0% 5.0% 3.0% 4.0% 5.0 5.0 2.5% 2.5% 5.0% 5.0%
9.5% 9.5% 10.5% 10.5% 15.0% 15.0% 18.0% 18.0% 4.5% 4.5% 4.0% 4.0% 10.0 10.0 3.5% 3.5% 4.0% 4.0%
9.0% 9.0% 10.5% 10.5% 21.0% 21.0% 14.0% 14.0% 4.0% 4.0% 3.0% 3.0% 7.0 7.0 3.0% 3.0% 4.0% 4.0%
10.0% 12.0% 11.0% 11.0% -- -- -- -- 3.5% 3.5% 3.5% 3.5% 5.0 10.0 2.0% 3.0% 4.0% 4.0%
10.0% 10.0% 9.0% 9.5% 19.0% 19.0% 15.0% 15.0% 8.0% 8.0% 6.0% 6.0% -- -- 2.5% 2.5% 4.0% 4.0%
10.0% 13.0% 12.0% 13.0% 25.0% 25.0% 20.0% 20.0% 3.5% 4.0% 3.5% 4.0% 5.0 5.0 3.5% 3.5% 4.0% 4.0%
10.5% 10.5% 10.5% 10.5% 13.5% 13.5% -- -- 3.5% 3.5% 3.5% 3.5% 10.0 10.0 3.0% 3.0% 5.0% 5.0%
8.0% 12.0% 8.0% 10.0% 15.0% 15.0% 20.0% 20.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0 3.0% 4.0% 4.0% 5.0%
Responses 13 13 13 13 11 11 11 11 13 13 13 13 12 12 13 13 13 13
Average (%) 9.3% 10.5% 10.4% 10.9% 15.8% 16.5% 17.3% 17.8% 4.2% 4.3% 3.7% 3.8% 6.6 7.3 2.8% 3.1% 4.2% 4.3%
- ------------------------------------------------------------------------------------------------------------------------------------
MID-RATE
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 12.0% 12.0% 15.0% 15.0% 18.0% 18.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
11.0% 11.0% 11.0% 11.0% 13.0% 13.0% 17.0% 17.0% 6.0% 6.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
9.5% 11.0% 11.0% 11.0% 15.0% 18.0% 17.0% 20.0% 3.0% 3.0% 2.0% 2.0% 5.0 5.0 2.0% 3.0% 4.0% 4.0%
10.0% 12.0% 10.5% 13.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
9.5% 9.5% 10.5% 10.5% 15.0% 15.0% 18.0% 18.0% 4.5% 4.5% 4.0% 4.0% 10.0 10.0 3.5% 3.5% 4.0% 4.0%
Responses 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5
Average (%) 10.0% 10.7% 11.0% 11.5% 14.2% 15.2% 18.0% 18.6% 4.2% 4.2% 3.7% 3.7% 6.4 7.0 2.9% 3.1% 4.0% 4.0%
----------------------------------------------------------------------------------------------------------------------
Total
Responses 25 25 26 26 24 24 24 24 26 26 26 26 25 25 26 26 26 26
Weighted
Average (%) 8.9% 10.1% 10.4% 11.1% 14.8% 15.7% 18.3% 18.8% 4.2% 4.3% 3.7% 3.8% 6.5 7.0 2.9% 3.2% 4.1% 4.2%
----------------------------------------------------------------------------------------------------------------------
</TABLE>
*as percent of total revenues
18 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES BLENDED INTERNAL EQUITY INTERNAL GROWTH RATES TYPICAL PROJECTION MANAGEMENT RESERVES FOR
GOING-IN TERMINAL RATE OF RETURN RATE OF RETURN INCOME EXPENSES PERIOD (YEARS) FEES* REPLACEMENT*
----------------------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
MID-RATE HOTEL - LIMITED SERVICE
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 12.0% 12.0% 15.0% 15.0% 15.0% 15.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
12.0% 12.0% 12.0% 12.0% 13.0% 13.0% 17.0% 17.0% 3.0% 3.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
8.0% 10.0% 10.0% 10.0% 12.0% 15.0% 14.0% 16.0% 3.0% 3.0% 2.0% 2.0% 5.0 5.0 3.0% 4.0% 4.0% 5.0%
11.0% 13.0% 11.5% 14.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
11.0% 11.0% 11.8% 11.8% 16.0% 16.0% 19.0% 19.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0 4.0% 4.0% 4.5% 4.5%
10.0% 13.0% 12.0% 13.0% 25.0% 25.0% 20.0% 20.0% 3.5% 4.0% 3.5% 4.0% 5.0 5.0 4.0% 4.0% 5.0% 5.0%
Responses 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6
Average (%) 10.3% 11.5% 11.5% 12.1% 15.7% 16.5% 17.5% 17.8% 3.5% 3.6% 3.7% 3.8% 6.2 6.7 3.3% 3.5% 4.3% 4.4%
- ------------------------------------------------------------------------------------------------------------------------------------
ECONOMY
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 12.0% 12.0% 15.0% 15.0% 15.0% 15.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
13.0% 13.0% 13.0% 13.0% 13.0% 13.0% 17.0% 17.0% 3.0% 3.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
9.0% 11.0% 10.0% 10.0% 12.0% 15.0% 14.0% 16.0% 3.0% 3.0% 3.0% 3.0% 5.0 5.0 4.0% 5.0% 5.0% 5.0%
11.0% 13.0% 11.5% 14.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
11.0% 11.0% 11.8% 11.8% 16.0% 16.0% 19.0% 19.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0 4.0% 4.0% 4.5% 4.5%
Responses 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5
Average (%) 10.8% 11.6% 11.7% 12.2% 13.8% 14.8% 17.0% 17.4% 3.5% 3.5% 3.9% 3.9% 6.4 7.0 3.4% 3.6% 4.3% 4.3%
Total
Responses 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11
Weighted
Average(%) 10.6% 11.6% 11.6% 12.1% 14.7% 15.7% 17.3% 17.6% 3.5% 3.5% 3.8% 3.8% 6.3 6.8 3.4% 3.6% 4.3% 4.4%
</TABLE>
*as percent of total revenues
AUTUMN 1996 19
<PAGE>
OFFICE BUILDING SALE
- --------------------------------------------------------------------------------
I-1 Sale
Building Name: Westlake Corporate Center
Location: Westlakes Drive
Tredyffrin Township
Chester County, PA
Grantor: Beacon Properties Corp.
Grantee: Cali Realty Corp.
Date of Sale: 05/01/97
Physical Description:
Land Area: 52.96 Acres
Net Rentable Area: 444,293 Square Feet
Occupancy at Sale: 97%
Parking: adequate
Quality: Good
Construction: Masonry
Stories: 3
Sale Price: $72,500,000
Terms of Sale: Cash to seller
Economic Indicators:
Net Operating Income: $6,525,000 Estimate
Appraisal Indicators:
Overall Rate (OAR): 9.0%
Sale Price/Square Foot (RSF): $163.18
COMMENTS:
This property consist of four,three story modern
office buildings in the Westlakes Corporate
Center which is considered one of the premier
office developments in suburan Philadelphia. The
improvements were built between 1988 and 1990 and
were in good condition.
Confirmation Data:
By: BROKER
With: Steve Coyle-JC
PHI-4-1685
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
OFFICE BUILDING SALE
- --------------------------------------------------------------------------------
I-2 Sale
Building Name: Airport Business Center
Location: Route 291 and I-95
Essington
Delaware County, PA
Grantor: Henderson/Tinucum L.P.and
International Court I,II,III
Grantee: Cali Airport Realty Associates
Date of Sale: 12/17/96
Recording Data: Deed Book 1545 Page 1636
Physical Description:
Land Area: 32.15 Acres
Net Rentable Area: 371,000 Square Feet
Occupancy at Sale: 90%
Parking: Adequate
Quality: Good
Construction: Masonry
Stories: 3
Sale Price: $43,000,000
Terms of Sale: Cash to seller
Economic Indicators:
Net Operating Income: $4,300,000 Estimate
Appraisal Indicators:
Overall Rate (OAR): 10%
Sale Price/Square Foot (RSF): $115.90
COMMENTS:
This property consist of a group of three and
four story concrete office buildings built in the
1980's. The property is located near the Delaware
Expressway and Philadelphia International
Airport.
Confirmation Data:
By: BROKER
With: Steve Coyle-JC
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
OFFICE BUILDING SALE
- --------------------------------------------------------------------------------
I-2 Continued
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
OFFICE BUILDING SALE
- --------------------------------------------------------------------------------
I-3 Sale
Building Name: Libertyview
Location: 457 Haddonfield Road
Cherry Hill Twp, Camden, NJ
Grantor: UM Real Estate Investment
Company, LLC
Grantee: Brandywine Realty Trust
Date of Sale: 07/01/96
Recording Data: Deed Book 4834 Page 131
Physical Description:
Land Area: 6.32 Acres
Net Rentable Area: 121,737 Square Feet
Year Built: 1990
Occupancy at Sale: 67%
Parking: Adequate
Quality: Good
Construction: Masonry & steel frame
Zoning: Commercial
Stories: 7
Sale Price: $10,716,000
Terms of Sale: (See Comments)
Sale Price/Square Foot (RSF): $88.03
COMMENTS:
Libertyview represents a seven story, Class A
office building situated along Haddonfield Road,
just south of Route 38 in Cherry Hill, New
Jersey. The improvements were constructed by
Rouse & Associates in 1990 as a speculative
office building but the complex never fully
leased. At the time of sale, the facility was 67
percent occupied.
The recorded consideration was $10,600,000,
but the buyer also paid a $116,000 commission
resulting on a total acquisition price of
$10,716,000. The purchaser is the Brandywine REIT which
solicited the sale despite the property not being
exposed to the market.
The purchaser estimates that the total investment,
including tenant improvements and leasing commissions
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
OFFICE BUILDING SALE
- --------------------------------------------------------------------------------
I-3 Continued
required to bring the property to stabilization will be
approximately $12.0 to $12.2 million.
Confirmation Data:
By: BUYER
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
OFFICE BUILDING SALE
- --------------------------------------------------------------------------------
I-4 Sale
Building Name: Four Greentree Centre
Location: Rt. 73 and W. Lincoln Drive
Evesham Township
Burlington County, NJ
Grantor: Linpro Greentree Mid Rise IV
Grantee: Liberty Property L.P.
Date of Sale: 05/01/96
Recording Data: Deed Book 5152 Page 297
Physical Description:
Land Area: 4.34 Acres
Net Rentable Area: 62,069 Square Feet
Year Built: 1985
Occupancy at Sale: 63%
Quality: Good
Construction: Masonry
Stories: 4
Sale Price: $3,400,000
Terms of Sale: Cash to seller
Sale Price/Square Foot (RSF): $54.78
COMMENTS:
The deed was in lieu of forclosure at $3,400,000
including $100,000 of grantee's acquisition costs.
This multi-tenant Class A office building has an
atrium and it was in average condition.
Confirmation Data:
By: BUYER
PHL4-1540
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
OFFICE BUILDING SALE
- --------------------------------------------------------------------------------
Sale
Building Name: 901 Lincoln Building
Location: 901 Lincoln Drive
Evesham Twp, Burlington, NJ
Parcel Number: Block 1.10, Lot 1
Grantor: Penn Mutual Life Insurance Co.
Grantee: Liberty Limited Partnership
Date of Sale: 03/12/96
Recording Data: Deed Book 5121 Page 283
Physical Description:
Land Area: 2.52 Acres
Net Rentable Area: 38,500 Square Feet
Year Built: Circa 1984
Occupancy at Sale: 100%
Parking: Adequate
Quality: Average
Construction: Masonry & steel
Zoning: OC-2
Stories: 3
Sale Price: $3,050,000
Terms of Sale: Cash to seller.
Sale Price/Square Foot (RSF): $79.22
COMMENTS:
The 901 Lincoln Building represents a three
story, Class B + office building located along
Route 73 at Lincoln Drive in the Greentree area of
Evesham Township, Burlington County, New Jersey.
The recorded consideration was $2,950,000 but
the buyer paid additional fees resulting in a
total acquisition cost of $3,050,000.
The complex was constructed in 1984 and was
considered in average condition. At the time of
sale, the facility was 100% occupied.
Confirmation Data:
By: BUYER
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
OFFICE BUILDING SALE
- --------------------------------------------------------------------------------
I-5 Continued
With: Ralph Kittrel
PHI-4-1575
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
OFFICE BUILDING SALE
- --------------------------------------------------------------------------------
I-6 Sale
Location: 5 Eves Drive
Evesham Township, Burlington
County, PA
Parcel Number: Block 2.07 Lot 3 & 4
Grantor: LAKN Marlton Associates,LP
Grantee: Brandy Operating Company
Date of Sale: 04/18/97
Recording Data: Book 5341 Page 150
Physical Description:
Land Area: 4.29 Acres
Gross Building Area: 48,116 Square Feet
Net Rentable Area: 45,889 Square Feet
Year Built: 1986
Occupancy at Sale: 65%
Parking: Adequate
Quality: Good
Construction: Masonry and Steel
Zoning: Office and Industrial
Stories: 3
Sale Price: $3,375,000
Terms of Sale: Cash to Seller
Sale Price/Square Foot (GSF): $70.14
Sale Price/Square Foot (RSF): $73.55
COMMENTS:
This 4.2 acre site is improved with a three story
elevator served office building containing a
gross rentable building area of 45,889 square
feet. The building was 65 percent occupied,
however the improvements were reportedly in good
condition.
Confirmation Data:
By: BUYER
PHI-4-1686
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
OFFICE/FLEX SALE
- --------------------------------------------------------------------------------
I-7 Sale
Building Name: The Fairways at Laurel Oaks
Location: 1030-44 Laurel Oak Road
Voorhees Township, Camden, NJ
Grantor: MDG Laurel Oak, LLC
Grantee: LN Fairways at Laurel Oak Ass.
Date of Sale: 09/01/96
Recording Data: Book 4845 Page 93
Physical Description:
Land Area: 6.00 Acres
Gross Building Area: 55,427 Square Feet
Net Rentable Area: 55,427 Square Feet
Year Built: 1987
Occupancy at Sale: 95%
Parking: Adequate
Quality: Good
Construction: Masonry Steel
Zoning: Industrial
Stories, 1
Sale Price: $3,320,000
Cash to Seller
Sale Price/Square Foot (GSF): $59.90
Sale Price/Square Foot (RSF): $59.90
COMMENTS:
This is a complex of four, one story buildings
originally constructed between 1986 and 1987. The
purchaser assumed existing financing. The mortgage
balance and terms were not available. The bulding
featured 85% finished offices.
Confirmation Data:
By: APPRAISER
PHI-4-1579
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
OFFICE/FLEX SALE
- --------------------------------------------------------------------------------
I-8 Sale
Location: 1025 Briggs Road
Cambridge Crossing
Mt.Laurel Twp., Burlington
County, NJ
Grantor: McGarvey Development
Cambridge Management Assoc.
Grantee: Liberty Property Trust
Date of Sale: 05/23/97
Physical Description:
Land Area: 6.21 Acres
Gross Building Area: 59,570 Square Feet
Net Rentable Area: 59,570 Square Feet
Year Built: 1987
Occupancy at Sale: 100%
Parking: Adequate
Quality: Excellent
Construction: Brick & Steel Frame
Zoning: I -- Industry
Stories: 1
Sale Price: $4,000,000
Terms of Sale: Cash and market oriented
financing.
Economic Indicators:
Net Operating Income: $440,000 Seller's Proforma
Appraisal Indicators:
Overall Rate (OAR): 11%
Sale Price/Square Foot (GSF): $67.15
Sale Price/Square Foot (RSF): $67.15
COMMENTS:
1025 Briggs Road is a 59,570 square foot office/flex
facility situated on a 6.2 acre site within the Cambridge
Crossing development at Route 38 & I-295 in Mt. Laurel, New
Jersey. The improvements were constructed in 1987 of steel
frame with brick veneer over concrete block walls. The
facility features 100%. According to a representative for
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
OFFICE/FLEX SALE
- --------------------------------------------------------------------------------
1-8 Continued
the grantee, the building was generating approximately
$440,000 in net operating income, resulting in an 11
percent overall rate.
Confirmation Data:
By: BROKER
PHI-4-793
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
OFFICE/FLEX SALE
- --------------------------------------------------------------------------------
I-9 Sale
Location: 1000 Briggs Road
Cambridge Crossing
Mt. Laurel Twp., Burlington
County, NJ
Grantor: 1000 Briggs Partnership
Grantee: Liberty Property Trust
Date of Sale: 05/23/97
Physical Description:
Land Area: 217,800 Square Feet
5.00 Acres
Gross Building Area: 40,500 Square Feet
Net Rentable Area: 40,500 Square Feet
Year Built: 1990
Occupancy at Sale: 100%
Parking: Adequate
Quality: Excellent
Construction: Brick & Steel Frame
Zoning: I - Industry
Stories: 1
Sale Price: $2,800,000
Terms of Sale: Cash to seller.
Economic Indicators:
Net Operating Income: $308,000 Seller's Proforma
Appraisal Indicators:
Overall Rate (OAR): 11.0%
Sale Price/Square Foot (GSF): $69.14
Sale Price/Square Foot (RSF): $69.14
COMMENTS:
1000 Briggs Road is a 40,500 square foot ofice/flex
facility situated on a 5.0 acre site within the Cambridge
Crossing development at Route 38 & I-295 in Mt. Laurel
Township, Burlington County, New Jersey. The improvements
were constructed in 1990 of steel frame with brick veneer
over concrete block exterior walls. The building is
finished as 100% office. According to a representative for
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
OFFICE/FLEX SALE
- --------------------------------------------------------------------------------
I-9 Continued
the grantee, the property was generating approximately
$308,000 in net operating income, indicating a 11 percent
overall rate.
Confirmation Data:
BY: BUYER
PHI-4-794
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
OFFICE BUILDING SALE
- --------------------------------------------------------------------------------
1-10 Sale
Building Name: Greentree Commons
Location: 9001 Lincoln Drive West
Evesham Township
Burlington County, PA
Parcel Number: Block 3.34, Lot 2
Grantor: Advent Realty Limited
Partnership
Grantee: Brandywine Operating
Partnership
Date of Sale: 05/19/97
Recording Data: Book 5363, Page 159
Physical Description:
Land Area: 5.04 Acres
Net Rentable Area: 43,719 Square Feet
Year Built: 1982
Occupancy at Sale: 89%
Parking: Adequate
Quality: Average
Construction: Stone, brick and wood siding
Zoning: MD-3 Planned Village Dev.
Stories: 1
Sale Price: $3,016,300
Terms of Sale: Cash to seller
Economic Indicators:
Effective Gross Income: $585,993 Actual
Less: Operating Expenses: $240,363 Actual
Net Operating Income: $345,630 Actual
Appraisal Indicators:
Overall Rate (OAR): 11.46%
Sale Price/Square Foot (RSF): $68.99
COMMENTS:
Greentree Commons represents a four building, single story,
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
OFFICE BUILDING SALE
- --------------------------------------------------------------------------------
I-10 Continued
multi-tenated office complex constructed in 1980. The
property contains a total rentable area of 43,719
square feet on 5.04 acres at the corner of Lincoln
Drive West and Route 73 in Evesham Township.
Confirmation Data:
By: BUYER
PHL4-1669
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
COMMERCIAL LAND SALE
- --------------------------------------------------------------------------------
L-1 Sale
Location: S/E/C Nixon Drive and 1-295
Off Ramp
Mt. Laurel Twp., Burlington, NJ
Parcel Number: Block 1200, Lot 1.01 & Lot 1.02
Grantor: Bell Atlantic Properties, Inc.
Grantee: East Gate Center, III, L.P.
(Berwind and Vesterra Corps.)
Date of Sale: 07/29/95
Size: 16.80 Acres
Maximum FAR: 129,OOOSF
Shape: Irregular
Frontage: Nixon Drive and 1-295 Off Ramp
Utilities: Sewer, Water, Natural Gas,
Electricity
Topography: Level
Zoning: MCD-Major Commercial District
Price: $4,275,841
Terms of Sale: Conventional terms.
Price per Acre: $254,514.35
Price/FAR: $ 33.15/SF
COMMENTS:
Site to be developed with Phase III of East Gate Square, a
power center located opposite the Moorestown Mall. Dick's
Sporting Goods has constructed a 60,000 s.f. freestanding
building on Lot 1.01 on a land lease with approvals for an
additional 10,000 s.f. of building area. Lot 1.02 will be
improved with a 54,000 s.f. retail building to be occupied
by Best Buys (45,000 s.f.), plus 9,000 s.f. of inline
space. Lot 1.02 also has approvals for a pad site capable
of supporting a 5,000 s.f. building. It is projected
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
COMMERCIAL LAND SALE
- --------------------------------------------------------------------------------
L-1 Continued
that the Best Buys store will be completed by July, 1997.
Confirmation Data:
By: BUYER
PHI-1-1292
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
COMMERCIAL LAND SALE
- --------------------------------------------------------------------------------
L-2 Sale
Location: N/E/C Nixon Drive and Mall
Link Road
Mt. Laurel Twp., Burlington, NJ
Parcel Number: Block 3000, Lot 4; Block 1200.02,
Lot 2
Grantor: Bell Atlantic Properties
Grantee: East Gate Center IV, L.P.
(Berwind and Vesterra Corps.)
Date of Sale: 07/31/96
Size: 12.06 Acres
Maximum FAR: 100,086SF
Shape: Irregular
Frontage: Nixon Drive and Mall Link Road
Utilities: Sewer, Water, Natural Gas,
Electricity
Topography: Level
Zoning: MCD and SRC
Price: $3,734,700
Terms of Sale: Conventional terms.
Price per Acre: $309,676.38
Price/FAR: $ 37.31 /SF
COMMENTS:
Site opposite the Moorestown Mall to be developed
with Phase IV of East Gate Square power center.
The sale price was the result of an option
agreement dated August 1, 1994 between the
seller and the Berwind Group. Phase IV will
contain 100,086 s.f. of retail area to include
four inline stores and two pad sites. Prelease
tenants include Barnes & Noble (30,000 s.f.) and
PetsMart (28,186 s.f.). Completion of the
improvements is scheduled for April 1, 1997. The
site lies on the border of Moorestown and Mt.
Laurel Townships.
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
COMMERCIAL LAND SALE
- --------------------------------------------------------------------------------
L-2 Continued
Confirmation Data:
By: BUYER
PHL1-1291
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
COMMERCIAL LAND SALE
- --------------------------------------------------------------------------------
L-3 Sale
Location: 2138 Route 38
Cherry Hill Twp., Camden, NJ
Parcel Number: Block 285.25, Lot 4 and Lot 8
Grantor: Lockhead Martin Corporation
Grantee: Cherry Hill Associates, L.P.
(Richard Rubin Co.)
Date of Sale: 11/04/96
Size: 77.77 Acres
Maximum FAR: 340,OOOSF
Shape: Irregular
Frontage: Along Route 38
Utilities: Sewer, Water, Natural Gas,
Electricity
Topography: Slopes upward from street.
Zoning: I-R, Restricted Commercial
Price: $12,900,000
Terms of Sale: Conventional terms.
Recording Data: Book 4857 Page 71
Price per Acre: $165,873.74
Price/FAR: $ 37.94/SF
COMMENTS:
Property was placed under contract in December,
1992 for a contract price is $11,000,000.
Additionally, the developer needed to acquire a
right of way parcel for $150,000. Finally, the
developer is budgeting $1,750,000 for demolition
of existing improvements for a total
consideration of $12,900,000. Developer received
approvals in June, 1996 and with closing in
November, 1996 with opening planned for
September, 1997. The property is pre-leased to
Target, Kohls, Babys R Us, PetsMart, Home
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
COMMERCIAL LAND SALE
- --------------------------------------------------------------------------------
L-3 Continued
Place and TGI Friday on a pad. Rental rates range
from $5.56/s.f. for Target on a pad lease, to
$18.11 /s.f. for PetsMart, $20.00/s.f. for Home Place
and $160,000 per year for the TGI Friday pad lease. The
site contains approximately 78 acres in two parcels.
The shopping center will be located on the main 56
acre site. The adjacent 22 acre site will be used
primarily as a water detention basin and open space.
After development of the center, the rear portion to
the south will be donated to Cherry Hill Township as
open park and ball field. The subject site has been
rezoned from I-R, Industrial Restricted to B-4,
Regional Business.
Confirmation Data:
By: BUYER
PHL1-1 290
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
QUALIFICATIONS OF JOHN J. LYNCH
- --------------------------------------------------------------------------------
Professional Affiliations
Member, Appraisal Institute (MAI Designation #10585) New Jersey Certified
General Appraiser (Certificate #RG 01569) Ohio Certified General Appraiser
(Certificate #414115) Pennsylvania Certified General Appraiser
(Certificate #GA-000485-L) Pennsylvania Real Estate Broker (License
#ABO42902A) Affiliate, Tri-State Commercial & Industrial Association of
Realtors
Real Estate Experience
Associate Director of Cushman & Wakefield of Pennsylvania, Inc. and
Assistant Manager of its Valuation Advisory Services Department in
Philadelphia. Mr. Lynch remains active with the Hospitality Group and
continues to advise clients on complex income producing properties.
Associate Director, Cushman & Wakefield of Pennsylvania, Inc. and member
of the firms Hospitality Group, which specializes in the valuation and
investment counseling on hotel properties, through June, 1993.
Senior Appraiser, Cushman & Wakefield Appraisal Division, specializing in
a wide variety of commercial and industrial real estate appraisal and
investment counseling assignments throughout the nation from January, 1980
to March, 1987. Cushman & Wakefield is an international full seminar real
estate organization and a Rockefeller Group Company.
Staff Appraiser, Walter A. McClatchy Co., Inc. of Philadelphia,
Pennsylvania, specializing in commercial and industrial real estate
appraisal and investment counseling throughout a wide geographic area from
March, 1977 to December, 1979.
Sales Associate, William Brucker Co. -Real Estate of Philadelphia,
Pennsylvania, specializing in the sale and leasing of residential,
commercial and industrial real estate from February, 1976 to March, 1977.
Formal Education
Pennsylvania State University, University Park, Pennsylvania
Bachelor of Science -1975
Appraisal Institute, Chicago, Illinois
Introduction to Appraising Real Property - 1977
Basic Appraisal Principles, Methods and Techniques - 1978
Capitalization Theory and Techniques - 1978
Case Studies in Real Estate Valuation - 1981
Valuation Analysis and Report Writing - 1982
Investment Analysis - 1983 Standards of Professional Practice - 1989
Various Lectures and Seminars for Continuing Education Credits
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
STATE OF NEW JERSEY
DEPARTMENT OF LAW AND PUBLIC SAFETY
DIVISION OF CONSUMER AFFAIRS
THIS IS TO CERTIFY THAT
BOARD OF REAL ESTATE APPRAISERS
HAS CERTIFIED
JOHN J LYNCH
29 WOODLAKE DRIVE
MARLTON NJ 08053-3603
FOR PRACTICE IN NEW JERSEY AS A(N) GENERAL APPRAISER
01/01/96 12/31/97 RG 01269
EFFECTIVE DATE EXPIRATION DATE LICENSE NO.
/s/ John L. Lynch /s/ [ILLEGIBLE]
----------------------------- -----------------------------
SIGNATURE OF REGISTRANT DIRECTOR
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
QUALIFICATIONS OF JOSEPH G. VIZZA
- --------------------------------------------------------------------------------
Professional Affiliations
Candidate, Appraisal Institute (MAI Candidate #M93-3017)
Delaware Certified General Appraiser (Certificate #X10000284
New Jersey Certified General Appraiser (Certificate #RG01426
Pennsylvania Certified General Appraiser (Certificate #GA-001242-L)
Pennsylvania Real Estate Salesperson (License #RS-198856-L)
Real Estate Experience
Staff Appraiser, Cushman & Wakefield Valuation Advisory Services,
specializing in commercial and industrial real estate appraisal and
investment counseling. Cushman & Wakefield is an international full
service real estate organization and a Rockefeller Group Company.
Fee Appraiser, Louis A. Iatarola Realty Appraisal Group of Philadelphia,
Pennsylvania, a full service appraisal and consulting firm, specializing
in commercial and industrial appraisal assignments from May, 1990 to
November, 1996.
Formal Education
Temple University, Philadelphia, Pennsylvania
May, 1992, Bachelor of Science, Real Estate
Appraisal Institute, Chicago, Illinois
Real Estate Appraisal Principals -Course 1A-1
Advanced Capitalization -Course 550
Basic Capitalization -Course 310
Basic Valuation Procedures -Course 1A-2
Restricted Appraisal Report Writing Seminar
Standards of Professional Practice - Part-A
Standards of Professional Practice - Part-B
Subdivision Analysis Seminar
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
STATE OF NEW JERSEY
DEPARTMENT OF-LAW AND PUBLIC SAFETY
DIVISION OF CONSUMER AFFAIRS
THIS IS TO CERTIFY THAT
BOARD OF REAL ESTATE APPRAISERS
HAS CERTIFIED
Joseph G Vizza
7225 Erdrick St
Phila., PA 19135
FOR PRACTICE IN NEW JERSEY AS A(N) GENERAL APPRAISER
03/03/97 12/31/97 RG 01426
EFFECTIVE DATE EXPIRATION DATE LICENSE NO.
/s/ Joseph G Vizza /s/ [ILLEGIBLE]
----------------------------- -----------------------------
SIGNATURE OF REGISTRANT DIRECTOR
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
QUALIFICATIONS OF JOHN B. RUSH
Professional Affiliations
Member, Appraisal Institute (MAI Designation #7261)
Delaware Certified General Appraiser (Certificate #X1-0000051)
Maryland Certified General Appraiser (Certificate #10041)
New Jersey Certified General Appraiser (Certificate #RG 00808)
Pennsylvania Certified General Appraiser (Certificate #GA-000331-L)
Pennsylvania Real Estate Broker (License #ABO43144A)
Affiliate, Tri-State Commercial & Industrial Association of Realtors
Associate, Urban Land Institute (Associate #164089)
Real Estate Experience
Director of Cushman & Wakefield of Pennsylvania, Inc. and Manager of its
Valuation Advisory Services Department in Philadelphia. Cushman &
Wakefield is a international full service real estate organization and a
Rockefeller Group Company.
Senior Appraiser, Cushman & Wakefield Appraisal Division, specializing in
commercial and industrial real estate appraisal and investment counseling
throughout the nation from January, 1980 to September, 1985.
Staff Appraiser, Boyle/Helbig Realty, Inc. of Philadelphia, Pennsylvania,
specializing in commercial and industrial real estate appraisal and
investment counseling throughout a wide geographic area from December,
1977 to December, 1979.
Associate, Michael Singer Real Estate Company of Philadelphia,
Pennsylvania, specializing in the investment, leasing and management of
local commercial and residential real estate from June, 1975 to December,
1977.
Formal Education
Drexel University, Philadelphia, Pennsylvania
Master of Business Administration -1982
Saint Joseph's College, Philadelphia, Pennsylvania
Bachelor of Arts -1975
Appraisal Institute, Chicago, Illinois
Required Courses of Study Leading to the MAI Designation
Various Lectures and Seminars for Continuing Education Credits
Board of Realtors, Philadelphia, Pennsylvania
Required Courses of Study for State Licensure
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Qualifications of John B. Rush
- --------------------------------------------------------------------------------
Qualified Expert Witness
United States Bankruptcy Court,
Eastern District of Pennsylvania
United States Bankruptcy Court,
Middle District of Pennsylvania
Court of Common Pleas
Dauphin County, Pennsylvania
Board of Assessment Appeals
Bucks County, Pennsylvania
Board of Revision of Taxes
City of Philadelphia
Board of Tax Review
City of Philadelphia
Board of Assessment Appeals
Dauphin County, Pennsylvania
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
STATE OF NEW JERSEY
DEPARTMENT OF LAW AND PUBLIC SAFETY
DIVISION OF CONSUMER AFFAIRS
THIS IS TO CERTIFY THAT
BOARD OF REAL ESTATE APPRAISERS
HAS CERTIFIED
JOHN B RUSH
325 POWDER HORN RD
FORT WASHINGTON PA 19034-1812
01/01/96 12/31/97 RG 00808
EFFECTIVE DATE EXPIRATION DATE LICENSE NO.
/s/ JOHN B RUSH /s/ [ILLEGIBLE]
----------------------------- -----------------------------
SIGNATURE OF REGISTRANT DIRECTOR
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET INDUSTRIAL MARKET - WAREHOUSE DISTRIBUTION
- ------------------------------------------------------------------------------------------------------------------------------------
9.2% 9.2% 9.5% 9.5% 10.0% 10.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.5% 8.5% 9.3% 9.3% 11.0% 11.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
8.5% 10.0% 9.5% 10.0% 11.0% 12.0% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
9.0% 9.0% 9.5% 9.5% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
8.0% 8.0% 8.5% 8.5% 10.5% 10.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 10.0% 9.0% 10.5% 11.0% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
9.0% 9.0% 10.0% 10.0% 11.0% 11.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
9.0% 9.0% 9.5% 9.5% 10.5% 10.5% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 10 10 10 10 10 10 10 10 10 10 10 10
Average (%) 8.8% 9.2% 9.4% 9.8% 10.9% 11.0% 2.9% 4.0% 3.3% 3.8% 9.8 10.1
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
9.2% 9.2% 9.5% 9.5% 10.0% 10.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.8% 8.8% 9.5% 9.5% 11.3% 11.3% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.5% 11.5% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
10.0% 10.0% 11.0% 11.0% 12.0% 12.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.8% 9.8% 10.3% 10.3% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 7 7 7 7 7 7 7 7 7 7 7 7
Average (%) 9.3% 9.5% 10.0% 10.2% 11.2% 11.2% 2.8% 4.3% 3.2% 3.9% 9.7 10.1
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 12.0% 12.0% 13.0% 13.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.8% 9.8% 10.3% 10.3% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 9.7% 9.9% 10.4% 10.8% 11.9% 11.9% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
12.0% 12.0% 13.0% 13.0% 14.0% 14.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 10.0% 10.5% 10.5% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.5% 10.5% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 10.1% 10.4% 10.9% 11.3% 12.4% 12.4% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
--------------------------------------------------------------------------------------------------------
Total Responses 25 25 25 25 25 25 25 25 25 25 25 25
Weighted Average (%) 9.5% 9.7% 10.2% 10.5% 11.6% 11.6% 2.6% 4.5% 3.2% 4.0% 9.6 10.2
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
10 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET INDUSTRIAL MARKET - BUSINESS PARKS, OTHER INDUSTRIAL & MANUFACTURING
- ------------------------------------------------------------------------------------------------------------------------------------
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 10.0 10.0
9.0% 9.0% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 3 3 4 4 4 4 4 4 4 4
Average (%) 8.9% 9.4% 9.7% 10.7% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.8 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.5% 10.5% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 10.0 10.0
10.0% 10.0% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 3 3 4 4 4 4 4 4 4 4
Average (%) 9.3% 9.8% 9.8% 10.8% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.8 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.5% 10.5% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 5 5 4 4 5 5 5 5 5 5 5 5
Average (%) 9.4% 10.0% 9.9% 10.9% 12.4% 13.2% 3.4% 4.0% 3.2% 3.8% 8.2 9.4
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.5% 10.5% 11.0% 11.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.5% 10.5% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 5 5 4 4 5 5 5 5 5 5 5 5
Average (%) 9.6% 10.2% 10.0% 11.0% 12.4% 13.2% 3.4% 4.0% 3.2% 3.8% 8.2 9.4
--------------------------------------------------------------------------------------------------------
Total Responses 18 18 14 14 18 18 18 18 18 18 18 18
Weighted Average(%) 9.3% 9.8% 9.8% 10.8% 12.0% 12.4% 3.3% 4.0% 3.2% 3.9% 8.5 9.8
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
AUTUMN 1996 11
This CD ROM contains an electronic version of appraisals for the Mortgaged
Properties in PDF format and forms part of the paper version of the Prospectus
Supplement. The information contained in this CD ROM does not appear elsewhere
in paper form in this Prospectus Supplement and must be considered as part of,
and together with, the information contained elsewhere in this Prospectus
Supplement and the Prospectus. The information contained in this CD ROM has
been filed by the Seller with the Securities and Exchange Commission as part
of a Current Report on Form 8-K, which is incorporated by reference in this
Prospectus Supplement, and is also available through the public reference
branch of the Securities and Exchange Commission. Defined terms used in this CD
ROM but not otherwise defined therein shall have the respective meanings
assigned to them in the paper portion of the Prospectus Supplement and the
Prospectus. All of the information contained in this CD ROM is subject to the
same limitations and qualifications contained in this Prospectus Supplement and
the Prospectus. Prospective investors are strongly urged to read the paper
portion of this Prospectus Supplement and the Prospectus in its entirety prior
to accessing this CD ROM. If this CD ROM was not received in a sealed package,
there can be no assurances that it remains in its original format and should
not be relied upon for any purpose. Prospective investors may contact J.
Theodore Borter of Goldman, Sachs Co. at (212)902-3857 to receive an original
copy of the CD ROM.
<PAGE>
==================================================
COMPLETE APPRAISAL OF
REAL PROPERTY
Golden East Crossing
Northwest corner of
Benvenue Road and U.S. Highway 301 Bypass
City of Rocky Mount, Nash County, North Carolina
==================================================
IN A SELF-CONTAINED REPORT
As of June 1, 1996
Cadillac Fairview U.S. Inc.
20 Queen Street West, 4th Floor
Toronto, Ontario M5H 3R4
Cushman & Wakefield, Inc.
Valuation Advisory Services
51 West 52nd Street, 9th Floor
New York, New York 10019-6178
<PAGE>
Cushman & Wakefield, Inc.
51 West 52nd Street
New York, NY 10019-6178 CUSHMAN &
(212) 841-7500 WAKEFIELD(R)
Improving your place
in the world.
May 29, 1996
Mr. John MacDonald
Senior Vice President, Finance & Treasurer
Cadillac Fairview U.S., Inc.
20 Queen Street West, 4th Floor
Toronto, Ontario M5H 354
Re: Complete Appraisal of Real Property
Golden East Crossing
Northwest corner of
Benvenue Road and U.S. Highway 301 Bypass
City of Rocky Mount, Nash County, North Carolina
Dear Mr. Macdonald:
In fulfillment of our agreement as outlined in the Letter of Engagement, Cushman
& Wakefield, Inc. is pleased to transmit our Self-Contained appraisal report
estimating the market value of the leased fee estate in the above referenced
property. In addition, we have estimated the fair market value of the fee simple
interest in three vacant outparcels. The subject improvements consist of a
572,914+/- square foot enclosed regional mall which includes one separately
owned anchor store of 112,957 square feet. Therefore, the owned area of the
center that is the subject of this appraisal represents 459,957 square feet.
This appraisal also includes the value of 3 outparcel lots that collectively
total 4.50 acres.
The value opinion reported herein are qualified by certain assumptions, limiting
conditions, certifications, and definitions, which are set forth in the report.
This report has been prepared for Cadillac Fairview U.S., Inc. and is intended
only for its specified use. It may not be distributed to or relied upon by other
persons or entities without written permission of Cushman & Wakefield, Inc.
The property was inspected by and the report was prepared by Douglas C.
Holowink. Richard W. Latella, MAI has reviewed and approved the report, but did
not inspect the property.
Based on our complete appraisal as defined by the Uniform Standards of
Professional Appraisal Practice, we have formed an opinion that the market value
of the leased fee estate in the referenced property, including the fee simple
estate in the three outparcel lots, subject to the assumptions, limiting
conditions, certifications, and definitions, as of June 1, 1996, was:
THIRTY NINE MILLION DOLLARS
$39,000,000
<PAGE>
Cushman & Wakefield, Inc.
Mr. Jonn Macdonald
Cadillac Fairview U.S., Inc. Page 2 May 29, 1996
This report has been prepared in compliance with the Uniform Standards of
Professional Appraisal Practice, including the Competency Provision.
This letter is invalid as an opinion of value if detached from the report, which
contains the text, exhibits, and an Addenda.
Respectfutly submitted,
Cushman & Wakefield, Inc.
/s/ Douglas C. Holowink
- -----------------------
Douglas C. Holowink
Director
Valuation Advisory Services
State of North Carolina
Temporary Practice Permit No. 594
/s/ Richard W. Latella
- -----------------------
Richard W. Latella, MAI
Senior Director
Retail Valuation Group
DCH:RWL:bajsjr
<PAGE>
SUMMARY OF SALIENT FACTS AND CONCLUSIONS
================================================================================
Property Name: Golden East Crossing
Property Type: Enclosed regional mall and three vacant
outparcels.
Location:
Northwest corner of Benvenue Road and U.S.
Highway 301 Bypass, City of Rocky Mount, Nash
County, North Carolina
Interest Appraised
Improved Mall Portion: Lease Fee Estate
Vacant Outparcels: Fee Simple Estate
Date of Value: June 1, 1996
Date of Inspection: April 9, 1996
Ownership: CFSCP, NC, Inc. (98%) and CF Properties Shannon,
Inc. (2%)
Land Area
Owned
Main Mall Parcel: 52.85+/- Acres
Owned Outparcels
301 Bypass Front: .90+/- Acres
301 Bypass Front: .94+/- Acres
Corner Jeffries/Benvenue: 2.66+/- Acres
Total Owned: 57.35+/- Acres
Un-owned Anchor 8.83+/- Acres
All Total: 66.18+/- Acres
Zoning: B3, Business District
Highest and Best Use
As If Vacant: Retail development as currently built with four
anchor tenants, a reduction from the current
level of mall shop spaces and development of
outparcels.
As Improved: Continued retail use as a regional mall with
outparcels.
Improvements: One-level enclosed regional mall containing
572,914+/- square feet of gross leasable area.
The Mall is anchored by Belk, JC Penney, Brody's
and Sears. Belk owns their store so that owned
GLA is 459,957 square feet.
<PAGE>
Summary Of Salient Facts And Conclusions
================================================================================
Gross Leasable Area
Belk*: 112,957+/- SF
JC Penney: 81,729+/- SF
Brody's: 69,960+/- SF
Sears: 89,564+/- SF
Mall Shops: 218,704+/- SF
----------- -------------
Total GLA: 572,914+/- SF
Total Owned GLA: 459,957+/- SF
* Belk is separately owned.
Year Built
Phase 1: August 1986
Phase II: October 1987 (Sears and contiguous shop space).
Summary of Income and Expense Information:
================================================================================
0perating Budget
================================================================================
CY 1997 CY 1998 CY 1999
- --------------------------------------------------------------------------------
Minimum Rent $ 3,768,374 $ 4,155,272 $ 4,381,353
- --------------------------------------------------------------------------------
Recoveries $ 1,698,068 $ 1,782,580 $ 1,795,392
- --------------------------------------------------------------------------------
Overage Rent $ 324,202 $ 312,666 $ 302,874
- --------------------------------------------------------------------------------
Vacancy/Credit Loss ($ 144,766) ($ 156,263) ($ 161,990)
- --------------------------------------------------------------------------------
Other Income $ 107,100 109,242 $ 111,427
- --------------------------------------------------------------------------------
Total Income $ 5,752,978 $ 6,203,497 $ 6,429,056
Operating Expenses $ 1,770,067 $ 1,838,983 $ 1,905,143
Net Operating Income $ 3,982,911 $ 4,364,514 $ 4,523,913
================================================================================
Income Approach Assumptions
Current Occupancy: 84.7%
Stabilized Occupancy: 89.8% Average
Sales Growth: 1996 - 0%
1997 - 2%
Thereafter - 3%
Rent Growth: 1996,1997 - 0%
1998 - 2%
Thereafter - 3%
Expense Growth: 3.5% - 1996-2005
Tax Growth: 3.5% - 1996-2005
Tenant Alterations
New: $10.OO/SF
Renewal: $ 2.00/SF
<PAGE>
Summary Of Salient Facts And Conclusions
================================================================================
Renewal Probability: 70%
Going-In Cap Rate: 9.25 - 9.75%
Terminal Cap Rate: 9.75 - 10.25%
Discount Rate: 11.5 - 12.5%
Value Indicators
Cost Approach N/A
Sales Comparison Approach
Owned Mall Portion: $37,000,000 to $39,000,000
Vacant Outparcels: $1,045,000
Income Approach
Discounted Cash Flow: $38,300,000
Direct Capitalization: $38,000,000
Value Conclusion: $39,000,000
Value Per Square Foot: $82.62 (GLA - 459,957 SF owned GLA
excluding outparcel values).
Implicit Capitalization Rate (FY 1997): 9.50% (NOI - $3,609,081)
Exposure Time Implicit
In Market Value Estimate: 12+/- months
Special Assumptions Affecting Valuation:
1. Throughout this analysis we have relied on information provided by
ownership and management which we assume to be accurate. In this
regard, we have reviewed the anchor leases and a sampling of other
recent leases, a current rent roll, operating statements, and a 1996
budget for income and expenses.
2. Our cash flow analysis and valuation has recognized that all signed
leases and any pending leases with a high probability of being
consummated are implemented according to the terms presented to us by
management. Such leases are identified within the body of this report.
3. The forecasts of income, expenses, and absorption of vacant space are
not predictions of the future. Rather, they are our best estimates of
current market thinking on future income, expenses, and demand. We
make no warranty or representation that these forecasts will
materialize.
4. The Americans With Disabilities Act (ADA) was enacted in 1990,
requiring equal access to public places for disabled persons.
Virtually all landlords of commercial facilities and tenants engaged
in business that serve the public have compliance obligations under
the law. While we are not experts in this field, our understanding of
the law is that it is broad-based and that most
<PAGE>
Summary Of Salient Facts And Conclusions
================================================================================
existing commercial facilities are not in full compliance because of
construction prior to enactment. We recommend a compliance study be
performed by qualified personnel to determine the extent of potential
non-compliance at the subject and any costs to cure.
5. Please refer to the complete list of assumptions and limiting
conditions included at the end of this report.
<PAGE>
PHOTOGRAPHS OF THE SUBJECT PROPERTY
================================================================================
[GRAPHIC OMITTED]
[PHOTO]
An exterior view of front of mall taken from Benvenue Road showing outparcels on
left and Brody's and Belk stores on right.
[GRAPHIC OMITTED]
[PHOTO]
An exterior view of rear of mall showing cinema section.
<PAGE>
Photographs of the Subject Property
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[GRAPHIC OMITTED]
[PHOTO]
Westerly view along U.S. Route 301 Bypass Road with subject on right.
[GRAPHIC OMITTED]
[PHOTO]
Northerly view along Benvenue Road with subject on left.
<PAGE>
Photographs of the Subject Property
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[GRAPHIC OMITTED]
[PHOTO]
A view of rear entrance to the mall and cinema section.
[GRAPHIC OMITTED]
[PHOTO]
An exterior view of JC Penney.
<PAGE>
Photographs of the Subject Property
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[GRAPHIC OMITTED]
[PHOTO]
A view of an interior atrium.
[GRAPHIC OMITTED]
[PHOTO]
A view of the common area in the food court area.
<PAGE>
Photographs of the Subject Property
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[GRAPHIC OMITTED]
[PHOTO]
View of available outparcel along U.S. Route 301 Bypass Road.
[GRAPHIC OMITTED]
[PHOTO]
Easterly view along U.S. Route 301 Bypass Road with subject outparcels on left.
<PAGE>
Photographs of the Subject Property
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[GRAPHIC OMITTED]
[PHOTO]
An exterior view of Sears.
[GRAPHIC OMITTED]
[PHOTO]
An exterior view of Belk store.
<PAGE>
TABLE OF CONTENTS
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Page
INTRODUCTION.................................................................1
Identification of Property..............................................1
Property Ownership and Recent History ..................................1
Purpose and Intended Use of the Appraisal ..............................1
Extent of the Appraisal Process ........................................1
Date of Value and Property Inspection ..................................2
Property Rights Appraised ..............................................2
Definitions of Value, Interest Appraised, and Other Pertinent Terms ....2
Legal Description ......................................................3
REGIONAL ANALYSIS ...........................................................4
RETAIL MARKET ANALYSIS .....................................................20
PROPERTY DESCRIPTION .......................................................46
Site Description ......................................................46
Improvements Description ..............................................47
REAL PROPERTY TAXES AND ASSESSMENTS ........................................51
ZONING .....................................................................52
HIGHEST AND BEST USE .......................................................53
A. Highest and Best Use of Site As Though Vacant ......................53
B. Highest and Best Use of Property As Improved .......................55
VALUATION PROCESS ..........................................................58
SALES COMPARISON APPROACH ..................................................59
INCOME APPROACH ............................................................75
RECONCILIATION AND FINAL VALUE ESTIMATE ...................................104
ASSUMPTIONS AND LIMITING CONDITIONS .......................................107
CERTIFICATION OF APPRAISAL ................................................110
ADDENDA ...................................................................1ll
<PAGE>
INTRODUCTION
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Identification of Property
The subject of this appraisal is Golden East Crossing, a one level regional
mall located in the City of Rocky Mount, North Carolina. The subject consists of
218,704 square feet of mall shop space, with the mall also featuring four anchor
stores, one of which is separately owned. The anchor stores consist of Belk
(separately owned), JC Penney, Sears and Brody's. The gross leaseable area of
the mall, inclusive of anchor space, is 572,914+/- square feet. The owned
portion is 459,957+/- square feet. The total site area is 66.18+/- acres, of
which 57.35+/- acres is owned and a part of the subject real estate. The
remaining 8.83+/- acres is separately owned by Belk.
The property is situated at the northwest corner of Benvenue Road and U.S.
Highway 301 Bypass in the City of Rocky Mount, Nash County, North Carolina.
Property Ownership and Recent History
It is our understanding that the subject property is owned by a partnership
of CFSCP, NC, Inc. (98 percent) and CF Properties Shannon, Inc. (2 percent).
Purpose and Intended Use of the Appraisal
The purpose of this appraisal is to estimate the market value of a leased
fee estate in the improved mall portion of the property and the fee simple
interest in the three vacant outparcel lots. The appraisal is to be used by the
Client in connection with a mortgage financing.
Extent of the Appraisal Process
In the process of preparing this appraisal, we:
o Inspected the exterior of all buildings and site improvements and a
representative sample of shop spaces with E. John Elmore, the property
manager;
o Interviewed representatives of the property management company;
o Reviewed leasing policy, concessions, tenant build-out allowances, and
history of recent occupancy with the leasing manager, Mr. Steven St.
Paul of Urban Retail Properties Co.
o Reviewed a detailed history of income and expenses as well as a budget
forecast for 1996;
o Conducted market research of occupancies, asking rents, concessions
and operating expenses at competing shopping centers which involved
interviews with on-site managers and a review of our own data base
from previous appraisal files;
o Prepared an estimate of stabilized income and expenses (for
capitalization purposes);
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Introduction
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o Prepared a detailed discounted cash flow (DCF) analysis using Pro-Ject
+plus software for the purpose of discounting the forecasted net
income stream into a present value of the leased fee estate for the
center;
o Conducted market inquiries into recent sales of similar properties to
ascertain sale prices per square foot, effective gross income
multipliers and capitalization rates. This process involved telephone
interviews with sellers, buyers and/or participating brokers;
o Prepared Sales Comparison and Income Approaches to value;
o Reconciled the value indications and concluded a final value estimate
for the subject in its "as is" condition; and
o Prepared a Complete Appraisal of real property, with the results
conveyed in this Self-Contained Report.
Date of Value and Property Inspection
The date of value is June 1, 1996. On April 9, 1996, Douglas C. Holowink
inspected the property and its environs. Richard W. Latella, MAI has reviewed
and approved the report but did not inspect the property.
Property Rights Appraised
Leased fee estate in the improved mall portion of the property exclusive of
the Belk department store and site, and the fee simple estate in the 3 vacant
outparcels.
Definitions of Value, Interest Appraised, and Other Pertinent Terms
The definition of market value taken from the Uniform Standards of
Professional Appraisal Practice of the Appraisal Foundation, is as follows:
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 is the
consummation of a sale as of a specified date and the passing of title from
seller to buyer under conditions whereby:
1. Buyer and seller are typically motivated;
2. Both parties are well informed or well advised, and acting in what
they consider their own best interests;
3. A reasonable time is allowed for exposure in the open market;
4. Payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
5. 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.
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Introduction
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Exposure Time
Under Paragraph 3 of the Definition of Market Value, the value estimate
presumes that "A reasonable time is allowed for exposure in the open
market". Exposure time is defined as the estimated length of time the
property interest being appraised would have been offered on the market
prior to the hypothetical consummation of a sale at the market value on the
effective date of the appraisal. Exposure time is presumed to precede the
effective date of the appraisal.
The following definitions of pertinent terms are taken from the Dictionary
of Real Estate Appraisal, Third Edition (1993), published by the Appraisal
Institute.
Fee Simple Estate
Absolute ownership unencumbered by any other interest or estate, subject to
the limitations imposed by the governmental powers of taxation, eminent
domain, police power, and escheat.
Leased Fee Estate
An ownership interest held by a landlord with the rights of use and
occupancy conveyed by lease to others. The rights of the lessor (the leased
fee owner) and the leased fee are specified by contract terms contained
within the lease.
Market Rent
The rental income that a property would most probably command on the open
market, indicated by the current rents paid and asked for comparable space
as of the date of appraisal.
Cash Equivalent
A price expressed in terms of cash, as distinguished from a price expressed
totally or partly in terms of the face amounts of notes or other securities
that cannot be sold at their face amounts.
Market Value As Is on Appraisal Date
The value of specific ownership rights to an identified parcel of real
estate as of the effective date of the appraisal; related to what
physically exists and is legally permissible and excludes all assumptions
concerning hypothetical market conditions or possible rezoning.
Legal Description
We have not been provided with a complete legal description of the
property. Therefore, one has not been included in the report. A copy of a
composite site plan for the property has been included within the body of the
report.
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REGIONAL ANALYSIS
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Introduction
The short- and long-term value of real estate is influenced by a variety of
factors and forces which interact within a given region. Regional analysis
serves to identify those forces which affect property value and the role they
play within the region. The four primary forces which influence real property
value include environmental characteristics, governmental forces, social
factors, and economic trends. These forces determine the supply and demand for
real property which, in turn, affect market value.
A. Environmental Characteristics
The primary environmental forces which influence the region include
physical location, geography, and infrastructure. These characteristics provide
a basis for the region's stability and describe the area's overall locational
bearing. Both natural and man-made environmental forces influence real property
values and are best understood in relation to the subject property's location.
General Overview
Rocky Mount is situated in the northeastern quadrant of North Carolina,
near the confluence of 1-95 and State Highway 64. The MSA is defined as
encompassing the counties of Nash and Edgecombe, although the retail and
services found within the area are a draw for many residents located in small
towns and rural areas surrounding the MSA. Rocky Mount is approximately 51+/-
miles northeast of Raleigh, 157+/- miles east of Winston-Salem, and 220+/- miles
northeast of Charlotte.
The subject site is located along the northwest side of Route 301 at Route
64, along the area's main commercial artery, northwest of downtown Rocky Mount.
The Facing Page chart presents an overview of demographic and economic data
relating to the subject region.
Development Patterns
Commercial, residential and industrial development within the Rocky Mount
MSA is concentrated in the areas south of Route 64, the area's main east-west
arterial. As further detailed in the Retail Market Analysis section of this
report, Nash County, comprising the western half of the MSA, is noticeably more
affluent than Edgecombe County, which comprises the eastern half of the MSA.
Both residential and commercial development patterns reflect this disparity.
Rocky Mounts traditional, downtown area, which contains municipal offices,
parks, older commercial districts and housing, is located east of the Tar River,
south of Route 64. The area's more affluent residential areas and newer
commercial developments are primarily located west of the Tar River south of
Route 64.
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Regional Analysis
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Transportation
Highways & Interstates
Rocky Mount is well served by an integrated highway system and
infrastructure. The main north/south arterial for the region is Interstate 95,
which travels through central Nash County, just west of the City of Rocky Mount.
Interstate 95 is one of the country's main north/south interstate highways,
originating in Maine and ending in Florida. Primary east/west access is gained
via Route 64, which runs from Tarboro west to Raleigh. Other main thoroughfares
in the area include: state highway 43, traveling in a southwesterly direction
through the MSA; state highway 48, traveling north/south; and state highway 97,
traveling in a southwesterly direction through the southern quadrant of the MSA.
Air Service
The most proximate of several regional airports is the Rocky Mount/Wilson
Airport, which primarily offers direct commuter flights from the Rocky Mount
area to the Charlotte-Douglas International Airport. The Charlotte-Douglas
International Airport is the nation's 24th largest airport, is USAir's main hub,
and offers 450 flights per day. Located within one hour of Rocky Mount is the
Raleigh-Durham International Airport, which is the nation's 36th largest airport
and offers 245 daily flights.
Other Services
The MSA is also served by the CSX Transportation and Norfolk-Southern railroad
systems which, via interchanges at Chicago, East St. Louis, Memphis, Birmingham
and New Orleans, provide single-system shipments to all 48 contiguous states,
Alaska, Mexico, and Canada. Rocky Mount is also serviced by Amtrak, with a major
north/south route with service to Boston, New York City, Baltimore, Washington,
Charleston, Savannah, Orlando and Miami, with east/west connections through
Raleigh and Charlotte. Over 30 motor fright carriers serve Nash County, with
three major carriers serving the West Coast directly.
B. Governmental Characteristics
Governmental influences on the region impact property values via political
and legal actions at all levels. The legal climate at a particular time or in a
particular place may overshadow the natural market forces of supply and demand.
Government provides many necessary facilities and services that affect land use
patterns, including public utilities, refuse collection, transportation
networks, zoning codes, and fiscal policies.
Tax Structure
The State of North Carolina carries a 4.00 percent general sales tax.
Edgecombe and Nash counties carry an additional 2.00 percent sales tax. Property
taxes are levied based upon a millage rate per $100 of assessed value. The Nash
County ad valorem tax rate for 1995 was 61 cents per $100 assessed value. The
Rocky Mount rate was 46 cents per $100.
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Regional Analysis
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Services & Utilities
The Rocky Mount MSA is serviced by numerous municipal agencies and
for-profit utilities companies. Electric is provided by North Carolina Power &
Light, Wake Electric Cooperative and the Electric-Cities cooperative, a venture
between various municipalities and North Carolina Power and Light. Natural Gas
is provided by North Carolina Natural Gas. Water and sewer is provided by
various municipalities, principally the City of Rocky Mount. Telephone service
is provided by Sprint Carolina.
Development Issues
The State of North Carolina is considered one of the most pro-business
states in the country. The state has exhibited a highly proactive stance to
attract new business to the region, using various economic incentives for new
business and industry. Among these incentives are tax credits, job tax credits,
Industrial Development Bonds, financial assistance grants, phased-in property
tax programs, enterprise and foreign trade zones, training programs, project
financing, and the area's already low tax burden.
Bond Rating
Moody's Bond Record rates the State of North Carolina bond rating as "Aaa"
relative to investment qualities. 'Aaa" bonds are judged to be the best quality
and carry the smallest degree of investment risk. Both Edgecombe County and
Rocky Mount have been accorded an "A" rating by Moody's. 'A" bonds are
considered to possess many favorable investment attributes and considered as
upper medium grade obligations.
C. Social Forces
Real estate values can be influenced to a large degree by social issues
impacting the region, including population trends, income levels, the profile of
workers in the area, and other quality of life issues. The demographic
composition of the population reveals the potential, basic demand for real
estate services.
Population
The population and its geographic distribution are basic determinants of
the need for real estate. Aggregate population growth is distributed among
regions in response to changing economic opportunities, while the demand for
real estate is created by a population's demand for the goods and services to be
produced or distributed within the region. Thus, population and demographic
trends can influence the demand for services provided by property, thereby
affecting property value.
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Regional Analysis
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<TABLE>
<CAPTION>
====================================================================================================================================
POPULATION TRENDS
====================================================================================================================================
Compound Compound Compound
Growth Rate Growth Rate Growth Rate
====================================================================================================================================
1980 1990 1996 2001 1980-1990 1990-1996 1996-2001
====================================================================================================================================
Population
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Rocky Mount MSA 123,141 133,235 141,551 146,585 0.79% 1.01% 0.70%
Nash County 67,153 76,677 85,722 90,417 1.34% 1.88% 1.07%
Edgecombe County 55,988 56,558 55,829 56,168 0.10% -0.22% 0.12%
North Carolina 6,881,768 6,628,637 7,290,830 7,848,028 1.20% 1.58% 1.51%
United States 226,545,856 248,709,872 265,037,504 277,157,184 0.94% 1.07% 0.90%
====================================================================================================================================
Source: Equifax National Decision Systems
====================================================================================================================================
</TABLE>
Population has grown at a relatively healthy pace within the Rocky Mount
MSA over the past decade, particularly in Nash County. Between 1980 and 1990,
the Rocky Mount MSA exhibited a compound annual growth rate of 0.79 percent, and
1.01 percent annual growth from 1990 to 1996, while Nash County posted an annual
growth rate of 1.34 percent between 1980 and 1990, and a 1.88 percent annual
growth rate between 1990 and 1996. By comparison, North Carolina has experienced
population growth of 1.07 percent per year over the last five years, while the
U.S. reports population growth of about 1.1 percent per year for the same
period. Estimates for 1996 place population at 141,551+/-, an aggregate increase
of 6.3 percent over 1990. Through 2001, Equifax National Decision Systems
forecast population growth of 0.7% per year, lower than the rate of growth
projected for the state as a whole.
A color graphic depicting projected population growth through 2001 is
included at the end of this section. As can be seen, the largest areas of growth
are forecasted to be in the eastern-central and southern portions of Nash
County, where growth is projected to see increases between 5.0-8.4 percent
through 2001, while the balance of Nash County is projected to see increases
between 2.0 and 4.9 percent through 2001.
Households
Household formation is an important component of demographic analysis which
helps to identify changing patterns or shifts within the population. A household
consists of all people occupying a single housing unit, thus providing
significant sociological information about the region. Household formation also
has a significant influence on demand for real estate. Households, combined with
effective purchasing power, provide the basic demand for housing units and
household needs, thereby transforming needs into effective demand for real
estate improvements.
<TABLE>
<CAPTION>
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HOUSEHOLDTRENDS
====================================================================================================================================
Compound Compound Compound
Growth Rate Growth Rate Growth Rate
1980 1990 1996 2001 1980-1990 1990-1996 1996-2001
<S> <C> <C> <C> <C> <C> <C> <C>
Rocky Mount MSA 41,867 49,360 53,700 55,876 1.66% 1.41% 0.80%
Nash County 23,470 29,041 33,043 34,947 2.15% 2.18% 1.13%
Edgecombe County 18,397 20,319 20,657 20,929 1.00% 0.28% 0.26%
North Carolina 2,043,292 2,517,026 2,862,251 3,123,172 2.11% 2.17% 1.76%
United States 80,389,688 91,947,408 100,130,936 105,243,728 1.35% 1.43% 1.00%
====================================================================================================================================
Source: Equifax National Decision Systems
====================================================================================================================================
</TABLE>
Like the nation as a whole, household formation has occurred at a rate in
excess of population growth within the subject region. This acceleration has
been the result of several trends, namely the fact that the population is
generally living longer, divorce rates have been on the rise, and many younger
professionals are postponing marriage and/or leaving home at
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an earlier age, all resulting in increases of one- and two-person households.
The total number of households in Rocky Mount has increased from 41,867+/- in
1980 to 53,700+/- in 1996, a compound annual increase of about 1.4 percent per
year. Accordingly, the number of persons per household within the MSA has
decreased from 2.94 in 1980 to 2.64 in 1996. Projections through 2001 show
household growth at 0.8 percent per year, slightly higher than population growth
forecasts.
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Income
Income levels, either on a per capita, per family, or per family, or per
household basis, indicate the economic level of residents within the region and
form an important component of economic analysis. Average income has direct
impact on the ability of residents to satisfy material desires for goods and
services, directly affecting the demand and price levels of real estate.
Exhibited below is a table which depicts income trends on a per capita, median
household and average household basis, as well as a graphic depicting average
household income levels with Nash and Edgecombe counties, the State of North
Carolina and the United States.
- --------------------------------------------------------------------------------
Average Household Income
[GRAPHIC OMITTED]
[DATA POINTS TO BE SUPPLIED]
Source: Equifax National Decision Systems
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
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Income Trends
- ------------------------------------------------------------------------------------------------------------------
Compound Compound Compound
Growth Rate Growth Rate Growth Rate
1980 1990 1996 2001 1980-1990 1990-1996 1996-2001
==================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Per Capita Income
- ------------------------------------------------------------------------------------------------------------------
Rocky Mount MSA $5,600 $11,345 $14,429 $18,729 7.32% 4.09% 5.36%
Nash County $6,043 $12,684 $16,184 $21,525 7.70% 4.14% 5.87%
Edgecombe County $5,068 $9,530 $11,734 $14,228 6.52% 3.53% 3.93%
North Carolina $6,133 $12,885 $17,153 $22,985 7.71% 4.88% 6.03%
United States $7,298 $14,420 $18,905 $25,467 7.05% 4.62% 6.14%
- ------------------------------------------------------------------------------------------------------------------
Median Household Income
- ------------------------------------------------------------------------------------------------------------------
Rocky Mount MSA $13,804 $24,200 $28,154 $33,200 5.77% 2.55% 3.35%
Nash County $13,960 $26,006 $30,572 $36,504 6.42% 2.73% 3.61%
Edgecombe $13,611 $21,916 $24,452 $28,317 4.88% 1.84% 2.98%
North Carolina $14,575 $26,886 $31,703 $38,430 6.31% 2.78% 3.92%
United States $17,092 $30,163 $36,410 $45,380 5.84% 3.19% 4.50%
- ------------------------------------------------------------------------------------------------------------------
Average Household Income
- ------------------------------------------------------------------------------------------------------------------
Rocky Mount MSA $16,385 $30,363 $37,181 $47,835 6.36% 3.43% 5.17%
Nash County $17,190 $33,323 $40,984 $54,107 6.84% 3.51% 5.71%
Edgecombe County $15,358 $26,169 $31,099 $37,362 5.47% 2.92% 3.74%
North Carolina $17,332 $33,242 $42,552 $56,532 6.73% 4.20% 5.85%
United States $20,307 $38,453 $49,031 $65,729 6.59% 4.13% 6.04%
==================================================================================================================
Source: Equifax National Decision Systems
==================================================================================================================
</TABLE>
As illustrated by the preceding table and graphic, average income levels
within the subject region are below both state and national figures. On a per
capita basis, Rocky Mount has an average income of $14,429, which trails the
state level of $17,153 by approximately 16 percent and the national level by 24
percent. As with the median and average household income levels, the region's
lower per capita income is largely influenced by Edgecombe.
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County, which contains approximately 39 percent of the region's population. The
per capita income of Edgecombe County is $11,734, which is 28 percent below that
of Nash County, 32 percent below that of the state, and 38 percent below the
national per capita income of $18,905. Per capita income growth for the MSA has,
however, kept pace with state and national trends, experiencing annual growth of
roughly 7.3 percent per year (1980-90) and 4.1 percent per year from 1990 to
1996 (not adjusted for inflation). Equifax is projecting per capita income
growth of 5.4 percent per year through 2001 for the Rocky Mount MSA. On a per
household basis, the Rocky Mount MSA has an average income of $37,181, which is
approximately 13 percent and 24 percent below state and national averages,
respectively. Average household income within the Rocky Mount MSA is projected
to increase by an compound annual rate of 5.17% over the next 5 years to
$47,835.
A color graphic displaying average household income by area is presented at
the end of this section. As shown, areas on the west side of the MSA , or within
Nash County, are generally more affluent than other sectors. The highest levels
of income are within eastern-central Nash County.
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Rocky Mount's relatively low level of per capita income largely reflects an
industry mix that pays lower wages. Because of the low cost of living, however,
the effective disposable income of residents--adjusted for tax payments,
contributions to pension funds, and the cost of new housing--ranks much higher.
As shown below, median household effective buying income for the Rocky Mount MSA
compares more favorably to both state and national levels. For 1994, Sales &
Marketing Management placed median household effective buying income at $30,851,
which trailed that of the state by only 6 percent.
[GRAPHIC OMITTED]
[DATA POINTS TO BE SUPPLIED]
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Median Householod Effective Buying Incomes
- --------------------------------------------------------------------------------
United States North Carolina Rocky Mount MSA Nash County
- --------------------------------------------------------------------------------
1990 $27,912 $23,488 $22,052 $22,233
1991 $32,073 $28,057 $25,581 $27,525
1992 $33,178 $29,284 $27,152 $28,785
1993 $35,056 $30,964 $28,918 $30,654
1994 $37,070 $32,845 $30,851 $32,796
- --------------------------------------------------------------------------------
Source: Sales & Marketing Management, Survey of Buying Power
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D. Economic Trends
Economic forces are significant to real property value. The fundamental
relationships between current and anticipated supply and demand and the economic
ability of the population to satisfy its wants, needs, and demands through
purchasing power are tantamount to such an analysis. Some of the specific market
characteristics considered in economic analysis include employment trends, the
economic base of the region, expansion and new development, and the overall
economic health of the region.
Overview
Greater Rocky Mount has an increasingly diverse employment base, with the
area's top employers including manufacturing, pharmaceutical, health care and
services concerns. Manufacturing, however, remains the major source of jobs for
the area. The largest sectors of insured employment in the Rocky Mount MSA
include Manufacturing (35 percent), Retail (21.5 percent) and Services (13.8
percent). The balance of non-agricultural employment by sector is as follows:
Government (10%); Finance, Insurance and Real Estate (6%), Wholesale Trade
(3.8%) and Construction (2.7%). Agriculture accounts for 4.6 percent of insured
employment.
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Major Employers
The major employers in the Rocky Mount MSA are shown on the following
chart.
- -------------------------------------------------------------------------------
Rocky Mount MSA Top Employers
1995
===============================================================================
1 Abbott Laboratories 2,400
2 *Nash-Rocky Mount School System 2,000
3 Consolidated Diesel Company 1,550
4 Carolina Telephone 1,500
5 Nash General Hospital 1,350
6 Meadowbrook Meat Company 925
7 *City of Rocky Mount 800
8 Texfi 775
9 Sara Lee Bakery 775
10 Hardee's Food System's, Inc. 700
11 Centura Bank 700
12 Barnhill Construction Company 650
13 Empire of Carolina 600
14 Ilco-Unican 600
15 *Edgecombe County Schools 575
16 Allied Signal 550
17 CSX Transportation Systems 550
18 Glenoit Mills 500
19 Standard Products 500
20 Barcalounger Co. 500
21 Stoney Creek Mills 500
22 Rocky Mount Mills 475
23 Phillips Fibers 475
24 Inco, Inc. 400
25 Fast Food Merchandisers 460
Employment at Concerns Employing 1,000+ 9,200
Percentage of All Employment 14%
Employment at Concerns Employing 500-999 10,200
Percentage of All Employment 16%
Total 1995 Rocky Mount MSA Employment 64,010
Source: Nash and Edgecombe County Economic Development
Employment Security Commission of North Carolina
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Unemployment Rates
Unemployment rates in the Rocky Mount MSA have historically been within the
range of both state and national figures. We note that unemployment levels
within Edgecombe County have consistently been above those of the more affluent
Nash County and the MSA as a whole. Mirroring national trends, unemployment
peaked in 1992 at 7.0 percent, followed by a declining trend through 1994. As of
April, 1996, unemployment within Edgecombe County was 10.3 percent; unemployment
within Nash County was significantly less, at 5.8 percent. The national
unemployment rate was 5.4 percent, compared to the state unemployment level of
4.2 percent. Historical unemployment data is depicted below in both graphic and
table forms.
HISTORICAL UNEMPLOYMENT
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Rocky Mount Nash Edgecombe North United
MSA County County Carolina States
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1990 4.6% 4.2% 5.1% 4.1% 5.5%
1991 6.8% 6.3% 7.4% 5.8% 6.7%
1992 7.4% 7.0% 8.0% 5.9% 7.4%
1993 6.2% 5.9% 6.7% 4.9% 6.8%
1994 5.9% 5.1% 7.4% 4.4% 6.1%
1995 6.4% 5.4% 8.1% 4.3% 5.6%
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Regional Analysis
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Employment Growth
Historical Employment Trends - Rocky Mount MSA
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[DATA POINTS TO BE SUPPLIED]
As exhibited above, after experiencing moderate gains during 1989 and 1990,
employment within the Rocky Mount MSA has remained relatively flat over the last
four years. A noticeable dip occurred in 1994 reflecting the relocation of a
Black & Decker manufacturing plant out of the area.
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Regional Analysis
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Retail Sales
Another measure of the economic health of a region is retail sales
patterns. Consumers drive the economy by creating demand for goods and services
and, in turn, generate the need for housing, office space, retail centers, and
warehouse/distribution facilities. It is estimated that consumer spending
accounts for two-thirds of all economic activity in the United Sates today. As
such, retail sales patterns have become an important indicator of the economic
health of a region.
Retail Spending Per Household
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[DATA POINTS TO BE SUPPLIED]
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United States North Carolina Rocky Mount MSA Nash County
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1990 $19,488 $17,955 $17,594 $22,741
1991 $19,443 $17,862 $17,638 $22,234
1992 $20,710 $19,326 $19,490 $23,645
1993 $21,683 $20,621 $20,543 $24,792
1994 $23,209 $22,118 $20,510 $25,699
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Between 1990 and 1994, retail sales growth within the Rocky Mount MSA has
posted relatively moderate but consistent gains. We note that retail spending
per household for Nash County, at $25,699 per household, significantly exceeds
MSA, state and national levels. It is our opinion that this reflects a high
level of in-flow sales from areas outside of Nash and Edgecombe counties. As
supported in the Retail Market Analysis section of this report, the
concentration of retail, restaurants and services within Nash County is a
formidable draw for residents of less developed areas throughout the
northeastern quadrant of the state.
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Regional Analysis
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E. Critical Observations
The following bullet points summarize some of our general observations
relating to the subject's region:
o The region's economy is increasingly diverse, while clearly the
manufacturing sector remains the largest source of employment for
residents of the Rocky Mount MSA. Overall unemployment levels have
historically been within the range of both state and national levels.
o The economic characteristics of Nash County, or the western half of
the MSA, are presently and have historically been superior to those of
Edgecombe County, which comprises the eastern half on the MSA. Income
levels and retail spending patterns within Nash County significantly
exceed those of Edgecombe County. Further, unemployment within Nash
County has historically mirrored state and national levels, while
unemployment within Edgecombe has tended to exceed state and national
levels.
o Location provides the basis for employment within both the retail and
manufacturing job sectors in Rocky Mount. Rocky Mount has continued to
provide a highly accessible, low-cost environment for manufacturers,
while the area has more recently emerged as a retail hub serving the
northeast quadrant of the state. Lower costs of living, a strong labor
force, excellent nodes of transportation, and other quality of life
characteristics are necessary attractions for new companies locating
to the region. Location is an important advantage for firms that serve
national markets and wish to minimize distribution costs.
o Population should continue to increase at an annual rate of 0.70
percent per year within the MSA as a whole, and at 1.07 percent per
year within Nash County.
o Income levels, on a per capital basis, are projected to increase at an
annual rate of about 5.36 percent per year for the MSA and 5.87
percent per year for Nash County through 2001.
Conclusion
The short-and long-term outlook for Rocky Mount and its surrounding region
is for relative stability, with moderate growth in employment, population and
income levels. These modest gains for the MSA as a whole will continue to be the
result of relatively strong growth within Nash County being tempered by
relatively weak growth within Edgecombe County. The economy is increasingly
diversified, with a low cost of living, strong labor force, and excellent
transportation system. On balance, we are cautiously optimistic about the
short-term outlook of the subject region. Long-term, the region should see
stability and moderate growth.
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ROCKY MOUNTAIN METROPOLITAN AREA
[MAP]
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ROCKY MOUNTAIN METROPOLITAN AREA
[MAP]
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ROCKY MOUNTAIN METROPOLITAN AREA
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GOLDEN EAST CROSSING
[MAP]
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GOLDEN EAST CROSSING
[MAP]
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RETAIL MARKET ANALYSIS
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Trade Area Overview
A retail center's trade area contains people who are likely to patronize
that particular retail center. These customers are drawn by a given class of
goods and services from a particular tenant mix. A center's fundamental drawing
power comes from the strength of the anchor tenants as well as the regional and
local tenants which complement and support the anchors. A successful combination
of these elements creates a destination for customers seeking a variety of goods
and services while enjoying the comfort and convenience of an integrated
shopping environment.
The subject can be described as a -regional shopping center.
A regional shopping center (1) provides for extensive variety of goods,
including a wide selection of general merchandise, apparel, and home
furnishings, as will as a variety of services and recreational facilities.
The major occupants of a regional center include a least one, but no more
than two, full line department stores. Each full-line department store
generally has an area of not less than 75,000 +/- square feet. In many
instances, the department stores are physically a part of the center but
are independently owned. In theory, its typical size for definitive
purposes is 450,000 square feet of gross leasable area; in practice it may
range from 300,000 to 850,000 square feet. The regional center is the
second largest type of shopping center. As such, it provides services
typical of a business district yet not as extensive of those of the super
regional center.
In order to define and analyze the market potential for the Golden East
Crossing, it is important to first establish the boundaries of the trade area
from which the subject will draw its customers. In some cases, defining the
trade area may be complicated by the existence of other retail facilities on
main thoroughfares within trade areas that are not clearly defined or whose
trade areas overlap with that of the subject.
The subject is one of two regional malls located in Nash County.
Competition in the immediate area includes the struggling Tarrytown Mall, which
lacks anchor depth and is tenanted by mainly local retailers and service
providers, and a limited number of traditional strip centers. There are also
some free-standing retailer development, including a Target discount department
store. While some cross-shopping does occur, these stores act more as a draw to
the area, creating an image for the area as an established shopping district and
generating more retail traffic to the area than would exist in their absence. We
recognize and mention these stores and centers to the extent that they provide a
complete understanding of the area's retail structure.
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(1) Urban Land Institute Dollars and Cents of Shopping Centers - 1995
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Once the trade area is defined, the area's demographics and economic
profile can be analyzed. This will provide key insight into the area's dynamics
as it relates to the subject. The sources of economic and demographic data for
the trade are analysis are as follows: Equifax National Decision Systems (ENDS),
Sales and Marketing Management's Survey of Buying Power, The Urban Land
Institute's Dollars and Cents of Shopping Centers (1995), CACI, The Sourcebook
of County Demographics, and The Census of Retail Trade - 1992. The subject's
Effective Trade Area, profiled by Equifax National Decision Systems, was defined
based on the results of a customer survey conducted by Urban Retail Properties,
Co., which included polling the mall's customer's to determine the zip code of
their primary residence.
Scope of Trade Area
Traditionally, a retail center's sales are principally generated from
within its primary trade area, which is typically within reasonably close
geographic proximity to the center itself. Generally, between 55 and 65 percent
of a center's sales are generated within its primary trade area. The secondary
trade area generally refers to more outlying areas which provide less frequent
customers to the center. Residents within the secondary trade area would be more
likely to shop closer to home due to time and travel constraints. Typically, an
additional 20 to 25 percent of a center's sales will be generated from within
the secondary area. The tertiary or peripheral trade area refers to more distant
areas from which occasional customers to the mall reside. These residents may be
drawn to the center by a particular service or store which is not found locally.
Industry experience shows that between 10 and 15 percent of a center's sales are
derived from customers residing outside of the trade area. This potential is
commonly referred to as inflow.
Before the trade area can be defined, it is necessary that we thoroughly
review the retail market and the competitive structure of the general
marketplace, with consideration given as to the subject's position therein.
Subsequent to our discussion of the area's retail structure, a profile of the
department stores which anchor the subject is presented in order to fully
acquaint the reader with its overall market position therein.
Retail Structure
In order to examine the subject property in its proper context, we must
first examine the nature of the competition. With respect to regional mall
competition, the subject is well positioned. We consider the nearby Tarrytown
Mall, which lacks anchor depth and it tenanted by mainly local retailers and
service providers, virtually obsolete as a traditional regional mall,
effectively leaving the subject as the only viable regional mall within the
Rocky Mount MSA. As such, the competitive properties cited on the following
pages are limited to a secondary status.
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Retail Market Analysis
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Competition
The following table identifies the larger alternative retail properties in
the area as well as the malls located outside the region with secondary trade
areas that could overlap with that of the subject
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Competitive Retail Shopping Centers
===========================================================================================
Map Center/Location Year Opened/ Total GLA Anchor Stores Distance
Key Renovated from
Subject
============================================================================================
<S> <C> <C> <C> <C>
S Golden East Crossing 1986 572,914 Belk NA
US Hwy. 101 & Rt. 43 JC Penny
Rocky, Mount, NC Brody's Goods
Sears
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1 Tarrytown Mall 1963 327,069 Goody's 1.8 miles
Hwys. 64 & 301 Montgomery Ward
Rocky Mount, NC
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2 Parkwood Mall & Plaza 1979 578,190 Belk 22 miles
101 West Ward Boulevard JC Penny
Wilson, North Carolina
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3 Carolina East Mall 1979 329,130 Belk 30 miles
238 Carolina E. Mall Sears
Greenville, North
Carolina
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4 The Plaza 1989 421,061 Belk 30 miles
714 E. Greenville road Brody's
Greenville, North Eckerd Drugs
Carolina JC Penny
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Total 2,228,364
============================================================================================
Source: Shopping Center Directory - 1995
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</TABLE>
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Subject Retail Center
Name: Golden East Crossing
Location: US Hwy. 301 & Rt. 43
Rocky Mount, NC
Owner: The Cadillac Fairview Corporation
Distance and Time from Subject: NA
Year Opened: 1986
Year(s) Expanded/Renovated: NA
Total GLA: 572,914+/-SF
Mail GLA: 218,704+/-SF
Mail Shop Ratio: 38%
Anchor Tenants: Belk 112,957 SF
JC Penney 81,729 SF
Brody's 69,960 SF
Sears 89,564 SF
-------
Total Anchor GLA 354,210 SF
Number of Mail Shops: 96+/-
Occupancy (Mail GLA): 75+/-%
Average Market Rent (Mall GLA): $15-$20/SF
Land Area: 60+/- AC
Parking/Ratio
Existing: 3,055; 5.3 spaces per 1,000 SF of GLA
Demographics: Effective Market Population: 268,643
Average Household Income: $35,389
Retail Sales: $267/SF Comparable Tenants
$239/SF All Reporting Tenants
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Comments: Golden East Crossing is the dominant mail in the Rocky Mount MSA,
anchored by strong national and regional department stores well-suited to the
region. The mall has attracted strong base of national retailers, although
merchandising mix would benefit from fewer local tenancies. During 1995,
reporting anchor tenants Sears and JC Penney reported noticeable sales increases
over the previous year. Sears reported a 5.5 percent increase in sales to
$16.1+/- million, or approximately $180 per square foot. JC Penney reported a
7.5 percent increase in sales to $21.1+/- million, or approximately $170 per
square foot. Both the sales level of Sears and JC Penney compare favorably to
national and regional averages. Reporting mall shop tenant sales of $239 per
square foot (versus comparable tenant sales of $267 per square foot)
significantly exceeds regional averages.
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Competitive Retail Center No. 1
Name: Tarrytown Mall
Location: Hwys. 64 & 301
Rocky Mount, North Carolina
Owner First Washington Management
Distance and Time from Subject: 1.8+/- mile south
(5+/- minutes drive time)
Year Opened: 1963
Year(s) Expanded/Renovated: 1989
Total GLA: 327,069+/- SF
Mall GLA: 134,000+/- SF
Mall Shop Ratio: 41%
Anchor Tenants: Goody's Family Clothing 24,000 SF
Montgomery Ward 74,069 SF
Vacant 95,000 SF
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Total Anchor GLA: 193,069 SF
Number of Mall Shops: 55+/-
Occupancy (Mall GLA): 97.7%
Average Rent (Mall GLA): $8.00+/-SF
Land Area: 30+/- AC
Parking/Ratio: 1,564 +/- cars; 4.8 per 1,000 +/- SF
Demographics: Primary Market Population: 175,000
Average Household Income: $32,000
(per Shopping Center Directory)
Retail Sales: $160/SF
Comments: Despite 95,000n square foot anchor tenant vacancy, small shop
occupancy remains at approximately 98 percent, albeit at relatively low rates
and short terms to a mainly local tenant base. Leasing agent reports active
interest in vacant anchor position, although majority of offers reportedly below
level acceptable to ownership. It is anticipated that space will be subdivided
to accommodate big box type retailers.
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Competitive Retail Center No. 2
Name: Parkwood Mall & Plaza
Location: 101 West Ward Boulevard
Wilson, North Carolina
Owner: North Hills, Inc.
Distance and Time from Subject: 22+/- miles southwest
(30+/- minute drive time)
Year Opened: 1979
Year(s) Expanded/Renovated: N/A
Total GLA: 415,000+/- SF
Mall GLA: 157,831+/- SF
Mall Shop Ratio: 38%
Anchor Tenants: Belk 85,924 SF
JC Penny 88,745 SF
Hills 82,500 SF
-------
Total Anchor GLA: 257,169 SF
Number of Mall Shops 94+/-
Occupancy (Mall GLA): 89%
Average Rent (Mall GLA): $8-$12/SF
Land Area: 78+/- AC
Parking/Ratio: 3,243+/- cars; 5.61 per 1,000+/- SF
Demographics: Primary Market Population: 110,000
Average Household Income: $33,000
(per Shopping Center Directory)
Retail Sales: $200/SF
Comments: Adjacent strip center and plaza development totaling 163,000+/- square
feet. Relatively small anchor stores augmented by wide array or national,
regional and local retailers, as well as non-traditional mall and strip center
tenants. Considered secondary competition to subject.
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Retail Market Analysis
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Competitive Retail Center No. 3
Name: Carolina East Mall
Location: 238 Carolina E. Mall
Greenville, North Carolina
Owner: Shadow Lake Properties
Distance and Time from Subject: 30+/- miles southeast
(40+/- minute drive time)
Year Opened: 1979
Year(s) Expanded/Renovated: N/A
Total GLA: 329,130+/- SF
Mall GLA: 140,230+/- SF
Mall Shop Ratio: 43%
Anchor Tenants: Belk 113,910 SF
Sears 75,000 SF
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Total Anchor GLA: 188,900 SF
Number of Mall Shops 55
Occupancy (Mall GLA): 86+/-%
Average Rent (Mall GLA): $10-$17/SF
Land Area: 37 acres
Parking/Ratio: 2,131+/- cars; 6.5 per 1,000+/- SF
Demographics: Primary Market Population: 157,000
Average Household Income: $33,700
(per Shopping Center Directory)
Retail Sales: $200/SF
Comments: Given distance from subject and inferior anchor alignment, considered
minimally competitive to subject. Leasing agent for center reported difficulty
in attracting key national tenants, such as the Limited concepts.
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Competitive Retail Center No. 4
Name: The Plaza
Location: 714 E. Greenville Blvd.
Greenville, North Carolina
Owner Rubin Strouse Retail
Distance and Time from Subject: 30+/- miles southeast
(40+/- minute drive time)
Year Opened: NA
Year(s) Expanded/Renovated: 1989
Total GLA: 421,061 +/- SF
Mall GLA: 197,064+/- SF
Mall Shop Ratio: 47%
Anchor Tenants: Belk 46,051 SF
Belk 54,000 SF
Brody's 56,934 SF
JC Penney 67,012 SF
-------
Total Anchor GLA: 223,997 SF
Number of Mall Shops 96
Occupancy (Mall GLA): 57+/-%
Average Rent (Mall GLA): $8-$12/SF (estimated)
Land Area: 40 acres
Parking/Ratio: 2,500+/- cars; 5.9 per 1,000+/- SF
Demographics: Primary Market Population: 185,000
Average Household Income: $30,800
Retail Sales: $200/SF
(per Shopping Center Directory)
Comments: Belk has expanded into former Rose's department store space,
separating their men's and junior's department's from women's. Significant
amount of mall shop space remote from anchor stores.
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Retail Market Analysis
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The mail properties cited above (inclusive of the subject) comprise
approximately 2.2+/- million square feet of mall space. Aside from the
marginally competitive Tarrytown Mall, the subject is the only true regional
mall in Nash County, as the balance of mall inventory compete with the subject
only peripherally.
Other Competition
As discussed, there is marginal direct mall competition for the subject in
its immediate trade area. Tarrytown Mall's lack of both anchor depth and
national mall shop tenant base has rendered the property virtually obsolete as a
competitive mall property. In addition to the facilifies described, the balance
of the retail inventory consists of certain big box stores and specialty tenants
in neighborhood and community centers as well as free-standing retail
facilities. A brief description of the retail centers in the immediate area will
serve to portray the balance of the neighborhood retail alignment.
o Tiffany Square Shopping Center, located along Highway 301 at Benvenue
Road (opposite subject), is a 132,000+/- square foot neighborhood
shopping center anchored by a Winn Dixie grocery store in 43,000+/-
square feet and a Kerr Drug store in 9,600+/- square feet. The balance
of the center is tenanted by 7 retail and service-type tenants,
including Little Caesar's and The Cellular Store. There is currently
one 1,937+/- square foot vacancy in the center, which is being offered
at $8.50 per square foot, triple net. This center also includes two
available outparcels of 1.58+/- acres and 1.64+/- acres, which are
currently offered for sale at $453,000 and $550,000, respectively.
o Sutter's Creek Plaza, located along the east side of Route 301
opposite Golden East Crossing, is a 191,822+/- square foot community
centered anchored by Wal-Mart in 114,600+/- square feet and Toys 'R'
Us in 31,000+/- square feet. A Blockbuster Video is located in an
outparcel position, while the balance of the center is leased to 9+/-
small shop tenants including Georgia Carpet Outlets, Rent-A Center and
Seasons Home Shop. This center is 100 percent leased, with the
center's leasing agent reported an average lease rate of $13.50 per
square foot, triple net.
o Rocky Mount Town Center, located immediately west of Golden East
Crossing, is a 182,000+/- square foot community center anchored by
Kmart with major tenants Fashion Bug and Pic 'n Pay Shoes. Outparcels
include Red Lobster and Baskin Robbins.
o Westridge Village is a 90,000+/- square foot neighborhood center
located approximately 4 miles southwest of Golden East Crossing along
Sunset Avenue. This center is anchored by a Harris Teeter grocery
store and an Almands drug store. Small shop tenants include services
such as Mail Boxes, Etc., as well as relatively upscale shops such as
Stephanie's-Ladies Fine Casual and Osborne Jewelers. This center was
100 percent occupied at the time of our inspection.
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o Target has recently opened a free-standing store located opposite
Sutter's Creek Plaza approximately .1 miles from Golden East Crossing.
This development also includes a Burger King and a Texas Steak House
Saloon in outparcel positions.
o Crossroads Center is a 1970-built, 240,000+/- square foot community
center located along Stone Rose Drive at Route 64/301 Bypass,
approximately two miles southwest of Golden East Crossing. The centers
main tenant is Cardinal Theater multiplex, and is occupied by mainly
discount-oriented and local tenants including Sally Beauty Supply,
Beneficial and Pic'n Pay Shoes.
Proposed Development
The development of a 60,000+/- square foot Hanaford's grocery store and a
30,000+/- square Circuit City is proposed for a 15+/- acre site located adjacent
to Golden East Crossing along its rear boundary. These stores will front
Jeffries Boulevard.
GLA per Capita
The data presented summarizes the extent of existing regional mail
development inside and proximate to the trade area. According to the National
Research Bureau, the average GLA per capita for the United States and State of
North Carolina were 5.5+/- and 3.7+/- square feet, respectively, in 1995. This
statistic pertains to centers in excess of 400,000 square feet.
As discussed previously, with the exception of the Tarrytown Mail, the
subject is the only traditional regional mall in the Rocky Mount MSA. Equifax
National Decision Systems estimates a Rocky Mount MSA population of 141,551 (see
Trade Area population discussion following). In order to render a comparative
statistic to both state and national GLA per capita averages, we use only the
GLA of Golden East Crossing, which results in a GLA per capita of 4.05+/- square
feet. However, counting the GLA of Tarrytown Mall (327,069+/- square feet)
results in a GLA per capita of approximately 6.4+/- square feet. Similarly, when
considering the Effective Trade Area, we count the GLA of Golden East and the
Parkwood Mall and Plaza only to render a comparative statistic of 4.3+/- square
feet of mall GLA per capita. Adding the GLA of Tarrytown Mall results in a GLA
per capita of 5.5+/- square feet for the Effective Trade Area.
The higher GLA per capita figures suggest that the market may suffer from
excess capacity. This interpretation would be consistent with current market
conditions, where the subject is posting mall shop vacancy in excess of 20+/-
percent and a 95,000+/- square foot anchor vacancy exists at the Tarrytown Mall.
We further suggest that the effective trade area's per capita income of $13,869
(see demographics chart following) be considered in interpreting the GLA per
capita ratios. While those ratios excluding Tarrytown Mall do not significantly
exceed the state average and do not exceed the national average, the average per
capita income of the state exceeds that of the effective trade area by
approximately 24 percent, while the average per capita income of the United
States exceeds that of the effective trade area by approximately 36 percent. We
suggest that due to significantly less income on a per capita basis, the trade
area inherently could not support the same level of GLA as the state or nation
on a per capita basis.
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Anchor Alignment
The anchor alignment of the subject also helps to define the potential
boundaries of the subject's trade area. The subject property is anchored by
Belk's, Brody's, Sears and JC Penney. The following is a profile of each of
these anchor tenants.
JC Penney, the fourth largest retailer in the United States (after
Wal-Mart, K-Mart and Sears), operates 1,233 JC Penney department stores and
526 drug stores (Thrift Drug and Treasury Drug) throughout all 50 states
and Puerto Rico. The $21 billion company has changed its historical image
as a discount dime store and has targeted upper-middle-class consumers by
adding brand-name soft goods and dropping hard goods from the in-store
product mix. Today the company's product mix centers on apparel, shoes,
jewelry, and home furnishings. In 1994, retail sales rose 7.4 percent to
$20.4 billion, surpassing the $20 billion mark for the first time. Net
income also exceeded $1 billion for the first time ever. Total revenues
were up 7.7 percent to $21.1 billion. The company has experienced a ten
year compound annual growth rate in retail sales (1984-1994) of about 4.2
percent. Overall, productivity among stores increased by 8.9 percent to
$159 per square foot from $146 per square foot in 1993, and $137 per square
foot in 1992. Catalog sales totaled $3.8 billion in 1994-95, accounting for
19 percent of total retail sales. Drug stores, under the Thrift Drug name,
totaled 526 units in 1994-95 and accounted for 7.6 percent of total sales
which achieved $243 per square foot. The company currently has
approximately 113 million square feet of store space. In February 1995, the
company acquired the 97 unit Kerr Drug Store chain. The company will
continue to expand its private brand lines. In addition, the catalog
operation is posed to continue to do well, coming off of its highest sales
in its 31 year history. The company did not fare as well in fiscal 1995
(year ending January 1996) with earnings failing by 20 percent and same
store sales declining by 2.5 percent in the fourth quarter and 1.4 percent
for the fiscal year. The company is planning a $700 capital expenditure
program over the next three years to help bolster store performance. Value
Line reports that the company's financial strength warrants a "B++" rating.
Standard & Poor's has forecasted a continued modest rise in comparable
store sales. They rate the company "A-".
Sears, the world's third largest retailer continues to profit from its
remarkable turnaround. Total revenues from operations increased by 6
percent to $54.56 billion in 1994. Sears Merchandising Group operates 800
department stores and 1,140 specialty stores throughout North America. The
company is focusing on three core operations: apparel; home, including home
appliances and electronics, home improvement and furniture; and automotive
including Sears Auto Centers and Western Auto. Revenues per selling square
foot were $340 in 1994, up from $321 in 1993. The restructuring that the
company implemented in 1993 involved the closure of approximately 113
unprofitable department stores and the elimination of 50,000 jobs. Sears
has also abandoned its once formidable catalog operation closing it in May,
1993. Also in 1993 the company sold 20 percent of Dean Witter/Discover Card
to the public raising $900 million then sold the rest to shareholders. It
also offered about 20 percent of Allstate, raising $2.4 billion in the
nations largest IPO in 1992. In 1995, it spun off the balance of its 80.3
percent stake. During 1994 the company transferred ownership of Sears Tower
and
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related mortgages to a trust. Also, at the end of 1995, Sears divested
itself of Homart its real estate development subsidiary.
In 1994, Sears' dominance continued as the Merchandise Group generated
income of $890 million, an 18.4 percent increase over 1993 income of $752
million. Comparable store growth was a very strong 8.3 percent which
followed the 8.9 percent growth in 1993 and 3.6 percent in 1992. In
addition to strong comparable store sales increases, core merchandising
revenues per selling square foot have also shown steady increases in 1994
and 1993, up 7.8 percent and 11.1 percent, respectively. Department store
revenues were up 8.5 percent in 1994, which added to the 10 percent
increase in 1993. More recently, comparable store sales were up 5.8 percent
in the fourth quarter of 1995.
The company has implemented a $4.0 billion remodeling program and over the
past two years, Sears has remodeled and modernized 240 department stores
and converted 2.9 million square feet of non-selling space and 1.5 million
square feet of selling space formerly occupied by furniture departments to
apparel selling space. Free-standing store revenues increased 20.2 percent
in 1994. This was fueled by 98 new Dealer stores, 22 Homelife stores and 11
Sears Hardware stores. Analysts are forecasting a 6 percent growth in
revenues and 4 to 5 percent same store sales increases in 1996. Value Line
rates the company's financial strength an "A", while Standard & Poors ranks
it "B".
Brody Brothers Dry Goods, headquartered in Greenville, North Carolina, is a
privately owned, small regional department store chain. They currently own
7 stores located in shopping malls throughout the state of North Carolina.
Brody's merchandise mix focuses on women's, men's and children's apparel
and appeals to the mid-market customer. With a store size averaging 65,000
square feet, Brody is expected to have a sales volume of about $23,000,000.
Growth in sales is expected to continue at 5%. As of January 1996, they
employee about 400 and are expected to have a 14% employment growth rate.
Belk Stores Services are the owners of Belk department stores.
Headquartered in Charlotte, North Carolina, the 280 Belk stores owned by
the company are located throughout the southeast including Maryland,
Kentucky, and Texas. The majority of stores, approximately 70%, are located
in shopping malls or centers. The yearly sales volume for this private
company is estimated to be $359,000,000. The Belk department store chain
employs approximately 5,500.
Trade Area Definition
Golden East Crossing is strategically located adjacent to the intersection
of US Highway 301 and North Carolina Highway 43. This location makes it one of
the more accessible retail locations within the area. The advantage of highway
proximity has the effect of expanding the mall's trade area by virtue of
reducing travel time for residents in more distant locations. As such, the
percentage of in-flow sales tends to be greater for more dominant properties.
As discussed in the previous section, the location and accessibility of
competing centers also has direct bearing on the formation and make-up of a
mall's trade area. Its location at the
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Retail Market Analysis
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intersection of highways 301 and 43 near the center of the Nash County also
maximizes its key position as the only true regional mall in the MSA. With the
fastest growing areas found in this general vicinity of the metro area, this
becomes even more significant. This is important for the subject since residents
living closest to the mall are more inclined to shop closer to home. We note
that shopping alternatives within at least a 30 mile radius are marginal,
allowing the subject to virtually dominate the market. Expanding outward to a 40
mile ring, competition is more intense with the inclusion of the Greenville
retail market. Consistent with relative scarcity of surrounding retail
development, the subject's effective trade area boundaries extend 25+/- 35+/-
miles from the subject.
We believe that it is also important to note that key community centers and
free-standing big box retailers represent a force in the market's competitive
environment. However, their primary stores (groceries, discount department
stores, and drugs) are generally different from those which comprise Golden East
Crossing. Certainly there is a place for both in most retail environments,
particularly the regionally-oriented 301 corridor found in Rocky Mount. Overall,
this type of development is limited, and includes store locations for Wal-mart,
Kmart and Target. Circuit City, which has proposed constructing a 30,000+/-
square foot store on a site adjacent to the mall, would join Toys 'R Us and
Office Depot as one of the few true 'category killers" to enter the market.
Together with a wide array of casual dining concepts, these retailers
collectively help balance out the retail infill and act as a traffic generator
that increases the area's status as a destination retail hub.
To summarize, the foundation of our analysis for delineation of the
subject's trade area may be summarized as follows:
1. The Rocky Mount/Route 301 corridor is a truly regional retail
destination, with an effective trade area expanding to points 30 miles
and beyond Golden East Crossing.
2. Highway accessibility including area traffic patterns, geographical
constraints and nodes of residential development.
3. The position and nature of the area retail structure including the
location of destination retail centers and the strength and
composition of the retail infill as discussed above.
4. The size, anchor tenancy and merchandising composition of the mall
tenants enhances its total market penetration.
5. Adequate cross shopping occurs with free-standing retailers and area
strip centers, whose tenants generally compliment rather than compete
with the mall.
Ownership has provided us with the results of their most recent customer
survey which has identified shopping patterns based upon origin by zip codes.
After reviewing this report in conjunction with our independent analysis of the
trade area, we are in concurrence with its findings. As such, we have elected to
rely on some of the demographic results it has produced. An analysis of key
demographic indicators can then be performed based upon this defined trade area.
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Retail Market Analysis
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Population
Once the market area has been established, the focus of our analysis
centers on the trade area's population. Equifax National Decision Systems
provides historical, current and forecasted population estimates for the
effective trade area. Patterns of development density and migration are
reflected in the current levels of population estimates. The chart on the Facing
Page compares these statistics.
Between 1990 and 1996, ENDS reports that the population within the
effective trade area increased by 12,150 to 268,643. This 4.7 percent increase
(0.77 percent per annum) has slightly trailed that of the Rocky Mount MSA growth
rate of 6.2 percent. The current projection is for a continuation of this trend
of moderate but continuous growth of .60 percent and .70 percent per annum for
the effective trade area and the Rocky Mount MSA, respectively. We note with
interest that population growth within the principally closer-in area has been,
and is expected to continue to be, the fastest growing quadrant in the effective
trade area. This is important for the subject since residents living closest to
the mall are more inclined to shop closer to home.
Provided on the Following Pages are graphic representations of the current
population distribution as well as projected population growth. These graphics
depict that the more densely developed areas, as well as those areas with the
strongest projected growth, are found within the closest proximity to the mail.
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<PAGE>
GOLDEN EAST CROSSING
EFFECTIVE TRADE AREA
[MAP]
[GRAPHIC OMITTED]
[DATA POINTS TO COME]
<PAGE>
GOLDEN EAST CROSSING
EFFECTIVE TRADE AREA
[MAP]
[GRAPHIC OMITTED]
[DATA POINTS TO COME]
<PAGE>
Retail Market Analysis
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Households
A household consists of all the people occupying a single housing unit.
While individual members of a household purchase goods and services, these
purchases actually reflect household needs and decisions. Thus, the household is
a critical unit to be considered when reviewing market data and forming
conclusions about the trade area as it impacts the retail center.
National trends indicate that the number of households are increasing at a
faster rate than the growth of the population. Several noticeable changes in the
way households are being formed have caused the acceleration in this growth,
specifically:
o The population in general is living longer on average. This results in
an increase of single and two person households.
o The divorce rate increased dramatically during the last decade, again
resulting in an increase in single person households.
o Many individuals have postponed marriage, thus also resulting in more
single person households.
Between 1990 and 1996, the effective trade area added 7,569 households,
increasing by 7.9 percent to 102,955 units. This growth is equivalent to a
compound annual increase of 1.28 percent. Alternatively, the Rocky Mount MSA
added 4,340 households to 53,700, indicating slightly higher 1.41 percent annual
rate of growth.
Between 1996 and 2001, the effective trade area is expected to grow by 4.0
percent (.79 percent per annum) to 107,127 households. This rate of growth is
consistent with that for the Rocky Mount MSA., which is expected to increase to
nearly 56,000+/- households.
Trade Area Income
A significant statistic for retailers is the income potential of a trade
area's population. Income levels, either on a per capita, per family or
household basis, indicate the economic level of the residents of the market area
and form an important component of this total analysis. More directly, average
household income, when combined with the number of households, is a major
determinant of an area's retail sales potential. The trade area income figures
support the profile of a broad-based middle income market. According to ENDS,
average household income within the effective trade area is currently $35,389.
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Available data shows an identifiable pattern of income levels throughout
the effective trade area as shown below along with comparisons to the Rocky
Mount MSA, the state and the United States.
---------------------------------------------
Average Household Income
---------------------------------------------
Area Average HH Income
---------------------------------------------
Effective Trade Area $35,389
Rocky Mount MSA $37,181
State of North Carolina $42,552
United States $49,031
---------------------------------------------
These statistics show that the effective trade area has an average
household income of $35,389, which is marginally below that of the Rocky Mount
MSA but noticeably below those of the state and the country.
Provided on the Following Page is a graphic presentation of the household
income distribution throughout the total trade area. As can be seen, the subject
lies within the area's upper income communities. Generally, the highest
concentrations of wealth (average incomes of $40,000 and higher) are found
immediately surrounding the center to the north, south and west. We also note
that average household income throughout the effective trade area is forecasted
to increase at compound annual rate of 4.96 percent.
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GOLDEN EAST CROSSING
EFFECTIVE TRADE AREA
[MAP]
[GRAPHIC OMITTED]
[DATA POINTS TO COME]
<PAGE>
Retail Market Analysis
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Effective Buying Income
Another measure of the ability of a trade area to support retail business
is the area's effective buying income (EBI). This data is not measured by
specific trade area, but rather by both the metropolitan statistical area (MSA),
as well as on a county basis as reported in Sales and Marketing Management's
Survey of Buying Power. As previously indicated, the subject's effective trade
area exceeds the boundaries of Nash and Edgecombe counties, but is not inclusive
of other counties in their entirety. As of year-end 1994, the Rocky Mount MSA
had an aggregate EBI of $1.955 billion. A comparison can be made to the Rocky
Mount MSA and Nash and Edgecombe Counties.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Effective Buying income
1990 1994 Compound Annual Charge
Total EBI (billions) Med HHEBI Total EBI (billions) Med HHEBI Total EBI Med HHEBI
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Rocky Mount MSA $1.472 $22,053 $1.955 $30,851 7.36% 8.76%
Edgecombe County $0.573 $21,872 $0.644 $27,797 2.99% 6.18%
Nash County $0.899 $22,233 $1.291 $32,729 9.47% 10.15%
- -------------------------------------------------------------------------------------------------------------------------
Source: Sales and Marketing Management, Survey of Buying Power
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
The data above shows that the median household effective buying income for
Nash County marginally exceeds that of the Rocky Mount metropolitan area. Since
1990, the total EBI for the Rocky Mount MSA has grown at an annual compound rate
of 7.36%, while the total EBI for Nash County, in which Golden East Crossing is
located, has grown at a compound annual rate of 9.47 percent. The median
household EBI has for the Rocky Mount MSA has grown at an annual compound rate
of 8.76%, while the median household EBI for Nash County has grown at an annual
compound rate of 10.15 percent. Both of these measures have exceeded inflation
over this period. Edgecombe County, as previously established the less affluent
sector of the Rocky Mount MSA, posted compound annual growth rates of 2.99
percent for total EBI and 6.18 percent for median household EBI.
Retail Sales
Retail sales growth for the Rocky Mount MSA were compared to Nash and
Edgecombe counties. Total retail sales for the MSA and the counties have
increased at relatively consistent rates. Together with strong growth in
household formation, annual compound growth in total retail sales was led by
Nash County, while Edgecombe County, which added a lower percentage of new
households during the same period, posted stronger growth in retail sales per
household. Overall, the entire MSA posted solid gains in both total retail sales
and retail sales per household, increasing at annual compound rates of 5.19
percent and 3.91 percent, respectively.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Retail Sales
1990 1994 Compound Annual Charge
Total Retail Sales Retail Sales Total Retail Sales Retail Sales Total Retail Sales
(millions) Per Household (millions) Per Household Retail Sales Per Household
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Rocky Mount MSA $874.4 $17,594 $1,070.6 $20,510 4.19% 3.91%
Edgecombe County $208.1 $10,201 $248.3 $12,290 4.51% 4.77%
Nash County $666.3 $22,741 $822.4 $25,699 5.40% 3.10%
- ----------------------------------------------------------------------------------------------------------------------------
Source: Sales and Marketing Management, Survey of Buying Power
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
We note that between 1990 and 1994, overall retail sales for the Rocky
Mount MSA grew by 22 percent to $1.07 billion.
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Retail Market Analysis
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Mall Shop Sales
While retail sales trends within the MSA and region lend insight into the
underlying economic aspects of the market, it is the subject's sales history
that is most germane to our analysis.
We have been provided with a summary of comparable mall shop sales for the
years 1991 to 1995. Per square foot sales figures represent the weighted average
sales for the calendar year for small shop tenants in continuous occupancy of
the same suite for the previous twenty four months. These results are summarized
below.
=========================================
SUMMARY OF
COMPARABLE SALES
=========================================
Comparable Percentage
Year PSF Sales Change
=========================================
1991 $213 NA
1992 $243 14.08%
1993 $257 5.76%
1994 $265 3.11%
1995 $267 0.75%
=========================================
As illustrated above, comparable sales posted notable increases between
1991 and 1995 for an aggregate increase of 25.3 percent, while comparable sales
remained relatively flat between 1994 and 1995, increasing .75 percent to $267
per square foot.
Total reporting mall shop sales for 1995 were $34.9 million. Based on a
reporting GLA of 146,104 square feet, this results in mall shop sales of $239
per square foot. This measure shows reporting tenant performance only, since
many tenants do not report sales by lease agreement or fail to report sales for
a particular sales period. While the aggregate sales amount is reflective of the
total sales generated by the mall shops, it is important to recognize that this
includes all sales including sales from partial year tenants. Furthermore, since
the unit rate is based upon a full reporting year, it has the effect of
understating the mall shop sales performance on a unit rate basis.
By comparison, the Urban Land Institute's Dollars and Cents of Shopping
Centers (1995) reports national and regional sales averages for regional and
super-regional shopping malls. Nationally, average sales at super-regional
centers is reported at $203.09 per square foot, down 1.4 percent from 1993. For
regional malls, average sales are reported to be $176.16, virtually even from
1993. A comparison of national and regional figures is shown on the following
chart.
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Retail Market Analysis
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================================================================================
Regional/Super-Regional Centers
================================================================================
Area Average Median Lower Decile Upper Decile
================================================================================
United States $176.16/ $163.54/ $125.88/ $285.40/
$203.09 $198.93 $140.46 $305.23
- --------------------------------------------------------------------------------
East $204.96/ $183.05/ $126.07/ $323.74/
$220.64 $183.81 $130.46 $379.81
- --------------------------------------------------------------------------------
West $188.63/ $167.46/ $124.00/ $264.89/
$190.51 $187.64 $143.01 $258.68
- --------------------------------------------------------------------------------
South $156.27/ $154.18/ $129.63/ $195.24/
$210.30 $207.99 $145.75 $293.70
- --------------------------------------------------------------------------------
Midwest $178.99/ $179.24/ $125.50/ $290.57/
$195.03 $192.42 $148.18 $261.09
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Source: Urban Land Institute Dollars and Cents of Shopping Centers (1995)
- --------------------------------------------------------------------------------
As a regional mail in the eastern part of the country, the subject's 1995
sales performance of $239 per square foot can be compared to its peers as shown
below.
==========================================================
Average Subject Variance
==========================================================
United States $176 $239 136%
- ----------------------------------------------------------
South $156 $239 153%
==========================================================
On a relative basis, the subject is outperforming its peer group on average
in terms of sales productivity, particularly on a regional basis.
Anchor Store Sales
We have been provided with sales information for the majority of anchor
stores. This data can be summarized as follows:
<TABLE>
<CAPTION>
================================================================================================================
Golden East Crossing
Anchor Store Sales
================================================================================================================
Department Store GLA (SF) 1994 1995 % Change
================================================================================================================
<S> <C> <C> <C> <C>
Sears 89,564 $15,253,543 $16,085,562 +5.5%
$170.30/SF $179.59/SF
- ----------------------------------------------------------------------------------------------------------------
Brody's* 69,690 NA NA NA
- ----------------------------------------------------------------------------------------------------------------
JC Penney 123,735 $19,538,500 $21,120,400 +7.5%
$157.90/SF $170.70/SF
- ----------------------------------------------------------------------------------------------------------------
Belk** 112,957 NA NA NA
- ----------------------------------------------------------------------------------------------------------------
Total 395,946 $34,787,043 $37,205,962 +6.75%***
$163./SF*** $174/SF***
================================================================================================================
* Store opening of August 1995
** Non-reporting anchor
*** Reporting anchors only
================================================================================================================
</TABLE>
In the aggregate, reporting anchor store sales for 1995 were $37.2 million,
equivalent to $174 per square foot, an increase of 6.75 percent over 1994. Belk
is not required to report sales to mall management, while Brody's did not occupy
the center until August of 1995.
Sears reported sales of approximately $16.1 million, or nearly $180 per
square foot, up 5.5 percent over 1994. Sears is believed to be the highest
producing store at Golden East Crossing on a unit rate basis.
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Retail Market Analysis
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JC Penney: In 1995, JC Penney reported a significant increase (7.5 percent)
with sales of $21.1 million, or nearly $171 per square foot.
A comparison of the subject's department store performance can be made to their
peers. The Urban Land Institute also tracks sales of owned and non-owned
department stores by selected affiliation and region. This information is
summarized in the following chart.
<TABLE>
<CAPTION>
========================================================================================
Department Store Sales Data
========================================================================================
Category/Region Average Sales PSF Top 10% PSF Top 2% PSF
========================================================================================
<S> <C> <C> <C>
Super-Regional U.S.
Owned Dept. Stores $144.99 $247.99 $505.13
National Chain $146.89 $271.91 $532.63
Non-Owned Dept. Stores $154.34 $243.28 $367.33
National Chain $154.34 $243.28 $367.33
Eastern Region $152.35 -- --
Western Region $147.26 -- --
Midwestern Region $131.12 -- --
Southern Region $159.23 -- --
========================================================================================
Average -All Super-Regional Centers $148.82 $251.62 $443.11
========================================================================================
Regional Malls U.S.
Owned Dept. Stores $149.26 $245.53 $352.79
National Chain $149.03 $237.27 $343.94
Non-Owned Dept. Stores $162.14 $215.20 $266.01
National Chain $163.08 $215.32 $266.09
Eastern Region $174.78 -- --
Western Region $165.36 -- --
Midwestern Region $151.49 -- --
Southern Region $150.39 -- --
========================================================================================
Average - All Regional Centers $158.19 $228.33 $307.21
========================================================================================
source: Urban Land Institute Dollars & Cents of Shopping Centers (1995)
========================================================================================
</TABLE>
Data from ULI shows that the mean sales level for department stores in
regional malls varies from $149.03 to $174.78 per square foot. Department stores
located in the southern region of the country average sales of $150.39 per
square foot, while the average for all regional centers is $158.19 per square
foot. Stores in the top 10 percent of their peers average (unweighted)
approximately $228 per square foot while the top 2 percent average approximately
$307.21 per square foot.
With reporting anchor sales averaging approximately $174 per square foot,
the reporting department stores at Golden East Crossing appear to outperform
national and southern region averages, but fall well short of the top 10
percent.
Summary
With anchor tenants of JC Penney, Sears, Brody's and Belk, the subject
property is clearly positioned toward the broad center of the retail market.
Mall shop space is tenanted primarily by traditional merchandise retailers, and
is well represented by national retailers such as The Limited and Limited
Express, Lerner, Victoria's Secret and The Bombay Company, as well as by popular
price formats such as Payless Shoe Source. While the tenant mix lacks newer
store concepts which are more upscale, Golden East's more traditional
merchandise
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Retail Market Analysis
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mix is well suited for an effective trade area posting an average household
income $35,389. However, the mall would benefit from national retailers which
offer more specialized merchandise and/or an entertainment orientation which are
not inherently upscale in their appeal (i.e. Disney, Saturday Matinee, Barnes &
Noble). This mix would bring a balance of retail uses to the market which would
include first time tenants to the trade area. Despite a stall in the
re-tenanting of Golden East Crossing, as evidenced in sizable mall vacancy and a
significant local tenant base, the subject benefits from a strong regional
location and the lack of viable mall competition within its immediate trade
area.
Conclusion
We have analyzed the retail trade history and profile of the Rocky Mount
MSA and Nash County in order to make reasonable assumptions as to the continued
performance of the subjects trade area.
A metropolitan and locational overview was presented which highlighted
important points about the study area and demographic and economic data specific
to the trade area was presented. We included a brief discussion of some of the
competitive retail centers in the market area as well as a profile of the anchor
tenants at the mall. The trade area profile discussed encompassed an MSA and zip
code based survey for the subject. Marketing information relating to these
sectors was presented and analyzed in order to determine patterns of change and
growth as it impacts the subject. Given that Belk is not required to report
sales and Brody's is new to the center, we were unable to provide extensive mall
sales analysis. However, Sears and JC Penney and reporting mall shop tenants
report sales noticeably above national and regional averages. The data is useful
in giving quantitative dimensions of the total trade area, while our comments
serve to provide qualitative insight into this area. The following summarizes
our key conclusions:
o The subject enjoys a visible and accessible location within the Rocky Mount
MSA. Both the Rocky Mount MSA and Nash County are expected to maintain a
moderate but steady growth pattern over the near to mid-term.
o The subject's location near the confluence of Highways 43 and 301
maximizes its position as the only viable enclosed regional mall within the
Rocky Mount MSA.
o The region's affluence as measured by average household income and market
expenditure potential has shown steady and moderate growth over the last
decade. While the average household income for the effective trade area is
noticeably below state and national averages, the most affluent areas of
the rather expansive trade area are located most proximate to the subject.
o Within its trade area, the subject competes mainly with community and
traditional strip centers for tenants. It is our opinion that given its
size, lack of anchor depth and mainly local mall shop tenant profile, the
nearby Tarrytown Mall is virtually obsolete as a traditional enclosed
regional mall.
o It is important for ownership to continue to focus on aggressively leasing
the vacant space to national and regional retailers that are considered
unique to the market. The high percentage of national and regional tenants
is important to the extent that these merchants have the benefit of
stronger
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name recognition and are more familiar to shoppers which typically results
in high sales levels.
o Peripheral development around the mall is complimentary rather than
competitive. The relatively recent addition of big box and category killer
formats and other development including restaurants adds to the area draw.
On balance, it is our opinion that with competent management and aggressive
marketing, Golden East Crossing will continue to be the dominant mall serving
the Rocky Mount MSA. Our outlook for the area specific to its role as a regional
shopping hub is cautiously optimistic, with moderate to good prospects for
appreciating real estate values.
Marketability and Marketing Period
In this subsection, we consider the potential market appeal, marketability
and demand for a center like the subject in light of the current real estate
investment market. As discussed elsewhere in this report, the subject involves
an enclosed, regional mall containing 218,704 square feet of mall shop GLA
anchored by four anchor stores for a combined mall GLA of 572,914 square feet.
We have considered the potential market demand and investor risk in our
analysis and valuation of the subject property through our selection of
investment parameters, growth rates, and various assumptions employed. In our
analysis, we have attempted to reflect current market conditions and investor
criteria. Most of the shopping center properties which have been offered for
sale at a "reasonable" price sold within twelve months exposure to the open
market or less. Properties for which seller expectations of value exceed the
market's perception have required more extended marketing periods and have
generally sold at below the initial asking price, or have been pulled off the
market. A "reasonable" price is defined as that price which offers a sufficient
return to the investor relative to the demand for and the risk associated with
the property. These returns vary widely in the current market depending on the
particular investment, its occupancy level, the surrounding demographics, and
upside or downside of the income stream.
The subject is characterized as a well-maintained mall which dominates its
trade area. The subject's effective trade area has a current population of
approximately 269,000 +/- people and is projected to experience moderate but
steady population and household growth in the foreseeable future. We believe
that, if the subject were offered for sale, it would represent an important
investment opportunity for a well positioned center with some upside through
lease rollover and continued efforts to upgrade the tenant mix. Based on the
above, it is our estimate that a market sale of the subject property should be
realized within twelve months exposure on the market.
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<PAGE>
PROPERTY DESCRIPTION
================================================================================
Site Description
Location: Northwest corner of Benvenue Road and U.S. High
301 Bypass
Land Area
Owned
Main Mail Parcel: 52.85 +/- Acres
Owned Outparcels
301 Bypass Front: .90 +/- Acres
301 Bypass Front: .94 +/- Acres
Corner Jeffries/Benvenue: 2.66 +/- Acres
Total Owned: 57.35 +/- Acres
Un-owned Anchors: 8.83 +/- Acres
All Total: 66.18 +/- Acres
Zoning: B3, Business District
Frontage/Terrain: Extensive frontage along Benvenue Road to the east
and U.S. Highway 30 Bypass to the south. The site
slopes in a general east to west direction.
The outparcels have frontage as follows:
.90 acre site along 301 Bypass Road
.94 acre site along 301 Bypass Road
2.66 acre site feet along Benvenue Road
Street Improvements: Benvenue Road is a four-lane arterial while U.S.
Highway 301 Bypass is a partially divided highway.
These street improvements do not include
sidewalks, curbing, and lighting.
Access: The property has good access by virtue of its
location at the corner of its two frontage roads.
Ingress/egress from each road is provided by one
entrance. There also two entrances along the rear
limited access road, Jeffries Road.
Site Improvements: Site improvements include surface parking,
pole-mounted lighting, landscaping, and drainage.
Soil Conditions: We did not receive nor review a soil report.
However, we assume that the soil's load-bearing
capacity is sufficient to support the existing
structures. We did not observe any evidence to the
contrary during our physical inspection of the
property. The tract's drainage appears to be
adequate.
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Property Description
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Gross Leasable Area
Belk*: 112,957 +/- SF
JC Penney: 81,729 +/- SF
Brody's: 69,960 +/- SF
Sears: 89,564 +/- SF
Mall Shops: 218,704 +/- SF
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Total GLA: 572,91 +/- SF
Total Owned GLA: 459,957 +/- SF
* Belk is separately owned.
Construction Detail
Foundations: Reinforced floating concrete slab.
Framing: Steel frame.
Ceiling Height Ceiling heights are 15 to 18 +/- feet in the
anchor tenant and 15 to 25 +/- feet common areas.
Mall shop space has ceiling heights which range
between 12 and 15 feet.
Floor System: Floor slab is reinforced with wire mesh.
Exterior Walls: Exterior walls consist of concrete block which is
brick. There is stone detail at the mall
entrances.
Roof Structure: Structural steel truss system with metal decking.
Roof cover is primarily built-up composition,
which was reported to be an overall average
condition.
Pedestrian Doors: The anchor mall entrances have glass in metal
frame swinging doors.
Loading: There are loading bays which service the mall shop
and anchor tenants.
Mechanical Detail
Heating and Air
Conditioning: There are roof-top electric heat and air
conditioning units which accommodate the
individual tenant spaces. The common area is
similarly accommodated by roof units. There is no
central boiler system.
Plumbing The plumbing is assumed to be to municipal code.
Each tenant space is not directly metered for
water. The charge for water usage is based upon
the number of restrooms in a tenant space.
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Property Description
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Electric: Each tenant is separately metered for electric
usage. The electric systems are assumed to be to
municipal code.
Lighting: Interior lighting is provided by a mixture of
recessed incandescent and florescent lighting
fixtures in the common areas. The stores have a
combination of recessed florescent, and
incandescent fixtures.
Life Safety: The building is fully sprinklered with a wet
system. Emergency power is provided by a diesel
powered generator for emergency lights, exit signs
and fire alarm systems.
Interior Detail
Layout: The mail building is slightly irregular in shape,
with anchor stores and in-line space arranged in a
near triangle shape. This configuration creates a
somewhat awkward inner central triangle set of
units and some awkward corner units for the outer
shop space stores. The main court area has high
ceilings and benefits from having ample natural
light which is provided by skylights located
throughout the mall. The center court and
corridors have attractive planters, and generally
convenient traffic flow.
The four anchors and the theatre space are linked
to the central triangle area by relatively short
corridors.
Floor Coverings: The mall is currently improved with a ceramic tile
paved flooring.
Ceilings: Generally a mixture of interlocking acoustical
tile and painted sheetrock.
Store Fronts: The store fronts are generally a mix of flush and
"pop out" type. Many reflect recent tenant designs
for the respective chain.
Restrooms: The mall has two sets of public restrooms. Tenant
spaces have their own toilet rooms.
Parking: There are 3,056 +/- total service parking spaces
which equates to a ratio of 5.3 spaces per 1,000
square feet of gross leaseable area.
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Property Description
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Americans With Disabilities
Act: The Americans With Disabilities Act (ADA) became
effective January 26, 1992. We have not made, nor
are we qualified by training to make, a specific
compliance survey and analysis of this property to
determine whether or not it is in conformity with
the various detailed requirements of the ADA. It
is possible that a compliance survey and a
detailed analysis of the requirements of the ADA
could reveal that the property is not in
compliance with one or more of the requirements of
the Act. If so, this fact could have a negative
effect upon the value of the property. Since we
have not been provided with the results of a
survey, we did not consider possible non-
compliance with the requirements of ADA in
estimating the value of the property.
Hazardous Substances: We are not aware of any potentially hazardous
materials (such as formaldehyde foam insulation,
asbestos insulation, radon gas emitting materials,
or other potentially hazardous materials) which
may have been used in the construction of the
improvements. However, we are not qualified to
detect such materials and urge the client to
employ an expert in the field to determine if such
hazardous materials are thought to exist.
Physical Condition: The mall was observed to be in overall good
condition.
Comments: The mall is in overall good condition. We are not
aware of ownership undertaking an enhancement
program to upgrade physical features of the mall.
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REAL PROPERTY TAXES AND ASSESSMENTS
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The subject is located within the taxing jurisdiction of both Nash County
and the City of Rocky Mount, North Carolina. The subject's tax parcels,
excluding the non-owned Belk store and previously sold outparcels are identified
for assessment purposes as shown in the chart below.
A summary of the most recent assessment and taxes for the county (payable
January 1996) and the city (payable September 1995), according to the four
parcels, are exhibited below. Parcel number 100 represents contains the owned
improvements and underlying mall land. The Belk department store taxes are not
shown here as it is the responsibility of that department store. Parcel numbers
300, 301 and 301 are the three unsold outparcels.
<TABLE>
<CAPTION>
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Assessment/Tax Summary
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No. Description Assessment City Tax County Tax Total
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<S> <C> <C> <C> <C> <C>
100 385118312755 $25,956,874 $119,409.34 $158,347.17 $277,756.51
300 385114320744 $638,400 $2,936.64 $3,894.24 $6,830.88
301 385118312071 $225,600 $1,037.76 $1,207.80 $2,245.56
302 385118316296 $198,000 $910.80 $1,376.16 $2,286.96
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Total $27,018,874 $124,294.54 $164,825.37 $289,119.91
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</TABLE>
Based upon the above, the total taxes payable in September 1995 and January
1996 are $289,119.91. This equates to a tax burden of $0.63 per square foot of
owned gross leaseable area. The tax rate for Nash County is $0.61 per $100 of
assessment. The prior year's tax rate was also $0.61. The City of Rocky Mount
tax rate is lower at $0.46 per $100 of assessment. The previous year was $0.44
per $100. This represents a 4.5 percent increase in the City's tax component.
Future tax increasing are forecast in our analysis at the inflation growth rate
factor of 3.5 percent.
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ZONING
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The entire subject property is located in the B-3, Business District.
Permitted uses in this district on an as-of-right basis include: several retail
uses including apparel and accessory sales, eating or drinking facilities, food
sales, hardware, home furnishings, office supplies and equipment, and
pharmaceuticals; printing and reproduction; bank, savings and loan company and
other financial activities; dry cleaning and laundry; medical office use; and
other uses. Residential and motel/hotel development are not permitted in the B-3
district.
The minimum lot size and yard regulations are as follows:
Minimum Lot Size 8.5 Acres
Yard Setbacks
Front 50 feet
Side 20 feet
Rear 20 feet
Maximum Height 35 feet
We are not experts in the interpretation of complex zoning ordinances but
the property appears to be a conforming use based on our review of public
information. The determination of compliance is beyond the scope of a real
estate appraisal.
We know of no deed restrictions, private or public, that further limit the
subject property's use. The research required to determine whether or not such
restrictions exist, however, is beyond the scope of this appraisal assignment.
Deed restrictions are a legal matter and only a title examination by an attorney
or title company can usually uncover such restrictive covenants. Thus, we
recommend a title search to determine if any such restrictions do exist.
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HIGHEST AND BEST USE
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Highest and Best Use Analysis
Highest and best use analysis evaluates existing land use for the subject
property and seeks to determine if alternative uses would prove more profitable.
The definition and analysis apply specifically to the land. The analysis further
examines whether the land value at its highest and best use exceeds the total
value of the property under its existing use or as improved. Highest and best
use identifies the most profitable, competitive use to which the property can be
put. Therefore, highest and best use is a market-driven concept.
Definition
Highest and best use is defined as follows:
The reasonably probable and legal use of vacant land or an improved
property, which is physically possible, appropriately supported,
financially feasible, and that results in the highest value. The four
criteria the highest and best use must meet are legal permissibility,
physical possibility, financial feasibility, and maximum profitability
(Dictionary of Real Estate Appraisal, Third Edition, 1993).
The definition indicates that there are two types of highest and best use
analysis required; the site as though vacant, and the site as currently
improved. In each case, the highest and best use must generally meet four
criteria. The use must be (1) physically possible, (2) legally permissible, (3)
financially feasible, and (4) maximally productive.
A. Highest and Best Use of Site As Though Vacant
According to the Dictionary of Real Estate Appraisal, Third Edition (1993),
a publication of the Appraisal Institute, the highest and best use of the site
as though vacant is defined as:
Among all reasonable, alternative uses, the use that yields the highest
present land value, after payments are made for labor, capital, and
coordination. The use of a property based on the assumption that the parcel
of land is vacant or can be made vacant by demolishing any improvements.
Physical Constraints
The first constraint imposed on the possible use of the site is dictated by
the physical aspects of the parcel itself. Physical factors influencing the use
of the site include location, size, shape, topography, soils, abutting uses, the
availability of utilities, and other characteristics.
The subject mall site contains 66.18 acres (including the un-owned Belk
anchor site and three outparcels). The property is located at the northwest
quadrant of Benvenue Road and U.S. Highway 301 Bypass, offering good regional
and local accessibility. Topography is generally level, with good exposure to
the site from both of these roadways. U.S. Highway 301 Bypass has experienced
steady commercial/retail development in recent years.
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Highest and Best Use
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All necessary utilities are available to the site, including public water,
gas, electricity, and telephone services. Physical characteristics--i.e. size,
shape, subsoil conditions, and location-- support various types of development,
including commercial, retail, office, and hotel uses. Abutting uses reflect a
mix of commercial development. As discussed, this quadrant of Rocky Mount has
become a retail/commercial hub for an expanding trade area.
Physically, the site could accommodate a number of potential uses. The
general location of the property and its relation to the Metro Rocky Mount area
is very good. Finally, there appear to be no physical constraints limiting
development of the subject property as though vacant. The site's size, location,
and configuration support a variety of possible uses, including retail, office
and hotel.
Legal Considerations
Legal factors influencing the highest and best use of the subject property
involve local land use guidelines, including comprehensive plans, zoning, and
building codes. The intensity of development may also be affected by surrounding
land uses, neighborhood concerns, and the local planning process.
The subject site is zoned B-3, Business by the City of Rocky Mount. This
zoning district allows for a variety of uses, including retail businesses,
eating and drinking establishments, banks, medical offices, food stores,
furniture sales, printers and other uses.
There are no other known land use regulations, easements, or encumbrances
which might impact development on the subject. Further, the site does not appear
to possess any significant natural, cultural, recreational, or scientific
attributes which may influence its use. Based upon this analysis, potential
legally permissible development of the subject site as though vacant would
include retail, certain service businesses and professional office assuming
proper parking requirements are met. Hotels/motels and residential uses are not
permitted.
Considering surrounding uses, it is clear that a large-scale retail use of
the site would be most appropriate. Parking would be necessary for this use.
Financial Feasibility/Economic Considerations
After determining those uses which are physically possible and legally
permissible, the uses considered must be analyzed in light of their financial
feasibility. For a potential use to be seriously considered, it must have the
potential to provide a sufficient return to attract investment capital over
alternative forms of investment. A positive net income or acceptable rate of
return would indicate that a use is financially feasible. Based on the foregoing
discussion, potential feasible uses for the subject site are limited to various
retail uses.
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Highest and Best Use
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As discussed in the various locational analyses sections of this report,
the Rocky Mount MSA and the City of Rocky Mount have experienced growth in
recent years, with growth potential projected for the near-term. Considering the
site's size, location, and accessibility, we are of the opinion that the
property's highest and best use would be for a use that utilizes this location
and relies upon the draw of customers both regionally and locally. In this
sense, regional mall development would best suit the attributes of the subject
site. The overall success of the subject property supports this conclusion.
However, it is important to note that the current subject mall contains surplus
shop space. It is our conclusion that there is not sufficient demand for
occupancy of all of the currently available shop space.
Maximum Productivity
Finally, of the financially feasible, physically possible, and legally
permissible uses considered, the use that produces the highest price or value
consistent with the rate of return warranted by the market for that use is the
highest and best use. While this test of maximum productivity implies a
quantitative analysis, it is often most qualitative and sensitive to community,
social, political, and governmental concerns.
In the case of the subject, the site has good accessibility and exposure.
Surrounding land uses imply a retail use for the subject site, while zoning has
also focused on retail development. Convenient access and parking are also
overriding issues for potential development of the site. The subject's size and
location lead us to the conclusion that the highest and best use of the subject
property, as though vacant, is for regional mall development with surrounding
outparcel uses. As will be discussed in the highest and best use as improved,
regional mall development provides a sufficient return to the land.
A developer mindful of the prospective lot coverage, yet savvy as to the
market's potential for absorbing new product, would consider the site's feasible
potential. Parking is an overriding constraint that dictates the ultimate size
of a potential development. Accordingly, our premise assumes that parking would
be provided to a level sufficient for the total project.
Conclusion As Though Vacant
Based on the preceding analysis, the highest and best use of the subject
property, as though vacant, is for a regional mall development that contains
outparcels.
B. Highest and Best Use of Property As Improved
According to the Dictionary of Real Estate Appraisal, highest and best use
of the property as improved is defined as:
The use that should be made of a property as it exists. An existing
property should be renovated or retained as is so long as it continues to
contribute to the total market value of the property, or until the return
from a new improvement would more than offset the cost of demolishing the
existing building and constructing a new one.
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Highest and Best Use
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Physical Constraints
In considering the physical characteristics of the subject as improved, the
existing use must also meet criteria in order to maintain the property's highest
and best use. Existing improvements can be analyzed three ways: 1) they can be
retained as is; 2) they can be modified, altered, or rehabilitated; and 3) they
can be demolished in favor of an alternative use.
The subject site is currently improved with an enclosed regional mall with
surface parking. The subject improvements are considered to be in good
condition. The layout and design are conducive for existing uses and the site
configuration provides good access into the property.
There do not appear to be any other physical factors such as soil or
drainage conditions or other physical characteristics that adversely affect the
continued utility and/or existence of subject improvements. Thus, the subject
site as currently improved is a physically possible use.
Legal Considerations
The subject site as currently improved represents a legal, conforming use.
There do not appear to be any public or private use restrictions or covenants
which adversely affect the current use of the property. Although the subject
building could legally be modified or possibly demolished for an alternative
use, this would not be a logical progression since the subject does not suffer
from prohibitive functional or physical problems which inhibit its current use.
Furthermore, the leases and operating agreements in place dictate a retail use
for the property. Therefore, the subject site, as improved, is legally
permissible.
Financial Feasibility/Economic Considerations
As will be discussed in the Income Approach section of this report, the
subject property, as improved, is capable of producing a sufficient return to
the land. Moreover, analysis of the subject property as if vacant indicates that
the highest and best use of the site is for retail development. This
determination has been made by comparing alternative uses for the property and
establishing which use provides the greatest return to the land. Demolishing
existing improvements would not be financially feasible due to the cost involved
and the potential return an alternative use would bring. Thus, current
improvements to the subject provide the most financially feasible use of the
site.
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Highest and Best Use
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Maximum Productivity
Based upon the foregoing analysis, the subject parcel, as currently
improved, represents the maximally productive use of the site. Although the site
could be developed with an alternative configuration by demolishing existing
improvements, this scenario would not be economically justifiable and, as a
result, fail the test of financial feasibility and maximum productivity. In our
opinion, no other use of the site would provide as great a return. It is our
opinion, however, that the long term historical vacancy of a portion of the shop
space represents structural vacancy. We do not foresee adequate near term growth
that would persuade a potential investor to project income for a portion of the
currently vacant space.
Conclusion As Improved
The highest and best use of the subject property is therefore as currently
improved. The existing use is physically possible, legally permissible,
financially feasible, and maximally productive. Market conditions in the Rocky
Mount MSA and the City of Rocky Mount indicate demand for properties of the
subject's stature, with vacancy and rental rates which justify the financial
feasibility of existing improvements.
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VALUATION PROCESS
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Appraisers typically use three approaches in valuing real property: The
Cost Approach, the Income Approach and the Sales Comparison Approach. The type
and age of the property and the quantity and quality of data effect the
applicability in a specific appraisal situation.
The Cost Approach renders an estimate of value based upon the price of
obtaining a site and constructing improvements, both with equal desirability and
utility as the subject property. Historically, investors have not emphasized
cost analysis in purchasing investment grade properties such as regional malls.
The estimation of obsolescence for functional and economic conditions as well as
depreciation on improvements makes this approach difficult at best. Furthermore,
the Cost Approach fails to consider the value of department store commitments to
regional shopping centers and the difficulty of site assemblage for such
properties. As such, a complete Cost Approach will not be employed in this
analysis due to the fact that the marketplace does not rigidly trade leased
shopping centers on a cost/value basis.
The Sales Comparison Approach is based on an estimate of value derived from
the comparison of similar type properties which have recently been sold. Through
an analysis of these sales, efforts are made to discern the actions of buyers
and sellers active in the marketplace, as well as establish relative unit values
upon which to base comparisons with regard to the mall. This approach has a
direct application to the subject property. Furthermore, this approach has been
used to develop investment indices and parameters from which to judge the
reasonableness of our principal approach, the Income Approach. The Sales
Comparison Approach will also be used to value the three owned, vacant
outparcels.
By definition, the subject property is considered an income/ investment
property. Properties of this type are historically bought and sold on the
ability to produce economic benefits, typically in the form of a yield to the
purchaser on investment capital. Therefore, the analysis of income capabilities
are particularly germane to this property since a prudent and knowledgeable
investor would follow this procedure in analyzing its investment qualities.
Therefore, the Income Approach has been emphasized as our primary methodology
for this valuation. This valuation concludes with a final estimate of the
subject's market value based upon the total analysis as presented herein.
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SALES COMPARISON APPROACH
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Methodology
The Sales Comparison Approach provides an estimate of market value by
comparing recent sales of similar properties in the surrounding or competing
area to the subject property. Inherent in this approach is the principle of
substitution, which holds that, when a property is replaceable in the market,
its value tends to be set at the cost of acquiring an equally desirable
substitute property, assuming that no costly delay is encountered in making the
substitution.
By analyzing sales that qualify as arms-length transactions between willing
and knowledgeable buyers and sellers, market value and price trends can be
identified. Comparability in physical, locational, and economic characteristics
is an important criterion when comparing sales to the subject property. The
basic steps involved in the application of this approach are as follows:
1. Research recent, relevant property sales and current offerings
throughout the competitive marketplace;
2. Select and analyze properties considered most similar to the subject,
giving consideration to the time of sale, change in economic
conditions which may have occurred since date of sale, and other
physical, functional, or locational factors;
3. Identify sales which include favorable financing and calculate the
cash equivalent price; and
4. Reduce the sale prices to a common unit of comparison, such as price
per square foot of gross leasable area sold;
5. Make appropriate adjustments between the comparable properties and the
property appraised;
6. Interpret the adjusted sales data and draw a logical value conclusion.
The most widely-used, market-oriented units of comparison for retail
properties such as the subject are the sale price per square foot of gross
leasable area (GLA) purchased, and the overall capitalization rate extracted
from the sale. This latter measure will be addressed in the Income Approach
which follows this methodology. An analysis of the inherent sales multiple also
lends additional support to the Sales Comparison Approach.
Market Overview
The typical purchaser of properties of the subject's caliber includes both
foreign and domestic insurance companies, large retail developers, pension
funds, and real estate investment trusts (REIT's). The large capital
requirements necessary to participate in this market and the expertise demanded
to successfully operate an investment of this type, both limit the number of
active participants and, at the same time, expand the geographic boundaries of
the marketplace to include the international arena. Due to the relatively small
number of market participants and the moderate amount of quality product
available in the current marketplace, strong demand exists for the nation's
quality retail developments.
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Sales Comparison Approach
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Most institutional grade retail properties are existing, seasoned centers
with good inflation protection. These centers offer stability in income and are
strongly positioned to the extent that they are formidable barriers to new
competition. They tend to be characterized as having three to five department
store anchors, most of which are dominant in the market. Mall shop sales are at
least $300 per square foot and the trade area offers good growth potential in
terms of population and income levels. Equally important are centers which offer
good upside potential after face-lifting, renovations, or expansion. With new
construction down substantially, owners have accelerated their renovation and
remerchandising programs. Little competition from over-building is likely in
most mature markets within which these centers are located. Environmental
concerns and "no-growth" mentalities in communities continue to be serious
impediments to new retail developments.
Over the past 18 +/- months, we have seen real estate investment return to
favor as an important part of many institutional investors' diversified
portfolios. Banks are aggressively competing for business, trying to regain
market share lost to Wall Street, while the more secure life insurance companies
are also reentering the market. The re-emergence of real estate investment
trusts (REITs) has helped to provide liquidity within the real estate market,
pushing demand for well-tenanted, quality property, particularly regional malls.
Currently, REITs are one of the most active segments of the industry and are
particularly attractive to institutional investors due to their liquidity.
The market for dominant Class A institutional quality malls is tight, as
characterized by the limited amount of good quality product available. It is the
consensus that Class A property would trade in the 7.0 to 8.0 percent
capitalization rate range. Conversely, there are many second tier and lower
quality malls offered on the market at this time. With limited demand from a
much thinner market, cap rates for this class of malls are felt to be in the
much broader 8.5 to 15.0 percent range. Reportedly, there are 50 +/- malls on
the market currently. Pessimism about the long term viability of many of these
lower quality malls has been fueled by the recent turmoil in the retail
industry. It is felt that the subject resides on the better quality end of this
latter category.
To better understand where investors stand in today's marketplace, we have
surveyed active participants in the retail investment market. Based upon our
survey, the following points summarize some of the more important "hot buttons"
concerning investors:
1. Occupancy Costs - This "health ratio" measure is of fundamental
concern today. Investors like to see ratios under 13.0 percent and
become quite concerned when they exceed 15.0 percent. This appears to
be by far the most important issue to an investor today. Investors are
looking for long term growth in cash flow and want to realize this
growth through real rent increases. High occupancy costs limit the
amount of upside through lease rollovers.
2. Market Dominance - The mall should truly be the dominant mall in the
market, affording it a strong barrier to entry. Some respondents feel
this is more important than the size of the trade area itself.
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Sales Comparison Approach
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3. Strong Anchor Alignment - Having at least three department stores, two
of which are dominant in that market. The importance of the
traditional department store as an anchor tenant has returned to favor
after several years of weak performance and confusion as to the
direction of the industry. As a general rule, most institutional
investors would not be attracted to a two- anchor mall.
4. Dense Marketplace - Several of the institutional investors favor
markets of 300,000 to 500,000 people (at least 150,000 households) or
greater within a 5 to 7 mile radius. Population growth in the trade
area is also very important. One advisor likes to see growth 50
percent better than the U.S. average. Another investor cited that they
will look at trade areas of 200,000 but that if there is no population
growth forecasted in the market, a 50 basis point adjustment to the
cap rate at the minimum is warranted.
5. Income Levels - Household incomes of $50,000+ which tends to be
limited in many cases to top 50 MSA locations.
6. Good Access - Interstate access with good visibility and a location
within or proximate to the growth path of the community.
7. Tenant Mix - A complimentary tenant mix is important. Mall shop ratios
of 35 +/- percent of total GLA are considered average with 75.0 to
80.0 percent allocated to national tenants. Mall shop sales of at
least $250 per square foot with a demonstrated positive trend in sales
is also considered to be important.
8. Physical Condition - Malls that have good sight lines, an updated
interior appearance, and a physical plant in good shape are looked
upon more favorably. While several developers are interested in
turnaround situations, the risk associated with large capital
infusions can add at least 200 to 300 basis points onto a cap rate.
9. Environmental Issues - The impact of environmental problems cannot be
understated. There are several investors who won't even look at a deal
if there are any potential environmental issues no matter how
seemingly insignificant.
10. Operating Covenants - Some buyers indicated that they would not be
interested in buying a mall if the anchor store operating covenants
were to expire over the initial holding period. Others weigh each
situation on its own merit. If it is a dominant center with little
likelihood of someone coming into the market with a new mall, they are
not as concerned about the prospects of loosing a department store. If
there is a chance of loosing an anchor, the cost of keeping them must
be weighed against the benefit. In many of their malls they are
finding that traditional department stores are not always the optimum
tenant but that a category killer or other big box use would be a more
logical choice.
In the following section we will discuss trends which have become apparent
over the past several years involving sales of regional malls.
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Sales Comparison Approach
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Regional Mall Property Sales
Evidence has shown that mall property sales which include anchor stores
have lowered the square foot unit prices for some comparables, and have affected
investor perceptions. In our discussions with major shopping center owners and
investors, we learned that capitalization rates and underwriting criteria have
become more sensitive to the contemporary issues affecting department store
anchors. Traditionally, department stores have been an integral component of a
successful shopping center and, therefore, of similar investment quality if they
were performing satisfactorily.
During the 1980's a number of acquisitions, hostile take-overs and
restructurings occurred in the department store industry which forever changed
the playing field. Weighted down by intolerable debt, combined with a slumping
economy and a shift in shopping patterns, the end of the decade was marked by a
number of bankruptcy filings unsurpassed in the industry's history. Evidence of
further weakening continued into 1991-1992 with filings by such major firms as
Carter Hawley Hale, P.A. Bergner & Company, and Macy's. In early 1994, Woodward
& Lothrop announced their bankruptcy involving two department store divisions
that dominate the Philadelphia and Washington D.C. markets. Recently, most of
the stores were acquired by the May Department Stores Company, effectively
ending the existence of the 134 year old Wanamaker name, the nation's oldest
department store company. More recently, however, department stores have been
reporting a return to profitability resulting from increased operating economies
and higher sales volumes. Sears, once marked by many for extinction, has more
recently won the praise of analysts. Federated Department Stores has also been
acclaimed as a text book example on how to successfully emerge from bankruptcy.
They have merged with Macy's and more recently acquired the Broadway chain to
form one of the nation's largest department store companies.
With all this in mind, investors are looking more closely at the strength
of the anchors when evaluating an acquisition. Most of our survey respondents
were of the opinion that they were indifferent to acquiring a center that
included the anchors versus stores that were independently owned if they were
good performers. However, where an acquisition includes anchor stores, the
resulting cash flow is typically segregated with the income attributed to
anchors (base plus percentage rent) analyzed at a higher cap rate then that
produced by the mall shops.
However, more recent data suggests that investors are becoming more
troubled by the creditworthiness of the mall shops. With an increase in
bankruptcies, store closures and consolidations, we see investors looking more
closely at the strength and vulnerabilities of the in-line shops. As a result,
there has been a marked trend of increasing capitalization rates.
Cushman & Wakefield has extensively tracked regional mall transaction
activity for several years. In this analysis we will show sales trends since
1991. Summary charts for the older sales (1991-1993) are provided in the
Addenda. The more recent sales (1994/1995) are provided herein. These sales are
inclusive of good quality Class A or B properties that are dominant in their
market. Also included are weaker properties in second tier cities that have a
narrower investment appeal. As such, the mall sales presented in this analysis
show a wide variety of prices on a per unit basis, ranging from $59 per square
foot up to $556 per square foot of total GLA purchased. When expressed on the
basis of mall shop GLA acquired, the range is more broadly seen to be $93 to
$647 per square foot. Alternatively, the overall
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Sales Comparison Approach
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capitalization rates that can be extracted from each transaction range from 5.60
percent to rates in excess of 11.0 percent.
One obvious explanation for the wide unit variation is the inclusion (or
exclusion) of anchor store square footage which has the tendency to distort unit
prices for some comparables. Other sales include only mall shop area where small
space tenants have higher rents and higher retail sales per square foot. A
shopping center sale without anchors, therefore, gains all the benefits of
anchor/small space synergy without the purchase of the anchor square footage.
This drives up unit prices to over $250 per square foot, with most sales over
$300 per square foot of salable area. A brief discussion of historical trends in
mall transactions follows.
o The fourteen sales included for 1991 show a mean average price per
square foot sold of $282. On the basis of mall shop GLA sold, these
sales present a mean of $357. Sales multiples range from .74 to 1.53
with a mean of 1.17. Capitalization rates range from 5.60 to 7.82
percent with an overall mean of 6.44 percent. The mean terminal
capitalization rate is approximately 100 basis points higher, or 7.33
percent. Yield rates range between 10.75 and 13.00 percent, with a
mean of 11.52 percent for those sales reporting IRR expectancies.
o In 1992, the eleven transactions display prices ranging from $136 to
$511 per square foot of GLA sold, with a mean of $259 per square foot.
For mall shop area sold, the 1992 sales suggest a mean price of $320
per square foot. Sales multiples range from .87 to 1.60 with a mean of
1.07. Capitalization rates range between 6.00 and 7.97 percent with
the mean cap rate calculated at 7.31 percent for 1992. For sales
reporting a going-out cap rate, the mean is shown to be 7.75 percent.
Yield rates range from 10.75 to around 12.00 percent with a mean of
11.56 percent. For 1993, a total of sixteen transactions have been
tracked. These sales show an overall average sale price of $242 per
square foot based upon total GLA sold and $363 per square foot based
solely upon mall GLA sold. Sales multiples range from .65 to 1.82 and
average 1.15. Capitalization rates continued to rise in 1993, showing
a range between 7.00 and 10.10 percent. The overall mean has been
calculated to be 7.92 percent. For sales reporting estimated terminal
cap rates, the mean is also equal to 7.92 percent. Yield rates for
1993 sales range from 10.75 to 12.50 percent with a mean of 11.53
percent for those sales reporting IRR expectancies. On balance, the
year was notable for the number of dominant Class A malls which
transferred.
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o Sales data for 1994 shows fourteen confirmed transactions with an
average unit price per square foot of $197 per square foot of total
GLA sold and $288 per square foot of mall shop GLA. Sales multiples
range from .57 to 1.43 and average .96. The mean going-in
capitalization rate is shown to be 8.37 percent. The residual
capitalization rates average 8.13 percent. Yield rates range from
10.70 to 11.50 percent and average 11.17 percent. During 1994, many of
the closed transactions involved second and third tier malls. This
accounted for the significant drop in unit rates and corresponding
increase in cap rates. Probably the most significant sale involved the
Riverchase Galleria, a 1.2 million square foot center in Hoover,
Alabama. LaSalle Partners purchased the mall of behalf of the
Pennsylvania Public School Employment Retirement System for $175.0
million. The reported cap rate was approximately 7.4 percent.
o Cushman & Wakefield has researched 14 mall transactions for 1995. With
the exception of Sale No. 95-1 (Natick Mall) and 95-2 (Smith Haven
Mall), by and large the quality of malls sold are lower than what has
been shown for prior years. For example, the average transaction price
has been slipping. In 1993, the peak year, the average deal was nearly
$133.8 million. Currently, it is shown to be $90.7 million which is
even skewed upward by Sale Nos. 95-1 and 95-2. The average price per
square foot of total GLA is calculated to be $152 per square foot. The
range in values of mall GLA sold are $93 to $607 with an average of
$275 per square foot. Characteristic of these lesser quality malls
would be higher initial capitalization rates. The range for these
transactions is 7.47 to 11. 1 percent with a mean of 9.14 percent,
the highest average over the past five years. Most market participants
feel that continued turmoil in the retail industry will force cap
rates to move higher over the ensuing year.
While these unit prices implicitly contain both the physical and economic
factors affecting the real estate, the statistics do not explicitly convey many
of the details surrounding a specific property. Thus, this single index to the
valuation of the subject property has limited direct application. The price per
square foot of mall shop GLA acquired yields one common form of comparison.
However, this can be distorted if anchor and/or other major tenants generate a
significant amount of income. The following chart summarizes the range and mean
for this unit of comparison by year of sale.
=============================================================
Transaction Price/SF Price/SF Sales
Year Unit Rate Range Mean Multiple
=============================================================
1991 $203 - $556 $357 1.17
-------------------------------------------------------------
1992 $226 - $511 $320 1.07
-------------------------------------------------------------
1993 $173 - $647 $363 1.15
-------------------------------------------------------------
1994 $129 - $502 $288 .96
-------------------------------------------------------------
1995 $ 93 - $607 $264 .98
=============================================================
* Includes all sales by each respective year.
=============================================================
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As discussed, one of the factors which may influence the unit rate is
whether or not anchor stores are included in the total GLA which is transferred.
Thus, a further refinement can be made between those malls which have
transferred with anchor space and those which have included only mall GLA. Chart
A, shown below makes this distinction.
<TABLE>
<CAPTION>
CHART A
Regional Mall Sales
Involving Mall Shop Space Only
=============================================================================================================================
1991 1992 1993 1994
=============================================================================================================================
Sale Unit NOI Sale Unit NOI Sale Unit NOI Sale Unit NOI
No. Rate Per SF No. Rate Per SF No. Rate Per SF No. Rate Per SF
=============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
91- 1 $257 $15.93 92- 2 $348 $25.27 93- 1* $355 $23.42 94- 1 $136 $11.70
- -----------------------------------------------------------------------------------------------------------------------------
91- 2 $232 $17.65 92- 9 $511 $33.96 93- 4 $471 $32.95 94- 3 $324 $22.61
- -----------------------------------------------------------------------------------------------------------------------------
91- 5 $203 $15.89 92-11 $283 $19.79 93- 5 $396 $28.88 94-12 $136 $14.00
- -----------------------------------------------------------------------------------------------------------------------------
91- 6 $399 $24.23 93- 8 $265 $20.55 94-14 $241 $18.16
- -----------------------------------------------------------------------------------------------------------------------------
91- 7 $395 $24.28 93-16 $268 $19.18
- -----------------------------------------------------------------------------------------------------------------------------
91- 8 $320 $19.51
- -----------------------------------------------------------------------------------------------------------------------------
91-10 $556 $32.22
- -----------------------------------------------------------------------------------------------------------------------------
Mean $337 $21.39 Mean $381 $26.34 Mean $351 $25.00 Mean $209 $16.62
=============================================================================================================================
* Sale included peripheral GLA.
=============================================================================================================================
</TABLE>
From the above we see that the mean unit rate for sales involving mall shop
GLA only has ranged from approximately $209 to $381 per square foot. We
recognized that these averages may be skewed somewhat by the size of the sample.
There were no 1995 transactions involving only mall shop GLA.
Alternately, where anchor store GLA has been included in the sale, the unit
rate is shown to range widely from $53 to $410 per square foot of salable area,
indicating a mean of $227 per square foot in 1991, $213 per square foot in 1992,
$196 per square foot in 1993, $193 per square foot in 1994 and $145 per square
foot in 1995. Chart B following depicts this data.
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<TABLE>
<CAPTION>
CHART B
Regional Mall Sales
Involving Mall Shops and Anchor GLA
==========================================================================================
1991 1992 1993
==========================================================================================
Sale Unit NOI Sale Unit NOI Sale Unit NOI
No. Rate Per SF No. Rate Per SF No. Rate Per SF
==========================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
91- 3 $156 $11.30 92- 1 $258 $20.24 93- 2 $225 $17.15
- ------------------------------------------------------------------------------------------
91- 4 $228 $16.50 92- 3 $197 $14.17 93- 3 $135 $11.14
- ------------------------------------------------------------------------------------------
91- 9 $193 $12.33 92- 4 $385 $29.43 93- 6 $224 $16.39
- ------------------------------------------------------------------------------------------
91-11 $234 $13.36 92- 5 $182 $14.22 93- 7 $ 73 $ 7.32
- ------------------------------------------------------------------------------------------
91-12 $287 $17.83 92- 6 $203 $16.19 93- 9 $279 $20.66
- ------------------------------------------------------------------------------------------
91-13 $242 $13.56 92- 7 $181 $13.60 93-10 $ 97 $ 9.13
- ------------------------------------------------------------------------------------------
91-14 $248 $14.87 92- 8 $136 $ 8.18 93-11 $289 $24.64
- ------------------------------------------------------------------------------------------
92-10 $161 $12.07 93-12 $194 $13.77
- ------------------------------------------------------------------------------------------
93-13 $108 $ 9.75
- ------------------------------------------------------------------------------------------
93-14 $322 $24.10
- ------------------------------------------------------------------------------------------
93-15 $214 $16.57
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Mean $227 $14.25 Mean $213 $16.01 Mean $196 $15.51
==========================================================================================
</TABLE>
CHART B
Regional Mall Sales
Involving Mall Shops and Anchor GLA
================================================================================
1994 1995
================================================================================
Sale Unit NOI Sale Unit NOI
No. Rate Per SF No. Rate Per SF
================================================================================
94- 2 $296 $23.12 95- 1 $410 $32.95
- --------------------------------------------------------------------------------
94- 4 $133 $11.69 95- 2 $272 $20.28
- --------------------------------------------------------------------------------
94- 5 $248 $18.57 95- 3 $ 91 $ 8.64
- --------------------------------------------------------------------------------
94- 6 $112 $ 9.89 95- 4 $105 $ 9.43
- --------------------------------------------------------------------------------
94- 7 $166 $13.86 95- 5 $ 95 $ 8.80
- --------------------------------------------------------------------------------
94- 8 $ 83 $ 7.63 95- 6 $ 53 $ 5.89
- --------------------------------------------------------------------------------
94- 9 $ 95 $ 8.57 95- 7 $ 79 $ 8.42
- --------------------------------------------------------------------------------
94-10 $155 $13.92 95- 8 $ 72 $ 7.16
- --------------------------------------------------------------------------------
94-11 $262 $20.17 95- 9 $ 96 $ 9.14
- --------------------------------------------------------------------------------
94-13 $378 $28.74 95-10 $212 $17.63
- --------------------------------------------------------------------------------
95-11 $ 56 $ 5.34
- --------------------------------------------------------------------------------
95-12 $ 59 $ 5.87
- --------------------------------------------------------------------------------
95-13 $143 $11.11
- --------------------------------------------------------------------------------
95-14 $287 $22.24
- --------------------------------------------------------------------------------
Mean $193 $15.62 Mean $145 $12.35
================================================================================
* Sale included peripheral GLA.
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Analysis of Sales
Within Charts A and B, we have presented a summary of recent transactions
(1991-1995) involving regional and super-regional-sized retail shopping malls
from which price trends may be identified for the extraction of value
parameters. These transactions have been segregated by year of acquisition so as
to lend additional perspective on our analysis. Comparability in both physical
and economic characteristics are the most important criteria for analyzing sales
in relation to the subject property. However, it is also important to recognize
the fact that regional shopping malls are distinct entities by virtue of age and
design, visibility and accessibility, the market segmentation created by anchor
stores and tenant mix, the size and purchasing power of the particular trade
area, and competency of management. Thus, the "Sales Comparison Approach", when
applied to a property such as the subject can, at best, only outline the
parameters in which the typical investor operates. The majority of these sales
transferred either on an all cash (100 percent equity) basis or its equivalent
utilizing market-based financing. Where necessary, we have adjusted the purchase
price to its cash equivalent basis for the purpose of comparison.
As suggested, sales which include anchors typically have lower square foot
unit prices. In our discussions with major shopping center owners and investors,
we learned that capitalization rates and underwriting criteria have become
more sensitive to the contemporary issues dealing with the department store
anchors. As such, investors are looking more closely than ever at the strength
of the anchors when evaluating an acquisition.
As the reader shall see, we have attempted to make comparisons of the
transactions to the subject primarily along economic lines. For the most part,
the transactions have involved dominant or strong Class A centers in top 50 MSA
locations which generally have solid, expanding trade areas and good income
profiles. Some of the other transactions are in decidedly inferior second tier
locations with limited growth potential and near term vacancy problems. These
sales tend to reflect lower unit rates and higher capitalization rates.
The subject contains 218,704+/- square feet of mall shop space together
with four anchors totaling 354,210+/- square feet. Three of the four anchor
stores are owned GLA totaling 241,253+/- square feet. Only Belk in 112,957+/-
square feet owns their own store. Therefore, we will look at the recent sales in
Chart B more closely. As a basis for comparison, we will analyze the subject
based upon projected NOI. The first year NOI has been projected to be $7.85 per
square foot (FY 1997), based upon 459,957+/- square feet of owned GLA.
Derivation of the subject's projected net operating income is presented in the
Income Approach section of this report as calculated by the Pro-Ject model. With
projected NOI of $7.85 per square foot, the subject falls toward the lower end
of the range of 1995 comparables sales. We note, however, that four of the
comparable sales posted a per square foot NOI lower than that of the subject's,
while nine of the comparable sales posted a per square foot NOI of less than
$10 per square foot. The mean was $12.35 of NOI per square foot.
Since the income that an asset will produce has direct bearing on the price
that a purchaser is willing to pay, it is obvious that a unit price which falls
within the lower end to middle of the range indicated by the comparables would
be applicable to the subject. The subject's anticipated net income can be
initially compared to the composite mean of the annual transactions in order to
place the subject in a frame of reference. This is shown on the following chart.
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==============================================================
Comprison to Regional Malls Sales
Involving Mall Shops & Anchor GLA
==============================================================
Sales Year Mean NOI Subject Forecast Subject Ratio
==============================================================
1991 $14.25 $7.85 55.1%
1992 $16.01 $7.85 49.0%
1993 $15.51 $7.85 50.6%
1994 $15.62 $7.85 50.3%
1995 $12.35 $7.85 63.6%
==============================================================
With first year NOI forecasted at approximately 49.0 to 63.6 percent of the
mean of these sales in each year, the unit price which the subject property
would command should be expected to fall within a relative range.
Net Income Multiplier Method - Retail Component
Many of the comparables were bought on expected income, not gross leasable
area, making unit prices a somewhat subjective reflection of investment behavior
regarding regional malls. In order to quantify the appropriate adjustments to
the indicated per square foot unit values, we have compared the subject's first
year pro forma net operating income to the pro forma income of the individual
sale properties. In our opinion, a buyer's criteria for the purchase of a retail
property is predicated primarily on the property's income characteristics. Thus,
we have identified a relationship between the net operating income and the sales
price of the property. Typically, a higher net operating income per square foot
corresponds to a higher sales price per square foot. Therefore, this adjustment
incorporates factors such as location, tenant mix, rent levels, operating
characteristics, and building quality.
Provided below, we have extracted the net income multiplier from each of
the improved sales. We have included only the recent sales data (1995). The
equation for the net income multiplier (NIM), which is the inverse of the
equation for the capitalization rate (OAR), is calculated as follows:
NIM =Sales Price
-----------
Net Operating Income
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==================================================
Net Income Multiplier Calculation
==================================================
Net Income
Sale No. NOI/SF Price/SF Multiplier
==================================================
95-1 $32.95 $410 12.44
95-2 $20.28 $272 13.41
95-3 $8.64 $91 10.53
95-4 $9.43 $105 11.13
95-5 $8.80 $95 10.80
95-6 $5.89 $53 9.00
95-7 $8.42 $79 9.38
95-8 $7.16 $72 10.06
95-9 $9.14 $96 10.50
95-10 $17.63 $212 12.02
95-11 $5.34 $53 9.93
95-12 $5.87 $59 10.05
95-13 $11.11 $143 12.87
95-14 $22.24 $287 12.90
==================================================
Mean $12.35 $145 11.07
==================================================
Valuation of the subject property utilizing the net income multipliers
(NIMs) from the comparable properties accounts for the disparity of the net
operating incomes ($NOI's) per square foot between the comparables and the
subject. Within this technique, each of the adjusted NIM's are multiplied by the
$NOI per square foot of the subject, which produces an adjusted value indication
for the subject. The net operating income per square foot for the subject
property is calculated as the first year of the holding period, as detailed in
the Income Approach section of this report.
Adjusted Unit Rate Summary
==================================================
Subject Net Income Indicated Price
Sale No. NOI/SF Multiplier $/SF
==================================================
95-1 $7.85 12.44 $97.65
95-2 $7.85 13.41 $105.27
95-3 $7.85 10.53 $82.66
95-4 $7.85 11.13 $87.37
95-5 $7.85 10.80 $84.78
95-6 $7.85 9.00 $70.65
95-7 $7.85 9.38 $73.63
95-8 $7.85 10.06 $78.97
95-9 $7.85 10.50 $82.43
95-10 $7.85 12.02 $94.36
95-11 $7.85 9.93 $77.95
95-12 $7.85 10.05 $78.89
95-13 $7.85 12.87 $101.03
95-14 $7.85 12.90 $101.27
==================================================
Mean $7.85 11.07 $86.92
==================================================
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From the process above, we see that the indicated net income multipliers
range from 9.00 to 13.41 with a mean of 11.07. The adjusted unit rates range
from $70.65 to $105.27 per square foot of owned GLA with a mean of $302 per
square foot.
We recognize that the sale price per square foot of gross leasable area,
including land, implicitly contains both the physical and economic factors of
the value of a shopping center. Such statistics by themselves, however, do not
explicitly convey many of the details surrounding a specific income producing
property like the subject. Nonetheless, the process we have undertaken here is
an attempt to quantify the unit price based upon the subject's income producing
potential.
Considering the characteristics of the subject relative to the above, we
believe that a unit rate range of $80 to $85 per square foot is appropriate.
Applying this unit rate range to 434,596+/- square feet of owned GLA results
in a value of approximately $36.8 million to $39.1 million for the subject as
shown:
459,957 SF 459,957 SF
x $80 x $85
---------- ----------
$36,796,560 $39,096,345
Rounded Value Estimate - Market Sales Unit Rate Comparison
$36,800,000 to $39,100,000
Sales Multiple Method - Retail Component
Arguably, it is the mall shop GLA sold and its intrinsic economic profile
that is of principal concern in the investment decision process. A myriad
of factors influence this rate, perhaps none of which is more important
than the sales performance of the mall shop tenants. Accordingly, the
abstraction of a sales multiple from each transaction lends additional
perspective to this analysis.
The sales multiple measure is often used as a relative indicator of the
reasonableness of the acquisition price. As a rule of thumb, investors will look
at a sales multiple of 1.0 as a benchmark, and will look to keep it within a
range of .75 to 1.25 times mall shop sales performance unless there are
compelling reasons why a particular property should deviate.
The sales multiple is defined as the sales price per square foot of mall
GLA divided by average mall shop sales per square foot. As this reasonableness
test is predicated upon the economics of the mall shops, technically, any income
(and hence value) attributed to anchors that are acquired with the mall as
tenants should be segregated from the transaction. As an income (or sales)
multiple has an inverse relationship with a capitalization rate, it is
consistent that, if a relatively low capitalization rate is selected for a
property, it follows that a correspondingly above-average sales (or income)
multiple be applied. In most instances, we are not privy to the anchor's
contributions to net income. As such, the sales multiples reported may be
slightly distorted to the extent that the imputed value of the anchor's
contribution to the purchase price has not been segregated.
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=================================
Sales Multiple Summary
=================================
Going-in Sales
Sale No. OAR Multiple
=================================
95-1 8.04% 1.46
95-2 7.47% 1.04
95-3 9.50% 1.02
95-4 9.00% 1.09
95-5 9.23% 0.83
95-6 11.10% 0.60
95-7 10.70% 1.31
95-8 10.00% 0.61
95-9 9.53% 0.89
95-10 8.31% 1.57
95-11 9.50% 0.39
95-12 10.03% 0.62
95-13 7.79% 1.06
95-14 7.76% 1.23
=================================
Mean 9.14% 0.98
=================================
The sales that are being compared to the subject show sales multiples that
range from 0.39 to 1.57 with a mean of about 0.98. As is evidenced, the more
productive malls with higher sales volumes on a per square foot basis tend to
have higher sales multiples. Furthermore, the higher multiples tend to be in
evidence where an anchor(s) is included in the sale.
Based upon its 1995 performance, the subject is projected to produce
average sales of $245 per square foot during fiscal year 1997 for all reporting
mall shop tenants based upon our forecasted growth rates.
In the case of the subject, the majority of the anchor stores are included
in the salable GLA. As such, we would be inclined to utilize a multiple
somewhat below the mean indicated by the sales. Additionally, the historical
vacancy of the subject's mall shop space, which is projected to continue to
average approximately 15 percent through the holding period, also supports the
selection of a lower multiple. Applying a ratio of say, 0.65 to 0.75 percent to
the forecasted sales of $245 per square foot, the following range in value is
indicated.
Unit Sales Volume (Mall Shops) $245 $245
Sales Multiple x 0.65 x 0.70
------------ -------------
Adjusted Unit Rate $159 $172
Mall Shop GLA x 218,704 x 218,704
------------ -------------
Value Indication $34,700,000 $37,600,000
The analysis shows an adjusted value range of approximately $34.7 to $37.6
million. Inherent in this exercise are mall shop sales which are projections
based on our investigation into the market which might not fully measure
investor's expectations. It is clearly difficult to
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project with any certainty what the mall shops might achieve in the future.
While we may minimize the weight we place on this analysis, it does,
nonetheless, offer a reasonableness check against the other methodologies.
Giving consideration to all of the above, the following value range is
warranted for the subject property based upon the sales multiple analysis.
Estimated Value - Sales Multiple Method
Rounded to $34,700,000 to $37,600,000
----------
Conc1usion
----------
We have considered all of the above relative to the physical and economic
characteristics of the subject. It is difficult to relate the subject to
comparables that are in such widely divergent markets with different cash flow
characteristics. The subject has good comparable sales levels compared to its
peers, with a typical anchor alignment and fair representation of national
tenants.
After considering all of the available market data in conjunction with the
characteristics of the subject property, the indices of investment that
generated our value ranges are as follows:
Unit Price Per Square Foot
Salable SF: 459,957+/-
Price Per SF of Salable Area: $80 to $85
Indicated Value Range: $36,800,000 to $39,100,000
Sales Multiple Analysis
Indicated Value Range $34,700,000 to $37,600,000
The parameters above show a value range of approximately $34.7 to $39.1
million for the subject.
Based on our total analysis, relative to the strengths and weaknesses of
each methodology, it would appear that the Sales Comparison Approach indicates a
market value within the more defined range of $37.0 to $39.0 million for the
subject as of June 1, 1996.
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Outparcel Land Valuation
The subject has three available outparcels which are .90, .94 and 2.66
acres in size. To date, four outparcels have been sold. A summary of three of
these previously sold parcels is presented below.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Golden East Crossing
Outparcel Sales
- ---------------------------------------------------------------------------------------------------------------------------
Current Use Sale Date Size Size (SF) Sale Price Sale Sale
(Acres) Price PSF Price Per
Acre
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Applebee's Restaurant 1989 1.02+/- 44,431 $300,000 $6.75 $294,118
Perkin's Restaurant 1992 1.00+/- 43,560 $333,986 $7.67 $333,986
New York Carpet World 1994 0.90+/- 39,204 $300,000 $7.65 $333,000
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The two smaller available parcels are located with frontage along U.S.
Route 301 Bypass. This is similar to the above three sales. All are accessed by
the mall's interior ring road. The larger 2.66 acre parcel is located in an
inferior location at the southeast corner of Jeffries Road and Benvenue Road.
Benvenue has significantly less traffic than U.S. Route 301 Bypass.
In establishing the market value of the three available parcels, the above
three sales as well as three additional sales and two offerings were considered.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Rocky Mount
Route 301 Bypass Area Land Sales
- ---------------------------------------------------------------------------------------------------------------------------
Current Use Sale Date Size Size (SF) Sale Price Sale Sale
(Acres) Price PSF Price Per
Acre
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Krispy Kreme 1993 0.80+/- 34,848 $365,000 $10.47 $456,250
Waffle House 1995 0.64+/- 27,878 $350,000 $12.55 $546,875
Ragazzi's Pizza 1995 1.00+/- 43,560 $400,000 $9.18 $400,000
Tiffany Square Current 1.58+/- 68,825 $453,000 $6.58 $286,709
Offerings 1.64+/- 71,438 $550,000 $7.70 $335,366
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Adjustments were considered for differences in market conditions, size,
location, utility and negotiability. The pre 1993 sales have been adjusted
upward to reflect improved commercial land sale conditions.
With respect to size adjustments, all factors constant, the smaller land
parcels sell for higher unit values than larger parcels. Therefore, relative
adjustment are necessary for size.
The locations of the subject and comparison parcels vary. The rear and
largest parcel is inferior to the Route 301 Bypass frontage parcels. This near
subject parcel is similar to the Tiffany Square interior positioned offerings.
The other comparable parcels that have direct frontage and access to Route 301
Bypass, versus the subject's ring road access, are superior in this respect.
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<PAGE>
Sales Comparison Approach
================================================================================
After considering the above factors, the conclusions of value for the
subject outparcels are as follows:
0.90 acre parcel @ $350,000/acre $315,000
0.94 acre parcel @ $350,000/acre $330,000
2.66 acre parcel @ $350,000/acre $400,000
The total market value of the outparcel is $1,045,000
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<PAGE>
INCOME APPROACH
================================================================================
Introduction
The Income Approach is based upon the economic principle that the value of
a property capable of producing income is the present worth of anticipated
future net benefits. The net income projected is translated into a present value
indication using the capitalization process. There are various methods of
capitalization that are based on inherent assumptions concerning the quality,
durability and pattern of the income projection. Where the pattern of income is
irregular due to existing leases that will terminate at staggered, future dates,
or to an absorption or stabilization requirement on a newer development,
discounted cash flow analysis is the most accurate.
Discounted Cash Flow Analysis (DCF) is a method of estimating the present
worth of future cash flow expectancies by individually discounting each
anticipated collection at an appropriate discount rate. The indicated market
value by this approach is the accumulation of the present worth of future
projected years' net income (before income taxes and depreciation) and the
present worth of the reversion (the estimated property value at the end of the
projection period). The estimated value of the reversion at the end of the
projection period is based upon capitalization of the next year's projected net
operating income. This is the more appropriate method to use in this assignment,
given the step up in lease rates and the long term tenure of retail tenants.
A second method of valuation, using the Income Approach, is to directly
capitalize a stabilized net income based on rates extracted from the market or
built up through mortgage equity analysis. This is a valid method of estimating
the market value of the property as of the achievement of stabilized operations.
In the case of the subject, the capitalization process will be used for
valuation "at stabilization".
Discounted Cash Flow Analysis
The Discounted Cash Flow (DCF) produces an estimate of value through an
economic analysis of the subject property in which the net income generated by
the asset is converted into a capital sum at an appropriate rate. First, the
revenues which a fully informed investor can expect the subject to produce over
a specified time horizon are established through an analysis of the current rent
roll, as well as the rental market for similar properties. Second, the projected
expenses incurred in generating these gross revenues are deducted. Finally, the
residual net income is discounted into a capital sum at an appropriate rate
which is then indicative of the subject property's current value in the
marketplace.
In this Income Approach to the valuation of the subject, we have utilized a
10-year holding period for the investment with the cash flow analysis
commencing on June 1, 1996. Although an asset such as the subject has a much
longer useful life, investment analysis becomes more meaningful if limited to a
time period considerably less than the real estate's economic life, but of
sufficient length for an investor. A 10-year holding period for this investment
is long enough to model the asset's performance and benefit from its lease-up
and performance, but short enough to reasonably estimate the expected income and
expenses of the real estate. It is noted that discounting will be done fiscally
as of June 1, 1996.
The revenues and expenses which an informed investor may expect to incur
from the subject property will vary, without a doubt, over the holding period.
Major investors active in
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Income Approach
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the market for this type of real estate establish certain parameters in the
computation of these cash flows and criteria for decision making which this
valuation analysis must include if it is to be truly market-oriented. These
current computational parameters are dependent upon market conditions in the
area of the subject property as well as the market parameters for this type of
real estate which we view as being national in scale.
By forecasting the anticipated income stream and discounting future value
at reversion into a current value, the capitalization process may be applied to
derive a value that an investor would pay to receive that particular income
stream. Typical investors price real estate on their expectations of the
magnitude of these benefits and their judgment of the risks involved. Our
valuation endeavors to reflect the most likely actions of typical buyers and
sellers of property interest similar to the subject. In this regard, we see the
subject as a long term investment opportunity for a competent owner/developer.
An analytical real estate computer model that simulates the behavioral
aspects of property and examines the results mathematically is employed for the
discounted cash flow analysis. In this instance, it is the PRO-JECT Plus+
computer model. Since investors are the basis of the marketplace in which the
subject property will be bought and sold, this type of analysis is particularly
germane to the appraisal problem at hand. On the Facing Page is a summary of the
expected annual cash flows from the operation of the subject over the stated
investment holding period. It is noted that the exhibited cash flow is presented
on a calendar year basis for ease of comparison to the historical operating
statements and budget for the subject property. A fiscal year cash flow
commencing June 1, 1996 is presented on the following facing page.
A general outline summary of the major steps involved may be listed as
follows:
1. Analysis of the income stream: establishment of an economic (market)
rent for tenant space; projection of future revenues annually based
upon existing and pending leases; probable renewals at market rentals;
and expected vacancy experience;
2. Estimation of a reasonable period of time to achieve stabilized
occupancy of the existing property and make all necessary improvements
for marketability;
3. Analysis of projected escalation recovery income based upon an
analysis of the property's history as well as the experiences of
reasonably similar properties;
4. Derivation of the most probable net operating income and pre-tax cash
flow (net income less reserves, tenant improvements, leasing
commissions and any extraordinary expenses to be generated by the
property) by subtracting all property expenses from the effective
gross income; and
5. Estimation of a reversionary sale price based upon capitalization of
the net operating income (before reserves, tenant improvements and
leasing commissions or other capital items) at the end of the
projection period.
Following is a detailed discussion of the components which form the basis
of this analysis.
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<PAGE>
Income Approach
================================================================================
Potential Gross Revenues
The total potential gross revenues generated by the subject property are
composed of a number of distinct elements: minimum rent determined by lease
agreement; additional overage rent based upon a percentage of retail sales;
reimbursement of certain expenses incurred in the ownership and operation of the
real estate; and other miscellaneous revenues.
The minimum base rent represents a legal contract establishing a return to
investors in the real estate, while the passing of certain expenses onto tenants
serves to maintain this return in an era of continually rising costs of
operation. Additional rent based upon a percentage of retail sales experienced
at the subject property serves to preserve the purchasing power of the residual
income to an equity investor over time. Finally, miscellaneous income adds an
additional source of revenue in the complete operation of the subject property.
In the initial year of the investment, fiscal year 1997, it is projected that
the subject property will generate approximately $5,471,412 in potential gross
revenues, equivalent to $11.90 per square foot of total appraised (owned) GLA
of 459,957+/- square feet. These forecasted revenues may be allocated to the
following components:
=================================================================
Revenue Summary-Retail Component
Initial Year of Investment (Fiscal Year 1997)
=================================================================
Revenue Component Amount Unit Rate* Income Ratio
=================================================================
Minimum Rent $3,409,265 $7.41 62.31%
Overage Rent $370,654 $0.81 6.77%
Expense Recoveries $1,620,910 $3.52 29.63%
Miscellaneous Income $70,583 $0.15 1.29%
Total $5,471,412 $11.90 100.00%
=================================================================
* Reflects total owned GLA of 459,957
=================================================================
Minimum Rental Income
Minimum rent produced by the subject property is derived from that paid by
the various tenant types. The projection utilized in this analysis is based upon
the actual rent roll and our projected leasing schedule in place as of the date
of appraisal, together with our assumptions as to the absorption of the vacant
space, market rent growth, and renewal/turnover probability. We have also made
specific assumptions regarding deals that are in progress and have a strong
likelihood of coming to fruition. In this regard, we have worked with management
and leasing personnel to analyze each pending deal on a case by case basis. We
have incorporated all executed leases in our analysis as well as those leases
which are out-for-signature. These transactions represent a reasonable and
prudent assumption from an investor's standpoint.
The rental income which an asset such as the subject property will generate
for an investor is analyzed as to its quality, quantity and durability. The
quality and probable duration of income will affect the amount of risk which an
informed investor may expect over the property's useful life. Segregation of the
income stream along these lines allows us to control the variables related to
the center's forecasted performance with greater accuracy. Each tenant type
lends itself to a specific weighting of these variables as the risk associated
with each varies.
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<PAGE>
Income Approach
================================================================================
The minimum rents forecasted at the subject property are essentially
derived from mall tenant revenues consisting of all in-line mall shops. In our
investigation and analysis of the marketplace, we have surveyed, and ascertained
where possible, rent levels being commanded by competing centers. However, it
should be recognized that large retail shopping centers are generally considered
to be separate entities by virtue of age and design, accessibility, visibility,
tenant mix, and the size and purchasing power of its trade area. Consequently,
the best measure of minimum rental income is its actual rent roll leasing
schedule.
As such, our a analysis of recently negotiated leases for new and
relocation tenants at the subject provides important insight into perceived
market rent levels for the mall. In so much as a tenant's ability to pay rent is
based upon expected sales achievement, the level of negotiated rents is directly
related to the individual tenant's perception of their expected performance at
the mall.
In-Line Shops
Our analysis of market rent levels for in-line shops has resolved itself to
a variety of influencing factors. Although it is typical that larger tenant
spaces are leased at lower per square foot rates and lower percentages, the type
of tenant as well as the variable of location within the mall can often distort
this size/rate relationship.
The following chart presents an analysis of in-line shop rents based upon
existing leases.
================================================================================
1996 Leases in Place *
Size Category Annualized Rent Applicable GLA Rent SF
================================================================================
< 750 SF $123,240 4,334 $28.44
750 - 1,200 SF $362,821 14,910 $24.33
1,201 - 2,000 SF $279,463 16,669 $16.77
2,001 - 3,500 SF $768,084 53,116 $14.46
3,501 - 5,000 SF $454,899 31,150 $14.60
5,001 10,000 SF $349,128 36,500 $9.57
> 10,000 SF $250,053 17,474 $14.31
Total $2,587,688 174,153 $14.86
================================================================================
* Includes all leases projected for calendar year 1996. Partial year tenants
have been annualized to reflect 12 months.
================================================================================
As can be seen, lease rates generally have an inverse relationship with
suite size and show an overall average rent of $23.44 per square foot. The chart
exhibited on this and the following Facing Pages presents an overview of leases
by size category, including all signed leases and leases out-for-signature.
Category 1 (Tenants < 750 SF) - This category shows seven total leases
ranging from $12.60 to $56.81 per square foot in rent. There are three
recent leases in this category, including two month to month tenants with
lease rates of $12.60 and $31.24, and Sunglass Hut, at $56.81 per square
foot. Recent leases yield a
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Income Approach
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weighted average rent of $30.07 per square foot. Excluding the recent month
to month lease of local tenant Keep in Touch at $12.61 per square foot, the
overall range is from $20 to $56.81 per square foot. The overall weighted
average is $28.36 per square foot. The highest rent in this grouping is the
recent lease to Sunglass Hut International, which occupies 440+/- square
feet. Excluding the Keep in Touch lease, the lower end of the range in this
category is formed by Claires Boutique and Great American Chocolate, with
each tenant paying a base rent of $20.00 per square foot.
Category 2 (Tenants 750 - 1,200 SF) - Tenants in this grouping show rents
from $7.35 to $45.00 per square foot in base rent. There are two recent
leases in this category, one of which, VIP Formal Wear, is a month to month
tenant paying $7.35 per square foot. Afterthoughts entered into a long-term
lease at a flat base rent of $23.21 per square foot. The overall weighted
average for this category is $24.33 per square foot. Excluding the two
month to month tenants, Carousel Children in 810+/- square feet at $9.25
per square foot and VIP Formal Wear in 1,044+/- square feet, a range of
$14.00 to $45.00 per square foot results. The highest rents in this
grouping have been jewelry tenants which generally have higher expected
sales, and pay between $35.00 and $45.00 per square foot
Category 3 (Tenants 1,201 - 2,000 SF) - There are two recent leases in this
category, one of which, Dokar, is a month to month tenant paying $7.78 per
square foot. Kids Footlocker entered into a long term lease at $25.00 per
square foot. Overall, tenants in this grouping show rents of $7.78 to
$30.66 per square foot. Again, the lower end of this range represents
leases to month to month tenants. Excluding these month to month tenants,
lease rates in this category range from a percentage rent only lease
(Bombay Company) to $30.66 paid by Friedman's Jewelry, with an overall
weighted average of $16.77 per square foot.
Category 4 (Tenants 2,001 - 3,500 SF) - There are three recent leases in
this category, ranging from $12.00 to $17.00 per square foot. Overall, this
category shows a weighted average rent of $14.46 per square foot. These
leases form a range in rental rates of from $10.00 to $25.01 per square
foot. Unlike the smaller tenant space categories, no month to month tenants
are found in this tenant grouping.
Category 5 (Tenants 3,501 - 5,000 SF) - There are four recent leases within
this category, ranging from $16.00 to $18.00 per square foot. The overall
range for this category is $12.00 to $18.00 per square foot, with an
overall weighted average rent is $14.60 per square foot. Again, no month to
month tenants are found in this category.
Category 6 (Tenants > 5,000 - 10,000 SF) - Record Town, in 5,452+/- square
feet at a flat base rent of $5.92 per square foot, is the only recent lease
in this category. This category contains a total six leases which range
from $5.02 per square foot to $16.00 per square foot. The overall weighted
average rent is $9.57 per square foot.
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Income Approach
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Category 7 (Tenants > 10,000 SF) -Carmike Cinema, in 17,474+/- square
feet, is the only mall tenant in this category. This 1987 lease commenced
at an initial rent of $14.31 per square foot, which escalates to $17.17 per
square foot over the term.
Overall, the average attained rent for all lease commitments and leases
out-for-signature ranges from an initial rent per square foot rent of $14.83
escalating to $16.06 for the final rent per square foot. The calendar year 1996
weighted average rent is $14.86 per square foot. The highest attained rents are
from tenants in Category 1 (Tenants < 750 SF).
Market Comparisons - Occupancy Cost Ratios
In further support of developing a forecast for market rent levels, we have
undertaken a comparison of minimum rent to projected sales and total occupancy
costs to sales ratios. Generally, our research and experience with other
regional malls shows that the ratio of minimum rent to sales falls within the
7.0 to 10.0 percent range in the initial year of the lease, with 7.5 percent to
8.5 percent being most typical. By adding additional costs to the tenant, such
as real estate tax and common area maintenance recoveries, a total occupancy
cost may be derived. Expense recoveries and other tenant charges can add up to
100 percent of minimum rent and comprise the balance of total tenant costs.
The typical range for total occupancy cost-to-sales ratios falls between
11.0 and 15.0 percent. As a general rule, where sales exceed $250 to $275 per
square foot, 14.0 to 15.0 percent would be a reasonable cost of occupancy.
Experience and research show that most tenants will resist total occupancy costs
that exceed 15.0 to 18.0 percent of sales. However, ratios of upwards to 20.0
percent are not uncommon. Obviously, this comparison will vary from tenant to
tenant and property to property.
In higher end markets where tenants are able to generate sales above
industry averages, tenants can generally pay rents which fall toward the upper
end of the ratio range. Moreover, if tenants perceive that their sales will be
increasing at real rates that are in excess of inflation, they will typically be
more inclined to pay higher initial base rents. Obviously, the opposite would be
true for poorer performing centers in that tenants would be squeezed by the thin
margins related to below average sales. With fixed expenses accounting for a
significant portion of the tenants contractual obligation, there would be little
room left for base rent.
In this context, we have provided an occupancy cost analysis for several
regional malls with which we have had direct insight over the past year. This
information is provided on the Following Page. On average, these ratio
comparisons provide a realistic check against projected market rental rate
assumptions.
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<PAGE>
<TABLE>
<CAPTION>
================================================================================================================================
OCCUPANCY COST ANALYSIS/COMPARISON
Cushman & Wakefield, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
No. Area Location State Budget Year Year Built No. Stories Total GLA Shop GLA Avg. Rent Recoveries
================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ULI-Super-Regional Malls US 1995 - - 999,544 342,260 $16.30 $8.72
- --------------------------------------------------------------------------------------------------------------------------------
- ULI-Regional Malls US 1995 - - 582,893 261,553 $12.05 $5.82
- --------------------------------------------------------------------------------------------------------------------------------
- ICSC-All Enclosed Malls US 1995 - - 582,893 261,553 $12.05 $5.82
- --------------------------------------------------------------------------------------------------------------------------------
- ICSC-Malls > 1,000,000sf US 1995 - - 1,206,874 407,060 $20.01 $12.57
================================================================================================================================
1 Saratoga County MSA NY 1995 1990/91/93 1 656,501 256,668 $15.79 $15.54
- --------------------------------------------------------------------------------------------------------------------------------
2 Syracuse MSA NY 1995 1954/96 2 1,035,525 410,818 $17.00 $12.90
- --------------------------------------------------------------------------------------------------------------------------------
3 Syracuse MSA NY 1995 1988/94 1 776,571 311,557 $17.00 $12.12
- --------------------------------------------------------------------------------------------------------------------------------
4 Rochester MSA NY 1995 1967/93 2 1,533,574 495,040 $18.00 $13.03
- --------------------------------------------------------------------------------------------------------------------------------
5 Jefferson County MSA NY 1995 1986/93 1 635,765 209,873 $21.96 $15.89
- --------------------------------------------------------------------------------------------------------------------------------
6 Buffalo MSA NY 1996 1985/89 1 753,105 285,771 $19.67 $14.83
- --------------------------------------------------------------------------------------------------------------------------------
7 White Plains MSA NY 1995 1980/93 4 882,689 326,774 $34.00 $25.31
- --------------------------------------------------------------------------------------------------------------------------------
8 Fairfield County MSA CT 1995 1986/91 2 1,270,146 499,868 $32.00 $17.20
- --------------------------------------------------------------------------------------------------------------------------------
9 Meriden MSA CT 1994 1971/94 2 711,626 292,877 $27.00 $14.20
- --------------------------------------------------------------------------------------------------------------------------------
10 Worcester County MSA MA 1996 1971/87 1 445,875 182,372 $22.36 $14.93
- --------------------------------------------------------------------------------------------------------------------------------
11 Boston MSA MA 1995 1980/93 1 322,120 155,080 $18.50 $17.40
- --------------------------------------------------------------------------------------------------------------------------------
12 Bristol County MSA MA 1995 1992 2 1,005,595 349,107 $21.50 $22.09
- --------------------------------------------------------------------------------------------------------------------------------
13 Bristol County MSA MA 1995 1987/89 2 967,363 374,630 $31.00 $21.71
- --------------------------------------------------------------------------------------------------------------------------------
14 Essex County MSA MA 1995 1993/94 2 863,344 329,065 $36.95 $11.27
- --------------------------------------------------------------------------------------------------------------------------------
15 Kingston MSA MA 1994 1989/92 1 771,007 295,562 $18.44 $14.32
- --------------------------------------------------------------------------------------------------------------------------------
16 Burlington MSA VT 1995 1979/89/92 1 490,424 185,398 $23.00 $9.51
- --------------------------------------------------------------------------------------------------------------------------------
17 Bucks County MSA PA 1995 1968/75 1 348,309 305,212 $19.35 $10.00
- --------------------------------------------------------------------------------------------------------------------------------
18 Monmouth County MSA NJ 1994 1990/91/94 2 1,153,396 525,741 $31.00 $15.70
- --------------------------------------------------------------------------------------------------------------------------------
19 Westminster MSA MD 1995 1987/94 1 524,964 193,557 $16.74 $17.93
- --------------------------------------------------------------------------------------------------------------------------------
20 Washington-Baltimore MD 1995 1979/93 2 661,639 245,217 $22.10 $19.86
- --------------------------------------------------------------------------------------------------------------------------------
21 Baltimore MSA MD 1995 1956/91 1 863,376 242,376 $19.87 $14.93
- --------------------------------------------------------------------------------------------------------------------------------
22 Prince William City, MSA VA 1995 1972/96 1 716,796 278,494 $21.50 $15.11
- --------------------------------------------------------------------------------------------------------------------------------
23 Arlington MSA VA 1994 1986 4 491,057 222,800 $28.00 $12.98
- --------------------------------------------------------------------------------------------------------------------------------
24 Bloomingdate MSA IL 1995 1981/88/91 2 1,292,186 427,609 $21.84 $10.37
- --------------------------------------------------------------------------------------------------------------------------------
25 Minneapolis MSA MN 1995 1962/94 1 982,228 201,561 $21.00 $22.51
- --------------------------------------------------------------------------------------------------------------------------------
26 Genesee County MSA MI 1995 1980/93 1 451,036 230,625 $16.00 $9.01
- --------------------------------------------------------------------------------------------------------------------------------
27 Indianapolis MSA IN 1995 1968/87 1 1,239,059 260,359 $22.43 $9.00
- --------------------------------------------------------------------------------------------------------------------------------
28 Tampa MSA FL 1995 1995 1 977,047 359,579 $27.00 $12.77
- --------------------------------------------------------------------------------------------------------------------------------
29 Plantation MSA FL 1995 1979/93 1 1,004,061 282,952 $28.22 $12.40
- --------------------------------------------------------------------------------------------------------------------------------
30 Miami MSA FL 1995 1982 1 1,120,827 290,385 $29.36 $16.55
- --------------------------------------------------------------------------------------------------------------------------------
31 Coral Springs MSA FL 1995 1984/96 1 1,171,127 293,183 $25.90 $11.55
- --------------------------------------------------------------------------------------------------------------------------------
32 North/Central Kansas KS 1995 1987/90 1 400,307 185,324 $14.97 $10.31
- --------------------------------------------------------------------------------------------------------------------------------
33 Amarillo MSA TX 1995 1982/86 1 889,508 316,190 $18.00 $7.53
- --------------------------------------------------------------------------------------------------------------------------------
34 Las Vegas MSA NV 1995 1992 1 241,580 241,580 $91.50 $22.04
- --------------------------------------------------------------------------------------------------------------------------------
35 Las Vegas MSA NV 1994 1981/93 2 819,374 286,936 $35.00 $13.21
- --------------------------------------------------------------------------------------------------------------------------------
36 Knoxville MSA TN 1995 1972/94 1 1,333,018 382,150 $23.80 $14.00
- --------------------------------------------------------------------------------------------------------------------------------
37 Nashville MSA TN 1995 1990 2 716,462 373,662 $15.25 $13.30
- --------------------------------------------------------------------------------------------------------------------------------
38 Riverside County MSA CA 1995 1970/91 1 1,044,536 411,640 $22.59 $17.00
- --------------------------------------------------------------------------------------------------------------------------------
39 Orange County MSA CA 1994 1975/94 1 810,470 273,970 $21.00 $10.28
- --------------------------------------------------------------------------------------------------------------------------------
40 Bellingham MSA WA 1994 1988 1 769,187 337,557 $20.85 $12.54
- --------------------------------------------------------------------------------------------------------------------------------
41 Seattle MSA WA 1995 1979/95 1 1,012,754 311,019 $27.35 $7.86
================================================================================================================================
Survey Mean: 833,950 304,724 $23.89 $13.86
================================================================================================================================
<CAPTION>
- --------------------------------------------------------------------------------------
No. Area Location Avg. Sales Rent-Sales Total Cost Location
======================================================================================
<S> <C> <C> <C> <C> <C>
- ULI-Super-Regional Malls $203.09 8.0% 12.3% -
- --------------------------------------------------------------------------------------
- ULI-Regional Malls $176.16 6.8% 10.1% -
- --------------------------------------------------------------------------------------
- ICSC-All Enclosed Malls $176.16 6.8% 10.1% -
- --------------------------------------------------------------------------------------
- ICSC-Malls > 1,000,000sf $271.64 7.4% 12.0% -
- --------------------------------------------------------------------------------------
1 Saratoga County MSA $194.00 8.1% 16.1% Suburban
- --------------------------------------------------------------------------------------
2 Syracuse MSA $208.00 8.2% 14.4% Suburban
- --------------------------------------------------------------------------------------
3 Syracuse MSA $198.00 8.6% 14.7% Suburban
- --------------------------------------------------------------------------------------
4 Rochester MSA $247.00 7.3% 12.6% Suburban
- --------------------------------------------------------------------------------------
5 Jefferson County MSA $231.00 9.5% 16.4% Suburban
- --------------------------------------------------------------------------------------
6 Buffalo MSA $250.00 7.9% 13.8% Suburban
- --------------------------------------------------------------------------------------
7 White Plains MSA $380.00 8.9% 15.6% Suburban
- --------------------------------------------------------------------------------------
8 Fairfield County MSA $425.00 7.5% 11.6% Suburban
- --------------------------------------------------------------------------------------
9 Meriden MSA $333.00 8.1% 12.4% Suburban
- --------------------------------------------------------------------------------------
10 Worcester County MSA $288.00 7.8% 12.9% Suburban
- --------------------------------------------------------------------------------------
11 Boston MSA $208.00 8.9% 17.3% Urban
- --------------------------------------------------------------------------------------
12 Bristol County MSA $280.00 7.7% 15.6% Suburban
- --------------------------------------------------------------------------------------
13 Bristol County MSA $404.00 7.7% 13.0% Suburban
- --------------------------------------------------------------------------------------
14 Essex County MSA $350.00 10.6% 13.8% Suburban
- --------------------------------------------------------------------------------------
15 Kingston MSA $211.00 8.7% 15.5% Suburban
- --------------------------------------------------------------------------------------
16 Burlington MSA $294.00 7.8% 11.1% Suburban
- --------------------------------------------------------------------------------------
17 Bucks County MSA $239.00 8.1% 12.3% Suburban
- --------------------------------------------------------------------------------------
18 Monmouth County MSA $338.00 9.2% 13.8% Suburban
- --------------------------------------------------------------------------------------
19 Westminster MSA $228.00 7.3% 15.2% Suburban
- --------------------------------------------------------------------------------------
20 Washington-Baltimore $285.00 7.8% 14.7% Suburban
- --------------------------------------------------------------------------------------
21 Baltimore MSA $214.00 9.3% 16.3% Suburban
- --------------------------------------------------------------------------------------
22 Prince William City, MSA $236.00 9.1% 15.5% Suburban
- --------------------------------------------------------------------------------------
23 Arlington MSA $300.00 9.3% 13.7% Urban
- --------------------------------------------------------------------------------------
24 Bloomingdate MSA $250.00 8.7% 12.9% Suburban
- --------------------------------------------------------------------------------------
25 Minneapolis MSA $262.00 8.0% 16.6% Suburban
- --------------------------------------------------------------------------------------
26 Genesee County MSA $219.00 7.3% 11.4% Suburban
- --------------------------------------------------------------------------------------
27 Indianapolis MSA $235.00 9.5% 13.4% Suburban
- --------------------------------------------------------------------------------------
28 Tampa MSA $300.00 9.0% 13.3% Suburban
- --------------------------------------------------------------------------------------
29 Plantation MSA $314.00 9.0% 12.9% Suburban
- --------------------------------------------------------------------------------------
30 Miami MSA $355.00 8.3% 12.9% Suburban
- --------------------------------------------------------------------------------------
31 Coral Springs MSA $284.00 9.1% 13.2% Suburban
- --------------------------------------------------------------------------------------
32 North/Central Kansas $212.00 7.1% 11.9% Suburban
- --------------------------------------------------------------------------------------
33 Amarillo MSA $200.00 9.0% 12.8% Suburban
- --------------------------------------------------------------------------------------
34 Las Vegas MSA $1,183.00 7.7% 9.6% Urban
- --------------------------------------------------------------------------------------
35 Las Vegas MSA $405.00 8.6% 11.9% Urban
- --------------------------------------------------------------------------------------
36 Knoxville MSA $333.00 7.1% 11.4% Suburban
- --------------------------------------------------------------------------------------
37 Nashville MSA $180.00 8.5% 15.9% Suburban
- --------------------------------------------------------------------------------------
38 Riverside County MSA $250.00 9.0% 15.8% Suburban
- --------------------------------------------------------------------------------------
39 Orange County MSA $270.00 7.8% 11.6% Suburban
- --------------------------------------------------------------------------------------
40 Bellingham MSA $238.00 7.4% 11.8% Suburban
- --------------------------------------------------------------------------------------
41 Seattle MSA $325.00 8.4% 10.8% Suburban
======================================================================================
Survey Mean: $289.51 8.3% 13.4%
======================================================================================
</TABLE>
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Income Approach
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From this analysis we see that the ratio of base rent to sales ranges from
7.1 to 10.6 percent, while the total occupancy cost ratios vary from 9.6 to 17.3
percent when all recoverable expenses are included. The surveyed mean for the
malls and industry standards analyzed is 8.3 percent and 13.4 percent,
respectively. Some of the higher ratios are found in older malls situated in
urban areas that have higher operating structures due to less efficient layout
and designs, older physical plants, and higher security costs, which in some
malls can add upwards of $2.00 per square foot to common area maintenance.
These relative measures can be compared with two well known publications,
The Score (1996) by the International Council of Shopping Centers and Dollars &
Cents of Shopping Centers (1995) by the Urban Land Institute. The most recent
publications indicate base rent-to-sales ratios of approximately 7.0 to 8.0
percent and total occupancy cost ratios of 10.1 and 12.3 percent, respectively.
In general, while the rental ranges and ratio of base rent to sales vary
substantially from mall to mall and tenant to tenant, they do provide general
support for the rental ranges and ratio which is projected for the subject
property.
Conclusion - Market Rent Estimate for In-Line Shops
Previously in the Retail Market Analysis section of this report, we
discussed the subject's sales potential. In light of our total analysis, we have
forecasted average sales of $245 per square foot for all mall shop tenants for
calendar year 1996. Based upon a ratio of 7.0 to 8.0 percent, an average rent
for the subject between $17 and $20 is indicated.
The following chart presents a comparison of existing lease commitments and
our projected market rental rates for each size category at the property.
================================================================================
Rent Comparisons and Conclusions
Size Category Leases in Place Recent Leases C&W Conclusion
================================================================================
< 750 SF $28.33 $30.07 $30.00
750 - 1,200 SF $23.90 $14.66 $25.00
1,201 - 2,000 SF $16.63 $17.43 $20.00
2,001 - 3,500 SF $14.42 $14.10 $15.00
3,501 - 5,000 SF $13.20 $13.71 $15.00
5,001 10,000 SF $9.57 $5.92 $10.00
> 10,000 SF $14.31 NA $8.00
Weighted Average $14.86 $13.78 $15.05
================================================================================
* Includes all leases projected for calendar year 1996. Partial year tenants
have been annualized to reflect full 12 months.
================================================================================
After considering all of the above, we have developed a weighted average
rental rate of approximately $15.05 per square foot based upon a relative
weighting of tenant space by size. We note that while the industry average of
7.0 to 8.0 percent of average retail sales indicates an average rent in the $17
to $20 per square foot range, recent leases reflect an average weighted rent of
only $14.77 per square foot, while all leases projected to be in place during
calendar year 1996 yield an average weighted rent of only $14.86 per square
foot. The
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Income Approach
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average rent is a weighted average rent for all in-line mall tenants only. This
average market rent has been allocated to space as shown on the Facing Page.
Occupancy Cost - Test of Reasonableness
Our weighted average rent can next be tested against total occupancy costs
in the mall based upon the standard recoveries for new mall tenants. Our total
occupancy cost analyses can be found on the following chart.
================================================================================
Total Occupancy Cost Analysis
Tenant Cost Estimated Expenses(SF)
================================================================================
Economic Base Rent-Mall Shops 15.05
(Weighted Average)
Occupancy Costs (A)
Common Area Maintenance (1) $6.21
Real Estate Taxes (2) $1.14
Water/Sewer Charge $0.22
Marketing Charge (3) $1.50
Total Tenant Costs $24.12
Projected Average Sales $245.00
Rent to Sales Ratio 8.14%
Cost of Occupancy Ratio 9.84%
================================================================================
(A) Costs that are occupancy sensitive will
decrease for new tenants on a unit rate basis
as lease-up occurs.
(1) CAM expense is based on gross occupied area
(GLOA). Generally, the standard lease clause
provides for CAM to be passed through with a
15.0 administrative fee less certain
exclusions including anchor contributions.
The standard denominator is based on occupied
area. A complete discussion of the standard
recovery formula is presented later in this
report.
(2) Tax estimate is based upon gross occupied
area (GLOA), with floor of 15 vacancy of mall
shop space, which is the recovery basis for
taxes.
(3) Not included in discounted cash flow
projections.
================================================================================
Total costs, on average, are shown to be 9.84 percent of projected average
1996 retail sales. While this is slightly below industry averages, we feel this
is quite reasonable. It is our opinion that the subject's location within a
tertiary market, together with historically high mall shop vacancy, will
continue to be an advantage to mall shop tenants in securing a favorable lease
rate relative to achievable sales per square foot. It is noted that CAM and tax
recoveries are tied to occupancy and that these costs will be reduced with
increased occupancy.
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Food Court
The subject has a small food court area that has a total of 6 spaces
comprising 3,939 square feet. Five of the six spaces are currently leased and
one, 461 square foot unit is vacant.
Concessions
Free rent is an inducement offered by developers to entice a tenant to
locate in their project over a competitor's. This marketing tool has become
popular in the leasing of office space, particularly in view of the
over-building which has occurred in many markets. As a rule, most major retail
developers have been successful in negotiating leases without including free
rent. Our experience with regional malls shows that free rent is generally
limited to new projects in marginal locations without strong anchor tenants that
are having trouble leasing, as well as older centers that are losing tenants to
new malls in their trade area. Management reports that free rent has been a part
of recent new leases, especially with the national tenants. Renewal leases have
not required a free rent concession.
We do believe that it will be necessary to offer free rent in new deals at
the subject. Accordingly, we have allowed for 3 months free rent for all vacant
spaces expected to be leased. We have, also made rather liberal allowances for
tenant workletters which acts as a form of inducement to convince a tenant to
locate at the subject. These allowances are liberal to the extent that ownership
has been relatively successful in leasing space "as is" to tenants in their
other malls. We have made allowances of $10.00 per square foot to new
tenants/future turnover space. We have also ascribed a rate of $2.00 per square
foot to renewal space. This assumption offers further support for the new and
renewal leasing at the subject.
Absorption
As of the date of analysis, the subject property had approximately 41,253+-
square feet vacant within sixteen in-line spaces. An additional 18,135 square
feet of temporary tenants (6,364 SF), month-to-month tenants (6,276 SF) and
short term renewals (5,495 SF) causes a potential vacancy of 59,388 SF or 27
percent of the mall shop area. Realizing that the subject has had a historically
high vacancy, and there are no near term prospects for filling all of the vacant
space, a structural vacancy factor of 12 percent has been forecast. This figure
of 12 percent together with a global vacancy/collection loss consideration of
2.5 percent leads to a 14.5 percent figure. Given additional rollover downtime
between leases, the effective vacancy is higher. Temporary and month-to-month
tenants are assumed to remain at this current rent structure for a one year
period and then reflect market rental rates.
In forecasting the scheduled absorption of the vacant space, we have
considered conversations with the property's general manager, as well as recent
leasing activity that has taken place over the past two years. We have projected
the lease-up of the property's vacant space over an approximate one and one-half
year period commencing in January 1997. Again, approximately 25,361 square feet
is never leased in our projection period to account for structural vacancy. The
following chart details our lease-up projections.
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============================================
Absorption Schedule
Golden East Crossing
============================================
Projected
Suite Size (SF) Lease-up Date
---------- --------------- ---------------
1112 2,691 1/1997
---------- --------------- ---------------
3016 3,335 1/1997
---------- --------------- ---------------
3018 4,361 1/1998
---------- --------------- ---------------
6018 440 1/1997
---------- --------------- ---------------
6022 2,540 1/1998
---------- --------------- ---------------
8010 461 1/1997
---------- --------------- ---------------
Total 13,828
========== =============== ===============
Anchor Tenants
Three of the four anchor tenants at the subject property are owned in
conjunction with the shop space. All three are obligated to pay rent. All four
tenants pay different common area contribution as will be discussed in a
subsequent section.
Rent Growth Rates
Market rent will, over the life of a prescribed holding period, quite
obviously follow an erratic pattern. A review of investor's expectations
regarding income growth shows that projections generally range between 3.0 and
4.0 percent for retail centers. Cushman & Wakefield's Winter 1995 survey of
pension funds, REITs, bank and insurance companies, and institutional advisors
reveals that current income forecasts are utilizing average annual growth rates
between zero and 5.0 percent. The low and high mean is shown to be 2.8 and 3.9
percent, respectively. (see Addenda for survey results). The Peter F. Korpacz
Investor Survey (Fourth Quarter 1995) shows slightly more conservative results
with average annual rent growth of 3.16 percent.
It is not unusual in the current environment to see investors structuring
no growth or even negative growth in the short term. The Rocky Mount
metropolitan area in general performed satisfactorily through the last
recession. As shown in the Retail Market Analysis section, Comparable Sales for
shop space have increased 14.08 percent, 5.76 percent, 3.11 percent and 0.75 in
the past four years. Sales at the subject have consistently grown at the subject
over the past five years. The past two years were very flat growth years,
however, demographics in the subjects trade area remain positive, with potential
for growth.
The tenants' ability to pay rent is closely tied to its increases in sales.
However, rent growth can be more impacted by competition and managements desire
to attract and keep certain tenants that increase the mall's synergy and appeal.
We have forecasted the following rent growth.
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=====================================================
Market Rent Growth Rate Forecast
=====================================================
Period Annual Growth Rate
===================== ==============================
1996 - 1997 0%
--------------------- ------------------------------
1998 2%
--------------------- ------------------------------
Thereafter 3%
=====================================================
* Indicated growth rate over the previous year's rent
=====================================================
Releasing Assumption
The typical lease term for new in-line retail leases in centers such as the
subject generally ranges from five to twelve years. Market practice dictates
that it is not uncommon to get rent bumps throughout the lease terms either in
the form of fixed dollar amounts or a percentage increase based upon changes in
some index, usually the Consumer Price Index (CPI). Often the CPI clause will
carry a minimum annual increase and be capped at a higher maximum amount.
For new leases in the regional malls, ten year terms are most typical.
Essentially, the developer will deliver a "vanilla" suite with mechanical
services roughed in and minimal interior finish. This allows the retailer to
finish the suite in accordance with their individual specifications. Because of
the up-front costs incurred by the tenants, they require a ten year lease term
to adequately amortize these costs. In certain instances, the developer will
offer some contribution to the cost of finishing out a space over and above a
standard allowance. A ten year lease term is consistent with recent leasing.
Upon lease expiration, it is our best estimate that there is a 70.0 percent
probability that an existing tenant will renew their lease while the remaining
30.0 percent will vacate their space at this time. An exception to this
assumption exists with respect to existing tenants who, at the expiration of
their lease, have sales that are substantially below the mall average and have
no chance to ever achieve percentage rent. In these instances, it is our
assumption that there is a 100 percent probability that the tenant will vacate
the property.
As stated above, it is not uncommon to get increases in base rent over the
life of a lease. Our global market assumptions for mall shop tenants may be
summarized as shown below.
================================================================================
Renewal Assumptions
================================================================================
Lease Free Tenant Lease
Tenant Type Term Rent Steps Rent Alterations Commissions
============ ========= ================= ========== ============== ============
Mall Shops 10 yrs 10% in 5th year No Yes Yes
================================================================================
Upon lease rollover/turnover, space is forecasted to be released at the
higher of the last effective rent (defined as minimum rent plus overage rent if
any) and the ascribed market rent as detailed previously increasing by our
market rent growth rate assumption.
Conclusion - Minimum Rent
In the initial full year of the investment (FY 1997), it is projected that
the subject property will produce approximately $3,409,265 in minimum rental
income. This estimate of base rental
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income is equivalent to $7.41 per square foot of total owned GLA. Alternatively,
minimum rental income accounts for 63.9 percent of all potential gross revenues.
Further analysis shows that over the holding period (1997-2007), minimum rent
advances at an average compound annual rate of 3.22 percent. This increase is a
synthesis of the mall's modest projected lease-up, fixed rental increases, as
well as market rents from rollover or turnover of space.
Overage Rent
In addition to minimum base rent, many tenants at the subject property have
contracted to pay a percentage of their gross annual sales over a
pre-established base amount as overage rent. Many leases have a natural
breakpoint although a number have stipulated breakpoints. The average overage
percentage for small space retail tenants is in a range of 5.0 to 6.0 percent.
Traditionally, it takes a number of years for a retail center to mature and
gain acceptance before generating any sizable percentage income. As a center
matures, the level of overage rents typically becomes a larger percentage of
total revenue. It is a major ingredient protecting the equity investor against
inflation.
In the Retail Market Analysis section of this report, we discussed the
forecasted sales levels for the mall tenants. It is difficult to predict the
accuracy what sales will be on an individual tenant level. Overage rent is
derived at the subject by some tenants paying percentage rent without a base (in
lieu of base rent) and by overages, caused by sales exceeding breakpoints. The
fiscal 1997 overage rent is $370,654.
Sales Growth Rates - Retail Component
In the Retail Market Analysis section of this report, we discussed that
comparable retail store sales at the subject property have increased between
1991 and 1993, while showing more stabilized growth in the ensuing two years. We
anticipate flat sales growth in 1996 and growth thereafter.
Retail sales in the Rocky Mount MSA have been increasing at a compound
annual rate of 5.05 percent per annum since 1990, according to Sales and
Marketing Management. According to both the Cushman & Wakefield and Korpacz
surveys, major investors are looking at a range of growth rates of 0 percent
initially to a high of 5 percent in their computational parameters. Most
typically, growth rates of 3 percent to 4 percent are seen in these surveys.
Nationally, total retail sales have been increasing at a compound annual
rate of 6.2 percent since 1980 and 4.9 percent per annum since 1990. Between
1990 and 1994, GAFO sales have grown at a compound annual rate of 5.83 percent
per year. Through 2000, total retail sales are forecasted to increase by 4.12
percent per year nationally, while GAFO sales are projected to grow by 5.04
percent annually.
After considering all of the above, combined with our assessment of
competition in the subject market, we have forecasted sales growth based upon
the following schedule.
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Sales Growth Rate Forecast
======================================
Period Annual Growth Rate
================= ===================
1996 0.0%
----------------- -------------------
1997 2.0%
----------------- -------------------
Thereafter 3.0%
================= ===================
Expense Reimbursement/Miscellaneous Income
By lease agreement, tenants are required to reimburse the lessor for
certain operating expenses. Included among these operating items are real estate
taxes, common area maintenance (CAM), and water/sewer recovery. There is no HVAC
tenant area utility charge from the mall owner because all tenants have their
own HVAC units and are separately metered. Miscellaneous income is essentially
derived from specialty leasing, and other charges. In the first full year of the
investment, it is projected that the subject property will generate
approximately $1,620,910 in reimbursements for these operating expenses and
$70,583 in other miscellaneous income.
Common Area Maintenance
Under the standard lease, mall tenants pay their pro-rata share of the
balance of the CAM expense after anchor and ring road outparcel tenant
contributions are deducted and an administrative fee is added. Provided below is
a summary of the standard clause that exists for a new tenant at the mall.
============== ================================================================
Common Area Maintenance Recovery Calculation
============== ================================================================
CAM Expense Actual hard cost for year exclusive of interest and depreciation
- -------------- ----------------------------------------------------------------
Add Administrative Fee
- -------------- ----------------------------------------------------------------
Less Contributions from department stores and developed outparcels
- -------------- ----------------------------------------------------------------
Equals: Net pro-ratable CAM billable to mall tenants on the basis of
gross occupied area (GLOA).
- -------------- ----------------------------------------------------------------
As discussed, department stores will be obligated to pay contributions
toward common area maintenance costs. It should be noted that total major
contributions consist of a pro rata share of exterior CAM or a fixed CAM amount,
plus a charge for HVAC usage. The following chart presents a summary of their
payments.
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<TABLE>
<CAPTION>
Anchor Contributions
====================================================================================================================================
Projected 1996
Tenant Area Annual Rent Contribution Amount
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
J.C. Penny 85,172 SF $327,912.24 Int/Ext CAM: $.30/sf yr. 1-10; Rent: $327,912.24
and 1.5% over $.40/sf yrs. 11-20; CAM: $25,552
$16,395,612 $.50/sf yrs 21-30; Taxes: $18,690
sales $.60/sf thereafter
R.E. Taxes: Increase in taxes over base
(average of 1st 3 yrs.)
====================================================================================================================================
Sears 89,564 SF $268,692 and Ext CAM: $22,391, 1st 5 yrs. with Rent: $268,692.00
2.5% over increase of $4,478.20 every 5 CAM: $30,869
$10,747,680 five yrs. for 20 yrs. then Taxes: $20,270
$8,956.40 increase every 5
years thereafter.
$4,000/year
After 2nd year, pro rata share
Int. CAM: above base amount.
R.E. Taxes:
====================================================================================================================================
Roses (Brody's) 69,960 SF $280,000 and CAM: $14,000 (yrs 1-5); Rent: $284,898
$4,898 for $24,500 (yrs 6-10); CAM: $35,000
insurance plus $35,000 (yrs 11-15); Taxes: $44,279
2.5% above $49,000 (yrs 16-20)
$11,200,000 R.E. Taxes: Net, pro-rata share
gross sales
====================================================================================================================================
Belk 112,957 SF No Rent Due Int/Ext CAM: $28,239 flat charge Rent: None
CAM: $28,239
R.E. Taxes: None Taxes: Direct Pay
====================================================================================================================================
</TABLE>
Real Estate Taxes
Mall tenants pay real estate tax recoveries based upon a pro-rata share of
the expense, less major and developed outparcel tenant contributions. The
pass-through is based upon pro-rata share of gross occupied area (GLOA).
HVAC/Utilities
Tenants are separately metered and have their own roof top heating/cooling
units. Therefore, the mall owner does not charge this expense.
Miscellaneous Income
Sources of miscellaneous revenues include temporary kiosk rentals,
forfeited security deposits, phone revenues, and interest income. Our forecast
for these additional revenues is net of a provision for vacancy and credit loss.
Overall, it is our assumption that these other revenues will increase by 2.0
percent per annum over the holding period.
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Allowance for Vacancy and Credit Loss
The investor of an income producing property is primarily interested in the
cash revenues that an income-producing property is likely to produce annually
over a specified period of time rather than what it could produce if it were
always 100 percent occupied with all tenants paying rent in full and on time. It
is normally a prudent practice to expect some income loss, either in the form of
actual vacancy or in the form of turnover, non-payment or slow payment by
tenants. We have reflected a 2.5 percent stabilized contingency for both
stabilized and unforeseen vacancy and credit loss. Please note that this vacancy
and credit loss provision is applied to all mall tenants equally.
In this analysis we have also forecasted that there is a 70.0 percent
probability that an existing tenant will renew their lease. Upon turnover, we
have forecasted that rent loss equivalent to six months would be incurred to
account for the time and/or costs associated with bringing space back on line.
Thus, minimum rent as well as overage rent and certain other income has been
reduced by this forecasted probability.
We have calculated the effect of the total provision of vacancy and credit
loss on the owned gross leasable area. Through the 10 years of this cash flow
analysis, the total allowance for vacancy and credit loss, including provisions
for downtime, ranges from a low of 8.87 percent of total potential gross
revenues to a high of 15.33 percent (1996). On average, the total allowance for
vacancy and credit loss over the 11 year projection period averages 10.16
percent of these revenues.
==================================================================
Total Rent Forecast
==================================================================
Year Physical Vacancy Global Vacancy Total Vacancy*
==================================================================
1996 12.83% 2.50% 15.33%
1997 8.85% 2.50% 11.35%
1998 7.36% 2.50% 9.86%
1999 6.81% 2.50% 9.31%
2000 6.73% 2.50% 9.23%
2001 6.69% 2.50% 9.19%
2002 6.41% 2.50% 8.91%
2003 6.37% 2.50% 8.87%
2004 6.59% 2.50% 9.09%
2005 6.73% 2.50% 9.23%
2006 7.95% 2.50% 10.45%
2007 8.60% 2.50% 11.10%
Avg. 7.66% 2.50% 10.16%
==================================================================
* Includes global vacancy provision for unseen vacancy and
credit loss as well as weighted downtime provision of lease
turnover.
==================================================================
On balance, the aggregate deductions of all gross revenues reflected in
this analysis are based upon overall long-term market occupancy levels and are
considered what a prudent investor would allow for credit loss. The remaining
sum is effective gross income which an informed investor may anticipate the
subject property to produce. We believe this is reasonable in light of overall
vacancy in this subject's market area as well as the current leasing structure
at the subject.
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Effective Gross Income - Retail Component
In the initial full year of the investment, FY 1997, effective gross
revenues ("Total Income" line on cash flow) are forecasted to amount to
approximately $5,337,274, equivalent to $11.61 per square foot of total owned
GLA.
================================================================================
Effective Gross Revenue Summary - Retail Component
Initial Year of Investment - Fiscal Year 1997
================================================================================
Aggregate Sum Unit Rate Income Ratio
================================================================================
Potential Gross Income $ 5,471,417 $11.90 100.0%
- --------------------------------------------------------------------------------
Less: Vacancy and Credit Loss ($ 134,138) ($0.29) 2.5%
- --------------------------------------------------------------------------------
Effective Gross income $ 5,337,274 $11.61 97.5%
================================================================================
Expenses
Total expenses incurred in the production of income from the subject
property are divided into two categories reimbursable and non-reimbursable
items. The major expenses which are reimbursable include real estate taxes, and
common area maintenance. Non-reimbursable expenses associated with the subject
property include certain general and administrative expenses, ownership's
contribution to the merchants association/ marketing fund, management charges,
and miscellaneous expenses. Other expenses include a reserve for the replacement
of short-lived capital components, alteration costs associated with bringing
space up to occupancy standards, leasing commissions, and a provision for
capital expenditures.
The various expenses incurred in the operation of the subject property have
been estimated from information provided by a number of sources. We have
reviewed the subject's component operating budget prepared by management. This
information is provided in the Addenda. We have compared this information to
published data which are available, as well as comparable expense information.
Finally, this information has been tempered by our experience with other
regional shopping centers.
Reimbursable Operating Expenses
We have analyzed each item of expense individually and attempted to project
what the typical investor in a property like the subject would consider
reasonable, based upon informed opinion, judgment and experience. The following
is a detailed summary and discussion of the reimbursable operating expenses
incurred in the operation of the subject property during the initial year of the
investment holding period.
Common Area Maintenance - This expense category includes the annual cost of
miscellaneous building maintenance contracts, recoverable labor and
benefits, security, insurance, landscaping, cleaning and janitorial,
exterminating, supplies, trash removal, exterior lighting, common area
energy, gas and fuel, equipment rental, interest and depreciation, and
other miscellaneous charges. As discussed, the standard lease agreement
allows management to pass along the CAM expense to tenants on the basis of
occupied area with the addition of a 15.0 percent administrative fee.
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Management has budgeted a stabilized common area maintenance expense of
$1,131,989 in 1996, or $5.18 per square foot of mall GLA (218,704+/- square
feet). This cost is summarized as follows:
=============================================================
Per Sq. Ft. of
Budget Year CAM Expense Mall Shop GLA
=============================================================
1996 $1,131,989 $5.18
=============================================================
Provided on the Facing Page chart is a comparison of CAM expense rates at
other regional malls. As can be seen, common area maintenance costs range
from $3.73 to $13.20 per square foot. The survey mean is $6.76. Other
properties in the south reflect CAM expenses between $4.74 and $6.46 per
square foot.
Overall, we believe that CAM expense projections for the subject are
reasonable. For our analysis, we have utilized a CAM expense of $1,115,718
in 1996 and grown this amount by 3.5 percent per annum in the ensuing years
of the cash flow.
Real Estate Taxes - The projected taxes to be incurred in 1996 are
projected to be $291,116. As discussed, the standard recovery for this
expense is charged on the basis of gross occupied area of non-anchor mall
tenant GLA, less majors contributions. For a complete discussion of the
subjects real estate taxes, please refer to the Real Property Taxes and
Assessment section of the report.
Non-Reimbursable Expenses
Total non-reimbursable expenses at the subject property are projected from
accepted practices and industry standards. Again, we have analyzed each item of
expenditure in an attempt to project what the typical investor in a property
similar to the subject would consider reasonable, based upon actual operations,
informed opinion, and experience. The following is a detailed summary and
discussion of non-reimbursable expenses incurred in the operation of the subject
property for the initial year. Expenses are forecasted to increase 3.5 percent
per annum, through the remainder of the holding period.
General and Administrative - Expenses related to the administrative aspects
of the mall include costs particular to operation of the mall, including
salaries, travel and entertainment, and dues and subscriptions. A provision
is also made for professional services (legal and accounting fees and other
professional consulting services). In 1996, we reflect general and
administrative expenses of $89,334, or $0.41 per square foot of mall shop
GLA.
Marketing - These costs relate to ownership's contribution to the merchant
association which is net of tenant contributions. In 1996, marketing costs
are forecasted to amount to $38,986, or $0.18 per square foot.
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Miscellaneous - This catch-all category is provided for various
miscellaneous and sundry expenses that ownership will typically incur. Such
items as unrecovered repair costs, preparation of suites for temporary
tenants, certain non-recurring expenses, expenses associated with
maintaining vacant space, and bad debts in excess of our credit loss
provision would be included here. In 1996, these miscellaneous items are
forecasted to amount to $30,000.
Management - The annual cost of managing the subject property is projected
to be 3.0 percent of minimum and percentage rent. In the initial year of
our analysis, this amount is shown to be $113,398. Alternatively, this
amount is equivalent to approximately 2.1 percent of effective gross
income. Our estimate is reflective of a typical management agreement with a
firm in the business of providing professional management services. This
amount is considered typical for a retail complex of this size. Our
investigation into the market for this property type indicates an overall
range of fees of 3 to 5 percent. Since we have reflected a structure where
ownership separately charges leasing commissions, we have used the lower
end of the range as providing for compensation for these services.
Alterations - The principal component of this expense is ownership's
estimated cost to prepare a vacant suite for tenant use. At the expiration
of a lease, we have made a provision for the likely expenditure of some
monies on ownership's part for tenant improvement allowances. In this
regard, we have forecasted a cost of $10.00 per square foot for turnover
space (initial cost growing at expense growth rate) weighted by our
turnover probability of 30.0 percent. We have forecasted a rate of $2.00
per square foot for renewal (rollover) tenants, based on a renewal
probability of 70.0 percent. The blended rate based on our 70/30 turnover
probability is therefore $4.40 per square foot. These costs are forecasted
to increase at our implied expense growth rate.
Leasing Commissions - Leasing services have been included as part of an all
inclusive management fees. However, within our analysis we have provided
for each of these services separately. A typical leasing structure is $3.50
per square foot for new tenants and $1.50 per square foot for renewal
tenants. These rates are increased by $0.50 and $0.25 per square foot,
respectively, every five years. This structure implies a payout up front at
the start of a lease. The cost is weighted by our 70/30 percent
renewal/turnover probability. Thus, upon lease expiration, a leasing
commission charge of $2.10 per square foot would be incurred.
Replacement Reserves - It is customary and prudent to set aside an amount
annually for the replacement of short-lived capital items such as the roof,
parking lot and certain mechanical items. The repairs and maintenance
expense category has historically included some capital items which have
been passed through to the tenants. This appears to be a fairly common
practice among most malls. However, we feel that over a holding period some
repairs or replacements will be needed that will not be passed on to the
tenants. For purposes of this report, we have estimated an expense of
approximately $0.20 per square foot of owned GLA during the first year
($91,991), thereafter increasing by our expense growth rate.
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Capital Repairs - We have allocated an additional capital funding of
$100,000 per year to allow for periodic renovation of common areas.
Expense Growth Rates - Retail Component
Expense growth rates are generally forecasted to be more consistent with
inflationary trends than with competitive market forces. The Winter 1995 Cushman
& Wakefield survey of regional malls found the low and high mean from each
respondent to be 3.75 percent. The Fourth Quarter 1995 Korpacz survey reports
that the range in expense growth rates runs from 3.0 percent to 5.0 percent with
an average of 3.98 percent, down 13 basis points from one year ago. Expenses are
forecasted to grow by 3.5 percent per annum over the remainder of the holding
period.
Net Income/Net Cash Flow - Retail Component
The total expenses of the subject property, including alterations,
commissions, capital expenditures, and reserves, are annually deducted from
total income, thereby leaving a residual net operating income or net cash flow
to the investors in each year of the holding period before debt service. In the
initial year of investment, the net operating income is forecasted to be equal
to approximately $3.61 million which is equivalent to 67.6 percent of effective
gross income. Deducting other expenses including capital items results in a net
cash flow before debt service of approximately $2.96 million.
================================================================================
OPERATING SUMMARY
INITIAL YEAR OF INVESTMENT
================================================================================
Aggregate Sum Unit Rate* Operating Ratio
================================================================================
Effective Gross Income $5,337,274 $11.60 100.0%
Operating Expenses $1,728,193 $ 3.76 32.4%
Net Operating Income $3,609,081 $ 7.85 67.6%
Other Expenses $ 646,825 $ 1.41 12.1%
Cash Flow $2,962,256 $ 6.44 55.5%
================================================================================
* Based on total owned GLA of 459,957
================================================================================
Investment Parameters
After projecting the income and expense components of the subject property,
investment parameters must be set in order to forecast property performance over
the holding period. These parameters include the selection of capitalization
rates (both initial and terminal) and application of the appropriate discount or
yield rate, also referred to as the internal rate of return (IRR).
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Selection of Capitalization Rates
Overall Capitalization Rate
The overall capitalization rate bears a direct relationship between net
operating income generated by the real estate in the initial year of investment
(or initial stabilized year) and the value of the asset in the marketplace.
Overall rates are also affected by the existing leasing schedule of the
property, the strength or weakness of the local rental market, the property's
position relative to competing properties, and the risk/return characteristics
associated with competitive investments.
For retail properties, the trend has been for rising capitalization rates.
We feel that much of this has to do with the quality of the product that has
been selling. Sellers of the better performing dominant Class A malls have been
unwilling to waver on their pricing. Many of the malls which have sold over the
past 18 to 24 months are found in less desirable second or third tier locations
or represent turnaround situations with properties that are posed for expansion
or remerchandising. With fewer buyers for the top performing assets, sales have
been somewhat limited.
================================================================================
Overall Capitalization Rates
Regional Mall Sales
================================================================================
Year Range Mean Basis Point Change
================================================================================
1988 5.00% - 8.00% 6.16% --
1989 4.58% - 7.26% 6.05% -11
1990 5.06% - 9.11% 6.33% +28
1991 5.60% - 7.82% 6.44% +11
1992 6.00% - 7.97% 7.31% +87
1993 7.00% -10.10% 7.92% +61
1994 6.98% -10.29% 8.37% +45
1995 7.47% -11.10% 9.14% +79
================================================================================
The data above shows that, with the exception of 1989, the average cap rate
has shown a rising trend each year Between 1988 and 1989, the average rate
declined by 11 basis points. This was partly a result of dramatically fewer
transactions in 1989 as well as the sale of Woodfield Mall at a reported cap
rate of 4.58 percent. In 1990, the average cap rate jumped 28 basis points to
6.33 percent. Among the 16 transactions we surveyed that year, there was a
marked shift of investment criteria upward, with additional basis point risk
added due to the deteriorating economic climate for commercial real estate.
Furthermore, the problems with department store anchors added to the perceived
investment risk.
Much of the buying over the past 18 to 24 months has been opportunistic
acquisitions involving properties selling near or below replacement cost. Many
of these properties have languished due to lack of management focus or
expertise, as well as a limited ability to make the necessary capital
commitments for growth. As these opportunities become harder to find, we believe
that investors will again begin to focus on the stable returns of the dominant
Class A product.
The Cushman & Wakefield's Winter 1995 survey reveals that going-in cap
rates for regional shopping centers range between 7.0 and 9.0 percent with a low
average of 7.47 and
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high average of 8.25 percent, respectively; a spread of 78 basis points.
Generally, the change in average capitalization rates over the Spring 1995
survey shows that the low average decreased by 3 basis points, while the upper
average increased by 15 points. Terminal, or going-out rates are now averaging
8.17 and 8.83 percent, representing a decrease of 22 basis points and 23 basis
points, from Spring 1995 averages.
<TABLE>
<CAPTION>
========================================================================================================================
Cushman & Wakefield Valuation Advisory Services
National Investor Survey - Regional Malls (%)
========================================================================================================================
Investment Winter 1994 Spring 1996 Winter 1995
-------------------------------------------------------------------------------------------------------
Parameters Low High LOW High LOW High
========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
OAR/Going-in 6.50 - 9.50 7.50 - 9.50 7.00 - 8.50 7.50 - 8.50 7.00 - 8.00 7.50 - 9.00
7.6 8.4 7.50 8.1 7.47 8.25
- ------------------------------------------------------------------------------------------------------------------------
OAR/Terrninal 7.00 - 9.50 7.50 - 10.50 7.50 - 8.75 8.00 - 9.25 7.00 - 9.00 8.00 - 10.00
8.0 8.8 7.95 8.6 8.17 8.83
- ------------------------------------------------------------------------------------------------------------------------
IRR 10.00 - 11.50 10.00 - 13.00 10.00 - 11.50 11.00 - 12.00 10.00 - 11.50 10.50 - 12.00
10.5 11.5 10.70 11.4 10.72 11.33
========================================================================================================================
</TABLE>
The Fourth Quarter 1995 Peter F. Korpacz survey finds that cap rates have
remained relatively stable. They recognize that there is extreme competition for
the few premier malls that are offered for sale which should exert downward
pressure on rates. However, most of the available product is B or C quality
which are not attractive to most institutional investors. The survey did,
however, note a dramatic change for the top tier investment category of 20 to 30
true "trophy" assets in that investors think it is unrealistic to assume that
cap rates could fall below 7.0 percent.
<TABLE>
<CAPTION>
====================================================================================================
NATIONAL REGIONAL MALL MARKET
FOURTH QUARTER 1995
====================================================================================================
KEY INDICATORS CURRENT LAST
Free & Clear Equity IRR QUARTER QUARTER YEAR AGO
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RANGE 10.00%-14.00% 10.00%-14.00% 10.00%-14.00%
AVERAGE 11.55% 11.55% 11.60%
- ----------------------------------------------------------------------------------------------------
CHANGE (Basis Points) - 0 -5
- ----------------------------------------------------------------------------------------------------
Free & Clear Going-in Cap Rate
- ----------------------------------------------------------------------------------------------------
RANGE 6.25%-11.00% 6.25%-11.00% 6.25%-11.00%
AVERAGE 7.86% 7.84% 7.73%
- ----------------------------------------------------------------------------------------------------
CHANGE (Basis Points) - +2 +13
- ----------------------------------------------------------------------------------------------------
Residual Cap Rate
- ----------------------------------------------------------------------------------------------------
RANGE 7.00%-11.00% 7.00%-11.00% 7.00%-11.00%
AVERAGE 8.45% 8.45% 8.30%
- ----------------------------------------------------------------------------------------------------
CHANGE (Basis Points) - 0 +15
====================================================================================================
Source. Peter Korpacz Associates, Inc. - Real Estate Investor Survey Fourth Quarter - 1995
====================================================================================================
</TABLE>
As can be seen from the above, the average IRR has decreased by 5 basis
points to 11.55 percent from one year ago. However, it is noted that this
measure has been relatively stable over the past three months. The quarter's
average initial free and clear equity cap rate rose 13 basis points to 7.86
percent from a year earlier, while the residual cap rate increased 15 basis
points to 8.45 percent.
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Income Approach
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Most retail properties that are considered institutional grade are
existing, seasoned centers with good inflation protection that offer stability
in income and are strongly positioned to the extent that they are formidable
barriers to new competition. Equally important are centers which offer good
upside potential after face-lifting, renovations, or expansion. With new
construction down substantially, owners have accelerated renovation and re-
merchandising programs. Little competition from over-building is likely in most
mature markets within which these centers are located. Environmental concerns
and "no-growth" mentalities in communities are now serious impediments to new
retail development.
Finally, investors have recognized that the retail landscape has been
fundamentally altered by consumer lifestyles changes, industry consolidations
and bankruptcies. This trend was strongly in evidence as the economy enters 1996
in view of the wave of retail chains whose troublesome earnings are forcing
major restructures or even liquidations. (The reader is referred to the National
Retail Overview in the Addenda of this report). Trends toward more casual dress
at work and consumers growing pre-occupation with their leisure and home lives
have created the need for refocused leasing efforts to bring those tenants to
the mall that help differentiate them from the competition. As such,
entertainment, a loosely defined concept, is one of the most common directions
malls have taken. A trend toward bringing in larger specialty and category
tenants to the mall is also in evidence. The risk from an owners standpoint is
finding that mix which works the best.
Nonetheless, the cumulative effect of these changes has been a rise in
rates as investors find it necessary to adjust their risk premiums in their
underwriting.
Based upon this discussion, we are inclined to group and characterize
regional malls into the general categories following:
Cap Rate Range Category
7.0% to 7.5% Top 20 to 25+ malls in the country.
7.5% to 8.5% Dominant Class A investment grade property, high
sales levels, relatively good health ratios, excellent
demographics (top 50 markets), and considered to
present a significant barrier to entry within its trade
area.
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8.5% to 10.5% Somewhat broad characterization of investment
quality properties ranging from primary MSAs to
second tier cities. Properties at the higher end of
the scale are probably somewhat vulnerable to
new competition in their market.
10.5% to 12.0% Remaining product which has limited appeal or
significant risk which will attract only a smaller,
select group of investors.
Conclusion - Initial Capitalization Rate
Based upon our analysis of the subject property, we have developed a
going-in capitalization rate for the property. The following points summarize
some of our thinking:
o Golden East Crossing is a good quality, investment grade mall which is
the dominant retail property in the Rocky Mount North Carolina region.
o Trade area demographics are stable, with potential for growth in
population, households, and income.
o Area income levels are low, however, continued remerchandising and the
current strong anchor mix will continue to produce a strong customer
draw to the property. The anchor alignment is properly positioned for
the trade area.
On balance, we believe that a property with characteristics of the subject
would potentially trade at an overall rate between 9.25 and 9.75 percent based
upon stabilized net operating income.
Terminal Capitalization Rate
The residual cash flows generated annually by the subject property comprise
only the first part of the return which an investor will receive. The second
component of this investment return is the pre-tax cash proceeds from the resale
of the property at the end of a projected investment holding period. Typically,
investors will structure a provision in their analyses in the form of a rate
differential over a going-in capitalization rate in projecting a future
disposition price. The view is that the improvement is then older and the future
is harder to visualize; hence a slightly higher rate is warranted for added
risks in forecasting. On average, our rate survey shows a 38 basis point
differential.
Therefore, to the range of stabilized overall capitalization rates, we have
added 50 basis points to arrive at a projected terminal capitalization rate
ranging from 9.75 to 10.25 percent. This provision is made for the risk of
maintaining a certain level of occupancy in the center, its level of revenue
collection, the prospects of future competition, as well as the uncertainty of
maintaining the forecasted growth rates over such a holding period. In our
opinion, this range of terminal rates would be appropriate for the subject.
Thus, this range of rates is applied to the following year's net operating
income before reserves, capital expenditures, leasing commissions and
alterations as it would be the first received by a new purchaser of the subject
property. Applying a rate of say 10.00 percent for disposition, a current
investor would dispose of the subject property at the end of the investment
holding period for an amount of
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Income Approach
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approximately $48.9 million based on fiscal year 2007 net income of
approximately $4.9 million.
From the projected reversionary value to an investor in the subject
property, we have made a deduction to account for the various transaction costs
associated with the sale of an asset of this type. These costs consist of 3.0
percent of the total disposition price of the subject property as an allowance
for transfer taxes, professional fees, and other miscellaneous expenses
including an allowance for alteration costs that the seller pays at final
closing. Deducting these transaction costs from the computed reversion renders
pre-tax the net proceeds of sale to be received by an investor in the subject
property at the end of the holding period.
<TABLE>
<CAPTION>
========================================================================================
Net Proceeds at Reversion
========================================================================================
Less Costs of Sale and
Net Income FY 2007 Gross Sale Price Miscellaneous Expenses @ 3.0% Net Proceeds
========================================================================================
<S> <C> <C> <C>
$4,894,241 $48,942,410 ($1,468,272) $47,474,138
========================================================================================
</TABLE>
Selection of Discount Rate
The discounted cash flow analysis makes several assumptions which reflect
typical investor requirements for yield on real property. These assumptions are
difficult to directly extract from any given market sale or by comparison to
other investment vehicles. Instead, investor surveys of major real estate
investment funds and trends in bond yield rates are often cited to support such
analysis.
A yield or discount rate differs from an income rate, such as cash-on-cash
(equity dividend rate), in that it takes into consideration all equity benefits,
including the equity reversion at the time of resale and annual cash flow from
the property. The internal rate of return is the single-yield rate that is used
to discount all future equity benefits (cash flow and reversion) into the
initial equity investment. Thus, a current estimate of the subject's present
value may be derived by discounting the projected income stream and reversion
year sale at the property's yield rate.
Yield rates on long term real estate investments range widely between
property types. As cited in Cushman & Wakefield's Winter 1995 survey, investors
in regional malls are currently looking at broad rates of return between 10.0
and 12.00 percent, down slightly from our last two surveys. The indicated low
and high means are 10.72 and 11.33 percent, respectively. Peter F. Korpacz
reports an average internal rate of return of 11.55 percent for the Fourth
Quarter 1995, down 5 basis points from the year ago level.
The yield rate on a long term real estate investment can also be compared
with yield rates offered by alternative financial investments since real estate
must compete in the open market for capital. In developing an appropriate risk
rate for the subject, consideration has been given to a number of different
investment opportunities. The following is a list of rates offered by other
types of securities.
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=======================================================
Market Rates and Bond Yields 1%) May, 1996
=======================================================
Reserve Bank Discount Rate 5.00
-------------------------------------------------------
Prime Rate (Monthly Average) 8.25
-------------------------------------------------------
3-Month Treasury Bills 4.98
-------------------------------------------------------
U.S. 10-Year Notes 6.90
-------------------------------------------------------
U.S. 30-Year Bonds 6.95
-------------------------------------------------------
Telephone Bonds 8.09
-------------------------------------------------------
Municipal Bonds 6.21
=======================================================
Source: New York Times
=======================================================
This compilation of yield rates from alternative investments reflects
varying degrees of risk as perceived by the market. Therefore, a riskless level
of investment might be seen in a three month treasury bill at 4.98 percent. A
more risky investment, such as telephone bonds, would currently yield a much
higher rate of 8.09 percent. The prime rate is currently 8.25 percent, while the
discount rate is 5.00 percent. Ten year treasury notes are currently yielding
around 6.90 percent, while 30-year bonds are at 6.95 percent.
Real estate investment typically requires a higher rate of return (yield)
and is much influenced by the relative health of financial markets. A retail
center investment tends to incorporate a blend of risk and credit based on the
tenant mix, the anchors that are included (or excluded) in the transaction, and
the assumptions of growth incorporated within the cash flow analysis. An
appropriate discount rate selected for a retail center thus attempts to consider
the underlying credit and security of the income stream, and includes an
appropriate premium for liquidity issues relating to the asset.
There has historically been a consistent relationship between the spread in
rates of return for real estate and the "safe" rate available through long-term
treasuries or high-grade corporate bonds. A wider gap between return
requirements for real estate and alternative investments has been created in
recent years due to illiquidity issues, the absence of third party financing,
and the decline in property values.
Investors have suggested that the regional mall market has become
increasingly "tiered" over the past two years. The country's premier malls are
considered to have the strongest trade areas, excellent anchor alignments, and
significant barriers of entry to future competitive supply. These and other
"dominant" malls will have average mall shop sales above $300 per square foot
and be attractive investment vehicles in the current market. It is our opinion
that the subject would attract interest from institutional investors if offered
for sale in the current marketplace. The subject is a well maintained asset that
has no immediate area competition. It is unlikely that another mall will be
built in its trade area for several years.
Finally, application of these rate parameters to the subject should entail
some sensitivity to the rate at which leases will be expiring over the
projection period. A complete expiration report is included in the Addenda. We
would also note that much of the risk factored into such an analysis is
reflected in the assumptions employed within the cash flow model, including rent
and sales growth, turnover, reserves, and vacancy provisions.
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We have briefly discussed the investment risks associated with the subject.
On balance, it is our opinion that an investor in the subject property would
require an internal rate of return between 11.50 and 12.50 percent.
Present Value Analysis
Analysis by the discounted cash flow method is examined over a holding
period that allows the investment to mature, the investor to recognize a return
commensurate with the risk taken, and a recapture of the original investment.
Typical holding periods usually range from 10 to 20 years and are sufficient for
the majority of institutional grade real estate such as the subject to meet the
criteria noted above. In the instance of the subject, we have analyzed the cash
flows anticipated over a ten year period commencing on June 1, 1996.
A sale or reversion is deemed to occur at the end of the 10th year based
upon capitalization of the following year's net operating income. This is based
upon the premise that a purchaser in the 10th year is buying the following
year's net income. Therefore, our analysis reflects this situation by
capitalizing the first year of the next holding period.
The present value is formulated by discounting the property cash flows at
various yield rates. The yield rate utilized to discount the projected cash flow
and eventual property reversion has been based on an analysis of anticipated
yield rates of investors dealing in similar investments. The rates reflect
acceptable expectations of yield to be achieved by investors currently in the
marketplace shown in their current investment criteria and as extracted from
comparable property sales.
Cash Flow Assumptions
Our cash flows forecasted for the property have been presented. To
reiterate, the formulation of these cash flows incorporate the following general
assumptions in our computer model:
1. The pro forma is presented on a fiscal year basis commencing on June
1, 1996. The present value analysis is based on a 10 year holding
period. This period reflects 9+/- years of stabilized operations.
2. Existing lease terms and conditions remain unmodified until their
expiration. At expiration, it has been assumed that there is a 70.0
percent probability that existing retail tenants will renew their
lease. Executed and high probability pending leases have been assumed
to be signed in accordance with negotiated terms as of the date of
valuation.
3. 1996 base date market rental rates have been established according to
tenant size with consideration given to location, the specific
merchandise category, as well as projected sales. Upon renewal, it is
assumed that new leases are written for an average of 10 years with a
rent step of 10.0 percent in year 6.
4. Market rents have been established for 1996. Subsequently, it is our
assumption that market rental rates for mall tenants will stay flat
through 1997, increase 2 percent in 1998 and 3 percent per year
thereafter.
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5. Most retail tenants have percentage rent clauses providing for the
payment of overage rent. In our analysis, we have forecasted that
sales will grow by 2.0 percent in 1997 and 3.0 percent thereafter
through the holding period.
6. Expense recoveries are based upon terms specified in the various lease
contracts. The standard lease contract for real estate taxes and
common area maintenance billings for interior mall tenants is
generally based upon a tenants pro rata share of occupied area.
7. Income lost due to vacancy and non-payment of obligations has been
based upon our turnover probability assumption as well as a global
provision for credit loss of 2.5 percent.
8. Specialty leasing and miscellaneous income consists of several
categories. Specialty leasing is generated by the mall's temporary
in-line tenant program which fill in during periods of downtime
between permanent in-line tenants. Miscellaneous income is generated
by chargebacks for tenant work, forfeited security deposits,
telephones, etc. We have grown all miscellaneous revenues by 2.0
percent per annum.
9. Operating expenses have been developed with management's budget from
which we have recast certain expense items. Expenses have also been
compared to industry standards as well as our general experience.
Operating expenses are forecasted to increase by 3.5 percent per year
except for management which is based upon a percentage of income.
Taxes are forecasted to grow at 3.5 percent per year. Alteration costs
are assumed to escalate at our forecasted expense inflation rate.
10. A provision for initial capital reserves has been reflected. An
alteration charge of $10.00 per square foot has been utilized for new
mall tenants upon future rollover of space. Renewal tenants have been
given an allowance of $2.00 per square foot. Leasing commissions
reflect a rate structure of $3.50 per square foot for new leases and
$1.50 per square foot for renewal leases.
For a property such as the subject, it is our opinion that an investor
would require an all cash discount rate in the range of 11.75 to 12.25 percent.
Accordingly, we have discounted the projected future pre-tax cash flows to be
received by an equity investor in the subject property to a present value so as
to yield 11.75 to 12.25 percent at 25 basis point intervals on equity capital
over the holding period. This range of rates reflects the risks associated with
the investment. Discounting these cash flows over the range of yield and
terminal rates now being required by participants in the market for this type of
real estate places additional perspective upon our analysis. The holding period
is deemed to run from June 1, 1996 through May 31, 2006. A valuation matrix for
the subject appears on the following table:
=========================================================================
Valuation Matrix (000)
=========================================================================
Terminal Cap Rate Discount Rate
-------------------------------------------------------------------------
11.75% 12.00% 12.25%
=========================================================================
9.75% $39,254 $38,648 $38,055
-------------------------------------------------------------------------
10.00% $38,853 $38,256 $37,672
-------------------------------------------------------------------------
10.25% $38,472 $37,883 $37,307
=========================================================================
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Income Approach
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Through such a sensitivity analysis, it can be seen that the prospective
value of the subject property varies from approximately $37.3 to $39.3 million.
Giving consideration to all of the characteristics of the subject previously
discussed, we feel that a prudent investor would require a yield which falls
near the middle of the range outlined above for this property. Accordingly, we
believe that based upon all of the assumptions inherent in our cash flow
analysis, an investor would look toward as IRR around 12.00 percent and a
terminal rate around 10.00 percent as being most representative of the subject's
value in the market.
In view of the analysis presented here, it becomes our opinion that the
discounted cash flow analysis indicates a market value of $38.3 million for the
subject property as of June 1, 1996. The indices of investment generated through
this indicated value conclusion are shown on the following chart:
==========================================================
Investment Indices
==========================================================
Equity Yield (IRR) 12.00%
----------------------------------------------------------
Overall Capitalization Rate 9.43%
----------------------------------------------------------
Price/SF of Owned GLA $83.27
----------------------------------------------------------
* Calculated fiscally by PRO-JECT +Plus ($3,609,081)
** Based upon 459,957+/- SF
==========================================================
We note that the computed equity yield is not necessarily the true rate of
return on equity capital. This analysis has been performed on a pre-tax basis.
The tax benefits created by real estate investment will serve to attract
investors to a pre-tax yield which is not the full measure of the return on
capital.
Direct Capitalization
To further support our value conclusion derived via the discounted cash
flow analysis, we have also utilized the direct capitalization method. In direct
capitalization an overall rate is applied to the net operating income of the
subject property. In this case, we will again consider the indicated overall
rates from the comparable sales in the Sales Comparison Approach as well as
those rates established in our Investor Survey. The sales displayed in our
summary charts developed overall rates ranging from 7.47 to 11.10 percent in
1995. The mean was 7.92 percent for 1993 transactions, 8.37 percent for 1994
sales, and 9.14 percent for 1995.
In view of all of the above, we would anticipate that the subject would
trade at an overall rate of between 9.25 and 9.75 percent. Applying this rate to
net operating income before reserves and alterations and other expenses for the
subject of $3,609,081 results in a value range of $37,016,215 to $39,017,092 for
the subject. Thus, we are inclined to conclude at a stabilized value for the
subject property via direct capitalization of $38,000,000 as of June 1, 1996.
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RECONCILIATION AND FINAL VALUE ESTIMATE
================================================================================
Application of the Sales Comparison, and Income Approaches used in the
valuation of the subject property has produced results which fall within a
reasonably acceptable range. Restated, these are:
==========================================================
Methodology Market Value Conclusion
==========================================================
Cost Approach N/A
----------------------------------------------------------
Sales Comparison Approach
----------------------------------------------------------
Owned Mail Portion $37,000,000 to $39,000,000
----------------------------------------------------------
Vacant Outparcels $1,045,000
----------------------------------------------------------
Income Approach
Discounted Cash Flow $38,300,000
Direct Capitalization $38,000,000
==========================================================
Each approach is well supported by data extracted from the market. There
are, however, strengths and weaknesses in each of these approaches which require
reconciliation before a final conclusion of value can be rendered.
Cost Approach
The Cost Approach is based on the principle of substitution which maintains
that a prudent purchaser will not pay more for a property than the cost to
construct an equally desirable substitute property. It is best applied to a
property where improvements to the site are new or of a special design and use,
The estimation of replacement cost new and developers profit requires judgment,
based upon cost services and interviews. The land value estimate was based on a
subjective exercise that essentially equated the acquisition costs of the site
together with the expended physical costs with value. Some limitations do exist
with this approach when estimating a future value. The cost approach was not
employed in this analysis due to the difficulty in estimating accrued
depreciation, as well as the fact that properties such as the subject are not
traded on a cost/value basis.
Sales Comparison Approach
The Sales Comparison Approach arrived at a value indicted for the property
by analyzing historical arms-length transaction, reducing the gathered
information to common units of comparison, adjusting the sale data for
differences with the subject and interpreting the results to yield a meaningful
value conclusion. The basis of these conclusions was the cash-on-cash return
based on net income and the adjusted price per square foot of gross leasable and
net rentable area sold. An analysis of the subject on the basis of its implicit
sales multiple was also utilized.
The process of comparing historical sales data to assess what purchasers
have been paying for similar type properties is weak in estimating future
expectations. Although the unit sale price yields comparable conclusions, it is
not the primary tool by which the investor market for a property like the
subject operates. In addition, no two properties are alike with respect to
quality of construction, location, market segmentation and income profile. As
such, subjective judgment necessarily becomes a part of the comparative process.
The usefulness of this approach is that it interprets specific investor
parameters established in their analysis and ultimate purchase of a property. In
light of the above, the writers are of the opinion that this methodology is best
suited as support for the conclusions of the Income Approach. It does
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VALUATION ADVISORY SERVICES
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<PAGE>
Reconciliation and Final Value Estimate
================================================================================
provide useful market extracted rates of return such as overall rates to
simulate investor behavior in the Income Approach.
Income Approach
Discounted Cash Flow Analysis
The subject property is highly suited to analysis by the discounted cash
flow method as it will be bought and sold in investment circles. The focus on
property value in relation to anticipated income is well founded since the basis
for investment is profit in the form of return or yield on invested capital. The
subject property, as an investment vehicle, is sensitive to all changes in the
economic climate and the economic expectations of investors. The discounted cash
flow analysis may easily reflect changes in the economic climate of investor
expectations by adjusting the variables used to qualify the model. In the case
of the subject property, the Income Approach can analyze existing leases, the
probabilities of future rollovers and turnovers and reflect the expectations of
overage rents. Essentially, the Income Approach can model many of the dynamics
of a complex property. The writers have considered the results of the discounted
cash flow analysis because of the applicability of this method in accounting for
the particular characteristics of the property, as well as being the tool used
by many purchasers.
Capitalization
Direct capitalization has its basis in capitalization theory and uses the
premise that the relationship between income and sales price may be expressed as
a rate or its reciprocal, a multiplier. This process selects rates derived from
the marketplace, in much the same fashion as the Sales Comparison Approach, and
applies this to a projected net operating income to derive a sale price. The
weakness here is the idea of using one year of cash flow as the basis for
calculating a sale price. This is simplistic in its view of expectations and may
sometimes be misleading. If the year chosen for the analysis of the sale price
contains an income stream that is over or understated, this error is compounded
by the capitalization process. For this reason, Direct Capitalization has not
received primary emphasis in our selection of the market value for the subject.
Conclusions
We have briefly discussed the applicability of each of the methods
presented. Because of certain vulnerable characteristics in the Sales Comparison
Approach, it has been used as supporting evidence and as a final check on the
value conclusion indicated by the Income Approach methodology. The value
exhibited by the Income Approach is consistent with the leasing profile of the
property. Overall, it indicates complimentary results with the Sales Comparison
Approach, the conclusions being supportive of each method employed, and neither
range being extremely high or low in terms of the other.
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VALUATION ADVISORY SERVICES
<PAGE>
Reconciliation and Final Value Estimate
================================================================================
As a result of our analysis, we have formed an opinion that the market
value of the leased fee estate in the referenced property, including the fee
simple estate in the three outparcels, subject to the assumptions, limiting
conditions, certifications, and definitions, as of June 1, 1996, was:
THIRTY NINE MILLION DOLLARS
$39,000,000
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<PAGE>
ASSUMPTIONS AND LIMITING CONDITIONS
================================================================================
"Appraisal" means the appraisal report and opinion of value stated therein; or
the letter opinion of value, to which these Assumptions and Limiting Conditions
are annexed.
"Property" means the subject of the Appraisal.
"C&W' means Cushman & Wakefield, Inc. or its subsidiary which issued the
Appraisal.
"Appraiser(s)" means the employee(s) of C&W who prepared and signed the
Appraisal.
This appraisal is made subject to the following assumptions and limiting
conditions:
1. 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 and for the intended use stated below. The appraiser is not
responsible for unauthorized use of this report. We are providing this
report as an update to our last analysis which was prepared as of January
1, 1995. As such, we have primarily reported only changes to the property
and its environs over the past year.
2. No opinion is intended to be expressed and no responsibility is assumed for
the legal description or for any matters which are legal in nature or
require legal expertise or specialized knowledge beyond that of a real
estate appraiser. Title to the Property is assumed to be good and
marketable and the Property is assumed to be free and clear of all liens
unless otherwise stated. No survey of the Property was undertaken.
3. The information contained in the Appraisal or upon which the Appraisal is
based has been gathered from sources the Appraiser assumes to be reliable
and accurate. Some of such information may have been provided by the owner
of the Property. Neither the Appraiser nor C&W shall be responsible for the
accuracy or completeness of such information, including the correctness of
estimates, opinions, dimensions, sketches, exhibits and factual matters.
4. The opinion of value is only as of the date stated in the Appraisal.
Changes since that date in external and market factors or in the Property
itself can significantly affect property value.
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<PAGE>
Assumptions and Limiting Conditions
================================================================================
5. The Appraisal is to be used in whole and not in part. No part of the
Appraisal shall be used in conjunction with any other appraisal.
Publication of the Appraisal or any portion thereof without the prior
written consent of C&W is prohibited. Except as may be otherwise stated in
the letter of engagement, the Appraisal may not be used by any person other
than the party to whom it is addressed or for purposes other than that for
which it was prepared. No part of the Appraisal shall be conveyed to the
public through advertising, or used in any sales or promotional material
without C&Ws prior written consent. Reference to the Appraisal Institute or
to the MAI designation is prohibited.
6. Except as may be otherwise stated in the letter of engagement, the
Appraiser shall not be required to give testimony in any court or
administrative proceeding relating to the Property or the Appraisal.
7. The Appraisal assumes (a) responsible ownership and competent management of
the Property; (b) there are no hidden or unapparent conditions of the
Property, subsoil or structures that render the Property more or less
valuable (no responsibility is assumed for such conditions or for arranging
for engineering studies that may be required to discover them); (c) full
compliance with all applicable federal, state and local zoning and
environmental regulations and laws, unless noncompliance is stated, defined
and considered in the Appraisal; and (d) all required licenses,
certificates of occupancy and other governmental consents have been or can
be obtained and renewed for any use on which the value estimate contained
in the Appraisal is based.
8. The forecasted potential gross income referred to in the Appraisal may be
based on lease summaries provided by the owner or third parties. The
Appraiser assumes no responsibility for the authenticity or completeness of
lease information provided by others. C&W recommends that legal advice be
obtained regarding the interpretation of lease provisions and the
contractual rights of parties.
9. The forecasts of income and expenses are not predictions of the future.
Rather, they are the Appraiser's best estimates of current market thinking
on future income and expenses. The Appraiser and C&W make no warranty or
representation that these forecasts will materialize. The real estate
market is constantly fluctuating and changing. It is not the Appraiser's
task to predict or in any way warrant the conditions of a future real
estate market; the Appraiser can only reflect what the investment
community, as of the date of the Appraisal, envisages for the future in
terms of rental rates, expenses, supply and demand.
10. Unless otherwise stated in the Appraisal, the existence of potentially
hazardous or toxic materials which may have been used in the construction
or maintenance of the improvements or may be located at or about the
Property was not considered in arriving at the opinion of value. These
materials (such as formaldehyde foam insulation, asbestos insulation and
other potentially hazardous materials) may adversely affect the value of
the Property. The Appraisers are not qualified to detect such substances.
C&W recommends that an environmental expert be employed to determine the
impact of these matters on the opinion of value.
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<PAGE>
Assumptions and Limiting Conditions
================================================================================
11. Unless otherwise stated in the Appraisal, compliance with the requirements
of the Americans With Disabilities Act of 1990 (ADA) has not been
considered in arriving at the opinion of value. Failure to comply with the
requirements of the ADA may adversely affect the value of the property. C&W
recommends that an expert in this field be employed.
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<PAGE>
CERTIFICATION OF APPRAISAL
================================================================================
We certify that, to the best of our knowledge and belief:
1. Douglas C. Holowink inspected the property. Richard W. Latella has reviewed
and approved the report, but did not inspect the property.
2. The statements of fact contained in this report are true and correct.
3. The reported analyses, opinions, and conclusions are limited only by the
reported assumptions and limiting conditions, and are our personal,
unbiased professional analyses, opinions, and conclusions.
4. We have no present or prospective interest in the property that is the
subject of this report and we have no personal interest or bias with
respect to the parties involved.
5. Our compensation is not contingent upon the reporting of a predetermined
value or direction in value that favors the cause of the client, the amount
of the value estimate, the attainment of a stipulated result, or the
occurrence of a subsequent event. The appraisal assignment was not based on
a requested minimum valuation, a specific valuation or the approval of a
loan.
6. No one provided significant professional assistance to the persons signing
this report.
7. Our analyses, opinions, and conclusions were developed, and this report has
been prepared, in conformity with the Uniform Standards of Professional
Appraisal Practice of the Appraisal Foundation and the Code of Professional
Ethics and the Standards of Professional Appraisal Practice of the
Appraisal Institute.
8. The use of this report is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives.
9. As of the date of this report, Richard W. Latella has completed the
requirements of the continuing education program of the Appraisal
Institute.
/s/ Douglas C. Holowink /s/ Richard W. Latella
- ----------------------- ----------------------
Douglas C. Holowink Richard W. Latella, MAI
Director Senior Director
Valuation Advisory Services Retail Valuation Group
State of North Carolina
Temporary Privilege/Certification No. TG-297
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VALUATION ADVISORY SERVICES
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<PAGE>
ADDENDA
================================================================================
NATIONAL RETAIL MARKET ANALYSIS
STATE OF NORTH CAROLINA TEMPORARY PRIVILEGE CERTIFICATE
1994 & 1995 OPERATING STATEMENTS AND 1996 BUDGET
RENT ROLL
PRO-JECT+ LEASE ABSTRACT REPORT
PRO-JECT+ ASSUMPTIONS REPORT
PRO-JECT+ TENANT REGISTER REPORT
PRO-JECT+ LEASE EXPIRATION REPORT
ENDS FULL DATA REPORTS
MALL SALES (1991-1994)
CUSHMAN & WAKEFIELD INVESTOR SURVEY
APPRAISERS' QUALIFICATIONS
================================================================================
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<PAGE>
===============================
National Retail Market Analysis
===============================
<PAGE>
NATIONAL RETAIL MARKET OVERVIEW
================================================================================
Introduction
Shopping centers constitute the major form of retail activity in the United
States today. Approximately 55 percent of all non-automotive retail sales occur
in shopping centers. It is estimated that consumer spending accounts for about
two-thirds of all economic activity in the United States. As such, retail sales
patterns have become an important indicator of the country's economic health.
During the period 1980 through 1995, total retail sales in the United
States increased at a compound annual rate of 6.16 percent. Data for the period
1990 through 1995 shows that sales growth has slowed to an annual average of
4.93 percent. This information is summarized an the following chart. The
Commerce Department reports that total retail sales fell three-tenths of a
percent in January 1996.
================================================================================
Total U.S. Retail Sales (1)
================================================================================
Year Amount (Billions) Annual Change
================================================================================
1980 $ 957,400 N/A
- --------------------------------------------------------------------------------
1985 $1,375,027 N/A
- --------------------------------------------------------------------------------
1990 $1,844,611 N/A
- --------------------------------------------------------------------------------
1991 $1,855,937 .61%
- --------------------------------------------------------------------------------
1992 $1,951,589 5.15%
- --------------------------------------------------------------------------------
1993 $2,074,499 6.30%
- --------------------------------------------------------------------------------
1994 $2,236,966 7.83%
- --------------------------------------------------------------------------------
1995 $2,346,577 4.90%
- --------------------------------------------------------------------------------
Compound Annual Growth Rate
1980-1995 +6.16%
- --------------------------------------------------------------------------------
CAGR: 1990 - 1995 +4.93%
- --------------------------------------------------------------------------------
(1)1985 - 1995 data reflects recent revisions by the U.S. Department of
Commerce: Combined Annual and Revised Monthly Retail Trade.
================================================================================
Source: Monthly Retail Trade Reports Business Division, Current Business
Reports, Bureau of the Census, U.S. Department of Commerce.
================================================================================
The early part of the 1990s was a time of economic stagnation and
uncertainty in the country. The gradual recovery, which began as the nation
crept out of the last recession, has shown some signs of weakness as corporate
downsizing has accelerated. But as the recovery period reaches into its fifth
year and the retail environment remains volatile, speculation regarding the
nation's economic future remains. It is this uncertainty which has shaped recent
consumer spending patterns.
Personal Income and Consumer Spending
Americans' personal income advanced by six-tenths of a percent in December,
which helped raise income for all of 1995 by 6.1 percent, the highest gain since
6.7 percent in 1990. This growth far outpaced the 2.5 percent in 1994 and 4.7
percent in 1993. Reports for February 1996 however, reported that income grew at
an annual rate of eight-tenths of a percent, the biggest gain in thirteen
months, and substantially above January's anemic growth rate of one-tenth of a
percent.
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National Retail Market Overview
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Consumer spending is another closely watched indicator of economic
activity. The importance of consumer spending is that it represents two-thirds
of the nation's economic activity. Total consumer spending rose by 4.8 percent
in 1995, slightly off of the 5.5 percent rise in 1994 and 5.8 percent in 1993.
These increases followed a significant lowering on unemployment and bolstered
consumer confidence. The Commerce Department reported that spending rose at a
1.1 percent annual pace, the largest gain in two years, in February 1996, led by
a sharp increase in automobile sales.
Unemployment Trends
The Clinton Administration touts that its economic policy has dramatically
increased the number of citizens who have jobs. Correspondingly, the nation's
unemployment rate continues to decrease from its recent peak in 1992. Selected
statistics released by the Bureau of Labor Statistics are summarized as follows:
<TABLE>
<CAPTION>
============================================================================================
Selected Employment Statistics
============================================================================================
Civilian Labor Force Employed
==========================================================================
Total Workers Total Workers Unemployment
Year(1) (000) % Change (000) % Change Rate
============================================================================================
<S> <C> <C> <C> <C> <C>
1990 124,787 7 117,914 5 5.5
- --------------------------------------------------------------------------------------------
1991 125,303 4 116,877 -.9 6.7
- --------------------------------------------------------------------------------------------
1992 126,982 1.3 117,598 .6 7.4
- --------------------------------------------------------------------------------------------
1993 128,040 .8 119,306 1.5 6.8
- --------------------------------------------------------------------------------------------
1994 131,056 2.4 123,060 3.1 6.1
- --------------------------------------------------------------------------------------------
1995 132,337 .98 124,926 1.5 5.6
- --------------------------------------------------------------------------------------------
CAGR 1.18 1.16
1990-1995
- --------------------------------------------------------------------------------------------
(1) Year ending December 31
============================================================================================
Source. Bureau of Labor Statistics U.S. Department of Labor
============================================================================================
</TABLE>
During 1995, the labor force increased by 1,281,000 or approximately 1.0
percent. Correspondingly, the level of employment increased by 1,866,000 or 1.5
percent. As such, the year end unemployment rate dropped by five-tenths of a
percent to 5.6 percent. For 1995, monthly job growth averaged 144,000. On
balance, over 8.0 million jobs have been created since the recovery began.
Evidence of continued strengthening continues into 1996 with first quarter job
growth averaging 206,000. At the end of March 1996 the nation's unemployment
rate stood at 5.6 percent.
Housing Trends
Housing starts were down in 1995 by 7 percent from 1994 with 1.35 million
units started. This compared with 1.46 million units in 1994 and 1.29 million in
1993. Single-family starts totaled 1.07 million units in 1995, down 10 percent
from 1994. Multi-family starts, however, reversed this trend with their second
consecutive yearly increase to 277,000 units.
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National Retail Market Overview
================================================================================
For 1995, sales of new homes slipped nine-tenths of a percent to 664,000
from 670,000 in 1994. This was the lowest level since 610,000 new homes were
sold in 1992. In a surprise to most analysts, new home sales rose by 4.2 percent
in January 1996 to a seasonally adjusted annual rate of 693,000. The 381,000
homes for sale represented a supply of six to seven months, the highest since
1980. The median new home price of new homes sold in the first nine months of
1995 was $132,000. The median was $130,000 for all of 1994. The Commerce
Department reported that construction spending rose 2.9 percent in October to an
annual rate of $207.7 billion, compared to $217.9 billion in all of 1994.
The home ownership rate seems to be rising, after remaining stagnant over
the last decade. For 1995, the share of households that own their homes was 64.8
percent, compared to 64.0 percent for a year earlier. Lower mortgage rates are
cited as a factor.
Gross Domestic Product
The report on the gross domestic product (GDP) showed that output for goods
and services expanded at an annual rate of just .9 percent in the fourth quarter
of 1995. Overall, the economy gained 2.0 percent in 1995, the weakest showing in
four years since the 1991 recession. The .5 percent rise in the fourth quarter
was much slower than the 1.7 percent expected by most analysts. The Fed sees the
U.S. economy expanding at a 2.0 to 2.25 percent pace during 1996 which is
in-line with White House forecasts.
The following chart cites the annual change in real GDP since 1990.
======================================
Real GDP
======================================
Year % Change
======================================
1990 1.2
--------------------------------------
1991 -.6
--------------------------------------
1992 2.3
--------------------------------------
1993 3.1
--------------------------------------
1994 4.1
--------------------------------------
1995 2.0
--------------------------------------
*Reflects new chain weighted system of
measurement. Comparable 1994 measure
would be 3.5 %
======================================
Source: Bureau
of Economic Analysis
======================================
Consumer Prices
The Bureau of Labor Statistics has reported that consumer prices rose by
only 2.5 percent in 1995, the fifth consecutive year in which inflation was
under 3.0 percent. This was the lowest rate in nearly a decade when the overall
rate was 1.1 percent in 1986. All sectors were down substantially in 1995
including the volatile health care segment which recorded inflation of only 3.9
percent, the lowest rate in 23 years.
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National Retail Market Overview
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The following chart tracks the annual change in the CPI since 1990.
===============================================
Consumer Price Index (1)
===============================================
Year CPI % Change
===============================================
1990 133.8 6.1
-----------------------------------------------
1991 137.9 3.0
-----------------------------------------------
1992 141.9 2.9
-----------------------------------------------
1993 145.8 2.7
-----------------------------------------------
1994 149.7 2.7
-----------------------------------------------
1995 153.5 2.5
===============================================
(1) All Urban Workers
===============================================
Source: Dept. of Labor
Bureau of Labor Statistics
===============================================
Other Indicators
The governments main economic forecasting gauge, the Index of Leading
Economic Indicators is intended to project economic growth over the next six
months. The Conference Board, an independent business group, reported that the
index soared 1.3 percent in February 1996, the biggest jump in 20 years. It has
become apparent that the Federal Reserve's conservative monetary policy has had
an effect on the economy and some economists are calling for a further reduction
in short term interest rates. In recent months, evidence has been mounting that
the economy is in the midst of a pick-up.
The Conference Board also reported that consumer confidence rebounded in
February 1996, following reports suggesting lower inflation. The board's index
of consumer confidence rose 9 points to 97 over January when consumers worried
about the government shutdown, the stalemate over the Federal budget and the
recent flurry of layoff announcements by big corporations.
In another sign of increasingly pinched household budgets, consumers
sharply curtailed new installment debt in September 1995, when installment
credit rose $5.4 billion, barely half as much as August. Credit card balances
increased by $2.8 billion, the slimmest rise of the year. For the twelve months
through September 1995, outstanding credit debt rose 13.9 percent, down from a
peak of 15.3 percent in May. Still, installment debt edged to a record 18.8
percent of disposable income, indicating that consumers may be reaching a point
of discomfort with new debt.
The employment cost index is a measure of overall compensation including
wages, salaries and benefits. In 1995 the index rose by only 2.9 percent, the
smallest increase since 1980. This was barely ahead of inflation and is a sign
of tighter consumer spending over the coming year. However, the productivity of
American workers grew 1.1 percent in 1995, the largest gain since a 3.2 percent
advance in 1992. Productivity is a key element in measuring the standard of
living since increased efficiency allows businesses to increase workers
compensation without having to raise prices.
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National Retail Market Overview
================================================================================
Economic Outlook
The WEFA Group, an economic consulting company, opines that the current
state of the economy is a "central bankers" dream, with growth headed toward the
Fed's 2.5 percent target, accompanied by stable if not falling inflation. They
project that inflation will remain in the 2.5 to 3.0 percent range into the
foreseeable future. This will have a direct influence on consumption (consumer
expenditures) and overall inflation rates (CPI).
Potential GDP provides an indication of the expansion of output, real
incomes, real expenditures, and the general standard of living of the
population. WEFA estimates that real U.S. GDP will grow at an average annual
rate between 2.0 and 2.5 percent over the next year and at 2.3 percent through
2003 as the output gap is reduced between real GDP and potential GDP. After
2003, annual real GDP growth will moderate, tapering to 2.2 percent per annum.
Consumption expenditures are primarily predicated on the growth of real
permanent income, demographic influences, and changes in relative prices over
the long term. Changes in these key variables explain much of the consumer
spending patterns of the 1970s and mid- 1980s, a period during which baby
boomers were reaching the asset acquisition stages of their lives; purchasing
automobiles and other consumer and household durables. Increases in real
disposable income supported this spending spurt with an average annual increase
of 2.9 percent per year over the past twenty years. Real consumption
expenditures increased at an average annual rate of 3.1 percent during the 1970s
and by an average of 4.0 percent from 1983 to 1988. WEFA projects that
consumption expenditure growth will slow to 2.0 percent per year by 2006 as a
result of slower population growth and aging. It is also projected that the
share of personal consumption expenditures relative to GDP will decline over the
next decade. Consumer spending as a share of GDP peaked in 1986 at 67.4 percent
after averaging about 63.0 percent over much of the post-war period. WEFA
estimates that consumption's share of aggregate output will decline to 64.5
percent by 2003 and 62.7 percent by 2018.
Retail Sales
In their publication, NRB/Shopping Centers Today 1994 Shopping Center
Census, the National Research Bureau reports that overall retail conditions
continued to improve for the third consecutive year in 1994. Total shopping
center sales increased 5.5 percent to $851.3 billion in 1994, up from $806.6
billion in 1993. The comparable 1993 increase was 5.0 percent. Retail sales in
shopping centers (excluding automotive and gasoline service station sales) now
account for about 55.0 percent of total retail sales in the United States.
Total retail sales per square foot have shown positive increases over the
past three years, rising by 8.7 percent from approximately $161 per square foot
in 1990, to $175 per square foot in 1994. It is noted that the increase in
productivity has exceeded the increase in inventory which bodes well for the
industry in general. This data is summarized on the following table.
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National Retail Market Overview
================================================================================
<TABLE>
<CAPTION>
Selected Shopping Center Statistics
1990-1994
=====================================================================================================================
% Compound
Change Annual
1990 1991 1992 1993 1994 1990-93 Growth
=====================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Retail Sales in Shopping Centers $706.40 $716.90 $768.20 $806.60 $851.30 20.5% 4.8%
- ---------------------------------------------------------------------------------------------------------------------
Total Leasable Area 4.4 4.6 4.7 4.8 4.9 11.4% 2.7%
- ---------------------------------------------------------------------------------------------------------------------
Unit Rate $160.89 $157.09 $164.20 $169.08 $175.13 8.7% 2.1%
=====================================================================================================================
* Billions of Dollars
** Billions of Square Feet
=====================================================================================================================
Source: National Research Bureau
=====================================================================================================================
</TABLE>
To put retail sales patterns into perspective, the following discussion
highlights key trends over the past few years.
o As a whole, 1993 was a good year for most of the nation's major retailers.
Sales for the month of December were up for most, however, the increase
ranged dramatically from 1.1 percent at Kmart to 13.3 percent at Sears for
stores open at least a year. It is noted that the Sears turnaround after
years of slippage was unpredicted by most forecasters.
o With the reporting of December 1994 results, most retailers posted same
store gains between 2.0 and 6.0 percent. The Goldman Sachs Retail Composite
Comparable Store Sales Index, a weighted average of monthly same store
sales of 52 national retail companies rose 4.5 percent in December. The
weakest sales were seen in women's apparel, with the strongest sales
reported for items such as jewelry and hard goods. Most department store
companies reported moderate increases in same store sales, though largely
as a result of aggressive markdowns. Thus, profits were negatively impacted
for many companies.
o For 1995, specialty apparel sales were lackluster at best, with only .4
percent comparable sales growth. This is of concern to investors since
approximately 30.0 percent of a mall's small shop space is typically
devoted to apparel tenants. Traditional department stores experienced 3.4
percent same store growth in 1995, led by Dillard's 5.0 percent increase.
Mass merchants' year- to-year sales increased by 6.7 percent in 1994,
driven by Sears' 7.9 percent increase. Mass merchants account for 35.0 to
55.0 percent of the anchors of regional malls and their resurgence bodes
well for increased traffic at these centers.
================================================================================
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<PAGE>
National Retail Market Overview
================================================================================
o Sales at the nation's largest retailer chains saw reasonably good increases
in March 1996, following the worst December sales figures since the 1990-91
recession in 1995. Same store sales were generally up due to the effects of
Easter in almost all sectors, although some specialty apparel retailers
continue to experience problems. Some chains were able to report increases
in sales but this generally came about through substantial discounting. As
such, profits are going to suffer and with many retailers being squeezed
for cash, 1996 is expected to be a period of continued consolidations and
bankruptcy. In March, discounters and off-price merchants like Target, Ross
and TJX Company did particularly well. The Goldman Sachs composite index of
same store sales grew by 4.2 percent in March 1996, compared to a .3
percent drop for March 1995.
Provided on the following chart is a summary of overall and same store
sales growth for selected national merchants for the most recent period.
================================================================================
Same Store Sales for the Month of March 1996
================================================================================
% Change From Previous Year
-------------------------------------
Name of Retailer Overall Same Store Basis
================================================================================
Wal-Mart +16.0% + 6.4%
- --------------------------------------------------------------------------------
Kmart - 1.0% -
- --------------------------------------------------------------------------------
Sears, Roebuck & Company +10.0% + 6.8%
- --------------------------------------------------------------------------------
J.C. Penney + 1.0% - 1.0%
- --------------------------------------------------------------------------------
Dayton Hudson Corporation +16.0% + 8.7%
- --------------------------------------------------------------------------------
May Department Stores +17.0% + 9.0%
- --------------------------------------------------------------------------------
Federated Department Stores +12.0% + 6.1%
- --------------------------------------------------------------------------------
The Limited Inc. +16.0% + 8.0%
- --------------------------------------------------------------------------------
Gap Inc. +32.0% +13.0%
- --------------------------------------------------------------------------------
Ann Taylor + 9.0% - 7.0%
================================================================================
Source: New York Times
================================================================================
The outlook for retail sales growth is one of cautious optimism. Some
analysts point to the fact that consumer confidence has resulted in increases in
personal debt which may be troublesome in the long run. Consumer loans by banks
rose 13.9 percent in the twelve months that ended on September 30, 1995. But
data gathered by the Federal Reserve on monthly payments suggest that debt
payments are not taking as big a bite out of income as in the late 1980s,
largely because of the record refinancings at lower interest rates in recent
years and the efforts by many Americans to repay debts.
GAFO and Shopping Center Inclined Sales
In a true understanding of shopping center dynamics, it is important to
focus on both GAFO sales or the broader category of Shopping Center Inclined
Sales. These types of goods comprise the overwhelming bulk of goods and products
carried in shopping centers and department stores and consist of the following
categories:
================================================================================
-7-
<PAGE>
National Retail Market Overview
================================================================================
o General merchandise stores including department and other stores;
o Apparel and accessory stores;
o Furniture and home furnishing stores; and
o Other miscellaneous shoppers goods stores.
Shopping Center Inclined Sales are somewhat broader and include such
classifications as home improvement and grocery stores.
Total retail sales grew by 7.8 percent in the United States in 1994 to
$2.237 trillion, an increase of $162 billion over 1993. This followed an
increase of $125 billion over 1992. Automobile dealers captured $69+/- billion
of total retail sales growth last year, while Shopping Center Inclined Sales
accounted for nearly 40.0 percent of the increase ($64 billion). GAFO sales
increased by $38.6 billion. This group was led by department stores which posted
an $18.0 billion increase in sales. The following chart summarizes the
performance for this most recent comparison period.
================================================================================
Retail Sales by Major Store Type
1993-1994 ($MIL.)
================================================================================
1993-1994
Store Type 1994 1993 % Change
- --------------------------------------------------------------------------------
GAFO:
General Merchandise $ 282,541 $ 264,617 6.8%
Apparel & Accessories 109,603 107,184 2.3%
Furniture & Furnishings 119,626 105,728 13.1%
Other GAFO 80,533 76,118 5.8%
- --------------------------------------------------------------------------------
GAFO Subtotal $ 592,303 $ 553,647 7.0%
- --------------------------------------------------------------------------------
Convenience Stores:
Grocery $ 376,330 $ 365,725 2.9%
Other Food 21,470 19,661 9.2%
- --------------------------------------------------------------------------------
Subtotal $ 397,800 $ 385,386 3.2%
Drug 81,538 79,646 2.4%
- --------------------------------------------------------------------------------
Convenience Subtotal $ 479,338 $ 465,031 3.1%
- --------------------------------------------------------------------------------
Other
Home Improvement &
Building Supplies Stores $ 122,533 $ 109,604 11.8%
Shopping Center-Inclined $1,194,174 $1,128,282 5.8%
Subtotal 526,319 456,890 15.2%
Automobile Dealers 142,193 138,299 2.8%
Gas Stations 228,351 213,663 6.9%
Eating and Drinking Places 145,929* 137,365* 6.2%
All Other
- --------------------------------------------------------------------------------
Total Retail Sales $2,236,966 $2,074,499 7.8%
================================================================================
* Estimated sales
================================================================================
Source: U.S. Department of Commerce and Dougal M. Casey: Retail Sales and
Shoppinq Center Development Through The Year 2000 (ICSC White Paper)
================================================================================
================================================================================
-8-
<PAGE>
National Retail Market Overview
================================================================================
GAFO sales grew by 7.0 percent in 1994 to $592.3 billion, led by furniture
and furnishings which grew by 13.1 percent. From the above it can be calculated
that GAFO sales accounted for 26.5 percent of total retail sales and nearly 50.0
percent of all shopping center - inclined sales.
The International Council of Shopping Centers (ICSC) publishes a Monthly
Mall Merchandise Index which tracks sales by store type for more than 400
regional shopping centers. The index shows that sales per square foot rose by
1.8 percent to $256 per square foot in 1994. The following chart identified the
most recent year-end results.
===============================================================================
-9-
<PAGE>
National Retail Market Overview
================================================================================
================================================================================
Index Sales per Square Foot
1993-1994 Percent Change
Store Type 1994 1993 ICSC Index
================================================================================
GAFO:
Apparel & Accessories:
Women's Ready-To-Wear $189 $196 - 3.8%
Women's Accessories and Specialties 295 283 + 4.2%
Men's and Boy's Apparel 231 239 - 3.3%
Children's Apparel 348 310 +12.2%
Family Apparel 294 292 + 0.4%
Women's Shoes 284 275 + 3.3%
Men's Shoes 330 318 + 3.8%
Family Shoes 257 252 + 1.9%
Shoes (Misc.) 340 348 - 2.2%
SUBTOTAL $238 $238 -0.2%
- --------------------------------------------------------------------------------
Furniture & Furnishings:
Furniture & Furnishings $267 $255 + 4.5%
Home Entertainment & Electronics 330 337 - 2.0%
Miscellaneous 291 282 + 3.3%
SUBTOTAL $309 $310 - 0.3%
- --------------------------------------------------------------------------------
Other GAFO:
Jewelry $581 $541 + 7.4%
Other 258 246 + 4.9%
SUBTOTAL $317 $301 + 5.3%
TOTAL GAFO $265 $261 + 1.6%
NON-GAFO
FOOD:
Fast Food $365 $358 + 2.0%
Restaurants 250 245 + 2.2%
Other 300 301 - 0.4%
SUBTOTAL $304 $298 + 1.9%
- --------------------------------------------------------------------------------
OTHER NON-GAFO:
Supermarkets $236 $291 -18.9%
Drug/HBA 254 230 +10.3%
Personal Services 264 253 + 4.1%
Automotive 149 133 +12.2%
Home Improvement 133 127 + 4.8%
Mail Entertainment 79 77 + 3.2%
Other Non-GAFO Miscellaneous 296 280 + 5.7%
SUBTOTAL $192 $188 + 2.4%
TOTAL NON-GAFO $233 $228 + 2.5%
TOTAL $256 $252 + 1.8%
================================================================================
Note: Sales per square foot numbers are rounded to
whole dollars. Three categories illustrated here have limited
representation in the ICSC sample: Automotive, +12.2%; Home
Improvement, +4.8%; and Supermarkets, -18.9%.
================================================================================
Source: U.S. Department of Commerce and Dougal M.
Casey.
================================================================================
GAFO sales have risen relative to household income. In 1990 these sales
represented 13.9 percent of average household income. By 1994 they rose to 14.4
percent. Projections through 2000 show a continuation of this trend to 14.7
percent. On average, total sales were equal to nearly 55.0 percent of household
income in 1994.
================================================================================
-10-
<PAGE>
National Retail Market Overview
================================================================================
<TABLE>
<CAPTION>
==========================================================================================================
Determinants of Retail Sales Growth and U.S. Retail Sales by Key Store Type
==========================================================================================================
1990 1994 2000 (P)
==========================================================================================================
<S> <C> <C> <C>
Determinants
Population 248.700,000 260,000,000 276,200,000
Households 91,900,000 95,700,000 103,700,000
Average Household Income $ 37,400 $ 42,600 $ 51,600
Total Census Money Income $ 3.4 Tril. $ 4.1 Tril. $ 5.4 Tril.
- ----------------------------------------------------------------------------------------------------------
% Allocation* of Income to Sales
GAFO Stores 13.9% 14.4% 14.7%
Convenience Stores 12.9% 11.7% 10.7%
Home Improvement Stores 2.8% 3.0% 3.3%
Total Shopping Center-Inclined Stores 29.6% 29.1% 28.8%
Total Retail Stores 54.3% 54.6% 52.8%
- ----------------------------------------------------------------------------------------------------------
Sales ($Billion)
GAFO Stores $ 472 $ 592 $ 795
Convenience Stores 439 479 580
Home Improvement Stores 95 123 180
Total Shopping Center-Inclined Stores $ 1,005 $ 1,194 $ 1,555
TOTAL RETAIL SALES $ 1,845 $ 2,237 $ 2,850
==========================================================================================================
Note: Sales and income figures are for the full year; population and
household figures are as of April 1 in each respective year. P = Projected.
==========================================================================================================
Source: U.S. Census of Population, 1990; U.S. Bureau of the Census
Current Population Reports: Consumer Income P6-168, 174, 180, 184 and 188, Berna Miller with
Linda Jacobsen, "Household Futures", American Demographics, March 1995; Retail Trade sources
already cited; and Dougal M. Casey: ICSC White Pager
==========================================================================================================
</TABLE>
GAFO sales have risen at a compound annual rate of approximately 6.8
percent since 1991 based on the following annual change in sales.
==============================
1990/91 2.9%
------------------------------
1991/92 7.0%
------------------------------
1992/93 6.6%
------------------------------
1993/94 7.0%
==============================
According to a recent study by the ICSC, GAFO sales are expected to grow by
5.0 percent per annum through the year 2000, which is well above the 4.1 percent
growth for all retail sales. This information is presented in the following
chart.
================================================================================
-11-
<PAGE>
National Retail Market Overview
================================================================================
<TABLE>
<CAPTION>
===============================================================================================
Retail Sales in the United States by Major Store Type
===============================================================================================
1994 2000(P) Percent Change
Compound
Store Type ($ Billions) ($ Billions) Total Annual
===============================================================================================
<S> <C> <C> <C> <C>
GAFO:
General Merchandise $ 283 $ 370 30.7% 4.6%
Apparel & Accessories 110 135 22.7% 3.5%
Furniture/Home Furnishings 120 180 50.0% 7.0%
Other Shoppers Goods 81 110 35.8% 5.2%
- -----------------------------------------------------------------------------------------------
GAFO Subtotal $ 592 $ 795 34.3% 5.0%
- -----------------------------------------------------------------------------------------------
CONVENIENCE GOODS:
Food Stores $ 398 $ 480 20.6% 3.2%
Drugstores 82 100 22.0% 3.4%
- -----------------------------------------------------------------------------------------------
Convenience Subtotal $ 479 $ 580 21.1% 3.2%
- -----------------------------------------------------------------------------------------------
Home Improvement 123 180 46.3% 6.6%
- -----------------------------------------------------------------------------------------------
Shopping Center-inclined Subtotal $1,194 $1,555 30.2% 4.5%
- -----------------------------------------------------------------------------------------------
All Other 1,043 1,295 24.2% 3.7%
- -----------------------------------------------------------------------------------------------
Total $2,237 $2,850 27.4% 4.1%
===============================================================================================
Note: P = Projected. Some figures rounded.
===============================================================================================
Source: U.S. Department of Commerce, Bureau of the Census and
Dougal M. Casey.
===============================================================================================
</TABLE>
In considering the six-year period January 1995 through December 2000, it
may help to look at the six-year period extending from January 1989 through
December 1994 and then compare the two time spans.
Between January 1989 and December 1994, shopping center-inclined sales in
the United States increased by $297 billion, a compound growth rate of 4.9
percent. These shopping center-inclined sales are projected to increase by $361
billion between January 1995 and December 2000, a compound annual growth rate of
4.5 percent. GAFO sales, however, are forecasted to increase by 34.3 percent or
5.0 percent per annum.
Industry Trends
According to the National Research Bureau, there were a total of 41,235
shopping centers in the United States at the end of 1995. During this year, 867
new centers opened, an 18.0 percent increase over the 735 that opened in 1994.
This followed a 1O percent increase in 1994. The greatest growth came in the
small center category (less than 100,000 square feet) where 551 centers were
constructed. In terms of GLA added, new construction in 1995 was up 2.2 percent
resulting in an addition of 106.2 million square feet of GLA from approximately
4.86 billion to 4.97 billion square feet. In other important trends, the
development of regional and super-regional malls hit a three year high in 1995
with the opening of eight centers, twice as many as in 1994. This boosted the
nation's total of regionals to 301 and super-regionals to 380. Power and
community center development in 1995 was up 17.9 percent in terms of the number
of centers opening. The following chart highlights trends over the period 1987
through 1995.
================================================================================
-12-
<PAGE>
National Retail Market Overview
================================================================================
<TABLE>
<CAPTION>
=================================================================================================================================
Census Data: 9-Year Trends
=================================================================================================================================
Total Average Average % Change % Increase
No. of Total Sales GLA per Sales per In Sales New In Total
Year Centers GLA (Billions) Center Sq. Ft. per Sq. Ft. Centers Centers
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1987 30,641 3,722,957,095 $ 602,294,426 121,502 $161.78 2.41% 2,145 7.53%
- ---------------------------------------------------------------------------------------------------------------------------------
1988 32,563 3,947,025,194 $ 641,096,793 121,212 $162.43 0.40% 1,922 6.27%
- ---------------------------------------------------------------------------------------------------------------------------------
1989 34,683 4,213,931,734 $ 682,752,628 121,498 $162.02 -0.25% 2,120 6.51%
- ---------------------------------------------------------------------------------------------------------------------------------
1990 36,515 4,390,371,537 $ 706,380,618 120,235 $160.89 -0.70% 1,832 5.28%
- ---------------------------------------------------------------------------------------------------------------------------------
1991 37,975 4,563,791,215 $ 716,913,157 120,179 $157.09 -2.37% 1,460 4.00%
- ---------------------------------------------------------------------------------------------------------------------------------
1992 38,966 4,678,527,428 $ 768,220,248 120,067 $164.20 4.53% 991 2.61%
- ---------------------------------------------------------------------------------------------------------------------------------
1993 39,633 4,770,760,559 $ 806,645,004 120,373 $169.08 2.97% 667 1.71%
- ---------------------------------------------------------------------------------------------------------------------------------
1994 40,368 4,860,920,056 $ 851,282,088 120,415 $175.13 3.58% 735 1.85%
- ---------------------------------------------------------------------------------------------------------------------------------
1995 41,235 4,967,160,331 $ 893,814,776 120,460 $179.94 2.75% 867 2.15%
- ---------------------------------------------------------------------------------------------------------------------------------
Compound
Annual
Growth +3.78% +3.67% +5.06% -.11% +1.34% N/A N/A N/A
=================================================================================================================================
Source: National Research Bureau Shopping Center Database and Statistical Model
</TABLE>
From the chart we see that both total GLA and total number of centers have
increased at a compound annual rate of approximately 3.7 percent since 1987. New
construction was up 2.2 percent in 1995, a slight increase over 1994 but still
well below the peak year 1987 when new construction increased by 7.5 percent.
California was by far the most active state with 139 new centers opening,
followed by North Carolina (64) and Florida (53).
Among the 41,235 centers in 1995, the following breakdown by size can be
shown.
<TABLE>
<CAPTION>
========================================================================================
U.S. Shopping Center Inventory, YE December 1995
========================================================================================
Number of Centers Square Feet (Millions)
---------------------------------------------------------
Size Range (SF) Amount Percent Amount Percent
========================================================================================
<S> <C> <C> <C> <C>
Under 100,000 26,001 63.1% 1,266.9 25.5%
100,001- 200,000 9,974 24.2% 1,367.9 27.5%
200,001- 400,000 3,345 8.1% 886.2 17.8%
400,001- 800,000 1,234 3.0% 668.7 13.5%
800,001- 1,000,000 301 .7% 271.0 5.5%
Over 1,000,000 380 .9% 486.4 9.8%
Total 41,235 100.0% 4,967.2 100.0%
========================================================================================
Source: National Research Bureau (some numbers
slightly rounded).
</TABLE>
According to the National Research Bureau, total sales in shopping centers
have grown at a compound rate of 5.06 percent since 1987. With sales growth
outpacing new construction, average sales per square foot have been showing
positive increases since the last recession. Aggregate sales were up 5.5 percent
nationwide from $851.3 billion (1994) to $893.8 billion (1995). In 1995, average
sales were $179.94 per square foot, up nearly 2.7 percent over 1994 and 1.34
percent (compound growth) over the past several years. The biggest gain came in
the super-regional category (more than 1.0 million square feet) where sales were
up 4.10 percent to $201.05 per square foot.
================================================================================
-13-
<PAGE>
National Retail Market Overview
================================================================================
The following chart tracks the change in average sales per square foot by
size category between 1993 and 1995.
<TABLE>
<CAPTION>
==========================================================================================================================
Sales Trends by Size Category
1993-1995
==========================================================================================================================
Average Sales Per Square Foot % Change
-------------------------------------------------------------------------------------
Category 1993 1994 1995 1994-95 1993-95
==========================================================================================================================
<S> <C> <C> <C> <C> <C>
Less than 100,000 SF $193.10 $199.70 $204.94 +2.6% +3.0%
- --------------------------------------------------------------------------------------------------------------------------
100,001 to 200,000 SF $156.18 $161.52 $166.00 +2.8% +3.1%
- --------------------------------------------------------------------------------------------------------------------------
200,001 to 400,000 SF $147.57 $151.27 $153.96 +11.8% +2.1%
- --------------------------------------------------------------------------------------------------------------------------
400,001 to 800,000 SF $157.04 $163.43 $168.21 +2.9% +3.5%
- --------------------------------------------------------------------------------------------------------------------------
800,001 to 1,000,000 SF $194.06 $203.20 $210.40 +3.5% +4.1%
- --------------------------------------------------------------------------------------------------------------------------
More than 1,000,000 SF $183.90 $193.13 $201.05 +4.1% +4.6%
- --------------------------------------------------------------------------------------------------------------------------
Total $169.08 $175.13 $179.94 +2.75% +3.2%
==========================================================================================================================
* Compound Annual Change
==========================================================================================================================
Source: National Research Bureau
==========================================================================================================================
</TABLE>
Empirical data shows that the average GLA per capita is increasing. In
1995, the average for the nation was 18.9. This was up 17 percent from 16.1 in
1988 and more recently, 18.7 square feet per capita in 1994. Among states,
Arizona surpassed Florida and now has the highest GLA per capita with 28.1
square feet. South Dakota has the lowest at 9.08 square feet. Per capita GLA
for regional malls (defined as all centers in excess of 400,000 square feet) has
also been rising from 5.0 in 1988 to 5.5 in 1995. This information is presented
on the following chart.
==========================================================
GLA per Capita
==========================================================
Year All Centers Regional Malls
==========================================================
1988 16.1 5.0
----------------------------------------------------------
1989 17.0 5.2
----------------------------------------------------------
1990 17.7 5.3
----------------------------------------------------------
1991 18.1 5.3
----------------------------------------------------------
1992 18.3 5.5
----------------------------------------------------------
1993 18.5 5.5
----------------------------------------------------------
1994 18.7 5.4
----------------------------------------------------------
1995 18.9 5.5
==========================================================
Source: International
Council of Shopping Center: The Scope of The
Shopping Center Industry and National Research Bureau
The Urban Land Institute, in the 1995 edition of Dollars and Cents of
Shopping Centers, reports that vacancy rates range from a low of 2.0 percent in
neighborhood centers to 14.0 percent for regional malls. Super-regional malls
reported a vacancy rate of 7.0 percent and community centers were 4.0 percent
based upon their latest survey.
================================================================================
-14-
<PAGE>
National Retail Market Overview
================================================================================
The retail industry's importance to the national economy can also be seen
in the level of direct employment. According to F.W. Dodge, the construction
information division of McGraw- Hill, new projects in 1994 generated $2.6
billion in construction contract awards and supported 41,600 jobs in
construction trade and related industries. This is nearly half of the
construction employment level of 95,360 for new shopping center development in
1990. It is estimated that 10.18 million people are now employed in shopping
centers, equal to about one of every nine non-farm workers in the country. This
is up 2.9 percent over 1991.
Market Shifts - Contemporary Trends in the Retail Industry
During the 1980s, the department store and specialty apparel store
industries competed in a tug of war for consumer dollars. Specialty stores
emerged largely victorious as department store sales steadily declined as a
percentage of total GAFO sales during the decade, slipping from 47.0 percent in
1979 to 44.0 percent in 1989. During this period, many anchor tenants teetered
from high debt levels incurred during speculative takeovers and leveraged
buyouts of the 1980s. Bankruptcies and restructuring, however, have forced major
chains to refocus on their customer and shed unproductive stores and product
lines. At year end 1994, department store sales, as a percentage of GAFO sales,
were approximately 37.5 percent.
The continued strengthening of some of the major department store chains,
including Sears, Federated/Macy's, May and Dayton Hudson, is in direct contrast
to the dire predictions made by analysts about the demise of the traditional
department store industry. This has undoubtedly been brought about by the
heightened level of merger and acquisition activity in the 1980s which produced
a burdensome debt structure among many of these entities. When coupled with
reduced sales and cash flow brought on by the recession, department stores were
unable to meet their debt service requirements.
Following a round of bankruptcies and restructurings, the industry has
responded with aggressive cost-cutting measures and a focused merchandising
program that is decidedly more responsive to consumer buying patterns. The
importance of department stores to mall properties is tantamount to a successful
project since the department store is still the principal attraction that brings
patrons to the center.
On balance, 1994/95 was a continued period of transition for the retail
industry. Major retailers achieved varying degrees of success in meeting the
demands of increasingly value conscious shoppers. Since the onset of the
national economic recession in mid-1990, the retail market has been
characterized by intense price competition and continued pressure on profit
margins. Many national and regional retail chains have consolidated operations,
closed underperforming stores, and/or scaled back on expansion plans due to the
uncertain spending patterns of consumers. Consolidations and mergers have
produced a more limited number of retail operators, which have responded to
changing spending patterns by aggressively repositioning themselves within this
evolving market. Much of the recent retail construction activity has involved
the conversion of existing older retail centers into power center formats,
either by retenanting or through expansion. An additional area of growth in the
retail sector is in the "supercenter" category, which consists of the combined
grocery and department stores being developed by such companies as Wal-Mart and
Kmart. These formats require approximately 150,000 to 180,000 square feet in
order to carry the depth of merchandise necessary for such economies of scale
and market penetration.
================================================================================
-15-
<PAGE>
National Retail Market Overview
================================================================================
Some of the important developments in the industry over the past year can
be summarized as follows:
o The discount department store industry emerged as arguably the most
volatile retail sector, lead by regional chains in the northeast.
Jamesway, Caldor and Bradlees each filed for Chapter 11 within six
months and Hills Stores is on the block. Jamesway is now in the
process of liquidating all of its stores. Filene's Basement was
granted relief from some covenant restrictions and its stock price
plummeted. Ames, based in Rocky Hill, Connecticut, will close 17 of
its 307 stores. Kmart continues to be of serious concern. Its debt has
been downgraded to junk bond status. Even Wal-Mart, accustomed to
double digit sales growth, has seen some meager comparable sales
increases. These trends are particularly troubling for strips since
these tenants are typical anchors.
o The attraction of regional malls as an investment has diminished in
view of the wave of consolidations and bankruptcies affecting in-line
tenants. Some of the larger restructurings include Melville with plans
to close up to 330 stores, sell Marshalls to TJX Companies, split into
three publicly traded companies, and sell Wilsons and This End Up;
Petrie Retail, which operates such chains as M.J. Carroll, G&G, Jean
Nicole, Marianne and Stuarts, has filed for bankruptcy protection;
Edison Brothers (Jeans West, J. Riggins, Oak Tree, 5-7-9 Shops, etc.)
announced plans to close up to 500 stores while in Chapter 11; J.
Baker intends to liquidate Fayva Shoe division (357 low-price family
footwear stores); The Limited announced a major restructuring,
including the sale of partial interests in certain divisions; Charming
Shoppes will close 290 Fashion Bug and Fashion Bug Plus stores; Trans
World Entertainment (Record Town) has closed 115 of its 600 mall shop
locations. Other chains having trouble include Rickel Home Centers
which filed Chapter 11; Today's Man, a 35 store Philadelphia based
discount menswear chain has filed; nine subsidiaries of Fretta,
including Dixon's, U.S. Holdings and Silo, filed Chapter 11; and
Clothestime, also in bankruptcy will close up to 140 of its 540
stores. Merry-Go-Round, a chain that operates 560 stores under the
names Merry-Go-Round, Dejaiz and Cignal is giving up since having
filed in January 1994 and will liquidate its assets. Toys "R" Us has
announced a global reorganization that will close 25 stores and cut
the number of items it carries to 11,000 from 15,000. Handy Andy, a
50 year old chain of 74 home improvement centers which had been in
Chapter 11, has decided to liquidate, laying off 2,500 people.
o Overall, analysts estimate that 4,000 stores closed in 1995 and as
many as 7,000 more will close in 1996. Mom-and-Pop stores, where 75
percent of U.S. retailers employ fewer than 10 people have been
declining for the past decade. Dun and Bradstreet reports that retail
failures are up 1.4 percent over Last year - most of them small stores
who don't have the financial flexibility to renegotiate payment
schedule.
================================================================================
-16-
<PAGE>
National Retail Market Overview
================================================================================
o With sales down, occupancy costs continue to be a major issue facing
many tenants. As such, expansion oriented retailers like The Limited,
Ann Taylor and The Gap, are increasingly shunning mall locations for
strip centers. This has put further pressure on mall operators to be
aggressive with their rent forecasts or in finding replacement
tenants.
o While the full service department store industry led by Sears has seen
a profound turnaround, further consolidation and restructuring
continues. Woodward & Lothrop was acquired by The May Department
Stores Company and JC Penney; Broadway Stores was acquired by
Federated Department Stores; Elder Beerman has filed Chapter 11 and
will close 102 stores; Steinbach Stores will be acquired by Crowley,
Milner & Co.; Younkers will merge with Proffifts; and Strawbridge and
Clothier has hired a financial advisor to explore strategic
alternatives for this Philadelphia based chain.
o Aside from the changes in the department store arena, the most notable
transaction in 1995 involved General Growth Properties' acquisition of
the Homart Development Company in a $1.85 billion year-end deal.
Included were 25 regional malls, two current projects and several
development sites. In November, General Growth arranged for the sale
of the community center division to Developers Diversified for
approximately $505 million. Another notable deal involved Rite Aid
Corporation's announcement that it will acquire Revco Drug Stores in a
$1.8 billion merger to form the nation's largest drug store company
with sales of $11 billion and 4,500 +/- stores.
o As of January 1, 1995 there were 311 outlet centers with 44.4 million
square feet of space. Outlet GLA has grown at a compound annual rate
of 18.1 percent since 1989. Concerns of over-building, tenant
bankruptcies, and consolidations have now negatively impacted this
industry as evidenced by the hit the outlet REIT stocks have taken.
Outlet tenants have not been immune to the global troubles impacting
retail sales as comparable store sales were down 3.1 percent through
November 1995.
o Category Killers and discount retailers have continued to drive the
demand for additional space. In 1995, new contracts were awarded for
the construction or renovation of 260 million square feet of stores
and shopping centers, up from 173 million square feet in 1991
according to F.W. Dodge, matching the highest levels over the past two
decades. It is estimated that between 1992 and 1994, approximately
55.0 percent of new retail square footage was built by big box
retailers. In 1994, it is estimated that they accounted for 80.0
percent of all new stores. Most experts agree that the country is
over-stored. Ultimately, it will lead to higher vacancy rates and
place severe pressure on aging, capital intensive centers. Many
analysts predict that consolidation will occur soon in the office
products superstores category where three companies are battling for
market share - OfficeMax, Office Depot and Staples.
================================================================================
-17-
<PAGE>
National Retail Market Overview
================================================================================
o Entertainment is clearly the new operational requisite for property
owners and developers who are incorporating some form of entertainment
into their designs. With a myriad of concepts available, ranging from
mini-amusement parks to multiplex theater and restaurant themes, to
interactive high-tech applications, choosing the right formula is a
difficult task.
Investment Criteria and Institutional Investment Performance
Investment criteria for mall properties range widely. Many firms and
organizations survey individuals active in this industry segment in order to
gauge their current investment criteria. These criteria can be measured against
traditional units of comparison such as price (or value) per square foot of GLA
and overall capitalization rates.
The price that an investor is willing to pay represents the current or
present value of all the benefits of ownership. Of fundamental importance is
their expectation of increases in cash flow and the appreciation of the
investment. Investors have shown a shift in preference to initial return,
placing probably less emphasis on the discounted cash flow analysis (DCF). A DCF
is defined as a set of procedures in which the quantity, variability, timing,
and duration of periodic income, as well as the quantity and timing of
reversions, are specified and discounted to a present value at a specified yield
rate. Understandably, market thinking has evolved after a few hard years of
reality where optimistic cash flow projections did not materialize. The DCF is
still, in our opinion, a valid valuation technique that when property supported,
can present a realistic forecast of a property's performance and its current
value in the marketplace.
Equitable Real Estate Investment Management, Inc. reports in their Emerging
Trends in Real Estate - 1996 that their respondents give retail investments
generally poor performance forecasts in their latest survey due to the
protracted merchant shake-out which will continue into 1996. While dominant,
Class A malls are still considered to be one of the best real estate investments
anywhere, only 13.0 percent of the respondents recommended buying malls. Rents
and values are expected to remain flat (in real terms) and no one disputes their
contention that 15 to 20 percent of the existing malls nationwide will be out of
business by the end of the decade. For those centers that will continue to
reposition themselves, entertainment will an increasingly important part of
their mix.
Investors do cite that, after having been written off, department stores
have emerged from the shake-out period as powerful as ever. The larger chains
such as Federated, May and Dillard's, continue to acquire the troubled regional
chains who find it increasingly difficult to compete against the category
killers. Many of the nations largest chains are reporting impressive profit
levels, part of which has come about from their ability to halt the double digit
sales growth of the national discount chains. Mall department stores are
aggressively reacting to power and outlet centers to protect their market share.
Department stores are frequently meeting discounters on price.
While power centers are considered one retail property type currently in a
growth mode, most respondents feel that the country is over-stored and value
gains with these types of centers will lag other property types, including
malls, over five and ten year time frames.
================================================================================
-18-
<PAGE>
National Retail Market Overview
================================================================================
The following chart summarizes the results of their current survey.
<TABLE>
<CAPTION>
======================================================================================================
Retail Property Ranking* and Forecasts
======================================================================================================
Investment Potential Predicted Value Gains
---------------------- --------------------------------
Property Type 1996
Rating(1) Ranking(2) Rent Increase 1 Yr. 5 Yr*. 10 Yrs.
======================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Regional Malls 4.9 8th 2.0% 2% 20% 40%
- -----------------------------------------------------------------------------------------------------
Power Centers 5.3 6th 2.3% 1% 17% 32%
- -----------------------------------------------------------------------------------------------------
Community Centers 5.4 5th 2.4% 2% 17% 33%
======================================================================================================
1 Scale of 1 to 10
2 Based on 9 property types
======================================================================================================
</TABLE>
The NCREIF Property Index represents data collected from the Voting Members
of the National Council of Real Estate Investment Fiduciaries. As shown in the
following table, data through the third quarter of 1995 shows that the retail
index posted a positive 1.23 percent increase in total return. Increased
competition in the retail sector from new and expanding formats and changing
locational references has caused the retail index to trail all other property
types. As such, the -2.01 percent decline in value reported by the retail
subindex for the year were in line with investors' expectations.
================================================================================
Retail Property Returns
NCREIF Index
Third Quarter 1995 (%)
================================================================================
Period Income Appreciation Total Change in CPI
================================================================================
3rd Qtr. 1995 1.95 -.72 1.23 .46
- --------------------------------------------------------------------------------
One Year 8.05 -2.01 5.92 2.55
- --------------------------------------------------------------------------------
Three Years 7.54 -3.02 4.35 2.73
- --------------------------------------------------------------------------------
Five Years 7.09 -4.61 2.23 2.92
- --------------------------------------------------------------------------------
Ten Years 6.95 .54 7.52 3.53
================================================================================
Source: Real Estate Performance Report
National Council of Real Estate Investment Fiduciaries
================================================================================
It is noted that the positive total return continues to be affected by the
capital return component which has been negative for the last five years.
However, as compared to the CPI, the total index has performed relatively well.
Real Estate Investment Trust Market (REITs)
To date, the impact of REITs on the retail investment market has been
significant, although the majority of Initial Property Offerings (IPOs)
involving regional malls, shopping centers, and outlet centers did not enter the
market until the latter part of 1993 and early 1994. It is noted that REITs
have dominated the investment market for apartment properties and have evolved
into a major role for retail properties as well.
================================================================================
-19-
<PAGE>
National Retail Market Overview
================================================================================
As of November 30, 1995, there were 297 REITs in the United States, about
79.0 percent (236) which are publicly traded. The advantages provided by REITs,
in comparison to more traditional real estate investment opportunities, include
the diversification of property types and location, increased liquidity due to
shares being traded on major exchanges, and the exemption from corporate taxes
when 95.0 percent of taxable income is distributed.
There are essentially three kinds of REITs which can either be
"open-ended", or Finite- life (FREITs) which have specified liquidation dates,
typically ranging from eight to fifteen years.
o Equity REITs center around the ownership of properties where
ownership interests (shareholders)receive the benefit of returns from
the operating income as well as the anticipated appreciation of
property value. Equity REITs typically provide lower yields than
other types of REITs, although this lower yield is theoretically
offset by property appreciation.
o Mortgage REITs invest in real estate through loans. The return to
shareholders is related to the interest rate for mortgages placed by
the REIT.
o Hybrid REITs combine the investment strategies of both the equity and
mortgage REITs in order to diversify risk.
The influx of capital into REITs has provided property owners with an
significant alternative marketplace of investment capital and resulted in a
considerably more liquid market for real estate. A number of "non-traditional"
REIT buyers, such as utility funds and equity/income funds, established a major
presence in the market during 1993/94.
1995 was not viewed as a great year for REITs relative to the advances
seen in the broader market. Through the end of November, equity REITs posted a
9.3 percent total return according to the National Association of Real Estate
Investment Trusts (NAREIT). The best performer among equity REITs was the
office sector with a 29.4 percent total return. This was followed by
self-storage (27.3%), hotels (26.7%), triple-net lease (20.6%), and health care
(18.8%). Two equity REIT sectors were in the red - outlet centers and regional
malls.
Retail REITs
As of November 30, 1995, there were a total of 47 REITs specializing in
retail, making up approximately 16 percent of the securities in the REIT market.
Depending upon the property type in which they specialize, retail REITs are
divided into three categories: shopping centers, regional malls, and outlet
centers. The REIT performance indices chart shown as Table A on the following
page, shows a two-year summary of the total retail REIT market as well as the
performance of the three composite categories.
================================================================================
-20-
<PAGE>
National Retail Market Overview
================================================================================
================================================================================
Table A - REIT Performance Indicies
- --------------------------------------------------------------------------------
Y-T-D Total Dividend No. of REIT Market
Return Yield Securities Capitalization*
================================================================================
As of November 30,1995
- --------------------------------------------------------------------------------
TOTAL RETAIL 0.49% 8.36% 47 $14,389.1
Strip Centers 2.87% 8.14% 29 $ 8,083.3
Regional Malls -2.47% 9.06% 11 $ 4,886.1
Outlet Centers -2.53% 9.24% 6 $ 1,108.7
- --------------------------------------------------------------------------------
As of November 30,1994
================================================================================
TOTAL RETAIL -3.29% 8.35% 46 $12,913.1
Strip Centers -4.36% 7.98% 28 $ 7,402.7
Regional Malls 2.84% 8.86% 11 $ 4,459.1
Outlet Centers -16.58% 8.74% 7 $ 1,051.4
- --------------------------------------------------------------------------------
* Number reported in thousands.
Source: Realty Stock Review
As can be seen, the 47 REIT securities have a market capitalization of
approximately $14.4 billion, up 11.5 percent from the previous year. Total
returns were positive through November 1995, reversing the negative return for
the comparable period 12 months earlier. It is noted that the positive return
was the result of the strength of the shopping center REITs which constitute
nearly 60 percent of the market capitalization. Total retail REITs dividend
yields have remained constant over the last year at approximately 8.36 percent.
Regional mall and shopping center REITs dominate the total market, making up
approximately 85 percent of the 47 retail REITs.
While many of the country's best quality malls and shopping centers have
recently been offered in the public market, this heavily capitalized marketplace
has provided sellers with an attractive alternative to the more traditional
market for large retail properties.
Regional Mall REITs
The accompanying exhibit Table B summarizes the basic characteristics of
eight REITs and one publicly traded real estate operating company (Rouse
Company) comprised exclusively or predominantly of regional mall properties.
Excluding the Rouse Company (ROUS), the IPOs have all been completed since
November 1992. The nine public offerings with available information have a total
of 281 regional or super regional malls with a combined leasable area of
approximately 229 million square feet. This figure represents more than 14.0
percent of the total national supply of this product type.
================================================================================
-21-
<PAGE>
National Retail Market Overview
================================================================================
was the star performer in 1995 with a 15 percent increase in its stock price
following the acquisition of the Homart retail portfolio from Sears for $1.85
billion - the biggest real estate acquisition of the decade.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Table B . REGIONAL MALL REIT ANALYSIS
Cushman & Wakefield, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
REIT PORTFOLIO CBL CMW EJD GGP MAC ROUS SPG TCO URS
CBL & Crown Edward General Macerich Rouse Simon Taubman Urban
Assoc. Amercian Debartolo Growth Company Company Property Centers Shopping
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------
Company Overview
- ----------------
Total Retail Centers 95 23 51 40 16 67 56 19 12
-Super Regional Centers* 5 1 28 14 4 27 21 16 7
-Regional Centers 11 22 23 25 10 27 35 3 2
-Community Centers 79 -- 11 1 2 13 55 -- 3
-Other -- -- -- -- -- -- 3 -- --
Total Mall GLA** 17,129 12,686 44,460 28,881 10,620 44,922 39,329 22,031 8,895
Total Mall Shop GLA** 6,500 4,895 15,300 12,111 -- 19,829 15,731 9,088 2,356
Avg. Total GLA/Center** 180 552 872 722 664 670 702 1,160 741
Avg. Mall Shop GLA/Center- 68 213 300 303 -- 296 281 478 196
- ------------------------------------------------------------------------------------------------------------------------------------
- ----------------
Mall Operations
- ----------------
Reporting Year 1994 1994 1994 1994 1994 1994 1994 1994 1994
Avg Sales PSF of Mall GLA $226 $204 $260 $245 $262 $285 $259 $335 $348
Minimum Rent/Sales Ratio 8.6% 7.1% 8.3% -- -- -- 6.8% 10.2% 8.1%
Total Occupancy Cost/Sales Ratio 12.2% 10.0% 12.4% -- 11.2% -- 10.2% 14.8% 11.7%
Mall Shop Occupancy Level 88.7% 84.0% 85.0% 87.0% 92.9% -- 86.2% 86.6% 93.3%
- ------------------------------------------------------------------------------------------------------------------------------------
- ----------------
Share Prices
- ----------------
IPO Date 10/27/93 8/9/93 6/30/94 4/8/93 3/9/94 1966 12/26/93 11/18/92 10/6/93
IPO Price $19.50 $17.25 $14.75 $22.00 $19.00 -- $22.25 $11.00 $23.50
Curtert Price (12/15/95) $21.63 $7.38 $13.00 $19.13 $19.75 $19.63 $25.13 $9.75 $21.75
52-Week High $22.00 $14.13 $15.13 $22.63 $21.88 $22.63 $26.00 $10.38 $22.50
52-Week Low $17.38 $6.50 $12.00 $18.13 $19.25 $17.50 $22.50 $8.88 $18.75
- ------------------------------------------------------------------------------------------------------------------------------------
- -----------------------
Capitalization & Yields
- -----------------------
Outstancling Shares*** 30.20 36.85 89.60 43.37 31.45 47.87 95.64 125.85 21.19
Market Capitalization*** $653 $272 $1,165 $830 $621 $940 $2,403 $1,227 $461
Annual Dividend $1.59 $0.80 $1.26 $1.72 $1.68 $0.80 $1.97 $0.88 $1.94
Dividend Yield (12/15/95) 7.35% 10.84% 9.69% 8.99% 8.51% 4.08% 7.84% 9.03% 8.92%
FFO 1995**** $1.85 $1.50 $1.53 $1.96 $1.92 $1.92 $2.28 $0.91 $2.17
FFO Yield (12/15/95) 8.55% 20.33% 11.77% 10.25% 9.72% 9.78% 9.07% 9.33% 9.98%
- ------------------------------------------------------------------------------------------------------------------------------------
Source: Salomon Bothers and Realty Stock Review; Annual Reports
* Super Regional Center (>= 800,000 Sq. Ft.).
** Numbers in thousands (OOO) includes malls only.
*** Nurnbers in millions.
**** Funds From Operations is defined as net income (loss) before
depreciation, amortization, other non-cash items, extraordinary items,
gains or losses on sales of assests and before minority interests in
the Operating Partnership.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
================================================================================
-22-
<PAGE>
National Retail Market Overview
================================================================================
Shopping Center REITs
Shopping center REITs comprise the largest sector of the retail REIT market
accounting for 29 out of the total 47 securities. General characteristics of
eight of the largest shopping center REITs are summarized on Table C. The public
equity market capitalization of the eight companies totaled $6.1 billion as of
December 15, 1995. The two largest, Kimco Realty Corp. and New Plan Realty Trust
have a market capitalization equal to approximately 34.5 percent of the group
total.
While the regional mall and outlet center REIT markets struggled through
1995, shopping center REITs showed a positive November 30, 1995 year-to-date
return of 2.87%. Through 1995, transaction activity in the national shopping
center market has been moderate. Most of the action in this market is in the
power center segment. As an investment, power centers appeal to investors and
REITs because of the high current cash returns and long-term leases. However,
with their popularity, the potential for overbuilding is high. Also creating
skepticism within this market is the stability of several large discount
retailers such as Kmart, and other discount department stores which typically
anchor power centers. Shopping center REITs which hold numerous properties where
struggling retailers are located are currently keeping close watch over these
centers in the event of these anchor tenants vacating their space.
Similar to the regional mall REITs, shopping center REITs have been
publicly traded for only a short period and do not have a defined track record.
While the REITs have been in existence for a relatively short period, the growth
requirements of the companies should place upward pressure on values due to
continued demand for new product.
================================================================================
-23-
<PAGE>
National Retail Market Overview
================================================================================
Table C - SHOPPING CENTER REIT ANALYSIS
Cushman & Wakefield, Inc.
<TABLE>
<CAPTION>
REIT PORTFOLIO DDR FRT GRT JPR
Devel. Federal Glimcher JP
Diversified Realty Inv Realty Realty Inc
=====================================================================================================================
Company Overview
- -----------------------
<S> <C> <C> <C> <C>
Total Properties 111 53 84 46
Total Retail Centers 104 53 84 40
Total Retail GLA* 23,600 11,200 12,300 6,895
Avg. Total GLA/Center* 227 211 146 172
- ---------------------------------------------------------------------------------------------------------------------
Mall Operations
- -----------------------
Reporting Year -- -- 1994 --
Total Rental Income -- -- $ 71,101 --
Average Rent/square Foot $ 6.04 -- $ 5.78 --
Total Operating Expenses -- -- $ 45,746 --
Operating Expenses/Square Foot -- -- $ 3.72 --
Operating Expense Ratio -- -- 64.3% --
Total Occupancy Level 96.6% 95.1% 96.3% 94.0%
- ---------------------------------------------------------------------------------------------------------------------
Share Profits
- -----------------------
IPO Date 1992 1993 1994 1994
IPO Price $ 19.50 $ 17.25 $ 14.75 $ 22.00
Current Price (12/15/95) $ 29.88 $ 23.38 $ 17.75 $ 20.63
52 - Week High $ 32.00 $ 23.75 $ 22.38 $21.38
52 - Week Low $ 26.13 $ 19.75 $ 16.63 $17.38
- ---------------------------------------------------------------------------------------------------------------------
Capitalization & Yields
- -----------------------
Outstanding Shares** 18.96 32.22 24.48 19.72
Market Capitalization** $ 567 $ 753 $ 435 $ 407
Annual Dividend $ 2.40 $ 1.64 $ 1.92 $ 1.68
Dividend Yield (12/15/95) 8.03% 7.01% 10.82% 8.14%
FFO 1995*** $ 2.65 $ 1.78 $ 2.25 $ 1.83
FFO Yield (12/15/95) 8.87% 7.61% 12.68% 8.87%
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
REIT PORTFOLIO KIM NPR VNO WRI
Kimco, New plan Vornado Weingarten
Realty Corp Realty Realty Realty
=====================================================================================================================
Company Overview
- -----------------------
<S> <C> <C> <C> <C>
Total Properties 193 123 65 161
Total Retail Centers 193 102 56 141
Total Retail GLA* 26,001 14,500 9,501 13,293
Avg. Total GLA/Center* 135 142 170 94
- ---------------------------------------------------------------------------------------------------------------------
Mall Operations
- -----------------------
Reporting Year 1994 -- -- 1994
Total Rental Income $ 125,272 -- -- $ 112,233
Average Rent/square Foot $ 4.82 -- -- $ 8.44
Total Operating Expenses $ 80,563 -- -- $ 76,771
Operating Expenses/Square Foot $ 3.10 -- -- $ 5.78
Operating Expense Ratio 64.3% -- -- 68.4%
Total Occupancy Level 94.7% 95.4% 94.0% 92.0%
- ---------------------------------------------------------------------------------------------------------------------
Share Profits
- -----------------------
IPO Date 1991 1973 1993 1985
IPO Price $ 19.00 -- $ 22.25 --
Current Price (12/15/95) $ 42.25 $ 21.63 $ 36.13 $ 36.13
52 - Week High $ 42.25 $ 23.00 $ 38.13 $ 38.13
52 - Week Low $ 35.00 $ 18.75 $ 32.75 $ 32.75
- ---------------------------------------------------------------------------------------------------------------------
Capitalization & Yields
- -----------------------
Outstanding Shares** 22.43 53.26 24.20 26.53
Market Capitalization** $ 948 $ 1,152 $ 874 $ 959
Annual Dividend $ 2.16 $ 1.39 $ 2.24 $ 2.40
Dividend Yield (12/1 SM) 5.11% 6.43% 6.20% 6.64%
FFO 1995*** $ 3.15 $ 1.44 $ 2.67 $ 2.80
FFO Yield (12/15/95) 7.46% 6.66% 7.39% 7.75%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Source: Salomon Bothers and Realty Stock Review Annual Reports
* Numbers in thousands (000) includes retail properties only.
** Numbers in millions.
*** Funds From Operations is defined as net income (loss) before depreciation,
amortiztion, other non-cash items, extraordinary items, gains or losses on
sales of assets and before minority interests in the Operating Partnership.
================================================================================
-24-
<PAGE>
National Retail Market Overview
================================================================================
Outlook
A review of various data sources reveals the intensity of the development
community's efforts to serve a U.S. retail market that is still growing,
shifting and evolving. It is estimated 25-30 power centers appear to be capable
of opening annually, generating more than 12 million square feet of new space
per year. That activity is fueled by the locational needs of key power center
tenants, 27 of which indicated in recent year-end reports to shareholders an
appetite for 900 new stores annually, an average of 30 new stores per firm.
With a per capita GLA figure of 19 square feet, most analysts are in
agreement that the country is already over-stored. As such, new centers will
become feasible through the following demand generators:
o The gradual obsolescence of some existing retail locations and retail
facilities;
o The evolution of the locational needs and format preferences of
various anchor tenants; and
o Rising retail sales generated by increasing population and household
levels.
By the year 2000, total retail sales are projected to rise from $2.237
trillion in 1994 to almost $2.9 trillion; shopping center-inclined sales are
projected to rise by $361 billion, from $1.194 trillion in 1994 to nearly $1.6
trillion in the year 2000. Those increases reflect annual compound growth rates
of 4.1 percent and 4.5 percent, respectively, for the six-year period.
On balance, we conclude that the outlook for the retail industry is one of
cautious optimism. Because of the importance of consumer spending to the
economy, the retail industry is one of the most studied and analyzed segments of
the economy. One obvious benefactor of the aggressive expansion and promotional
pricing which has characterized the industry is the consumer. There will
continue to be an increasing focus on choosing the right format and
merchandising mix to differentiate the product from the competition and meet the
needs of the consumer. Quite obviously, many of the nations' existing retail
developments will find it difficult if not impossible to compete. Tantamount to
the success of these older centers must be a proper merchandising or
repositioning strategy that adequately considers the feasibility of the capital
intensive needs of such an undertaking. Coincident with all of the change which
will continue to influence the industry is a general softening of investor
bullishness. This will lead to a realization that the collective interaction of
the fundamentals of risk and reward now require higher capitalization rates and
long term yield expectations in order to attract investment capital.
================================================================================
-25-
<PAGE>
=======================================================
State of North Carolina Temporary Privilege Certificate
=======================================================
<PAGE>
[SEAL]
NORTH CAROLINA
APPRAISAL BOARD
A. MELTON BLACK. JR. P.O. BOX 20500 DONALD F. CREWS
Executive Director RALEIGH, N.C. 27619-0500 Deputy Director
919/420-7920 ROBERTA A. Ouellette
Legal Counsel
Permit No. 594
TEMPORARY PRACTICE PERMIT
Having satisfied the North Carolina Appraisal Board as to his (or her)
qualifications for an Appraisal Temporary Practice Permit under the provisions
of North Carolina Appraisal Board Rule 57A.0210, temporary appraiser licensing
or certification privileges are hereby granted to the person named below for the
exclusive and limited purpose of performing that appraisal assignment summarily
described below. This Temporary Practice Permit shall become effective on the
date of its issuance or the beginning date of the appraisal assignment,
whichever shall come later; and unless extended by the Appraisal Board, shall
expire upon the completion of the appraisal assignment or upon the expiration
date set forth below, whichever shall come first.
Permittee Name: Douglas C. Holowink
State in which Resident Appraiser
License/Certificate Held: New York
Type and Number of License/
Certificate Held in Resident State: General No. 46000003911
Appraisal Assignment: Golden East Crossing is located at the intersection of
NC HWY 43 and US HWY 301 Bypass in Rocky Mount, NC. It
is a regional mall with 572,400 square feet located on
a 70.5+/- acre parcel. The purpose of the report is to
estimate fair market value.
Appraisal Beginning Date: 5/10/96 Ending Date: 6/10/96
Permit Issuance Date: 5/15/96 Expiration Date: 6/12/96
/s/ [ILLEGIBLE]
---------------------------------
A. Melton Black, Jr.
Executive Director
North Carolina Appraisal Board
In issuing this permit, the North Carolina Appraisal Board has made no
independent inquiry regarding the competency of the permitee or his (or her)
qualifications to perform the appraisal assignment herein described.
<PAGE>
================================================
1994 & 1995 Operating Statements and 1996 Budget
================================================
<PAGE>
Page B-1
Property: Golden East Crossing DATE : 06/30
Company #: 9125 TIME : 10:27
GLA - Small Shop : 218,704
URBAN RETAIL PROPERTIES CO.
1996 COMMERCIAL OPERATING BUDGET
YR-TO-YR BUDGET COMPARISON
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1995 1995 Budget/ 1995 Proj 1995 Proj 1996
Budget Sq. Ft. Actual Act/Sq Ft Budget
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
INCOME:
Rental Income 3,356,532 $15.35 3,379,152 $15.45 3,331,946
Percentage Rent 291,897 1.33 447,650 2.05 385,943
Common Area Income 1,009,715 4.62 882,335 4.03 1,106,227
Food Court Income 14,209 0.06 17,140 0.08 25,607
Real Estate Tax Income 269,174 1.23 181,519 0.83 258,041
Utility Income 49,391 0.23 51,602 0.24 47,682
Other Tenant Charges 8,556 0.04 16,026 0.07 8,494
Miscellaneous Income 30,344 0.14 58,976 0.27 30,344
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME 5,029,818 $23.00 5,034,400 $23.02 5,194,284
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Advertising/Promotion 950 $0.00 540 $0.00 0
Administrative 39,696 0.18 40,509 0.19 37,761
Janitorial/Cleaning 205,980 0.94 205,729 0.94 206,247
Building Decorating 3,300 0.02 2,539 0.01 3,900
Lawn Maintenance 64,288 0.29 67,333 0.31 66,400
Security 19,236 0.09 18,380 0.08 21,345
Rubbish Removal 36,124 0.17 34,314 0.16 37,620
Snow Removal 5,000 0.02 0 0.00 2,500
Parking Lot Repairs & Maint 94,368 0.43 96,437 0.44 106,168
Building Maint & Repair 59,079 0.27 57,099 0.26 71,650
Payroll - Salary/ Bonus 242,866 1.11 266,660 1.22 297,684
Payroll - Taxes/Insurance 48,570 0.22 53,332 0.24 59,536
Other Operating Expenses 49,828 0.23 51,165 0.23 52,121
Management Fees 145,718 0.67 152,956 0.70 147,419
General Insurance 70,615 0.32 66,556 0.30 53,778
Professional Services 117,574 0.54 75,453 0.35 69,379
Utility - Electricity 147,695 0.68 148,795 0.68 151,671
-Gas/Fuel 0 0.00 0 0.00 0
-Water/Sewer 32,321 0.15 31,139 0.14 32,707
Real Estate Taxes (Incl. Consultant Fees) 311,537 1.42 291,116 1.33 291,116
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 1,694,745 $7.75 1,660,052 $7.59 1,709,002
- ------------------------------------------------------------------------------------------------------------------------------------
NET OPERATING INCOME 3,335,073 $15.25 3,374,348 $15.43 3,485,282
- ------------------------------------------------------------------------------------------------------------------------------------
Mortgage Interest 2,732,628 $12.49 2,732,628 $12.49 2,732,628
Mortgage Principal 0 0.00 0 0.00 0
Additional Mortgage Interest 0 0.00 0 0.00 0
Land Rent 0 0.00 0 0.00 0
Additional Land Rent 0 0.00 0 0.00 0
Other Interest Expense 0 0.00 0 0.00 0
- ------------------------------------------------------------------------------------------------------------------------------------
SUB-TOTAL OPERATING CASH FLOW 602,445 $2.75 641,720 $2.93 752,654
- ------------------------------------------------------------------------------------------------------------------------------------
NET MARKETING/MEDIA FUNDS (Rec/Disb) 0 $0.00 0 $0.00 0
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATING CASH FLOW 602,445 $2.75 641,720 $2.93 752,654
....................................................................................................................................
Tenant Improvements 237,750 $1.09 303,610 $1.39 305,237
Capital Improvements 75,000 0.34 59,949 0.27 160,871
Lease Commissions 0 0.00 0 0.00 0
....................................................................................................................................
CASH FLOW 289,695 $1.32 278,161 $1.27 286,546
====================================================================================================================================
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
1996 Budget/ Variance % Variance Reference
Sq. Ft. 96Bud/95 Act 96 Bud/95Act Pg No
==============================================================================================================
<S> <C> <C> <C> <C> <C>
INCOME:
Rental Income $15.23 (47,206) -1.40% 10,23,32-36
Percentage Rent 1.76 (61,707) -13.78% 10,23,49-51
Common Area Income 5.06 223,892 25.37% 10,23,32,52
Food Court Income 0.12 8,467 49.40% 11,23,32,52
Real Estate Tax Income 1.18 76,522 42.16% 11,23,32,52
Utility Income 0.22 (3,920) -7.60% 11,23,83
Other Tenant Charges 0.04 (7,532) -47.00% 12,23,83
Miscellaneous Income 0.14 (28,632) -48.55% 12,23,83
- --------------------------------------------------------------------------------------------------------------
TOTAL INCOME $23.75 159,884 3.18%
- --------------------------------------------------------------------------------------------------------------
EXPENSES:
Advertising/Promotion $0.00 (540) -100.00% 13,23,95
Administrative 0.17 (2,748) -6.78% 13,23,95-96
Janitorial/Cleaning 0.94 518 0.25% 13,23,96
Building Decorating 0.02 1,361 53.60% 14,23,96
Lawn Maintenance 0.30 (933) -1.39% 14,23,97
Security 0.10 2,965 16.13% 14,23,97
Rubbish Removal 0.17 3,306 9.63% 15,23,97
Snow Removal 0.01 2,500 0.00% 15,23,97
Parking Lot Repairs & Maint 0.49 9,731 10.09% 15,23,97
Building Maint & Repair 0.33 14,551 25.48% 16,23,98
Payroll - Salary/ Bonus 1.36 31,024 11.63% 16,23,99
Payroll - Taxes/Insurance 0.27 6,204 11.63% 16,23,99
Other Operating Expenses 0.24 956 1.87% 17,23,102
Management Fees 0.67 (5,537) -3.62% 17,23,103
General Insurance 0.25 (12,778) -19.20% 17,23,103
Professional Services 0.32 (6,074) -8.05% 18,23,103
Utility - Electricity 0.69 2,876 1.93% 18,23,104
-Gas/Fuel 0.00 0 0.00%
-Water/Sewer 0.15 1,568 5.04% 19,23,105
Real Estate Taxes (Incl. Consultant Fees) 1.33 0 0.00% 19,23,105
- -------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES $7.81 48,950 2.95%
- -------------------------------------------------------------------------------------------------------------
NET OPERATING INCOME $15.95 110,934 3.29%
- -------------------------------------------------------------------------------------------------------------
Mortgage Interest $12.49 0 0.00% 19,23,105
Mortgage Principal 0.00 0 0.00%
Additional Mortgage Interest 0.00 0 0.00%
Land Rent 0.00 0 0.00%
Additional Land Rent 0.00 0 0.00%
Other Interest Expense 0.00 0 0.00%
- --------------------------------------------------------------------------------------------------------------
SUB-TOTAL OPERATING CASH FLOW $3.44 110,934 17.29%
- --------------------------------------------------------------------------------------------------------------
NET MARKETING/MEDIA FUNDS (Rec/Disb) $0.00 0 0.00%
- --------------------------------------------------------------------------------------------------------------
OPERATING CASH FLOW $3.44 110,934 17.29%
- --------------------------------------------------------------------------------------------------------------
Tenant Improvements $1.40 1,627 0.54% 22,23,106
Capital Improvements 0.74 100,922 168.35% 22,23,106
Lease Commissions 0.00 0 0.00%
- --------------------------------------------------------------------------------------------------------------
CASH FLOW $1.31 8,385 3.01%
==============================================================================================================
<CAPTION>
- --------------------------------------------------------------------------------
1996 STANDARD
GENERAL INFORMATION PRO RATA
TENANT CHARGE
============================== ======================
<S> <C> <C> <C>
GLA With All Department Stores = 572,914 [ILLEGIBLE]
----------
GLA With Owned Dept. Stores = 459,957 CAM [ILLEGIBLE]
MAM [ILLEGIBLE]
DEPARTMENT STORES Square Ft. Escalations [ILLEGIBLE]
----------------- --------- RET [ILLEGIBLE]
1. Belk 112,957 (Nonowned) Utilities [ILLEGIBLE]
2. JC Penny 81,729 (Owned) Marketing [ILLEGIBLE]
3. Brody's 69,960 (Owned) Other [ILLEGIBLE]
4. Sears 89,564 (Owned) -------------------------
5. ( ) Sub Total [ILLEGIBLE]
6. ( ) -------------------------
----------------- ---------
DEPT. STORE TOTAL 354,210 Food Court [ILLEGIBLE]
-------------------------
Date of Purchase: 01-Jan-80 1996 Total [ILLEGIBLE]
Purchase Price: ==========================
Ownership:
Cash Invested:
1995 Total [ILLEGIBLE]
Sales PSF (Rolling 12 Months): $272.32/pef ==========================
- --------------------------------------------------------------------------------
<CAPTION>
PAYROLL NOTES
=============
1995 Budgeted Payroll: 242,866
/Sq. Ft.: $1.11
1995 Projected Actual Payroll: 266,660
/Sq. Ft.: $1.22
1996 Budgeted Payroll: 297,684
/Sq. Ft.: $1.36
Varlance - 1996 Budget vs 1995 Proj Act: 31,024
% Difference: 11.63%
- --------------------------------------------------------------------------------
MARKETING FUND NOTES
====================
<S> <C>
Marketing Fund Income: 155,944
Owner's Contribution & Subsidiaries: 38,986
Media Fund Income: 59,230
--------------------------------------------------------
TOTAL INCOME: 254,160
--------------------------------------------------------
Marketing & Media Expense: 254,160
--------------------------------------------------------
Net Marketing & Media Funds: 0
========================================================
Page_____
================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
B-2 Co#:9125 Date: 25-Aug-95 1996 COMMERCIAL OPERATING BUDGET Property: Golden East Crossing Sq. Ft.: 218,704 4:31 PM
====================================================================================================================================
Jan-96 Feb-96 Mar-96 Apr-96 May-96 Jun-96
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
INCOME:
Rental Income 281,109 271,109 272,055 273,825 272,575 274,219
Percentage Rent 27,731 79,259 25,380 17,543 25,032 19,292
Common Area Income 86,301 86,301 86,301 88,964 106,158 107,600
Food Court Income 1,582 1,582 1,582 1,913 3,202 3,202
Real Estate Tax Income 15,072 15,072 15,072 15,535 52,025 52,305
Utility Income 3,908 3,908 3,908 3,991 3,991 3,991
Other Tenant Charges 696 696 696 706 706 706
Miscellaneous Income 0 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME 416,399 457,927 404,944 402,477 463,689 461,316
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Advertising/Promotion 0 0 0 0 0 0
Administrative 2,900 2,450 2,889 3,645 2,550 3,054
Janitorial/Cleaning 17,240 17,090 17,807 17,090 17,090 17,090
Building Decorating 500 0 300 200 500 400
Lawn Maintenance 5,900 6,400 7,900 6,400 4,400 5,600
Security 4,422 1,422 1,511 1,471 1,471 1,511
Rubbish Removal 3,020 3,020 3,020 3,020 3,020 3,020
Snow Removal 750 750 750 0 0 250
Parking Lot Repairs & Maint 5,144 1,144 2,644 1,144 84,644 1,144
Building Repairs & Maint 24,976 4,927 8,165 2,602 6,177 5,415
Payroll - Salary/ Bonus 22,205 22,205 23,025 23,025 34,537 23,025
Payroll - Taxes/Insurance 4,441 4,441 4,605 4,605 6,907 4,605
Other Operating Expenses 5,496 4,471 4,040 3,780 3,658 3,908
Management Fees 12,332 13,993 11,876 11,633 11,883 11,719
General Insurance 0 0 0 0 0 53,778
Professional Services 2,000 1,500 16,000 13,459 1,500 7,500
Utility - Electricity 13,700 13,990 13,284 10,336 12,478 12,778
-Gas/Fuel 0 0 0 0 0 0
-Water/Sewer 3,134 2,100 2,056 2,250 2,839 3,330
Real Estate Taxes (Incl. Consultant Fees) 24,093 24,093 24,093 24,093 24,093 26,093
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 152,253 123,996 143,965 128,753 217,747 184,220
- ------------------------------------------------------------------------------------------------------------------------------------
NET OPERATING INCOME 264,146 333,931 261,029 273,724 245,942 277,096
- ------------------------------------------------------------------------------------------------------------------------------------
Mortgage Interest 227,719 227,719 227,719 227,719 227,719 227,719
Mortgage Principal 0 0 0 0 0 0
Additional Mortgage Interest 0 0 0 0 0 0
Land Rent 0 0 0 0 0 0
Additional Land Rent 0 0 0 0 0 0
Other Interest Expense 0 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
SUB-TOTAL OPERATING CASH FLOW 36,427 106,212 33,310 46,005 18,223 49,377
- ------------------------------------------------------------------------------------------------------------------------------------
NET MARKETING(Rec/Disb) 0 0 0 0 0 0
NET MEDIA FUND (Rec/DIsb)
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATING CASH FLOW 36,427 106,212 33,310 46,005 18,223 49,377
- ------------------------------------------------------------------------------------------------------------------------------------
Tenant Improvements 0 0 0 0 75,000 0
Capital Improvements 10,000 0 30,543 11,868 54,230 54,230
Lease Commissions 0 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
CASH FLOW 26,427 106,212 2,767 34,137 (111,007) (4,853)
====================================================================================================================================
<CAPTION>
====================================================================================================================================
Jul-96 Aug-96 Sep-96 Oct-96 Nov-96 Dec-96
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
INCOME:
Rental Income 272,857 282,558 273,929 275,077 289,075 293,558
Percentage Rent 18,152 17,968 7,500 4,703 136,882 6,501
Common Area Income 88,964 94,616 88,565 90,819 90,819 90,819
Food Court Income 1,913 2,126 2,126 2,126 2,126 2,126
Real Estate Tax Income 15,535 16,094 15,038 15,431 15,431 15,431
Utility Income 3,991 4,074 3,949 3,991 3,990 3,990
Other Tenant Charges 706 716 712 717 718 719
Miscellaneous Income 0 0 0 30,344 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME 402,118 418,152 391,819 423,208 539,041 413,144
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Advertising/Promotion 0 0 0 0 0 0
Administrative 3,450 4,150 3,134 3,500 2,700 3,339
Janitorial/Cleaning 17,240 17,090 17,090 17,240 17,090 17,090
Building Decorating 700 400 100 200 400 200
Lawn Maintenance 4,400 4,600 4,400 5,600 5,400 5,400
Security 1,471 1,471 1,511 1,952 1,571 1,561
Rubbish Removal 3,020 3,020 3,020 3,020 3,710 3,710
Snow Removal 0 0 0 0 0 0
Parking Lot Repairs & Maint 2,644 1,144 1,144 1,144 2,864 1,364
Building Repairs & Maint 3,427 1,927 5,015 2,077 2,277 4,665
Payroll - Salary/ Bonus 23,025 34,537 23,025 23,025 23,025 23,025
Payroll - Taxes/Insurance 4,605 6,907 4,605 4,605 4,605 4,605
Other Operating Expenses 6,158 3,897 4,702 3,753 3,714 4,544
Management Fees 11,619 11,792 11,028 10,962 16,809 11,773
General Insurance 0 0 0 0 0 0
Professional Services 2,000 2,692 8,843 2,000 8,500 3,385
Utility - Electricity 13,784 13,789 11,437 10,981 12,729 12,385
-Gas/Fuel 0 0 0 0 0 0
-Water/Sewer 2,709 2,410 2,915 2,256 4,272 2,436
Real Estate Taxes (Incl. Consultant Fees) 24,093 24,093 24,093 24,093 24,093 24,093
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 124,345 133,919 126,062 116,408 133,759 123,575
- ------------------------------------------------------------------------------------------------------------------------------------
NET OPERATING INCOME 277,773 284,233 265,757 306,800 405,282 289,569
- ------------------------------------------------------------------------------------------------------------------------------------
Mortgage Interest 227,719 227,719 227,719 227,719 227,719 227,719
Mortgage Principal 0 0 0 0 0 0
Additional Mortgage Interest 0 0 0 0 0 0
Land Rent 0 0 0 0 0 0
Additional Land Rent 0 0 0 0 0 0
Other Interest Expense 0 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
SUB-TOTAL OPERATING CASH FLOW 50,054 56,514 38,038 79,081 177,563 61,850
- ------------------------------------------------------------------------------------------------------------------------------------
NET MARKETING(Rec/Disb) 0 0 0 0 0 0
NET MEDIA FUND (Rec/DIsb)
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATING CASH FLOW 50,054 56,514 38,038 79,081 177,563 61,850
- ------------------------------------------------------------------------------------------------------------------------------------
Tenant Improvements 0 0 163,537 66,700 0 0
Capital Improvements 0 0 0 0 0 0
Lease Commissions 0 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
CASH FLOW 50,054 56,514 (125,499) 12,381 177,563 61,850
====================================================================================================================================
<CAPTION>
================================================================================================
TOTAL 1995 Proj 1996 Recov
================================================================================================
<S> <C> <C> <C>
INCOME:
Rental Income 3,331,946 3,379,152
Percentage Rent 385,943 447,650
Common Area Income 1,106,227 882,335
Food Court Income 25,607 17,140
Real Estate Tax Income 258,041 181,519
Utility Income 47,682 51,602
Other Tenant Charges 8,494 16,026
Miscellaneous Income 30,344 58,976
- ------------------------------------------------------------------------------------------------
TOTAL INCOME 5,194,284 5,034,400
- ------------------------------------------------------------------------------------------------
EXPENSES:
Advertising/Promotion 0 540 0
Administrative 37,761 40,509 34,761
Janitorial/Cleaning 206,247 205,729 206,247
Building Decorating 3,900 2,539 3,900
Lawn Maintenance 66,400 67,333 66,400
Security 21,345 18,380 21,345
Rubbish Removal 37,620 34,314 37,620
Snow Removal 2,500 0 2,500
Parking Lot Repairs & Maint 106,168 96,437 106,168
Building Repairs & Maint 71,650 57,099 65,650
Payroll - Salary/ Bonus 297,684 266,660 297,684
Payroll - Taxes/Insurance 59,536 53,332 59,537
Other Operating Expenses 52,121 51,165 10,805
Management Fees 147,419 152,956 0
General Insurance 53,778 66,556 53,778
Professional Services 69,379 75,453 0
Utility - Electricity 151,671 148,795 143,046
-Gas/Fuel 0 0 0
-Water/Sewer 32,707 31,139 32,707
Real Estate Taxes (Incl. Consultant Fees) 291,116 291,116 291,116
- ------------------------------------------------------------------------------------------------
TOTAL EXPENSES 1,709,002 1,660,062 1,433,264
- ------------------------------------------------------------------------------------------------
NET OPERATING INCOME 3,485,282 3,374,348
- ------------------------------------------------------------------------------------------------
Mortgage Interest 2,732,628 2,732,628 0
Mortgage Principal 0 0 0
Additional Mortgage Interest 0 0 0
Land Rent 0 0 0
Additional Land Rent 0 0 0
Other Interest Expense 0 0 0
- ------------------------------------------------------------------------------------------------
SUB-TOTAL OPERATING CASH FLOW 752,654 641,720
- ------------------------------------------------------------------------------------------------
NET MARKETING(Rec/Disb) 0
NET MEDIA FUND (Rec/DIsb) 0
- ------------------------------------------------------------------------------------------------
OPERATING CASH FLOW 752,654 641,720
- ------------------------------------------------------------------------------------------------
Tenant Improvements 305,237 303,610 0
Capital Improvements 160,871 59,949 53,624
Lease Commissions 0 0 0
- ------------------------------------------------------------------------------------------------
CASH FLOW 286,546 278,161
================================================================================================
PAGE ________
</TABLE>
<PAGE>
PROPERTY MANAGEMENT INFORMATION SYSTEM
CASH OPERATING STATEMENT - DEC, 94 (SCHEDULE 1)
9125: GOLDEN EAST CROSSING
9-Feb-95 15:45 Page 1
(DATA AS OF FEB 9, 1995 15:27)
<TABLE>
<CAPTION>
DEC,94
- ------------------------------------------
ACTUAL BUDGET VARIANCE DESCRIPTION
------- ------- -------- ---------------------------------
<C> <C> <C> <S>
473,221 419,408 53,813 TOTAL INCOME
146,609 139,160 7,449 TOTAL EXPENSES
------- ------- --------
326,612 280,248 46,364 NET OPERATING INCOME
895,947 227,719 668,228 LESS: DEBT SERVICE
0 0 0 NET MARKETING FUND
0 0 0 CAPITAL IMPROVEMENTS
0 0 0 TENANT IMPROVEMENTS
0 0 0 LEASE COMMISSIONS
0 0 0 REDEVELOPMENT COSTS
------- ------- --------
569,334- 52,529 621,863- OPERATING CASH FLOW
======= ======= ========
SUPPLEMENTAL INFORMATION
0 0 0 DEFERRED EXPENSES
0 0 0 DEFERRED LEASE COMMISSIONS
0 0 0 SECURITY DEPOSITS
251,392- 0 251,392- ESCROWED FUNDS
81,391 81,547 156- COMMON AREA EXPENSES
668,228- 0 668,228- OTHER
PAYROLL EXPENSE DETAIL
PAYROLL BY MINOR ACCOUNT
0 0 0 ADMINISTRATIVE
12,214 11,721 493 CAM (OUTSIDE)
19,758 16,062 3,696 MAM (INSIDE)
0 0 0 CENTRAL PLANT
0 0 0 FOOD COURT
0 0 0 SECURITY
0 0 0 MARKETING SERV
0 0 0 NET LABOR ALLOCATION
------- ------- --------
31,972 27,783 4,189 TOTAL PAYMENT
======= ======= ========
<CAPTION>
JAN, 94 - DEC,94
----------------------------------------------------- ANNUAL
DESCRIPTION ACTUAL BUDGET VARIANCE SQ FT BUDGET
- ----------------------- --------- --------- --------- ------ ---------
<S> <C> <C> <C> <C> <C>
TOTAL INCOME 4,616,915 4,929,865 312,950- 21.11 4,929,865
TOTAL EXPENSES 1,321,843 1,682,032 360,189- 6.04 1,682,032
--------- --------- --------- ------ ---------
NET OPERATING INCOME 3,295,072 3,247,833 47,239 15.06 3,247,833
LESS: DEBT SERVICE 4,779,338 2,732,628 2,046,710 21.85 2,732,628
NET MARKETING FUND 0 0 0 0.00 0
CAPITAL IMPROVEMENTS 0 0 0 0.00 0
TENANT IMPROVEMENTS 320,000 358,300 38,300- 1.46 358,300
LEASE COMMISSIONS 0 0 0 0.00 0
REDEVELOPMENT COSTS 0 0 0 0.00 0
--------- --------- --------- ------ ---------
OPERATING CASH FLOW 1,804,266- 156,905 1,961,171- 8.24- 156,905
========= ========= ========= ====== =========
SUPPLEMENTAL INFORMATION
DEFERRED EXPENSES 21 0 21 0.00 0
EXPENSS
DEFERRED LEASE COMMISSIONS 0 0 0 0.00 0
SECURITY DEPOSITS 600- 0 600- 0.00 0
ESCROWED FUNDS 4,278,701 0 4,278,701 19.56 0
COMMON AREA EXPENSES 1,032,409 1,020,858 11,551 4.72 1,020,858
OTHER 6,372,413- 0 6,372,413- 29.13- 0
PAYROLL EXPENSE DETAIL
PAYROLL BY MINOR ACCOUNT
ADMINISTRATIVE 0 0 0 0.00 0
CAM (OUTSIDE) 89,025 98,992 9,967- 0.40 98,992
MAM (INSIDE) 167,874 134,730 33,144 0.76 134,730
CENTRAL PLANT 0 0 0 0.00 0
FOOD COURT 0 0 0 0.00 0
SECURITY 0 0 0 0.00 0
MARKETING SERV 0 0 0 0.00 0
NET LABOR ALLOCATION 0 0 0 0.00 0
--------- --------- --------- ------ ---------
TOTAL PAYMENT 256,899 233,722 23,177 1.17 233,722
========= ========= ========= ====== =========
</TABLE>
218,704 SQUARE FEET
PRINT SCHEDULES WHICH DEVIATE FROM BUDGET BY $ 0.00 OR 0%
<PAGE>
PROPERTY MANAGEMENT INFORMATION SYSTEM
CASH OPERATING STATEMENT - DEC,94 (SCHEDULE 2)
9125: GOLDEN EAST CROSSING
FEBRUARY 9, 1995 15:45 PAGE 2
(DATA AS OF FEB 9, 1995 15:27)
<TABLE>
<CAPTION>
DEC,94
ACTUAL BUDGET VARIANCE DESCRIPTION
------- ------- -------- -------------------------------
<C> <C> <C> <S>
INCOME:
296,967 302,333 5,386- RENTAL
46,973 16,666 30,307 PERCENTAGE RENT
72,565 78,367 5,802- COMMON AREA
2,045 1,231 814 FOOD COURT
12,476 15,990 3,514- REAL ESTATE TAX
4,187 4,116 71 UTILITY
170 705 535- OTHER TENANT
37,859 0 37,859 MISCELLANEOUS
------- ------- ------
473,221 419,408 53,813 TOTAL INCOME
------- ------- ------
EXPENSES:
91 125 34- ADVERTISING/PROMOTION
2,042 3,415 1,373- ADMINISTRATIVE
0 17,390 17,390- JANATORIAL CLEANING
0 0 0 TENANT DECORATING
1,575 80 1,495 BUILDING RENOVATION
8,163 5,450 2,713 LAWN MAINTENANCE
3,149 400 2,749 SECURITY
2,881 3,651 770- RUBBISH REMOVAL
0 0 0 SNOW REMOVAL
2,811 1,364 1,447 PARKING LOT
4,312 3,425 887 BUILDING MAINTENANCE/REPAIR
31,972 27,783 4,189 PAYROLL SALARY/BONUE
12,226 5,556 6,670 PAYROLL TAX/INSURANCE
5,620 4,373 1,247 OTHER OPERATING
13,215 12,743 472 MANAGEMENT FEES
0 0 0 GENERAL INSURANCE
11,260 14,167 2,907- PROFESSIONAL SERVICES
11,652 12,038 386- UTILITY - ELECTRIC
0 0 0 - GAS/FUEL
2,307 2,948 641- - WATER/SEWER
33,333 24,252 9,081 REAL ESTATE TAXES
0 0 0 MISCELLANEOUS
------- ------- ------
146,609 139,160 7,449 TOTAL EXPENSES
------- ------- ------
326,612 280,248 46,364 NET OPERATING INCOME
227,719 227,719 0- MORTGAGE INTEREST
0 0 0 MORTGAGE PRINCIPAL
668,228 0 668,228 ADDITIONAL MORTGAGE INTEREST
0 0 0 LAND RENT
------- ------- -------
569,334- 52,529 621,863- SUB TOTAL - OPERATING CASH FLOW
0 0 0 NET MKT'G FUND
------- ------- -------
569,334- 52,529 621,863- OPERATING CASH FLOW
0 0 0 TENANT IMPROVEMENTS
0 0 0 CAPITAL ADDITIONS
0 0 0 LEASE COMMISSIONS
0 0 0 REDEVELOPMENT COSTS
------- ------- -------
569,334- 52,529 621,863- CASH FLOW
======= ======= =======
<CAPTION>
JAN,94 - DEC,94
---------------------------------------------------------------------------
ANNUAL
DESCRIPTION ACTUAL BUDGET BUDGET /SQ FT BUDGET
- ------------------------------- --------- --------- --------- ------ ---------
<S> <C> <C> <C> <C> <C>
INCOME:
RENTAL 3,229,586 3,394,196 164,610- 14.76 3,394,196
PERCENTAGE RENT 267,382 264,229 3,153 1.22 264,229
COMMON AREA 829,252 902,055 72,803- 3.79 902,055
FOOD COURT 10,453 13,873 3,420- 0.04 13,873
REAL ESTATE TAX 265,257 297,855 32,598- 1.21 297,855
UTILITY 49,617 49,252 365 0.22 49,252
OTHER TENANT 8,002 8,405 403- 0.03 8,405
MISCELLANEOUS 42,633- 0 42,633- 0.19- 0
--------- --------- --------- ----- ---------
TOTAL INCOME 4,616,915 4,929,865 312,950- 21.11 4,929,865
--------- --------- --------- ----- ---------
EXPENSES:
ADVERTISING/PROMOTION 15,003 375 14,628 0.06 375
ADMINISTRATIVE 34,000 43,445 9,445- 0.15 43,445
JANATORIAL CLEANING 188,042 206,880 18,838- 0.85 206,880
TENANT DECORATING 0 0 0 0.00 0
BUILDING RENOVATION 14,839 4,316 10,523 0.06 4,316
LAWN MAINTENANCE 65,203 62,786 2,417 0.29 62,786
SECURITY 17,284 10,275 7,009 0.07 10,275
RUBBISH REMOVAL 30,141 36,208 6,067- 0.13 36,208
SNOW REMOVAL 2,293 6,000 3,707- 0.01 6,000
PARKING LOT 108,470 95,968 12,502 0.49 95,968
BUILDING MAINTENANCE/REPAIR 90,214 46,149 44,065 0.41 46,149
PAYROLL SALARY/BONUE 256,899 233,722 23,177 1.17 233,722
PAYROLL TAX/INSURANCE 58,003 46,751 11,252 0.26 46,751
OTHER OPERATING 54,522 54,394 128 0.24 54,394
MANAGEMENT FEES 142,569 146,130 3,561- 0.65 146,130
GENERAL INSURANCE 1,333- 88,849 90,182- 0.00 88,849
PROFESSIONAL SERVICES 105,838 136,604 30,766- 0.48 136,604
UTILITY - ELECTRIC 148,940 138,515 10,425 0.68 138,515
- GAS/FUEL 0 0 0 0.00 0
- WATER/SEWER 27,179 32,265 5,086- 0.12 32,265
REAL ESTATE TAXES 36,263- 292,400 328,663- 0.16- 292,400
MISCELLANEOUS 0 0 0 0.00 0
--------- --------- --------- ----- ---------
TOTAL EXPENSES 1,321,843 1,682,032 360,189- 6.04 1,682,032
--------- --------- --------- ----- ---------
NET OPERATING INCOME 3,295,072 3,247,833 47,239 15.06 3,247,833
MORTGAGE INTEREST 2,732,625 2,732,628 3- 12.49 2,732,628
MORTGAGE PRINCIPAL 0 0 0 0.00 0
ADDITIONAL MORTGAGE INTEREST 2,046,713 0 2,046,713 9.35 0
LAND RENT 0 0 0 0.00 0
--------- --------- --------- ----- ---------
SUB TOTAL - OPERATING CASH FLOW 1,484,266- 515,205 1,999,471- 6.78- 515,205
NET MKT'G FUND 0 0 0 0.00 0
--------- --------- --------- ----- ---------
OPERATING CASH FLOW 1,484,266- 515,205 1,999,471- 6.78- 515,205
TENANT IMPROVEMENTS 320,000 358,300 38,300- 1.46 358,300
CAPITAL ADDITIONS 0 0 0 0.00 0
LEASE COMMISSIONS 0 0 0 0.00 0
REDEVELOPMENT COSTS 0 0 0 0.00 0
--------- ------- --------- ---- -------
CASH FLOW 1,804,266- 156,905 1,961,171- 8.24- 156,905
========= ======= ========= ==== =======
</TABLE>
<PAGE>
============================================
RENT ROLL
============================================
<PAGE>
GOLDEN EAST CROSSING, ROCKY MOUNT, NC
RENT ROLL AS OF 1/1996
(FISCAL YEAR BASIS)
6/14/96 @ 18:19
<TABLE>
<CAPTION>
TENANT/
LEASE TYPE AND DATES/ BASE RENT/ OVERAGE/ SALES (000)/ RECOVERIES/ REVENUE/
SQUARE FEET PER SF PER SF PER SF PER SF PER SF
--------------------- ---------- -------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C>
1- TENANTS < 750
# 38 - SUITE 4011
CHRISTY'S
BASE LEASE 1/95- 12/97 18,744 0 110 2,192 20,936
600 SF 31.24 0.00 183.15 3.65 34.89
# 49 - SUITE 5020
GIGI'S BOUTIQUE
BASE LEASE 12/86-12/97 12,960 0 63 2,416 15,376
648 SF 20.00 0.00 96.82 3.73 23.73
# 50 - SUITE 5022
CLAIRE'S BTQUE
BASE LEASE 10/86- 9/96 14,580 251 185 2,718 17,549
729 SF 20.00 0.34 254.31 3.73 24.07
# 52 - SUITE 5026
GR. AMER. CHOCALAT
BASE LEASE 8/86- 8/06 24,960 0 242 2,326 27,286
624 SF 40.00 0.00 387.35 3.73 43.73
# 53 - SUITE 5028
KEEP IN TOUCH
BASE LEASE 1/96- 12/96 3,749 0 21 2,608 6,357
714 SF 5.25 0.00 28.75 3.65 8.90
# 68 - SUITE 7004
SUNGLASS HUT
BASE LEASE 4/95- 3/05 24,999 0 120 1,682 26,681
451 SF 55.43 0.00 267.00 3.73 59.16
# 69 - SUITE 7006
LEE NAILS
BASE LEASE 9/94- 8/99 18,001 0 73 1,576 19,577
579 SF 31.09 0.00 125.99 2.72 33.81
----- ---- ------ ---- -----
TENANTS < 750 117,993 251 814 15,518 133,762
4,345 SF 27.16 0.06 187.25 3.57 30.79
2- TENANTS 751-1200
# 4 - SUITE 1010
JEWEL BOX
BASE LEASE 8/86-12/06 36,225 16,533 879 3,522 56,280
1,035 SF 35.00 15.97 849.56 3.40 54.38
# 5 - SUITE 1012
SUGAR FOOT
BASE LEASE 11/86-11/96 17,088 4,310 357 2,908 24,306
1,068 SF 16.00 4.04 333.92 2.72 22.76
# 22 - SUITE 2022
REEDS JEWELERS
BASE LEASE 8/86-12/96 47,496 15,352 1,099 4,475 67,323
1,200 SF 39.58 12.79 915.60 3.73 56.10
</TABLE>
<PAGE>
PAGE 2
<TABLE>
<CAPTION>
TENANT/
LEASE TYPE AND DATES/ BASE RENT/ OVERAGE/ SALES(000)/ RECOVERIES/ REVENUE/
SQUARE FEET PER SF PER SF PER SF PER SF PER SF
- --------------------- ---------- -------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
# 23 - SUITE 3002
STRIDE-RITE
BASE LEASE 3/87- 1/98 13,188 1,524 245 2,565 17,277
942 SF 14.00 1.62 260.30 2.72 18.34
# 35 - SUITE 3032
REGIS HAIRSTYLIST
BASE LEASE 8/86- 8/96 20,250 0 269 2,757 23,007
810 SF 25.00 0.00 331.76 3.40 28.40
# 41 - SUITE 5002
GOLD VALLEY
BASE LEASE 7/87- 7/97 30,784 2,576 334 3,102 36,462
832 SF 37.00 3.10 400.96 3.73 43.82
# 42 - SUITE 5004
PICTURE YOU/ONE
BASE LEASE 9/93- 8/98 25,950 0 189 2,826 28,776
1,038 SF 25.00 0.00 182.10 2.72 27.72
# 43 - SUITE 5006
ELECTRONICS BTQUE
BASE LEASE 8/91-10/01 24,000 9,214 554 2,206 35,420
810 SF 29.63 11.38 683.42 2.72 43.73
# 44 - SUITE 5007
CAROUSEL CHILDREN
BASE LEASE 8/94-12/49 7,493 0 43 2,958 10,451
810 SF 9.25 0.00 53.58 3.65 12.90
# 45 - SUITE 5008
NATURALIZER
BASE LEASE 3/88- 3/98 19,200 0 171 4,475 23,675
1,200 SF 16.00 0.00 142.39 3.73 19.73
# 51 - SUITE 5024
BAILEY'S JEWELERS
BASE LEASE 8/86- 1/07 43,515 53,061 1,932 3,532 100,108
967 SF 45.00 54.87 1,997.45 3.65 103.52
# 57 - SUITE 5046
LADY FOOTLOCKER
BASE LEASE 4/89- 3/99 22,960 31,470 907 3,677 58,107
1,148 SF 20.00 27.41 790.21 3.20 50.62
# 70 - SUITE 7008
AFTERTHOUGHTS
BASE LEASE 1/95-12/04 22,003 0 184 3,226 25,229
948 SF 23.21 0.00 194.53 3.40 26.61
# 71 - SUITE 7012
VIP FORMAL WEAR
BASE LEASE 8/95- 7/96 6,395 0 0 3,813 10,208
1,044 SF 6.13 0.00 0.00 3.65 9.78
# 73 - SUITE 7016
GENERAL NUTRITION
BASE LEASE 3/91- 2/01 19,996 2,800 326 3,945 26,741
1,058 SF 18.90 2.65 307.80 3.73 25.28
--------- --------- --------- --------- ---------
TENANTS 751-1200 356,543 136,840 7,488 49,987 543,370
14,910 SF 23.91 9.18 502.20 3.35 36.44
</TABLE>
<PAGE>
PAGE 3
<TABLE>
<CAPTION>
TENANT/
LEASE TYPE AND DATES/ BASE RENT/ OVERAGE/ SALES(000)/ RECOVERIES/ REVENUE/
SQUARE FEET PER SF PER SF PER SF PER SF PER SF
- --------------------- ---------- -------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
3 TENANTS 1201-2000
# 3 SUITE 1006
DOLL'N BEAR
BASE LEASE 1/96-12/97 4,551 0 72 4,627 9,178
1,267 SF 3.59 0.00 56.98 3.65 7.24
# 11 - SUITE 1032
LADY'S CHOICE
BASE LEASE 10/91-10/96 14,450 0 143 3,934 18,384
1,445 SF 10.00 0.00 99.30 2.72 12.72
# 12 - SUITE 1102
SEARS, ROEBUCK
BASE LEASE 7/94-12/96 0 0 0 0 0
1,873 SF 0.00 0.00 0.00 0.00 0.00
# 13 - SUITE 1104
LEMSTONE BOOKS
BASE LEASE 10/89- 9/99 18,645 0 234 4,540 23,185
1,243 SF 15.00 0.00 188.30 3.65 18.65
# 34 - SUITE 3030
BOMBAY CO.
BASE LEASE 9/87- 9/97 0 22,243 477 0 22,243
1,825 SF 0.00 12.19 261.17 0.00 12.19
# 39 - SUITE 4014
CANNON'S MENS WEAR
BASE LEASE 12/86-11/96 15,100 0 271 4,837 19,937
1,510 SF 10.00 0.00 179.31 3.20 13.20
# 46 - SUITE 5010
UPS 'N DOWNS
BASE LEASE 5/87- 4/97 16,375 0 313 5,701 22,076
1,561 SF 10.49 0.00 200.40 3.65 14.14
# 55 - SUITE 5040
KIDS FOOTLOCKER
BASE LEASE 11/95- 7/05 25,550 0 273 6,398 31,948
1,752 SF 14.58 0.00 155.75 3.65 18.24
# 56 - SUITE 5042
FRIEDMAN'S JEWELER
BASE LEASE 11/89-11/99 50,006 2,858 1,057 5,224 58,088
1,631 SF 30.66 1.75 648.25 3.20 35.61
# 58 - SUITE 5048
TILT
BASE LEASE 8/86-12/99 35,514 3,004 257 4,833 43,351
1,420 SF 25.01 2.12 180.84 3.40 30.53
# 62 - SUITE 6016
CHICK FIL-A
BASE LEASE 8/86- 8/98 25,560 21,708 788 4,883 52,151
1,704 SF 15.00 12.74 462.33 2.87 30.61
# 72 - SUITE 7014
DOKAR
BASE LEASE 1/96-12/97 4,250 0 0 4,788 9,038
1,311 SF 3.24 0.00 0.00 3.65 6.89
--------- --------- --------- --------- ---------
</TABLE>
<PAGE>
PAGE 4
<TABLE>
<CAPTION>
TENANT/
LEASE TYPE AND DATES/ BASE RENT/ OVERAGE/ SALES(000)/ RECOVERIES/ REVENUE/
SQUARE FEET PER SF PER SF PER SF PER SF PER SF
- --------------------- ---------- -------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
TENANTS 1201-2000 210,001 49,813 3,885 49,765 309,579
18,542 SF 11.33 2.69 209.51 2.68 16.70
4 TENANTS 2001-3500
# 1 - SUITE 1002
D.A. KELLY'S
BASE LEASE 9/93- 8/98 43,750 0 614 9,529 53,279
3,500 SF 12.50 0.00 175.47 2.72 15.22
# 2 - SUITE 1004
HOFHEIMER'S EXPRE
BASE LEASE 11/86- 1/97 43,428 0 369 8,446 51,874
3,102 SF 14.00 0.00 118.83 2.72 16.72
# 6 - SUITE 1016
MERRY-GO-ROUND
BASE LEASE 9/90- 1/01 45,510 0 570 11,081 56,591
3,034 SF 15.00 0.00 187.82 3.65 18.65
# 7 - SUITE 1018
WALDENBOOKS
BASE LEASE 8/86- 1/97 44,109 0 706 8,627 52,736
2,535 SF 17.40 0.00 278.36 3.40 20.80
# 8 - SUITE 1020
AMY'S HALLMARK
BASE LEASE 11/86- 1/97 41,904 0 390 8,914 50,818
2,619 SF 16.00 0.00 149.05 3.40 19.40
# 9 - SUITE 1022
THE FINISH LINE
BASE LEASE 8/90-10/00 52,100 17,063 1,153 9,713 78,876
2,605 SF 20.00 6.55 442.50 3.73 30.28
# 14 - SUITE 1106
BRIAR PATCH
BASE LEASE 11/95-10/05 24,010 3,464 458 10,738 38,212
2,940 SF 8.17 1.18 155.75 3.65 13.00
# 17 - SUITE 2008
KAY-BEE TOY
BASE LEASE 8/86- 8/96 44,580 0 585 11,082 55,662
2,972 SF 15.00 0.00 196.75 3.73 18.73
# 18 - SUITE 2010
PAYLESS SHOESOURCE
BASE LEASE 8/86- 8/96 39,792 0 373 9,083 48,875
2,487 SF 16.00 0.00 149.85 3.65 19.65
# 20 - SUITE 2016
FINE'S MEN WEAR
BASE LEASE 10/86-10/96 36,240 10,111 927 9,673 56,024
3,020 SF 12.00 3.35 306.96 3.20 18.55
# 27 - SUITE 3014
KINNEY SHOES
BASE LEASE 8/86- 8/96 49,485 0 333 12,049 61,534
3,299 SF 15.00 0.00 100.86 3.65 18.65
# 31 - SUITE 3024
RADIO SHACK
BASE LEASE 11/86-11/01 29,004 0 596 8,226 37,230
2,417 SF 12.00 0.00 246.70 3.40 15.40
</TABLE>
<PAGE>
PAGE 5
<TABLE>
<CAPTION>
TENANT/
LEASE TYPE AND DATES/ BASE RENT/ OVERAGE/ SALES(000)/ RECOVERIES/ REVENUE/
SQUARE FEET PER SF PER SF PER SF PER SF PER SF
- --------------------- ---------- -------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
# 33 - SUITE 3028
FOOTLOCKER
BASE LEASE 8/86- 8/06 43,560 72,511 1,935 8,839 124,910
2,420 SF 18.00 29.96 799.39 3.65 51.62
# 36 - SUITE 3033
EYE CARE CENTER
BASE LEASE 10/91-10/01 36,127 3,364 779 10,362 49,853
2,779 SF 13.00 1.21 280.17 3.73 17.94
# 40 - SUITE 4016
SHOE SHOW
BASE LEASE 8/86- 8/96 34,416 0 443 7,809 42,225
2,868 SF 12.00 0.00 154.58 2.72 14.72
# 47 - SUITE 5014
COUNTY SEAT
BASE LEASE 3/87- 3/97 35,618 0 567 11,020 46,638
3,238 SF 11.00 0.00 175.21 3.40 14.40
# 61 - SUITE 6014
DISC JOCKEY
BASE LEASE 8/86- 8/96 45,144 0 594 7,651 52,795
2,052 SF 22.00 0.00 289.24 3.73 25.73
--------- --------- --------- --------- ---------
TENANTS 2001-3500 688,777 106,513 11,390 162,842 958,132
47,887 SF 14.38 2.22 237.85 3.40 20.01
5 - TENANTS 3501-5000
# 24 - SUITE 3004
VICTORIA'S SECRET
BASE LEASE 7/95- 7/07 51,905 0 866 12,925 64,830
3,539 SF 14.67 0.00 244.75 3.65 18.32
# 26 - SUITE 3012
THE LIMITED
BASE LEASE 8/86- 8/98 75,015 0 857 17,849 92,864
4,887 SF 15.35 0.00 175.29 3.65 19.00
# 30 - SUITE 3022
LERNER SHOP
BASE LEASE 8/86- 8/98 59,640 0 846 18,152 77,792
4,970 SF 12.00 0.00 170.27 3.65 15.65
# 48 - SUITE 5018
DURHAM SPORTING GD
BASE LEASE 8/86- 8/96 57,708 0 813 16,367 74,075
4,809 SF 12.00 0.00 168.98 3.40 15.40
# 54 - SUITE 5036
AMERICAN EAGLE
BASE LEASE 8/95- 7/05 51,773 0 864 14,479 66,252
3,883 SF 13.33 0.00 222.50 3.73 17.06
--------- --------- --------- --------- ---------
TENANTS 3501-5000 296,041 0 4,246 79,772 375,813
22,088 SF 13.40 0.00 192.22 3.61 17.01
6 - TENANTS 5001-10000
</TABLE>
<PAGE>
PAGE 6
<TABLE>
<CAPTION>
TENANT/
LEASE TYPE AND DATES/ BASE RENT/ OVERAGE/ SALES(000)/ RECOVERIES/ REVENUE/
SQUARE FEET PER SF PER SF PER SF PER SF PER SF
- --------------------- ---------- -------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
# 15 - SUITE 1108
LIMITED EXPRESS
BASE LEASE 2/88- 2/00 83,264 0 861 19,007 102,271
5,204 SF 16.00 0.00 165.46 3.65 19.65
# 25 - SUITE 3008
LANE BRYANT
BASE LEASE 8/86- 8/98 57,079 0 1,106 18,952 76,031
5,189 SF 11.00 0.00 213.21 3.65 14.65
# 37 - SUITE 3038
REX RADIO & TELEV.
BASE LEASE 5/94- 5/99 42,499 0 0 23,050 65,549
8,466 SF 5.02 0.00 0.00 2.72 7.74
# 59 - SUITE 6002
CATO
BASE LEASE 8/86- 1/97 61,370 0 1,091 16,708 78,078
6,137 SF 10.00 0.00 177.80 2.72 12.72
# 60 - SUITE 6010
CHAMPS SPORTS
BASE LEASE 12/93-12/03 72,624 0 1,127 20,596 93,220
6,052 SF 12.00 0.00 186.25 3.40 15.40
--------- --------- --------- --------- ---------
TENANTS 5001-10000 316,836 0 4,186 98,313 415,149
31,048 SF 10.20 0.00 134.82 3.17 13.37
7 TENANTS > 10000
# 66 SUITE 7001
CARMIKE'S CINEMAS
BASE LEASE 10/87-10/07 250,053 0 652 65,156 315,209
17,474 SF 14.31 0.00 37.30 3.73 18.04
--------- --------- --------- --------- ---------
TENANTS > 10000 250,053 0 652 65,156 315,209
17,474 SF 14.31 0.00 37.30 3.73 18.04
8 - FOOD COURT TENANTS
# 65 - SUITE 6024
HARDEE'S
BASE LEASE 10/86-10/98 27,998 755 479 2,845 31,598
773 SF 36.22 0.98 619.95 3.68 40.88
# 74 - SUITE 8004
DAIRY QUEEN
BASE LEASE 10/95- 9/05 14,000 0 119 2,463 16,463
669 SF 20.93 0.00 178.00 3.68 24.61
# 75 - SUITE 8006
RUFFINO'S
BASE LEASE 8/86- 9/07 25,002 0 249 2,190 27,192
595 SF 42.02 0.00 417.70 3.68 45.70
# 76 - SUITE 8008
MR. WOK
BASE LEASE 6/95- 5/05 19,992 0 123 2,149 22,141
595 SF 33.60 0.00 206.13 3.61 37.21
</TABLE>
<PAGE>
PAGE 7
<TABLE>
<CAPTION>
TENANT/
LEASE TYPE AND DATES/ BASE RENT/ OVERAGE/ SALES(000)/ RECOVERIES/ REVENUE/
SQUARE FEET PER SF PER SF PER SF PER SF PER SF
- --------------------- ---------- -------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
# 78 - SUITE 8012
OMAR'S GYROS
BASE LEASE 8/91- 1/97 12,690 0 98 3,055 15,745
846 SF 15.00 0.00 115.45 3.61 18.61
--------- --------- --------- --------- ---------
FOOD COURT TENANTS 99,682 755 1,067 12,702 113,139
3,478 SF 28.66 0.22 306.83 3.65 32.53
10 - ANCHOR TENANTS
# 79 - SUITE 9002
JC PENNEY
BASE LEASE 8/86- 8/16 327,733 0 10,152 35,712 363,445
81,729 SF 4.01 0.00 124.22 0.44 4.45
# 80 - SUITE 9101
BELKS
BASE LEASE 8/86- 7/26 0 0 0 28,239 28,239
1 SF 0.00 0.00 1.00 28,239.00 28,239.00
# 81 - SUITE 9103
BRODY"S
BASE LEASE 8/95- 7/16 233,200 0 0 43,228 276,428
69,960 SF 3.33 0.00 0.00 0.62 3.95
# 82 - SUITE 9104
SEARS, ROEBUCK
BASE LEASE 10/87-10/15 268,692 112,139 16,086 53,344 434,175
89,564 SF 3.00 1.25 179.60 0.60 4.85
--------- --------- --------- --------- ---------
ANCHOR TENANTS 829,625 112,139 26,238 160,523 1,102,287
241,254 SF 3.44 0.46 108.76 0.67 4.57
--------- --------- --------- --------- ---------
TOTALS 3,165,551 406,311 59,964 694,578 4,266,440
401,026 SF 7.89 1.01 149.53 1.73 10.64
========= ========= ========= ========= =========
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
PRO-Ject+ Lease Abstract Report
- --------------------------------------------------------------------------------
<PAGE>
GOLDEN EAST CROSSING, ROCKY MOUNT, NC
LEASE ABSTRACT REPORT
FOR ALL TENANTS
6/14/96 @ 18:22
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT %
- ------------------- --------- ------ ----- ----- ------ ------------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 tenants < 750
# 38-SUITE 4011 1 600 1/95 12/97 - 31.24 18,744 6.00
CHRISTY'S 1
# 49-SUITE 5020 1 648 12/86 12/97 - 20.00 12,960 6.00
GIGI'S BOUTIQUE 1
# 50-SUITE 5022 1 729 10/86 9/96 - 20.00 14,580 8.00
CLAIRE'S BTQUE 1
# 52-SUITE 5026 1 624 8/86 8/06 - 40.00 24,960 10.00
GR. AMER. CHOCALAT 1 9/96 48.08 30,002
# 53-SUITE 5028 1 714 1/96 12/96 - 12.60 8,996 7.00
KEEP IN TOUCH 1
# 63-SUITE 6018 1 440 1/97 12/06 - 30.00 13,200 6.00
VACANT 1
# 68-SUITE 7004 1 451 4/95 3/05 - 55.43 24,999 7.00
SUNGLASS HUT 1
# 69-SUITE 7006 1 579 9/94 8/99 - 31.09 18,001 6.00
LEE NAILS 1
-----
4,785
2 TENANTS 751-1200
# 4-SUITE 1010 1 1,035 8/86 12/06 - 35.00 36,225 6.00
JEWEL BOX 2 1/97 50.00 51,750
# 5-SUITE 1012 1
SUGAR FOOT 2 1,068 11/86 11/96 - 16.00 17,088 6.00
# 22-SUITE 2022 1 1,200 8/86 12/96 - 39.58 47,496 5.00
REEDS JEWELERS 2
# 23-SUITE 3002 1 942 3/87 1/98 - 14.00 13,188 6.00
STRIDE-RITE 2
# 35-SUITE 3032 1 810 8/86 8/96 - 25.00 20,250 6.00
REGIS HAIRSTYLIST 2
# 41-SUITE 5002 1 832 7/87 7/97 - 37.00 30,784 10.00
GOLD VALLEY 2
# 42-SUITE 5004 1 1,038 9/93 8/98 - 25.00 25,950 8.00
PICTURE YOU/ONE 2 9/97 27.00 28,026
# 43-SUITE 5006 1 810 8/91 10/01 - 29.63 24,000 6.00
ELECTRONICS BTQUE 2 11/98 32.10 26,001
# 44-SUITE 5007 1 810 8/94 12/49 - 9.25 7,493 5.00
CAROUSEL CHILDREN 2
# 45-SUITE 5008 1 1,200 3/88 3/98 - 16.00 19,200 6.00
NATURALIZER 2
<CAPTION>
CEILING BREAKPOINT
TENANT (OOO'S) (000'S) RECOVERIES
- ------------------- -------- ----------- -----------------
<S> <C> <C> <C>
1 tenants < 750
# 38-SUITE 4011 UNLIMITED NATURAL CAM1-RECOVERY CAM1
CHRISTY'S TAX1-RECOVERY TAX1
# 49-SUITE 5020 UNLIMITED NATURAL CAM1-RECOVERY CAM1
GIGI'S BOUTIQUE TAX1-RECOVERY TAX1
# 50-SUITE 5022 UNLIMITED NATURAL CAM1-RECOVERY CAM1
CLAIRE'S BTQUE TAX1-RECOVERY TAX1
# 52-SUITE 5026 UNLIMITED NATURAL CAM1-RECOVERY CAM1
GR. AMER. CHOCALAT TAX1-RECOVERY TAX1
# 53-SUITE 5028 UNLIMITED NATURAL CAM1-RECOVERY CAM1
KEEP IN TOUCH TAX1-RECOVERY TAX1
# 63-SUITE 6018 UNLIMITED NATURAL CAM1-RECOVERY CAM1
VACANT TAX1-RECOVERY TAX1
# 68-SUITE 7004 UNLIMITED NATURAL CAM1-RECOVERY CAM1
SUNGLASS HUT TAX1-RECOVERY TAX1
# 69-SUITE 7006 UNLIMITED NATURAL CAM1-RECOVERY CAM1
LEE NAILS TAX1-RECOVERY TAX1
2 TENANTS 751-1200
# 4-SUITE 1010 UNLIMITED NATURAL CAM1-RECOVERY CAM1
JEWEL BOX
# 5-SUITE 1012
SUGAR FOOT UNLIMITED NATURAL CAM1-RECOVERY CAM1
TAX1-RECOVERY TAX1
# 22-SUITE 2022 UNLIMITED 792 CAM1-RECOVERY CAM1
REEDS JEWELERS TAX1-RECOVERY TAX1
# 23-SUITE 3002 UNLIMITED NATURAL CAM1-RECOVERY CAMI
STRIDE-RITE TAX1-RECOVERY TAXI
# 35-SUITE 3032 UNLIMITED NATURAL CAM1-RECOVERY CAM1
REGIS HAIRSTYLIST TAX1-RECOVERY TAX1
# 41-SUITE 5002 UNLIMITED NATURAL CAM1-RECOVERY CAM1
GOLD VALLEY TAX1-RECOVERY TAX1
# 42-SUITE 5004 UNLIMITED NATURAL CAM1-RECOVERY CAM1
PICTURE YOU/ONE TAX1-RECOVERY TAX1
# 43-SUITE 5006 UNLIMITED NATURAL CAM1-RECOVERY CAM1
ELECTRONICS BTQUE TAX1-RECOVERY TAX1
# 44-SUITE 5007 UNLIMITED NATURAL CAM1-RECOVERY CAM1
CAROUSEL CHILDREN TAX1-RECOVERY TAX1
# 45-SUITE 5008 UNLIMITED NATURAL CAM1-RECOVERY CAM1
NATURALIZER TAX1-RECOVERY TAX1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT %
- ------------------- --------- ------ ----- ----- ------ ------------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
# 51-SUITE 5024 1 967 8/86 1/07 - 45.00 43,515 5.00
BAILEY'S JEWELERS 2 60.00 58,020
3 57-SUITE 5046 1 1,148 4/89 3/99 - 2/97 20.00 22,960 6.00
LADY FOOTLOCKER 2
# 70-SUITE 7008 1 948 1/95 12/04 - 23.21 22,003 8.00
AFTERTHOUGHTS 2
# 71-SUITE 7012 1 1,044 8/95 7/96 - 7.35 7,673 7.00
VIP FORMAL WEAR 2
# 73-SUITE 7016 1 1,058 3/91 2/01 - 18.90 19,996 7.00
GENERAL NUTRITION 2
------
14,910
3 TENANTS 1201-2000
# 3-SUITE 1006 1 1,267 1/96 12/97 - 8.62 10,922 7.00
DOLL'N BEAR 3
# 11-SUITE 1032 1 1,445 10/91 10/96 - 10.00 14,450 6.00
LADY'S CHOICE 3
# 12-SUITE 1102 1 1,873 7/94 12/96 - 0.00 0 6.00
SEARS, ROEBUCK 3
# 13-SUITE 1104 1 1,243 10/89 9/99 - 15.00 18,645 7.00
LEMSTONE BOOKS 3 10/96 18.00 22,374
# 34-SUITE 3030 1 1,825 9/87 9/97 - 0.00 0 8.00
BOMBAY CO. 3
# 39-SUITE 4014 1 1,510 12/86 11/96 - 10.00 15,100 5.00
CANNON'S MENS WEAR 3
# 46-SUITE 5010 1 1,561 5/87 4/97 - 10.49 16,375 5.00
UPS 'N DOWNS 3
# 55-SUITE 5040 1 1,752 11/95 7/05 - 25.00 43,800 6.00
KIDS FOOTLOCKER 3
# 56-SUITE 5042 1 1,631 11/89 11/99 - 30.66 50,006 5.00
FRIEDMAN'S JEWELER 3 12/96 33.72 54,997
# 58-SUITE 5048 1 1,420 8/86 12/99 - 25.01 35,514 15.00
TILT 3
# 62-SUITE 6016 1 1,704 8/86 8/98 - 15.00 25,560 6.00
CHICK FIL-A 3
# 72-SUITE 7014 1 1,311 1/96 12/97 - 7.78 10,200 6.00
DOKAR 3
------
18,542
4 Tenants 2001-3500
# 1-Suite 1002 1 3,500 9/93 8/98 - 12.50 43,750 5.00
D.A. KELLY'S 4
<CAPTION>
CEILING BREAKPOINT
TENANT (OOO'S) (000'S) RECOVERIES
- ------------------- -------- -------------- -----------------
<S> <C> <C> <C>
# 51-SUITE 5024
BAILEY'S JEWELERS UNLIMITED NATURAL CAM1-RECOVERY CAM1
TAX1-RECOVERY TAX1
3 57-SUITE 5046
LADY FOOTLOCKER UNLIMITED NATURAL CAM1-RECOVERY CAM1
TAX1-RECOVERY TAX1
# 70-SUITE 7008
AFTERTHOUGHTS UNLIMITED NATURAL CAM1-RECOVERY CAM1
TAX1-RECOVERY TAX1
# 71-SUITE 7012
VIP FORMAL WEAR UNLIMITED NATURAL CAM1-RECOVERY CAM1
TAX1-RECOVERY TAX1
# 73-SUITE 7016
GENERAL NUTRITION UNLIMITED NATURAL CAM1-RECOVERY CAM1
TAX1-RECOVERY TAX1
3 TENANTS 1201-2000
# 3-SUITE 1006
DOLL'N BEAR UNLIMITED ZERO CAM1-RECOVERY CAM1
TAX1-RECOVERY TAX1
# 11-SUITE 1032
LADY'S CHOICE UNLIMITED NATURAL CAM1-RECOVERY CAM1
TAX1-RECOVERY TAX1
# 12-SUITE 1102
SEARS, ROEBUCK UNLIMITED NATURAL NONE
# 13-SUITE 1104
LEMSTONE BOOKS UNLIMITED 311 CAM1-RECOVERY CAM1
10/96 373 TAX1-RECOVERY TAX1
# 34-SUITE 3030
BOMBAY CO. UNLIMITED ZERO NONE
# 39-SUITE 4014
CANNON'S MENS WEAR UNLIMITED 350 CAM1-RECOVERY CAM1
TAX1-RECOVERY TAX1
# 46-SUITE 5010
UPS 'N DOWNS UNLIMITED NATURAL CAM1-RECOVERY CAM1
TAX1-RECOVERY TAX1
# 55-SUITE 5040
KIDS FOOTLOCKER UNLIMITED NATURAL CAM1-RECOVERY CAM1
TAX1-RECOVERY TAX1
# 56-SUITE 5042
FRIEDMAN'S JEWELER UNLIMITED NATURAL CAM1-RECOVERY CAM1
TAX1-RECOVERY TAX1
# 58-SUITE 5048
TILT UNLIMITED NATURAL CAM1-RECOVVERY CAM1
TAX1-RECOVERY TAX1
# 62-SUITE 6016
CHICK FIL-A UNLIMITED NATURAL CAM1-RECOVERY CAM1
TAX1-RECOVERY TAX1
# 72-SUITE 7014
DOKAR UNLIMITED NATURAL CAM1-RECOVERY CAM1
TAX1-RECOVERY TAX1
4 Tenants 2001-3500
# 1-Suite 1002
D.A. KELLY'S UNLIMITED NATURAL CAM1-RECOVERY CAM1
TAX1-RECOVERY TAX1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT %
- ------------------- --------- ------ ----- ----- ------ ------------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
# 2-SUITE 1004 1 3,102 11/86 1/97 - 14.00 43,428 6.00
HOFHEIMER'S EXPRE 4
# 6-SUITE 1016 1 3,034 9/90 1/01 - 15.00 45,510 6.00
MERRY-GO-ROUND 4
# 7-SUITE 1018 1 2,535 8/86 1/97 - 17.40 44,109 6.00
WALDENBOOKS 4
# 8-SUITE 1020 1 2,619 11/86 1/97 - 16.00 41,904 7.00
AMY'S HALLMARK 4
# 9-SUITE 1022 1 2,605 8/90 10/00 - 20.00 52,100 6.00
THE FINISH LINE 4 8/97 22.00 57,310
# 14-SUITE 1106 1 2,940 11/95 10/05 - 14.00 41,160 6.00
BRIAR PATCH 4 11/98 15.00 44,100
11/02 16.00 47,040
# 16-SUITE 1112 1 2,691 1/97 12/06 - 15.00 40,365 6.00
VACANT 4
# 17-SUITE 2008 1 2,972 8/86 8/96 - 15.00 44,580 6.00
KAY-BEE TOY 4
# 18-SUITE 2010 1 2,487 8/86 8/96 - 16.00 39,792 6.00
PAYLESS SHOESOURCE 4
# 19-SUITE 2012-14 1 2,982 9/96 8/06 - 12.00 35,784 6.00
HUNGATE CRAFTS 4
# 20-SUITE 2016 1 3,020 10/86 10/96 - 12.00 36,240 5.00
FINE'S MEN WEAR 4
# 27-SUITE 3014 1 3,299 8/86 8/96 - 15.00 49,485 6.00
KINNEY SHOES 4
# 28-SUITE 3016 1 3,335 1/97 12/06 - 15.00 50,025 6.00
VACANT 4
# 31-SUITE 3024 1 2,417 11/86 11/01 - 12.00 29,004 3.00
RADIO SHACK 4 11/96 14.50 35,047
# 32-SUITE 3026 1 2,247 11/96 10/06 - 17.00 38,199 6.00
BATH & BODY 4
# 33-SUITE 3028 1 2,420 8/86 8/06 - 18.00 43,560 6.00
FOOTLOCKER 4 9/96 37.19 90,000
# 36-SUITE 3033 1 2,779 10/91 10/01 - 13.00 36,127 6.00
EYE CARE CENTER 4 10/96 16.60 46,131
# 40-SUITE 4016 1 2,868 8/86 8/96 - 12.00 34,416 6.00
SHOE SHOW 4
# 47-SUITE 5014 1 3,238 3/87 3/97 11.00 35,618 6.00
COUNTY SEAT 4
# 61-SUITE 6014 1 2,052 8/86 8/96 - 22.00 45,144 6.00
DISC JOCKEY 4
# 64-SUITE 6022 1 2,540 1/98 12/07 - 15.30 38,862 6.00
VACANT 4
<CAPTION>
CEILING BREAKPOINT
TENANT (OOO'S) (000'S) RECOVERIES
- ------------------- -------- -------------- -----------------
<S> <C> <C> <C>
# 2-SUITE 1004 UNLIMITED NATURAL CAM1-RECOVERY CAM1
HOFHEIMER'S EXPRE TAX1-RECOVERY TAX1
# 6-SUITE 1016 UNLIMITED NATURAL CAM1-RECOVERY CAM1
MERRY-GO-ROUND TAX1-RECOVERY TAX1
# 7-SUITE 1018 UNLIMITED NATURAL CAM1-RECOVERY CAM1
WALDENBOOKS TAX1-RECOVERY TAX1
# 8-SUITE 1020 UNLIMITED NATURAL CAM1-RECOVERY CAM1
AMY'S HALLMARK TAX1-RECOVERY TAX1
# 9-SUITE 1022 UNLIMITED NATURAL CAM1-RECOVERY CAM1
THE FINISH LINE TAX1-RECOVERY TAX1
# 14-SUITE 1106 UNLIMITED NATURAL CAM1-RECOVERY CAM1
BRIAR PATCH TAX1-RECOVERY TAX1
# 16-SUITE 1112 UNLIMITED NATURAL CAM1-RECOVERY CAM1
VACANT TAX1-RECOVERY TAX1
# 17-SUITE 2008 UNLIMITED NATURAL CAM1-RECOVERY CAM1
KAY-BEE TOY TAX1-RECOVERY TAX1
# 18-SUITE 2010 UNLIMITED NATURAL NONE
PAYLESS SHOESOURCE
# 19-SUITE 2012-14 UNLIMITED NATURAL CAM1-RECOVERY CAM1
HUNGATE CRAFTS TAX1-RECOVERY TAX1
# 20-SUITE 2016 UNLIMITED NATURAL CAM1-RECOVERY CAM1
FINE'S MEN WEAR TAX1-RECOVERY TAX1
# 27-SUITE 3014 UNLIMITED NATURAL CAM1-RECOVERY CAM1
KINNEY SHOES TAX1-RECOVERY TAX1
# 28-SUITE 3016 UNLIMITED NATURAL CAM1-RECOVERY CAM1
VACANT TAX1-RECOVERY TAX1
# 31-SUITE 3024 UNLIMITED 725 CAM1-RECOVERY CAM1
RADIO SHACK TAX1-RECOVERY TAX1
# 32-SUITE 3026 UNLIMITED NATURAL CAM1-RECOVERY CAM1
BATH & BODY TAX1-RECOVERY TAX1
# 33-SUITE 3028 UNLIMITED NATURAL CAM1-RECOVVERY CAM1
FOOTLOCKER TAX1-RECOVERY TAX1
# 36-SUITE 3033 UNLIMITED 723 CAM1-RECOVERY CAM1
EYE CARE CENTER 10/96 923 TAX1-RECOVERY TAX1
# 40-SUITE 4016 UNLIMITED NATURAL CAM1-RECOVERY CAM1
SHOE SHOW TAX1-RECOVERY TAX1
# 47-SUITE 5014 UNLIMITED NATURAL CAM1-RECOVERY CAM1
COUNTY SEAT TAXI-RECOVERY TAX1
# 61-SUITE 6014 UNLIMITED NATURAL CAM1-RECOVERY CAM1
DISC JOCKEY TAX1-RECOVERY TAX1
# 64-SUITE 6022 UNLIMITED NATURAL CAM1-RECOVERY CAM1
VACANT TAX1-RECOVERY TAX1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT %
- ------------------- --------- ------ ----- ----- ------ ------------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
61,682
5 TENNANTS 3501-5000
# 10-SUITE 1026 1 4,833 2/96 3/06 - 14.00 67,662 5.00
RACK ROOM SHOES 5 4/99 16.00 77,328
4/03 18.00 86,994
# 21-SUITE 2018-20 1 4,229 11/96 10/06 - 18.00 76,122 5.00
HALLMARK 5
# 24-SUITE 3004 1 3,539 7/95 7/07 - 16.00 56,624 5.00
VICTORIA'S SECRET 5 8/98 17.00 60,163
8/02 18.00 63,702
# 26-SUITE 3012 1 4,887 8/86 8/98 - 15.35 75,015 5.00
THE LIMITED 5
# 29-SUITE 3018 1 4,361 1/98 12/07 - 15.30 66,723 6.00
VACANT 5
# 30-SUITE 3022 1 4,970 8/86 8/98 - 12.00 59,640 5.00
LERNER SHOP 5
# 48-SUITE 5018 1 4,809 8/86 8/96 - 12.00 57,708 4.00
DURHAM SPORTING GD 5
# 54-SUITE 5036 1 3,883 8/95 7/05 - 16.00 62,128 5.00
AMERICAN EAGLE 5
------
35,511
6 TENANTS 5001-10000
# 15-SUITE 1108 1 5,204 2/88 2/00 - 16.00 83,264 5.00
LIMITED EXPRESS 6
# 25-SUITE 3008 1 5,189 8/86 8/98 - 11.00 57,079 5.00
LANE BRYANT 6
# 37-SUITE 3038 1 8,466 5/94 5/99 - 5.02 42,499 1.00
REX RADIO & TELEV. 6
# 59-SUITE 6002 1 6,137 8/86 1/97 - 10.00 61,370 5.00
CATO 6
# 60-SUITE 6010 1 6,052 12/93 12/03 - 12.00 72,624 5.00
CHAMPS SPORTS 6 11/98 14.00 84,728
# 67-SUITE 7002 1 5,452 10/96 9/06 - 18.00 98,136 6.00
RECORD TOWN 6
------
36,500
7 TENANTS > 10000
# 66-SUITE 7001 1 17,474 10/87 10/07 - 14.31 250,053 20.00
CARMIKE'S CINEMAS 7 11/97 15.74 275,041
11/02 17.17 300,029
------
17,474
<CAPTION>
CEILING BREAKPOINT
TENANT (OOO'S) (000'S) RECOVERIES
- ------------------- -------- -------------- -----------------
<S> <C> <C> <C>
5 TENNANTS 3501-5000
# 10-SUITE 1026 UNLIMITED 1,692 CAM1-RECOVERY CAM1
RACK ROOM SHOES TAX1-RECOVERY TAX1
# 21-SUITE 2018-20 UNLIMITED NATURAL CAM1-RECOVERY CAM1
HALLMARK TAX1-RECOVERY TAX1
# 24-SUITE 3004 UNLIMITED NATURAL CAM1-RECOVERY CAM1
VICTORIA'S SECRET TAX1-RECOVERY TAX1
# 26-SUITE 3012 UNLIMITED NATURAL CAM1-RECOVERY CAM1
THE LIMITED TAX1-RECOVERY TAX1
# 29-SUITE 3018 UNLIMITED NATURAL CAM1-RECOVERY CAM1
VACANT TAX1-RECOVERY TAX1
# 30-SUITE 3022 UNLIMITED NATURAL CAM1-RECOVERY CAM1
LERNER SHOP TAX1-RECOVERY TAX1
# 48-SUITE 5018 UNLIMITED NATURAL CAM1-RECOVERY CAM1
DURHAM SPORTING GD TAX1-RECOVERY TAX1
# 54-SUITE 5036 UNLIMITED NATURAL CAM1-RECOVERY CAM1
AMERICAN EAGLE TAX1-RECOVERY TAX1
6 TENANTS 5001-10000
# 15-SUITE 1108 UNLIMITED NATURAL NONE
LIMITED EXPRESS
# 25-SUITE 3008 UNLIMITED NATURAL CAM1-RECOVERY CAM1
LANE BRYANT TAX1-RECOVERY TAX1
# 37-SUITE 3038 UNLIMITED NATURAL CAM1-RECOVERY CAM1
REX RADIO & TELEV. TAX1-RECOVERY TAX1
# 59-SUITE 6002 UNLIMITED 1,364 CAM1-RECOVERY CAM1
CATO TAX1-RECOVERY TAX1
# 60-SUITE 6010 UNLIMITED NATURAL CAM1-RECOVERY CAM1
CHAMPS SPORTS TAX1-RECOVERY TAX1
# 67-SUITE 7002 UNLIMITED NATURAL CAM1-RECOVERY CAM1
RECORD TOWN TAX1-RECOVERY TAX1
7 TENANTS > 10000
# 66-SUITE 7001 UNLIMITED NATURAL CAM1-RECOVERY CAM1
CARMIKE'S CINEMAS TAX1-RECOVERY TAX1
</TABLE>
8 FOOD COURT TENANTS
<PAGE>
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM OVERAGE
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT %
- ------------------- --------- ------ ----- ----- ------ ------------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
# 65-SUITE 6024 2 773 10/86 10/98 - 36.22 27,998 6.00
HARDEE'S 8
# 74-SUITE 8004 2 669 10/95 9/05 - 31.39 21,000 7.00
DAIRY QUEEN 8
# 75-SUITE 8006 2 595 8/86 9/07 - 42.02 25,002 10.00
RUFFINO'S 8 10/97 52.10 31,000
# 76-SUITE 8008 2 595 6/95 5/05 - 33.60 19,992 10.00
MR. WOK 8
# 77-SUITE 8010 2 461 1/97 12/08 - 30.00 13,830 6.00
VACANT 8
# 78-SUITE 8012 2 846 8/91 1/97 - 15.00 12,690 8.00
OMAR'S GYROS 8
-------
3,939
10 ANCHOR TENANTS
# 79-SUITE 9002 4 81,729 8/86 8/16 - 4.01 327,733 1.50
JC PENNEY 10
# 80-SUITE 9101 4 1 8/86 7/26 - 0.00 0 1.00
BELKS 10
# 81-SUITE 9103 4 69,960 8/95 7/16 - 4.00 279,840 2.50
BRODY'S 10
# 82-SUITE 9104 4 89,564 10/87 10/15 - 3.00 268,692 2.50
SEARS, ROEBUCK 10
-------
241,254
-------
434,597
=======
<CAPTION>
CEILING BREAKPOINT
TENANT (OOO'S) (000'S) RECOVERIES
- ------------------- -------- -------------- -----------------
<S> <C> <C> <C>
# 65-SUITE 6024 UNLIMITED NATURAL FCT-FOOD COURT
HARDEE'S TAX1-RECOVERY TAX1
# 74-SUITE 8004 UNLIMITED NATURAL FCT-FOOD COURT
DAIRY QUEEN TAX1-RECOVERY TAX1
# 75-SUITE 8006 UNLIMITED 313 FCT-FOOD COURT
RUFFINO'S 9/97 387 TAX1-RECOVERY TAX1
# 76-SUITE 8008 UNLIMITED NATURAL FCT-FOOD COURT
MR. WOK TAX1-RECOVERY TAX1
# 77-SUITE 8010 UNLIMITED NATURAL FCT-FOOD COURT
VACANT TAX1-RECOVERY TAX1
# 78-SUITE 8012 UNLIMITED 212 FCT-FOOD COURT
OMAR'S GYROS TAX1-RECOVERY TAX1
10 ANCHOR TENANTS
# 79-SUITE 9002 UNLIMITED 16,396 CAM
JC PENNEY REAL ESTATE TAXES
# 80-SUITE 9101 UNLIMITED NATURAL BELK'S CAM
BELKS
# 81-SUITE 9103 UNLIMITED NATURAL REAL ESTATE TAXES
BRODY'S CAM
# 82-SUITE 9104 UNLIMITED 11,600 REAL ESTATE TAXES
SEARS, ROEBUCK CAM
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
PRO-Ject+ Assumptions Report
- --------------------------------------------------------------------------------
<PAGE>
GOLDEN EAST CROSSING, ROCKY MOUNT, NC
PROJECT ASSUMPTIONS REPORT
INCLUDING ALL TENANTS
5/20/96 @ 10:19
BUILDING PROLOGUE
- -----------------
LEASEHOLD ANALYSIS OF GOLDEN EAST CROSSING, ROCKY MOUNT,NC BEGINNING 1/1995
FOR 15 YEARS ON A CALENDAR YEAR BASIS
AREA MEASURES
- -------------
SGLA
DESCRIBED AS GROSS LEASABLE AREA; MALL SHOP TENANTS
1995 VALUE - 218,704
THEREAFTER - CONSTANT
AGLA
DESCRIBED AS GROSS LEASABLE AREA; ANCHOR TENANTS
1995 VALUE - 572,914
THEREAFTER - CONSTANT
OGLA
DESCRIBED AS GROSS LEASABLE AREA; TOTAL OWNED GLA
1995 VALUE - 459,957
THEREAFTER - CONSTANT
3001
DESCRIBED AS LEASABLE NET OF MAJORS AT END OF YEAR
1995 VALUE - 218,704
THEREAFTER - CONSTANT
3200
DESCRIBED AS LEASED NET OF MAJORS AT END OF YEAR
1995 VALUE- 144,336
1996 VALUE- 159,690
1997 VALUE- 178,016
1998 VALUE- 184,861
1999 VALUE- 187,362
2000 VALUE- 187,730
2001 VALUE- 187,922
2002 VALUE- 189,203
2003 VALUE- 189,404
2004 VALUE- 188,395
2005 VALUE- 187,742
2006 VALUE- 182,155
2007 VALUE- 179,135
2008 VALUE- 183,559
2009 VALUE- 187,602
THEREAFTER-CONSTANT
3280
DESCRIBED AS LEASED NET OF MAJORS, BUT NOT LESS THAN 80% LEASED
1995 VALUE- 174,963
1996 VALUE- 174,963
1997 VALUE- 178,016
1998 VALUE- 184,861
1999 VALUE- 187,362
2000 VALUE- 187,730
2001 VALUE- 187,992
2002 VALUE- 189,203
2003 VALUE- 189,404
2004 VALUE- 188,395
2005 VALUE- 187,742
2006 VALUE- 182,155
2007 VALUE- 179,135
2008 VALUE- 183,559
<PAGE>
PAGE 2
2009 VALUE- 187,602
THEREAFTER-CONSTANT
3285
DESCRIBED AS LEASED NET OF MAJORS, BUT NOT LESS THAN 85% LEASED
1995- 185,898
1996- 185,898
1997- 185,898
1998- 185,898
1999- 187,362
2000- 187,730
2001- 187,922
2002- 189,203
2003- 189,404
2004- 188,395
2005- 187,742
2006- 185,898
2007- 185,898
2008- 185,898
2009- 187,602
THEREAFTER -CONSTANT
3290
DESCRIBED AS LEASED NET OF MAJORS, BUT NOT LESS THAN 90% LEASED
1995 VALUE- 196,834
THEREAFTER CONSTANT
3295
DESCRIBED AS LEASED NET OF MAJORS, BUT NOT LESS THAN 95% LEASED
1995 VALUE- 207,769
THEREAFTER-CONSTANT
FOOD
DESCRIBED AS FOOD COURT LEASABLE AREA
1995 VALUE- 3,939
THEREAFTER-CONSTANT
GROWTH RATES
- ------------
SALG
DESCRIBED AS GROWTH RATE FACTOR; SALES GROWTH
1995 VALUE- 0.00
1996 VALUE- 2.00
1997 VALUE- 3.00
THEREAFTER-CONSTANT
RENG
DESCRIBED AS GROWTH RATE FACTOR; MARKET RENT GROWTH
1995 VALUE- 0.00
1996 VALUE- 0.00
1997 VALUE- 2.00
1998 VALUE- 3.00
THEREAFTER-CONSTANT
EXPG
DESCRIBED AS GROWTH RATE FACTOR; GENERAL EXPENSE GROWTH
1995 VALUE- 3.50
1996 VALUE- 3.50
THEREAFTER-CONSTANT
TAXG
DESCRIBED AS GROWTH RATE FACOTR; TAX EXPENSE GROWTH
1995 VALUE- 3.50
1996-VALUE- 3.50
THEREAFTER-CONSTANT
<PAGE>
PAGE 3
UTLG
DESCRIVED AS GROWTH RATE FACTOR; MISCELLANEOUS INCOME GROWTH
1995-VALUE- 2.00
1996 VALUE- 2.00
THEREAFTER-CONSTANT
MISG
1995 VALUE- 2.00
THEREAFTER-CONSTANT
MARKET RATES
- ------------
MKT1
DESCRIBED AS MARKET RENTAL RATE; TENANTS < 750 SQ/FT
1995 VALUE - 30.00
1996 VALUE - 30.00
THEREAFTER - GROWING AT GROWTH RATE RENG
MKT2
DESCRIBED AS MARKET RENTAL RATE; TENANTS 751-1200 SQ/FT
1995 VALUE - 25.00
1996 VALUE - 25.00
THEREAFTER - GROWING AT GROWTH RATE RENG
MKT3
DESCRIBED AS MARKET RENTAL RATE; TENANTS 1201-2000 SQ/FT
1995 VALUE - 20.00
1996 - 20.00
THEREAFTER - GROWING AT GROWTH RATE RENG
MKT4
DESCRIBED AS MARKET RENTAL RATE; TENANTS 2001-3500 SQ FT
1995 VALUE - 15.00
1996 VALUE - 15.00
THEREAFTER - GROWING AT GROWTH RATE RENG
MKT5
DESCRIBED AS MARKET RENTAL RATE; TENANTS 3501-5000 SQ/FT
1995 VALUE - 15.00
1996 VALUE - 15.00
THEREAFTER - GROWING AT GROWTH RATE RENG
MKTG 6
DESCRIBED AS MARKET RENTAL RATE; TENANTS 5001-10000 SQ FT
1995 VALUE - 10.00
1996 VALUE - 10.00
THEREAFTER - GROWING AT GROWTH RATE RENG
MKTG7
DESCRIBED AS MARKET RENTAL RATE; TENANTS > 10000 SQ/FT
1995 VALUE - 6.00
1996 - 6.00
THREAFTER - GROWING AT GROWTH RATE RENG
MKTG8
DESCRIBED AS MARKET RENTAL RATE; FOOD COURT TENANTS
1995 VALUE - 30.00
1996 VALUE - 30.00
THEREAFTER - GROWING AT GROWTH RATE RENG
MKT9
DESCRIBED AS MARKET RENTAL RATE; KIOSK TENANTS
1995 VALUE - 100
1996 VALUE - 100
THEREAFTER - GROWING AT GROWTH RATE RENG
<PAGE>
PAGE 4
MKT0
DESCRIBED AS ANCHOR MARKET RENT
1995 VALUE - 4.00
1996 VALUE - 4.00
THEREAFTER - GROWING AT GROWTH RATE RENG
SALS
1995 VALUE - 267
THEREAFTER GROWING AT GROWTH RATE SALG
ALTN
DESCRIBED AS ALTERATION RATE; NEW TENANTS
1995 VALUE - 10.00
1996 VALUE - 10.00
THEREAFTER - GROWING AT GROWTH RATE EXPG
ALTR
DESCRIBED AS ALTERATION RATE; RENEWAL TENANTS
1995 VALUE - 2.00
1996 VALUE - 2.00
THEREAFTER - GROWING AT GROWTH RATE EXPG
ALT B
DESCRIBED AS ALTERATION RATE; BLENDED RATE BASED ON RENEWAL PROBABILITY
+30.0% OF ALTN + 70.0% OF ALTR
COMN
DESCRIBED AS COMISSION RATE; NEW TENANTS
1995 VALUE - 3.50
1996 VALUE - 3.50
1997 VALUE - 3.50
1998 VALUE - 3.50
1999 VALUE - 3.50
2000 VALUE - 3.50
2001 VALUE - 4.00
2002 VALUE - 4.00
2003 VALUE - 4.00
2004 VALUE - 4.00
2005 VALUE - 4.00
2006 VALUE - 4.50
THEREAFTER - CONSTANT
COMPR
DESCRIBED AS COMISSION RATE; RENEWAL TENANTS
1995 VALUE - 1.50
1996 VALUE - 1.50
1997 VALUE - 1.50
1998 VALUE - 1.50
1999 VALUE - 1.50
2000 VALUE - 1.50
2001 VALUE - 1.75
2002 VALUE - 1.75
2003 VALUE - 1.75
2004 VALUE - 1.75
2005 VALUE - 1.75
2006 VALUE - 2.00
THEREAFTER - CONSTANT
COMB
DESCRIBED AS COMMISSION RATE; BLENDED RATE BASED ON RENTAL PROBABILITY
+30.0% OF COMM +70.0% OF COMR
RESX
DESCRIBED AS EXPENSE RATE; RESERVES FOR REPLACEMENT
1995 VALUE - 0.20
1996 VALUE - 0.20
THEREAFTER -GROWING AT GROWTH RATE EXPG
<PAGE>
PAGE 5
UTLR
DESCRIBED AS EXPENSE RATE; MALL SHOP UTILITIES
1995 VALUE - 0.00
1996 VALUE - 0.00
THEREAFTER - GROWING AT GROWTH RATE UTLG
W/SR
DESCRIBED AS EXPENSE RATE; MALL SHOP WATER/SEWER
1995 VALUE - 0.00
1996 VALUE - 0.00
THEREAFTER - GROWING AT GROWTH RATE UTLG
SRCW
DESCRIBED AS SEARS STEPPED, FIXED CAM CHARGE INCLUDING NON-STEPPED $4000/YEAR
INTERIOR MALL CHARGE
1995 VALUE - 0.35
1996 VALUE - 0.35
1997 VALUE - 0.35
1998 VALUE - 0.40
1999 VALUE - 0.40
2000 VALUE - 0.40
2001 VALUE - 0.40
2002 VALUE - 0.40
2003 VALUE - 0.44
2004 VALUE - 0.44
2005 VALUE - 0.44
2006 VALUE - 0.44
2007 VALUE - 0.44
2008 VALUE - 0.50
2009 VALUE - 0.50
THEREAFTER - CONSTANT
SRIN
DESCRIBED AS SEARS PRO-RATA LIABILITY CHARGE
1995 VALUE - 0.16
1996 VALUE - 0.16
THEREAFTER - GROWING AT GROWTH RATE EXPG
SRPU
DESCRIBED AS SEARS TOTAL CAM CHARGE
+100.0% OF SRCM+100.0% OF SRIN
BRPU
DESCRIBED AS BRODY'S CAM PASSTHRU
1995 VALUE - 0.35
1996 VALUE - 0.50
1997 VALUE - 0.50
1998 VALUE - 0.50
1999 VALUE - 0.50
2000 VALUE - 0.50
2001 VALUE - 0.70
2002 VALUE - 0.70
2003 VALUE - 0.70
2004 VALUE - 0.70
2005 VALUE - 0.70
2006 VALUE - 0.80
2007 VALUE - 0.80
2008 VALUE - 0.80
2009 VALUE - 0.80
THEREAFTER - CONSTANT
JCPU
1995 VALUE - 0.30
1996 VALUE - 0.40
1997 VALUE - 0.40
1998 VALUE - 0.40
1999 VALUE - 0.40
2000 VALUE - 0.40
<PAGE>
PAGE 6
2001 VALUE - 0.50
2002 VALUE - 0.50
2003 VALUE - 0.50
2004 VALUE - 0.50
2005 VALUE - 0.50
2006 VALUE - 0.60
2007 VALUE - 0.60
2008 VALUE - 0.60
2009 VALUE - 0.60
THEREAFTER - CONSTANT
MISCELLANEOUS INCOMES
- ---------------------
WATER/SEWER
1995 VALUE - 0.00
1996 VALUE - 35,000
THEREAFTER - GROWING AT GROWTH RATE MISG
MISCELLANEOUS
1995 VALUE - 0.00
1996 VALUE - 70,000
THEREAFTER - GROWING AT GROWTH RATE MISG
EXPENSES
- --------
COMMON AREA MAINT., REFERRED TO AS CAMX
DESCRIBED AS COMMON AREA MAINTENANCE; GENERAL EXPENSE
CHARGED AGAINST NET OPERATING INCOME
1995 VALUE - 0.00
1996 VALUE - 1,115,718
THEREAFTER - GROWING AT GROWTH RATE EXPG
CMGT-MGMT.FEE , REFERRED TO AS CMGT
DESCRIBED AS COMON AREA MAINTENANCE EXPENSE; MANAGEMENT FEE PASS-THROUGH
AN INFORMATIONAL EXPENSE
ZERO
CANC-ANCHOR CONT. , REFERRED TO AS CANC
DESCRIBED AS COMMON AREA MAINTENANCE; ANCHOR CONTRIBUTION POOL
AN INFORMATIONAL EXPENSE
1995 VALUE - 107,859
1996 VALUE - 140,809
1997 VALUE - 141,299
1998 VALUE - 146,284
1999 VALUE - 146,809
2000 VALUE - 147,352
2001 VALUE - 170,080
2002 VALUE - 170,661
2003 VALUE - 175,742
2004 VALUE - 176,365
2005 VALUE - 177,011
2006 VALUE - 192,847
2007 VALUE - 193,538
2008 VALUE - 198,732
2009 VALUE - 199,472
THEREAFTER - CONSTANT
CAM1-RECOVERY CAM1, REFERRED TO AS CAM1
DESCRIBED AS COMMON AREA MAINTENANCE; FOR RECOVERY PASS-THRU TYPE 1
AN INFORMATIONAL EXPENSE
+115.0% OF CAMX-100.0% OF CANC
+115.0% OF AMOR
CAM2-RECOVERY CAM2, REFERRED TO AS CAM2
<PAGE>
PAGE 7
DESCRIBED AS COMMON AREA MAINTENANCE; FOR RECOVERY PASS-THRU TYPE 2
AN INFORMATIONAL EXPENSE
ZERO
CAM3-RECOVERY CAM3, REFERRED TO AS CAM3
DESCRIBED AS COMMON AREA MAINTENANCE; FOR RECOVERY PASS-THRU TYPE 3
AN INFORMATIONAL EXPENSE
ZERO
CAM4-RECOVERY CAM4, REFERRED TO AS CAM4
DESCRIBED AS COMMON AREA MAINTENANCE; FOR RECOVERY PASS-THRU TYPE 4
AN INFORMATIONAL EXPENSE
ZERO
REAL ESTATE TAXES , REFERRED TO AS TAXX
DESCRIBED AS REAL ESTATE TAXES; GENERAL EXPENSE
CHARGED AGAINST NET OPERATING INCOME
1995 VALUE - 0.00
1996 VALUE - 291,116
THEREAFTER - GROWING AT GROWTH RATE TAXG
TANC-ANCHOR CONT. , REFERRED TO AS TANC
DESCRIBED AS REAL ESTATE TAXES; ANCHOR TAX CONTRIBUTIONS
AN INFORMATIONAL EXPENSE
+100.0% OF JCTX+100.0% OF BRTX
+100.0% OF SRTX
TAXI-RECOVERY TAX1, REFERRED TO AS TAX1
DESCRIBED AS REAL ESTATE TAXES; FOR RECOVERY PASS-THRU TYPE 1
AN INFORMATIONAL EXPENSE
+100.0% OF TAXX-100.0% OF TANC
TAX2-RECOVERY TAX2, REFERRED TO AS TAX2
DESCRIBED AS REAL ESTATE TAXES; FOR RECOVERY PASS-THRU TYPE 2
AN INFORMATIONAL EXPENSE
ZERO
UTILITY EXPENSE , REFERRED TO AS UT~LX
DESCRIBED AS UTILITIES; GENERAL EXPENSE
AN INFORMATIONAL EXPENSE
1995 VALUE - 0.00
1996 VALUE - 0.00
THEREAFTER - GROWING AT GROWTH RATE EXPG
UTL-UTILITIES , REFERRED TO AS UTLR
DESCRIBED AS UTILITIES; MALL SHOP PASS-THROUGH
AN INFORMATIONAL EXPENSE
+130.0% OF UTLX
WATER & SEWER EXP., REFERRED TO AS W/SX
DESCRIBED AS WATER & SEWER; GENERAL EXPENSE
AN INFORMATIONAL EXPENSE
1995 VALUE - 0.00
1996 VALUE - 0.00
1997 VALUE - 0.00
THEREAFTER - CONSTANT
W/S-WATER & SEWER , REFERRED TO AS W/SR
DESCRIBED AS WATER & SEWER; MALL SHOP PASS-THROUGH
AN INFORMATIONAL EXPENSE
+100.0% OF W/SX
FOOD COURT EXPENSE, REFERRED TO AS FCTX
DESCRIBED AS FOOD COURT; GENERAL EXPENSE
CHARGED AGAINST NET OPERATING INCOME
1995 VALUE - 0.00
1996 VALUE - 26,430
THEREAFTER - GROWING AT GROWTH RATE EXPG
<PAGE>
PAGE 8
FCT-FOOD COURT , REFERRED TO AS FCTR
DESCRIBED AS FOOD COURT; FOOD COURT PASS-THROUGH
AN INFORMATIONAL EXPENSE
+115.0% OF FCTX
AMORTIZATION , REFERRED TO AS AMOR
AN INFORMATIONAL EXPENSE
1995 VALUE 0.00
1996 VALUE 68,624
1997 VALUE 68,624
1998 VALUE 68,624
1999 VALUE 15,000
2000 VALUE 0.00
THEREAFTER CONSTANT
GENERAL & ADMIN. , REFERRED TO AS G&AX
DESCRIBED AS NON-RECOVERABLE EXPENSE; GENERAL & ADMINISTRATIVE
CHARGED AGAINST NET OPERATING INCOME
1995 VALUE - 0.00
1996 VALUE - 89,334
THEREAFTER - GROWING AT GROWTH RATE EXPG
MARKETING EXPENSE , REFERRED TO AS MKTX
DESCRIBED AS NON-RECOVERABLE EXPENSE; MARKETING
CHARGED AGAINST NET OPERATING INCOME
1995 VALUE - 0.00
1996 VALUE - 38,966
THEREAFTER - GROWING AT GROWTH RATE EXPG
MISCELLANEOUS , REFERRED TO AS MISX
DESCRIBED AS NON-RECOVERABLE EXPENSE; MISCELLANEOUS
CHARGED AGAINST NET OPERATING INCOME
1995 VALUE - 0.00
1996 VALUE - 30,000
THEREAFTER - GROWING AT GROWTH RATE EXPG
JC PENNEY , REFERRED TO AS JCTX
AN INFORMATIONAL EXPENSE
1995 VALUE - 0.00
1996 VALUE - 18,690
1997 VALUE - 20,501
1998 VALUE - 22,374
1999 VALUE - 24,314
2000 VALUE - 26,321
2001 VALUE - 28,399
2002 VALUE - 30,549
2003 VALUE - 32,775
2004 VALUE - 35,078
2005 VALUE - 37,462
2006 VALUE - 39,930
2007 VALUE - 42,483
2008 VALUE - 45,127
2009 VALUE - 47,862
THEREAFTER - CONSTANT
BRODYS TAX , REFERRED TO AS BRTX
AN INFORMATIONAL EXPENSE
1995 VALUE - 0.00
1996 VALUE - 44,279
1997 VALUE - 45,829
1998 VALUE - 47,433
1999 VALUE - 49,093
2000 VALUE - 50,811
2001 VALUE - 52,590
2002 VALUE - 54,430
2003 VALUE - 56,335
2004 VALUE - 58,307
2005 VALUE - 60,348
<PAGE>
PAGE 9
2006 VALUE - 62,460
2007 VALUE - 64,646
2008 VALUE - 66,909
2009 VALUE - 69,251
THEREAFTER - CONSTANT
SEARS TAX ,REFERRED TO AS SRTX
AN INFORMATIONAL EXPENSE
1995 VALUE - 0.00
1996 VALUE - 20,270
1997 VALUE - 22,254
1998 VALUE - 24,307
1999 VALUE - 26,433
2000 VALUE - 28,632
2001 VALUE - 30,909
2002 VALUE - 33,266
2003 VALUE - 35,704
2004 VALUE - 38,229
2005 VALUE - 40,841
2006 VALUE - 43,545
2007 VALUE - 46,344
2008 VALUE - 49,241
2009 VALUE - 52,239
THEREAFTER - CONSTANT
VACANCY ALLOWANCE
- -----------------
PERCENTAGE OF POTENTIAL GROSS INCOME
FOR ALL TENANTS SUBJECT TO VACANCY
1995 VALUE - 2.50
1996 VALUE - 2.50
THEREAFTER - CONSTANT
MANAGEMENT FEE
- --------------
PERCENTAGE OF MINIMUM AND PERCENTAGE RENTS ONLY
FOR ALL TENANTS
NOT PASSED THROUGH TO TENANTS
1995 VALUE - 3.00
1996 VALUE - 3.00
THEREAFTER - CONSTANT
COMMISSION CALCULATIONS
- -----------------------
STANDARD METHOD #1 - 5.000% OF TOTAL RENT
STANDARD METHOD #2 - 2.500% OF TOTAL RENT
STANDARD METHOD #3 - 3.250% OF TOTAL RENT
STANDARD METHOD #4 - 0.000% OF TOTAL RENT
STANDARD METHOD #5 - 0.000% OF TOTAL RENT
COMMISSION PAYOUTS
- ------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - CASHED OUT
<PAGE>
PAGE 10
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
ALTERATION CALCULATION
- -----------------------
NONE
ALTERATION PAYOUTS
- ------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - CASHED OUT
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
COMMON AREA MAINTENANCE POOL
- ----------------------------
CONTRIBUTIONS CONTAINED IN EXPENSE CANC
BASED ON RECOVERIES ASSIGNED TO COST CENTER 2- CAM-ANCHOR TENANTS FOR THOSE
TENANTS WITH THE FOLLOWING PRIMARY CLASSIFICATION CODE(S):
4 - ANCHOR TENANTS
CAPITAL EXPENDITURES
- --------------------
REPL'MENT RESERVE
MARKET RATE RESX MULTIPLIED BY AREA MEASURE OGLA
CAPITAL REPAIRS
1995 VALUE - 100,000
THEREAFTER - CONSTANT
PRIMARY CLASSIFICATION CODES
- ----------------------------
1 - MALL SHOP TENANTS
2 - FOOD COURT TENANTS
3 - KIOSK TENANTS
4 - ANCHOR TENANTS
SECONDARY CLASSIFICATION CODES
- ------------------------------
1 - TENANTS < 750
2 - TENANTS 751-1200
3 - TENANTS 1201-2000
4 - TENANTS 2001-3500
5 - TENANTS 3501-5000
6 - TENANTS 5001-10000
7 - TENANTS > 10000
8 - FOOD COURT TENANTS
9 - KIOSK TENANTS
<PAGE>
PAGE 12
CAM1-RECOVERY CAM1, REFERRED TO AS CAM4
DESCRIBED AS CAM RECOVERY; TYPE 4
ASSIGNED TO COST CENTER 1 - CAM-MALL SHOPS
PRO RATA SHARE RECOVERY OF EXPENSE CAM1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE 3285
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
CAM1-RECOVERY CAM1, REFERRED TO AS CAM5
DESCRIBED AS CAM RECOVERY; TYPE 5
ASSIGNED TO COST CENTER 1 - CAM-MALL SHOPS
PRO RATA SHARE RECOVERY OF EXPENSE CAM1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE 3295
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
CAM1-RECOVERY CAM1, REFERRED TO AS CAM6
DESCRIBED AS CAM RECOVERY: TYPE 6
ASSIGNED TO COST CENTER 1 - CAM-MALL SHOPS
PRO RATA SHARE RECOVERY OF EXPENSE CAM1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE 3001
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
TAX1-RECOVERY TAX1, REFERRED TO AS TAX1
DESCRIBED AS TAX RECOVERY; TYPE I
ASSIGNED TO COST CENTER 3 - TAX-MALL SHOPS
PRO RATA SHARE RECOVERY OF EXPENSE TAX1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE 3285
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE Of ZERO FOR A COMPLETE PASSTHROUGH
TAX1-RECOVERY TAX1, REFERRED TO AS TAX2
DESCRIBED AS TAX RECOVERY; TYPE 2
ASSIGNED TO COST CENTER 3 - TAX-MALL SHOPS
PRO RATA SHARE RECOVERY OF EXPENSE TAX1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE 3200
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
TAX1-RECOVERY TAX1, REFERRED TO AS TAX3
ASSIGNED TO COST CENTER 3 - TAX-MALL
SHOPS PRO RATA SHARE RECOVERY OF EXPENSE TAX1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE 3280
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
TAX1-RECOVERY TAX1, REFERRED TO AS TAX4
ASSIGNED TO COST CENTER 3 - TAX-MALL
SHOPS PRO RATA SHARE RECOVERY OF EXPENSE TAX1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE 3285
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
TAX1-RECOVERY TAX1, REFERRED TO AS TAX5
DESCRIBED AS UTILITY RECOVERY; MALL SHOPS
ASSIGNED TO COST CENTER 3 - TAX-MALL SHOPS
PRO RATA SHARE RECOVERY OF EXPENSE TAX1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE 3295
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
<PAGE>
PAGE 13
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
TAX1-RECOVERY TAX1, REFERRED TO AS TAX6
DESCRIBED AS WATER/SEWER RECOVERY; MALL SHOPS
ASSIGNED TO COST CENTER 3 - TAX-MALL SHOPS
PRO RATA SHARE RECOVERY OF EXPENSE TAX1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE 3001
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
FCT-FOOD COURT , REFERRED TO AS FCAM
DESCRIBED AS HVAC RECOVERY; MALL TENANT CHARGE
ASSIGNED TO COST CENTER 8 - FCT-FOOD COURT
PRO RATA SHARE RECOVERY OF EXPENSE FCTR
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE FOOD
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
FCTR-FOOD COURT , REFERRED TO AS FCTR
DESCRIBED AS FOOD COURT RECOVERY;
ASSIGNED TO COST CENTER 8 - FCT-FOOD COURT
3.00% OF SALES
GLB1
GLOBAL GROUPING
GLOBAL RECOVERY CAM1
GLOBAL RECOVERY TAX1
GLB2
GLOBAL GROUPING
GLOBAL RECOVERY CAM2
GLOBAL RECOVERY TAX2
GLOBAL RECOVERY TAX5
GLOBAL RECOVERY TAX6
GLFD
GLOBAL GROUPING
GLOBAL RECOVERY FCAM
GLOBAL RECOVERY TAX1
TENANT PROLOGUE
- ---------------
MINIMUM RENTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
SALES VOLUMES AND BREAKPOINTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
RENEWAL RENTS ARE COMPOUNDED ANNUALLY
RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET
REFERENCE TENANTS
- -----------------
THERE ARE A TOTAL OF 9 REFERENCE TENANT(S):
- -------------------------------------------------------------------------------
# 1 - MKT1
BASE LEASE DATES: 1/1996 TO 12/2005
TYPE OF TENANT: RETAIL
<PAGE>
PAGE 14
SQUARE FOOTAGE: 1
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 1 - TENANTS < 750
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT 0.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - O/YEAR
THEREAFTER - GROWING AT 0.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
RECAPTURES: NONE
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT1
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: 14ARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 2 - MKT2
BASE LEASE DATES: 1/1996 TO 12/2005
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 2 - TENANTS 751-1200
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - O/YEAR
THEREAFTER - GROWING AT 0.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
RECAPTURES: NONE
<PAGE>
PAGE 15
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT2
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMIUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLBI
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 3 - MKT3
BASE LEASE DATES: 1/1996 TO 12/2005
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE : 1
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 3 - TENANTS 1201-2000
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - O/YEAR
THEREAFTER - GROWING AT 0.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
RECAPTURES: NONE
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL NINIMlUM RENT:
<PAGE>
PAGE 16
100.00% OF HIGHER Of 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT3
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHWNT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLBI
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 4 - MKT4
BASE LEASE DATES: 1/1996 TO 12/2005
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: ~4 - TENANTS 2001-3500
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 0/YEAR
THEREAFTER - GROWING AT 0.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
RECAPTURES: NONE
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT4
MULTIPLIED BY 1.000. OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
<PAGE>
PAGE 17
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 5 - MKT5
BASE LEASE DATES: 1/1996 TO 12/2005
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 5 - TENANTS 3501-5000
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - O/YEAR
THEREAFTER - GROWING AT 0.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
RECAPTURES: NONE
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT5
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 6 - MKT6
BASE LEASE DATES: 1/1996 TO 12/2005
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 6 - TENANTS 5001-10000
<PAGE>
PAGE 18
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT 0.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 0/YEAR
THEREAFTER - GROWING AT 0.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
RECAPTURES: NONE
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT6
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 7 - MKT7
BASE LEASE DATES: 1/1996 TO 12/2005
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 7 - TENANTS > 10000
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 0/YEAR
THEREAFTER - GROWING AT 0.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
RECAPTURES: NONE
RECOVERIES: NONE
COMMISSIONS: NONE
<PAGE>
PAGE 19
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT7
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLBI
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 8 - MKT8-FOOD COURT
BASE LEASE DATES: 1/1996 TO 12/2005
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1
PRIMARY CODE: 2 - FOOD COURT TENANTS
SECONDARY CODE: 8 - FOOD COURT TENANTS
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.OO/SF/YR
PERCENTAGE RENT:
INITIAL SALES - O/YEAR
THEREAFTER - GROWING AT 0.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
RECAPTURES: NONE
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT8
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
<PAGE>
PAGE 20
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLFD
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 9 - MKT9-KI0SKS
BASE LEASE DATES: 1/1996 TO 12/2000
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1
PRIMARY CODE: 3 - KIOSK TENANTS
SECONDARY CODE: 9 - KIOSK TENANTS
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - O/YEAR
THEREAFTER - GROWING AT 0.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
RECAPTURES: NONE
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 2 NONE NONE YES NO
2 5.00 2 NONE NONE YES NO
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% Of FINAL EFFECTIVE RENT, MARKET RATE MKT9
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 36
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
<PAGE>
PAGE 21
RENEWAL ALTERATIONS: NONE
TENANTS
- -------
THERE ARE A TOTAL OF 82 LEASEHOLD TENANT(S):
- -------------------------------------------------------------------------------
# 1 - SUITE 1002 , D.A. KELLY'S
BASE LEASE DATES: 9/1993 TO 8/1998
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 3,500
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 4 - TENANTS 2001-3500
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 12.50/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 614,135/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
5.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM6
GLOBAL GROUPING
GLOBAL RECOVERY TAX6
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT4
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
<PAGE>
PAGE 22
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 2 - SUITE 1004 , HOFHEIMER'S EXPRE
BASE LEASE DATES: 11/1986 TO 1/1997
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 3,102
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 4 - TENANTS 2001-3500
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 14.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 368,596/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
6.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM6
GLOBAL GROUPING
GLOBAL RECOVERY TAX6
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT4
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
<PAGE>
PAGE 11
10 - ANCHOR TENANTS
COST CENTERS
- ------------
1 - CAM-MALL SHOPS
2 - CAM-ANCHOR TENANTS
3 - TAX-MALL SHOPS
4 - TAX-ANCHOR TENANTS
5 - UTL-UTILITY INCOME
6 - W/S-WATER & SEWER
7 - HVC-HVAC INCOME
8 - FCT-FOOD COURT
SALES VOLUME PROFILE
- --------------------
PERCENT OF RELATIVE
MONTH ANNUAL SALES VOLUME
- ----- ------------ --------
JAN 8.33% 1.00
FEB 8.33% 1.00
MAR 8.33% 1.00
APR 8.33% 1.00
MAY 8.33% 1.00
JUN 8.33% 1.00
JUL 8.33% 1.00
AUG 8.33% 1.00
SEP 8.33% 1.00
OCT 8.33% 1.00
NOV 8.33% 1.00
DEC 8.33% 1.00
------- -----
TOTALS 100.00% 12.00
GLOBAL RECOVERIES
- -----------------
CAM1-RECOVERY CAM1, REFERRED TO AS CAM1
DESCRIBED AS CAM RECOVERY; TYPE 1
ASSIGNED TO COST CENTER 1 - CAM-MALL SHOPS
PRO RATA SHARE RECOVERY OF EXPENSE CAM1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE 3200
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
CAM1-RECOVERY CAM1, REFERRED TO AS CAM2
DESCRIBED AS CAM RECOVERY; TYPE 2
ASSIGNED TO COST CENTER 1 - CAM-MALL SHOPS
PRO RATA SHARE RECOVERY OF EXPENSE CAM1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE 3200
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
CAM1-RECOVERY CAM1, REFERRED TO AS CAM3
DESCRIBED AS CAM RECOVERY; TYPE 3
ASSIGNED TO COST CENTER 1 - CAM-MALL SHOPS
PRO RATA SHARE RECOVERY OF EXPENSE CAM1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE 3280
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLTE PASSTHROUGH
<PAGE>
PAGE 12
CAM1-RECOVERY CAM1, REFERRED TO AS CAM4
DESCRIBED AS CAM RECOVERY; TYPE 4
ASSIGNED TO COST CENTER 1 - CAM-MALL SHOPS
PRO RATA SHARE RECOVERY OF EXPENSE CAM1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE 3285
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
CAM1-RECOVERY CAM1, REFERRED TO AS CAM5
DESCRIBED AS CAM RECOVERY; TYPE 5
ASSIGNED TO COST CENTER 1 - CAM-MALL SHOPS
PRO RATA SHARE RECOVERY OF EXPENSE CAM1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE 3295
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
CAM1-RECOVERY CAM1, REFERRED TO AS CAM6
DESCRIBED AS CAM RECOVERY: TYPE 6
ASSIGNED TO COST CENTER 1 - CAM-MALL SHOPS
PRO RATA SHARE RECOVERY OF EXPENSE CAM1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE 3001
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
TAX1-RECOVERY TAX1, REFERRED TO AS TAX1
DESCRIBED AS TAX RECOVERY; TYPE I
ASSIGNED TO COST CENTER 3 - TAX-MALL SHOPS
PRO RATA SHARE RECOVERY OF EXPENSE TAX1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE 3285
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE Of ZERO FOR A COMPLETE PASSTHROUGH
TAX1-RECOVERY TAX1, REFERRED TO AS TAX2
DESCRIBED AS TAX RECOVERY; TYPE 2
ASSIGNED TO COST CENTER 3 - TAX-MALL SHOPS
PRO RATA SHARE RECOVERY OF EXPENSE TAX1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE 3200
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
TAX1-RECOVERY TAX1, REFERRED TO AS TAX3
ASSIGNED TO COST CENTER 3 - TAX-MALL
SHOPS PRO RATA SHARE RECOVERY OF EXPENSE TAX1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE 3280
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
TAX1-RECOVERY TAX1, REFERRED TO AS TAX4
ASSIGNED TO COST CENTER 3 - TAX-MALL
SHOPS PRO RATA SHARE RECOVERY OF EXPENSE TAX1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE 3285
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
TAX1-RECOVERY TAX1, REFERRED TO AS TAX5
DESCRIBED AS UTILITY RECOVERY; MALL SHOPS
ASSIGNED TO COST CENTER 3 - TAX-MALL SHOPS
PRO RATA SHARE RECOVERY OF EXPENSE TAX1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE 3295
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
<PAGE>
PAGE 13
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
TAX1-RECOVERY TAX1, REFERRED TO AS TAX6
DESCRIBED AS WATER/SEWER RECOVERY; MALL SHOPS
ASSIGNED TO COST CENTER 3 - TAX-MALL SHOPS
PRO RATA SHARE RECOVERY OF EXPENSE TAX1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE 3001
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
FCT-FOOD COURT , REFERRED TO AS FCAM
DESCRIBED AS HVAC RECOVERY; MALL TENANT CHARGE
ASSIGNED TO COST CENTER 8 - FCT-FOOD COURT
PRO RATA SHARE RECOVERY OF EXPENSE FCTR
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE FOOD
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
FCTR-FOOD COURT , REFERRED TO AS FCTR
DESCRIBED AS FOOD COURT RECOVERY;
ASSIGNED TO COST CENTER 8 - FCT-FOOD COURT
3.00% OF SALES
GLB1
GLOBAL GROUPING
GLOBAL RECOVERY CAM1
GLOBAL RECOVERY TAX1
GLB2
GLOBAL GROUPING
GLOBAL RECOVERY CAM2
GLOBAL RECOVERY TAX2
GLOBAL RECOVERY TAX5
GLOBAL RECOVERY TAX6
GLFD
GLOBAL GROUPING
GLOBAL RECOVERY FCAM
GLOBAL RECOVERY TAX1
TENANT PROLOGUE
- ---------------
MINIMUM RENTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
SALES VOLUMES AND BREAKPOINTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
RENEWAL RENTS ARE COMPOUNDED ANNUALLY
RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET
REFERENCE TENANTS
- -----------------
THERE ARE A TOTAL OF 9 REFERENCE TENANT(S):
- -------------------------------------------------------------------------------
# 1 - MKT1
BASE LEASE DATES: 1/1996 TO 12/2005
TYPE OF TENANT: RETAIL
<PAGE>
PAGE 14
SQUARE FOOTAGE: 1
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 1 - TENANTS < 750
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT 0.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - O/YEAR
THEREAFTER - GROWING AT 0.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
RECAPTURES: NONE
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT1
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: 14ARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 2 - MKT2
BASE LEASE DATES: 1/1996 TO 12/2005
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 2 - TENANTS 751-1200
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - O/YEAR
THEREAFTER - GROWING AT 0.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
RECAPTURES: NONE
<PAGE>
PAGE 15
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT2
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMIUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLBI
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 3 - MKT3
BASE LEASE DATES: 1/1996 TO 12/2005
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE : 1
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 3 - TENANTS 1201-2000
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - O/YEAR
THEREAFTER - GROWING AT 0.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
RECAPTURES: NONE
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL NINIMlUM RENT:
<PAGE>
PAGE 16
100.00% OF HIGHER Of 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT3
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHWNT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLBI
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 4 - MKT4
BASE LEASE DATES: 1/1996 TO 12/2005
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: ~4 - TENANTS 2001-3500
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 0/YEAR
THEREAFTER - GROWING AT 0.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
RECAPTURES: NONE
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT4
MULTIPLIED BY 1.000. OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
<PAGE>
PAGE 17
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 5 - MKT5
BASE LEASE DATES: 1/1996 TO 12/2005
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 5 - TENANTS 3501-5000
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - O/YEAR
THEREAFTER - GROWING AT 0.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
RECAPTURES: NONE
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT5
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 6 - MKT6
BASE LEASE DATES: 1/1996 TO 12/2005
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 6 - TENANTS 5001-10000
<PAGE>
PAGE 18
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT 0.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 0/YEAR
THEREAFTER - GROWING AT 0.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
RECAPTURES: NONE
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT6
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 7 - MKT7
BASE LEASE DATES: 1/1996 TO 12/2005
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 7 - TENANTS > 10000
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 0/YEAR
THEREAFTER - GROWING AT 0.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
RECAPTURES: NONE
RECOVERIES: NONE
COMMISSIONS: NONE
<PAGE>
PAGE 19
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT7
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLBI
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 8 - MKT8-FOOD COURT
BASE LEASE DATES: 1/1996 TO 12/2005
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1
PRIMARY CODE: 2 - FOOD COURT TENANTS
SECONDARY CODE: 8 - FOOD COURT TENANTS
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.OO/SF/YR
PERCENTAGE RENT:
INITIAL SALES - O/YEAR
THEREAFTER - GROWING AT 0.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
RECAPTURES: NONE
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT8
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
<PAGE>
PAGE 20
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLFD
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 9 - MKT9-KI0SKS
BASE LEASE DATES: 1/1996 TO 12/2000
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1
PRIMARY CODE: 3 - KIOSK TENANTS
SECONDARY CODE: 9 - KIOSK TENANTS
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - O/YEAR
THEREAFTER - GROWING AT 0.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
RECAPTURES: NONE
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 2 NONE NONE YES NO
2 5.00 2 NONE NONE YES NO
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% Of FINAL EFFECTIVE RENT, MARKET RATE MKT9
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 36
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
<PAGE>
PAGE 21
RENEWAL ALTERATIONS: NONE
TENANTS
- -------
THERE ARE A TOTAL OF 82 LEASEHOLD TENANT(S):
- -------------------------------------------------------------------------------
# 1 - SUITE 1002 , D.A. KELLY'S
BASE LEASE DATES: 9/1993 TO 8/1998
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 3,500
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 4 - TENANTS 2001-3500
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 12.50/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 614,135/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
5.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM6
GLOBAL GROUPING
GLOBAL RECOVERY TAX6
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT4
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
<PAGE>
PAGE 22
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 2 - SUITE 1004 , HOFHEIMER'S EXPRE
BASE LEASE DATES: 11/1986 TO 1/1997
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 3,102
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 4 - TENANTS 2001-3500
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 14.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 368,596/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
6.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM6
GLOBAL GROUPING
GLOBAL RECOVERY TAX6
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT4
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
<PAGE>
PAGE 33
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 14 - SUITE 1106 , BRIAR PATCH
BASE LEASE DATES: 11/1995 TO 10/200S
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 2,940
PRIMARY CODE: 1 MALL SHOP TENANTS
SECONDARY CODE: 4 TENANTS 2001-3500
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT 14.OO/SF/YR
CHANGING TO 15.OO/SF/YR ON 11/1998
CHANGING TO 16.00/SF/YR ON 11/2002
PERCENTAGE RENT:
INITIAL SALES - MARKET RATE SALS
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
6.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM1
GLOBAL GROUPING
GLOBAL RECOVERY TAX1
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SO FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.OO% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT4
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEW COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
<PAGE>
PAGE 34
RENEWAL ALTERATIONS: MINIMUM RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 15 - SUITE 1108 , LIMITED EXPRESS
BASE LEASE DATES: 2/1988 TO 2/2000
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 5,204
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 6 - TENANTS 5001-10000
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 16.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 861,064/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
5.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAN1
GLOBAL GROUPING
GLOBAL RECOVERY TAX1
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SO FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT6
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 16 - SUITE 1112 , VACANT
<PAGE>
PAGE 35
BASE LEASE DATES: 1/1997 TO 12/2006
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 2,691
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 4 - TENANTS 2001-3500
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - MARKET RATE MKT4
WITH 3 MONTHS OF FREE RENT
PERCENTAGE RENT:
INITIAL SALES - 1/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
6.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM1
GLOBAL GROUPING
GLOBAL RECOVERY TAX1
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SO FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT4
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE CONS
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 17 - SUITE 2008 , KAY-BEE TOY
BASE LEASE DATES: 8/1986 TO 8/1996
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 2,972
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 4 - TENANTS 2001-3500
<PAGE>
PAGE 36
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT 15.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 584,727/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
6.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM2
GLOBAL GROUPING
GLOBAL RECOVERY TAX2
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SO FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
RENEWAL NINIMLIM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT4
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60 FINAL
EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE MINIMUM
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 18 - SUITE 2010 PAYLESS SHOESOURCE
BASE LEASE DATES: 8/1986 TO 8/1996
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 2,487
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 4 - TENANTS 2001-3500
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 16.00/SF/YR
<PAGE>
PAGE 37
PERCENTAGE RENT:
INITIAL SALES - 372,677/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
6.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM1
GLOBAL GROUPING
GLOBAL RECOVERY TAX1
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SO FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT4
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTS
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 19 - SUITE 2012-14 , HUNGATE CRAFTS
BASE LEASE DATES: 9/1996 TO 8/2006
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 2,982
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 4 - TENANTS 2001-3500
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 12.OO/SF/YR
WITH 4 MONTHS OF FREE RENT
PERCENTAGE RENT:
INITIAL SALES - l/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
<PAGE>
PAGE 38
6.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM1
GLOBAL GROUPING
GLOBAL RECOVERY TAX1
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SO FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT4
MULTIPLIED BY 1.000. OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE C0MB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 20 - SUITE 2016 FINE'S MEN WEAR
BASE LEASE DATES: 10/1986 TO 10/1996
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 3,020
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 4 - TENANTS 2001-3500
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 12.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 927,015/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
5.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
<PAGE>
PAGE 39
GLOBAL GROUPING
GLOBAL RECOVERY CAM4
GLOBAL GROUPING
GLOBAL RECOVERY TAX4
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SO FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT4
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 21 - SUITE 2018-20 , HALLMARK
BASE LEASE DATES: 11/1996 TO 10/2006
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 4,229
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 5 - TENANTS 3501-5000
SUBJECT TO VACANCY ALLOWANCE
SUBJECT TO LEASE PRESENT VALUE ANALYSIS
MINIMUM RENT:
INITIAL RENT - 18.00/SF/YR
WITH 10 MONTHS OF FREE RENT
PERCENTAGE RENT:
INITIAL SALES - 1/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
5.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM3
<PAGE>
PAGE 40
GLOBAL GROUPING
GLOBAL RECOVERY TAX3
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SO FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT5
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
~# 22 - SUITE 2022 , REEDS JEWELERS
BASE LEASE DATES: 8/1986 TO 12/1996
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1,200
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 2 - TENANTS 751-1200
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 39.58/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 1,096,716/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
INITIAL BREAKPOINT - 791,667/YEAR
5.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAN2
GLOBAL GROUPING
GLOBAL RECOVERY TAX2
COMMISSIONS: NONE
ALTERATIONS: NONE
<PAGE>
PAGE 41
SPECULATIVE RENEWALS:
LENGTH VACANT SO FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT2
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 23 - SUITE 3002 STRIDE-RITE
BASE LEASE DATES: 3/1987 TO 1/1993
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 942
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 2 - TENANTS 751-1200
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 14.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 245,205/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
6.00~% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM6
GLOBAL GROUPING
GLOBAL RECOVERY TAX6
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SO FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
<PAGE>
PAGE 42
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT2
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE C0M6
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 24 - SUITE 3004 VICTORIA'S SECRET
BASE LEASE DATES: 7/1995 TO 7/2007
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 3,539
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE 5 - TENANTS 3501-5000
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 16.00/SF/YR
CHANGING TO - 17.00/SF/YR ON 8/1998
CHANGING TO - 18.00/SF/YR ON 8/2002
PERCENTAGE RENT:
INITIAL SALES - MARKET RATE SALS
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
5.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM1
GLOBAL GROUPING
GLOBAL RECOVERY TAX1
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SO FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
<PAGE>
PAGE 43
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT5
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 25 - SUITE 3008 LANE BRYANT
BASE LEASE DATES: 8/1986 TO 8/1998
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 5,189
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 6 - TENANTS 5001-10000
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 11.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 1,106,357/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
5.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM1
GLOBAL GROUPING
GLOBAL RECOVERY TAX1
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SO FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT6
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
<PAGE>
PAGE 44
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
...............................................................................
# 26 - SUITE 3012 THE LIMITED
BASE LEASE DATES: 8/1986 TO 8/1998
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 4,887
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 5 - TENANTS 3501-5000
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 15.35/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 856,658/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
5.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM1
GLOBAL GROUPING
GLOBAL RECOVERY TAX1
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SO FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT5
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
<PAGE>
PAGE 45
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 27 - SUITE 3014 KINNEY SHOES
BASE LEASE DATES: 8/1986 TO 5/1996
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 3,299
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 4 - TENANTS 2001-3500
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 15.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 332,724/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
6.OO% Of OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM1
GLOBAL GROUPING
GLOBAL RECOVERY TAX1
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SO FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT4
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROWING
GLOBAL RECOVERY GLB1
<PAGE>
PAGE 46
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 28 - SUITE 3016 VACANT
BASE LEASE DATES: 1/1997 TO 12/2006
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 3,335
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 4 - TENANTS 2001-3500
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - MARKET RATE MKT4
WITH 3 MONTHS OF FREE RENT
PERCENTAGE RENT:
INITIAL SALES - 1/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
6.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM1
GLOBAL GROUPING
GLOBAL RECOVERY TAX1
COMMISSIONS: MARKET RATE COMN
PAYOUT: CASHED OUT
ALTERATIONS: MARKET RATE ALTM
PAYOUT: CASHED OUT
SPECULATIVE RENEWALS:
LENGTH VACANT SO FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT4
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
<PAGE>
PAGE 47
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 29 - SUITE 3018 VACANT
BASE LEASE DATES: 1/1998 TO 12/2007
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 4,361
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 5 - TENANTS 3501-5000
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - MARKET RATE MKT5
WITH 3 MONTHS OF FREE RENT
PERCENTAGE RENT:
INITIAL SALES - 1/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
6.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM1
GLOBAL GROUPING
GLOBAL RECOVERY TAX1
COMMISSIONS: MARKET RATE COMN
PAYOUT: CASHED OUT
ALTERATIONS: MARKET RATE ALTN
PAYOUT: CASHED OUT
SPECULATIVE RENEWALS:
LENGTH VACANT SO FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT5
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: PAYOUT RATE ALTB
RENEWAL PAYOUT: CASHED OUT
<PAGE>
PAGE 48
- -------------------------------------------------------------------------------
# 30 - SUITE 3022 LERNER SHOP
BASE LEASE DATE$: 8/1986 TO 8/1998
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 4,970
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 5 - TENANTS 3501-5000
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 12.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 846,264/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
5.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM1
GLOBAL GROUPING
GLOBAL RECOVERY TAX1
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SO FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT5
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COW
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 31 - SUITE 3024 RADIO SHACK
BASE LEASE DATES: 11/1986 TO 11/2001
<PAGE>
PAGE 49
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 2,417
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 4 - TENANTS 2001-3500
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 12.00/SF/YR
CHANGING TO - 14.50/SF/YR ON 11/1996
PERCENTAGE RENT:
INITIAL SALES - 596,282/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
INITIAL BREAKPOINT - 725,100/YEAR
3.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM3
GLOBAL GROUPING
GLOBAL RECOVERY TAX3
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SO FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT4
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE C0MB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 32 - SUITE 3026 BATH & BODY
BASE LEASE DATES: 11/1996 TO 10/2006
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 2,247
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 4 - TENANTS 2001-3500
SUBJECT TO VACANCY ALLOWANCE
<PAGE>
PAGE 50
MINIMUM RENT:
INITIAL RENT 17.00/SF/YR
WITH 24 MONTHS OF FREE RENT
PERCENTAGE RENT:
INITIAL SALES - 5/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
6.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM1
GLOBAL GROWING
GLOBAL RECOVERY TAX1
COMMISSIONS: NONE
ALTERATIONS: 92,127
PAYOUT: CASHED OUT
SPECULATIVE RENEWALS:
LENGTH VACANT SO FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT4
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLS1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 33 - SUITE 3028 FOOTLOCKER
BASE LEASE DATES: 8/1986 TO 8/2006
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 2,420
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 4 - TENANTS 2001-3500
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 18.00/SF/YR
CHANGING TO - 37.19/SF/YR ON 9/1996
<PAGE>
PAGE 51
PERCENTAGE RENT:
INITIAL SALES - 1,934,524/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
6.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM1
GLOBAL GROUPING
GLOBAL RECOVERY TAX1
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SO FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT4
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 34 - SUITE 3030 BOMBAY CO.
BASE LEASE DATES: 9/19~87 TO 9/1997
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1,825
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 3 - TENANTS 1201-2000
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT 0.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 476,637/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A ZERO BREAKPOINT LESS MINIMUM RENT
8.00% OF OVERAGE TO AN UNLIMITED CEILING
<PAGE>
PAGE 52
RECAPTURES: NONE
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SO FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT3
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 35 - SUITE 3032 REGIS HAIRSTYLIST
BASE LEASE DATES: 8/1986 TO 8/1996
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 810
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 2 - TENANTS 751-1200
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 25.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 268,724/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
6.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM3
GLOBAL GROUPING
GLOBAL RECOVERY TAX3
COMMISSIONS: NONE
<PAGE>
PAGE 23
- --------------------------------------------------------------------------------
# 3 - SUITE 1006 DOLL'N BEAR
BASE LEASE DATES: 1/1996 TO 12/1997
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1,267
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 3 - TENANTS 1201-2000
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 8.62/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 173,278/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A ZERO BREAKPOINT LESS MINIMUM RENT
7.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM1
GLOBAL GROUPING
GLOBAL RECOVERY TAX1
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
<TABLE>
<CAPTION>
LENGTH VACANT SQ FT MONTHS OF
TERM YEAR.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ----------- ------ -------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
</TABLE>
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT3
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00% FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF 10.00 AFTER MONTH 60 FINAL EFFECTIVE RENT IS LAST
MINIMUM PLUS COVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 4 - SUITE 1010 , JEWEL BOX
BASE LEASE DATES: 8/1986 TO 12/2006
<PAGE>
PAGE 24
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1,035
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 2 - TENANTS 751-1200
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 35.00/SF/YR
CHANGING TO - 50.00/SF/YR ON 1/1997
PERCENTAGE RENT:
INITIAL SALES - 35.00/SF/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
6.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM3
GLOBAL GROUPING
GLOBAL RECOVERY TAX3
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS
<TABLE>
<CAPTION>
LENGTH VACANT SQ FT MONTHS OF
TERM YEAR.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ----------- ------ -------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1 10.00 2 NONE NONE YES YES
</TABLE>
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT2
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00% FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF 10.00 AFTER MONTH 60 FINAL EFFECTIVE RENT IS LAST
MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 5 - SUITE 1012 , SUGAR FOOT
BASE LEASE DATES: 11/1986 TO 11/1996
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1,068
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 2 - TENANTS 751-1200
SUBJECT TO VACANCY ALLOWANCE
<PAGE>
PAGE 25
MINIMUM RENT:
INITIAL RENT - 16.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 356,625/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT LESS MINIMUM RENT
6.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM6
GLOBAL GROUPING
GLOBAL RECOVERY TAX6
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
<TABLE>
<CAPTION>
LENGTH VACANT SQ FT MONTHS OF
TERM YEAR.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ----------- ------ -------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
</TABLE>
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT2
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00% FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF 10.00 AFTER MONTH 60 FINAL EFFECTIVE RENT IS LAST
MINIMUM PLUS COVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 6 - SUITE 1016 , MERRY-GO-ROUND
BASE LEASE DATES: 9/1990 TO 1/2001
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 3,034
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE 4 - TENANTS 2001-3500
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 15.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 569,841/YEAR
<PAGE>
PAGE 26
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
6.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM1
GLOBAL GROUPING
GLOBAL RECOVERY TAX1
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS
<TABLE>
<CAPTION>
LENGTH VACANT SQ FT MONTHS OF
TERM YEAR.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ----------- ------ -------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1 10.00 2 NONE NONE YES YES
</TABLE>
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT4
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00% FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF 10.00 AFTER MONTH 60 FINAL EFFECTIVE RENT IS LAST
MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 7 - SUITE 1018 , WALDENBOOKS
BASE LEASE DATES: 8/1986 TO 1/1997
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 2,535
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 4 - TENANTS 2001-3500
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 17.40/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 705,644/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
6.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
<PAGE>
PAGE 27
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM3
GLOBAL GROUPING
GLOBAL RECOVERY TAX3
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS
<TABLE>
<CAPTION>
LENGTH VACANT SQ FT MONTHS OF
TERM YEAR.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ----------- ------ -------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
</TABLE>
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT4
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00% FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF 10.00 AFTER MONTH 60 FINAL EFFECTIVE RENT IS LAST
MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 8 - SUITE 1020 , AMY'S HALLMARK
BASE LEASE DATES: 11/1986 TO 1/1997
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 2,619
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 4 - TENANTS 2001-3500
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 16.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 390,365/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
6.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM3
<PAGE>
PAGE 28
GLOBAL GROUPING
GLOBAL RECOVERY TAX3
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS
<TABLE>
<CAPTION>
LENGTH VACANT SQ FT MONTHS OF
TERM YEAR.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ----------- ------ -------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
</TABLE>
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT4
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00% FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF 10.00 AFTER MONTH 60 FINAL EFFECTIVE RENT IS LAST
MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
# 9 - SUITE 1022 , THE FINISH LINE
BASE LEASE DATES: 8/1990 TO 10/2000
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 2,605
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 4 - TENANTS 2001-3500
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 20.00/SF/YR ON 8/1997
CHANGING TO - 22.00/SF/YR ON 8/1997
PERCENTAGE RENT:
INITIAL SALES - 1,152,723/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
6.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM2
GLOBAL GROUPING
GLOBAL RECOVERY TAX 2
COMMISSION: NONE
<PAGE>
PAGE 29
ALTERATIONS: NONE
SPECULATIVE RENEWALS
<TABLE>
<CAPTION>
LENGTH VACANT SQ FT MONTHS OF
TERM YEAR.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ----------- ------ -------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1 10.00 2 NONE NONE YES YES
</TABLE>
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT4
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00% FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF 10.00 AFTER MONTH 60 FINAL EFFECTIVE RENT IS LAST
MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
# 10 - SUITE 1026 , RACK ROOM SHOES
BASE LEASE DATES: 2/1996 TO 13/2006
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 4,833
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 4 - TENANTS 3501-5000
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 14.00/SF/YR
CHANGING TO - 16.00/SF/YR ON 4/1999
CHANGING TO - 18.00/SF/YR ON 4/2003
PERCENTAGE RENT:
INITIAL SALES - 1/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
INITIAL BREAKPOINT - 1,691,725/YEAR
5.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVRY CAM1
GLOBAL GROUPING
GLOBAL RECOVERY TAX1
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
<PAGE>
PAGE 30
<TABLE>
<CAPTION>
LENGTH VACANT SQ FT MONTHS OF
TERM YEAR.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ----------- ------ -------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1 10.00 2 NONE NONE YES YES
</TABLE>
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT5
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00% FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF 10.00 AFTER MONTH 60 FINAL EFFECTIVE RENT IS LAST
MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
# 11 - SUITE 1032 , LADY'S CHOICE
BASE LEASE DATES: 10/1991 TO 10/1996
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1,445
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 4 - TENANTS 1201-2000
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 10.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 143,482/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
6.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM6
GLOBAL GROUPING
GLOBAL RECOVERY TAX6
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
<TABLE>
<CAPTION>
LENGTH VACANT SQ FT MONTHS OF
TERM YEAR.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ----------- ------ -------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
</TABLE>
<PAGE>
PAGE 31
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT3
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00% FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF 10.00 AFTER MONTH 60 FINAL EFFECTIVE RENT IS LAST
MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 12 - SUITE 1102 , SEARS, ROEBUCK
BASE LEASE DATES: 7/1994 TO 12/1996
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1,873
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 4 - TENANTS 1201-2000
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 1/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
6.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
<TABLE>
<CAPTION>
LENGTH VACANT SQ FT MONTHS OF
TERM YEAR.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ----------- ------ -------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
</TABLE>
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT3
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00% FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF 10.00 AFTER MONTH 60 FINAL EFFECTIVE RENT IS LAST
MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
<PAGE>
PAGE 32
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 13 - SUITE 1104 , LEMSTONE BOOKS
BASE LEASE DATES: 10/1989 TO 9/1999
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1,243
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 4 - TENANTS 1201-2000
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 15.00/SF/YR
CHANGING TO - 18.00/SF/YR ON 10/1996
PERCENTAGE RENT:
INITIAL SALES - 234,052/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
INITIAL BREAKPOINT - 310,750/YEAR
CHANGING TO - 372,900/YEAR ON 10/1996
7.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM1
GLOBAL GROUPING
GLOBAL RECOVERY TAX1
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
<TABLE>
<CAPTION>
LENGTH VACANT SQ FT MONTHS OF
TERM YEAR.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ----------- ------ -------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
</TABLE>
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT3
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00% FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF 10.00 AFTER MONTH 60 FINAL EFFECTIVE RENT IS LAST
MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
<PAGE>
PAGE 53
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT2
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 36 - SUITE 3033 , EYE CARE CENTER
BASE LEASE DATES: 10/1991 TO 10/2001
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 2,779
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 4 - TENANTS 2001-3500
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 13.00/SF/YR
CHANGING TO - 16.60/SF/YR ON 10/1996
PERCENTAGE RENT:
INITIAL SALES - 778,603/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
INITIAL BREAKPOINT - 722,540/YEAR
CHANGING TO - 922,620/YEAR ON 10/1996
6.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM2
GLOBAL GROUPING
GLOBAL RECOVERY TAX2
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
<PAGE>
PAGE 54
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT4
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED CUT
- -------------------------------------------------------------------------------
# 37 - SUITE 3038 , REX RADIO & TELEV.
BASE LEASE DATES: 5/1994 TO 5/1999
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE 8,466
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 6 - TENANTS 5001-10000
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 5.02/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 1/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
1.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM6
GLOBAL GROUPING
GLOBAL RECOVERY TAX6
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
<PAGE>
PAGE 55
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT6
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 38 - SUITE 4011 , CHRISTY'S
BASE LEASE DATES: 1/1995 TO 12/1997
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 600
ALTERNATE MEASURE: 600
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 1 - TENANTS < 750
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 31.24/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 109,887/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
6.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM1
GLOBAL GROUPING
GLOBAL RECOVERY TAX1
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT1
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
<PAGE>
PAGE 56
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 39 - SUITE 4014 , CANNON'S MENS WEAR
BASE LEASE DATES: 12/1986 TO 11/1996
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1,510
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 3 - TENANTS 1201-2000
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 10.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 270,761/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
INITIAL BREAKPOINT - 350,000/YEAR
5.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM4
GLOBAL GROUPING
GLOBAL RECOVERY TAX4
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT3
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
<PAGE>
PAGE 57
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB,
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 40 - SUITE 4016 , SHOE SHOW
BASE LEASE DATES: 8/1986 TO 8/1996
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 2,868
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 4 - TENANTS 2001-3500
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 12.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 443,342/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
6.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM6
GLOBAL GROUPING
GLOBAL RECOVERY TAX6
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT4
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
<PAGE>
PAGE 58
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 41 - SUITE 5002 , GOLD VALLEY
BASE LEASE DATES: 7/1987 TO 7/1997
TYPE OF TENANT: RETAIL
SOME FOOTAGE: 832
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 2 - TENANTS 751-1200
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 37.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 333,595/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
10.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM2
GLOBAL GROUPING
GLOBAL RECOVERY TAX2
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER O 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT2
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
<PAGE>
PAGE 59
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 42 - SUITE 5004 , PICTURE YOU/ONE
BASE LEASE DATES: 9/1993 TO 8/1998
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1,038
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 2 - TENANTS 751-1200
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 25.00/SF/YR
CHANGING TO - 27.00/SF/YR ON 9/1997
PERCENTAGE RENT:
INITIAL SALES - 189,023/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
8.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM6
GLOBAL GROUPING
GLOBAL RECOVERY TAX6
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT2
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
<PAGE>
PAGE 60
- -------------------------------------------------------------------------------
# 43 - SUITE 5006 , ELECTRONICS BTQUE
BASE LEASE DATES: 8/1991 TO 10/2001
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 810
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 2 - TENANTS 751-1200
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 29.63/SF/YR
CHANGING TO - 32.10/SF/YR ON 11/1998
PERCENTAGE RENT:
INITIAL SALES - 553,568/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
6.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM6
GLOBAL GROUPING
GLOBAL RECOVERY TAX6
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT2
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 44 - SUITE 5007 , CAROUSEL CHILDREN
BASE LEASE DATES: 8/1994 TO 12/2049
<PAGE>
PAGE 61
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 810
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 2 - TENANTS 751-1200
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 9.25/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 43,400/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
INITIAL BREAKPOINT - NATURAL
5.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM1
GLOBAL GROUPING
GLOBAL RECOVERY TAX1
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT2
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 45 - SUITE 5008 , NATURALIZER
BASE LEASE DATES: 3/1988 TO 3/1998
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1,200
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 2 - TENANTS 751-1200
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
<PAGE>
PAGE 62
INITIAL RENT 16.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 170,864/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
6.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM2
GLOBAL GROUPING
GLOBAL RECOVERY TAX2
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT2
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 46 - SUITE 5010 , UPS 'N DOWNS
BASE LEASE DATES: 5/1987 TO 4/1997
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1,561
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 3 - TENANTS 1201-2000
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 10.49/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 312,829/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
<PAGE>
PAGE 63
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
5.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM1
GLOBAL GROUPING
GLOBAL RECOVERY TAX1
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT3
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 47 - SUITE 5014 , COUNTY SEAT
BASE LEASE DATES: 3/1987 TO 3/1997
TYPE Of TENANT: RETAIL
SQUARE FOOTAGE: 3,238
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 4 - TENANTS 2001-3500
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 11.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 567,337/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
6.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
<PAGE>
PAGE 64
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM3
GLOBAL GROUPING
GLOBAL RECOVERY TAX3
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT3
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 48 - SUITE 5018 , DURHAM SPORTING GD
BASE LEASE DATES: 8/1986 TO 8/1996
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 4,809
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 5 - TENANTS 3501-5000
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 12.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 812,637/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
4.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM3
<PAGE>
PAGE 65
GLOBAL GROUPING
GLOBAL RECOVERY TAX3
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT3
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 49 - SUITE 5020 , GIGI'S BOUTIQUE
BASE LEASE DATES: 12/1986 TO 12/1997
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 648
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 1 - TENANTS < 750
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 20.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 62,739/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
6.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM2
GLOBAL GROUPING
GLOBAL RECOVERY TAX2
COMMISSIONS: NONE
<PAGE>
PAGE 66
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT1
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 50 - SUITE 5022 , CLAIRE'S BTQUE
BASE LEASE DATES: 10/1986 TO 9/1996
TYPE Of TENANT: RETAIL
SQUARE FOOTAGE: 729
PRIMARY CODE: 1 - HALL SHOP TENANTS
SECONDARY CODE: 1 - TENANTS < 750
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 20.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 185,390/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAXPOINT PLUS MINIMUM RENT
8.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM2
GLOBAL GROUPING
GLOBAL RECOVERY TAX2
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
<PAGE>
PAGE 67
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT1
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 51 - SUITE 5024 , BAILEY'S JEWELERS
BASE LEASE DATES: 8/1966 TO 1/2007
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 967
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 2 - TENANTS 751-1200
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 45.OO/SF/YR
CHANGING TO - 60.00/SF/YR ON 2/1997
PERCENTAGE RENT:
INITIAL SALES - 1,931,530/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
5.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM1
GLOBAL GROUPING
GLOBAL RECOVERY TAX1
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
<PAGE>
PAGE 68
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT2
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 52 - SUITE 5026 , GR. AMER. CHOCALAT
BASE LEASE DATES: 8/1986 TO 8/2006
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 624
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 1 - TENANTS < 750
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 40.00/SF/YR
CHANGING TO - 48.08/SF/YR ON 9/1996
PERCENTAGE RENT:
INITIAL SALES - 241,706/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
10.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM2
GLOBAL GROUPING
GLOBAL RECOVERY TAX2
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT1
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
<PAGE>
PAGE 69
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 53 - SUITE 5028 , KEEP IN TOUCH
BASE LEASE DATES: 1/1996 TO 12/1996
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 714
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 1 - TENANTS < 750
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 12.60/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 49,261/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
INITIAL BREAKPOINT - NATURAL
7.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM1
GLOBAL GROUPING
GLOBAL RECOVERY TAX1
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT1
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
<PAGE>
PAGE 70
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE C0MB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 54 - SUITE 5036 , AMERICAN EAGLE
BASE LEASE DATES: 8/1995 TO 7/2005
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 3,883
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 5 - TENANTS 3501-5000
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 16.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - MARKET RATE SALG
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
5.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM2
GLOBAL GROUPING
GLOBAL RECOVERY TAX2
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT5
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
<PAGE>
PAGE 71
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 55 - SUITE 5040 , KIDS FOOTLOCKER
BASE LEASE DATES: 11/1995 To 7/2005
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1,752
PRIMARY CODE: 1 - HALL SHOP TENANTS
SECONDARY CODE: 3 - TENANTS 1201-2000
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 25.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - MARKET RATE SALS
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
6.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM1
GLOBAL GROUPING
GLOBAL RECOVERY TAX1
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT3
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
<PAGE>
PAGE 72
- --------------------------------------------------------------------------------
# 56 - SUITE 5042 , FRIEDMAN'S JEWELER
BASE LEASE DATES: 11/1989 TO 11/1999
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1,631
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 3 - TENANTS 1201-2000
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 30.66/SF/YR
CHANGING TO - 33.72/SF/YR ON 12/1996
PERCENTAGE RENT:
INITIAL SALES - 1,057,298/YEAR
THERAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
5.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM4
GLOBAL GROUPING
GLOBAL RECOVERY TAX4
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT3
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 57 - SUITE 5046 , LADY FOOTLOCKER
<PAGE>
PAGE 73
BASE LEASE DATES: 4/1989 TO 3/1999
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1,148
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 2 - TENANTS 751-1200
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 20.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 907,162/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
6.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM4
GLOBAL GROUPING
GLOBAL RECOVERY TAX4
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT2
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 58 - SUITE 5048 ,TILT
BASE LEASE DATES: 8/1986 TO 12/1999
TYPE OF TENANT: RETAIL
SOME FOOTAGE: 1,420
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 3 - TENANTS 1201-2000
<PAGE>
PAGE 74
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 25.01/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 256,789/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
15.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM3
GLOBAL GROUPING
GLOBAL RECOVERY TAX3
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT3
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 59 - SUITE 6002 ,CATO
BASE LEASE DATES: 8/1906 TO 1/1997
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 6,137
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 6 - TENANTS 5001-10000
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 10.00/SF/YR
PERCENTAGE RENT:
<PAGE>
PAGE 75
INITIAL SALES - 1,091,158/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
INITIAL BREAKPOINT - 1,363,777/YEAR
5.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM6
GLOBAL GROUPING
GLOBAL RECOVERY TAX6
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT6
MULTIPLIED BY 1.000. OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 60 - SUITE 6010 ,CHAMPS SPORTS
BASE LEASE DATES: 12/1993 TO 12/2003
TYPE OF TENANT: RETAIL
SOME FOOTAGE: 6,052
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 6 - TENANTS 5001-10000
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 12.00/SF/YR
CHANGING TO - 6.00/SF/YR ON 11/1998
PERCENTAGE RENT:
INITIAL SALES - 1,127,199/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
5.00% OF OVERAGE TO AN UNLIMITED CEILING
<PAGE>
PAGE 76
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM3
GLOBAL GROUPING
GLOBAL RECOVERY TAX3
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT6
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 61 - SUITE 6014 ,DISC JOCKEY
BASE LEASE DATES: 8/1986 TO 8/1996
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 2,052
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 4 - TENANTS 2001-3500
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 22.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 593,515/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
6.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM2
<PAGE>
PAGE 77
GLOBAL GROUPING
GLOBAL RECOVERY TAX2
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT4
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 62 - SUITE 6016 ,CHICK FIL-A
BASE LEASE DATES: 8/1986 TO 8/1995
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1,704
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 3 - TENANTS 1201-2000
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 15.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 787,803/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
6.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM5
GLOBAL GROUPING
GLOBAL RECOVERY TAX5
COMMISSIONS: NONE
<PAGE>
PAGE 78
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT3
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROWING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 63 - SUITE 6018 ,VACANT
BASE LEASE DATES: 1/1997 TO 12/2006
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 440
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 1 - TENANTS < 750
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - MARKET RATE MKT1
WITH 3 MONTHS OF FREE RENT
PERCENTAGE RENT:
INITIAL SALES - 1/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
6.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM1
GLOBAL GROUPING
GLOBAL RECOVERY TAX1
COMMISSIONS: MARKET RATE ALTN
PAYOUT: CASHED OUT
ALTERATIONS: MARKET RATE COMM
PAYOUT: CASHED OUT
<PAGE>
PAGE 79
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT1
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 64 - SUITE 6022 ,VACANT
BASE LEASE DATES: 1/1998 TO 12/2007
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 2,540
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 4 - TENANTS 2001-3500
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - MARKET RATE MKT4
WITH 3 MONTHS OF FREE RENT
PERCENTAGE RENT:
INITIAL SALES - 1/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAK POINT PLUS MINIMUM RENT
6.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM1
GLOBAL GROUPING
GLOBAL RECOVERY TAX1
COMMISSIONS: MARKET RATE COMN
PAYOUT: CASHED OUT
ALTERATIONS: MARKET RATE ALTN
PAYOUT: CASHED OUT
SPECULATIVE RENEWALS:
<PAGE>
PAGE 80
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT4
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 65 - SUITE 6024 ,HARDEE'S
BASE LEASE DATES: 10/1966 TO 10/1998
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 773
PRIMARY CODE: 2 - FOOD COURT TENANTS
SECONDARY CODE: 8 - FOOD COURT TENANTS
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 36.22/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 479,218/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
6.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY FCAM
GLOBAL GROUPING
GLOBAL RECOVERY TAX4
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
<PAGE>
PAGE 81
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT8
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLFD
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 66 - SUITE 7001 ,CARMIKE'S CINEMAS
BASE LEASE DATES: 10/1987 TO 10/2007
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 17,474
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 7 - TENANTS > 10000
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 14.31/SF/YR
CHANGING TO - 15.74/SF/YR ON 11/1997
CHANGING TO - 17.17/SF/YR ON 11/2002
PERCENTAGE RENT:
INITIAL SALES - 651,769/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
20.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM2
GLOBAL GROUPING
GLOBAL RECOVERY TAX2
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT7
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
<PAGE>
PAGE 82
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 67 - SUITE 7002 ,RECORD TOWN
BASE LEASE DATES: 10/1996 TO 9/2006
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 5,452
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 6 - TENANTS 5001-10000
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 18.00/SF/YR
WITH 12 MONTHS OF FREE RENT
PERCENTAGE RENT:
INITIAL SALES - 1/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
6.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM1
GLOBAL GROUPING
GLOBAL RECOVERY TAX1
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT6
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
<PAGE>
PAGE 83
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 68 - SUITE 7004 ,SUNGLASS HUT
BASE LEASE DATES: 4/1995 TO 3/2005
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 451
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 1 - TENANTS < 750
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 55.43/SF/YR
PERCENTAGE RENT:
INITIAL SALES - MARKET RATE SALS
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
7.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM2
GLOBAL GROUPING
GLOBAL RECOVERY TAX2
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT1
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
<PAGE>
PAGE 84
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 69 - SUITE 7006 ,LEE NAILS
BASE LEASE DATES: 9/1994 TO 8/1999
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 579
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 1 - TENANTS < 750
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 31.09/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 72,948/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
6.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM6
GLOBAL GROUPING
GLOBAL RECOVERY TAX6
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT1
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
<PAGE>
PAGE 85
- --------------------------------------------------------------------------------
# 70 - SUITE 7008 ,AFTERTHOUGHTS
BASE LEASE DATES: 1/1995 TO 12/2004
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 948
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 2 - TENANTS 751-1200
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 23.21/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 184,416/YEAR
HEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
8.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM3
GLOBAL GROUPING
GLOBAL RECOVERY TAX3
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT2
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 71 - SUITE 7012 ,VIP FORMAL WEAR
BASE LEASE DATES: 8/1995 TO 7/1996
TYPE OF TENANT: RETAIL
<PAGE>
PAGE 86
SQUARE FOOTAGE: 1,044
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 2 - TENANTS 751-1200
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 7.35/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 1/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
7.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM1
GLOBAL GROUPING
GLOBAL RECOVERY TAXI
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT2
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 72 - SUITE 7014 ,DOKAR
BASE LEASE DATES: 1/1996 TO 12/1997
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1,311
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 3 - TENANTS 1201-2000
SUBJECT TO VACANCY ALLOWANCE
<PAGE>
PAGE 87
MINIMUM RENT:
INITIAL RENT 7.78/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 1/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
6.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM1
GLOBAL GROUPING
GLOBAL RECOVERY TAX1
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT3
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHNEMT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 73 - SUITE 7016 ,GENERAL NUTRITION
BASE LEASE DATES: 3/1991 TO 2/2001
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1.058
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 2 - TENANTS 751-1200
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 18.90/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 325,655/YEAR
<PAGE>
PAGE 88
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
7.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY CAM2
GLOBAL GROUPING
GLOBAL RECOVERY TAX2
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT2
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 74 - SUITE 8004 ,DAIRY QUEEN
BASE LEASE DATES: 10/1995 TO 9/20~0
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 669
PRIMARY CODE: 2 FOOD COURT TENANTS
SECONDARY CODE: 8 FOOD COURT TENANTS
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 31.39/SF/YR
PERCENTAGE RENT:
INITIAL SALES - MARKET RATE SALS
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
7.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
<PAGE>
PAGE 89
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY FCAM
GLOBAL GROUPING
GLOBAL RECOVERY TAX1
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT8
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLFD
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 75 - SUITE 8006 ,RUFFINO'S
BASE LEASE DATES: 8/1986 TO 9/2007
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 595
PRIMARY CODE: 2 - FOOD COURT TENANTS
SECONDARY CODE: 8 - FOOD COURT TENANTS
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT 42.02/SF/YR
CHANGING TO 52.10/SF/YR ON 10/1997
PERCENTAGE RENT:
INITIAL SALES - 248,533/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
INITIAL BREAKPOINT - 312,500/YEAR
CHANGING TO - 387,494/YEAR ON 9/1997
10.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY FCAM
<PAGE>
PAGE 90
GLOBAL GROUPING
GLOBAL RECOVERY TAX4
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT8
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLFD
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 76 - SUITE 8008 ,MR. WOK
BASE LEASE DATES: 6/1995 TO 5/2005
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 595
PRIMARY CODE: 2 - FOOD COURT TENANTS
SECONDARY CODE: 8 - FOOD COURT TENANTS
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 33.60/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 122,645/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
10.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY FCAM
GLOBAL GROUPING
GLOBAL RECOVERY TAX6
COMMISSIONS: NONE
ALTERATIONS: NONE
<PAGE>
PAGE 91
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
30.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT5
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLFD
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 77 - SUITE 8010 ,VACANT
BASE LEASE DATES: 1/1997 TO 12/2008
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 461
PRIMARY CODE: 2 FOOD COURT TENANTS
SECONDARY CODE: 8 FOOD COURT TENANTS
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - MARKET RATE MKT8
PERCENTAGE RENT:
INITIAL SALES - 1/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
6.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY FCAM
GLOBAL GROUPING
GLOBAL RECOVERY TAX1
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
<PAGE>
PAGE 92
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT8
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT :
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROWING
GLOBAL RECOVERY GLFD
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 78 - SUITE 8012 ,OMAR'S GYROS
BASE LEASE DATES: 8/1991 TO 1/1997
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 846
PRIMARY CODE: 2- FOOD COURT TENANTS
SECONDARY CODE: 8- FOOD COURT TENANTS
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 15.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 97,67L/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
INITIAL BREAKPOINT - 211,500/YEAR
8.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES: NONE
GLOBAL GROUPING
GLOBAL RECOVERY FCAM
GLOBAL GROWING
GLOBAL RECOVERY TAX6
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
2 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT8
MULTIPLIED BY 1.000, OR FINAL RENT OWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
<PAGE>
PAGE 93
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLFD
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 79 - SUITE 9002 JC PENNEY
BASE LEASE DATES: 8/1986 TO 8/2016
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: $1,729
PRIMARY CODE: 4 - ANCHOR TENANTS
SECONDARY CODE: 10 - ANCHOR TENANTS
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 4.01/SF/YR
PERCENTAGE RENT:
INITIAL SALES 10,152,193/YEAR
THEREAFTER OWING AT GROWTH RATE SALG
INITIAL BREAKPOINT - 16,395,612/YEAR
1.50% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
CAM
ASSIGNED TO COST CENTER 2 - CAM-ANCHOR TENANTS
RECOVERY OF AMOUNTS OR RATES IN COMBINATION
ADD MARKET RATE JCPU
WITH RATES MULTIPLIED BY TENANT SQUARE FOOTAGE AND A FACTOR OF 1.00
REAL ESTATE TAXES
ASSIGNED TO COST CENTER 4 - TAX-ANCHOR TENANTS
PRO RATA SHARE RECOVERY OF EXPENSE TAXX
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE OGLA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP AND
A BASE AMOUNT OF 185,931
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS: NONE
- --------------------------------------------------------------------------------
# 80 - SUITE 9101 , BELKS
BASE LEASE DATES: 8/1986 TO 7/2026
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1
PRIMARY CODE: 4 - ANCHOR TENANTS
SECONDARY CODE: 10 - ANCHOR TENANTS
<PAGE>
PAGE 94
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT 0.OO/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 1/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
1.00% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
BELK'S CAM
ASSIGNED TO COST CENTER 2 - CAM-ANCHOR TENANTS
RECOVERY Of AMOUNTS OR RATES GROWING AT A RATE
YEAR 1 VALUE - 28,239
THEREAFTER - GROWING AT 0.00%
CAP - NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS: NONE
- -------------------------------------------------------------------------------
#81 - SUITE 9103 , BRODY'S
BASE LEASE DATES: 8/1995 TO 7/2016
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 69,960
PRIMARY CODE: 4 - ANCHOR TENANTS
SECONDARY CODE: 10 - ANCHOR TENANTS
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 4.OO/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 1/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
2.50% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
REAL ESTATE TAXES
ASSIGNED TO COST CENTER 4 - TAX-ANCHOR TENANTS
PRO RATA SHARE RECOVERY OF EXPENSE TAXX
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE OGLA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
CAM
ASSIGNED TO COST CENTER 2 - CAM-ANCHOR TENANTS
RECOVERY OF AMOUNTS OR RATES IN COMBINATION
ADD MARKET RATE BRPU
WITH RATES MULTIPLIED BY TENANT SQUARE FOOTAGE AND A FACTOR OF 1.00
COMMISSIONS: NONE
ALTERATIONS: NONE
<PAGE>
PAGE 95
SPECULATIVE RENEWALS: NONE
- -------------------------------------------------------------------------------
# 82 - SUITE 9104 , SEARS, ROEBUCK
BASE LEASE DATES: 10/1987 TO 10/2015
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 89,564
PRIMARY CODE: 4 - ANCHOR TENANTS
SECONDARY CODE: 10 - ANCHOR TENANTS
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 3.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 16,085,562/YEAR
THEREAFTER - GROWING AT GROWTH RATE SALG
INITIAL BREAKPOINT - 11,600,00O/YEAR
2.50% OF OVERAGE TO AN UNLIMITED CEILING
RECAPTURES: NONE
RECOVERIES:
REAL ESTATE TAXES
ASSIGNED TO COST CENTER 4 - TAX-ANCHOR TENANTS
PRO RATA SHARE RECOVERY OF EXPENSE TAXX
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE OGLA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 187,020
CAN
ASSIGNED TO COST CENTER 2 - CAM-ANCHOR TENANTS
RECOVERY OF AMOUNTS OR RATES IN COMBINATION
ADD MARKET RATE SRPU
WITH RATES MULTIPLIED BY TENANT SQUARE FOOTAGE AND A FACTOR OF 1.00
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS: NONE
<PAGE>
================================================================================
PRO-Ject+ Tenant Register Report
================================================================================
<PAGE>
GOLDEN EAST CROSSING, ROCKY MOUNT, NC
TENANT REGISTER
6/14/96 @ 18:23
TENANT SQUARE FEET BEGIN DATE END DATE
- ---------------------------------------- ----------- ---------- --------
1 - TENANTS < 750
# 38- SUITE 4011 CHRISTY'S 600 1/1995 12/1997
# 49 - SUITE 5020 GIGI'S BOUTIQUE 648 12/1986 12/1997
# 50 - SUITE 5022 CLAIRE'S BTQUE 729 10/1986 9/1996
# 52 - SUITE 5026 GR. AMER. CHOCALAT 624 8/1986 8/2006
# 53 - SUITE 5028 KEEP IN TOUCH 714 1/1996 12/1996
# 63 - SUITE 6018 VACANT 440 1/1997 12/2006
# 68 - SUITE 7004 SUNGLASS HUT 451 4/1995 3/2005
# 69 - SUITE 7006 LEE NAILS 579 9/1994 8/1999
------
8 TENANTS 4,785
2 - TENANTS 751-1200
# 4 - SUITE 1010 JEWEL BOX 1,035 8/1986 12/2006
# 5 - SUITE 1012 SUGAR FOOT 1,068 11/1986 11/1996
# 22 - SUITE 2022 REEDS JEWELERS 1,200 8/1986 12/1996
# 23 - SUITE 3002 STRIDE-RITE 942 3/1987 1/1998
# 35 - SUITE 3032 REGIS HAIRSTYLIST 810 8/1986 8/1996
# 41 - SUITE 5002 GOLD VALLEY 832 7/1987 7/1997
# 42 - SUITE 5004 PICTURE YOU/ONE 1,038 9/1993 8/1998
# 43 - SUITE 5006 ELECTRONICS BTQUE 810 8/1991 10/2001
# 44 - SUITE 5007 CAROUSEL CHILDREN 810 8/1994 12/2049
# 45 - SUITE 5008 NATURALIZER 1,200 3/1988 3/1998
# 51 - SUITE 5024 BAILEY'S JEWELERS 967 8/1986 1/2007
# 57 - SUITE 5046 LADY FOOTLOCKER 1,148 4/1989 3/1999
# 70 - SUITE 7008 AFTERTHOUGHTS 948 1/1995 12/2004
# 71 - SUITE 7012 VIP FORMAL WEAR 1,044 8/1995 7/1996
# 73 - SUITE 7016 GENERAL NUTRITION 1,058 3/1991 2/2001
------
15 TENANTS 14,910
3 - TENANTS 1201-2000
# 3 - SUITE 1006 DOLL'N BEAR 1,267 1/1996 12/1997
# 11 - SUITE 1032 LADY'S CHOICE 1,445 10/1991 10/1996
# 12 - SUITE 1102 SEARS, ROEBUCK 1,873 7/1994 12/1996
# 13 - SUITE 1104 LEMSTONE BOOKS 1,243 10/1989 9/1999
# 34 - SUITE 3030 BOMBAY CO. 1,825 9/1987 9/1997
# 39 - SUITE 4014 CANNON'S MENS WEAR 1,510 12/1986 11/1996
# 46 - SUITE 5010 UPS IN DOWNS 1,561 5/1987 4/1997
# 55 - SUITE 5040 KIDS FOOTLOCKER 1,752 11/1995 7/2005
# 56 - SUITE 5042 FRIEDMAN'S JEWELER 1,631 11/1989 11/1999
# 58 - SUITE 5048 TILT 1,420 8/1986 12/1999
# 62 - SUITE 6016 CHICK FIL-A 1,704 8/1986 8/1998
# 72 - SUITE 7014 DOKAR 1,311 1/1996 12/1997
------
12 TENANTS 18,542
4 - TENANTS 2001-3500
# 1 - SUITE 1002 D.A. KELLY'S 3,500 9/1993 8/1998
# 2 - SUITE 1004 HOFHEMER'S EXPRE 3,102 11/1986 1/1997
# 6 - SUITE 1016 MERRY-GO-ROUND 3,034 9/1990 1/2001
# 7 - SUITE 1018 WALDENBOOKS 2,535 8/1986 1/1997
# 8 - SUITE 1020 AMY'S HALLMARK 2,619 11/1986 1/1997
# 9 - SUITE 1022 THE FINISH LINE 2,605 8/1990 10/2000
# 14 - SUITE 1106 BRIAR PATCH 2,940 11/1995 10/2005
# 16 - SUITE 1112 VACANT 2,691 1/1997 12/2006
# 17 - SUITE 2008 KAY-BEE TOY 2,972 8/1986 8/1996
# 18 - SUITE 2010 PAYLESS SHOESOURCE 2,487 8/1986 8/1996
# 19 - SUITE 2012-14 HUNGATE CRAFTS 2,982 9/1996 8/2006
# 20 - SUITE 2016 FINE'S MEN WEAR 3,020 10/1986 10/1996
<PAGE>
GOLDEN EAST CROSSING, ROCKY MOUNT, NC PAGE 2
TENANT SQUARE FEET BEGIN DATE END DATE
- ---------------------------------------- ----------- ---------- --------
# 27 - SUITE 3014 KINNEY SHOES 3,299 8/1986 8/1996
# 28 - SUITE 3016 VACANT 3,335 1/1997 12/2006
# 31 - SUITE 3024 RADIO SHACK 2,417 11/1986 11/2001
# 32 - SUITE 3026 BATH & BODY 2,247 11/1996 10/2006
4 33 - SUITE 3028 FOOTLOCKER 2,420 8/1986 8/2006
# 36 - SUITE 3033 EYE CARE CENTER 2,779 10/1991 10/2001
# 40 - SUITE 4016 SHOE SHOW 2,868 8/1986 8/1996
# 47 - SUITE 5014 COUNTY SEAT 3,238 3/1987 3/1997
# 61 - SUITE 6014 DISC JOCKEY 2,052 8/1986 8/1996
# 64 - SUITE 6022 VACANT 2,540 1/1998 12/2007
-------
22 TENANTS 61,682
5 - TENANTS 3501-5000
# 10 - SUITE 102-6 RACK ROOM SHOES 4,833 2/1996 3/2006
# 21 - SUITE 2018-20 HALLMARK 4,229 11/1996 10/2006
# 24 - SUITE 3004 VICTORIA'S SECRET 3,539 7/1995 7/2007
# 26 - SUITE 3012 THE LIMITED 4,887 8/1986 8/1998
# 29 - SUITE 3018 VACANT 4,361 1/1998 12/2007
# 30 - SUITE 3022 LERNER SHOP 4,970 8/1986 8/1998
# 48 - SUITE 5018 DURHAM SPORTING GD 4,809 8/1986 8/1996
# 54 - SUITE 5036 AMERICAN EAGLE 3,883 8/1995 7/2005
-------
8 TENANTS 35,511
6 - TENANTS 5001-10000
# 15 - SUITE 1108 LIMITED EXPRESS 5,204 2/1988 2/2000
# 25 - SUITE 3008 LANE BRYANT 5,189 8/1986 8/1998
# 37 - SUITE 3038 REX RADIO & TELEV. 8,466 5/1994 5/1999
# 59 - SUITE 6002 CATO 6,137 8/1986 1/1997
# 60 - SUITE 6010 CHAMPS SPORTS 6,052 12/1993 12/2003
# 67 - SUITE 7002 RECORD TOWN 5,452 10/1996 9/2006
-------
6 TENANTS 36,500
7 - TENANTS > 10000
# 66 - SUITE 7001 CARMIKE'S CINEMAS 17,474 10/1987 10/2007
-------
1 TENANTS 17,474
8 - FOOD COURT TENANTS
# 65 - SUITE 6024 HARDEE'S 773 10/1986 10/1998
# 74 - SUITE 8004 DAIRY QUEEN 669 10/1995 9/2005
# 75 - SUITE 8006 RUFFINO'S 595 8/1986 9/2007
# 76 - SUITE 8008 MR. WOK 595 6/1995 5/2005
# 77 - SUITE 8010 VACANT 461 1/1997 12/2008
# 78 - SUITE 8012 OMAR'S GYROS 846 8/1991 1/1997
-------
6 TENANTS 3,939
10 - ANCHOR TENANTS
# 79 - SUITE 9002 JC PENNEY 81,729 8/1986 8/2016
# 80 - SUITE 9101 BELKS 1 8/1986 7/2026
# 81 - SUITE 9103 BRODY'S 69,960 8/1995 7/2016
# 82 - SUITE 9104 SEARS, ROEBUCK 89,564 10/1987 10/2015
-------
4 TENANTS 241,254
-------
82 TENANTS 434,597
=======
<PAGE>
================================================================================
PRO-Ject+ Lease Expiration Report
================================================================================
<PAGE>
GOLDEN EAST CROSSING, ROCKY MOUNT, NC
EXPIRATION REPORT
YEARS 1996 To 2010, ALL TENANTS,
INCLUDING OPTIONS, INCLUDING RENEWALS,
EXCLUDING BASE LEASES AND PRIOR OPTIONS,
BASE RENTS INCLUDING CPI ADJUSTMENTS,
INCLUDING PERCENTAGE RENTS
6/14/96 @ 18:15
<TABLE>
<CAPTION>
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- ------------------- --------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
# 71-SUITE 7012 INITIAL
VIP FORMAL WEAR 1,044 7/1996 7.34 8.76 16.10 25.00
# 18-SUITE 2010 INITIAL
PAYLESS SHOESOURCE 2,487 8/1996 16.00 8.77 24.77 15.00
# 27-SUITE 3014 INITIAL
KINNEY SHOES 3,299 8/1996 15.00 8.76 23.76 15.00
# 35-SUITE 3032 INITIAL
REGIS HAIRSTYLIST 810 8/1996 25.01 8.16 33.17 25.00
# 40-SUITE 4016 INITIAL
SHOE SHOW 2,868 8/1996 12.00 6.54 18.54 15.00
# 48-SUITE 5018 INITIAL
DURHAM SPORTING GD 4,809 8/1996 12.00 8.17 20.17 15.00
# 61-SUITE 6014 INITIAL
DISC JOCKEY 2,052 8/1996 22.00 8.95 30.95 15.00
# 17-SUITE 2008 INITIAL
KAY-BEE TOY 2,972 8/1996 15.00 8.95 23.95 15.00
# 50-SUITE 5022 INITIAL
CLAIRE'S BTQUE 729 9/1996 20.35 8.95 29.30 30.00
# 20-SUITE 2016 INITIAL
FINE'S MEN WEAR 3,020 10/1996 15.35 7.68 23.03 15.00
# 11-SUITE 1032 INITIAL
LADY'S CHOICE 1,445 10/1996 10.00 6.53 16.53 20.00
# 39-SUITE 4014 INITIAL
CANNON'S MENS WEAR 1,510 11/1996 10.00 7.69 17.69 20.00
# 5-SUITE 1012 INITIAL
SUGAR FOOT 1,068 11/1996 20.03 6.54 26.57 25.00
# 53-SUITE 5028 INITIAL
KEEP IN TOUCH 714 12/1996 12.61 8.77 21.38 30.00
# 12-SUITE 1102 INITIAL
SEARS, ROEBUCK 1,873 12/1996 0.00 0.00 0.00 20.00
# 22-SUITE 2022 INITIAL
REEDS JEWELERS 1,200 12/1996 52.37 8.95 61.32 25.00
# 2-SUITE 1004 INITIAL
HOFHEIMER'S EXPRE 3,102 1/1997 14.00 6.76 20.76 15.00
# 59-SUITE 6002 INITIAL
CATO 6,137 1/1997 10.00 6.76 16.76 10.00
# 7-SUITE 1018 INITIAL
WALDENBOOKS 2,535 1/1997 17.40 8.30 25.70 15.00
</TABLE>
<PAGE>
PAGE 2
<TABLE>
<CAPTION>
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- ------------------- --------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
# 8-SUITE 1020 INITIAL
AMY'S HALLMARK 2,619 1/1997 16.00 8.31 24.31 15.00
# 78-SUITE 8012 INITIAL
OMAR'S GYROS 846 1/1997 15.01 8.96 23.97 30.00
# 47-SUITE 5014 INITIAL
COUNTY SEAT 3,238 3/1997 11.00 8.30 19.30 15.00
# 46-SUITE 5010 INITIAL
UPS 'N DOWNS 1,561 4/1997 10.49 8.26 18.75 20.00
--------- ------- ------- ------- -------
23 FY 97 EXPIRATIONS 51,938 14.22 7.64 21.86 16.48
# 41-SUITE 5002 INITIAL
GOLD VALLEY 832 7/1997 40.89 8.31 49.20 25.00
# 34-SUITE 3030 INITIAL
BOMBAY CO. 1,825 9/1997 21.31 0.00 21.31 20.00
# 3-SUITE 1006 INITIAL
DOLL'N BEAR 1,267 12/1997 9.76 8.26 18.02 20.40
# 38-SUITE 4011 INITIAL
CHRISTY'S 600 12/1997 31.24 8.24 39.48 30.60
# 72-SUITE 7014 INITIAL
DOKAR 1,311 12/1997 7.78 8.26 16.04 20.40
# 49-SUITE 5020 INITIAL
GIGI'S BOUTIQUE 648 12/1997 20.00 8.31 28.31 30.60
# 23-SUITE 3002 INITIAL
STRIDE-RITE 942 1/1998 16.41 6.97 23.38 25.50
# 45-SUITE 5008 INITIAL
NATURALIZER 1,200 3/1998 16.00 8.25 24.25 25.50
--------- ------- ------- ------- -------
8 FY 98 EXPIRATIONS 8,625 18.76 6.38 25.14 23.50
--------- ------- ------- ------- -------
31 CUMULATIVE EXPS 60,563 14.87 7.46 22.33 17.48
# 25-SUITE 3008 INITIAL
LANE BRYANT 5,189 8/1998 11.20 8.24 19.44 10.20
# 26-SUITE 3012 INITIAL
THE LIMITED 4,987 8/1998 15.35 8.24 23.59 15.30
# 62-SUITE 6016 INITIAL
CHICK FIL-A 1,704 8/1998 29.14 7.34 36.48 20.40
# 42-SUITE 5004 INITIAL
PICTURE YOU/ONE 1,038 8/1998 27.01 6.97 33.98 25.50
# 1-SUITE 1002 INITIAL
D.A. KELLY'S 3,500 8/1998 12.50 6.97 19.47 15.30
# 30-SUITE 3022 INITIAL
LERNER SHOP 4,970 8/1998 12.00 8.24 20.24 15.30
</TABLE>
<PAGE>
PAGE 3
<TABLE>
<CAPTION>
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- ------------------- --------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
# 65-SUITE 6024 INITIAL
HARDEE'S 773 10/1998 39.07 9.42 48.50 30.60
# 57-SUITE 5046 INITIAL
LADY FOOTLOCKER 1,148 3/1999 51.30 8.09 59.39 26.26
# 37-SUITE 3038 INITIAL
REX RADIO & TELEV. 8,466 5/1999 5.02 6.93 11.95 10.51
--------- ------- ------- ------- -------
9 FY 99 EXPIRATIONS 31,675 14.07 7.68 21.76 14.56
--------- ------- ------- ------- -------
40 CUMULATIVE EXPS 92,238 14.59 7.54 22.13 16.48
# 69-SUITE 7006 INITIAL
LEE NAILS 579 8/1999 31.09 6.92 38.01 31.52
# 13-SUITE 1104 INITIAL
LEMSTONE BOOKS 1,243 9/1999 18.00 8.09 26.09 21.01
# 56-SUITE 5042 INITIAL
FRIEDMAN'S JEWELER 1,631 11/1999 35:07 8.09 43.17 21.01
# 58-SUITE 5048 INITIAL
TILT 1,420 12/1999 29.36 8.10 37.45 21.64
# 15-SUITE 1108 INITIAL
LIMITED EXPRESS 5,204 2/2000 16.00 8.27 24.27 10.82
--------- ------- ------- ------- -------
5 FY100 EXPIRATIONS 10,077 22.08 8.12 30.20 16.44
--------- ------- ------- ------- -------
45 CUMULATIVE EXPS 102,315 15.33 7.59 22.93 16.47
# 9-SUITE 1022 INITIAL
THE FINISH LINE 2,605 1012000 29.59 8.27 37.87 16.23
# 6-SUITE 1016 INITIAL
MERRY-GO-ROUND 3,034 1/2001 15.00 8.45 23.45 16.72
# 73-SUITE 7016 INITIAL
GENERAL NUTRITION 1,058 2/2001 24.73 8.45 33.18 27.86
--------- ------- ------- ------- -------
3 FY101 EXPIRATIONS 6,697 22.21 8.38 30.59 18.29
--------- ------- ------- ------- -------
48 CUMULATIVE EXPS 109,012 15.76 7.64 23.40 16.59
# 43-SUITE 5006 INITIAL
ELECTRONICS BTQUE 810 10/2O01 47.08 7.26 54.34 27.86
# 36-SUITE 3033 INITIAL
EYE CARE CENTER 2,779 10/2001 16.60 8.45 25.04 16.72
# 31-SUITE 3024 INITIAL
RADIO SNACK 2,417 11/2001 14.50 8.45 22.95 16.72
--------- ------- ------- ------- -------
3 FY102 EXPIRATIONS 6,006 19.87 8.29 28.15 18.22
--------- ------- ------- ------- -------
51 CUMULATIVE EXPS 115,018 15.97 7.68 23.65 16.67
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- ------------------- --------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
# 60-SUITE 6010 INITIAL
CHAMPS SPORTS 6,052 12/2003 14.00 8.99 22.99 12.18
--------- ------- ------- ------- -------
1 FY104 EXPIRATIONS 6,052 14.00 8.99 22.99 12.18
--------- ------- ------- ------- -------
52 CUMULATIVE EXPS 121,070 15.87 7.74 23.61 16.45
# 70-SUITE 7008 INITIAL
AFTERTHOUGHTS 948 12/2004 23.22 9.38 32.59 31.36
# 68-SUITE 7004 INITIAL
SUNGLASS HUT 451 3/2005 55.42 9.76 65.19 37.63
# 76-SUITE 8008 INITIAL
MR. WOK 595 5/2005 33.60 11.70 45.30 37.63
--------- ------- ------- ------- -------
3 FY105 EXPIRATIONS 1,994 33.60 10.16 43.76 34.65
--------- ------- ------- ------- -------
55 CUMULATIVE EXPS 123,064 16.16 7.78 23.94 16.74
# 54-SUITE 5036 INITIAL
AMERICAN EAGLE 3,883 7/2005 17.25 9.75 26.99 18.82
# 55-SUITE 5040 INITIAL
KIDS FOOTLOCKER 1,752 7/2005 25.00 9.75 34.75 25.09
# 74-SUITE 8004 INITIAL
DAIRY QUEEN 669 9/2005 31.39 11.89 43.28 37.63
# 14-SUITE 1106 INITIAL
BRIAR PATCH 2,940 10/2005 20.70 9.75 30.44 18.82
# 10-SUITE 1026 INITIAL
RACK ROOM SHOES 4,833 3/2006 18.00 10.30 28.30 19.38
--------- ------- ------- ------- -------
5 FY106 EXPIRATIONS 14,077 19.86 10.04 29.90 20.69
--------- ------- ------- ------- -------
60 CUMULATIVE EXPS 137,141 16.54 8.01 24.55 17.15
# 52-SUITE 5026 INITIAL
GR. AMER. CHOCALAT 624 8/2006 51.54 10.35 61.88 38.76
# 19-SUITE 2012-14 INITIAL
HUNGATE CRAFTS 2,982 8/2006 12.00 10.30 22.30 19.38
# 33-SUITE 3028 INITIAL
FOOTLOCKER 2,420 8/2006 63.83 10.30 74.13 19.38
# 71-SUITE 7012 RENEWAL 1
VIP FORMAL WEAR 1,044 9/2006 27.51 10.30 37.80 32.30
# 67-SUITE 7002 INITIAL
RECORD TOWN 5,452 9/2006 18.00 10.30 28.30 12.92
# 35-SUITE 3032 RENEWAL 1
REGIS HAIRSTYLIST 810 10/2006 27.50 10.30 37.79 32.30
</TABLE>
<PAGE>
PAGE 5
<TABLE>
<CAPTION>
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- ------------------- --------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
# 17-SUITE 2008 RENEWAL 1
KAY-BEE TOY 2,972 10/2006 16.50 10.30 26.81 19.38
# 32-SUITE 3026 INITIAL
BATH & BODY 2,247 10/2006 17.00 10.30 27.30 19.38
# 18-SUITE 2010 RENEWAL 1
PAYLESS SHOESOURCE 2,487 10/2006 17.60 10.30 27.90 19.38
# 61-SUITE 6014 RENEWAL 1
DISC JOCKEY 2,052 10/2006 24.20 10.30 34.50 19.38
# 27-SUITE 3014 RENEWAL 1
KINNEY SHOES 3,299 10/2006 16.50 10.30 26.80 19.38
# 21-SUITE 2018-20 INITIAL
HALLMARK 4,229 10/2006 18.00 10.33 28.33 19.38
# 40-SUITE 4016 RENEWAL 1
SHOE SHOW 2,868 10/2006 16.50 10.30 26.80 19.38
# 48-SUITE 5018 RENEWAL 1
DURHAM SPORTING GD 4,809 10/2006 16.50 10.30 26.80 19.38
# 50-SUITE 5022 RENEWAL 1
CLAIRE'S BTQUE 729 11/2006 33.00 10.30 43.31 38.76
# 4-SUITE 1010 INITIAL
JEWEL BOX 1,035 12/2006 67.85 10.33 78.18 33.27
# 11-SUITE 1032 RENEWAL 1
LADY'S CHOICE 1,445 12/2006 22.00 10.30 32.30 26.62
# 16-SUITE 1112 INITIAL
VACANT 2,691 12/2006 15.00 10.30 25.30 19.96
# 28-SUITE 3016 INITIAL
VACANT 3,335 12/2006 15.00 10.30 25.30 19.96
# 20-SUITE 2016 RENEWAL 1
FINE'S MEN WEAR 3,020 12/2006 20.43 10.30 30.73 19.96
# 63-SUITE 6018 INITIAL
VACANT 440 12/2006 30.00 10.31 40.31 39.93
# 5-SUITE 1012 RENEWAL 1
SUGAR FOOT 1,068 1/2007 27.51 10.84 38.35 33.27
# 51-SUITE 5024 INITIAL
BAILEY'S JEWELERS 967 1/2007 136.90 10.85 147.75 33.27
# 39-SUITE 4014 RENEWAL 1
CANNON'S MENS WEAR 1,510 1/2007 22.00 10.84 32.84 26.62
# 53-SUITE 5028 RENEWAL 1
KEEP IN TOUCH 714 2/2007 33.01 10.84 43.85 39.93
# 12-SUITE 1102 RENEWAL 1
SEARS, ROEBUCK 1,873 2/2007 22.00 10.84 32.84 26.62
# 22-SUITE 2022 RENEWAL 1
REEDS JEWELERS 1,200 2/2007 62.75 10.84 73.59 33.27
</TABLE>
<PAGE>
PAGE 6
<TABLE>
<CAPTION>
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- ------------------- --------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
* 8-SUITE 1020 RENEWAL 1
AMY'S HALLMARK 2.619 3/2007 17.60 10.84 28.44 19.96
# 7-SUITE 1018 RENEWAL 1
WALDENBOOKS 2,535 3/2007 22.89 10.84 33.73 19.96
# 59-SUITE 6002 RENEWAL 1
CATO 6,137 3/2007 12.19 10.84 23.02 13.31
# 2-SUITE 1004 RENEWAL 1
HOFHEIMER'S EXPRE 3,102 3/2007 16.50 10.84 27.34 19.96
# 78-SUITE 8012 RENEWAL 1
OMAR'S GYROS 8" 3/2007 33.01 12.72 45.73 39.93
# 47-SUITE 5014 RENEWAL 1
COUNTY SEAT 3,238 5/2007 16.50 10.84 27.34 19.96
------- ------- ------- ------- -------
33 FY107 EXPIRATIONS 76,799 22.75 10.50 33.26 21.01
------- ------- ------- ------- -------
93 CUMULATIVE EXPS 213,940 18.77 8.91 27.68 18.53
# 46-SUITE 5010 RENEWAL
UPS IN DOWNS 1,561 6/2007 22.00 10.84 32.84 26.62
# 24-SUITE 3004 INITIAL
VICTORIA'S SECRET 3,539 7/2007 18.30 10.84 29.14 19.96
# 75-SUITE 8006 INITIAL
RUFFINO'S 595 9/2007 52.09 12.73 64.82 39.93
# 41-SUITE 5002 RENEWAL 1
GOLD VALLEY 832 9/2007 54.97 10.83 65.80 33.27
# 66-SUITE 7001 INITIAL
CARMIKE'S CINEMAS 17,474 10/2007 17.17 10.89 28.06 7.99
# 34-SUITE 3030 RENEWAL 1
BOMBAY CO. 1,825 11/2007 28.64 10.84 39.48 26.62
# 64-SUITE 6022 INITIAL
VACANT 2,540 12/2007 15.30 10.84 26.14 20.56
# 29-SUITE 3018 INITIAL
VACANT 4,361 12/2007 15.30 10.84 26.14 20.56
# 3-SUITE 1006 RENEWAL 1
DOLL'N BEAR 1,267 2/2008 22.44 10.98 33.41 27.42
# 72-SUITE 7014 RENEWAL 1
DOKAR 1,311 2/2008 22.44 10.98 33.43 27.42
# 38-SUITE 4011 RENEWAL I
CHRISTY'S 600 2/2008 34.36 10.98 45.34 41.12
# 49-SUITE 5020 RENEWAL 1
GIGI'S BOUTIQUE 648 2/2008 33.67 10.98 ".65 41.12
# 23-SUITE 3002 RENEWAL I
STRIDE-RITE 942 3/2008 28.05 10.98 39.03 34.27
</TABLE>
<PAGE>
PAGE 7
<TABLE>
<CAPTION>
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- ------------------- --------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
# 45-SUITE 5008 RENEWAL 1
NATURALIZER 1,200 5/2008 28.05 10.98 39.03 34.27
------- ------- ------- ------- -------
14 FY108 EXPIRATIONS 38,695 20.52 10.91 31.44 17.81
------- ------- ------- ------- -------
107 CUMULATIVE EXPS 252,635 19.04 9.21 28.25 18.42
# 25-SUITE 3008 RENEWAL 1
LANE BRYANT 5,189 10/2008 15.05 10.98 26.03 13.71
# 42-SUITE 5004 RENEWAL 1
PICTURE YOU/ONE 1.038 10/2008 29.70 10.98 40.68 34.27
# 1-SUITE 1002 RENEWAL 1
D.A. KELLY'S 3,500 1012008 16.83 10.98 27.81 20.56
# 30-SUITE 3022 RENEWAL 1
LERNER SHOP 4,970 10/2008 16.83 10.98 27.81 20.56
# 26-SUITE 3012 RENEWAL 1
THE LIMITED 4,987 10/2008 16.88 10.98 27.86 20.56
# 62-SUITE 6016 RENEWAL 1
CHICK FIL-A 1,704 10/2008 39.16 10.98 50.14 27.42
# 65-SUITE 6024 RENEWAL 1
HARDEE'S 773 1212008 52.52 13.16 65.68 42.36
# 77-SUITE 8010 INITIAL
VACANT 461 12/2008 30.01 13.17 43.18 42.36
# 57-SUITE 5046 RENEWAL 1
LADY FOOTLOCKER 1,148 5/2009 68.95 11.16 80.11 35.30
------- ------- ------- ------- -------
9 FY109 EXPIRATIONS 23,670 22.57 11.10 33.67 22.00
------- ------- ------- ------- -------
116 CUMULATIVE EXPS 276,305 19.34 9.38 28.72 18.73
# 37-SUITE 3038 RENEWAL 1
REX RADIO & TELEV. 8,466 7/2009 1136 11.16 22.71 14.12
# 69-SUITE 7006 RENEWAL I
LEE NAILS 579 10/2009 34.67 11.17 45.84 42.36
# 13-SUITE 1104 RENEWAL 1
LEMSTONE BOOKS 1,243 11/2009 23.11 11.16 34.27 28.24
------- ------- ------- ------- -------
3 FY110 EXPIRATIONS 10,288 14.25 11.16 25.41 17.41
------- ------- ------- ------- -------
119 CUMULATIVE EXPS 286,593 19.16 9.44 28.60 18.68
</TABLE>
<PAGE>
====================================================
ENDS Full Data Reports
====================================================
<PAGE>
Tue Apr 16, 1996 Page 1
CUSTOM SUMMARY REPORT
(POP FACTS: FULL DATA REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6511
PREPARED FOR
CUSHMAN & WAKEFIELD
GOLDEN EAST CROSSING
EFFECTIVE TRADE AREA COORD: 00:00.00 00:00.00
- --------------------------------------------------------------------------------
DESCRIPTION TOTALS
- --------------------------------------------------------------------------------
POPULATION
2001 PROJECTION 276,809
1996 ESTIMATE 268,643
1990 CENSUS 256,493
1980 CENSUS 242,775
GROWTH 1980 - 1990 5.65%
HOUSEHOLDS
2001 PROJECTION 107,127
1996 ESTIMATE 102,998
1990 CENSUS 95,426
1980 CENSUS 82,158
GROWTH 1980 - 1990 16.15%
1996 ESTIMATED POPULATION BY RACE 268,643
WHITE 52.97%
BLACK 45.38%
ASIAN & PACIFIC ISLANDER 0.28%
OTHER RACES 1.37%
1996 ESTIMATED POPULATION 268,643
HISPANIC ORIGIN 0.78%
OCCUPIED UNITS 95,426
OWNER OCCUPIED 62.75%
RENTER OCCUPIED 37.25%
1990 AVERAGE PERSONS PER HH 2.64
1996 EST. HOUSEHOLDS BY INCOME 102,998
$150,000 OR MORE 1.71%
$100,000 TO $149,999 2.20%
$ 75,000 TO $ 99,999 3.48%
$ 50,000 TO $ 74,999 13.47%
$ 35,000 TO $ 49,999 16.35%
$ 25,000 TO $ 34,999 14.85%
$ 15,000 TO $ 24,999 17.92%
$ 5,000 TO $ 15,000 21.11%
UNDER $ 5,000 8.89%
1996 EST. AVERAGE HOUSEHOLD INCOME $35,389
1996 EST. MEDIAN HOUSEHOLD INCOME $26,396
1996 EST. PER CAPITA INCOME $13,869
<PAGE>
Tue Apr 16, 1996 Page 2
CUSTOM SUMMARY REPORT
(POP FACTS: FULL DATA REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6511
PREPARED FOR
CUSHMAN & WAKEFIELD
GOLDEN EAST CROSSING
EFFECTIVE TRADE AREA COORD: 00:00.00 00:00.00
- --------------------------------------------------------------------------------
DESCRIPTION TOTALS
- --------------------------------------------------------------------------------
1996 ESTIMATED POPULATION BY SEX 268,643
MALE 46.74%
FEMALE 53.26%
MARITAL STATUS 199,929
SINGLE MALE 13.57%
SINGLE FEMALE 13.13%
MARRIED 52.03%
PREVIOUSLY MARRIED MALE 6.11%
PREVIOUSLY MARRIED FEMALE 15.16%
HOUSEHOLDS WITH CHILDREN 37,822
MARRIED COUPLE FAMILY 64.02%
OTHER FAMILY-MALE HEAD 4.62%
OTHER FAMILY-FEMALE HEAD 30.42%
NON FAMILY 0.94%
1996 ESTIMATED POPULATION BY AGE 268,643
UNDER 5 YEARS 6.89%
5 TO 9 YEARS 7.18%
10 TO 14 YEARS 8.01%
15 TO 17 YEARS 4.94%
18 TO 20 YEARS 3.71%
21 TO 24 YEARS 4.47%
25 TO 29 YEARS 6.04%
30 TO 34 YEARS 7.57%
35 TO 39 YEARS 8.79%
40 TO 49 YEARS 14.98%
50 TO 59 YEARS 9.53%
60 TO 64 YEARS 4.18%
65 TO 69 YEARS 4.33%
70 TO 74 YEARS 3.78%
75 + YEARS 5.63%
MEDIAN AGE 35.69
AVERAGE AGE 36.56
<PAGE>
Tue Apr 16, 1996 Page 3
CUSTOM SUMMARY REPORT
(POP FACTS: FULL DATA REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6511
PREPARED FOR
CUSHMAN & WAKEFIELD
GOLDEN EAST CROSSING
EFFECTIVE TRADE AREA COORD: 00:00.00 00:00.00
- --------------------------------------------------------------------------------
DESCRIPTION TOTALS
- --------------------------------------------------------------------------------
1996 ESTIMATED FEMALE POP. BY AGE 143,074
UNDER 5 YEARS 6.40%
5 TO 9 YEARS 6.66%
10 TO 14 YEARS 7.31%
15 TO 17 YEARS 4.61%
18 TO 20 YEARS 3.61%
21 TO 24 YEARS 4.40%
25 TO 29 YEARS 6.04%
30 TO 34 YEARS 7.67%
35 TO 39 YEARS 8.82%
40 TO 49 YEARS 14.30%
50 TO 59 YEARS 9.76%
60 TO 64 YEARS 4.29%
65 TO 69 YEARS 4.48%
70 TO 74 YEARS 4.14%
75 + YEARS 7.50%
FEMALE MEDIAN AGE 36.87
FEMALE AVERAGE AGE 38.22
POPULATION BY HOUSEHOLD TYPE 256,493
FAMILY HOUSEHOLDS 86.67%
NON-FAMILY HOUSEHOLDS 11.40%
GROUP QUARTERS 1.94%
HOUSEHOLDS BY TYPE 95,426
SINGLE MALE 9.26%
SINGLE FEMALE 14.90%
MARRIED COUPLE 52.16%
OTHER FAMILY-MALE HEAD 3.54%
OTHER FAMILY-FEMALE HEAD 17.34%
NON FAMILY-MALE HEAD 1.74%
NON FAMILY-FEMALE HEAD 1.07%
POPULATION BY URBAN VS. RURAL 256,370
URBAN 48.31%
RURAL 51.69%
<PAGE>
Tue Apr 16, 1996 Page 4
CUSTOM SUMMARY REPORT
(POP FACTS: FULL DATA REPORT)
BY EQUINOX NATIONAL DECISION SYSTEMS 800-866-6511
PREPARED FOR
CUSHION & WAKEFIELD
GOLDEN EAST CROSSING
EFFECTIVE TRADE AREA COORD: 00:00.00 00:00.00
- --------------------------------------------------------------------------------
DESCRIPTION TOTALS
- --------------------------------------------------------------------------------
FEMALES 16+ WITH CHILDREN 0 - 17: BASE 106,738
WORKING WITH CHILD 0 - 5 5.22%
NOT WORKING WITH CHILD 0 - 5 0.60%
NOT IN LABOR FORCE WITH CHILD 0 - 5 2.56%
WORKING WITH CHILD 6 - 17 13.34%
NOT WORKING WITH CHILD 6 - 17 0.80%
NOT IN LAB. FORCE WITH CHILD 6 - 17 3.98%
WORKING WITH CHILD 0 - 5 & 6 - 18 3.78%
NOT WORKING WITH CHILD 0-5 & 6-18 0.49%
NOT IN LAB. FORCE W/CHILD 0-5 &6-18 2.29%
WORKING WITH NO CHILDREN 30.79%
NOT WORKING WITH NO CHILDREN 2.05%
NOT IN LAB. FORCE WITH NO CHILD. 34.10%
HH BY AGE BY POVERTY STATUS 95,433
ABOVE POVERTY UNDER AGE 65 64.14%
ABOVE POVERTY AGE 65 + 16.02%
BELOW POVERTY UNDER AGE 65 12.84%
BELOW POVERTY AGE 65 + 7.00%
POPULATION 16+ BY EMPLOYMENT STATUS 195,624
EMPLOYED IN ARMED FORCES 0.19%
EMPLOYED CIVILIANS 60.66%
UNEMPLOYED CIVILIANS 3.80%
NOT IN LABOR FORCE 35.36%
POPULATION 16+ BY OCCUPATION 118,665
EXECUTIVE AND MANAGERIAL 8.49%
PROFESSIONAL SPECIALTY 9.98%
TECHNICAL SUPPORT 2.73%
SALES 10.64%
ADMINISTRATIVE SUPPORT 13.44%
SERVICE: PRIVATE HOUSEHOLD 0.67%
SERVICE: PROTECTIVE 1.71%
SERVICE: OTHER 9.16%
FARMING FORESTRY & FISHING 4.08%
PRECISION PRODUCTION & CRAFT 12.90%
MACHINE OPERATOR 15.88%
TRANS. AND MATERIAL MOVING 5.15%
LABORERS 5.16%
<PAGE>
Tue Apr 16, 1996 Page 5
CUSTOM SUMMARY REPORT
(POP FACTS: FULL DATA REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6511
PREPARED FOR
CUSHMAN & WAKEFIELD
GOLDEN EAST CROSSING
EFFECTIVE TRADE AREA COORD: 00:00.00 00:00.00
- --------------------------------------------------------------------------------
DESCRIPTION TOTALS
- --------------------------------------------------------------------------------
FAMILIES BY NUMBER OF WORKERS 70,499
NO WORKERS 12.40%
ONE WORKER 28.60%
TWO WORKERS 45.12%
THREE + WORKERS 13.88%
HISPANIC POPULATION BY TYPE 256,493
NOT HISPANIC 99.35%
MEXICAN 0.36%
PUERTO RICAN 0.07%
CUBAN 0.01%
OTHER HISPANIC 0.21%
1996 HISPANIC RACE BASE 2,107
WHITE 35.86%
BLACK 10.03%
ASIAN 1.45%
OTHER 52.67%
POPULATION BY TRANSPORTATION TO WORK 116,919
DRIVE ALONE 76.73%
CAR POOL 16.81%
PUBLIC TRANSPORTATION 0.81%
DRIVE MOTORCYCLE 0.08%
WALKED ONLY 2.33%
OTHER MEANS 1.56%
WORKED AT HOME 1.67%
POPULATION BY TRAVEL TIME TO WORK 116,919
UNDER 10 MINUTES / WORK AT HOME 20.89%
10 TO 29 MINUTES 59.76%
30 TO 59 MINUTES 16.27%
60 TO 89 MINUTES 2.37$
90+ MINUTES 0.71%
AVERAGE TRAVEL TIME IN MINUTES 17.75
HOUSEHOLDS BY NO. OF VEHICLES 95,386
NO VEHICLES 14.77%
1 VEHICLE 32.04%
2 VEHICLES 34.02%
3+ VEHICLES 19.17%
ESTIMATED TOTAL VEHICLES 153,988
<PAGE>
Tue Apr 16, 1996 Page 6
CUSTOM SUMMARY REPORT
(POP FACTS: FULL DATA REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6511
PREPARED FOR
CUSHMAN & WAKEFIELD
GOLDEN EAST CROSSING
EFFECTIVE TRADE AREA COORD: 00:00.00 00:00.00
- --------------------------------------------------------------------------------
DESCRIPTION TOTALS
- --------------------------------------------------------------------------------
POPULATION 25+ BY EDUCATION LEVEL 163,223
ELEMENTARY (0-8) 17.98%
SOME HIGH SCHOOL (9-11) 21.59%
HIGH SCHOOL GRADUATE (12) 30.73%
SOME COLLEGE (13-15) 12.45%
ASSOCIATES DEGREE ONLY 5.75%
BACHELORS DEGREE ONLY 8.67%
GRADUATE DEGREE 2.82%
POPULATION ENROLLED IN SCHOOL 63,966
PUBLIC PRE- PRIMARY 3.22%
PRIVATE PRE- PRIMARY 1.50%
PUBLIC ELEM/HIGH 71.94%
PRIVATE ELEM/HIGH 4.11%
ENROLLED IN COLLEGE 19.23%
HOUSING UNITS BY OCCUPANCY STATUS 102,726
OCCUPIED 92.89%
VACANT 7.11%
VACANT UNITS 7,300
FOR RENT 34.84%
FOR SALE ONLY 11.46%
SEASONAL 9.50%
OTHER 44.20%
OWNER OCCUPIED PROPERTY VALUES 42,151
UNDER $25,000 10.30%
$25,000 TO $49,999 33.91%
$50,000 TO $74,999 29.99%
$75,000 TO $99,999 14.25%
$100,000 TO $149,999 7.55%
$150,000 TO $199,999 2.47%
$200,000 TO $299,999 1.12%
$300,000 TO $399,999 0.25%
$400,000 TO $499,999 0.09%
$500,000 + 0.07%
MEDIAN PROPERTY VALUE $57,718
TOTAL RENTAL UNITS 30,710
MEDIAN RENT $211
<PAGE>
Tue Apr 16, 1996 Page 7
CUSTOM SUMMARY REPORT
(POP FACTS: FULL DATA REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6511
PREPARED FOR
CUSHMAN & WAKEFIELD
GOLDEN EAST CROSSING
EFFECTIVE TRADE AREA COORD: 00:00.00 00:00.00
- --------------------------------------------------------------------------------
DESCRIPTION TOTALS
- --------------------------------------------------------------------------------
PERSONS IN UNIT 95,426
1 PERSON UNITS 24.15%
2 PERSON UNITS 30.81%
3 PERSON UNITS 19.62%
4 PERSON UNITS 15.16%
5 PERSON UNITS 6.21%
6 PERSON UNITS 2.32%
7 + UNITS 1.71%
YEAR ROUND UNITS IN STRUCTURE 102,726
SINGLE UNITS DETACHED 66.59%
SINGLE UNITS ATTACHED 1.92%
DOUBLE UNITS 5.07%
3 TO 9 UNITS 7.55%
10 TO 19 UNITS 1.35%
20 TO 49 UNITS 0.48%
50 + UNITS 0.38%
MOBILE HOME OR TRAILER 15.70%
ALL OTHER 0.95%
SINGLE/MULTIPLE UNIT RATIO 4.62
HOUSING UNITS BY YEAR BUILT 95,386
BUILT 1989 TO MARCH 1990 2.38%
BUILT 1985 TO 1988 9.78%
BUILT 1980 TO 1984 12.15%
BUILT 1970 TO 1979 24.50%
BUILT 1960 TO 1969 16.59%
BUILT 1950 TO 1959 13.20%
BUILT 1940 TO 1949 8.59%
BUILT 1939 OR EARLIER 12.81%
<PAGE>
Tue Apr 23, 1996 Page 1
CUSTOM SUMMARY REPORT
(POP 80-01, HH 80-01, INC 80-01)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6511
PREPARED FOR
CUSHMAN & WAKEFIELD
GOLDEN EAST CROSSING
EFFECTIVE TRADE AREA COORD: 00:00.00 00:00.00
- --------------------------------------------------------------------------------
DESCRIPTION TOTALS
- --------------------------------------------------------------------------------
POP_80: TOTAL 242,775
POP_90: TOTAL 256,493
POP_96: TOTAL (EST.) 268,643
POP_01: TOTAL (PROJ.) 276,809
HH_80: TOTAL 82,158
HH_90: TOTAL 95,426
HH_96: TOTAL (EST.) 102,998
HH_01: TOTAL (PROJ.) 107,127
INC_80: PER CAPITA (EST.) $5,572
INC_90: PER CAPITA $10,908
INC_96: PER CAPITA (EST.) $13,869
INC_01: PER CAPITA (PROJ.) $17,880
HH_80 BY INCOME_79: MEDIAN $13,301
HH_90_BY INCOME_89: MEDIAN $23,028
HH_96_BY INCOME: MEDIAN (EST.) $26,396
HH_00_BY INCOME: MEDIAN $31,029
HH_80_BY INCOME_79: AVERAGE $16,464
HH_90_BY INCOME_89: AVERAGE $29,054
HH_96_BY INCOME: AVERAGE (EST.) $35,389
HH_01_BY INCOME: AVERAGE $45,082
<PAGE>
Page 1
Tue Apr 16, 1996
CUSTOM SUMMARY REPORT
(POP FACTS: FULL DATA REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6511
PREPARED FOR
CUSHMAN & WAKEFIELD
NORTH CAROLINA
COORD: 00:00.00 00:00.00
- --------------------------------------------------------------------------------
DESCRIPTION TOTALS
- --------------------------------------------------------------------------------
POPULATION
2001 PROJECTION 7,848,028
1996 ESTIMATE 7,280,830
1990 CENSUS 6,628,637
1980 CENSUS 5,881,768
GROWTH 1980 - 1990 12.70%
HOUSEHOLDS
2001 PROJECTION 3,123,172
1996 ESTIMATE 2,862,251
1990 CENSUS 2,517,026
1980 CENSUS 2,043,292
GROWTH 1980 - 1990 23.18%
1996 ESTIMATED POPULATION BY RACE 7,280,830
WHITE 73.55%
BLACK 23.43%
ASIAN & PACIFIC ISLANDER 1.02%
OTHER RACES 2.00%
1996 ESTIMATED POPULATION 7,280,830
HISPANIC ORIGIN 1.44%
OCCUPIED UNITS 2,517,026
OWNER OCCUPIED 68.01%
RENTER OCCUPIED 31.99%
1990 AVERAGE PERSONS PER HH 2.54
1996 EST. HOUSEHOLDS BY INCOME 2,862,251
$150,000 OR MORE 2.86%
$100,000 TO $149,999 3.40%
$ 75,000 TO $ 99,999 5.27%
$ 50,000 TO $ 74,999 16.25%
$ 35,000 TO $ 49,999 17.23%
$ 25,000 TO $ 34,999 15.15%
$ 15,000 TO $ 24,999 16.91%
$ 5,000 TO $ 15,000 17.08%
UNDER $ 5,000 5.86%
1996 EST. AVERAGE HOUSEHOLD INCOME $42,552
1996 EST. MEDIAN HOUSEHOLD INCOME $31,703
1996 EST. PER CAPITA INCOME $17,153
<PAGE>
Tue Apr 16, 1996 Page 2
CUSTOM SUMMARY REPORT
(POP FACTS: FULL DATA REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6511
PREPARED FOR
CUSHMAN & WAKEFIELD
NORTH CAROLINA
COORD: 00:00.00 00:00.00
- --------------------------------------------------------------------------------
DESCRIPTION TOTALS
- --------------------------------------------------------------------------------
1996 ESTIMATED POPULATION BY SEX 7,280,830
MALE 48.38%
FEMALE 51.62%
MARITAL STATUS 5,293,221
SINGLE MALE 13.73%
SINGLE FEMALE 11.40%
MARRIED 56.30%
PREVIOUSLY MARRIED MALE 5.73%
PREVIOUSLY MARRIED FEMALE 12.84%
HOUSEHOLDS WITH CHILDREN 921,516
MARRIED COUPLE FAMILY 72.69%
OTHER FAMILY-MALE HEAD 4.38%
OTHER FAMILY-FEMALE HEAD 21.97%
NON FAMILY 0.96%
1996 ESTIMATED POPULATION BY AGE 7,280,830
UNDER 5 YEARS 6.96%
5 TO 9 YEARS 6.49%
10 TO 14 YEARS 6.64%
15 TO 17 YEARS 4.28%
18 TO 20 YEARS 4.49%
21 TO 24 YEARS 5.72%
25 TO 29 YEARS 7.16%
30 TO 34 YEARS 7.86%
35 TO 39 YEARS 8.27%
40 TO 49 YEARS 15.20%
50 TO 59 YEARS 9.93%
60 TO 64 YEARS 4.01%
65 TO 69 YEARS 4.14%
70 TO 74 YEARS 3.48%
75 + YEARS 5.37%
MEDIAN AGE 35.24
AVERAGE AGE 36.55
<PAGE>
Tue Apr 16, 1996 Page 3
CUSTOM SUMMARY REPORT
(POP FACTS: FULL DATA REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6511
PREPARED FOR
CUSHMAN & WAKEFIELD
NORTH CAROLINA
COORD: 00:00.00 00:00.00
- --------------------------------------------------------------------------------
DESCRIPTION TOTALS
- --------------------------------------------------------------------------------
1996 ESTIMATED FEMALE POP. BY AGE 3,758,056
UNDER 5 YEARS 6.67%
5 TO 9 YEARS 6.23%
10 TO 14 YEARS 6.26%
15 TO 17 YEARS 4.04%
18 TO 20 YEARS 4.32%
21 TO 24 YEARS 5.28%
25 TO 29 YEARS 6.87%
30 TO 34 YEARS 7.73%
35 TO 39 YEARS 8.17%
40 TO 49 YEARS 14.90%
50 TO 59 YEARS 10.15%
60 TO 64 YEARS 4.11%
60 TO 69 YEARS 4.35%
70 TO 74 YEARS 3.74%
75 + YEARS 7.18%
FEMALE MEDIAN AGE 36.59
FEMALE AVERAGE AGE 38.04
POPULATION BY HOUSEHOLD TYPE 6,628,637
FAMILY HOUSEHOLDS 83.88%
NON-FAMILY HOUSEHOLDS 12.73%
GROUP QUARTERS 3.39%
HOUSEHOLDS BY TYPE 2,517,026
SINGLE MALE 9.45%
SINGLE FEMALE 14.27%
MARRIED COUPLE 56.58%
OTHER FAMILY-MALE HEAD 3.10%
OTHER FAMILY-FEMALE HEAD 12.31%
NON FAMILY-MALE HEAD 2.59%
NON FAMILY-FEMALE HEAD 1.71%
POPULATION BY URBAN VS. RURAL 6,628,637
URBAN 50.32%
RURAL 49.68%
<PAGE>
Tue Apr 16, 1996 Page 4
CUSTOM SUMMARY REPORT
(POP FACTS: FULL DATA REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6511
PREPARED FOR
CUSHMAN & WAKEFIELD
NORTH CAROLINA
COORD: 00:00.00 00:00.00
- --------------------------------------------------------------------------------
DESCRIPTION TOTALS
- --------------------------------------------------------------------------------
FEMALES 16+ WITH CHILDREN 0 - 17: BASE 2,719,169
WORKING WITH CHILD 0 - 5 5.30%
NOT WORKING WITH CHILD 0 - 5 0.49%
NOT IN LABOR FORCE WITH CHILD 0 - 5 2.85%
WORKING WITH CHILD 6 - 17 13.32%
NOT WORKING WITH CHILD 6 - 17 0.64%
NOT IN LAB. FORCE WITH CHILD 6 - 17 3.42%
WORKING WITH CHILD 0 - 5 & 6 - 18 3.56%
NOT WORKING WITH CHILD 0-5 & 6-18 0.28%
NOT IN LAB. FORCE W/CHILD 0-5 &6-18 1.93%
WORKING WITH NO CHILDREN 34.36%
NOT WORKING WITH NO CHILDREN 1.86%
NOT IN LAB. FORCE WITH NO CHILD. 31.99%
HH BY AGE BY POVERTY STATUS 2,517,098
ABOVE POVERTY UNDER AGE 65 70.11%
ABOVE POVERTY AGE 65 + 15.92%
BELOW POVERTY UNDER AGE 65 9.08%
BELOW POVERTY AGE 65 + 4.90%
POPULATION 16+ BY EMPLOYMENT STATUS 5,203,230
EMPLOYED IN ARMED FORCES 2.28%
EMPLOYED CIVILIANS 62.24%
UNEMPLOYED CIVILIANS 3.13%
NOT IN LABOR FORCE 32.35%
POPULATION 16+ BY OCCUPATION 3,238,414
EXECUTIVE AND MANAGERIAL 10.28%
PROFESSIONAL SPECIALTY 11.98%
TECHNICAL SUPPORT 3.47%
SALES 11.30%
ADMINISTRATIVE SUPPORT 14.03%
SERVICE: PRIVATE HOUSEHOLD 0.37%
SERVICE: PROTECTIVE 1.42%
SERVICE: OTHER 9.64%
FARMING FORESTRY & FISHING 2.59%
PRECISION PRODUCTION & CRAFT 13.27%
MACHINE OPERATOR 12.72%
TRANS. AND MATERIAL MOVING 4.33%
LABORERS 4.60%
<PAGE>
Tue Apr 16, 1996 Page 5
CUSTOM SUMMARY REPORT
(POP FACTS: FULL DATA REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6511
PREPARED FOR
CUSHMAN & WAKEFIELD
NORTH CAROLINA
COORD: 00:00.00 00:00.00
- --------------------------------------------------------------------------------
DESCRIPTION TOTALS
- --------------------------------------------------------------------------------
FAMILIES BY NUMBER OF WORKERS 1,824,465
NO WORKERS 11.13%
ONE WORKER 26.41%
TWO WORKERS 49.16%
THREE + WORKERS 13.30%
HISPANIC POPULATION BY TYPE 6,628,637
NOT HISPANIC 98.84%
MEXICAN 0.49%
PUERTO RICAN 0.22%
CUBAN 0.06%
OTHER HISPANIC 0.39%
1996 HISPANIC RACE BASE 104,665
WHITE 44.63%
BLACK 5.48%
ASIAN 2.16%
OTHER 47.74%
POPULATION BY TRANSPORTATION TO WORK 3,300,481
DRIVE ALONE 76.59%
CAR POOL 16.05%
PUBLIC TRANSPORTATION 1.03%
DRIVE MOTORCYCLE 0.16%
WALKED ONLY 2.93%
OTHER MEANS 1.09%
WORKED AT HOME 2.15%
POPULATION BY TRAVEL TIME TO WORK 3,300,481
UNDER 10 MINUTES / WORK AT HOME 18.22%
10 TO 29 MINUTES 58.41%
30 TO 59 MINUTES 20.19%
60 TO 89 MINUTES 2.45%
90+ MINUTES 0.72%
AVERAGE TRAVEL TIME IN MINUTES 19.33
HOUSEHOLDS BY NO. OF VEHICLES 2,517,026
NO VEHICLES 9.60%
1 VEHICLE 31.23%
2 VEHICLES 38.11%
3+ VEHICLES 21.06%
ESTIMATED TOTAL VEHICLES 4,400,678
<PAGE>
Tue Apr 16, 1996 Page 6
CUSTOM SUMMARY REPORT
(POP FACTS: FULL DATA REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6511
PREPARED FOR
CUSHMAN & WAKEFIELD
NORTH CAROLINA
COORD: 00:00.00 00:00.00
- --------------------------------------------------------------------------------
DESCRIPTION TOTALS
- --------------------------------------------------------------------------------
POPULATION 25+ BY EDUCATION LEVEL 4,253,494
ELEMENTARY (0-8) 12.69%
SOME HIGH SCHOOL (9-11) 17.35%
HIGH SCHOOL GRADUATE (12) 28.98%
SOME COLLEGE (13-15) 16.78%
ASSOCIATES DEGREE ONLY 6.82%
BACHELORS DEGREE ONLY 11.99%
GRADUATE DEGREE 5.38%
POPULATION ENROLLED IN SCHOOL 1,624,913
PUBLIC PRE- PRIMARY 3.77%
PRIVATE PRE- PRIMARY 2.34%
PUBLIC ELEM/HIGH 63.42%
PRIVATE ELEM/HIGH 3.41%
ENROLLED IN COLLEGE 27.06%
HOUSING UNITS BY OCCUPANCY STATUS 2,818,193
OCCUPIED 89.31%
VACANT 10.69%
VACANT UNITS 301,167
FOR RENT 27.21%
FOR SALE ONLY 10.65%
SEASONAL 32.78%
OTHER 29.36%
OWNER OCCUPIED PROPERTY VALUES 1,217,975
UNDER $25,000 6.99%
$25,000 TO $49,999 24.44%
$50,000 TO $74,999 29.09%
$75,000 TO $99,999 18.18%
$100,000 TO $149,999 12.74%
$150,000 TO $199,999 4.62%
$200,000 TO $299,999 2.72%
$300,000 TO $399,999 0.72%
$400,000 TO $499,999 0.26%
$500,000 + 0.26%
MEDIAN PROPERTY VALUE $65,800
TOTAL RENTAL UNITS 709,716
MEDIAN RENT $284
<PAGE>
Tue Apr 16, 1996 Page 7
CUSTOM SUMMARY REPORT
(POP FACTS: FULL DATA REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6511
PREPARED FOR
CUSHMAN & WAKEFIELD
NORTH CAROLINA
COORD: 00:00.00 00:00.00
- --------------------------------------------------------------------------------
DESCRIPTION TOTALS
- --------------------------------------------------------------------------------
PERSONS IN UNIT 2,517,026
1 PERSON UNITS 23.72%
2 PERSON UNITS 33.72%
3 PERSON UNITS 19.40%
4 PERSON UNITS 15.03%
5 PERSON UNITS 5.45%
6 PERSON UNITS 1.71%
7 + UNITS 0.97%
YEAR ROUND UNITS IN STRUCTURE 2,818,193
SINGLE UNITS DETACHED 64.94%
SINGLE UNITS ATTACHED 2.64%
DOUBLE UNITS 2.95%
3 TO 9 UNITS 8.00%
10 TO 19 UNITS 3.43%
20 TO 49 UNITS 1.25%
50 + UNITS 0.68%
MOBILE HOME OR TRAILER 15.27%
ALL OTHER 0.84%
SINGLE/MULTIPLE UNIT RATIO 4.14
HOUSING UNITS BY YEAR BUILT 2,517,026
BUILT 1989 TO MARCH 1990 2.54%
BUILT 1985 TO 1988 12.96%
BUILT 1980 TO 1984 12.16%
BUILT 1970 TO 1979 24.32%
BUILT 1960 TO 1969 17.08%
BUILT 1950 TO 1959 13.18%
BUILT 1940 TO 1949 7.87%
BUILT 1939 OR EARLIER 9.89%
<PAGE>
Mall Sales (1991-1994)
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
REGIONAL SHOPPING CENTER SALES SUMMARY 1991
1991 TRANSACTIONS CHART
Cushman & Wakefield, Inc.
====================================================================================================================================
Sale Sale Year Total GLA/ Mall Shop Mall Shop NOI/
No. Property Name Date Price Price GLA Sold GLA Shop Ratio Sales PSF NOI PSF
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
91-1 Confidential 12/91 1988/ $92,500,000 928,000 360,000 38.79% $275 $5,735,000
South Central MSA 90 360,000 $15.93
- ------------------------------------------------------------------------------------------------------------------------------------
91-2 Sarasota Square Mall 12/91 1977/ $72,000,000 903,000 310,000 34.33% $240 $5,472,000
Sarasota, FL 89 310,000 $17.65
- ------------------------------------------------------------------------------------------------------------------------------------
91-3 Confidential 12/91 1971/ $108,923,717 990,941 314,239 31.71% $300 $7,900,000
New England MSA 83 * 696,977 $11.30
- ------------------------------------------------------------------------------------------------------------------------------------
91-4 Confidential 12/91 1965 $102,559,402 1,024,084 360,000 35.16% $320 $7,425,000
Top 20 Eastern MSA 450,000 $16.50
- ------------------------------------------------------------------------------------------------------------------------------------
91-5 Eastland Mall 12/91 1975 $75,115,000 1,024,425 369,675 36.08% $275 $5,874,000
Charlotte, NC 369,576 $15.89
- ------------------------------------------------------------------------------------------------------------------------------------
91-6 Alderwood Mall 11/91 1979 $103,750,000 961,700 260,000 27.04% $310 $8,300,000
Lynnwood, VA 260,000 $24.23
- ------------------------------------------------------------------------------------------------------------------------------------
91-7 Confidential 11/91 1957 $130,000,000 897,174 329,500 36.73% $300 $8,000,000
Weston MSA esc. * 329,500 est. $24.28
- ------------------------------------------------------------------------------------------------------------------------------------
91-8 The Oaks 10/91 1978/ $115,000,000 1,084,575 359,000 33.10% $295 $7,000,000
Thousand Oaks, CA 83 * 359,000 $19.60
- ------------------------------------------------------------------------------------------------------------------------------------
91-9 Mayfair Mall 10/91 1958/ $125,000,000 859,000 330,000 38.42% $287 $8,000,000
Wauwatosa, WI 86 ** 649,000 $12.33
- ------------------------------------------------------------------------------------------------------------------------------------
91-10 Valley Fair S.C. 7/91 1986 $197,900,000 1,064,190 356,243 33.48% $437 $11,478,000
Santa Clara, CA * 356,243 $32.22
- ------------------------------------------------------------------------------------------------------------------------------------
91-11 Montclair Plaza 3/91 1968/ $210,500,000 1,501,500 389,000 25.91% $363 $12,000,000
Montclair, CA 85 897,900 $13.36
- ------------------------------------------------------------------------------------------------------------------------------------
91-12 Paradise Valley Mall 2/91 1978/ $160,000,000 1,223,567 417,495 34.12% $250 $9,936,000
Phoenix, AZ 91 * 557,347 *** $17.83
- ------------------------------------------------------------------------------------------------------------------------------------
91-13 Mall of Victor Valley 1/91 1986 $102,857,143 579,076 296,501 51.20% $290 $5,760,000
Victorville, CA * 424,676 $13.56
- ------------------------------------------------------------------------------------------------------------------------------------
91-14 Edison Mall 1/91 1965 $115,000,000 1,013,030 327,833 32.36% $310 $6,900,000
Ft. Meyers, FL 463,883 $14.87
====================================================================================================================================
14 Survey Average $122,221,804 1,003,878 341,386 34.01% $304 $7,698,571
463,293 $16.62
Survey Mean $17.82
====================================================================================================================================
<CAPTION>
=========================================================================================================
Capitalization Rate Unit Rate Comparison
---------------------- ----------------------
Sale Going-In Terminal Price/GLA Price/Mall Sales
No. Property Name OAR OAR IRR Purchased Shop GLA Multiple
=========================================================================================================
<C> <C> <C> <C> <C> <C> <C> <C>
91-1 Confidential 6.20% 7.50% 11.50% $257 $257 0.93
South Central MSA
- ---------------------------------------------------------------------------------------------------------
91-2 Sarasota Square Mall 7.60% 8.00% 12.00% $232 $232 0.97
Sarasota, FL
- ---------------------------------------------------------------------------------------------------------
91-3 Confidential 7.25% 8.00% 11.80% $156 $347 1.16
New England MSA
- ---------------------------------------------------------------------------------------------------------
91-4 Confidential 7.24% 7.50% 11.10% $228 $285 0.69
Top 20 Eastern MSA
- ---------------------------------------------------------------------------------------------------------
91-5 Eastland Mall 7.82% 7.50% 11.73% $203 $203 0.74
Charlotte, NC
- ---------------------------------------------------------------------------------------------------------
91-6 Alderwood Mall 6.07% 7.00% 11.80% $399 $399 1.29
Lynnwood, VA
- ---------------------------------------------------------------------------------------------------------
91-7 Confidential 6.15% n/a n/a $395 $395 1.32
Weston MSA
- ---------------------------------------------------------------------------------------------------------
91-8 The Oaks 6.09% 7.50% 11.25% $320 $320 1.09
Thousand Oaks, CA
- ---------------------------------------------------------------------------------------------------------
91-9 Mayfair Mall 6.40% n/a 13.00% $193 $379 1.32
Wauwatosa, WI
- ---------------------------------------------------------------------------------------------------------
91-10 Valley Fair S.C. 5.80% 6.50% 11.20% $556 $556 1.27
Santa Clara, CA
- ---------------------------------------------------------------------------------------------------------
91-11 Montclair Plaza 5.70% n/a 11.00% $234 $541 1.49
Montclair, CA
- ---------------------------------------------------------------------------------------------------------
91-12 Paradise Valley Mall 6.21% 6.25% 10.75% $287 $383 1.53
Phoenix, AZ
- ---------------------------------------------------------------------------------------------------------
91-13 Mall of Victor Valley 5.60% n/a n/a $242 $347 1.20
Victorville, CA
- ---------------------------------------------------------------------------------------------------------
91-14 Edison Mall 6.00% 7.50% 11.10% $248 $351 1.13
Ft. Meyers, FL
=========================================================================================================
14 Survey Average -- -- -- $264 $358 1.18
Survey Mean 6.44% 7.33% 11.52% $282 $367 1.17
=========================================================================================================
</TABLE>
- ----------
* Adjusted to reflect 100% interest.
** Allocated price.
*** As expanded.
================================================================================
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
REGIONAL SHOPPING CENTER SALES SUMMARY 1992
1992 TRANSACTIONS CHART
Cushman & Wakefield, Inc.
====================================================================================================================================
Sale Sale Year Total GLA/ Mall Shop Mall Shop NOI/
No. Property Name Date Price Price GLA Sold GLA Shop Ratio Sales PSF NOI PSF
====================================================================================================================================
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
92-1 The Avenues 2/92 1990 $124,000,000 987,500 359,645 38.42% $215 $9,734,000
Jacksonville, FL * 480,853 $20.24
- ------------------------------------------------------------------------------------------------------------------------------------
92-2 Confidential 2/92 1985 $115,000,000 898,000 330,000 36.75% $310 $8,337,500
Southern California 330,000 $25.27
- ------------------------------------------------------------------------------------------------------------------------------------
92-3 West Oaks Mall 9/92 1984/ $77,500,000 1,018,900 318,900 31.30% $270 $5,580,000
Houston, TX 90 * 393,900 $14.17
- ------------------------------------------------------------------------------------------------------------------------------------
92-4 Confidential 7/92 1990/ $140,000,000 951,985 328,423 34.50% $352 $10,710,300
New England MSA 92 363,985 $29.43
- ------------------------------------------------------------------------------------------------------------------------------------
92-5 Oakview Mall 6/92 1991 $73,000,000 732,116 252,900 34.64% $275 $5,700,000
Omaha ME 400,900 $14.22
- ------------------------------------------------------------------------------------------------------------------------------------
92-6 Altamonte Mall 6/92 1973/ $112,345,000 1,072,600 392,221 36.57% $300 $8,950,000
Altamonte Springs, FL 74 * 552,708 $16.19
- ------------------------------------------------------------------------------------------------------------------------------------
92-7 Monroeville Mall 5/92 1969 150,000,000 1,302,237 476,928 36.62% $300 $11,250,000
Monroeville, PA 627,173 $13.16
- ------------------------------------------------------------------------------------------------------------------------------------
92-8 Northshore S.C. 5/92 1958 $102,875,000 1,240,000 455,000 36.69% $270 $6,173,000
Peabody, MA 755,000 $8.18
- ------------------------------------------------------------------------------------------------------------------------------------
92-10 T.C. at Boca Raton 4/92 1980/ $202,500,000 1,326,400 396,000 29.66% $400 $13,450,000
Boca Raton, FL 86 396,000 $33.96
- ------------------------------------------------------------------------------------------------------------------------------------
92-11 University Square Mall 2/92 1974 $85,000,000 1,155,940 347,312 30.05% $280 $6,375,000
Tampa, FL 528,312 $12.07
- ------------------------------------------------------------------------------------------------------------------------------------
92-12 Clacksmas Town Ctr. 1/92 1979/ $122,400,000 1,206,824 433,000 35.88% $302 $8,568,000
Portland, OR 81 * 433,000 $19.79
====================================================================================================================================
11 Survey Average $118,601,618 1,081,137 371,848 34.39% $298 $8,620,709
496,530 $17.36
Survey Mean $18.83
====================================================================================================================================
<CAPTION>
=========================================================================================================
Capitalization Rate Unit Rate Comparison
---------------------- ----------------------
Sale Going-In Terminal Price/GLA Price/Mall Sales
No. Property Name OAR OAR IRR Purchased Shop GLA Multiple
=========================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
92-1 The Avenues 7.85% n/a 11.50% $258 $345 1.60
Jacksonville, FL
- ---------------------------------------------------------------------------------------------------------
92-2 Confidential 7.25% n/a 11.50- $348 $348 1.12
Southern California 12.00%
- ---------------------------------------------------------------------------------------------------------
92-3 West Oaks Mall 7.20% n/a 12.00% $197 $243 0.90
Houston, TX
- ---------------------------------------------------------------------------------------------------------
92-4 Confidential 7.65% 8.00% 11.50- $385 $426 1.21
New England MSA 12.00%
- ---------------------------------------------------------------------------------------------------------
92-5 Oakview Mall 7.81% n/a 11.25% $182 $289 1.05
Omaha ME
- ---------------------------------------------------------------------------------------------------------
92-6 Altamonte Mall 7.97% 8.50% 12.00% $203 $286 0.84
Altamonte Springs, FL
- ---------------------------------------------------------------------------------------------------------
92-7 Monroeville Mall 7.50% n/a 11.50% $181 $315 1.28
Monroeville, PA
- ---------------------------------------------------------------------------------------------------------
92-8 Northshore S.C. 6.00% n/a n/a $136 $226 0.84
Peabody, MA
- ---------------------------------------------------------------------------------------------------------
92-10 T.C. at Boca Raton 6.64% 7.00% 10.75% $511 $511 1.28
Boca Raton, FL
- ---------------------------------------------------------------------------------------------------------
92-11 University Square Mall 7.50% 7.50% 11.50% $161 $245 0.87
Tampa, FL
- ---------------------------------------------------------------------------------------------------------
92-12 Clacksmas Town Ctr. 7.00% n/a 11.60% $283 $283 0.94
Portland, OR
=========================================================================================================
11 Survey Average -- -- -- $239 $319 1.07
Survey Mean 7.31% 7.75% 11.66% $259 $320 1.07
=========================================================================================================
</TABLE>
- ----------------
* Adjusted to reflect 100% interest.
================================================================================
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
REGIONAL SHOPPING CENTER SALES SUMMARY 1993
1993 TRANSACTIONS CHART
Cushman & Wakefield, Inc.
====================================================================================================================================
Sale Sale Year Total GLA/ Mall Shop Shop Ratio/ Mall Shop NOI/
No. Property Name Date Built Price GLA Sold GLA Occupancy Sales PSF NOI PSF
====================================================================================================================================
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
93-1 The Galleria@ 12/93 1964/ $125,800,000 1,088,317 354,396 32.56% $384 $9,400,000
Ft. Lauderdale, FL 80/83 401,362 90.00% $23.42
- ------------------------------------------------------------------------------------------------------------------------------------
93-2 Kenwood Towne Ctr. 12/93 1958/ $194,000,000 1,076,337 424,045 39.40% $413 $14,800,000
Cincinnata, OH 88 862,936 97.00% $17.15
- ------------------------------------------------------------------------------------------------------------------------------------
93-3 Westgate Mall 12/93 1982 $71,000,000 895,000 321,000 35.87% $230 $5,857,600
Amarillo, TX 526,000 89.00% $11.14
- ------------------------------------------------------------------------------------------------------------------------------------
93-4 Arden Fair Mall 12/93 1957/81/ $192,400,000 1,085,000 408,700 38.38% $405 $13,468,000
Sacramento, CA 90/93 * 408,700 90.00% $32.95
- ------------------------------------------------------------------------------------------------------------------------------------
93-5 Fiesta Mall 12/93 1979/ $124,000,000 1,036,743 313,187 30.21% $341 $9,045,200
Mesa, AZ 89/90 313,187 98.40% $28.88
- ------------------------------------------------------------------------------------------------------------------------------------
93-6 Coronado Center 9/93 1964/ $115,000,000 1,140,570 394,012 34.55% $250 $8,395,000
Albuquerque, NM 84 512,284 99.70% $16.39
- ------------------------------------------------------------------------------------------------------------------------------------
93-7 Clackamas Town Ctr. 7/93 1979/ $114,827,000 1,206,824 433,000 35.88% $302 $8,899,100
Portland OR 81/93 * 433,000 95.00% $20.55
- ------------------------------------------------------------------------------------------------------------------------------------
93-8 Garden State Plaza 7/93 1957/82/ $380,000,000 1,361,000 587,400 43.16% $434 $28,120,000
Paramus, NJ 84/92 1,361,000 98.00% $20.66
- ------------------------------------------------------------------------------------------------------------------------------------
93-9 Lakewood Center Mall 6/93 1975 $172,000,000 1,875,953 348,645 18.58% $300 $14,687,800
Lakewood, CA * 596,021 96.40% $24.64
- ------------------------------------------------------------------------------------------------------------------------------------
93-10 Carolina Place 6/93 1991 $116,000,000 1,097,826 318,628 29.01% $200 $8,248,000
Charlotte, NC * 598,920 75.00% $13.77
- ------------------------------------------------------------------------------------------------------------------------------------
93-11 Rivercenter 5/93 1988 $100,000,000 1,060,271 225,000 21.22% $350 $9,000,000
San Antonio, TX 922,656 92.00% $9.75
- ------------------------------------------------------------------------------------------------------------------------------------
93-12 The Florida Mall 3/93 1986 $163,000,000 1,107,864 368,018 33.22% $447 $12,200,000
Orlando, FL * 506,232 98.00% $24.10
- ------------------------------------------------------------------------------------------------------------------------------------
93-13 North Riverside Park 1/93 1975/ $100,000,000 1,097,974 397,086 36.17% $240 $7,750,000
Riverside, IL 89 * 467,813 92.40% $16.57
- ------------------------------------------------------------------------------------------------------------------------------------
93-14 Sarasota Square Mall 1/93 1977/ $84,000,000 894,081 313,511 35.07% $245 $6,012,000
Sarasota, FL 89 313,511 95.00% $19.18
====================================================================================================================================
14 Survey Average $146,573,357 1,143,124 371,895 32.53% $331 $11,134,471
587,402 93.71% $18.96
Survey Mean $19.94
====================================================================================================================================
<CAPTION>
=========================================================================================================
Capitalization Rate Unit Rate Comparison
---------------------- ----------------------
Sale Going-In Terminal Price/GLA Price/Mall Sales
No. Property Name OAR OAR IRR Purchased Shop GLA Multiple
=========================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
93-1 The Galleria@ 7.47% n/a 11.50% $313 $355 0.92
Ft. Lauderdale, FL **
- ---------------------------------------------------------------------------------------------------------
93-2 Kenwood Towne Ctr. 7.63% 7.50% 11.00% $225 $457 1.11
Cincinnata, OH
- ---------------------------------------------------------------------------------------------------------
93-3 Westgate Mall 8.25% 8.50% 12.00% $135 $221 0.98
Amarillo, TX
- ---------------------------------------------------------------------------------------------------------
93-4 Arden Fair Mall 7.00% n/a n/a $471 $471 1.16
Sacremento, CA
- ---------------------------------------------------------------------------------------------------------
93-5 Fiesta Mall 7.29% 7.50% 11.50% $396 $396 1.16
Mesa, AZ
- ---------------------------------------------------------------------------------------------------------
93-6 Coronado Center 7.30% 7.25% 10.75% $224 $292 1.17
Albuquerque, NM
- ---------------------------------------------------------------------------------------------------------
93-7 Clackamas Town Ctr. 7.75% 8.00% 11.50% $265 $265 0.88
Portland OR
- ---------------------------------------------------------------------------------------------------------
93-8 Garden State Plaza 7.40% 7.50- 11.50% $279 $647 1.49
Paramua, NJ 9.00%
- ---------------------------------------------------------------------------------------------------------
93-9 Lakewood Center Mall 8.54% n/a n/a $289 $493 1.64
Lakewood, CA ***
- ---------------------------------------------------------------------------------------------------------
93-10 Carolina Place 7.11% 7.00% 12.00% $194 $364 1.82
Charlotte, NC
- ---------------------------------------------------------------------------------------------------------
93-11 Rivercenter 9.00% n/a 12.50% $108 $444 1.27
San Antonio, TX
- ---------------------------------------------------------------------------------------------------------
93-12 The Florida Mall 7.48% n/a 11.00% $322 $443 0.99
Orlando, FL
- ---------------------------------------------------------------------------------------------------------
93-13 North Riverside Park 7.75% n/a 11.10% $214 $252 1.06
Riverside, IL
- ---------------------------------------------------------------------------------------------------------
93-14 Sarasota Square Mall 7.16% n/a n/a $268 $268 1.09
Sarasota, FL
=========================================================================================================
14 Survey Average $250 $394 1.19
Survey Mean 7.55% 7.78% 11.48% $265 $383 1.19
=========================================================================================================
</TABLE>
- ----------
* Adjusted to reflect 100% interest.
** Includes 47,000 square feet of outparcel GLA.
*** Includes strip center and outparcels.
================================================================================
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
REGIONAL SHOPPING CENTER SALES SUMMARY 1994
1994 TRANSACTIONS CHART
Cushman & Wakefield, Inc.
====================================================================================================================================
Sale Sale Year Total GLA/ Mall Shop Shop Ratio/ Mall Shop NOI/
No. Property Name Date Built Price GLA Sold GLA Occupancy Sales PSF NOI PSF
====================================================================================================================================
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
94-1 Mall of The Americas 10/94 1970 $76,200,000 678,000 225,000 33.19% $338 $6,706,000
Miami, Florida 92/93 678,000 98.50% $9.89
- ------------------------------------------------------------------------------------------------------------------------------------
94-2 Corte Madera T.C. 9/94 1958/ $70,500,000 425,572 237,453 55.80% $325 $5,900,000
Marin County, CA 85 425,572 93.50% $13.86
- ------------------------------------------------------------------------------------------------------------------------------------
94-3 North Shore Square 7/94 1985 $34,150,000 624,000 178,326 28.58% $218 3,073,000
Slidell, Louisiana 358,709 94.00% $8.57
- ------------------------------------------------------------------------------------------------------------------------------------
94-4 Chesterfield Towne Ctr. 6/94 1988/ $93,600,000 605,161 291,744 48.21% $290 $8,424,000
Richmond, Virginia 87/89 605,161 95.00% $13.92
- ------------------------------------------------------------------------------------------------------------------------------------
94-5 Crossroads Mall 4/94 1974 $51,500,000 1,114,720 378,704 33.97% $189 $5,300,000
Oklahoma City, OK 378,704 95.00% $14.00
- ------------------------------------------------------------------------------------------------------------------------------------
94-6 Riverchase Galleria 2/94 1986 $175,000,000 1,251,142 350,504 28.01% $305 $12,949.000
Hoover, Alabama 462,612 95.00% $27.99
- ------------------------------------------------------------------------------------------------------------------------------------
93-7 Confidential 1/94 1981/ $119,000,000 1,294,682 493,404 38.11% $260 $8,962,500
Top Ten MSA 88/91 493,404 95.20% $18.16
====================================================================================================================================
7 Survey Average 7/93 $88,584,286 856,182 307,876 35.96% $271 $7,330,643
488,023 96.16% $15,08
Survey Mean $16.20
====================================================================================================================================
<CAPTION>
=========================================================================================================
Capitalization Rate Unit Rate Comparison
---------------------- ----------------------
Sale Going-In Terminal Price/GLA Price/Mall Sales
No. Property Name OAR OAR IRR Purchased Shop GLA Multiple
=========================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
94-1 Mall of The Americas 8.80% n/a 11.80% $112 $339 1.00
Miami, Florida **
- ---------------------------------------------------------------------------------------------------------
94-2 Corte Madera T.C. 8.37% 9.00% 11.00% $166 $297 0.91
Marin County, CA ***
- ---------------------------------------------------------------------------------------------------------
94-3 North Shore Square 9.00% n/a n/a $95 $192 0.88
Slidell, Louisiana
- ---------------------------------------------------------------------------------------------------------
94-4 Chesterfield Towne Ctr. 9.00% n/a n/a $155 $321 1.11
Richmond, Virginia
- ---------------------------------------------------------------------------------------------------------
94-5 Crossroads Mall 10.29% n/a n/a $136 $136 0.72
Oklahoma City, OK
- ---------------------------------------------------------------------------------------------------------
94-6 Riverchase Galleria 7.40% n/a n/a $378 $499 1.64
Hoover, Alabama
- ---------------------------------------------------------------------------------------------------------
93-7 Confidential 7.53% 8.00- 11.00% $241 $241 0.93
Top Ten MSA 8.25%
=========================================================================================================
7 Survey Average $182 $288 1.08
Survey Mean 8.63% 8.42% 11.27% $183 $289 1.03
=========================================================================================================
- ----------
* Adjusted to reflect 100% interest.
** Sale includes leased anchors, including TJMaxx, Home Depot, Marshalls, Oshmans, & Cinema.
*** Sale includes 75,712 square foot professional building..
=========================================================================================================
</TABLE>
<PAGE>
===================================
Cushman & Wakefield Investor Survey
===================================
<PAGE>
<TABLE>
OFFICES-URBAN, CLASS A
<CAPTION>
Projection
Going In Cap Rate Terminal Cap Rate IRR Income Growth Expense Growth Period
====================================================================================================================================
Low High Low High Low High Low High Low High Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10.00% 10.50% 10.00% 10.00% 12.00% 13.00% 3.00% 3.00% 4.00% 4.00% 10
9.50% 9.75% 9.75% 10.00% 11.75% 12.25% 3.00% 3.50% 3.50% 3.50% 10
9.00% 9.00% 9.00% 9.00% 12.00% 12.00% 0.00% 10.00% 4.00% 4.00% 10
8.00% 10.00% 9.00% 11.00% 10.00% 13.00% 0.00% 4.00% 4.00% 4.00% 10
8.00% 10.00% 9.00% 9.00% 11.00% 13.00% 4.00% 5.00% 4.00% 4.00% 10
7.50% 9.00% 8.00% 9.50% 10.50% 11.50% 2.00% 3.50% 3.50% 3.50% 10
9.00% 10.00% 10.00% 11.00% 11.00% 13.00% 4.00% 4.00% 4.00% 4.00% 10
9.50% 10.00% 10.00% 10.50% 11.40% 11.70% 3.00% 4.00% 3.50% 4.50% 10
12.00% 12.00% 10.00% 10.00% 15.00% 15.00% 3.00% 4.00% 2.00% 4.00% 5
12.00% 12.00% 12.00% 12.00% 14.00% 14.00% 3.00% 3.00% 3.00% 3.00% 10
8.50% 9.00% 9.00% 9.50% 12.00% 12.50% 2.00% 3.00% 2.00% 3.00% 10
9.50% 10.00% 10.00% 11.00% 12.00% 13.00% 3.00% 3.00% 3.00% 3.00% 10
8.00% 9.00%
10.00% 10.00% 10.00% 10.00% 12.50% 12.50% 2.00% 3.00% 3.00% 3.00% 10
7.00% 8.00% 9.00% 9.00% 11.00% 11.00% 6.00% 6.00% 4.00% 4.00% 10
8.00% 9.00% 9.00% 10.00% 11.00% 12.00% 3.00% 3.00% 3.00% 3.00% 10
9.00% 9.25% 10.00% 10.25% 12.00% 12.00% 4.00% 4.00% 4.00% 4.00% 10
- -----------------------------------------------------------------------------------------------------------------------
No. of Responses 16 16 17 17 16 16 16 16 16 16
Average 9.16% 9.84% 9.51% 10.04% 11.82% 12.59% 2.81% 4.13% 3.41% 3.66%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
OFFICES-SUBURBAN
<CAPTION>
Projection
Going In Cap Rate Terminal Cap Rate IRR Income Growth Expense Growth Period
====================================================================================================================================
Low High Low High Low High Low High Low High Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9.50% 11.00% 9.00% 10.50% 14.00% 14.00% 3.25% 3.25% 4.00% 4.00% 5
9.00% 9.00% 9.00% 9.50% 11.00% 11.00% 5.00% 5.00% 4.00% 4.00% 10
9.00% 10.00% 9.50% 10.00% 11.50% 12.50% 3.50% 3.50% 10
9.50% 9.75% 9.75% 10.00% 11.75% 12.25% 3.50% 4.00% 3.50% 3.50% 10
9.00% 9.00% 9.00% 9.00% 12.00% 12.00% 4.00% 15.00% 4.00% 4.00% 10
9.00% 11.00% 9.75% 12.00% 11.00% 14.00% 0.00% 4.00% 4.00% 4.00% 10
9.00% 10.50% 9.50% 11.00% 11.50% 12.00% 2.00% 3.50% 3.50% 3.50% 10
8.00% 9.50% 9.00% 10.50% 11.00% 12.00% 4.00% 4.00% 4.00% 4.00% 10
9.50% 9.75% 9.75% 10.50% 11.40% 11.70% 3.00% 4.00% 3.50% 4.50% 10
12.00% 12.00% 10.00% 10.00% 15.00% 15.00% 3.00% 4.00% 2.00% 4.00% 5
10.00% 10.00% 10.00% 10.00% 12.00% 12.00% 4.00% 4.00% 3.00% 3.00% 10
8.50% 9.00% 9.00% 9.50% 12.00% 12.50% 3.00% 5.00% 3.00% 4.00% 10
9.00% 10.00% 9.50% 10.50% 12.00% 12.50% 3.00% 3.00% 3.00% 3.00% 10
9.00% 9.00%
10.50% 10.50% 10.50% 10.50% 12.50% 12.50% 2.00% 3.00% 3.00% 3.00% 10
9.00% 10.00% 9.00% 9.00% 15.00% 15.50% 5.00% 5.00% 3.00% 3.00% 5-7
9.00% 9.00% 9.00% 9.00% 11.25% 11.25% 5.00% 5.00% 4.00% 4.00% 10
8.00% 9.00% 9.00% 10.00% 11.00% 12.00% 3.00% 3.00% 3.00% 3.00% 10
9.00% 9.25% 10.00% 10.25% 12.00% 12.00% 4.00% 4.00% 4.00% 4.00% 10
- -----------------------------------------------------------------------------------------------------------------------
No. of Responses 18 18 19 19 18 18 17 17 18 18
Average 9.25% 9.90% 9.43% 10.04% 12.11% 12.59% 3.34% 4.63% 3.44% 3.67%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
INDUSTRIAL
<CAPTION>
Projection
Going In Cap Rate Terminal Cap Rate IRR Income Growth Expense Growth Period
====================================================================================================================================
Low High Low High Low High Low High Low High Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9.00% 9.00% 9.50% 9.50% 11.50% 11.50% 4.00% 4.00% 4.00% 4.00% 10
8.50% 10.00% 9.50% 10.00% 11.50% 12.50% 3.50% 3.50% 10
9.00% 9.25% 9.50% 9.75% 11.50% 11.75% 3.50% 4.00% 3.50% 3.50% 10
9.00% 9.00% 9.50% 9.50% 11.50% 11.50% 2.00% 8.00% 4.00% 4.00% 10
9.00% 10.00% 9.75% 12.00% 10.00% 13.00% 2.00% 4.00% 4.00% 4.00% 10
9.00% 10.00% 10.00% 11.00% 11.50% 12.50% 4.00% 4.00% 4.00% 4.00% 10
9.00% 9.50% 9.50% 9.75% 11.20% 11.50% 3.00% 3.50% 3.50% 4.00% 10
12.00% 12.00% 10.00% 10.00% 14.00% 14.00% 2.00% 3.00% 3
8.50% 8.50% 9.00% 9.50% 11.00% 11.50% 4.00% 4.00% 4.00% 4.00% 10
9.00% 9.50% 9.50% 10.00% 11.25% 11.75% 3.00% 3.00% 3.00% 3.00% 10
9.00% 10.00%
9.00% 9.00% 9.50% 9.50% 11.25% 11.25% 4.00% 4.50% 4.00% 4.00% 10
9.00% 9.25% 10.00% 10.25% 12.00% 12.00% 4.00% 4.00% 4.00% 4.00% 10
- -----------------------------------------------------------------------------------------------------------------------
No. of Responses 12 12 13 13 12 12 11 11 11 11
Average 9.17% 9.58% 9.56% 10.06% 11.52% 12.06% 3.23% 4.18% 3.77% 3.82%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
RETAIL, COMMUNITY AND NEIGHBOHOOD CENTERS
<CAPTION>
Projection
Going In Cap Rate Terminal Cap Rate IRR Income Growth Expense Growth Period
====================================================================================================================================
Low High Low High Low High Low High Low High Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9.50% 11.00% 9.00% 10.50% 14.00% 14.00% 3.25% 3.25% 4.00% 4.00% 5
9.00% 10.00% 9.00% 10.00% 11.50% 12.50% 3.50% 3.50% 3.50% 3.50% 10
9.50% 9.75% 9.75% 10.00% 11.50% 11.75% 3.50% 4.00% 3.50% 3.50% 10
9.50% 9.50% 10.00% 10.00% 12.50% 12.50% 0.00% 4.00% 4.00% 4.00% 10
9.00% 10.50% 9.75% 11.50% 10.00% 14.00% 2.00% 4.00% 4.00% 4.00% 10
10.00% 10.00% 10.00% 10.00% 12.00% 12.00% 4.00% 4.00% 4.00% 4.00% 10
8.50% 9.50% 9.50% 10.50% 11.50% 12.50% 4.00% 4.00% 4.00% 4.00% 10
9.50% 9.75% 9.75% 10.00% 11.25% 11.50% 3.00% 4.00% 3.50% 4.50% 10
8.50% 9.00% 9.00% 9.50% 11.00% 12.00% 3.00% 3.00% 3.00% 3.00% 10
9.50% 10.00% 10.00% 10.50% 11.50% 12.50% 3.00% 3.00% 3.00% 3.00% 10
9.00% 10.00%
9.50% 9.50% 10.00% 10.00% 12.00% 12.00% 3.00% 3.00% 3.00% 3.00% 10
8.50% 9.50% 10.00% 11.00% 11.25% 12.50% 3.00% 3.00% 3.00% 3.00% 10
9.00% 9.25% 10.00% 10.25% 12.00% 12.00% 4.00% 4.00% 4.00% 4.00% 10
- -----------------------------------------------------------------------------------------------------------------------
No. of Responses 13 13 14 14 13 13 13 13 13 13
Average 9.19% 9.79% 9.63% 10.27% 11.69% 12.44% 3.02% 3.60% 3.58% 3.65%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
RETAIL, POWER CENTERS AND "BIG BOX"
<CAPTION>
Projection
Going In Cap Rate Terminal Cap Rate IRR Income Growth Expense Growth Period
====================================================================================================================================
Low High Low High Low High Low High Low High Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9.25% 9.50% 9.50% 10.00% 11.50% 11.50% 3.00% 3.50% 4.00% 4.00% 10
9.50% 9.75% 9.75% 10.00% 10.50% 11.50% 3.50% 4.00% 3.50% 3.50% 10
10.00% 10.00% 10.00% 10.00% 12.00% 12.00% 0.00% 4.00% 4.00% 4.00% 10
9.00% 9.50% 9.50% 10.00% 11.00% 12.00% 2.00% 3.50% 3.50% 3.50% 10
8.00% 9.00% 9.00% 10.00% 11.00% 12.00% 4.00% 4.00% 4.00% 4.00% 10
9.75% 10.00% 9.75% 10.00% 11.20% 11.50% 3.00% 3.50% 3.50% 4.00% 10
9.00% 9.50% 10.00% 10.00% 10.50% 11.00% 2.50% 2.50% 2.50% 2.50% 10
9.50% 10.00% 10.00% 10.50% 11.50% 12.50% 3.00% 3.00% 3.00% 3.00% 10
8.50% 9.50%
9.00% 9.00% 9.50% 9.50% 11.50% 11.50% 3.00% 3.00% 3.00% 3.00% 10
9.50% 9.50% 9.75% 9.75% 11.25% 11.25% 4.00% 4.00% 4.00% 4.00% 10
9.00% 9.25% 10.00% 10.25% 12.00% 12.00% 4.00% 4.00% 4.00% 4.00% 10
- -----------------------------------------------------------------------------------------------------------------------
No. of Responses 11 11 12 12 11 11 11 11 11 11
Average 9.23% 9.55% 9.60% 9.96% 11.27% 11.70% 2.91% 3.55% 3.55% 3.59%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
REGIONAL MALLS
<TABLE>
<CAPTION>
Projection
Going In Cap Rate Terminal Cap Rate IRR Income Growth Expense Growth Period
====================================================================================================================================
Low High Low High Low High Low High Low High Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8.00% 8.50% 8.50% 9.00% 10.50% 10.50% 3.00% 3.50% 4.00% 4.00% 10
7.75% 8.25% 8.50% 8.75% 11.00% 11.50% 3.50% 4.00% 3.50% 3.50% 10
7.50% 7.50% 8.00% 8.00% 11.50% 11.50% 0.00% 4.00% 4.00% 4.00% 10
7.50% 9.00% 8.00% 9.75% 10.00% 12.00% 2.00% 4.00% 4.00% 4.00% 10
7.00% 8.00% 7.00% 8.00% 11.00% 11.00% 4.00% 4.00% 4.00% 4.00% 10
7.50% 8.00% 7.50% 9.00% 10.50% 11.50% 2.00% 3.50% 3.50% 3.50% 10
7.00% 8.00% 9.00% 10.00% 10.50% 11.50% 4.00% 4.00% 4.00% 4.00% 10
7.50% 8.00% 8.50% 8.50% 10.00% 11.00% 3.00% 3.00% 3.00% 3.00% 10
7.50% 9.00% 8.50% 8.50% 11.50% 11.50% 4.00% 5.00% 10
- ------------------------------------------------------------------------------------------------------------------------------------
No. of Responses 9 9 9 9 9 9 9 9 8 8
Average 7.47% 8.25% 8.17% 8.83% 10.72% 11.33% 2.83% 3.89% 3.75% 3.75%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LODGING, FULL SERVICE
<TABLE>
<CAPTION>
Blended Equity
Going-In Cap Rate Terminal Cap Rate IRR IRR
- -----------------------------------------------------------------------------------------------------------
Low High Low High Low High Low High
- -----------------------------------------------------------------------------------------------------------
Luxury
<S> <C> <C> <C> <C> <C> <C> <C> <C>
8.00% 9.00% 10.00% 10.00% 15.00% 20.00% 20.00% 25.00%
5.00% 7.00% 10.50% 11.00% 12.50% 13.00%
11.00% 13.00% 11.00% 13.00% 15.00% 15.00% 20.00% 25.00%
10.50% 10.50% 10.00% 10.00%
11.00% 11.00% 13.00% 13.00%
9.00% 9.00% 10.00% 10.00% 13.00% 13.00% 16.00% 16.00%
11.00% 12.00% 10.00% 11.00% 12.00% 16.00% 19.00% 23.00%
8.00% 8.00% 10.00% 10.00% 12.00% 14.00% 15.00% 20.00%
6.00% 8.00% 8.00% 9.00% 20.00% 25.00%
8.50% 8.50% 9.00% 9.00%
8.00% 10.00% 15.00% 18.00% 18.00% 22.00%
- -----------------------------------------------------------------------------------------------------------
No. of Responses 10 10 11 11 7 7 7 7
Average 8.80% 9.60% 9.95% 10.55% 13.50% 15.57% 18.29% 22.29%
- -----------------------------------------------------------------------------------------------------------
First Class
11.00% 11.00% 11.00% 11.00% 15.00% 20.00% 20.00% 20.00%
11.00% 11.00% 13.00% 13.00%
10.00% 10.00% 11.00% 11.00% 15.00% 15.00% 18.00% 18.00%
10.00% 10.00% 11.00% 11.00% 15.00% 18.00% 15.00% 20.00%
10.00% 10.00% 10.50% 10.50% 16.00% 16.00% 25.00% 25.00%
8.00% 9.00% 10.00% 10.00% 20.00% 25.00%
10.00% 10.00% 10.50% 10.50% 22.00% 22.00%
8.00% 10.00% 15.00% 18.00% 18.00% 22.00%
5.00% 5.00% 10.00% 11.00% 15.00% 15.00%
8.00% 8.00% 10.00% 10.00% 14.50% 14.50% 20.00% 20.00%
10.50% 10.50% 11.00% 11.00% 13.00% 13.00% 20.00% 23.00%
- -----------------------------------------------------------------------------------------------------------
No. of Responses 10 10 11 11 8 8 9 9
Average 9.35% 9.45% 10.55% 10.82% 14.81% 16.19% 19.78% 21.67%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Income Growth Expense Growth Projection Management
- -------------------------------------------------------------- Period Fees Reserves
Low High Low High Years % Revenue % Revenue
- ------------------------------------------------------------------------------------------------
Luxury
<S> <C> <C> <C> <C> <C> <C> <C>
6.00% 6.00% 4.00% 4.00% 7 2.50% 4.00%
4.00% 5.00% 3.00% 4.00% 10 3.50% 4.00%
4.00% 8.00% 4.00% 4.00% 5 4.00% 5.00%
3.50% 5.00% 10 4.50% 5.00%
5.00% 6.00% 3.00% 4.00% 5 3.00% 4.00%
4.00% 4.50% 3.00% 3.00% 10 2.50% 3.00%
3.00% 4.00% 4.00% 4.00% 5 3.00% 3.50%
8.00% 8.00% 6.00% 6.00% 10 4.50% 5.50%
5.00% 5.00% 3.00% 4.00% 5 4.00% 4.00%
5.00% 5.00% 4.00% 4.00% 5 3.00% 3.00%
4.00% 4.00% 5 3.50% 4.00%
- ------------------------------------------------------------------------------------------------
No. of Responses 9 9 11 11 11 11 11
Average 4.89% 5.72% 3.77% 4.18% 7 3.45% 4.09%
- ------------------------------------------------------------------------------------------------
First Class
4.00% 4.00% 4.00% 4.00% 7 2.50% 3.00%
5.00% 6.00% 3.00% 4.00% 5 3.00% 4.00%
4.00% 4.50% 3.00% 3.00% 10 2.50% 3.00%
10.00% 10.00% 5.00% 5.00% 10 3.50% 4.50%
4.00% 4.00% 3.00% 3.00% 7 2.50% 4.00%
5.00% 5.00% 3.00% 4.00% 5 3.00% 4.00%
4.00% 4.00% 4.00% 4.00% 5 3.00% 4.00%
4.00% 4.00% 5 3.50% 4.00%
4.00% 4.00% 3.00% 3.00% 5 3.00% 4.50%
3.50% 3.50% 3.50% 3.50% 10 2.00% 4.00%
4.50% 4.50% 3.50% 3.50% 10 3.50% 4.00%
- ------------------------------------------------------------------------------------------------
No. of Responses 1 0 10 11 11 11 11 11
Average 4.80% 4.95% 3.55% 3.73% 7 2.91% 3.91%
- ------------------------------------------------------------------------------------------------
</TABLE>
- ----------
The blended IRR is the composite return on debt and equity and the rate to be
applied to net operating income.
The equity return is rate of return on the equity component of the investment
only.
<PAGE>
LODGING, LIMITED SERVICE
<TABLE>
<CAPTION>
Blended Equity
Going-In Cap Rate Terminal Cap Rate IRR IRR
- ------------------------------------------------------------------------------------------------------------
Low High Low High Low High Low High
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-Rate
10.00% 10.00% 12.00% 12.00% 20.00% 20.00%
10.00% 12.00% 10.00% 12.00% 15.00% 15.00% 20.00% 25.00%
11.00% 11.00% 10.00% 10.00%
10.00% 13.00% 12.00% 14.00% 10.00% 12.00% 12.00% 14.00%
12.00% 12.0O% 14.00% 14.00%
12.00% 12.00% 13.00% 13.00% 19.00% 19.00% 22.00% 22.00%
10.50% 10.50% 12.00% 12.00% 15.00% 20.00% 18.00% 20.00%
10.00% 11.00% 22.00% 22.00%
- ------------------------------------------------------------------------------------------------------------
No. of Responses 7 7 8 8 4 4 6 6
Average 10.79% 11.50% 11.63% 12.25% 14.75% 16.50% 19.00% 20.50%
- ------------------------------------------------------------------------------------------------------------
Economy
10.00% 12.00% 12.00% 12.00% 18.00% 25.00%
10.00% 13.00% 12.00% 14.00% 10.00% 12.00% 12.00% 14.00%
12.50% 12.50% 14.00% 14.00%
13.00% 13.00% 14.00% 14.00% 21.00% 21.00% 24.00% 24.00%
11.50% 11.50% 12.00% 12.00% 15.00% 20.00% 18.00% 20.00%
- ------------------------------------------------------------------------------------------------------------
No. of Responses 5 5 5 5 3 3 4 4
Average 11.40% 12.40% 12.80% 13.20% 15.33% 17.67% 18.00% 20.75%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Income Growth Expense Growth Projection Management
- -------------------------------------------------------------- Period Fees Reserves
Low High Low High Years % Revenue % Revenue
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Mid-Rate
4,00% 4.00% 4.00% 4.00% 7 2.50% 3.00%
4.00% 8.00% 4.00% 4.00% 5 4.00% 4.50%
3.50% 5.00% 10 4.00% 5.00%
4.00% 4.00% 3.50% 3.50% 5 4.00% 4.50%
2.00% 3.00% 3.00% 4.00% 5 3.00% 6.00%
3.50% 4.00% 3.00% 3.00% 5 3.00% 3.00%
5.00% 5.00% 4.00% 4.00% 10 2.50% 4.00%
6.00% 6.00% 4.00% 4.00% 5 5.00% 4.00%
- ------------------------------------------------------------------------------------------------
No. of Responses 7 7 8 8 8 8 8
Average 4.07% 4.86% 3.63% 3.94% 7 3.50% 4.25%
- ------------------------------------------------------------------------------------------------
Economy
4.00% 4.00% 4.00% 4.00% 7 2.50% 3.00%
4.00% 4.00% 3.50% 3.50% 5 4.00% 4.50%
2.00% 3.00% 3.00% 4.00% 5 3.00% 6.00%
2.50% 4.00% 3.00% 3.00% 5 4.00% 3.00%
5.00% 5.00% 4.00% 4.00% 10 2.50% 4.00%
- ------------------------------------------------------------------------------------------------
No. of Responses 5 5 5 5 5 5 5
Average 3.50% 4.00% 3.50% 3.70% 6 3.20% 4.10%
- ------------------------------------------------------------------------------------------------
</TABLE>
- ----------
The blended IRR is the composite return on debt and equity and the rate to be
applied to net operating income.
The equity return is rate of return on the equity component of the investment
only.
<PAGE>
APARTMENTS
<TABLE>
<CAPTION>
Projection
Going In Cap Rate Terminal Cap Rate IRR Income Growth Expense Growth Period
====================================================================================================================================
Low High Low High Low High Low High Low High Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8.50% 9.00% 9.50% 9.50% 11.00% 11.00% 4.00% 4.00% 4.00% 4.00% 10
8.50% 9.00% 9.25% 9.50% 11.50% 12.00% 3.50% 4.00% 3.50% 3.50% 10
8.50% 9.25% 9.00% 10.00% 10.50% 12.00% 2.00% 8.00% 4.00% 4.00% 10
8.00% 9.00% 8.50% 9.50% 3.50% 3.50% 3.50% 3.50% 10
8.50% 8.50% 9.25% 9.25% 11.25% 11.25% 4.00% 4.00% 4.00% 4.00% 10
9.00% 9.25% 9.25% 9.50% 11.20% 11.50% 3.75% 4.25% 4.00% 4.50% 10
8.50% 9.50% 9.00% 10.00% 11.00% 12.00% 3.00% 4.00% 3.00% 4.00% 10
8.75% 9.25% 9.25% 9.75% 3.00% 3.00% 3.00% 3.00%
9.00% 9.00%
9.00% 9.00% 9.50% 9.50% 11.50% 11.50% 3.00% 4.00% 3.00% 3.00% 10
8.00% 9.00% 9.00% 10.00% 11.00% 12.50% 3.00% 3.00% 3.00% 3.00% 10
9.00% 9.25% 10.00% 10.25% 12.00% 12.00% 4.00% 4.00% 4.00% 4.00% 10
- ------------------------------------------------------------------------------------------------------------------------------------
No. of Responses 11 11 12 12 9 9 11 11 11 11
Average 8.57% 9.09% 9.21% 9.65% 11.22% 11.75% 3.34% 3.98% 3.55% 3.68%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SURVEY OF RECENT CLOSED TRANSACTIONS
<TABLE>
<CAPTION>
Net Rentable Area Sales Price Per Sq. Ft.
------------------------------ -------------------------------
Property No. Sales No. Sales
Type Reported Average Median Reported Average Median
- -------------------- ------------------------------ -------------------------------
<S> <C> <C> <C> <C> <C> <C>
Offices, Urban 16 498,859 440,929 16 $130.66 $116.76
Offices, Suburban 66 230,760 191,893 66 $83.39 $78.78
Industrial 57 150,787 118,400 57 $37.75 $37.87
Retail (Other Than Malls) 29 136,429 121,552 29 $95.99 $91.67
Malls 9 615,102 649,130 9 $124.68 $96.00
</TABLE>
<TABLE>
<CAPTION>
Number of Units Sales Price Per Unit
------------------------------ -------------------------------
No. Sales No. Sales
Reported Average Median Reported Average Median
------------------------------ -------------------------------
<S> <C> <C> <C> <C> <C> <C>
Apartments 50 201 190 50 $47,975 $46,458
</TABLE>
<TABLE>
<CAPTION>
Going-in Cap Rate Internal Rate of Return
------------------------------- --------------------------------
Property No. Sales No. Sales
Type Reported Average Median Reported Average Median
- -------------------- ------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C>
Offices, Urban 12 9.68% 9.13% 9 12.42 12.75%
Offices, Suburban 57 9.97% 10.00% 11 13.20 12.25%
Industrial 28 10.80% 10.61% (Sample Not Large Enough to Report)
Retail (Other Than Malls) 27 10.05% 10.00% 8 11.59 11.33%
Malls 9 9.29% 9.53% (Sample Not Large Enough to Report)
</TABLE>
Going-in Cap Rate
------------------------------
Property No. Sales
Type Reported Average Median
- -------------------- -------------------------------
Apartments 41 9.19% 9.30%
<PAGE>
- --------------------------------------------------------------------------------
Appraiser Qualification
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
QUALIFICATIONS OF RICHARD W LATELLA
================================================================================
Professional Affiliations
Member, American Institute of Real Estate Appraisers
(MAI Designation #8346)
New York State Certified General Real Estate Appraiser #46000003892
Pennsylvania State Certified General Real Estate Appraiser #GA-001053-R
State of Maryland Certified General Real Estate Appraiser #01462
Minnesota Certified General Real Estate Appraiser #20026517
Commonwealth of Virginia Certified General Real Estate Appraiser #4001-003348
State of Michigan Certified General Real Estate Appraiser #1201005216
New Jersey Real Estate Salesperson (License #NS-130101-A)
Certified Tax Assessor - State of New Jersey
Affiliate Member - International Council of Shopping Centers, ICSC
Real Estate Experience
Senior Director, Retail Valuation Group, Cushman & Wakefield Valuation Advisory
Services. Cushman & Wakefield is a national full service real estate
organization and a Rockefeller Group Company. While Mr. Latella's experience has
been in appraising a full array of property types, his principal focus is in the
appraisal and counseling for major retail properties and specialty centers on a
national basis. As Senior Director of Cushman & Wakefield's Retail Group his
responsibilities include the coordination of the firm's national group of
appraisers who specialize in the appraisal of regional malls, department stores
and other major retail property types. He has personally appraised and consulted
on in excess of 200 regional malls and specialty retail properties across the
country.
Senior Appraiser, Valuation Counselors, Princeton, New Jersey, specializing in
the appraisal of commercial and industrial real estate, condemnation analyses
and feasibility studies for both corporate and institutional clients from July
1980 to April 1983.
Supervisor, State of New Jersey, Division of Taxation, Local Property and Public
Utility Branch in Trenton, New Jersey, assisting and advising local municipal
and property tax assessors throughout the state from June 1977 to July 1980.
Associate, Warren W Orpen & Associates, Trenton, New Jersey, assisting in the
preparation of appraisals of residential property and condemnation analyses
from July 1975 to April 1977.
Formal Education
Trenton State College, Trenton, New Jersey
Bachelor of Science, Business Administration - 1977
As of the date of this report, Richard W. Latella, MAI, has completed the
requirements under the continuing education program of the Appraisal Institute.
<PAGE>
QUALIFICATIONS OF DOUGLAS C. HOLOWINK
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Education
Yale University, New Haven, Connecticut
Bachelor of Arts - May 1983
Major - Psychology/Administrative Science
Curriculum - Accounting, computer science,
architecture and geology/geophysics
American Institute of Real Estate Appraisers:
Real Estate Appraisal Principles (1A1)
Basic Valuation Procedures (1A2)
Standards of Professional Practice
Capitalization Theory and Techniques Part A (1B-A)
Capitalization Theory and Techniques Part B (1B-B)
Case Studies In Real Estate Valuation (2-1)
Report Writing and Valuation Analysis (2-2)
Fairfield University - Real Estate Law
University of Connecticut - Real Estate Appraisal
Experience
Cushman & Wakefield, Inc.
New York, New York
July 1988 to Present
Director in charge of Portfolio Securitization Group Appraisal. Appraisal
experience includes the valuation of income producing properties throughout the
United States. Assignments have included suburban and tower office buildings,
shopping centers, regional and super-regional shopping malls, large scale
industrial complexes, apartment buildings, hotels, vacant land, air rights and
special use facilities including gasoline stations, refrigerated warehouse
properties and hospitals. Valuations have been made of proposed, partially
completed, existing and renovated structures.
Cushman & Wakefield of Connecticut, Inc.
Stamford, Connecticut
May 1986 to June 1988
Associate involved in appraisal of income producing properties throughout
the United States.
<PAGE>
Qualifications of Douglas C. Holowink
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Plaza Realty & Management Corp.
Stamford, Connecticut
May 1985 to April 1986
Commercial Brokerage Manager - Responsibilities included the leasing of
several office buildings and the investment and feasibility analysis of
residential, commercial and industrial properties.
Curtis Associates, Inc.
Greenwich, Connecticut
June 1983 to April 1985
Commercial Brokerage Manager - Responsibilities included residential and
commercial brokerage, appraisal and investment analysis on a variety of
residential and commercial properties.
This CD ROM contains an electronic version of appraisals for the Mortgaged
Properties in PDF format and forms part of the paper version of the Prospectus
Supplement. The information contained in this CD ROM does not appear elsewhere
in paper form in this Prospectus Supplement and must be considered as part of,
and together with, the information contained elsewhere in this Prospectus
Supplement and the Prospectus. The information contained in this CD ROM has
been filed by the Seller with the Securities and Exchange Commission as part
of a Current Report on Form 8-K, which is incorporated by reference in this
Prospectus Supplement, and is also available through the public reference
branch of the Securities and Exchange Commission. Defined terms used in this CD
ROM but not otherwise defined therein shall have the respective meanings
assigned to them in the paper portion of the Prospectus Supplement and the
Prospectus. All of the information contained in this CD ROM is subject to the
same limitations and qualifications contained in this Prospectus Supplement and
the Prospectus. Prospective investors are strongly urged to read the paper
portion of this Prospectus Supplement and the Prospectus in its entirety prior
to accessing this CD ROM. If this CD ROM was not received in a sealed package,
there can be no assurances that it remains in its original format and should
not be relied upon for any purpose. Prospective investors may contact J.
Theodore Borter of Goldman, Sachs Co. at (212)902-3857 to receive an original
copy of the CD ROM.
<PAGE>
COMPLETE APPRAISAL OF
REAL PROPERTY
Hookston Square
3478 & 3480 Buskirk Avenue
Pleasant Hill, Contra Costa County, California
CUSHMAN &
WAKEFIELD(R)
A ROCKEFELLER GROUP COMPANY
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VALUATION ADVISORY SERVICES
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<PAGE>
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COMPLETE APPRAISAL OF
REAL PROPERTY
Hookston Square
3478 & 3480 Buskirk Avenue
Pleasant Hill, Contra Costa County, California
=========================================================
IN A SUMMARY REPORT
As of July 26, 1996
Prepared For:
GMAC Commercial Mortgage Corporation
650 Dresher Road
Horsham, PA 19044-8015
Prepared By:
Cushman & Wakefield of California, Inc.
Valuation Advisory Services
2055 Gateway Place - Suite 550
San Jose, California 95110
<PAGE>
Cushman & Wakefield of California, Inc.
2055 Gateway Place, Suite 550 CUSHMAN &
San Jose, CA 95110-1068 WAKEFIELD
Tel: (408) 436-5500
Fax: (408) 437-9129
August 9, 1996
Ms. Avis Tsuya
Senior Underwriter
GMAC COMMERCIAL MORTGAGE CORPORATION
650 Dresher Road
Horsham, PA 19044-8015
RE: Appraisal of Real Property
Hookston Square
3478 & 3480 Buskirk Avenue
Pleasant Hill, Contra Costa County, California
Dear Ms. Tsuya:
In fulfillment of our agreement as outlined in the Letter of Engagement,
Cushman & Wakefield of California, Inc. is pleased to transmit our summary
report estimating the market value of the leasehold estate in the referenced
property.
As specified in the Letter of Engagement, the value opinion reported below is
qualified by certain assumptions, limiting conditions, certifications, and
definitions, which are set forth in the report.
This is a complete appraisal prepared in accordance with the Uniform
Standards of Professional Appraisal Practice of The Appraisal Foundation. The
results of the appraisal are being conveyed in a Summary report according to our
agreement. Because this is a summary report, the level of detail of presentation
is less than that found in a self-contained report.
This report was prepared for GMAC Commercial Mortgage Corporation and it is
intended only for the specified use of said Client. It may not be distributed to
or relied upon by other persons or entities without written permission of the
Appraiser.
The property was inspected by and the report was prepared by John C.
Vaughan. Ken E. Matlin, MAI has inspected the property and reviewed the report
and is in concurrence with the findings herein.
<PAGE>
Ms. Avis Tsuya
Page 2
August 9, 1996
As a result of our analysis, we have formed an opinion that the market
value of the leasehold estate in the subject property, subject to the
assumptions, limiting conditions, certifications, and definitions, as of July
24, 1996 was:
FOURTEEN MILLION DOLLARS
$14,000,000
The preceding estimate of market value are based upon a forecasted
marketing period of approximately 12 months, which we believe (through a review
of recent office building sale activity, as well as with conversations with
local office/investment brokers) is reasonably representative for this product
type.
This letter is invalid as an opinion of value if detached from the report,
which contains the text, exhibits, and an Addenda.
Respectfully submitted,
CUSHMAN & WAKEFIELD OF CALIFORNIA, INC.
/s/ John C. Vaughan
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John C. Vaughan
Valuation Advisory Services
California State License No. AG002680
/s/ Kenneth E. Matlin
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Kenneth E. Matlin, MAI
Manager-Director
Valuation Advisory Services
California State License No. AG002022
<PAGE>
SUMMARY OF SALIENT FACTS AND CONCLUSIONS
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Property Name: Hookston Square
Location: The subject property is located in the
southeast quadrant of Hookston Road and
Buskirk Avenue. The street address is 3478
& 3480 Buskirk Avenue, Pleasant Hill, Contra
Costa County, California.
Contra Costa County
Tax I.D. No.: 148-090-034 and 148-090-030
Interest Appraised: Leasehold estate
Date of Value: July 24, 1996
Date of Inspection: July 24, 1996
Ownership: WHC-Six Real Estate Limited Partnership
Land Area: 9.43 acres or 410,594.49 square feet
1995/96 Property Assessment
Land: $ 5,821,000
Building: $15,466,000
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Total $21,287,000
1995/6 Property Taxes: $186,932.64
Zoning: PAO, Professional Administrative Office
Highest and Best Use
If Vacant: Commercial development, such as a single-
tenant or multi-tenant office building;
however, current market conditions are not
conducive to speculative, multi-tenant office
development at the present time, thus a
holding period would be required before
development of this type would likely occur.
As Improved: As developed, with a multi-tenant, office
building
CUSHMAN &
WAKEFIELD(R)
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Summary of Salient Facts and Conclusions
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Improvements
Type: Hookston Square consists of two three-story,
brick veneer, garden office buildings with a
total of 191,528 square feet of net rentable
area. According to the ALTA/ACSM Land
Title Survey performed dated June 23, 1994,
the site contains 636 parking spaces (3.32
spaces/1,000 SF of NRA) located on a
surface parking lot.
Year Built: 1984
Size
Gross Building Area: 206,550 square feet
Net Rentable Office Area: 191,528 square feet
Net Useable Area: 168,545 square feet (implied by 12% load
factor utilized by property management)
Common Area Factor: 12.0 percent
Condition: Average
Quality: Fair
Operating Data and Forecasts
Current Occupancy: 91.23%
Forecasted First Year Occupancy
(Fiscal Year 1996/7): 91.45%
Forecasted Average Occupancy: 94.31%
Average Annual Rental Rate
Actual: $13.13 per square foot
Forecasted
Multi-Tenant Space: $17.00 per square foot
Large Block Space: $17.00 per square foot
Operating Expenses
Last Full Year (1995): $8.38 per net rentable square foot
Budget (1996): $8.16 per net rentable square foot
Forecasted (1996): $8.29 per net rentable square foot
CUSHMAN &
WAKEFIELD(R)
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Summary of Salient Facts and Conclusions
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Value Indicators
Sales Comparison Approach: $14,000,000 ($73.10 per square foot of net
rentable area)
Income Approach: $14,090,000 ($73.57 per square foot of net
rentable area)
Discounted Cash Flow Assumptions
Market Rental Growth Rate
1996: $0.68 per square foot or 4 percent
1997: $0.88 per square foot or 5 percent
1998: $0.92 per square foot or 5 percent
Thereafter: 4.0%
Expense Growth Rates: 3.5%
Credit Loss Allowance: 2.0%
Projected Term of Future Leases: 5 years
Vacancy Between Tenants 6 months for small tenant spaces and 12
months for large tenant space.
Renewal Probability: 75.0% for small tenant spaces and 60.0%
for large tenant space.
Tenant Improvements
New Tenants: $10.00 per square foot
Renewal Tenants: $ 5.00 per square foot
Commission Expense
New Leases: 5.0%
Renewals: 2.5%
Terminal Capitalization Rate: 13.0%
Cost of Sale at Reversion: 2.0%
Discount Rate: 12.5%
Implicit Year 1 Overall
Capitalization Rate: 11.01%
Value Conclusion
As Is Value Estimate: $14,000,000
Resulting Indicators
Going-In Capitalization Rate
(Overall Capitalization Rate): 11.09%
Price Per Square Foot
(Net Rentable Area): $73.10
Estimated Marketing Time: 12 months or less
CUSHMAN &
WAKEFIELD(R)
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<PAGE>
TABLE OF CONTENTS
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Page
PHOTOGRAPHS OF THE SUBJECT PROPERTY ....................................... 1
INTRODUCTION .............................................................. 3
Identification of Property .............................................. 3
Property Ownership and Recent History ................................... 3
Purpose and Function of the Appraisal ................................... 3
Extent of the Appraisal Process ......................................... 3
Date of Value and Property Inspection ................................... 4
Property Rights Appraised ............................................... 4
Definitions of Value, Interest Appraised, and Other Pertinent Terms ..... 4
Legal Description ....................................................... 5
NEIGHBORHOOD ANALYSIS ..................................................... 6
OFFICE MARKET ANALYSIS .................................................... 7
PROPERTY DESCRIPTION ...................................................... 11
Site Description ........................................................ 11
Improvements Description ................................................ 11
REAL PROPERTY TAXES AND ASSESSMENTS ....................................... 13
ZONING .................................................................... 14
HIGHEST AND BEST USE ...................................................... 15
VALUATION PROCESS ......................................................... 16
SALES COMPARISON APPROACH ................................................. 17
INCOME APPROACH ........................................................... 21
RECONCILIATION AND FINAL ESTIMATE OF VALUE ................................ 34
ASSUMPTIONS AND LIMITING CONDITIONS ....................................... 36
CERTIFICATION OF APPRAISAL ................................................ 38
ADDENDA ................................................................... 39
Project Assumptions and Analysis
Cushman & Wakefield Investor Survey
Qualifications of John C. Vaughan
Qualifications of Kenneth E. Matlin
CUSHMAN &
WAKEFIELD(R)
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PHOTOGRAPHS OF THE SUBJECT PROPERTY
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[GRAPHIC OMITTED]
Subject Entrrance from Buskirk Avenue
[GRAPHIC OMITTED]
View of Subject and Courtyard
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Photographs of the Subject Property
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[GRAPHIC OMITTED]
View of Lobby
[GRAPHIC OMITTED]
View of Typical Hallway
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INTRODUCTION
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Identification of Property
The subject property, which is known as Hookston Square, is composed of two
three-story garden style office buildings which contain a total of 191,528
square feet of net rentable area. The improvements are situated on two Assessor
parcels totaling 9.55 acres of land that are located at the southeast quadrant
of Hookston Road and Buskirk Avenue in Pleasant Hill, California. The common
address is 3478 & 3480 Buskirk Avenue, Pleasant Hill, Contra Costa County,
California. The building was constructed in 1984 and is 91.23 percent occupied
by 34 tenants as of the appraisal date.
Property Ownership and Recent History
A title report was not provided to the appraisers. According to public
records, the leasehold interest of the subject property is currently vested in
WHC-Six Real Estate Limited Partnership, which acquired the property as part of
a bulk purchase from Prudential Insurance Company of America in August of 1994.
A separate value allocation to the subject property was not recorded.
Prudential Insurance Company acquired the leasehold interest in the
property through foreclosure on January 29, 1993.
The property was marketed in 1995 with an asking price of $15,200,000 but
according to the listing broker, there were no offers.
To the best of our knowledge, the property is not currently being offered
for sale, nor have there have been any subsequent ownership transfers.
Purpose and Function of the Appraisal
The purpose of the appraisal is to provide an estimate of market value of
the leased fee estate in the property. The function of this report is to assist
GMAC Commercial Mortgage Corporation in an evaluation of the property for loan
underwriting purposes.
Extent of the Appraisal Process
In the process of preparing this appraisal, we:
o Inspected the exterior of the building and site improvements and a
representative sample of tenant spaces with Rosalie Vaughn, the
assistant building manager;
o Reviewed the leasing policy, tenant build-out allowances and history
of recent rental rates and occupancy with Betsy Corta the building
manager;
o Reviewed a detailed history of the income and expenses and a budget
forecast for 1996, including the budget for planned capital
expenditures and repairs;
o Conducted market research into occupancies, asking rents, and
operating expenses at competing buildings including interviews with
on-site managers and a review of our own data base from previous
appraisal files;
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Introduction
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o Conducted market inquiries into recent sales of similar buildings to
ascertain the sales prices per square foot, effective gross income
multipliers and capitalization rates. This process involved telephone
interviews with sellers, buyers and/or participating brokers; and
o Prepared Sales Comparison and Income Approaches to value. The Cost
Approach was not used.
Date of Value and Property Inspection
The date of value is July 24, 1996, with our date of our last inspection
being the same.
Property Rights Appraised
We valued the leasehold estate, which is the right to use and occupy real
estate for a stated term and under conditions; conveyed by a lease.
Definitions of Value, Interest Appraised, and Other Pertinent Terms
The definition of market value taken from the Uniform Standards of
Professional Appraisal Practice, 1994 Edition, published by The Appraisal
Foundation, is as follows:
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 is the
consummation of a sale as of a specified date and the passing of title from
seller to buyer under conditions whereby:
(1) Buyer and seller are typically motivated;
(2) Both parties are well informed or well advised, and acting in what
they consider their own best interests;
(3) A reasonable time is allowed for exposure in the open market;
(4) Payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
(5) 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.
Exposure Time
Under Paragraph 3 of the Definition of Market Value, the value estimate
presumes that A reasonable time is allowed for exposure in the open market.
Exposure time is defined as the estimated length of time the property
interest being appraised would have been offered on the market prior to the
hypothetical consummation of a sale at the market value on the effective
date of the appraisal. Exposure time is presumed to precede the effective
date of the appraisal.
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Introduction
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Based upon the available sales data in the marketplace, as well as our
discussions, six to nine months would appear to have been reasonably
appropriate for the subject property as the date of valuation.
Market Rent
The rental income that a property would most probably command on the open
market; indicated by the current rents paid and asked for comparable space
as of the date of the appraisal.
Cash Equivalent
A price expressed in terms of cash, as distinguished from a price expressed
totally or partly in terms of the face amounts of notes or other securities
that cannot be sold at their face amounts.
Discounted Cash Flow (DCF) Analysis
The procedure in which a discount rate is applied to a set of projected
income streams and a reversion. The analyst specifies the quantity,
variability, timing, and duration of the income streams as well as the
quantity and timing of the reversion and discounts each to its present
value at a specified yield rate. DCF analysis can be applied with any yield
capitalization technique and may be performed on either a lease-by-lease or
aggregate basis.
Legal Description
Parcel 1: Parcel B as shown on the Parcel Map filed January 8, 1969 in Book
11 of Parcel Maps at Page 30 of Contra Costa County Records.
Parcel 2: Parcel A as shown on the Parcel Map filed July 13, 1973 in Book
29 of Parcel Maps at Page 1 of Contra Costa County Records.
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NEIGHBORHOOD ANALYSIS
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The subject property is located in the City of Pleasant Hill, Contra Costa
County, approximately 30 miles northeast of San Francisco. The city of Pleasant
Hill is centrally located in Contra Costa County along the northern section of
the Interstate 680 Corridor. The city encompasses 6.8 square miles. Between 1980
and 1990, the population of Pleasant Hill increased 27.8%, from 30,089 to
38,429. Between 1990 and 2000, the population is projected to increase another
10.3% to 42,400. By the year 2010 it is projected to increase only slightly to
43,800.
The number of households in Pleasant Hill increased 35.9% between 1980 and
1990, from 11,695 to 15,898. By the year 2000, households are projected to
increase to 17,660 and 18,810 by the year 2010. Mean household income in
Pleasant Hill, measured in constant 1990 dollars, increased 20.2% between 1980
and 1990, from $47,489 to $57,107. Mean household income is projected to
increase 1.6% between 1990 and 2000, to approximately $58,000.
Interstate 680 connects Pleasant Hill to all major points between the San
Francisco Bay Area and the Sacramento metropolitan area. Buchanan Field, 12
miles outside of the city limits, provides commercial and private landing
facilities. Oakland International Airport is approximately 24 miles south. BART
is also located in Pleasant Hill. Amtrak is located eight miles north in
Martinez.
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OFFICE MARKET ANALYSIS
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The subject property is located in the I-680 Corridor Office Market.
Following is a discussion of the current and forecasted office market conditions
in the I-680 Corridor, along with the particular submarket and specific
competitive office projects that significantly impact the subject property.
The current office inventory in the I-680 Corridor in Contra Costa and
Southern Alameda County exceeds 22,600,000 square feet of which 12,400,000 sf
(55%) is Class A product and 8,425,000 sf (37%) is Class B product. Principal
markets along the I-680 Corridor include Walnut Creek, Pleasant Hill,
Pleasanton, Dublin, San Ramon, Concord and Martinez. Substantial development
occurred during the early to mid-1980's to meet increased demand. This demand
was created by an increasing suburban population and a lack of available and
affordable office space in San Francisco and other urban locations.
The overall occupancy level in the I-680 Corridor was 88.6 percent as of
second quarter 1996, compared to the Year-End 1995 level of 86.6 percent.
The following chart illustrates the vacancy rate of the I-680 Corridor over
the past three years:
=================================
Occupancy Summary
2nd Qtr 1993 through 2nd Qtr 1996
=================================
Year/Qtr Vacancy Rate:
=================================
1993/2nd 16.0%
1993/4th 13.4%
1994/2nd 13.2%
1994/4th 13.6%
1995/2nd 13.8%
1995/4th 13.4%
1996/2nd 11.4%
=================================
According to the above figures, the I-680 office market vacancy rate has
hovered around 13.5% for the past three years but is showing signs of
improvement during the first two quarters of 1996. This improvement is
attributed to an overall improvement in the regional economy and a lack of
available office space in the other office markets of the Bay Area, most notably
the Silicon Valley, San Mateo Peninsula and Downtown San Francisco markets. This
trend is expected to continue as the regional economy expands.
Net absorption for the second quarter of 1996 was recorded at 247,925
square feet, down from the 389,539 square feet for the first quarter of the
year. The majority of this leasing activity was in the Pleasanton and San Ramon
submarkets, where several large blocks of Class A and B space were leased. These
markets benefit from overflow demand from Silicon Valley, where there is a
severe shortage of office space.
The following chart illustrates the market and submarket statistics for the
I-680 Corridor in the second quarter of 1996.
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Office Market Analysis
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Market and Submarket Statistics
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Inventory Overall Net Weighted
Market SF Vacancy Absorption Average
Rate: Rent/SF/YR.
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Concord 3,226,833 13.7% (11,574) $16.92
Pleasant Hill/BART 1,029,935 22.5% (12,216) $22.20
Pleasant Hill/ Martinez 1,283,172 16.0% (8,445) $15.72
Lafayette/Moraga/Orinda 937,662 12.9% 10,177 $22.32
Walnut Creek - Downtown 4,403,280 12.6% 56,329 $21.24
Walnut Creek - Shadelands 1,830,466 17.7% (12,206) $15.96
Alamo/Danville 538,625 11.4% (24,687) $19.56
San Ramon 3,965,204 6.4% 211,026 $19.32
Dublin 764,748 12.9% (10,854) $15.36
Pleasanton 5,591,136 7.2% 50,375 $19.32
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TOTALS 23,571,061 11.4% 247,925 $18.72
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The I-680 Corridor's current weighted average rent of $18.72 per square
foot per month is 6.85% higher than the $17.52 per square foot reported for the
Second Quarter of 1995. This rent increase is attributed primarily to increases
in Class A space. However, the rent increase is expected to filter through to
Class B space as the amount of available Class A space is reduced.
In summary, the I-680 Corridor reflects substantial improvement during the
past 12 months. This improvement is expected to continue with declining vacancy
rates marketwide and increasing rental rates in Class A buildings. Secondary
markets and Class B buildings are expected to see rental rate increases as the
Class A product reaches full occupancy.
Pleasant Hill Submarket
The subject is located in the northern portion of Pleasant Hill in the
Pleasant Hill/Martinez submarket. This is a secondary office market within the
I-680 Corridor. As of the second quarter of 1996, this submarket contained
1,283,172 square feet of office space. No new multi-tenant office buildings are
presently under construction in this submarket. The lack of construction
emanates from the submarket's relative position within the I-680 Corridor.
The overall vacancy rate for this market was reported at 16 percent for the
second quarter 1996, down from the 16.4 percent vacancy rate reported for the
fourth quarter of 1995. Conversely, the weighted average quoted rental rate has
decreased 0.76 percent to $15.72 per square foot over this time period.
Class A projects have a weighted average rental rate which is approximately
27 percent higher than Class B properties. As would be expected, Class C
projects have the lowest weighted average of the quoted rental rates and
occupancy level.
The weighted average quoted rent for the Class A projects in this submarket
is $18.00 per square foot. It is important to note that the quoted rental rates
are on a full service basis, wherein
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Office Market Analysis
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each tenant is responsible for their pro rata share of all expenses over a
base year operating expense stop. Typically, the base year is defined as
the year in which the lease commences.
The need for new speculative Class A office product in this submarket will
probably not occur for at least five years because of available land in superior
submarkets such as San Ramon and Pleasanton.
Direct Competition
In order to gain a better understanding of the market conditions specific
to the subject property, we conducted a survey concentrating on those buildings
that would be considered most competitive to the subject.
The subject competes with properties located in the Pleasant Hill/BART
submarket, located south of the subject, and the Concord submarket, located
north of the subject. The overall vacancy rate for the Pleasant Hill/Bart
submarket was reported at 22.5% for the second quarter of 1996. The weighted
average asking rental rate for this submarket was reported at $22.20 per square
foot annually. The Concord submarket has a 13.7 percent vacancy rate with an
average asking rental rate of $16.92 per square foot annually.
The subject's direct competition is identified as five office buildings
containing a total of 458,383 square feet of net rentable office space. These
projects are Class A and B buildings that compete directly with the subject
property because of their location, as well as their physical characteristics.
The age of the buildings ranges from nine to 12 years, with the sizes
ranging from 42,000 to 139,227 net rentable square feet. These buildings reflect
what we consider to be the subject's direct competition. The comparables are all
multi-story buildings with good access, parking and exposure. The subject is
generally considered inferior to the comparables in regard to construction
quality but is superior to the comparables in terms of landscaping. Only one of
the comparables has a structured parking garage (Comparable R-2).
Based on our survey results, the five office buildings revealed occupancy
levels ranging from 90.0 to 100.0 percent. The average occupancy level of the
surveyed properties is 96.1 percent, which is above the submarket average of
82.8 percent, but considered reasonable given that the survey includes only
Class A properties.
The quoted effective rental rates for the comparables ranged from $12.00 to
$15.50 per square foot, fully serviced. A more detailed discussion centering on
these buildings and their rental rates can be found in the Income Approach
section of this report.
According to the leasing brokers of these buildings, occupancy and rent
levels started increasing approximately 6 months ago. Further, given the
increasing occupancy levels for Class A office space, rental rates for Class B
product are anticipated to begin rising in the near future.
New supply is currently entering the I-680 Corridor in the San Ramon and
Pleasanton submarkets. However, because it is not economically feasible, no new
supply should be entering the subject's submarket for at least five years. The
large supply of Class A space in the Pleasant
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Office Market Analysis
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Hill/Bart submarket will be a damper on rental rates in the near term. However,
once the supply of Class A space in this area approaches stabilization, the
market could become somewhat of a landlord driven market, with upward pressure
on rental rates increasing. Obviously, this would be tempered somewhat by the
performance of other Class A product in the surrounding submarket and
competition from other submarkets.
In summary, in terms of rental rates and percentage leased, the survey group of
competitive office properties is outperforming the submarket but not the I-680
market as a whole. Further, rental rates have increased among the competitive
buildings over the past 24 months. With an improving occupancy level, rental
rates should increase at a rate higher than inflation over the next couple of
years.
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<PAGE>
PROPERTY DESCRIPTION
================================================================================
Site Description
The subject site is situated at the northeast quadrant of Hookston Road and
Buskirk Avenue. The site has access to both of these streets and encircles the
corner parcel at Buskirk Avenue and Hookston Road. The common street address is
3478 and 3480 Buskirk Avenue, Pleasant Hill, Contra Costa County, California.
The site (in total) is irregular in shape and contains 9.43 acres or 410,594
square feet of land area. The topography is generally level. We have assumed
that the soil's load-bearing capacity is sufficient to support the existing
structures. All essential utilities including electricity, water, sewer, and
telephone are currently serving the site.
The site does not have good commercial exposure and freeway access is
somewhat difficult. These two factors have a negative impact on demand for
rental space at this building.
According to Community Panel No. 060034 Panel 1-5, effective September,
1983, the improvements at the subject property are situated in Zone C, an area
designated as being outside of the floodplain. The northwest portion of the
parking area appears to be situated in Zone B, which is within the 100 year
floodplain.
Improvements Description
Hookston Square consists of two three-story garden style office buildings
containing 191,528 square feet of rentable area. The floor plates for the
facility generally average just under 32,000 rentable square feet. There is a
central courtyard between the two buildings, with extensive waterscapes and
mature landscaping, including historical Oak trees. Tenant services include a
fitness center with sauna, showers and lockers as well as an on-site
delicatessen.
The improvements are attractive and have been well maintained; however, the
quality of construction is rated fair. The builder reportedly used residential
construction standards and the improvements are considered inferior to the
majority of office product in the competitive market area. The buildings have
brick facades which reportedly were incorrectly applied and require constant
monitoring to replace fallen bricks.
The mechanical systems include a variable, energy efficient central air
system with two roof mounted, gas fired, package HVAC units per floor. The HVAC
units are rated between 40 and 55 tons each and supply chilled air to variable
air volume (VAV) boxes. Warm air is provided from two gas fired furnaces for
each floor, supplied to the VAV boxes. The HVAC equipment was installed 1983 and
is in fairly good condition. Plumbing and electrical systems are assumed to meet
required building codes. The property has two 2,500 pound hydraulic passenger
elevators in each building. The property has zoned smoke and fire alarm systems,
and a card access security system that restricts non-business hour access.
As previously mentioned, the subject has concrete surface parking for 636
vehicles, and concrete curbs, and sidewalks. The site is heavily landscaped with
mature trees, lawns, plants and ornamental shrubs.
We have specifically assumed that the property complies with the Americans
With Disabilities Act, and that potentially hazardous materials have not been
used in the construction or maintenance of the property. Overall, the
improvements are in average condition. No evidence
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<PAGE>
Property Description
================================================================================
of structural damage was observed on our inspection of the improvements.
Further, we are not aware of any major items of deferred maintenance.
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<PAGE>
REAL PROPERTY TAXES AND ASSESSMENTS
================================================================================
The subject property is under the taxing jurisdictions of Contra Costa
County. The Assessors' parcel identification numbers are 148-090-030 and
148-090-034.
<TABLE>
<CAPTION>
===================================================================================================
CURRENT ASSESSMENT AND TAX INFORMATION: 1995-96
- ---------------------------------------------------------------------------------------------------
1995/96 Assessed Value
- ---------------------------------------------------------------------------------------------------
Tax Total Taxes
Parcel No. Land Improvements Total Rate Inc. Assessments
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
148-090-030 $1,686,000 $6,539,000 $8,225,000 1.0375% $88,135.26
- ---------------------------------------------------------------------------------------------------
148-090-034 $4,135,000 $4,792,000 $8,927,000 1.0375% $98,797.38
- ---------------------------------------------------------------------------------------------------
Totals $5,821,000.0 $11,331,000.00 $17,152,000.0 1.0375% $186,932.64
- ---------------------------------------------------------------------------------------------------
0 0
- ---------------------------------------------------------------------------------------------------
(1) Applies to real estate only. Taxes on personal property, improvement fixtures, etc., if any, are
excluded from the analysis.
Source: Contra Costra County Assessor
===================================================================================================
</TABLE>
Tax Rates
The 1996 tax rates have not been determined at this time, the 1995/96 tax
rates have therefore been utilized in our valuation analysis. Based on
Proposition 13, projected taxes for the subject property are grown at 2.0
percent annually.
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ZONING
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The subject property zoning designation is PAO: Professional Administrative
Office according to the Planning Department of the City of Pleasant Hill. The
PAO District was established to provide for professional and administrative
office needs. This classification primarily permits office uses. No industrial
or residential uses are allowed.
This zoning classification requires one parking space per 250 square feet
of gross building area. Based upon the subject's gross building area of 206,550
square feet, this equates to 826 required spaces. According to the ALTA/ACSM
Land Title Survey for the subject property dated June 29, 1994, the subject site
contains 634 parking spaces. Based on the Survey, the subject property is not in
compliance with the current parking requirements. We are not experts in the
interpretation of complex zoning ordinances but the property appears to be a
legal-nonconforming use based on our review of public information. However, the
determination of compliance is beyond the scope of a real estate appraisal.
We know of no deed restrictions, private or public, that further limit the
subject property's use. The research required to determine whether or not such
restrictions exist, however, is beyond the scope of this appraisal assignment.
Deed restrictions are a legal matter and only a title examination by an attorney
or title company can usually uncover such restrictive covenants. Thus, we
recommend a title search to determine if any such restrictions do exist.
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HIGHEST AND BEST USE
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Highest and Best Use of Site As Though Vacant
The highest and best use must be (1) legally permissible, (2) physically
possible, (3) financially feasible, and (4) maximally productive. The size,
shape, and physical attributes of the site are considered sufficient to
accommodate most forms of development. Given the existing office zoning and the
surrounding development (which consists of a relatively equal mixture of office,
retail, residential, and vacant land), some type of commercial use would be most
compatible with surrounding development. As discussed in the Office Market
Analysis section of this report, the Pleasant Hill office submarket has a
Mid-Year 1996 occupancy level of approximately 84 percent. Rental rates in the
Pleasant Hill submarket are currently not at the level necessary to support
speculative development. Therefore, it is our opinion the highest and best use
of the site is to hold for future development of some type of office
development.
Highest and Best Use, As Improved
As noted in the Property Description section of this report, the subject
site is improved with two three-story garden style office buildings which
contain an aggregate of 191,528 square feet of net rentable area. Constructed in
1984, the buildings reflect fair quality construction and are in average
condition. The design and layout are considered to be functional for the current
use.
The office submarket in which the subject competes has stabilized with
slowly increasing occupancy levels and rental rates, as will be supported by the
data and analysis presented in the balance of this report. Therefore, it is our
opinion that the subject property, as improved, is capable of providing an
adequate return on investment over the foreseeable future. This conclusion is
supported by the data and analysis presented in the balance of this report. For
these reasons, it is our opinion that the highest and best use of this site, as
improved, is for continued use as a garden style office complex.
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COST APPROACH
================================================================================
In this appraisal, we have used the Sales Comparison Approach and the
Income Approach to develop market value estimates for the subject property. The
subject property represents a leasehold interest; therefore, the Cost Approach
is not applicable to the valuation. Because this is a summary report, the level
of detail of presentation is less than that found in a self-contained report.
In the Sales Comparison Approach, we performed the following steps:
o Investigated the market for recent sales of similar industrial
properties.
o Analyzed those sales on the basis of the sales price per square foot;
and
o Correlated the value indications into a point value estimate from
within the range.
In developing the Income Approach we:
o Studied the rents in effect in this and competing properties to
estimate the potential rental income at market levels;
o Studied the recent history of operating expenses at this and competing
properties to estimate an appropriate level of expenses and reserves
for replacement;
o Estimated net operating income and cash flow by subtracting the
operating, fixed, and other expenses from the effective gross income;
and
o Prepared a discounted cash flow analysis in which the cash flow and
property value at reversion are discounted to an estimate of current
market value at a market-derived discount rate. Potential gross
revenues are estimated based on a modeling of the actual rents and
recovery provisions in effect through the term of existing leases. As
the existing leases expire, the space is estimated to rent at the then
current market rental rate with appropriate allowances for downtime.
Spaces now vacant will be rented at market rates and at the time
intervals discussed in the Income Approach section of this report.
From potential gross revenues, we subtract vacancy and expenses
(operating, fixed, and other) to arrive at an estimate of cash flow
over an 11 year forecast.
The appraisal process is concluded by a review and re-examination of each
of the approaches to value that have been employed. Consideration is given to
the type and reliability of data used, and the applicability of each approach.
Finally, the approaches are reconciled and a final value conclusion is
estimated.
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<PAGE>
SALES COMPARISON APPROACH
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Methodology
In the Sales Comparison Approach, we estimated the value by comparing this
property with similar, recently sold properties in the surrounding or competing
area. Inherent in this approach is the principle of substitution, which holds
that when a property is replaceable in the market, its value tends to be set at
the cost of acquiring an equally desirable substitute property, assuming that no
costly delay is encountered in making the substitution.
By analyzing sales which qualify as arms-length transactions between
willing, knowledgeable buyers and sellers, we can identify value and price
trends. The basic steps involved in the application of this approach are:
(1) researching recent, relevant property sales and current offerings
throughout the competitive area;
(2) selecting and analyzing those properties considered most similar to
the subject, considering changes in economic conditions that may have
occurred between the sale date and the date of value, and other
physical, functional, or locational factors;
(3) identifying sales which include favorable financing and calculate the
cash equivalent price;
(4) reducing the sale prices to common units of comparison, such as price
per square foot of building area (in this case net rentable area) and
effective gross income multiplier;
(5) making appropriate comparative adjustments to the prices of the
comparable properties to relate them to the property appraised; and
(6) interpreting the adjusted sales data and draw a logical value
conclusion.
The subject represents a leasehold interest and the Sales Comparison
Approach is not directly applicable to the valuation of the subject property;
however, this method has been used as a test of reasonableness for the value
indication from the Income Approach.
The most widely-used and market-oriented unit of comparison for properties
such as the subject is the sales price per net rentable square foot. All
comparable sales were analyzed on this basis. On the following page is presented
a summary of the improved properties that we compared with the subject property,
and a map showing their locations.
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<PAGE>
<TABLE>
<CAPTION>
Hookston Square
3478 and 3480 Buskirk Road
Pleasant Hill, Contra Costa County
Office Building Sales Summary
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Net
Comp. Year Leasable
No. Name/Location Sale Date Built Area
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
I-1 Centre Pointe Apr-96 1982 198,153
165-225 Lennon Lane
Walnut Creek
I-2 Sutter Square Apr-96 1986 171,161
1800 Sutter Street
Concord
I-3 2625-2637 Shadelands Drive Apr-96 1980 145,000
Walnut Creek
I-4 11501 Dublin Boulevard Apr-96 1985 41,129
Dublin
I-5 Canyon Place Dec-95 1981 121,932
3150-3180 Crow Canyon Place
San Ramon
I-6 1600 S. Main Plaza Dec-95 1983 83,227
Walnut Creek
- -------------------------------------------------------------------------------------------------------------------------------
Subject Hookston Square N/A 1984 191,528
3478 and 3480 Buskirk Avenue
Pleasant Hill, California
- -------------------------------------------------------------------------------------------------------------------------------
Low 1980 41,129
Data Range: High 1986 198,153
Mean 1983 126,767
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Percent Cash Sale
Comp. Occupied on Equivalent Price NOI/
No. Date of Sale Sale Price Per SF SF OAR Comments
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
I-1 95.0% $15,900,000 $80.24 $8.84 11.1% 6 two-story office buildings on a 12.3
acre site. Project was leased to
12 tenants.
I-2 81.8% $15,900,000 $92.89 $7.43 8.0% 9-story Class "A" office building
with 6 levels of underground
parking, marketed for 1+ years.
I-3 100.0% $11,600,000 $80.00 $8.82 11.0% 2 single story office/R&D
buildings located in Shadelands
business park.
I-4 51.4% $2,200,000 $53.49 $5.20 9.7% 2-story office/R&D building. The
pro forma entire ground floor was vacant at
time of sale.
I-5 92.0% $8,750,000 $71.76 $10.28 14.3% 4 two-story frame buildings
located in Canyon Place Office
Park.
I-6 90.0% $8,850,000 $103.00 $11.27 10.6% 2 four-story light steel frame
Class "A" office buildings.
- -------------------------------------------------------------------------------------------------------------------------------
Subject 91.2% N/A N/A $8.10* N/A
- -------------------------------------------------------------------------------------------------------------------------------
Data Range:
Low 51.4% $2,200,000 $53.49 $5.20 8.0%
High 100.0% $15,900,00 $103.00 $11.27 14.4%
Mean 85.0% $10,533,333 $80.23 $8.64 10.8%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Note: The subject's NOI per square foot is based on the income forecasted
in the Income Approach of this report.
CUSHMAN &
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<PAGE>
Sales Comparison Approach
================================================================================
The comparable properties utilized in this analysis are considered the best
indicators of value for the subject from a physical standpoint. Generally
speaking, the investment market for the subject property is limited due to the
leasehold property rights.
Sales Price Per Square Foot Analysis
The six comparables indicate sales prices ranging from $53.49 to $103.00
per square foot of net rentable area on a cash equivalent basis. The prices per
square foot are influenced by the differences in construction quality, occupancy
levels, character of the tenancy, economics, and location. Nevertheless, it is
important to address each property in terms of the conventional sequence of
adjustments. Following are those considerations which are relevant to the
subject. The first three elements must be considered in advance of applying any
other compensating factors to derive value conclusions via the sales price per
square foot methodology.
Property Rights Conveyed
The subject property represents a leasehold estate while the comparables
represent leased fee estates. Downward adjustments to the comparables are
required to reflect the fact that the subject site is not owned in fee and that
the improvements will eventually revert to the landowner.
Seller Financing/Cash Equivalency
All of the comparables were sold on the basis of cash to the seller. Thus,
we have made no adjustments to the comparables for seller financing.
Conditions of Sale
We identified no special motivational conditions concerning the
comparables; therefore, no adjustments for conditions of sale were made.
Other
Because of the multiple differences inherent in office properties with
respect to quality and design, location, and, in this case economics, not to
mention the quality of the tenant base, mathematical adjustments for the
reasoning noted above would be extremely difficult, at best.
In our opinion, Comparables I-1, I-3, and I-5 are most similar to the
subject in that they are Class B properties in secondary locations. These
comparables sold for $80.24, $80.00 and $71.56 per square foot. Based upon all
of the above data, we believe the value of the subject would be in the range of
$70.00 to $75.00 per square foot of net rentable area. Thus, our value range by
the Sales Price Per Square Foot method is as follows:
================================================================================
Sales Price Per Square Foot Summary
================================================================================
Net Rentable Area Sales Price Per Indicated
(SF) Square Foot Value
================================================================================
191,528 x $70.00 = $13,406,960
Rounded To: $13,400,000
191,528 x $75.00 = $14,364,600
Rounded To: $14,360,000
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<PAGE>
Sales Comparison Approach
================================================================================
In conclusion, the analysis resulted in the following value ranges:
$13,400,000 to $14,360,000 based on the sales price per square foot methodology.
Based on the above noted sales and analysis, our estimate of value for the
subject via the Sales Comparison Approach is $14,000,000, which equates to
$73.10 per square foot of net rentable area.
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<PAGE>
INCOME APPROACH
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Methodology
The Income Approach is a method of converting the anticipated economic
benefits of owning property into a value estimate through capitalization. The
principle of anticipation underlying this approach is that investors recognize
the relationship between an asset's income and its value. In order to value the
anticipated economic benefits of a particular property, potential income and
expenses must be estimated and the most appropriate capitalization method must
be selected.
The two most common methods of converting net income into value are through
direct capitalization and a discounted cash flow analysis. In direct
capitalization, the net operating income is divided by an overall capitalization
rate extracted from market sales to indicate a value. In the discounted cash
flow method, anticipated future income streams and a reversionary value are
discounted to a net present value at a chosen yield rate (internal rate of
return).
The direct capitalization method is an effective technique when stable
conditions exist both in the marketplace and for the property. However, when
market conditions are either changing or likely to change in a fairly dramatic
manner over time, direct capitalization becomes a more difficult technique to
administer. Direct capitalization is further inhibited by the numerous variables
that exist with multi-tenant office buildings, i.e., multiple leases, with
staggered lease terms and varying lease structures; the lease-up of vacant
space; and differing tenant finish allowances, depending upon whether the space
is in a shell or second generation state.
Given these numerous variables, coupled with our inquiries of participants
in the marketplace, we feel that the majority of investors for a property like
the subject would utilize the discounted cash flow method, in an attempt to
mirror the expectations relative to those variables. Overall, office market
conditions are still below normalized levels (although segments of the market
are strengthening rapidly). Consequently, the discounted cash flow method
affords the most realistic method of reflecting investor expectations of the
current period, as well as the projected recovery (primarily rental rates in the
subject's case). Also, the discounted cash flow methodology can better quantify
the impact of multi-tenant leases, with staggered lease terms and varying rental
rate structures than the direct capitalization technique. Therefore, it is our
opinion that the discounted cash flow method is the most appropriate method in
the valuation of the subject property. As such, the direct capitalization method
will not be used in this analysis. However, at the conclusion of the Income
Approach, we will analyze the resulting overall capitalization rate derived from
the discounted cash flow analysis as a check for reasonableness.
In the following sections, we will first analyze the subject's existing
leases and market rents before discussing the subject's operating expenses and
preparing the discounted cash flow analysis.
Summary of Existing Leases
Based on the rent roll provided by the property manager, there were 33
leased suites as of the effective date of value. The total occupied area was
reported at 174,118 feet of net rentable area. The management office (622 square
feet) is considered occupied space. We have included this space in our analysis
for occupancy purposes, but have not assigned a rent in the future. Therefore,
the total occupied area is 174,740 square feet, with 16,788 square feet vacant.
This equates to an occupancy factor of 91.13 percent. A rent roll of the subject
property
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Income Approach
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abstracting the existing leases is located in the Addenda. The property manager
reported that the suites had been remeasured and new leases were being written
based on the remeasured areas. The net rentable area is thus in flux until all
leases have been written to the remeasured area. The property manager stated
that the aggregate net rentable area was not available to the appraisers.
Therefore, we have utilized the net rentable area reported on the Rent Roll
dated July 19, 1996.
The most significant lease at the subject property is with Brown and
Caldwell, a regional engineering firm, which can be viewed as the anchor tenant
of this development. Brown & Caldwell occupies 58,545 square feet or just over
30 percent of the total project. The current rental rate is $15.96 per square
foot annually with an increase to $17.40 per square foot in September of 1998.
The lease expires on August 31, 2000.
The most notable recent lease has been to Foundation for Education for
6,336 square feet for a five year term at $15.96 per square foot. The lease was
negotiated in 1995, signed in February 1996 and will commence in September of
1996. The tenant provided their own TI's, resulting in an effective rental rate
below current market rent.
The Pacific Business Center leased 13,748 square feet for a 5 year term in
September of 1995 with an annual rental rate of $17.40 per square foot. Tenant
improvements were reported at approximately $10.00 per square foot by the
leasing agent.
Assumptions Regarding the Existing Leases
With the exception of the previously noted changes, our analysis
specifically assumes the existing tenants will remain in the property and
continue paying rent under the terms of their leases. Information provided by
management indicates that no tenants are currently in default of their lease,
and the tenant base, which includes a number of local businesses, generally
appears to be stable.
Lease Expirations
With respect to the current leasing structure, there are three tenants with
leases expiring during 1997, which comprises approximately 3.5 percent of the
total net rentable area. There are four tenants comprising just less than 9.5
percent of net rentable area with expiration dates in 1998, while 12.5 percent
of the rentable area is exposed during 1999. Thus, over the next three years
(1997-1999), the percentage of space expiring is slightly more than 25 percent
of the building. In years 2000 and 2001 have the largest percentage of space
expiring at 12.9 and 47.14 percent, respectively. Thus, over the near to
intermediate term, the leasing exposure is significant from a risk perspective.
None of the renewal options contained in the existing leases specify below
market rates. Therefore, at the expiration of those leases which contain renewal
options, we have assumed normal renewal probabilities.
Estimate of Current Market Rent
According to the leasing agent, current quoted rental rates at the subject
property generally range from $16.20 to $17.40 per square foot annually, on a
full service basis. Quoted tenant
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<PAGE>
Income Approach
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finish allowances range from $5.00 to $10.00 per square foot. Typically, tenant
finish for second generation space is $3.00 to $5.00 per square foot. In order
to gauge the reasonableness of the quoted rent and form a conclusion as to the
current market rent for the subject property as of the appraisal date, we
conducted a survey of five office buildings totaling 538,169 square feet of net
rentable area. These comparables are considered to be the subject's direct
competition. On the following page is a summary of properties utilized in our
rent comparable analysis.
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<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Net
Rent Number of Rentable Load
No. Name/Location Class Year Built Stories Area (SF) Factor
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
R-1 The Terraces A 1987 6 128,131 13.6%
2300 Contra Costa Boulevard
Pleasant Hill
R-2 Station Plaza B 1988 3 52,339 12.0%
3100 Oak Road
Pleasant Hill/BART
R-3 Buskirk Bart Executive Center B 1980 3 60,000 12.0%
2950 Buskirk Avenue
Pleasant Hill/BART
R-4 Sutter Square A 1986 9 180,000 11.0%
1800 Sutter Street
Concord
R-5 Urban West B 1986 5 117,699 12.1%
1350 Treat Boulevard
Pleasant Hill/BART
- ------------------------------------------------------------------------------------------------------
Subject Hookston Square B 1984 3 191,528 12.0%
3478 and 3480 Buskirk Avenue
Pleasant Hill, California
- ------------------------------------------------------------------------------------------------------
Data Range: Low 1980 3 52,339 11.0%
High 1988 9 180,000 13.6%
Mean 1985 5 107,634 12.1%
- ------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------
Quoted Rental Rate Tenant Improvement Cost
Per Square Foot Per Square Foot
------------------ Lease -----------------------
Rent Percent Term Expense New Renewal
No. Leased Low High (Years) Stop (SF) Leases Leases
<S> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
R-1 95.8% $18.60 $19.80 3 - 5 Base Year $10.00 Negotiable
Stop
R-2 80.1% $22.20 $22.20 3 - 5 Base Year $15.00 Negotiable
Stop
R-3 98.1% $18.00 $19.20 3 - 7 Base Year $10.00 $5.00
Stop
R-4 82.8% $18.60 $18.60 3 - 7 Base Year $10.00 $5.00
Stop
R-5 77.0% $21.60 $22.20 3 - 5 Base Year $15.00 Negotiable
Stop
- -------------------------------------------------------------------------------------------
Subject 91.2% $16.20 $18.00 3 - 5 Base Year $10.00 $3.00
Stop to
$5.00
- -------------------------------------------------------------------------------------------
Data Range:
Low 77.0% $18.00 $18.60 3 - 5 N/A $10.00 $5.00
High 98.1% $22.20 $22.20 3 - 7 N/A $15.00 $5.00
Mean 86.8% $20.40 $19.80 3 - 6 N/A $12.00 $5.00
- -------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
Income Approach
================================================================================
The rates summarized above indicate the quoted rental rate for the
comparable properties. In some cases, the actual effective rates being achieved
for recent leases was unavailable. In those instances where the leasing agent
indicated the effective rate, it was either the same as the quoted rate or
slightly lower.
We were able to obtain actual lease information on four of the subject's
competing buildings. These four buildings, which are considered to be either
slightly inferior to similar to the subject, showed a rather substantial amount
of leasing activity over the past 12 months or so. The four buildings exhibited
effective lease rates ranging from about $16.00 to $21.00 per square foot. The
tenant improvement allowances ranged from $0 to about $15.00 per square foot.
The majority of renewal leases were done as-is while a few were done with up to
about $5.00 per square foot in tenant improvement allowances. New tenants
typically exhibited a higher rate of tenant improvement allowances of over
$10.00 per square foot. Lastly, the actual leases demonstrate the beginnings of
a rising market in terms of lease rates.
In summary, there is a relatively wide range in rental rates among the
comparables. This is attributed to the respective quality and location of the
individual properties. The quoted rental rates range from $18.00 to $22.20 per
square foot on a full service basis. All of the comparables are quoting base
year operating expense stops and a range of tenant finish allowances up to
$15.00 per square foot for second generation space.
In addition to the comparison with the surveyed properties noted above, we
have also taken into consideration the recent leases which have been executed at
the subject property. Most of the recent leases have average rental rates
between $15.60 and $18.46 per square foot, on a full-service basis. Tenant
finish allowances range from $0.00 to $10.00 per square foot for new tenants and
from $0.00 to $5.00 per square foot for renewals. The majority of the recent
leases have terms of three to five years, and most reflect base year expense
stops or a stated dollar expense stop. In general, the reasons for the range in
base rental rates in the recent leases include: (1) the size, location, and
physical condition of the space leased, (2) the amount of the tenant improvement
allowance provided by the landlord, and (3) the creditworthiness of the tenant.
The length of the term can be another contributing factor.
After considering the competitive properties, it is our opinion that the
following parameters are representative of a market lease for the subject
property as of the effective date of appraisal:
1) The market rental rate for the subject is estimated to equate to
$17.00 per square foot of net rentable area, full service. This is
within the range that the leasing agent is currently marketing the
space at.
2) In future leases, a base year expense stop is tied to the projected
year a lease commences.
3) Future leases are assumed to have a five year lease term, which
attempts to recognize that the majority of the tenants will execute
leases between three and seven years.
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Income Approach
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4) The tenant improvement allowance is projected to be $10.00 per square
foot for new tenants that lease second generation space and $5.00 per
square foot for tenant renewals of second generation space.
Rental Rate Forecast
Several brokers indicated to us that the office buildings that compete with
the subject property are beginning to experience rental rate increases. Our
historical survey presented earlier in the Market Analysis section supports this
contention. Furthermore, it is our opinion that the subject will likely
experience rental rate increases over the next few years as the regional economy
continues to improve.
We have forecasted a 4.0 percent increase in the market rental rate for the
subject property in 1996, 5.0 percent in 1997 and 1998, and a 4.0 percent
increase thereafter.
Expense Recovery Income
Most of the existing leases have provisions for expense pass throughs above
a base year or stated expense stop. The allowable expenses included in the
expense recoveries for leases include all items of expense except the management
fee, leasing and promotion expenses, capital replacements, tenant improvements,
and leasing commissions. The recovery income reflected in our cash flow analysis
is based on the terms of the existing tenant leases, plus a base year expense
stop applied to all future contracts.
Miscellaneous (Other) Income
Historically, the subject property has generated nominal miscellaneous
income from a variety of sources. Primarily, this income is attributable to
vending income, charges to tenants for keys, lock changes, and security cards.
The amount of miscellaneous income has ranged from a high of $2,265 in 1995 to a
low of $273 in 1996 year to date. The 1996 budget forecasts no income from this
category and this is supported by the year to date information. Giving primary
weight to the more recent figures, we have not projected miscellaneous income
for the subject property.
Vacancy and Collection Loss
Both the investor and the appraiser are primarily interested in the cash
revenue that an income property is likely to produce annually over a specified
period time rather than what it could produce if it were always 100 percent
occupied and all the tenants were actually paying their rent in full and on
time. It is normally a prudent practice to expect some income loss, either in
the form of actual vacancy or in the form of turnover, non-payment, or slow
payment of rent.
We have projected a 75 percent renewal probability based on discussions
with the leasing agent and property manager . The average downtime is estimated
at six months upon the expiration of every lease with an average lease term of
five years. This equates to a 3.2 percent vacancy factor (two months divided by
62 months including the two months vacancy). Additionally, a collection loss
factor of 2.0 percent is being projected for all tenants, except those larger,
credit-worthy tenants.
The average occupancy level of the subject property's submarket is 84
percent and the average occupancy for Class B space is 89 percent. The weighted
average occupancy of the
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Income Approach
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subject's direct competition is 86.8 percent. The projected occupancy for the
subject over the holding period is 94.31%. This is considered reasonable given
the current strengthening market conditions and the subject's current
performance which is exceeding its competitive submarket.
Operating and Fixed Expenses
On the facing page is our Income and Expense Summary for the subject
property. We based our estimated operating expenses on a review of the 1995
actual itemized expenses for the subject property (1994 data was unavailable).
In addition, we were provided with the property's 1996 budget. Finally, this
data was compared with known operating statements of similar office projects,
and consultations with the local property management personnel, as well as
Cushman & Wakefield's Management staff.
Total operating expenses were $8.38 per square foot in 1995 and are
projected at $8.29 per square foot in the 1996 budget.
As illustrated in the preceding chart, the expenses reflect a reasonable
trend over the period for which we have historical data. Based on the data
provided by the property manager, as well as data contained in our files, we
have made Year One expense projections as illustrated in preceding chart. All of
the above mentioned expense categories have been grown at three and one-half
percent except property taxes, which are grown at 2.0% based upon California Tax
Law.
Operating Expenses
Management - Based upon discussions with Cushman & Wakefield's Management
Services staff, this expense typically includes management, bookkeeping,
and general accounting costs associated with the operation of the property.
The operating statements we were provided indicate a management fee of 2.1
percent of effective gross income has historically been charged. Based on
the management fees for similar buildings, we consider a management fee of
3.0 percent of effective gross income to be appropriate.
Property Taxes - Real Estate Taxes are based upon the 1995/96 tax rate
applied to the appraised value.
Ground Rent - This expense is based on the terms of the subject's ground
lease which expires in 2031 but has two 25 year options. While the ground
lease is considered relatively favorable to the leasehold position, it
still represents an added risk to ownership. The ground rent is currently
$201,732 per year but will increase to $229,360 in 1997 according to
current ownership. The ground rent is increased every five years based on
growth in CPI. We have estimated annual CPI growth at 3.5%, thus in the
sixth year of the cash flow the ground rent is increased to $269,498
annually.
Other Expenses:
Other operating expenses include Tenant Improvements and Leasing
Commissions. The probability of incurring future leasing commissions and tenant
alterations is based on a 75 percent
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Income Approach
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probability of turnover (an existing tenant vacates a space and the space is
released to a new tenant) and a 25 percent probability of rollover (an existing
tenant relets his space).
Tenant Improvements - We have factored a $10.00 per square foot allowance
for second generation space and an allowance of $5.00 per square foot is
projected for tenant renewals. The weighted average finish-out allowance
for all tenants is therefore equals to $6.65 per square foot.
Tenant improvement costs are projected to increase at a rate of four
percent per year through the projection period.
Leasing Commissions - For the period under analysis, leasing commissions
for all new leases are estimated to be 5.0 percent. Renewal commissions are
projected at 2.5 percent.
As a result of these projections, the weighted average commission applied
to all expiring space is equal to 3.125 percent.
Capital Replacements/Reserves - Reserves for replacements are or should be
set aside to accumulate an amount sufficient to replace and/or repair
certain major building components over time, i.e., roof, major parking lot
repairs, HVAC systems, etc. during the period under analysis. Based on the
expense behavior of other comparable properties and the age of the subject
property, we have estimated capital replacements/reserves at $0.10 per net
rentable square foot, increasing by four percent per year throughout our
analysis.
Our projected expenses are predicated on the assumption that the property
will be prudently managed, while maintaining the improvements at a competitive
level to preserve value. The preceding cumulative annual operating expense
estimate for 1996 equates to $1,588,014 ($8.29 per square foot of net rentable
area), excluding the capital replacements, tenant improvements and the leasing
commissions. Our total projected expenses appear reasonable when compared to the
historical experience and the 1996 budgeted amount. The primary difference is
the increase in the tax assessment.
Cash Flow Model
In the calculation of the cash flow forecasts and investment results
produced under these assumptions, projections and parameters, we employed the
Pro-Ject Plus+ computer program. The program has the flexibility to allow for a
tenant by tenant analysis of the subject as encumbered by the existing leases.
It also allows for a variety of assumptions regarding future income streams and
expenses. Our eleven-year and five month discounted cash flow analysis can be
found on the following page.
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<PAGE>
HOOKSTON SQUARE, PLEASANT HILL, CA
PROJECT DESIGNATOR: HOOK
REVISION: 7/31/96 @ 11:46
ANNUAL CASH FLOW REPORT
BEGINNING 8/1/96 FOR 15 YEARS
7/31/96 @ 11:47
<TABLE>
<CAPTION>
FY1997 FY1998 FY1999 FY2000 FY2001
<S> <C> <C> <C> <C> <C>
INCOME
MINIMUM RENT:
ALL TENANTS 3,020,966 3,245,244 3,378,797 3,414,476 3,141,855
---------- ---------- ---------- ---------- ----------
TOTAL MINIMUM RENT 3,020,966 3,245,244 3,378,797 3,414,476 3,141,855
RECOVERIES
REIMBURSABLE EXP 183,096 202,124 206,355 230,397 81,071
---------- ---------- ---------- ---------- ----------
TOTAL RECOVERIES 183,096 202,124 206,355 230,397 81,071
---------- ---------- ---------- ---------- ----------
GROSS RENTAL INCOME 3,204,062 3,447,368 3,585,152 3,644,873 3,222,926
CREDIT LOSS (64,081) (68,947) (71,703) (72,898) (64,458)
---------- ---------- ---------- ---------- ----------
TOTAL INCOME 3,139,981 3,378,421 3,513,449 3,571,975 3,158,468
EXPENSES
- --------
GROUND LEASE PAYMENTS 217,848 229,360 229,360 229,360 229,360
PROPERTY TAX EXP 159,096 162,278 165,523 168,834 172,210
UTILITIES 469,392 485,820 502,824 520,423 538,638
ADMINISTRATION 28,061 29,044 30,060 31,112 32,201
PAYROLL 119,389 123,567 127,892 132,368 137,001
BUILDING SERVICES 188,777 195,384 202,223 209,301 216,626
SECURITY 68,572 70,972 73,456 76,027 78,688
GROUNDS MAINTENANCE 47,960 49,638 51,376 53,174 55,035
REPAIRS & MAINTENANCE 80,613 83,434 86,355 89,377 92,505
ADVERTISING & MARKETING 14,616 15,128 15,658 16,206 16,773
INSURANCE 99,491 102,973 106,577 110,307 114,168
MANAGEMENT FEE 94,199 101,353 105,404 107,159 94,754
---------- ---------- ---------- ---------- ----------
TOTAL EXPENSES 1,588,014 1,648,951 1,696,708 1,743,648 1,777,959
---------- ---------- ---------- ---------- ----------
NET OPERATING INCOME 1,551,967 1,729,470 1,816,741 1,828,327 1,380,509
ALTERATIONS 109,541 161,835 162,027 98,189 708,410
COMMISSIONS 47,369 72,514 79,136 50,360 392,773
RESERVES 19,150 19,820 20,514 21,232 21,975
---------- ---------- ---------- ---------- ----------
CASH FLOW 1,375,907 1,475,301 1,555,064 1,658,546 257,351
<CAPTION>
FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME
MINIMUM RENT:
ALL TENANTS 3,889,634 4,075,311 4,217,095 4,415,892 3,853,674 4,772,520 4,950,506
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL MINIMUM RENT 3,889,634 4,075,311 4,217,095 4,415,892 3,853,674 4,772,520 4,950,506
RECOVERIES
REIMBURSABLE EXP 97,518 128,874 144,741 163,548 119,540 88,156 110,885
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL RECOVERIES 97,518 128,874 144,741 163,548 119,540 88,156 110,885
---------- ---------- ---------- ---------- ---------- ---------- ----------
GROSS RENTAL INCOME 3,987,152 4,204,185 4,361,836 4,579,440 3,973,214 4,860,676 5,061,391
CREDIT LOSS (79,743) (84,084) (87,237) (91,589) (79,464) (97,214) (101,228)
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL INCOME 3,907,409 4,120,101 4,274,599 4,487,851 3,893,750 4,763,462 4,960,163
EXPENSES
- --------
GROUND LEASE PAYMENTS 252,774 269,498 269,498 269,498 269,498 269,498 269,498
PROPERTY TAX EXP 175,655 179,168 182,751 186,406 190,134 193,937 197,816
UTILITIES 557,490 577,002 597,197 618,099 639,733 662,123 685,298
ADMINISTRATION 33,328 34,495 35,702 36,952 38,245 39,583 40,969
PAYROLL 141,796 146,759 151,896 157,212 162,715 168,410 174,304
BUILDING SERVICES 224,208 232,055 240,177 248,583 257,284 266,289 275,609
SECURITY 81,442 84,293 87,243 90,296 93,457 96,728 100,113
GROUNDS MAINTENANCE 56,961 58,955 61,018 63,154 65,364 67,652 70,020
REPAIRS & MAINTENANCE 95,743 99,094 102,562 106,152 109,867 113,712 117,692
ADVERTISING & MARKETING 17,360 17,967 18,596 19,247 19,921 20,618 21,340
INSURANCE 118,164 122,299 126,580 131,010 135,596 140,341 145,253
MANAGEMENT FEE 117,222 123,603 128,238 134,636 116,813 142,904 148,805
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL EXPENSES 1,872,143 1,945,188 2,001,458 2,061,245 2,098,627 2,181,795 2,246,717
---------- ---------- ---------- ---------- ---------- ---------- ----------
NET OPERATING INCOME 2,035,266 2,174,913 2,273,141 2,426,606 1,795,123 2,581,667 2,713,446
ALTERATIONS 124,325 127,419 135,958 124,258 657,697 129,163 173,294
COMMISSIONS 69,306 73,795 81,671 77,184 446,752 87,349 121,283
RESERVES 22,744 23,450 24,364 25,217 26,099 27,013 27,958
---------- ---------- ---------- ---------- ---------- ---------- ----------
CASH FLOW 1,818,891 1,950,159 2,031,148 2,199,947 664,575 2,338,142 2,390,911
</TABLE>
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Income Approach
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Terminal Capitalization Rate Selection
A terminal capitalization rate was used to estimate the market value of the
property at the end of the assumed investment holding period. The rate is
applied to the eleventh year estimate of net operating income before making
deductions for leasing commissions, tenant improvement allowances, or capital
reserves. We estimated an appropriate terminal rate based on the indicated
capitalization rates of the improved property sales in today's market, as
summarized below.
========================================
Summary of Capitalization Rates
========================================
Sale Capitalization
No. Rate
========================================
1 11.1%
2 8.0%
3 11.0%
4 9.7%(pro forma)
5 14.3%
6 10.6%
========================================
The subject represents a unique product within its marketplace due to its
leasehold interest. Market participants stated that the leasehold position
warranted a 200 basis point increase in the going-in capitalization rate when
compared to a leased fee interest. Based on our discussions with market
participants as well the Comparable Sales an appropriate going-in rate for the
subject would most likely be in the 12.0 to 12.5 percent range.
A premium is generally added to today's rate to allow for the risk of
unforeseen events or trends which might affect our estimate of net operating
income during the holding period, including possible changes in market
conditions for the property. Investors typically add 50 to 100 basis points to
the going-in rate to arrive at a terminal capitalization rate, according to
Cushman & Wakefield's periodic investor surveys.
Considering the survey results and comparing the subject property to the
comparables included in the Sales Comparison Approach, but also tempered by the
fact that capitalization rates are failing (which is not reflected in the
sales), we are of the opinion that a 13.0 percent terminal capitalization rate
is appropriate to apply to the subject's projected net operating income in the
eleventh year.
From this projected sales price, the estimated costs of sale for such items
as real estate commissions, closing costs, legal fees, as well as others, must
be deducted. We have estimated these cost to be two percent of the sales price
resulting in cash flow from the sale of the property in the tenth year.
Discount Rate Analysis
We estimated future cash flows, including property value at reversion, and
discounted that income stream at an internal rate of return (yield rates)
currently required by investors for similar-
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Income Approach
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quality real property. The yield rate (internal rate of return or IRR) is the
single rate that discounts all future equity benefits (cash flows and equity
reversion) to an estimate of net present value.
Cushman & Wakefield Valuation Advisory Services periodically surveys
national real estate investors to determine their investment objectives.
Following is a brief review of internal rates of return, overall rates, and
income and expense growth rates considered acceptable by respondents.
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CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES
SUMMER 1996 NATIONAL INVESTOR SURVEY FOR SUBURBAN OFFICE BUILDINGS
================================================================================
INCOME EXPENSE
GOING IN TERMINAL IRR GROWTH GROWTH
------------------------------------------------------------- Projection
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH Period
=========================================================================
Mean 9.2 9.8 9.6 10.1 12.9 13.5 3.6 4.1 3.4 3.6 7.7-8.7 YRS
- --------------------------------------------------------------------------------
Range 8.0 12.0 8.5 11.0 10.5 20.0 2.0 7.0 2.0 4.3 5-11 YRS
- --------------------------------------------------------------------------------
No. of Responses: 37 TO 45
================================================================================
This table summarizes the investment parameters of some of the most
prominent investors currently acquiring good quality office building properties
in the United States. The entire survey is included in the Addenda to this
report.
The investors internal rates of return cited above range from 10.5 to 20.0
percent with the high end of the range reflecting a rate appropriate for
properties which require more active management and involvement due to leasing
issues and/or additional capital investment for physical issues. We have
selected a 12.5 percent discount rate for the subject property.
The internal rate of return and terminal capitalization rate selected for
this analysis were strongly influenced by our recent Investor Survey, but we
also relied very heavily on the anecdotal data from Cushman & Wakefield's
Financial Services Group. Furthermore, we realize that the survey reflects
target rates rather than transactional rates. Transactional rates are usually
difficult to obtain in the verification process and are actually only target
rates of the buyer at the time of sale. The property's performance will
ultimately determine the actual yield and capitalization rate at the time of
sale after a specific holding period. We have found that, in improving markets
or with above average properties, demand will be high and transactional rates
may be lower than target rates that are quoted in surveys. We have tried to
recognize this factor in our choice of rate for our cash flow model.
Discounted Cash Flow Chart
The discounted cash flow analysis can be found on the following page.
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Income Approach
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PURCHASE/SALE YIELD TABLE FOR HOOKSTON SQUARE, PLEASANT HILL, CA
REVISION: 7/31/96 @ 11:46
7/31/96 @ 11:48
Purchase Price(000's)/Cap Going In as a function of IRR
All Cash analysis (Purchased August 1996 Sold July 2006)
Sale Price(000s)/Terminal Cap
20,002 19,223 18,502 17,833
IRR 12.50 13.00 13.50 14.00
- --------------------------------------------------------------------------------
11.50 15,257 14,994 14,752 14,526
10.17 10.35 10.52 10.68
12.00 14,783 14,532 14,300 14,085
10.50 10.68 10.85 11.02
12.50 14,329 14,090 13,868 13,662
10.83 11.02 11.19 11.36
13.00 13,895 13,665 13,453 13,256
11.17 11.36 11.54 11.71
13.SO 13,478 13,259 13,056 12,867
11.51 11.71 11.89 12.06
14.00 13,079 12,869 12,674 12,494
11.87 12.06 12.25 12.42
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Income Approach
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Conclusions Via the Income Approach
The resulting value estimate is $14,090,000, or $73.57 per net rentable
square foot, which results in an implied going-in capitalization rate of 11.01
percent.
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<PAGE>
RECONCILIATION AND FINAL ESTIMATE OF VALUE
================================================================================
Value indications for the subject property by the Approaches to Value are
indicated as follows:
Sales Comparison Approach $14,000,000
Income Approach $14,090,000
In the reconciliation, each approach to value is considered in order to
determine the reliability of the data in each and to weigh which approach best
represents the actions of typical users and investors in the market.
The Cost Approach was not relied upon in this instance because the subject
property represents a leasehold interest in the site.
The Sales Comparison Approach, is based on the principle of substitution
which implies that a prudent person will not pay more to buy or rent a property
than it would cost to buy a comparable substitute property. In this approach,
the subject property was compared with five office building sales. We analyzed
the sales using the sales price per square foot method. Although various
dissimilarities between the sales and the subject were noted, the general
analysis is believed to provide reasonable support for our value conclusion. As
such, the Sales Comparison Approach is afforded appropriate weight in the final
conclusion.
The Income Approach is based upon investor expectations for the income
stream generated by an income producing property. After estimating gross income
and the absorption of the vacant space, deductions were made for vacancy and
collection losses, and variables fixed and other expenses. The resulting net
operating income was then converted into an indication of value by means of
discounted cash flow model.
Since investment properties are generally bought and sold based upon their
income generating ability, all sources of pertinent data were carefully
researched. It is our opinion that the Income Approach is the most reliable
indicator of the value of the subject since the intent of our analysis was to
mirror investor expectations.
Therefore, giving primary weight to the indication of value via the Income
Approach, as supported by the Sales Comparison Approach, we have formed an
opinion that the market value of the leasehold estate in the referenced
property, subject to the assumptions, limiting conditions, certifications, and
definitions, as of July 24, 1996, was:
FOURTEEN MILLION DOLLARS
$14,000,000
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Reconciliation and Final Estimate of Value
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Marketing Time
Marketing time is an estimate of the time that might be required to sell a
real property interest at the appraised value. Marketing time is presumed to
start on the effective date of the appraisal. Marketing time is subsequent to
the effective date of the appraisal, and exposure time is presumed to precede
the effective date of appraisal.
The estimate of marketing time uses some of the same data analyzed in the
process of estimating the reasonable exposure time and is not intended to be a
prediction of a date of sale.
Our estimate of an appropriate marketing time for the subject relates to a
sale of the property in its As Is condition. Based on our discussions with local
brokers and buyer/sellers of office projects like the subject, as well as our
assessment of the local real estate market and economic forces in general, we
have concluded that the probable marketing period for the subject property in
today's environment would approximate 12 months or less.
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<PAGE>
ASSUMPTIONS AND LIMITING CONDITIONS
================================================================================
Appraisal means the appraisal report and opinion of value stated therein; or the
letter opinion of value, to which these Assumptions and Limiting Conditions are
annexed.
Property means the subject of the Appraisal.
C&W means Cushman & Wakefield, Inc. or its subsidiary which issued the
Appraisal.
Appraiser(s) means the employee(s) of C&W who prepared and signed the Appraisal.
The Appraisal has been made subject to the following assumptions and limiting
conditions:
1) No opinion is intended to be expressed and no responsibility is assumed for
the legal description or for any matters which are legal in nature or
require legal expertise or specialized knowledge beyond that of a real
estate appraiser. Title to the Property is assumed to be good and
marketable and the Property is assumed to be free and clear of all liens
unless otherwise stated. No survey of the Property was undertaken.
2) The information contained in the Appraisal or upon which the Appraisal is
based has been gathered from sources the Appraiser assumes to be reliable
and accurate. Some of such information may have been provided by the owner
of the Property. Neither the Appraiser nor C&W shall be responsible for the
accuracy or completeness of such information, including the correctness of
estimates, opinions, dimensions, sketches, exhibits and factual matters.
3) The opinion of value is only as of the date stated in the Appraisal.
Changes since that date in external and market factors or in the Property
itself can significantly affect property value.
4) The Appraisal is to be used in whole and not in part. No part of the
Appraisal shall be used in conjunction with any other appraisal.
Publication of the Appraisal or any portion thereof without the prior
written consent of C&W is prohibited. Except as may be otherwise stated in
the letter of engagement, the Appraisal may not be used by any person other
than the party to whom it is addressed or for purposes other than that for
which it was prepared. No part of the Appraisal shall be conveyed to the
public through advertising, or used in any sales or promotional material
without C&W's prior written consent. Reference to the Appraisal Institute
or to the MAI designation is prohibited.
5) Except as may be otherwise stated in the letter of engagement, the
Appraiser shall not be required to give testimony in any court or
administrative proceeding relating to the Property or the Appraisal.
6) The Appraisal assumes (a) responsible ownership and competent management of
the Property; (b) there are no hidden or unapparent conditions of the
Property, subsoil or structures that render the Property more or less
valuable (no responsibility is assumed for such conditions or for arranging
for engineering studies that may be required to discover them); (c) full
compliance with all applicable federal, state and local zoning and
environmental regulations and laws, unless noncompliance is stated, defined
and considered in the Appraisal; and (d) all required licenses,
certificates of occupancy and other governmental
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Assumptions and Limiting Conditions
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consents have been or can be obtained and renewed for any use on which the
value estimate contained in the Appraisal is based.
7) The physical condition of the improvements considered by the Appraisal is
based on visual inspection by the Appraiser or other person identified in
the Appraisal. C&W assumes no responsibility for the soundness of
structural members nor for the condition of mechanical equipment, plumbing
or electrical components.
8) The forecasted potential gross income referred to in the Appraisal may be
based on lease summaries provided by the owner or third parties. The
Appraiser assumes no responsibility for the authenticity or completeness of
lease information provided by others. C&W recommends that legal advice be
obtained regarding the interpretation of lease provisions and the
contractual rights of parties.
9) The forecasts of income and expenses are not predictions of the future.
Rather, they are the Appraiser's best estimates of current market thinking
on future income and expenses. The Appraiser and C&W make no warranty or
representation that these forecasts will materialize. The real estate
market is constantly fluctuating and changing. It is not the Appraiser's
task to predict or in any way warrant the conditions of a future real
estate market; the Appraiser can only reflect what the investment
community, as of the date of the Appraisal, envisages for the future in
terms of rental rates, expenses, supply and demand.
10) Unless otherwise stated in the Appraisal, the existence of potentially
hazardous or toxic materials which may have been used in the construction
or maintenance of the improvements or may be located at or about the
Property was not considered in arriving at the opinion of value. These
materials (such as formaldehyde foam insulation, asbestos insulation and
other potentially hazardous materials) may adversely affect the value of
the Property. The Appraisers are not qualified to detect such substances.
C&W recommends that an environmental expert be employed to determine the
impact of these matters on the opinion of value.
11) Unless otherwise stated in the Appraisal, compliance with the requirements
of the Americans With Disabilities Act of 1990 (ADA) has not been
considered in arriving at the opinion of value. Failure to comply with the
requirements of the ADA may adversely affect the value of the Property. C&W
recommends that an expert in this field be employed.
================================================================================
-37-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
CERTIFICATION OF APPRAISAL
================================================================================
We certify that, to the best of our knowledge and belief:
1) We, John C. Vaughan and Kenneth E. Matlin have inspected the property,
and 1, Kenneth E. Matlin, MAI, have reviewed the report and concur
with the findings contained herein.
2) The statements of fact contained in this report are true and correct.
3) The reported analyses, opinions, and conclusions are limited only by
the reported assumptions and limiting conditions, and are our
personal, unbiased professional analyses, opinions, and conclusions.
4) We have no present or prospective interest in the property that is the
subject of this report, and we have no personal interest or bias with
respect to the parties involved.
5) Our compensation is not contingent upon the reporting of a
predetermined value or direction in value that favors the cause of the
client, the amount of the value estimate, the attainment of a
stipulated result, or the occurrence of a subsequent event. The
appraisal assignment was not based on a requested minimum valuation, a
specific valuation or the approval of a loan.
6) No one provided significant professional assistance to the persons
signing this report.
7) Our analyses, opinions, and conclusions were developed, and this
report has been prepared, in conformity with the Uniform Standards of
Professional Appraisal Practice of the Appraisal Foundation and the
Code of Professional Ethics and the Standards of Professional
Appraisal Practice of the Appraisal Institute.
8) The use of this report is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives.
9) As of the date of this report, Kenneth E. Matlin, MAI, has completed
the requirements of the continuing education program of the Appraisal
Institute.
/s/ John C. Vaughan
- ---------------------------------------
John C. Vaughan
Valuation Advisory Services
California StatL,6 License No. AGO02680
/s/ Kenneth E. Matlin
- ---------------------------------------
Kenneth E. Matlin, MAI
Managing Director
Valuation Advisory Services
California State License No. AGO02022
================================================================================
-38-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
ADDENDA
================================================================================
================================================================================
-39-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
HOOKSTON SQUARE, PLEASANT HILL, CA
PROJECT DESIGNATOR: HOOK
REVISION: 7/31/96 @ 11:46
PROJECT ASSUMPTIONS REPORT
INCLUDING ALL TENANTS
7/31/96 @ 13:13
BUILDING PROLOGUE
- -----------------
LEASEHOLD ANALYSIS OF HOOKSTON SQUARE, PLEASANT HILL, CA BEGINNING 8/1996
FOR 15 YEARS ON A FISCAL YEAR BASIS
AREA MEASURES
- -------------
GBA
1996 VALUE - 206,55O
THEREAFTER - CONSTANT
NRA
1996 VALUE - 191,528
THEREAFTER - CONSTANT
GROWTH RATES
- ------------
TAXG
1996 VALUE - 2.00
THEREAFTER - CONSTANT
CPI
1996 VALUE - 3.50
THEREAFTER - CONSTANT
EXPG
1996 VALUE - 3.50
THEREAFTER - CONSTANT
RNTG
1996 VALUE - 4.00
1997 VALUE - 5.00
1998 VALUE - 5.00
1999 VALUE - 4.00
THEREAFTER - CONSTANT
MARKET RATES
- ------------
MKTR
1996 VALUE - 17.00
PAGE 2
THEREAFTER - GROWING AT GROWTH RATE RNTG
NTIS
1996 VALUE - 10.00
THEREAFTER - GROWING AT GROWTH RATE CPI
RNTI
1996 VALUE - 5.00
THEREAFTER - GROWING AT GROWTH RATE CPI
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
BLTI
+25.0% OF NTIS +75.0% OF RNTI
MISCELLANEOUS INCOMES
- ---------------------
NONE
EXPENSES
- --------
GROUND LEASE PYMTS, REFERRED TO AS GRND
CHARGED AGAINST NET OPERATING INCOME
1996 VALUE - 201,732
1997 VALUE - 229,360
1998 VALUE - 229,360
1999 VALUE - 229,360
2000 VALUE - 229,360
2001 VALUE - 229,360
2002 VALUE - 269,498
THEREAFTER - CONSTANT
PROPERTY TAX EXP , REFERRED TO AS TAXX
CHARGED AGAINST NET OPERATING INCOME
1996 VALUE - 157,261
THEREAFTER - GROWING AT GROWTH RATE TAXG
UTILITIES , REFERRED TO AS UTLX
CHARGED AGAINST NET OPERATING INCOME
1996 VALUE - 460,000
THEREAFTER - GROWING AT GROWTH RATE EXPG
ADMINISTRATION , REFERRED TO AS ADMX
04ARGED AGAINST NET OPERATING INCOME
1996 VALUE - 27,500
THEREAFTER - GROWING AT GROWTH RATE EXPG
PAYROLL , REFERRED TO AS PAYX
CHARGED AGAINST NET OPERATING INCOME
1996 VALUE - 117,000
PAGE 3
THEREAFTER - GROWING AT GROWTH RATE EXPG
BUILDING SERVICES , REFERRED TO AS BLDX
CHARGED AGAINST NET OPERATING INCOME
1996 VALUE - 185,000
THEREAFTER - GROWING AT GROWTH RATE EXPG
SECURITY , REFERRED TO AS SECX
CHARGED AGAINST NET OPERATING INCOME
1996 VALUE - 67,200
THEREAFTER - GROWING AT GROWTH RATE EXPG
GROUNDS MAINTENANCE, REFERRED TO AS GNDX
CHARGED AGAINST NET OPERATING INCOME
1996 VALUE - 47,000
THEREAFTER - GROWING AT GROWTH RATE EXPG
REPAIRS & MAINTEN., REFERRED TO AS R&MX
CHARGED AGAINST NET OPERATING INCOME
1996 VALUE - 79,000
THEREAFTER - GROWING AT GROWTH RATE EXPG
ADVERTISING & MKTG, REFERRED TO AS ADVX
CHARGED AGAINST NET OPERATING INCOME
1996 VALUE - 14,324
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
THEREAFTER - GROWING AT GROWTH RATE EXPG
INSURANCE , REFERRED TO AS INSX
CHARGED AGAINST NET OPERATING INCOME
1996 VALUE - 97,500
THEREAFTER - GROWING AT GROWTH RATE EXPG
REIMBURSABLE EXP. , REFERRED TO AS REIM
AN INFORMATIONAL EXPENSE
+100.0% OF GRND+100.0% OF TAXX
+100.0% OF UTLX+100.0% OF ADMX
+100.0% OF PAYX+100.0% OF BLDX
+100.0% OF SECX+100.0% OF GNDX
+100.0% OF R&MX+100.0% OF ADVX
+100.0% OF INSX
VACANCY ALLOWANCE
- -----------------
PERCENTAGE OF POTENTIAL GROSS INCOME
FOR ALL TENANTS SUBJECT TO VACANCY
1996 VALUE - 2.00
THEREAFTER - CONSTANT
PAGE 4
MANAGEMENT FEE
- --------------
PERCENTAGE OF EFFECTIVE GROSS INCOME
FOR ALL TENANTS
NOT PASSED THROUGH TO TENANTS
1996 VALUE - 3.00
THEREAFTER - CONSTANT
COMMISSION CALCULATIONS
- -----------------------
STANDARD METHOD #1 - 0.000% OF TOTAL RENT
STANDARD METHOD #2 - 0.000% OF TOTAL RENT
STANDARD METHOD #3 - 0.000% OF TOTAL RENT
STANDARD METHOD #4 - 0.000% OF TOTAL RENT
STANDARD METHOD #5 - 0.000% OF TOTAL RENT
COMMISSION PAYOUTS
- ------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - CASHED OUT
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
ALTERATION CALCULATION
- ----------------------
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
NONE
ALTERATION PAYOUTS
- ------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - CASHED OUT
STANDARD METHOD #3 - CASHED OUT
PAGE 5
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
COMMON AREA MAINTENANCE POOL
- ----------------------------
NONE
CAPITAL EXPENDITURES
- --------------------
RESERVES FOR REPL.
1996 VALUE - 19,150
THEREAFTER - GROWING AT GROWTH RATE CPI
PRIMARY CLASSIFICATION CODES
- ----------------------------
NONE
SECONDARY CLASSIFICATION CODES
- ------------------------------
NONE
COST CENTERS
- ------------
NONE
SALES VOLUME PROFILE
- --------------------
PERCENT OF RELATIVE
MONTH ANNUAL SALES VOLUME
- ----- ------------ --------
JAN 8.33% 1.00
FEB 8.33% 1.00
MAR 8.33% 1.00
APR 8.33% 1.00
MAY 8.33% 1.00
JUN 8.33% 1.00
JUL 8.33% 1.00
AUG 8.33% 1.00
SEP 8.33% 1.00
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 6
OCT 8.33% 1.00
NOV 8.33% 1.00
DEC 8.33% 1.00
------- -------
TOTALS 100.00% 12.00
GLOBAL RECOVERIES
- -----------------
REIMBURSABLE EXP. , REFERRED TO AS GREC
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
TENANT PROLOGUE
- ---------------
MINIMUM RENTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
SALES VOLUMES AND BREAKPOINTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
RENEWAL RENTS ARE COMPOUNDED ANNUALLY
RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET
REFERENCE TENANTS
- -----------------
NONE
TENANTS
THERE ARE A TOTAL OF 37 LEASEHOLD TENANT(S):
- -------------------------------------------------------------------------------
# 1 - SUITE 01-100 , FOUNDATION FOR EDU
BASE LEASE DATES: 2/1996 TO 8/2001
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 6,336
SUBJECT TO VACANCY ALLOWANCE
PAGE 7
MINIMUM RENT:
1997 VALUE - 15.96/SF/YR
1998 VALUE - 16.52/SF/YR
1999 VALUE - 17.10/SF/YR
2000 VALUE - 17.70/SF/YR
2001 VALUE - 18.31/SF/YR
2002 VALUE - 18.96/SF/YR
THEREAFTER - GROWING AT GROWTH RATE CPI
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
HOOKSTON SQUARE, PLEASANT HILL, CA
PROJECT DESIGNATOR: HOOK
REVISION: 8/ 5/96 @ 11:05
PROJECT ASSUMPTIONS REPORT
FOR TENANTS ONLY
INCLUDING ALL TENANTS
8/ 5/96 @ 16:41
TENANTS
- -------
THERE ARE A TOTAL OF 37 LEASEHOLD TENANT(S):
- -------------------------------------------------------------------------------
# 1 - SUITE 01-100 , FOUNDATION FOR EDU
BASE LEASE DATES: 2/1996 TO 8/2001
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 6,336
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1997 VALUE - 15.96/SF/YR
1998 VALUE - 16.52/SF/YR
1999 VALUE - 17.10/SF/YR
2000 VALUE 17.70/SF/YR
2001 VALUE 18.31/SF/YR
2002 VALUE 18.96/SF/YR
THEREAFTER GROWING AT GROWTH RATE CPI
RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 2 NONE NONE YES YES
2 5.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPI PER YEAR DURING EACH RENEWAL TERM
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: 3.00%
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: 6.25/SF
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 2 - SUITE 01-1000 , PACIFIC BUSINESS
BASE LEASE DATES: 9/1993 TO 8/2000
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 13,748
SUBJECT TO VACANCY ALLOWANCE
PAGE 2
MINIMUM RENT:
INITIAL RENT - 18.46/SF/YR
CHANGING TO - 19.11/SF/YR ON 1/1997
CHANGING TO - 19.77/SF/YR ON 1/1998
CHANGING TO - 20.47/SF/YR ON 1/1999
RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 1,120,031
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 2 NONE NONE YES YES
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
2 5.00 2 NONE NONE YES YES
3 5.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPI PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA.
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: 3.00%
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: 6.25/SF
RENEWAL PAYOUT: CASHED OUT
-------------------------------------------------------------------------------
# 3 - SUITE 01-105 , NELSON PERSONNEL
BASE LEASE DATES: 9/1993 TO 9/2000
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 2,465
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1997 VALUE - 17.40/SF/YR
THEREAFTER - GROWING AT GROWTH RATE CPI
RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM PRO RATED ON TENANT SQUARE
FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A
CALENDAR YEAR EXPENSE WITH NO CAP
AND A BASE AMOUNT OF 1,120,031
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:.
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 2 NONE NONE YES YES
2 5.00 2 NONE NONE YES YES
3 5.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPI PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM PRO RATED ON TENANT SQUARE FOOTAGE
OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR
EXPENSE WITH NO CAP AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: 3.00%
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: 6.25/SF
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 4 - SUITE 01-130 , THE BISTRO
BASE LEASE DATES: 1/1986 TO 12/2000
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,139
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1997 VALUE - 32.84/SF/YR
1998 VALUE - 33.99/SF/YR
1999 VALUE - 35.18/SF/YR
2000 VALUE - 36.41/SF/YR
THEREAFTER - GROWING AT GROWTH RATE CPI
RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 956,765
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 2 NONE NONE YES YES
2 5.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
95.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKTR
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT GROWTH RATE CPI
FROM DATE OF ESTABLISHMENT
INCREASING AT GROWTH RATE CPI PER YEAR DURING EACH RENEWAL TERM
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
PAGE 4
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: 3.00%
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: 6.25/SF
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 5 - SUITE 01-140 , SUN STAR ACCEPTANC
BASE LEASE DATES: 1/1995 TO 1/2000
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,774
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1997 VALUE - 18.00/SF/YR
THEREAFTER - GROWING AT GROWTH RATE CPI
RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 2 NONE NONE YES YES
2 5.00 2 NONE NONE YES YES
3 5.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPI PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA.
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: 3.00%
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: 6.25/SF
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 6 - SUITE 01-210 , DATA GENERAL
BASE LEASE DATES: 10/1995 TO 9/1996
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 654
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1997 VALUE - 19.80/SF/YR
THEREAFTER - GROWING AT GROWTH RATE CPI
RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
Page 5
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
COMMISSIONS: NONE
ALTERATIONS: NONE
OPTION 1 DATES: 10/1996 TO 11/1998
SQUARE FOOTAGE: 654
MINIMUM RENT:
1997 VALUE - 19.80/SF/YR
THEREAFTER - GROWING AT GROWTH RATE CPI
RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A
CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 2 NONE NONE YES YES
2 5.00 2 NONE NONE YES YES
3 5.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPI PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: 3.00%
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: 6.25/SF
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
# 7 - SUITE 01-215 , EDD
BASE LEASE DATES: 8/1991 TO 7/1999
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 5,971
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 20.42/SF/YR
CHANGING TO - 21.13/SF/YR ON 8/1996
CHANGING TO - 21.87/SF/YR ON 8/1997
CHANGING TO - 22.64/SF/YR ON 8/1998
RECOVERIES: NONE
COMMISSIONS: NONE
PAGE 6
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 2 NONE NONE YES YES
2 5.00 2 NONE NONE YES YES
3 5.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPI PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: 3.00%
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: 6.25/SF
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 8 - SUITE 01-217, BOARD OF MEDICAL Q
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
BASE LEASE DATES: 11/1991 TO 10/1999
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 3,396
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 20.42/SF/YR
CHANGING TO - 21.40/SF/YR ON 11/1996
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 2 NONE NONE YES YES
2 5.00 2 NONE NONE YES YES
3 5.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPI PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: 3.00%
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: 6.25/SF
RENEWAL PAYOUT: CASHED OUT
PAGE 7
- -------------------------------------------------------------------------------
# 9 - SUITE 01-219 , JAT COMPUTER
BASE LEASE DATES: 8/1993 TO 7/1999
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 994
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 17.40/SF/YR
RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 1,149,245
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 2 NONE NONE YES YES
2 5.00 2 NONE NONE YES YES
3 5.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPI PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: 3.00%
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: 6.25/SF
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 10 - SUITE 01-220 , GIRARD & VINSON
BASE LEASE DATES: 5/1994 TO 5/1997
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 2,843
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 18.13/SF/YR
RECOVERIES:
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 1,252,784
COMMISSIONS: NONE
ALTERATIONS: NONE
PAGE 8
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 2 NONE NONE YES YES
2 5.00 2 NONE NONE YES YES
3 5.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPI PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: 3.00%
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: 6.2S/SF
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 11 - SUITE 01-230 , BRACK & BROCK
BASE LEASE DATES: 1/1996 TO 1/2001
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,150
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
INITIAL RENT - 17.40/SF/YR
CHANGING TO - 18.01/SF/YR ON 1/1997
CHANGING TO - 18.64/SF/YR ON 1/1998
CHANGING TO - 19.29/SF/YR ON 1/1999
CHANGING TO - 19.97/SF/YR ON 1/2000
RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 2 NONE NONE YES YES
2 5.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPI PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
PAGE 9
RENEWAL COMMISSIONS: 3.00%
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: 6.25/SF
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
12 - SUITE 01-240 , CORLMEYER & FULL.
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
BASE LEASE DATES: 8/1990 TO 7/1998
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,427
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 17.73/SF/YR
CHANGING TO - 18.35/SF/YR ON 1/1997
CHANGING TO - 18.99/SF/YR ON 1/1998
RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 1,326,472
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 2 NONE NONE YES YES
2 5.00 2 NONE NONE YES YES
3 5.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPI PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: 3.00%
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: 6.25/SF
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 13 - SUITE 01-242 , STEAM ON WHEELS
BASE LEASE DATES: 6/1993 TO 5/2000
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,547
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
INITIAL RENT - 17.27/SF/YR
CHANGING TO - 17.87/SF/YR ON 1/1997
CHANGING TO - 18.50/SF/YR ON 1/1998
CHANGING TO - 19.15/SF/YR ON 1/1999
RECOVERIES:
PAGE 10
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP AND
A BASE AMOUNT OF 1,120,031
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 2 NONE NONE YES YES
2 5.00 2 NONE NONE YES YES
3 5.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPI PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: 3.00%
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: 6.25/SF
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
# 14 - SUITE 01-275 , COLOR SPOT NURSERY
BASE LEASE DATES: 1/1996 TO 5/2000
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 6,481
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 16.80/SF/YR
RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 2 NONE NONE YES YES
2 5.00 2 NONE NONE YES YES
3 5.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPI PER YEAR DURING EACH RENEWAL TERM
PAGE 11
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: 3.00%
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: 6.25/SF
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 15 - SUITE 01-275 , VILLAGE RESORTS
BASE LEASE DATES: 6/1993 TO 6/1998
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 7,570
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 16.99/SF/YR
CHANGING TO - 17.58/SF/YR ON 1/1997
CHANGING TO - 18.20/SF/YR ON 1/1998
RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 1,120,031
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 2 NONE NONE YES YES
2 5.00 2 NONE NONE YES YES
3 5.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPI PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP AND
A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: 3.00%
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: 6.25/SF
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 16 - SUITE 01-300 , GBA FINANCIAL
BASE LEASE DATES: 4/1994 TO 9/1998
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 5,445
SUBJECT TO VACANCY ALLOWANCE
PAGE 12
MINIMUM RENT:
INITIAL RENT - 15.87/SF/YR
RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP AND A BASE AMOUNT OF 1,379,713
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 2 NONE NONE YES YES
2 5.00 2 NONE NONE YES YES
3 5.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPI PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: 3.00%
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: 6.25/SF
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
# 17 - SUITE 01-308 , WAGNER LOFTIN
BASE LEASE DATES: 11/1993 TO 11/1996
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 718
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 16.80/SF/YR
RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 1,149,245
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 2 NONE NONE YES YES
2 5.00 2 NONE NONE YES YES
3 5.00 2 NONE NONE YES YES
PAGE 13
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPI PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: 3.00%
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: 6.25/SF
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 18 - SUITE 01-310 , DEPARTMENT OF JUST
BASE LEASE DATES: 2/1992 TO 1/1997
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 3,143
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 18.00/SF/YR
RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 15,715
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 2 NONE NONE YES YES
2 5.00 2 NONE NONE YES YES
3 5.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPI PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: 3.00%
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: 6.25/SF
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 19 - SUITE 01-333 , C.C.C. SCHOOL INS.
BASE LEASE DATES: 4/1995 TO 7/2000
TYPE OF TENANT: OFFICE
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 14
SQUARE FOOTAGE: 8,005
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 17.40/SF/YR
RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 1,379,713
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 2 NONE NONE YES YES
2 5.00 2 NONE NONE YES YES
3 5.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPI PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR%+99
RENEWAL COMMISSIONS: 3.00%
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: 6.25/SF
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
# 20 - SUITE 01-335 , DATA GENERAL CORP
BASE LEASE DATES: 12/1995 TO 11/1998
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 3,846
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1997 VALUE - 18.48/SF/YR
THEREAFTER - GROWING AT GROWTH RATE CPI
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 2 NONE NONE YES YES
2 5.00 2 NONE NONE YES YES
3 5.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
PAGE 15
INCREASING AT GROWTH RATE CPI PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: 3.00%
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: 6.2S/SF
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 21 - SUITE 01-342 , HOMEOWNERS TRUST
BASE LEASE DATES: 4/1995 TO 2/2002
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,301
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 18.36/SF/YR
RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM PRO RATED ON TENANT SQUARE FOOTAGE
OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR
EXPENSE WITH NO CAP AND A BASE AMOUNT OF 1,116,783
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 2 NONE NONE YES YES
2 5.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPI PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: 3.00%
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: 6.25/SF
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 22 - SUITE 01-343 , EMA SERVICES INC.
BASE LEASE DATES: 5/1993 TO 10/1999
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 2,187
SUBJECT TO VACANCY ALLOWANCE
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 16
MINIMUM RENT:
INITIAL RENT - 18.00/SF/YR
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 2 NONE NONE YES YES
2 5.00 2 NONE NONE YES YES
3 5.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPI PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: 3.00%
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: 6.25/SF
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 23 - SUITE 01-346 , PACIFIC BASIN
BASE LEASE DATES: 3/1994 TO 3/1999
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,878
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 17.40/SF/YR
RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 1,288,175
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 2 NONE NONE YES YES
2 5.00 2 NONE NONE YES YES
3 5.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPI PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
PAGE 17
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: 3.00%
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: 6.25/SF
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 24 - SUITE 01-350 , TELEGENISYS
BASE LEASE DATES: 12/1994 TO 11/1997
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,470
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 12.00/SF/YR
RECOVERIES:
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM PRO RATED ON TENANT SQUARE FOOTAGE
OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR
EXPENSE WITH NO CAP AND A BASE AMOUNT OF 1,326,472
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 2 NONE NONE YES YES
2 5.00 2 NONE NONE YES YES
3 5.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPI PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: 3.00%
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: 6.2S/SF
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 25 - SUITE 02-100 , WOLBERG MICHAELSON
BASE LEASE DATES: 4/1994 TO 3/1999
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,432
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 16.20/SF/YR
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 1,229,995
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 2 NONE NONE YES YES
2 5.00 2 NONE NONE YES YES
3 5.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPI PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: 3.00%
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: 6.25/SF
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 26 - SUITE 02-105 , REHABILITATION
BASE LEASE DATES: 8/1990 TO 1/1999
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 2,8ll
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 17.16/SF/YR
RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 1,071,242
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 2 NONE NONE YES YES
2 5.00 2 NONE NONE YES YES
3 5.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
PAGE 19
INCREASING AT GROWTH RATE CPI PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: 3.00%
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: 6.25/SF
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 27 - SUITE 01-120 , THE MARK GROUP
BASE LEASE DATES: 12/1991 TO 11/1997
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 7,680
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 16.80/SF/YR
RECOVERIES:
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 1,252,784
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 2 NONE NONE YES YES
2 5.00 2 NONE NONE YES YES
3 5.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPI PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: 3.00%
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: 6.25/SF
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 28 - SUITE 02-150 , BROWN AND CALDWELL
BASE LEASE DATES: 9/1993 TO 8/2000
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 58,511
SUBJECT TO VACANCY ALLOWANCE
Page 20
MINIMUM RENT:
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
INITIAL RENT - 15.96/SF/YR
CHANGING TO - 17.40/SF/YR ON 8/1998
RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 1,288,175
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 2 NONE NONE YES YES
2 5.00 2 NONE NONE YES YES
3 5.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPI PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP. PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: 3.50%
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: 7.00/SF
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 29 - SUITE 02-200 , PROPERTY SCIENCES
BASE LEASE DATES: 1/1996 TO 3/2001
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 8,114
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 16.80/SF/YR
RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 2 NONE NONE YES YES
2 5.00 2 NONE NONE YES YES
PAGE 21
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPI PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: 3.00%
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: 6.25/SF
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 30 - SUITE 02-205 , KRAMER REAL ESTATE
BASE LEASE DATES: 11/1994 TO 11/1999
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,388
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 16.34/SF/YR
CHANGING TO - 17.17/SF/YR ON 11/1996
RECOVERIES:
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 1,326,472
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 2 NONE NONE YES YES
2 5.00 2 NONE NONE YES YES
3 5.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPI PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: 3.00%
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: 6.25/SF
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 31 - SUITE 02-290 , OPSI - MGMT OFFICE
BASE LEASE DATES: 1/1995 TO 1/2015
PAGE 22
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 622
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
INITIAL RENT - 15.61/SF/YR
RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR%+96
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPI PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: 3.00%
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: 6.25/SF
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 32 - SUITE 02-300 , JWA
BASE LEASE DATES: 3/1991 TO 3/1999
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 861
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 15.61/SF/YR
RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 1,160,296
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 2 NONE NONE YES YES
2 5.00 2 NONE NONE YES YES
PAGE 23
3 5.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPI PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM PRO RATED ON TENANT SQUARE
FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A
CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF THE EXPENSE VALUE IN THE
OCCUPANCY YEAR
RENEWAL COMMISSIONS: 3.00%
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: 6.2S/SF
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 33 - SUITE 02-305 , MADERA GLASS CO
BASE LEASE DATES: 11/1994 TO 10/2000
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 5,126
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 19.20/SF/YR
RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE AMOUNT OF 1,160,296
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 2 NONE NONE YES YES
2 5.00 2 NONE NONE YES YES
3 5.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPI PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM PRO RATED ON TENANT SQUARE FOOTAGE
OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR
EXPENSE WITH NO CAP AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: 3.00%
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: 6.25/SF
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 34 - SUITE 100 ,LEASE UP ONE
PAGE 24
BASE LEASE DATES: 12/1996 TO 11/2001
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 4,197
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - MARKET RATE MKTR
RECOVERIES:
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
COMMISSIONS: 5.00%
PAYOUT: CASHED OUT
ALTERATIONS: MARKET RATE NTIS
PAYOUT: CASHED OUT
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 2 NONE NONE YES YES
2 5.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPI PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: 3.00%
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: 6.25/SF
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 35 - SUITE 200 ,LEASE UP TWO
BASE LEASE DATES: 4/1997 TO 3/2002
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 4,197
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - MARKET RATE MKTR
RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR%+96
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
COMMISSIONS: 5.00%
PAYOUT: CASHED OUT
ALTERATIONS: MARKET RATE NTIS
PAYOUT: CASHED OUT
PAGE 25
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 2 NONE NONE YES YES
2 5.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPI PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: 3.00%
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: 6.25/SF
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 36 - SUITE 300 , LEASE UP THREE
BASE LEASE DATES: 8/1997 TO 7/2002
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 4,197
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - MARKET RATE MKTR
RECOVERIES:
REIMBURSABLE EXP.
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA
MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
COMMISSIONS: 5.00%
PAYOUT: CASHED OUT
ALTERATIONS: MARKET RATE NTIS
PAYOUT: CASHED OUT
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 2 NONE NONE YES YES
2 5.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPI PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: 3.00%
RENEWAL PAYOUT: CASHED OUT
PAGE 26
RENEWAL ALTERATIONS: 6.25/SF
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 37 - SUITE 400 , LEASE UP FOUR
BASE LEASE DATES: 12/1997 TO 11/2002
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 4,197
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - MARKET RATE MKTR
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP A
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
COMMISSIONS: 5.00%
PAYOUT: CASHED OUT
ALTERATIONS: MARKET RATE NTIS
PAYOUT: CASHED OUT
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 2 NONE NONE YES YES
2 5.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPI PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: 3.00%
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: 6.25/SF
RENEWAL PAYOUT: CASHED OUT
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
REAL ESTATE OUTLOOK
Office Market
Urban/CBD
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Capitalization Rates Growth Rate Typical
--------------------------------- Internal --------------------------------- Projection
Going-In Terminal Rate of Return Income Expenses Period (Years)
Low High Low High Low High Low High Low High Low High
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A - Leased Asset
- ------------------------------------------------------------------------------------------------------------------------------------
9.5% 10.0% 10.0% 10.0% 11.5% 11.5% 3.0% 3.0% 3.0% 4.0% 10.0 10.0
9.5% 10.0% 10.0% 10.5% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
8.0% 9.0% 8.5% 8.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
13.0% 13.0% 14.0% 14.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
9.3% 9.3% 10.3% 10.3% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 9.0% 8.5% 9.0% 10.5% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
10.0% 10.0% 10.0% 10.0% 12.5% 12.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
9.0% 9.0% 9.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.0% 9.0% 8.0% 9.0% 10.0% 12.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
- ------------------------------------------------------------------------------------------------------------------------------------
Responses 10 10 9 9 10 10 10 10 10 10 10 10
Average (%) 9.3% 9.8% 9.3% 9.8% 11.8% 12.2% 3.6% 3.9% 3.5% 3.8% 8.3 9.5
- ------------------------------------------------------------------------------------------------------------------------------------
Class B - Leased Asset
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 9.0% 9.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.5% 9.5% 10.5% 10.5% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 10.0% 10.0% 11.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
15.0% 15.0% 20.0% 20.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
9.0% 10.0%
9.0% 10.0% 9.0% 10.0% 12.0% 13.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
- ------------------------------------------------------------------------------------------------------------------------------------
Responses 7 7 5 5 6 6 6 6 8 6 6 10
Average (%) 10.1% 10.6% 9.6% 10.4% 12.9% 13.3% 3.9% 4.2% 3.6% 3.9% 8.0 9.5
- ------------------------------------------------------------------------------------------------------------------------------------
Class A - Value Added
- ------------------------------------------------------------------------------------------------------------------------------------
8.0% 9.0 9.5% 10.0% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
8.0% 10.0% 8.5% 9.0% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.5% 9.5% 10.5% 10.5% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
12.0% 12.0% 13.0% 13.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
12.0% 13.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
- ------------------------------------------------------------------------------------------------------------------------------------
Responses 7 7 6 6 8 8 8 8 8 8 8 8
Average (%) 9.3% 10.0% 9.5% 10.3% 12.8% 13.6% 3.9% 4.1% 3.6% 3.8% 7.3 8.8
- ------------------------------------------------------------------------------------------------------------------------------------
Class B - Value Added
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 11.0 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.8% 9.8% 10.8% 10.8% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
14.0% 14.0% 20.0% 20.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 11.0% 14.0% 14.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
- ------------------------------------------------------------------------------------------------------------------------------------
Responses 5 5 4 4 5 5 5 5 5 5 5 5
Average (%) 10.5% 10.9% 10.1% 10.9% 14.5% 15.3% 3.9% 4.2% 3.4% 3.7% 7.6 8.5
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
Total Responses 29 29 24 24 29 29 29 29 29 29 29 29
Weighted Average (%) 9.8% 10.3% 9.6% 10.3% 13.0% 13.8% 3.8% 4.1% 3.5% 3.8% 7.8 9.1
====================================================================================================================================
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management
involvement due to leasing issues and/or additional capital Investment for
physical issues
-----------------------------------------------------
Cushman & Wakefield Valuation Advisory Services
National Investor Survey - Summer 1996
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Office Market
Suburban/Non-CBD
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Capitalization Rates Growth Rate Typical
--------------------------------- Internal --------------------------------- Projection
Going-In Terminal Rate of Return Income Expenses Period (Years)
Low High Low High Low High Low High Low High Low High
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A - Leased Asset
- ------------------------------------------------------------------------------------------------------------------------------------
9.5% 9.5% 10.5% 10.5% 10.5% 10.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.5% 8.5% 9.3% 9.3% 11.3% 11.3% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
11.0% 11.0% 12.0% 12.0% 5.0% 3.0% 3.0% 3.0% 5.0 7.0
8.5% 10.0% 9.0% 10.5% 11.0% 12.5% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
4.0% 10.0% 9.5% 10.0% 11.5% 12.0% 4.0% 6.0% 4.0% 4.0% 10.0 10.0
10.0% 11.0% 10.5% 11.0% 12.0% 12.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.0% 9.0% 8.5% 8.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.1% 9.1% 10.1% 10.1% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 10.0% 9.0% 10.5% 11.0% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
9.0% 9.0% 10.0% 10.0% 11.5% 11.5% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.0% 9.0% 9.0% 9.0% 12.0% 13.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.0% 10.0%
8.0% 9.0% 8.0% 9.0% 10.0% 12.0% 5.0% 5.0% 4.0% 4.0% 5.0 10.0
- ------------------------------------------------------------------------------------------------------------------------------------
Responses 15 15 13 13 14 14 14 14 14 14 14 14
Average (%) 8.8% 9.6% 9.4% 10.0% 11.2% 11.7% 3.8% 4.1% 3.6% 3.7% 8.8 9.6
- ------------------------------------------------------------------------------------------------------------------------------------
Class B - Leased Asset
- ------------------------------------------------------------------------------------------------------------------------------------
9.5% 9.5% 10.5% 10.5 % 10.5% 10.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.8% 8.8% 9.5% 9.5% 11.8% 11.8% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
12.0% 12.0% 18.0% 18.0% 5.0% 3.0% 3.0% 3.0% 5.0 7.0
10.5% 10.5% 10.0% 10.0% 11.0% 13.0% 2.0% 2.0% 2.0% 2.0% 10.0 10.0
8.0% 10.0% 9.5% 10.0% 11.0% 12.0% 4.0% 6.0% 4.0% 4.0% 10.0 10.0
9.0% 10.0% 9.0% 9.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.4% 9.4% 10.4% 10.4% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 4.0% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 10.0% 14.0% 15.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
10.0% 11.0%
10.0% 11.0% 10.0% 11.0% 12.0% 13.0% 5.0% 5.0% 4.0% 4.0% 5.0 10.0
- ------------------------------------------------------------------------------------------------------------------------------------
Responses 12 12 10 10 11 11 11 11 11 11 11 11
Average (%) 9.6% 10.1% 9.7% 10.2% 12.1% 12.6% 3.7% 4.1% 3.5% 3.6% 8.5 9.5
- ------------------------------------------------------------------------------------------------------------------------------------
Class A - Value Added
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 13.0% 13.0% 3.0% 3.0% 3.0% 3.0% 5.0 7.0
8.0% 10.0% 8.5% 9.0% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.4% 9.4% 10.4% 10.4% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
6.0% 6.0% 9.0% 9.0% 17.0% 20.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.0% 10.0%
12.0% 12.0% 10.0% 10.0% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 2.0 2.0
- ------------------------------------------------------------------------------------------------------------------------------------
Responses 9 9 7 7 8 8 8 8 8 8 8 8
Average (%) 9.0% 9.7% 9.5% 10.1% 13.6% 14.6% 3.5% 4.1% 3.5% 3.7% 6.9 7.8
- ------------------------------------------------------------------------------------------------------------------------------------
Class B - Value Added
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 16.0% 18.0% 3.0% 3.0% 3.0% 3.0% 5.0 7.0
10.5% 10.5% 10.0% 10.0% 11.0% 13.0% 2.0% 2.0% 2.0% 2.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.6% 9.6% 10.6% 10.6% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
6.0% 6.0% 10.0% 10.0% 20.0% 20.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.0% 10.0%
12.0% 12.0% 10.0% 10.0% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 2.0 2.0
- ------------------------------------------------------------------------------------------------------------------------------------
Responses 9 9 7 7 8 8 8 8 8 8 8 8
Average (%) 9.5% 9.8% 9.9% 10.4% 14.6% 15.3% 3.3% 3.9% 3.2% 3.4% 6.9 7.8
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
Total Responses 45 45 37 37 41 41 41 41 41 41 41 41
Weighted Average (%) 9.2% 9.8% 9.6% 10.1% 12.9% 13.5% 3.6% 4.1% 3.4% 3.6% 7.7 8.7
====================================================================================================================================
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management
involvement due to leasing issues and/or additional capital Investment
for physical issues
-----------------------------------------------------
Cushman & Wakefield Valuation Advisory Services
National Investor Survey - Summer 1996
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Industrial Market
Warehouse / Distribution
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Capitalization Rates Growth Rate Typical
--------------------------------- Internal --------------------------------- Projection
Going-In Terminal Rate of Return Income Expenses Period (Years)
Low High Low High Low High Low High Low High Low High
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A - Leased Asset
- ------------------------------------------------------------------------------------------------------------------------------------
9.2% 9.2% 9.5% 9.5% 10.0% 10.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.5% 8.5% 9.3% 9.3% 11.0% 11.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
8.5% 10.0% 9.5% 10.0% 11.0% 12.0% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
9.0% 9.0% 9.5% 9.5% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 10.0% 9.0% 10.5% 11.0% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
9.0% 9.0% 10.0% 10.0% 11.0% 11.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
9.0% 9.0% 9.5% 9.5% 10.5% 10.5% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
- ------------------------------------------------------------------------------------------------------------------------------------
Responses 9 9 9 9 9 9 9 9 9 9 9 9
Average (%) 8.9% 9.3% 9.5% 9.9% 10.9% 11.1% 3.3% 3.6% 3.3% 3.6% 9.8 10.1
- ------------------------------------------------------------------------------------------------------------------------------------
Class B - Leased Asset
- ------------------------------------------------------------------------------------------------------------------------------------
9.2% 9.2% 9.5% 8.5% 10.0% 10.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.8% 8.8% 9.5% 9.5% 11.3% 11.3% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.5% 11.5% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
9.8% 9.8% 10.3% 10.3% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
- ------------------------------------------------------------------------------------------------------------------------------------
Responses 6 6 6 6 6 6 6 6 6 6 6 6
Average (%) 9.2% 9.4% 9.8% 10.0% 11.0% 11.0% 3.2% 3.6% 3.3% 3.7% 9.7 10.2
- ------------------------------------------------------------------------------------------------------------------------------------
Class A - Value Added
- ------------------------------------------------------------------------------------------------------------------------------------
9.8% 9.8 10.3% 10.3% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
- ------------------------------------------------------------------------------------------------------------------------------------
Responses 3 3 3 3 3 3 3 3 3 3 3 3
Average (%) 9.3% 9.6% 9.9% 10.4% 11.5% 11.5% 3.3% 3.8% 3.3% 3.8% 9.3 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
Class B - Value Added
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 10.5% 10.5% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.5% 10.5% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
- ------------------------------------------------------------------------------------------------------------------------------------
Responses 3 3 3 3 3 3 3 3 3 3 3 3
Average (%) 9.5% 9.8% 10.2% 10.7% 11.8% 11.8% 3.3% 3.8% 3.3% 3.8% 9.3 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
Total Responses 21 21 21 21 21 21 21 21 21 21 21 21
Weighted Average (%) 9.2% 9.5% 9.9% 10.3% 11.3% 11.4% 3.2% 3.7% 3.3% 3.7% 9.5 10.2
====================================================================================================================================
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management
involvement due to leasing issues and/or additional capital Investment
for physical issues
-----------------------------------------------------
Cushman & Wakefield Valuation Advisory Services
National Investor Survey - Summer 1996
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Industrial Market
Business Parks, Other Industrial and Manufacturing
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Capitalization Rates Growth Rate Typical
--------------------------------- Internal --------------------------------- Projection
Going-In Terminal Rate of Return Income Expenses Period (Years)
Low High Low High Low High Low High Low High Low High
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A - Leased Asset
- ------------------------------------------------------------------------------------------------------------------------------------
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 10.0 10.0
9.0% 9.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
- ------------------------------------------------------------------------------------------------------------------------------------
Responses 4 4 3 3 4 4 4 4 4 4 4 4
Average (%) 8.9% 9.4% 9.7% 10.7% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.8 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
Class B - Leased Asset
- ------------------------------------------------------------------------------------------------------------------------------------
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.5% 10.5% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 10.0 10.0
10.0% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
- ------------------------------------------------------------------------------------------------------------------------------------
Responses 4 4 3 3 4 4 4 4 4 4 4 4
Average (%) 9.3% 9.8% 9.8% 10.8% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.8 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
Class A - Value Added
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 10.5% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
- ------------------------------------------------------------------------------------------------------------------------------------
Responses 5 5 4 4 5 5 5 5 5 5 5 5
Average (%) 9.4% 10.0% 9.9% 10.9% 12.4% 13.2% 3.4% 4.0% 3.2% 3.8% 8.2 9.4
- ------------------------------------------------------------------------------------------------------------------------------------
Class B - Value Added
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.5% 10.5% 11.0% 11.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.5% 10.5% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
- ------------------------------------------------------------------------------------------------------------------------------------
Responses 5 5 4 4 5 5 5 5 5 5 5 5
Average (%) 9.6% 10.2% 10.0% 11.0% 12.4% 13.2% 3.4% 4.0% 3.2% 3.8% 8.2 9.4
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
Total Responses 18 18 14 14 18 18 18 18 18 18 18 18
Weighted Average (%) 9.3% 9.8% 9.8% 10.8% 12.0% 12.4% 3.3% 4.0% 3.2% 3.9% 8.5 9.8
====================================================================================================================================
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management
involvement due to leasing issues and/or additional capital Investment
for physical issues
-----------------------------------------------------
Cushman & Wakefield Valuation Advisory Services
National Investor Survey - Summer 1996
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Retail Market
Neighborhood and Community Centers
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Capitalization Rates Growth Rate Typical
--------------------------------- Internal --------------------------------- Projection
Going-In Terminal Rate of Return Income Expenses Period (Years)
Low High Low High Low High Low High Low High Low High
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A - Leased Asset
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 10.5% 9.5% 10.5% 11.0% 12.5% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
9.5% 10.0% 10.0% 10.0% 12.5% 12.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
10.0% 10.0% 10.5% 10.5% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
10.3% 10.3% 10.8% 10.0% 13.0% 13.0% 2.0% 2.0% 4.0% 4.0% 7.0 7.0
9.8% 9.8% 10.3% 10.3% 11.5% 11.5% 3.8% 4.0% 4.0% 4.0% 10.0 10.0
9.0% 10.0% 3.0% 3.0% 4.0% 4.0% 10.0 10.0
9.0% 9.0% 9.5% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
- ------------------------------------------------------------------------------------------------------------------------------------
Responses 8 8 7 7 7 7 8 8 8 8 8 8
Average (%) 9.4% 9.9% 10.0% 10.4% 12.1% 12.4% 3.2% 3.4% 3.6% 3.8% 8.8 9.4
- ------------------------------------------------------------------------------------------------------------------------------------
Class B - Leased Asset
- ------------------------------------------------------------------------------------------------------------------------------------
10.8% 10.8% 11.3% 11.3% 14.0% 14.0% 2.0% 2.0% 4.0% 4.0% 7.0 7.0
9.0% 10.0% 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 11.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.5% 10.5%
- ------------------------------------------------------------------------------------------------------------------------------------
Responses 5 5 3 3 3 3 4 4 4 4 4 4
Average (%) 9.5% 10.1% 10.3% 11.1% 12.3% 12.3% 2.9% 3.3% 3.6% 4.0% 8.8 9.5
- ------------------------------------------------------------------------------------------------------------------------------------
Class A - Value Added
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 10.0 10.0
9.0% 10.0% 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 9.5% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.0% 10.0%
11.0% 11.0% 9.5% 9.5% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 3.0 3.0
- ------------------------------------------------------------------------------------------------------------------------------------
Responses 6 6 4 4 4 4 5 5 5 5 5 5
Average (%) 9.5% 10.2% 9.6% 10.4% 14.0% 15.0% 3.3% 3.6% 3.3% 3.6% 8.2 8.8
- ------------------------------------------------------------------------------------------------------------------------------------
Class B - Value Added
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 10.0 10.0
9.0% 10.0% 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 11.0% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 11.0% 11.0% 14.0% 14.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
11.0% 11.0% 10.5% 11.0% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 73.0 3.0
- ------------------------------------------------------------------------------------------------------------------------------------
Responses 5 5 4 4 4 4 5 5 5 5 5 5
Average (%) 9.7% 10.3% 10.0% 10.9% 14.3% 15.3% 3.3% 3.6% 3.3% 3.8% 8.2 8.8
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
Total Responses 24 24 24 24 24 24 24 24 24 24 24 24
Weighted Average (%) 9.5% 10.1% 10.0% 10.7% 13.2% 13.7% 3.2% 3.5% 3.5% 3.8% 8.6 9.1
====================================================================================================================================
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management
involvement due to leasing issues and/or additional capital Investment
for physical issues
-----------------------------------------------------
Cushman & Wakefield Valuation Advisory Services
National Investor Survey - Summer 1996
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Retail Market
Power Center & "Big Box"
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Capitalization Rates Growth Rate Typical
--------------------------------- Internal --------------------------------- Projection
Going-In Terminal Rate of Return Income Expenses Period (Years)
Low High Low High Low High Low High Low High Low High
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A - Leased Asset
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 9.0% 9.5% 9.5% 11.0% 11.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
10.0% 10.0% 9.5% 9.5% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
10.5% 10.5% 10.5% 10.5% 11.0% 12.0% 2.0% 2.0% 3.0% 3.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.4% 11.4% 3.8% 3.8% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 9.5% 10.0% 11.0% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
9.3% 9.3% 9.5% 10.0% 10.5% 10.5% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.0% 9.0%
9.0% 9.5% 9.5% 10.0% 11.0% 11.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
- ------------------------------------------------------------------------------------------------------------------------------------
Responses 9 9 8 8 8 8 3 8 8 8 8 8
Average (%) 9.4% 9.5% 9.7% 10.1% 11.5% 11.7% 3.2% 3.5% 3.4% 3.7% 9.1 10.1
- ------------------------------------------------------------------------------------------------------------------------------------
Class B - Leased Asset
- ------------------------------------------------------------------------------------------------------------------------------------
10.8% 10.8% 10.8% 10.8% 11.0% 12.0% 2.0% 3.0% 3.0% 3.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
- ------------------------------------------------------------------------------------------------------------------------------------
Responses 3 3 3 3 3 3 3 3 3 3 3 3
Average (%) 9.8% 10.1% 10.1% 10.6% 11.0% 11.3% 2.8% 3.7% 3.2% 3.7% 9.3 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
Class A - Value Added
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.8% 10.8% 10.8% 12.0% 12.0% 2.0% 2.0% 3.0% 3.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
- ------------------------------------------------------------------------------------------------------------------------------------
Responses 3 3 3 3 3 3 3 3 3 3 3 3
Average (%) 9.5% 9.9% 10.1% 10.6% 12.0% 12.0% 2.8% 3.3% 3.2% 3.7% 9.3 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
Class B - Value Added
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 10.8% 10.8% 12.0% 12.0% 2.0% 2.0% 3.0% 3.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
15.0% 15.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
- ------------------------------------------------------------------------------------------------------------------------------------
Responses 2 2 2 2 3 3 3 3 3 3 3 3
Average (%) 9.8% 10.3% 10.1% 10.9% 12.7% 12.7% 2.8% 3.3% 3.2% 3.7% 9.3 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
Total Responses 17 17 16 16 17 17 17 17 17 17 17 17
Weighted Average (%) 9.6% 9.9% 10.0% 10.5% 11.8% 11.9% 2.9% 3.5% 3.2% 3.7% 9.3 10.3
====================================================================================================================================
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management
involvement due to leasing issues and/or additional capital Investment
for physical issues
-----------------------------------------------------
Cushman & Wakefield Valuation Advisory Services
National Investor Survey - Summer 1996
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Retail Market
Regional Malls
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Capitalization Rates Growth Rate Typical
--------------------------------- Internal --------------------------------- Projection
Going-In Terminal Rate of Return Income Expenses Period (Years)
Low High Low High Low High Low High Low High Low High
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A - Leased Asset
- ------------------------------------------------------------------------------------------------------------------------------------
7.5% 7.5% 8.0% 8.0% 11.3% 11.3% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.0% 9.0% 9.0% 9.0% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
7.5% 7.5% 7.8% 7.8% 12.0% 12.0% 1.5% 2.0% 3.0% 3.0% 10.0 10.0
9.0% 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.0% 8.0% 9.0% 10.5% 11.0% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
8.0% 8.0% 8.5% 8.5% 11.0% 11.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
7.8% 8.0% 8.3% 8.5% 11.0% 12.0% 2.5% 3.0% 2.5% 3.0% 10.0 10.0
7.0% 8.0% 7.0% 8.0% 10.0% 11.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
- ------------------------------------------------------------------------------------------------------------------------------------
Responses 9 8 8 8 8 8 9 9 9 9 9 9
Average (%) 8.0% 8.2% 8.3% 8.7% 11.5% 11.8% 3.3% 3.5% 3.6% 3.7% 9.0 9.6
- ------------------------------------------------------------------------------------------------------------------------------------
Class B - Leased Asset
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 10.0% 10.0% 17.0% 17.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
9.0% 9.0% 9.0% 9.0% 13.5% 13.5% 2.0% 2.0% 4.0% 4.0% 7.0 7.0
10.0% 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
- ------------------------------------------------------------------------------------------------------------------------------------
Responses 4 3 3 3 3 3 4 4 4 4 4 4
Average (%) 9.4% 9.5% 9.5% 10.0% 13.8% 13.8% 3.1% 3.3% 3.9% 4.0% 8.3 8.3
- ------------------------------------------------------------------------------------------------------------------------------------
Class A - Value Added
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.8% 10.0% 10.0% 18.0% 18.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
9.0% 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.5% 8.5% 9.0% 11.5% 12.5% 2.5% 3.0% 2.5% 3.0% 10.0 10.0
- ------------------------------------------------------------------------------------------------------------------------------------
Responses 4 3 3 3 3 3 4 4 4 4 4 4
Average (%) 8.9% 9.3% 9.3% 10.0% 13.5% 13.8% 3.3% 3.5% 3.5% 3.8% 9.0 9.0
- ------------------------------------------------------------------------------------------------------------------------------------
Class B - Value Added
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 11.0% 11.0% 20.0% 20.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
10.0% 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 9.0% 9.3% 9.8% 12.0% 13.0% 2.5% 3.0% 2.5% 3.0% 10.0 10.0
13.0% 13.0% 11.0% 11.0% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 3.0 3.0
- ------------------------------------------------------------------------------------------------------------------------------------
Responses 5 4 4 4 4 4 5 5 5 5 5 5
Average (%) 10.2% 10.6% 10.2% 10.7% 14.8% 15.0% 3.2% 3.4% 3.4% 3.6% 7.8 7.8
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
Total Responses 22 18 18 18 18 18 22 22 22 22 22 22
Weighted Average (%) 9.1% 9.4% 9.3% 9.9% 13.4% 13.6% 3.2% 3.4% 3.6% 3.8% 8.5 8.7
====================================================================================================================================
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management
involvement due to leasing issues and/or additional capital Investment
for physical issues
-----------------------------------------------------
Cushman & Wakefield Valuation Advisory Services
National Investor Survey - Summer 1996
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Residential
Apartments
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Capitalization Rates Growth Rate Typical
--------------------------------- Internal --------------------------------- Projection
Going-In Terminal Rate of Return Income Expenses Period (Years)
Low High Low High Low High Low High Low High Low High
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A - Leased Asset
- ------------------------------------------------------------------------------------------------------------------------------------
8.5% 10.0% 9.0% 10.5% 3.5% 3.5% 1.0 1.0
8.5% 9.0% 9.0% 9.0% 11.0% 11.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
9.8% 9.8% 10.0% 10.0% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
8.3% 9.0% 9.0% 9.5% 10.5% 11.5% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
8.8% 8.8% 9.0% 9.0% 11.3% 11.3% 3.8% 4.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 9.0% 9.0% 9.5% 10.0% 11.5% 3.0% 4.0% 3.0% 3.0% 10.0 10.0
8.5% 9.0% 8.5% 9.0% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
8.8% 9.0% 9.0% 9.5% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
- ------------------------------------------------------------------------------------------------------------------------------------
Responses 9 9 9 9 7 7 8 8 9 9 9 9
Average (%) 8.7% 9.2% 9.1% 9.7% 11.4% 11.8% 3.3% 3.8% 3.3% 3.7% 8.2 8.8
- ------------------------------------------------------------------------------------------------------------------------------------
Class B - Leased Asset
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 9.5% 9.5% 10.0% 11.0% 12.0% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.0% 10.0% 10.0% 10.5% 10.5% 12.0% 3.0% 4.0% 3.0% 3.0% 10.0 10.0
9.0% 9.5% 9.5% 10.0% 11.5% 11.5% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
- ------------------------------------------------------------------------------------------------------------------------------------
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 8.9% 9.6% 9.6% 10.4% 11.0% 11.6% 3.1% 4.0% 3.1% 3.8% 9.5 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
Class A - Value Added
- ------------------------------------------------------------------------------------------------------------------------------------
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.0% 9.0% 9.0% 11.0% 12.0% 4.0% 6.0% 3.0% 3.0% 3.0 5.0
9.0% 9.0% 9.5% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
- ------------------------------------------------------------------------------------------------------------------------------------
Responses 3 3 3 3 3 3 3 3 3 3 3 3
Average (%) 8.5% 8.8% 9.3% 10.0% 11.3% 11.7% 3.5% 4.7% 3.2% 3.7% 7.0 8.7
- ------------------------------------------------------------------------------------------------------------------------------------
Class B - Value Added
- ------------------------------------------------------------------------------------------------------------------------------------
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.0% 10.0% 10.0% 11.0% 13.0% 4.0% 6.0% 3.0% 3.0% 3.0 5.0
9.5% 10.0% 10.0% 11.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
- ------------------------------------------------------------------------------------------------------------------------------------
Responses 3 3 3 3 3 3 3 3 3 3 3 3
Average (%) 8.7% 9.2% 9.8% 10.7% 11.7% 12.3% 3.5% 4.7% 3.2% 3.7% 7.0 8.7
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
Total Responses 19 19 19 19 17 17 18 18 19 19 19 19
Weighted Average (%) 8.7% 9.2% 9.5% 10.2% 11.3% 11.8% 3.4% 4.3% 3.2% 3.7% 7.9 9.1
====================================================================================================================================
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management
involvement due to leasing issues and/or additional capital Investment
for physical issues
-----------------------------------------------------
Cushman & Wakefield Valuation Advisory Services
National Investor Survey - Summer 1996
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Single-Tenant NNN Leased Properties
(Excludes "Bondable" Leases)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Going-In Cap Rate Internal Rate of Return
Minimum No. --------------------------------------------------------------------------------
Of Years Low High Low High
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Grade Tenant
4.0 9.0% 9.0% 10.0% 12.0%
- ------------------------------------------------------------------------------------------------------------------------------------
10.0 8.0% 9.0% 10.5% 11.5%
- ------------------------------------------------------------------------------------------------------------------------------------
5.0 10.5% 10.5% 13.0% 13.0%
- ------------------------------------------------------------------------------------------------------------------------------------
10.0 9.0% 10.5% 13.0% 15.0%
- ------------------------------------------------------------------------------------------------------------------------------------
10.0 8.5% 9.0% 10.5% 12.0%
- ------------------------------------------------------------------------------------------------------------------------------------
10.0 8.5% 11.0% 10.8% 12.0%
- ------------------------------------------------------------------------------------------------------------------------------------
10.0 9.5% 9.5% 11.0% 11.0%
- ------------------------------------------------------------------------------------------------------------------------------------
20.0 9.0% 9.0% N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
10.0 8.0% 10.0% N/A N/A
====================================================================================================================================
Responses 9.0 9.0 9.0 7.0 7.0
Average (%) 9.9 8.9% 9.7% 11.3% 12.4%
====================================================================================================================================
Non-Investment Grade Tenant
4.0 9.5% 9.5% 10.0% 13.0%
- ------------------------------------------------------------------------------------------------------------------------------------
10.0 9.0% 10.0% 11.5% 12.5%
- ------------------------------------------------------------------------------------------------------------------------------------
5.0 13.0% 13.0% 15.0% 15.0%
- ------------------------------------------------------------------------------------------------------------------------------------
10.0 10.0% 12.0% 17.0% 20.0%
- ------------------------------------------------------------------------------------------------------------------------------------
10.0 9.0% 10.0% 11.0% 13.0%
- ------------------------------------------------------------------------------------------------------------------------------------
10.0 10.5% 10.5% 13.0% 13.0%
- ------------------------------------------------------------------------------------------------------------------------------------
20.0 11.0% 11.0%
- ------------------------------------------------------------------------------------------------------------------------------------
10.0 10.0% 12.5%
====================================================================================================================================
Responses 8.0 8.0 8.0 6.0 6.0
Average (%) 9.9 10.3% 11.1% 13.0% 14.4%
====================================================================================================================================
</TABLE>
-----------------------------------------------------
Cushman & Wakefield Valuation Advisory Services
National Investor Survey - Summer 1996
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
QUALIFICATIONS OF APPRAISER
================================================================================
John C. Vaughan
Professional Affiliation and License
Associate Member of Appraisal Institute
State of California Certified General Real Estate Appraiser (ID #AG002680)
Real Estate Experience
More than nine years of Real Estate Appraisal and Consulting experience
throughout California.
1996-Present Cushman & Wakefield, Inc. San Francisco, CA
1991-1996 CB Commercial Real Estate Group, Inc. San Francisco, CA
1991 Bank of California San Francisco, CA
1986-1991 Security Pacific National Bank Los Angeles, Orange
County, and San
Francisco, CA
Education
Bachelor of Science, Specialization Managerial Economics
University of California, Davis
Appraisal Institute Courses:
Advanced Applications (1995)
Capitalization Theory and Techniques - Parts A & B (1991-1992)
Standards of Professional practice, Parts A & B (1990-1993)
Appraisal Principles (1993)
Basic Valuation (1993)
Residential Valuation (1987)
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
QUALIFICATIONS OF APPRAISER
================================================================================
Kenneth E. Matlin, MAI
Association Membership
Member Appraisal Institute (MAI No. 8397) Senior Residential Appraiser
Senior Member, American Society of Real Estate Appraisers - Past President
of
San Jose Chapter
Brokers License - State of California
Certified - General, Certificate Number AG002022
Kenneth E. Matlin has completed the requirements of the continuing
education programs of the Appraisal Institute and the American Society of
Appraisers
Real Estate Experience
Director and Manager, Cushman & Wakefield Valuation Advisory Services, San
Jose and San Francisco Divisions. San Jose and San Francisco Divisions are
responsible for the appraisal and consulting function of Cushman &
Wakefield of California, Inc., a national full service real estate
organization.
Regional Chief Appraiser, California First Bank, San Jose, California,
between 1974 and 1983.
Education
California State University of San Diego, California Bachelor of Science
Degree - Major: Real Estate, Minor: Political Science (1973)
American Institute of Real Estate Appraisers:
No. 1-Al - Real Estate Appraisal Principles (6-86)
No. 1 -A2 - Basic Valuation Procedures (3-87)
No. 1 -BA - Capitalization Theory & Techniques, Part A (9-87)
No. 1 -BB - Capitalization Theory & Techniques, Part B (9-87)
No. 2-1 - Case Studies (3-87)
No. 2-2 - Valuation Analysis and Reporting Writing (10-86)
No. 2-3 - Standard of Professional Practice (6-86)
No. 410 - USPAP
No. 420 - Standards of Professional Practice (11-93)
No. 510 - Advanced Capitalization Theory (7-93)
Society of Real Estate Appraisers:
No. 101 - Introduction to Appraising Real Property (8-76)
No. 201 - Principles of Income Property Appraising (6-75)
No. 202 - Case Problems (6-83)
No. R-2 - Single Family Report Exam (2-77)
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Qualification of Appraiser
================================================================================
Kenneth E. Matlin, MAI
Litigation Experience
Qualified as expert witness Santa Clara County Superior Court
Qualified as expert witness Alameda County Superior Court
Qualified as expert witness Federal Bankruptcy Court
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
This CD ROM contains an electronic version of appraisals for the Mortgaged
Properties in PDF format and forms part of the paper version of the Prospectus
Supplement. The information contained in this CD ROM does not appear elsewhere
in paper form in this Prospectus Supplement and must be considered as part of,
and together with, the information contained elsewhere in this Prospectus
Supplement and the Prospectus. The information contained in this CD ROM has
been filed by the Seller with the Securities and Exchange Commission as part
of a Current Report on Form 8-K, which is incorporated by reference in this
Prospectus Supplement, and is also available through the public reference
branch of the Securities and Exchange Commission. Defined terms used in this CD
ROM but not otherwise defined therein shall have the respective meanings
assigned to them in the paper portion of the Prospectus Supplement and the
Prospectus. All of the information contained in this CD ROM is subject to the
same limitations and qualifications contained in this Prospectus Supplement and
the Prospectus. Prospective investors are strongly urged to read the paper
portion of this Prospectus Supplement and the Prospectus in its entirety prior
to accessing this CD ROM. If this CD ROM was not received in a sealed package,
there can be no assurances that it remains in its original format and should
not be relied upon for any purpose. Prospective investors may contact J.
Theodore Borter of Goldman, Sachs Co. at (212)902-3857 to receive an original
copy of the CD ROM.
<PAGE>
=================================================
COMPLETE APPRAISAL
OF REAL PROPERTY
Iron Run Corporate Center
Various Locations
Upper Macungie Township
Lehigh County, Pennsylvania
=================================================
IN A SELF-CONTAINED REPORT
As of July 1, 1997
Prepared For:
Goldman Sachs Mortgage Company
85 Broad Street
New York, New York 10004
Prepared By:
Cushman & Wakefield of Pennsylvania, Inc.
Valuation Advisory Services
Two Logan Square - 20th Floor
Philadelphia, Pennsylvania 19103
<PAGE>
Cushman & Wakefield of Pennsylvania, Inc. CUSHMAN &
Two Logan Square WAKEFIELD(R)
Philadelphia, PA 19103 A ROCKEFELLER GROUP COMPANY
(215) 963-4000
July 1, 1997
Mr. Sheridan Schechner
Managing Partner
Goldman Sachs Mortgage Company
85 Broad Street
New York, New York 10004
Re: Complete Appraisal of Real Property
Iron Run Corporate Center
Various Locations
Upper Macungie Township
Lehigh County, Pennsylvania
Dear Mr. Schechner:
In fulfillment of our agreement as outlined in the Letter of Engagement,
Cushman & Wakefield, Inc. is pleased to transmit our self-contained appraisal
report estimating the market value of the appropriate leased fee/fee simple
estate in the subject property.
The value opinion reported below is qualified by certain assumptions,
limiting conditions, certifications, and definitions, which are set forth in the
report. This report was prepared for Goldman Sachs Mortgage Company and is
intended only for its specified use. It may not be distributed to or relied upon
by other persons or entities without written permission of Cushman & Wakefield,
Inc.
This appraisal report has been prepared in accordance with our
interpretation of your institution's guidelines, the regulations of OCC and the
Uniform Standards of Professional Appraisal Practice, including the Competency
Provision and The Financial Institutions Reform, Recovery and Enforcement Act
(FIRREA) and the guidelines of federal regulatory agencies.
The property was inspected by and the report was prepared by Thomas H.
Myers, Jr. under the supervision of John B. Rush, MAI.
<PAGE>
Mr. Sheridan Schechner
Goldman Sachs Mortgage Company Page 2 July 1, 1997
Based on our complete appraisal as defined by the Uniform Standards of
Professional Appraisal Practice, we have formed an opinion that the market value
of the appropriate leased fee/fee simple estate in the referenced property,
subject to the assumptions, limiting conditions, certifications, and
definitions, as of July 1, 1997, was:
FIFTY ONE MILLION EIGHT HUNDRED FIFTY THOUSAND DOLLARS
$51,850,000
The Iron Run Corporate Center includes ten separate parcels more fully
described within the body of this report. Individual cash flow projections have
been prepared on each building leading to a conclusion of value on a building by
building basis. The individual values are as follows:
7535 Windsor Drive $ 11,500,000
7450 Tilghman Street $ 6,725,000
7055 Ambassador Drive $ 5,900,000
6755 Snowdrift Road $ 4,700,000
7150 Windsor Drive $ 3,750,000
6690 Grant Way $ 3,450,000
6845 Snowdrift Road $ 3,550,000
6670 Grant Way $ 2,850,000
7010 Snowdrift Road $ 2,300,000
7020 Snowdrift Road $ 1,375,000
6810 Tilghman Street $ 2,075,000
10 Development Parcels $ 4,200,000
------------
Total $ 52,375,000
This letter is invalid as an opinion of value if detached from the report,
which contains the text, exhibits, and an Addenda.
Respectfully submitted,
Cushman & Wakefield of Pennsylvania, Inc.
/s/ Thomas H. Myers
Thomas H. Myers, Jr.
State Certified Appraiser #GA-000496-L
/s/ John B. Rush
John B. Rush, MAI
State Certified Appraiser #GA-000331-L
<PAGE>
PHOTOGRAPHS OF SUBJECT PROPERTY
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Photographs of Subject Property
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INTRODUCTION
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Identification of Property
This is a portfolio of one-story office, office/flex, and warehouse
buildings, as well as one mid-rise office building and 10 development parcels
which form a part of Iron Run Corporate Center. Located in the neighborhood of
Upper Macungie Township, Lehigh County, Pennsylvania, it is an attractive and
modern corporate complex located at and near the corner of Tilghman Street and
Snowdrift Road, about 1/2 miles from the interchange of Interstate 78 and
Pennsylvania Route 100. The street addresses of the properties which comprise
the subject are as follows:
<TABLE>
<CAPTION>
===============================================================================================================================
Land Rentable Year
Address Property Type Area Bldg. Area Constructed Occupancy # Tenants
- -------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
7535 Windsor Drive Mid-rise 15.0000+/- acs. 129,223s.f. 1986 99% 11
7450 Tilghman Street Single story office 13.4304+/-acs. 100,000s.f. 1986 100% 1
7055 Ambassador Dr. Single story whse. 11.7030+/-acs. 153,600s.f. 1991 100% 1
6755 Snowdrift Road Singel story whse. 9.7339+/-acs. 125,000s.f. 1988 100% 2
7150 Windsor Drive Single story flex 6.1485acs. 49,420s.f. 1989 100% 5
6690 Grant Way Single story whse. 6.9031+/-acs. 88,000s.f. 1981 100% 1
6845 Snowdrift Road Single story whse. 8.6238+/-acs 93,000s.f. 1975 100% 2
6670 Grant Way Single story whse. 6.8108+/-acs. 72,885s.f. 1979 100% 2
7010 Snowdrift Road Singe story office 3.9342+/-acs. 33,029s.f. 1991 0 0
7020 Snowdrift Road Single story whse. 4.0909+/-acs. 41,390s.f. 1975 100% 2
6810 Tighman Street Single story whse. 6.0533+/-acs. 54,844s.f. 1975 100% 2
Vacant Parcels Office.industrialland 73.7607+/-acs. N/A N/A N/A N/A
===============================================================================================================================
</TABLE>
It is important to note that the 7010 Snowdrift Road property is now 85
percent released to two tenants who will take occupancy on July 1 and December 1
1997.
Property Ownership and Recent History
With the exception of the 7535 Windsor Drive property, all of the improved
properties were constructed by the current owner, which holds title as Bell
Atlantic Properties, Bell Atlantic Land Development, Inc., Iron Run Venture I,
and Iron Run Venture II. No transfers have occurred in the last three years. We
note, though, that several of the properties were transferred from Bell Atlantic
Properties, Inc. to Bell Atlantic Land Development Inc. in April, 1997. These
transfers are recorded in the Lehigh County Recorder of Deeds at Allentown in
Book 1583, Pages 113 through 147 and Book 1585, Pages 33 through 36. All
indicate nominal considerations.
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Introduction
================================================================================
The 7535 Windsor Drive property was acquired by the present owner, Bell
Atlantic Properties, from John VanKooten in November, 1986 for a consideration
of $10,100,000. This was reportedly an all cash transaction after adequate
market exposure
Purpose and Intended Use of the Appraisal
The purpose of this appraisal is to estimate the market value of the
appropriate leased fee/fee simple estate on July 1, 1997. The appraisal is to be
used in conjunction with a proposed mortgage financing of the subject property.
Extent of the Appraisal Process
In the process of preparing this appraisal, we:
o Inspected the exterior of the building and the site improvements and
a representative sample of tenant spaces with Philip Schenkel,
Director of Portfolio Management for Atlantic American Properties at
Iron Run.
o Reviewed leasing policy, concessions, tenant build-out allowances,
and history of recent rental rates and occupancy with the building
manager.
o Reviewed a detailed history of income and expense and a budget
forecast for 1997 including the budget for planned capital
expenditures and repairs.
o Conducted market research of occupancies, asking rents, concessions
and operating expenses at competing buildings which involved
interviews with on-site managers and a review of our own data base
from previous appraisal files.
o Prepared an estimate of stabilized income and expense (for
capitalization purposes).
o Conducted market inquiries into recent sales of similar buildings to
ascertain sales price per square foot, effective gross income
multipliers and capitalization rates. This process involved
telephone interviews with sellers, buyers and/or participating
brokers. (See detailed sales write-ups in Addenda for more complete
information on the verification process.)
o Prepared Sales Comparison and Income Approaches to value.
Date of Value and Property Inspection
The date of value is July 1, 1997. We inspected the property on May 28,
1997.
Property Rights Appraised
Leased fee estate/fee simple.
Definitions of Value, Interest Appraised, and Other Pertinent Terms
The definition of market value taken from the Uniform Standards of
Professional Appraisal Practice of the Appraisal Foundation, is as follows:
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Introduction
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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 is the consummation of a sale as of
a specified date and the passing of title from seller to buyer under conditions
whereby:
1. Buyer and seller are typically motivated;
2. Both parties are well informed or well advised, and acting in what they
consider their own best interests;
3. A reasonable time is allowed for exposure in the open market;
4. Payment is made in terms of cash in U.S. dollars or in terms of financial
arrangements comparable thereto; and
5. 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.
Exposure Time
Under Paragraph 3 of the Definition of Market Value, the value estimate presumes
that "A reasonable time is allowed for exposure in the open market". Exposure
time is defined as the estimated length of time the property interest being
appraised would have been offered on the market prior to the hypothetical
consummation of a sale at the market value on the effective date of the
appraisal. Exposure time is presumed to precede the effective date of the
appraisal. Based our analysis of market data, as well as the fact that the
subject consists of a well maintained and located portfolio of modern
facilities, we estimate a reasonable Exposure Time to have been six to nine
months for the subject at the concluded opinion of value reported.
The following definitions of pertinent terms are taken from the Dictionary
of Real Estate Appraisal, Third Edition (1993), published by the Appraisal
Institute.
Leased Fee Estate
An ownership interest held by a landlord with the rights of use and
occupancy conveyed by lease to others. The rights of the lessor (the
leased fee owner) and the leased fee are specified by contract terms
contained within the lease.
Fee Simple Estate
Absolute ownership unencumbered by any other interest or estate; subject
only to the limitations of eminent domain, escheat, police power, and
taxation.
Value As Is
The value of specific ownership rights to an identified parcel of real
estate as of the effective date of the appraisal; relates to what
physically exists and is legally permissible and excludes all assumptions
concerning hypothetical market conditions or possible rezoning.
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Introduction
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Legal Description
The properties which comprise the subject are legally identified by the
Lehigh County Assessor's Office as described in the chart on the following page.
We have not been provided with the metes and bounds legal description of the
sites, therefore, none is exhibited.
<TABLE>
<CAPTION>
========================================================================================================
Address Township County District Map Block Lot
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
7535 Windsor Drive Upper Macungie Lehigh 20 H06 35 1
- --------------------------------------------------------------------------------------------------------
7450 Tilghman Street Upper Macungie Lehigh 20 H06 35 2
- --------------------------------------------------------------------------------------------------------
7055 Ambassador Dr. Upper Macungie Lehigh 20 H06 34 2
- --------------------------------------------------------------------------------------------------------
6755 Snowdrift Road Upper Macungie Lehigh 20 H06 16 2B
- --------------------------------------------------------------------------------------------------------
7150 Windsor Drive Upper Macungie Lehigh 20 H06 29 2H
- --------------------------------------------------------------------------------------------------------
6690 Grant Way Upper Macungie Lehigh 20 H07NW4 1 9
- --------------------------------------------------------------------------------------------------------
6845 Snowdrift Road Upper Macungie Lehigh 20 H06 16 1A
- --------------------------------------------------------------------------------------------------------
6670 Grant Way Upper Macungie Lehigh 20 H07NW4 1 10
- --------------------------------------------------------------------------------------------------------
7010 Snowdrift Road Upper Macungie Lehigh 20 H06 29 2J
- --------------------------------------------------------------------------------------------------------
7020 Snowdrift Road Upper Macungie Lehigh 20 H06 29 5
- --------------------------------------------------------------------------------------------------------
6810 Tilghman Street Upper Macungie Lehigh 20 H07SW1 6 1F
- --------------------------------------------------------------------------------------------------------
6870 Tilghman Street (vacant land) Upper Macungie Lehigh 20 H07SW1 6 1
- --------------------------------------------------------------------------------------------------------
South Side Windsor Drive (vacant land) Upper Macungie Lehigh 20 H06 29 2
- --------------------------------------------------------------------------------------------------------
North Side Windsor Drive (vacant land) Upper Macungie Lehigh 20 H06 35 6
- --------------------------------------------------------------------------------------------------------
6980 Snowdrift Road (vacant land) Upper Macungie Lehigh 20 H07SW1 1 1
- --------------------------------------------------------------------------------------------------------
6642 Grant Way Upper Macungie Lehigh 20 H07NW4 1 12
- --------------------------------------------------------------------------------------------------------
North Side Ambassador Dr. (vacant land) Upper Macungie Lehigh 20 H06 34 3
========================================================================================================
</TABLE>
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[MAP OF AREA]
<PAGE>
REGIONAL ANALYSIS
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Allentown-Bethlehem-Easton Metropolitan Area
The subject property is located in the western portion of the
Allentown-Bethlehem-Easton Metropolitan Area in Upper Macungie Township, west
of the City of Allentown, Lehigh County, Pennsylvania. The City of Allentown
and, to a lesser extent, the cities of Bethlehem and Easton, serve as the
commercial core of this region in east central Pennsylvania. In addition to
Lehigh County, the Allentown-Bethlehem-Easton Metropolitan Area encompasses
Carbon and Northampton Counties in Pennsylvania. The Lehigh Valley, as this
region is frequently referred, is a closely integrated market which pervades the
many political subdivisions incorporated in it.
Population
According to Sales & Marketing Management - 1996, the
Allentown-Bethlehem-Easton Metropolitan Area had a population of approximately
614,000. This represents a 10.7 percent increase over that counted in 1980. The
1995 population of Lehigh County is reported to be about 298,200, a decrease of
approximately 1.0 percent since 1990.
Population Statistics
Allentown-Bethlehem-Easton Metropolitan Area
(In Thousands)
================================================================================
% Change
County 1980 1990 1995 1980-1995
================================================================================
Carbon 53.5 59.3 59.2 + 10.6%
- --------------------------------------------------------------------------------
Lehigh 275.0 301.1 298.2 + 8.4%
- --------------------------------------------------------------------------------
Northampton 226.2 258.5 256.7 + 13.5%
- --------------------------------------------------------------------------------
Total Metropolitan Area 554.7 618.9 614.1 + 10.7%
================================================================================
Source: U.S. Census Bureau
================================================================================
Employment
Consistent with current national trends, the economic base of the
Allentown-Bethlehem-Easton Metropolitan Area is now rooted in the service
industries. Approximately 31 percent of the 259,000 people in the region's
workforce are employed in service industries, while about 22 percent are
employed in the service industries. Other major employment segments here are
retail trade (16.5 percent) and government (12 percent).
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Regional Analysis
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Employment Statistics
Allentown-Bethlehem-Easton Metropolitan Area
(In Thousands)
================================================================================
Industry 4/97 4/96 Change
================================================================================
Contract Construction & Mining 10.2 9.8 +4.1%
Manufacturing 56.8 56.7 -0.1%
Transportation 8.3 8.1 +2.5%
Communications & Utilities 6.7 6.9 -2.9%
Wholesale Trade 11.3 11.0 +2.7%
Retail Trade 42.4 42.3 +0.2%
Finance, Insurance, Real Estate 13.3 13.8 -3.6%
Services 82.3 79.8 +3.1%
Government 30.8 30.8 --
Total 262.1 258.8 +1.3%
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Source: Pennsylvania Department of Labor & Industry
================================================================================
As of April, 1997, the unemployment rate for the
Allentown-Bethlehem-Easton Metropolitan Statistical Area was 5.0 percent, which
is consistent with the 5.3 percent for the State of Pennsylvania and the 4.9
percent level for the nation as a whole.
Income
The median effective household buying income, or disposable income after
all federal, state, and local taxes, in the Allentown-Bethlehem-Easton
Metropolitan Area is currently estimated to be $36,229. Throughout the region,
it is estimated that 24.5 percent of the 234,200 households have an effective
buying income under $20,000 annually. For the entire metropolitan area, 31.4
percent of households have yearly EBI in excess of $50,000. Lehigh County has
the second highest median household income level in the Allentown-Bethlehem-
Easton Metropolitan Area at $36,857 per dwelling unit.
================================================================================
Income Statistics
Allentown-Bethlehem-Easton Metropolitan Area
================================================================================
Effective Median
Buying Income Household
County Households (In Thousands) EBI
================================================================================
Carbon 23,000 $ 782,171 $28,730
- --------------------------------------------------------------------------------
Lehigh 116,400 5,128,805 36,857
- --------------------------------------------------------------------------------
Northampton 94,800 4,193,277 37,625
- --------------------------------------------------------------------------------
Total 233,200 $10,104,253 $36,229
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Source: Sales & Marketing Management - 1996
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Regional Analysis
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Retail Sales
After two years of declining sales, retail sales increased 1.3 percent
overall in 1995 in the Allentown-Bethlehem-Easton MSA. Within Lehigh County,
specifically, retail sales grew 1.0 percent in 1995 as compared to the prior
year. In the period between 1987 and 1995, retail sales in Lehigh County have
grown at 2.58 percent compound rate.
================================================================================
Retail Sales
Allentown-Bethlehem-Easton Metropolitan Area
and Lehigh County
(In Thousands)
================================================================================
Metropolitan
Year Area % Change Lehigh County % Change
================================================================================
1987 $4,302,247 -- $2,436,081 --
- --------------------------------------------------------------------------------
1988 $4,620,814 +10.7% $2,646,626 +8.6%
- --------------------------------------------------------------------------------
1989 $5,140,458 +11.3% $2,776,953 +4.9%
- --------------------------------------------------------------------------------
1990 $5,190,601 +1.0% $2,776,906 -0.2
- --------------------------------------------------------------------------------
1991 $5,067,637 -2.4 $2,724,295 -1.9%
- --------------------------------------------------------------------------------
1992 $5,786,963 +14.2% $3,169,511 +16.3%
- --------------------------------------------------------------------------------
1993 $5,102,077 -11.8% $3,242,063 +2.3%
- --------------------------------------------------------------------------------
1994 $4,878,360 -4.4 $2,981,896 -8.0%
- --------------------------------------------------------------------------------
1995 $4,942,631 +1.3% $2,985,843 +1.0%
================================================================================
Source: Sales & Marketing Management - 1995
Note: Warren County, New Jersey not part of the MSA in 1993.
================================================================================
Linkages
The Allentown-Bethlehem-Easton Metropolitan Area benefits from an
excellent transportation system linking the region to the rest of the nation and
points throughout the world. The Allentown-Bethlehem-Easton Airport is located
just outside the City of Bethlehem. Regular national service and commuter
airlines provide services to many locations. From its central location in the
region, excellent highway and rail accessibility is also facilitated.
Philadelphia is approximately one hour south of this region, while New York City
lies about one and a half hours east.
Cultural, Educational and Recreational Resources
Educational opportunities abound throughout the region, with ten major
colleges and universities located here. The most notable area Lehigh University,
Moravian College, Allentown College and Lafayette College. The region is endowed
with a wide range of cultural facilities including numerous restored buildings
from the original Moravian settlement of the City of Bethlehem.
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Regional Analysis
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Summary
o The Allentown-Bethlehem-Easton MSA is strategically located in close
proximity to the markets of the northeastern portion of the country,
particularly the New York, Philadelphia, and Baltimore Metropolitan Areas.
o The region is served by a fine highway network and it has experienced good
population and economic growth trends over the past decade. It offers a
wide array of housing, abundant commercial, recreational, cultural and
other amenities of a desirable area.
o Regional economic trends point toward an era of modest growth which has
alleviated the imbalance which existed between supply and demand for most
types of real property. However, only those with a desirable locational
and functional design will outperform inflation in the general economy.
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[MAP OF UPPER MACUNGIE]
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MARKET ANALYSIS
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Area Overview
The subject property lies within Upper Macungie Township, Lehigh County,
Pennsylvania. Located in the western portion of the county, Upper Macungie lies
adjacent to neighboring Berks County and immediately west of the City of
Allentown. Encompassing an area of 26.3 square miles, the township has a current
estimated population of approximately 9,300. Despite its limited population and
largely agrarian character, the township is extensively developed with
non-residential uses.
Development in the township is focused around the interchange of
Interstate 78 and Route 100. This interchange lies less than three miles west of
the interchange of the Northeast Extension of the Pennsylvania Turnpike and
Route 22, another major east/west artery serving the Lehigh Valley. The largest
development proximate to I-78 and Route 100 is Iron Run Corporate Center, within
which the subject is located. This 725 acre business park was begun in 1974 and
now includes over three million square feet of light industrial, flex, and
office space. Major firms with a significant presence here include Cotter and
Company (True Value), Air Products & Chemicals, Georgia-Pacific, and Beatrice
Foods. Two major corporate facilities are also found nearby. The headquarters
complex of Air Products and Chemicals is located along Route 222 and Centronia
Road to the south of the subject. To the southwest, a major research and
development facility originally constructed by Bell Labs is now occupied by
Lucent Technologies. This facility is located on Route 222, west of Brookdale
Road.
The excellent highway access afforded the township has encouraged the
development described above. As noted, the township is served by Interstate 78,
which connects the area with the balance of the Lehigh Valley and New Jersey to
the east and Harrisburg to the west. It is here where access to Baltimore is
available via Interstate 83. I-78 also provides east access to U.S. Route 22, a
four lane, limited access highway which is the other primary east/west artery
serving the Lehigh Valley. This roadway connects the Easton area and New Jersey
to the east with Allentown and several other major highways in the region,
including Route 309 and the Northeast Extension of the Pennsylvania Turnpike.
The latter provides direct access to the east-west turnpike at Plymouth Meeting
and offers access to most of the Philadelphia Metropolitan Area.
General Office Market Overview
Office buildings, as an asset class, are attracting renewed interest from
investors in the current market. Many believe suburban office buildings offer
the greatest upside potential among the various property types. Prices for the
best quality suburban office buildings have increased due to buyer demand.
In most suburban markets, office vacancies have declined reflecting the
expansions of small business. Most acknowledge that the market has
"bottomed-out" as rents are generally stabilizing. More recently, as buyer
demand pushes prices up, some investors are more willing to pay for "future"
dollars, when only 18 months ago purchase decisions were based solely on revenue
in place.
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Market Analysis
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The lack of new construction is also viewed as a positive in the office
market. Though firms are leasing less space per employee than ever before, once
the current economic recovery solidifies, office building owners are now in a
stronger negotiating position as demand outpaces supply. Still, in most
communities, there is plenty of land available for new competition.
The job growth which is occurring now comes from small and mid-sized
technologically sophisticated firms. These, more than most, seek suburban
locations which are close to their employees. By moving closer to their
employees, commuting time is less which, some say, creates a more productive
workforce. Frequently, occupancy costs are lower in the suburbs than in the
urban core which translates back into corporate profitability. The subject
property benefits from such trends, particularly due to its location outside the
Philadelphia city limits.
The subject property shares in these macro-market observations and trends.
More importantly, the subject competes in its own micro-market for tenants,
users and ultimately, investment returns. The following is a detailed
description of this local marketplace.
Market Supply
The subject property competes for tenants in what Cushman & Wakefield
designates the Lehigh Valley market area. This marketplace includes both Lehigh
and Northampton Counties. There are approximately 4.4 million square feet of
existing commercial office space in the Lehigh Valley marketplace. The following
chart is an overview of this marketplace at the end of the first quarter of
1997.
================================================================================
Office Market Overview
Lehigh Valley, Pennsylvania
March 31, 1997
================================================================================
Class of Space Total Rentable Area Total Area Available Vacancy Rate
- --------------------------------------------------------------------------------
A 3,794,922 SF 336,989 SF 8.9%
- --------------------------------------------------------------------------------
B 601,702 SF 79,234 SF 13.2%
--------------------------------------------------------
Total Inventory 4,396,624 SF 416,223 SF 9.5%
================================================================================
As of March 31, 1997, total vacancy in this marketplace was reported to be
9.5 percent, down from 10.1 percent at year-end 1996 and 12.4 percent at the end
of 1995. In any type of market, there must be an inventory of goods maintained
in order to satisfy demand. Within the commercial office market, some space must
be maintained at all times to accommodate the constant shifting of tenants. The
following is a listing of blocks of contiguous space in the Lehigh Valley
marketplace in excess of 20,000 square feet.
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Market Analysis
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Blocks of Continuous Space
20,000 Square Feet or Greater
Lehigh Valley Marketplace
March 31, 1997
================================================================================
Location Rentable Contiguous Area
- --------------------------------------------------------------------------------
1770 Bathgate Road, Easton 60,000 SF
Cedar Crest Professional Park, Allentown 25,000 SF
Highland Office Plaza, Bethlehem 35,000 SF
Martin Tower, Bethlehem 23,399 SF
60 West Broad Street, Bethlehem 30,000 SF
================================================================================
A shortage in available inventory is indicated in the market when there is
a discernible lack of prime contiguous office space for larger users. Under
these conditions, new construction is stimulated. At present, there is one,
speculative project under construction in the Lehigh Valley at the Lehigh Valley
Corporate Center near Bethlehem. This property will be a single story, 27,000
square foot building. The sponsor of this project, Liberty Property Trust, also
anticipates beginning construction of a 75,000 square foot, three story
building, also on a speculative basis, during the third quarter of 1997.
There are only five blocks of space in excess of 20,000 contiguous square
feet which are currently vacant in the local marketplace. Land does exist in
this marketplace for new competition. However, financing requirements continue
to be stringent which will curtail rampant, speculative development. Without a
financially responsible lead tenant or user, construction and permanent
financing is unobtainable at this time. We note that Liberty Property Trust is
not constrained as it has considerable funding at its disposal. Despite this,
they have chosen to proceed with new development on a gradual, orderly basis.
Over the last 12 months, the vacancy rate in the Lehigh Valley marketplace
has declined from 12.4 percent at the end of 1995 to 10.1 percent at year-end
1996 level and 9.5 percent at the current time. This significant, steady
decrease is attributable to the current rate of absorption and the continued
reduction in inventory, as well as the lack of new development. Interestingly,
the vacancy that does exist in most markets is concentrated in the average and
below average buildings. Older, lesser quality office space cannot compare
against newer, functional buildings. The aggregate amount of these spaces is
such that many analysts are now suggesting structural vacancy to be well above
the conventional five percent utilized in past years. On a relative basis, most
of the vacancy in the current market is in the older lesser grades of space. The
following chart summarizes overall vacancy and total availabilities in the local
market since the end of 1993.
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-11-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Market Analysis
================================================================================
================================================================================
Office Market Vacancy and Availabilities
Lehigh Valley, Pennsylvania
================================================================================
Period Space Available Vacancy Rate
- --------------------------------------------------------------------------------
1st Quarter 1997 416,223 SF 9.5%
Year End 1996 440,845 SF 10.1%
Yer End 1995 541,882 SF 12.4%
Year End 1994 500,763 SF 11.9%
Year End 1993 628,873 SF 15.3%
================================================================================
There are no formal plans for additions to inventory, other than the two
speculative projects noted in a previous paragraph, in the local market.
Additionally, there are only five blocks of contiguous space equal to 20,000
square feet or greater in the Lehigh Valley market. The majority of this space
is located in the Bethlehem area to the east of the subject property. Besides
those cited, a major user has no alternative but to consider a build-to-suit
transaction. Considering the current costs of construction relative to market
rental rates, the basis is set for a jump in rental rates though the timing of
such an event is not all that clear. Nonetheless, this is a positive market
influence on existing office product like the subject property.
Market Demand
Market demand for office space is primarily measured by absorption
statistics. Demand for office space in the Lehigh Valley market has historically
come from the movement of users from Metropolitan Philadelphia, Northern New
Jersey, and the formation of new high tech/service oriented businesses. From
1993 through 1996, absorption of office space in this market averaged 4,350+/-
square foot per quarter or 52,200+/- square feet annually. However, during the
first quarter of 1997, absorption spiked to nearly 35,000 square feet. Over the
same period, leasing activity essentially maintained itself at something
approximating 11,900+/- square feet per quarter or 47,500+/- square feet per
annum. Again, activity spiked during the first quarter, increasing to a rate of
over 200,000 square feet annualized.
================================================================================
Office Market Absorption and Leasing
Lehigh Valley Marketplace
================================================================================
Period Absorption Leasing
- --------------------------------------------------------------------------------
1st Quarter 1997 34,935 SF 50,+22 SF
Year End 1996 61,885 SF 147,637 SF
Yer End 1995 - 707 SF 167,150 SF
Year End 1994 137,514 SF 194,131 SF
Year End 1993 14,454 SF 61,336 SF
================================================================================
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Market Analysis
================================================================================
From an overall market perspective, absorption statistics are highly
indicative of long term growth or decline. Among the various properties which
compete for tenants, leasing activity serves as an indication of movement around
a specific marketplace. Where absorption is the net change in occupied space
over a period of time, leasing is the sum of all completed transactions in a
given time period. Leasing statistics are an important consideration in an
office market analysis as they can show the amount of continued interest in a
specific marketplace and product type. Typically, new construction benefits in a
market with strong leasing statistics as tenants "trade-up" to the latest
buildings from older complexes.
Office occupancies are now being affected by American business' need to
compete globally and an application of new technologies to the way white collar
employment is conducted. In order to compete, many corporations are downsizing
their operations, forcing fewer employees to do more in less space. Also,
technologies like portable phone systems and voice mail enable many to work for
extended periods outside their base of operations. Many of these new jobs are
frequently held by workers who can perform their services from home offices,
clients' offices or under "hoteling" arrangements.
Given current market dynamics, it would appear that new office space will
be needed in the next few years. This, of course, bodes well for current
investors with the patience and wherewithal to wait for that expected turn of
events. With anticipated demand, and the obsolescence in most of the existing
Class B space, it would appear that upside potential exists in well located and
functionally designed office properties like the subject. We note, however, that
discipline will need to continue among financiers of such projects or a return
to the economic bust of the late Eighties will result.
Rental Rates
The average face rental rate for Class A office space in the Lehigh Valley
marketplace at year end 1996 of $14.08 per square foot of rentable building area
on a full service basis was unchanged at the end of the first quarter of 1997.
This level represents a 4.8 percent decrease from that reported at year end
1995. Despite this decline, the current rent level for Class A space in the
Lehigh Valley market is viewed as having stabilized and is expected to begin to
increase in the near term. In the local marketplace, Class B space leases at an
approximate 10 to 15 percent discount from Class A space. The following is a
presentation of average face office rental rates in this market since year end
1993.
<TABLE>
<CAPTION>
=========================================================================================================
Average Face Office Rental Rates
Full Service Basis
Lehigh Valley Market
=========================================================================================================
Average Average
Period Ending Class A Change Class B Change CPI Change
Rent Rent
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1st Quarter 1997 $14.08/SF -- $12.51/SF -- 166.0 +0.7%
Year End 1996 $14.08/SF -4.8% $12.51/SF +13.7% 164.9 +2.9%
Year End 1995 $14.79/SF +4.1% $11.00/SF -18.5% 160.3 +2.4%
Year End 1994 $14.20/SF +10.9% $13.49/SF +25.3% 156.6 +2.7%
Year End 1993 $12.80/SF $10.76/SF 152.5
Compound Annual Rate: +3.0% +4.7% +2.6%
=========================================================================================================
</TABLE>
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Market Analysis
================================================================================
As can be seen from this presentation, the average rental rate for Class A
office space in the Lehigh Valley marketplace has increased at an annual
compound rate of 3.0 percent since year end 1993. By comparison, the region's
Consumer Price Index has increased at a compound annual rate of approximately
2.6 percent over the same time period. However, with the gradual decline in the
overall vacancy rate in the local marketplace, we would expect the growth rate
in rental rates to exceed the rate of inflation in the short term.
Eventually, a tight Class A office market like the subject's will
precipitate new construction. In order to economically justify construction,
users must first be willing to pay higher rents than are now being achieved in
the competitive open market. Again, this bodes well for well designed and well
maintained real property like the subject.
Concessions
Rent abatement had been a standard inducement to tenants during the late
Eighties and very early Nineties, but are now not frequently being granted. In
order to win new tenants, landlords had been paying for tenant requested office
finishes well over the standard work letter. In some instances, landlords were
also paying the tenants' moving charges, assuming the rental payments on the
tenants' existing leases, and even making cash bonus payments to the tenants in
order to entice them to a new project. Most of these types of concessions have
ceased though as capital for such items has all but effectively been removed
from the current market. While there are still instances of free rent being
quoted, the current trend is definitely toward effective rents.
Tenant Improvements' Costs
In the leasing of brand new professional office space, a building standard
for interior finishes is established. Should a particular tenant desire interior
office finishes which exceed the established building standard, then that tenant
must reimburse the landlord for constructing them. The standard work letter for
brand new first generation office space in the Lehigh Valley is approximately
$20.00 per square foot of rentable area. The cost for tenant requested interior
office finishes which exceed these standards are borne by the lessee. In relet,
second generation space like the subject, however, the cost of tenant
alterations is considerably less as many materials can be recycled.
The trend of the current marketplace, particularly in second generation
space, has been to work with what is in place. From ownership's perspective,
cash for tenant improvements is scarce so that avoiding demolition and
reconstruction costs is important. We are informed that tenants are also less
demanding in their space improvements needs in order to secure a more favorable
rental rate in these competitive times for American business.
In general terms, a simple re-painting and re-carpeting and cleaning of
ceiling tiles can cost from $5.00 to $8.00 per square foot of rentable area.
When some demolition and reconstruction is necessary, tenant improvement costs
easily escalate to the $10.00 to $15.00 per square foot range. A complete
demolition and reconstruction of a major tenant area or full floor will cost
from $18.00 to $22.00 per square foot in the current market. The amortization of
these costs over the term of the lease is expensive and can further lower
ownership's return.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Market Analysis
================================================================================
Leasing Commissions
The standard market practice for leasing commissions at office space in
the Lehigh Valley is six percent of the first year's negotiated rent, five
percent of the second, four percent of the third, and three percent of each
successive year's gross rent - all payable at initial occupancy. On a weighted
average basis for a five year lease, commissions would amount to 4.2 percent of
the aggregate rent negotiated. For a renewal, half that amount is customary but
open to negotiation between ownership and the brokerage community. In any event,
the cost of leasing commissions is an expense to ownership beyond the general
operations of the real estate.
Direct Competition
As of the end of the first quarter of 1997, there were a total of
approximately 3.8 million square feet of existing Class A commercial office
space in the Lehigh Valley market, itself, dispersed among 40 buildings. We have
identified 14 office buildings of the 40 Class A buildings in the market which
we believe directly compete for tenants with the subject property. This direct
competition is summarized on the opposing page. As can be seen from this
presentation, there are approximately 1.33 million square feet of office space
in these 14 buildings. At the end of the first quarter of 1997, total vacancy at
the competition was computed to be 9.2 percent, which is slightly below the
overall market. Rental rates range from $10.00 per square foot on a net basis up
to $17.50 per square foot plus electricity with a base year expense stop. As the
office buildings which comprise a part of the subject are currently 97 percent
occupied, the desirability of this sub-market is apparent.
Conclusions
In conclusion, the local rental market has improved over the past 27
months, with overall vacancy in the Class A product type currently at 9.5
percent. During the past 3 to 4 years, overall absorption has been positive,
vacancy has declined and rental rates have increased modestly in the subject's
marketplace. Although it is best described as a secondary metropolitan area, the
Lehigh Valley is expected to be see gradual growth in job creation into the next
century. However, while forecasts call for an expansion in office type
employment, the absolute amount of that will be less than previously experienced
in the boom years of the Eighties. Nevertheless, the Lehigh Valley's proximity
to the highway network serving the Eastern Seaboard, coupled with its desirable
residential neighborhoods, should ensure a continued demand for office space in
this sector. With efficient management and aggressive promotion, we believe the
subject property will continue to favorably compete in this market.
Lehigh Valley Industrial Market Overview
The Lehigh Valley area has become a desirable location for warehousing and
distribution to the Eastern Seaboard, particularly the area between Boston and
Washington, D.C. Along with Harrisburg to the west, It has become a favored
location for many national and regional firms for several reasons. First, and
foremost, is its access to a regional highway network which includes four
interstate roadways, including Interstate Routes 476 and 76 (the Pennsylvania
Turnpike), 78, 80, 81, and 83. This makes it possible to distribute goods to New
England, the Middle Atlantic States, the Midwest, and the South. Additionally,
as a largely non-union labor market, wage rates here are below those found in
the nearest major metropolitan areas such as New York/New Jersey, Philadelphia,
and Baltimore.
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-15-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Market Analysis
================================================================================
In addition to Iron Run, there are several other light industrial
developments in the area which have capitalized on the highway access available
here. These include the Meadows Business Center, a 63 acre park which adjoins
Iron Run to the north off of Snowdrift Road, and Mill Run Corporate Center, a
148 acre planned development now undergoing initial development. Additionally,
there are several developments on the south side of Interstate 78. The William
Penn Business Center is situated in the southeasterly quadrant formed by 1-78
and PA Route 100 and is largely built out with single and multi-occupant
facilities.
Immediately to the west of the Stroh Brewery, which lies in the
southwesterly quadrant formed by the aforementioned highways, is a new
industrial park. This complex, known as Lehigh Valley West, now includes a 1.2
million square foot refrigerated warehouse under construction for occupancy by
Kellogg's and Pillsbury, a 250,000 square foot bottling and distribution center
occupied by Perrier, and a 1,000,000 square foot warehouse occupied by Nestle.
This latter facility was constructed in 1995 to consolidate five scattered
warehouse locations in Pennsylvania and New Jersey to this area. On the east
side of Route 100 is a newly constructed 250,000 square foot bottling and
distribution facility occupied by Coca-Cola. Other regional and national firms
with major distribution facilities in the immediate vicinity include Circuit
City, Sylvania Osram, and Exel Logistics. As was noted previously, True Value
has a major warehouse facility in Iron Run.
The Lehigh Valley Industrial Market is comprised of two segments commonly
referred to as the East End and West End. The East End marketplace is centered
around the Allentown-Bethlehem-Easton International Airport and includes
several existing business parks. These include Lehigh Valley Industrial Parks I,
II, III, IV, and V, the Lehigh Valley Corporate Center, and the Bethlehem
Business Park. Smaller nodes of light industrial and flex development are also
found in this general area. Development in the noted parks includes light
industrial, flex, and office buildings.
The West End market is found to the west of Route 309 and includes several
industrial parks centered around the interchange of Interstate 78 and Route 100.
While this market area also offers the broad spectrum of uses found in the East
End, the majority of space here is intended for warehouse users requiring large
blocks of space. The I-78/Route 100 interchange has been the focal point for
warehouse development here for many years. The most significant development here
is Iron Run Corporate Center. This development, which was described in a
previous paragraph, is the location of the subject property. As noted
previously, there are additional projects in the immediate vicinity as well.
According to statistical data assembled by Cushman & Wakefield, the
existing inventory of industrial space in the Lehigh Valley was approximately
29.5 million square feet at the end of 1996. At that time, the vacancy rate was
estimated to be approximately 10.0 percent. This represents a continued trend of
improving market conditions. Over the past eighteen months, the vacancy rate in
industrial space has declined approximately 750 basis points. Also, of this
total inventory, approximately 21 million square feet is considered to be
modern, functional single story space. Although separate statistics are not kept
on this segment of the overall market, it is estimated that vacancy in this type
of space is closer to 9 percent at the present time.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Market Analysis
================================================================================
Of the total building area noted above, approximately 1.73 million square
feet is classified as flex space, with the balance being warehouse and
manufacturing facilities. According to the most recent data assembled by Cushman
& Wakefield, there are current availabilities totaling approximately 245,000
square feet, indicating a vacancy rate of approximately 14.2 percent at year end
1996 within this segment of the marketplace.
The completion of Interstate 78 served to increase warehouse development
activity here. Over the past two years, there have been several major
build-to-suit transactions completed here. In addition to the projects described
in a previous paragraph, a 600,000 square foot distribution facility was
constructed for occupancy by Circuit City Stores in Lehigh Valley Industrial
Park V to serve their northeastern region retail stores. Also in this park,
Osram Sylvania recently completed a 500,000 square foot regional warehouse to
replace a smaller, 203,000 square foot facility near I-78 and Route 100.
Over the past three years, lease transactions in excess of 50,000 square
feet have been completed with such firms as Rodale Press, GTE, SKF Bearings,
Exel Logistics and Caterpillar Logistics, among others. During that time total
sales and leasing activity exceeded 7 million square feet. As more than half of
this activity involved leasing, the local vacancy rate has continued to decline
as noted previously. Rental rates in the Lehigh Valley generally range from
$3.00 to $4.50 per square foot for warehouse space. Most recent activity here
has involved smaller areas, where the range of rental rates is greater depending
upon the level of finish.
Construction of new flex space has been at a veritable halt throughout the
Nineties as historic demand has lagged supply. The only exception to this has
been build-to-suit situations where the credit of the user or lead tenant is
tied to the financing of construction. As can be seen from the chart on the
opposing page, only three flex buildings have been constructed in this market
over the past five years. Of the total 178,000 square feet constructed, none was
available for lease.
There are no reliable absorption statistics available on the industrial or
flex real estate market in the Allentown-Bethlehem-Easton Metropolitan Area as
there are in office or retail space. This is due to the manner in which this
type of property is presented to the market. Availabilities in the flex market
are: for sale, for lease, and, for sale or lease. When a flex property sells
that had been for lease, apples and oranges are created which cannot validly be
put together into one statistic titled absorption.
Rental Rates
The rental rates for flex space such as that provided at one of the
subject properties is a function of physical condition, location, and degree of
interior finish. Typically, the office component will lease for $8.00 to $11.00
per square foot on a net basis, while the warehouse portion will lease from
$3.00 to $5.00 per square foot on a net basis. The actual lease terms for a
facility will often be a weighted average of the rental rates which the office
and warehouse components can command in the marketplace. Also, the cost of any
specialized space, particularly laboratory areas, will be amortized as an
extra-ordinary increase to the rent paid over the term of the lease. More
traditional industrial space leases in the latter range noted.
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-17-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Market Analysis
================================================================================
In summary, warehouse/distribution facilities occupied by credit tenants
on a long term basis are a preferred investment in the general real estate
market. Manufacturing facilities and flex buildings are not as favored due to
perceived additional risks of ownership, partially from vacancy and, within the
flex category, the uncertainty of tenant alterations costs and rollover/turnover
risk. Within the local market, overall vacancy is currently reported to be
approximately 10 percent. The overall vacancy rate for industrial space has
declined as this marketplace continues to recover from the oversupply remaining
from the depressed markets of the early 1990's. However, the available inventory
also includes older functionally obsolete buildings with limited demand. Thus,
if these properties are excluded from inventory, the true vacancy rate would be
less than indicated.
New construction in the Lehigh Valley remains largely limited to
build-to-suit transactions, which will continue to constrain the supply side.
With underwriting criteria continuing to be stringent, this factor should
continue to influence new development in all of these markets over the
foreseeable future. In general, demand is strong and availabilities are limited
for modern, office/service and warehouse/distribution product. Economic data
indicate a growing economy and its effects have translated into decreasing
availabilities in this industrial real estate market.
Also, the local marketplace has seen a considerable amount of sale
activity in both single and multi-tenanted complexes. Over the past two years,
several major investors, including Liberty Property Trust, First Industrial, and
J.P. Morgan Investment have acquired additional holdings in the Lehigh Valley.
These firms are also continuing to seek out new opportunities in the form of
existing properties or new development. Where sales of multi-tenant properties
in the early 1990's mainly involved bank foreclosures, the more recent activity
has been in stabilized properties. According to area brokers, approximately
975,000 square feet of industrial real estate was sold in the Lehigh Valley
marketplace in 1995. This was up significantly from 1994's sales of 675,650 and
1993's sales of 404,900 square feet. During 1996, sales reportedly total about
1.3 million square feet. This sale activity, coupled with the declining vacancy
rate, bodes well for the local marketplace over the foreseeable future.
Exposure Time
Exposure Time is defined as the estimated length of time the property
interest being appraised would have been offered on the market prior to the
hypothetical consummation of a sale at the estimated market value on the
effective date of the appraisal. It is a retrospective estimate based upon an
analysis of past events assuming a competitive and open market. Thus, Exposure
Time is presumed to precede the effective date of the appraisal.
Our analysis of comparable sales indicates that an Exposure Time of
between 6 and 12 months was typical for properties such as those which comprise
the subject. Therefore, based upon our analysis of comparable sales in
conjunction with the physical, locational and economic characteristics of the
subject property, it is our opinion that an Exposure Time of approximately nine
months would be typical prior to our market value conclusion as of the date of
valuation.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
Site Specific Details
Iron Run Properties
===================================================================================================================================
Parcel Location Shape Area Primary Topography Utilities Access Street
Frontage Improvements
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
#1 7535 Windsor Drive Irregular 15.0000+/-Acs. 1,459.63' Level All Good Curbing, storm sewers.
#2 7450 Tilghman Street Irregular 13.4304+/-Acs. 749.59' Level All Good Curbing, storm sewers.
#3 7055 Ambassador Drive Irregular 11.7030+/-Acs. 795.00' Sloping All Good Curbing, storm sewers.
#4 6755 Snowdrift Road Irregular 9.7339+/-Acs. 688.72' Level All Good Curbing, storm sewers.
#5 7150 Windsor Drive Irregular 6.1485+/-Acs. 798.45' Level All Good Curbing, storm sewers.
#6 6690 Grant Way Irregular 6.9031+/-Acs. 413.90' Level All Good Curbing, storm sewers.
#7 6845 Snowdrift Road Irregular 8.6238+/-Acs. 640.87' Level All Good Curbing, storm sewers.
#8 6670 Grant Way Irregular 6.8108+/-Acs. 506.02' Level All Good Curbing, storm sewers.
#9 7010 Snowdrift Road Irregular 3.9342+/-Acs. 405.00' Gently sloping All Good Curbing, storm sewers.
#10 7020 Snowdrift Road Rectangular 4.0909+/-Acs. 360.00' Gently sloping All Good Curbing, storm sewers.
#11 6810 Tilghman Street Irregular 6.0533+/-Acs. 30.00' Level All Good Storm sewers
#12 Lot C-15 Windsor Drive Irregular 5.0558+/-Acs. N/A Gently sloping All Good Storm sewers
#13 Lot 58 Windsor Drive Irregular 12.9879+/-Acs. N/A Gently sloping All Good; Storm sewers
#14 Lot 61 Windsor Drive Irregular 6.9879+/-Acs. N/A Gently sloping All Good Storm sewers
#15 Lot 62 Windsor Drive Irregular 6.8728+/-Acs. N/A Gently sloping All Good Storm sewers.
#16 Lot 63 Windsor Drive Irregular 4.2952+/-Acs. N/A Gently sloping All Good Storm sewers.
#17 6870 Tilghman Street Irregular 5.0017+/-Acs. N/A Gently sloping All Good Storm sewers.
#18 6980 Snowdrift Road Irregular 10.0702+/-Acs. N/A Level All Good Storm sewers.
#19 6642 Grant Way Irregular 5.4892+/-Acs. N/A Level All Good Storm sewers.
#20 N/S Ambassador Drive Irregular 14.0000+/-Acs. N/A Gently sloping All Good Storm sewers.
#21 Ambassador & Hickory Irregular 3.0000+/-Acs. N/A Gently sloping All Good Storm sewers.
===================================================================================================================================
</TABLE>
===============================================
Floor
Parcel Status Area
Ratio
===============================================
#1 129,223 SF office building 19.8%
#2 100,000 SF office building 17.1%
#3 153,600 SF industrial 30.1%
building
#4 125,000 SF industrial 29.5%
building
#5 49,420 SF flex building 18.5%
#6 88,000 SF industrial 29.3%
building
#7 93,000 SF industrial 24.8%
building
#8 72,885 SF industrial 24.6%
building
#9 33,029 SF office building 19.3%
#10 41,390 SF industrial 23.3%
building
#11 54,844 SF industrial 32.3%
building
#12 Vacant Land N/A
#13 Vacant Land N/A
#14 Vacant Land N/A
#15 Vacant Land N/A
#16 Vacant Land N/A
#17 Vacant Land N/A
#18 Vacant Land N/A
#19 Vacant Land N/A
#20 Vacant Land N/A
#21 Vacant Land N/A
===============================================
<PAGE>
PROPERTY DESCRIPTION
================================================================================
The Subject Property
The subject property consists of 21 separate parcels of real estate. Of
this total, 11 are improved with buildings; the remaining 10 are vacant sites
awaiting future development. Among those parcels which are now improved with
buildings: seven of them are modern, single story industrial facilities; one is
a single story "flex" facilities; two are single story office buildings and the
remaining property is a multi-story office buildings. The following is more
detailed description of the 21 parcels which comprise the subject property:
Site Descriptions
On the opposing page is a presentation of site specific characteristics
for the 20 parcels which comprise the subject property. In our appraisals of
these parcels, we did not receive nor review a soil report. However, we assume
that the soil's load-bearing capacity is sufficient to support all existing
structures and any which might eventually be constructed on the now vacant
parcels. The sites' drainage appears to be adequate.
We were not given a title report to review. We do not know of any other
easements, encroachments or restrictions, other than normal utility easements
that would adversely affect the sites' uses. However, we recommend a title
search to determine whether any adverse conditions exist.
We were not given a Wetlands survey to review either. If subsequent
engineering data reveal the presence of regulated wetlands areas, it could
materially affect property value. We recommend a wetlands survey by a competent
engineering firm.
According to Community Panel #420144-0005C, National Flood Insurance Rate
Map, effective April 2, 1979, all of the parcels which comprise the subject are
situated in Flood Hazard Zone C, an area of minimal flood risk. Therefore, they
do not require flood hazard insurance.
No evidence of toxic or hazardous substances were observed during our
inspection of the sites. However, we are not trained to perform technical
environmental inspections. A professional study is recommended for final
determination of any presence of toxic substances.
Overall, the sites are typical of business campus development in the area,
functionally adequate and well suited for that use
================================================================================
-19-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
General Physical Attributes of the Improvments
Iron Run Properties
====================================================================================================================================
Rentable Basic Finished Ceiling Loading
Parcel Location Age Area Stories Construction Condition Area Heights Doors
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
#1 7535 Windsor Drive 1986 129,223 SF 4 Masonry with Steel Frame Excellent 100.0% 10' None
#2 7450 Tilghman Street 1986 100,000 SF 1 Masonry with Steel Frame Excellent 100.0% 10' 1TG
#3 7055 Ambassador Drive 1991 153,600 SF 1 Metal and Masonry with Steel Frame Excellent 4.6% 26' 18TG/3DI
#4 6755 Snowdrift Road 1988 125,000 SF 1 Masonry with Steel Frame Excellent 1.6% 24' 3TG/1DI
#5 7150 Windsor Drive 1989 49,420 SF 1 Masonry with Steel Frame Excellent 80.0% 18' 4TG
#6 6690 Grant Way 1981 88,000 SF 1 Masonry with Steel Frame Good 2.8% 24' 12TG
#7 6845 Snowdrift Road 1975 93,000 SF 1 Masonry with Steel Frame Good 0.0% 24' 14TG
#8 6670 Grant Way 1979 72,885 SF 1 Metal and Masonry with Steel Frame Good 19.2% 24' 1OTG
#9 7010 Snowdrift Road 1991 33,029 SF 1 Metal and Masonry with Steel Frame Excellent 100.0% 18' None
#10 7020 Snowdrift Road 1975 41,390 SF 1 Masonry with Steel Frame Good 5.0% 16' 8TG
#11 6810 Tilghman Street 1975 54,844 SF 1 Metal and Masonry with Steel Frame Good 3.3% 18' 1OTG/3D1
====================================================================================================================================
</TABLE>
====================
Remaining
Parcel Life
====================
#1 30 Years
#2 30 Years
#3 40 Years
#4 35 Years
#5 35 Years
#6 30 Years
#7 25 Years
#8 25 Years
#9 40 Years
#10 25 Years
#11 25 Years
===================
<PAGE>
Property Description
================================================================================
Descriptions of Improvements
On the opposing page is a presentation of general physical characteristics
for the 11 buildings which are part of the subject property. The reader will
note that we have not made, nor are we qualified by training to make, a
compliance survey of the properties with the American with Disabilities Act
(ADA). Since we have not been provided with the results of a professional
survey, we did not consider possible non-compliance with the requirements of ADA
in estimating the value of the real estate.
Additionally, we are not aware of any potentially hazardous materials
which may have been used in the construction of the improvements to the subject
site. Again, we are not qualified to detect such materials and urge the client
to employ an expert in the field to determine if any exist. Finally, no personal
property is included in our analysis of the subject property The following
paragraphs describe specific important attributes for each building:
7535 Windsor Drive - This is a four story office building. The ground
floor includes an attractive lobby area leading to three passenger
elevators. Office area on each floor is accessed via common hallways.
Men's and women's ceramic tile washrooms are provided on each floor. It is
entirely heated and cooled by an electric VAV system and is fully
sprinklered. Office finishes include carpeted floors, painted or vinyl
clad walls, and suspended acoustical tile ceilings with recessed
fluorescent lighting. Most office areas are demised with private and
general office areas.
Functionally, the common areas of 7535 Windsor Drive are modern and
attractive, exhibiting continued upgrading over the recent past.
Locationally, there are no deleterious influences emanating form outside
this property which would create external obsolescence. On-site parking
for 550+/- cars are provided and low maintenance shrubbery and green areas
present an aesthetic appeal to the building.
7450 Tilghman Street - This office building is a single story facility
which was built-to-suit for occupancy by a single tenant. However, it
could be adapted for multi-tenanted occupancy if desired. Men's and
women's ceramic tile washrooms are provided in several locations. It is
entirely heated and cooled by an electric VAV system and is fully
sprinklered. There is also a full cafeteria and a raised floor computer
room. Office finishes include carpeted floors, painted or vinyl clad
walls, and suspended acoustical tile ceilings with recessed fluorescent
lighting. The building is demised with major general office areas and
perimeter private offices.
Functionally, 7450 Tilghman Street is a modern and attractive facility,
exhibiting a high degree of maintenance. Locationally, there are no
deleterious influences emanating form outside this property which would
create external obsolescence. On-site parking for 650+/- cars are provided
and low maintenance shrubbery and green areas present an aesthetic appeal
to the building.
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Property Description
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7055 Ambassador Drive - This single story industrial building is
partitioned into a front office area and a rear devoted to warehouse
space. The office features carpeted floors, painted sheetrock walls and
suspended acoustical tile ceilings with recessed fluorescent lighting.
There are ceramic tile washrooms in the office area and a small employee
kitchen. Heating and cooling to office areas are provided by electrically
fired ceiling units.
The rear warehouse area basically features painted exposed construction
with the exception of a 2,000+/- square foot shipping office. Heat is
supplied by gas fired air rotation units and lighting is derived by
suspended sodium vapor fixtures. The building is sprinklered for fire
protection with a high intensity system and the loading docks have
levelers with weather guards.
Functionally, the improvements consist of a modern, high bay facility
designed for warehousing and distribution. Locationally, there are no
deleterious influences emanating form outside this property which would
create external obsolescence. Adequate on-site parking and turn-around
areas are provided and low maintenance shrubbery and green areas present
an aesthetic appeal to the building.
6755 Snowdrift Road - This is a single story industrial building which is
currently leased to a single tenant. It has 2,000+/- square feet of
office area in the front of the building, with the balance devoted to
warehouse area. Heat is provided by gas fired suspended units in the
warehouse; the office area is heated and air conditioned by an electric
fired package unit. In addition to the existing loading, there are
knockout panels for six additional tailgate doors. The building also has a
new roof.
Functionally, the improvements consist of a modern, high bay facility
designed for warehousing and distribution. This structure is also
expandable by 50,000 square feet if desired. Locationally, there are no
deleterious influences emanating form outside this property which would
create external obsolescence. Adequate on-site parking and turnaround
areas are provided and low maintenance shrubbery and green areas present
an aesthetic appeal to the building.
7150 Windsor Drive - This is a single story flex building which is
currently demised for occupancy by six tenants. All are office/assembly
type operations and, as a result, each has highly finished space. Typical
office finishes include carpeted floors, painted walls, and suspended
acoustical tile ceilings with recessed fluorescent lighting. Assembly
areas are similar, with the primary difference being vinyl tile floors and
some painted concrete block walls. Loading is provided at the rear of the
building. It is fully sprinklered and heated and air conditioned by roof
mounted electric units. Suspended, gas units are provided in the limited
warehouse areas in one tenant space.
Functionally, the improvements consist of a modern, multi-tenanted
facility designed for office or office/assembly occupancy. Locationally,
there are no deleterious influences emanating form outside this property
which would create external obsolescence. Adequate on-site parking and
maneuvering areas are provided and low maintenance shrubbery and green
areas present an aesthetic appeal to the building.
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Property Description
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6690 Grant Way - This single story warehouse/distribution facility is
currently demised for occupancy by two tenants. Office area includes
private and general area for each tenant with carpeted floors, painted
floors, and suspended acoustical tile ceilings with recessed fluorescent
lighting. The balance of each tenant area is open, unfinished warehouse
area. Washroom facilities are provided to each. The facility is fully
sprinklered by a wet system. Warehouse lighting is provided by high
pressure sodium fixtures.
Functionally, the improvements consist of a modern, two-tenant facility
designed for warehouse/distribution occupancy. Locationally, there are no
deleterious influences emanating form outside this property which would
create external obsolescence. Adequate on-site parking and maneuvering
areas are provided and low maintenance shrubbery and green areas present
an aesthetic appeal to the building.
6845 Snowdrift Road - This single story warehouse/distribution facility is
also currently dernised for occupancy by two tenants. At present, this
facility is devoted entirely to warehouse area and has no finished office
space. As such, each tenant area is open, unfinished warehouse area.
Washroom facilities are provided to each. The facility is fully
sprinklered by a wet system. Warehouse lighting is provided by fluorescent
fixtures.
Functionally, the improvements consist of a modern, two-tenant facility
designed for warehouse/distribution occupancy. Locationally, there are no
deleterious influences emanating form outside this property which would
create external obsolescence. Adequate on-site parking and maneuvering
areas are provided and low maintenance shrubbery and green areas present
an aesthetic appeal to the building.
6670 Grant Way - This single story warehouse/distribution facility is
currently dernised for single tenant occupancy. Office area includes two
levels, with private and general area for each tenant with carpeted
floors, painted floors, and suspended acoustical tile ceilings with
recessed fluorescent lighting. The balance of the building is open,
unfinished warehouse area. Washroom facilities are provided to both the
office and warehouse areas. The facility is fully sprinklered by a wet
system. Warehouse lighting is provided by high pressure sodium and
fluorescent fixtures.
Functionally, the improvements consist of a modern, single tenant facility
designed for warehouse/distribution occupancy. Locationally, there are no
deleterious influences emanating form outside this property which would
create external obsolescence. Adequate on-site parking and maneuvering
areas are provided and low maintenance shrubbery and green areas present
an aesthetic appeal to the building.
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Property Description
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7010 Snowdrift Road - This office building is a single story facility
which was, until recently, occupied by a single tenant. However, it was
designed and constructed for the multi-tenanted occupancy to which it is
now being converted. Each tenant area will be demised to suit with
private and general office areas. Men's and women's ceramic tile washrooms
will be provided in each tenant area. It is entirely heated and cooled by
an electric system and is fully sprinklered. Office finishes include
carpeted floors, painted or vinyl clad walls, and suspended acoustical
tile ceilings with recessed fluorescent lighting.
Functionally, 7010 Snowdrift Road is a modern and attractive facility,
exhibiting a high degree of maintenance. Locationally, there are no
deleterious influences emanating form outside this property which would
create external obsolescence. On-site parking for 150+/- cars are provided
and low maintenance shrubbery and green areas present an aesthetic appeal
to the building.
7020 Snowdrift Road - This single story industrial building is currently
demised for occupancy by two tenants. Each tenant area offers minimal
office areas with ceramic tile washrooms. Office finishes include carpeted
floors, painted walls, and suspended acoustical tile ceilings with
recessed fluorescent lighting. Warehouse areas are open and unfinished.
The office areas are fully heated and air conditioned by roof mounted
electric systems; the warehouse space is heated by suspended gas units.
Functionally, 7020 Snowdrift Road is a modern and attractive facility,
exhibiting a high degree of maintenance. Locationally, there are no
deleterious influences emanating form outside this property which would
create external obsolescence. On-site parking and adequate maneuvering
area are provided and low maintenance shrubbery and green areas present an
aesthetic appeal to the building.
6810 Tilghman Street - This single story industrial building is currently
demised for occupancy by two tenants. Each tenant area offers minimal
office areas with ceramic tile washrooms. Office finishes include carpeted
floors, painted walls, and suspended acoustical tile ceilings with
recessed fluorescent lighting. Warehouse areas are open and unfinished.
The office areas are fully heated and air conditioned by roof mounted
electric systems; the warehouse space is heated by suspended gas units.
Functionally, 7020 Snowdrift Road is a modern and attractive facility,
exhibiting a high degree of maintenance. This building is also expandable
to up to 100,000 square feet in total. Locationally, there are no
deleterious influences emanating form outside this property which would
create external obsolescence. On-site parking and adequate maneuvering
area are provided and low maintenance shrubbery and green areas present an
aesthetic appeal to the building.
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REAL PROPERTY TAXES AND ASSESSMENTS
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The subject property is under the taxing jurisdiction of Upper Macungie
Township, Lehigh County, Pennsylvania. Taxes are levied against all real
property in this locale for the purpose of providing funding for the various
municipalities. The amount of ad valorem taxes is determined by the current
assessed value for the real property, in conjunction with the total combined tax
rates of the taxing jurisdiction.
Tax Rates
No comparison can be performed on long term trends in tax rates levied by
the above noted taxing jurisdictions as the county underwent a revaluation in
1994. As a result, rates were reset in 1995 based upon the newly implemented tax
assessments. The current assessor indicated that, prior to that time, the tax
rate increased, on average about 3 percent per year. This increase was uneven
during the late 1980's as considerable new construction was taking place and
limited the need for increases. As new construction slowed, increases in rates
were reportedly more dramatic. Typically, over the long term, tax rates will
mirror inflationary trends, with average compound growth rates of 3.0 to 4.0
percent.
Tax rates increase or decrease annually based upon changes in municipal
budgets and the total tax base. Again, over the longer term, tax rate increases
tend to mirror inflationary trends, except during periods of economic decline or
in fast growing areas where new services are required. With the stabilization of
real estate values and the tax base, we are of the opinion that more normal
increases in tax rates, of say 3.0 to 4.0 percent, will be the trend over the
intermediate term.
Tax Assessment
Lehigh County establishes the assessed value on real property for all of
the previously noted taxing jurisdictions. Assessed values have not changed
since the aforementioned revaluation unless as a result of an appeal. The 1997
assessments for each of the properties which comprise the subject are as
follows:
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Real Property Taxes and Assessments
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Current Assessed Values
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Address Assessment
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7535 Windsor Dr. $ 4,500,000
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7450 Tilghman St. $ 3,373,000
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7055 Ambassador Dr. $ 2,271,550
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6755 Snowdrift Rd. $ 1,891,850
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7150 Windsor Dr. $ 1,462,700
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6690 Grant Way $ 1,334,050
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6845 Snowdrift Rd. $ 1,389,050
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6670 Grant Way $ 1,089,450
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7010 Snowdrift Rd. $ 1,106,900
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7020 Snowdrift Rd. $ 595,700
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6810 Tilghman St. $ 817,400
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6870 Tilghman St. $ 150,050
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S/S Windsor Dr. $ 744,550
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N/S Windsor Dr. $ 393,650
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6980 Snowdrift Rd. $ 299,700
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6642 Grant Way $ 148,500
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N/S Ambassador Dr. $ 526,500
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Total $22,094,600
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In an effort to evaluate the fairness of the subject's current assessed
value and future prospects for a change in the assessment, we have (1) compared
the assessment to estimated value of the subject property via the Income
Capitalization Approach as presented later in this report; and (2) the market
value estimate concluded in this report.
The estimated value of the subject property in the Income Capitalization
Approach section of this report is $48,175,000, which is consistent with our
final value conclusion. Based on our discussion with the Lehigh County
Assessor's Office, the Income Capitalization Approach is the typical methodology
the Assessor's office uses in determining the value of properties such as those
which compose the subject. While the assessment is designated at 50 percent of
the market value of a property, it is our understanding that this taxing
authority is not particularly aggressive in its property assessments. Thus, we
are not surprised that the assessed value is approximately 15 percent lower than
our value estimate via the Income Capitalization Approach and our final value
conclusion. As such, the subject property appears to be assessed fairly.
Real Property Tax Conclusions
Applying the 1997 assessment for the subject to the total tax rate results
in a combined tax burden of $634,335.97 in that year as calculated in the
following chart.
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$.02871 X $22,094,600 = $634,335.97
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The above taxes have been paid for 1996. County and township taxes are
paid for 1997. School taxes are not due and payable until September, 1997.
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ZONING
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The subject property is zoned L-1, Light Industrial by Upper Macungie
Township. The use regulations of this zone encourage light industrial, office
and business development and uses, as well as certain agricultural uses. The
developmental requirements in this zone are summarized as follows:
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Developmental Requirements
L-1 Light Industrial
Upper Macungie Township
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Minimum Site Area: 87,000 square feet
Minimum Lot Width: 150'at building setback line; 250'
at street right-of-way line.
Minimum Building Setback: 150'
Maximum Impervious Coverage: 75%
Minimum Front Yard: 50'
Minimum Side Yard: 30' each
Minimum Rear Yard: 30'
Maximum Building Height: 50' or four stories
We know of no deed restrictions (private or public) which would further
limit the use of the subject property. However, this statement should not be
taken as a guarantee or warranty that no such restrictions exist. Deed
restrictions are a legal matter and only a title examination by an attorney
would normally uncover such restrictive covenants. Thus, an updated title search
of the subject property is recommended to determine the existence of such
restrictions.
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HIGHEST AND BEST USE
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Highest and Best Use of Site as Though Vacant
According to the Dictionary of Real Estate Appraisal, Third Edition
(1993), a publication of the Appraisal Institute, the highest and best use of
the site as though vacant is defined as:
Among all reasonable, alternative uses, the use that yields the highest
present land value, after payments are made for labor, capital, and
coordination. The use of a property based on the assumption that the
parcel of land is vacant or can be made vacant by demolishing any
improvements.
Physically Possible
The sites which comprise the subject property vary in area from
approximately 3.9342 to 15.0000 acres. Each offers frontage along Windsor Drive,
Snowdrift Road, Tilghman Street, or Ambassador Drive; all are important local
roadways which serve Iron Run Corporate Center. The size and configuration of
each of the sites is felt to provide a suitable land use and/or development
potential for a wide variety of possible and ordinary suburban land uses.
Municipal utilities would adequately provide for nearly all uses. Street
improvements are also adequate.
Legally Permissible
The subject's zoning classification permits development of light
industrial, office, and business related uses. These types of uses are
consistent with those presently in existence in Iron Run Corporate Center.
Financially Feasible
Several features of the subject property indicate that a light industrial
or office use is the highest and best use of the subject property. First, the
Iron Run Corporate Center is a location which offers a level of prestige to both
types of tenants. In addition, this high profile business development offers
excellent access to the regional highway system.
Based on the above, we have concluded that the highest and best use of the
subject, as vacant, is for light industrial or office development consistent
with zoning.
Highest and Best Use of Property as Improved
According to the Dictionary of Real Estate Appraisal, highest and best use
of the property as improved is defined as:
The use that should be made of a property as it exists. An existing
property should be renovated or retained so long as it continues to
contribute to the total market value of the property, or until the return
from a new improvement would more than offset the cost of demolishing the
existing building and constructing a new one.
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Highest and Best Use
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Unlike the previous analysis of the subject sites as vacant, this analysis
considers the various parcels which comprise the subject property as currently
improved with an evaluation as to the physical, legal, and financial
appropriateness of the existing land use.
Physical Considerations
The developed sites are improved with existing structures and, based upon
our observation, there are no apparent physical factors such as soils, drainage,
or other site characteristics that would adversely affect the continued utility
and/or existence of the subject improvements.
Legal Considerations
The subject sites, as presently improved, each represents a legal,
conforming use.
Financially Feasible
The use of the subject improvements is considered to contribute in an
economic manner to their respective sites. Occupancy levels at the subject
property are slightly higher than competing office and light industrial
buildings in the Lehigh Valley. We believe the occupancy of the subject property
is generally considered to indicate market feasibility.
Therefore, based on the subject's historical performance and the prospect
for continued growth, it is our opinion that the subject property, as presently
developed, represents the highest and best use of the various sites as improved.
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VALUATION PROCESS
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In this appraisal, we have used the Sales Comparison Approach and the
Income Capitalization Approach to develop a market value estimate.
The Cost Approach was not performed for the following reasons:
o This approach is more relevant for new construction or where
sufficient information is available to reasonably estimate the
replacement cost new of the improvements and land.
o The investment marketplace does not typically trade buildings such
as the subject on a cost/value basis, particularly in markets where
it is generally perceived that cost exceeds value.
o The subjectivity of accurately estimating accrued depreciation of
the existing improvements significantly limits the reliability of
this approach.
In the Sales Comparison Approach, we performed the following steps:
o Searched the market for recent office and industrial building sales
which exhibit similar physical and economic characteristics to the
subject property.
o Analyzed differences between those sales and the subject on the
basis of the sales price per square foot and extracted overall
capitalization rates.
o Correlated the various value indications into a point value estimate
from within the range.
In developing the Income Capitalization Approach, we:
o Studied rents in effect in the immediate and competing areas to
estimate potential rental income at market levels for office and
industrial uses.
o Studied the recent history of operating expenses at the subject
property and competing properties to estimate an appropriate level
of stabilized expenses and reserves for replacement.
o Estimated net operating income by subtracting stabilized expenses
from potential gross income after deduction for vacancy and
collection loss.
o Prepared a discounted cash flow analysis in which the estimated
income and expenses over a projected holding period, and the
estimated property value at the time of reversion, are discounted at
an appropriate rate to estimate present market value.
In estimating the final value, we performed the following:
o Reviewed and re-examined each of the approaches to value which were
employed.
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Valuation Process
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o Considered the type and reliability of the data used and
applicability of each approach.
o Reconciled the approaches to a final value conclusion.
Finally, there are ten parcels of vacant land associated with the subject
property. We have taken a Developmental Approach to the valuation of this
portion of the subject, which analyzes the potential proceeds of sale for the
various parcels over time. In effect, this valuation technique combines aspects
of all three of the conventional methods.
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<TABLE>
<CAPTION>
====================================================================================================================================
Market Summary
Office Complexes
Lehigh Valley, Pennsylvania
====================================================================================================================================
Rentable Floor Date
Sale Location Land Building Area Age Condition Occupancy of Unit Overall
Area Area Coverage Sale Rate Rate
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
#1 Lehigh Valley Office Commons 12.599 Acs 60,580 SF 11.0% 1989-90 Good 96.7% 7/96 $64.38/SF 10.60%
87 S. Commerce Way
Lehigh Valley Industrial Park IV
Hanover Township
Northampton County, PA
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#2 Newpointe 4.46 Acs 47,147 SF 24.3% 1989 Good 100% 10/95 $69.99/SF 9.48%
98 Broadhead Road
Lehigh Valley Industrial Park IV
Hanover Township
Northampton County, PA
- ------------------------------------------------------------------------------------------------------------------------------------
#3 Westfield Corporate Center 4.18 Acs 56,493 SF 31.0% 1989 Good 84% 6/95 $52.22/SF 11.00%
4905 Tilghman Street
South Whitehall Township
Lehigh County, PA
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#4 Lehigh Valley Executive Campus 16.0007 Acs 163,690 SF 23.5% 1987-89 Good 89% 6/95 $67.81/SF 9.37%
2200/02 Irving Street
867, 871 & 881 Marcon Boulevard
Lehigh Valley Industrial Park Ill
Hanover Township
Lehigh County, PA
====================================================================================================================================
</TABLE>
<PAGE>
SALES COMPARISON APPROACH
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Methodology
In the Sales Comparison Approach, we estimated value by comparing this
property with similar, recently sold properties in the surrounding or competing
area. Inherent in this approach is the principle of substitution, which holds
that when a property is replaceable in the market, its value tends to be set at
the cost of acquiring an equally desirable substitute property, assuming that no
costly delay is encountered in making the substitution.
By analyzing sales that qualify as arms-length transactions between
willing and knowledgeable buyers and sellers, we can identify value and price
trends. The basic steps of this approach are:
1. research recent, relevant property sales and current offerings
throughout the competitive area;
2. select and analyze properties that are similar to the property
appraised, considering changes in economic conditions that may have
occurred between the sale date and the date of value, and other
physical, functional, or locational factors;
3. identify sales that include favorable financing and calculate the
cash equivalent price;
4. reduce the sale prices to a common unit of comparison such as price
per square foot of net rentable area, effective gross income
multiplier, and overall capitalization rate;
5. make appropriate comparative adjustments to the prices of the
comparable properties to relate them to the property being
appraised; and
6. interpret the adjusted sales data and draw a logical value
conclusion.
Analysis of Sales
Over the past 24 months, the Lehigh Valley market has shown signs of
improvement. Rents have increased and concession packages have all but
disappeared as positive net absorption is taking place. In terms of the
investment market, demand is primarily being generated by institutional
investors including several large REIT's and several national investors with
regional partners.
The subject property consists of eleven separate but adjacent parcels. On
the opposing page is a presentation of the comparable property sales which were
analyzed for the valuation of 7535 Windsor Drive. The most widely-used and
market-oriented unit of comparison for properties such as the subject is the
sales price per square foot of building area. All comparable sales were analyzed
on this basis. Detail sheets describing these and all the sales employed in this
analysis can be found among the Addenda to this report.
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Sales Comparison Approach
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7535 Windsor Drive
This property is a 129,223 square foot four story office building on
15.0000+/- acres of land which was constructed in 1986. It is now 100 percent
occupied by 11 tenants. On the date of inspection, the building was in excellent
condition having benefited from an on-going maintenance program. This facility
provides quality office finishes and offers an excellent location within Iron
Run Corporate Center. The property possesses good "curb appeal" and features
good quality construction materials. With regard to the market data assembled
for this analysis, the following comparisons are made:
Comparable Property Sale #1 was an arm's length transaction accomplished
with market oriented financing. It is also a relatively recent transfer
without any adverse leaseholds interests. Locationally, Sale #1 is
considered slightly inferior to the subject.
Physically, this property was in good overall condition at the time of
sale, which is inferior to the excellent condition of the subject.
Economically, Sale #1 was 96.7 percent leased at the time of conveyance
which is comparable to the 100 percent occupancy now experienced by the
subject. No non-realty items of property were reported to be included in
the price for this property. Overall, a positive adjustment is warranted
for Sale #1.
Comparable Property Sale #2 was also an arm's length transaction which
also offers a slightly inferior location to the subject. Market conditions
were considered inferior at the time of sale, indicating a positive
adjustment to be appropriate. Physically, this property was in excellent
condition at the time of sale which is consistent with that of the
subject. This building is, however, more modern than the subject.
Economically, Sale #2 was 100 percent leased at the time of conveyance. No
non-realty items were included with the sale. Overall, a positive
adjustment is warranted for Sale #2.
Comparable Property Sale #3 offers a highly visible and accessible
location on Tilghman Street at the Pennsylvania Turnpike. This transaction
was reported to be arm's length and was accomplished with market oriented
financing without any adverse leaseholds interests. Sale #3 occurred at a
time when market conditions were inferior to those of the present time.
Physically, this property is slightly more modern than the subject.
Despite this, its overall condition was considered similar. Positive
adjustment for economic characteristics is necessary here to account for
the lower occupancy level at the sale property at the time of sale.
Overall, a positive adjustment is made to Sale #3.
Finally, Comparable Property Sale #4 offers a slightly inferior location
in the Lehigh Valley Industrial Park III. Positive adjustment to account
for favorable changes in market conditions has been considered.
Physically, this property was in excellent condition at the time of sale
which is consistent with that of the subject. Economically, Sale #4 was 89
percent leased at the time of conveyance. Overall, a positive adjustment
is warranted for Sale #4.
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Sales Comparison Approach
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Conclusion - The four sales assembled for this analysis of 7535 Windsor
Drive reflect a range in unit value from $52.22 to $69.99 per square foot
of rentable building area. The adjustments discussed above are presented
to outline the logic of our thought processes with the ultimate result
being a plausible market value conclusion for the subject property. Based
on our analysis of these data on a price per square foot basis, we have
concluded an appropriate adjusted range of $82.00 to $87.00 per square
foot of rentable building area. From within this adjusted range, we
conclude the Sales Comparison Approach to indicate a current market value
of $11,000,000 for 7535 Windsor Drive. This indication of value is equal
to $85.12 per square foot of rentable building area.
7450 Tilghman Street
This property is a 100,000 square foot single story office building on
13.4304+/- acres of land which was constructed in 1986. It is now 100 percent
occupied by one tenant, Prudential Insurance Company. However, the lease with
this tenant will expire at year-end 1997. Although negotiations are reportedly
ongoing with another tenant, no agreement had been reached as of the effective
date of appraisal. On the date of inspection, the building was in excellent
condition having benefited from an on-going maintenance program. This facility
provides quality office finishes and offers an excellent location within Iron
Run Corporate Center. The property possesses good "curb appeal" and features
good quality construction materials. The same data considered in our analysis of
7535 Windsor Drive are reanalyzed here. With regard to these market data, the
following comparisons are made:
Comparable Property Sale #1 is considered slightly inferior to the
subject. Physically, this property was in good overall condition at the
time of sale, which is inferior to the excellent condition of the subject.
Economically, Sale #1 was 96.7 percent leased at the time of conveyance,
as opposed to the potential of the subject to be entirely vacant within
six months. No non-realty items of property were reported to be included
in the price for this property. Overall, a negative adjustment is
warranted for Sale #1.
Comparable Property Sale #2 also offers a slightly inferior location to
the subject. Physically, this property was in excellent condition at the
time of sale which is consistent with that of the subject. A positive
adjustment for improving market conditions since the date of sale is
considered necessary. Economically, Sale #2 was 100 percent leased at the
time of conveyance. Overall, a positive adjustment is warranted for Sale
#2.
Comparable Property Sale #3 also requires positive adjustment to account
for favorable changes in market conditions since the date of sale. This is
offset, to a degree, by the fact that this property was substantially
occupied at the time of sale. As was noted, the existing lease over the
subject expires at year-end.
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WAKEFIELD(R)
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<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Market Summary
Wharehouse Building Sales
Lehigh Valley, Pennsylvania
====================================================================================================================================
Rentable Land/ Date
Sale Location Land Building Bldg. Age Condition Occupancy of Unit Overall
Area Area Ratio Sale Rate Rate
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
#1 904-34 Marcon Boulevard 14.64 Acs 182,400 SF 3.50:1 1987 Good 97.4% 7/96 $32.89/SF 11.00%
Lehigh Valley Industrial Park III
Hanover Township
Lehigh County, PA
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#2 6813, 6829, 6831 Ruppsville Road 19.30 Acs 302,600 SF 2.78:1 1984-88 Good 100% 2/96 $28.75/SF 10.20%
& 7663 Industrial Boulevard
Upper Macungie Township
Lehigh County, PA
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#3 1 & 5 Highland Avenue 6.72 Acs 72,129 SF 4.06:1 1988 Good 70% 12/95 $42.00/SF N/A
Bethlehem Business Park V
Hanover Township
Northampton County, PA
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#4 7620 Cetronia Road 12.32 Acs 155,060 SF 3.46:1 1990 Excellent 100% 5/95 $31.48/SF 9.89%
Upper Macungie Township
Lehigh County, PA
====================================================================================================================================
</TABLE>
<PAGE>
Sales Comparison Approach
================================================================================
Comparable Property Sale #4 offers a slightly inferior location in the
Lehigh Valley Industrial Park III. Positive adjustment to account for
this, as well as improving market conditions since the date of sale, has
been considered. Physically, this property was in excellent condition at
the time of sale which is consistent with that of the subject.
Economically, Sale #4 was 89 percent leased at the time of conveyance.
Overall, no adjustment is warranted for Sale #4.
Conclusion - The four sales assembled for this analysis of 7450 Tilghman
Street reflect a range in unit value from $52.22 to $69.99 per square foot
of rentable building area. The adjustments discussed on the previous page
are presented to outline the logic of our thought processes with the
ultimate result being a plausible market value conclusion for the subject
property. Based on our analysis of these data on a price per square foot
basis, we have concluded an appropriate adjusted range of $65.00 to $70.00
per square foot of rentable building area. From within this adjusted
range, we conclude the Sales Comparison Approach to indicate a current
market value of $6,700,000 for 7450 Tilghman Street. This indication of
value is equal to $67.00 per square foot of rentable building area.
7055 Ambassador Drive
On the opposing page is a presentation of the comparable property sales
which were analyzed for the valuation of 7055 Ambassador Drive. This property is
a 153,600 square foot single story warehouse on 11.7030+/- acres of land which
was constructed in 1991. It is now 100 percent occupied by a single tenant. On
the date of inspection, the building was in excellent condition having benefited
from an on-going maintenance program. This facility provides 4.6 percent
interior office finishes on an overall basis and ceiling heights of 26 feet. The
property possesses good "curb appeal" and features good quality construction
materials. With regard to the market data assembled for this analysis, the
following comparisons are made:
Comparable Property Sale #1 was sold by a motivated seller. Prior to the
ultimate sale, an agreement of sale had been dissolved. Subsequent to this
occurring, the grantor ordered a quick sale. Positive adjustment to
account for this is warranted. Locationally, the sale property is situated
in a planned industrial park which, though desirable, is considered
inferior to Iron Run. Thus, additional positive adjustment is warranted.
Physically, this property was only in good condition at the time of sale
which is inferior to the excellent overall condition of the subject. This
complex had 20 to 22 foot clear ceilings, which is lower than the 26 foot
clear heights found at the subject. Positive adjustments are considered as
a result. Economically, Sale #1 was 97 percent leased at the time of
conveyance which is generally consistent with the 100 percent occupancy
now experienced by the subject. No non-realty items of property were
reported to be included in the price for this property. Overall, a
positive adjustment is warranted for Sale #1.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Sales Comparison Approach
================================================================================
Comparable Property Sale #2 benefits from a comparable location in Upper
Macungie Township immediately to the south of the subject. Physically,
this property was older than the subject and in good condition at the time
of sale, factors which render it inferior to the subject. This complex had
22 foot clear ceilings and 2 percent finished area as well. Economically,
Sale #2 was 100 percent leased at the time of conveyance. Overall, a
positive adjustment is warranted to Sale #2.
Comparable Property Sale #3 was an arm's length transaction which was
accomplished with market oriented financing without any adverse leaseholds
interests. Sale #3 occurred at a time when market conditions were inferior
to those of the present.
From a locational point of view, Sale #3 is considered inferior to the
subject property. Physically, this property has lower ceiling clearances
and less loading. This property was purchased by a user so that no
adjustment for economic characteristics is necessary here. However, a
positive adjustment to account for its smaller size is warranted. Overall,
a positive adjustment is made to Sale #3.
Finally, Comparable Property Sale #4 benefits from a similar location in
Upper Macungie on the south side of Interstate 78. A positive adjustment
to account for favorable changes in market conditions since the date of
sale is considered appropriate. Physically, this property was in excellent
condition at the time of sale which is consistent with that of the
subject. This building had 24 foot clear ceilings and 8 percent finished
interior as well. Economically, Sale #4 was 100 percent leased to three
tenants at the time of conveyance. However, all were of short tenure and
were scheduled to expire within six months. Overall, a positive adjustment
is warranted for Sale #4.
Conclusion - The four sales assembled for this analysis of 7055 Ambassador
Drive reflect a range in unit values from $28.75 to $42.00 per square foot
of gross building area. The adjustments discussed above are presented to
outline the logic of our thought processes with the ultimate result being
a plausible market value conclusion for the subject property. Based on our
analysis of these data on a price per square foot basis, we have concluded
an appropriate adjusted range of $35.00 to $40.00 per square foot of gross
building area. From within this adjusted range, we conclude the Sales
Comparison Approach to indicate a current market value of $5,900,000 for
7050 Ambassador Drive. This indication of value is equal to $38.41 per
square foot of gross building area.
6755 Snowdrift Road
This property is a 125,000 square foot single story warehouse on 9.7339+/-
acres of land which was constructed in 1988. It is now 100 percent occupied by a
single tenant. On the date of inspection, the building was in excellent
condition having benefited from an on-going maintenance program. This facility
provides 1.6 percent interior office finishes on an overall basis and ceiling
heights of 24 feet. Additionally, it offers about 3+/- acres of excess land,
which will provide for an expansion to 175,000 square feet if desired. The
property possesses good "curb appeal" and features good quality construction
materials. The same data considered in our analysis of 7055 Ambassador Drive are
reanalyzed here. With regard to these market data, the following comparisons are
made:
================================================================================
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Sales Comparison Approach
================================================================================
Comparable Property Sale #1 was sold by a motivated seller. Prior to the
ultimate sale, an agreement of sale had been dissolved. Subsequent to this
occurring, the grantor ordered a quick sale. Positive adjustment to
account for this is warranted. Locationally, the sale property is situated
in a planned industrial park which, though desirable, is considered
inferior to Iron Run. Thus, additional positive adjustment is warranted.
Physically, this property was only in good condition at the time of sale
which is inferior to the excellent overall condition of the subject. This
complex had 20 to 22 foot clear ceilings, which is lower than the 24 foot
clear heights found at the subject. Positive adjustments are considered as
a result. Economically, Sale #1 was generally consistent with the 100
percent occupancy now experienced by the subject. No non-realty items of
property were reported to be included in the price for this property.
Overall, a positive adjustment is warranted for Sale #1.
Comparable Property Sale #2 benefits from a comparable location in Upper
Macungie Township immediately to the south of the subject. Physically,
this property was older than the subject and in good condition at the time
of sale, factors which render it inferior to the subject. This complex had
22 foot clear ceilings and 2 percent finished area as well. Economically,
Sale #2 was 100 percent leased at the time of conveyance. However,
consideration must be given to its larger size in relation to the subject.
Overall, a positive adjustment is warranted to Sale #2.
Comparable Property Sale #3 was an arm's length transaction which was
accomplished with market oriented financing without any adverse leaseholds
interests. Sale #3 occurred at a time when market conditions were inferior
to those of the present.
From a locational point of view, Sale #3 is considered inferior to the
subject property. Physically, this property has lower ceiling clearances
and less loading. This property was purchased by a user so that no
adjustment for economic characteristics is necessary here. However, a
positive adjustment to account for its smaller size is warranted. Overall,
a positive adjustment is made to Sale #3.
Finally, Comparable Property Sale #4 benefits from a similar location in
Upper Macungie on the south side of Interstate 78. A positive adjustment
to account for favorable changes in market conditions since the date of
sale is considered appropriate. Physically, this property was in excellent
condition at the time of sale which is consistent with that of the
subject. This building had 24 foot clear ceilings and 8 percent finished
interior as well. Economically, Sale #4 was 100 percent leased at the time
of conveyance. However, all were of short tenure and were scheduled to
expire within six months. Overall, a negative adjustment is warranted for
Sale #4.
In addition to all of the foregoing, adjustment was considered to each of
the sales to reflect the presence of excess land at the subject property.
The subject is expandable by an additional 50,000 square feet and offers
approximately 3+/- acres of excess land to accomodate this expansion if
desired.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Sales Comparison Approach
================================================================================
Conclusion - The four sales assembled for this analysis of 6755 Snowdrift
Road reflect a range in unit values from $28.75 to $42.00 per square foot
of gross building area. The adjustments discussed above are presented to
outline the logic of our thought processes with the ultimate result being
a plausible market value conclusion for the subject property. Based on our
analysis of these data on a price per square foot basis, we have concluded
an appropriate adjusted range of $35.00 to $40.00 per square foot of gross
building area. From within this adjusted range, we conclude the Sales
Comparison Approach to indicate a current market value of $4,700,000 for
6755 Snowdrift Road. This indication of value is equal to $37.60 per
square foot of gross building area.
7150 Windsor Drive
On the opposing page is a presentation of the comparable property sales
which were analyzed for the valuation of 7150 Windsor Drive. This property is a
49,420 square foot single story flex building on 6.1486+/- acres of land which
was constructed in 1989. It is now 100 percent occupied by 4 tenants. On the
date of inspection, the building was in excellent condition having benefited
from an on-going maintenance program. This facility provides 80+/- percent
interior office finishes on an overall basis and ceiling heights of 18 feet. The
property possesses good "curb appeal" and features good quality construction
materials. With regard to the market data assembled for this analysis, the
following comparisons are made:
Comparable Property Sale #1 is a single occupant facility in Iron Run
which was acquired by a user. This was reported to be an arm's length
transaction not subject to any unusual terms or financing. Locationally,
it is considered comparable to the subject as it lies within the Iron Run
Corporate Center. Physically, it is similar in age to the subject.
Positive adjustment to account for its lower level of overall finish is
offset, to a degree, by the fact that there was excess land associated
with this property. Overall, positive adjustment in relation to the
subject has been considered.
Comparable Property Sales #2, #3, and #4 were all acquired by an active
real estate investment trust. All were reported to be arm's length and not
subject to any special motivations or financing. While no adjustment for
this is necessary, positive adjustment to each to account for favorable
changes in market conditions has been considered. Each is situated in
Lehigh Valley Industrial Park 1, an older development which is considered
inferior to the subject.
Physically, Sales #2 and #3 were both in excellent overall condition
comparable to that of the subject. Both have considerably less finished
area, though, and require positive adjustment as a result. Sale #4 is
older than the subject, and of inferior construction quality, but offered
a level of finish generally consistent with that of the subject.
Economically, all three properties were fully occupied at the time of
sale. Overall, all require varying degrees of positive adjustment in
relation to the subject.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Sales Comparison Approach
================================================================================
Conclusion - The four sales assembled for this analysis of 7150 Windsor
Drive reflect a range in unit values from $36.39 to $60.83 per square foot
of gross building area. The adjustments discussed above are presented to
outline the logic of our thought processes with the ultimate result being
a plausible market value conclusion for the subject property. Based on our
analysis of these data on a price per square foot basis, we have concluded
an appropriate adjusted range of $70.00 to $75.00 per square foot of gross
building area. From within this adjusted range, we conclude the Sales
Comparison Approach to indicate a current market value of $3,600,000 for
7150 Windsor Drive. This indication of value is equal to $72.85 per square
foot of gross building area.
6690 Grant Way
This property is an 88,000 square foot single story warehouse on 6.9031+/-
acres of land which was constructed in 1981. It is now 100 percent occupied by
two tenants. On the date of inspection, the building was in excellent condition
having benefited from an on-going maintenance program. This facility provides
2.8 percent interior office finishes on an overall basis and ceiling heights of
24 feet. The property possesses good "curb appeal" and features good quality
construction materials. The same data considered in our analysis of 7055
Ambassador Drive are reanalyzed here. With regard to these market data, the
following comparisons are made:
Comparable Property Sale #1 was sold by a motivated seller. Prior to the
ultimate sale, an agreement of sale had been dissolved. Subsequent to this
occurring, the grantor ordered a quick sale. Positive adjustment to
account for this is warranted. Locationally, the sale property is situated
in a planned industrial park which, though desirable, is considered
inferior to Iron Run. Thus, additional positive adjustment is warranted.
Physically, this property was in good condition at the time of sale which
is consistent with the overall condition of the subject. This complex had
20 to 22 foot clear ceilings, which is lower than the 24 foot clear
heights found at the subject. Positive adjustment is considered as a
result. Economically, Sale #1 was generally consistent with the 100
percent occupancy now experienced by the subject. No non-realty items of
property were reported to be included in the price for this property.
Overall, a positive adjustment is warranted for Sale #1.
Comparable Property Sale #2 benefits from a comparable location in Upper
Macungie Township immediately to the south of the subject. Physically,
this property was newer than the subject and in good condition at the time
of sale, factors which render it slightly superior to the subject. This
complex had 22 foot clear ceilings and 2 percent finished area as well.
Economically, Sale #2 was 100 percent leased at the time of conveyance.
However, consideration must be given to its larger size in relation to the
subject. Overall, a positive adjustment is warranted to Sale #2.
Comparable Property Sale #3 was an arm's length transaction which was
accomplished with market oriented financing without any adverse leaseholds
interests. Sale #3 occurred at a time when market conditions were inferior
to those of the present.
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Market Summary
Flex Office/Industrial Buildings
Lehigh Valley, Pennsylvania
====================================================================================================================================
Gross Floor Date
Sale Location Land Building Area Age Condition Occupancy of Unit Overall
Area Area Coverage Sale Rate Rate
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
#1 6620 Grant Way 5.3 Acs 30,000 SF 13.0% 1989 Good 100% 11/96 $60.83/SF N/A
Iron Run Corporate Center
Upper Macungie Township
Lehigh County, PA
- ------------------------------------------------------------------------------------------------------------------------------------
#2 2041 Avenue C 2.567 Acs 30,400 SF 27.2% 1989 Good 100% 2/95 $42.43/SF 10.34%
Lehigh Valley Industrial Park I
Hanover Township
Lehigh County, PA
- ------------------------------------------------------------------------------------------------------------------------------------
#3 2l24 Avenue C 3.353 Acs 36,000 SF 24.7% 1989 Good 100% 2/95 $36.39/SF 10.27%
Lehigh Valley Industrial Park I
Hanover Township
Lehigh County, PA
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#4 2l96 Avenue C 4.483 Acs 31,381 SF 16.1% 1980 Good 100% 7/94 $59.27/SF 9.40%
Lehigh Valley Industrial Park I
Hanover Township
Lehigh County, PA
====================================================================================================================================
</TABLE>
<PAGE>
Sales Comparison Approach
================================================================================
From a locational point of view, Sale #3 is considered inferior to the
subject property. Physically, this property has lower ceiling clearances
and less loading. This property was purchased by a user so that no
adjustment for economic characteristics is necessary here. Overall, a
positive adjustment is made to Sale #3.
Finally, Comparable Property Sale #4 benefits from a similar location in
Upper Macungie on the south side of Interstate 78. A positive adjustment
to account for favorable changes in market conditions since the date of
sale is considered appropriate. Physically, this property was in excellent
condition at the time of sale which is consistent with that of the
subject. This building had 24 foot clear ceilings and 8 percent finished
interior as well. Economically, Sale #4 was 100 percent leased at the time
of conveyance. However, all were of short tenure and were scheduled to
expire within six months. Overall, a positive adjustment is warranted for
Sale #4.
Conclusion - The four sales assembled for this analysis of 6690 Grant Way
reflect a range in unit values from $28.75 to $42.00 per square foot of
gross building area. The adjustments discussed above are presented to
outline the logic of our thought processes with the ultimate result being
a plausible market value conclusion for the subject property. Based on our
analysis of these data on a price per square foot basis, we have concluded
an appropriate adjusted range of $35.00 to $40.00 per square foot of gross
building area. From within this adjusted range, we conclude the Sales
Comparison Approach to indicate a current market value of $3,400,000 for
6690 Grant Way. This indication of value is equal to $38.64 per square
foot of gross building area.
6845 Snowdrift Road
This property is a 93,000 square foot single story warehouse on 8.6238+/-
acres of land which was constructed in 1988. It is now 100 percent occupied by
two tenants. On the date of inspection, the building was in excellent condition
having benefited from an on-going maintenance program. This facility is entirely
devoted to warehouse space and offers ceiling heights of 24 feet. The property
possesses good "curb appeal" and features good quality construction materials.
The same data considered in our analysis of 7055 Ambassador Drive are reanalyzed
here. With regard to these market data, the following comparisons are made:
Comparable Property Sale #1 was sold by a motivated seller. Prior to the
ultimate sale, an agreement of sale had been dissolved. Subsequent to this
occurring, the grantor ordered a quick sale. Positive adjustment to
account for this is warranted. Locationally, the sale property is situated
in a planned industrial park which, though desirable, is considered
inferior to Iron Run. Thus, additional positive adjustment is warranted.
Physically, this property was in good condition at the time of sale which
is consistent with the overall condition of the subject. This complex had
20 to 22 foot clear ceilings, which is lower than the 24 foot clear
heights found at the subject. Positive adjustment is considered as a
result. This is tempered, however, to account for the lack of any office
finishes at the subject property. Economically, Sale #1 was generally
consistent with the 100 percent occupancy now experienced by the subject.
No non-realty items of property were reported to be included in the price
for this property. Overall, a positive adjustment is warranted for Sale
#1.
================================================================================
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Sales Comparison Approach
================================================================================
Comparable Property Sale #2 benefits from a comparable location in Upper
Macungie Township immediately to the south of the subject. Physically,
this property was newer than the subject and in good condition at the time
of sale, factors which render it slightly superior to the subject. This
complex had 22 foot clear ceilings and 2 percent finished area as well.
Economically, Sale #2 was 100 percent leased at the time of conveyance.
However, consideration must be given to its larger size in relation to the
subject. Overall, a positive adjustment is warranted to Sale #2.
Comparable Property Sale #3 was an arm's length transaction which was
accomplished with market oriented financing without any adverse leaseholds
interests. Sale #3 occurred at a time when market conditions were inferior
to those of the present.
From a locational point of view, Sale #3 is considered inferior to the
subject property. Physically, this property has lower ceiling clearances
and less loading. This property was purchased by a user so that no
adjustment for economic characteristics is necessary here. Overall, a
positive adjustment is made to Sale #3.
Finally, Comparable Property Sale #4 benefits from a similar location in
Upper Macungie on the south side of Interstate 78. A positive adjustment
to account for favorable changes in market conditions since the date of
sale is considered appropriate. Physically, this property was in excellent
condition at the time of sale which is consistent with that of the
subject. This building had 24 foot clear ceilings and 8 percent finished
interior as well. The latter factor suggests a modest negative adjustment
to account for the lack of office area at the subject property.
Economically, Sale #4 was 100 percent leased at the time of conveyance.
However, all were of short tenure and were scheduled to expire within six
months. Overall, a positive adjustment is warranted for Sale #4.
Conclusion - The four sales assembled for this analysis of 6845 Snowdrift
Road reflect a range in unit values from $28.75 to $42.00 per square foot
of gross building area. The adjustments discussed above are presented to
outline the logic of our thought processes with the ultimate result being
a plausible market value conclusion for the subject property. Based on our
analysis of these data on a price per square foot basis, we have concluded
an appropriate adjusted range of $35.00 to $40.00 per square foot of gross
building area. From within this adjusted range, we conclude the Sales
Comparison Approach to indicate a current market value of $3,500,000 for
6845 Snowdrift Road. This indication of value is equal to $37.63 per
square foot of gross building area.
6670 Grant Way
This property is a 72,885 square foot single story warehouse on 6.8108+/-
acres of land which was constructed in 1979. It is now 100 percent occupied by
one tenant, which is scheduled to vacate by September 1, 1997. On the date of
inspection, the building was in good condition having benefited from an on-going
maintenance program. This facility provides 19.2 percent interior office
finishes on an overall basis and ceiling heights of 24 feet. The property
possesses good "curb appeal" and features good quality construction materials.
The same data considered in our analysis of 7055 Ambassador Drive are reanalyzed
here. With regard to these market data, the following comparisons are made:
================================================================================
-40-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Sales Comparison Approach
================================================================================
Comparable Property Sale #1 was sold by a motivated seller. Prior to the
ultimate sale, an agreement of sale had been dissolved. Subsequent to this
occurring, the grantor ordered a quick sale. Positive adjustment to
account for this is warranted. Locationally, the sale property is
situated in a planned industrial park which, though desirable, is
considered inferior to Iron Run. Thus, additional positive adjustment is
warranted.
Physically, this property was in good condition at the time of sale which
is consistent with the overall condition of the subject. This complex had
20 to 22 foot clear ceilings, which is lower than the 24 foot clear
heights found at the subject. Additionally, the subject offers
considerably more finished area. Positive adjustments are considered as a
result. Economically, Sale #1 was generally consistent with the 100
percent occupancy now experienced by the subject. No non-realty items of
property were reported to be included in the price for this property.
Overall, a positive adjustment is warranted for Sale #1.
Comparable Property Sale #2 benefits from a comparable location in Upper
Macungie Township immediately to the south of the subject. Physically,
this property was newer than the subject and in good condition at the time
of sale, factors which render it slightly superior to the subject. This
complex had 22 foot clear ceilings and 2 percent finished area as well.
Economically, Sale #2 was 100 percent leased at the time of conveyance.
However, consideration must be given to its larger size in relation to the
subject. Overall, a positive adjustment is warranted to Sale #2.
Comparable Property Sale #3 was an arm's length transaction which was
accomplished with market oriented financing without any adverse leaseholds
interests. Sale #3 occurred at a time when market conditions were inferior
to those of the present.
From a locational point of view, Sale #3 is considered inferior to the
subject property. Physically, this property has lower ceiling clearances
and less loading. Alternatively, it does offer a higher level of finish.
This property was purchased by a user so that no adjustment for economic
characteristics is necessary here. Overall, a negative adjustment is made
to Sale #3.
Finally, Comparable Property Sale #4 benefits from a similar location in
Upper Macungie on the south side of Interstate 78. A positive adjustment
to account for favorable changes in market conditions since the date of
sale is considered appropriate. Physically, this property was in excellent
condition at the time of sale. This building had 24 foot clear ceilings
but only 8 percent finished office area. Economically, Sale #4 was 1 00
percent leased at the time of conveyance. However, all were of short
tenure and were scheduled to expire within six months. Overall, a positive
adjustment is warranted for Sale #4.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Sales Comparison Approach
================================================================================
Conclusion - The four sales assembled for this analysis of 6670 Grant Way
reflect a range in unit values from $28.75 to $42.00 per square foot of
gross building area. The adjustments discussed above are presented to
outline the logic of our thought processes with the ultimate result being
a plausible market value conclusion for the subject property. Based on our
analysis of these data on a price per square foot basis, we have concluded
an appropriate adjusted range of $35.00 to $40.00 per square foot of gross
building area. From within this adjusted range, we conclude the Sales
Comparison Approach to indicate a current market value of $2,700,000 for
6670 Grant Way. This indication of value is equal to $37.04 per square
foot of gross building area.
7010 Snowdrift Road
This property is a 33,029 square foot single story office building on
3.9342+/- acres of land which was constructed in 1991. It was formerly occupied
by one tenant, Pennsylvania Power & Light Company, which vacated the building in
April, 1997. Since that time, about 80 percent of the building has been released
to two tenants, with occupancy scheduled for July and December 1. On the date of
inspection, the building was in excellent condition having benefited from an
on-going maintenance program. This facility provides quality office finishes and
offers an excellent location within Iron Run Corporate Center. The property
possesses good "curb appeal" and features good quality construction materials.
The same data considered in our analysis of 7535 Windsor Drive are reanalyzed
here. With regard to these market data, the following comparisons are made:
Comparable Property Sale #1 is considered slightly inferior to the
subject. Physically, this property was in good overall condition at the
time of sale, which is inferior to the excellent condition of the subject.
Economically, Sale #1 was 96.7 percent leased at the time of conveyance,
as opposed to the 80 percent level of the subject. No non-realty items of
property were reported to be included in the price for this property.
Overall, a modest positive adjustment is warranted for Sale #1.
Comparable Property Sale #2 also offers a slightly inferior location to
the subject. Physically, this property was in excellent condition at the
time of sale which is consistent with that of the subject. A positive
adjustment for improving market conditions since the date of sale is
considered necessary. Economically, Sale #2 was 100 percent leased at the
time of conveyance, which is superior to the status of the subject.
Overall, a negative adjustment is warranted for Sale #2.
Comparable Property Sale #3 also requires positive adjustment to account
for favorable changes in market conditions since the date of sale.
Physically, it is in similar overall condition to the subject.
Additionally, occupancy at the time of sale was consistent with that of
the subject at the time of sale. Overall, positive adjustment to this sale
has been considered.
Comparable Property Sale #4 offers a slightly inferior location in the
Lehigh Valley Industrial Park III. Positive adjustment to account for
this, as well as improving market conditions since the date of sale, has
been considered. Physically, this property was in excellent condition at
the time of sale which is consistent with that of the subject.
Economically, Sale #4 was 89 percent leased at the time of conveyance.
Overall, modest negative adjustment is warranted for Sale #4.
================================================================================
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Market Summary
Flex Office/Industrial Buildings
Lehigh Valley, Pennsylvania
====================================================================================================================================
Gross Floor Date
Sale Location Land Building Area Age Condition Occupancy of Unit Overall
Area Area Coverage Sale Rate Rate
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
#1 904-34 Marcon Boulevard 14.64 Acs 182,400 SF 3.50:1 1987 Good 97.4% 7/96 $32.89/SF 11.00%
Lehigh Valley Industrial Park III
Hanover Township
Lehigh County, PA
- ------------------------------------------------------------------------------------------------------------------------------------
#2 1 & 5 Highland Avenue 6.72 Acs 72,129 SF 4.06:1 1988 Good 70% 12/95 $42.00/SF N/A
Bethlehem Business Park V
Hanover Township
Northampton County, PA
- ------------------------------------------------------------------------------------------------------------------------------------
#3 2041 Avenue C 2.567 Acs 30,400 SF 27.2% 1989 Good 100% 2/95 $42.43/SF 10.34%
Lehigh Valley Industrial Park I
Hanover Township
Lehigh County, PA
- ------------------------------------------------------------------------------------------------------------------------------------
#4 2l24 Avenue C 3.353 Acs 36,000 SF 24.7% 1989 Good 100% 2/95 $36.39/SF 10.27%
Lehigh Valley Industrial Park I
Hanover Township
Lehigh County, PA
====================================================================================================================================
</TABLE>
<PAGE>
Sales Comparison Approach
================================================================================
Conclusion - The four sales assembled for this analysis of 7010 Snowdrift
Road reflect a range in unit value from $52.22 to $69.99 per square foot
of rentable building area. The adjustments discussed on the previous page
are presented to outline the logic of our thought processes with the
ultimate result being a plausible market value conclusion for the subject
property. Based on our analysis of these data on a price per square foot
basis, we have concluded an appropriate adjusted range of $65.00 to $70.00
per square foot of rentable building area. From within this adjusted
range, we conclude the Sales Comparison Approach to indicate a current
market value of $2,200,000 for 7010 Snowdrift Road. This indication of
value is equal to $66.61 per square foot of rentable building area.
7020 Snowdrift Road
On the opposing page is a presentation of the comparable property sales
which were analyzed for the valuation of 7020 Snowdrift Road. This property is a
41,390 square foot single story warehouse on 4.0909+/- acres of land which was
constructed in 1975. It is now 100 percent occupied by a two tenants. On the
date of inspection, the building was in good condition having benefited from an
on-going maintenance program. This facility provides 5.0 percent interior office
finishes on an overall basis and ceiling heights of 16 feet. The property
possesses good "curb appeal" and features good quality construction materials.
With regard to the market data assembled for this analysis, the following
comparisons are made:
Comparable Property Sale #1 was sold by a motivated seller. Prior to the
ultimate sale, an agreement of sale had been dissolved. Subsequent to this
occurring, the grantor ordered a quick sale. Positive adjustment to
account for this is warranted. Locationally, the sale property is situated
in a planned industrial park which, though desirable, is considered
inferior to Iron Run. Thus, additional positive adjustment is warranted.
Comparable Property Sale #2 was an arm's length transaction which was
accomplished with market oriented financing without any adverse leaseholds
interests. Sale #2 occurred at a time when market conditions were inferior
to those of the present.
From a locational point of view, Sale #2 is considered inferior to the
subject property. Physically, this property has greater ceiling
clearances, but less loading. Alternatively, it does offer a higher level
of finish. This property was purchased by a user so that no adjustment for
economic characteristics is necessary here. Overall, a negative adjustment
is made to Sale #2.
Comparable Property Sales #3 and #4 were acquired by an active real estate
investment trust. Both were reported to be arm's length and not subject to
any special motivations or financing. While no adjustment for this is
necessary, positive adjustment to each to account for favorable changes in
market conditions has been considered. Each is situated in Lehigh Valley
Industrial Park 1, an older development which is considered inferior to
the subject.
================================================================================
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Sales Comparison Approach
================================================================================
Physically, Sales #3 and #4 were both newer than the subject, but in
comparable overall condition. Both have a similar level of finished area.
However, the subject is older than both, requiring a negative adjustment
as a result. Economically, both properties were fully occupied at the time
of sale. Overall, both require varying degrees of negative adjustment in
relation to the subject.
Conclusion - The four sales assembled for this analysis of 7020 Snowdrift
Road reflect a range in unit value from $32.89 to $42.43 per square foot
of gross building area. The adjustments discussed on the previous page are
presented to outline the logic of our thought processes with the ultimate
result being a plausible market value conclusion for the subject property.
Based on our analysis of these data on a price per square foot basis, we
have concluded an appropriate adjusted range of $33.00 to $38.00 per
square foot of gross building area. From within this adjusted range, we
conclude the Sales Comparison Approach to indicate a current market value
of $1,400,000 for 7020 Snowdrift Road. This indication of value is equal
to $33.82 per square foot of rentable building area.
6810 Tilghman Street
This property is a 54,844 square foot single story warehouse building on
6.0533+/- acres of land which was constructed in 1975. It is now 100 percent
occupied by a two tenants. On the date of inspection, the building was in
excellent condition having benefited from an on- going maintenance program. This
facility provides 3.3 percent interior office finishes on an overall basis and
ceiling heights of 18 feet. Additionally, approximately 2.75+/- acres of excess
land are available to expand the building to 100,000 square feet if desired. The
property possesses good "curb appeal" and features good quality construction
materials. The same data considered in our analysis of 7020 Snowdrift Road are
reanalyzed here. With regard to these market data, the following comparisons are
made:
Comparable Property Sale #1 was sold by a motivated seller. Prior to the
ultimate sale, an agreement of sale had been dissolved. Subsequent to this
occurring, the grantor ordered a quick sale. Positive adjustment to
account for this is warranted. Locationally, the sale property is situated
in a planned industrial park which, though desirable, is considered
inferior to Iron Run. Thus, additional positive adjustment is warranted.
Comparable Property Sale #2 was an arm's length transaction which was
accomplished with market oriented financing without any adverse
leaseholds interests. Sale #2 occurred at a time when market conditions
were inferior to those of the present.
From a locational point of view, Sale #2 is considered inferior to the
subject property. Physically, this property has similar ceiling clearances
and less loading. Alternatively, it does offer a higher level of finish.
This property was purchased by a user so that no adjustment for economic
characteristics is necessary here. Overall, a negative adjustment is made
to Sale #2.
================================================================================
-44-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Sales Comparison Approach
================================================================================
Comparable Property Sales #3 and #4 were acquired by an active real estate
investment trust. Both were reported to be arm's length and not subject to
any special motivations or financing. While no adjustment for this is
necessary, positive adjustment to each to account for favorable changes in
market conditions has been considered. Each is situated in Lehigh Valley
Industrial Park 1, an older development which is considered inferior to
the subject.
Physically, Sales #3 and #4 were both newer than the subject but in
comparable overall condition. Both have a similar level of finished area.
However, the subject is older than both, requiring a negative adjustment
as a result. Economically, both properties were fully occupied at the time
of sale. Overall, both require varying degrees of negative adjustment in
relation to the subject.
In addition to all of the foregoing, adjustment was considered to each of
the sales to reflect the presence of excess land at the subject property.
The subject is expandable to 100,000 square feet and offers approximately
2.75+/- acres of excess land to accomodate this expansion if desired.
Conclusion - The four sales assembled for this analysis of 6810 Tilghman
Street reflect a range in unit value from $32.89 to $42.43 per square foot
of gross building area. The adjustments discussed on the previous page are
presented to outline the logic of our thought processes with the ultimate
result being a plausible market value conclusion for the subject property.
Based on our analysis of these data on a price per square foot basis, we
have concluded an appropriate adjusted range of $33.00 to $38.00 per
square foot of gross building area. From within this adjusted range, we
conclude the Sales Comparison Approach to indicate a current market value
of $2,175,000 for 6810 Tilghman Street. This indication of value is equal
to $39.66 per square foot of rentable building area.
Final Conclusions
The subject property consists of a mid-rise office building, a single
story office/flex building, two single story office buildings, and seven
warehouse facilities. Due to differences among these, four sets of data were
necessary for this comparative analysis of the real estate. Based upon these
analyses, it is our conclusion that the Sales Comparison Approach indicates a
total market value of FORTY SEVEN MILLION TWO HUNDRED SEVENTY FIVE THOUSAND
DOLLARS ($47,275,000) for the entire subject property. This total value is
comprised as follows:
================================================================================
-45-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Sales Comparison Approach
================================================================================
================================================================================
Final Conclusions
================================================================================
Property Indicated Market Value
================================================================================
7535 Windsor Drive $11,000,000
7450 Tilghman Street $ 6,700,000
7055 Ambassador Drive $ 5,900,000
6755 Snowdrift Road $ 4,700,000
7150 Windsor Drive $ 3,600,000
6690 Grant Way $ 3,400,000
6845 Snowdrift Road $ 3,500,000
6670 Grant Way $ 2,700,000
7010 Snowdrift Road $ 2,200,000
7020 Snowdrift Road $ 1,400,000
6810 Tilghman Street $ 2,175,000
TOTAL $47,275,000
================================================================================
================================================================================
-46-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
<TABLE>
<CAPTION>
20006 - 7535 WINDSOR DRIVE
ANNUAL CASH FLOW REPORT
BEGINNING 7/1/97 FOR 12 YEARS
FY1998 FY1999 FY2000 FY2OO1 FY2002 FY2003 FY2004 FY2005 FY2006
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME
MINIMUM RENT:
GROSS RENTS 1,797,405 1,839,920 1,911,862 1,975,115 2,186,308 2,349,929 2,411,810 2,490,523 2,550,486
LESS LAG VACANCY (5,914) (52,218) (31,038) (25,024) (301,072) (57,330) 0 (99,304) (14,502)
--------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL MINIMUM RENT 1,791,491 1,787,702 1,880,824 1,950,091 1,885,236 2,292,599 2,411,810 2,391,219 2,535,984
RECOVERIES:
OPERATING EXPENSES 86,168 99,112 91,532 101,560 56,757 45,595 68,559 74,213 91,250
--------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL RECOVERIES 86,168 99,112 91,532 101,560 56,757 45,595 68,559 74,213 91,250
GROSS RENTAL
INCOME 1,877,659 1,886,814 1,972,356 2,051,651 1,941,993 2,338,194 2,480,369 2,465,432 2,627,234
CREDIT LOSS (56,330) (56,605) (59,171) (61,550) (58,260) (70,146) (74,411) (73,963) (78,817)
--------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL INCOME 1,821,329 1,830,209 1,913,185 1,990,101 1,883,733 2,268,048 2,405,958 2,391,469 2,548,417
EXPENSES
COMMON UTILITIES 72,317 74,848 77,468 80,179 82,985 85,890 88,896 92,007 95,227
INSURANCE 20,378 21,092 21,830 22,594 23,385 24,203 25,050 25,927 26,835
MANAGEMENT FEE 65,743 68,044 70,425 72,890 75,441 78,082 80,815 83,643 86,571
REAL ESTATE TAXES 131,456 136,057 140,819 145,748 150,849 156,128 161,593 167,249 173,102
CLEANING 59,168 61,239 63,382 87,844 113,161 117,122 121,221 125,464 129,855
MAINTENANCE 72,317 74,848 77,468 80,179 82,985 85,890 88,896 92,007 95,227
OUTSIDE CONTRACTS 58,745 60,801 62,930 65,132 67,412 69,771 72,213 74,741 77,356
ADMINISTRATIVE 99,399 102,878 106,478 110,205 114,062 118,054 122,186 126,463 130,889
OTHER 33,683 34,862 36,082 37,345 38,652 40,005 41,405 42,855 44,355
--------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL EXPENSES 613,206 634,669 656,882 702,116 748,932 775,145 802,275 830,356 859,417
--------- --------- --------- --------- --------- --------- --------- --------- ---------
NET OPERATING
INCOME 1,208,123 1,195,540 1,256,303 1,287,985 1,134,801 1,492,903 1,603,683 1,561,113 1,689,000
ALTERATIONS 20,790 0 283,953 41,469 794,198 200,651 0 337,247 49,252
COMMISSIONS 5,401 0 73,774 10,774 206,738 52,131 0 87,620 12,796
RESERVES 12,922 13,375 13,843 14,327 14,829 15,348 15,885 16,441 17,016
--------- --------- --------- --------- --------- --------- --------- --------- ---------
CASH FLOW 1,169,010 1,182,165 884,733 1,221,415 119,036 1,224,773 1,587,798 1,119,805 1,609,936
</TABLE>
FY2007 FY2008 FY2009
INCOME
MINIMUM RENT:
GROSS RENTS 2,658,955 2,788,994 2,854,379
LESS LAG VACANCY (374,481) (76,153) 0
--------- --------- ---------
TOTAL MINIMUM RENT 2,284,474 2,712,841 2,854,379
RECOVERIES:
OPERATING EXPENSES 79,815 61,303 81,429
--------- --------- ---------
TOTAL RECOVERIES 79,815 61,303 81,429
GROSS RENTAL
INCOME 2,364,289 2,774,144 2,935,808
CREDIT LOSS (70,929) (83,224) (88,074)
--------- --------- ---------
TOTAL INCOME 2,293,360 2,690,920 2,847,734
EXPENSES
COMMON UTILITIES 98,560 102,010 105,580
INSURANCE 27,774 28,746 29,752
MANAGEMENT FEE 89,601 92,737 95,982
REAL ESTATE TAXES 179,161 185,432 191,922
CLEANING 134,400 139,104 143,973
MAINTENANCE 98,560 102,010 105,580
OUTSIDE CONTRACTS 80,064 82,866 85,766
ADMINISTRATIVE 135,470 140,212 145,119
OTHER 45,907 47,514 49,177
--------- --------- ---------
TOTAL EXPENSES 889,497 920,631 952,851
--------- --------- ---------
NET OPERATING
INCOME 1,403,863 1,770,289 1,894,883
ALTERATIONS 902,636 278,935 0
COMMISSIONS 234,988 72,471 0
RESERVES 17,612 18,228 18,866
--------- --------- ---------
CASH FLOW 248,627 1,400,655 1,876,017
<PAGE>
INCOME CAPITALIZATION APPROACH
================================================================================
Methodology
The Income Capitalization Approach is a method of converting the
anticipated economic benefits of owning property into a value estimate through
capitalization. The principle of "anticipation" underlies this approach in that
investors recognize the relationship between an asset's income and its value. In
order to value the anticipated economic benefits of a particular property,
potential income and expenses must be estimated, and the most appropriate
capitalization method must be selected.
The two most common methods of converting net income into value are direct
capitalization and discounted cash flow analysis. In direct capitalization, net
operating income is divided by an overall rate extracted from market sales to
indicate a value. In the discounted cash flow method, anticipated future net
income streams and a reversionary value are discounted to an estimate of net
present value at a chosen yield rate (internal rate of return).
In our opinion, the discounted cash flow method is the more appropriate
capitalization technique as the subject property consists of six separate
parcels occupied by a number of tenants at differing rental rates for varying
lease durations. Direct capitalization does not adequately account for the
subtleties of all those variables. The following is a discussion of our
discounted cash flow analysis for each parcel which comprises the subject
property.
7535 Windsor Drive
This property is a 129,223 square foot, four story, multi-tenant, Class A
office building which is now 99 percent occupied by 11 tenants. On the opposing
page is a presentation of the cash flows which an informed investor could
reasonably expect 7535 Windsor Drive to generate over an eleven year time
horizon. The holding period is extended by one year to allow the sale of the
property in an optimal year. These cash flows are based upon the following
analysis:
Base Rental Income - The base rental income which an asset such as the
subject property will generate for an investor reflects a review of the
existing rent roll in conjunction with the rent now being paid for
comparable space and services in the competitive open market. A copy of
the rent roll over the subject property is included among the Addenda to
this report. As can be noted from the current rent roll, existing
contracts provide for base rental income of $14.13 per square foot in the
coming 12 months.
Three major tenants in the subject, Air Products, Weaver Mosebach, and
Rosenbluth Travel, occupy 57,357, 15,806, and 14,537 square feet,
respectively, which equates to approximately 68 percent of the property.
Their annual rent is equivalent to $13.13, $14.93, and $14.90 per square
foot, respectively. The credit quality for the minor tenants ranges from
average to good within the context of their mostly unrated status.
There is only one short term lease expirations which will result in a
vacancy of 2,280 square feet. Given the current vacancy rate, as well as
the decreasing supply of available space within the marketplace, we have
projected that this space can be absorbed by the market within nine
months. The term of the spec tenant will be for five years at a market
derived rental rate of $16.00 per square foot plus electric.
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WAKEFIELD(R)
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<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Summary of Market Data
Office Market Leases
Lehigh Valley Marketplace
====================================================================================================================================
Lease Location Lessee Leased Lease Annual Comments
# Area Term Rental
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Highland Office Plaza OmniPoint 25,000+/- SF 5 years $15.50/SF This property consists of a
95 Highland Avenue Communications commencing + electric mid-rise office buildingnt building
Bethlehem Business Park September, known as Highland Office Plaza. It
Bethlehem, PA 1996 is located near Routes 22 and 512 a
short distance north of Bethlehem.
Tenant improvements were reported
to be $12.00/SF.
2 Valley Center Parkway Undisclosed 13,666+/- SF 5 years $12.00/SF This property consists of a one
Lehigh Valley Corporate commencing story office building known within
Center September, an attractive business park
Bethlehem, PA 1996 setting. The lease is structured on
a net basis.
3 Bethlehem Office Hanover Engineers 2,100+/- SF 5 years $10.50/SF This is part of a multi-building,
Commons "C" commencing single story office complex. The
Bethlehem, PA September, lease is written on a net basis
1996 with the tenant responsible for all
operating expenses.
4 Bethlehem Office BiRoe Associates 5,200+/- SF 5 years $10.50/SF This is part of a multi-building,
Commons "C" commencing single story office complex. The
Bethlehem, PA September, lease is written on a net basis
1996 with the tenant responsible for all
operating expenses.
====================================================================================================================================
</TABLE>
<PAGE>
Income Capitalization Approach
================================================================================
At the subject property, three leases were negotiated in the past year at
average rental rates ranging from $15.08 per square foot to $21.51 per
square foot on a full service basis. Tenant areas range from about 359+/-
square feet up to 2,115+/- square feet. The following summarizes this
recent leasing activity.
================================================================================
Recent Leasing
7537 Windsor Drive
================================================================================
Tenant Rentable Area Contract Rent
================================================================================
Cadence Design Systems 4,876 SF $15.25/SF + electric
AIM Executive Holdings 1,846 SF $16.25/SF + electric
Piosa, Hixson, Giordano & Reilly 3,180 SF $16.66/SF + electric
Rosenbluth Travel; (expansion) 3,743 SF $16.50/SF + electric
================================================================================
On the opposing page is a presentation of recent rental rates on mid-rise
office space in the market area of the subject property. As can be seen
from this summary, rental rates on space comparable to the subject range
from $10.50 per square foot on a net basis up to $15.50 per square foot on
a gross basis plus electricity.
Comparable Lease #1 is space within a mid-rise, Class A building in the
Bethlehem Business Park. This facility is slightly inferior locationally,
but is physically similar to the subject. Additionally, this lease is
structured on a gross basis plus electric. Overall, positive adjustment to
this lease rate is necessary. Comparable Lease #2 is a one story office
building in the Lehigh Valley Corporate Center. This facility is
locationally and physically very similar to the subject. Structured on a
net basis, this lease indicates a rental of $12.00 per square foot over
its five year term. When "grossed up", this rate is equivalent to $16.50
per square foot plus electric. A negative adjustment to this transaction
to account for its superior physical condition is warranted. Comparable
Leases #3 and #4 both involve recent leases in Bethlehem Office Commons.
Physically similar to the subject, the location of this property is
considered slightly inferior to the subject. Additionally, this lease is
structured on a net basis with the lessee responsible for all operating
expenses including electricity. Overall, positive adjustment is made to
this lease.
In addition to analyzing actual lease transactions inside and outside the
property, leasing brokers were interviewed in an effort to ascertain
competitive packages available in the marketplace today. Most brokers
interviewed were of the opinion that free rent was no longer being given
in the local marketplace. Tenant workletters, however, are a standard and
felt to range from $10.00 to $20.00 per square foot depending on the size
of the tenant, the quality of the building, and the duration of the lease.
After considering the most recent leasing achieved at the subject property
in conjunction with the rents now being paid for comparable space and
services in the competitive open market, it is our conclusion that the
current average economic rent for it is $16.00 per square foot plus
electricity. This rent would be adjusted annually by 50 percent of the
increase in the Consumer Price Index over an average five year term.
Additionally, the tenants would also be responsible for increases in
operating expenses over those incurred during the first year of occupancy.
================================================================================
-48-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
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<PAGE>
Historical Operating Statements
7535 Windsor Drive
<TABLE>
<CAPTION>
Building NRA 135,219 SF
1994 Actual 1995 Actual 1996 Actual BAP Budget 1997
----------- ----------- ----------- ----------------
Item Amount Per SF Amount Per SF Amount Per SF Amount Per SF
==========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues:
Base Rents $ 1,428,908 $ 10.57 $ 1,520,054 $ 11.24 $ 1,597,475 $ 11.81 $ 1,632,333 $ 12.07
Rents from Affiliates 10,558 0.08 9,317 0.07 38,167 0.28 -- --
Operating Escalation 37,897 0.28 15,546 0.11 (19,336) (0.14) 4,080 0.03
Hotel Operations -- --
Marina Rentals -- --
Other 6,362 0.05 1,114 0.01 1,443 0.01 2,020 0.01
-------------------------------------------------------------------------------------------
Total operating revenues $ 1,483,725 $ 10.97 $ 1,546,031 $ 11.43 $ 1,617,749 $ 11.96 $ 1,638,433 $ 12.12
-------------------------------------------------------------------------------------------
Operating expenses:
Administrative and general:
Management fees $ 51,739 $ 0.38 $ 54,104 $ 0.40 $ 56,602 $ 0.42 $ 62,988 $ 0.47
Salaries 83,249 0.62 62,431 0.46 75,176 0.56 73,938 0.55
Other administrative 48,021 0.36 39,432 0.29 38,903 0.29 29,076 0.22
Bad debts 496 0.00 (34) (0.00) (37) (0.00) -- --
Professional services 914 0.01 3,414 0.03 4,269 0.03 5,060 0.04
Utilities 78,142 0.58 60,733 0.45 67,563 0.50 67,734 0.50
Maintenace labor 22,172 0.16 29,797 0.22 29,183 0.22 29,228 0.22
Outside contracts 74,241 0.55 69,506 0.51 72,069 0.53 57,735 0.43
Cleaning 38,230 0.28 44,000 0.33 41,345 0.31 55,840 0.41
Maintenance materials 10,007 0.07 15,246 0.11 17,922 0.13 40,177 0.30
Real estate and other taxes 130,105 0.96 120,746 0.89 123,377 0.91 124,314 0.92
Advertising 15,595 0.12 16,605 0.12 9,521 0.07 28,608 0.21
Lease expense, land -- -- -- -- -- -- 14,139 0.10
Other 2,938 0.02 2,152 0.02 1,957 0.01 -- --
-------------------------------------------------------------------------------------------
Total operating expenses $ 555,849 $ 4.11 $ 518,132 $ 3.83 $ 537,850 $ 3.98 $ 588,837 $ 4.35
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
NET OPERATING INCOME $ 927,876 $ 6.86 $ 1,027,899 $ 7.60 $ 1,079,899 $ 7.99 $ 1,049,596 $ 7.76
===========================================================================================
</TABLE>
<PAGE>
Income Capitalization Approach
================================================================================
Market rent is forecasted to increase by 3.5 percent throughout the
holding period. This forecast of income growth rates reflects typical
investor expectations as noted in the Cushman & Wakefield Investor Survey
which is among the Addenda to this report. More importantly, we are of the
opinion that these growth rates reflect the current supply/demand
relationship of space in the local market which, all other factors being
equal, will move toward equilibrium over time.
Expense Reimbursements - Consistent with market leasing practice for this
type of real estate, the tenants in a property like the subject are
responsible for a proportionate share of certain expenses incurred
annually in the operation and ownership of the investment above an
established base amount. These expenses include real estate taxes,
insurance premiums, utilities, maintenance, administration, cleaning,
management fees, contract fees, and miscellaneous fees incurred. Future
leases in the subject property are projected to be structured in a similar
fashion.
Allowance for Vacancy and Credit Loss - A deduction must be made from the
total gross revenues due an investor in the subject property to account
for the possibility of vacancy and/or non-collection of rent. We have,
therefore, deducted 3 percent from gross revenues as a global allowance
for the non-payment of rent or expenses by a lessee. This rate has
considered the creditworthiness of the tenant roster and long-term market
conditions.
Additionally, our analysis over time has incorporated a lag vacancy
allowance which provides for "down time" between the expiration of an
existing lease and the commencement of a new lease. Upon the expiration of
a lease, it is our best estimate that there is a 65 percent probability
that the tenant will renew and a 35 percent probability that the tenant
will vacate. At renewal, no down time is recognized; should this tenant
vacate, then it is our expectation that an average down time of
approximately six months time would be reasonable to re-lease the space.
Therefore, the weighted average lag vacancy utilized between lease
expirations in this report is two months.
================================================================================
Lag Vacancy Allowance
================================================================================
Event Probability X Down Time = Weighted Time
================================================================================
Rollover 65% X -0- = -0-
Turnover 35% X 6 months = 2 months
- --------------------------------------------------------------------------------
Total 100% Average Weighted Time = 2 months
================================================================================
Based on the subject's weighted average downtime between leases, the
overall average occupancy rate of the subject property over the ten year
holding period is 97.1 percent. Including our overall vacancy/global
credit loss allowance estimated at 3.0 percent, the implied overall
occupancy rate of the subject property over the ten year holding period is
95.6 percent.
Operating Expenses - We were provided with historic operating expense data
for the subject property. We have also been provided with current
ownership's operating pro forma. On the opposing page is a presentation of
these data sets.
================================================================================
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
================================================================================
Income Capitalization Approach
As can be seen, historic operating expenses at the subject property from
1994 through 1996 ranged from $3.83 to $4.11 per square foot. Current
ownership budgets operating expenses at $4.35 per square foot for 1997. In
the initial year of the investment holding period, we project operating
expenses to be $4.75 per square foot at the subject property based upon
the following:
Real Estate Taxes - This item is sensitive to a specific local
jurisdiction so that a direct comparison with those expense data
available from the market is not possible. However, in the Real
Estate Tax and Assessments section of this report, we document the
level of assessment on the subject building. In the initial year of
the investment, the cost of real estate taxes associated with 7535
Windsor Drive was projected to be $72,317.
Insurance - The history of the subject and the data available from
our files indicate an extremely tight range for this expense item on
a square foot basis. Therefore, we have stabilized the insurance
expense at $20,378 or $0.16 per square foot for this analysis.
Repairs & Maintenance - This expense category includes the annual
cost to maintain the facility with supplies and labor. Historically,
these costs have ranged from $0.33 to 0.35 per square foot, but are
expected to increase dramatically in the coming year as many of
these tasks had been handled as a part of exterior capital
improvements made over the past several years. In the initial year
of investment, repairs and maintenance expense is projected at $0.56
per square foot, which is more indicative of a stabilized level for
this item.
Common Area Utilities - This expense category typically includes
energy to operate the facility plus water and sewer charges.
Historically, utilities expense has ranged from $0.45 to $0.58 per
square foot. The owner's 1997 projection for the utilities expense
is $.50 per square foot. In the initial year of the investment, a
utilities expense was projected to be $.56 per square foot.
Cleaning - This expense category typically includes the cost for
daily janitorial services including supplies. The cost of this item
is historically low as the building's largest tenant, Air Products
and Chemicals, cleans their space. This is reflected in our initial
year projection, which is equivalent to $.46 per square foot of
rentable area. This is projected to change upon expiration of the
aforementioned lease to a more market oriented level based upon a
current cost of $.75 per square foot of rentable area.
Outside Contracts - At properties like the subject, it is necessary
to engage outside contractors for services that include landscaping,
snow removal and trash removal. According to ownership, costs
associated with outside contracts has historically ranged from $0.51
to $0.55 per square foot of building area. In addition, ownership
has budgeted $0.43 for 1997. In the initial year of the investment,
we have projected outside contracts to be $0.45 per square foot.
================================================================================
-50-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Management and Administrative - The fee for providing professional
management services includes collections, supervision and the
preparation of all budgets. According to the historical operating
expenses, the cost for professional management has ranged from $0.38
to $0.47 per square foot of rentable building area. As a "stand
alone" property in the initial fiscal year, this amount is
forecasted to be $.50 per square foot of building area respectively.
Additionally, ownership in course of operations, will incur
administrative cost such as salaries, legal and auditing fees etc.
As a result we have projected in addition to a management burden,
$0.77 per square foot in the initial year of the investment for
general administrative costs. Although appearing high, we are
informed that this is closer to the level expected to be incurred in
the coming year.
Other - Invariably, miscellaneous expenses occur in the operation of
a property such as the subject. These include advertising and
promotional expenses, space planning, brochures, and a contingency
for the unknown. The data available from the market indicate
allowances for miscellaneous expenses ranging from $0.04 to $0.15
per square foot of rentable area. For this analysis, miscellaneous
operating expenses are conservatively stabilized at $0.25 per
rentable square foot of building area.
Operating expenses are forecasted to increase at an average annual rate of
3.5 percent over the investment holding period. The forecast of projected
growth rates in all categories of expense reflect typical investor
expectations as noted in the Cushman & Wakefield Investor Survey, which
has been placed among the Addenda to this report. Except where noted, our
projected growth rates for the various types of expense categories
generally do not attempt to reflect growth rates for any individual year,
but rather the long term trend over the period of analysis.
Other Non-Operating Expenses - Other, non-operating expenses of the
subject property are projected in this analysis from prevailing commission
schedules, construction costs, and accepted practices. We have analyzed
each item of capital expenditure in an attempt to project what the typical
investor in a property like the subject would consider reasonable, based
upon informed opinion and experience. The following is a discussion of the
other, non-operating expenses incorporated into this analysis of the
subject property.
Tenant Alterations - Upon the expiration of a lease, it is our best
estimate that there is a 65 percent probability of the existing
tenant renewing their lease and a 35 percent probability that the
existing tenant will vacate. The current cost to alter and
re-decorate office space for a rollover tenant is estimated to be
$7.00 per square foot while that to prepare space for a new turnover
tenant is estimated to be $12.00 per square foot. On average, then,
the weighted cost of tenant alterations is projected to be $1 1. 1 0
per square foot in the initial year of the investment holding
period. The following is a presentation of these computations.
================================================================================
-51-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
================================================================================
Tenant Improvements Costs
================================================================================
Event Probability X Unit Cost = Weighted Cost
================================================================================
Rollover 65% X $ 7.00/SF = $4.55/SF
Turnover 35% X $12.00/SF = $4.20/SF
- --------------------------------------------------------------------------------
Total 100% Average Weighted Time = $8.75/SF
================================================================================
Leasing Commissions In estimating the appropriate stabilized leasing
expense for the subject property, the same rollover/turnover
probabilities as described above are utilized. The standard leasing
commission for new tenants is 6 percent of the first year's rent, 5
percent of the second, 4 percent of the third and 3 percent of each
succeeding year's contract rent, payable at lease commencement.
Based upon an average five year lease term, leasing commissions are
equal to 4.2 percent of total base rental income. The following is a
summary of these computations.
================================================================================
Effective Leasing Commissions
Average Five Year Lease Term
Turnover Tenant
================================================================================
Lease Year % X Commission = Weighted Rate
================================================================================
1 20% X 6% = 1.20%
2 20% X 5% = 1.00%
3 20% X 4% = .80%
4 20% X 3% = .60%
5 20% X 3% = .60%
- --------------------------------------------------------------------------------
Total 100% Effective Commission Rate = 4.20%
================================================================================
For a tenant who elects to renew a lease, half of a commission is
payable. On a weighted average basis, then, leasing commissions are
equal to 2.84 percent of total effective base rental income over the
term. The following is a presentation of these computations.
================================================================================
Leasing Commission Expense
================================================================================
Event Probability X Commission = Weighted Rate
================================================================================
Rollover 65% X 2.1% = 1.37%
Turnover 35% X 4.2% = 1.47%
- --------------------------------------------------------------------------------
Total 100% Average Weighted Time = 2.84%
================================================================================
Reserves - It is customary and prudent to set aside an amount
annually for the replacement of short lived capital items such as
roofs, parking lots, or mechanical equipment. In this analysis, we
have projected an allowance for reserves of $0.10 per square foot of
rentable building area which is typical in the local market place
for a property like the subject. Reserves for replacements are
therefore stabilized at $12,922.
Other non-operating expenses are also forecasted to increase at an average
annual rate of 3.5 percent over the investment holding period. This too is
consistent with the Cushman & Wakefield Investor Survey. Again, our
projected growth rates for the various types of expense categories
generally do not attempt to reflect growth rates for any individual year,
but rather the long term trend over the period of analysis.
================================================================================
-52-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Terminal Capitalization Rate - The residual cash flows annually generated
by the subject property comprise only the first part of the return which
an investor will receive. The second component of this investment return
is the pre-tax cash proceeds from the resale of the property at the end of
a projected investment holding period. A terminal capitalization rate was
used to estimate the market value of the property at the end of the
assumed investment holding period. We estimated an appropriate terminal
rate based on indicated rates in today's market. A premium was added to
today's rate to allow for the risk of unforeseen events or trends which
might affect our estimate of net operating income during the holding
period.
================================================================================
Summary of Capitalization Rates
================================================================================
Sale # Location Capitalization Rate
================================================================================
1 Lehigh Valley Office Commons 10.60%
Hanover Twp.
Northampton Co., PA
================================================================================
2 Newpointe 9.48%
Hanover Twp.
Northampton Co., PA
================================================================================
3 Westfield Corporate Center 11.00%
South Whitehall Twp.
Lehigh Co., PA
================================================================================
4 Lehigh Valley Executive Campus 9.37%
Hanover Twp.
Lehigh Co., PA
================================================================================
Terminal Capitalization Rate Selected 11.00%
================================================================================
Investors typically add 50 to 100 basis points to the "going-in" rate to
arrive at a terminal capitalization rate, according to Cushman &
Wakefield's periodic investor surveys. Our survey indicates that terminal
capitalization rates have ranged from 8.0 to 11.0 percent. Based on our
most recent experience, we have found little variance between going in and
terminal rates. For this analysis, it is our projection that the subject
property would most likely be sold at the end of the 11th year of the
holding period for an amount equal to what would be the next year's net
operating income capitalized at an overall rate of 11.0 percent. The
holding period is extended by one year to allow the property to
restabilize from a major lease turnover and provide for an optimal sale.
The 12th year's computed net operating income is employed at this point
as it would be the first received by a new purchaser of the subject
property. It is projected, then, that a current investor would dispose of
the subject property at the end of the projected holding period for an
amount equal to $17,226,000 or $133.30 per square foot of building area.
================================================================================
-53-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Transaction Costs - From the projected $17,226,000 reversion to an
investor in the subject property, we have deducted a total of $516,000 to
account for the various transaction costs associated with the sale of an
asset of this type. These costs consist of 3 percent of the total
disposition price of the subject property as an allowance for transfer
taxes, professional fees, and other miscellaneous expenses that the seller
pays at final closing. Deducting these transaction costs from the computed
reversion renders pre-tax net proceeds of sale equal to $16,710,000 to be
received by an investor in the subject property at the end of the holding
period.
Discount Rate - In our valuation, we endeavored to reflect the most likely
actions of typical buyers and sellers in this market. We forecasted cash
flows and discounted them and the future property value at reversion to a
present value at various rates of return (yield rates) currently required
by investors for similar quality real property. The yield rate (internal
rate of return or IRR) is the single rate that discounts all future
benefits (cash flow and reversion) to an estimate of net present value.
Cushman & Wakefield Valuation Advisory Services periodically surveys
national real estate investors to determine their investment objectives.
Following is a brief review of internal rates of return, overall rates,
and income and expense growth rates considered acceptable by respondents.
The entire survey is included among the Addenda to this report.
================================================================================
AUTUMN 1996 INVESTOR SURVEY
FOR SUBURBAN OFFICE BUILDINGS
================================================================================
GOING-IN TERMINAL IRR
- --------------------------------------------------------------------------------
Low High Low High Low High
================================================================================
Mean 8.80% 9.50% 9.30% 9.90% 11.2% 11.6%
- --------------------------------------------------------------------------------
Range 8.00% 11.0% 8.00% 11.0% 10.0% 13.0%
================================================================================
The wide range of investment parameters indicates that property risk and
yield are assessed to a particular investment property based on a variety
of variables. Risk is the primary determinant, and the risk variables
include whether current contract rents are significantly above or below
current market rents; the amount and timing of tenant roll-overs; the risk
to lease-up the property and the strength of the market during the
lease-up period; the durability of the cash flow, and its ability to
increase with inflation along with the creditworthiness of the existing
tenancy. Risk is also dependent on investor demand for the property type;
the diversification of the metropolitan area; the property's location
within the local market; the supply and demand for the property type
within the market; and the effective age of the property.
================================================================================
-54-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
The internal rate of return and terminal capitalization rate selected for
this analysis were strongly influenced by our recent Investor Survey. We
realize that this type of survey reflects target rather than transactional
rates. Transactional rates are usually difficult to obtain in the
verification process and are actually only target rates of the buyer at
the time of sale. The property's performance will ultimately determine the
actual yield and capitalization rate at the time of sale after a specific
holding period. We have found that, in improving markets or with above
average properties, demand will be high and transactional rates may be
lower than target rates that are quoted in surveys. We have tried to
recognize this factor in our choice of these two rates for our cash flow
model.
Considering the locational attributes, physical traits and economic
characteristics of the subject property, we believe a discount rate
ranging from 11.0 percent to 12.0 percent would be appropriate for the
subject property in light of the investment criteria presented here. Thus,
we have discounted the projected future pre-tax cash flows to be received
by an investor in the subject property to a present value so as to yield
11.0 percent to 12.0 percent on capital at 25 basis point intervals over
the holding period. This discounting process is summarized as follows:
================================================================================
Investment Summary
================================================================================
Discount Rate Present Worth Unit Rate Overall Rate
================================================================================
11.00% $11,903,000 $92.11/SF 10.15%
11.25% $11,700,000 $90.54/SF 10.33%
11.50% $11,501,000 $89.00/SF 10.50%
11.75% $11,307,000 $87.50/SF 10.68%
12.00% $11,118,000 $86.04/SF 10.87%
================================================================================
Through such a sensitivity analysis, it can be seen that the present value
of the subject property varies from approximately $11,118,000 to
$11,903,000. Considering the quality of the tenant roster in place at the
subject, we believe a discount rate which falls toward the mid-point of
the range now required in the marketplace to be appropriate in this case.
Using an 11.50 percent internal rate of return, our discounted cash flow
model computes to a present worth of $11,501,000 which we round to
$11,500,000 as an indication of market value for 7535 Windsor Drive via
the Income Capitalization Approach.
This indication of value produces an implied "going-in" overall
capitalization rate of 10.50 percent based upon the initial years net
operating income of $1,208,123. Additionally, based upon a market value of
$11,500,000 and a projected future gross reversionary value of
approximately $17,226,000, a compound annual rate of appreciation of 3.74
percent is computed. Finally, with regard to the composition of the
internal rate of return employed here, approximately 61 percent of the
expected yield is from cash flows while the balance is attributable to
property reversion. These percentages fall within the generally accepted
relevant range of most current real estate investors.
================================================================================
-55-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
<TABLE>
<CAPTION>
20004 - 7450 TILGHMAN STREET #2
ANNUAL CASH FLOW REPORT
BEGINNING 7/1/97 FOR 14 YEARS
FY1998 FY1999 FY2000 FY2OO1 FY2002 FY2003 FY2004 FY2005 FY2006
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME
MINIMUM RENT:
GROSS RENTS 559,688 846,598 1,060,004 1,078,555 1,097,428 1,122,912 1,217,456 1,255,320 1,277,288
LESS LAG VACANCY 0 0 0 0 0 (51,218) (155,448) 0 0
------- ------- --------- --------- --------- --------- --------- --------- ---------
TOTAL MINIMUM RENT 559,688 846,598 1,060,004 1,078,555 1,097,428 1,071,694 1,062,008 1,255,320 1,277,288
RECOVERIES:
OPERATING EXPENSES 104,244 254,875 323,388 334,708 346,424 343,351 324,976 384,084 397,528
------- ------- --------- --------- --------- --------- --------- --------- ---------
TOTAL RECOVERIES 104,244 254,875 323,388 334,708 346,424 343,351 324,976 384,084 397,528
------- ------- --------- --------- --------- --------- --------- --------- ---------
GROSS RENTAL
INCOME 663,932 1,101,473 1,383,392 1,413,263 1,443,852 1,415,045 1,386,984 1,639,404 1,674,816
CREDIT LOSS (19,918) (33,044) (41,502) (42,398) (43,316) (42,451) (41,609) (49,182) (50,244)
------- ------- --------- --------- --------- --------- --------- --------- ---------
TOTAL INCOME 644,014 1,068,429 1,341,890 1,370,865 1,400,536 1,372,594 1,345,375 1,590,222 1,624,572
EXPENSES
COMMON UTILITIES 12,500 25,438 26,328 27,249 28,203 29,190 30,212 31,269 32,364
INSURANCE 7,752 15,263 15,797 16,350 16,922 17,514 18,127 18,762 19,418
MANAGEMENT FEE 50,875 52,656 54,499 56,406 58,380 60,424 62,538 64,727 66,993
REAL ESTATE TAXES 113,679 117,658 121,776 126,038 130,449 135,015 139,741 144,632 149,694
CLEANING 14,555 54,726 81,748 84,609 87,570 84,873 86,057 95,103 100,489
MAINTENANCE 2,035 2,106 2,180 2,256 2,335 2,417 2,502 2,589 2,680
OUTSIDE CONTRACTS 0 0 0 0 0 0 0 0 0
ADMINISTRATIVE 12,938 20,350 21,062 21,799 22,562 23,352 24,169 25,015 25,891
OTHER 5,000 5,088 5,266 5,450 5,641 5,838 6,042 6,254 6,473
------- ------- --------- --------- --------- --------- --------- --------- ---------
TOTAL EXPENSES 219,334 293,285 328,656 340,157 352,062 358,623 369,388 388,351 404,002
------- ------- --------- --------- --------- --------- --------- --------- ---------
NET OPERATING
INCOME 424,680 775,144 1,013,234 1,030,708 1,048,474 1,013,971 975,987 1,201,871 1,220,570
ALTERATIONS 321,368 975,351 0 0 0 278,311 844,674 0 0
COMMISSIONS 66,992 203,320 0 0 0 39,782 120,739 0 0
RESERVES 10,000 10,350 10,712 11,087 11,475 11,877 12,293 12,723 13,168
------- ------- --------- --------- --------- --------- --------- --------- ---------
CASH FLOW 26,320 (413,877) 1,002,522 1,019,621 1,036,999 684,001 (1,719) 1,189,148 1,207,402
<CAPTION>
FY2007 FY2008 FY2009 FY2010 FY2011
INCOME
<S> <C> <C> <C> <C> <C>
MINIMUM RENT:
GROSS RENTS 1,299,641 1,324,870 1,433,808 1,499,490 1,525,730
LESS LAG VACANCY 0 (30,416) (216,107) 0 0
--------- --------- --------- --------- ---------
TOTAL MINIMUM RENT 1,299,641 1,294,454 1,217,701 1,499,490 1,525,730
RECOVERIES:
OPERATING EXPENSES 411,440 416,816 376,628 456,172 472,140
--------- --------- --------- --------- ---------
TOTAL RECOVERIES 411,440 416,816 376,628 456,172 472,140
--------- --------- --------- --------- ---------
GROSS RENTAL
INCOME 1,711,081 1,711,270 1,594,329 1,955,662 1,997,870
CREDIT LOSS (51,332) (51,338) (47,830) (58,670) (59,936)
--------- --------- --------- --------- ---------
TOTAL INCOME 1,659,749 1,659,932 1,546,499 1,896,992 1,937,934
EXPENSES
COMMON UTILITIES 33,496 34,669 35,882 37,138 38,438
INSURANCE 20,098 20,801 21,529 22,283 23,063
MANAGEMENT FEE 69,337 71,764 74,276 76,876 79,566
REAL ESTATE TAXES 154,933 160,356 165,968 171,777 177,789
CLEANING 104,006 101,943 102,169 111,772 119,349
MAINTENANCE 2,773 2,871 2,971 3,075 3,183
OUTSIDE CONTRACTS 0 0 0 0 0
ADMINISTRATIVE 26,797 27,735 28,706 29,710 30,750
OTHER 6,699 6,934 7,176 7,428 7,688
--------- --------- --------- --------- ---------
TOTAL EXPENSES 418,139 427,073 438,677 460,059 479,826
--------- --------- --------- --------- ---------
NET OPERATING
INCOME 1,241,610 1,232,859 1,107,822 1,436,933 1,458,108
ALTERATIONS 0 0 1,345,322 0 0
COMMISSIONS 0 0 192,304 0 0
RESERVES 13,629 14,106 14,600 15,111 15,640
--------- --------- --------- --------- ---------
CASH FLOW 1,227,981 1,218,753 (444,404) 1,421,822 1,442,468
</TABLE>
<PAGE>
Income Capitalization Approach
================================================================================
7450 Tilghman Street
This property is a 100,000 square foot, single story, single tenant, Class
A office building which is now 100 percent occupied by 1 tenant. On the
opposing page is a presentation of the cash flows which an informed investor
could reasonably expect 7450 Tilghman Street to generate over a thirteen year
time horizon. The holding period is extended due to the potential for having to
release this building on a multi-tenanted basis should the current tenant leave
at year end. These cash flows are based upon the following analysis:
Base Rental Income - The existing lease contract at the subject property
provides for the current tenant, Prudential to pay a net rent equivalent
to $9.90 per square foot through year-end 1997. At that time, this lease
expires. Additionally, Prudential will not require this space as it no
longer has the AARP contract which was serviced here. Therefore, a
potential investor in the subject property would anticipate the necessity
of releasing the subject on a multi-tenanted basis.
The rental data previously analyzed for 7535 Windsor Drive are applicable
to this property as well. As noted, rental rates on space comparable to
the subject range from $10.50 per square foot on a net basis up to $15.50
per square foot on a gross basis plus electricity. After analyzing the
rents now being paid for comparable space and services in the competitive
open market, it is our conclusion that the current average economic rent
for it is $10.00 per square foot on a net basis. Economic rent is
forecasted to increase by 3.5 percent throughout the projection period.
Absorption
At present, the subject is leased as described through December, 1997. In
our analysis, we have projected that the vacated building will be absorbed over
the next 12 months subsequent to this expiration. The following chart is a
presentation of the absorption schedule which we have incorporated in our
analysis. We believe this schedule reflects the thinking of a knowledgeable and
realistic investor in the current environment and is consistent with the level
of activity experienced at the subject property over the recent past.
================================================================================
7450 Tilghman Street
Projected Absorption Schedule
================================================================================
Leased Rental Annual
Tenant Area Date Term Rate Increase Expenses
================================================================================
Spec. 1 25,000 SF 4/98 5 yrs. $10.35 50% CPI Net
Spec. 2 25,000 SF 7/98 5 yrs. $10.35 50% CPI Net
Spec. 3 25,000 SF 10/98 5 yrs. $10.71 50% CP1 Net
Spec. 4 25,000 SF 1/99 5 yrs. $10.71 50% CPI Net
================================================================================
Expense Reimbursements - The tenants in a property like the subject are
responsible for a pro rata share of certain expenses incurred annually in
the operation and ownership of the investment above an established base
amount. These expenses include real estate taxes, insurance premiums,
utilities, maintenance, administration, cleaning, management fees,
contract fees, and miscellaneous fees incurred. Future leases in the
subject property are projected to be structured in a similar fashion.
================================================================================
-56-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Historical Operating Statements
7450 Tilghman Street
<TABLE>
<CAPTION>
Building NRA 100,000 SF
1994 Actual 1995 Actual 1996 Actual BAP Budget 1997
----------- ----------- ----------- ----------------
Item Amount Per SF Amount Per SF Amount Per SF Amount Per SF
==========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues:
Base Rents $ 990,000 $ 9.90 $ 990,000 $ 9.90 $ 990,000 $ 9.90 $ 990,000 $ 9.90
Rents from Affiliates 683 0.01 559 0.01 -- -- -- --
Operating Escalation -- -- -- -- -- -- -- --
Hotel Operations -- -- -- -- -- -- -- --
Marina Rentals -- -- -- -- -- -- -- --
Other 265 0.00 -- -- -- -- -- --
-----------------------------------------------------------------------------------------
Total operating revenues $ 990,948 $ 9.91 $ 990,559 $ 9.91 $ 990,000 $ 9.90 $ 990,000 $ 9.90
-----------------------------------------------------------------------------------------
Operating expenses:
Administrative and general:
Management fees $ 19,814 $ 0.20 $ 19,811 $ 0.20 $ 29,700 $ 0.30 $ 29,700 $ 0.30
Salaries 10,095 0.10 3,508 0.04 4,454 0.04 4,440 0.04
Other administrative 1,348 0.01 1,476 0.01 1,533 0.02 1,056 0.01
Bad debts -- -- -- --
Professional services 1,208 0.01 4,535 0.05 10,605 0.11 2,192 0.02
Utilities -- -- -- -- -- -- -- --
Maintenace labor -- -- -- -- -- -- -- --
Outside contracts (1,357) (0.01) 23 0.00 22,165 0.22 24 0.00
Cleaning 411 0.00 -- -- -- -- -- --
Maintenance materials 14,302 0.14 5 0.00 2,554 0.03 2,000 0.02
Real estate and other taxes -- -- -- -- 277 0.00 -- --
Advertising 3,745 0.04 3,022 0.03 2,385 0.02 19,752 0.20
Lease expense, land -- -- -- -- -- -- 848 0.01
Other 227 0.00 126 0.00 115 0.00 -- --
-----------------------------------------------------------------------------------------
Total operating expenses $ 49,793 $ 0.50 $ 32,506 $ 0.33 $ 73,788 $ 0.74 $ 60,012 $ 0.60
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
NET OPERATING INCOME $ 941,155 $ 9.41 $ 958,053 $ 9.58 $ 916,212 $ 9.16 $ 929,988 $ 9.30
=========================================================================================
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Income Capitalization Approach
================================================================================
Allowance for Vacancy and Credit Loss - We have deducted 3 percent from
gross revenues as a global allowance for the non-payment of rent or
expenses by a lessee. Additionally, our analysis over time has
incorporated a lag vacancy allowance which provides for "down time"
between the expiration of an existing lease and the commencement of a new
lease. The weighted average lag vacancy utilized between lease expirations
in this report is two months as previously described.
Operating Expenses - On the opposing page is a presentation of historic
operating expense data for the subject property and current ownership's
operating pro forma expense data. As can be seen, historic operating
expenses at the subject property have reflected the single tenancy at the
property as well as the tenant's direct payment of much of the operating
costs associated with its ownership. Ownership budgets operating expenses
at $.60 per square foot for 1997 assuming the presence of a single tenant
under a similar lease structure. Given our releasing assumption, we
project operating expenses, including taxes, to be $3.28 per square foot
at the subject property on a stabilized basis. Operating expenses are
forecasted to increase at an average annual rate of 3.5 percent over the
investment holding period.
Other Non-Operating Expenses - The initial cost to retrofit the building
for multi-tenanted occupancy is projected to be $20.00 per square foot.
As previously described herein, the weighted cost of tenant alterations is
projected to be $8.75 per square foot in the initial year of the
investment holding period. On a weighted average basis, leasing
commissions are equal to 2.84 percent of total effective base rental
income over the term as well. Reserves for replacements are stabilized at
$0.10 per square foot of rentable building area. Other non-operating
expenses are forecasted to increase at an average annual rate of 3.5
percent over the investment holding period.
Terminal Capitalization Rate - At the end of the assumed investment
holding period, it is our projection that the subject property would
most likely be sold at the end of the 13th year of the holding period for
an amount equal to what would be the next year's net operating income
capitalized at an overall rate of 11.0 percent. An 11.0 percent terminal
capitalization rate is utilized in this analysis as it reflects current
local market levels for an asset of this type plus a premium for the risk
of unforeseen events or trends over time. The 11th year's computed net
operating income is employed at this point as it would be the first
received by a new purchaser of the subject property. In this analysis,
then, a current investor would dispose of the subject property at the end
of the projected holding period for an amount equal to $13,255,000 or
$132.55 per square foot of building area.
Transaction Costs - From the projected $13,255,000 reversion to an
investor in the subject property, we have deducted a total of $530,000 to
account for the various transaction costs associated with the sale of an
asset of this type. These costs consist of 4 percent of the total
disposition price of the subject property as an allowance for transfer
taxes, professional fees, and other miscellaneous expenses that the seller
pays at final closing. Deducting these transaction costs from the computed
reversion renders pre-tax net proceeds of sale equal to $12,725,000 to be
received by an investor in the subject property at the end of the holding
period.
================================================================================
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CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
<TABLE>
<CAPTION>
20008 - 7055 AMBASSADOR ROAD
ANNUAL CASH FLOW REPORT
BEGINNING 7/1/97 FOR 13 YEARS
FY1998 FY1999 FY2000 FY2OO1 FY2002 FY2003 FY2004 FY2005 FY2006
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME
MINIMUM RENT:
GROSS RENTS 636,941 655,604 667,077 678,751 690,629 723,804 776,394 789,981 803,805
LESS LAG VACANCY (108,634) 0 0 0 0 (129,022) 0 0 0
------- ------- ------- ------- ------- ------- ------- ------- -------
TOTAL MINIMUM RENT 528,307 655,604 667,077 678,751 690,629 594,782 776,394 789,981 803,805
RECOVERIES:
OPERATING EXPENSES 116,073 143,892 148,208 152,655 157,234 134,560 166,810 171,814 176,968
------- ------- ------- ------- ------- ------- ------- ------- -------
TOTAL RECOVERIES 116,073 143,892 148,208 152,655 157,234 134,560 166,810 171,814 176,968
------- ------- ------- ------- ------- ------- ------- ------- -------
GROSS RENTAL
INCOME 644,380 799,496 815,285 831,406 847,863 729,342 943,204 961,795 980,773
CREDIT LOSS (19,331) (23,985) (24,459) (24,942) (25,436) (21,880) (28,296) (28,854) (29,423)
------- ------- ------- ------- ------- ------- ------- ------- -------
TOTAL INCOME 625,049 775,511 790,826 806,464 822,427 707,462 914,908 932,941 951,350
EXPENSES
INSURANCE 15,590 16,058 16,540 17,036 17,547 18,074 18,616 19,174 19,749
MANAGEMENT FEE 18,940 19,508 20,093 20,696 21,317 21,957 22,615 23,294 23,993
REAL ESTATE TAXES 66,194 68,180 70,225 72,332 74,502 76,737 79,039 81,411 83,853
MAINTENANCE 38,976 40,145 41,350 42,590 43,868 45,184 46,539 47,936 49,374
OTHER 4,677 4,817 4,962 5,111 5,264 5,422 5,585 5,752 5,925
------- ------- ------- ------- ------- ------- ------- ------- -------
TOTAL EXPENSES 144,377 148,708 153,170 157,765 162,498 167,374 172,394 177,567 182,894
------- ------- ------- ------- ------- ------- ------- ------- -------
NET OPERATING
INCOME 480,672 626,803 637,656 648,699 659,929 540,088 742,514 755,374 768,456
ALTERATIONS 54,997 0 0 0 0 63,757 0 0 0
COMMISSIONS 95,853 0 0 0 0 113,843 0 0 0
RESERVES 15,360 15,821 16,295 16,784 17,288 17,806 18,341 18,891 19,458
------- ------- ------- ------- ------- ------- ------- ------- -------
CASH FLOW 314,462 610,982 621,361 631,915 642,641 344,682 724,173 736,483 748,998
</TABLE>
FY2007 FY2008 FY2009 FY2010
INCOME
MINIMUM RENT:
GROSS RENTS 817,872 844,708 919,430 935,521
LESS LAG VACANCY 0 (153,235) 0 0
------- ------- ------- -------
TOTAL MINIMUM RENT 817,872 691,470 919,430 935,521
RECOVERIES:
OPERATING EXPENSES 182,278 155,992 193,378 199,180
------- ------- ------- -------
TOTAL RECOVERIES 182,278 155,992 193,378 199,180
------- ------- ------- -------
GROSS RENTAL
INCOME 1,000,150 847,462 1,112,808 1,134,701
CREDIT LOSS (30,004) (25,424) (33,384) (34,041)
------- ------- ------- -------
TOTAL INCOME 970,146 822,038 1,079,424 1,100,660
EXPENSES
INSURANCE 20,342 20,952 21,581 22,228
MANAGEMENT FEE 24,712 25,454 26,217 27,004
REAL ESTATE TAXES 86,368 88,960 91,628 94,377
MAINTENANCE 50,855 52,380 53,952 55,570
OTHER 6,103 6,286 6,474 6,668
------- ------- ------- -------
TOTAL EXPENSES 188,380 194,032 199,852 205,847
------- ------- ------- -------
NET OPERATING
INCOME 781,766 628,006 879,572 894,813
ALTERATIONS 0 0 73,911 0
COMMISSIONS 0 0 135,209 0
RESERVES 20,041 20,643 21,262 21,900
------- ------- ------- -------
CASH FLOW 761,725 607,363 649,190 872,913
<PAGE>
Income Capitalization Approach
================================================================================
Discount Rate - Considering the locational attributes, physical traits and
economic characteristics of the subject property, we believe a discount
rate ranging from 11.0 percent to 12.0 percent would be appropriate for
the subject property in light of the investment criteria previously
presented herein. Through such a sensitivity analysis, it can be seen that
the present value of the subject property varies from approximately
$6,726,000 to $7,341,000. This discounting process is summarized as
follows:
================================================================================
Investment Summary
================================================================================
Discount Rate Present Worth Unit Rate
================================================================================
11.00% $7,341,000 $73.41/SF
11.25% $7,181,000 $71.81/SF
11.50% $7,025,000 $70.25/SF
11.75% $6,873,000 $68.73/SF
12.00% $6,726,000 $67.26/SF
================================================================================
Mindful of the relatively short remaining term of the existing lease in
place at the subject, we believe a discount rate which falls toward the
upper end of the range now required in the marketplace to be appropriate
in this case. Using a 12 percent internal rate of return, our discounted
cash flow model computes to a present worth of $6,726,000 which we round
to $6,725,000 for an indication of market value for 7450 Tilghman Street
via the Income Capitalization Approach. No meaningful "going-in" overall
capitalization rate can be discerned.
Additionally, based upon a market value of $6,725,000 and a projected
future gross reversionary value of approximately $13,255,000, a compound
annual rate of appreciation of 5.36 percent is computed. Finally, with
regard to the composition of the internal rate of return employed here,
approximately 54 percent of the expected yield is from cash flows while
the balance is attributable to property reversion. These percentages fall
within the generally accepted relevant range of most current real estate
investors.
7055 Ambassador Drive
This property is a 153,600 square foot single story warehouse which is
occupied by a single tenant through year-end 1997 and will require releasing at
that time. On the opposing page is a presentation of the cash flows which an
informed investor could reasonably expect 7055 Ambassador Drive to generate over
a eleven year time horizon. These cash flows are based upon the following
analysis:
Base Rental Income - The base rental income which an asset such as the
subject property will generate for an investor reflects a review of the
existing rent roll in conjunction with the rent now being paid for
comparable space and services in the competitive open market. As
mentioned, the existing lease at the subject property will expire at
year-end 1997 and will require the owner to secure a tenant.
================================================================================
-58-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
On the opposing page is a presentation of recent rental rates on light
industrial warehouse space in the market area of the subject property. As
can be seen from this summary, rental rates on space comparable to the
subject range from $3.50 per square foot up to $4.66 per square foot on a
triple net basis.
Comparable Rental #1 represents a modern building within the Iron Run
Corporate Center. This space within a multi-tenanted facility contains
14,585 square feet with minimal office space. This comparable rental was
considered to be in a similar location; however physically, the comparable
was regarded as inferior. Although much smaller than the subject,
adjustment for this factor is more than offset by the subject's higher
ceilings, superior loading, and superior overall condition. As a result of
our comparison, only a slight negative adjustment was applied to this
comparable rental.
Comparable Rental #2 is also within the Iron Run Corporate Center. This is
a one year renewal of an existing tenancy within a multi-tenanted
building. Negative adjustment is considered to account for the motivation
of the tenant, which obtained a short term lease without having to incur
moving expenses. No adjustment is necessary for location. However, the
subject is more modern than the comparable and in superior overall
condition. As a result of our comparison, a negative adjustment was
applied to this comparable rental.
Comparable Rental #3 also represents a modern building within the Iron Run
Corporate Center A positive adjustment to this datum is necessary to
account for improving market conditions since the date of the lease. This
space is located within a modern facility considered comparable to the
subject in terms of age and size. It has less finished area, however. As a
result of our comparison, a positive adjustment was applied to this
comparable rental.
Comparable Rental #4 is a modern building a short distance to the south of
Iron Run Corporate Center. It is a portion of a larger facility which
provides modern, high bay warehouse space such as the subject. It is,
however, considered inferior with respect to construction quality. As a
result of our comparison, a nominal positive adjustment was considered
appropriate.
In addition to analyzing actual lease transactions outside the property,
leasing brokers were interviewed in an effort to ascertain competitive
packages available in the marketplace today. Most brokers interviewed were
of the opinion that free rent was no longer being given in the local
marketplace. Tenant improvements in industrial space in the local
marketplace are very limited and range from nothing up to $1.00 per square
foot depending on the size of the tenant and the duration of the lease.
After considering the rents now being paid for comparable space and
services in the competitive open market, it is our conclusion that the
current average economic rent for it is $4.10 per square foot on a triple
net basis. This rent would increase at 50 percent of the CPI over the
term, which is consistent with market practice. Additionally, the tenant
would also be entitled to improvements up to $.50 per square foot of
rentable building area.
================================================================================
-59-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Historical Operating Statements
7055 Ambassador Drive
<TABLE>
<CAPTION>
Building NRA 153,600 SF
1994 Actual 1995 Actual 1996 Actual BAP Budget 1997
----------- ----------- ----------- ----------------
Item Amount Per SF Amount Per SF Amount Per SF Amount Per SF
==========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues:
Base Rents $ 576,000 $ 3.75 $ 591,360 $ 3.85 $ 606,720 $ 3.95 $ 622,080 $ 4.05
Rents from Affiliates 932 0.01 932 0.01 -- --
Operating Escalation 6,480 0.04 17,741 0.12 133,862 0.87 130,284 0.85
Hotel Operations -- -- -- --
Marina Rentals -- -- -- --
Other 9 0.00 -- -- 124 0.00 174 0.00
------------------------------------------------------------------------------------------
Total operating revenues $ 583,421 $ 3.80 $ 610,033 $ 3.97 $ 740,706 $ 4.82 $ 752,538 $ 4.90
------------------------------------------------------------------------------------------
Operating expenses:
Administrative and general:
Management fees $ 9,360 $ 0.06 $ 17,741 $ 0.12 $ 18,202 $ 0.12 $ 18,660 $ 0.12
Salaries 1,766 0.01 6,572 0.04 7,422 0.05 7,392 0.05
Other administrative 4,197 0.03 (8,955) (0.06) 8,681 0.06 7,848 0.05
Bad debts 157 0.00 2,859 0.02 -- -- -- --
Professional services 20 0.00 521 0.00 2,778 0.02 812 0.01
Utilities 245 0.00 (1,177) (0.01) 851 0.01 980 0.01
Maintenace labor (40) (0.00) -- -- (17) (0.00) 677 0.00
Outside contracts 585 0.00 260 0.00 31,942 0.21 25,812 0.17
Cleaning -- --
Maintenance materials 1,741 0.01 5,976 0.04 4,611 0.03 3,708 0.02
Real estate and other taxes -- -- -- -- 43,946 0.29 64,716 0.42
Advertising 566 0.00 1,340 0.01 1,160 0.01 2,055 0.01
Lease expense, land -- -- -- -- -- -- 1,413 0.01
Other 174 0.00 201 0.00 191 0.00 -- --
------------------------------------------------------------------------------------------
Total operating expenses $ 18,771 $ 0.12 $ 25,338 $ 0.16 $ 119,668 $ 0.78 $ 134,073 $ 0.87
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
NET OPERATING INCOME $ 564,650 $ 3.68 $ 584,695 $ 3.81 $ 621,038 $ 4.04 $ 618,465 $ 4.03
==========================================================================================
==========================================================================================================================
</TABLE>
<PAGE>
Income Capitalization Approach
================================================================================
Market rent is forecasted to increase at an average annual rate of 3.5
percent throughout the holding period. This forecast of income growth
rates reflects typical investor expectations as noted in the Cushman &
Wakefield Investor Survey which is among the Addenda to this report.
Absorption - At year-end, the existing lease over the subject expires. The
potential for renewal by the existing tenant does exist. however. Given
this, we have applied a renewal probability of 35 percent, consistent with
our assumptions in this regard described previously.
Expense Reimbursements - Consistent with market leasing practice for this
type of real estate, the tenant in a property like the subject is
responsible for certain expenses incurred annually in the operation and
ownership of the investment. These expenses include real estate taxes,
insurance premiums, and common area maintenance. Future leases in the
subject property are projected to be structured in a similar fashion.
Allowance for Vacancy and Credit Loss - We have deducted 3 percent from
gross revenues as a global allowance for the non-payment of rent or
expenses by a lessee. Additionally, our analysis over time has
incorporated a lag vacancy allowance which provides for "down time"
between the expiration of an existing lease and the commencement of a new
lease. The weighted average lag vacancy utilized between lease expirations
in this report is two months as previously described.
Operating Expenses - We were provided with historic operating expense data
for the subject property. We have also been provided with current
ownership's operating pro forma. On the opposing page is a presentation of
the historical operating expenses for the subject building. The following
is a brief summary of the projected expenses for the subject property.
Real Estate Taxes - In the Real Estate Tax and Assessments section
of this report, we document the level of assessment for each of the
subject buildings that make up the subject property. In the initial
year of investment, (FY 1997), the real estate tax expense for 7055
Ambassador Drive is estimated to be $66,194 or $0.43.
Insurance - Based upon historical experience, the cost for hazard
and liability insurance ranged from $.03 to $.05 per square foot. In
this analysis, we have stabilized insurance expense at $15,590 in
the first year of the investment or $0.10 per square foot for this
analysis.
Common Area Charges - This expense category includes all common
building and yard maintenance such as lawn service and trash
collection that the landlord contracts and the tenant reimburses.
Due to the age and condition of the building in the initial year of
investment, (FY 1997), the common area charges expense is estimated
at $0.25 per square foot of gross building area.
================================================================================
-60-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
Management - The fee for providing professional management services
includes collections, supervision and the preparation of all
budgets. According to the historical operating expenses, the cost
for professional management has ranged from $0.06 to $0.12 per
square foot of rentable building area. It must be noted that the
this building was managed as part of a portfolio and ownership was
able to capitalize on economies of scale. As a "stand alone"
property in the initial fiscal year, this amount is forecasted to be
$.12 per square foot of building area.
Miscellaneous - Invariably, miscellaneous expenses occur in the
operation of a property such as the subject. These include
advertising and promotional expenses, professional fees, brochures,
and a contingency for the unknown. The data available from the
market indicate allowances for miscellaneous expenses ranging from
$0.01 to $0.08 per square foot of rentable area. For this analysis,
miscellaneous operating expenses are stabilized at $0.03 per
rentable square foot of building area.
Operating expenses are forecasted to increase at an average annual rate of
3.5 percent over the investment holding period. The forecast of projected
growth rates in all categories of expense reflect typical investor
expectations as noted in the Cushman & Wakefield Investor Survey, which
has been placed among the Addenda to this report. Except where noted, our
projected growth rates for the various types of expense categories
generally do not attempt to reflect growth rates for any individual year,
but rather the long term trend over the period of analysis.
Other Non-Operating Expenses - Other, non-operating expenses of the
subject property are projected in this analysis from prevailing commission
schedules, construction costs, and accepted practices. We have analyzed
each item of capital expenditure in an attempt to project what the typical
investor in a property like the subject would consider reasonable, based
upon informed opinion and experience. The following is a discussion of the
other, non-operating expenses incorporated into this analysis of the
subject property.
Tenant Alterations - Upon the expiration of a lease, it is our best
estimate that there is a 65 percent probability of the existing
tenant renewing their lease and a 35 percent probability that the
existing tenant will vacate. The current cost associated with tenant
improvements at tenant rollover is estimated to be $0.25 per square
foot while that to prepare space for a new turnover tenant is
estimated to be $0.50 per square foot. On average, then, the
weighted cost of tenant alterations is projected to be $0.34 per
square foot in the initial year of the investment holding period.
Leasing Commissions - On a weighted average basis, leasing
commissions are equal to 2.84 percent of total effective base rental
income over the term as well. This calculation was exhibited
previously.
================================================================================
-61-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Reserves - It is customary and prudent to set aside an amount
annually for the replacement of short lived capital items such as
roofs, parking lots, or mechanical equipment. In this analysis, we
have projected an allowance for reserves of $0.10 per square foot
of rentable building area which is typical in the local market place
for a property like the subject. Reserves for replacements are
therefore stabilized at $15,360.
Other non-operating expenses are also forecasted to increase at an average
annual rate of 3.5 percent over the investment holding period. This too is
consistent with the Cushman & Wakefield Investor Survey. Again, our
projected growth rates for the various types of expense categories
generally do not attempt to reflect growth rates for any individual year,
but rather the long term trend over the period of analysis.
Terminal Capitalization Rate - The residual cash flows annually generated
by the subject property comprise only the first part of the return which
an investor will receive. The second component of this investment return
is the pre-tax cash proceeds from the resale of the property at the end of
a projected investment holding period. A terminal capitalization rate was
used to estimate the market value of the property at the end of the
assumed investment holding period. We estimated an appropriate terminal
rate based on indicated rates in today's market. A premium was added to
today's rate to allow for the risk of unforeseen events or trends which
might affect our estimate of net operating income during the holding
period.
================================================================================
Investment Grade Industrial Properties
Summary of Capitalization Rates
================================================================================
Sale # Location Date Capitalization
Rate
================================================================================
1 904-34 Marcon Boulevard
Lehigh Valley Industrial Park III 7/96 11.00%
Hanover Township
Lehigh County, PA
- --------------------------------------------------------------------------------
2 6813, 6829, 6831 Ruppsville Road
7663 Industrial Boulevard 2/96 10.20%
Upper Macungie Township
Bucks County, PA
- --------------------------------------------------------------------------------
4 7620 Cetronia Road
Upper Macungie Township 5/95 9.89%
Lehigh County, PA
================================================================================
Terminal Capitalization Rate Selected 11.00%
================================================================================
For this analysis, it is our projection that the subject property would
most likely be sold at the end of the 11th year of the holding period for
an amount equal to what would be the next year's net operating income
capitalized at an overall rate of 11.0 percent. The 12th year's computed
net operating income is employed at this point as it would be the first
received by a new purchaser of the subject property. In this analysis,
then, a current investor would dispose of the subject property at the end
of the projected holding period for an amount equal to $7,996,000 or
$52.06 per square foot of building area.
================================================================================
-62-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Transaction Costs - From the projected $7,996,000 reversion to an investor
in the subject property, we have deducted a total of $320,000 to account
for the various transaction costs associated with the sale of an asset of
this type. These costs consist of 4 percent of the total disposition price
of the subject property as an allowance for transfer taxes, professional
fees, and other miscellaneous expenses that the seller pays at final
closing. Deducting these transaction costs from the computed reversion
renders pre-tax net proceeds of sale equal to $7,676,000 to be received by
an investor in the subject property at the end of the holding period.
Discount Rate - In our valuation, we endeavored to reflect the most likely
actions of typical buyers and sellers in this market. We forecasted cash
flows and discounted them and the future property value at reversion to a
present value at various rates of return (yield rates) currently required
by investors for similar quality real property. The yield rate (internal
rate of return or IRR) is the single rate that discounts all future
benefits (cash flow and reversion) to an estimate of net present value.
Cushman & Wakefield Valuation Advisory Services periodically surveys
national real estate investors to determine their investment objectives.
Following is a brief review of internal rates of return, overall rates,
and income and expense growth rates considered acceptable by respondents.
The entire survey is included among the Addenda to this report.
================================================================================
AUTUMN 1996 WINTER INVESTOR SURVEY
FOR INDUSTRIAL BUILDINGS
================================================================================
GOING-IN TERMINAL IRR
- --------------------------------------------------------------------------------
Low High Low High Low High
- --------------------------------------------------------------------------------
Mean 8.90% 9.40% 9.70% 10.7% 11.5% 11.5%
- --------------------------------------------------------------------------------
Range 8.50% 9.50% 9.50% 11.0% 11.0% 12.0%
================================================================================
The wide range of investment parameters indicates that property risk and
yield are assessed to a particular investment property based on a variety
of variables. Risk is the primary determinant, and the risk variables
include whether current contract rents are significantly above or below
current market rents; the amount and timing of tenant roll-overs; the risk
to lease-up the property and the strength of the market during the
lease-up period; the durability of the cash flow, and its ability to
increase with inflation along with the creditworthiness of the existing
tenancy. Risk is also dependent on investor demand for the property type;
the diversification of the metropolitan area; the property's location
within the local market; the supply and demand for the property type
within the market; and the effective age of the property.
================================================================================
-62-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
The internal rate of return and terminal capitalization rate selected for
this analysis were strongly influenced by our recent Investor Survey. We
realize that this type of survey reflects target rather than transactional
rates. Transactional rates are usually difficult to obtain in the
verification process and are actually only target rates of the buyer at
the time of sale. The property's performance will ultimately determine the
actual yield and capitalization rate at the time of sale after a specific
holding period. We have found that, in improving markets or with above
average properties, demand will be high and transactional rates may be
lower than target rates that are quoted in surveys. We have tried to
recognize this factor in our choice of these two rates for our cash flow
model.
Considering the locational attributes, physical traits and economic
characteristics of the subject property, we believe a discount rate
ranging from 11.0 percent to 12.0 percent would be appropriate for the
subject property in light of the investment criteria presented here. Thus,
we have discounted the projected future pre-tax cash flows to be received
by an investor in the subject property to a present value so as to yield
11.0 percent to 12.0 percent on capital at 25 basis point intervals over
the holding period. This discounting process is summarized as follows:
================================================================================
Investment Summary
================================================================================
Stabilized Overall
Discount Rate Present Worth Unit Rate Rate
================================================================================
11.00% $6,073,000 $39.54/SF 10.32%
11.25% $5,969,000 $38.86/SF 10.50%
11.50% $5,868,000 $38.20/SF 10.68%
11.75% $5,769,000 $37.56/SF 10.87%
12.00% $5,673,000 $36.93/SF 11.05%
================================================================================
Through such a sensitivity analysis, it can be seen that the present value
of the subject property varies from approximately $5,673,000 to
$6,073,000. Although the existing lease at the subject property expires in
the near future, the potential for renewal exists. Therefore, we believe
that discount rate which falls toward the middle of the range now required
in the marketplace to be appropriate in this case. Using an 11.50 percent
internal rate of return, our discounted cash flow model computes to a
present worth of $5,869,000 which we round to $5,900,000 as an indication
of market value for 7055 Ambassador Drive via the Income Capitalization
Approach.
This indication of value produces an implied stabilized "going-in" overall
capitalization rate of 10.62 percent based upon the initial stabilized
year's net operating income of $626,803. The implied "going-in" overall
capitalization rate is above the parameters set by the above investors
survey due to lag vacancy incurred during the initial year. Additionally,
based upon a market value of $5,900,000 and a projected future gross
reversionary value of approximately $7,996,000, a compound annual rate of
appreciation of 2.80 percent is computed. Finally, with regard to the
composition of the internal rate of return employed here, approximately 56
percent of the expected yield is from cash flows while the balance is
attributable to property reversion. This percentage falls within the
generally accepted relevant range of most current real estate investors.
================================================================================
-64-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
<TABLE>
<CAPTION>
20010 - 6755 SNOWDRIFT DRIVE
ANNUAL CASH FLOW REPORT
BEGINNING 7/1/97 FOR 11 YEARS
FY1998 FY1999 FY2000 FY2OO1 FY2002 FY2003 FY2004 FY2005 FY2006
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME
MINIMUM RENT:
GROSS RENTS 468,750 481,250 500,548 528,177 537,420 546,825 556,394 574,652 625,484
LESS LAG VACANCY 0 0 (87,774) 0 0 0 0 (104,248) 0
------- ------- ------- ------- ------- ------- ------- ------- -------
TOTAL MINIMUM RENT 468,750 481,250 412,774 528,177 537,420 546,825 556,394 470,404 625,484
RECOVERIES:
OPERATING EXPENSES 116,316 120,387 103,476 128,961 133,475 138,146 142,981 122,897 153,165
------- ------- ------- ------- ------- ------- ------- ------- -------
TOTAL RECOVERIES 116,316 120,387 103,476 128,961 133,475 138,146 142,981 122,897 153,165
------- ------- ------- ------- ------- ------- ------- ------- -------
GROSS RENTAL
INCOME 585,066 601,637 516,250 657,138 670,895 684,971 699,375 593,301 778,649
CREDIT LOSS (17,552) (18,049) (15,487) (19,714) (20,127) (20,549) (20,981) (17,799) (23,359)
------- ------- ------- ------- ------- ------- ------- ------- -------
TOTAL INCOME 567,514 583,588 500,763 637,424 650,768 664,422 678,394 575,502 755,290
EXPENSES
INSURANCE 12,719 13,164 13,625 14,102 14,595 15,106 15,635 16,182 16,748
MANAGEMENT FEE 15,263 15,797 16,350 16,922 17,514 18,127 18,762 19,418 20,098
REAL ESTATE TAXES 55,266 57,200 59,202 61,274 63,418 65,638 67,935 70,313 72,774
MAINTENANCE 25,438 26,328 27,249 28,203 29,190 30,212 31,269 32,364 33,496
ADMINISTRATIVE 7,631 7,898 8,175 8,461 8,757 9,064 9,381 9,709 10,049
OTHER 3,816 3,949 4,087 4,230 4,379 4,532 4,690 4,855 5,024
------- ------- ------- ------- ------- ------- ------- ------- -------
TOTAL EXPENSES 120,133 124,336 128,688 133,192 137,853 142,679 147,672 152,841 158,189
------- ------- ------- ------- ------- ------- ------- ------- -------
NET OPERATING
INCOME 447,381 459,252 372,075 504,232 512,915 521,743 530,722 422,661 597,101
ALTERATIONS 0 0 46,774 0 0 0 0 0 55,553
COMMISSIONS 0 0 77,447 0 0 0 0 0 91,982
RESERVES 6,250 6,469 6,695 6,929 7,172 7,423 7,683 7,952 8,230
------- ------- ------- ------- ------- ------- ------- ------- -------
CASH FLOW 441,131 452,783 241,159 497,303 505,743 514,320 523,039 414,709 441,336
</TABLE>
INCOME FY2007 FY2008
MINIMUM RENT:
GROSS RENTS 636,430 647,568
LESS LAG VACANCY 0 0
------- -------
TOTAL MINIMUM RENT 636,430 647,568
RECOVERIES:
OPERATING EXPENSES 158,526 164,074
------- -------
TOTAL RECOVERIES 158,526 164,074
------- -------
GROSS RENTAL
INCOME 794,956 811,642
CREDIT LOSS (23,849) (24,349)
------- -------
TOTAL INCOME 771,107 787,293
EXPENSES
INSURANCE 17,334 17,941
MANAGEMENT FEE 20,801 21,529
REAL ESTATE TAXES 75,321 77,957
MAINTENANCE 34,669 35,882
ADMINISTRATIVE 10,401 10,765
OTHER 5,200 5,382
------- -------
TOTAL EXPENSES 163,726 169,456
------- -------
NET OPERATING
INCOME 607,381 617,837
ALTERATIONS 0 0
COMMISSIONS 0 0
RESERVES 8,518 8,816
------- -------
CASH FLOW 598,863 609,021
<PAGE>
Historical Operating Statements
6755 Snowdrift Road
Building NRA 125,000 SF
<TABLE>
<CAPTION>
1994 Actual 1995 Actual 1996 Actual BAP Budget 1997
-------------------- ------------------ ------------------- ------------------
Item Amount Per SF Amount Per SF Amount Per SF Amount Per SF
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues:
Base Rents $ 745 $ 0.01 $ 112,746 $ 0.90 $ 423,000 $ 3.38 $ 462,504 $ 3.70
Rents from Affiliates -- -- -- -- -- -- -- --
Operating Escalation -- -- -- -- 89,437 0.72 103,548 0.83
Hotel Operations -- -- -- -- -- -- -- --
Marina Rentals -- -- -- -- -- -- -- --
Other -- -- -- -- 834 0.01 -- --
-----------------------------------------------------------------------------------------
Total operating revenues $ 745 $ 0.01 $ 112,746 $ 0.90 $ 513,271 $ 4.11 $ 566,052 $ 4.53
-----------------------------------------------------------------------------------------
Operating expenses:
Administrative and general:
Management fees $ -- $ -- $ 13,155 $ 0.11 $ 13,500 $ 0.11 $ 13,872 $ 0.11
Salaries -- -- 5,257 0.04 5,938 0.05 5,913 0.05
Other administrative 1,920 0.02 1,803 0.01 7,647 0.06 7,056 0.06
Bad debts -- -- -- -- -- -- -- --
Professional services 3,582 0.03 685 0.01 3,058 0.02 552 0.00
Utilities 35,532 0.28 1,058 0.01 481 0.00 584 0.00
Maintenance labor 211 0.00 656 0.01 -- -- 574 0.00
Outside contracts 10,906 0.09 271 0.00 25,916 0.21 19,860 0.16
Cleaning 338 0.00 -- -- -- -- -- --
Maintenance materials -- -- -- -- 1,667 0.01 1,767 0.01
Real estate and other taxes 51,816 0.41 -- -- 35,655 0.29 53,327 0.43
Advertising 5,634 0.05 1,072 0.01 1,045 0.01 -- --
Lease expense, land -- -- -- -- -- -- 1,131 0.01
Other 649 0.01 187 0.00 153 0.00 -- --
-----------------------------------------------------------------------------------------
Total operating expenses $ 110,588 $ 0.88 $ 24,144 $ 0.19 $ 95,060 $ 0.76 $ 104,636 $ 0.84
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
NET OPERATING INCOME $ (109,843) $ (0.88)(1) $ 88,602 $ 0.71(1) $ 418,211 $ 3.35 $ 461,416 $ 3.69
=========================================================================================
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note:(1) Existing tenant vacated the premises mid-year 1994. Day Timers
leased 125,000-square-foot space in January 1995.
<PAGE>
Income Capitalization Approach
================================================================================
6755 Snowdrift Road
This property is a 125,000 square foot single story warehouse building
which is now 100 percent occupied by one tenant. On the opposing page is a
presentation of the cash flows which an informed investor could reasonably
expect 6755 Snowdrift Road to generate over a ten year time horizon. These cash
flows are based upon the following analysis:
Base Rental Income - The existing lease contract at the subject property
provides a current base rental income of $3.70 per square foot of gross
building area increasing by $.10 per square foot per year over the
remaining term. A copy of the rent roll over the subject property is
included among the Addenda to this report.
The rental data previously analyzed for 7055 Ambassador Drive are
applicable to this property as well. As noted, rental rates on space
comparable to the subject range from $3.50 per square foot up to $4.66 per
square foot on a net basis. After analyzing the rents now being paid for
comparable space and services in the competitive open market, it is our
conclusion that the current average economic rent for the subject is $3.80
per square foot on a net basis. Economic rent is forecasted to increase by
3.5 percent throughout the projection period.
Expense Reimbursements - Consistent with market leasing practice for this
type of real estate, the tenant in a property like the subject is
responsible for certain expenses incurred annually in the operation and
ownership of the investment. These expenses include real estate taxes,
insurance premiums, and common area maintenance. Future leases in the
subject property are projected to be structured in a similar fashion.
Allowance for Vacancy and Credit Loss - We have deducted 3 percent from
gross revenues as a global allowance for the non-payment of rent or
expenses by a lessee. Additionally, our analysis over time has
incorporated a lag vacancy allowance which provides for "down time"
between the expiration of an existing lease and the commencement of a new
lease. The weighted average lag vacancy utilized between lease expirations
in this report is two months as previously described.
Operating Expenses - We were provided with historic operating expense data
for the subject property. We have also been provided with current
ownership's operating pro forma. On the opposing page is a presentation of
the historical operating expenses for the subject building. The following
is a brief summary of the projected expenses for the subject property.
Real Estate Taxes - In the Real Estate Tax and Assessments section
of this report, we document the level of assessment for each of the
subject buildings that make up the subject property. In the initial
year of investment, (FY 1997), the real estate tax expense for 6755
Snowdrift Road is estimated to be $55,266 or $0.44.
Insurance - Based upon historical experience, the cost for hazard
and liability insurance has ranged from $.01 to $.02 per square
foot, which appears inordinately low. We have stabilized insurance
expense at $12,719 in the first year of the investment or $0.10
per square foot.
================================================================================
-65-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Historical Operating Statements
6755 Snowdrift Road
Building NRA 125,000 SF
<TABLE>
<CAPTION>
1994 Actual 1995 Actual 1996 Actual BAP Budget 1997
-------------------- ----------------- ------------------ ------------------
Item Amount Per SF Amount Per SF Amount Per SF Amount Per SF
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues:
Base Rents $ 745 $ 0.01 $112,746 $ 0.90 $ 423,000 $ 3.38 $ 462,504 $ 3.70
Rents from Affiliates -- -- -- -- -- -- -- --
Operating Escalation -- -- -- -- 89,437 0.72 103,548 0.83
Hotel Operations -- -- -- -- -- -- -- --
Marina Rentals -- -- -- -- -- -- -- --
Other -- -- -- -- 834 0.01 -- --
-------------------------------------------------------------------------------------------
Total operating revenues $ 745 $ 0.01 $112,746 $ 0.90 $ 513,271 $ 4.11 $ 566,052 $ 4.53
-------------------------------------------------------------------------------------------
Operating expenses:
Administrative and general:
Management fees $ -- $ -- $ 13,155 $ 0.11 $ 13,500 $ 0.11 $ 13,872 $ 0.11
Salaries -- -- 5,257 0.04 5,938 0.05 5,913 0.05
Other administrative 1,920 0.02 1,803 0.01 7,647 0.06 7,056 0.06
Bad debts -- -- -- -- -- -- -- --
Professional services 3,582 0.03 685 0.01 3,058 0.02 552 0.00
Utilities 35,532 0.28 1,058 0.01 481 0.00 584 0.00
Maintenance labor 211 0.00 656 0.01 -- -- 574 0.00
Outside contracts 10,906 0.09 271 0.00 25,916 0.21 19,860 0.16
Cleaning 338 0.00 -- -- -- -- -- --
Maintenance materials -- -- -- -- 1,667 0.01 1,767 0.01
Real estate and other taxes 51,816 0.41 -- -- 35,655 0.29 53,327 0.43
Advertising 5,634 0.05 1,072 0.01 1,045 0.01 -- --
Lease expense, land -- -- -- -- -- -- 1,131 0.01
Other 649 0.01 187 0.00 153 0.00 -- --
-------------------------------------------------------------------------------------------
Total operating expenses $ 110,588 $ 0.88 $ 24,144 $ 0.19 $ 95,060 $ 0.76 $ 104,636 $ 0.84
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
NET OPERATING INCOME $ (109,843) $ (0.88)(1) $ 88,602 $ 0.71(1) $ 418,211 $ 3.35 $ 461,416 $ 3.69
===========================================================================================
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note:(1) Existing tenant vacated the premises Mid-year 1994. Day Timers
leased 125,000-square-foot space in January 1995.
<PAGE>
Income Capitalization Approach
================================================================================
Common Area Charges - This expense category includes all common
building and yard maintenance such as lawn service and trash
collection that the landlord contracts and the tenant reimburses.
Due to the age and condition of the building in the initial year of
investment, (FY 1997), the common area charges expense is estimated
at $0.20 per square foot of gross building area, which is consistent
with experience.
Management - The fee for providing professional management services
includes collections, supervision and the preparation of all
budgets. According to the historical operating expenses, the cost
for professional management has ranged from $0.06 to $0.12 per
square foot of rentable building area. It must be noted that the
this building was managed as part of a portfolio and ownership was
able to capitalize on economies of scale. As a "stand alone"
property in the initial fiscal year, this amount is forecasted to be
$.12 per square foot of building area.
Miscellaneous - Invariably, miscellaneous expenses occur in the
operation of a property such as the subject. These include
advertising and promotional expenses, professional fees, brochures,
and a contingency for the unknown. The data available from the
market indicate allowances for miscellaneous expenses ranging from
$0.01 to $0.08 per square foot of rentable area. For this analysis,
miscellaneous operating expenses are stabilized at $0.03 per
rentable square foot of building area.
Operating expenses are forecasted to increase at an average annual rate of
3.5 percent over the investment holding period. The forecast of projected
growth rates in all categories of expense reflect typical investor
expectations as noted in the Cushman & Wakefield Investor Survey, which
has been placed among the Addenda to this report. Except where noted, our
projected growth rates for the various types of expense categories
generally do not attempt to reflect growth rates for any individual year,
but rather the long term trend over the period of analysis.
Other Non-Operating Expenses - As previously described herein, the
weighted cost of tenant alterations is projected to be $0.34 per square
foot in the initial year of the investment holding period. On a weighted
average basis, leasing commissions are equal to 2.84 percent of total
effective base rental income over the term as well. Reserves for
replacements are stabilized at $0.10 per square foot of rentable building
area. Other non-operating expenses are forecasted to increase at an
average annual rate of 3.5 percent over the investment holding period.
================================================================================
-66-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Terminal Capitalization Rate - At the end of the assumed investment
holding period, it is our projection that the subject property would most
likely be sold at the end of the 10th year of the holding period for an
amount equal to what would be the next year's net operating income
capitalized at an overall rate of 11.0 percent. An 11.0 percent terminal
capitalization rate is utilized in this analysis as it reflects current
local market levels for an asset of this type plus a premium for the risk
of unforeseen events or trends over time. The 11th year's computed net
operating income is employed at this point as it would be the first
received by a new purchaser of the subject property. In this analysis,
then, a current investor would dispose of the subject property at the end
of the projected holding period for an amount equal to $5,617,000 or
$44.94 per square foot of building area.
Transaction Costs - From the projected $5,617,000 reversion to an investor
in the subject property, we have deducted a total of $225,000 to account
for the various transaction costs associated with the sale of an asset of
this type. These costs consist of 4 percent of the total disposition price
of the subject property as an allowance for transfer taxes, professional
fees, and other miscellaneous expenses that the seller pays at final
closing. Deducting these transaction costs from the computed reversion
renders pre-tax net proceeds of sale equal to $5,392,000 to be received by
an investor in the subject property at the end of the holding period.
Discount Rate - Considering the locational attributes, physical traits and
economic characteristics of the subject property, we believe a discount
rate ranging from 11.0 percent to 12.0 percent would be appropriate for
the subject property in light of the investment criteria previously
presented herein. Through such a sensitivity analysis, it can be seen that
the present value of the subject property varies from approximately
$4,282,000 to $4,558,000. This discounting process is summarized as
follows:
================================================================================
Investment Summary
================================================================================
Stabilized Overall
Discount Rate Present Worth Unit Rate Rate
================================================================================
11.00% $4,558,000 $36.46/SF 9.81%
11.25% $4,487,000 $35.90/SF 9.97%
11.50% $4,417,000 $35.34/SF 10.13%
11.75% $4,349,000 $34.79/SF 10.29%
12.00% $4,282,000 $34.26/SF 10.45%
================================================================================
Using an 11.50 percent internal rate of return, our discounted cash flow
model computes to a present worth of $4,417,000 which we round to
$4,400,000 as an indication of market value for 6755 Snowdrift Road via
the Income Capitalization Approach.
================================================================================
-67-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
20011 - 7150 WINDSOR DRIVE
ANNUAL CASH FLOW REPORT
BEGINNING 7/1/97 FOR 12 YEARS
<TABLE>
<CAPTION>
FY1998 FY1999 FY2000 FY2001 FY2002 FY2003 FY2004
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME
- ------
MINIMUM RENT:
GROSS RENTS 424,517 447,065 466,725 481,527 494,727 504,676 520,207
LESS LAG VACANCY (13,308) (10,636) (27,604) (27,962) 0 (15,806) (6,316)
------- ------- ------- ------- ------- ------- -------
TOTAL MINIMUM RENT 411,209 436,429 439,121 453,565 494,727 488,870 513,891
RECOVERIES:
OPERATING EXPENSES 117,793 122,270 121,856 126,208 137,103 136,555 143,599
------- ------- ------- ------- ------- ------- -------
TOTAL RECOVERIES 117,793 122,270 121,856 126,208 137,103 136,555 143,599
------- ------- ------- ------- ------- ------- -------
GROSS RENTAL
INCOME 529,002 558,699 560,977 579,773 631,830 625,425 657,490
CREDIT LOSS (15,870) (16,761) (16,829) (17,393) (18,955) (18,763) (19,725)
------- ------- ------- ------- ------- ------- -------
TOTAL INCOME 513,132 541,938 544,148 562,380 612,875 606,662 637,765
EXPENSES
- --------
INSURANCE 7,211 7,427 7,650 7,879 8,116 8,359 8,610
MANAGEMENT FEE 16,061 16,543 17,039 17,551 18,077 18,620 19,178
REAL ESTATE TAXES 42,624 43,903 45,220 46,576 47,974 49,413 50,895
OTHER 1,019 1,050 1,081 1,114 1,147 1,181 1,217
COMMON AREA MAINT 55,918 57,596 59,324 61,104 62,937 64,825 66,769
------- ------- ------- ------- ------- ------- -------
TOTAL EXPENSES 122,833 126,519 130,314 134,224 138,251 142,398 146,669
------- ------- ------- ------- ------- ------- -------
NET OPERATING
INCOME 390,299 415,419 413,834 428,156 474,624 464,264 491,096
ALTERATIONS 43,707 34,758 82,597 75,031 0 0 50,668
COMMISSIONS 11,743 9,384 25,209 24,672 0 0 13,947
RESERVES 4,942 5,090 5,243 5,400 5,562 5,729 5,901
------- ------- ------- ------- ------- ------- -------
CASH FLOW 329,907 366,187 300,785 323,053 469,062 458,535 420,580
</TABLE>
FY2006 FY2007 FY2008 FY2009
INCOME
- ------
MINIMUM RENT:
GROSS RENTS 563,035 585,876 596,131 615,768
LESS LAG VACANCY (33,210) 0 0 (18,774)
------- ------- ------- -------
TOTAL MINIMUM RENT 529,825 585,876 596,131 596,994
RECOVERIES:
OPERATING EXPENSES 146,310 158,940 163,710 163,216
------- ------- ------- -------
TOTAL RECOVERIES 146,310 158,940 163,710 163,216
------- ------- ------- -------
GROSS RENTAL
INCOME 676,135 744,816 759,841 760,210
CREDIT LOSS (20,284) (22,344) (22,795) (22,806)
------- ------- ------- -------
TOTAL INCOME 655,851 722,472 737,046 737,404
EXPENSES
- --------
INSURANCE 9,134 9,408 9,690 9,981
MANAGEMENT FEE 20,346 20,956 21,585 22,233
REAL ESTATE TAXES 53,995 55,615 57,283 59,001
OTHER 1,291 1,330 1,370 1,411
COMMON AREA MAINT 70,836 72,961 75,150 77,404
------- ------- ------- -------
TOTAL EXPENSES 155,602 160,270 165,078 170,030
------- ------- ------- -------
NET OPERATING
INCOME 500,249 562,202 571,968 567,374
ALTERATIONS 0 86,982 0 58,738
COMMISSIONS 0 29,302 0 16,565
RESERVES 6,260 6,448 6,642 6,841
------- ------- ------- -------
CASH FLOW 493,989 439,470 565,326 485,230
<PAGE>
Income Capitalization Approach
This indication of value produces an implied "going-in" overall
capitalization rate of 10.17 percent based upon the initial year's net
operating income of $447,381. Additionally, based upon a market value of
$4,400,000 and a projected future gross reversionary value of
approximately $5,617,000, a compound annual rate of appreciation of 2.47
percent is computed. Finally, with regard to the composition of the
internal rate of return employed here, approximately 56 percent of the
expected yield is from cash flows while the balance is attributable to
property reversion. This percentage falls within the generally accepted
relevant range of most current real estate investors.
To this conclusion, we then add the value attributable to the excess land
associated with this property. As noted, the existing improvements are
expandable to 175,000 square feet and offer expansion land of
approximately 3+/- acres for this purpose. We refer the reader to the
subsequent Developmental Approach to the valuation of the vacant sites
which comprise a part of the subject property. Here, we estimate the
current value of land in Iron Run Corporate Center to be $100,000 per
acre. Therefore, when added to the foregoing, a total value indicated by
the Income Capitalization Approach is $4,700,000.
7150 Windsor Drive
This property is a 49,420 square foot single story flex building which is
100 percent occupied by a four tenants. On the opposing page is a presentation
of the cash flows which an informed investor could reasonably expect 7150
Windsor Drive to generate over a ten year time horizon. These cash flows are
based upon the following analysis:
Base Rental Income - The base rental income which an asset such as the
subject property will generate for an investor reflects a review of the
existing rent roll in conjunction with the rent now being paid for
comparable space and services in the competitive open market.
On the opposing page is a presentation of recent rental rates on highly
finished flex type space in the market area of the subject property. As
can be seen from this summary, rental rates on space comparable to the
subject range from $6.75 per square foot up to $10.55 per square foot on a
triple net basis.
Comparable Leases #1 and #2 are built-to suit tenant areas within a
facility in the City of Bethlehem. This facility is locationally inferior,
but offers space which is physically similar to the subject. At the time
of lease, the building was newly constructed, making it superior to the
subject in this regard. Lease #1 was to have more elaborate interior
finishes than found at the subject. Lease #2 offers a similar percentage
of finished area to that the subject. Consideration is also given to the
smaller size of each. Overall, varying degrees of negative adjustment to
these lease rates is necessary.
Comparable Lease #3 is a lease renewal involving a one story building
situated in Lehigh Valley Industrial Park III, which lies several miles
east of the subject property. Locationally, this property is considered
slightly inferior to the subject, although it offers visibility from Route
22. Although offering a comparable level of office finish than the
subject, this property is significantly larger. Overall, a positive
adjustment is warranted.
================================================================================
-68-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
<TABLE>
<CAPTION>
==============================================================================================================================
Summary of Market Data
Office/Service/Lab Leasing
==============================================================================================================================
Lessee Leased Lease Annual
Lease # Location Area Term Rental
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Bethlehem Technology Center Quantum Epitaxial 9,920+/- SF 5 years $10.55/SF;
25 East Second Street Designs, Inc. commencing escalating
City of Bethlehem January, 1994 2.5%/year
Northampton County, PA over term.
2 Bethlehem Technology Center Bio-Med Sciences 5,460+/- SF 5 years $7.50/SF;
25 East Second Street commencing escalating
City of Bethlehem January, 1994 3.0%/year
Northampton County, PA over term.
3 794 Roble Road Day-Timers, Inc. 101,750+/- SF 5 years $7.10/SF
Lehigh Valley Industrial Park III commencing
Hanover Township June, 1996
Lehigh County, PA
4 3600 Horizon Drive Neotech 35,115+/- SF 10 years $6.75/SF in
Renaissance @ Gulph Mills commencing Year 1
Upper Merion Township June, 1996 increasing to
Montgomery County, PA $8.00/SF
over term.
5 781 Third Avenue Interdigital 50,600+/- SF 7 years $7.50/SF
King of Prussia Park Communication Corp. commencing
Upper Merion Township September, 1995
Montgomery County, PA
==============================================================================================================================
<CAPTION>
==========================================================================================================
==========================================================================================================
Lease # Location Comments
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
1 Bethlehem Technology Center This building was newly constructed. The leased area
25 East Second Street includes 41% office, 36% process area with clean rooms,
City of Bethlehem with the balance being warehouse area and service
Northampton County, PA chases. The lease is structured on a net basis.
2 Bethlehem Technology Center This building was newly constructed. The leased area
25 East Second Street includes 42% office, 37% lab and production area, and
City of Bethlehem 21% warehouse. The lease is structured on a net basis.
Northampton County, PA
3 794 Roble Road This building was originally constructed in 1989 for a
Lehigh Valley Industrial Park III computer software firm. It includes 67 percent office
Hanover Township finish and semi-finished production area which is fully air
Lehigh County, PA conditioned. This is a renewal of a lease dating from
1991. It is structured on a net basis.
4 3600 Horizon Drive This building was constructed in 1988. It includes 60%
Renaissance @ Gulph Mills finished office area and is fully sprinklered and air
Upper Merion Township conditioned. The balance of the space is semi-finished
Montgomery County, PA assembly area with dropped ceilings. It is structured on a
net basis.
5 781 Third Avenue This space is within a single story industrial building
King of Prussia Park which was reskinned and entirely retrofitted in 1995. Of
Upper Merion Township the leased area, 50% is finished as office space, with the
Montgomery County, PA balance being finished assembly space. It is also 100%
air conditioned. The tenant ultimately purchased the
building.
==========================================================================================================
</TABLE>
<PAGE>
Income Capitalization Approach
================================================================================
Comparable Leases #4 and #5 involve recent leases on buildings in King of
Prussia. Both are considered superior to the subject in terms of location.
Lease #4 is in a physically similar property excepting that its
construction quality is inferior to the subject. Overall, slight positive
adjustment is made to this lease. Lease #5 is in an older building which
was entirely renovated to suit the tenant. It is considered physically
similar to the subject in terms of quality although the level of finish is
less than that found in several of the tenant areas at the subject. A
modest negative adjustment overall is warranted.
In addition to analyzing actual lease transactions outside the property,
leasing brokers were interviewed in an effort to ascertain competitive
packages available in the marketplace today. Most brokers interviewed were
of the opinion that free rent was no longer being given in the local
marketplace. Tenant improvements in industrial space in the local
marketplace are very limited and range from nothing up to $1.00 per square
foot depending on the size of the tenant and the duration of the lease.
After considering the rents now being paid for comparable space and
services in the competitive open market, it is our conclusion that the
current economic rent for the tenant areas at the subject would be as
follows:
================================================================================
Tenant Market Rate
- --------------------------------------------------------------------------------
Interior Workplace Solutions $8.00/SF
Bell Atlantic $9.00/SF
Monsanto $8.00/SF
Linden Optical $9.00/SF
ICT Group $10.00/SF
================================================================================
All would be structured on a triple net basis. This rent would increase at
50 percent of the CPI over the term, which is consistent with local market
practice. Additionally, a new tenant would also be entitled to
improvements of up to $7.00 per square foot of rentable building area.
Market rent is forecasted to increase at an average annual rate of 3.5
percent throughout the holding period. This forecast of income growth
rates reflects typical investor expectations as noted in the Cushman &
Wakefield Investor Survey which is among the Addenda to this report.
Expense Reimbursements - Consistent with market leasing practice for this
type of real estate, the tenant in a property like the subject is
responsible for certain expenses incurred annually in the operation and
ownership of the investment. These expenses include real estate taxes,
insurance premiums, and common area maintenance. Future leases in the
subject property are projected to be structured in a similar fashion.
================================================================================
-69-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Historical Operating Statements
7150 Windsor Drive
Building NRA 49,420 SF
<TABLE>
<CAPTION>
1994 Actual 1995 Actual 1996 Actual BAP Budget 1997
-------------------- ----------------- ------------------ ------------------
Item Amount Per SF Amount Per SF Amount Per SF Amount Per SF
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues:
Base Rents $ 275,080 $ 5.57 $ 258,325 $ 5.23 $ 202,489 $ 4.10 $ 202,489 $ 4.10
Rents from Affiliates 146,643 2.97 147,885 2.99 146,995 2.97 146,995 2.97
Operating Escalation 20,755 0.42 96,723 1.96 98,312 1.99 98,312 1.99
Hotel Operations -- -- -- -- -- -- -- --
Marina Rentals -- -- -- -- -- -- -- --
Other 678 0.01 127 0.00 69 0.00 69 0.00
---------------------------------------------------------------------------------------------
Total operating revenues $ 43,156 $ 8.97 $ 503,060 $ 10.18 $ 447,865 $ 9.06 $ 447,865 $ 9.06
---------------------------------------------------------------------------------------------
Operating expenses:
Administrative and general:
Management fees $ 9,178 $ 0.19 $ 15,088 $ 0.31 $ 13,434 $ 0.27 $ 13,434 $ 0.27
Salaries 9,116 0.18 13,144 0.27 14,844 0.30 14,844 0.30
Other administrative 8,998 0.18 7,374 0.15 10,465 0.21 10,465 0.21
Bad debts 190 0.00 (217) (0.00) -- --
Professional services -- -- 1,349 0.03 746 0.02 746 0.02
Utilities 4.765 010 6,879 0.14 13,138 0.27 13,138 0.27
Maintenance labor 1,878 0.04 -- -- 231 0.00 231 0.00
Outside contracts 9,460 0.19 20,021 0.41 36,252 0.73 36,252 0.73
Cleaning -- -- 589 0.01 590 0.01 590 0.01
Maintenance materials -- -- 1,984 0.04 2,963 0.06 2,963 0.06
Real estate and other taxes -- -- 31,205 0.63 47,757 0.97 47,757 0.97
Advertising -- -- 9,150 0.19 2,071 0.04 2,071 0.04
Lease expense, land -- -- -- -- -- -- -- --
Other 3,276 0.07 598 0.01 383 0.01 383 0.01
---------------------------------------------------------------------------------------------
Total operating expenses $ 46,861 $ 0.95 $ 107,164 $ 2.17 $ 142,874 $ 2.89 $ 142,874 $ 2.89
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
NET OPERATING INCOME $ 396,295 $ 8.02 $ 395,896 $ 8.01 $ 304,991 $ 6.17(1) $ 304,991 $ 6.17
=============================================================================================
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: (1) Occupancy decreased to 80 percent from 100 percent during a portion
of 1996.
<PAGE>
Income Capitalization Approach
================================================================================
Allowance for Vacancy and Credit Loss - We have deducted 3 percent from
gross revenues as a global allowance for the non-payment of rent or
expenses by a lessee. Additionally, our analysis over time has
incorporated a lag vacancy allowance which provides for "down time"
between the expiration of an existing lease and the commencement of a new
lease. The weighted average lag vacancy utilized between lease expirations
in this report is two months as previously described.
Operating Expenses - We were provided with historic operating expense data
for the subject property. We have also been provided with current
ownership's operating pro forma. On the opposing page is a presentation of
the historical operating expenses for the subject building. The following
is a brief summary of the projected expenses for the subject property.
Real Estate Taxes - In the Real Estate Tax and Assessments section
of this report, we document the level of assessment for each of the
subject buildings that make up the subject property. In the initial
year of investment, (FY 1997), the real estate tax expense for 7150
Windsor Drive is estimated to be $42,624 or $0.86 per square foot.
Insurance - Based upon historical experience, the cost for hazard
and liability insurance ranged from $.15 to $.21 per square foot. In
this analysis, we have stabilized insurance expense at $7,211 in the
first year of the investment or about $0.15 per square foot for this
analysis.
Common Area Charges - This expense category includes all common
building and yard maintenance such as lawn service and trash
collection that the landlord contracts and the tenant reimburses.
Due to the age and condition of the building in the initial year of
investment, (FY 1997), the common area charges expense is estimated
at $1.13 per square foot of gross building area, which is consistent
with historical experience and budget projections for the coming
year.
Management - The fee for providing professional management services
includes collections, supervision and the preparation of all
budgets. According to the historical operating expenses, the cost
for professional management has ranged from $0.19 to $0.31 per
square foot of rentable building area. It must be noted that the
this building was managed as part of a portfolio and ownership was
able to capitalize on economies of scale. As a "stand alone"
property in the initial fiscal year, this amount is forecasted to be
$.32 per square foot of building area.
Miscellaneous - Invariably, miscellaneous expenses occur in the
operation of a property such as the subject. These include
advertising and promotional expenses, professional fees, brochures,
and a contingency for the unknown. The data available from the
market indicate allowances for miscellaneous expenses ranging from
$0.01 to $0.08 per square foot of rentable area. For this analysis,
miscellaneous operating expenses are stabilized at $0.02 per
rentable square foot of building area, which is consistent with
prior experience.
================================================================================
-70-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Operating expenses are forecasted to increase at an average annual rate of
3.5 percent over the investment holding period. The forecast of projected
growth rates in all categories of expense reflect typical investor
expectations as noted in the Cushman & Wakefield Investor Survey, which
has been placed among the Addenda to this report. Except where noted, our
projected growth rates for the various types of expense categories
generally do not attempt to reflect growth rates for any individual year,
but rather the long term trend over the period of analysis.
Other Non-Operating Expenses - Other, non-operating expenses of the
subject property are projected in this analysis from prevailing commission
schedules, construction costs, and accepted practices. We have analyzed
each item of capital expenditure in an attempt to project what the typical
investor in a property like the subject would consider reasonable, based
upon informed opinion and experience. The following is a discussion of the
other, non-operating expenses incorporated into this analysis of the
subject property.
Tenant Alterations - Upon the expiration of a lease, it is our best
estimate that there is a 65 percent probability of the existing
tenant renewing their lease and a 35 percent probability that the
existing tenant will vacate. The current cost associated with tenant
improvements at tenant rollover is estimated to be $3.00 per square
foot while that to prepare space for a new turnover tenant is
estimated to be $7.00 per square foot. On average, then, the
weighted cost of tenant alterations is projected to be $4.40 per
square foot in the initial year of the investment holding period.
Leasing Commissions - On a weighted average basis, leasing
commissions are equal to 2.84 percent of total effective base rental
income over the term as well. This calculation was exhibited
previously.
Reserves - It is customary and prudent to set aside an amount
annually for the replacement of short lived capital items such as
roofs, parking lots, or mechanical equipment. In this analysis, we
have projected an allowance for reserves of $0.10 per square foot of
rentable building area which is typical in the local market place
for a property like the subject. Reserves for replacements are
therefore stabilized at $4,942.
Other non-operating expenses are also forecasted to increase at an average
annual rate of 3.5 percent over the investment holding period. This too is
consistent with the Cushman & Wakefield Investor Survey. Again, our
projected growth rates for the various types of expense categories
generally do not attempt to reflect growth rates for any individual year,
but rather the long term trend over the period of analysis.
================================================================================
-71-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Terminal Capitalization Rate - The residual cash flows annually generated
by the subject property comprise only the first part of the return which
an investor will receive. The second component of this investment return
is the pre-tax cash proceeds from the resale of the property at the end of
a projected investment holding period. A terminal capitalization rate was
used to estimate the market value of the property at the end of the
assumed investment holding period. We estimated an appropriate terminal
rate based on indicated rates in today's market. A premium was added to
today's rate to allow for the risk of unforeseen events or trends which
might affect our estimate of net operating income during the holding
period.
================================================================================
Investment Grade Industrial and Office Properties
Summary of Capitalization Rates
================================================================================
Sale # Location Date Capitalization
Rate
================================================================================
1 904-34 Marcon Boulevard
Lehigh Valley Industrial Park III 7/96 11.00%
Hanover Township
Lehigh County, PA
- --------------------------------------------------------------------------------
2 6813, 6829, 6831 Ruppsville Road
7663 Industrial Boulevard 2/96 10.20%
Upper Macungie Township
Bucks County, PA
- --------------------------------------------------------------------------------
3 7620 Cetronia Road
Upper Macungie Township 5/95 9.89%
Lehigh County, PA
- --------------------------------------------------------------------------------
4 Lehigh Valley Office Commons
87 S. Commerce Way 7/96 10.60%
Lehigh Valley Industrial Park IV
Hanover Township
Lehigh County, PA
- --------------------------------------------------------------------------------
5 Lehigh Valley Executive Campus
Lehigh Valley Industrial Park IV 6/95 9.37%
Hanover Township
Lehigh County, PA
================================================================================
Terminal Capitalization Rate Selected 11.00%
================================================================================
For this analysis, it is our projection that the subject property would
most likely be sold at the end of the 11th year of the holding period for
an amount equal to what would be the next years net operating income
capitalized at an overall rate of 11.0 percent. The 12th year's computed
net operating income is employed at this point as it would be the first
received by a new purchaser of the subject property. In this analysis,
then, a current investor would dispose of the subject property at the end
of the projected holding period for an amount equal to $5,200,000 or
$105.22 per square foot of building area.
================================================================================
-72-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
Transaction Costs - From the projected $5,200,000 reversion to an investor
in the subject property, we have deducted a total of $208,000 to account
for the various transaction costs associated with the sale of an asset of
this type. These costs consist of 4 percent of the total disposition price
of the subject property as an allowance for transfer taxes, professional
fees, and other miscellaneous expenses that the seller pays at final
closing. Deducting these transaction costs from the computed reversion
renders pre-tax net proceeds of sale equal to $4,992,000 to be received by
an investor in the subject property at the end of the holding period.
Discount Rate - In our valuation, we endeavored to reflect the most likely
actions of typical buyers and sellers in this market. We forecasted cash
flows and discounted them and the future property value at reversion to a
present value at various rates of return (yield rates) currently required
by investors for similar quality real property. The yield rate (internal
rate of return or IRR) is the single rate that discounts all future
benefits (cash flow and reversion) to an estimate of net present value.
Cushman & Wakefield Valuation Advisory Services periodically surveys
national real estate investors to determine their investment objectives.
Following is a brief review of internal rates of return, overall rates,
and income and expense growth rates considered acceptable by respondents.
The entire survey is included among the Addenda to this report.
================================================================================
AUTUMN 1996 WINTER INVESTOR SURVEY
FOR INDUSTRIAL BUILDINGS
================================================================================
GOING-IN TERMINAL IRR
- --------------------------------------------------------------------------------
Low High Low High Low High
================================================================================
Mean 8.90% 9.40% 9.70% 10.7% 11.5% 11.5%
- --------------------------------------------------------------------------------
Range 8.50% 9.50% 9.50% 11.0% 11.0% 12.0%
================================================================================
================================================================================
AUTUMN 1996 INVESTOR SURVEY
FOR SUBURBAN OFFICE BUILDINGS
================================================================================
GOING-IN TERMINAL IRR
- --------------------------------------------------------------------------------
Low High Low High Low High
================================================================================
Mean 8.80% 9.50% 9.30% 9.90% 11.2% 11.6%
- --------------------------------------------------------------------------------
Range 8.00% 11.0% 8.00% 11.0% 10.0% 13.0%
================================================================================
The wide range of investment parameters indicates that property risk and
yield are assessed to a particular investment property based on a variety
of variables. Risk is the primary determinant, and the risk variables
include whether current contract rents are significantly above or below
current market rents; the amount and timing of tenant roll-overs; the
risk to lease-up the property and the strength of the market during the
lease-up period; the durability of the cash flow, and its ability to
increase with inflation along with the creditworthiness of the existing
tenancy. Risk is also dependent on investor demand for the property type;
the diversification of the metropolitan area; the property's location
within the local market; the supply and demand for the property type
within the market; and the effective age of the property.
================================================================================
-74-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
The internal rate of return and terminal capitalization rate selected for
this analysis were strongly influenced by our recent Investor Survey. We
realize that this type of survey reflects target rather than transactional
rates. Transactional rates are usually difficult to obtain in the
verification process and are actually only target rates of the buyer at
the time of sale. The property's performance will ultimately determine the
actual yield and capitalization rate at the time of sale after a specific
holding period. We have found that, in improving markets or with above
average properties, demand will be high and transactional rates may be
lower than target rates that are quoted in surveys. We have tried to
recognize this factor in our choice of these two rates for our cash flow
model.
Considering the locational attributes, physical traits and economic
characteristics of the subject property, we believe a discount rate
ranging from 11.0 percent to 12.0 percent would be appropriate for the
subject property in light of the investment criteria presented here. Thus,
we have discounted the projected future pre-tax cash flows to be received
by an investor in the subject property to a present value so as to yield
11.0 percent to 12.0 percent on capital at 25 basis point intervals over
the holding period. This discounting process is summarized as follows:
================================================================================
Investment Summary
================================================================================
Discount Rate Present Worth Unit Rate Overall Rate
================================================================================
11.00% $3,984,000 $80.62/SF 9.80%
11.25% $3,921,000 $79.34/SF 9.95%
11.50% $3,859,000 $78.09/SF 10.12%
11.75% $3,798,000 $76.85/SF 10.28%
12.00% $3,738,000 $75.64/SF 10.44%
================================================================================
Through such a sensitivity analysis, it can be seen that the present value
of the subject property varies from approximately $3,738,000 to
$3,984,000. Given the subject's status as a flex building, we believe that
it would be viewed more conservatively than a conventional office or
industrial building. Therefore, we believe that discount rate which falls
toward the upper end of the range now required in the marketplace to be
appropriate in this case. Using a 12.00 percent internal rate of return,
our discounted cash flow model computes to a present worth of $3,738,000
which we round to $3,750,000 as an indication of market value for 7150
Windsor Drive via the Income Capitalization Approach.
This indication of value produces an implied "going-in" overall
capitalization rate of 10.41 percent based upon the initial year's net
operating income of $390,299. The implied "going-in" overall
capitalization rate is consistent the parameters set by the above
investors surveys. Additionally, based upon a market value of $3,750,000
and a projected future gross reversionary value of approximately
$5,200,000, a compound annual rate of appreciation of 3.32 percent is
computed. Finally, with regard to the composition of the internal rate of
return employed here, approximately 55 percent of the expected yield is
from cash flows while the balance is attributable to property reversion.
This percentage falls within the generally accepted relevant range of most
current real estate investors.
================================================================================
-74-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
20003 - 6690 GRANT WAY
ANNUAL CASH FLOW REPORT
BEGINNING 7/1/97 FOR 11 YEARS
<TABLE>
<CAPTION>
FY1998 FY1999 FY2000 FY2001 FY2002 FY2003 FY2004
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME
- ------
MINIMUM RENT:
GROSS RENTS 389,010 397,676 412,165 412,525 419,744 427,090 434,564
LESS LAG VACANCY 0 (32,248) (35,734) 0 0 0 0
------- ------- ------- ------- ------- ------- -------
TOTAL MINIMUM RENT 389,010 365,428 376,431 412,525 419,744 427,090 434,564
RECOVERIES:
OPERATING EXPENSES 90,342 85,848 88,294 100,163 103,670 107,298 111,054
------- ------- ------- ------- ------- ------- -------
TOTAL RECOVERIES 90,342 85,848 88,294 100,163 103,670 107,298 111,054
------- ------- ------- ------- ------- ------- -------
GROSS RENTAL
INCOME 479,352 451,276 464,725 512,688 523,414 534,388 545,618
CREDIT LOSS (14,381) (13,538) (13,942) (15,381) (15,702) (16,032) (16,369)
------- ------- ------- ------- ------- ------- -------
TOTAL INCOME 464,971 437,738 450,783 497,307 507,712 518,356 529,249
EXPENSES
- --------
INSURANCE 4,811 4,979 5,153 5,334 5,520 5,714 5,914
MANAGEMENT FEE 17,908 18,535 19,183 19,855 20,550 21,269 22,014
REAL ESTATE TAXES 38,971 40,335 41,747 43,208 44,720 46,286 47,906
OTHER 4,477 4,634 4,796 4,964 5,137 5,317 5,503
COMMON AREA MAINT 28,652 29,655 30,693 31,767 32,879 34,029 35,220
------- ------- ------- ------- ------- ------- -------
TOTAL EXPENSES 94,819 98,138 101,572 105,128 108,806 112,615 116,557
------- ------- ------- ------- ------- ------- -------
NET OPERATING
INCOME 370,152 339,600 349,211 392,179 398,906 405,741 412,692
ALTERATIONS 0 0 49,655 0 0 0 0
COMMISSIONS 0 0 59,983 0 0 0 0
RESERVES 8,800 9,108 9,427 9,757 10,098 10,452 10,817
------- ------- ------- ------- ------- ------- -------
CASH FLOW 361,352 330,492 230,146 382,422 388,808 395,289 401,875
</TABLE>
FY2005 FY2006 FY2007 FY2008
INCOME
- ------
MINIMUM RENT:
GROSS RENTS 467,888 488,538 497,087 505,786
LESS LAG VACANCY (80,740) 0 0 0
------- ------- ------- -------
TOTAL MINIMUM RENT 387,148 488,538 497,087 505,786
RECOVERIES:
OPERATING EXPENSES 95,772 118,963 123,127 127,436
------- ------- ------- -------
TOTAL RECOVERIES 95,772 118,963 123,127 127,436
------- ------- ------- -------
GROSS RENTAL
INCOME 482,920 607,501 620,214 633,222
CREDIT LOSS (14,488) (18,225) (18,606) (18,997)
------- ------- ------- -------
TOTAL INCOME 468,432 589,276 601,608 614,225
EXPENSES
- --------
INSURANCE 6,121 6,335 6,557 6,786
MANAGEMENT FEE 22,784 23,581 24,407 25,261
REAL ESTATE TAXES 49,582 51,318 53,114 54,973
OTHER 5,696 5,895 6,102 6,315
COMMON AREA MAINT 36,453 37,729 39,049 40,416
------- ------- ------- -------
TOTAL EXPENSES 120,636 124,858 129,229 133,751
------- ------- ------- -------
NET OPERATING
INCOME 347,796 464,418 472,379 480,474
ALTERATIONS 58,973 0 0 0
COMMISSIONS 71,241 0 0 0
RESERVES 11,196 11,588 11,993 12,413
------- ------- ------- -------
CASH FLOW 206,386 452,830 460,386 468,061
<PAGE>
Income Capitalization Approach
================================================================================
6690 Grant Way
This property is an 88,000 square foot single story warehouse building
which is 100 percent occupied by two tenants. On the opposing page is a
presentation of the cash flows which an informed investor could reasonably
expect 6690 Grant Way to generate over a ten year time horizon. These cash flows
are based upon the following analysis:
Base Rental Income - The existing lease contracts at the subject property
provide a current base rental income of $4.39 per square foot of gross
building area. One lease also provides for annual increases over the
remaining term. A copy of the rent roll over the subject property is
included among the Addenda to this report.
The rental data previously analyzed for 7055 Ambassador Drive are
applicable to this property as well. As noted, rental rates on space
comparable to the subject range from $3.50 per square foot up to $4.66 per
square foot on a net basis. After analyzing the rents now being paid for
comparable space and services in the competitive open market, it is our
conclusion that the current average economic rent for the subject is $4.25
per square foot on a net basis. Economic rent is forecasted to increase by
3.5 percent throughout the projection period.
Expense Reimbursements - Consistent with market leasing practice for this
type of real estate, the tenant in a property like the subject is
responsible for certain expenses incurred annually in the operation and
ownership of the investment. These expenses include real estate taxes,
insurance premiums, and common area maintenance. Future leases in the
subject property are projected to be structured in a similar fashion.
Allowance for Vacancy and Credit Loss - We have deducted 3 percent from
gross revenues as a global allowance for the non-payment of rent or
expenses by a lessee. Additionally, our analysis over time has
incorporated a lag vacancy allowance which provides for "down time"
between the expiration of an existing lease and the commencement of a new
lease. The weighted average lag vacancy utilized between lease expirations
in this report is two months as previously described.
Operating Expenses - We were provided with historic operating expense data
for the subject property. We have also been provided with current
ownership's operating pro forma. On the opposing page is a presentation of
the historical operating expenses for the subject building. The following
is a brief summary of the projected expenses for the subject property.
Real Estate Taxes - In the Real Estate Tax and Assessments section of this
report, we document the level of assessment for each of the subject
buildings that make up the subject property. In the initial year of
investment, (FY 1997), the real estate tax expense for 6690 Grant Way is
estimated to be $38,971 or $0.44.
Insurance - Based upon historical experience, the cost for hazard and
liability insurance has ranged from $.02 to $.09 per square foot. We have
stabilized insurance expense at $4,811 in the first year of the investment
or $0.05 per square foot. This is consistent with ownership's budget
projections.
================================================================================
-75-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Historical Operating Statements
6690 Grant Way
Building NRA 88,000 SF
<TABLE>
<CAPTION>
1994 Actual 1995 Actual 1996 Actual BAP Budget 1997
-------------------- ----------------- ------------------ ------------------
Item Amount Per SF Amount Per SF Amount Per SF Amount Per SF
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues:
Base Rents $ 357,896 $ 4.07 $ 375,650 $ 4.27 $ 370,650 $ 4.21 $ 385,395 $ 4.38
Rents from Affiliates 683 0.01 559 0.01 -- -- -- --
Operating Escalation 8,372 0.10 11,299 0.13 84,241 0.96 81,732 0.93
Hotel Operations -- -- -- -- -- -- -- --
Marina Rentals -- -- -- -- -- -- -- --
Other 4 0.00 31 0.00 14 0.00 20 0.00
-------------------------------------------------------------------------------------------
Total operating revenues $ 366,955 $ 4.17 $ 387,539 $ 4.40 $ 454,905 $ 5.17 $ 464,147 $ 5.31
-------------------------------------------------------------------------------------------
Operating expenses:
Administrative and general:
Management fees $ 9,949 $ 0.11 $ 11,270 $ 0.13 $ 11,120 $ 0.13 $ 11,565 $ 0.13
Salaries 6,121 0.07 3,701 0.04 5,597 0.06 5,913 0.07
Other administrative 7,919 0.09 1,348 0.02 5,118 0.06 4,728 0.05
Bad debts (473) (0.01) -- -- -- -- -- --
Professional services -- -- 470 0.01 267 0.00 2,252 0.03
Utilities -- -- -- -- -- -- 488 0.01
Maintenance labor -- -- -- -- -- -- 372 0.00
Outside contracts 1,018 0.01 172 0.00 23,255 0.26 18,048 0.21
Cleaning -- -- -- -- -- -- -- --
Maintenance materials 221 0.00 77 0.00 1,320 0.02 2,210 0.03
Real estate and other taxes -- -- -- -- 25,810 0.29 38,007 0.43
Advertising 3,333 0.04 3,057 0.03 2,559 0.03 4,368 0.05
Lease expense, land -- -- -- -- -- -- 848 0.01
Other 185 0.00 161 0.00 153 0.00 -- --
-------------------------------------------------------------------------------------------
Total operating expenses $ 28,273 $ 0.32 $ 20,256 $ 0.23 $ 75,646 $ 0.86 $ 88,799 $ 1.01
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
NET OPERATING INCOME $ 338,682 $ 3.85 $ 367,283 $ 4.17 $ 379,259 $ 4.31 $ 378,348 $ 4.30
===========================================================================================
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Income Capitalization Approach
Common Area Charges - This expense category includes all common
building and yard maintenance such as lawn service and trash
collection that the landlord contracts and the tenant reimburses.
Given the age and condition of the building in the initial year of
investment, (FY 1997), the common area charges expense is estimated
at $0.32 per square foot of gross building area, which is consistent
with experience.
Management - The fee for providing professional management services
includes collections, supervision and the preparation of all
budgets. According to the historical operating expenses, the cost
for professional management has ranged from $0.11 to $0.13 per
square foot of rentable building area. It must be noted that the
this building was managed as part of a portfolio and ownership was
able to capitalize on economies of scale. As a "stand alone"
property in the initial fiscal year, this amount is forecasted to be
$.20 per square foot of building area.
Miscellaneous - Invariably, miscellaneous expenses occur in the
operation of a property such as the subject. These include
advertising and promotional expenses, professional fees, brochures,
and a contingency for the unknown. The data available from the
market indicate allowances for miscellaneous expenses ranging from
$0.01 to $0.08 per square foot of rentable area. For this analysis,
miscellaneous operating expenses are stabilized at $0.05 per
rentable square foot of building area.
Operating expenses are forecasted to increase at an average annual rate of
3.5 percent over the investment holding period. The forecast of projected
growth rates in all categories of expense reflect typical investor
expectations as noted in the Cushman & Wakefield Investor Survey, which
has been placed among the Addenda to this report. Except where noted, our
projected growth rates for the various types of expense categories
generally do not attempt to reflect growth rates for any individual year,
but rather the long term trend over the period of analysis.
Other Non-Operating Expenses - As previously described herein, the
weighted cost of tenant alterations is projected to be $0.34 per square
foot in the initial year of the investment holding period. On a weighted
average basis, leasing commissions are equal to 2.84 percent of total
effective base rental income over the term as well. Reserves for
replacements are stabilized at $0.10 per square foot of rentable building
area. Other non-operating expenses are forecasted to increase at an
average annual rate of 3.5 percent over the investment holding period.
================================================================================
-76-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
This indication of value produces an implied "going-in" overall
capitalization rate of 10.73 percent based upon the initial year's net
operating income of $370,152. The implied "going-in" overall
capitalization rate is consistent the parameters set by the above
investor's surveys. Additionally, based upon a market value of $3,450,000
and a projected future gross reversionary value of approximately
$4,368,000, a compound annual rate of appreciation of 2.39 percent is
computed. Finally, with regard to the composition of the internal rate of
return employed here, approximately 57 percent of the expected yield is
from cash flows while the balance is attributable to property reversion.
This percentage falls within the generally accepted relevant range of most
current real estate investors.
6845 Snowdrift Road
This property is a 93,000 square foot single story warehouse building
which is 100 percent occupied by two tenants. These leases are scheduled to
rollover on August 31, 1997 and February 28, 1998. Thus, there is some leasing
risk inherent in this property over the near term. On the opposing page is a
presentation of the cash flows which an informed investor could reasonably
expect 6845 Snowdrift Road to generate over an eleven year time horizon. This
additional year allows for a stabilized holding period of ten years. These cash
flows are based upon the following analysis:
Base Rental Income - The existing lease contracts at the subject property
provide a current base rental income of $4.01 per square foot of gross
building area. A copy of the rent roll over the subject property is
included among the Addenda to this report.
The rental data previously analyzed for 7055 Ambassador Drive are
applicable to this property as well. As noted, rental rates on space
comparable to the subject range from $3.50 per square foot up to $4.66 per
square foot on a net basis. After analyzing the rents now being paid for
comparable space and services in the competitive open market, it is our
conclusion that the current average economic rent for the subject is $4.25
per square foot on a net basis. Economic rent is forecasted to increase by
3.5 percent throughout the projection period.
Expense Reimbursements - Consistent with market leasing practice for this
type of real estate, the tenant in a property like the subject is
responsible for certain expenses incurred annually in the operation and
ownership of the investment. These expenses include real estate taxes,
insurance premiums, and common area maintenance. Future leases in the
subject property are projected to be structured in a similar fashion.
Allowance for Vacancy and Credit Loss - We have deducted 3 percent from
gross revenues as a global allowance for the non-payment of rent or
expenses by a lessee. Additionally, our analysis over time has
incorporated a lag vacancy allowance which provides for "down time"
between the expiration of an existing lease and the commencement of a new
lease. The weighted average lag vacancy utilized between lease expirations
in this report is two months as previously described.
================================================================================
-78-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Historical Operating Statements
6845 Snowdrift Road
Building NRA 93,000 SF
<TABLE>
<CAPTION>
1994 Actual 1995 Actual 1996 Actual BAP Budget 1997
-------------------- ----------------- ------------------ ------------------
Item Amount Per SF Amount Per SF Amount Per SF Amount Per SF
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues:
Base Rents $ 290,703 $ 3.13 $ 358,028 $ 3.85 $ 367,328 $ 3.95 $ 371,062 $ 3.99
Rents from Affiliates 17,582 0.19 745 0.01 -- -- -- --
Operating Escalation 7,872 0.08 10,741 0.12 86,950 0.93 79,860 0.86
Hotel Operations -- -- -- -- -- -- -- --
Marina Rentals -- -- -- -- -- -- -- --
Other -- -- -- -- -- -- -- --
-------------------------------------------------------------------------------------------
Total operating revenues $ 316,157 $ 3.40 $ 369,514 $ 3.97 $ 454,278 $ 4.88 $ 450,922 $ 4.85
-------------------------------------------------------------------------------------------
Operating expenses:
Administrative and general:
Management fees $ 8,775 $ 0.09 $ 10,741 $ 0.12 $ 11,020 $ 0.12 $ 11,134 $ 0.12
Salaries 7,372 0.08 4,967 0.05 5,938 0.06 5,913 0.06
Other administrative 8,554 0.09 1,418 0.02 5,174 0.06 4,560 0.05
Bad debts 138 0.00 -- -- -- -- -- --
Professional services 258 0.00 555 0.01 492 0.01 2,252 0.02
Utilities (15) (0.00) -- -- 400 0.00 344 0.00
Maintenance labor -- -- -- -- -- -- 417 0.00
Outside contracts 2,612 0.03 69 0.00 22,054 0.24 16,012 0.17
Cleaning -- -- -- -- -- -- -- --
Maintenance materials 1,154 0.01 1,133 0.01 2,514 0.03 1,071 0.01
Real estate and other taxes 6,678 0.07 -- -- 26,873 0.29 39,574 0.43
Advertising 3,709 0.04 3,135 0.03 2,663 0.03 4,536 0.05
Lease expense, land -- -- -- -- -- -- 1,131 0.01
Other 195 0.00 161 0.00 153 0.00 -- --
-------------------------------------------------------------------------------------------
Total operating expenses $ 39,430 $ 0.42 $ 22,208 $ 0.24 $ 77,281 $ 0.83 $ 86,944 $ 0.93
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
NET OPERATING INCOME $ 276,727 $ 2.98 $ 347,306 $ 3.73 $ 376,997 $ 4.05 $ 363,978 $ 3.91
===========================================================================================
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Income Capitalization Approach
================================================================================
Operating Expenses - We were provided with historic operating expense data
for the subject property. We have also been provided with current
ownership's operating pro forma. On the opposing page is a presentation of
the historical operating expenses for the subject building. The following
is a brief summary of the projected expenses for the subject property.
Real Estate Taxes - In the Real Estate Tax and Assessments section
of this report, we document the level of assessment for each of the
subject buildings that make up the subject property. In the initial
year of investment, (FY 1997), the real estate tax expense for 6845
Snowdrift Road is estimated to be $40,478 or $0.44 per square foot.
Insurance - Based upon historical experience, the cost for hazard
and liability insurance has ranged from $.02 to $.09 per square
foot. We have stabilized insurance expense at $4,628 in the first
year of the investment or $0.05 per square foot. This is consistent
with ownership's budget projections.
Common Area Charges - This expense category includes all common
building and yard maintenance such as lawn service and trash
collection that the landlord contracts and the tenant reimburses.
Given the age and condition of the building in the initial year of
investment, (FY 1997), the common area charges expense is estimated
at $0.26 per square foot of gross building area, which is consistent
with experience.
Management - The fee for providing professional management services
includes collections, supervision and the preparation of all
budgets. According to the historical operating expenses, the cost
for professional management has ranged from $0.05 to $0.08 per
square foot of rentable building area. It must be noted that the
this building was managed as part of a portfolio and ownership was
able to capitalize on economies of scale. As a "stand alone"
property in the initial fiscal year, this amount is forecasted to be
$.12 per square foot of building area.
Miscellaneous - Invariably, miscellaneous expenses occur in the
operation of a property such as the subject. These include
advertising and promotional expenses, professional fees, brochures,
and a contingency for the unknown. The data available from the
market indicate allowances for miscellaneous expenses ranging from
$0.01 to $0.08 per square foot of rentable area. For this analysis,
miscellaneous operating expenses are stabilized at $0.03 per
rentable square foot of building area.
Operating expenses are forecasted to increase at an average annual rate of
3.5 percent over the investment holding period. The forecast of projected
growth rates in all categories of expense reflect typical investor
expectations as noted in the Cushman & Wakefield Investor Survey, which
has been placed among the Addenda to this report. Except where noted, our
projected growth rates for the various types of expense categories
generally do not attempt to reflect growth rates for any individual year,
but rather the long term trend over the period of analysis.
================================================================================
-79-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Other Non-Operating Expenses - The weighted cost of tenant alterations is
projected to be $0.51 per square foot in the initial year of the
investment holding period. This figure reflects an allowance of $1.00 per
square foot for a turnover tenant to allow for the possible construction
of office space. As noted elsewhere, there currently are no office
finishes in this building. On a weighted average basis, leasing
commissions are equal to 2.84 percent of total effective base rental
income over the term as well. Reserves for replacements are stabilized at
$0.10 per square foot of rentable building area. Other non-operating
expenses are forecasted to increase at an average annual rate of 3.5
percent over the investment holding period.
Terminal Capitalization Rate - At the end of the assumed investment
holding period, it is our projection that the subject property would
most likely be sold at the end of the 10th year of the holding period
for an amount equal to what would be the next year's net operating income
capitalized at an overall rate of 11.0 percent. An 11.0 percent terminal
capitalization rate is utilized in this analysis as it reflects current
local market levels for an asset of this type plus a premium for the risk
of unforeseen events or trends over time. The 12th year's computed net
operating income is employed at this point as it would be the first
received by a new purchaser of the subject property. In this analysis,
then, a current investor would dispose of the subject property at the end
of the projected holding period for an amount equal to $4,596,000 or
$49.42 per square foot of building area.
Transaction Costs - From the projected $4,596,000 reversion to an investor
in the subject property, we have deducted a total of $184,000 to account
for the various transaction costs associated with the sale of an asset of
this type. These costs consist of 4 percent of the total disposition price
of the subject property as an allowance for transfer taxes, professional
fees, and other miscellaneous expenses that the seller pays at final
closing. Deducting these transaction costs from the computed reversion
renders pre-tax net proceeds of sale equal to $4,412,000 to be received by
an investor in the subject property at the end of the holding period.
Discount Rate - Considering the locational attributes, physical traits and
economic characteristics of the subject property, we believe a discount
rate ranging from 11.0 percent to 12.0 percent would be appropriate for
the subject property in light of the investment criteria previously
presented herein. Through such a sensitivity analysis, it can be seen that
the present value of the subject property varies from approximately
$3,427,000 to $3,663,000. This discounting process is summarized as
follows:
================================================================================
Investment Summary
================================================================================
Stabilized
Discount Rate Present Worth Unit Rate Overall Rate
================================================================================
11.00% $3,663,000 $39.39/SF 10.16%
11.25% $3,602,000 $38.73/SF 10.33%
11.50% $3,542,000 $38.09/SF 10.50%
11.75% $3,484,000 $37.46/SF 10.68%
12.00% $3,427,000 $36.85/SF 10.86%
================================================================================
================================================================================
-80-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
20005 - 6670 GRANT WAY
ANNUAL CASH FLOW REPORT
BEGINNING 7/1/97 FOR 14 YEARS
<TABLE>
<CAPTION>
FY1998 FY1999 FY2000 FY2001 FY2002 FY2003 FY2004
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME
- ------
MINIMUM RENT:
GROSS RENTS 247,809 331,809 337,616 343,524 349,536 383,695 406,702
LESS LAG VACANCY 0 0 0 0 0 (64,924) 0
------ ------- ------- ------- ------- ------- -------
TOTAL MINIMUM RENT 247,809 331,809 337,616 343,524 349,536 318,771 406,702
RECOVERIES:
OPERATING EXPENSES 49,682 68,171 70,557 73,026 75,582 65,414 80,965
------ ------- ------- ------- ------- ------- -------
TOTAL RECOVERIES 49,682 68,171 70,557 73,026 75,582 65,414 80,965
------ ------- ------- ------- ------- ------- -------
GROSS RENTAL
INCOME 297,491 399,980 408,173 416,550 425,118 384,185 487,667
CREDIT LOSS (8,925) (11,999) (12,245) (12,496) (12,754) (11,526) (14,630))
------ ------- ------- ------- ------- ------- -------
TOTAL INCOME 288,566 387,981 395,928 404,054 412,364 372,659 473,037
EXPENSES
- --------
INSURANCE 4,151 4,297 4,447 4,603 4,764 4,931 5,103
MANAGEMENT FEE 7,640 7,908 8,185 8,471 8,768 9,074 9,392
REAL ESTATE TAXES 31,825 32,939 34,092 35,285 36,520 37,799 39,122
OTHER 2,225 2,303 2,384 2,467 2,554 2,643 2,735
COMMON AREA MAINT 22,248 23,027 23,833 24,667 25,530 26,424 27,349
------ ------- ------- ------- ------- ------- -------
TOTAL EXPENSES 68,089 70,474 72,941 75,493 78,136 80,871 83,701
------- ------- ------- ------- ------- ------- -------
NET OPERATING
INCOME 220,477 317,507 322,987 328,561 334,228 291,788 389,336
ALTERATIONS 145,770 0 0 0 0 91,834 0
COMMISSIONS 71,330 0 0 0 0 59,290 0
RESERVES 7,289 7,544 7,808 8,081 8,364 8,656 8,959
------ ------- ------- ------- ------- ------- -------
CASH FLOW (3,912) 309,963 315,179 320,480 325,864 132,008 380,377
<CAPTION>
FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME
- ------
MINIMUM RENT:
GROSS RENTS 413,819 421,061 428,430 455,496 481,638 490,066 498,643
LESS LAG VACANCY 0 0 0 (79,808) 0 0 0
------- ------- ------- ------- ------- ------- -------
TOTAL MINIMUM RENT 413,819 421,061 428,430 375,688 481,638 490,066 498,643
RECOVERIES:
OPERATING EXPENSES 83,799 86,732 89,768 77,158 96,161 99,527 103,010
------- ------- ------- ------- ------- ------- -------
TOTAL RECOVERIES 83,799 86,732 89,768 77,158 96,161 99,527 103,010
------- ------- ------- ------- ------- ------- -------
GROSS RENTAL
INCOME 497,618 507,793 518,198 452,846 577,799 589,593 601,653
CREDIT LOSS (14,929) (15,234) (15,546) (13,585) (17,334) (17,688) (18,050)
------- ------- ------- ------- ------- ------- -------
TOTAL INCOME 482,689 492,559 502,652 439,261 560,465 571,905 583,603
EXPENSES
- --------
INSURANCE 5,282 5,467 5,658 5,856 6,061 6,273 6,493
MANAGEMENT FEE 9,721 10,061 10,413 10,778 11,155 11,545 11,949
REAL ESTATE TAXES 40,491 41,908 43,375 44,893 46,464 48,090 49,773
OTHER 2,831 2,930 3,033 3,139 3,249 3,363 3,480
COMMON AREA MAINT 28,306 29,297 30,322 31,383 32,482 33,618 34,795
------- ------- ------- ------- ------- ------- -------
TOTAL EXPENSES 86,631 89,663 92,801 96,049 99,411 102,889 106,490
------- ------- ------- ------- ------- ------- -------
NET OPERATING
INCOME 396,058 402,896 409,851 343,212 461,054 469,016 477,113
ALTERATIONS 0 0 0 109,070 0 0 0
COMMISSIONS 0 0 0 70,418 0 0 0
RESERVES 9,273 9,598 9,933 10,281 10,641 11,013 11,399
------- ------- ------- ------- ------- ------- -------
CASH FLOW 386,785 393,298 399,918 153,443 450,413 458,003 465,714
</TABLE>
<PAGE>
Income Capitalization Approach
Using an 11.50 percent internal rate of return, our discounted cash flow
model computes to a present worth of $3,542,000 which we round to
$3,550,000 as an indication of market value for 6845 Snowdrift Road via
the Income Capitalization Approach.
This indication of value produces an implied stabilized "going-in" overall
capitalization rate of 10.48 percent based upon the initial year's net
operating income of $372,043. The implied "going-in" overall
capitalization rate is consistent the parameters set by the above
investor's surveys. Additionally, based upon a market value of $3,550,000
and a projected future gross reversionary value of approximately
$4,596,000, a compound annual rate of appreciation of 2.38 percent is
computed. Finally, with regard to the composition of the internal rate of
return employed here, approximately 58 percent of the expected yield is
from cash flows while the balance is attributable to property reversion.
This percentage falls within the generally accepted relevant range of most
current real estate investors.
6670 Grant Way
This property is a 72,885 square foot single story warehouse building
currently occupied by a subtenant. The primary lease over this property expires
on July 31, 1997 and will not be renewed. Thus, there is some leasing risk
inherent in this property over the near term. On the opposing page is a
presentation of the cash flows which an informed investor could reasonably
expect 6670 Grant Way to generate over an eleven year time horizon. This
additional year allows for a stabilized holding period of ten years following
the releasing of the property. These cash flows are based upon the following
analysis:
Base Rental Income - The existing lease contracts at the subject property
provide a current base rental income of $4.80 per square foot of gross
building area. A copy of the rent roll over the subject property is
included among the Addenda to this report.
The rental data previously analyzed for 7055 Ambassador Drive are
applicable to this property as well. As noted, rental rates on space
comparable to the subject range from $3.50 per square foot up to $4.66 per
square foot on a net basis. After analyzing the rents now being paid for
comparable space and services in the competitive open market, it is our
conclusion that the current average economic rent for the subject is $4.50
per square foot on a net basis. This conclusion is reflective of the
higher than typical percentage of finished area at the subject property.
Economic rent is forecasted to increase by 3.5 percent throughout the
projection period.
Absorption - At present, the subject is leased as described through July,
1997. In our analysis, we have projected that the vacated building will be
released by November, 1997 for a five year term at the economic rent
indicated previously. We believe this reflects the thinking of a
knowledgeable and realistic investor in the current environment and is
consistent with the level of activity experienced at the subject property
over the recent past.
================================================================================
-81-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Historical Operating Statements
6670 Grant Way
Building NRA 72,885 SF
<TABLE>
<CAPTION>
1994 Actual 1995 Actual 1996 Actual BAP Budget 1997
-------------------- ----------------- ------------------ ------------------
Item Amount Per SF Amount Per SF Amount Per SF Amount Per SF
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues:
Base Rents $ 313,405 $ 4.30 $ 345,203 $ 4.74 $ 349,848 $ 4.80 $ 250,186 $ 3.43
Rents from Affiliates 932 0.01 932 0.01 -- -- -- --
Operating Escalation -- -- -- -- 54,583 0.75 49,380 0.68
Hotel Operations -- -- -- -- -- -- -- --
Marina Rentals -- -- -- -- -- -- -- --
Other 9,184 0.13 4,592 0.06 9,828 0.13 13,759 0.19
-------------------------------------------------------------------------------------------
Total operating revenues $ 323,521 $ 4.44 $ 350,727 $ 4.81 $ 414,259 $ 5.68 $ 313,325 $ 4.30
-------------------------------------------------------------------------------------------
Operating expenses:
Administrative and general:
Management fees $ 6,287 $ 0.09 $ 6,924 $ 0.09 $ 6,078 $ 0.08 $ 7,509 $ 0.10
Salaries 5,738 0.08 6,378 0.09 6,279 0.09 5,913 0.08
Other administrative 8,635 0.12 4,797 0.07 4,923 0.07 4,080 0.06
Bad debts 882 0.01 (882) (0.01) -- -- -- --
Professional services -- -- 2,218 0.03 27 0.00 2,252 0.03
Utilities -- -- -- -- -- -- 6,150 0.08
Maintenance labor -- -- -- -- -- -- 318 0.00
Outside contracts 321 0.00 (272) (0.00) 16,790 0.23 12,300 0.17
Cleaning -- -- -- -- -- -- -- --
Maintenance materials 25 0.00 3,138 0.04 1,728 0.02 2,384 0.03
Real estate and other taxes -- -- -- -- 21,077 0.29 31,038 0.43
Advertising 2,949 0.04 2,688 0.04 6,078 0.08 4,311 0.06
Lease expense, land -- -- -- -- -- -- 1,413 0.02
Other 207 0.00 166 0.00 153 0.00 -- --
-------------------------------------------------------------------------------------------
Total operating expenses $ 25,044 $ 0.34 $ 25,155 $ 0.35 $ 67,550 $ 0.93 $ 77,668 $ 1.07
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
NET OPERATING INCOME $ 298,477 $ 4.10 $ 325,572 $ 4.47 $ 346,709 $ 4.76 $ 235,657 $ 3.23(1)
===========================================================================================
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: (1) Existing tenant's lease expires on 7/31/97. BAP Budget assumes
downtime and lease-up costs.
<PAGE>
Income Capitalization Approach
================================================================================
Expense Reimbursements - Consistent with market leasing practice for this
type of real estate, the tenant in a property like the subject is
responsible for certain expenses incurred annually in the operation and
ownership of the investment. These expenses include real estate taxes,
insurance premiums, and common area maintenance. Future leases in the
subject property are projected to be structured in a similar fashion.
Allowance for Vacancy and Credit Loss - We have deducted 3 percent from
gross revenues as a global allowance for the non-payment of rent or
expenses by a lessee. Additionally, our analysis over time has
incorporated a lag vacancy allowance which provides for "down time"
between the expiration of an existing lease and the commencement of a new
lease. The weighted average lag vacancy utilized between lease expirations
in this report is two months as previously described.
Operating Expenses - We were provided with historic operating expense data
for the subject property. We have also been provided with current
ownership's operating pro forma. On the opposing page is a presentation of
the historical operating expenses for the subject building. The following
is a brief summary of the projected expenses for the subject property.
Real Estate Taxes - In the Real Estate Tax and Assessments section
of this report, we document the level of assessment for each of the
subject buildings that make up the subject property. In the initial
year of investment, (FY 1997), the real estate tax expense for 6670
Grant Way is estimated to be $31,825 or $0.44 per square foot.
Insurance - Based upon historical experience, the cost for hazard
and liability insurance has ranged from $.07 to $.12 per square
foot. We have stabilized insurance expense at $4,151 in the first
year of the investment or $0.06 per square foot. This is consistent
with ownership's budget projections.
Common Area Charges - This expense category includes all common
building and yard maintenance such as lawn service and trash
collection that the landlord contracts and the tenant reimburses.
Given the age and condition of the building in the initial year of
investment, (FY 1997), the common area charges expense is estimated
at $0.31 per square foot of gross building area, which is consistent
with experience.
Management - The fee for providing professional management services
includes collections, supervision and the preparation of all
budgets. According to the historical operating expenses, the cost
for professional management has ranged from $0.08 to $0.09 per
square foot of rentable building area. It must be noted that the
this building was managed as part of a portfolio and ownership was
able to capitalize on economies of scale. As a "stand alone"
property in the initial fiscal year, this amount is forecasted to be
$.11 per square foot of building area.
================================================================================
-82-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Miscellaneous - Invariably, miscellaneous expenses occur in the
operation of a property such as the subject. These include
advertising and promotional expenses, professional fees, brochures,
and a contingency for the unknown. The data available from the
market indicate allowances for miscellaneous expenses ranging from
$0.01 to $0.08 per square foot of rentable area. For this analysis,
miscellaneous operating expenses are stabilized at $0.03 per
rentable square foot of building area.
Operating expenses are forecasted to increase at an average annual rate of
3.5 percent over the investment holding period. The forecast of projected
growth rates in all categories of expense reflect typical investor
expectations as noted in the Cushman & Wakefield Investor Survey, which
has been placed among the Addenda to this report. Except where noted, our
projected growth rates for the various types of expense categories
generally do not attempt to reflect growth rates for any individual year,
but rather the long term trend over the period of analysis.
Other Non-Operating Expenses - The weighted cost of tenant alterations is
projected to be $0.34 per square foot in the initial year of the
investment holding period. On a weighted average basis, leasing
commissions are equal to 2.84 percent of total effective base rental
income over the term as well. Reserves for replacements are stabilized at
$0.10 per square foot of rentable building area. Other non-operating
expenses are forecasted to increase at an average annual rate of 3.5
percent over the investment holding period.
Terminal Capitalization Rate - At the end of the assumed investment
holding period, it is our projection that the subject property would most
likely be sold at the end of the 10th year of the holding period for an
amount equal to what would be the next year's net operating income
capitalized at an overall rate of 11.0 percent. An 11.0 percent terminal
capitalization rate is utilized in this analysis as it reflects current
local market levels for an asset of this type plus a premium for the risk
of unforeseen events or trends over time. The 12th year's computed net
operating income is employed at this point as it would be the first
received by a new purchaser of the subject property. In this analysis,
then, a current investor would dispose of the subject property at the end
of the projected holding period for an amount equal to $4,191,000 or
$57.50 per square foot of building area.
Transaction Costs - From the projected $4,191,000 reversion to an investor
in the subject property, we have deducted a total of $167,000 to account
for the various transaction costs associated with the sale of an asset of
this type. These costs consist of 4 percent of the total disposition price
of the subject property as an allowance for transfer taxes, professional
fees, and other miscellaneous expenses that the seller pays at final
closing. Deducting these transaction costs from the computed reversion
renders pre-tax net proceeds of sale equal to $4,023,000 to be received by
an investor in the subject property at the end of the holding period.
================================================================================
-83-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
20007 - 7010 SNOWDRIFT ROAD
ANNUAL CASH FLOW REPORT
BEGINNING 7/1/97 FOR 14 YEARS
<TABLE>
<CAPTION>
FY1998 FY1999 FY2000 FY2001 FY2002 FY2003 FY2004
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME
- ------
MINIMUM RENT:
GROSS RENTS 317,477 379,878 391,475 403,441 415,792 421,953 424,620
LESS LAG VACANCY 0 0 0 0 0 (69,379) 0
FREE RENT (57,609) 0 0 0 0 0 0
------- ------- ------- ------- ------- ------- -------
TOTAL MINIMUM RENT 259,868 379,878 391,475 403,441 415,792 352,574 424,620
RECOVERIES:
OPERATING EXPENSES 87,657 127,676 132,510 137,514 138,139 118,215 151,548
------- ------- ------- ------- ------- ------- -------
TOTAL RECOVERIES 87,657 127,676 132,510 137,514 138,139 118,215 151,548
------- ------- ------- ------- ------- ------- -------
GROSS RENTAL
INCOME 347,525 507,554 523,985 540,955 553,931 470,789 576,168
CREDIT LOSS (10,426) (15,227) (15,720) (16,229) (16,618) (14,124) (17,285))
------- ------- ------- ------- ------- ------- -------
TOTAL INCOME 337,099 492,327 508,265 524,726 537,313 456,665 558,883
EXPENSES
- --------
UTILITIES 8,401 8,696 9,000 9,315 9,641 9,978 10,328
INSURANCE 6,032 6,243 6,461 6,687 6,922 7,164 7,415
MANAGEMENT FEE 16,813 20,164 20,870 21,600 22,356 23,138 23,948
REAL ESTATE TAXES 32,335 33,467 34,638 35,851 37,105 38,404 39,748
MAINTENANCE 46,124 69,567 72,001 74,521 72,575 73,222 80,570
OTHER 1,680 1,739 1,800 1,863 1,928 1,995 2,065
------- ------- ------- ------- ------- ------- -------
TOTAL EXPENSES 111,385 139,876 144,770 149,837 150,527 153,901 164,074
------- ------- ------- ------- ------- ------- -------
NET OPERATING
INCOME 225,714 352,451 363,495 374,889 386,786 302,764 394,809
ALTERATIONS 660,580 0 0 0 0 302,361 0
COMMISSIONS 80,458 0 0 0 0 61,859 0
RESERVES 3,303 3,419 3,538 3,662 3,790 3,923 4,060
------- ------- ------- ------- ------- ------- -------
CASH FLOW (518,627) 349,032 359,957 371,227 382,996 (65,379) 390,749
<CAPTION>
FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME
- ------
MINIMUM RENT:
GROSS RENTS 432,050 439,612 447,304 478,483 505,440 514,285 523,286
LESS LAG VACANCY 0 0 0 (83,478) 0 0 0
FREE RENT 0 0 0 0 0 0 0
------- ------- ------- ------- ------- ------- -------
TOTAL MINIMUM RENT 432,050 439,612 447,304 395,005 505,440 514,285 523,286
RECOVERIES:
OPERATING EXPENSES 159,344 165,287 168,966 141,531 178,916 191,214 198,273
------- ------- ------- ------- ------- ------- -------
TOTAL RECOVERIES 159,344 165,287 168,966 141,531 178,916 191,214 198,273
------- ------- ------- ------- ------- ------- -------
GROSS RENTAL
INCOME 591,394 604,899 616,270 536,536 684,356 705,499 721,559
CREDIT LOSS (17,742) (18,147) (18,488) (16,096) (20,531) (21,165) (21,647)
------- ------- ------- ------- ------- ------- -------
TOTAL INCOME 573,652 586,752 597,782 520,440 663,825 684,334 699,912
EXPENSES
- --------
UTILITIES 10,689 11,063 11,450 11,851 12,266 12,695 13,140
INSURANCE 7,674 7,943 8,221 8,508 8,806 9,114 9,433
MANAGEMENT FEE 24,786 25,654 26,552 27,481 28,443 29,439 30,469
REAL ESTATE TAXES 41,139 42,579 44,069 45,612 47,208 48,861 50,571
MAINTENANCE 85,515 88,508 89,133 86,861 92,653 101,565 105,120
OTHER 2,137 2,212 2,290 2,370 2,453 2,538 2,627
------- ------- ------- ------- ------- ------- -------
TOTAL EXPENSES 171,940 177,959 181,715 182,683 191,829 204,212 211,360
------- ------- ------- ------- ------- ------- -------
NET OPERATING
INCOME 401,712 408,793 416,067 337,757 471,996 480,122 488,552
ALTERATIONS 0 0 0 360,953 0 0 0
COMMISSIONS 0 0 0 73,846 0 0 0
RESERVES 4,202 4,349 4,502 4,659 4,822 4,991 5,166
------- ------- ------- ------- ------- ------- -------
CASH FLOW 397,510 404,444 411,565 (101,701) 467,174 475,131 483,386
</TABLE>
<PAGE>
Income Capitalization Approach
================================================================================
Discount Rate - Considering the locational attributes, physical traits and
economic characteristics of the subject property, we believe a discount
rate ranging from 11.0 percent to 12.0 percent would be appropriate for
the subject property in light of the investment criteria previously
presented herein. Through such a sensitivity analysis, it can be seen that
the present value of the subject property varies from approximately
$2,723,000 to $2,925,000. This discounting process is summarized as
follows:
================================================================================
Investment Summary
================================================================================
Stabilized
Discount Rate Present Worth Unit Rate Overall Rate
================================================================================
11.00% $2,925,000 $40.13/SF 10.86%
11.25% $2,872,000 $39.40/SF 11.06%
11.50% $2,822,000 $38.76/SF 11.25%
11.75% $2,772,000 $38.03/SF 11.45%
12.00% $2,723,000 $37.36/SF 11.66%
================================================================================
Using an 11.50 percent internal rate of return, our discounted cash flow
model computes to a present worth of $2,825,000 which we round to
$2,850,000 as an indication of market value for 6670 Grant Way via the
Income Capitalization Approach.
This indication of value produces an implied stabilized "going-in" overall
capitalization rate of 11.14 percent based upon the initial year's net
operating income of $372,043. The implied "going-in" overall
capitalization rate is above the parameters set by the investor's survey
nut is reflective of the downtime in the initial year necessary to release
the property and its resulting impact on cash flow. Additionally, based
upon a market value of $2,850,000 and a projected future gross
reversionary value of approximately $4,191,000, a compound annual rate of
appreciation of 3.57 percent is computed. Finally, with regard to the
composition of the internal rate of return employed here, approximately 53
percent of the expected yield is from cash flows while the balance is
attributable to property reversion. This percentage falls within the
generally accepted relevant range of most current real estate investors.
7010 Snowdrift Road
This property is a 33,029 square foot, single story, Class A office
building. Formerly occupied by a single tenant, which vacated in March, 1997,
the building is now being leased on a multi-tenanted basis. As of the date of
appraisal, approximately 80 percent of the property had been released to two new
tenants. On the opposing page is a presentation of the cash flows which an
informed investor could reasonably expect 7010 Snowdrift Road to generate over a
thirteen year time horizon. The holding period is extended due to the potential
for having to release this building on a multi-tenanted basis should the current
tenant leave at year end. These cash flows are based upon the following
analysis:
================================================================================
-84-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Historical Operating Statements
7010 Snowdrift Road
Building NRA 41,075 SF
<TABLE>
<CAPTION>
1994 Actual 1995 Actual 1996 Actual BAP Budget 1997
-------------------- ----------------- ------------------ ------------------
Item Amount Per SF Amount Per SF Amount Per SF Amount Per SF
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues:
Base Rents $ 315,427 $ 7.68 $ 315,427 $ 7.68 $ 315,427 $ 7.68 $ 194,895 $ 4.74
Rents from Affiliates 1,677 0.04 1,304 0.03 -- -- -- --
Operating Escalation 24,143 0.59 25,630 0.62 30,635 0.75 34,394 0.84
Hotel Operations -- -- -- -- -- -- -- --
Marina Rentals -- -- -- -- -- -- -- --
Other -- -- 104 0.00 -- -- -- --
-------------------------------------------------------------------------------------------
Total operating revenues $ 341,247 $ 8.31 $ 342,465 $ 8.34 $ 346,062 $ 8.43 $ 229,289 $ 5.58
-------------------------------------------------------------------------------------------
Operating expenses:
Administrative and general:
Management fees $ 6,825 $ 0.17 $ 6,847 $ 0.17 $ 6,921 $ 0.17 $ 3,900 $ 0.09
Salaries 2,472 0.06 9,201 0.22 10,392 0.25 10,353 0.25
Other administrative 14,517 0.35 7,074 0.17 7,016 0.17 5,928 0.14
Bad debts -- -- -- -- -- -- -- --
Professional services 543 0.01 994 0.02 48 0.00 932 0.02
Utilities 2,657 0.06 2,021 0.05 1,597 0.04 10,741 0.26
Maintenance labor -- -- -- -- -- -- 157 0.00
Outside contracts 17,750 0.43 18,901 0.46 28,870 0.70 13,262 0.32
Cleaning -- -- -- -- -- -- 800 0.02
Maintenance materials 1,436 0.03 2,033 0.05 1,614 0.04 8,067 0.20
Real estate and other taxes 31,320 0.76 31,609 0.77 32,267 0.79 31,576 0.77
Advertising 1,132 0.03 2,337 0.06 6,065 0.15 4,098 0.10
Lease expense, land -- -- -- -- -- -- 1,979 0.05
Other 330 0.01 333 0.01 276 0.01 -- --
-------------------------------------------------------------------------------------------
Total operating expenses $ 78,982 $ 1.92 $ 81,350 $ 1.98 $ 95,066 $ 2.31 $ 91,793 $ 2.23
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
NET OPERATING INCOME $ 262,265 $ 6.39 $ 261,115 $ 6.36 $ 250,996 $ 6.11 $ 137,496 $ 3.35(1)
===========================================================================================
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: (1) Existing tenant's lease expires on 4/30/97. BAP Budget assumes
downtime and lease-up costs.
<PAGE>
Income Capitalization Approach
================================================================================
Base Rental Income - The existing lease contracts at the subject property
provide for the new tenants to pay a net rent equivalent to $11.14 per
square foot during the initial year of their tenure. Both leases call for
annual increases in base rent over their respective terms. Additionally, a
potential investor in the subject property would face the necessity of
releasing the remainder of the space, totaling 4,945 square feet.
The rental data previously analyzed for 7535 Windsor Drive are applicable
to this property as well. As noted, rental rates on space comparable to
the subject range from $10.50 per square foot on a net basis up to $15.50
per square foot on a gross basis plus electricity. After analyzing the
rents now being paid for comparable space and services in the competitive
open market, it is our conclusion that the current average economic rent
for it is $10.50 per square foot on a net basis. Economic rent is
forecasted to increase by 3.5 percent throughout the projection period. We
note that the new lease with Vitalink calls for a base rent of $11.50 per
square foot, net. However, this tenant obtained what has become an anomaly
in the local marketplace, namely free rent. The effective rent being paid
by this tenant is, as a result, closer to the projected market level.
Absorption - At present, the subject is approximately 80 percent leased as
described. In our analysis, we have projected that the remaining space
will be absorbed by a single tenant by October, 1997. We believe this
assumption reflects the thinking of a knowledgeable and realistic investor
in the current environment and is consistent with the level of activity
experienced at the subject property over the recent past.
Expense Reimbursements - The tenants in a property like the subject are
responsible for a pro rata share of certain expenses incurred annually in
the operation and ownership of the investment above an established base
amount. These expenses include real estate taxes, insurance premiums,
utilities, maintenance, administration, cleaning, management fees,
contract fees, and miscellaneous fees incurred. Future leases in the
subject property are projected to be structured in a similar fashion.
Allowance for Vacancy and Credit Loss - We have deducted 3 percent from
gross revenues as a global allowance for the non-payment of rent or
expenses by a lessee. Additionally, our analysis over time has
incorporated a lag vacancy allowance which provides for "down time"
between the expiration of an existing lease and the commencement of a new
lease. The weighted average lag vacancy utilized between lease expirations
in this report is two months as previously described.
Operating Expenses - On the opposing page is a presentation of historic
operating expense data for the subject property and current ownership's
operating pro forma expense data. As can be seen, historic operating
expenses at the subject property have reflected the single tenancy at the
property as well as the tenant's direct payment of much of the operating
costs associated with its ownership. Ownership budgets operating expenses
at $2.23 per square foot for 1997 assuming the presence of a single tenant
under a net lease structure. Given our releasing assumption, we project
operating expenses, including taxes to be $4.00 per square foot at the
subject property. Operating expenses are forecasted to increase at an
average annual rate of 3.5 percent over the investment holding period.
================================================================================
-85-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Other Non-Operating Expenses - The initial cost to retrofit the building
for multi-tenanted occupancy is projected to be $20.00 per square foot.
As previously described herein, the weighted cost of tenant alterations is
projected to be $8.75 per square foot in the initial year of the
investment holding period. On a weighted average basis, leasing
commissions are equal to 2.84 percent of total effective base rental
income over the term as well. Reserves for replacements are stabilized at
$0.10 per square foot of rentable building area. Other non-operating
expenses are forecasted to increase at an average annual rate of 3.5
percent over the investment holding period.
Terminal Capitalization Rate - At the end of the assumed investment
holding period, it is our projection that the subject property would most
likely be sold at the end of the 11th year of the holding period for an
amount equal to what would be the next year's net operating income
capitalized at an overall rate of 11.0 percent. An 11.0 percent terminal
capitalization rate is utilized in this analysis as it reflects current
local market levels for an asset of this type plus a premium for the risk
of unforeseen events or trends over time. The 12th year's computed net
operating income is employed at this point as it would be the first
received by a new purchaser of the subject property. In this analysis,
then, a current investor would dispose of the subject property at the end
of the projected holding period for an amount equal to $4,291,000 or
$129.92 per square foot of building area.
Transaction Costs - From the projected $4,291,000 reversion to an investor
in the subject property, we have deducted a total of $172,000 to account
for the various transaction costs associated with the sale of an asset of
this type. These costs consist of 4 percent of the total disposition price
of the subject property as an allowance for transfer taxes, professional
fees, and other miscellaneous expenses that the seller pays at final
closing. Deducting these transaction costs from the computed reversion
renders pre-tax net proceeds of sale equal to $4,119,000 to be received by
an investor in the subject property at the end of the holding period.
Discount Rate - Considering the locational attributes, physical traits and
economic characteristics of the subject property, we believe a discount
rate ranging from 11.0 percent to 12.0 percent would be appropriate for
the subject property in light of the investment criteria previously
presented herein. Through such a sensitivity analysis, it can be seen that
the present value of the subject property varies from approximately
$2,262,000 to $2,455,000. This discounting process is summarized as
follows:
================================================================================
Investment Summary
================================================================================
Discount Rate Present Worth Unit Rate
================================================================================
11.00% $2,455,000 $74.33/SF
11.25% $2,405,000 $72.81/SF
11.50% $2,356,000 $71.33/SF
11.75% $2,309,000 $69.90/SF
12.00% $2,262,000 $68.49/SF
================================================================================
================================================================================
-86-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
20000 - 7020 SNOWDRIFT ROAD
ANNUAL CASH FLOW REPORT
BEGINNING 7/1/97 FOR 14 YEARS
<TABLE>
<CAPTION>
FY1998 FY1999 FY2000 FY2001 FY2002 FY2003 FY2004
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME
- ------
MINIMUM RENT:
GROSS RENTS 146,602 148,797 144,321 148,123 172,019 178,871 182,373
LESS LAG VACANCY 0 (7,626) 0 0 (21,516) 0 (4,529)
------- ------- ------- ------- ------- ------- -------
TOTAL MINIMUM RENT 146,602 141,171 144,321 148,123 150,503 178,871 177,844
RECOVERIES:
OPERATING EXPENSES 43,252 42,677 46,332 47,954 43,740 51,369 51,928
------- ------- ------- ------- ------- ------- -------
TOTAL RECOVERIES 43,252 42,677 46,332 47,954 43,740 51,369 51,928
------- ------- ------- ------- ------- ------- -------
GROSS RENTAL
INCOME 189,854 183,848 190,653 196,077 194,243 230,240 229,772
CREDIT LOSS (5,696) (5,515) (5,720) (5,882) (5,827) (6,907) (6,893)
------- ------- ------- ------- ------- ------- -------
TOTAL INCOME 184,158 178,333 184,933 190,195 188,416 223,333 222,879
EXPENSES
- --------
INSURANCE 2,686 2,780 2,878 2,978 3,082 3,190 3,302
MANAGEMENT FEE 8,423 8,718 9,023 9,339 9,665 10,004 10,354
REAL ESTATE TAXES 17,402 18,011 18,642 19,294 19,970 20,668 21,392
COMMON AREA MAINT 14,741 15,256 15,790 16,343 16,915 17,507 18,120
OTHER 2,106 2,180 2,256 2,335 2,417 2,502 2,589
------- ------- ------- ------- ------- ------- -------
TOTAL EXPENSES 45,358 46,945 48,589 50,289 52,049 53,871 55,757
------- ------- ------- ------- ------- ------- -------
NET OPERATING
INCOME 138,800 131,388 136,344 139,906 136,367 169,462 167,122
ALTERATIONS 0 6,472 0 0 18,261 0 0
COMMISSIONS 0 6,729 0 0 18,985 0 0
RESERVES 4,139 4,284 4,434 4,589 4,750 4,916 5,088
------- ------- ------- ------- ------- ------- -------
CASH FLOW 134,661 113,903 131,910 135,317 94,371 164,546 162,034
<CAPTION>
FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME
- ------
MINIMUM RENT:
GROSS RENTS 189,557 192,794 207,205 217,244 221,046 229,749 234,022
LESS LAG VACANCY (4,529) 0 (25,554) 0 0 (10,756) 0
------- ------- ------- ------- ------- ------- -------
TOTAL MINIMUM RENT 185,028 192,794 181,651 217,244 221,046 218,993 234,022
RECOVERIES:
OPERATING EXPENSES 53,788 56,954 51,950 61,011 63,146 62,410 67,644
------- ------- ------- ------- ------- ------- -------
TOTAL RECOVERIES 53,788 56,954 51,950 61,011 63,146 62,410 67,644
------- ------- ------- ------- ------- ------- -------
GROSS RENTAL
INCOME 238,816 249,748 233,601 278,255 284,192 281,403 301,666
CREDIT LOSS (7,164) (7,492) (7,008) (8,348) (8,526) (8,442) (9,050)
------- ------- ------- ------- ------- ------- -------
TOTAL INCOME 231,652 242,256 226,593 269,907 275,666 272,961 292,616
EXPENSES
- --------
INSURANCE 3,418 3,537 3,661 3,789 3,922 4,059 4,201
MANAGEMENT FEE 10,716 11,091 11,480 11,881 12,297 12,728 13,173
REAL ESTATE TAXES 22,141 22,916 23,718 24,548 25,407 26,296 27,216
COMMON AREA MAINT 18,754 19,410 20,090 20,793 21,521 22,274 23,054
OTHER 2,680 2,773 2,871 2,971 3,075 3,183 3,294
------- ------- ------- ------- ------- ------- -------
TOTAL EXPENSES 57,709 59,727 61,820 63,982 66,222 68,540 70,938
------- ------- ------- ------- ------- ------- -------
NET OPERATING
INCOME 173,943 182,529 164,773 205,925 209,444 204,421 221,678
ALTERATIONS 7,687 0 22,447 0 0 9,129 0
COMMISSIONS 7,991 0 23,337 0 0 9,491 0
RESERVES 5,266 5,450 5,641 5,838 6,043 6,254 6,473
------- ------- ------- ------- ------- ------- -------
CASH FLOW 152,999 177,079 113,348 200,087 203,401 179,547 215,205
</TABLE>
<PAGE>
Income Capitalization Approach
================================================================================
Mindful of the leasing costs to be incurred, as well as the near term risk
associated with the lease-up of the vacant space, we believe a discount
rate which falls toward the upper end of the range now required in the
marketplace to be appropriate in this case. Using a 11.75 percent internal
rate of return, our discounted cash flow model computes to a present worth
of $2,309,000 which we round to $2,300,000 for an indication of market
value for 7010 Snowdrift Road via the Income Capitalization Approach. No
meaningful "going-in" overall capitalization rate can be discerned.
Additionally, based upon a market value of $2,300,000 and a projected
future gross reversionary value of approximately $4,291,000, a compound
annual rate of appreciation of 5.83 percent is computed. This higher than
typical rate of growth results from the dramatic growth in cash flow
during the initial years of the holding period. Finally, with regard to
the composition of the internal rate of return employed here,
approximately 51 percent of the expected yield is from cash flows while
the balance is attributable to property reversion. These percentages fall
within the generally accepted relevant range of most current real estate
investors.
7020 Snowdrift Road
This property is an 41,390 square foot single story warehouse building
which is 100 percent occupied by two tenants. On the opposing page is a
presentation of the cash flows which an informed investor could reasonably
expect 7020 Snowdrift Road to generate over a ten year time horizon. These cash
flows are based upon the following analysis:
Base Rental Income - The existing lease contracts at the subject property
provide a current base rental income of $3.44 per square foot of gross
building area. Both also provide for annual increases over the remaining
term. A copy of the rent roll over the subject property is included among
the Addenda to this report.
The rental data previously analyzed for 7055 Ambassador Drive are
applicable to this property as well. As noted, rental rates on space
comparable to the subject range from $3.50 per square foot up to $4.66 per
square foot on a net basis. After analyzing the rents now being paid for
comparable space and services in the competitive open market, it is our
conclusion that the current average economic rent for the subject is $3.75
per square foot on a net basis. Economic rent is forecasted to increase by
3.5 percent throughout the projection period.
Expense Reimbursements - Consistent with market leasing practice for this
type of real estate, the tenant in a property like the subject is
responsible for certain expenses incurred annually in the operation and
ownership of the investment. These expenses include real estate taxes,
insurance premiums, and common area maintenance. Future leases in the
subject property are projected to be structured in a similar fashion.
Allowance for Vacancy and Credit Loss - We have deducted 3 percent from
gross revenues as a global allowance for the non-payment of rent or
expenses by a lessee. Additionally, our analysis over time has
incorporated a lag vacancy allowance which provides for "down time"
between the expiration of an existing lease and the commencement of a new
lease. The weighted average lag vacancy utilized between lease expirations
in this report is two months as previously described.
================================================================================
-87-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
7020 Snowdrift Road
Building NRA 41,390
<TABLE>
<CAPTION>
1994 Actual 1995 Actual 1996 Actual BAP Budget 1997
-------------------- ----------------- ------------------ ------------------
Item Amount Per SF Amount Per SF Amount Per SF Amount Per SF
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues:
Base Rents $ 154,633 $ 3.74 $ 134,909 $ 3.26 $ 132,588 $ 3.20 $ 143,962 $ 3.48
Rents from Affiliates 683 0.02 559 0.01 -- -- -- --
Operating Escalation 1,153 0.03 1,998 0.05 33,733 0.82 41,160 0.99
Hotel Operations -- -- -- -- -- -- -- --
Marina Rentals -- -- -- -- -- -- -- --
Other 4,192 0.10 25 0.00 1,147 0.03 1,606 0.04
-------------------------------------------------------------------------------------------
Total operating revenues $ 160,661 $ 3.88 $ 137,491 $ 3.32 $ 167,468 $ 4.05 $ 186,728 $ 4.51
-------------------------------------------------------------------------------------------
Operating expenses:
Administrative and general:
Management fees $ 3,130 $ 0.08 $ 2,749 $ 0.07 $ 4,168 $ 0.10 $ 4,068 $ 0.10
Salaries 5,128 0.12 3,750 0.09 4,454 0.11 4,440 0.11
Other administrative 5,194 0.13 1,884 0.05 3,090 0.07 2,640 0.06
Bad debts 16 0.00 18 0.00 -- -- -- --
Professional services 370 0.01 486 0.01 215 0.01 2,192 0.05
Utilities (198) (0.00) (461) (0.01) 830 0.02 1,160 0.03
Maintenance labor -- -- -- -- -- -- 194 0.00
Outside contracts 323 0.01 2,472 0.06 18,635 0.45 13,440 0.32
Cleaning -- -- 6 0.00 -- -- -- --
Maintenance materials 888 0.02 1,322 0.03 5,135 0.12 9,561 0.23
Real estate and other taxes -- -- -- -- 5,871 0.14 4,773 0.12
Advertising 2,103 0.05 3,686 0.09 2,254 0.05 2,928 0.07
Lease expense, land -- -- -- -- -- -- 848 0.02
Other 282 0.01 276 0.01 115 0.00 -- --
-------------------------------------------------------------------------------------------
Total operating expenses $ 17,236 $ 0.42 $ 16,188 $ 0.39 $ 44,767 $ 1.08 $ 46,244 $ 1.12
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
NET OPERATING INCOME $ 143,425 $ 3.47 $ 121,303 $ 2.93 $ 122,701 $ 2.96 $ 140,484 $ 3.39
===========================================================================================
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Income Capitalization Approach
================================================================================
Operating Expenses - We were provided with historic operating expense data
for the subject property. We have also been provided with current
ownership's operating pro forma. On the opposing page is a presentation of
the historical operating expenses for the subject building. The following
is a brief summary of the projected expenses for the subject property.
Real Estate Taxes - In the Real Estate Tax and Assessments section
of this report, we document the level of assessment for each of the
subject buildings that make up the subject property. In the initial
year of investment, (FY 1997), the real estate tax expense for 7020
Snowdrift Road is estimated to be $17,402 or $0.42 per square foot.
Insurance - Based upon historical experience, the cost for hazard
and liability insurance has ranged from $.05 to $.13 per square
foot. We have stabilized insurance expense at $4,811 in the first
year of the investment or $0.06 per square foot. This is consistent
with ownership's budget projections.
Common Area Charges - This expense category includes all common
building and yard maintenance such as lawn service and trash
collection that the landlord contracts and the tenant reimburses.
Given the age and condition of the building in the initial year of
investment, (FY 1997), the common area charges expense is estimated
at $0.35 per square foot of gross building area, which is consistent
with experience.
Management - The fee for providing professional management services
includes collections, supervision and the preparation of all
budgets. According to the historical operating expenses, the cost
for professional management has ranged from $0.07 to $0.10 per
square foot of rentable building area. It must be noted that the
this building was managed as part of a portfolio and ownership was
able to capitalize on economies of scale. As a "stand alone"
property in the initial fiscal year, this amount is forecasted to be
$.20 per square foot of building area.
Miscellaneous - Invariably, miscellaneous expenses occur in the
operation of a property such as the subject. These include
advertising and promotional expenses, professional fees, brochures,
and a contingency for the unknown. The data available from the
market indicate allowances for miscellaneous expenses ranging from
$0.01 to $0.08 per square foot of rentable area. For this analysis,
miscellaneous operating expenses are stabilized at $0.05 per
rentable square foot of building area.
Operating expenses are forecasted to increase at an average annual
rate of 3.5 percent over the investment holding period. The forecast
of projected growth rates in all categories of expense reflect
typical investor expectations as noted in the Cushman & Wakefield
Investor Survey, which has been placed among the Addenda to this
report. Except where noted, our projected growth rates for the
various types of expense categories generally do not attempt to
reflect growth rates for any individual year, but rather the long
term trend over the period of analysis.
================================================================================
-88-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
Other Non-Operating Expenses - As previously described herein, the
weighted cost of tenant alterations is projected to be $0.34 per
square foot in the initial year of the investment holding period. On
a weighted average basis, leasing commissions are equal to 2.84
percent of total effective base rental income over the term as well.
Reserves for replacements are stabilized at $0.10 per square foot of
rentable building area. Other non-operating expenses are forecasted
to increase at an average annual rate of 3.5 percent over the
investment holding period.
Terminal Capitalization Rate - At the end of the assumed investment
holding period, it is our projection that the subject property
would most likely be sold at the end of the 10th year of the
holding period for an amount equal to what would be the next year's
net operating income capitalized at an overall rate of 11.0
percent. An 11.0 percent terminal capitalization rate is utilized
in this analysis as it reflects current local market levels for an
asset of this type plus a premium for the risk of unforeseen events
or trends over time. The 11th year's computed net operating income
is employed at this point as it would be the first received by a new
purchaser of the subject property. In this analysis, then, a current
investor would dispose of the subject property at the end of the
projected holding period for an amount equal to $1,872,000 or $45.23
per square foot of building area.
Transaction Costs - From the projected $1,872,000 reversion to an
investor in the subject property, we have deducted a total of
$75,000 to account for the various transaction costs associated with
the sale of an asset of this type. These costs consist of 4 percent
of the total disposition price of the subject property as an
allowance for transfer taxes, professional fees, and other
miscellaneous expenses that the seller pays at final closing.
Deducting these transaction costs from the computed reversion
renders pre-tax net proceeds of sale equal to $1,797,000 to be
received by an investor in the subject property at the end of the
holding period.
Discount Rate - Considering the locational attributes, physical
traits and economic characteristics of the subject property, we
believe a discount rate ranging from 11.0 percent to 12.0 percent
would be appropriate for the subject property in light of the
investment criteria previously presented herein. Through such a
sensitivity analysis, it can be seen that the present value of the
subject property varies from approximately $1,342,000 to $1,430,000.
This discounting process is summarized as follows:
================================================================================
Investment Summary
================================================================================
Discount Rate Present Worth Unit Rate Overall Rate
================================================================================
11.00% $1,430,000 $34.55/SF 9.71%
11.25% $1,407,000 $33.99/SF 9.86%
11.50% $1,385,000 $33.46/SF 10.02%
11.75% $1,363,000 $32.93/SF 10.18%
12.00% $1,342,000 $32.42/SF 10.34%
================================================================================
================================================================================
-89-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
20002 - 6810 TILGHMAN STREET
ANNUAL CASH FLOW REPORT
BEGINNING 7/1/97 FOR 14 YEARS
<TABLE>
<CAPTION>
FY1998 FY1999 FY2000 FY2001 FY2002 FY2003 FY2004
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME
- ------
MINIMUM RENT:
GROSS RENTS 185,693 191,849 197,786 203,780 236,780 240,623 244,143
LESS LAG VACANCY 0 0 0 0 (28,874) (10,826) 0
------- ------- ------- ------- ------- ------- -------
TOTAL MINIMUM RENT 185,693 191,849 197,786 203,780 207,906 229,797 244,143
RECOVERIES:
OPERATING EXPENSES 57,452 59,463 61,544 63,699 58,001 65,263 70,623
------- ------- ------- ------- ------- ------- -------
TOTAL RECOVERIES 57,452 59,463 61,544 63,699 58,001 65,263 70,623
------- ------- ------- ------- ------- ------- -------
GROSS RENTAL
INCOME 243,145 251,312 259,330 267,479 265,907 295,060 314,766
CREDIT LOSS (7,294) (7,539) (7,780) (8,024) (7,977) (8,852) (9,443)
------- ------- ------- ------- ------- ------- -------
TOTAL INCOME 235,851 243,773 251,550 259,455 257,930 286,208 305,323
EXPENSES
- --------
INSURANCE 2,882 2,982 3,087 3,195 3,307 3,422 3,542
MANAGEMENT FEE 11,161 11,552 11,956 12,374 12,807 13,256 13,720
REAL ESTATE TAXES 23,879 24,714 25,579 26,475 27,401 28,360 29,353
COMMON AREA MAINT 19,531 20,214 20,922 21,654 22,412 23,197 24,008
OTHER 2,790 2,888 2,989 3,093 3,202 3,314 3,430
------- ------- ------- ------- ------- ------- -------
TOTAL EXPENSES 60,243 62,350 64,533 66,791 69,129 71,549 74,053
------- ------- ------- ------- ------- ------- -------
NET OPERATING
INCOME 175,608 181,423 187,017 192,664 188,801 214,659 231,270
ALTERATIONS 14,585 0 0 0 23,677 8,878 0
COMMISSIONS 13,822 0 0 0 25,477 9,553 0
RESERVES 5,484 5,676 5,875 6,081 6,293 6,514 6,742
------- ------- ------- ------- ------- ------- -------
CASH FLOW 141,717 175,747 181,142 186,583 133,354 189,714 224,528
<CAPTION>
FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME
- ------
MINIMUM RENT:
GROSS RENTS 248,415 252,763 271,999 290,092 296,522 301,710 306,990
LESS LAG VACANCY 0 0 (34,294) (12,858) 0 0 0
------- ------- ------- ------- ------- ------- -------
TOTAL MINIMUM RENT 248,415 252,763 237,705 277,234 296,522 301,710 306,990
RECOVERIES:
OPERATING EXPENSES 73,096 75,653 68,886 77,512 83,878 86,814 89,853
------- ------- ------- ------- ------- ------- -------
TOTAL RECOVERIES 73,096 75,653 68,886 77,512 83,878 86,814 89,853
------- ------- ------- ------- ------- ------- -------
GROSS RENTAL
INCOME 321,511 328,416 306,591 354,746 380,400 388,524 396,843
CREDIT LOSS (9,645) (9,852) (9,198) (10,642) (11,412) (11,656) (11,905)
------- ------- ------- ------- ------- ------- -------
TOTAL INCOME 311,866 318,564 297,393 344,104 368,988 376,868 384,938
EXPENSES
- --------
INSURANCE 3,666 3,794 3,927 4,065 4,207 4,354 4,507
MANAGEMENT FEE 14,200 14,697 15,211 15,744 16,295 16,865 17,455
REAL ESTATE TAXES 30,380 31,444 32,544 33,683 34,862 36,082 37,345
COMMON AREA MAINT 24,849 25,718 26,619 27,550 28,515 29,513 30,545
OTHER 3,550 3,674 3,802 3,936 4,073 4,216 4,363
------- ------- ------- ------- ------- ------- -------
TOTAL EXPENSES 76,645 79,327 82,103 84,978 87,952 91,030 94,215
------- ------- ------- ------- ------- ------- -------
NET OPERATING
INCOME 235,221 239,237 215,290 259,126 281,036 285,838 290,723
ALTERATIONS 0 0 29,105 10,544 0 0 0
COMMISSIONS 0 0 31,317 11,346 0 0 0
RESERVES 6,978 7,222 7,475 7,736 8,007 8,287 8,577
------- ------- ------- ------- ------- ------- -------
CASH FLOW 228,243 232,015 147,393 229,500 273,029 277,551 282,146
</TABLE>
<PAGE>
Income Capitalization Approach
Using an 11.50 percent internal rate of return, our discounted cash flow
model computes to a present worth of $1,385,000 which we round to
$1,375,000 as an indication of market value for 7020 Snowdrift Road via
the Income Capitalization Approach.
This indication of value produces an implied "going-in" overall
capitalization rate of 10.10 percent based upon the initial year's net
operating income of $138,800. The implied "going-in" overall
capitalization rate is consistent the parameters set by the above
investor's surveys. Additionally, based upon a market value of $1,375,000
and a projected future gross reversionary value of approximately
$1,872,000, a compound annual rate of appreciation of 3.13 percent is
computed. Finally, with regard to the composition of the internal rate of
return employed here, approximately 57 percent of the expected yield is
from cash flows while the balance is attributable to property reversion.
This percentage falls within the generally accepted relevant range of most
current real estate investors.
6810 Tilghman Street
This property is a 54,844 square foot single story warehouse building
which is 100 percent occupied by two tenants, one of which will take occupancy
on August 1, 1997. On the opposing page is a presentation of the cash flows
which an informed investor could reasonably expect 6810 Tilghman Street to
generate over a ten year time horizon. These cash flows are based upon the
following analysis:
Base Rental Income - The existing lease contracts at the subject property
provide a current base rental income of $3.33 per square foot of gross
building area. Both also provide for annual increases over the remaining
term. A copy of the rent roll over the subject property is included among
the Addenda to this report.
The rental data previously analyzed for 7055 Ambassador Drive are
applicable to this property as well. As noted, rental rates on space
comparable to the subject range from $3.50 per square foot up to $4.66 per
square foot on a net basis. After analyzing the rents now being paid for
comparable space and services in the competitive open market, it is our
conclusion that the current average economic rent for the subject is $4.00
per square foot on a net basis for the larger tenant area of 40,259 square
feet, and $4.25 per square foot for the remaining space, which encompasses
14,585 square feet. Economic rent is forecasted to increase by 3.5 percent
throughout the projection period.
Expense Reimbursements - Consistent with market leasing practice for this
type of real estate, the tenant in a property like the subject is
responsible for certain expenses incurred annually in the operation and
ownership of the investment. These expenses include real estate taxes,
insurance premiums, and common area maintenance. Future leases in the
subject property are projected to be structured in a similar fashion.
================================================================================
-90-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
6810 Tilghman Street
Building NRA 54,844
<TABLE>
<CAPTION>
1994 Actual 1995 Actual 1996 Actual BAP Budget 1997
-------------------- ----------------- ------------------ ------------------
Item Amount Per SF Amount Per SF Amount Per SF Amount Per SF
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues:
Base Rents $ 184,363 $ 3.36 $ 168,639 $ 3.07 $ 174,124 $ 3.17 $ 179,609 $ 3.27
Rents from Affiliates 683 0.01 559 0.01 -- -- -- --
Operating Escalation 1,131 0.02 1,619 0.03 38,189 0.70 38,496 0.70
Hotel Operations -- -- -- -- -- -- -- --
Marina Rentals -- -- -- -- -- -- -- --
Other 1,622 0.03 -- -- 42 0.00 -- --
-------------------------------------------------------------------------------------------
Total operating revenues $ 187,799 $ 3.42 $ 170,817 $ 3.11 $ 212,355 $ 3.87 $ 218,105 $ 3.98
-------------------------------------------------------------------------------------------
Operating expenses:
Administrative and general:
Management fees $ 3,757 $ 0.07 $ 3,416 $ 0.06 $ 5,224 $ 0.10 $ 5,040 $ 0.09
Salaries 5,128 0.09 3,750 0.07 4,454 0.08 4,440 0.08
Other administrative 6,514 0.12 1,069 0.02 3,281 0.06 2,832 0.05
Bad debts -- -- 4 0.00 -- -- -- --
Professional services 326 0.01 420 0.01 20 0.00 2,192 0.04
Utilities 517 0.01 (264) (0.00) 343 0.01 360 0.01
Maintenance labor -- -- -- -- -- -- 252 0.00
Outside contracts 456 0.01 (302) (0.01) 18,339 0.33 13,168 0.24
Cleaning -- -- -- -- -- -- -- --
Maintenance materials 2,329 0.04 776 0.01 2,548 0.05 5,324 0.10
Real estate and other taxes 124 0.00 -- -- 4,821 0.09 6,193 0.11
Advertising 3,111 0.06 2,018 0.04 1,744 0.03 3,348 0.06
Lease expense, land -- -- -- -- -- -- 848 0.02
Other 174 0.00 151 0.00 115 0.00 -- --
-------------------------------------------------------------------------------------------
Total operating expenses $ 22,436 $ 0.41 $ 11,038 $ 0.20 $40,889 $ 0.75 $ 43,997 $ 0.80
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
NET OPERATING INCOME $ 165,363 $ 3.02 $ 159,779 $ 2.91 $ 171,466 $ 3.13 $ 174,108 $ 3.17
===========================================================================================
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Income Capitalization Approach
================================================================================
Allowance for Vacancy and Credit Loss - We have deducted 3 percent from
gross revenues as a global allowance for the non-payment of rent or
expenses by a lessee. Additionally, our analysis over time has
incorporated a lag vacancy allowance which provides for "down time"
between the expiration of an existing lease and the commencement of a new
lease. The weighted average lag vacancy utilized between lease expirations
in this report is two months as previously described.
Operating Expenses - We were provided with historic operating expense data
for the subject property. We have also been provided with current
ownership's operating pro forma. On the opposing page is a presentation of
the historical operating expenses for the subject building. The following
is a brief summary of the projected expenses for the subject property.
Real Estate Taxes - In the Real Estate Tax and Assessments section
of this report, we document the level of assessment for each of the
subject buildings that make up the subject property. In the initial
year of investment, (FY 1997), the real estate tax expense for 6810
Tilghman Street is estimated to be $23,879 or $0.44 per square foot.
Insurance - Based upon historical experience, the cost for hazard
and liability insurance has ranged from $.02 to $.12 per square
foot. We have stabilized insurance expense at $2,882 in the first
year of the investment or $0.05 per square foot. This is consistent
with ownership's budget projections.
Common Area Charges - This expense category includes all common
building and yard maintenance such as lawn service and trash
collection that the landlord contracts and the tenant reimburses.
Given the age and condition of the building in the initial year of
investment, (FY 1997), the common area charges expense is estimated
at $0.35 per square foot of gross building area, which is consistent
with experience.
Management - The fee for providing professional management services
includes collections, supervision and the preparation of all
budgets. According to the historical operating expenses, the cost
for professional management has ranged from $0.06 to $0.10 per
square foot of rentable building area. It must be noted that the
this building was managed as part of a portfolio and ownership was
able to capitalize on economies of scale. As a "stand alone"
property in the initial fiscal year, this amount is forecasted to be
$.20 per square foot of building area.
Miscellaneous - Invariably, miscellaneous expenses occur in the
operation of a property such as the subject. These include
advertising and promotional expenses, professional fees, brochures,
and a contingency for the unknown. The data available from the
market indicate allowances for miscellaneous expenses ranging from
$0.01 to $0.08 per square foot of rentable area. For this analysis,
miscellaneous operating expenses are stabilized at $0.05 per
rentable square foot of building area.
================================================================================
-91-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Operating expenses are forecasted to increase at an average annual rate of
3.5 percent over the investment holding period. The forecast of projected
growth rates in all categories of expense reflect typical investor
expectations as noted in the Cushman & Wakefield Investor Survey, which
has been placed among the Addenda to this report. Except where noted, our
projected growth rates for the various types of expense categories
generally do not attempt to reflect growth rates for any individual year,
but rather the long term trend over the period of analysis.
Other Non-Operating Expenses - As previously described herein, the
weighted cost of tenant alterations is projected to be $0.34 per square
foot in the initial year of the investment holding period. On a weighted
average basis, leasing commissions are equal to 2.84 percent of total
effective base rental income over the term as well. Reserves for
replacements are stabilized at $0.10 per square foot of rentable building
area. Other non-operating expenses are forecasted to increase at an
average annual rate of 3.5 percent over the investment holding period.
Terminal Capitalization Rate - At the end of the assumed investment
holding period, it is our projection that the subject property would
most likely be sold at the end of the 10th year of the holding period
for an amount equal to what would be the next year's net operating income
capitalized at an overall rate of 11.0 percent. An 11.0 percent terminal
capitalization rate is utilized in this analysis as it reflects current
local market levels for an asset of this type plus a premium for the risk
of unforeseen events or trends over time. The 11th year's computed net
operating income is employed at this point as it would be the first
received by a new purchaser of the subject property. In this analysis,
then, a current investor would dispose of the subject property at the end
of the projected holding period for an amount equal to $2,356,000 or
$42.96 per square foot of building area.
Transaction Costs - From the projected $2,355,000 reversion to an investor
in the subject property, we have deducted a total of $94,000 to account
for the various transaction costs associated with the sale of an asset of
this type. These costs consist of 4 percent of the total disposition price
of the subject property as an allowance for transfer taxes, professional
fees, and other miscellaneous expenses that the seller pays at final
closing. Deducting these transaction costs from the computed reversion
renders pre-tax net proceeds of sale equal to $2,261,000 to be received by
an investor in the subject property at the end of the holding period.
Discount Rate - Considering the locational attributes, physical traits and
economic characteristics of the subject property, we believe a discount
rate ranging from 11.0 percent to 12.0 percent would be appropriate for
the subject property in light of the investment criteria previously
presented herein. Through such a sensitivity analysis, it can be seen that
the present value of the subject property varies from approximately
$1,712,000 to $1,852,000. This discounting process is summarized as
follows:
================================================================================
-92-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Discount Rate Present Worth Unit Rate Overall Rate
11.00% $1,852,000 $33.77/SF 9.48%
11.25% $1,823,000 $33.24/SF 9.63%
11.50% $1,794,000 $32.71/SF 9.79%
11.75% $1,766,000 $32.20/SF 9.94%
12.00% $1,739,000 $31.71/SF 10.10%
Using an 11.50 percent internal rate of return, our discounted cash flow
model computes to a present worth of $1,794,000 which we round to
$1,800,000 as an indication of market value for 6810 Tilghman Street via
the Income Capitalization Approach.
This indication of value produces an implied "going-in" overall
capitalization rate of 9.76 percent based upon the initial year's net
operating income of $175,608. The implied "going-in" overall
capitalization rate is consistent the parameters set by the above
investor's surveys. Additionally, based upon a market value of $1,800,000
and a projected future gross reversionary value of approximately
$2,355,000, a compound annual rate of appreciation of 3.72 percent is
computed. Finally, with regard to the composition of the internal rate of
return employed here, approximately 54 percent of the expected yield is
from cash flows while the balance is attributable to property reversion.
This percentage falls within the generally accepted relevant range of most
current real estate investors.
To this conclusion, we then add the value attributable to the excess land
associated with this property. As noted, the existing improvements are
expandable to 100,000 square feet and offer expansion land of
approximately 2.75+/- acres for this purpose. We refer the reader to the
subsequent Developmental Approach to the valuation of the vacant sites
which comprise a part of the subject property. Here, we estimate the
current value of land in Iron Run Corporate Center to be $100,000 per
acre. Therefore, when added to the foregoing, a total value indicated by
the Income Capitalization Approach is $2,075,000.
Final Conclusions - Improved Properties
The subject property consists of both mid-rise office buildings and
single story office/flex buildings. Due to differences among these, two sets of
rental data were necessary for this comparative analysis of the real estate.
Based upon these analyses, it is our conclusion that the Income Approach
indicates a total market value of FORTY EIGHT MILLION ONE HUNDRED SEVENTY FIVE
THOUSAND DOLLARS ($48,175,000) for the entire subject property. This total value
is comprised as follows:
================================================================================
-93-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
================================================================================
Final Conclusions
================================================================================
Property Indicated Market Value
================================================================================
7535 Windsor Drive $11,500,000
7450 Tilghman Street $ 6,725,000
7055 Ambassador Drive $ 5,900,000
6755 Snowdrift Road $ 4,700,000
7150 Windsor Drive $ 3,750,000
6690 Grant Way $ 3,450,000
6845 Snowdrift Road $ 3,550,000
6670 Grant Way $ 2,850,000
7010 Snowdrift Road $ 2,300,000
7020 Snowdrift Road $ 1,375,000
6810 Tilghman Street $ 2,075,000
--------------------
TOTAL $48,175,000
================================================================================
================================================================================
-94-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
IRON RUN
REMAINING DEVELOPMENT LAND
Input Data
Total Land Area 73.7607
Entrepreneurial Profit 12.00%
Marketing 3.00%
Overhead $ 12,000
Transaction Costs 3.00%
Expense Growth 3.50%
Current Market Value/Acre $100,000
Real Estate Taxes $ 60,661 $822.40 $851.19 $880.98 $911.81 $943.73
Site Summary Land Area Base Value/Acre %Total Area Taxes
N/S Windsor Drive 12.9879 $ 100,000 17.61%
S/S Windsor Drive 5.0558 $ 100,000 6.85%
S/S Windsor Drive 6.9879 $ 100,000 9.47%
S/S Windsor Drive 6.8728 $ 100,000 9.32%
S/S Windsor Drive 4.2952 $ 100,000 5.82%
S/S Tilghman Street 5.0017 $ 100,000 6.78%
NEC Snowdrift & Tilghman 10.0702 $ 100,000 13.65% 8604
Cul-De-Sac of Grant Way 5.4892 $ 100,000 7.44% 4263
N/S Ambassador Drive 14.0000 $ 100,000 18.98% 15116
NWC Ambassador & Hickory 3.0000 $ 100,000 4.07%
(9 acres gross)
Total Usable 73.7607 100.00%
Land Appreciation Year 1997 1998 1999 2000 2001
Rates Appreciation 0.0% 2.5% 2.5% 2.5% 2.5%
Price/Acre $100,000 $102,500 $105,063 $107,689 $110,381
<TABLE>
<CAPTION>
Development Scenario
1997 1998 1999 2000 2001
<S> <C> <C> <C> <C> <C>
Takedown Schedule 17.0000 15.5594 9.2969 13.8607 18.0437
Remaining Developable Land Area 56.7607 41.2013 31.9044 18.0437 --
Gross Proceeds $1,700,000 $1,594,839 $976,756 $1,492,646 $1,991,687
Less: Entrepreneurial Profit $ 204,000 $ 191,381 $117,211 $ 179,117 $ 239,002
Net Land Proceeds $1,496,000 $1,403,458 $859,545 $1,313,528 $1,752,684
Operating Expenses
Real Estate Taxes $ 46,680 $ 35,070 $ 28,107 $ 16,452 $ --
Marketing $ 44,880 $ 42,104 $ 25,786 $ 39,406 $ 52,581
Overhead $ 12,000 $ 12,000 $ 12,000 $ 12,000 $ 12,000
Transaction Costs $ 44,880 $ 42,104 $ 25,786 $ 39,406 $ 52,581
Total Operating Expenses $ 148,440 $ 131,277 $ 91,680 $ 107,264 $ 117,161
Net Income Attributable
to Land $1,347,560 $1,272,180 $767,865 $1,206,264 $1,635,523
</TABLE>
Aggregate $/Acre
Net Present Value @ 14.00% $4,242,903 $ 57,523
14.50% $4,191,672 $ 56,828
15.00% $4,141,456 $ 56,147
15.50% $4,092,230 $ 55,480
16.00% $4,043,968 $ 54,826
<PAGE>
DEVELOPMENT PARCEL VALUATION
================================================================================
The Developmental Approach has been utilized to value the ten development
parcels associated with the subject property. This methodology combines aspects
of all three of the traditional valuation techniques to produce an indication of
value for real property which is to be subdivided, improved and resold to the
public. The economic principle of contribution, the underlying rationale of this
approach, holds that the value of a particular component in a real estate
venture is measured in terms of its addition to the value of the whole property.
This method of valuation is particularly significant when development represents
the highest and best use of the property and when the market data on the
finished product are available.
In the Developmental Approach, we employ the following steps to reach an
estimate of market value for the subject:
1. estimate the total revenues which an informed developer can expect
to receive for his or her final product over time through an
analysis of similar approved and improved office building sites
which have recently transferred in the competitive open market;
2. deduct the typical costs associated with owning and marketing that
inventory from the retail or sale prices to the final consumer;
3. deduct the profit margin which would be necessary to adequately
reward an entrepreneur for accepting the marketing risks of the
property;
4. discount all potential future benefits derived from the marketing of
the lots to a present sum at an appropriate rate which is then
indicative of the subject property's current value as a tract of
fully approved and improved building lots.
In the case of the subject property, we are analyzing the value of the
remaining developable land In Iron Run Corporate Center. On the opposing page is
a presentation of our Developmental Approach to the valuation of the subject
property. Subsequent to this is a complete discussion of the figures utilized in
this analysis.
Gross Sales Revenue
The gross retail sales which an informed developer can reasonably expect
to receive in marketing development sites at the subject is estimated by a
direct comparison with similar lots which have recently transferred in the local
marketplace. These market data are converted to a meaningful unit of comparison
and analyzed in relation to the various lots at the subject property. When
information is available as to a sufficient number of transactions involving
similar properties, the resulting pattern is a good indication of the gross
revenues which could be generated from the subject property.
The most widely used and market oriented unit of comparison for properties
with characteristics similar to those of the subject is the sale price per
square per acre of land area. All transactions utilized in this analysis are
computed on this basis. On the following opposing page is a summary of the
market data assembled for this analysis. The details of each transaction are
included among the Addenda to this report.
================================================================================
-95-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
Market Summary
Industrial Land Sales
Upper Macungie Township, Lehigh County
===================================================================================================================================
Sale Location Date Consideration Land Area Sale Comments
Price/Acre
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
#1 Lot 4 6/97 $ 679,250 7.15 acres $95,000 This site was purchased by a user
Mill Run Corporate Center for the development of a 60,000
Upper Macungie Township square foot manufacturing facility.
Lehigh County, PA
#2 Industrial Blvd. & Schantz Rd. U/C $2,970,000 27+/- acres $110,000 This site is being sold to a Chicago
Upper Macungie Township based developer, who will
Lehigh County, PA reportedly construct a 425,000
square foot warehouse to suit an
undisclosed tenant.
#3 7235 Penn Drive 5/96 $ 250,000 2.858 acres $87,473 This site was acquired for future
Wm. Penn Bus. Ctr. development. All utilities are
Upper Macungie Township available.
Lehigh County, PA
#4 Lots 16 & 17 3/96 $6,731,200 77.221 acres $87,168 This site was acquired for the
Lehigh Valley West Ind Pk development of a 1.2 million square
Upper Macungie Township foot warehouse facility. All utilities
Lehigh County, PA were available.
#5 E/S Windsor Drive 1/95 $ 370,400 2.9632 acres $125,000 This site was subsequently
Iron Run Corporate Center developed with a warehouse facility
Upper Macungie Township by the purchaser. Reportedly, the
Lehigh County, PA grantee was motivated in that he
specifically desired this site and
was willing to pay a premium price.
===================================================================================================================================
</TABLE>
<PAGE>
Development Parcel Valuation
================================================================================
Provided on the opposing page are the Comparable Land Sales that were
assembled for this analysis. As a result, the following comparisons are made:
Comparable Land Sale #1 is situated within Mill Run Corporate Center, a
newer development which adjoins Iron Run to the west. This transaction
represents the most recent land activity in the immediate area.
Discussions with a representative of the grantor indicated that the
consideration represented a figure agreed to some time ago and that land
in this development was now being priced at $100,000 per acre. A slight
positive adjustment was made to this land transaction to account for the
foregoing. All utilities were available to the site with necessary
infrastructure in place.
Comparable Property Sales #2, #3, and #4 are all situated a short
distance to the south of Iron Run on the south side of Interstate 78. All
were reportedly arm's length and were achieved with market oriented
financing. Sale #2 is a current contract which gives another excellent
example of the escalation of land values in the immediate area. Sales #3
and #4, which took place within two months of one another, tend to
indicate that no discounting for economies of scale is currently evident
in this marketplace. All utilities were available to these sites, with
necessary infrastructure in place.
Finally, Comparable Property Sale #5 is the most recent land sale which
took place within Iron Run. Negative adjustment to this sale to account
for the special motivation of the grantee, who agreed to a premium price
in order to locate here, is considered. All utilities were available to
the site with necessary infrastructure in place.
Conclusion of Land Value
After considering all available data in conjunction with the
characteristics of the subject site, it is our opinion that, by direct sales
comparison, the current average market value for each development site would be
$100,000 per acre of land area. This level of pricing has been utilized in
calculating the initial projected land values for the subject parcels.
Project Absorption
At the present time, demand is strong for sites in the immediate area and
has been so over the past several years. Current ownership of the subject sites
has not sold land other than one parcel in 1995 as they prefer to hold the
parcels for their own speculative or build-to-suit development. However, given
the desirability of this location for both industrial and office use, it is
anticipated that a development period of approximately five years will be
required to successfully market the subject sites. This assumption assumes that
an aggressive marketing program similar to that of other developments would be
instituted.
During the projected absorption period, we have anticipated a phased
absorption of land as follows:
================================================================================
Year Acres Absorbed
- --------------------------------------------------------------------------------
1997 17.0000
1998 15.5594
1999 9.2969
2000 13.8607
2001 18.0437
================================================================================
================================================================================
-96-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Development Parcel Valuation
================================================================================
Price Appreciation
Market conditions in the local industrial and office sectors continue to
be favorable demand here. However, while we expect that there will be gradual
price appreciation of land values here going forward, it is our belief that this
average rate will lag that of improved properties. Given this as well as the
impact of the aforementioned competing land developments, we project an
appreciation rate of 2.5 percent per annum throughout the remainder of the
development period.
We again refer the reader to the summary of the Development Approach,
exhibited previously, which indicates the effect of these assumptions on the
price per square foot of floor area ratio over the anticipated absorption
period. As can be seen from this schedule, the total projected gross proceeds of
sale from the development parcels which comprise the subject property over the
marketing and development period are estimated to be approximately $7,756,000.
This estimate is equivalent to $105,151 per acre of land area.
Developer's Entrepreneurial Profit
Like all other manufacturers, real estate developers must be rewarded for
their entrepreneurial efforts from the sale of the final product or there would
be no economic incentive to initiate the venture. There needs to be a positive
margin between gross revenues and the sum of all costs, namely; land, labor and
capital, for real estate project to be feasible. This profit margin serves to
compensate the entrepreneur for accepting the risks of acquiring a suitable
parcel of land, securing the appropriate governmental approvals, designing and
constructing the improvements and marketing the final product to the ultimate
consumer.
Profit margins on real estate ventures vary greatly and can be as high as
20 percent of gross revenues, but typically range between 8 and 12 percent. A
current purchaser of the subject sites would incur the risks of completing any
required infrastructure and marketing improved office sites in an established
office location which has witnessed the largest absorption of new office space
in the marketplace. Relative to other suburban markets, development in the
Lehigh Valley offers slightly greater risk. Although currently strong, it is
nevertheless viewed as a secondary market area by some investors. Therefore, in
this analysis, we have deducted twelve percent of gross sales revenues as the
necessary compensation for the entrepreneurial efforts required to market the
subject property.
On an aggregate basis, the total provision for entrepreneurial profit in
this analysis is projected to be approximately $931,000 over the anticipated
absorption period. On average, this is equivalent to about $186,000 per
calendar year.
Interim Holding Costs
During the anticipated marketing period, a developer of the subject
property would incur certain expenses. These interim holding costs include the
real estate taxes on the unsold inventory of land, marketing fees, an allowance
for administrative overhead, and transfer taxes. The following is more detailed
discussion of these interim holding costs:
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-97-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
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<PAGE>
Development Parcel Valuation
================================================================================
Sales & Marketing - An allowance of 3 percent of gross sale prices has
been estimated to cover the costs of marketing the project. This includes
the cost for site plans and third party brokerage commissions. As the
majority of land deals in this marketplace are typically sourced by the
land developer, we feel an allowance of three percent is adequate.
Overhead & Soft Costs - General and administrative costs consist primarily
of office expense and minor overhead associated with the overall
responsibilities of the developer. We have provided an allowance of
$12,000 annually for these expenses.
Transaction Costs - This category includes transfer taxes and other
incidental costs of sale. We have budgeted an allowance for this item
equivalent to three percent of gross revenues throughout the development
period.
Discount Rate
After deducting a provision for entrepreneurial profit and all interim
holding costs, the remaining net proceeds of sale are discounted at an
appropriate rate to a present sum which is indicative of the current value of
the project on a completed basis. All capital invested in real estate ventures
competes in the open market for alternative opportunities. Since any real estate
investment must compete in the open market for capital, it must be competitive
with the various alternatives available in the financial marketplace.
In developing an appropriate risk rate for the subject, we have given
consideration to a number of different investment opportunities. These included
long term rates such as Tax Exempt Bonds presently yielding approximately 5.67
percent for A-rated, long term general obligation bonds, and Treasury Bonds
averaging about 6.8 percent. In addition, short term rates were also studied and
included Commercial Paper at 5.41 percent which is the discount rate for
unsecured notes of high quality corporate borrowers; the current prime rate of
8.25 percent and the current discount rate of five percent. Despite the
continued decline in yields on alternative investments, due to the continued
imbalance in most real estate asset classes in conjunction with the lack of
available financing, yield requirements for real estate have not fallen
dramatically.
Cushman & Wakefield's survey of real estate investors indicates that
average yields ranging from about 11.0 percent to 15.0 percent are necessary in
the current market. This survey is included among the Addenda to this report.
The lower discount rates are generally applicable to such preferred real estate
investments as regional shopping malls and well leased industrial facilities.
The upper end of this range is generally applicable to real estate investments
such as hotels and land development projects. For this analysis, we have
discounted the net sales income to a present sum at a range in discount rates
from 14.0 percent to 15.0 percent. From within this range, we have selected a
discount rate of approximately 14.50 percent. In utilizing a 14.50 percent
discount rate, invested capital would be adequately compensated for the risks
associated with a development property like the subject property.
================================================================================
-98-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Development Parcel Valuation
================================================================================
================================================================================
Iron Run Development Land
Net Present Value Matrix
================================================================================
Discount Net Present Net Present
Rate Value Value/Acre
================================================================================
14.00% $4,242,903 $57,523
- --------------------------------------------------------------------------------
14.50% $4,191,672 $56,828
- --------------------------------------------------------------------------------
15.00% $4,141,456 $56,147
================================================================================
Conclusion
The gross sales revenues produced by the subject property are estimated to
be approximately $7,756,000 over the anticipated five year absorption period. A
provision for entrepreneurial profit results in net proceeds of sale of
$6,825,000. Interim holding costs during this time are projected to be about
$596,000. Further deducting a provision for the cost of capital invested in the
venture produces an indication of the value of the project. Based upon this
analysis, it is our opinion that the Developmental Approach indicates a current
market value of FOUR MILLION TWO HUNDRED THOUSAND DOLLARS ($4,200,000) for the
remaining development land within Iron Run Corporate Center. This conclusion of
market value is equivalent to approximately $56,941 per acre of land area.
================================================================================
-99-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
RECONCILIATION AND FINAL VALUE ESTIMATE
================================================================================
We have considered all of the traditional approaches to estimating market
value of commercial real estate in our analysis. Two of the three traditional
approaches were utilized, indicating the following values for the improved
components of subject property:
================================================================================
Property Sales Comparison Approach Income Capitalization Approach
================================================================================
7535 Windsor Drive $11,000,000 $11,500,000
7450 Tilghman Street $ 6,700,000 $ 6,725,000
7055 Ambassador Drive $ 5,900,000 $ 5,900,000
6755 Snowdrift Road $ 4.700,000 $ 4,700,000
7150 Windsor Drive $ 3,600,000 $ 3,750,000
6690 Grant Way $ 3,400,000 $ 3,450,000
6845 Snowdrift Road $ 3,500,000 $ 3,550,000
6670 Grant Way $ 2,700,000 $ 2,850,000
7010 Snowdrift Road $ 2.200,000 $ 2,300,000
7020 Snowdrift Road $ 1,400,000 $ 1,375,000
6810 Tilghman Street $ 2,175,000 $ 2,075,000
---------------------------------------------------------
TOTAL $47,275,000 $48,175,000
================================================================================
The three traditional methods of estimating the market value of commercial
real estate are not mutually exclusive approaches to deriving an estimate of
most probable selling price, but are inter-dependent methodologies, each relying
on components from at least one of the other approaches. Hence, the Cost
Approach requires extensive market data to derive estimates of depreciation and
to determine the value of land as if vacant. This approach may also require
income data in order to make adjustments for functional and economic
obsolescence. The Sales Comparison Approach requires application of methods from
the Income Capitalization Approach in order to make adjustments for differences
in income that have influenced the sale price. Consideration of market data is
also required for the Income Capitalization Approach in the selection and
application of equity, capitalization and discount rates, and estimation of
income and expenses. Consequently, it is our opinion that purchasers and
sellers, at least intuitively, consider components of all three approaches in
the process of negotiating an acceptable price for a particular property.
It is the Income Capitalization Approach, however, that is logically
considered the most appropriate technique for estimating the value of
income-producing property. Not only does this approach represent the most direct
and accurate simulation of market behavior, it is the method explicitly employed
by buyers and sellers in acquisition and disposition decisions. Therefore,
following the implied dictum of the market, we have used an approach based
primarily on projected income as the foundation for our valuation of the subject
property.
There are several additional reasons why the Sales Comparison Approach
does not form the basis of our value estimate for the subject property. The
quantity and quality of market information inhibits the use of the Sales
Comparison Approach. Inadequacy of information regarding gross and net income,
lease details and expenses of comparable sales often deters accurate and
relevant adjustments of unit price indicators. Comparison at a dollar per square
foot level precludes the analysis of those key factors which form the basis for
projections on which the purchase decision was made.
================================================================================
-100-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
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<PAGE>
Reconciliation and Final Value Estimate
================================================================================
Our analysis has also considered the value of the remaining vacant
development parcels within the Iron Run Corporate Center. Our analysis of these
parcels via the Developmental Approach has indicated a present value of
$4,200,000 as market oriented.
In light of the above, we are of the opinion that the market value of the
appropriate leased fee/fee simple estate in the property, as of July 1, 1997,
was:
FIFTY TWO MILLION THREE HUNDRED SEVENTY FIVE THOUSAND DOLLARS
$52,375,000
The individual values are as follows:
7535 Windsor Drive $11,500,000
7450 Tilghman Street $ 6,725,000
7055 Ambassador Drive $ 5,900,000
6755 Snowdrift Road $ 4,700,000
7150 Windsor Drive $ 3,750,000
6690 Grant Way $ 3,450,000
6845 Snowdrift Road $ 3,550,000
6670 Grant Way $ 2,850,000
7010 Snowdrift Road $ 2,300,000
7020 Snowdrift Road $ 1,375,000
6810 Tilghman Street $ 2,075,000
Remaining Development Parcels $ 4,200,000
-----------
Total $52,375,000
================================================================================
-101-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
ASSUMPTIONS AND LIMITING CONDITIONS
================================================================================
"Appraisal" means the appraisal report and opinion of value stated therein; or
the letter opinion of value, to which these Assumptions and Limiting Conditions
are annexed.
"Property" means the subject of the Appraisal.
"C&W" means Cushman & Wakefield, Inc. or its subsidiary which issued the
Appraisal.
"Appraiser(s)" means the employee(s) of C&W who prepared and signed the
Appraisal.
This appraisal is made subject to the following assumptions and limiting
conditions:
1. No opinion is intended to be expressed and no responsibility is assumed
for the legal description or for any matters which are legal in nature or
require legal expertise or specialized knowledge beyond that of a real
estate appraiser. Title to the Property is assumed to be good and
marketable and the Property is assumed to be free and clear of all liens
unless otherwise stated. No survey of the Property was undertaken.
2. The information contained in the Appraisal or upon which the Appraisal is
based has been gathered from sources the Appraiser assumes to be reliable
and accurate. Some of such information may have been provided by the owner
of the Property. Neither the Appraiser nor C&W shall be responsible for
the accuracy or completeness of such information, including the
correctness of estimates, opinions, dimensions, sketches, exhibits and
factual matters.
3. The opinion of value is only as of the date stated in the Appraisal.
Changes since that date in external and market factors or in the Property
itself can significantly affect property value.
4. The Appraisal is to be used in whole and not in part. No part of the
Appraisal shall be used in conjunction with any other appraisal.
Publication of the Appraisal or any portion thereof without the prior
written consent of C&W is prohibited. Except as may be otherwise stated in
the letter of engagement, the Appraisal may not be used by any person
other than the party to whom it is addressed or for purposes other than
that for which it was prepared. No part of the Appraisal shall be conveyed
to the public through advertising, or used in any sales or promotional
material without C&W's prior written consent. Reference to the Appraisal
Institute or to the MAI designation is prohibited.
5. Except as may be otherwise stated in the letter of engagement, the
Appraiser shall not be required to give testimony in any court or
administrative proceeding relating to the Property or the Appraisal.
================================================================================
-102-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Assumptions and Limiting Conditions
================================================================================
6. The Appraisal assumes (a) responsible ownership and competent management
of the Property; (b) there are no hidden or unapparent conditions of the
Property, subsoil or structures that render the Property more or less
valuable (no responsibility is assumed for such conditions or for
arranging for engineering studies that may be required to discover them);
(c) full compliance with all applicable federal, state and local zoning
and environmental regulations and laws, unless noncompliance is stated,
defined and considered in the Appraisal; and (d) all required licenses,
certificates of occupancy and other governmental consents have been or can
be obtained and renewed for any use on which the value estimate contained
in the Appraisal is based.
7. The physical condition of the improvements considered by the Appraisal is
based on visual inspection by the Appraiser or other person identified in
the Appraisal. C&W assumes no responsibility for the soundness of
structural members nor for the condition of mechanical equipment, plumbing
or electrical components.
8. The forecasted potential gross income referred to in the Appraisal may be
based on lease summaries provided by the owner or third parties. The
Appraiser has not reviewed lease documents and assumes no responsibility
for the authenticity or completeness of lease information provided by
others. C&W recommends that legal advice be obtained regarding the
interpretation of lease provisions and the contractual rights of parties.
9. The forecasts of income and expenses are not predictions of the future.
Rather, they are the Appraisers best estimates of current market thinking
on future income and expenses. The Appraiser and C&W make no warranty or
representation that these forecasts will materialize. The real estate
market is constantly fluctuating and changing. It is not the Appraiser's
task to predict or in any way warrant the conditions of a future real
estate market; the Appraiser can only reflect what the investment
community, as of the date of the Appraisal, envisages for the future in
terms of rental rates, expenses, supply and demand.
10. Unless otherwise stated in the Appraisal, the existence of potentially
hazardous or toxic materials which may have been used in the construction
or maintenance of the improvements or may be located at or about the
Property was not considered in arriving at the opinion of value. These
materials (such as formaldehyde foam insulation, asbestos insulation and
other potentially hazardous materials) may adversely affect the value of
the Property. The Appraisers are not qualified to detect such substances.
C&W recommends that an environmental expert be employed to determine the
impact of these matters on the opinion of value.
Unless otherwise stated in the Appraisal, compliance with the requirements
of the Americans With Disabilities Act of 1990 (ADA) has not been
considered in arriving at the opinion of value. Failure to comply with the
requirements of the ADA may adversely affect the value of the property.
C&W recommends that an expert in this field be employed.
================================================================================
-103-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
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<PAGE>
CERTIFICATION OF APPRAISAL
================================================================================
We certify that, to the best of our knowledge and belief:
1. Thomas H. Myers, Jr. has inspected the property, and John B. Rush, MAI,
Manager, Valuation Advisory Services, has reviewed and approved the report
but did not inspect the property.
2. The statements of fact contained in this report are true and correct.
3. The reported analyses, opinions, and conclusions are limited only by the
reported assumptions and limiting conditions, and are our personal,
unbiased professional analyses, opinions, and conclusions.
4. We have no present or prospective interest in the property that is the
subject of this report, and we have no personal interest or bias with
respect to the parties involved.
5. Our compensation is not contingent upon the reporting of a predetermined
value or direction in value that favors the cause of the client, the
amount of the value estimate, the attainment of a stipulated result, or
the occurrence of a subsequent event. The appraisal assignment was not
based on a requested minimum valuation, a specific valuation or the
approval of a loan.
6. No one provided significant professional assistance to the persons signing
this report.
7. Our analyses, opinions, and conclusions were developed, and this report
has been prepared, in conformity with the Uniform Standards of
Professional Appraisal Practice of the Appraisal Foundation and the Code
of Professional Ethics and the Standards of Professional Appraisal
Practice of the Appraisal Institute.
8. The use of this report is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives.
9. As of the date of this report, John B. Rush, MAI have completed the
requirements of the continuing education program of the Appraisal
Institute.
/s/ Thomas H. Myers
-----------------------------------------------------
Thomas H. Myers, Jr.
State Certified General Appraiser No. GA-000496-L
/s/ John B. Rush
-----------------------------------------------------
John B. Rush, MAI
State Certified General Appraiser No. GA-000331-L
Reviewed and Approved
================================================================================
-104-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
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<PAGE>
ADDENDA
- --------------------------------------------------------------------------------
RENT ROLL
INVESTOR SURVEY
IMPROVED SALES
LAND SALES
APPRAISERS' QUALIFICATIONS
- --------------------------------------------------------------------------------
-105-
<PAGE>
20006 - 7535 WINDSOR DRIVE
RENT ROLL AS OF 7/1997
(FISCAL YEAR BASIS)
TENANT/
LEASE TYPE AND DATES/ BASE RENT/ OVERAGE/ SALES(000)/ RECOVERIES/ REVENUE/
SQUARE FEET PER SF PER SF PER SF PER SF PER SF
- ---------------------- ---------- --------- ---------- ---------- --------
# 1
ROSENBLUTH INTL
BASE LEASE 1/96- 4/99 90,671 0 0 7,004 97,675
6,038 SF 15.02 0.00 0.00 1.16 16.18
# 2
ROSENBLUTH TRAVEL
BASE LEASE 5/97- 4/99 62,071 0 0 4,342 66,413
3,743 SF 16.58 0.00 0.00 1.16 17.74
# 3
SIEMENS AUTOMOTIVE
BASE LEASE 1/96- 6/00 60,917 0 0 1,652 62,569
4,130 SF 14.75 0.00 0.00 0.40 15.15
# 4
BAP SALES/MGMT
BASE LEASE 1/96-10/97 29,455 0 0 338 29,793
2,218 SF 13.28 0.00 0.00 0.15 13.43
# 5
ROSENBLUTH INTL
BASE LEASE 1/96- 4/99 44,990 0 0 3,475 48,465
2,996 SF 15.02 0.00 0.00 1.16 16.18
# 6
AIR PRODUCTS
BASE LEASE 1/96-10/01 15,125 0 0 0 15,125
3,361 SF 4.50 0.00 0.00 0.00 4.50
# 7
ROSENBLUTH INTL
BASE LEASE 1/96- 4/99 41,641 0 0 3,216 44,857
2,773 SF 15.02 0.00 0.00 1.16 16.18
# 8
ROSENBLUTH INTL
BASE LEASE 1/96- 4/99 40,996 0 0 3,167 44,163
2,730 SF 15.02 0.00 0.00 1.16 16.18
# 9
WEAVER MOSEBACH
BASE LEASE 1/96-10/02 234,442 0 0 0 234,442
15,806 SF 14.83 0.00 0.00 0.00 14.83
# 10
<PAGE>
PROFIT WIZE MKTG
BASE LEASE 1/96- 1/00 58,513 0 0 2,142 60,655
3,967 SF 14.75 0.00 0.00 0.54 15.29
# 11
PROFIT WIZE MKTG
BASE LEASE 1/96- 1/00 18,659 0 0 683 19,342
1,265 SF 14.75 0.00 0.00 0.54 15.29
PAGE 2
TENANT/
LEASE TYPE AND DATES/ BASE RENT/ OVERAGE/ SALES(000)/ RECOVERIES/ REVENUE/
SQUARE FEET PER SF PER SF PER SF PER SF PER SF
- ---------------------- ---------- --------- ---------- ---------- --------
# 12
SUMMIT BANK
BASE LEASE 1/96-10/99 54,796 0 0 1,026 55,822
3,540 SF 15.48 0.00 0.00 0.29 15.77
# 13
AIR PRODUCTS
BASE LEASE 1/96-10/01 740,142 0 0 49,978 790,120
54,329 SF 13.62 0.00 0.00 0.92 14.54
# 14
AIR PRODUCTS
BASE LEASE 1/96-10/01 5,859 0 0 0 5,859
1,514 SF 3.87 0.00 0.00 0.00 3.87
# 15
MASS MUTUAL LIFE
BASE LEASE 1/96- 5/01 108,582 0 0 1,996 110,578
6,885 SF 15.77 0.00 0.00 0.29 16.06
# 16
MASS MUTUAL LIFE
BASE LEASE 1/96- 5/01 23,499 0 0 432 23,931
1,490 SF 15.77 0.00 0.00 0.29 16.06
# 17
AIR PRODUCTS
BASE LEASE 1/96-10/01 5,859 0 0 0 5,859
1,514 SF 3.87 0.00 0.00 0.00 3.87
# 18
CADENCE
BASE LEASE 10/96-11/01 76,041 0 0 3,462 79,503
4,876 SF 15.59 0.00 0.00 0.71 16.30
<PAGE>
# 19
AIM EXECUTIVE HOLD
BASE LEASE 2/97- 1/00 30,374 0 0 997 31,371
1,846 SF 16.45 0.00 0.00 0.54 16.99
# 20
PIOSA, HIXSON, GIO
BASE LEASE 4/97- 3/02 48,859 0 0 2,258 51,117
3,180 SF 15.36 0.00 0.00 0.71 16.07
---------- --------- ---------- ---------- ---------
TOTALS 1,791,491 0 0 86,168 1,877,659
128,201 SF 13.97 0.00 0.00 0.67 14.65
========== ========= ========== ========== =========
<PAGE>
20004 - 7450 TILGHMAN STREET #2
RENT ROLL AS OF 7/1997
(FISCAL YEAR BASIS)
TENANT/
LEASE TYPE AND DATES/ BASE RENT/ OVERAGE/ SALES(000)/ RECOVERIES/ REVENUE/
SQUARE FEET PER SF PER SF PER SF PER SF PER SF
- ---------------------- ---------- --------- ---------- ---------- --------
# 1
PRUDENTIAL INSURAN
BASE LEASE 6/86-12/97 495,000 0 0 85,052 580,052
100,000 SF 4.95 0.00 0.00 0.85 5.80
---------- --------- ---------- ---------- --------
TOTALS 495,000 0 0 85,052 580,052
100,000 SF 4.95 0.00 0.00 0.85 5.80
========== ========= ========== ========== ========
<PAGE>
20008 - 7055 AMBASSADOR ROAD
RENT ROLL AS OF 7/1997
(FISCAL YEAR BASIS)
TENANT/
LEASE TYPE AND DATES/ BASE RENT/ OVERAGE/ SALES(000)/ RECOVERIES/ REVENUE/
SQUARE FEET PER SF PER SF PER SF PER SF PER SF
- ---------------------- ---------- --------- ---------- ---------- --------
# 1
CATERPILLAR LOGIST
BASE LEASE 9/92-12/97 528,307 0 0 116,073 644,380
153,600 SF 3.44 0.00 0.00 0.76 4.20
---------- --------- --------- --------- --------
TOTALS 528,307 0 0 116,073 644,380
153,600 SF 3.44 0.00 0.00 0.76 4.20
========== ========= ========= ========= ========
<PAGE>
20010 - 6755 SNOWDRIFT DRIVE
RENT ROLL AS OF 7/1997
(FISCAL YEAR BASIS)
TENANT/
LEASE TYPE AND DATES/ BASE RENT/ OVERAGE/ SALES(000)/ RECOVERIES/ REVENUE/
SQUARE FEET PER SF PER SF PER SF PER SF PER SF
- ---------------------- ---------- --------- ---------- ---------- --------
# 1
DAY TIMERS INC
BASE LEASE 1/95- 2/00 468,750 0 0 116,316 585,066
125,000 SF 3.75 0.00 0.00 0.93 4.68
---------- --------- ---------- ---------- ---------
TOTALS 468,750 0 0 116,316 585,066
125,000 SF 3.75 0.00 0.00 0.93 4.68
========== ========= ========= ========= ========
<PAGE>
20011 - 7150 WINDSOR DRIVE
RENT ROLL AS OF 7/1997
(FISCAL YEAR BASIS)
TENANT/
LEASE TYPE AND DATES/ BASE RENT/ OVERAGE/ SALES(000)/ RECOVERIES/ REVENUE/
SQUARE FEET PER SF PER SF PER SF PER SF PER SF
- ---------------------- ---------- --------- ---------- ---------- --------
# 1
INTERIOR WRKPLC SO
BASE LEASE 1/96- 3/99 54,449 0 0 18,353 72,802
7,446 SF 7.31 0.00 0.00 2.46 9.78
# 2
BELL ATLANTIC PA
BASE LEASE 1/96-10/99 155,871 0 0 42,344 198,215
17,179 SF 9.07 0.00 0.00 2.46 11.54
# 3
MONSANTO
BASE LEASE 1/96- 2/98 58,314 0 0 19,751 78,065
9,644 SF 6.05 0.00 0.00 2.05 8.09
# 4
LINDEN OPTICAL
BASE LEASE 3/96- 2/01 44,197 0 0 13,088 57,285
5,310 SF 8.32 0.00 0.00 2.46 10.79
# 5
ICT GROUP
BASE LEASE 3/96- 2/01 49,256 0 0 12,125 61,381
4,919 SF 10.01 0.00 0.00 2.46 12.48
# 6
ICT GROUP
BASE LEASE 7/96- 2/01 49,122 0 0 12,132 61,254
4,922 SF 9.98 0.00 0.00 2.46 12.44
---------- --------- ---------- ---------- ---------
TOTALS 411,209 0 0 117,793 529,002
49,420 SF 8.32 0.00 0.00 2.38 10.70
========== ========= ========== ========== =========
<PAGE>
20003 - 6690 GRANT WAY
RENT ROLL AS OF 7/1997
(FISCAL YEAR BASIS)
TENANT/
LEASE TYPE AND DATES/ BASE RENT/ OVERAGE/ SALES(000)/ RECOVERIES/ REVENUE/
SQUARE FEET PER SF PER SF PER SF PER SF PER SF
- ---------------------- ---------- --------- ---------- ---------- --------
# 1
AJ OSTER COMPANY
BASE LEASE 1/97-12/99 214,760 0 0 46,711 261,471
45,500 SF 4.72 0.00 0.00 1.03 5.75
# 2
BATESVILLE CASKET
BASE LEASE 5/93- 4/99 174,250 0 0 43,631 217,881
42,500 SF 4.10 0.00 0.00 1.03 5.13
---------- --------- ---------- ---------- ---------
TOTALS 389,010 0 0 90,342 479,352
88,000 SF 4.42 0.00 0.00 1.03 5.45
========== ========= ========== ========== =========
<PAGE>
20001 - 6845 SNOWDRIFT ROAD
RENT ROLL AS OF 7/1997
(FISCAL YEAR BASIS)
TENANT/
LEASE TYPE AND DATES/ BASE RENT/ OVERAGE/ SALES(000)/ RECOVERIES/ REVENUE/
SQUARE FEET PER SF PER SF PER SF PER SF PER SF
- ---------------------- ---------- --------- ---------- ---------- --------
# 1
BMG MUSIC
BASE LEASE 3/93- 2/98 146,978 0 0 29,927 176,905
41,600 SF 3.53 0.00 0.00 0.72 4.25
# 2
RODALE PRESS
BASE LEASE 2/94- 8/02 200,032 0 0 44,503 244,535
51,400 SF 3.89 0.00 0.00 0.87 4.76
---------- --------- ---------- ---------- ---------
TOTALS 347,010 0 0 74,430 421,440
93,000 SF 3.73 0.00 0.00 0.80 4.53
========== ========= ========== ========== =========
<PAGE>
20005 - 6670 GRANT WAY
RENT ROLL AS OF 7/1997
(FISCAL YEAR BASIS)
TENANT/
LEASE TYPE AND DATES/ BASE RENT/ OVERAGE/ SALES(000)/ RECOVERIES/ REVENUE/
SQUARE FEET PER SF PER SF PER SF PER SF PER SF
- ---------------------- ---------- --------- ---------- ---------- --------
# 1
TREASURE CHEST ADV
BASE LEASE 8/87- 7/97 29,154 0 0 5,394 34,548
72,885 SF 0.40 0.00 0.00 0.07 0.47
---------- --------- ---------- ---------- ---------
TOTALS 29,154 0 0 5,394 34,548
72,885 SF 0.40 0.00 0.00 0.07 0.47
========== ========= ========== ========== =========
<PAGE>
20007 - 7010 SNOWDRIFT ROAD
RENT ROLL AS OF 1/1998
(FISCAL YEAR BASIS)
TENANT/
LEASE TYPE AND DATES/ BASE RENT/ OVERAGE/ SALES(000)/ RECOVERIES/ REVENUE/
SQUARE FEET PER SF PER SF PER SF PER SF PER SF
- ---------------------- ---------- --------- ---------- ---------- --------
# 1
ANDERSON BDG
BASE LEASE 7/97- 6/02 82,472 0 0 16,265 98,737
8,046 SF 10.25 0.00 0.00 2.02 12.27
# 2
VITALINK PHARMACY
BASE LEASE 9/97-11/02 138,454 0 0 58,098 196,552
20,038 SF 6.91 0.00 0.00 2.90 9.81
# 3
SPECULATIVE TENANT
BASE LEASE 10/97- 9/02 38,942 0 0 13,294 52,236
4,945 SF 7.88 0.00 0.00 2.69 10.56
---------- --------- ---------- ---------- ---------
TOTALS 259,868 0 0 87,657 347,525
33,029 SF 7.87 0.00 0.00 2.65 10.52
========== ========= ========== ========== =========
<PAGE>
20000 - 7020 SNOWDRIFT ROAD
RENT ROLL AS OF 9/1997
(FISCAL YEAR BASIS)
TENANT/
LEASE TYPE AND DATES/ BASE RENT/ OVERAGE/ SALES(000)/ RECOVERIES/ REVENUE/
SQUARE FEET PER SF PER SF PER SF PER SF PER SF
- ---------------------- ---------- --------- ---------- ---------- --------
# 1
AIR PRODUCTS
BASE LEASE 9/94- 8/01 92,500 0 0 31,350 123,850
30,000 SF 3.08 0.00 0.00 1.04 4.13
# 2
INTERIOR SOLUTIONS
BASE LEASE 10/95- 3/99 54,102 0 0 11,902 66,004
11,390 SF 4.75 0.00 0.00 1.04 5.79
---------- --------- ---------- ---------- --------
TOTALS 146,602 0 0 43,252 189,854
41,390 SF 3.54 0.00 0.00 1.04 4.59
========== ========= ========== ========== ========
<PAGE>
20002 - 6810 TILGHMAN STREET
RENT ROLL AS OF 9/1997
(FISCAL YEAR BASIS)
TENANT/
LEASE TYPE AND DATES/ BASE RENT/ OVERAGE/ SALES(000)/ RECOVERIES/ REVENUE/
SQUARE FEET PER SF PER SF PER SF PER SF PER SF
- ---------------------- ---------- --------- ---------- ---------- --------
# 1
AIR PRODUCTS
BASE LEASE 1/96- 8/01 124,132 0 0 42,174 166,306
40,259 SF 3.08 0.00 0.00 1.05 4.13
# 3
HERR'S
BASE LEASE 8/97- 7/02 56,821 0 0 14,027 70,848
14,585 SF 3.90 0.00 0.00 0.96 4.86
---------- --------- ---------- ---------- ---------
TOTALS 180,953 0 0 56,201 237,154
54,844 SF 3.30 0.00 0.00 1.02 4.32
========== ========= ========== ========== ========
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET OFFICE MARKET - URBAN/CBD
- ------------------------------------------------------------------------------------------------------------------------------------
9.5% 10.0% 10.0% 10.0% 11.5% 11.5% 3.0% 3.0% 3.0% 4.0% 10.0 10.0
9.5% 10.0% 10.0% 10.5% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
8.0% 9.0% 8.5% 8.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
13.0% 13.0% -- -- 14.0% 14.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
8.0% 8.0% 8.5% 8.5% 10.5% 10.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.3% 9.3% 10.3% 10.3% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 9.0% 8.5% 9.0% 10.5% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
10.0% 10.0% 10.0% 10.0% 12.5% 12.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
9.0% 9.0% 9.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.0% 9.0% 8.0% 9.0% 10.0% 12.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
Responses 11 11 10 10 11 11 11 11 11 11 11 11
Average (%) 9.2% 9.6% 9.2% 9.7% 11.7% 12.0% 3.3% 4.2% 3.4% 3.9% 8.5 9.5
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 9.0% 9.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 12.0% 12.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.5% 9.5% 10.5% 10.5% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 10.0% 10.0% 11.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
15.0% 15.0% -- -- 20.0% 20.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
9.0% 10.0% -- -- -- -- -- -- -- -- -- --
9.0% 10.0% 9.0% 10.0% 12.0% 13.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
Responses 8 8 6 6 7 7 7 7 7 7 7 7
Average (%) 10.0% 10.4% 9.7% 10.3% 12.8% 13.1% 3.3% 4.7% 3.5% 4.0% 8.3 9.7
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
8.0% 9.0% 9.5% 10.0% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
8.0% 10.0% 8.5% 9.0% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0 10.0 10.0
10.0% 10.0% 10.0% 10.0% 13.0% 13.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.5% 9.5% 10.5% 10.5% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
12.0% 12.0% -- -- 13.0% 13.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
-- -- -- -- 12.0% 13.0% 4.0% 4.0% 4.0% 4.0 5.0 10.0
Responses 8 8 7 7 9 9 9 9 9 9 9 9
Average (%) 9.4% 10.0% 9.6% 10.2% 12.8% 13.5% 3.5% 4.6% 3.5% 3.9% 7.6 8.9
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
12.0% 12.0% 12.0% 12.0% 15.0% 15.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.8% 9.8% 10.8% 10.8% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
14.0% 14.0% -- -- 20.0% 20.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 11.0% 14.0% 14.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 6 6 5 5 6 6 6 6 6 6 6 6
Average (%) 10.7% 11.0% 10.5% 11.2% 14.6% 15.3% 3.2% 4.6% 3.3% 3.9% 8.0 8.8
--------------------------------------------------------------------------------------------------------
Total Responses 33 33 28 28 33 33 33 33 33 33 33 33
Weighted Average (%) 9.8% 10.3% 9.7% 10.3% 13.0% 13.5% 3.3% 4.6% 3.4% 3.9% 8.1 9.2
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
8 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET OFFICE MARKET - SUBURBAN/NON - CBD
- ------------------------------------------------------------------------------------------------------------------------------------
9.5% 9.5% 10.5% 10.5% 10.5% 10.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.5% 8.5% 9.3% 9.3% 11.3% 11.3% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
11.0% 11.0% -- -- 12.0% 12.0% 5.0% 3.0% 3.0% 3.0% 5.0 7.0
8.5% 10.0% 9.0% 10.5% 11.0% 12.5% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
8.0% 10.0% 9.5% 10.0% 11.5% 12.0% 4.0% 6.0% 4.0% 4.0% 10.0 10.0
l0.0% 11.0% 10.5% 11.0% 12.0% 12.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.0% 9.0% 8.5% 8.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
8.0% 8.0% 8.5% 8.5% 10.5% 10.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.1% 9.1% 10.1% l0.1% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 10.0% 9.0% 10.5% 11.0% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
9.0% 9.0% 10.0% 10.0% 11.5% 11.5% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.0% 9.0% 9.0% 9.0% 12.0% 13.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.0% 10.0% -- -- -- -- -- -- -- -- --
8.0% 9.0% 8.0% 9.0% 10.0% 12.0% 5.0% 5.0% 4.0% 4.0% 5.0 10.0
Responses 16 16 14 14 15 15 15 15 15 15 15 15
Average (%) 8.8% 9.5% 9.3% 9.9% 11.2% 11.6% 3.5% 4.4% 3.6% 3.8% 8.9 9.7
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
9.5% 9.5% 10.5% 10.5% 10.5% 10.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.8% 8.8% 9.5% 9.5% 11.8% 11.8% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
12.0% 12.0% -- -- 18.0% 18.0% 5.0% 3.0% 3.0% 3.0% 5.0 7.0
10.5% 10.5% 10.0% 10.0% 11.0% 13.0% 2.0% 2.0% 2.0% 2.0% 10.0 10.0
8.0% 10.0% 9.5% 10.0% 11.0% 12.0% 4.0% 6.0% 4.0% 4.0% 10.0 10.0
9.0% 10.0% 9.0% 9.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.0% 11.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.4% 9.4% 10.4% 10.4% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 10.0% 14.0% 15.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
10.0% 11.0% -- -- -- -- -- -- -- -- -- --
10.0% 11.0% 10.0% 11.0% 12.0% 13.0% 5.0% 5.0% 4.0% 4.0% 5.0 10.0
Responses 13 13 11 11 12 12 12 12 12 12 12 12
Average (%) 9.5% 10.0% 9.8% 10.2% 12.0% 12.5% 3.4% 4.5% 3.4% 3.7% 8.6 9.6
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% -- -- 13.0% 13.0% 3.0% 3.0% 3.0% 3.0% 5.0 7.0
8.0% 10.0% 8.5% 9.0% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
10.0% 10.0% 10.0% 10.0% 12.5% 12.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.4% 9.4% 10.4% 10.4% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
6.0% 6.0% 9.0% 9.0% 17.0% 20.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.0% 10.0% -- -- -- -- -- -- -- -- -- --
12.0% 12.0% 10.0% 10.0% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 2.0 2.0
Responses 10 10 8 8 9 9 9 9 9 9 9 9
Average (%) 9.1% 9.7% 9.5% 10.0% 13.4% 14.3% 3.1% 4.6% 3.4% 3.8% 7.2 8.0
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% -- -- 18.0% 18.0% 3.0% 3.0% 3.0% 3.0% 5.0 7.0
10.5% 10.5% 10.0% 10.0% 11.0% 13.0% 2.0% 2.0% 2.0% 2.0% 10.0 10.0
11.0% 11.0% 11.0% 11.0% 14.0% 14.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.6% 9.6% 10.6% 10.6% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
6.0% 6.0% 10.0% 10.0% 20.0% 20.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.0% 10.0% -- -- -- -- -- -- -- -- -- --
12.0% 12.0% 10.0% 10.0% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 2.0 2.0
Responses 10 10 8 8 9 9 9 9 9 9 9 9
Average (%) 9.7% 10.0% 10.0% 10.5% 14.5% 15.2% 2.9% 4.3% 3.2% 3.6% 7.2 8.0
--------------------------------------------------------------------------------------------------------
Total Responses 49 49 41 41 45 45 45 45 45 45 45 45
Weighted Average (%) 9.3% 9.8% 9.7% 10.1% 12.8% 13.4% 3.2% 4.4% 3.4% 3.7% 8.0 8.8
--------------------------------------------------------------------------------------------------------
</TABLE>
AUTUMN 1996 9
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET INDUSTRIAL MARKET - WAREHOUSE/DISTRIBUTION
- ------------------------------------------------------------------------------------------------------------------------------------
9.2% 9.2% 9.5% 9.5% 10.0% 10.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.5% 8.5% 9.3% 9.3% 11.0% 11.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
8.5% 10.0% 9.5% 10.0% 11.0% 12.0% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
9.0% 9.0% 9.5% 9.5% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
8.0% 8.0% 8.5% 8.5% 10.5% 10.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 10.0% 9.0% 10.5% 11.0% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
9.0% 9.0% 10.0% 10.0% 11.0% 11.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
9.0% 9.0% 9.5% 9.5% 10.5% 10.5% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 10 10 10 10 10 10 10 10 10 10 10 10
Average (%) 8.8% 9.2% 9.4% 9.8% 10.9% 11.0% 2.9% 4.0% 3.3% 3.8% 9.8 10.1
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
9.2% 9.2% 9.5% 9.5% 10.0% 10.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.8% 8.8% 9.5% 9.5% 11.3% 11.3% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.5% 11.5% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
10.0% 10.0% 11.0% 11.0% 12.0% 12.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.8% 9.8% 10.3% 10.3% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 7 7 7 7 7 7 7 7 7 7 7 7
Average (%) 9.3% 9.5% 10.0% 10.2% 11.2% 11.2% 2.8% 4.3% 3.2% 3.9% 9.7 10.1
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 12.0% 12.0% 13.0% 13.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.8% 9.8% 10.3% 10.3% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 9.7% 9.9% 10.4% 10.8% 11.9% 11.9% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
12.0% 12.0% 13.0% 13.0% 14.0% 14.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 10.0% 10.5% 10.5% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.5% 10.5% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 10.1% 10.4% 10.9% 11.3% 12.4% 12.4% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
--------------------------------------------------------------------------------------------------------
Total Responses 25 25 25 25 25 25 25 25 25 25 25 25
Weighted Average (%) 9.5% 9.7% 10.2% 10.5% 11.6% 11.6% 2.6% 4.5% 3.2% 4.0% 9.6 10.2
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
10 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET INDUSTRIAL MARKET - BUSINESS PARKS, OTHER INDUSTRIAL & MANUFACTURING
- ------------------------------------------------------------------------------------------------------------------------------------
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 10.0 10.0
9.0% 9.0% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 3 3 4 4 4 4 4 4 4 4
Average (%) 8.9% 9.4% 9.7% 10.7% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.8 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.5% 10.5% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 10.0 10.0
10.0% 10.0% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 3 3 4 4 4 4 4 4 4 4
Average (%) 9.3% 9.8% 9.8% 10.8% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.8 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.5% 10.5% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 5 5 4 4 5 5 5 5 5 5 5 5
Average (%) 9.4% 10.0% 9.9% 10.9% 12.4% 13.2% 3.4% 4.0% 3.2% 3.8% 8.2 9.4
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.5% 10.5% 11.0% 11.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.5% 10.5% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 5 5 4 4 5 5 5 5 5 5 5 5
Average (%) 9.6% 10.2% 10.0% 11.0% 12.4% 13.2% 3.4% 4.0% 3.2% 3.8% 8.2 9.4
--------------------------------------------------------------------------------------------------------
Total Responses 18 18 14 14 18 18 18 18 18 18 18 18
Weighted Average(%) 9.3% 9.8% 9.8% 10.8% 12.0% 12.4% 3.3% 4.0% 3.2% 3.9% 8.5 9.8
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
AUTUMN 1996 11
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET RETAIL MARKET - NEIGHBORHOOD & COMMUNITY CENTERS
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 10.5% 9.5% 10.5% 11.0% 12.5% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
9.5% 10.0% 10.0% 10.0% 12.5% 12.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
10.0% 10.0% 10.5% 10.5% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
10.3% 10.3% 10.8% 10.8% 13.0% 13.0% 2.0% 2.0% 4.0% 4.0% 7.0 7.0
9.0% 9.0% 10.0% 10.0% 10.0% 10.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
9.8% 9.8% 10.3% 10.3% 11.5% 11.5% 3.8% 4.0% 4.0% 4.0% 10.0 10.0
9.0% 10.0% -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
9.0% 9.0% 9.5% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
Responses 9 9 8 8 8 8 9 9 9 9 9 9
Average (%) 9.3% 9.8% 10.0% 10.4% 11.9% 12.1% 2.9% 3.7% 3.4% 3.9% 8.9 9.4
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
10.8% 10.8% 11.3% 11.3% 14.0% 14.0% 2.0% 2.0% 4.0% 4.0% 7.0 7.0
10.0% 10.0% 11.0% 11.0% 12.0% 12.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
9.0% 10.0% -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 11.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.5% 10.5% -- -- -- -- -- -- -- -- -- --
Responses 6 6 4 4 4 4 5 5 5 5 5 5
Average (%) 9.5% 10.0% 10.4% 11.1% 12.3% 12.3% 2.3% 3.8% 3.3% 4.2% 9.0 9.6
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 12.0% 12.0% 13.0% 13.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 10.0 10.0
9.0% 10.0% -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 9.5% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.0% 10.0% -- -- -- -- -- -- -- --
11.0% 11.0% 9.5% 9.5% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 3.0 3.0
Responses 7 7 5 5 5 5 6 6 6 6 6 6
Average (%) 9.7% 10.3% 10.1% 10.7% 13.8% 14.6% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
13.0% 13.0% 14.0% 14.0% 14.0% 14.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 10.0 10.0
9.0% 10.0% -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 11.0% 14.0% 14.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
11.0% 11.0% 10.5% 10.5% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 3.0 3.0
Responses 6 6 5 5 5 5 6 6 6 6 6 6
Average (%) 10.3% 10.8% 10.8% 11.5% 14.2% 15.0% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
--------------------------------------------------------------------------------------------------------
Total Responses 28 28 22 22 22 22 26 26 26 26 26 26
Weighted Average (%) 9.7% 10.2% 10.3% 10.9% 13.0% 13.5% 2.7% 3.9% 3.2% 4.0% 8.7 9.3
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
12 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET RETAIL MARKET - POWER CENTERS & "BIG BOX"
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 9.0% 9.5% 9.5% 11.0% 11.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
10.0% 10.0% 9.5% 9.5% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
10.5% 10.5% 10.5% 10.5% 11.0% 12.0% 2.0% 2.0% 3.0% 3.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.4% 11.4% 3.8% 3.8% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 9.5% 10.0% 11.0% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
9.3% 9.3% 9.5% 10.0% 10.5% 10.5% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.0% 9.0% -- -- -- -- -- -- -- -- -- --
9.0% 9.5% 9.5% 10.0% 11.0% 11.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
Responses 9 9 8 8 8 8 8 8 8 8 8 8
Average (%) 9.4% 9.5% 9.7% 10.1% 11.5% 11.7% 3.3% 3.5% 3.4% 3.7% 9.1 10.1
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
10.8% 10.8% 10.8% 10.8% 11.0% 12.0% 2.0% 3.0% 3.0% 3.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 3 3 3 3 3 3 3 3 3 3 3 3
Average (%) 9.8% 10.1% 10.1% 10.6% 11.0% 11.3% 2.8% 3.7% 3.2% 3.7% 9.3 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.8% 10.8% 10.8% 10.8% 12.0% 12.0% 2.0% 2.0% 3.0% 3.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 3 3 3 3 3 3 3 3 3 3 3 3
Average (%) 9.6% 9.9% 10.1% 10.6% 12.0% 12.0% 2.8% 3.3% 3.2% 3.7% 9.3 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 10.8% 10.8% 12.0% 12.0% 2.0% 2.0% 3.0% 3.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
-- -- -- -- 15.0% 15.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 2 2 2 2 3 3 3 3 3 3 3 3
Average (%) 9.8% 10.3% 10.1% 10.9% 12.7% 12.7% 2.8% 3.3% 3.2% 3.7% 9.3 10.3
--------------------------------------------------------------------------------------------------------
Total Responses 17 17 16 16 17 17 17 17 17 17 17 17
Weighted Average (%) 9.6% 9.9% 10.0% 10.5% 11.8% 11.9% 2.9% 3.5% 3.2% 3.7% 9.3 10.3
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
AUTUMN 1996 13
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET RETAIL MARKET - REGIONAL MALLS
- ------------------------------------------------------------------------------------------------------------------------------------
7.5% 7.5% 8.0% 8.0% 11.3% 11.3% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.0% 9.0% 9.0% 9.0% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
7.5% 7.5% 7.8% 7.8% 12.0% 12.0% 1.5% 2.0% 3.0% 3.0% 10.0 10.0
7.0% 8.0% 8.0% 8.0% 10.5% 11.5% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
9.0% -- -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.0% 8.0% 9.0% 10.5% 11.0% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
8.0% 8.0% 8.5% 8.5% 11.0% 11.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
7.8% 8.0% 8.3% 8.5% 11.0% 12.0% 2.5% 3.0% 2.5% 3.0% 10.0 10.0
7.0% 8.0% 7.0% 8.0% 10.0% 11.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
Responses 10 9 9 9 9 9 10 10 10 10 10 10
Average (%) 7.9% 8.2% 8.2% 8.6% 11.4% 11.8% 3.0% 3.6% 3.5% 3.8% 9.1 9.6
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 10.0% 10.0% 17.0% 17.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
9.0% 9.0% 9.0% 9.0% 13.5% 13.5% 2.0% 2.0% 4.0% 4.0% 7.0 7.0
9.0% 10.0% 10.0% 10.0% 12.0% 14.0% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
10.0% -- -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
Responses 5 4 4 4 4 4 5 5 5 5 5 5
Average (%) 9.3% 9.6% 9.6% 10.0% 13.4% 13.9% 2.5% 3.4% 3.7% 4.0% 8.6 8.6
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 10.0% 10.0% 18.0% 18.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
11.0% 11.0% 11.0% 11.0% 13.0% 14.0% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
9.0% -- -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.5% 8.5% 9.0% 11.5% 12.5% 2.5% 3.0% 2.5% 3.0% 10.0 10.0
Responses 5 4 4 4 4 4 5 5 5 5 5 5
Average (%) 9.3% 9.8% 9.8% 10.3% 13.4% 13.9% 2.6% 3.6% 3.4% 3.8% 9.2 9.2
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 11.0% 11.0% 20.0% 20.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
12.5% 12.5% 12.0% 12.0% 14.0% 15.0% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
10.0% -- -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 9.0% 9.3% 9.8% 12.0% 13.0% 2.5% 3.0% 2.5% 3.0% 10.0 10.0
13.0% 13.0% 11.0% 11.0% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 3.0 3.0
Responses 6 5 5 5 5 5 6 6 6 6 6 6
Average (%) 10.6% 11.0% 10.6% 11.0% 14.6% 15.0% 2.7% 3.5% 3.3% 3.7% 8.2 8.2
--------------------------------------------------------------------------------------------------------
Total Responses 26 22 22 22 22 22 26 26 26 26 26 26
Weighted Average (%) 9.3% 9.6% 9.5% 10.0% 13.2% 13.6% 2.7% 3.5% 3.5% 3.8% 8.8 8.9
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
14 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET RESIDENTIAL - APARTMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
8.5% 10.0% 9.0% 10.5% -- -- -- -- 3.5% 3.5% 1.0 1.0
8.5% 9.0% 9.0% 9.0% 11.0% 11.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
9.8% 9.8% 10.0% 10.0% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
8.3% 9.0% 9.0% 9.5% 10.5% 11.5% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
7.5% 8.5% 8.0% 9.0% 10.0% 11.0% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.8% 8.8% 9.0% 9.0% 11.3% 11.3% 3.8% 4.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 9.0% 9.0% 9.5% 10.0% 11.5% 3.0% 4.0% 3.0% 3.0% 10.0 10.0
8.5% 9.0% 8.5% 9.0% -- -- 3.0% 3.5% 3.0% 3.5% 10.0 10.0
8.8% 9.0% 9.0% 9.5% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 10 10 10 10 8 8 9 9 10 l0 l0 10
Average (%) 8.6% 9.2% 9.0% 9.6% 11.2% 11.7% 2.9% 3.9% 3.3% 3.8% 8.4 8.9
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 9.5% 9.5% 10.0% 11.0% 12.0% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
9.0% 10.0% 10.0% 10.0% 11.0% 12.5% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.0% 10.0% 10.0% 10.5% 10.5% 12.0% 3.0% 4.0% 3.0% 3.0% 10.0 10.0
9.0% 9.5% 9.5% 10.0% 11.5% 11.5% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 5 5 5 5 5 5 5 5 5 5 5 5
Average (%) 8.9% 9.7% 9.7% 10.3% 11.0% 11.8% 2.5% 4.2% 3.1% 4.0% 9.6 10.2
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 11.0% 11.0% 11.0% 12.5% 13.5% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.0% 9.0% 9.0% 11.0% 12.0% 4.0% 6.0% 3.0% 3.0% 3.0 5.0
9.0% 9.0% 9.5% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 8.9% 9.4% 9.8% 10.3% 11.6% 12.1% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
12.0% 13.0% 13.0% 13.0% 13.0% 15.0% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.0% 10.0% 10.0% 11.0% 13.0% 4.0% 6.0% 3.0% 3.0% 3.0 5.0
9.5% 10.0% 10.0% 11.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 9.5% 10.1% 10.6% 11.3% 12.0% 13.0% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
Total Responses 23 23 23 23 21 21 22 22 23 23 23 23
Weighted Average (%) 9.0% 9.6% 9.8% 10.4% 11.5% 12.1% 2.7% 4.4% 3.2% 4.0% 8.4 9.3
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical
issues
AUTUMN 1996 15
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICE SUMMARY OF WEIGHTED AVERAGE
- ------------------------------------------------------------------------------------------------------------------------------------
Urban/CBD 9.8% 10.3% 9.7% 10.3% 13.0% 13.5% 3.3% 4.6% 3.4% 3.9% 8.1 9.2
Class A - Leased Asset 9.2% 9.6% 9.2% 9.7% 11.7% 12.0% 3.3% 4.2% 3.4% 3.9% 8.5 9.5
Class B - Leased Asset 10.0% 10.4% 9.7% 10.3% 12.8% 13.1% 3.3% 4.7% 3.5% 4.0% 8.3 9.7
Class A - Value Added 9.4% 10.0% 9.6% 10.2% 12.8% 13.5% 3.5% 4.6% 3.5% 3.9 7.6 8.9
Class B - Value Added 10.7% 11.0% 10.5% 11.2% 14.6% 15.3% 3.2% 4.8% 3.3% 3.9% 8.0 8.8
Suburban 9.3% 9.8% 9.7% 10.1% 12.8% 13.4% 3.2% 4.4% 3.4% 3.7% 8.0 8.8
Class A - Leased Asset 8.8% 9.5% 9.3% 9.9% 11.2% 11.6% 3.5% 4.4% 3.6% 3.8% 8.9 9.7
Class B - Leased Asset 9.5% 10.0% 9.8% 10.2% 12.0% 12.5% 3.4% 4.5% 3.4% 3.7% 8.6 9.6
Class A - Value Added 9.1% 9.7% 9.5% 10.0% 13.4% 14.3% 3.1% 4.6% 3.4% 3.8% 7.2 8.0
Class B - Value Added 9.7% 10.0% 10.0% 10.5% 14.5% 15.2% 2.9% 4.3% 3.2% 3.6% 7.2 8.0
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL
- ------------------------------------------------------------------------------------------------------------------------------------
Warehouse/Distribution 9.5% 9.7% 10.2% 10.5% 11.6% 11.6% 2.6% 4.5% 3.2% 4.0% 9.6 10.2
Class A - Leased Asset 8.8% 9.2% 9.4% 9.8% 10.9% 11.0% 2.9% 4.0% 3.3% 3.8% 9.8 10.1
Class B - Leased Asset 9.3% 9.5% 10.0% 10.2% 11.2% 11.2% 2.8% 4.3% 3.2% 3.9% 9.7 10.1
Class A - Value Added 9.7% 9.9% 10.4% 10.8% 11.9% 11.9% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
Class 8 - Value Added 10.1% 10.4% 10.9% 11.3% 12.4% 12.4% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
Business Parks 9.4% 9.9% 10.0% 10.8% 12.3% 12.9% 3.4% 4.0% 3.2% 3.8% 8.3 9.6
Class A - Leased Asset 9.0% 9.5% 9.8% 10.5% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
Class B - Leased Asset 9.3% 9.8% 10.0% 10.8% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
Class A - Value Added 9.5% 10.2% 10.0% 10.8% 13.0% 14.3% 3.5% 4.0% 3.2% 3.7% 7.7 8.7
Class B - Value Added 9.7% 10.3% 10.2% 11.0% 13.0% 14.3% 3.5% 4.0% 3.2% 3.7% 7.7 8.7
0ther Industrial/
Manufacturing 9.2% 9.7% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.8 10.3
Class A - Leased Asset 8.8% 9.3% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.5 10.0
Class B - Leased Asset 9.3% 9.8% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.5 10.0
Class A - Value Added 9.3% 9.8% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
Class B - Value Added 9.5% 10.0% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
- ------------------------------------------------------------------------------------------------------------------------------------
RETAIL
- ------------------------------------------------------------------------------------------------------------------------------------
Neighborhood & Community
Centers 9.7% 10.2% 10.3% 10.9% 13.0% 13.5% 2.7% 3.9% 3.2% 4.0% 8.7 9.3
Class A - Leased Asset 9.3% 9.8% 10.0% 10.4% 11.9% 12.1% 2.9% 3.7% 3.4% 3.9% 8.9 9.4
Class B - Leased Asset 9.5% 10.0% 10.4% 11.1% 12.3% 12.3% 2.3% 3.8% 3.3% 4.2% 9.0 9.6
Class A - Value Added 9.7% 10.3% 10.1% 10.7% 13.8% 14.6% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
Class B - Value Added 10.3% 10.8% 10.8% 11.5% 14.2% 15.0% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
Power Center & "Big Box" 9.6% 9.9% 10.0% 10.5% 11.8% 11.9% 2.9% 3.5% 3.2% 3.7% 9.3 10.3
Class A - Leased Asset 9.4% 9.5% 9.7% 10.1% 11.5% 11.7% 3.3% 3.5% 3.4% 3.7% 9.1 10.1
Class B - Leased Asset 9.8% 10.1% 10.1% 10.6% 11.0% 11.3% 2.8% 3.7% 3.2% 3.7% 9.3 10.3
Class A - Value Added 9.6% 9.9% 10.1% 10.6% 12.0% 12.0% 2.8% 3.3% 3.2% 3.7% 9.3 10.3
Class B - Value Added 9.8% 10.3% 10.1% 10.9% 12.7% 12.7% 2.8% 3.3 3.2% 3.7% 9.3 10.3
Regional Malls 9.3% 9.6% 9.5% 10.0% 13.2% 13.6% 2.7% 3.5% 3.5% 3.8% 8.8 8.9
Class A - Leased Asset 7.9% 8.2% 8.2% 8.6% 11.4% 11.8% 3.0% 3.6% 3.5% 3.8% 9.1 9.6
Class B - Leased Asset 9.3% 9.6% 9.6% 10.0% 13.4% 13.9% 2.5% 3.4% 3.7% 4.0% 8.6 8.6
Class A - Value Added 9.3% 9.8% 9.8% 10.3% 13.4% 13.9% 2.6% 3.6% 3.4% 3.8% 9.2 9.2
Class B - Value Added 10.6% 11.0% 10.6% 11.0% 14.6% 15.0% 2.7% 3.5% 3.3% 3.7% 8.2 8.2
Specialty Retail 9.5% 10.5% 10.8% 11.5% 12.0% 12.6 1.9% 4.0% 3.3% 4.0% 10.0 10.5
Class A - Leased Asset 8.2% 9.0% 8.8% 9.7% 10.7% 11.3% 2.5% 4.0% 3.5% 4.0% 8.7 10.3
Class B - Leased Asset 9.3% 10.3% 10.8% 11.5% 11.5% 12.5% 1.8% 4.0% 3.3% 4.0% 10.5 10.5
Class A - Value Added 10.0% 11.0% 11.3% 12.0% 12.5% 13.0% 1.8% 4.0% 3.3% 4.0% 10.5 10.5
Class B - Value Added 10.8% 11.8% 12.3% 13.0% 13.5% 13.5% 1.8% 4.0% 3.3% 4.0% 10.5 10.5
- ------------------------------------------------------------------------------------------------------------------------------------
RESIDENTIAL
- ------------------------------------------------------------------------------------------------------------------------------------
Apartments 9.0% 9.6% 9.8% 10.4% 11.5% 12.1% 2.7% 4.4% 3.2% 4.0% 8.4 9.3
Class A - Leased Asset 8.6% 9.2% 9.0% 9.6% 11.2% 11.7% 2.9% 3.9% 3.3% 3.8% 8.4 8.9
Class B - Leased Asset 8.9% 9.7% 9.7% 10.3% 11.0% 11.8% 2.5% 4.2% 3.1% 4.0% 9.6 10.2
Class A - Value Added 8.9% 9.4% 9.8% 10.3% 11.6% 12.1% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
Class B - Value Added 9.5% 10.1% 10.6% 11.3% 12.0% 13.0% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
</TABLE>
16 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
Single-Tenant NNN Leased Properties
(Excludes "Bondable" Leases)
Minimum No. Going-In Cap Rate Internal Rate of Return
of Years Low High Low High
Investment Grade Tenant
- --------------------------------------------------------------------------------
4.0 9.0% 9.0% 10.0% 12.0%
----------------------------------------------------------
10.0 8.0 9.0 10.5 11.5
----------------------------------------------------------
5.0 10.5 10.5 13.0 13.0
----------------------------------------------------------
10.0 9.0 10.5 13.0 15.0
----------------------------------------------------------
10.0 8.5 9.0 10.5 12.0
----------------------------------------------------------
10.0 9.5 10.0 10.5 11.5
----------------------------------------------------------
10.0 8.5 11.0 10.8 12.0
----------------------------------------------------------
10.0 9.5 9.5 11.0 11.0
----------------------------------------------------------
20.0 9.0 9.0 N/A N/A
----------------------------------------------------------
10.0 8.0 10.0 N/A N/A
- --------------------------------------------------------------------------------
Responses 10.0 10.0 10.0 8.0 8.0
Average 9.9 9.0% 9.8% 11.2% 12.3%
Non-Investment Grade
Tenant
- --------------------------------------------------------------------------------
4.0 9.5% 9.5% 10.5% 13.0%
----------------------------------------------------------
10.0 9.0 10.0 11.5 12.5
----------------------------------------------------------
5.0 13.0 13.0 15.0 15.0
----------------------------------------------------------
10.0 10.0 12.0 17.0 20.0
----------------------------------------------------------
10.0 9.0 10.0 11.0 13.0
----------------------------------------------------------
10.0 11.0 12.0 13.0 15.0
----------------------------------------------------------
10.0 10.5 10.5 13.0 13.0
----------------------------------------------------------
20.0 11.0 11.0 N/A N/A
----------------------------------------------------------
10.0 10.0 12.5 N/A N/A
----------------------------------------------------------
Responses 9.0 9.0 9.0 7.0 7.0
Average 9.9 10.3% 11.2% 13.0% 14.5%
AUTUMN 1996 17
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES BLENDED INTERNAL EQUITY INTERNAL GROWTH RATES TYPICAL PROJECTION MANAGEMENT RESERVES FOR
GOING-IN TERMINAL RATE OF RETURN RATE OF RETURN INCOME EXPENSES PERIOD (YEARS) FEES* REPLACEMENT*
----------------------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
LUXURY
- ------------------------------------------------------------------------------------------------------------------------------------
8.0% 8.0% 10.0% 10.0% 18.0% 18.0% 25.0% 25.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 5.0% 5.0%
7.0% 7.0% 10.0% 10.0% 15.0% 15.0% 20.0% 20.0% 7.0% 7.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
6.0% 9.5% 10.0% 10.0% 12.0% 15.0% 15.0% 18.0% 3.0% 3.0% 3.0% 3.0% 5.0 5.0 2.0% 4.0% 4.0% 4.0%
8.0% 11.0% 8.5% 12.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
9.5% 9.5% 10.5% 10.5% 15.0% 15.0% 18.0% 18.0% 4.5% 4.5% 4.0% 4.0% 10.0 10.0 3.5% 3.5% 4.0% 4.0%
-- -- 11.0% 13.0% 15.0% 15.0% 18.0% 18.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0 3.0% 3.0% 4.0% 4.0%
6.0% 8.0% 10.0% 12.0% 13.0% 14.0% 20.0% 22.0% 3.0% 4.0% 3.0% 4.0% 5.0 5.0 2.0% 3.0% 4.0% 5.0%
8.0% 12.0% 8.0% 10.0% 15.0% 15.0% 20.0% 20.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0 3.0% 4.0% 4.0% 5.0%
Responses 7 7 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8
Average (%) 7.5% 9.3% 9.8% 10.9% 14.5% 15.3% 19.5% 20.1% 4.1% 4.3% 3.8% 3.9% 6.5 6.9 2.8% 3.3% 4.1% 4.4%
- ------------------------------------------------------------------------------------------------------------------------------------
FIRST CLASS
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 9.0% 11.0% 11.0% 12.0% 12.0% 20.0% 20.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
10.0% 10.0% 10.0% 10.0% -- -- 13.0% 13.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0 3.0% 3.0% 4.0% 5.0%
9.0% 9.0% 11.0% 11.0% 14.0% 14.0% 18.0% 18.0% 6.0% 6.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
9.5% 11.0% 11.0% 11.0% 15.0% 20.0% 18.0% 22.0% 3.0% 3.0% 2.0% 2.0% 5.0 5.0 2.0% 3.0% 4.0% 4.0%
10.0% 12.0% 10.5% 13.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
7.0% 9.0% 10.0% 11.0% 11.5% 12.0% 14.0% 16.0% 4.0% 5.0% 3.0% 4.0% 5.0 5.0 2.5% 2.5% 5.0% 5.0%
9.5% 9.5% 10.5% 10.5% 15.0% 15.0% 18.0% 18.0% 4.5% 4.5% 4.0% 4.0% 10.0 10.0 3.5% 3.5% 4.0% 4.0%
9.0% 9.0% 10.5% 10.5% 21.0% 21.0% 14.0% 14.0% 4.0% 4.0% 3.0% 3.0% 7.0 7.0 3.0% 3.0% 4.0% 4.0%
10.0% 12.0% 11.0% 11.0% -- -- -- -- 3.5% 3.5% 3.5% 3.5% 5.0 10.0 2.0% 3.0% 4.0% 4.0%
10.0% 10.0% 9.0% 9.5% 19.0% 19.0% 15.0% 15.0% 8.0% 8.0% 6.0% 6.0% -- -- 2.5% 2.5% 4.0% 4.0%
10.0% 13.0% 12.0% 13.0% 25.0% 25.0% 20.0% 20.0% 3.5% 4.0% 3.5% 4.0% 5.0 5.0 3.5% 3.5% 4.0% 4.0%
10.5% 10.5% 10.5% 10.5% 13.5% 13.5% -- -- 3.5% 3.5% 3.5% 3.5% 10.0 10.0 3.0% 3.0% 5.0% 5.0%
8.0% 12.0% 8.0% 10.0% 15.0% 15.0% 20.0% 20.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0 3.0% 4.0% 4.0% 5.0%
Responses 13 13 13 13 11 11 11 11 13 13 13 13 12 12 13 13 13 13
Average (%) 9.3% 10.5% 10.4% 10.9% 15.8% 16.5% 17.3% 17.8% 4.2% 4.3% 3.7% 3.8% 6.6 7.3 2.8% 3.1% 4.2% 4.3%
- ------------------------------------------------------------------------------------------------------------------------------------
MID-RATE
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 12.0% 12.0% 15.0% 15.0% 18.0% 18.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
11.0% 11.0% 11.0% 11.0% 13.0% 13.0% 17.0% 17.0% 6.0% 6.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
9.5% 11.0% 11.0% 11.0% 15.0% 18.0% 17.0% 20.0% 3.0% 3.0% 2.0% 2.0% 5.0 5.0 2.0% 3.0% 4.0% 4.0%
10.0% 12.0% 10.5% 13.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
9.5% 9.5% 10.5% 10.5% 15.0% 15.0% 18.0% 18.0% 4.5% 4.5% 4.0% 4.0% 10.0 10.0 3.5% 3.5% 4.0% 4.0%
Responses 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5
Average (%) 10.0% 10.7% 11.0% 11.5% 14.2% 15.2% 18.0% 18.6% 4.2% 4.2% 3.7% 3.7% 6.4 7.0 2.9% 3.1% 4.0% 4.0%
----------------------------------------------------------------------------------------------------------------------
Total
Responses 25 25 26 26 24 24 24 24 26 26 26 26 25 25 26 26 26 26
Weighted
Average (%) 8.9% 10.1% 10.4% 11.1% 14.8% 15.7% 18.3% 18.8% 4.2% 4.3% 3.7% 3.8% 6.5 7.0 2.9% 3.2% 4.1% 4.2%
----------------------------------------------------------------------------------------------------------------------
</TABLE>
*as percent of total revenues
18 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES BLENDED INTERNAL EQUITY INTERNAL GROWTH RATES TYPICAL PROJECTION MANAGEMENT RESERVES FOR
GOING-IN TERMINAL RATE OF RETURN RATE OF RETURN INCOME EXPENSES PERIOD (YEARS) FEES* REPLACEMENT*
----------------------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
MID-RATE HOTEL - LIMITED SERVICE
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 12.0% 12.0% 15.0% 15.0% 15.0% 15.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
12.0% 12.0% 12.0% 12.0% 13.0% 13.0% 17.0% 17.0% 3.0% 3.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
8.0% 10.0% 10.0% 10.0% 12.0% 15.0% 14.0% 16.0% 3.0% 3.0% 2.0% 2.0% 5.0 5.0 3.0% 4.0% 4.0% 5.0%
11.0% 13.0% 11.5% 14.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
11.0% 11.0% 11.8% 11.8% 16.0% 16.0% 19.0% 19.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0 4.0% 4.0% 4.5% 4.5%
10.0% 13.0% 12.0% 13.0% 25.0% 25.0% 20.0% 20.0% 3.5% 4.0% 3.5% 4.0% 5.0 5.0 4.0% 4.0% 5.0% 5.0%
Responses 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6
Average (%) 10.3% 11.5% 11.5% 12.1% 15.7% 16.5% 17.5% 17.8% 3.5% 3.6% 3.7% 3.8% 6.2 6.7 3.3% 3.5% 4.3% 4.4%
- ------------------------------------------------------------------------------------------------------------------------------------
ECONOMY
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 12.0% 12.0% 15.0% 15.0% 15.0% 15.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
13.0% 13.0% 13.0% 13.0% 13.0% 13.0% 17.0% 17.0% 3.0% 3.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
9.0% 11.0% 10.0% 10.0% 12.0% 15.0% 14.0% 16.0% 3.0% 3.0% 3.0% 3.0% 5.0 5.0 4.0% 5.0% 5.0% 5.0%
11.0% 13.0% 11.5% 14.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
11.0% 11.0% 11.8% 11.8% 16.0% 16.0% 19.0% 19.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0 4.0% 4.0% 4.5% 4.5%
Responses 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5
Average (%) 10.8% 11.6% 11.7% 12.2% 13.8% 14.8% 17.0% 17.4% 3.5% 3.5% 3.9% 3.9% 6.4 7.0 3.4% 3.6% 4.3% 4.3%
Total
Responses 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11
Weighted
Average(%) 10.6% 11.6% 11.6% 12.1% 14.7% 15.7% 17.3% 17.6% 3.5% 3.5% 3.8% 3.8% 6.3 6.8 3.4% 3.6% 4.3% 4.4%
</TABLE>
*as percent of total revenues
AUTUMN 1996 19
<PAGE>
WAREHOUSE BUILDING SALE
- --------------------------------------------------------------------------------
I-1 Sale
Location: 904-34 Marcon Boulevard
Hanover Township, Lehigh County, PA
Parcel Number: F10-10-8, 9, 10, & 11
Grantor: Mellon Bank, NA as Ancillary
Trustee for Westinghouse, Inc.
Grantee: Larise Lehigh Associates One
Date of Sale: 07/08/96
Physical Description:
Land Area: 14.64 Acres
Gross Building Area: 182,400 Square Feet
Finished Office Area: 6.0%
% Air Conditioned: 10%
Clear Ceiling Height: 20.0 feet
Sprinklered: Yes
Year Built: 1987
Land/Building Ratio: 3.50:1
Rail Access: No
Condition: Good
Construction Type: Masonry and metal panel
Zoning: Industrial
Sale Price: $6,000,000
Terms of Sale: Cash to seller.
Appraisal Indicators:
Overall Rate (OAR): 11.00%
Sale Price/Square Foot (GSF): $32.89
COMMENTS:
The seller of this property was highly motivated
after an agreement of sale at a higher price
collapsed. At the time of sale, it was 97.4 percent
occupied by 14 tenants. Clearance ranges up to 22
feet and their is extensive tailgate loading. This
four building complex also offers visibility from
Route 22.
Confirmation Data:
By: BROKER
<PAGE>
WAREHOUSE BUILDING SALE
- --------------------------------------------------------------------------------
I-1 Continued
With: Michael Hines (C&W)
PHL4-1687
<PAGE>
WAREHOUSE BUILDING SALE
- --------------------------------------------------------------------------------
I-2 Sale
Building Name: Upper Mac Portfolio
Location: 6813, 6829, 6831 Ruppsville Rd
7663 Industrial Blvd.
Upper Macungie Twp, Lehigh County, PA
Parcel Number: Various
Grantor: Upper Mac Realty (Thomas
Armbruster & Michael Prokup)
Grantee: J. P. Morgan Investment
Management
Date of Sale: 02/23/96
Physical Description:
Land Area: 19.30 Acres
Gross Building Area: 302,600 Square Feet
Finished Office Area: 2.0 %
% Air Conditioned: 2 %
Clear Ceiling Height: 22.0 feet
Sprinklered: Yes
Year Built: 1984
Land/Building Ratio: 2.78:1
Rail Access: Yes
Condition: Good
Construction Type: Tilt up masonry
Zoning: EC Employment Center
Sale Price: $8,700,000
Terms of Sale: Cash
Economic Indicators:
Net Operating Income: $887,000 Actual
Appraisal Indicators:
Overall Rate (OAR): 10.20%
Sale Price/Square Foot (GSF): $28.75
COMMENTS:
This is a portfolio of four single story buildings
<PAGE>
WAREHOUSE BUILDING SALE
- --------------------------------------------------------------------------------
I-2 Continued
constructed between 1984 and 1988. All lie within
close proximity of one another. Clearance is typically
22'; the Industrial Boulevard building has 38' clear
heights. At the time of sale, the buildings were 100%
occupied by a total of seven tenants.
Confirmation Data:
By: BUYER
With: John Begier
PHL4-1342
<PAGE>
FLEX INDUSTRIAL BLDG SALE
- --------------------------------------------------------------------------------
I-3 Sale
Location: 1 & 5 Highland Avenue
Bethlehem Business Park
Hanover Township, Northampton County, PA
Parcel Number: M6-15-10V
Grantor: John Hancock Life Insurance
Company
Grantee: Specialty Minerals, Inc.
Date of Sale: 12/27/95
Recording Data: Volume 1995-1, Page 124627
Physical Description:
Land Area: 6.72 Acres
Gross Building Area: 72,129 Square Feet
Finished Office Area: 30.9%
% Air Conditioned: 30.9%
Clear Ceiling Height: 18.0 feet
Sprinklered: Yes
Year Built: 1988
Land/Building Ratio: 4.06:1
Rail Access: No
Condition: Good
Construction Type: Masonry and steel frame
Zoning: Planned Industrial
Sale Price: $3,029,420
Terms of Sale: Cash to seller.
Sale Price/Square Foot (GSF): $42.00
COMMENTS:
At the time of sale, this two building complex was
78.6 percent occupied by six tenants, including
the grantee. One building is 37,129 square feet,
the other is 35,000 square feet. The buildings are
visible from U.S. Route 22. It is the intent of
the grantee to occupy the buildings as the
existing leases expire. They also own and occupy a
larger facility adjacent to this property.
Confirmation Data:
By: SELLER
<PAGE>
FLEX INDUSTRIAL BLDG SALE
- --------------------------------------------------------------------------------
I-3 Continued
With: John Begier
PHL4-1373
<PAGE>
FLEX INDUSTRIAL BLDG SALE
- --------------------------------------------------------------------------------
I-4 Sale
Location: 7620 Cetronia Road
Upper Macungie Twp, Lehigh County, PA
Parcel Number: J7SW4-3-9
Grantor: The Beacon Group
Grantee: Liberty Properties Limited
Partnership
Date of Sale: 05/02/95
Recording Data: Book 1544, Page 416
Physical Description:
Land Area: 12.32 Acres
Gross Building Area: 155,060 Square Feet
Finished Office Area: 8.0%
% Air Conditioned: 8%
Clear Ceiling Height: 24.0 feet
Sprinklered: Yes
Year Built: 1990
Land/Building Ratio: 3.46:1
Rail Access: No
Condition: Good
Construction Type: Tilt up concrete and steel
Zoning: EC Employment Center
Sale Price: $4,880,763
Terms of Sale: Cash
Economic Indicators:
Gross Annual Income: $640,126
Less: Operating Expenses: $157,490
Net Operating Income: $482,636
Appraisal Indicators:
Overall Rate (OAR): 9.89%
Sale Price/Square Foot (GSF): $31.48
COMMENTS:
This is an "L" shaped single story warehouse/distribution
facility designed for multi-tenanted occupancy. The
<PAGE>
FLEX INDUSTRIAL BLDG SALE
- --------------------------------------------------------------------------------
I-4 Continued
building has 24 tailgate docks and two drive-in doors.
At the time of sale it was fully occupied by three
tenants at rental rates ranging from $3.21 to $3.75
per square foot. All of the existing leases were
scheduled to expire during 1995 and 1996.
Confirmation Data:
By: BUYER
With: Liberty Property
PHL4-1374
<PAGE>
OFFICE BUILDING SALE
- --------------------------------------------------------------------------------
I-1 Sale
Building Name: Lehigh Valley Office Commons
Location: 87 South Commerce Way
LVIP IV
Hanover Township, Northampton County, PA
Parcel Number: M6-15-40
Grantor: MAG LVOC Associates Limited
Grantee: Liberty Property Limited
Partnership
Date of Sale: 07/15/96
Recording Data: Volume 19961 Page 68430
Physical Description:
Land Area: 12.60 Acres
Gross Building Area: 62,454 Square Feet
Net Rentable Area: 60,580 Square Feet
Year Built: 1989
Occupancy at Sale: 97%
Parking: Adequate
Quality: Good
Construction: Masonry and steel frame
Zoning: PIBD
Stories: 1
Sale Price: $3,900,000
Terms of Sale: Cash
Appraisal Indicators:
Overall Rate (OAR): 10.60%
Sale Price/Square Foot (GSF): $62.45
Sale Price/Square Foot (RSF): $64.38
COMMENTS:
This is a complex of three, single story office
buildings. Originally developed by Franklin
Realty, they were acquired by deed in lieu of
foreclosure by PNC Realty Holding in
<PAGE>
OFFICE BUILDING SALE
- --------------------------------------------------------------------------------
I-1 Continued
December, 1991 and sold to the grantor for
$4,500,000. At that time, the property also included
the concrete pad and structural framework for an
additional building of 21,250 square feet. However,
permits to construct this building had expired and
these improvements were removed. Of the total land
area approximately 1 to 2 acres are considered excess
to the improvements. The development potential of this
land is unknown at this time.
Confirmation Data:
By: BUYER
PHL4-1577
<PAGE>
OFFICE BUILDING SALE
- --------------------------------------------------------------------------------
I-2 Sale
Building Name: Newpointe Building
Location: 98 Brodhead Road
LVIP IV
Hanover Township, Northampton County, PA
Parcel Number: M6-15-42
Grantor: Newpointe Partnership
Grantee: Liberty Property Trust
Date of Sale: 10/01/95
Recording Data: Volume 19951, Page 93664
Physical Description:
Land Area: 4.46 Acres
Gross Building Area: 52,142 Square Feet
Net Rentable Area: 47,147 Square Feet
Year Built: 1989
Occupancy at Sale: 100%
Parking: Adequate
Quality: Good
Construction: Masonry
Zoning: PIBD
Stories: 2
Sale Price: $3,300,000
Terms of Sale: Cash
Economic Indicators:
Net Operating Income: $313,000
Appraisal Indicators:
Overall Rate (OAR): 9.48%
Sale Price/Square Foot (GSF): $63.29
Sale Price/Square Foot (RSF): $69.99
COMMENTS:
A two story multi-tenanted office building constructed in
1989 with a gross building area of 52,142 s.f. and a net
<PAGE>
OFFICE BUILDING SALE
- --------------------------------------------------------------------------------
I-2 Continued
rentable area of 47,147 s.f. The first floor contains
a bank with a three lane, drive-through facility. The
building contains a high level of interior finish and
high quality construction.
Confirmation Data:
By: BUYER
PHL4-1372
<PAGE>
OFFICE BUILDING SALE
- --------------------------------------------------------------------------------
I-3 Sale
Building Name: Westfield Corporate Center
Location: 4905 Tilghman Street
S. Whitehall Twp., Lehigh County, PA
Parcel Number: H7-17-9
Grantor: WCC Holdings, Inc.
Grantee: 4905 Tilghman Limited
Partnership
Date of Sale: 06/01/95
Recording Data: Volume 1547, Page 1092
Physical Description:
Land Area: 4.18 Acres
Gross Building Area: 66,749 Square Feet
Net Rentable Area: 56,493 Square Feet
Year Built: 1989
Occupancy at Sale: 84%
Parking: Adequate
Quality: Average
Construction: Masonry
Zoning: Commercial/Office
Stories: 3
Sale Price: $2,950,000
Terms of Sale: Cash to seller.
Appraisal Indicators:
Overall Rate (OAR): 11.00%
Sale Price/Square Foot (GSF): $44.20
Sale Price/Square Foot (RSF): $52.22
COMMENTS:
The site is improved with a three story, steel
frame multi-tenated office building with a gross
building area of 66,749 square feet and a net
rentable area of 56,493 s.f. Exterior walls are a
combination of dryvit and glass, and the building
contains an atrium. According to a
<PAGE>
OFFICE BUILDING SALE
- --------------------------------------------------------------------------------
I-3 Continued
conversation with the purchaser, the sale price was
predictaed around an 11 percent overall rate.
Confirmation Data:
By: BUYER
PHL4-1371
<PAGE>
OFFICE BUILDING SALE
- --------------------------------------------------------------------------------
I-4 Sale
Building Name: Lehigh Valley Executive Campus
Location: 2200-02 Irving St.; 867, 871 &
881 Marcon Boulevard
Hanover Township, Lehigh County, PA
Parcel Number: F10-10-8, 9, 10, & 11
Grantor: Lehigh Valley Equities
Grantee: Lehigh Valley Executive Campus
Limited Partnership
Date of Sale: 06/20/95
Recording Data: Volume 1547 Page 174
Physical Description:
Land Area: 16.00 Acres
Gross Building Area: 163,690 Square Feet
Net Rentable Area: 163,690 Square Feet
Year Built: 1987
Occupancy at Sale: 89%
Parking: Adequate
Quality: Excellent
Construction: Masonry and steel frame
Zoning: PIO-Planned Industrial Office
Stories: 1
Sale Price: $11,100,000
Terms of Sale: Cash to seller.
Appraisal Indicators:
Overall Rate (OAR): 9.37%
Sale Price/Square Foot (GSF): $67.81
Sale Price/Square Foot (RSF): $67.81
COMMENTS:
This is a five building complex located within Lehigh
Valley Industrial Park III. At the time of sale, it was
about 90 percent finished as office space. Tenants
included Airborne, Kraft Foods, and Dun & Bradstreet. The
<PAGE>
OFFICE BUILDING SALE
- --------------------------------------------------------------------------------
I-4 Continued
buildings are four sides brick and offer separate utilities
to each tenant.
Confirmation Data:
By: SELLER
PHL4-1578
<PAGE>
LIGHT INDUSTRIAL SALE
- --------------------------------------------------------------------------------
I-1 Sale
Location: 6620 Grant Way
Iron Run Corporate Center
Upper Macungie Twp, Lehigh County, PA
Parcel Number: H7-12-5A
Grantor: D & M Properties, Inc.
Grantee: Submicron Systems Management
Date of Sale: 11/21/96
Physical Description:
Land Area: 5.30 Acres
Gross Building Area: 30,000 Square Feet
Finished Office Area: 40.0%
% Air Conditioned: 40%
Clear Ceiling Height: 16.0 feet
Sprinklered: Yes
Year Built: 1989
Land/Building Ratio: 7.70:1
Rail Access: No
Condition: Good
Construction Type: Masonry and steel frame
Zoning: Industrial
Sale Price: $1,825,000
Terms of Sale: Cash to seller.
Sale Price/Square Foot (GSF): $60.83
COMMENTS:
This property was purchased to serve as the
corporate headquarters of the grantee. A portion
of the site is considered excess to the
improvements as a 20,000 square foot addition was
to be constructed following the sale. The buyer
also intended to convert the warehouse area to
office and training area.
Confirmation Data:
By: SELLER
PHL4-1597
<PAGE>
LIGHT INDUSTRIAL SALE
- --------------------------------------------------------------------------------
I-2 Sale
Location: 2041 Avenue C
Lehigh Valley Ind. Park I
Hanover Township, Lehigh County, PA
Parcel Number: E10SE4-4-2
Grantor: Avenue C-17 Associates
Grantee: Liberty Property Limited
Partnership
Date of Sale: 02/06/95
Recording Data: Book 1540 Page 385
Physical Description:
Land Area: 2.57 Acres
Gross Building Area: 30,400 Square Feet
Finished Office Area: 17.0%
% Air Conditioned: 17%
Clear Ceiling Height: 24.0 feet
Sprinklered: Yes
Year Built: 1989
Land/Building Ratio: 3.68:1
Rail Access: No
Condition: Good
Construction Type: Masonry and steel frame
Zoning: Industrial
Sale Price: $1,290,000
Terms of Sale: Cash to seller
Appraisal Indicators:
Overall Rate (OAR): 10.34%
Sale Price/Square Foot (GSF): $42.43
COMMENTS:
The purchaser of this property was an active real
estate investment trust. At the time of sale, the
property was fully occupied by three tenants.
Confirmation Data:
By: BUYER
PHL4-1598
<PAGE>
LIGHT INDUSTRIAL SALE
- --------------------------------------------------------------------------------
I-3 Sale
Location: 2124 Avenue C
Lehigh Valley Ind. Park I
Hanover Township, Lehigh County, PA
Parcel Number: E10SE4-3-15
Grantor: Avenue C Associates
Grantee: Liberty Property Limited
Partnership
Date of Sale: 02/06/95
Recording Data: Book 1540 Page 390
Physical Description:
Land Area: 3.35 Acres
Gross Building Area: 36,000 Square Feet
Finished Office Area: 5.0%
% Air Conditioned: 5%
Clear Ceiling Height: 24.0 feet
Sprinklered: Yes
Year Built: 1989
Land/Building Ratio: 4.05:1
Rail Access: No
Condition: Good
Construction Type: Masonry and metal panel
Zoning: Industrial
Sale Price: $1,310,000
Terms of Sale: Cash to seller.
Appraisal Indicators:
Overall Rate (OAR): 10.27%
Sale Price/Square Foot (GSF): $36.39
COMMENTS:
This property was purchased by an active real
estate investment trust. At the time of sale, it
was leased to a single tenant, Graybar Electric,
through 10/97 at a rental rate of $4.07/s.f.,
net.
Confirmation Data:
By: BUYER
<PAGE>
LIGHT INDUSTRIAL SALE
- --------------------------------------------------------------------------------
I-3 Continued
PHL4-1599
<PAGE>
LIGHT INDUSTRIAL SALE
- --------------------------------------------------------------------------------
I-4 Sale
Location: 2196 Avenue C
Lehigh Valley Ind. Park I
Hanover Township, Lehigh County, PA
Parcel Number: F1ONE1-1-3
Grantor: Lehigh County Industrial
Development Authority
Grantee: Liberty Property Limited
Partnership
Date of Sale: 07/26/94
Recording Data: Book 1529 Page 1128
Physical Description:
Land Area: 4.48 Acres
Gross Building Area: 31,381 Square Feet
Finished Office Area: 75.0%
% Air Conditioned: 100%
Clear Ceiling Height: 16.0 feet
Sprinklered: Yes
Year Built: 1980
Land/Building Ratio: 6.22:1
Rail Access: No
Condition: Good
Construction Type: Masonry and steel frame
Zoning: Industrial
Sale Price: $1,859,920
Appraisal Indicators:
Overall Rate (OAR): 9.40%
Sale Price/Square Foot (GSF): $59.27
COMMENTS:
This property was acquired by an active real estate
investment trust. At the time of sale, it was
occupied under lease by Centennial School, a school
for autistic children. Approximately 75 percent of
the building had office type finishes, with the
entirety having finished ceilings. The rental rate
reported at sale was $6.00/s.f., net.
<PAGE>
LIGHT INDUSTRIAL SALE
- --------------------------------------------------------------------------------
I-4 Continued
Confirmation Data:
By: BUYER
PHL4-1600
<PAGE>
INDUSTRIAL SITE SALE
- --------------------------------------------------------------------------------
L-1 Sale
Location: Lot 4
Mill Run Corporate Center
Upper Macungie Twp, Lehigh County, PA
Grantor: Lehigh Portland Cement Company
Grantee: Phoenix Forging Company
Date of Sale: 06/09/97
Size: 7.15 Acres
Shape: Irregular
Frontage: Mill Road
Utilities: Sewer, Water, Natural Gas, Electricity
Topography: Generally level
Zoning: Industrial
Price: $679,250
Terms of Sale: Cash to seller.
Price per Acre: $95,000.00
COMMENTS:
The grantee purchased this property for the
development of a 60,000 square foot manufacturing
facility for their use.
Confirmation Data:
By: BROKER
With: John Begier
PHL1-1407
<PAGE>
INDUSTRIAL SITE SALE
- --------------------------------------------------------------------------------
L-2 Sale
Location: Industrial Boulevard & Schantz
Road
Upper Macungie Twp, Lehigh County, PA
Grantor: Thrift Drug Company
Grantee: Walsh Higgins Company
Size: 27.00 Acres
Shape: Irregular
Frontage: Industrial Boulevard and
Schantz Road
Utilities: Sewer, Water, Natural Gas, Electricity
Topography: Level
Zoning: Industrial
Price: $2,970,000
Terms of Sale: Cash to seller.
Price per Acre: $110,000.00
COMMENTS:
This site is currently under agreement of sale.
The purchaser, a Chicago area developer,
reportedly will construct a 425,000 square foot
warehouse for an undisclosed tenant.
Confirmation Data:
By: BROKER
PHL1-1408
<PAGE>
INDUSTRIAL SITE SALE
L-3 Sale
Location: 7235 Penn Drive
William Penn Business Center
Upper Macungie Twp, Lehigh County, PA
Parcel Number: H17-33-1
Grantor: Alexander Tamerler
Grantee: SCC Real Estate Partnership
Date of Sale: 05/22/96
Size: 2.86 Acres
Shape: Irregular
Frontage: Penn Drive
Utilities: Sewer, Water, Natural Gas, Electricity
Topography: Level and at street grade
Zoning: Industrial
Price: $250,000
Terms of Sale: Cash to seller.
Recording Data: Book 1565 Page 34
Price per Acre: $87,412.31
COMMENTS:
This site was acquired for future development by
the grantee.
Confirmation Data:
By: SELLER
PHL1-1409
<PAGE>
INDUSTRIAL SITE SALE
- --------------------------------------------------------------------------------
L-4 Sale
Location: Lots 16 & 17
Lehigh Valley West Ind. Park
Upper Macungie Twp, Lehigh County, PA
Parcel Number: J6-3-12, 13, & 14
Grantor: Jaindl Land Company
Grantee: Liberty Property Limited
Partnership
Date of Sale: 03/19/96
Size: 77.22 Acres
Shape: Irregular
Utilities: Sewer, Water, Natural Gas, Electricity
Topography: Generally level and at grade
Zoning: Industrial
Price: $6,731,200
Terms of Sale: Cash to seller.
Recording Data: Book 1561 Page 973
Price per Acre: $87,169.13
COMMENTS:
This is the assemblage of three adjacent tracts
for the developernent of a 1.2 million square foot
distribution facility.
Confirmation Data:
By: BUYER
With: Rob Fenza
PHL1-1410
<PAGE>
INDUSTRIAL SITE SALE
- --------------------------------------------------------------------------------
L-5 Sale
Location: E/S Windsor Drive
Iron Run Corporate Center
Upper Macungie Twp, Lehigh County, PA
Grantor: Bell Atlantic Development, Inc
Grantee: Allentown Valve & Fitting
Date of Sale: 01/27/95
Size: 2.96 Acres
Shape: Irregular
Frontage: Windsor Drive
Utilities: Sewer, Water, Natural Gas, Electricity
Topography: Level and at street grade
Zoning: Industrial
Price: $370,400
Terms of Sale: Cash to seller.
Price per Acre: $125,134.75
COMMENTS:
The agreed upon price for this 2.9632 site was
$125,000 per acre. The grantee was reportedly
motivated and willing to pay a premium price to
acquire this specific tract in Iron Run.
Confirmation Data:
By: SELLER
With: Phil Schenkel
PHL1-1411
<PAGE>
QUALIFICATIONS OF THOMAS H. MYERS
- --------------------------------------------------------------------------------
Professional Affiliations
Candidate, Appraisal Institute (MAI Candidate #M850905)
New Jersey Certified General Appraiser (Certificate #RG01655)
Ohio Certified General Appraiser (Certificate #391699)
Pennsylvania Certified General Appraiser (Certificate #GA-000496-L)
Pennsylvania Real Estate Broker (License #AB-049650-L)
Real Estate Experience
Senior Appraiser, Cushman & Wakefield Valuation Advisory
Services, specializing in commercial and industrial real
estate appraisal and investment counseling. Cushman &
Wakefield is an international full service real estate
organization and a Rockefeller Group Company.
Senior Appraiser, Boyle/Helbig Realty, Inc. of Philadelphia,
Pennsylvania, specializing in commercial and industrial real
estate appraisal and investment counseling throughout a wide
geographic area from March, 1979 to December, 1979.
Staff Appraiser, Reaves C. Lukens Company of
Philadelphia, Pennsylvania, specializing in commercial
real estate appraisal throughout the Delaware Valley
from January, 1977 to March, 1979.
Salesman, Eagle Corporation, specializing in the
marketing of residential real estate in Delaware County,
Pennsylvania from April, 1974 to January, 1977.
Salesman, Lanard & Axilbund, Inc., of Philadelphia,
Pennsylvania, specializing in the sale and leasing of
both commercial and industrial real estate in center
city from January, 1971 to March, 1974.
Formal Education
Drexel Institute of Technology, Philadelphia, Pennsylvania
Attended College of Business and Administration - 1967-1970
Temple University, Philadelphia, Pennsylvania
Required Courses of Study for State Brokerage Licensure
Appraisal Institute, Chicago, Illinois
Appraisal Principles, Methods and Techniques
Capitalization Theory and Techniques
Case Studies in Real Estate Valuation
Valuation Analysis and Report Writing
Investment Analysis
Standards of Professional Practice
<PAGE>
================================================================================
DISPLAY THIS CERTIFICATE PROMINENTLY * NOTIFY AGENCY WITHIN 10 DAYS OF ANY
CHANGE
- --------------------------------------------------------------------------------
Commonwealth of Pennsylvania
Department of State
Bureau of Professional and Occupational Affairs
P.O. BOX 2649, Harrisburg, PA 17105-2649
Classification
GENERAL APPRAISER
Certificate Number Certificate Date Issued Expires
GA-000331-L SEP 10 1991 MAY 15 1995 JUN 30 1997
[Seal of the Bureau of Professional and Occupational Affairs, Department
of State]
/s/ John B. Rush Issued To:
- -----------------------------
Signature JOHN BENJAMIN RUSH
325 POWDER HORN ROAD
/s/ Dorothy Childress FORT WASHINGTON PA 19034
- -----------------------------
Commissioner of Professional
and Occupational Affairs
- --------------------------------------------------------------------------------
ALTERATION OF THIS DOCUMENT IS A CRIMINAL OFFENSE UNDER 18 PA.C.S.ss.4911
================================================================================
<PAGE>
QUALIFICATIONS OF JOHN B. RUSH
- --------------------------------------------------------------------------------
Professional Affiliations
Member, Appraisal Institute (MAI Designation #7261)
Delaware Certified General Appraiser (Certificate #X1-0000051)
Maryland Certified General Appraiser(Certificate #1 0041)
New Jersey Certified General Appraiser (Certificate #RG 00808)
Pennsylvania Certified General Appraiser (Certificate #GA-000331-L)
Pennsylvania Real Estate Broker (License #ABO43144A)
Affiliate, Tri-State Commercial & Industrial Association of Realtors
Associate, Urban Land Institute (Associate #164089)
Real Estate Experience
Director of Cushman & Wakefield of Pennsylvania, Inc. and
Manager of its Valuation Advisory Services Department in
Philadelphia. Cushman & Wakefield is a international full
service real estate organization and a Rockefeller Group
Company.
Senior Appraiser, Cushman & Wakefield Appraisal Division,
specializing in commercial and industrial real estate
appraisal and investment counseling throughout the nation
from January, 1980 to September, 1985.
Staff Appraiser, Boyle/Helbig Realty, Inc. of
Philadelphia, Pennsylvania, specializing in commercial and
industrial real estate appraisal and investment counseling
throughout a wide geographic area from December, 1977 to
December, 1979.
Associate, Michael Singer Real Estate Company of
Philadelphia, Pennsylvania, specializing in the
investment, leasing and management of local commercial and
residential real estate from June, 1975 to December, 1977.
Formal Education
Drexel University, Philadelphia, Pennsylvania
Masterof Business Administration - 1982
Saint Joseph's College, Philadelphia, Pennsylvania
Bachelor of Arts - 1975
Appraisal Institute, Chicago, Illinois
Required Courses of Study Leading to the MAI Designation
Various Lectures and Seminars for Continuing Education Credits
Board of Realtors, Philadelphia, Pennsylvania
Required Courses of Study for State Licensure
<PAGE>
Qualifications of John B. Rush
- --------------------------------------------------------------------------------
Qualified Expert Witness
United States Bankruptcy Court,
Eastern District of Pennsylvania
United States Bankruptcy Court,
Middle District of Pennsylvania
Court of Common Pleas
Dauphin County, Pennsylvania
Board of Assessment Appeals
Bucks County, Pennsylvania
Board of Revision of Taxes
City of Philadelphia
Board of Tax Review
City of Philadelphia
Board of Assessment Appeals
Dauphin County, Pennsylvania
<PAGE>
================================================================================
DISPLAY THIS CERTIFICATE PROMINENTLY * NOTIFY AGENCY WITHIN 10 DAYS OF ANY
CHANGE
- --------------------------------------------------------------------------------
Commonwealth of Pennsylvania
Department of State
Bureau of Professional and Occupational Affairs
P.O. BOX 2649, Harrisburg, PA 17105-2649
Classification
GENERAL APPRAISER
Certificate Number Certificate Date Issued Expires
GA-000496-L DEC 11 1991 JUN 26 1995 JUN 30 1997
[Seal of the Bureau of Professional and Occupational Affairs, Department
of State]
/s/ Thomas Harper Myers Jr. Issued To:
- -----------------------------
Signature THOMAS HARPER MYERS JR
947 NORTH AVENUE
/s/ Dorothy Childress SPRINGFIELD PA 19064
- -----------------------------
Commissioner of Professional
and Occupational Affairs
- --------------------------------------------------------------------------------
ALTERATION OF THIS DOCUMENT IS A CRIMINAL OFFENSE UNDER 18 PA.C.S.ss.4911
================================================================================
This CD ROM contains an electronic version of appraisals for the Mortgaged
Properties in PDF format and forms part of the paper version of the Prospectus
Supplement. The information contained in this CD ROM does not appear elsewhere
in paper form in this Prospectus Supplement and must be considered as part of,
and together with, the information contained elsewhere in this Prospectus
Supplement and the Prospectus. The information contained in this CD ROM has
been filed by the Seller with the Securities and Exchange Commission as part
of a Current Report on Form 8-K, which is incorporated by reference in this
Prospectus Supplement, and is also available through the public reference
branch of the Securities and Exchange Commission. Defined terms used in this CD
ROM but not otherwise defined therein shall have the respective meanings
assigned to them in the paper portion of the Prospectus Supplement and the
Prospectus. All of the information contained in this CD ROM is subject to the
same limitations and qualifications contained in this Prospectus Supplement and
the Prospectus. Prospective investors are strongly urged to read the paper
portion of this Prospectus Supplement and the Prospectus in its entirety prior
to accessing this CD ROM. If this CD ROM was not received in a sealed package,
there can be no assurances that it remains in its original format and should
not be relied upon for any purpose. Prospective investors may contact J.
Theodore Borter of Goldman, Sachs Co. at (212)902-3857 to receive an original
copy of the CD ROM.
<PAGE>
===========================================
COMPLETE APPRAISAL
OF REAL PROPERTY
Keystone Industrial Park
180 Rittenhouse Circle and
155 Rittenhouse Circle
Bristol Township
Bucks County, Pennsylvania
===========================================
IN A SELF-CONTAINED REPORT
As of July 1, 1997
Prepared For:
Goldman Sachs Mortgage Company
85 Broad Street
New York, New York 10004
Prepared By:
Cushman & Wakefield of Pennsylvania, Inc.
Valuation Advisory Services
Two Logan Square - 20th Floor
Philadelphia, Pennsylvania 19103
<PAGE>
Cushman & Wakefield of Pennsylvania, Inc. CUSHMAN &
Two Logan Square WAKEFIELD(R)
Philadelphia, PA 19103 A ROCKEFELLER GROUP COMPANY
(215) 963-4000
July 1, 1997
Mr. Sheridan Schechner
Managing Partner
Goldman Sachs Mortgage Company
85 Broad Street
New York, New York 10004
Re: Complete Appraisal of Real Property
Keystone Industrial Park
180 Rittenhouse Circle and
155 Rittenhouse Circle
Bristol Township
Bucks County, Pennsylvania
Dear Mr. Schechner
In fulfillment of our agreement as outlined in the Lefter of Engagement,
Cushman & Wakefield of Pennsylvania Inc. is pleased to transmit our
self-contained appraisal report estimating market value of the appropriate fee
simple/leased fee interest in the subject property.
The value opinion reported below is qualified by certain assumptions,
limiting conditions, certifications, and definitions, which are set forth in the
report.
This report was prepared for Goldman Sachs Mortgage Company and is
intended only for its specified use. It may not be distributed to or relied upon
by other persons or entities without written permission of Cushman & Wakefield
of Pennsylvania Inc.
This appraisal report has been prepared in accordance with our
interpretation of your institution's guidelines, the regulations of OCC and the
Uniform Standards of Professional Appraisal Practice, including the Competency
Provision and The Financial Institutions Reform, Recovery and Enforcement Act
(FIRREA) and the guidelines of federal regulatory agencies.
The property was inspected by and the report was prepared by Joseph G.
Vizza under the supervision of John B. Rush, MAI.
<PAGE>
Mr. Sheridan Schechner
Goldman Sachs Mortgage Company Page 2 July 1, 1997
Based on our complete appraisal as defined by the Uniform Standards of
Professional Appraisal Practice, we have formed an opinion that the market value
of the appropriate fee simple/leased fee estate in the referenced property,
subject to the assumptions, limiting conditions, certifications, and
definitions, as of July 1, 1997, was:
TWO MILLION EIGHT HUNDRED TWENTY-FIVE THOUSAND DOLLARS
$2,825,000
The subject property includes two separate parcels more fully described
within the body of this report. Individual cash flow projections have been
prepared on each building leading to a conclusion of value on a building by
building basis. The individual values are as follows:
180 Rittenhouse Circle $1,575,000
155 Rittenhouse Circle $1,250,000
This letter is invalid as an opinion of value if detached from the report,
which contains the text, exhibits, and an Addenda.
Respectfully submitted,
Cushman & Wakefield of Pennsylvania, Inc.
/s/ Joseph G. Vizza
Joseph G. Vizza
Valuation Advisory Services
Pennsylvania Certified
General Appraiser #GA-001242-L
/s/ John B. Rush
John B. Rush, MAI
Director
Valuation Advisory Services
Pennsylvania Certified
General Appraiser #GA-000331-L
Reviewed and Approved
<PAGE>
SUMMARY OF SALIENT FACTS AND CONCLUSIONS
================================================================================
Property Name: Keystone Industrial Park
Location: 180 Rittenhouse Circle and
155 Rittenhouse Circle
Bristol Township
Bucks County, Pennsylvania
General Overview: 180 Rittenhouse Circle consists of a one
story warehouse building containing 60,000
square feet in building area upon a 4.72
acre site. This building was constructed of
masonry and steel, featuring a brick and
metal panel facade. As of the effective
date of this appraisal, the building was
vacant and available for occupancy. 155
Rittenhouse Circle consists of a one story
office building containing 22,500 square
feet in building area constructed on a 3.01
acre site. This building is also
constructed of masonry and steel
construction and featured a brick and glass
plate facade. On the effective date of
appraisal, occupancy stood at 100 percent.
Both facilities featured adequate parking
accommodations.
Interest Appraised: 180 Rittenhouse Circle Fee simple
155 Rittenhouse Circle Leased Fee
Date of Value: July 1, 1997
Date of Inspection: May 28, 1997
Ownership: Bell Atlantic
180 Rittenhouse Circle 155 Rittenhouse Circle
Highest and Best Use: As Vacant Light industrial use Light industrial use
As Improved Light industrial use Office use
Value Indicators
Sales Comparison Approach: $1,600,000 $1,300,000
Value Per Square Foot: $26.66 $57.77
Income Capitalization Approach
Estimated Market Rental Rate: $3.75/SF $7.00/SF
Stabilized Vacancy Rate: 3% 3%
Effective Gross Income: $3.56/SF $8.75/SF
Operating Expenses $1.34/SF $2.78/SF
Real Estate Taxes: $0.08/SF $1.86/SF
Net Operating Income: $2.22 $5.96/SF
Estimated Vacancy Between Tenants 6 months 6 months
<PAGE>
Summary of Salient Facts and Conclusions
================================================================================
Free Rent: NA NA
Probability of Renewal: 65% 65%
Tenant Improvement Allowance
New Tenants in Previously
Occupied Space: $1.00 per square foot $7.00 per square
foot
Renewal Tenants in Same Space: $0.50 per square foot $2.00 per square
foot
Estimated Market Rental Growth Rate 3.5% 3.5%
Estimated Expense Growth Rate: 3.5% 3.5%
Estimated Real Estate Tax Growth 3.5% 3.5%
Rate:
Reversion Year Capitalization Rate 11.0% 11.0%
Transaction Costs in Reversion Sale: 4.0% 4.0%
Discount Rate: 12.0% 11.5%
Indicated Value: $1,575,000 $1,250,000
Value Conclusion: $1,575,000 $1,250,000
Value Per Square Foot: $26.25 $55.55
Implicit Capitalization Rate: 8.46% 10.74%
Marketing Time: 6 months
Special Assumptions Affecting Valuation:
1. None
2. Please refer to the complete list of assumptions and limiting conditions
included at the end of this report.
<PAGE>
PHOTOGRAPHS OF SUBJECT PROPERTY
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[GRAPHIC OMITTED]
[PHOTO]
Front Elevation 180 Rittenhouse Circle
[GRAPHIC OMITTED]
[PHOTO]
Rear Elevation 180 Rittenhouse Circle
<PAGE>
Photographs of Subject Property
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[GRAPHIC OMITTED]
[PHOTO]
Front Elevation 155 Rittenhouse Circle
[GRAPHIC OMITTED]
[PHOTO]
Rittenhouse Circle looking South
<PAGE>
Photographs of Subject Property
================================================================================
[GRAPHIC OMITTED]
[PHOTO]
Rittenhouse Circle Looking North
<PAGE>
TABLE OF CONTENTS
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Page
PHOTOGRAPHS OF SUBJECT PROPERTY ............................................ 1
INTRODUCTION ......................................................... 1
Identification of Property ........................................... 1
Property Ownership and Recent History ................................ 1
Purpose and Intended Use of the Appraisal ............................ 1
Interest Appraised and Date of Value ................................. 2
Definitions of Value, Interest Appraised, and Other Pertinent Terms .. 2
Legal Description .................................................... 3
REGIONAL ANALYSIS .......................................................... 4
MARKET ANALYSIS ............................................................ 9
PROPERTY DESCRIPTION ....................................................... 21
Site Description ..................................................... 21
Improvements Description ............................................. 22
REAL PROPERTY TAXES AND ASSESSMENTS ........................................ 23
ZONING ..................................................................... 25
HIGHEST AND BEST USE ....................................................... 26
VALUATION PROCESS .......................................................... 28
SALES COMPARISON APPROACH .................................................. 30
INCOME CAPITALIZATION APPROACH ............................................. 40
RECONCILIATION AND FINAL VALUE ESTIMATE .................................... 48
ASSUMPTIONS AND LIMITING CONDITIONS ........................................ 50
CERTIFICATION OF APPRAISAL ................................................. 52
ADDENDA .................................................................... 53
<PAGE>
INTRODUCTION
================================================================================
Identification of Property
The subject of this appraisal is 180 and 155 Rittenhouse Circle at the
Keystone Industrial Park in Bristol Township, Bucks County, Pennsylvania. 180
Rittenhouse Circle consists of a vacant single story, single user light
industrial building that contains 60,000 square feet on a 4.79+/- acre parcel of
land, while 155 Rittenhouse Drive consists of a single story, single user office
building of 22,500 square feet situated upon a 3.01+/- acre parcel of land. Both
buildings were in average to good condition at the time of the inspection.
Property Ownership and Recent History
Both buildings are title to Bell Atlantic Properties and were purchased on
separate occasions. No transfers have occurred within the last ten years. We
have reason to believe that the property may now be under contract of sale.
However, after discussing the matter with the owner, we have been unable to
obtain any details of the pending transaction. The present owner considers this
information to be confidential and was not willing to provide details for our
analysis. 180 Rittenhouse Circle was vacant at the time of the inspection, while
155 Rittenhouse Circle was entirely leased. The terms of that lease are
presented as follows:
================================================================================
Location Tenant Term Rental Rate
- --------------------------------------------------------------------------------
155 Rittenhouse Circle Jones Apparel 7/95-6/00 7/95 $6.25 Net
5/97 $6.50 Net
5/98 $7.00 Net
================================================================================
Purpose and Intended Use of the Appraisal
The purpose of this appraisal is to estimate the market value of the
appropriate fee simple/leased fee estate on July 1, 1997. This report is to
function as a supporting document in a proposed mortgage financing of the
subject property by our client Goldman Sachs Mortgage Company. Extent of the
Appraisal Process
In the process of preparing this appraisal, we:
o Inspected the interior and exterior of each of the subject buildings
and the site improvements with Peter Corcoran, the property manager.
o Interviewed Peter Corcoran of the property management company.
o Reviewed leasing policy, concessions, tenant build-out allowances,
and history of recent rental rates and occupancy with the building
manager.
o Reviewed a detailed history of income and expense and a budget
forecast for the past three years including the budget for planned
capital expenditures and repairs.
o Conducted market research of occupancies, asking rents, concessions
and operating expenses at competing buildings which involved
interviews with on-site managers and a review of our own data base
from previous appraisal files.
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Introduction
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o Prepared an estimate of income and expenses for the development of a
discounted cash flow analysis.
Conducted market inquiries into recent sales of similar buildings to
ascertain sales price per square foot, and capitalization rates.
This process involved telephone interviews with sellers, buyers
and/or cooperating brokers. (See detailed sales write-ups in Addenda
for more complete information on the verification process.)
o Prepared Sales Comparison and Income Capitalization Approaches to
value.
Date of Value and Property Inspection
The date of value is July 1, 1997. We inspected the property on May 28,
1997.
Property Rights Appraised
For the property at 180 Rittenhouse Circle, we have appraised the fee
simple estate while for 155 Rittenhouse Circle, we appraised the leased fee
estate.
Definitions of Value, Interest Appraised, and Other Pertinent Terms
The definition of market value taken from the Uniform Standards of
Professional Appraisal Practice of the Appraisal Foundation, is as follows:
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 is the
consummation of a sale as of a specified date and the passing of title
from seller to buyer under conditions whereby:
1. Buyer and seller are typically motivated;
2. Both parties are well informed or well advised, and acting in what
they consider their own best interests;
3. A reasonable time is allowed for exposure in the open market;
4. Payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
5. 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.
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Introduction
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Exposure Time
Under Paragraph 3 of the Definition of Market Value, the value estimate
presumes that "A reasonable time is allowed for exposure in the open
market". Exposure time is defined as the estimated length of time the
property interest being appraised would have been offered on the market
prior to the hypothetical consummation of a sale at the market value on
the effective date of the appraisal. Exposure time is presumed to precede
the effective date of the appraisal. Due to the demand for real property
like the subject, we estimate a reasonable Exposure Time to have been six
months at the concluded opinion of value reported.
The following definitions of pertinent terms are taken from the Dictionary
of Real Estate Appraisal, Third Edition (1993), published by the Appraisal
Institute.
Fee Simple
Absolute ownership unencumbered by any other interest or estate; subject
only to the limitations of eminent domain, escheat, police power, and
taxation.
Leased Fee Estate
An ownership interest held by a landlord with the rights of use and
occupancy conveyed by lease to others. The rights of the lessor (the
leased fee owner) and the leased fee are specified by contract terms
contained within the lease.
Value As Is
The value of specific ownership rights to an identified parcel of real
estate as of the effective date of the appraisal; relates to what
physically exists and is legally permissible and excludes all assumptions
concerning hypothetical market conditions or possible rezoning.
Legal Description
The property is legally identified by the Bucks County Assessor's Office,
as Lots 44 (180 Rittenhouse Circle) and 53 (155 Rittenhouse Circle) contained
within Block 023. We have not been provided with the metes and bounds legal
description of this site, therefore, none is exhibited.
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REGIONAL ANALYSIS
================================================================================
Philadelphia Metropolitan Area
The subject property is located on the northern side of the Philadelphia
Metropolitan Area in Bucks County, Pennsylvania. The Philadelphia Metropolitan
Area, itself, encompasses over 3,500 square miles through the counties
immediately surrounding the city in both Pennsylvania and New Jersey. The
greater metropolitan area is actually part of a larger economic and geographic
entity known as the Delaware Valley, which extends from Trenton, New Jersey at
the north to Wilmington, Delaware at the south. The Delaware Valley is a closely
integrated market which pervades the many political subdivisions incorporated in
it.
Population
According to the most recent estimate of the Federal Census Bureau, the
Philadelphia Metropolitan Area has the fourth largest population in the nation
after Los Angeles, New York, and Chicago. The currently reported population of
about five million represents a .7 percent increase over that counted in 1990.
The statistics indicated population growth in the suburban counties surrounding
Philadelphia, with a decline in the city itself. The current population of Bucks
County is reported to be about 570.6, an increase of approximately 5.4 percent
since 1990. These statistics are significant in that demographers believe
population growth is directly tied to employment growth.
================================================================================
Population Statistics
Philadelphia Metropolitan Area
(In Thousands)
================================================================================
County 1980 1990 (delta) 1995 (delta)
================================================================================
Bucks 483.8 541.2 + 11.9% 570.6 + 5.4%
- --------------------------------------------------------------------------------
Chester 320.1 376.4 + 17.6% 399.7 + 6.2%
- --------------------------------------------------------------------------------
Delaware 552.2 547.7 - 0.8% 548.2 + .1%
- --------------------------------------------------------------------------------
Montgomery 644.6 678.1 + 5.2% 703.2 + 3.7%
- --------------------------------------------------------------------------------
Philadelphia 1,668.2 1,585.6 - 5.0% 1,521.5 - 4.0%
- --------------------------------------------------------------------------------
Burlington 366.0 395.1 + 8.0% 400.8 + 1.4%
- --------------------------------------------------------------------------------
Camden 472.8 502.8 + 6.4% 506.6 + .8%
- --------------------------------------------------------------------------------
Gloucester 202.1 230.1 + 13.9% 243.1 + 5.7%
- --------------------------------------------------------------------------------
Salem 65.0 65.3 + 0.5% 64.6 - 1.1%
================================================================================
Total Metropolitan Area 4,774.8 4,922.3 + 3.1% 4,958.3 + .7%
================================================================================
Source: U.S. Census Bureau
================================================================================
Employment
The traditional economic base of the region was once heavy manufacturing.
Concurrent with national trends, the regional economy has now shifted toward a
skilled/service oriented base. Approximately 33 percent of the region's 2.15+/-
million in the wage and salary workforce is now employed in the service
industries, as contrasted with the approximate 15 percent employed in
manufacturing. Furthermore, another 22 percent of the region's workforce is
employed in the wholesale and retail trades, while only 14 percent is employed
by government.
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Regional Analysis
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Philadelphia Metropolitan Area
January Employment Statistics
(In Thousands)
<TABLE>
<CAPTION>
=====================================================================================================
Industry Classification 1990 1995 (delta) 1997 (delta)
=====================================================================================================
<S> <C> <C> <C> <C> <C>
Manufacturing 358.6 311.8 -2.6% 305.6 -2.0%
Construction & Mining 95.4 73.9 +6.0% 73.2 -1.0%
Transportation, Communication & Utilities 99.0 104.5 +3.3% 104.7 +1.9%
Wholesale & Retail Trades 508.0 482.8 -2.3% 494.6 +2.4%
Finance, Insurance & Real Estate 167.6 155.1 -1.3% 154.2 -0.6%
Services 659.1 717.5 +4.3% 765.4 +6.7%
Government 308.4 303.3 +0.6% 298.7 -1.5%
--------------------------------------------------------
Total Wage & Salary Employment 2,196.1 2,148.9 +0.8% 2,196.4 +2.2%
========================================================
Total Civilian Labor Force 2,409.0 2,397.6 -0.9% 2,450.3 +2.2%
========================================================
Unemployment 114.1 143.5 123.3
Unemployment Rate 4.7% 6.0% 5.0%
=====================================================================================================
Source: Pennsylvania Department of Labor and Industry
=====================================================================================================
</TABLE>
According to statistics prepared by the Pennsylvania Department of
Industry and Labor, wage and salary employment in the Philadelphia Metropolitan
Area increased by 47,500 jobs or 2.2 percent between 1995 and 1997.
Additionally, the total civilian labor force which includes wage and salary
employment plus those who are self-employed increased by 52,700 workers. As can
be seen, a vast majority of this growth in employment is in the service
industries and the wholesale and retail trades.
The state Department of Industry and Labor reports that, within the
service industries, business services, particularly temporary help agencies and
accounting firms, led this employment classification with a growth of 27,900
jobs created since 1992. Second place goes to medical services with 12,600 new
jobs created in the Philadelphia Metropolitan Area over the past four years.
Private sector education was third growing by 19,900 jobs. A listing of the ten
largest employers in Bucks County alone bears out this observation. Note that
the total civilian labor force, which includes self-employed, has generally
remained the same since 1990. Wage and salary positions, though, have declined
somewhat.
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Regional Analysis
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<TABLE>
<CAPTION>
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Largest Non-Public Employers
Bucks County
- ----------------------------------------------------------------------------------------------------
Employer Local Employees Product or Service
====================================================================================================
<S> <C> <C>
Rohm and Haas Delaware Valley, Inc. 1,498 Chemicals; Engineering; Research
- ----------------------------------------------------------------------------------------------------
Charming Shops, Inc. 1,000 Women's Apparel
- ----------------------------------------------------------------------------------------------------
USX Corp., Fairless Works 975 Steel Operations
- ----------------------------------------------------------------------------------------------------
Woods Services 949 Residential Hospice
- ----------------------------------------------------------------------------------------------------
Union Fidelity Life Insurance Co. 933 Insurance
- ----------------------------------------------------------------------------------------------------
St. Mary Hospital 915 Health Care; Rehabilitation Center
- ----------------------------------------------------------------------------------------------------
Independence Bancorp, Inc. 757 Banking
- ----------------------------------------------------------------------------------------------------
Betz Laboratories, Inc. 753 Engineered Chemical Treatment
- ----------------------------------------------------------------------------------------------------
Ametek, Inc. 718 Engineered Materials
- ----------------------------------------------------------------------------------------------------
Lower Bucks Hospital 700 Community Hospital
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Source: Philadelphia Business Journal
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</TABLE>
According to the Pennsylvania Department of Labor and Industry, the April
1997 unemployment rate in the nine county Philadelphia Metropolitan Area was 4.9
percent. This compares favorably to 5.3 percent for the Commonwealth of
Pennsylvania and 4.8 percent for the nation as a whole. Over the last twelve
months, unemployment within the Philadelphia Metropolitan Area has declined
slightly from 5.2 percent.
Income
The median effective household buying income or disposable income after
federal taxes in the Philadelphia Metropolitan Area is currently estimated to be
$44,815. Throughout the region, it is estimated that 11.4 percent of the 1.8
million households have an effective buying income under $20,000 annually. For
the entire metropolitan area, 43.9 percent of households have yearly EBI in
excess of $50,000. Bucks County has the fourth highest current median household
income level in the Metropolitan Area at $53,117 per dwelling unit.
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Regional Analysis
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Income Statistics
Philadelphia Metropolitan Area
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Effective Buying
County Households Income (In Thousands) Median Household EBI
================================================================================
Bucks 201,200 $12,262,322 $53,117
- --------------------------------------------------------------------------------
Chester 141,500 9,721,125 56,581
- --------------------------------------------------------------------------------
Delaware 202,700 11,060,641 45,572
- --------------------------------------------------------------------------------
Montgomery 267,400 18,535,055 54,711
- --------------------------------------------------------------------------------
Philadelphia 577,300 22,803,611 31,682
- --------------------------------------------------------------------------------
Burlington 139,900 7,995,281 49,379
- --------------------------------------------------------------------------------
Camden 179,200 9,980,971 47,387
- --------------------------------------------------------------------------------
Gloucester 83,100 4,672,913 51,405
- --------------------------------------------------------------------------------
Salem 23,700 1,195,590 45,095
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Total 1,816,000 $98,227,509 $44,815
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Source: Sales & Marketing Management
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Retail Sales
Retail sales in the Philadelphia Metropolitan Area are currently estimated
to exceed $44 billion annually. The Philadelphia area ranked fifth nationally
behind Chicago, Los Angeles, New York and Washington, D.C. in total retail sales
for 1995, the last year for which statistics are currently available. Retail
sales in this metropolitan area have increased at a compound annual rate of 4.0
percent since 1990. Within Bucks County, annual retail sales for 1995 were
estimated to be $6.7 billion, which were 3.7 percent over the previous year
sales. Since 1990, retail sales in Bucks County have increased at an annual
compound rate of 6.1 percent.
================================================================================
Retail Sales
Philadelphia Metropolitan Area and Bucks County
(In Thousands)
================================================================================
Metropolitan
Year Philadelphia (delta) Bucks County (delta)
================================================================================
1990 $36,033,312 + 0.6% $4,962,012 -2.7%
- --------------------------------------------------------------------------------
1991 $35,120,446 - 2.5% $4,958,338 -0.1%
- --------------------------------------------------------------------------------
1992 $39,811,716 +12.2% $5,843,542 +17.9%
- --------------------------------------------------------------------------------
1993 $40,858,286 + 2.6% $6,255,303 +7.0%
- --------------------------------------------------------------------------------
1994 $43,480,561 +6.4% $6,423,095 +2.7%
- --------------------------------------------------------------------------------
1995 $44,309,612 +1.9% $6,663,133 +3.7%
- --------------------------------------------------------------------------------
Compound Annual Change + 4.0% +6.1%
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Source: Sales & Marketing Management 1990-1995
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Regional Analysis
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Linkages
The Philadelphia Metropolitan Area benefits from an admirable
transportation system linking the region to the rest of the nation and points
throughout the world. The Port of Philadelphia is one of the largest fresh water
ports in the country. The Philadelphia International Airport provides service to
most major North American cities and many European destinations. From its
central location in the heart of the eastern megalopolis, excellent highway and
rail accessibility is also available.
Cultural, Educational and Recreational Resources
Educational opportunities abound throughout the region, with twelve major
colleges and universities located here. There are also four teaching medical
college hospitals in the Philadelphia area. As the nation's fourth largest urban
center and first capital, cultural and recreational activities available to the
populace are widely diverse.
Conclusions
The central core of this metropolitan area, the City of Philadelphia,
continues to experience a fiscal crisis precipitated by a diminishing tax base
and the increased need for new and costly municipal services. However, the
current administration and council are now cooperating to promote fiscal
responsibility which the first operating surplus in years. On the other hand,
the surrounding suburban counties have been the focus of the region's population
and job growth over the last decade. This trend is expected to continue into the
next century.
Overall, the Philadelphia Metropolitan Area is an older, densely developed
region with a mature economy which can only be expected to grow less and at a
slower pace in the months and years to come. Taxes and labor costs throughout
the Northeastern United States are higher than elsewhere so that the
opportunities for low cost start-up companies are less. Fortunately, the
patchwork of existing small to mid-sized companies in the Philadelphia
Metropolitan Area should protect this region from the severe economic shocks
seen in many single industry towns.
Thus, over the long term, the Philadelphia Metropolitan Area benefits from
a diversified economic base which should protect the region from the effects of
wide swings in the economy. The region's strategic location along the eastern
seaboard and its reputation as a major business center should further enhance
the area's long term outlook. The region's real estate market is exhibiting some
optimism as availabilities are absorbed through the current economic expansion.
It is our conclusion that the long term trends of the region should eventually
exert positive influences on the values of well located and well designed real
property.
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MARKET ANALYSIS
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Location Overview
The subject property is situated in Bristol Township, in an area more
commonly referred to as Lower Bucks County, Pennsylvania. Bristol Township lies
approximately eight miles north of the Philadelphia city limits. According to
the 1990 Census, 57,129 people currently reside in the township, which is a 3
percent decrease from the 1980 Census. Bristol Township is characterized by a
mix of industrial, residential and commercial land uses, and has been
substantially developed for years. Industrial development is centered in "campus
settings" along major highways. Typical of these are the Keystone Business Park,
Edgely Industrial Park and Expressway 95 Industrial Park.
The area immediately surrounding and directly influencing the subject
property is characterized by industrial development in the Keystone Industrial
Park. The park consists of is a 400 acre, non-offensive
manufacturing/assembly/distribution industrial center which was begun in the
early 1970's. The park benefits from a location adjacent to Interstate 95 and is
in close proximity to Interchange 29 of the Pennsylvania Turnpike. Keystone
Business Center, which situated directly across Ford Road, is a smaller
development within the confines of Keystone Industrial Park. Prominent
tenants/owners having facilities within the park include Kinney Wall Coverings,
Ferag, Hosiery Corp of America, Clopay, Scanforms, Rolm, and Jones Apparel
Group.
Industrial Market Overview
Industrial real estate is typically segregated into three basic classifications
for analytical purposes: warehouse/distribution, manufacturing and flex/research
and development. Warehouse/distribution facilities have high ceilings and an
abundance of tailgate loading, while manufacturing facilities are designed with
heavy power and a more substantial structural frame plus reinforced flooring to
accommodate machinery. A nominal amount of office space is included within the
demised area of both types, usually five to ten percent.
There has evolved a distinct submarket for single story facilities which
can be completely finished as office space or laboratory space should the
occupant elect to do so. These "flex" buildings or research and development
facilities additionally differentiate themselves in the marketplace by offering
lower ceiling heights than typically found in the traditional industrial
property, limited loading, many times air conditioning throughout, and a
generally higher quality of construction. The term "flex" signifies that the
building's overall design is flexible in accommodating users with needs of
between ten percent and 100 percent of the demised area finished as office area
or laboratories. The following points summarize major recent trends in the local
industrial market surrounding the subject property:
In the current real estate market, warehouse/distribution facilities are a
preferred commodity. Competition from cheaper foreign made products is strong so
that the market for manufacturing space is expected to remain in the doldrums
for some time to come. The market for flex/research and development space is
dependent research frequently funded by the federal government, particularly
defense spending; the specialization of much of the construction which goes into
these facilities creates built-in functional obsolescence, thereby increasing
the risks of ownership since retrofit can be very costly.
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Market Analysis
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Metropolitan Philadelphia Industrial Market
It is estimated that the industrial real estate market of the Philadelphia
Metropolitan Area contains approximately 300 million square feet. Of this total,
about 130 million square feet are located in the four suburban counties which
are adjacent to the City of Philadelphia on the Pennsylvania side of the
Delaware River, while another 70 million are situated in the three surrounding
counties on the New Jersey side. The remaining 100 million square feet of this
inventory may be found within the City of Philadelphia, itself.
As of 1st Quarter 1997 the vacancy rate in the industrial market of the
Philadelphia Metropolitan Area was estimated by the Market Research Development
of Cushman & Wakefield to be 11.6 percent. This estimate indicates a modest
change since Year-End 1996 when the overall vacancy rate was 12.9 percent.
Although vastly improved since 1992 when vacancy peaked at 18.9%, it remains
above the low of 9.9% set in 1989. The following chart details vacancy rates in
this marketplace over the last seven and one-quarter years.
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Vacancy Rates
Industrial Real Estate Market
Philadelphia Metropolitan Area
================================================================================
Metropolitan City of Suburban Suburban
Date Philadelphia Philadelphia Pennsylvania New Jersey
================================================================================
1st Quarter 1997 11.6% 9.4% 17.3% 15%
- --------------------------------------------------------------------------------
1996 12.9% 11.1% 16.6% 10.0%
- --------------------------------------------------------------------------------
1995 12.8% 11.8% 14.7% 10.8%
- --------------------------------------------------------------------------------
1994 14.2% 13.5% 17.6% 8.9%
- --------------------------------------------------------------------------------
1993 17.7% 19.5% 18.9% 12.9%
- --------------------------------------------------------------------------------
1992 18.9% 22.0% 18.2% 15.8%
- --------------------------------------------------------------------------------
1991 17.9% 16.3% 19.9% 16.3%
- --------------------------------------------------------------------------------
1990 13.3% 11.3% 14.9% 13.2%
================================================================================
At the end of the 1st Quarter 1997, there were approximately 34.9 million
square feet of available industrial space in this metropolitan area. This figure
was reduced from the year end 1996 availability of 38.6 million with the most
significant absorption found in warehouse/distribution space. However, the
majority of vacancy is still found in warehouse space. The following chart
summarizes availability in the industrial real estate market of the Philadelphia
Metropolitan Area by product type.
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Market Analysis
================================================================================
================================================================================
Industrial Market Availabilities
Philadelphia Metropolitan Area
First Quarter 1997
================================================================================
Metropolitan City of Suburban Suburban
Type of Space Philadelphia Philadelphia Pennsylvania New Jersey
================================================================================
Manufacturing 8,589,925 3,426,616 3,593,897 1,569,412
- --------------------------------------------------------------------------------
Warehouse 19,163,901 5,507,134 9,492,403 4,164,364
- --------------------------------------------------------------------------------
High-Tech 1,370,548 244,000 1,086,428 40,120
- --------------------------------------------------------------------------------
Office Service Center 689,640 43,000 447,568 199,072
- --------------------------------------------------------------------------------
Flex/Other 5,115,759 210,184 3,887,062 1,018,513
================================================================================
TOTALS 34,929,773 9,430,934 18,507,358 6,991,481
================================================================================
By location, the subject property, 180 Rittenhouse Circle competes in the
Suburban Philadelphia Submarket. There are approximately 18.5 million square
feet of industrial space now available in this submarket which represents a
vacancy rate of 15.8 percent. On an overall basis, vacancy in suburban
Philadelphia increased 100 basis points from Year-End 1995. While the vacancy
rate is high, it should be mentioned that older, functionally obsolete buildings
with little demand are included in the available space.
<TABLE>
<CAPTION>
========================================================================================================
Industrial Market Activity
Suburban Philadelphia
First Quarter 1997
========================================================================================================
Year-End Total
Year Leasing Activity Sales Activity Total Activity Availabilities
========================================================================================================
<C> <C> <C> <C> <C>
1st Quarter 1997 685,547 sf 1,349,138 sf 2,034,685 sf NA
- --------------------------------------------------------------------------------------------------------
1996 3,865,910 sf 2,422,132 sf 6,288,042 sf 20,546,050 sf
- --------------------------------------------------------------------------------------------------------
1995 4,100,725 sf 3,643,244 sf 7,743,969 sf 19,089,320 sf
- --------------------------------------------------------------------------------------------------------
1994 6,928,000 sf 1,681,000 sf 8,609,000 sf 22,934,000 sf
- --------------------------------------------------------------------------------------------------------
1993 5,933,000 sf 2,646,000 sf 8,579,000 sf 24,552,000 sf
- --------------------------------------------------------------------------------------------------------
1992 4,042,000 sf 1,617,000 sf 5,659,000 sf 23,706,000 sf
- --------------------------------------------------------------------------------------------------------
1991 3,893,000 sf 1,222,000 sf 5,115,000 sf 25,866,000 sf
- --------------------------------------------------------------------------------------------------------
1990 3,998,000 sf 669,000 sf 4,667,000 sf 19,370,000 sf
- --------------------------------------------------------------------------------------------------------
1989 6,487,000 sf 1,286,000 sf 7,773,000 sf 12,800,000 sf
========================================================================================================
</TABLE>
During the first quarter 1997, the suburban Philadelphia market,
consisting of Montgomery, Bucks, Chester and Delaware counties, accounted for
over 70 percent of all sales and leasing activity for the entire Philadelphia
metropolitan area. The largest amount of activity is occurring in Montgomery
County, followed by Bucks, Delaware, and Chester Counties. In terms of overall
vacancy, Bucks County followed only Montgomery County which was estimated to be
15.7 percent. The following is a summary of relevant statistics for the suburban
Philadelphia market as of 1st Quarter 1997.
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Market Analysis
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Industrial Market Activity
Suburban Philadelphia
First Quarter 1997
================================================================================
County Estimated Estimated Sales Activity Leasing
Inventory Overall Vacancy Activity
================================================================================
Montgomery 40,000,000 sf 17.5% 734,446 sf 331,000 sf
- --------------------------------------------------------------------------------
Bucks 37,000,000 sf 15.7% 80,000 sf 113,625 sf
- --------------------------------------------------------------------------------
Chester 25,000,000 sf 9.8% 30,000 sf 159,833 sf
- --------------------------------------------------------------------------------
Delaware 28,000,000 sf 12.3% 72,040 sf 80,664 sf
================================================================================
During the first quarter 1997, Bucks County accounted for 17 percent of
all leasing activity in suburban Philadelphia. Moreover, leasing activity in
Bucks County in 1996 was slightly below the leasing activity of 1995. Sales
activity reported in Bucks County in the first quarter 1997 accounted for only 6
percent of all sales activity in Suburban Philadelphia. Most of the activity in
Bucks occurred in warehouse/distribution space. Understandably, the demand for
manufacturing space is less as our economy is no longer based in that sector.
================================================================================
Annual Leasing Activity
Industrial Real Estate Market
Bucks County, Pennsylvania
================================================================================
Year Warehouse Manufacturing Flex Total
================================================================================
1st Quarter 1997 101,625 12,000 -0- 113,625 sf
- --------------------------------------------------------------------------------
1996 1,113,650 sf 208,785 sf 67,765 sf 1,390,200 sf
- --------------------------------------------------------------------------------
1995 1,046,000 sf 217,000 sf 197,000 sf 1,460,000 sf
- --------------------------------------------------------------------------------
1994 1,476,000 sf 231,000 sf 214,000 sf 1,921,000 sf
- --------------------------------------------------------------------------------
1993 1,353,000 sf 148,000 sf 264,000 sf 1,765,000 sf
- --------------------------------------------------------------------------------
1992 721,000 sf 251,000 sf 220,000 sf 1,192,000 sf
- --------------------------------------------------------------------------------
1992 778,000 sf 78,000 sf 143,000 sf 1,000,000 s
- --------------------------------------------------------------------------------
1990 947,000 sf 260,000 sf 269,000 sf 1,475,000 sf
================================================================================
As indicated on the following chart, total sales in Bucks County were
approximately 906,000 square feet during 1995, up considerably from the 388,000
square feet sold in 1994. Moreover, Year-End 1996 figures report an increase in
sales activity from 1995, with the majority of the activity within the
manufacturing sector.
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Market Analysis
================================================================================
================================================================================
Annual Sales Activity
Industrial Real Estate Market
Bucks County, Pennsylvania
================================================================================
Year Warehouse Manufacturing Flex Total
================================================================================
1st Quarter 1997 80,000 sf -0- -0- 80,000 sf
- --------------------------------------------------------------------------------
1996 297,772 sf 566,864 sf 140,000 sf 1,005,304 sf
- --------------------------------------------------------------------------------
1995 224,000 sf 682,000 sf -0- 906,000 sf
- --------------------------------------------------------------------------------
1994 337,000 sf 20,000 sf 31,000 sf 388,000 sf
- --------------------------------------------------------------------------------
1993 378,000 sf 238,000 sf 74,000 sf 690,000 sf
- --------------------------------------------------------------------------------
1992 463,000 sf 180,000 sf 66,000 sf 709,000 sf
- --------------------------------------------------------------------------------
1991 243,000 sf -0- 82,000 sf 325,000 sf
- --------------------------------------------------------------------------------
1990 118,000 sf 54,000 sf -0- 172,000 sf
================================================================================
Rental Rates
The directed weighted average rental rate for industrial space in the
Lower Bucks County submarket was reported at the end of the First Quarter 1997
to be $3.69 per square foot of net rentable building area. on a net basis. This
average rental rate represents a 3.65 percent increase over the year end 1996
average rental rate of $3.56 per square foot. As presented later in the Income
Capitalization Approach, a survey of light industrial building leases indicated
a range from $2.90 to $3.85 per square foot of rentable building area on a net
basis. These buildings varied in percentage of finish office area, ceiling
height and loading facilities.
Based on the overall condition, functional utility and location of 180
Rittenhouse Circle, given the aforementioned competitive rental data, an
economic rental for the subject property was concluded to be $3.75 per square
foot of rentable building area on a net basis. This conclusion will be late
elaborated upon in the subsequent Income Capitalization Approach.
Conclusions
180 Rittenhouse Circle located in the Keystone Industrial Park, within a
market accepted business campus in Lower Bucks County. The park is situated
within close proximity to highways and strong labor pool.
From an investment standpoint, warehouse/distribution facilities occupied
by credit tenants on a long term basis are a preferred investment in the general
real estate market. Manufacturing facilities and flex buildings are not as
favored due to perceived additional risks of ownership.
Finally, in suburban Philadelphia, the overall vacancy rate for industrial
space is 17.3 percent which is up from 16.6 percent at year end 1996. Vacancy in
Bucks County it self is estimated to be the second highest in Suburban
Philadelphia at the second quarter 1997. The available inventory includes older
functionally obsolete buildings with little demand. If these properties are
excluded from inventory, the true vacancy is less than indicated.
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WAKEFIELD(R)
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Market Analysis
================================================================================
New construction is essentially limited to build-to-suit transactions which
will help to constrain the supply of the local market.
General Office Market Overview
Office buildings, as an asset class, are attracting renewed interest from
investors in the current market. Many believe suburban office buildings offer
the greatest upside potential among the various property types. Prices for the
best quality suburban office buildings have increased due to buyer demand.
In most suburban markets, office vacancies have declined reflecting the
expansions of small business. Most acknowledge that the market "bottomed-out" in
1995 and rents are now generally escalating. More recently, as buyer demand
pushes prices up, some investors are more willing to pay for "future" dollars,
when only 18 months ago purchase decisions were based solely on revenue in
place.
The lack of new construction is also viewed as a positive in the office
market. Though firms are leasing less space per employee than ever before,
office building owners are now in a stronger negotiating position as demand
outpaces supply. Still, in most communities, there is plenty of land available
for new competition.
The job growth which is occurring now comes from small and mid-sized
technologically sophisticated firms. These, more than most, seek suburban
locations which are close to their employees. By moving closer to their
employees, commuting time is less which, some say, creates a more productive
workforce. Frequently, occupancy costs are lower in the suburbs than in the
urban core which translates back into corporate profitability. The subject
property benefits from such trends, particularly due to its location outside the
Philadelphia city limits.
155 Rittenhouse Circle share in these macro-market observations and
trends. More importantly, the subject competes in its own micro-market for
tenants, users and ultimately, investment returns. The following is a detailed
description of this local marketplace.
Southern Bucks County Market Supply
The subject property, 155 Rittenhouse Circle, competes for tenants in what
Cushman & Wakefield designates the Southern Bucks County submarket area of the
northern suburbs of Philadelphia. There are approximately 2.6 million square
feet of existing commercial office space in the Southern Bucks County
marketplace. The following chart is an overview of this marketplace as of the
1st Quarter 1997.
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Market Analysis
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================================================================================
Office Market Overview
Lower Bucks County
March 30, 1997
================================================================================
Class of Space Total Rentable Area Total Area Available Vacancy Rate
================================================================================
A 1,527,169 SF 180,285 SF 11.8%
B 1,064,107 SF 115,747 SF 10.9%
--------------------------------------------------------------
Total Inventory 2,591,276 SF 296,032 SF 11.4%
================================================================================
As of March 30, 1997, total vacancy in this marketplace was reported to be
approximately 11.4 percent, slightly up from year end 1996, however
substantially down from a high of 17.9 percent during 1995. In any type of
market, there must be an inventory of goods maintained in order to satisfy
demand. Within the commercial office market, some space must be maintained at
all times to accommodate the constant shifting of tenants.
A shortage in available inventory is indicated in the market when there is
a discernible lack of prime contiguous office space for larger users. Under
these conditions, new construction is stimulated. At present, there are no
projects under construction in Lower Bucks County. Land does exist in this
marketplace for new competition. However, financing requirements continue to be
stringent which will curtail rampant, speculative development. Without a
financially responsible lead tenant or user, construction and permanent
financing is unobtainable at this time.
Over the last 15 months, the vacancy rate in the Lower Bucks County
marketplace has declined from 17.9 percent at the end of 1995 down to a first
quarter 1997 level of 11.4 percent. This significant decrease is attributable to
the recent rate of absorption. Interestingly, the vacancy that does exist in
this market is concentrated in the average and below average buildings. Older,
lesser quality office space cannot compare against newer, functional buildings.
The aggregate amount of these spaces is such that many analysts are now
suggesting structural vacancy to be well above the conventional five percent
utilized in past years. On a relative basis, most of the vacancy in the current
market is in the older lesser grades of space. The following chart summarizes
overall vacancy and total availabilities in the local market since year end
1993.
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Market Analysis
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================================================================================
Office Market Vacancy and Availabilities
Lower Bucks County
================================================================================
Period Space Available Vacancy Rate
================================================================================
1st Quarter 1997 296,032 SF 11.4%
Year End 1996 277,248 SF 10.7%
Year End 1995 460,507 SF 17.9%
Year End 1994 616,113 SF 22.7%
Year End 1993 462,570 SF 18.5%
================================================================================
There are no formal plans for additions to inventory at this time in the
Lower Bucks County market. Additionally, there are only four blocks of
contiguous space equal to 20,000 square feet or greater in the market area, one
of which is significantly inferior space. Besides those cited, a major user has
no alternative but to consider a build-to-suit transaction. Considering the
current cost of construction relative to market rental rates, the basis is set
for a jump in rental rates though the timing of such an event is unclear.
Nonetheless, this is a positive market influence on existing office product like
the subject property.
Market Demand
Market demand for office space is primarily measured by absorption
statistics. Demand for office space in the Lower Bucks County market has
historically come from the movement of users outward from within the City of
Philadelphia and from the formation of new high tech/service oriented
businesses. Over the last two years, absorption of office space in this market
has been averaging 23,350+/- square feet per quarter or 93,400+/- square feet
annually. Leasing activity has essentially maintained itself at something
approximating an average of 47,000 square feet per quarter or 188,000 square
feet per annum. However, in First Quarter 1997, leasing activity has reached
only 25,518 square feet, while absorption has surpassed historical trends at
31,216 square feet.
================================================================================
Office Market Absorption and Leasing
Lower Bucks County
================================================================================
Period Absorption Leasing
================================================================================
1st Quarter, 1997 31,216 SF 25,518 SF
Year End, 1996 228,043 SF 184,477 SF
Year End, 1995 115,174 SF 186,593 SF
Year End 1994 -42,324 SF 226,511 SF
Year End 1993 75,995 SF 140,703 SF
================================================================================
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WAKEFIELD(R)
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<PAGE>
Market Analysis
From an overall market perspective, absorption statistics are highly
indicative of long term growth or decline. Among the various properties which
compete for tenants, leasing activity serves as an indication of movement around
a specific marketplace. Where absorption is the net change in occupied space
over a period of time, leasing is the sum of all completed transactions in a
given time period. Leasing statistics are an important consideration in an
office market analysis as they can show the amount of continued interest in a
specific marketplace and product type. Typically, new construction benefits in a
market with strong leasing statistics as tenants "trade-up" to the latest
buildings from older complexes.
Office occupancies are now being affected by American business' need to
compete globally and an application of new technologies to the way white collar
employment is conducted. In order to compete, many corporations are downsizing
their operations, forcing fewer employees to do more in less space. Also,
technologies like portable phone systems and voice mail enable many to work for
extended periods outside their base of operations. Many of these new jobs are
frequently held by workers who can perform their services from home offices,
clients' offices or under "hoteling" arrangements.
Given current market dynamics, it would appear that new office space will
be needed in the next few years. This, of course, bodes well for current
investors with the patience and wherewithal to wait for that expected turn of
events. With anticipated demand, and the obsolescence in most of the existing
Class B space, it would appear that upside potential exists in well located and
functionally designed office properties like the subject. We note, however, that
discipline will need to continue among financiers of such projects or a return
to the economic bust of the late Eighties will result.
Rental Rates
The average face rental rate for Class A office space in the Lower Bucks
County marketplace at the end of the First Quarter of 1997 was $20.53 per square
foot of rentable building area on a full service basis. This level has increased
from the year end 1996 average rental of $18.96 per square foot of rentable
area. With the Class A segment tightening, the Class B segment witnessed a
phenomenal increase in quoted rates. In the local marketplace, Class B space
leases at an approximate 17 percent discount from Class A space. The following
is a presentation of average face office rental rates in this market since year
end 1993.
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Market Analysis
================================================================================
<TABLE>
<CAPTION>
====================================================================================================
Average Face Office Rental Rates
Full Service Basis
Lower Bucks County Market
====================================================================================================
Average Average
Period Ending Class A Change Class B (delta) CPI (delta)
Rent Rent
====================================================================================================
<S> <C> <C> <C> <C> <C> <C>
1st Quarter 1997 $20.53/SF +8.2% $17.02/SF +1.73% 166.0 +.5%
Year End 1996 $18.96/SF +3.7% $16.73/SF +11.16% 165.1 +2.9%
Year End 1995 $18.28/SF -3.7% $15.05/SF -1.1% 160.3 +2.4%
Year End 1994 $18.98/SF -0.3% $15.22/SF +1.4% 156.6 +2.7%
Year End 1993 $19.04/SF $15.01/SF 152.5
====================================================================================================
Compound Annual Rate: +1.78% +3.0% +2.01%
====================================================================================================
</TABLE>
As can be seen from this presentation, the average rental rate for Class A
office space in the Lower Bucks County marketplace has remained relatively
stable since 1993 but has increased by 8.2 percent over the past three months.
By comparison, the region's Consumer Price Index has increased at a compound
annual rate of 2.01 percent over the same time period. However, with the decline
in vacancy over the past year, market rents are now increasing at rates in
excess of inflation.
Eventually, a tight Class A office market will precipitate new
construction. In order to economically justify construction, users must first be
willing to pay higher rents than are now being achieved in the competitive open
market. Again, this bodes well for well designed and well maintained real
property in both classes of office space.
Concessions
Rent abatement had been a standard inducement to tenants during the late
Eighties and very early Nineties, but are now not frequently being granted. In
order to win new tenants, landlords had been paying for tenant requested office
finishes well over the standard work letter. In some instances, landlords were
also paying the tenants' moving charges, assuming the rental payments on the
tenants' existing leases, and even making cash bonus payments to the tenants in
order to entice them to a new project. Most of these types of concessions have
ceased though as capital for such items has all but effectively been removed
from the current market. While there are still instances of free rent being
quoted, the current trend is definitely toward effective rents.
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Market Analysis
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Tenant Improvements' Costs
In the leasing of brand new professional office space, a building standard
for interior finishes is established. The standard work letter for brand new
first generation office space in suburban Philadelphia is approximately $20.00
to $25.00 per square foot of rentable area. In relet, second generation space
like the subject, however, the cost of tenant alterations is considerably less
as many materials can be recycled.
The trend of the current marketplace, particularly in second generation
space, has been to work with what is in place. From ownership's perspective,
cash for tenant improvements is scarce so that avoiding demolition and
reconstruction costs is important. We are informed that tenants are also less
demanding in their space improvements needs in order to secure a more favorable
rental rate in these competitive times for American business.
In general terms, a simple re-painting and re-carpeting and cleaning of
ceiling tiles can cost from $5.00 to $10.00 per square foot of rentable area.
When some demolition and reconstruction is necessary, tenant improvement costs
easily escalate to the $10.00 to $15.00 per square foot range. A complete
demolition and reconstruction of a major tenant area or full floor will cost
from $18.00 to $22.00 per square foot in the current market. In single story
office and office/flex space, these costs are less as significant partitioning
is not typically required. The amortization of these costs over the term of the
lease is expensive and will lower ownership's return.
Leasing Commissions
The standard market practice for leasing commissions at office space in
suburban Philadelphia is six percent of the first year's negotiated rent, five
percent of the second, four percent of the third, and three percent of each
successive year's gross rent - all payable at initial occupancy. On a weighted
average basis for a five year lease, commissions would amount to 4.2 percent of
the aggregate rent negotiated. For a renewal, half that amount is customary but
open to negotiation between ownership and the brokerage community. In any event,
the cost of leasing commissions is an expense to ownership beyond the general
operations of the real estate.
Direct Competition
Cushman & Wakefield identifies twelve office buildings and six flex
complexes, including the subject, which we believe directly compete for tenants
within this sub-market. This direct competition is summarized on the opposing
page. As can be seen from this presentation, there are approximately 360,780
square feet of office space in these eleven complexes. While there are numerous
commercial office buildings in Bucks County, these eleven directly compete due
to location, design and professional management. At the End of the First Quarter
1997, total vacancy at the competition was computed to be 11.0 percent which is
similar to the overall market vacancy rate of 11.7 percent and the Class A
vacancy rate of 11.5 percent.
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Market Analysis
================================================================================
As noted on the previous opposing page, the direct competition for office
space is now quoting rents ranging from $10.00 per square foot on a net basis
to $18.00 per square foot on a gross basis plus electric with a base year
expense stop. In terms of its overall design, 155 Rittenhouse Circle was
originally constructed in 1984 as an office/flex building and has subsequently
been converted to 100 percent office. As a result, the market would not view
the property as a traditional one story office building, but rather it would
compete with other office/flex buildings comprised of a high degree of office
finish. Being predominately a light industrial complex, Keystone Industrial Park
has not historically appealed to the office user. Thus, based on the overall
design, age and location of 155 Rittenhouse Circle, the existing contract rent
of $7.00, although below the aforementioned range of rates, appears to be
reasonable.
Conclusions
In conclusion, the local rental market has improved over the past year
with overall vacancy in the Class A product type at 11.5 percent. During the
past 3 to 4 years, overall absorption has been positive, vacancy has declined
and rental rates have increased in the subject's marketplace. Concessions are
nil and work letters are diminishing in response to demand now over-reaching
supply.
There is land available for future development like that found at the
subject in the Lower Bucks market. However, financing requirements continue to
be stringent which will curtail rampant, speculative development. Discipline
will need to continue among financiers of such projects, though, or a return to
the economic bust of the late Eighties will result.
Suburban office buildings have become the prime real estate investment
again behind net leased warehouse/distribution facilities and apartment
complexes. Prices are appreciating due to renewed demand. All of these market
trends bode positively for the office portions of the subject property. With
efficient management and aggressive promotion, we believe the subject property
will continue to favorably compete in this market.
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<PAGE>
PROPERTY DESCRIPTION
================================================================================
The Subject Property
The subject of this appraisal is 180 and 155 Rittenhouse Circle at the
Keystone Industrial Campus in Bristol Township, Bucks County, Pennsylvania. The
property consists of two separately and distinct single story buildings. 180
Rittenhouse Circle consists of 60,000 square foot light industrial building
situated upon a 4.72+/- acre parcel of land, while 155 Rittenhouse Circle
consists of a 22,500+/- square foot single story office building situated on
3.01 acres. The following is a more detailed description of subject property.
Site Descriptions
On the opposing page is a presentation of site specific characteristics
for the 2 parcels which comprise the subject property. In our appraisals of
these parcels, we did not receive nor review a soil report. However, we assume
that the soil's load-bearing capacity is sufficient to support all existing
structures and any which might eventually be constructed on the now vacant
parcels. The sites' drainage appears to be adequate.
We were not given a title report to review. We do not know of any other
easements, encroachments or restrictions, other than normal utility easements,
that would adversely affect the sites' uses. However, we recommend a title
search to determine whether any adverse conditions exist.
We were not given a Wetlands survey to review either. If subsequent
engineering data reveal the presence of regulated wetlands areas, it could
materially affect property value. We recommend a wetlands survey by a competent
engineering firm.
According to Community Panel No. 420984-0005C National Flood Insurance
Rate Map, effective June 4, 1990, the subject property is located in Flood
Hazard Zone C. Zone C is an area which is not within a designated flood prone
area. Therefore, the subject property does not require flood hazard insurance.
No evidence of toxic or hazardous substances were observed during our
inspection of the sites. However, we are not trained to perform technical
environmental inspections. A professional study is recommended for final
determination of any presence of toxic substances.
Overall, the site at 180 Rittenhouse Circle is typical of business campus
development in the area, functionally adequate and well suited for that use.
Additionally, although the building coverage ratio at 155 Rittenhouse Circle is
slightly below what is typical in the marketplace, only nominal expansion is
possible. Thus, given the location of the property and the limited demand
element for office users, the practicality of such an expansion becomes
questionable.
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<PAGE>
Property Description
================================================================================
Descriptions of Improvements
On the opposing page is a presentation of general physical characteristics
for the 2 buildings which are part of the subject property. The reader will note
that we have not made, nor are we qualified by training to make, a compliance
survey of the properties with the American with Disabilities Act (ADA). Since we
have not been provided with the results of a professional survey, we did not
consider possible non-compliance with the requirements of ADA in estimating the
value of the real estate.
Additionally, we are not aware of any potentially hazardous materials
which may have been used in the construction of the improvements to the subject
site. Again, we are not qualified to detect such materials and urge the client
to employ an expert in the field to determine if any exist. Finally, no personal
property is included in our analysis of the subject property. The following
paragraphs describe specific important attributes for each building:
180 Rittenhouse Circle - This industrial building is partitioned into a
front office area and a rear devoted to warehouse production space. The
office area, which is approximately 10 percent of the total building area,
features carpeted floors, painted sheetrock walls and suspended acoustical
tile ceilings with recessed fluorescent lighting. There is a ceramic tile
lavatory in the office area and a small employee kitchen. Heating and
cooling to office areas are provided by electrically fired roof-mounted
units.
The rear production area basically features painted exposed construction.
Heat is supplied by gas fired suspended units and lighting is derived by
suspended halon fixtures. There are men's and women's locker rooms in this
space and a small "break; area as well. The building is sprinklered for
fire protection and the loading docks have levelers with weather guards.
It was reported by ownership that the roof requires replacement and will
be completed within the next three months. Locationally, there are no
deleterious influences emanating form outside this property which would
create external obsolescence. Adequate on-site parking and turn-around
areas are provided and low maintenance shrubbery and green areas present
an aesthetic appeal to the building.
155 Rittenhouse Circle - This is a one story office building that is 100
percent occupied by a single tenant. The office areas feature carpeted
floors, painted sheetrock walls and suspended acoustical tile ceilings
with recessed fluorescent lighting. There is a ceramic tile lavatory and a
small employee kitchen. Heating and cooling to office areas are provided
by electrically fired roof-top units.
Functionally, the floor plan is generally versatile with open areas at the
perimeter and private offices to the center. Overall the condition was
good. We note the roof had been replace within the last two years.
Locationally, given that the Keystone Industrial Park is predominately
industrial and has historically attracted industrial users and not office
users, the overall desirability of the subject is limited. Adequate
on-site parking and turn-around areas are provided and low maintenance
shrubbery and green areas present an aesthetic appeal to the building.
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CUSHMAN &
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<PAGE>
REAL PROPERTY TAXES AND ASSESSMENTS
================================================================================
The subject property is under the taxing jurisdiction of Bucks County
Board of Assessment. Taxes are levied against all real and personal property in
this locale for the purpose of providing funding for the various municipalities.
The amount of ad valorem taxes is determined by the current assessed value for
the real and personal property, in conjunction with the total combined tax rates
of the taxing jurisdiction. In an effort to project the future tax liability for
the subject's real and personal property, we have reviewed both the present and
historical tax rates combined with a forecast of the assessments.
Tax Rates
The following is a chart displaying the five and ten year trend in tax
rates levied by the above noted taxing jurisdictions:
================================================================================
Tax Rates Per $1,000 of Assessed Value
================================================================================
Taxing Authority 1987 Tax Rate 1992 Tax Rate 1997 Tax Rate
================================================================================
County 38.00 50.35 55.00
- --------------------------------------------------------------------------------
Township 53.25 56.75 55.60
- --------------------------------------------------------------------------------
School 228.77 378.60 432.40
- --------------------------------------------------------------------------------
Total 320.02 485.70 543.00
================================================================================
As the preceding chart indicates, the tax rates affecting the subject
property have increased by approximately 7.4 percent per year over the past five
years (since 1992), but only 1.4 percent per year over the past ten years (since
1987). Typically, over the long term, tax rates will mirror inflationary trends,
with average compound growth rates of 3.0 to 4.0 percent.
Tax rates increase or decrease annually based upon changes in municipal
budgets and the total tax base. Again, over the longer term, tax rate increases
tend to mirror inflationary trends, except during periods of economic decline or
in fast growing areas where new services are required. With the likely
stabilization of real estate values and the tax base, we are of the opinion that
more normal increases in tax rates, of say 3.0 to 4.0 percent, will be the trend
over the intermediate term.
Tax Assessment
The Bucks County Tax Assessors Office establishes the assessed value on
real property for all of the previously noted taxing jurisdictions. The 1997
assessment, as well as the historical assessments for 1995 and 1996, are as
follows:
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Real Property Taxes And Assessments
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================================================================================
Historical Assessed Value
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180 Rittenhouse Circle
================================================================================
1995 1996 1997
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Land $23,180 $23,180 $23,180
- --------------------------------------------------------------------------------
Building $59,290 $59,290 $59,290
- --------------------------------------------------------------------------------
Total $82,470 $82,470 $82,470
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155 Rittenhouse Circle
================================================================================
1995 1996 1997
================================================================================
Land $14,790 $14,790 $14,790
- --------------------------------------------------------------------------------
Building $62,430 $62,430 $62,430
- --------------------------------------------------------------------------------
Total $77,220 $77,220 $77,220
================================================================================
As can be seen from the above charts, the 1995 through 1997 has tax
assessment for both properties has remained stable. In an effort to evaluate the
fairness of the subject's current assessed value and future prospects for a
change in the assessment, we have compared the assessment to estimated value of
the subject property as concluded in this report.
According to the State Tax Equalization Board (STEB), the current
assessment-to-land ratio in Bucks County is 4.9 percent. Thus, the subject's
estimated assessment implies a market value, for tax purposes, of $1,683,000 for
180 Rittenhouse Circle and $1,576,000 for Rittenhouse Circle. Based upon our
subsequent value conclusion, it appears that both properties are over assessed
and an appeal for a reduction should be pursued.
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Assessed Value Vs. Market Value
- --------------------------------------------------------------------------------
Location Assessed Market Value C&W Market Value
- --------------------------------------------------------------------------------
180 Rittenhouse Circle $1,683,000 $1,575,000
155 Rittenhouse Circle $1,576,000 $1,250,000
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Ad Valorem Tax Conclusions
Applying the 1997 assessment for the subject to the total 1997 tax rate
results in a combined tax burden of $86,711 in that year as calculated in the
following chart.
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180 Rittenhouse Circle
- --------------------------------------------------------------------------------
$82,470 x $0.543 = $44,781.21
================================================================================
155 Rittenhouse Circle
- --------------------------------------------------------------------------------
$77,220 x $0.543 = $41,930.23
================================================================================
The above taxes have been paid for 1997.
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ZONING
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The subject property is currently zoned PI- Planned Industrial by Bristol
Township. The use regulations in this zone permit a wide range of manufacturing
and warehousing activity as well as offices. Several accessory uses are also
permitted. The developmental requirements of this zone are summarized as
follows:
===========================================================
Bristol Township
PI- Planned Industrial
-----------------------------------------------------------
Minimum Lot Area 2.0 acres
-----------------------------------------------------------
Minimum Lot Width 175 feet
-----------------------------------------------------------
Maximum Floor Area Ratio 50 percent
-----------------------------------------------------------
Front Yard 50 feet
-----------------------------------------------------------
Side Yard 25 feet
-----------------------------------------------------------
Rear Yard 50 feet
-----------------------------------------------------------
Maximum Building Height 35 ft.
-----------------------------------------------------------
On-Site Parking: Office - 1 space per 400
square feet of area.
Warehouse - 1 space
per 1,000 square feet of
area.
===========================================================
We are not experts in the interpretation of complex zoning ordinances but
the property appears to be a conforming use based on our review of public
information. The determination of compliance is beyond the scope of a real
estate appraisal. We know of no deed restrictions, private or public that
further limit the subject property's use. The research required to determine
whether or not such restrictions exist, however, is beyond the scope of this
assignment. Deed restrictions are a legal matter and only a title examination by
an attorney or title company can usually uncover such restrictive covenants.
Thus, we recommend a title search to determine if any such restrictive do
exists.
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HIGHEST AND BEST USE
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Highest and Best Use of Site as Though Vacant
According to the Dictionary of Real Estate Appraisal, Third Edition
(1993), a publication of the Appraisal Institute, the highest and best use of
the site as though vacant is defined as:
Among all reasonable, alternative uses, the use that yields the highest
present land value, after payments are made for labor, capital, and
coordination. The use of a property based on the assumption that the
parcel of land is vacant or can be made vacant by demolishing any
improvements.
Physically Possible
180 Rittenhouse Circle contains 4.72 acres of land, while 155 Rittenhouse
Circle contains 3.01 acres of land. The frontage, size and configuration of each
site is felt to provide a suitable land use and/or development potential for a
wide variety of possible planned industrial land uses. Public utilities would
adequately provide for nearly all uses. Street improvements are also adequate.
Legally Permissible
The subject's zoning classification permits a wide range of manufacturing
and warehousing activity as well as offices. As previously mentioned, we are not
experts in the interpretation of complex zoning ordinances. Additionally, there
are no private restrictions which are known to adversely affect the utilization
of the land. Thus, a planned industrial utilization of the subject parcels is
legally permissible.
Financially Feasible
The Regional Analysis section of this report presents demographic and
general economic trends which are now favorable for real estate ownership and
development. This is particularly true for the suburban communities surrounding
Philadelphia where population growth and employment creation are expected to
positively continue into the foreseeable future. In spite of this optimism, real
estate owners and investors must be cognizant of the fact that the region is
densely developed on a relative basis with a mature economy which serves to
limit opportunities. Thus, only those properties with a desirable location and
functional design are expected to out perform inflation in the general economy.
In the local real estate market, occupancies among Class A office
properties are now the highest in several years with a moderate increase in
rental rates being achieved. Additionally, the industrial sector has witnessed a
steady decline in vacancies since reaching a peak of 18.2 percent in 1992.
Financing is now available when sufficiently supported by the credit of an owner
or major tenant. Considering the strength of the market, permitted uses by
zoning and the site's physical traits, it is our opinion that the highest and
best use of the land on a vacant basis is light industrial development.
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Highest and Best Use
================================================================================
Highest and Best Use of Property as Improved
According to the Dictionary of Real Estate Appraisal, highest and best use
of the property as improved is defined as:
The use that should be made of a property as it exists. An existing
property should be renovated or retained so long as it continues to
contribute to the total market value of the property, or until the return
from a new improvement would more than offset the cost of demolishing the
existing building and constructing a new one.
Unlike the previous analysis of the subject site as vacant, this analysis
considers the subject property as currently improved with an evaluation as to
the physical, legal, and financial appropriateness of the existing land use.
Physical Considerations
The subject site at 180 Rittenhouse Circle has been improved with a
60,000 square foot light industrial warehouse building that was to be in good
condition at the time of the inspection. The building has been vacant for
approximately one month, but actively marketed. The subject parcel at 155
Rittenhouse Circle has been improved with a 22,500 square foot one story office
building that was 100 percent occupied as of the date of this appraisal. Based
upon our observation, there are no apparent physical factors such as soils,
drainage, or other site characteristics that would adversely affect the
continued utility and/or existence of the subject improvements.
Legal Considerations
As previously stated, we are not experts in the interpretation of complex
zoning ordinances. However, based upon our review of public information, it
appears that the existing use and development of the subject have been accepted
by the local zoning officials. Thus, the subject parcels, as presently improved,
represents legal and conforming uses.
Financially Feasible
As stated in the Market Analysis section of the report, vacancy levels
have generally remain stable within the past two years. In addition, sales
activity reported in Bucks County in 1996 was slightly above the sales activity
reported in 1995. Moreover, most of the activity in Bucks occurred in
warehouse/distribution space demonstrating the overall appeal of this building
sector. In addition, the local rental market has improved over the past year
with overall vacancy in the Class A office product type at 11.5 percent. During
the past 2 years, overall absorption has been positive, vacancy has declined,
and rental rates have increased in the subject's marketplace.
Therefore, based on the subject's historical performance and the prospect
for continued growth, it is our opinion that the subject property, as presently
developed, represents the highest and best use of the site as improved.
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VALUATION PROCESS
================================================================================
In this appraisal, we have used the Sales Comparison Approach and the
Income Capitalization Approach to develop a market value estimate.
The Cost Approach was not performed for the following reasons:
o This approach is more relevant for new construction or where
sufficient information is available to reasonably estimate the
replacement cost new of the improvements and land.
o The investment marketplace does not typically trade buildings such
as the subject on a cost/value basis, particularly in markets where
it is generally perceived that cost exceeds value.
o The subjectivity of accurately estimating accrued depreciation of
the existing improvements significantly limits the reliability of
this approach.
In the Sales Comparison Approach, we performed the following steps:
o Searched the market for recent light industrial and one story office
building sales within the subject marketplace which contain similar
physical and economic characteristics to the subject property.
o Analyzed differences between those sales and the subject on the
basis of the saleprice per square foot and extracted overall
capitalization rates.
o Correlated the various value indications into a point value estimate
from within the range.
In developing the Income Capitalization Approach, we:
o Studied rents in effect in the immediate and competing areas to
estimate potential rental income at market levels for office, and
industrial uses.
o Studied the recent history of operating expenses at the subject
property and competing properties to estimate an appropriate level
of stabilized expenses and reserves for replacement.
o Estimated net operating income by subtracting stabilized expenses
from potential gross income after deduction for vacancy and
collection loss.
o Prepared a discounted cash flow analysis in which the estimated
income and expenses over a projected holding period, and the
estimated property value at the time of reversion, are discounted at
an appropriate rate to estimate present market value.
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Valuation Process
================================================================================
In estimating the final value, we performed the following:
o Reviewed and re-examined each of the approaches to value which were
employed.
o Considered the type and reliability of the data used and
applicability of each approach.
o Reconciled the approaches to a final value conclusion.
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<PAGE>
SALES COMPARISON APPROACH
================================================================================
Methodology
In the Sales Comparison Approach, we estimated value by comparing this
property with similar, recently sold properties in the surrounding or competing
area. Inherent in this approach is the principle of substitution, which holds
that when a property is replaceable in the market, its value tends to be set at
the cost of acquiring an equally desirable substitute property, assuming that no
costly delay is encountered in making the substitution.
By analyzing sales that qualify as arms-length transactions between
willing and knowledgeable buyers and sellers, we can identify value and price
trends. The basic steps of this approach are:
1. research recent, relevant property sales and current offerings
throughout the competitive area;
2. select and analyze properties that are similar to the property
appraised, considering changes in economic conditions that may have
occurred between the sale date and the date of value, and other
physical, functional, or locational factors;
3. identify sales that include favorable financing and calculate the
cash equivalent price;
4. reduce the sale prices to a common unit of comparison such as price
per square foot of net rentable area, effective gross income
multiplier, and overall capitalization rate;
5. make appropriate comparative adjustments to the prices of the
comparable properties to relate them to the property being
appraised; and
6. interpret the adjusted sales data and draw a logical value
conclusion.
Analysis of Sales
Over the past 12 months, the market has shown signs of improvement. Rents
have increased and concession packages have dissipated while positive net
absorption is taking place. In terms of the investment market, demand is
primarily being generated by institutional investors including several large
pension funds/European and Asian investors/opportunistic investors such as
Vulture Funds stimulated in an effort to capture "bottom of the market" sale
prices.
The subject property consists of two separate parcels identified as 180
Rittenhouse Circle and 155 Rittenhouse Circle On the opposing page is a
presentation of the comparable property sales which were analyzed for the
valuation of 180 Rittenhouse Circle. The most widely-used and market-oriented
unit of comparison for properties such as the subject is the sales price per
square foot of building area. All comparable sales were analyzed on this basis.
Detail sheets describing these and all the sales employed in this analysis can
be found among the Addenda to this report.
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<PAGE>
Sales Comparison Approach
================================================================================
180 Rittenhouse Circle
This property is a 60,000 square foot single story warehouse on 4.72 acres
of land which was constructed circa 1980. The building was recently vacated and
is being actively marketed. On the date of inspection, the building was in good
condition having benefited from an on-going maintenance program. However,
ownership has informed the appriasers that a new roof is required on the
facility. This facility provides approximately 10 percent interior office
finishes on an overall basis and ceiling heights of 24 feet. The property
possesses good "curb appeal" and features good quality construction materials.
With regard to the market data assembled for this analysis, the following
comparisons are made:
Comparable Property Sale #1 was an arm's length transaction accomplished
with market oriented financing. It is also a relatively recent transfer
without any adverse leaseholds interests. Locationally, Sale #1 exhibits
similar attributes as the subject.
Physically, this property was in similar condition at the time of sale and
also required a new roof. This building had 20 foot clear ceilings,
similar loading facilities, a 12.5 percent finished interior and a
land-to-building ratio of 3.17:1. Economically, Sale #1 was vacant at the
time of conveyance. No non-realty items of property were reported to be
included in the price. Based on the foregoing, a nominal adjustment to
this comparable was deemed necessary.
Comparable Property Sale #2 was also an arm's length transaction
accomplished with market oriented financing. The conveyance took place
approximately one year ago and did not involve any adverse leaseholds
interests. The property was situated within a similarly planned industrial
park as the subject property. Physically, this property was in good
condition at the time of sale which is similar to the subject.
Additionally, comparable sale #2 featured a higher degree of office
finish; however its ceiling height was inferior to what is offered at the
subject. Finally, in terms of physical attributes, the Comparable Sale
included excess land able to accommodate an additional 15,000 square feet
of building expansion. As a result, an overall negative adjustment was
applied to this sale for physical attributes. Economically, Comparable
Sale #2 was also vacant at the time of conveyance, however the building
was much smaller than the subject property suggesting negative adjustment
for economies of scale.
We are informed that Comparable Property Sale #3 involved two unrelated
parties and incorporated market oriented financing. The conveyance, which
took place six months ago, did not involve any adverse leaseholds
interests. Comparable Sale #3 is situated within a slightly superior
planned industrial park than the subject. Thus a slight negative
adjustment was applied. Physically, the property featured a similar
percentage of finished office area as well as loading and ceiling
clearance. The comparable property was considered to be superior in terms
of overall physical condition; however it did feature a smaller
land-to-building ratio. Thus, a slight negative adjustment for superior
physical attributes was applied.
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Sales Comparison Approach
================================================================================
Economically, Comparable Sale #3 was also vacant at the time of
conveyance. The building was much smaller than the subject property
suggesting a negative adjustment for economies of scale. Overall, a
negative adjustment is made to Sale #3.
Comparable Property Sale #4 involved two unrelated parties and
incorporated market oriented financing. The conveyance, which took place
four months ago, did not involve any adverse leaseholds interests.
Comparable Sale #4 is situated within a slightly inferior location than
the subject, resulting in a positive adjustment. Physically, the property
featured a smaller percentage of finished office area but was similar in
terms of overall physical condition, loading and ceiling clearance.
Finally, although the comparable sale feature a greater land-to-building
ratio, the site of the comparable property was such that exposure and
visibility were limited due to the fact that it featured a flag lot
configuration and was situated approximately 300' off of Canal Road.
Overall, this comparable sale was regarded as inferior and warranted a
slight positive adjustment. Economically, the comparable was similar in
terms of building area and was purchased by an owner/user.
Finally, Comparable Property Sale #5 is a pending sale involving two
unrelated parties incorporating market oriented financing. Comparable Sale
#5, which is situated within the Keystone Industrial Park, included a
similar percentage of finish office area: however, it featured a greater
land-to-building ratio than the subject property. Moreover, despite its
inferior ceiling height, the comparable was considered to be superior in
terms of physical condition. Overall, this comparable sale was regarded as
superior and warranted a negative adjustment. Economically, the comparable
was similar in terms of building area, and was purchased by an owner/user.
Conclusion - The five sales assembled for this analysis of 180 Rittenhouse
Circle reflect a range in unit value from $27.08 to $36.28 per square foot
of building area. The adjustments discussed above are presented to outline
the logic of our thought processes with the ultimate result being a
plausible market value conclusion for the subject property. Based on our
analysis of these data on a price per square foot basis, we have concluded
an appropriate adjusted range of $26.00 to $28.00 per square foot of
building area. From within this adjusted range, we conclude the Sales
Comparison Approach to indicate a current market value of $1,600,000 for
180 Rittenhouse Circle. This indication of value is equal to $26.66
square foot of building area.
155 Rittenhouse Circle.
This property is a 22,500 square foot single story office building on 3.01
acres of land which was constructed in 1980. It is now 100 percent occupied by a
single tenant. On the date of inspection, the building was in good condition
having benefited from an on-going maintenance program. The property possesses
good "curb appeal" and features good quality construction materials. Presented
on the opposing page are the data considered applicable to the valuation of 155
Rittenhouse Circle via the Sales Comparison Approach.
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Sales Comparison Approach
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Comparable Property Sale #1 was an arm's length transaction accomplished
with market oriented financing. It is also a relatively recent transfer
without any adverse leaseholds interests. Locationally, Comparable Sale
#1 exhibits similar attributes as the subject.
Physically, this property was in similar condition at the time of sale.
However, the comparable featured a partial second floor area that resulted
in a positive adjustment due to the inferior utility. Economically,
Comparable Sale #1 was 85 percent occupied at the time of sale as
compared to the 100 percent occupied subject property. Regarding economies
of scale, the comparable featured a larger building area than the subject
suggesting a positive adjustment. Based on the foregoing, an overall
positive adjustment to this comparable was deemed necessary.
We were informed that Comparable Property Sale #2 was an arm's length
transaction accomplished with market oriented financing. It is also a
relatively recent transfer without any adverse leaseholds interests.
Locationally, Comparable Sale #2 is considered to be superior to the
subject and warrants a negative adjustment. Physically, the property was
regarded as similar to the subject property, both having benefited from an
on-going maintenance program. Economically, the comparable was reportedly
at stabilization at the time of the conveyance. Based on the foregoing, an
overall negative adjustment to this comparable was deemed necessary.
Comparable Property Sale #3 was an arm's length transaction accomplished
with market oriented financing. It is also a relatively recent transfer
without any adverse leaseholds interests. Locationally, Comparable Sale #3
is considered to be superior than the subject and warranted a substantial
negative adjustment as a result.
Physically, this property was of similar vintage to that of the subject
property. However, the comparable featured a two story section that
resulted in a slight positive adjustment for the inferior utility of the
second floor space. Economically, Comparable Sale #3 was also 100 percent
occupied. Based on the foregoing, an overall negative adjustment
attributable to its superior location was deemed necessary.
Comparable Property Sale #4 was reported to be an arm's length transaction
accomplished market oriented financing. The conveyance took place
approximately two months ago and did not involve any adverse leaseholds
interest. The location of the comparable was considered to be superior and
warranted a negative adjustment. The improvements at the comparable
property were regarded as similar to the subject; however, economically,
the comparable property was only 89 percent occupied as compared to the
100 percent occupied subject property. All things being considered, the
comparable property required an overall negative adjustment.
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Sales Comparison Approach
================================================================================
Conclusion - As before, the adjustments discussed above are presented to
outline the logic of our thought processes with the ultimate result being
a plausible market value conclusion for the subject property. Based on our
analysis of these data on a price per square foot basis, we have concluded
an appropriate adjusted range of $55.00 to $58.00 per square foot of
building area. From within this adjusted range, we conclude the Sales
Comparison Approach to indicate a current market value of $1,300,000 for
155 Rittenhouse Circle. This indication of value is equal to $57.77 per
square foot of building area.
Final Conclusions
The subject property consists of two separate parcels. Due to differences
among these, two sets of data were necessary for this comparative analysis of
the real estate. Based upon these analyses, it is our conclusion that the Sales
Comparison Approach indicates a total market value of TWO MILLION NINE HUNDRED
THOUSAND DOLLARS ($2,900,000) for the entire subject property. This total value
is comprised as follows:
====================================================
Final Conclusions
====================================================
Property Indicated Market Value
====================================================
180 Rittenhouse Circle $1,600,000
155 Rittenhouse Circle $1,300,000
--------------
TOTAL $2,900,000
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<PAGE>
INCOME CAPITALIZATION APPROACH
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Methodology
The Income Capitalization Approach is a method of converting the
anticipated economic benefits of owning property into a value estimate through
capitalization. The principle of "anticipation" underlies this approach in that
investors recognize the relationship between an asset's income and its value. In
order to value the anticipated economic benefits of a particular property,
potential income and expenses must be estimated, and the most appropriate
capitalization method must be selected.
The two most common methods of converting net income into value are direct
capitalization and discounted cash flow analysis. In direct capitalization, net
operating income is divided by an overall rate extracted from market sales to
indicate a value. In the discounted cash flow method, anticipated future net
income streams and a reversionary value are discounted to an estimate of net
present value at a chosen yield rate (internal rate of return).
With regard to 180 Rittenhouse Circle, which consists of a 60,000 light
industrial warehouse building that is entirely vacant, we have elected to employ
the discounted cash flow (DCF) method. In the DCF method, capital costs as well
as the rent loss incurred during the lease-up period is the more easily taken
into account than in the direct capitalization technique. In addition, 155
Rittenhouse Circle is a single story office building currently leased on a
triple net basis with Jones Apparel which will expire in approximately four
years. For the same reasons as stated earlier, the discounted cash flow method
is most appropriate for the appraisal problem. The following is a discussion of
our discounted cash flow analysis for each parcel which comprises the subject
property.
180 Rittenhouse Circle
This property is a 60,000 square foot single story warehouse which is now
vacant and requires lease up. On the opposing page is a presentation of the cash
flows which an informed investor could reasonably expect 180 Rittenhouse Circle
to generate over a eleven year time horizon. These cash flows are based upon the
following analysis:
Base Rental Income - The base rental income which an asset such as the
subject property will generate for an investor reflects a review of the
existing rent roll in conjunction with the rent now being paid for
comparable space and services in the competitive open market. As
mentioned, the subject property is vacant and requires the owner to secure
a tenant.
On the following opposing page is a presentation of recent rental rates on
light industrial warehouse space in the market area of the subject
property. As can be seen from this summary, rental rates on space
comparable to the subject range from $2.75 per square foot up to $3.85 per
square foot on a triple net basis.
Comparable Rental #1 represents a modern building within the Bucks County
Business Park in Middletown Township, Bucks County. This space within a
multi-tenanted facility contained 46,000 square feet with minimal office
space. This comparable rental was considered to be in a similar location;
however physically, the comparable was regarded as inferior. Two months
free rent were reportedly given to the tenant. As a result of our
comparison, a slight upward adjustment was applied to this comparable
rental.
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Income Capitalization Approach
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Comparable Rental #2 represents a modern building within the I-95
Industrial Park in Bensalem Township, Bucks County. This space within a
multi-tenanted facility contained 50,200 square feet also with minimal
office space. This comparable rental was considered to be in a similar
industrial location. As a result of our comparison, an upward adjustment
was applied to this comparable rental.
Comparable Rental #3 represents a modern building within the Bucks County
Business Park in Middletown Township, Bucks County. This space, which was
located in a similar industrial location, contained 78,213 square feet of
which 4 percent is finished office space. As a result of our comparison, a
upward adjustment was applied to this comparable rental.
Comparable Rental #4 represents a modern building within the Warrington
Industrial Park in Warrington Township, Bucks County and was regarded as
slightly superior. This space contained 38,000 square feet with 8 percent
finished office space, but only 18' clear ceiling clearance. As a result
of our comparison, a nominal adjustment was considered appropriate.
In addition to analyzing actual lease transactions outside the property,
leasing brokers were interviewed in an effort to ascertain competitive
packages available in the marketplace today. Most brokers interviewed were
of the opinion that free rent was no longer being given in the local
marketplace. Tenant improvements, however, are a standard and felt to
range from $0.50 to $1.00 per square foot depending on the size of the
tenant and the duration of the lease.
After considering the most recent leasing achieved at the subject property
in conjunction with the rents now being paid for comparable space and
services in the competitive open market, it is our conclusion that the
current average economic rent for it is $3.75 per square foot on a triple
net basis. This rent would be fixed over an average five year term.
Additionally, the tenant would also be entitled to improvements up to
$1.00 per square foot of rentable building area.
Market rent is forecasted to increase at an average annual rate of 3.5
percent throughout the holding period. This forecast of income growth
rates reflects typical investor expectations as noted in the Cushman &
Wakefield Investor Survey which is among the Addenda to this report.
Absorption - At the present, the subject property is completely vacant.
The local marketplace is experiencing declining vacancy rates, a trend
that we feel will continue in the intermediate term. Given the subject's
convenient location and functional design, we expect that a tenant could
be secured by October 1997 at the rental rate concluded above.
Expense Reimbursements - Consistent with market leasing practice for this
type of real estate, the tenant in a property like the subject is
responsible for certain expenses incurred annually in the operation and
ownership of the investment. These expenses include real estate taxes,
insurance premiums, and common area maintenance. Future leases in the
subject property are projected to be structured in a similar fashion.
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Income Capitalization Approach
================================================================================
Allowance for Vacancy and Credit Loss - A deduction must be made from the
total gross revenues due an investor in the subject property to account
for the possibility of vacancy and/or non-collection of rent. We have,
therefore, deducted 3 percent from gross revenues as a global allowance
for the non-payment of rent or expenses by a lessee. This rate has
considered the creditworthiness of the tenant roster and long-term market
conditions.
Additionally, our analysis over time has incorporated a lag vacancy
allowance which provides for "down time" between the expiration of an
existing lease and the commencement of a new lease. Upon the expiration of
a lease, it is our best estimate that there is a 65 percent probability
that the tenant will renew and a 35 percent probability that the tenant
will vacate. At renewal, no down time is recognized; should this tenant
vacate, then it is our expectation that an average down time of
approximately six months time would be reasonable to re-lease the space.
Therefore, the weighted average lag vacancy utilized between lease
expirations in this report is three months.
==========================================================================
Lag Vacancy Allowance
==========================================================================
Event Probability x Down Time = Weighted Time
==========================================================================
Rollover 65% x -0- = -0-
Turnover 35% x 2 months = 2 months
--------------------------------------------------------------------------
Total 100% Average Weighted Time = 2 months
==========================================================================
Based on the subject's weighted average downtime between leases, the
overall average occupancy rate of the subject property over the ten year
holding period is 5.6 percent. Including our overall vacancy/global credit
loss allowance estimated at 3 percent, the implied overall occupancy rate
of the subject property over the ten year holding period is 7.16 percent.
Operating Expenses - We were provided with historic operating expense data
for the subject property. We have also been provided with current
ownership's operating pro forma. On the opposing page is a presentation of
the historical operating expenses for the subject building. Please note,
given the subject building historically has been leased on a triple net
basis, only those expenses incurred by the landlord are reflected.
Additionally, the 1997 budget reflects higher than normal expenses due to
the anticipated vacancy attributable by the vacating tenant. The following
is a brief summary of the projected expenses for the subject property.
Real Estate Taxes - In the Real Estate Tax and Assessments section
of this report, we document the level of assessment for each of the
subject buildings that make up the subject property. In the initial
year of investment, (FY 1997), the real estate tax expense for 180
Rittenhouse Circle is estimated to be $44,781 or $0.75.
Insurance - Based upon our experience, the cost for hazard and
liability insurance ranged we have stabilized insurance expense at
$7,326 in the first year of the investment or $0.12 per square foot
for this analysis.
================================================================================
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Common Area Charges - This expense category includes all common
building and yard maintenance such as lawn service and trash
collection that the landlord contracts and the tenant reimburses.
Due to the age and condition of the buildings in the initial year of
investment, (FY 1997), the common area charges expense is estimated
at $0.25 per square foot of gross building area.
Management - The fee for providing professional management services
includes collections, supervision and the preparation of all
budgets. According to the historical operating expenses, the cost
for professional management has ranged from $0.06 to $0.08 per
square foot of rentable building area. It must be noted that the
this building was managed as part of a portfolio and ownership was
able to capitalize on economies of scale. As a "stand alone"
property in the initial fiscal year, this amount is forecasted to be
$.15 per square foot of building area respectively.
Miscellaneous - Invariably, miscellaneous expenses occur in the
operation of a property such as the subject. These include
advertising and promotional expenses, professional fees, brochures,
and a contingency for the unknown. The data available from the
market indicate allowances for miscellaneous expenses ranging from
$0.01 to $0.08 per square foot of rentable area. For this analysis,
miscellaneous operating expenses are stabilized at $0.05 per
rentable square foot of building area.
Operating expenses are forecasted to increase at an average annual rate of
3.5 percent over the investment holding period. The forecast of projected
growth rates in all categories of expense reflect typical investor
expectations as noted in the Cushman & Wakefield Investor Survey, which
has been placed among the Addenda to this report. Except where noted, our
projected growth rates for the various types of expense categories
generally do not attempt to reflect growth rates for any individual year,
but rather the long term trend over the period of analysis.
Other Non-Operating Expenses - Other, non-operating expenses of the
subject property are projected in this analysis from prevailing commission
schedules, construction costs, and accepted practices. We have analyzed
each item of capital expenditure in an attempt to project what the typical
investor in a property like the subject would consider reasonable, based
upon informed opinion and experience. The following is a discussion of the
other, non-operating expenses incorporated into this analysis of the
subject property.
Tenant Alterations - Upon the expiration of a lease, it is our best
estimate that there is a 65 percent probability of the existing
tenant renewing their lease and a 35 percent probability that the
existing tenant will vacate. The current cost associated with tenant
improvements at tenant rollover is estimated to be $1.00 per square
foot while that to prepare space for a new turnover tenant is
estimated to be $0.50 per square foot. On average, then, the
weighted cost of tenant alterations is projected to be $0.68 per
square foot in the initial year of the investment holding period.
The following is a presentation of these computations.
================================================================================
-38-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
====================================================================
Tenant Improvement Costs
====================================================================
Event Probability x Unit Cost = Weighted Cost
====================================================================
Rollover 65% x $0.50/SF = $0.33/SF
Turnover 35% x $1.00/SF = $0.35/SF
--------------------------------------------------------------------
Total 100% Average Weighted Cost = $0.68/SF
====================================================================
Leasing Commissions - In estimating the appropriate stabilized
leasing expense for the subject property, the same rollover/turnover
probabilities as described above are utilized. The standard leasing
commission for new tenants is 6 percent of the first year's rent, 5
percent of the second, 4 percent of the third and 3 percent of each
succeeding year's contract rent, payable at lease commencement.
Based upon an average five year lease term, leasing commissions are
equal to 4.2 percent of total base rental income. The following is a
summary of these computations:
====================================================================
Effective Leasing Commissions
Average Five Year Lease Term
Turnover Tenant
====================================================================
Lease Year % X Commission = Weighted Rate
====================================================================
1 20% X 6% = 1.20%
2 20% X 5% = 1.00%
3 20% X 4% = .80%
4 20% X 3% = .60%
5 20% X 3% = .60%
--------------------------------------------------------------------
Total 100% Effective Commission Rate = 4.20%
====================================================================
For a tenant who elects to renew a lease, half of a commission is
payable. On a weighted average basis, then, leasing commissions are
equal to 2.84 percent of total effective base rental income over the
term. The following is a presentation of these computations.
====================================================================
Leasing Commission Expense
====================================================================
Event Probability x Commission = Weighted Rate
====================================================================
Rollover 65% x 2.1% = 1.37%
Turnover 35% x 4.2% = 1.47%
--------------------------------------------------------------------
Total 100% Average Weighted Rate = 2.84%
====================================================================
Reserves - It is customary and prudent to set aside an amount
annually for the replacement of short lived capital items such as
roofs, parking lots, or mechanical equipment. In this analysis, we
have projected an allowance for reserves of $O.10 per square foot of
rentable building area which is typical in the local market place
for a property like the subject. Reserves for replacements are
therefore stabilized at $6,000.
Capital Improvements - Based on conversations with property
management, the roof cover at the subject is in need of replacement.
We have deducted to cost to cure this obsolescence within the first
year at a cost of $2.50 per square foot or $150,000.
================================================================================
-39-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
Other non-operating expenses are also forecasted to increase at an average
annual rate of 3.5 percent over the investment holding period. This too is
consistent with the Cushman & Wakefield Investor Survey. Again, our
projected growth rates for the various types of expense categories
generally do not attempt to reflect growth rates for any individual year,
but rather the long term trend over the period of analysis.
Terminal Capitalization Rate - The residual cash flows annually generated
by the subject property comprise only the first part of the return which
an investor will receive. The second component of this investment return
is the pre-tax cash proceeds from the resale of the property at the end of
a projected investment holding period. A terminal capitalization rate was
used to estimate the market value of the property at the end of the
assumed investment holding period. We estimated an appropriate terminal
rate based on indicated rates in today's market. A premium was added to
today's rate to allow for the risk of unforeseen events or trends which
might affect our estimate of net operating income during the holding
period.
================================================================================
Investment Grade Industrial Properties
Summary of Capitalization Rates
================================================================================
Sale #. Location Date Capitalization
Rate
================================================================================
1 201-221 King Manor Drive
King Manor Industrial Campus 4/97 12.01%
Upper Merion Township
Montgomery County, PA
- --------------------------------------------------------------------------------
2 34 Blevins Drive and 263 Quigley Boulevard
Airport Business Center 9/96 11.13%
New Castle County, DE
- --------------------------------------------------------------------------------
3 1800 Ogletown Road
Brookside Distribution Center 4/96 9.17%
New Castle County, DE
- --------------------------------------------------------------------------------
4 Progress Drive
USX Industrial Park 3/96 10.00%
Falls Township
Bucks County, PA
================================================================================
Terminal Capitalization Rate Selected 11.00%
================================================================================
Investors typically add 50 to 100 basis points to the "going-in" rate to
arrive at a terminal capitalization rate, according to Cushman &
Wakefield's periodic investor surveys. For this analysis, it is our
projection that the subject property would most likely be sold at the end
of the 11th year of the holding period for an amount equal to what would
be the next year's net operating income capitalized at an overall rate of
11.0 percent. The 12th year's computed net operating income is employed at
this point as it would be the first received by a new purchaser of the
subject property. It is projected, then, that a current investor would
dispose of the subject property at the end of the projected holding period
for an amount equal to $2,707,500 or $45.12 per square foot of building
area.
================================================================================
-40-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
Transaction Costs - From the projected $2,707,500 reversion to an investor
in the subject property, we have deducted a total of $108,300 to account
for the various transaction costs associated with the sale of an asset of
this type. These costs consist of 4 percent of the total disposition price
of the subject property as an allowance for transfer taxes, professional
fees, and other miscellaneous expenses that the seller pays at final
closing. Deducting these transaction costs from the computed reversion
renders pre-tax net proceeds of sale equal to $2,599,200 to be received by
an investor in the subject property at the end of the holding period.
Discount Rate - In our valuation, we endeavored to reflect the most likely
actions of typical buyers and sellers in this market. We forecasted cash
flows and discounted them and the future property value at reversion to a
present value at various rates of return (yield rates) currently required
by investors for similar quality real property. The yield rate (internal
rate of return or IRR) is the single rate that discounts all future
benefits (cash flow and reversion) to an estimate of net present value.
Cushman & Wakefield Valuation Advisory Services periodically surveys
national real estate investors to determine their investment objectives.
Following is a brief review of internal rates of return, overall rates,
and income and expense growth rates considered acceptable by respondents.
The entire survey is included among the Addenda to this report.
======================================================================
AUTUMN 1996 WINTER INVESTOR SURVEY
FOR INDUSTRIAL BUILDINGS
======================================================================
GOING-IN TERMINAL IRR
----------------------------------------------------------------------
Low High Low High Low High
======================================================================
Mean 8.90% 9.40% 9.70% 10.7% 11.5% 11.5%
----------------------------------------------------------------------
Range 8.50% 9.50% 9.50% 11.0% 11.0% 12.0%
======================================================================
The wide range of investment parameters indicates that property risk and
yield are assessed to a particular investment property based on a variety
of variables. Risk is the primary determinant, and the risk variables
include whether current contract rents are significantly above or below
current market rents; the amount and timing of tenant rollovers; the risk
to lease-up the property and the strength of the market during the
lease-up period; the durability of the cash flow, and its ability to
increase with inflation along with the creditworthiness of the existing
tenancy. Risk is also dependent on investor demand for the property type;
the diversification of the metropolitan area; the property's location
within the local market; the supply and demand for the property type
within the market; and the effective age of the property.
================================================================================
-41-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
The internal rate of return and terminal capitalization rate selected for
this analysis were strongly influenced by our recent Investor Survey. We
realize that this type of survey reflects target rather than transactional
rates. Transactional rates are usually difficult to obtain in the
verification process and are actually only target rates of the buyer at
the time of sale. The property's performance will ultimately determine the
actual yield and capitalization rate at the time of sale after a specific
holding period. We have found that, in improving markets or with above
average properties, demand will be high and transactional rates may be
lower than target rates that are quoted in surveys. We have tried to
recognize this factor in our choice of these two rates for our cash flow
model.
Considering the locational attributes, physical traits and economic
characteristics of the subject property, we believe a discount rate
ranging from 11.0 percent to 12.0 percent would be appropriate for the
subject property in light of the investment criteria presented here. Thus,
we have discounted the projected future pre-tax cash flows to be received
by an investor in the subject property to a present value so as to yield
11.0 percent to 12.0 percent on capital at 25 basis point intervals over
the holding period. This discounting process is summarized as follows:
==========================================================================
Investment Summary
==========================================================================
Discount Rate Present Worth Unit Rate Overall Rate
==========================================================================
11.00% $1,669,000 $27.81/SF 7.98%
11.25% $1,635,000 $27.25/SF 8.15%
11.50% $1,601,000 $26.68/SF 8.32%
11.75% $1,569,000 $26.15/SF 8.49%
12.00% $1,537,000 $25.61/SF 8.66%
==========================================================================
Through such a sensitivity analysis, it can be seen that the present value
of the subject property varies from approximately $1,537,000 to
$1,669,000. Considering the fact that the subject property is vacant and
requires a tenant to be secured, we believe a discount rate which falls
toward the upper end of the range now required in the marketplace to be
appropriate in this case. Using an 11.75 percent internal rate of return,
our discounted cash flow model computes to a present worth of $1,569,000
which we round to $1,575,000,000 as an indication of market value for 180
Rittenhouse Circle via the Income Capitalization Approach.
This indication of value produces an implied "going-in" overall
capitalization rate of 8.46 percent based upon the initial year's net
operating income of $133,188. The implied "going-in" overall
capitalization rate is below the parameters set by the above investor's
survey due to the lost revenue incurred during lease up. Additionally,
based upon a market value of $1,575,000 and a projected future gross
reversionary value of approximately $2,707,500, a compound annual rate of
appreciation of 5.04 percent is computed which is high, but reflects the
subject's current vacant state and need for a new roof. Finally, with
regard to the composition of the internal rate of return employed here,
approximately 51 percent of the expected yield is from cash flows while
the balance is attributable to property reversion. This percentage falls
within the generally accepted relevant range of most current real estate
investors.
================================================================================
-42-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
155 Rittenhouse Circle
This property is a 22,500 square foot single story office building which
is now 100 percent occupied by one tenant. On the opposing page is a
presentation of the cash flows which an informed investor could reasonably
expect 155 Rittenhouse Circle to generate over a ten year time horizon. These
cash flows are based upon the following analysis:
Base Rental Income - The existing lease contract at the subject property
provides an average base rental income of $6.54 per square foot of
occupied space in the coming 12 months. A copy of the rent roll over the
subject property is included among the Addenda to this report.
Opposing the page which follows are comparable leases considered in
estimating the economic rental value for the 155 Rittenhouse Circle. As
gleaned from our rental survey, rates on space comparable to the subject
range from $7.25 per square foot up to $9.50 per square foot on a net
basis.
Comparable Rental #1 represents office/flex space that was situated within
the Bucks County Business Park in Middletown Township, Bucks County. This
space within a multi-tenanted facility contained 29,638 square feet with a
high degree of office space. This comparable rental was considered to be
situated within a superior business park; however, physically, the
comparable was regarded as equal. Economically, the space is considerably
smaller than the subject, warranting a slight negative adjustment. As a
result of our comparison, a negative adjustment was applied to this
comparable rental.
Comparable Rental #2 represents a modern one story office/flex building
within the Neshaminy Interplex in Bensalem Township, Bucks County. This
complex is one of the higher profile business parks in Southern Bucks
County that is regarded as superior as compared to the subject's location.
This space contained 10,000 square feet and was regarded as similar in
terms of physical condition. Economically, the space is smaller than the
subject, warranting a slight negative adjustment. As a result of our
comparison, an negative adjustment was applied to this comparable rental.
Comparable Rental #3 represents office/flex space that was situated within
the Bucks County Business Park in Middletown Township, Bucks County. This
space within a multi-tenanted facility contained 40,000 square feet with a
high degree of office space. This comparable rental was considered to be
situated within a superior business park; however, physically, the
comparable was regarded as equal. As a result of compatible's slightly
superior location, a negative adjustment was applied.
Comparable Rental #4 represents office/flex space that was situated
within the Bucks County Business Park in Middletown Township, Bucks
County. This space within a multi-tenanted facility contained 40,000
square feet with a high degree of office space. This comparable rental was
considered to be situated within a superior business park; however,
physically, the comparable was regarded as equal. As a result of
comparable's slightly superior location, a negative adjustment was
applied.
================================================================================
-43-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
In addition to analyzing actual lease transactions outside the property,
leasing brokers were interviewed in an effort to ascertain competitive
packages available in the marketplace today. Most brokers interviewed were
of the opinion that free rent was no longer being given in the local
marketplace. Tenant improvements, however, are a standard and felt to
range from $5.00 to $7.00 per square foot depending on the size of the
tenant and the duration of the lease.
After considering the most recent leasing achieved at the subject property
in conjunction with the rents now being paid for comparable space and
services in the competitive open market, it is our conclusion that the
current average economic rent for it is $7.00 per square foot on a net
basis.
Market rent is forecasted to increase by 3.5 percent throughout the
holding period. This forecast of income growth rates reflects typical
investor expectations as noted in the Cushman & Wakefield Investor Survey
which is among the Addenda to this report.
Expense Reimbursements - The tenants in a property like the subject are
responsible for a proportionate share of certain expenses incurred
annually in the operation and ownership of the investment. These expenses
include real estate taxes, insurance premiums and common area maintenance.
Future leases in the subject property are projected to be structured in a
similar fashion.
Allowance for Vacancy and Credit Loss - We have deducted 3 percent from
gross revenues as a global allowance for the non-payment of rent or
expenses by a lessee. Additionally, our analysis over time has
incorporated a lag vacancy allowance which provides for "down time"
between the expiration of an existing lease and the commencement of a new
lease. The weighted average lag vacancy utilized between lease expirations
in this report is three months as previously described.
Operating Expenses - Opposing the following page is a presentation of the
historical operating expenses for the subject building. Please note, given
the subject building historically has been leased on a triple net basis,
only those expenses incurred by the landlord are reflected. Additionally,
we were informed that the property was 100 percent vacant in 1994 and
part of 1995 which would explain the high expense ratio. given that the
structure of the lease is triple net, in addition to utilities, the tenant
is responsible for real estate taxes, insurance and common area
maintenance. The sum total for these expenses was calculated to be $55,893
or $2.48 per square foot of building area in the first year of the
investment. The expenses that are not reimbursed by the tenants include
management and a miscellaneous line item. In the initial year of the
investment, these costs were quantified to be $6,817 or $0.30 per square
foot of building area.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Other Non-Operating Expenses For this analysis, we have projected tenant
improvements at $7.00 for a new tenant and $2.00 for a renewal tenant.
Upon the expiration of a lease, it is our best estimate that there is a 65
percent probability of the existing tenant renewing their lease and a 35
percent probability that the existing tenant will vacate. Thus, a weighted
cost of tenant alterations is projected to be $3.75 per square foot in the
initial year of the investment holding period.
On a weighted average basis, leasing commissions are equal to 2.84 percent
of total effective base rental income over the term as well. Reserves for
replacements are stabilized at $0.10 per square foot of rentable building
area. Other non-operating expenses are forecasted to increase at an
average annual rate of 3.5 percent over the investment holding period.
Terminal Capitalization Rate - The residual cash flows annually generated
by the subject property comprise only the first part of the return which
an investor will receive. The second component of this investment return
is the pre-tax cash proceeds from the resale of the property at the end of
a projected investment holding period. A terminal capitalization rate was
used to estimate the market value of the property at the end of the
assumed investment holding period. We estimated an appropriate terminal
rate based on indicated rates in today's market. A premium was added to
today's rate to allow for the risk of unforeseen events or trends which
might affect our estimate of net operating income during the holding
period.
================================================================================
Single Story Office Complexes
Summary of Capitalization Rates
================================================================================
Sale Location Date Capitalization Rate
================================================================================
1 928 Jaymor Road
Bucks County, PA 8/96 12.37%
Upper Southampton
- --------------------------------------------------------------------------------
2 700-800 Business Center Drive
Horsham Township 9/96 10.73%
Montgomery County, PA
- --------------------------------------------------------------------------------
3 9001 Lincoln Drive
Evesham Township 5/97 11.46%
Burlington County, NJ
================================================================================
Terminal Capitalization Rate Selected 11.00%
================================================================================
Investors typically add 50 to 100 basis points to the "going-in" rate to
arrive at a terminal capitalization rate, according to Cushman &
Wakefield's periodic investor surveys. For this analysis, it is our
projection that the subject property would most likely be sold at the end
of the 10th year of the holding period for an amount equal to what would
be the next year's net operating income capitalized at an overall rate of
11.0 percent. The 11th year's computed net operating income is employed
at this point as it would be the first received by a new purchaser of the
subject property. It is projected, then, that a current investor would
dispose of the subject property at the end of the projected holding period
for an amount equal to $1,719,936 or $76.44 per square foot of building
area.
================================================================================
-45-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
======================================================================
AUTUMN 1996 INVESTOR SURVEY
FOR SUBURBAN OFFICE BUILDINGS
======================================================================
GOING-IN TERMINAL IRR
----------------------------------------------------------------------
Low High Low High Low High
======================================================================
Mean 8.80% 9.50% 9.30% 9.90% 11.2% 11.6%
----------------------------------------------------------------------
Range 8.00% 11.0% 8.00% 11.0% 10.0% 13.0%
======================================================================
Transaction Costs - From the projected $1,719,936 reversion to an investor
in the subject property, we have deducted a total of $68,797 to account
for the various transaction costs associated with the sale of an asset of
this type. These costs consist of 4 percent of the total disposition price
of the subject property as an allowance for transfer taxes, professional
fees, and other miscellaneous expenses that the seller pays at final
closing. Deducting these transaction costs from the computed reversion
renders pre-tax net proceeds of sale equal to $1,651,138 to be received by
an investor in the subject property at the end of the holding period.
Discount Rate - Considering the locational attributes, physical traits and
economic characteristics of the subject property, we believe a discount
rate ranging from 11.0 percent to 12.0 percent would be appropriate for
the subject property in light of the investment criteria previously
presented herein. Through such a sensitivity analysis, it can be seen that
the present value of the subject property varies from approximately
$1,221,000 to $1,300,000. This discounting process is summarized as
follows:
==========================================================================
Investment Summary
==========================================================================
Discount Rate Present Worth Unit Rate Overall Rate
==========================================================================
11.00% $1.300,000 $57.77/SF 10.33%
11.25% $1,279,000 $56.84/SF 10.50%
11.50% $1,259,000 $55.95/SF 10.66%
11.75% $1,240,000 $55.11/SF 10.83%
12.00% $1,221,000 $54.26/SF 11.00%
==========================================================================
Given the fact that there is approximately four years left on the existing
lease, , we believe a discount rate which falls toward the middle of the
range now required in the marketplace to be appropriate in this case.
Using an 11.50 percent internal rate of return, our discounted cash flow
model computes to a present worth of $1,259,000 which we round to
$1,250,000 for an indication of market value for 155 Rittenhouse Circle
via the Income Capitalization Approach. This indication of value produces
an implied "going-in" overall capitalization rate of 10.74 percent based
upon the initial year's net operating income of $134,278.
Additionally, based upon a market value of $1,250,000 and a projected
future gross reversionary value of approximately $1,719,936, a compound
annual rate of appreciation of 3.24 percent is computed. Finally, with
regard to the composition of the internal rate of return employed here,
approximately 53 percent of the expected yield is from cash flows while
the balance is attributable to property reversion. These percentages fall
within the generally accepted relevant range of most current real estate
investors.
================================================================================
-46-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Final Conclusions
The subject property consists of two separate parcels. Due to differences
among these, two sets of rental data were necessary for this economic analysis
of the real estate. Based upon these analyses, it is our conclusion that the
Income Capitalization Approach indicates a total market value of TWO MILLION
EIGHT HUNDRED TWENTY-FIVE THOUSAND DOLLARS ($2,825,000) for the entire subject
property. This total value is comprised as follows:
====================================================
Final Conclusions
====================================================
Property Indicated Market Value
====================================================
180 Rittenhouse Circle $1,575,000
155 Rittenhouse Circle $1,250,000
----------
TOTAL $2,825,000
====================================================
================================================================================
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
RECONCILIATION AND FINAL VALUE ESTIMATE
================================================================================
We have considered all of the traditional approaches to estimating market
value of commercial real estate in our analysis. Two of the three traditional
approaches were utilized, indicating the following values for the subject
property:
================================================================================
Property Sales Comparison Approach Income Capitalization Approach
================================================================================
180 Rittenhouse Circle $1,600,000 $1,575,000
155 Rittenhouse Circle $1,300,000 $1,250,000
- --------------------------------------------------------------------------------
TOTAL $2,900,000 $2,825,000
================================================================================
The three traditional methods of estimating the market value of commercial
real estate are not mutually exclusive approaches to deriving an estimate of
most probable selling price, but are inter-dependent methodologies, each relying
on components from at least one of the other approaches. Hence, the Cost
Approach requires extensive market data to derive estimates of depreciation and
to determine the value of land as if vacant. This approach may also require
income data in order to make adjustments for functional and economic
obsolescence. The Sales Comparison Approach requires application of methods from
the Income Capitalization Approach in order to make adjustments for differences
in income that have influenced the sale price. Consideration of market data is
also required for the Income Capitalization Approach in the selection and
application of equity, capitalization and discount rates, and estimation of
income and expenses. Consequently, it is our opinion that purchasers and
sellers, at least intuitively, consider components of all three approaches in
the process of negotiating an acceptable price for a particular property.
It is the Income Capitalization Approach, however, that is logically
considered the most appropriate technique for estimating the value of
income-producing property. Not only does this approach represent the most direct
and accurate simulation of market behavior, it is the method explicitly employed
by buyers and sellers in acquisition and disposition decisions. Therefore,
following the implied dictum of the market, we have used an approach based
primarily on projected income as the foundation for our valuation of the subject
property.
There are several additional reasons why the Sales Comparison Approach
does not form the basis of our value estimate for the subject property. The
quantity and quality of market information inhibits the use of the Sales
Comparison Approach. Inadequacy of information regarding gross and net income,
lease details and expenses of comparable sales often deters accurate and
relevant adjustments of unit price indicators. Comparison at a dollar per square
foot level precludes the analysis of those key factors which form the basis for
projections on which the purchase decision was made.
================================================================================
-48-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Reconciliation and Final Value Estimate
================================================================================
In light of the above, we are of the opinion that the market value in the
property, as of July 1, 1997, was:
TWO MILLION EIGHT HUNDRED TWENTY-FIVE DOLLARS
$2,825,000
This aggregate conclusion of value is allocated as follows:
================================================================================
Final Conclusions of Market Value
================================================================================
Property Concluded Value
================================================================================
180 Rittenhouse Circle $1,575,000
155 Rittenhouse Circle $1,250,000
--------------------------------
TOTAL $2,825,000
================================================================================
================================================================================
-49-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
ASSUMPTIONS AND LIMITING CONDITIONS
================================================================================
"Appraisal" means the appraisal report and opinion of value stated therein; or
the letter opinion of value, to which these Assumptions and Limiting Conditions
are annexed.
"Property" means the subject of the Appraisal.
"C&W" means Cushman & Wakefield, Inc. or its subsidiary which issued the
Appraisal.
"Appraiser(s)" means the employee(s) of C&W who prepared and signed the
Appraisal.
This appraisal is made subject to the following assumptions and limiting
conditions:
1. No opinion is intended to be expressed and no responsibility is assumed
for the legal description or for any matters which are legal in nature or
require legal expertise or specialized knowledge beyond that of a real
estate appraiser. Title to the Property is assumed to be good and
marketable and the Property is assumed to be free and clear of all liens
unless otherwise stated. No survey of the Property was undertaken.
2. The information contained in the Appraisal or upon which the Appraisal is
based has been gathered from sources the Appraiser assumes to be reliable
and accurate. Some of such information may have been provided by the owner
of the Property. Neither the Appraiser nor C&W shall be responsible for
the accuracy or completeness of such information, including the
correctness of estimates, opinions, dimensions, sketches, exhibits and
factual matters.
3. The opinion of value is only as of the date stated in the Appraisal.
Changes since that date in external and market factors or in the Property
itself can significantly affect property value.
4. The Appraisal is to be used in whole and not in part. No part of the
Appraisal shall be used in conjunction with any other appraisal.
Publication of the Appraisal or any portion thereof without the prior
written consent of C&W is prohibited. Except as may be otherwise stated in
the letter of engagement, the Appraisal may not be used by any person
other than the party to whom it is addressed or for purposes other than
that for which it was prepared. No part of the Appraisal shall be conveyed
to the public through advertising, or used in any sales or promotional
material without C&W's prior written consent. Reference to the Appraisal
Institute or to the MAI designation is prohibited.
5. Except as may be otherwise stated in the letter of engagement, the
Appraiser shall not be required to give testimony in any court or
administrative proceeding relating to the Property or the Appraisal.
================================================================================
-50-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Assumptions and Limiting Conditions
================================================================================
6. The Appraisal assumes (a) responsible ownership and competent management
of the Property; (b) there are no hidden or unapparent conditions of the
Property, subsoil or structures that render the Property more or less
valuable (no responsibility is assumed for such conditions or for
arranging for engineering studies that may be required to discover them);
(c) full compliance with all applicable federal, state and local zoning
and environmental regulations and laws, unless noncompliance is stated,
defined and considered in the Appraisal; and (d) all required licenses,
certificates of occupancy and other governmental consents have been or can
be obtained and renewed for any use on which the value estimate contained
in the Appraisal is based.
7. The physical condition of the improvements considered by the Appraisal is
based on visual inspection by the Appraiser or other person identified in
the Appraisal. C&W assumes no responsibility for the soundness of
structural members nor for the condition of mechanical equipment, plumbing
or electrical components.
8. The forecasted potential gross income referred to in the Appraisal may be
based on lease summaries provided by the owner or third parties. The
Appraiser has not reviewed lease documents and assumes no responsibility
for the authenticity or completeness of lease information provided by
others. C&W recommends that legal advice be obtained regarding the
interpretation of lease provisions and the contractual rights of parties.
9. The forecasts of income and expenses are not predictions of the future.
Rather, they are the Appraiser's best estimates of current market thinking
on future income and expenses. The Appraiser and C&W make no warranty or
representation that these forecasts will materialize. The real estate
market is constantly fluctuating and changing. It is not the Appraiser's
task to predict or in any way warrant the conditions of a future real
estate market; the Appraiser can only reflect what the investment
community, as of the date of the Appraisal, envisages for the future in
terms of rental rates, expenses, supply and demand.
10. Unless otherwise stated in the Appraisal, the existence of potentially
hazardous or toxic materials which may have been used in the construction
or maintenance of the improvements or may be located at or about the
Property was not considered in arriving at the opinion of value. These
materials (such as formaldehyde foam insulation, asbestos insulation and
other potentially hazardous materials) may adversely affect the value of
the Property. The Appraisers are not qualified to detect such substances.
C&W recommends that an environmental expert be employed to determine the
impact of these matters on the opinion of value.
Unless otherwise stated in the Appraisal, compliance with the requirements
of the Americans With Disabilities Act of 1990 (ADA) has not been
considered in arriving at the opinion of value. Failure to comply with the
requirements of the ADA may adversely affect the value of the property.
C&W recommends that an expert in this field be employed.
================================================================================
-51-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
CERTIFICATION OF APPRAISAL
================================================================================
We certify that, to the best of our knowledge and belief:
1. Joseph G. Vizza inspected the property. John B. Rush, MAI has reviewed and
approved the report and but did not inspect the property.
2. The statements of fact contained in this report are true and correct.
3. The reported analyses, opinions, and conclusions are limited only by the
reported assumptions and limiting conditions, and are our personal,
unbiased professional analyses, opinions, and conclusions.
4. We have no present or prospective interest in the property that is the
subject of this report, and we have no personal interest or bias with
respect to the parties involved.
5. Our compensation is not contingent upon the reporting of a predetermined
value or direction in value that favors the cause of the client, the
amount of the value estimate, the attainment of a stipulated result, or
the occurrence of a subsequent event. The appraisal assignment was not
based on a requested minimum valuation, a specific valuation or the
approval of a loan.
6. No one provided significant professional assistance to the persons signing
this report.
7. Our analyses, opinions, and conclusions were developed, and this report
has been prepared, in conformity with the Uniform Standards of
Professional Appraisal Practice of the Appraisal Foundation and the Code
of Professional Ethics and the Standards of Professional Appraisal
Practice of the Appraisal Institute.
8. The use of this report is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives.
9. As of the date of this report, John B. Rush has completed the requirements
of the continuing education program of the Appraisal Institute.
/s/ Joseph G. Vizza
- ------------------------------
Joseph G. Vizza
Valuation Advisory Services
Pennsylvania Certified
General Appraiser #GA-001242-L
/s/ John B. Rush
- ------------------------------
John B. Rush, MAI
Director
Valuation Advisory Services
Pennsylvania Certified
================================================================================
-52-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Certification of Appraisal
================================================================================
General Appraiser #GA-000331-L
================================================================================
-53-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
ADDENDA
================================================================================
INVESTOR SURVEY
APPRAISERS' QUALIFICATIONS
<PAGE>
[GRAPHIC OMITTED]
[REGIONAL MAP]
------------
Regional Map
------------
<PAGE>
[GRAPHIC OMITTED]
[NEIGHBORHOOD MAP]
----------------
Neighborhood Map
----------------
<PAGE>
[GRAPHIC OMITTED]
[SECTION OF BUCKS COUNTY TAX MAP]
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET OFFICE MARKET - URBAN/CBD
- ------------------------------------------------------------------------------------------------------------------------------------
9.5% 10.0% 10.0% 10.0% 11.5% 11.5% 3.0% 3.0% 3.0% 4.0% 10.0 10.0
9.5% 10.0% 10.0% 10.5% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
8.0% 9.0% 8.5% 8.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
13.0% 13.0% -- -- 14.0% 14.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
8.0% 8.0% 8.5% 8.5% 10.5% 10.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.3% 9.3% 10.3% 10.3% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 9.0% 8.5% 9.0% 10.5% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
10.0% 10.0% 10.0% 10.0% 12.5% 12.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
9.0% 9.0% 9.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.0% 9.0% 8.0% 9.0% 10.0% 12.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
Responses 11 11 10 10 11 11 11 11 11 11 11 11
Average (%) 9.2% 9.6% 9.2% 9.7% 11.7% 12.0% 3.3% 4.2% 3.4% 3.9% 8.5 9.5
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 9.0% 9.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 12.0% 12.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.5% 9.5% 10.5% 10.5% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 10.0% 10.0% 11.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
15.0% 15.0% -- -- 20.0% 20.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
9.0% 10.0% -- -- -- -- -- -- -- -- -- --
9.0% 10.0% 9.0% 10.0% 12.0% 13.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
Responses 8 8 6 6 7 7 7 7 7 7 7 7
Average (%) 10.0% 10.4% 9.7% 10.3% 12.8% 13.1% 3.3% 4.7% 3.5% 4.0% 8.3 9.7
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
8.0% 9.0% 9.5% 10.0% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
8.0% 10.0% 8.5% 9.0% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0 10.0 10.0
10.0% 10.0% 10.0% 10.0% 13.0% 13.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.5% 9.5% 10.5% 10.5% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
12.0% 12.0% -- -- 13.0% 13.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
-- -- -- -- 12.0% 13.0% 4.0% 4.0% 4.0% 4.0 5.0 10.0
Responses 8 8 7 7 9 9 9 9 9 9 9 9
Average (%) 9.4% 10.0% 9.6% 10.2% 12.8% 13.5% 3.5% 4.6% 3.5% 3.9% 7.6 8.9
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
12.0% 12.0% 12.0% 12.0% 15.0% 15.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.8% 9.8% 10.8% 10.8% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
14.0% 14.0% -- -- 20.0% 20.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 11.0% 14.0% 14.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 6 6 5 5 6 6 6 6 6 6 6 6
Average (%) 10.7% 11.0% 10.5% 11.2% 14.6% 15.3% 3.2% 4.6% 3.3% 3.9% 8.0 8.8
--------------------------------------------------------------------------------------------------------
Total Responses 33 33 28 28 33 33 33 33 33 33 33 33
Weighted Average (%) 9.8% 10.3% 9.7% 10.3% 13.0% 13.5% 3.3% 4.6% 3.4% 3.9% 8.1 9.2
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
8 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET OFFICE MARKET - SUBURBAN/NON - CBD
- ------------------------------------------------------------------------------------------------------------------------------------
9.5% 9.5% 10.5% 10.5% 10.5% 10.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.5% 8.5% 9.3% 9.3% 11.3% 11.3% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
11.0% 11.0% -- -- 12.0% 12.0% 5.0% 3.0% 3.0% 3.0% 5.0 7.0
8.5% 10.0% 9.0% 10.5% 11.0% 12.5% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
8.0% 10.0% 9.5% 10.0% 11.5% 12.0% 4.0% 6.0% 4.0% 4.0% 10.0 10.0
l0.0% 11.0% 10.5% 11.0% 12.0% 12.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.0% 9.0% 8.5% 8.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
8.0% 8.0% 8.5% 8.5% 10.5% 10.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.1% 9.1% 10.1% l0.1% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 10.0% 9.0% 10.5% 11.0% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
9.0% 9.0% 10.0% 10.0% 11.5% 11.5% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.0% 9.0% 9.0% 9.0% 12.0% 13.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.0% 10.0% -- -- -- -- -- -- -- -- --
8.0% 9.0% 8.0% 9.0% 10.0% 12.0% 5.0% 5.0% 4.0% 4.0% 5.0 10.0
Responses 16 16 14 14 15 15 15 15 15 15 15 15
Average (%) 8.8% 9.5% 9.3% 9.9% 11.2% 11.6% 3.5% 4.4% 3.6% 3.8% 8.9 9.7
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
9.5% 9.5% 10.5% 10.5% 10.5% 10.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.8% 8.8% 9.5% 9.5% 11.8% 11.8% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
12.0% 12.0% -- -- 18.0% 18.0% 5.0% 3.0% 3.0% 3.0% 5.0 7.0
10.5% 10.5% 10.0% 10.0% 11.0% 13.0% 2.0% 2.0% 2.0% 2.0% 10.0 10.0
8.0% 10.0% 9.5% 10.0% 11.0% 12.0% 4.0% 6.0% 4.0% 4.0% 10.0 10.0
9.0% 10.0% 9.0% 9.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.0% 11.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.4% 9.4% 10.4% 10.4% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 10.0% 14.0% 15.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
10.0% 11.0% -- -- -- -- -- -- -- -- -- --
10.0% 11.0% 10.0% 11.0% 12.0% 13.0% 5.0% 5.0% 4.0% 4.0% 5.0 10.0
Responses 13 13 11 11 12 12 12 12 12 12 12 12
Average (%) 9.5% 10.0% 9.8% 10.2% 12.0% 12.5% 3.4% 4.5% 3.4% 3.7% 8.6 9.6
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% -- -- 13.0% 13.0% 3.0% 3.0% 3.0% 3.0% 5.0 7.0
8.0% 10.0% 8.5% 9.0% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
10.0% 10.0% 10.0% 10.0% 12.5% 12.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.4% 9.4% 10.4% 10.4% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
6.0% 6.0% 9.0% 9.0% 17.0% 20.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.0% 10.0% -- -- -- -- -- -- -- -- -- --
12.0% 12.0% 10.0% 10.0% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 2.0 2.0
Responses 10 10 8 8 9 9 9 9 9 9 9 9
Average (%) 9.1% 9.7% 9.5% 10.0% 13.4% 14.3% 3.1% 4.6% 3.4% 3.8% 7.2 8.0
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% -- -- 18.0% 18.0% 3.0% 3.0% 3.0% 3.0% 5.0 7.0
10.5% 10.5% 10.0% 10.0% 11.0% 13.0% 2.0% 2.0% 2.0% 2.0% 10.0 10.0
11.0% 11.0% 11.0% 11.0% 14.0% 14.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.6% 9.6% 10.6% 10.6% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
6.0% 6.0% 10.0% 10.0% 20.0% 20.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.0% 10.0% -- -- -- -- -- -- -- -- -- --
12.0% 12.0% 10.0% 10.0% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 2.0 2.0
Responses 10 10 8 8 9 9 9 9 9 9 9 9
Average (%) 9.7% 10.0% 10.0% 10.5% 14.5% 15.2% 2.9% 4.3% 3.2% 3.6% 7.2 8.0
--------------------------------------------------------------------------------------------------------
Total Responses 49 49 41 41 45 45 45 45 45 45 45 45
Weighted Average (%) 9.3% 9.8% 9.7% 10.1% 12.8% 13.4% 3.2% 4.4% 3.4% 3.7% 8.0 8.8
--------------------------------------------------------------------------------------------------------
</TABLE>
AUTUMN 1996 9
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET INDUSTRIAL MARKET - WAREHOUSE/DISTRIBUTION
- ------------------------------------------------------------------------------------------------------------------------------------
9.2% 9.2% 9.5% 9.5% 10.0% 10.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.5% 8.5% 9.3% 9.3% 11.0% 11.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
8.5% 10.0% 9.5% 10.0% 11.0% 12.0% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
9.0% 9.0% 9.5% 9.5% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
8.0% 8.0% 8.5% 8.5% 10.5% 10.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 10.0% 9.0% 10.5% 11.0% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
9.0% 9.0% 10.0% 10.0% 11.0% 11.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
9.0% 9.0% 9.5% 9.5% 10.5% 10.5% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 10 10 10 10 10 10 10 10 10 10 10 10
Average (%) 8.8% 9.2% 9.4% 9.8% 10.9% 11.0% 2.9% 4.0% 3.3% 3.8% 9.8 10.1
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
9.2% 9.2% 9.5% 9.5% 10.0% 10.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.8% 8.8% 9.5% 9.5% 11.3% 11.3% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.5% 11.5% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
10.0% 10.0% 11.0% 11.0% 12.0% 12.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.8% 9.8% 10.3% 10.3% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 7 7 7 7 7 7 7 7 7 7 7 7
Average (%) 9.3% 9.5% 10.0% 10.2% 11.2% 11.2% 2.8% 4.3% 3.2% 3.9% 9.7 10.1
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 12.0% 12.0% 13.0% 13.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.8% 9.8% 10.3% 10.3% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 9.7% 9.9% 10.4% 10.8% 11.9% 11.9% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
12.0% 12.0% 13.0% 13.0% 14.0% 14.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 10.0% 10.5% 10.5% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.5% 10.5% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 10.1% 10.4% 10.9% 11.3% 12.4% 12.4% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
--------------------------------------------------------------------------------------------------------
Total Responses 25 25 25 25 25 25 25 25 25 25 25 25
Weighted Average (%) 9.5% 9.7% 10.2% 10.5% 11.6% 11.6% 2.6% 4.5% 3.2% 4.0% 9.6 10.2
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
10 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET INDUSTRIAL MARKET - BUSINESS PARKS, OTHER INDUSTRIAL & MANUFACTURING
- ------------------------------------------------------------------------------------------------------------------------------------
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 10.0 10.0
9.0% 9.0% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 3 3 4 4 4 4 4 4 4 4
Average (%) 8.9% 9.4% 9.7% 10.7% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.8 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.5% 10.5% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 10.0 10.0
10.0% 10.0% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 3 3 4 4 4 4 4 4 4 4
Average (%) 9.3% 9.8% 9.8% 10.8% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.8 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.5% 10.5% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 5 5 4 4 5 5 5 5 5 5 5 5
Average (%) 9.4% 10.0% 9.9% 10.9% 12.4% 13.2% 3.4% 4.0% 3.2% 3.8% 8.2 9.4
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.5% 10.5% 11.0% 11.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.5% 10.5% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 5 5 4 4 5 5 5 5 5 5 5 5
Average (%) 9.6% 10.2% 10.0% 11.0% 12.4% 13.2% 3.4% 4.0% 3.2% 3.8% 8.2 9.4
--------------------------------------------------------------------------------------------------------
Total Responses 18 18 14 14 18 18 18 18 18 18 18 18
Weighted Average(%) 9.3% 9.8% 9.8% 10.8% 12.0% 12.4% 3.3% 4.0% 3.2% 3.9% 8.5 9.8
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
AUTUMN 1996 11
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET RETAIL MARKET - NEIGHBORHOOD & COMMUNITY CENTERS
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 10.5% 9.5% 10.5% 11.0% 12.5% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
9.5% 10.0% 10.0% 10.0% 12.5% 12.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
10.0% 10.0% 10.5% 10.5% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
10.3% 10.3% 10.8% 10.8% 13.0% 13.0% 2.0% 2.0% 4.0% 4.0% 7.0 7.0
9.0% 9.0% 10.0% 10.0% 10.0% 10.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
9.8% 9.8% 10.3% 10.3% 11.5% 11.5% 3.8% 4.0% 4.0% 4.0% 10.0 10.0
9.0% 10.0% -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
9.0% 9.0% 9.5% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
Responses 9 9 8 8 8 8 9 9 9 9 9 9
Average (%) 9.3% 9.8% 10.0% 10.4% 11.9% 12.1% 2.9% 3.7% 3.4% 3.9% 8.9 9.4
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
10.8% 10.8% 11.3% 11.3% 14.0% 14.0% 2.0% 2.0% 4.0% 4.0% 7.0 7.0
10.0% 10.0% 11.0% 11.0% 12.0% 12.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
9.0% 10.0% -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 11.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.5% 10.5% -- -- -- -- -- -- -- -- -- --
Responses 6 6 4 4 4 4 5 5 5 5 5 5
Average (%) 9.5% 10.0% 10.4% 11.1% 12.3% 12.3% 2.3% 3.8% 3.3% 4.2% 9.0 9.6
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 12.0% 12.0% 13.0% 13.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 10.0 10.0
9.0% 10.0% -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 9.5% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.0% 10.0% -- -- -- -- -- -- -- --
11.0% 11.0% 9.5% 9.5% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 3.0 3.0
Responses 7 7 5 5 5 5 6 6 6 6 6 6
Average (%) 9.7% 10.3% 10.1% 10.7% 13.8% 14.6% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
13.0% 13.0% 14.0% 14.0% 14.0% 14.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 10.0 10.0
9.0% 10.0% -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 11.0% 14.0% 14.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
11.0% 11.0% 10.5% 10.5% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 3.0 3.0
Responses 6 6 5 5 5 5 6 6 6 6 6 6
Average (%) 10.3% 10.8% 10.8% 11.5% 14.2% 15.0% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
--------------------------------------------------------------------------------------------------------
Total Responses 28 28 22 22 22 22 26 26 26 26 26 26
Weighted Average (%) 9.7% 10.2% 10.3% 10.9% 13.0% 13.5% 2.7% 3.9% 3.2% 4.0% 8.7 9.3
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
12 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET RETAIL MARKET - POWER CENTERS & "BIG BOX"
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 9.0% 9.5% 9.5% 11.0% 11.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
10.0% 10.0% 9.5% 9.5% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
10.5% 10.5% 10.5% 10.5% 11.0% 12.0% 2.0% 2.0% 3.0% 3.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.4% 11.4% 3.8% 3.8% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 9.5% 10.0% 11.0% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
9.3% 9.3% 9.5% 10.0% 10.5% 10.5% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.0% 9.0% -- -- -- -- -- -- -- -- -- --
9.0% 9.5% 9.5% 10.0% 11.0% 11.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
Responses 9 9 8 8 8 8 8 8 8 8 8 8
Average (%) 9.4% 9.5% 9.7% 10.1% 11.5% 11.7% 3.3% 3.5% 3.4% 3.7% 9.1 10.1
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
10.8% 10.8% 10.8% 10.8% 11.0% 12.0% 2.0% 3.0% 3.0% 3.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 3 3 3 3 3 3 3 3 3 3 3 3
Average (%) 9.8% 10.1% 10.1% 10.6% 11.0% 11.3% 2.8% 3.7% 3.2% 3.7% 9.3 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.8% 10.8% 10.8% 10.8% 12.0% 12.0% 2.0% 2.0% 3.0% 3.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 3 3 3 3 3 3 3 3 3 3 3 3
Average (%) 9.6% 9.9% 10.1% 10.6% 12.0% 12.0% 2.8% 3.3% 3.2% 3.7% 9.3 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 10.8% 10.8% 12.0% 12.0% 2.0% 2.0% 3.0% 3.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
-- -- -- -- 15.0% 15.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 2 2 2 2 3 3 3 3 3 3 3 3
Average (%) 9.8% 10.3% 10.1% 10.9% 12.7% 12.7% 2.8% 3.3% 3.2% 3.7% 9.3 10.3
--------------------------------------------------------------------------------------------------------
Total Responses 17 17 16 16 17 17 17 17 17 17 17 17
Weighted Average (%) 9.6% 9.9% 10.0% 10.5% 11.8% 11.9% 2.9% 3.5% 3.2% 3.7% 9.3 10.3
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
AUTUMN 1996 13
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET RETAIL MARKET - REGIONAL MALLS
- ------------------------------------------------------------------------------------------------------------------------------------
7.5% 7.5% 8.0% 8.0% 11.3% 11.3% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.0% 9.0% 9.0% 9.0% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
7.5% 7.5% 7.8% 7.8% 12.0% 12.0% 1.5% 2.0% 3.0% 3.0% 10.0 10.0
7.0% 8.0% 8.0% 8.0% 10.5% 11.5% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
9.0% -- -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.0% 8.0% 9.0% 10.5% 11.0% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
8.0% 8.0% 8.5% 8.5% 11.0% 11.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
7.8% 8.0% 8.3% 8.5% 11.0% 12.0% 2.5% 3.0% 2.5% 3.0% 10.0 10.0
7.0% 8.0% 7.0% 8.0% 10.0% 11.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
Responses 10 9 9 9 9 9 10 10 10 10 10 10
Average (%) 7.9% 8.2% 8.2% 8.6% 11.4% 11.8% 3.0% 3.6% 3.5% 3.8% 9.1 9.6
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 10.0% 10.0% 17.0% 17.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
9.0% 9.0% 9.0% 9.0% 13.5% 13.5% 2.0% 2.0% 4.0% 4.0% 7.0 7.0
9.0% 10.0% 10.0% 10.0% 12.0% 14.0% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
10.0% -- -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
Responses 5 4 4 4 4 4 5 5 5 5 5 5
Average (%) 9.3% 9.6% 9.6% 10.0% 13.4% 13.9% 2.5% 3.4% 3.7% 4.0% 8.6 8.6
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 10.0% 10.0% 18.0% 18.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
11.0% 11.0% 11.0% 11.0% 13.0% 14.0% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
9.0% -- -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.5% 8.5% 9.0% 11.5% 12.5% 2.5% 3.0% 2.5% 3.0% 10.0 10.0
Responses 5 4 4 4 4 4 5 5 5 5 5 5
Average (%) 9.3% 9.8% 9.8% 10.3% 13.4% 13.9% 2.6% 3.6% 3.4% 3.8% 9.2 9.2
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 11.0% 11.0% 20.0% 20.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
12.5% 12.5% 12.0% 12.0% 14.0% 15.0% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
10.0% -- -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 9.0% 9.3% 9.8% 12.0% 13.0% 2.5% 3.0% 2.5% 3.0% 10.0 10.0
13.0% 13.0% 11.0% 11.0% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 3.0 3.0
Responses 6 5 5 5 5 5 6 6 6 6 6 6
Average (%) 10.6% 11.0% 10.6% 11.0% 14.6% 15.0% 2.7% 3.5% 3.3% 3.7% 8.2 8.2
--------------------------------------------------------------------------------------------------------
Total Responses 26 22 22 22 22 22 26 26 26 26 26 26
Weighted Average (%) 9.3% 9.6% 9.5% 10.0% 13.2% 13.6% 2.7% 3.5% 3.5% 3.8% 8.8 8.9
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
14 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET RESIDENTIAL - APARTMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
8.5% 10.0% 9.0% 10.5% -- -- -- -- 3.5% 3.5% 1.0 1.0
8.5% 9.0% 9.0% 9.0% 11.0% 11.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
9.8% 9.8% 10.0% 10.0% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
8.3% 9.0% 9.0% 9.5% 10.5% 11.5% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
7.5% 8.5% 8.0% 9.0% 10.0% 11.0% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.8% 8.8% 9.0% 9.0% 11.3% 11.3% 3.8% 4.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 9.0% 9.0% 9.5% 10.0% 11.5% 3.0% 4.0% 3.0% 3.0% 10.0 10.0
8.5% 9.0% 8.5% 9.0% -- -- 3.0% 3.5% 3.0% 3.5% 10.0 10.0
8.8% 9.0% 9.0% 9.5% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 10 10 10 10 8 8 9 9 10 l0 l0 10
Average (%) 8.6% 9.2% 9.0% 9.6% 11.2% 11.7% 2.9% 3.9% 3.3% 3.8% 8.4 8.9
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 9.5% 9.5% 10.0% 11.0% 12.0% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
9.0% 10.0% 10.0% 10.0% 11.0% 12.5% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.0% 10.0% 10.0% 10.5% 10.5% 12.0% 3.0% 4.0% 3.0% 3.0% 10.0 10.0
9.0% 9.5% 9.5% 10.0% 11.5% 11.5% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 5 5 5 5 5 5 5 5 5 5 5 5
Average (%) 8.9% 9.7% 9.7% 10.3% 11.0% 11.8% 2.5% 4.2% 3.1% 4.0% 9.6 10.2
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 11.0% 11.0% 11.0% 12.5% 13.5% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.0% 9.0% 9.0% 11.0% 12.0% 4.0% 6.0% 3.0% 3.0% 3.0 5.0
9.0% 9.0% 9.5% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 8.9% 9.4% 9.8% 10.3% 11.6% 12.1% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
12.0% 13.0% 13.0% 13.0% 13.0% 15.0% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.0% 10.0% 10.0% 11.0% 13.0% 4.0% 6.0% 3.0% 3.0% 3.0 5.0
9.5% 10.0% 10.0% 11.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 9.5% 10.1% 10.6% 11.3% 12.0% 13.0% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
Total Responses 23 23 23 23 21 21 22 22 23 23 23 23
Weighted Average (%) 9.0% 9.6% 9.8% 10.4% 11.5% 12.1% 2.7% 4.4% 3.2% 4.0% 8.4 9.3
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical
issues
AUTUMN 1996 15
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICE SUMMARY OF WEIGHTED AVERAGE
- ------------------------------------------------------------------------------------------------------------------------------------
Urban/CBD 9.8% 10.3% 9.7% 10.3% 13.0% 13.5% 3.3% 4.6% 3.4% 3.9% 8.1 9.2
Class A - Leased Asset 9.2% 9.6% 9.2% 9.7% 11.7% 12.0% 3.3% 4.2% 3.4% 3.9% 8.5 9.5
Class B - Leased Asset 10.0% 10.4% 9.7% 10.3% 12.8% 13.1% 3.3% 4.7% 3.5% 4.0% 8.3 9.7
Class A - Value Added 9.4% 10.0% 9.6% 10.2% 12.8% 13.5% 3.5% 4.6% 3.5% 3.9 7.6 8.9
Class B - Value Added 10.7% 11.0% 10.5% 11.2% 14.6% 15.3% 3.2% 4.8% 3.3% 3.9% 8.0 8.8
Suburban 9.3% 9.8% 9.7% 10.1% 12.8% 13.4% 3.2% 4.4% 3.4% 3.7% 8.0 8.8
Class A - Leased Asset 8.8% 9.5% 9.3% 9.9% 11.2% 11.6% 3.5% 4.4% 3.6% 3.8% 8.9 9.7
Class B - Leased Asset 9.5% 10.0% 9.8% 10.2% 12.0% 12.5% 3.4% 4.5% 3.4% 3.7% 8.6 9.6
Class A - Value Added 9.1% 9.7% 9.5% 10.0% 13.4% 14.3% 3.1% 4.6% 3.4% 3.8% 7.2 8.0
Class B - Value Added 9.7% 10.0% 10.0% 10.5% 14.5% 15.2% 2.9% 4.3% 3.2% 3.6% 7.2 8.0
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL
- ------------------------------------------------------------------------------------------------------------------------------------
Warehouse/Distribution 9.5% 9.7% 10.2% 10.5% 11.6% 11.6% 2.6% 4.5% 3.2% 4.0% 9.6 10.2
Class A - Leased Asset 8.8% 9.2% 9.4% 9.8% 10.9% 11.0% 2.9% 4.0% 3.3% 3.8% 9.8 10.1
Class B - Leased Asset 9.3% 9.5% 10.0% 10.2% 11.2% 11.2% 2.8% 4.3% 3.2% 3.9% 9.7 10.1
Class A - Value Added 9.7% 9.9% 10.4% 10.8% 11.9% 11.9% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
Class 8 - Value Added 10.1% 10.4% 10.9% 11.3% 12.4% 12.4% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
Business Parks 9.4% 9.9% 10.0% 10.8% 12.3% 12.9% 3.4% 4.0% 3.2% 3.8% 8.3 9.6
Class A - Leased Asset 9.0% 9.5% 9.8% 10.5% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
Class B - Leased Asset 9.3% 9.8% 10.0% 10.8% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
Class A - Value Added 9.5% 10.2% 10.0% 10.8% 13.0% 14.3% 3.5% 4.0% 3.2% 3.7% 7.7 8.7
Class B - Value Added 9.7% 10.3% 10.2% 11.0% 13.0% 14.3% 3.5% 4.0% 3.2% 3.7% 7.7 8.7
0ther Industrial/
Manufacturing 9.2% 9.7% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.8 10.3
Class A - Leased Asset 8.8% 9.3% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.5 10.0
Class B - Leased Asset 9.3% 9.8% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.5 10.0
Class A - Value Added 9.3% 9.8% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
Class B - Value Added 9.5% 10.0% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
- ------------------------------------------------------------------------------------------------------------------------------------
RETAIL
- ------------------------------------------------------------------------------------------------------------------------------------
Neighborhood & Community
Centers 9.7% 10.2% 10.3% 10.9% 13.0% 13.5% 2.7% 3.9% 3.2% 4.0% 8.7 9.3
Class A - Leased Asset 9.3% 9.8% 10.0% 10.4% 11.9% 12.1% 2.9% 3.7% 3.4% 3.9% 8.9 9.4
Class B - Leased Asset 9.5% 10.0% 10.4% 11.1% 12.3% 12.3% 2.3% 3.8% 3.3% 4.2% 9.0 9.6
Class A - Value Added 9.7% 10.3% 10.1% 10.7% 13.8% 14.6% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
Class B - Value Added 10.3% 10.8% 10.8% 11.5% 14.2% 15.0% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
Power Center & "Big Box" 9.6% 9.9% 10.0% 10.5% 11.8% 11.9% 2.9% 3.5% 3.2% 3.7% 9.3 10.3
Class A - Leased Asset 9.4% 9.5% 9.7% 10.1% 11.5% 11.7% 3.3% 3.5% 3.4% 3.7% 9.1 10.1
Class B - Leased Asset 9.8% 10.1% 10.1% 10.6% 11.0% 11.3% 2.8% 3.7% 3.2% 3.7% 9.3 10.3
Class A - Value Added 9.6% 9.9% 10.1% 10.6% 12.0% 12.0% 2.8% 3.3% 3.2% 3.7% 9.3 10.3
Class B - Value Added 9.8% 10.3% 10.1% 10.9% 12.7% 12.7% 2.8% 3.3 3.2% 3.7% 9.3 10.3
Regional Malls 9.3% 9.6% 9.5% 10.0% 13.2% 13.6% 2.7% 3.5% 3.5% 3.8% 8.8 8.9
Class A - Leased Asset 7.9% 8.2% 8.2% 8.6% 11.4% 11.8% 3.0% 3.6% 3.5% 3.8% 9.1 9.6
Class B - Leased Asset 9.3% 9.6% 9.6% 10.0% 13.4% 13.9% 2.5% 3.4% 3.7% 4.0% 8.6 8.6
Class A - Value Added 9.3% 9.8% 9.8% 10.3% 13.4% 13.9% 2.6% 3.6% 3.4% 3.8% 9.2 9.2
Class B - Value Added 10.6% 11.0% 10.6% 11.0% 14.6% 15.0% 2.7% 3.5% 3.3% 3.7% 8.2 8.2
Specialty Retail 9.5% 10.5% 10.8% 11.5% 12.0% 12.6 1.9% 4.0% 3.3% 4.0% 10.0 10.5
Class A - Leased Asset 8.2% 9.0% 8.8% 9.7% 10.7% 11.3% 2.5% 4.0% 3.5% 4.0% 8.7 10.3
Class B - Leased Asset 9.3% 10.3% 10.8% 11.5% 11.5% 12.5% 1.8% 4.0% 3.3% 4.0% 10.5 10.5
Class A - Value Added 10.0% 11.0% 11.3% 12.0% 12.5% 13.0% 1.8% 4.0% 3.3% 4.0% 10.5 10.5
Class B - Value Added 10.8% 11.8% 12.3% 13.0% 13.5% 13.5% 1.8% 4.0% 3.3% 4.0% 10.5 10.5
- ------------------------------------------------------------------------------------------------------------------------------------
RESIDENTIAL
- ------------------------------------------------------------------------------------------------------------------------------------
Apartments 9.0% 9.6% 9.8% 10.4% 11.5% 12.1% 2.7% 4.4% 3.2% 4.0% 8.4 9.3
Class A - Leased Asset 8.6% 9.2% 9.0% 9.6% 11.2% 11.7% 2.9% 3.9% 3.3% 3.8% 8.4 8.9
Class B - Leased Asset 8.9% 9.7% 9.7% 10.3% 11.0% 11.8% 2.5% 4.2% 3.1% 4.0% 9.6 10.2
Class A - Value Added 8.9% 9.4% 9.8% 10.3% 11.6% 12.1% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
Class B - Value Added 9.5% 10.1% 10.6% 11.3% 12.0% 13.0% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
</TABLE>
16 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
Single-Tenant NNN Leased Properties
(Excludes "Bondable" Leases)
Minimum No. Going-In Cap Rate Internal Rate of Return
of Years Low High Low High
Investment Grade Tenant
- --------------------------------------------------------------------------------
4.0 9.0% 9.0% 10.0% 12.0%
----------------------------------------------------------
10.0 8.0 9.0 10.5 11.5
----------------------------------------------------------
5.0 10.5 10.5 13.0 13.0
----------------------------------------------------------
10.0 9.0 10.5 13.0 15.0
----------------------------------------------------------
10.0 8.5 9.0 10.5 12.0
----------------------------------------------------------
10.0 9.5 10.0 10.5 11.5
----------------------------------------------------------
10.0 8.5 11.0 10.8 12.0
----------------------------------------------------------
10.0 9.5 9.5 11.0 11.0
----------------------------------------------------------
20.0 9.0 9.0 N/A N/A
----------------------------------------------------------
10.0 8.0 10.0 N/A N/A
- --------------------------------------------------------------------------------
Responses 10.0 10.0 10.0 8.0 8.0
Average 9.9 9.0% 9.8% 11.2% 12.3%
Non-Investment Grade
Tenant
- --------------------------------------------------------------------------------
4.0 9.5% 9.5% 10.5% 13.0%
----------------------------------------------------------
10.0 9.0 10.0 11.5 12.5
----------------------------------------------------------
5.0 13.0 13.0 15.0 15.0
----------------------------------------------------------
10.0 10.0 12.0 17.0 20.0
----------------------------------------------------------
10.0 9.0 10.0 11.0 13.0
----------------------------------------------------------
10.0 11.0 12.0 13.0 15.0
----------------------------------------------------------
10.0 10.5 10.5 13.0 13.0
----------------------------------------------------------
20.0 11.0 11.0 N/A N/A
----------------------------------------------------------
10.0 10.0 12.5 N/A N/A
----------------------------------------------------------
Responses 9.0 9.0 9.0 7.0 7.0
Average 9.9 10.3% 11.2% 13.0% 14.5%
AUTUMN 1996 17
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES BLENDED INTERNAL EQUITY INTERNAL GROWTH RATES TYPICAL PROJECTION MANAGEMENT RESERVES FOR
GOING-IN TERMINAL RATE OF RETURN RATE OF RETURN INCOME EXPENSES PERIOD (YEARS) FEES* REPLACEMENT*
----------------------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
LUXURY
- ------------------------------------------------------------------------------------------------------------------------------------
8.0% 8.0% 10.0% 10.0% 18.0% 18.0% 25.0% 25.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 5.0% 5.0%
7.0% 7.0% 10.0% 10.0% 15.0% 15.0% 20.0% 20.0% 7.0% 7.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
6.0% 9.5% 10.0% 10.0% 12.0% 15.0% 15.0% 18.0% 3.0% 3.0% 3.0% 3.0% 5.0 5.0 2.0% 4.0% 4.0% 4.0%
8.0% 11.0% 8.5% 12.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
9.5% 9.5% 10.5% 10.5% 15.0% 15.0% 18.0% 18.0% 4.5% 4.5% 4.0% 4.0% 10.0 10.0 3.5% 3.5% 4.0% 4.0%
-- -- 11.0% 13.0% 15.0% 15.0% 18.0% 18.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0 3.0% 3.0% 4.0% 4.0%
6.0% 8.0% 10.0% 12.0% 13.0% 14.0% 20.0% 22.0% 3.0% 4.0% 3.0% 4.0% 5.0 5.0 2.0% 3.0% 4.0% 5.0%
8.0% 12.0% 8.0% 10.0% 15.0% 15.0% 20.0% 20.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0 3.0% 4.0% 4.0% 5.0%
Responses 7 7 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8
Average (%) 7.5% 9.3% 9.8% 10.9% 14.5% 15.3% 19.5% 20.1% 4.1% 4.3% 3.8% 3.9% 6.5 6.9 2.8% 3.3% 4.1% 4.4%
- ------------------------------------------------------------------------------------------------------------------------------------
FIRST CLASS
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 9.0% 11.0% 11.0% 12.0% 12.0% 20.0% 20.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
10.0% 10.0% 10.0% 10.0% -- -- 13.0% 13.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0 3.0% 3.0% 4.0% 5.0%
9.0% 9.0% 11.0% 11.0% 14.0% 14.0% 18.0% 18.0% 6.0% 6.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
9.5% 11.0% 11.0% 11.0% 15.0% 20.0% 18.0% 22.0% 3.0% 3.0% 2.0% 2.0% 5.0 5.0 2.0% 3.0% 4.0% 4.0%
10.0% 12.0% 10.5% 13.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
7.0% 9.0% 10.0% 11.0% 11.5% 12.0% 14.0% 16.0% 4.0% 5.0% 3.0% 4.0% 5.0 5.0 2.5% 2.5% 5.0% 5.0%
9.5% 9.5% 10.5% 10.5% 15.0% 15.0% 18.0% 18.0% 4.5% 4.5% 4.0% 4.0% 10.0 10.0 3.5% 3.5% 4.0% 4.0%
9.0% 9.0% 10.5% 10.5% 21.0% 21.0% 14.0% 14.0% 4.0% 4.0% 3.0% 3.0% 7.0 7.0 3.0% 3.0% 4.0% 4.0%
10.0% 12.0% 11.0% 11.0% -- -- -- -- 3.5% 3.5% 3.5% 3.5% 5.0 10.0 2.0% 3.0% 4.0% 4.0%
10.0% 10.0% 9.0% 9.5% 19.0% 19.0% 15.0% 15.0% 8.0% 8.0% 6.0% 6.0% -- -- 2.5% 2.5% 4.0% 4.0%
10.0% 13.0% 12.0% 13.0% 25.0% 25.0% 20.0% 20.0% 3.5% 4.0% 3.5% 4.0% 5.0 5.0 3.5% 3.5% 4.0% 4.0%
10.5% 10.5% 10.5% 10.5% 13.5% 13.5% -- -- 3.5% 3.5% 3.5% 3.5% 10.0 10.0 3.0% 3.0% 5.0% 5.0%
8.0% 12.0% 8.0% 10.0% 15.0% 15.0% 20.0% 20.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0 3.0% 4.0% 4.0% 5.0%
Responses 13 13 13 13 11 11 11 11 13 13 13 13 12 12 13 13 13 13
Average (%) 9.3% 10.5% 10.4% 10.9% 15.8% 16.5% 17.3% 17.8% 4.2% 4.3% 3.7% 3.8% 6.6 7.3 2.8% 3.1% 4.2% 4.3%
- ------------------------------------------------------------------------------------------------------------------------------------
MID-RATE
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 12.0% 12.0% 15.0% 15.0% 18.0% 18.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
11.0% 11.0% 11.0% 11.0% 13.0% 13.0% 17.0% 17.0% 6.0% 6.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
9.5% 11.0% 11.0% 11.0% 15.0% 18.0% 17.0% 20.0% 3.0% 3.0% 2.0% 2.0% 5.0 5.0 2.0% 3.0% 4.0% 4.0%
10.0% 12.0% 10.5% 13.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
9.5% 9.5% 10.5% 10.5% 15.0% 15.0% 18.0% 18.0% 4.5% 4.5% 4.0% 4.0% 10.0 10.0 3.5% 3.5% 4.0% 4.0%
Responses 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5
Average (%) 10.0% 10.7% 11.0% 11.5% 14.2% 15.2% 18.0% 18.6% 4.2% 4.2% 3.7% 3.7% 6.4 7.0 2.9% 3.1% 4.0% 4.0%
----------------------------------------------------------------------------------------------------------------------
Total
Responses 25 25 26 26 24 24 24 24 26 26 26 26 25 25 26 26 26 26
Weighted
Average (%) 8.9% 10.1% 10.4% 11.1% 14.8% 15.7% 18.3% 18.8% 4.2% 4.3% 3.7% 3.8% 6.5 7.0 2.9% 3.2% 4.1% 4.2%
----------------------------------------------------------------------------------------------------------------------
</TABLE>
*as percent of total revenues
18 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES BLENDED INTERNAL EQUITY INTERNAL GROWTH RATES TYPICAL PROJECTION MANAGEMENT RESERVES FOR
GOING-IN TERMINAL RATE OF RETURN RATE OF RETURN INCOME EXPENSES PERIOD (YEARS) FEES* REPLACEMENT*
----------------------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
MID-RATE HOTEL - LIMITED SERVICE
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 12.0% 12.0% 15.0% 15.0% 15.0% 15.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
12.0% 12.0% 12.0% 12.0% 13.0% 13.0% 17.0% 17.0% 3.0% 3.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
8.0% 10.0% 10.0% 10.0% 12.0% 15.0% 14.0% 16.0% 3.0% 3.0% 2.0% 2.0% 5.0 5.0 3.0% 4.0% 4.0% 5.0%
11.0% 13.0% 11.5% 14.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
11.0% 11.0% 11.8% 11.8% 16.0% 16.0% 19.0% 19.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0 4.0% 4.0% 4.5% 4.5%
10.0% 13.0% 12.0% 13.0% 25.0% 25.0% 20.0% 20.0% 3.5% 4.0% 3.5% 4.0% 5.0 5.0 4.0% 4.0% 5.0% 5.0%
Responses 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6
Average (%) 10.3% 11.5% 11.5% 12.1% 15.7% 16.5% 17.5% 17.8% 3.5% 3.6% 3.7% 3.8% 6.2 6.7 3.3% 3.5% 4.3% 4.4%
- ------------------------------------------------------------------------------------------------------------------------------------
ECONOMY
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 12.0% 12.0% 15.0% 15.0% 15.0% 15.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
13.0% 13.0% 13.0% 13.0% 13.0% 13.0% 17.0% 17.0% 3.0% 3.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
9.0% 11.0% 10.0% 10.0% 12.0% 15.0% 14.0% 16.0% 3.0% 3.0% 3.0% 3.0% 5.0 5.0 4.0% 5.0% 5.0% 5.0%
11.0% 13.0% 11.5% 14.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
11.0% 11.0% 11.8% 11.8% 16.0% 16.0% 19.0% 19.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0 4.0% 4.0% 4.5% 4.5%
Responses 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5
Average (%) 10.8% 11.6% 11.7% 12.2% 13.8% 14.8% 17.0% 17.4% 3.5% 3.5% 3.9% 3.9% 6.4 7.0 3.4% 3.6% 4.3% 4.3%
Total
Responses 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11
Weighted
Average(%) 10.6% 11.6% 11.6% 12.1% 14.7% 15.7% 17.3% 17.6% 3.5% 3.5% 3.8% 3.8% 6.3 6.8 3.4% 3.6% 4.3% 4.4%
</TABLE>
*as percent of total revenues
AUTUMN 1996 19
<PAGE>
QUALIFICATIONS OF JOSEPH G. VIZZA
================================================================================
Professional Affiliations
Candidate, Appraisal Institute (MAI Candidate #M93-3017)
Delaware Certified General Appraiser (Certificate #X10000284
New Jersey Certified General Appraiser (Certificate #RG01426
Pennsylvania Certified General Appraiser (Certificate #GA-001242-L)
Pennsylvania Real Estate Salesperson (License #RS-198856-L)
Real Estate Experience
Staff Appraiser, Cushman & Wakefield Valuation Advisory Services,
specializing in commercial and industrial real estate appraisal and
investment counseling. Cushman & Wakefield is an international full
service real estate organization and a Rockefeller Group Company.
Fee Appraiser, Louis A. Iatarola Realty Appraisal Group of Philadelphia,
Pennsylvania, a full service appraisal and consulting firm, specializing
in commercial and industrial appraisal assignments from May, 1990 to
November, 1996.
Formal Education
Temple University, Philadelphia, Pennsylvania
May, 1992, Bachelor of Science, Real Estate
Appraisal Institute, Chicago, Illinois
Real Estate Appraisal Principals - Course 1A-1
Advanced Capitalization - Course 550
Basic Capitalization - Course 310
Basic Valuation Procedures - Course 1A-2
Restricted Appraisal Report Writing Seminar
Standards of Professional Practice - Part-A
Standards of Professional Practice - Part-B
Subdivision Analysis Seminar
<PAGE>
================================================================================
DISPLAY THIS CERTIFICATE PROMINENTLY * NOTIFY AGENCY WITHIN 10 DAYS OF ANY
CHANGE
- --------------------------------------------------------------------------------
Commonwealth of Pennsylvania
Department of State
Bureau of Professional and Occupational Affairs
P.O. BOX 2649, Harrisburg, PA 17105-2649
Classification
GENERAL APPRAISER
Certificate Number Certificate Date Issued Expires
GA-001242-L MAY 12 1994 MAY 30 1995 JUN 30 1997
[Seal of the Bureau of Professional and Occupational Affairs, Department
of State]
/s/ Joseph G. Vizza Issued To:
- -----------------------------
Signature JOSEPH G VIZZA
1408 WRIGHTSTOWN ROAD
/s/ Dorothy Childress NEWTOWN PA 18940
- -----------------------------
Commissioner of Professional
and Occupational Affairs
- --------------------------------------------------------------------------------
ALTERATION OF THIS DOCUMENT IS A CRIMINAL OFFENSE UNDER 18 PA.C.S.ss.4911
================================================================================
<PAGE>
QUALIFICATIONS OF JOHN B. RUSH
================================================================================
Professional Affiliations
Member, Appraisal Institute (MAI Designation #7261)
Delaware Certified General Appraiser (Certificate #X1-0000051)
Maryland Certified General Appraiser (Certificate #10041)
New Jersey Certified General Appraiser (Certificate #RG 00808)
Pennsylvania Certified General Appraiser (Certificate #GA-000331-L)
Pennsylvania Real Estate Broker (License #AB043144A)
Affiliate, Tri-State Commercial & Industrial Association of Realtors
Associate, Urban Land Institute (Associate #164089)
Real Estate Experience
Director of Cushman & Wakefield of Pennsylvania, Inc. and Manager of its
Valuation Advisory Services Department in Philadelphia. Cushman &
Wakefield is a international full service real estate organization and a
Rockefeller Group Company.
Senior Appraiser, Cushman & Wakefield Appraisal Division, specializing in
commercial and industrial real estate appraisal and investment counseling
throughout the nation from January, 1980 to September, 1985.
Staff Appraiser, Boyle/Helbig Realty, Inc. of Philadelphia, Pennsylvania,
specializing in commercial and industrial real estate appraisal and
investment counseling throughout a wide geographic area from December,
1977 to December, 1979.
Associate, Michael Singer Real Estate Company of Philadelphia,
Pennsylvania, specializing in the investment, leasing and management of
local commercial and residential real estate from June, 1975 to December,
1977.
Formal Education
Drexel University, Philadelphia, Pennsylvania
Master of Business Administration - 1982
Saint Joseph's College, Philadelphia, Pennsylvania
Bachelor of Arts - 1975
Appraisal Institute, Chicago, Illinois
Required Courses of Study Leading to the MAI Designation
Various Lectures and Seminars for Continuing Education Credits
Board of Realtors, Philadelphia, Pennsylvania
Required Courses of Study for State Licensure
<PAGE>
Qualifications of John B. Rush
================================================================================
Qualified Expert Witness
United States Bankruptcy Court,
Eastern District of Pennsylvania
United States Bankruptcy Court,
Middle District of Pennsylvania
Court of Common Pleas
Dauphin County, Pennsylvania
Board of Assessment Appeals
Bucks County, Pennsylvania
Board of Revision of Taxes
City of Philadelphia
Board of Tax Review
City of Philadelphia
Board of Assessment Appeals
Dauphin County, Pennsylvania
<PAGE>
================================================================================
DISPLAY THIS CERTIFICATE PROMINENTLY * NOTIFY AGENCY WITHIN 10 DAYS OF ANY
CHANGE
- --------------------------------------------------------------------------------
Commonwealth of Pennsylvania
Department of State
Bureau of Professional and Occupational Affairs
P.O. BOX 2649, Harrisburg, PA 17105-2649
Classification
GENERAL APPRAISER
Certificate Number Certificate Date Issued Expires
GA-000331-L SEP 10 1991 MAY 15 1995 JUN 30 1997
[Seal of the Bureau of Professional and Occupational Affairs, Department
of State]
/s/ John B. Rush Issued To:
- -----------------------------
Signature JOHN BENJAMIN RUSH
325 POWDER HORN ROAD
/s/ Dorothy Childress FORT WASHINGTON PA 19034
- -----------------------------
Commissioner of Professional
and Occupational Affairs
- --------------------------------------------------------------------------------
ALTERATION OF THIS DOCUMENT IS A CRIMINAL OFFENSE UNDER 18 PA.C.S.ss.4911
================================================================================
This CD ROM contains an electronic version of appraisals for the Mortgaged
Properties in PDF format and forms part of the paper version of the Prospectus
Supplement. The information contained in this CD ROM does not appear elsewhere
in paper form in this Prospectus Supplement and must be considered as part of,
and together with, the information contained elsewhere in this Prospectus
Supplement and the Prospectus. The information contained in this CD ROM has
been filed by the Seller with the Securities and Exchange Commission as part
of a Current Report on Form 8-K, which is incorporated by reference in this
Prospectus Supplement, and is also available through the public reference
branch of the Securities and Exchange Commission. Defined terms used in this CD
ROM but not otherwise defined therein shall have the respective meanings
assigned to them in the paper portion of the Prospectus Supplement and the
Prospectus. All of the information contained in this CD ROM is subject to the
same limitations and qualifications contained in this Prospectus Supplement and
the Prospectus. Prospective investors are strongly urged to read the paper
portion of this Prospectus Supplement and the Prospectus in its entirety prior
to accessing this CD ROM. If this CD ROM was not received in a sealed package,
there can be no assurances that it remains in its original format and should
not be relied upon for any purpose. Prospective investors may contact J.
Theodore Borter of Goldman, Sachs Co. at (212)902-3857 to receive an original
copy of the CD ROM.
<PAGE>
=========================================
COMPLETE APPRAISAL
OF REAL PROPERTY
Masons Mill Business Park
1800 Byberry Road
Bryn Athyn Borough
Montgomery County, Pennsylvania
=========================================
IN A SELF-CONTAINED REPORT
As of July 1, 1997
Prepared For:
Goldman Sachs Mortgage Company
85 Broad Street
New York, New York 10004
Prepared By:
Cushman & Wakefield of Pennsylvania, Inc.
Valuation Advisory Services
Two Logan Square - 20th Floor
Philadelphia, Pennsylvania 19103
<PAGE>
Cushman & Wakefield of Pennsylvania, Inc. CUSHMAN &
Two Logan Square WAKEFIELD(R)
Philadelphia, PA 19103 A ROCKEFELLER GROUP COMPANY
(215) 963-4000
June 18, 1997
Mr. Sheridan Schechner
Managing Partner
Goldman Sachs Mortgage Company
85 Broad Street
New York, New York 10004
Re: Complete Appraisal of Real Property
Masons Mill Business Park
1800 Byberry Road
Bryn Athyn Borough
Montgomery County, Pennsylvania
Dear Mr. Schechner:
In fulfillment of our agreement as outlined in the Letter of Engagement,
Cushman & Wakefield of Pennsylvania Inc. is pleased to transmit our
self-contained appraisal report estimating market value of the leased fee
interest in the subject property.
The value opinion reported below is qualified by certain assumptions,
limiting conditions, certifications, and definitions, which are set forth in the
report.
This report was prepared for Goldman Sachs Mortgage Company and is
intended only for its specified use. It may not be distributed to or relied upon
by other persons or entities without written permission of Cushman & Wakefield
of Pennsylvania Inc.
This appraisal report has been prepared in accordance with our
interpretation of your institution's guidelines, the regulations of OCC and the
Uniform Standards of Professional Appraisal Practice, including the Competency
Provision and The Financial Institutions Reform, Recovery and Enforcement Act
(FIRREA) and the guidelines of federal regulatory agencies.
The property was inspected by and the report was prepared by Michael A.
Lagreca under the supervision of John B. Rush, MAI.
<PAGE>
Mr. Sheridan Schechner
Goldman Sachs Mortgage Company Page 2 June 18, 1997
Based on our complete appraisal as defined by the Uniform Standards of
Professional Appraisal Practice, we have formed an opinion that the market value
of the leased fee estate in the referenced property, subject to the assumptions,
limiting conditions, certifications, and definitions as of July 1, 1997, was:
FOURTEEN MILLION TWO HUNDRED THOUSAND DOLLARS
$14,200,000
This letter is invalid as an opinion of value if detached from the report,
which contains the text, exhibits, and an Addenda.
Respectfully submitted,
Cushman & Wakefield of Pennsylvania, Inc.
/s/ Michael A. Lagreca
Michael A. Lagreca
Valuation Advisory Services
Pennsylvania Certified
General Appraiser #GA-000218-L
/s/ John B. Rush
John B. Rush, MAI
Director
Valuation Advisory Services
Pennsylvania Certified
General Appraiser #GA-000331-L
MAL/JBR/os
(97-9112D)
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
SUMMARY OF SALIENT FACTS AND CONCLUSIONS
================================================================================
Property Name: Masons Mill Business Park
Location: 1800 Byberry Road
Bryn Athyn Borough
Montgomery County, Pennsylvania
General Overview: Masons Mill Business Park is
fourteen building, masonry and steel
frame, multi-tenanted office complex
situated near the corner of Byberry
and Mason Mill Roads in Bryn Athyn
Borough, Montgomery County,
Pennsylvania. Situated on a 45.11+/-
acre site, the fourteen buildings
contain a combined leasable area of
211,833+/- square feet. On the
effective date of appraisal,
occupancy stood at 90.8 percent.
Interest Appraised: Leased fee
Date of Value: July 1, 1997
Date of Inspection: May 29,1997
Ownership: Bell Atlantic Land Development, Inc.
Highest and Best Use: Continued Office Complex
Value Indicators
Sales Comparison Approach:
Indicated Value: $13,800,000
Value Per Square Foot: $65.15
Income Capitalization Approach
Estimated Market Rental Rate: $13.00/SF
Stabilized Vacancy Rate: 3.0%
Effective Gross Income: $13.00/SF
Operating Expenses $ 4.23/SF
Net Operating Income: $ 8.77/SF
Estimated Vacancy Between Tenants Six months
Free Rent: None
Probability of Renewal: 65%
Tenant Improvement Allowance
Rollover $ 7.00 per square foot
Turnover $12.00 per square foot
Estimated Market Rental Growth Rate 3.5%
Estimated Expense Growth Rate: 3.5%
Reversion Year Capitalization Rate 11.0%
Transaction Costs in Reversion Sale: 3.0%
Discount Rate: 11.5%
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Summary of Salient Facts and Conclusions
================================================================================
Indicated Value: $14,200,000
Value Conclusion: $14,200,000
Value Per Square Foot: $67.03
Implicit Capitalization Rate: 13.07%
Marketing Time: 6 months
Special Assumptions Affecting Valuation:
1. Please refer to the complete list of assumptions and limiting conditions
included at the end of this report.
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PHOTOGRAPHS OF SUBJECT PROPERTY
================================================================================
[GRAPHIC OMITTED]
Aerial view of the Masons Mill Business Park
<PAGE>
Photographs of Subject Property
================================================================================
[GRAPHIC OMITTED]
Building 4
Building 6
<PAGE>
Photographs of Subject Property
================================================================================
[GRAPHIC OMITTED]
Building 11
Building 12
<PAGE>
Photographs of Subject Property
================================================================================
[GRAPHIC OMITTED]
Northwest view along Byberry Road
Southeast view along Masons Mill Road
<PAGE>
TABLE OF CONTENTS
================================================================================
Page
INTRODUCTION ............................................................... 1
Identification of Property ............................................ 1
Property Ownership and Recent History ................................. 1
Purpose, Function and Scope of the Appraisal .......................... 1
Definitions of Value, Interest Appraised, and Other Pertinent Terms ... 2
Legal Description ..................................................... 3
REGIONAL ANALYSIS .......................................................... 4
MARKET ANALYSIS ............................................................ 9
PROPERTY DESCRIPTION ....................................................... 16
Site Description ...................................................... 16
Improvements Description .............................................. 17
REAL PROPERTY TAXES AND ASSESSMENTS ........................................ 22
ZONING ..................................................................... 24
HIGHEST AND BEST USE ....................................................... 25
VALUATION PROCESS .......................................................... 27
SALES COMPARISON APPROACH .................................................. 29
INCOME CAPITALIZATION APPROACH ............................................. 32
RECONCILIATION AND FINAL VALUE ESTIMATE .................................... 43
ASSUMPTIONS AND LIMITING CONDITIONS ........................................ 44
CERTIFICATION OF APPRAISAL ................................................. 46
ADDENDA .................................................................... 47
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
INTRODUCTION
================================================================================
Identification of Property
The subject property is a fourteen building, one story, multi-tenanted,
office complex known as Masons Mill Business Park which is located in Bryn Athyn
Borough, Montgomery County, Pennsylvania. It is an attractive and modern office
complex located near the corner of Byberry and Masons Mill Roads. The street
address is 1800 Byberry Road, Huntingdon Valley, Pennsylvania. The subject is
identified by Montgomery County as Tax Parcel 03-00-00272-004, 03-00-00489-003
and 03-00-00272-013 in Bryn Athyn Borough.
This is a modern one-story complex built in phases from 1978 to 1980 on a
45.11+/- acre site. The complex contains 211,833+/- net rentable square feet.
The complex is modern in appearance and functional in design. On the effective
date of appraisal, occupancy stood at 90.8 percent.
Property Ownership and Recent History
Title to the three tax parcels which comprise the subject property is held
by Bell Atlantic Land Development, Inc. The following chart summarizes the most
recent transaction at each tax parcel.
<TABLE>
<CAPTION>
===============================================================================================================================
Tax Parcel Grantor Grantee Date Deed Consideration
Reference
- -------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
03-001-005 Montgomery County IDA Bell Atlantic Land Development, Inc. 04/25/97 5185-2484 $3,150,00
03-001-024 Bell Atlantic Properties, Inc. Bell Atlantic Land Development, Inc. 04/01/97 5183-1646 $ 1.00
03-001-028 Bell Atlantic Properties, Inc. Bell Atlantic Land Development, Inc. 04/01/97 5183-1657 $ 1.00
===============================================================================================================================
</TABLE>
Purpose and Intended Use of the Appraisal
The purpose of this appraisal is to estimate the market value of a leased
fee estate on July 1, 1997. The appraisal is to be used in a potential financing
by our client, Goldman Sachs Mortgage Company.
Extent of the Appraisal Process
In the process of preparing this appraisal, we:
o Inspected the exterior of the building and the site improvements and a
representative sample of tenant spaces with the property manager;
o Interviewed Chris Rodenhaver of the property management company, Bell
Atlantic Properties;
o Reviewed leasing policy, concessions, tenant build-out allowances, and
history of recent rental rates and occupancy with the property manager;
o Reviewed a detailed history of income and expense and a budget forecast
for 1997 including the budget for planned capital expenditures and
repairs;
o Conducted market research of occupancies, asking rents, concessions and
operating expenses at competing properties which involved interviews with
on-site managers and a review of our own data base from previous appraisal
files;
================================================================================
-1-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Introduction
================================================================================
o Prepared an estimate of stabilized income and expense (for capitalization
purposes);
o Conducted market inquiries into recent sales of similar properties to
ascertain sales price per square foot and capitalization rates. This
process involved telephone interviews with sellers, buyers and/or
participating brokers. (See detailed sales write-ups in Addenda for more
complete information on the verification process.);
o Prepared Sales Comparison and Income Capitalization Approaches to value.
Date of Value and Property Inspection
The date of value is July 1, 1997. We inspected the property on May 29,
1997.
Property Rights Appraised
Leased fee estate.
Definitions of Value, Interest Appraised, and Other Pertinent Terms
The definition of market value taken from the Uniform Standards of
Professional Appraisal Practice of the Appraisal Foundation, is as follows:
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 is the
consummation of a sale as of a specified date and the passing of title
from seller to buyer under conditions whereby:
1. Buyer and seller are typically motivated;
2. Both parties are well informed or well advised, and acting in what
they consider their own best interests;
3. A reasonable time is allowed for exposure in the open market;
4. Payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
5. 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.
Exposure Time
Under Paragraph 3 of the Definition of Market Value, the value estimate presumes
that "A reasonable time is allowed for exposure in the open market". Exposure
time is defined as the estimated length of time the property interest being
appraised would have been offered on the market prior to the hypothetical
consummation of a sale at the market value on the effective date of the
appraisal. Exposure time is presumed to precede the effective date of the
appraisal.
================================================================================
-2-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Introduction
================================================================================
Our analysis of comparable sales indicates that an Exposure Time of
between 6 and 9 months was typical for office facilities. Therefore, based
upon our analysis of comparable sales in conjunction with the physical,
locational and economic characteristics of the subject property, it is our
opinion that an Exposure Time of approximately 6 months would be typical
prior to our market value conclusion as of the date of valuation
The following definitions of pertinent terms are taken from the Dictionary
of Real Estate Appraisal, Third Edition (1993), published by the Appraisal
Institute.
Leased Fee Estate
An ownership interest held by a landlord with the rights of use and
occupancy conveyed by lease to others. The rights of the lessor (the
leased fee owner) and the leased fee are specified by contract terms
contained within the lease.
Value As Is
The value of specific ownership rights to an identified parcel of real
estate as of the effective date of the appraisal; relates to what
physically exists and is legally permissible and excludes all assumptions
concerning hypothetical market conditions or possible rezoning.
Legal Description
The property is legally identified by the Montgomery County Tax Assessor's
Office, as Unit 005, 024 and 028 contained within Block 001 in Bryn Athyn
Borough. We have not been provided with the metes and bounds legal description
of this site. Therefore, none is exhibited in this report.
================================================================================
-3-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
REGIONAL ANALYSIS
================================================================================
Philadelphia Metropolitan Area
The subject property is located in the northwest quadrant of the
Philadelphia Metropolitan Area in Montgomery County, Pennsylvania. The
Philadelphia Metropolitan Area, itself, encompasses over 3,500 square miles
through the counties immediately surrounding the city in both Pennsylvania and
New Jersey. The greater metropolitan area is actually part of a larger economic
and geographic entity known as the Delaware Valley, which extends from Trenton,
New Jersey at the north to Wilmington, Delaware at the south. The Delaware
Valley is a closely integrated market which pervades the many political
subdivisions incorporated in it.
Population
According to the most recent estimate of the Federal Census Bureau, the
Philadelphia Metropolitan Area has the fourth largest population in the nation
after Los Angeles, New York, and Chicago. The currently reported population of
about five million represents a .7 percent increase over that counted in 1990.
The statistics indicated population growth in the suburban counties surrounding
Philadelphia, with a decline in the city itself. The current population of
Montgomery County is reported to be about 703,200, an increase of approximately
3.7 percent since 1990. These statistics are significant in that demographers
believe population growth is directly tied to employment growth.
================================================================================
Population Statistics
Philadelphia Metropolitan Area
(In Thousands)
================================================================================
County 1980 1990 (delta) 1995 (delta)
================================================================================
Bucks 483.8 541.2 +11.9% 570.6 +5.4%
- --------------------------------------------------------------------------------
Chester 320.1 376.4 +17.6% 399.7 +6.2%
- --------------------------------------------------------------------------------
Delaware 552.2 547.7 - 0.8% 548.2 + .1%
- --------------------------------------------------------------------------------
Montgomery 644.6 678.1 + 5.2% 703.2 +3.7%
- --------------------------------------------------------------------------------
Philadelphia 1,668.2 1,585.6 - 5.0% 1,521.5 -4.0%
- --------------------------------------------------------------------------------
Burlington 366.0 395.1 + 8.0% 400.8 +1.4%
- --------------------------------------------------------------------------------
Camden 472.8 502.8 + 6.4% 506.6 + .8%
- --------------------------------------------------------------------------------
Gloucester 202.1 230.1 +13.9% 243.1 +5.7%
- --------------------------------------------------------------------------------
Salem 65.0 65.3 + 0.5% 64.6 -1.1%
================================================================================
Total Metropolitan Area 4,774.8 4,922.3 + 3.1% 4,958.3 + .7%
================================================================================
Source: U.S. Census Bureau
================================================================================
Employment
The traditional economic base of the region was once heavy manufacturing.
Concurrent with national trends, the regional economy has now shifted toward a
skilled/service oriented base. Approximately 35 percent of the region's 2.2+/-
million in the wage and salary workforce is now employed in the service
industries, as contrasted with the approximate 14 percent employed in
manufacturing. Furthermore, another 23 percent of the region's workforce is
employed in the wholesale and retail trades, while only 14 percent is employed
by government.
================================================================================
-4-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
REGIONAL ANALYSIS
================================================================================
================================================================================
Philadelphia Metropolitan Area
January Employment Statistics
(In Thousands)
================================================================================
Industry Classification 1990 1995 (delta) 1997 (delta)
================================================================================
Manufacturing 358.6 311.8 -2.6% 305.6 - 2.0%
Construction & Mining 95.4 73.9 +6.0% 73.2 - 1.0%
Transportation, Communication &
Utilities 99.0 104.5 +3.3% 104.7 + 1.9%
Wholesale & Retail Trades 508.0 482.8 -2.3% 494.6 + 2.4%
Finance, Insurance & Real Estate 167.6 155.1 -1.3% 154.2 - 0.6%
Services 659.1 717.5 +4.3% 765.4 + 6.7%
Government 308.4 303.3 +0.6% 298.7 - 1.5%
----------------------------------------------
Total Wage & Salary Employment 2,196.1 2,148.9 +0.8% 2,196.4 + 2.2%
==============================================
Total Civilian Labor Force 2,409.0 2,397.6 -0.9% 2,450.3 + 2.2%
==============================================
Unemployment 114.1 143.5 123.3
Unemployment Rate 4.7% 6.0% 5.0%
================================================================================
Source: Pennsylvania Department of Labor and Industry
================================================================================
According to statistics prepared by the Pennsylvania Department of
Industry and Labor, wage and salary employment in the Philadelphia Metropolitan
Area increased by 47,500 jobs or 2.2 percent between 1995 and 1997.
Additionally, the total civilian labor force which includes wage and salary
employment plus those who are self-employed increased by 52,700 workers. As can
be seen, a vast majority of this growth in employment is in the service
industries and the wholesale and retail trades. The continued growth in the
service industries as well as the relative stability in the finance, insurance
and real estate classification is significant to real property like the subject
as it is from these groups that the occupants of office space come.
The state Department of Industry and Labor reports that, within the
service industries, business services, particularly temporary help agencies and
accounting firms, led this employment classification with a growth of 27,900
jobs created since 1992. Second place goes to medical services with 12,600 new
jobs created in the Philadelphia Metropolitan Area over the past four years.
Private sector education was third growing by 19,900 jobs. A listing of the ten
largest employers in Montgomery County alone bears out these statistics.
================================================================================
Largest Non-Public Employers
Montgomery County
- --------------------------------------------------------------------------------
Employer Local Employees Product or Service
================================================================================
Prudential Insurance Company 6,720 Insurance; Financial Services
- --------------------------------------------------------------------------------
Martin Marietta 5,700 Defense & Space Equipment
- --------------------------------------------------------------------------------
Merck & Co. 5,200 Pharmaceuticals
- --------------------------------------------------------------------------------
SmithKline Beecham 3,650 Pharmaceuticals; R&D
- --------------------------------------------------------------------------------
Main Line Health System 3,480 Home Health Care
- --------------------------------------------------------------------------------
Rhone-Poulenc Rorer, Inc. 2,600 Pharmaceuticals
- --------------------------------------------------------------------------------
Unisys Corp. 2,600 Computer Equipment/Software
- --------------------------------------------------------------------------------
U.S. Healthcare, Inc. 2,388 Managed Health Care Plans
- --------------------------------------------------------------------------------
Ford Electronics & Refrigeration 2,300 Automotive Electronics
- --------------------------------------------------------------------------------
Abington Memorial Hospital 1,921 Teaching Hospital
================================================================================
Source: Philadelphia Business Journal
================================================================================
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Regional Analysis
================================================================================
According to the Pennsylvania Department of Labor and Industry, the March,
1997 unemployment rate in the nine county Philadelphia Metropolitan Area was 4.9
percent as compared to 5.1 percent for the Commonwealth of Pennsylvania and 5.2
percent for the U.S. as a whole. Montgomery County had a 3.7 percent
unemployment rate in March, 1997 which was one of the unemployment rate of any
county in Pennsylvania.
Income
The median effective household buying income or disposable income after
federal taxes in the Philadelphia Metropolitan Area is currently estimated to be
$44,815. Throughout the region, it is estimated that 11.4 percent of the 1.8
million households have an effective buying income under $20,000 annually. For
the entire metropolitan area, 43.9 percent of households have yearly EBI in
excess of $50,000. Montgomery County has the second highest current median
household income level in the Metropolitan Area at $54,711 per dwelling unit.
================================================================================
Income Statistics
Philadelphia Metropolitan Area
================================================================================
Effective
Buying Income Median Household EBI
County Households (in Thousands)
================================================================================
Bucks 201,200 $12,262,322 $53,117
- --------------------------------------------------------------------------------
Chester 141,500 9,721,125 56,581
- --------------------------------------------------------------------------------
Delaware 202,700 11,060,641 45,752
- --------------------------------------------------------------------------------
Montgomery 267,400 18,535,055 54,711
- --------------------------------------------------------------------------------
Philadelphia 577,300 22,803,611 31,682
- --------------------------------------------------------------------------------
Burlington 139,900 7,995,281 49,379
- --------------------------------------------------------------------------------
Camden 179,200 9,980,971 47,387
- --------------------------------------------------------------------------------
Gloucester 83,100 4,672,913 51,405
- --------------------------------------------------------------------------------
Salem 23,700 1,195,590 45,095
================================================================================
Total 1,816,000 $98,227,509 $44,815
================================================================================
Source: Sales & Marketing Management
================================================================================
Retail Sales
Retail sales in the Philadelphia Metropolitan Area are currently estimated
to approach $44.3 billion annually. The Philadelphia area ranked fourth
nationally behind Chicago, Los Angeles, New York and Washington, D.C. in total
retail sales for 1995, the last year for which statistics are currently
available. Retail sales in this metropolitan area have increased at a compound
annual rate of 4.2 percent since 1990. Within Montgomery County, annual retail
sales for 1995 were estimated to be about $8.6 billion, which were 2.6 percent
higher than the previous year sales. Since 1989, retail sales in Montgomery
County have been erratic but have increased overall at a compound annual rate of
2.2 percent.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Regional Analysis
================================================================================
Retail Sales
Philadelphia Metropolitan Area and Montgomery County
(In Thousands)
================================================================================
Metropolitan Montgomery
Year Philadelphia (delta) County (delta)
================================================================================
1989 $35,816,878 -- $7,544,275 --
- --------------------------------------------------------------------------------
1990 $36,033,312 +0.6% $7,357,913 -2.5%
- --------------------------------------------------------------------------------
1991 $35,120,446 -2.5% $7,079,937 -3.8%
- --------------------------------------------------------------------------------
1992 $39,811,716 +12.2% $8,016,495 +13.2%
- --------------------------------------------------------------------------------
1993 $40,858,286 +2.6% $8,358,755 +4.3%
- --------------------------------------------------------------------------------
1994 $43,480,561 +6.4% $8,366,567 +0.1%
- --------------------------------------------------------------------------------
1995 $44,309,612 +1.9% $8,581,033 +2.6%
- --------------------------------------------------------------------------------
Compound Annual Change +4.2% +2.2%
================================================================================
Source: Sales & Marketing Management 1990-1996
================================================================================
Linkages
The Philadelphia Metropolitan Area benefits from an admirable
transportation system linking the region to the rest of the nation and points
throughout the world. The Port of Philadelphia is one of the largest fresh water
ports in the country. The Philadelphia International Airport provides service to
most major North American cities and many European destinations. From its
central location in the heart of the eastern megalopolis, excellent highway and
rail accessibility is also available.
Cultural, Educational and Recreational Resources
Educational opportunities abound throughout the region, with twelve major
colleges and universities located here. There are also four teaching medical
college hospitals in the Philadelphia area. As the nation's fourth largest urban
center and first capital, cultural and recreational activities available to the
populace are widely diverse.
Conclusions
The central core of this metropolitan area, the City of Philadelphia,
continues to experience a fiscal crisis precipitated by a diminishing tax base
and the increased need for new and costly municipal services. However, the
current administration and council are now cooperating to promote fiscal
responsibility which has created the city's first operating surplus in years. On
the other hand, the surrounding suburban counties have been the focus of the
region's population and job growth over the last decade. This trend is expected
to continue into the next century.
Overall, the Philadelphia Metropolitan Area is an older, densely developed
region with a mature economy which can only be expected to grow less and at a
slower pace in the months and years to come. Taxes and labor costs throughout
the Northeastern United States are higher than elsewhere so that the
opportunities for low cost start-up companies are less. Fortunately, the
patchwork of existing small to mid-sized companies in the Philadelphia
Metropolitan Area should protect this region from the severe economic shocks
seen in many single industry towns.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Regional Analysis
================================================================================
Thus, over the long term, the Philadelphia Metropolitan Area benefits from
a diversified economic base which should protect the region from the effects of
wide swings in the economy. The region's strategic location along the eastern
seaboard and its reputation as a major business center should further enhance
the area's long term outlook. The region's real estate is giving way to optimism
as availabilities are absorbed through the current economic expansion. It is our
conclusion that the long term trends of the region should eventually exert
positive influences on the values of well located and well designed real
property.
Conclusion
Philadelphia is the fifth largest city in the country but, due to the
population of its suburbs, it is the fourth largest metropolitan area. On an
overall basis, the population of this region is experiencing only modest gains.
However, significant gains are occurring within the suburban counties of Bucks
and Chester on the Pennsylvania side of the Delaware River and in Gloucester
County on the New Jersey side. This comes at the expense of the older, more
densely developed Cities of Philadelphia and Camden. Major shifts in population
create opportunities for land developers.
The region's economy is diversified with the service industries now the
largest single sector. This segment provides the largest gains in employment as
well which is a primary demand generator for office space and service
establishments. A expanding economy is also good for housing, retailing and the
wholesale trades as well.
Regional economic trends point toward an era of continued modest growth,
particularly in the suburban area of the region. This, over time, should
continue to maintain demand for most types of real property. However, we believe
that only those properties with a desirable location and functional design will
out-perform inflation in the general economy.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
MARKET ANALYSIS
================================================================================
The subject property is located in the Huntingdon Valley section of
Montgomery County, Pennsylvania. Huntingdon Valley is primarily an established
and highly desirable community situated just beyond the Philadelphia city limits
in the eastern end of Montgomery County. There are commercial office and retail
facilities in this neighborhood along some of the major arterial roadways which
circulate through Huntingdon Valley. The subject property is its own office
complex of fourteen single story buildings on one of those arterials, Byberry
Road.
General Office Market Overview
Office buildings, as an asset class, are attracting renewed interest from
investors in the current market. Many believe suburban office buildings offer
the greatest upside potential among the various property types. Prices for the
best quality suburban office buildings have increased due to buyer demand.
In most suburban markets, office vacancies have declined reflecting the
expansions of small business. Most acknowledge that the market "bottomed-out" in
1995 and rents are now generally increasing. More recently, as buyer demand
pushes prices up, some investors are more willing to pay for "future" dollars
when only 18 months ago purchase decisions were based solely on revenue in
place.
The lack of new construction is also viewed as a positive in the office
market. Though firms are leasing less space per employee than ever before, once
the current economic recovery solidifies, office building owners are now in a
stronger negotiating position as demand outpaces supply. Still, in most
communities, there is plenty of land available for new competition.
The job growth which is occurring now comes from small and mid-sized
technologically sophisticated firms. These, more than most, seek suburban
locations which are close to their employees. By moving closer to their
employees, commuting time is less which, some say, creates a more productive
workforce. Frequently, occupancy costs are lower in the suburbs than in the
urban core which translates back into corporate profitability. The subject
property benefits from such trends, particularly due to its location outside the
Philadelphia city limits.
The subject property shares in these macro-market observations and trends.
More importantly, the subject competes in its own micro-market for tenants,
users and ultimately, investment returns. The following is a detailed
description of this local marketplace.
Market Supply
The subject property competes for tenants in what Cushman & Wakefield
designates the Horsham/Willow Grove/Jenkintown submarket area of the western
suburbs of Philadelphia. There are approximately 3.14 million square feet of
existing commercial office space in the Horsham/Willow Grove/Jenkintown
marketplace. The following chart is an overview of this marketplace at the end
of the First Quarter 1997.
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CUSHMAN &
WAKEFIELD(R)
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<PAGE>
Market Analysis
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================================================================================
Office Market Overview
Horsham/Willow Grove/Jenkintown
March 31, 1997
================================================================================
Class of Space Total Rentable Area Total Area Available Vacancy Rate
================================================================================
A 2,037,839 SF 140,712 SF 6.9%
B 997,284 SF 123,828 SF 12.4%
C 108,200 SF 10,000 SF 9.2%
Total Inventory 3,143,323 SF 274,540 SF 8.7%
================================================================================
As of March 31, 1997, total vacancy in this marketplace was reported to be
8.7 percent, down from 9.4 percent at the end of 1996. In any type of market,
there must be an inventory of goods maintained in order to satisfy demand.
Within the commercial office market, some space must be maintained at all times
to accommodate the constant shifting of tenants. The following is a listing of
blocks of contiguous space in the Horsham/Willow Grove/Jenkintown marketplace in
excess of 20,000 square feet.
================================================================================
Blocks of Contiguous Space
20,000 Square Feet or Greater
Horsham/Willow Grove/Jenkintown Market
March 31, 1997
================================================================================
Location Rentable Contiguous Area
================================================================================
The Pavilions at Jenkintown 45,000+/- SF
Lakeside Plaza 11 22,265+/- SF
One Fairway Plaza 30,000+/- SF
================================================================================
A shortage in available inventory is indicated in the market when there is
a discernible lack of prime contiguous office space for larger users. Under
these conditions, new construction is stimulated. At present, there are two
build-to suit projects under construction in the Horsharn Millow
Grove/Jenkintown market area at the Commonwealth Corporate Center in Horsham
Township. These include a 90,000+/- square foot building for Advanta, as well as
a 480,000+/- square foot administrative and engineering complex on 70 acres for
General Instrument.
There are only three blocks of space in excess of 20,000 contiguous square
feet which are currently vacant in the Horsham/Willow Grove/Jenkintown market
area. Land does exist in this marketplace for new competition. However,
financing requirements continue to be stringent which will curtail rampant,
speculative development. Without a financially responsible lead tenant or user,
construction and permanent financing is unobtainable at this time.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Market Analysis
================================================================================
Over the last 15 months, the vacancy rate in the Horsham/Willow
Grove/Jenkintown marketplace has declined from 17.5 percent at the end of 1995
down to a first quarter 1997 level of 8.7 percent. This significant decrease is
attributable to the current rate of absorption, combined with the reduction in
inventory and availablities associated with the sale of the Breyer Office Park
in Jenkintown to an owner/user. Interestingly, the vacancy that does exist in
most markets is concentrated in the average and below average buildings. Older,
lesser quality office space cannot compare against newer, functional buildings.
The aggregate amount of these spaces is such that many analysts are now
suggesting structural vacancy to be well above the conventional five percent
utilized in past years. On a relative basis, most of the vacancy in the current
market is in the older lesser grades of space. The following chart summarizes
overall vacancy and total availabilities in the local market since the end of
1993.
================================================================================
Office Market Vacancy and Availabilities
Horsham/Willow Grove/Jenkintown
================================================================================
Period Space Available Vacancy Rate
================================================================================
1st Quarter 1997 274,540 SF 8.7%
Year End 1996 294,365 SF 9.4%
Year End 1995 614,977 SF 17.5%
Year End 1994 499,450 SF 15.2%
Year End 1993 554,565 SF 17.5%
================================================================================
There are no formal plans for additions to inventory other than the
90,000+/- square foot Advanta headquarters building and the 480,000+/- square
foot General Instrument headquarters property in the Commonwealth Corporate
Center at this time in the local market. Additionally, there are only three
blocks of contiguous space equal to 20,000 square feet or greater in the
Horsham/Willow Grove/Jenkintown market. Locally, there are 45,000+/- square feet
available within The Pavillions at Jenkintown, 22,365+/- square feet at Lakeside
Plaza 11 and 30,000+/- square feet available at One Fairway Plaza. Besides those
cited, a major user has no alternative but to consider a build-to-suit
transaction. Considering the current costs of construction relative to market
rental rates, the basis is set for a jump in rental rates though the timing of
such an event is not all that clear. Nonetheless, this is a positive market
influence on existing office product like the subject property.
Market Demand
Market demand for office space is primarily measured by absorption
statistics. Demand for office space in the Horsham/Willow Grove/Jenkintown
market has historically come from the movement of users outward from within the
City of Philadelphia and from the formation of new high tech/service oriented
businesses. Over the past 51 months, absorption of office space in this market
has been averaging 11,234+/- square foot per quarter or 44,935+/- square feet
annually. Leasing activity has essentially maintained itself at something
approximating 53,951+/- square feet per quarter or 215,805+/- square feet per
annum.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Market Analysis
================================================================================
================================================================================
Office Market Absorption and Leasing
Horsham/Willow Grove/Jenkintown
================================================================================
Period Absorption Leasing
================================================================================
1st Quarter 1997 16,325 SF 49,185 SF
Year End 1996 94,212 SF 309,292 SF
Year End 1995 -86,151 SF 121,056 SF
Year End 1994 -73,840 SF 245,307 SF
Year End 1993 240,428 SF 192,332 SF
================================================================================
From an overall market perspective, absorption statistics are highly
indicative of long term growth or decline. Among the various properties which
compete for tenants, leasing activity serves as an indication of movement around
a specific marketplace. Where absorption is the net change in occupied space
over a period of time, leasing is the sum of all completed transactions in a
given time period. Leasing statistics are an important consideration in an
office market analysis as they can show the amount of continued interest in a
specific marketplace and product type. Typically, new construction benefits in a
market with strong leasing statistics as tenants "trade-up" to the latest
buildings from older complexes.
Office occupancies are now being affected by American business' need to
compete globally and an application of new technologies to the way white collar
employment is conducted. In order to compete, many corporations are downsizing
their operations, forcing fewer employees to do more in less space. Also,
technologies like portable phone systems and voice mail enable many to work for
extended periods outside their base of operations. Many of these new jobs are
frequently held by workers who can perform their services from home offices,
clients' offices or under "hoteling" arrangements.
Given current market dynamics, it would appear that new office space will
be needed in the next few years. This, of course, bodes well for current
investors with the patience and wherewithal to wait for that expected turn of
events. With anticipated demand, and the obsolescence in most of the existing
Class B and C space, it would appear that upside potential exists in well
located and functionally designed office properties like the subject. We note,
however, that discipline will need to continue among financiers of such projects
or a return to the economic bust of the late Eighties will result.
Rental Rates
The average face rental rate for Class A office space in the
Horsham/Willow Grove/Jenkintown marketplace at the end First Quarter of 1997 was
$20.20 per square foot of rentable building area on a full service basis. This
represents a slight decrease from the year end 1996 figures, but an 11 percent
increase from that reported at year end 1995. In the local marketplace, Class B
space leases at an approximate 20 to 25 percent discount from Class A space. The
following is a presentation of average face office rental rates in this market
since year end 1993.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Market Analysis
================================================================================
<TABLE>
<CAPTION>
=====================================================================================================
Average Face Office Rental Rates
Full Service Basis
Horsham/Willow Grove/Jenkintown Market
=====================================================================================================
Average Average
Period Ending Class A (delta) Class B (delta) CPI (delta)
Rent Rent
<S> <C> <C> <C> <C> <C> <C>
1st Quarter 1997 $20.20/SF - 2.8% $15.68/SF +0.0% 166.0 +0.1%
Year End 1996 $20.78/SF +13.8% $15.56/SF +4.9% 165.1 +3.0%
Year End 1995 $18.20/SF -13.3% $14.83/SF +2.5% 160.3 +2.4%
Year End 1994 $21.00/SF +12.8% $14.47/SF +0.1% 156.6 +2.7%
Year End 1993 $18.61/SF $14.46/SF 152.5
=====================================================================================================
Compound Annual Rate: +2.6% +2.5% +2.6%
=====================================================================================================
</TABLE>
As can be seen from this presentation, the average rental rate for Class A
office space in the Horsham/Willow Grove/Jenkintown marketplace has increased at
an annual compound rate of 2.6 percent since year end 1993, while Class B space
increased at a rate of 2.5 percent. By comparison, the region's Consumer Price
Index has increased at a compound annual rate of approximately 2.6 percent over
the same time period. However, with the recent increase in rental rates for
Class A space and the sharp decline in the overall vacancy rate in the local
marketplace, we would expect the growth rate in rental rates to exceed the rate
of inflation in the short term.
Eventually, a tight Class A office market like the subject's will
precipitate new construction. In order to economically justify construction,
users must first be willing to pay higher rents than are now being achieved in
the competitive open market. Again, this bodes well for well designed and well
maintained real property like the subject.
Concessions
Rent abatement had been a standard inducement to tenants during the late
Eighties and very early Nineties, but are now not frequently being granted. In
order to win new tenants, landlords had been paying for tenant requested office
finishes well over the standard work letter. In some instances, landlords were
also paying the tenants' moving charges, assuming the rental payments on the
tenants' existing leases, and even making cash bonus payments to the tenants in
order to entice them to a new project. Most of these types of concessions have
ceased though as capital for such items has all but effectively been removed
from the current market. While there are still instances of free rent being
quoted, the current trend is definitely toward effective rents.
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
<PAGE>
Market Analysis
================================================================================
Tenant Improvements' Costs
In the leasing of brand new professional office space, a building standard
for interior finishes is established. Should a particular tenant desire interior
office finishes which exceed the established building standard, then that tenant
must reimburse the landlord for constructing them. The standard work letter for
brand new first generation office space in suburban Philadelphia is
approximately $20.00 per square foot of rentable area. The cost for tenant
requested interior office finishes which exceed these standards are borne by the
lessee. In relet, second generation space like the subject, however, the cost of
tenant alterations is considerably less as many materials can be recycled.
The trend of the current marketplace, particularly in second generation
space, has been to work with what is in place. From ownership's perspective,
cash for tenant improvements is scarce so that avoiding demolition and
reconstruction costs is important. We are informed that tenants are also less
demanding in their space improvements needs in order to secure a more favorable
rental rate in these competitive times for American business.
In general terms, a simple re-painting and re-carpeting and cleaning of
ceiling tiles can cost from $5.00 to $8.00 per square foot of rentable area.
When some demolition and reconstruction is necessary, tenant improvement costs
easily escalate to the $10.00 to $15.00 per square foot range. A complete
demolition and reconstruction of a major tenant area or full floor will cost
from $18.00 to $22.00 per square foot in the current market. The amortization of
these costs over the term of the lease is expensive and can further lower
ownership's return.
Leasing Commissions
The standard market practice for leasing commissions at office space in
suburban Philadelphia is six percent of the first year's negotiated rent, five
percent of the second, four percent of the third, and three percent of each
successive year's gross rent - all payable at initial occupancy. On a weighted
average basis for a five year lease, commissions would amount to 4.2 percent of
the aggregate rent negotiated. For a renewal, half that amount is customary but
open to negotiation between ownership and the brokerage community. In any event,
the cost of leasing commissions is an expense to ownership beyond the general
operations of the real estate.
Direct Competition
As of the end of the first quarter 1997, there were a total of
approximately 2.04 million square feet of existing Class A commercial office
space in the Horsham/Willow Grove/Jenkintown market, itself, dispersed among 41
buildings. At the same time, there is approximately one million square feet of
Class B space in this marketplace within 18 buildings. The segment of the
Horsham/Willow Grove/Jenkintown market which was thought to be competitive with
the subject property consisted of four multi-story buildings in the Huntingdon
Valley/Rydal area, as well as eleven one story buildings in the Horsham area. At
the present time, these fifteen properties exhibit a total vacancy rate of
approximately 19 percent which is much higher than the market at large. However,
it must be noted that the majority of the vacant competing space is situated
within two properties, namely One Fairway Plaza and Lakeside Plaza II. When
excluding these two properties from the survey, the vacancy rate for the
competitive properties is reduced to a market oriented 9.5 percent.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Market Analysis
================================================================================
We have identified 15 Class A and Class B buildings in the Horsham/Willow
Grove/Jenkintown market which we directly compete for tenants with the subject
property. This direct competition is summarized on the opposing page. As can be
seen from this presentation, there are approximately 557,000 square feet of
office space in these 15 buildings. As of the first quarter of 1997, quoted
rental rates range from $13.75 per square foot plus tenant electricity with a
base year expense stop up to $16.50 per square foot plus electricity with a base
year expense stop. As the subject is currently 90 percent occupied, the
desirability of this sub-market is apparent.
As noted on the opposing page, the direct competition is now asking for
$13.75 to $16.50 per square foot plus electricity. In addition, the overall
market vacancy level is in single digits. It is to be noted that current market
rental levels have surpassed some existing contract rents now in place in the
Horsham/Willow Grove/Jenkintown marketplace. This creates an opportunity for
ownership of the subject property once the existing leases expire which can only
have a positive impact for long term values.
Conclusions
In conclusion, the local rental market has improved over the past year
with an overall vacancy rate at 8.7 percent. During the past 3 to 4 years,
overall absorption has been positive, vacancy has declined and rental rates have
increased modestly in the subject's marketplace. Suburban areas like
Horsham/Willow Grove/Jenkintown marketplace are expected to be the focus of job
creation well into the next century. However, while forecasts call for an
expansion in office type employment, the absolute amount of that will be less
than previously experienced in the boom years of the Eighties. Nevertheless,
Huntingdon Valley's proximity to the Willow Grove Interchange of the
Pennsylvania Turnpike and its desirable residential neighborhoods should ensure
a continued demand for office space in this sector. With efficient management
and aggressive promotion, we believe the subject property will continue to
favorably compete in this market.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
PROPERTY DESCRIPTION
================================================================================
Site Description
Location: Masons Mill Business Park
1800 Byberry Road
Bryn Athyn Borough
Montgomery County, Pennsylvania
Shape: Irregular
Land Area:
Tax Parcel 03-001-005 11.94+/- acres
Tax Parcel 03-001-024 14.17+/- acres
Tax Parcel 03-001-028 19.00+/- acres
Total 45.11+/- acres
Frontage: 778' of frontage along the southwesterly side of
Byberry Road and 1,058' along the southeasterly
side of Masons Mill Road
Topography: Generally level
Street Improvements: Byberry Road and Masons Mill Road are both macadam
paved roadways. Byberry Road extends in generally
a northwest/southeast direction, while Masons
Mill Road extends in generally a
northeast/southwest direction.
Access: Access to the subject site is available via two
driveway entrances along the southwesterly side of
Byberry Road and two additional entrances along
the southeast side of Masons Mill Road.
Soil Conditions: We did not receive nor review a soil report.
However, we assume that the soil's load-bearing
capacity is sufficient to support the existing
structures. We did not observe any evidence to the
contrary during our physical inspection of the
property. The tract's drainage appears to be
adequate.
Land Use Restrictions: We were not given a title report to review. We do
not know of any easements, encroachments, or
restrictions that would adversely affect the
site's use. However, we recommend a title search
to determine whether any adverse conditions exist.
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<PAGE>
Property Description
================================================================================
Flood Hazard: According to Community Panel No. 421899-0001B,
National Flood Insurance Rate Map, effective May
15, 1991, the subject property is in Flood Hazard
Zone AE and Zone X. The portions of the subject
which are situated in Zone AE are affected by the
100 year flood hazard area for which flood
insurance is a requirement, while the portions
situated in Zone X are defined as being in either
the 500 year flood plain or outside the boundaries
of the 500 year flood plain. Without a more
definitive engineering report, we have assumed
that the individual buildings were not situated in
the flood hazard areas.
Wetlands: We were not given a Wetlands survey. If subsequent
engineering data reveal the presence of regulated
wetlands, it could materially affect property
value. We recommend a wetlands survey by a
competent engineering firm.
Hazardous Substances: We observed no evidence of toxic or hazardous
substances during our inspection of the site.
However, we are not trained to perform technical
environmental inspections and recommend the
services of a professional engineer for this
purpose.
Comments: Tax Parcel 03-001-024 is separated from the other
two parcels which form the subject property by
land titled to the Pennypack Watershed. This
designated open space area, which comprises almost
21 acres, together with the subject lands, combine
to offer an aesthetically pleasing office
environment. Overall, the subject site is typical
of the area, functionally adequate and well suited
for its present use. Although the Floor Area Ratio
is only 10.8 percent, which is low for a property
like the subject property, it was thought to be
reasonable when considering the irregular shape of
the subject site and the presence of the
designated flood plain areas.
Improvements Description
The following description of improvements is based upon our physical
inspection of the improvements along with our discussions with the building
manager.
General Description
Year Built: 1978 through 1982
Number of Floors: One (1)
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<PAGE>
Property Description
================================================================================
Number of Buildings: Fourteen (14)
Gross Leasable Area:
Building 1 17,415+/- square feet
Building 2 12,000+/- square feet
Building 3 12,000+/- square feet
Building 4 11,880+/- square feet
Building 5 16,060+/- square feet
Building 6 16,000+/- square feet
Building 7 16,365+/- square feet
Building 8 18,000+/- square feet
Building 9 12,000+/- square feet
Building 10 18,039+/- square feet
Building 11 12,000+/- square feet
Building 12 17,994+/- square feet
Building 13 14,000+/- square feet
Building 14 18,080+/- square feet
----------------------
Total 211,833+/- square feet
Construction Detail:
Foundation: Reinforced concrete footings.
Framing: Structural steel.
Floors: Reinforced concrete slab over a crushed stone
base.
Exterior Walls: Building #1 through #6 consist of a stucco finish
which was applied over an original siding of T-111
wood panels. Building #7 through #14 consist of
stucco and stone veneer over concrete block.
Roof Cover: Insulated metal deck over steel framing
throughout. The roof cover on each building
consists of aluminum panels over the original
asphalt shingle roof. The portion of the roof
structure which is flat and within the parapet
consists of a rubberized cover.
Windows: Aluminum framed, fixed pane, insulated glass
windows throughout.
Pedestrian Doors: Aluminum and safety glass pedestrian access doors.
Loading Doors Insulated metal, overhead, drive-in loading
doors are available in Building #4, #6, #9, #10,
#11, #12 and #13.
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Property Description
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Mechanical Detail
Heating and Cooling: Each building is heated and cooled by roof
mounted, electric heat pumps equipped with
supplementary electric baseboard heating units.
Electrical: Each building is separately metered. Incoming
power was considered sufficient for the existing
office use.
Plumbing: Male and female restroom facilities are provided
in each tenanted area. Water and waste lines are
of code - conforming materials. Domestic hot water
was provided by individual electric fired water
heaters.
Elevator Service: None
Fire Protection: With the exception of a portion of Building #8,
which was originally the corporate offices of a
local lending institution, the buildings were not
sprinklered.
Security: Each tenanted area has an individual security
system.
Interior Detail
Layout: The layout of each building is flexible in design,
suitable for either single or multiple tenant
occupancy. As of the date of our inspection
Building #1, #2, #3, #6, #9, #10, and #11
were utilized as single tenant buildings, while
the remaining seven buildings were utilized as
multi-tenanted buildings. Access to the tenant
areas is via aluminum/glass doors along the
exterior of each building.
The layout of the individual units consist
primarily of partitioned private offices along the
perimeter and open general office space along the
interior.
Floor Covering: Primarily carpeted or vinyl tiled floor cover.
Walls: Primarily painted drywall, throughout.
Ceilings: Suspended acoustical ceiling tiles.
Lighting: Recessed fluorescent lighting fixtures,
throughout.
Restrooms: Individual male and female restroom facilities are
provided in each tenanted area.
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Property Description
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Site Improvements
Parking: Macadam paved parking for 715+/- automobiles.
On-Site Landscaping: Low maintenance shrubbery and green areas present
an aesthetic appeal to the buildings.
Americans With
Disabilities Act: The Americans With Disabilities Act (ADA) became
effective January 26, 1992. We have not made, nor
are we qualified by training to make, a specific
compliance survey and analysis of this property to
determine whether or not it is in conformity with
the various detailed requirements of the ADA. It
is possible that a compliance survey and a
detailed analysis of the requirements of the ADA
could reveal that the property is not in
compliance with one or more of the requirements of
the Act. If so, this fact could have a negative
effect upon the value of the property. Since we
have not been provided with the results of a
survey, we did not consider possible non-
compliance with the requirements of ADA in
estimating the value of the property.
Hazardous Substances: We are not aware of any potentially hazardous
materials (such as formaldehyde foam insulation,
asbestos insulation, radon gas emitting materials,
or other potentially hazardous materials) which
may have been used in the construction of the
improvements. However, we are not qualified to
detect such materials and urge the client to
employ an expert in the field to determine if such
hazardous materials are thought to exist.
Design Features and
Functionality: The subject improvements consist of fourteen,
one-story office buildings which can be utilized
for either single or multi-tenant occupancy.
Considering the overall layout and design of the
buildings, the available on-site parking and the
aesthetic appeal provided by the landscaped yard
areas, the subject's appeal to prospective tenants
is very good.
Physical Condition: The subject property was inspected on May 29,
1997. At that time, the improvements appeared to
be in good physical condition with no significant
items of deferred maintenance noted. Ordinarily,
the economic life of a complex like this is 45
years. Due to the high level of maintenance which
the improvements have received, the appraiser
estimates the effective age of the complex to be 5
to 10 years with a remaining economic life of 35
to 40 years.
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Property Description
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We did not inspect the roof of the building or
make a detailed inspection of the mechanical
systems. The appraisers, however, are not
qualified to render an opinion as to the adequacy
or condition of these components. The client is
urged to retain an expert in this field if
detailed information is needed about the adequacy
and condition of mechanical systems.
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<PAGE>
REAL PROPERTY TAXES AND ASSESSMENTS
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The subject property is under the taxing jurisdiction of Montgomery
County. Taxes are levied against all real property in this locale for the
purpose of providing funding for the various municipalities. The amount of ad
valorem taxes is determined by the current assessed value for the real property,
in conjunction with the total combined tax rates of the taxing jurisdiction. In
an effort to project the future tax liability for the subject property, we have
reviewed both. the present and historical tax rates combined with a forecast of
the assessments.
Tax Rates
The following is a chart displaying the five and ten year trend in tax
rates levied by the above noted taxing jurisdictions:
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Tax Rates Per $1000 of Assessed Value
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Taxing Authority 1987 Tax Rate 1992 Tax Rate 1997 Tax Rate
================================================================================
County $ 22.65 $ 33.00 $ 40.60
- --------------------------------------------------------------------------------
Borough 56.50 89.00 93.00
- --------------------------------------------------------------------------------
Schools 12.00 17.00 20.00
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Total $91.15 $139.00 $153.60
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As the preceding chart indicates, the tax rates affecting the subject
property have increased by approximately 2.02 percent per year over the past
five years (since 1992), but 5.36 percent per year over the past ten years
(since 1987). Typically, over the long term, tax rates will mirror inflationary
trends, with average compound growth rates of 3.0 to 4.0 percent.
Tax rates increase or decrease annually based upon changes in municipal
budgets and the total tax base. Again, over the longer term, tax rate increases
tend to mirror inflationary trends, except during periods of economic decline or
in fast growing areas where new services are required. With the likely
stabilization of real estate values and the tax base, we are of the opinion that
more normal increases in tax rates, of say 3.0 to 4.0 percent, will be the trend
over the intermediate term.
Tax Assessment
The Montgomery County Board of Assessment establishes the assessed value
on real property for all of the previously noted taxing jurisdictions. The 1997
assessment, as well as the historical assessments for 1995 and 1996, are as
follows:
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Historical Assessed Value
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Block - Unit 1995 1996 1997
================================================================================
001-005 $291,700 $291,700 $240,832
001-024 $386,300 $386,300 $318,895
001-028 $300,800 $300,800 $242,358
Total $978,800 $978,800 $808,085
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Real Property Taxes and Assessments
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As can be seen from the above chart, the 1995 and 1996 assessment remained
stable. The 1997 assessment represents a 17.4 percent decrease over the 1996
assessment, as the result of a successful assessment appeal. In an effort to
evaluate the fairness of the subject's current assessed value and future
prospects for a change in the assessment, we have compared the assessment to
estimated value of the subject property as concluded in this report.
According to the State Tax Equalization Board (STEB), the current
assessment to value ratio in Montgomery County is 5.4 percent. Thus, the
subject's total assessment implies a market value, for tax purposes, of
approximately $14,965,000. Based upon our subsequent value conclusion, it
appears that the subject is slightly over assessed.
Ad Valorem Tax Conclusions
Applying the 1997 assessment for the subject to the total 1997 tax rate
results in a combined tax burden of $124,121.86 in that year as calculated in
the following chart.
======================================================
$808,080 x $0.1536 = $124,121.86
======================================================
The above taxes have been paid for 1997.
Montgomery County recently completed a county wide re-evaluation. For
1998, the combined assessment on the subject property will be $18,347,390, which
is based upon the county's estimate of the current market value of the subject.
The proposed total assessment over the subject property implies a value for tax
purposes that is much greater than that found in our subsequent valuation.
Conversation with a representative of the assessor's office indicated that the
county mailed the official assessment notices for Bryn Athyn Borough on June 13,
1997 and that the owner needs to appeal the assessment within 40 days, which
would be July 23, 1997. In that the subject's assessment for 1997 was reduced by
court order to an equalized value of approximately $14,965,000, it would appear
that an appeal of the 1998 assessment would be reasonable. Combining the likely
change in the 1998 assessment with the fact that the 1998 tax rate has not been
established, we have utilized the current assessment and tax rate as a basis for
an estimate of future tax liability.
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ZONING
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The subject property is zoned LI Limited Industrial. Permitted uses within
this district include offices, flex-office and most light industrial type land
uses. Following is a summary of the area requirements which regulate development
within the LI zoning classification.
Minimum Site Area: 10 acres.
Minimum Individual Lot Area: 2 acres.
Maximum Building Coverage Ratio: 50 percent.
Minimum Yard Requirements:
Front 100 feet.
Side 50 feet.
Front 50 feet.
Maximum Building Height: 40 feet or three stories.
Minimum Off-Street Parking: One space per 100 square feet
of floor area
Based upon the subject's leasable area of 211,833+/- square feet, it would
appear that zoning would require that the contain 2,118+/- parking spaces. Based
upon the subjects 715+/- existing spaces, it would appear that the subject
represents a legal non-conforming use.
We know of no deed restrictions (private or public) which would further
limit the use of the subject property. However, this statement should not be
taken as a guarantee or warranty that no such restrictions exist. Deed
restrictions are a legal matter and only a title examination by an attorney
would normally uncover such restrictive covenants. Thus, an updated title search
of the subject property is recommended to determine the existence of such
restrictions.
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HIGHEST AND BEST USE
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Highest and Best Use of Site as Though Vacant
According to the Dictionary of Real Estate Appraisal, Third Edition
(1993), a publication of the Appraisal Institute, the highest and best use of
the site as though vacant is defined as:
Among all reasonable, alternative uses, the use that yields the highest
present land value, after payments are made for labor, capital, and
coordination. The use of a property based on the assumption that the
parcel of land is vacant or can be made vacant by demolishing any
improvements.
Physically Possible
The subject site contains approximately 45.11+/- acres of land with
frontage along Masons Mill and Byberry Roads in Bryn Athyn Borough. While the
size and of the site is felt to provide a for a wide variety of development
potential, the shape and existence of floodways limits the density threreof.
Municipal utilities would adequately provide for nearly all uses. Street
improvements are also adequate.
Legally Permissible
The subject's zoning classification permits light industrial and office
type land uses. As previously mentioned, we are not experts in the
interpretation of complex zoning ordinances. Additionally, there are no private
restrictions which are known to adversely affect the utilization of the land.
Thus, a planned industrial of office utilization of the subject parcels is
legally permissible.
Financially Feasible
The Regional Analysis section of this report presents demographic and
general economic trends which are now favorable for real estate ownership and
development. This is particularly true for the suburban communities surrounding
Philadelphia where population growth and employment creation are expected to
positively continue into the foreseeable future. In spite of this optimism, real
estate owners and investors must be cognizant of the fact that the region is
densely developed on a relative basis with a mature economy which serves to
limit opportunities. Thus, only those properties with a desirable location and
functional design are expected to out perform inflation in the general economy.
In the local real estate market, occupancies are now the highest they have
been in server with positive effects on rental rates achieved. Financing is now
available when sufficiently supported by the credit of an owner or major tenant.
We note, though, that office users can afford to pay more for space than can
industrial users of real property. Considering the strength of the market,
permitted uses by zoning and the site's physical traits, it is our opinion that
the highest and best use of the land on a vacant basis is office development.
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Highest and Best Use
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Highest and Best Use of Property as Improved
According to the Dictionary of Real Estate Appraisal, highest and best use
of the property as improved is defined as:
The use that should be made of a property as it exists. An existing
property should be renovated or retained so long as it continues to
contribute to the total market value of the property, or until the return
from a new improvement would more than offset the cost of demolishing the
existing building and constructing a new one.
Unlike the previous analysis of the subject site as vacant, here we
consider the subject property as currently improved with an evaluation as to the
physical, legal, and financial appropriateness of the existing land use.
Physical Considerations
The subject site at 1800 Byberry Road has been improved with a fourteen
building office complex which contains a leasable area of 211,833+/- square
feet. The property, which was 90 percent occupied at the time of inspection,
appeared to be in good physical condition. Based upon our observation, there are
no apparent physical factors that would adversely affect the continued utility
and/or existence of the subject improvements.
Legal Considerations
As previously stated, we are not experts in the interpretation of complex
zoning ordinances. However, based upon our review of public information, it
appears that the existing use and development of the subject have been accepted
by the local zoning officials. Thus, the subject parcels, as presently improved,
represents legal and conforming uses.
Financially Feasible
At present, the subject property is 91 occupied though a significant
tenant, General Instrument, is scheduled to vacate over the next year when its
new headquarters in Horsham Township is completed. Despite this, our analysis of
the local trends suggests that this space can be re-absorbed by the market in a
reasonable amount of time. Our subsequent analysis of the property (land plus
improvements) is greater than what would be the value of the land on a vacant
basis. Therefore, it is our opinion that the subject property, as presently
developed, represents the highest and best use of the site.
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VALUATION PROCESS
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In this appraisal, we have used the Sales Comparison Approach and the
Income Capitalization Approach to develop a market value estimate.
The Cost Approach was not performed for the following reasons:
o This approach is more relevant for new construction or where
sufficient information is available to reasonably estimate the
replacement cost new of the improvements and land.
o The investment marketplace does not typically trade buildings such
as the subject on a cost/value basis, particularly in markets where
it is generally perceived that cost exceeds value.
o The subjectivity of accurately estimating accrued depreciation of
the existing improvements significantly limits the reliability of
this approach.
In the Sales Comparison Approach, we performed the following steps:
o Searched the market for recent sales of one story office complexes
within the subject marketplace which contain similar physical and
economic characteristics to the subject property.
o Analyzed differences between those sales and the subject on the
basis of the sale price per square foot and extracted overall
capitalization rates.
o Correlated the various value indications into a point value estimate
from within the range.
In developing the Income Capitalization Approach, we:
o Studied rents in effect in the immediate and competing areas to
estimate potential rental income at market levels for office, and
industrial uses.
o Studied the recent history of operating expenses at the subject
property and competing properties to estimate an appropriate level
of stabilized expenses and reserves for replacement.
o Estimated net operating income by subtracting stabilized expenses
from potential gross income after deduction for vacancy and
collection loss.
o Prepared a discounted cash flow analysis in which the estimated
income and expenses over a projected holding period, and the
estimated property value at the time of reversion, are discounted at
an appropriate rate to estimate present market value.
In estimating the final value, we performed the following:
o Reviewed and re-examined each of the approaches to value which were
employed.
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Valuation Process
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0 Considered the type and reliability of the data used and
applicability of each approach.
0 Reconciled the approaches to a final value conclusion.
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SALES COMPARISON APPROACH
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Methodology
In the Sales Comparison Approach, we estimated value by comparing this
property with similar, recently sold properties in the surrounding or competing
area. Inherent in this approach is the principle of substitution, which holds
that when a property is replaceable in the market, its value tends to be set at
the cost of acquiring an equally desirable substitute property, assuming that no
costly delay is encountered in making the substitution.
By analyzing sales that qualify as arms-length transactions between
willing and knowledgeable buyers and sellers, we can identify value and price
trends. The basic steps of this approach are:
1. research recent, relevant property sales and current offerings
throughout the competitive area;
2. select and analyze properties that are similar to the property
appraised, considering changes in economic conditions that may have
occurred between the sale date and the date of value, and other
physical, functional, or locational factors;
3. identify sales that include favorable financing and calculate the
cash equivalent price;
4. reduce the sale prices to a common unit of comparison such as price
per square foot of net rentable area, effective gross income
multiplier, and overall capitalization rate;
5. make appropriate comparative adjustments to the prices of the
comparable properties to relate them to the property being
appraised; and
6. interpret the adjusted sales data and draw a logical value
conclusion.
Analysis of Sales
Over the past 12 months, the market has shown signs of improvement. Rents
have increased and concession packages have dissipated while positive net
absorption is taking place. In terms of the investment market, demand is
primarily being generated by institutional investors including several large
pension funds/European and Asian investors/opportunistic investors such as
Vulture Funds stimulated in an effort to capture "bottom of the market" sale
prices.
The subject property consists of a fourteen building, one story office
complex identified as Masons Mill Business Park which contains a leasable area
of 211,833+/- square feet. On the opposing page is a presentation of the
comparable property sales which were analyzed for the valuation of the subject
property. The most widely-used and market-oriented unit of comparison for
properties such as the subject is the sales price per square foot of building
area. All comparable sales were analyzed on this basis. Detail sheets describing
the sales employed in this analysis can be found among the Addenda to this
report.
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Sales Comparison Approach
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Comparable Property Sale #1 was an arm's length transaction accomplished
with market oriented financing. It is also a relatively recent transfer without
any adverse leaseholds interests. Locationally, Comparable Sale #1 exhibits a
superior commercial office location in suburban Chester County. Physically, this
property was in similar condition at the time of sale. Economically, Comparable
Sale #1 was 98 percent occupied at the time of sale as compared to the 90
percent occupied subject property. Regarding economies of scale, the comparable
featured a slightly smaller building area than the subject suggesting a small
downward adjustment. Based on the foregoing, an overall negative adjustment to
this comparable was deemed necessary.
Comparable Property Sale #2 was an arm's length transaction accomplished
with market oriented financing. It is also a relatively recent transfer without
any adverse leaseholds interests. Although situated less than 2+/- miles to the
east of the subject, the location of Comparable Sale # 2 in nearby Upper
Southampton Township was thought to be inferior to the subject given the nature
of the surrounding land uses at the subject property.
Physically, this property was in similar condition at the time of sale.
However, the comparable featured a partial second floor area that resulted in a
positive adjustment due to its inferior utility. Economically, Comparable Sale
#2 was 85 percent occupied at the time of sale as compared to the 90 percent
occupied subject property. Regarding economies of scale, the comparable featured
a smaller building area than the subject suggesting a negative adjustment. Based
on the foregoing, an overall positive adjustment to this comparable was deemed
necessary.
Comparable Property Sale #3 was an arm's length transaction accomplished
with market oriented financing. It is a recent transfer, occurring three months
ago, without any adverse leaseholds interests. Locationally, Comparable Sale #3
is considered to be slightly superior to the subject and warranted a negative
adjustment as a result.
Physically, this property was in older than the subject requiring a
positive adjustment for age and condition. Economically, Comparable Sale #3 was
95 percent occupied at the time of sale as compared to the 90 percent occupied
subject property. Regarding economies of scale, the comparable featured a
slightly smaller building area than the subject suggesting a small downward
adjustment. Based on the foregoing, an overall negative adjustment to this
comparable was deemed necessary.
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Sales Comparison Approach
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Comparable Property Sale #4 was reported to be an arm's length
transaction accomplished market oriented financing. The conveyance took place
approximately two months ago and did not involve any adverse leaseholds
interest. The location of the comparable was considered to be slightly superior
and warranted a small negative adjustment. The improvements at the comparable
property were regarded as similar to the subject; as was its occupancy level of
89 percent at the time of sale. Regarding economies of scale, the comparable
featured a smaller building area than the subject suggesting a negative
adjustment. Based on the foregoing, an overall negative adjustment to this
comparable was deemed necessary.
Conclusion
The adjustments discussed above are presented to outline the logic of our
thought processes with the ultimate result being a plausible market value
conclusion for the subject property. Based on our analysis of these data on a
price per square foot basis, we have concluded an appropriate adjusted range of
$64.00 to $66.00 per square foot of building area. From within this adjusted
range, we conclude the Sales Comparison Approach to indicate a current market
value of $13,800,000 for the Masons Mill Business Park. This indication of value
is equal to $65.15 per square foot of building area.
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<PAGE>
INCOME CAPITALIZATION APPROACH
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Methodology
The Income Capitalization Approach is a method of converting the
anticipated economic benefits of owning property into a value estimate through
capitalization. The principle of "anticipation" underlies this approach in that
investors recognize the relationship between an asset's income and its value. In
order to value the anticipated economic benefits of a particular property,
potential income and expenses must be estimated, and the most appropriate
capitalization method must be selected.
The two most common methods of converting net income into value are direct
capitalization and discounted cash flow analysis. In direct capitalization, net
operating income is divided by an overall rate extracted from market sales to
indicate a value. In the discounted cash flow method, anticipated future net
income streams and a reversionary value are discounted to an estimate of net
present value at a chosen yield rate (internal rate of return).
In our opinion the discounted cash flow method is the most appropriate
means of income capitalization for the subject property. The discounted cash
flow analysis is generally thought to be the best method for evaluating income
producing properties purchased for investment. Forecasted future patterns of
income and expenses are modeled to reflect perceived investor expectations.
Potential Gross Income
Generally, office tenants pay fixed gross rent on a rentable area basis
which is consistent with space measurement standards for buildings of similar
vintage, plus any increases in operating expenses and real estate taxes above
stipulated base year amounts. Tenant electric costs are either directly metered,
submetered or rent inclusion (charged as additional rent).
Existing Leases
Masons Mill Business Park is currently 90.8 percent occupied by eighteen
tenants. The property contains 19,495+/- vacant square feet within five separate
suites.
The major tenant at the subject property, General Instrument, occupies
86,754+/- square feet within six entire buildings and a portion of a seventh
building. This represents almost 41 percent of the leasable area within the
Masons Mill Business Park. As noted in the Market Analysis, General Instrument
is in the process of constructing a corporate headquarters in the Commonwealth
Corporate Center and will be vacating all of its local space next year when the
property is completed.
The balance of the property is occupied by a mixture of national, regional
and local tenants within suites ranging from 1,400+/0- square feet to 16,000+/-
square feet. The credit quality for the minor tenants ranges from average to
good within the context of their mostly unrated status.
Based upon the subject's current lease expiration schedule, 72 percent of
the property's rentable area is represented by leases which are due to expire
within the next three calendar years. Within the following three years, 19
percent of current leases are due to expire. Thus, within our projected 10 year
holding period, all of the leases currently in place will expire.
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Income Capitalization Approach
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Based upon the lease expiration schedule, we have forecasted a ten year
investment holding period. The 11th year is estimated to be the reversionary
year. As can be seen from the calendar year schedule, the 11th calendar year
will experience a typical number of lease expirations as a percentage of total
building area and, for analysis purposes, is considered a stabilized
reversionary year.
Market Rental Rate
Market rent for the vacant space within the subject property has been
estimated by analyzing five comparable leases exhibited on the summary chart on
the facing page.
Comparable Rental #1 represents 19,050+/- square feet within a one story,
multi-tenanted office building situated within the Horsham Business Center
in Horsham Township, Montgomery County. This comparable rental was
considered to be situated within a superior business park; however,
physically, the comparable was regarded as equal. Economically, the space
is larger than the average unit size at the subject property, warranting a
positive adjustment. The lease structure of this transaction was similar
to that of the subject, thus, no adjustment is needed. As a result of our
comparison, with emphasis on its superior location, a negative adjustment
was applied to this comparable rental.
Comparable Rental #2 represents 15,348+/- square feet within a one story,
dual-tenanted office building situated within the Horsham Business
Center. Like the previous lease, this comparable rental was considered to
be situated within a superior business park; however, physically, the
comparable was regarded as equal. Economically, the space is larger than
the average unit size at the subject property, warranting a positive
adjustment. The lease structure of this transaction was similar to that of
the subject, thus, no adjustment is needed. As a result of our comparison,
with emphasis on its superior location, a negative adjustment was applied
to this comparable rental.
Comparable Rental #3 represents a 30,138+/- square foot, one story, single
occupant office building situated within the Horsham Business Center. Like
the other leases, this rental was considered to be locationally superior
and physically equal to the subject property. Economically, the space is
larger than the average unit size at the subject property, warranting a
positive adjustment. The lease structure of this transaction was on a
triple net basis, thus, a positive adjustment was applied. As a result of
our comparison, a positive adjustment was applied to this comparable
rental.
Comparable Rental #4 represents a 44,000+/- square foot, one story, single
occupant office building situated in Horsham Township. Like the other
leases, this rental was considered to be locationally superior to the
subject. In addition, representing new construction this property was
superior to the subject property. Economically, the space is larger than
the average unit size at the subject property, warranting a positive
adjustment, while the lease structure of this transaction was on a triple
net basis, requiring an additional positive adjustment. As a result of our
comparison, a slight positive adjustment was applied to this comparable
rental.
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Income Capitalization Approach
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Comparable Rental #5 represents a 4,701+/- square foot unit within a one
story, multi-tenanted office building situated within the Pennsylvania
Business Campus. Like the previous leases, the location of this property
was thought to be superior to the subject property. Physically, the
comparable was regarded as equal to the subject property. Economically,
the space is similar to the average size of the subject units, thus, no
adjustment is required. However, the lease structure of this transaction
was on a triple net basis, requiring a positive adjustment. As a result of
our comparison, a positive adjustment was applied to this comparable
rental.
The subject's contract rents average $13.15 per square foot, plus tenant
electric. Certain leases within the property were signed several years ago and
fall above the current market rents. Other leases, however, were signed during
the past 12 to 24 months and thus, represent current market conditions. On
average, we believe the contract rents within the building are at market
oriented levels. The most recent leases within the property have been in the
$13.00 per square foot range. These leases may be summarized as follows:
<TABLE>
<CAPTION>
================================================================================================
Most Recent Leases
================================================================================================
Area Term Yr/Rent
No. Tenant Building Date (SF) (Yrs) (SF) Concessions
================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
1. Food Service Marketing 12 5/97 1,957 5 $13.12 None
- ------------------------------------------------------------------------------------------------
2. Prime Public Adjusters 12 6/97 1,400 3 $13.04 None
- ------------------------------------------------------------------------------------------------
3. Michael I. Levin 14 11/96 2,620 5 $13.03 None
- ------------------------------------------------------------------------------------------------
4 Visiting Nurses 12 7/96 3,568 2 $13.00 None
================================================================================================
</TABLE>
After considering the more recent leases signed at the subject property,
in conjunction with the rents now being paid for comparable space and services
in the competitive open market, it is our conclusion that the current average
economic rent for the subject property is $13.00 per square foot gross, plus
electric. This rent was assumed to increase at a rate of 50 percent of CPI (3.5
percent) over an average five year term. Additionally, the tenants would also be
responsible for increases in operating expenses over those incurred during the
initial year of occupancy.
The leasing brokers interviewed indicated that the Horsham/Willow
Grove/Jenkintown office market has improved dramatically over the past 12 to 15
months, with rents increasing and concessions decreasing. In the view of many,
the leasing market should continue to strengthen through the end of 1997. In
keeping with these observations, we have assumed that market rent will increase
at an average rate of 3.5 percent per annum through the projection period.
Absorption
At present, the subject is approximately 90.8 percent leased, with a total
of 19,446+/- square feet available throughout the complex. In our analysis, we
have projected that this vacant space will be absorbed over the next ten months.
The following chart is a presentation of the absorption schedule which we have
incorporated in our analysis. We believe this schedule reflects the thinking of
a knowledgeable and realistic investor in the current environment.
================================================================================
-34-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
<TABLE>
<CAPTION>
================================================================================================
Masons Mill Business Park
Projected Absorption Schedule
================================================================================================
Leased Rental Annual
Bldg.# Area Date Term Rate Increase Expenses
================================================================================================
<S> <C> <C> <C> <C> <C> <C>
4 2,048+/- SF 9/97 5 yrs. $13.00 1.75% Tenant Electric
- ------------------------------------------------------------------------------------------------
8 3,325+/- SF 11/97 5 yrs. $13.00 1.75% Tenant Electric
- ------------------------------------------------------------------------------------------------
12 3,570+/- SF 1/98 5 yrs. $13.45 1.75% Tenant Electric
- ------------------------------------------------------------------------------------------------
14 6,503+/- SF 3/98 5 yrs. $13.45 1.75% Tenant Electric
- ------------------------------------------------------------------------------------------------
7 4,000+/- SF 5/98 5 yrs. $13.45 1.75% Tenant Electric
================================================================================================
</TABLE>
In addition to the space which is currently vacant, we have also
established an schedule for the reabsorption of the 86,754+/- square feet of
space which is currently occupied by General Instrument. In that it would be
most unlikely that this space will be leased to a single tenant, we have broken
the space into smaller blocks of space, which are more consistent with the
existing tenancy. In our analysis, we have projected that it would take almost
two years to reabsorb this space after it is vacated. The following chart is a
presentation of the absorption schedule which we have incorporated in our
analysis. Once again, we believe this schedule reflects the thinking of a
knowledgeable and realistic investor in the current environment.
<TABLE>
<CAPTION>
================================================================================================
General Instrument Space
Projected Reabsorption Schedule
================================================================================================
Leased Rental Annual
Bldg.# Area Date Term Rate Increase Expenses
================================================================================================
<S> <C> <C> <C> <C> <C> <C>
1 8,708+/- SF 7/98 5 yrs. $13.45 1.75% Tenant Electric
- ------------------------------------------------------------------------------------------------
1 8,708+/- SF 9/98 5 yrs. $13.45 1.75% Tenant Electric
- ------------------------------------------------------------------------------------------------
2 8,000+/- SF 11/98 5 yrs. $13.45 1.75% Tenant Electric
- ------------------------------------------------------------------------------------------------
2/3 8,000+/- SF 1/99 5 yrs. $13.93 1.75% Tenant Electric
- ------------------------------------------------------------------------------------------------
3 8,000+/- SF 3/99 5 yrs. $13.93 1.75% Tenant Electric
- ------------------------------------------------------------------------------------------------
9 8,000+/- SF 5/99 5 yrs. $13.93 1.75% Tenant Electric
- ------------------------------------------------------------------------------------------------
10 9,019+/- SF 7/99 5 yrs. $13.93 1.75% Tenant Electric
- ------------------------------------------------------------------------------------------------
10 9,020+/- SF 9/99 5 yrs. $13.93 1.75% Tenant Electric
- ------------------------------------------------------------------------------------------------
11 8,000+/- SF 11/99 5 yrs. $13.93 1.75% Tenant Electric
- ------------------------------------------------------------------------------------------------
9/11 8,000+/- SF 1/00 5 yrs. $14.41 1.75% Tenant Electric
- ------------------------------------------------------------------------------------------------
13 3,300+/- SF 3/00 5 yrs. $14.41 1.75% Tenant Electric
================================================================================================
</TABLE>
Reimbursable Expenses (Escalations)
Consistent with market leasing practice for this type of real estate, the
tenants in a property like the subject are responsible for a proportionate share
of certain expenses incurred annually in the operation and ownership of the
investment above an established base amount. These expenses include real estate
taxes, insurance premiums, repairs and maintenance, utilities, management fees
and miscellaneous items occasionally incurred. A full discussion of reimbursable
as well as some other, non-reimbursable expenses is found in subsequent
paragraphs.
================================================================================
-35-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Vacancy and Collection Loss
A deduction must be made from the total gross revenues due an investor in
the subject property to account for the possibility of vacancy and/or
non-collection of rent. We have, therefore, deducted 3 percent from gross
revenues as a global allowance for the non-payment of rent or expenses by a
lessee. This rate has considered the creditworthiness of the tenant roster and
long-term market conditions.
Additionally, our analysis over time has incorporated a lag vacancy
allowance which provides for "down time" between the expiration of an existing
lease and the commencement of a new lease. Upon the expiration of a lease, it is
our best estimate that there is a 65 percent probability that the tenant will
renew and a 35 percent probability that the tenant will vacate. At renewal, no
down time is recognized should the tenant vacate. Regarding turnover, an average
down time of approximately six months time would be reasonable. Therefore, the
weighted average lag vacancy utilized between lease expirations in this report
is two months.
================================================================================
Lag Vacancy Allowance
================================================================================
Event Probability X Down Time = Weighted Time
================================================================================
Rollover 65% x - 0 - = - 0 -
Turnover 35% x 6 months = 2 months
- --------------------------------------------------------------------------------
Total 100% Average Weighted Time = 2 months
================================================================================
In the initial year of the stabilized investment, there was $27,248 of lag
vacancy. Additionally, credit loss was placed at $80,011 or 3 percent of
potential gross revenues. Combined, the vacancy and credit loss in year one of
the stabilized investment period is 4.0 percent. The reader should note that,
through the subsequent 10 years of our cash flow analysis, total vacancy and
credit loss are projected to amount to an average of 8.2 percent of potential
gross revenues. This is more in line with current market attitudes.
Operating Expenses
We were provided with historic operating expense data for the subject
property. We have also been provided with current ownership's operating pro
forma. On the opposing page is a presentation of these data sets.
As can be seen, historic operating expenses at the subject property from
1994 through 1996 ranged from $3.96 to $4.22 per square foot. Current ownership
budgets operating expenses at $4.22 per square foot for 1997. In the initial
year of the investment holding period, we project operating expenses to be $4.23
per square foot at the subject property based upon the following:
Utilities - This expense category includes energy to operate the common
areas plus water and sewer charges. Historically, this cost has ranged
from $0.49 to $0.65 per square foot, with a budgeted cost for 1997 of
$0.57 per square foot. Thus, we have concluded a charge of $0.57 per
square foot, which has been applied to the subject's occupied area. This
results in a first year utility expense of $109,111.
================================================================================
-36-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Capitalization Approach
================================================================================
Vacancy and Collection Loss
A deduction must be made from the total gross revenues due an investor in
the subject property to account for the possibility of vacancy and/or
non-collection of rent. We have, therefore, deducted 3 percent from gross
revenues as a global allowance for the non-payment of rent or expenses by a
lessee. This rate has considered the creditworthiness of the tenant roster and
long-term market conditions.
Additionally, our analysis over time has incorporated a lag vacancy
allowance which provides for "down time" between the expiration of an existing
lease and the commencement of a new lease. Upon the expiration of a lease, it is
our best estimate that there is a 65 percent probability that the tenant will
renew and a 35 percent probability that the tenant will vacate. At renewal, no
down time is recognized should the tenant vacate. Regarding turnover, an average
down time of approximately six months time would be reasonable. Therefore, the
weighted average lag vacancy utilized between lease expirations in this report
is two months.
Lag Vacancy Allowance
================================================================================
Event Probability X Down Time = Weighted Time
================================================================================
Rollover 65% x - 0 - = - 0 -
Turnover 35% x 6 months = 2 months
- --------------------------------------------------------------------------------
Total 100% Average Weighted Time = 2 months
================================================================================
In the initial year of the stabilized investment, there was $27,248 of lag
vacancy. Additionally, credit loss was placed at $80,011 or 3 percent of
potential gross revenues. Combined, the vacancy and credit loss in year one of
the stabilized investment period is 4.0 percent. The reader should note that,
through the subsequent 10 years of our cash flow analysis, total vacancy and
credit loss are projected to amount to an average of 8.2 percent of potential
gross revenues. This is more in line with current market attitudes.
Operating Expenses
We were provided with historic operating expense data for the subject
property. We have also been provided with current ownership's operating pro
forma. On the opposing page is a presentation of these data sets.
As can be seen, historic operating expenses at the subject property from
1994 through 1996 ranged from $3.96 to $4.22 per square foot. Current ownership
budgets operating expenses at $4.22 per square foot for 1997. In the initial
year of the investment holding period, we project operating expenses to be $4.23
per square foot at the subject property based upon the following:
Utilities - This expense category includes energy to operate the common
areas plus water and sewer charges. Historically, this cost has ranged
from $0.49 to $0.65 per square foot, with a budgeted cost for 1997 of
$0.57 per square foot. Thus, we have concluded a charge of $0.57 per
square foot, which has been applied to the subject's occupied area. This
results in a first year utility expense of $109,111.
================================================================================
-36-
<PAGE>
Income Capitalization Approach
================================================================================
Insurance - Our files reveal a comparable cost for liability and hazard
insurance to range from $0.08 to $0.22 per square foot of rentable
building area. Historically, this expense has ranged from $0.12 to $0.13
per square foot at the subject property. We have stabilized insurance
expense at $0.13 per square foot for this analysis after considering the
subject's operating history and budgeted cost for 1997.
Management - This item of expense provides for professional management
services like collections, supervision and the preparation of all budgets.
According to the subject's operating history, this cost has ranged from
$0.29 to $0.42 per square foot. Our files indicate that the cost for this
service typically ranges from $0.50 to $0.75 per square foot. Based upon
the subject's operating history, 1997 budgeted cost of $0.43 per square
foot and comparable expense data, we have concluded a management expense
in the initial year of the holding period of $0.50 per square foot.
Real Estate Taxes - This item is sensitive to a specific local
jurisdiction so that a direct comparison with those expense data available
from the market is not possible. However, in the Real Estate Tax and
Assessments section of this report, we document the level of assessments
of the subject property and comment on its reasonableness. As the
subject's assessment has been recently reduced by court order and
considered similar to its competition, we have utilized the actual taxes
over it here.
Cleaning - This expense item typically includes the cost for daily
janitorial services including supplies. From 1994 to 1996 this expense has
indicated a range from $0.47 to $0.60 per square foot, with a 1997
budgeted cost of $0.60 per square foot. However, at the present time
General Instrument is taking care of its own janitorial services. Thus,
the indicated unit rates are skewed by the inclusion of this space in the
calculation. For the purposes of this valuation we have applied a more
market oriented rate for suburban office space of $0.90 per square foot to
the subject's occupied area.
Maintenance - This expense category includes the annual cost of
maintaining the facility with supplies and labor. Historically, these
costs have ranged from $0.31 to $0.46 per square foot. The 1997 budgeted
cost for this expense item is $0.33 per square foot. In the initial year
of the investment, we have stabilized the maintenance costs at the
budgeted figure of $0.33 per square foot.
Outside Contracts - At properties like the subject, it is necessary to
engage outside contractors for services that include landscaping, snow
removal and trash removal. According to ownership, the costs associated
with outside contracts has historically ranged from $0.50 to $0.70 per
square foot. In addition, ownership has budgeted $0.56 per square foot for
1997. Thus, in the initial year of the investment, we have placed the cost
for outside contracts at $0.56 per square foot.
================================================================================
-37-
<PAGE>
Income Capitalization Approach
================================================================================
Administrative - in the course of operation, ownership will incur
administrative costs such as salaries, legal and accounting fees, etc.
Historically, this expense item has ranged from $0.44 to $0.80 per square
foot, with a 1997 budgeted cost of $0.78 per square foot. For purposes of
this valuation, we have estimated the administrative costs to be $0.70 per
square foot.
Miscellaneous - Invariably, miscellaneous expenses occur in the operation
of a property such as the subject. These include advertising and
promotional expenses, space planning, brochures, and a contingency for the
unknown. Historically, this expense has ranged from $0.04 to $0.09 per
square foot, with a budgeted cost of $0.17 per square foot. For this
analysis, miscellaneous operating expenses are stabilized at $0.05 per
rentable square foot of building area.
Operating expenses are forecasted to increase at an average annual rate of
3.5 percent over the investment holding period. The forecast of projected growth
rates in all categories of expense reflect typical investor expectations as
noted in the Cushman & Wakefield Investor Survey, which has been placed among
the Addenda to this report. Except where noted, our projected growth rates for
the various types of expense categories generally do not attempt to reflect
growth rates for any individual year, but rather the long term trend over the
period of analysis.
Other Non-Operating Expenses - Other, non-operating expenses of the
subject property are projected in this analysis from prevailing commission
schedules, construction costs, and accepted practices. We have analyzed
each item of capital expenditure in an attempt to project what the typical
investor in a property like the subject would consider reasonable, based
upon informed opinion and experience. The following is a discussion of the
other, non-operating expenses incorporated into this analysis of the
subject property.
Tenant Alterations - Upon the expiration of a lease, it is our best
estimate that there is a 65 percent probability of the existing tenant
renewing their lease and a 35 percent probability that the existing tenant
will vacate. The current cost to alter and re-decorate office space for a
rollover tenant is estimated to be $7.00 per square foot while that to
prepare space for a new turnover tenant is estimated to be $12.00 per
square foot. On average, then, the weighted cost of tenant alterations is
projected to be $8.75 per square foot in the initial year of the
investment holding period. The following is a presentation of these
computations.
================================================================================
Tenant Improvements Costs
================================================================================
Event Probability X Unit Cost = Weighted Cost
================================================================================
Rollover 65% X $ 7.00/SF = $ 4.55/SF
Turnover 35% X $12.00/SF = $ 4.20/SF
- --------------------------------------------------------------------------------
Total 100% Average Weighted Cost = $ 8.75/SF
================================================================================
================================================================================
-38-
<PAGE>
Income Capitalization Approach
================================================================================
Leasing Commissions - In estimating the appropriate stabilized leasing
expense for the subject property, the same rollover/turnover probabilities
as described above are utilized. The standard leasing commission for new
tenants is 6 percent of the first year's rent, 5 percent of the second, 4
percent of the third and 3 percent of each succeeding year's contract
rent, payable at lease commencement. Based upon an average five year lease
term, leasing commissions are equal to 4.2 percent of total base rental
income. The following is a summary of these computations.
==========================================================================
Effective Leasing Commissions
Average Five Year Lease Tenn
Turnover Tenant
==========================================================================
Lease Year % X Commission = Weighted Rate
==========================================================================
1 20% X 6% = 1.20%
2 20% X 5% = 1.00%
3 20% X 4% = .80%
4 20% X 3% = .60%
5 20% X 3% = .60%
--------------------------------------------------------------------------
Total 100% Effective Commission Rate = 4.20%
==========================================================================
For a tenant who elects to renew a lease, half of a commission is payable.
On a weighted average basis, then, leasing commissions are equal to 2.84
percent of total effective base rental income over the term. The following
is a presentation of these computations.
==========================================================================
Leasing Commission Expense
==========================================================================
Event Probability X Commission = Weighted Rate
==========================================================================
Rollover 65% X 2.1% = 1.37%
Turnover 35% X 4.2% = 1.47%
--------------------------------------------------------------------------
Total 100% Average Weighted Rate = 2.84%
==========================================================================
Reserves - It is customary and prudent to set aside an amount annually for
the replacement of short lived capital items such as roofs, parking lots,
or mechanical equipment. In this analysis, we have projected an allowance
for reserves of $0.10 per square foot of rentable building area which is
typical in the local market place for a property like the subject.
Reserves for replacements are therefore stabilized at $21,183.
Other non-operating expenses are also forecasted to increase at an average
annual rate of 3.5 percent over the investment holding period. This too is
consistent with the Cushman & Wakefield Investor Survey. Again, our projected
growth rates for the various types of expense categories generally do not
attempt to reflect growth rates for any individual year, but rather the long
term trend over the period of analysis.
================================================================================
-39-
<PAGE>
Income Capitalization Approach
================================================================================
Terminal Capitalization Rate - The residual cash flows annually generated
by the subject property comprise only the first part of the return which
an investor will receive. The second component of this investment return
is the pre-tax cash proceeds from the resale of the property at the end of
a projected investment holding period. A terminal capitalization rate was
used to estimate the market value of the property at the end of the
assumed investment holding period. We estimated an appropriate terminal
rate based on indicated rates in today's market. A premium was added to
today's rate to allow for the risk of unforeseen events or trends which
might affect our estimate of net operating income during the holding
period.
==========================================================================
Summary of Capitalization Rates
==========================================================================
Sale Location Capitalization Rate
#.
==========================================================================
1 West Valley Business Center 10.95%
Tredyffrin Township
Chester County, PA
2 Southampton Office Park 12.37%
Upper Southampton Township
Bucks County, PA
3 Greentree Executive Campus 9.14%
Evesham Township
Burlington County, NJ
4 Greentree Commons 11.46%
Evesham Township
Burlington County, NJ
==========================================================================
Terminal Capitalization Rate Selected 11.0%
==========================================================================
Investors typically add 50 to 100 basis points to the "going-in" rate to
arrive at a terminal capitalization rate, according to Cushman &
Wakefield's periodic investor surveys. Our survey indicates that terminal
capitalization rates have ranged from 8.0 to 11.0 percent. Based on our
most recent experience, we have found little variance between going in and
terminal rates. For this analysis, it is our projection that the subject
property would most likely be sold at the end of the 10th year of the
holding period for an amount equal to what would be the next year's net
operating income capitalized at an overall rate of 11 percent. The 11th
year's computed net operating income is employed at this point as it would
be the first received by a new purchaser of the subject property. It is
projected, then, that a current investor would dispose of the subject
property at the end of the projected holding period for an amount equal to
$22,033,000 or $104.01 per square foot of building area.
================================================================================
-40-
<PAGE>
Income Capitalization Approach
================================================================================
Transaction Costs - From the projected $22,033,000 reversion to an
investor in the subject property, we have deducted a total of $661,000 to
account for the various transaction costs associated with the sale of an
asset of this type. These costs consist of 3 percent of the total
disposition price of the subject property as an allowance for transfer
taxes, professional fees, and other miscellaneous expenses that the seller
pays at final closing. Deducting these transaction costs from the computed
reversion renders pre-tax net proceeds of sale equal to $21,372,000 to be
received by an investor in the subject property at the end of the holding
period.
Discount Rate - In our valuation, we endeavored to reflect the most likely
actions of typical buyers and sellers in this market. We forecasted cash
flows and discounted them and the future property value at reversion to a
present value at various rates of return (yield rates) currently required
by investors for similar quality real property. The yield rate (internal
rate of return or IRR) is the single rate that discounts all future
benefits (cash flow and reversion) to an estimate of net present value.
Cushman & Wakefield Valuation Advisory Services periodically surveys
national real estate investors to determine their investment objectives.
Following is a brief review of internal rates of return, overall rates,
and income and expense growth rates considered acceptable by respondents.
The entire survey is included among the Addenda to this report.
==========================================================================
AUTUMN 1996 INVESTOR SURVEY
FOR SUBURBAN OFFICE BUILDINGS
==========================================================================
GOING-IN TERMINAL IRR
--------------------------------------------------------------------------
Low High Low High Low High
==========================================================================
Mean 8.80% 9.50% 9.30% 9.90% 11.2% 11.6%
--------------------------------------------------------------------------
Range 8.00% 11.0% 8.00% 11.0% 10.0% 13.0%
==========================================================================
The wide range of investment parameters indicates that property risk and
yield are assessed to a particular investment property based on a variety
of variables. Risk is the primary determinant, and the risk variables
include whether current contract rents are significantly above or below
current market rents; the amount and timing of tenant rollovers; the risk
to lease-up the property and the strength of the market during the
lease-up period; the durability of the cash flow, and its ability to
increase with inflation along with the creditworthiness of the existing
tenancy. Risk is also dependent on investor demand for the property type;
the diversification of the metropolitan area; the property's location
within the local market; the supply and demand for the property type
within the market; and the effective age of the property.
================================================================================
-41-
<PAGE>
Income Capitalization Approach
================================================================================
The internal rate of return and terminal capitalization rate selected for
this analysis were strongly influenced by our recent Investor Survey. We
realize that this type of survey reflects target rather than transactional
rates. Transactional rates are usually difficult to obtain in the
verification process and are actually only target rates of the buyer at
the time of sale. The property's performance will ultimately determine the
actual yield and capitalization rate at the time of sale after a specific
holding period. We have found that, in improving markets or with above
average properties, demand will be high and transactional rates may be
lower than target rates that are quoted in surveys. We have tried to
recognize this factor in our choice of these two rates for our cash flow
model.
Considering the locational attributes, physical traits and economic
characteristics of the subject property, we believe a discount rate
ranging from 11.0 percent to 12.0 percent would be appropriate for the
subject property in light of the investment criteria presented here. Thus,
we have discounted the projected future pre-tax cash flows to be received
by an investor in the subject property to a present value so as to yield
11.0 percent to 12.0 percent on capital at 25 basis point intervals over
the holding period. This discounting process is summarized as follows:
==========================================================================
Investment Summary
==========================================================================
Discount Rate Present Worth Unit Rate Overall Rate
==========================================================================
11.00% $14,717,000 $69.47/SF 12.61%
11.25% $14,463,000 $68.28/SF 12.84%
11.50% $14,214,000 $67.10/SF 13.06%
11.75% $13,970,000 $65.95/SF 13.29%
12.00% $13,732,000 $64.82/SF 13.52%
==========================================================================
Through such a sensitivity analysis, it can be seen that the present value
of the subject property varies from approximately $13,732,000 to
$14,717,000. Considering the quality of the tenant roster in place at the
subject, we believe a discount rate which falls toward the mid-point of
the range now required in the marketplace to be appropriate in this case.
Using an 11.50 percent internal rate of return, our discounted cash flow
model computes to a present worth of $14,214,000 which we round to
$14,200,000 as an indication of market value for Masons Mill Business Park
via the Income Capitalization Approach.
This indication of value produces a skewed non-descriptive "going-in"
overall capitalization rate of 13.06 percent, due to the potential for a
large amount of tenant turnover at the subject property over the next 12
to 18 months with the departure of General Instrument. Additionally, based
upon a currently indicated value of $14,200,000 and a projected future
gross reversionary value of approximately $22,000,000, a compound annual
rate of appreciation of 4.48 percent is computed. Although this percentage
increase is higher than anticipated value appreciation, it was thought to
be reasonable when considering the costs associated with leasing the space
to be vacated by General Instrument. Finally, with regard to the
composition of the internal rate of return employed here, approximately 49
percent of the expected yield is from cash flows while the balance is
attributable to property reversion. Once again, this percentage, which is
lower than the norm is affected by the cost associated with departure of
General Instrument.
================================================================================
-42-
<PAGE>
RECONCILIATION AND FINAL VALUE ESTIMATE
================================================================================
We have considered all of the traditional approaches to estimating market
value of commercial real estate in our analysis. Two of the three traditional
approaches were utilized, indicating the following values for the subject
property.
Sales Comparison Approach $13,800,000
Income Capitalization Approach $14,200,000
The three traditional methods of estimating the market value of commercial
real estate are not mutually exclusive approaches to deriving an estimate of
most probable selling price, but are inter-dependent methodologies, each relying
on components from at least one of the other approaches. Hence, the Cost
Approach requires extensive market data to derive estimates of depreciation and
to determine the value of land as if vacant. This approach may also require
income data in order to make adjustments for functional and economic
obsolescence. The Sales Comparison Approach requires application of methods from
the Income Capitalization Approach in order to make adjustments for differences
in income that have influenced the sale price. Consideration of market data is
also required for the Income Capitalization Approach in the selection and
application of equity, capitalization and discount rates, and estimation of
income and expenses. Consequently, it is our opinion that purchasers and
sellers, at least intuitively, consider components of all three approaches in
the process of negotiating an acceptable price for a particular property.
It is the Income Capitalization Approach, however, that is logically
considered the most appropriate technique for estimating the value of
income-producing property. Not only does this approach represent the most direct
and accurate simulation of market behavior, it is the method explicitly employed
by buyers and sellers in acquisition and disposition decisions. Therefore,
following the implied dictum of the market, we have used an approach based
primarily on projected income as the foundation for our valuation of the subject
property.
There are several additional reasons why the Sales Comparison Approach
does not form the basis of our value estimate for the subject property. The
quantity and quality of market information inhibits the use of the Sales
Comparison Approach. Inadequacy of information regarding gross and net income,
lease details and expenses of comparable sales often deters accurate and
relevant adjustments of unit price indicators. Comparison at a dollar per square
foot level precludes the analysis of those key factors which form the basis for
projections on which the purchase decision was made.
In light of the above, we are of the opinion that the market value of the
leased fee estate in the property, as of July 1, 1997 was:
FOURTEEN MILLION TWO HUNDRED THOUSAND DOLLARS
$14,200,000
================================================================================
-43-
<PAGE>
ASSUMPTIONS AND LIMITING CONDITIONS
================================================================================
"Appraisal" means the appraisal report and opinion of value stated therein; or
the letter opinion of value, to which these Assumptions and Limiting Conditions
are annexed.
"Property" means the subject of the Appraisal.
"C&W" means Cushman & Wakefield, Inc. or its subsidiary which issued the
Appraisal.
"Appraiser(s)" means the employee(s) of C&W who prepared and signed the
Appraisal.
This appraisal is made subject to the following assumptions and limiting
conditions:
1. No opinion is intended to be expressed and no responsibility is assumed
for the legal description or for any matters which are legal in nature or
require legal expertise or specialized knowledge beyond that of a real
estate appraiser. Title to the Property is assumed to be good and
marketable and the Property is assumed to be free and clear of all liens
unless otherwise stated. No survey of the Property was undertaken.
2. The information contained in the Appraisal or upon which the Appraisal is
based has been gathered from sources the Appraiser assumes to be reliable
and accurate. Some of such information may have been provided by the owner
of the Property. Neither the Appraiser nor C&W shall be responsible for
the accuracy or completeness of such information, including the
correctness of estimates, opinions, dimensions, sketches, exhibits and
factual matters.
3. The opinion of value is only as of the date stated in the Appraisal.
Changes since that date in external and market factors or in the Property
itself can significantly affect property value.
4. The Appraisal is to be used in whole and not in part. No part of the
Appraisal shall be used in conjunction with any other appraisal.
Publication of the Appraisal or any portion thereof without the prior
written consent of C&W is prohibited. Except as may be otherwise stated in
the letter of engagement, the Appraisal may not be used by any person
other than the party to whom it is addressed or for purposes other than
that for which it was prepared. No part of the Appraisal shall be conveyed
to the public through advertising, or used in any sales or promotional
material without C&W's prior written consent. Reference to the Appraisal
Institute or to the MAI designation is prohibited.
5. Except as may be otherwise stated in the letter of engagement, the
Appraiser shall not be required to give testimony in any court or
administrative proceeding relating to the Property or the Appraisal.
================================================================================
-44-
<PAGE>
Assumptions and Limiting Conditions
================================================================================
6. The Appraisal assumes (a) responsible ownership and competent management
of the Property; (b) there are no hidden or unapparent conditions of the
Property, subsoil or structures that render the Property more or less
valuable (no responsibility is assumed for such conditions or for
arranging for engineering studies that may be required to discover them);
(c) full compliance with all applicable federal, state and local zoning
and environmental regulations and laws, unless noncompliance is stated,
defined and considered in the Appraisal; and (d) all required licenses,
certificates of occupancy and other governmental consents have been or can
be obtained and renewed for any use on which the value estimate contained
in the Appraisal is based.
7. The physical condition of the improvements considered by the Appraisal is
based on visual inspection by the Appraiser or other person identified in
the Appraisal. C&W assumes no responsibility for the soundness of
structural members nor for the condition of mechanical equipment, plumbing
or electrical components.
8. The forecasted potential gross income referred to in the Appraisal may be
based on lease summaries provided by the owner or third parties. The
Appraiser has not reviewed lease documents and assumes no responsibility
for the authenticity or completeness of lease information provided by
others. C&W recommends that legal advice be obtained regarding the
interpretation of lease provisions and the contractual rights of parties.
9. The forecasts of income and expenses are not predictions of the future.
Rather, they are the Appraiser's best estimates of current market thinking
on future income and expenses. The Appraiser and C&W make no warranty or
representation that these forecasts will materialize. The real estate
market is constantly fluctuating and changing. It is not the Appraiser's
task to predict or in any way warrant the conditions of a future real
estate market; the Appraiser can only reflect what the investment
community, as of the date of the Appraisal, envisages for the future in
terms of rental rates, expenses, supply and demand.
10. Unless otherwise stated in the Appraisal, the existence of potentially
hazardous or toxic materials which may have been used in the construction
or maintenance of the improvements or may be located at or about the
Property was not considered in arriving at the opinion of value. These
materials (such as formaldehyde foam insulation, asbestos insulation and
other potentially hazardous materials) may adversely affect the value of
the Property. The Appraisers are not qualified to detect such substances.
C&W recommends that an environmental expert be employed to determine the
impact of these matters on the opinion of value.
Unless otherwise stated in the Appraisal, compliance with the requirements
of the Americans With Disabilities Act of 1990 (ADA) has not been
considered in arriving at the opinion of value. Failure to comply with the
requirements of the ADA may adversely affect the value of the property.
C&W recommends that an expert in this field be employed.
================================================================================
-45-
<PAGE>
CERTIFICATION OF APPRAISAL
================================================================================
We certify that, to the best of our knowledge and belief:
1. Michael A. Lagreca inspected the property. John B. Rush, MAI has reviewed
and approved the report and but did not inspect the property.
2. The statements of fact contained in this report are true and correct.
3. The reported analyses, opinions, and conclusions are limited only by the
reported assumptions and limiting conditions, and are our personal,
unbiased professional analyses, opinions, and conclusions.
4. We have no present or prospective interest in the property that is the
subject of this report, and we have no personal interest or bias with
respect to the parties involved.
5. Our compensation is not contingent upon the reporting of a predetermined
value or direction in value that favors the cause of the client, the
amount of the value estimate, the attainment of a stipulated result, or
the occurrence of a subsequent event. The appraisal assignment was not
based on a requested minimum valuation, a specific valuation or the
approval of a loan.
6. No one provided significant professional assistance to the persons signing
this report.
7. Our analyses, opinions, and conclusions were developed, and this report
has been prepared, in conformity with the Uniform Standards of
Professional Appraisal Practice of the Appraisal Foundation and the Code
of Professional Ethics and the Standards of Professional Appraisal
Practice of the Appraisal Institute.
8. The use of this report is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives.
9. As of the date of this report, John B. Rush has completed the requirements
of the continuing education program of the Appraisal Institute.
/s/ Michael A. Lagreca
- --------------------------------------
Michael A. Lagreca
Valuation Advisory Services
Pennsylvania Certified
General Appraiser #GA-000218-L
/s/ John B. Rush
- --------------------------------------
John B. Rush, MAI
Director
Valuation Advisory Services
Pennsylvania Certified
General Appraiser#GA-000331-L
================================================================================
-46-
<PAGE>
ADDENDA
================================================================================
INVESTOR SURVEY
APPRAISERS' QUALIFICATIONS
-47-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET OFFICE MARKET - URBAN/CBD
- ------------------------------------------------------------------------------------------------------------------------------------
9.5% 10.0% 10.0% 10.0% 11.5% 11.5% 3.0% 3.0% 3.0% 4.0% 10.0 10.0
9.5% 10.0% 10.0% 10.5% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
8.0% 9.0% 8.5% 8.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
13.0% 13.0% -- -- 14.0% 14.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
8.0% 8.0% 8.5% 8.5% 10.5% 10.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.3% 9.3% 10.3% 10.3% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 9.0% 8.5% 9.0% 10.5% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
10.0% 10.0% 10.0% 10.0% 12.5% 12.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
9.0% 9.0% 9.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.0% 9.0% 8.0% 9.0% 10.0% 12.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
Responses 11 11 10 10 11 11 11 11 11 11 11 11
Average (%) 9.2% 9.6% 9.2% 9.7% 11.7% 12.0% 3.3% 4.2% 3.4% 3.9% 8.5 9.5
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 9.0% 9.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 12.0% 12.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.5% 9.5% 10.5% 10.5% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 10.0% 10.0% 11.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
15.0% 15.0% -- -- 20.0% 20.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
9.0% 10.0% -- -- -- -- -- -- -- -- -- --
9.0% 10.0% 9.0% 10.0% 12.0% 13.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
Responses 8 8 6 6 7 7 7 7 7 7 7 7
Average (%) 10.0% 10.4% 9.7% 10.3% 12.8% 13.1% 3.3% 4.7% 3.5% 4.0% 8.3 9.7
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
8.0% 9.0% 9.5% 10.0% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
8.0% 10.0% 8.5% 9.0% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0 10.0 10.0
10.0% 10.0% 10.0% 10.0% 13.0% 13.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.5% 9.5% 10.5% 10.5% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
12.0% 12.0% -- -- 13.0% 13.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
-- -- -- -- 12.0% 13.0% 4.0% 4.0% 4.0% 4.0 5.0 10.0
Responses 8 8 7 7 9 9 9 9 9 9 9 9
Average (%) 9.4% 10.0% 9.6% 10.2% 12.8% 13.5% 3.5% 4.6% 3.5% 3.9% 7.6 8.9
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
12.0% 12.0% 12.0% 12.0% 15.0% 15.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.8% 9.8% 10.8% 10.8% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
14.0% 14.0% -- -- 20.0% 20.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 11.0% 14.0% 14.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 6 6 5 5 6 6 6 6 6 6 6 6
Average (%) 10.7% 11.0% 10.5% 11.2% 14.6% 15.3% 3.2% 4.6% 3.3% 3.9% 8.0 8.8
--------------------------------------------------------------------------------------------------------
Total Responses 33 33 28 28 33 33 33 33 33 33 33 33
Weighted Average (%) 9.8% 10.3% 9.7% 10.3% 13.0% 13.5% 3.3% 4.6% 3.4% 3.9% 8.1 9.2
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
8 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET OFFICE MARKET - SUBURBAN/NON - CBD
- ------------------------------------------------------------------------------------------------------------------------------------
9.5% 9.5% 10.5% 10.5% 10.5% 10.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.5% 8.5% 9.3% 9.3% 11.3% 11.3% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
11.0% 11.0% -- -- 12.0% 12.0% 5.0% 3.0% 3.0% 3.0% 5.0 7.0
8.5% 10.0% 9.0% 10.5% 11.0% 12.5% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
8.0% 10.0% 9.5% 10.0% 11.5% 12.0% 4.0% 6.0% 4.0% 4.0% 10.0 10.0
l0.0% 11.0% 10.5% 11.0% 12.0% 12.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.0% 9.0% 8.5% 8.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
8.0% 8.0% 8.5% 8.5% 10.5% 10.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.1% 9.1% 10.1% l0.1% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 10.0% 9.0% 10.5% 11.0% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
9.0% 9.0% 10.0% 10.0% 11.5% 11.5% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.0% 9.0% 9.0% 9.0% 12.0% 13.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.0% 10.0% -- -- -- -- -- -- -- -- --
8.0% 9.0% 8.0% 9.0% 10.0% 12.0% 5.0% 5.0% 4.0% 4.0% 5.0 10.0
Responses 16 16 14 14 15 15 15 15 15 15 15 15
Average (%) 8.8% 9.5% 9.3% 9.9% 11.2% 11.6% 3.5% 4.4% 3.6% 3.8% 8.9 9.7
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
9.5% 9.5% 10.5% 10.5% 10.5% 10.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.8% 8.8% 9.5% 9.5% 11.8% 11.8% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
12.0% 12.0% -- -- 18.0% 18.0% 5.0% 3.0% 3.0% 3.0% 5.0 7.0
10.5% 10.5% 10.0% 10.0% 11.0% 13.0% 2.0% 2.0% 2.0% 2.0% 10.0 10.0
8.0% 10.0% 9.5% 10.0% 11.0% 12.0% 4.0% 6.0% 4.0% 4.0% 10.0 10.0
9.0% 10.0% 9.0% 9.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.0% 11.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.4% 9.4% 10.4% 10.4% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 10.0% 14.0% 15.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
10.0% 11.0% -- -- -- -- -- -- -- -- -- --
10.0% 11.0% 10.0% 11.0% 12.0% 13.0% 5.0% 5.0% 4.0% 4.0% 5.0 10.0
Responses 13 13 11 11 12 12 12 12 12 12 12 12
Average (%) 9.5% 10.0% 9.8% 10.2% 12.0% 12.5% 3.4% 4.5% 3.4% 3.7% 8.6 9.6
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% -- -- 13.0% 13.0% 3.0% 3.0% 3.0% 3.0% 5.0 7.0
8.0% 10.0% 8.5% 9.0% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
10.0% 10.0% 10.0% 10.0% 12.5% 12.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.4% 9.4% 10.4% 10.4% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
6.0% 6.0% 9.0% 9.0% 17.0% 20.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.0% 10.0% -- -- -- -- -- -- -- -- -- --
12.0% 12.0% 10.0% 10.0% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 2.0 2.0
Responses 10 10 8 8 9 9 9 9 9 9 9 9
Average (%) 9.1% 9.7% 9.5% 10.0% 13.4% 14.3% 3.1% 4.6% 3.4% 3.8% 7.2 8.0
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% -- -- 18.0% 18.0% 3.0% 3.0% 3.0% 3.0% 5.0 7.0
10.5% 10.5% 10.0% 10.0% 11.0% 13.0% 2.0% 2.0% 2.0% 2.0% 10.0 10.0
11.0% 11.0% 11.0% 11.0% 14.0% 14.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.6% 9.6% 10.6% 10.6% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
6.0% 6.0% 10.0% 10.0% 20.0% 20.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.0% 10.0% -- -- -- -- -- -- -- -- -- --
12.0% 12.0% 10.0% 10.0% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 2.0 2.0
Responses 10 10 8 8 9 9 9 9 9 9 9 9
Average (%) 9.7% 10.0% 10.0% 10.5% 14.5% 15.2% 2.9% 4.3% 3.2% 3.6% 7.2 8.0
--------------------------------------------------------------------------------------------------------
Total Responses 49 49 41 41 45 45 45 45 45 45 45 45
Weighted Average (%) 9.3% 9.8% 9.7% 10.1% 12.8% 13.4% 3.2% 4.4% 3.4% 3.7% 8.0 8.8
--------------------------------------------------------------------------------------------------------
</TABLE>
AUTUMN 1996 9
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET INDUSTRIAL MARKET - WAREHOUSE/DISTRIBUTION
- ------------------------------------------------------------------------------------------------------------------------------------
9.2% 9.2% 9.5% 9.5% 10.0% 10.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.5% 8.5% 9.3% 9.3% 11.0% 11.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
8.5% 10.0% 9.5% 10.0% 11.0% 12.0% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
9.0% 9.0% 9.5% 9.5% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
8.0% 8.0% 8.5% 8.5% 10.5% 10.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 10.0% 9.0% 10.5% 11.0% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
9.0% 9.0% 10.0% 10.0% 11.0% 11.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
9.0% 9.0% 9.5% 9.5% 10.5% 10.5% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 10 10 10 10 10 10 10 10 10 10 10 10
Average (%) 8.8% 9.2% 9.4% 9.8% 10.9% 11.0% 2.9% 4.0% 3.3% 3.8% 9.8 10.1
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
9.2% 9.2% 9.5% 9.5% 10.0% 10.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.8% 8.8% 9.5% 9.5% 11.3% 11.3% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.5% 11.5% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
10.0% 10.0% 11.0% 11.0% 12.0% 12.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.8% 9.8% 10.3% 10.3% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 7 7 7 7 7 7 7 7 7 7 7 7
Average (%) 9.3% 9.5% 10.0% 10.2% 11.2% 11.2% 2.8% 4.3% 3.2% 3.9% 9.7 10.1
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 12.0% 12.0% 13.0% 13.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.8% 9.8% 10.3% 10.3% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 9.7% 9.9% 10.4% 10.8% 11.9% 11.9% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
12.0% 12.0% 13.0% 13.0% 14.0% 14.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 10.0% 10.5% 10.5% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.5% 10.5% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 10.1% 10.4% 10.9% 11.3% 12.4% 12.4% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
--------------------------------------------------------------------------------------------------------
Total Responses 25 25 25 25 25 25 25 25 25 25 25 25
Weighted Average (%) 9.5% 9.7% 10.2% 10.5% 11.6% 11.6% 2.6% 4.5% 3.2% 4.0% 9.6 10.2
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
10 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET INDUSTRIAL MARKET - BUSINESS PARKS, OTHER INDUSTRIAL & MANUFACTURING
- ------------------------------------------------------------------------------------------------------------------------------------
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 10.0 10.0
9.0% 9.0% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 3 3 4 4 4 4 4 4 4 4
Average (%) 8.9% 9.4% 9.7% 10.7% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.8 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.5% 10.5% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 10.0 10.0
10.0% 10.0% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 3 3 4 4 4 4 4 4 4 4
Average (%) 9.3% 9.8% 9.8% 10.8% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.8 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.5% 10.5% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 5 5 4 4 5 5 5 5 5 5 5 5
Average (%) 9.4% 10.0% 9.9% 10.9% 12.4% 13.2% 3.4% 4.0% 3.2% 3.8% 8.2 9.4
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.5% 10.5% 11.0% 11.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.5% 10.5% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 5 5 4 4 5 5 5 5 5 5 5 5
Average (%) 9.6% 10.2% 10.0% 11.0% 12.4% 13.2% 3.4% 4.0% 3.2% 3.8% 8.2 9.4
--------------------------------------------------------------------------------------------------------
Total Responses 18 18 14 14 18 18 18 18 18 18 18 18
Weighted Average(%) 9.3% 9.8% 9.8% 10.8% 12.0% 12.4% 3.3% 4.0% 3.2% 3.9% 8.5 9.8
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
AUTUMN 1996 11
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET RETAIL MARKET - NEIGHBORHOOD & COMMUNITY CENTERS
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 10.5% 9.5% 10.5% 11.0% 12.5% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
9.5% 10.0% 10.0% 10.0% 12.5% 12.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
10.0% 10.0% 10.5% 10.5% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
10.3% 10.3% 10.8% 10.8% 13.0% 13.0% 2.0% 2.0% 4.0% 4.0% 7.0 7.0
9.0% 9.0% 10.0% 10.0% 10.0% 10.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
9.8% 9.8% 10.3% 10.3% 11.5% 11.5% 3.8% 4.0% 4.0% 4.0% 10.0 10.0
9.0% 10.0% -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
9.0% 9.0% 9.5% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
Responses 9 9 8 8 8 8 9 9 9 9 9 9
Average (%) 9.3% 9.8% 10.0% 10.4% 11.9% 12.1% 2.9% 3.7% 3.4% 3.9% 8.9 9.4
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
10.8% 10.8% 11.3% 11.3% 14.0% 14.0% 2.0% 2.0% 4.0% 4.0% 7.0 7.0
10.0% 10.0% 11.0% 11.0% 12.0% 12.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
9.0% 10.0% -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 11.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.5% 10.5% -- -- -- -- -- -- -- -- -- --
Responses 6 6 4 4 4 4 5 5 5 5 5 5
Average (%) 9.5% 10.0% 10.4% 11.1% 12.3% 12.3% 2.3% 3.8% 3.3% 4.2% 9.0 9.6
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 12.0% 12.0% 13.0% 13.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 10.0 10.0
9.0% 10.0% -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 9.5% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.0% 10.0% -- -- -- -- -- -- -- --
11.0% 11.0% 9.5% 9.5% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 3.0 3.0
Responses 7 7 5 5 5 5 6 6 6 6 6 6
Average (%) 9.7% 10.3% 10.1% 10.7% 13.8% 14.6% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
13.0% 13.0% 14.0% 14.0% 14.0% 14.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 10.0 10.0
9.0% 10.0% -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 11.0% 14.0% 14.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
11.0% 11.0% 10.5% 10.5% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 3.0 3.0
Responses 6 6 5 5 5 5 6 6 6 6 6 6
Average (%) 10.3% 10.8% 10.8% 11.5% 14.2% 15.0% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
--------------------------------------------------------------------------------------------------------
Total Responses 28 28 22 22 22 22 26 26 26 26 26 26
Weighted Average (%) 9.7% 10.2% 10.3% 10.9% 13.0% 13.5% 2.7% 3.9% 3.2% 4.0% 8.7 9.3
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
12 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET RETAIL MARKET - POWER CENTERS & "BIG BOX"
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 9.0% 9.5% 9.5% 11.0% 11.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
10.0% 10.0% 9.5% 9.5% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
10.5% 10.5% 10.5% 10.5% 11.0% 12.0% 2.0% 2.0% 3.0% 3.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.4% 11.4% 3.8% 3.8% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 9.5% 10.0% 11.0% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
9.3% 9.3% 9.5% 10.0% 10.5% 10.5% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.0% 9.0% -- -- -- -- -- -- -- -- -- --
9.0% 9.5% 9.5% 10.0% 11.0% 11.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
Responses 9 9 8 8 8 8 8 8 8 8 8 8
Average (%) 9.4% 9.5% 9.7% 10.1% 11.5% 11.7% 3.3% 3.5% 3.4% 3.7% 9.1 10.1
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
10.8% 10.8% 10.8% 10.8% 11.0% 12.0% 2.0% 3.0% 3.0% 3.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 3 3 3 3 3 3 3 3 3 3 3 3
Average (%) 9.8% 10.1% 10.1% 10.6% 11.0% 11.3% 2.8% 3.7% 3.2% 3.7% 9.3 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.8% 10.8% 10.8% 10.8% 12.0% 12.0% 2.0% 2.0% 3.0% 3.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 3 3 3 3 3 3 3 3 3 3 3 3
Average (%) 9.6% 9.9% 10.1% 10.6% 12.0% 12.0% 2.8% 3.3% 3.2% 3.7% 9.3 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 10.8% 10.8% 12.0% 12.0% 2.0% 2.0% 3.0% 3.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
-- -- -- -- 15.0% 15.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 2 2 2 2 3 3 3 3 3 3 3 3
Average (%) 9.8% 10.3% 10.1% 10.9% 12.7% 12.7% 2.8% 3.3% 3.2% 3.7% 9.3 10.3
--------------------------------------------------------------------------------------------------------
Total Responses 17 17 16 16 17 17 17 17 17 17 17 17
Weighted Average (%) 9.6% 9.9% 10.0% 10.5% 11.8% 11.9% 2.9% 3.5% 3.2% 3.7% 9.3 10.3
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
AUTUMN 1996 13
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET RETAIL MARKET - REGIONAL MALLS
- ------------------------------------------------------------------------------------------------------------------------------------
7.5% 7.5% 8.0% 8.0% 11.3% 11.3% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.0% 9.0% 9.0% 9.0% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
7.5% 7.5% 7.8% 7.8% 12.0% 12.0% 1.5% 2.0% 3.0% 3.0% 10.0 10.0
7.0% 8.0% 8.0% 8.0% 10.5% 11.5% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
9.0% -- -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.0% 8.0% 9.0% 10.5% 11.0% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
8.0% 8.0% 8.5% 8.5% 11.0% 11.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
7.8% 8.0% 8.3% 8.5% 11.0% 12.0% 2.5% 3.0% 2.5% 3.0% 10.0 10.0
7.0% 8.0% 7.0% 8.0% 10.0% 11.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
Responses 10 9 9 9 9 9 10 10 10 10 10 10
Average (%) 7.9% 8.2% 8.2% 8.6% 11.4% 11.8% 3.0% 3.6% 3.5% 3.8% 9.1 9.6
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 10.0% 10.0% 17.0% 17.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
9.0% 9.0% 9.0% 9.0% 13.5% 13.5% 2.0% 2.0% 4.0% 4.0% 7.0 7.0
9.0% 10.0% 10.0% 10.0% 12.0% 14.0% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
10.0% -- -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
Responses 5 4 4 4 4 4 5 5 5 5 5 5
Average (%) 9.3% 9.6% 9.6% 10.0% 13.4% 13.9% 2.5% 3.4% 3.7% 4.0% 8.6 8.6
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 10.0% 10.0% 18.0% 18.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
11.0% 11.0% 11.0% 11.0% 13.0% 14.0% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
9.0% -- -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.5% 8.5% 9.0% 11.5% 12.5% 2.5% 3.0% 2.5% 3.0% 10.0 10.0
Responses 5 4 4 4 4 4 5 5 5 5 5 5
Average (%) 9.3% 9.8% 9.8% 10.3% 13.4% 13.9% 2.6% 3.6% 3.4% 3.8% 9.2 9.2
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 11.0% 11.0% 20.0% 20.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
12.5% 12.5% 12.0% 12.0% 14.0% 15.0% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
10.0% -- -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 9.0% 9.3% 9.8% 12.0% 13.0% 2.5% 3.0% 2.5% 3.0% 10.0 10.0
13.0% 13.0% 11.0% 11.0% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 3.0 3.0
Responses 6 5 5 5 5 5 6 6 6 6 6 6
Average (%) 10.6% 11.0% 10.6% 11.0% 14.6% 15.0% 2.7% 3.5% 3.3% 3.7% 8.2 8.2
--------------------------------------------------------------------------------------------------------
Total Responses 26 22 22 22 22 22 26 26 26 26 26 26
Weighted Average (%) 9.3% 9.6% 9.5% 10.0% 13.2% 13.6% 2.7% 3.5% 3.5% 3.8% 8.8 8.9
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
14 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET RESIDENTIAL - APARTMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
8.5% 10.0% 9.0% 10.5% -- -- -- -- 3.5% 3.5% 1.0 1.0
8.5% 9.0% 9.0% 9.0% 11.0% 11.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
9.8% 9.8% 10.0% 10.0% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
8.3% 9.0% 9.0% 9.5% 10.5% 11.5% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
7.5% 8.5% 8.0% 9.0% 10.0% 11.0% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.8% 8.8% 9.0% 9.0% 11.3% 11.3% 3.8% 4.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 9.0% 9.0% 9.5% 10.0% 11.5% 3.0% 4.0% 3.0% 3.0% 10.0 10.0
8.5% 9.0% 8.5% 9.0% -- -- 3.0% 3.5% 3.0% 3.5% 10.0 10.0
8.8% 9.0% 9.0% 9.5% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 10 10 10 10 8 8 9 9 10 l0 l0 10
Average (%) 8.6% 9.2% 9.0% 9.6% 11.2% 11.7% 2.9% 3.9% 3.3% 3.8% 8.4 8.9
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 9.5% 9.5% 10.0% 11.0% 12.0% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
9.0% 10.0% 10.0% 10.0% 11.0% 12.5% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.0% 10.0% 10.0% 10.5% 10.5% 12.0% 3.0% 4.0% 3.0% 3.0% 10.0 10.0
9.0% 9.5% 9.5% 10.0% 11.5% 11.5% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 5 5 5 5 5 5 5 5 5 5 5 5
Average (%) 8.9% 9.7% 9.7% 10.3% 11.0% 11.8% 2.5% 4.2% 3.1% 4.0% 9.6 10.2
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 11.0% 11.0% 11.0% 12.5% 13.5% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.0% 9.0% 9.0% 11.0% 12.0% 4.0% 6.0% 3.0% 3.0% 3.0 5.0
9.0% 9.0% 9.5% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 8.9% 9.4% 9.8% 10.3% 11.6% 12.1% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
12.0% 13.0% 13.0% 13.0% 13.0% 15.0% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.0% 10.0% 10.0% 11.0% 13.0% 4.0% 6.0% 3.0% 3.0% 3.0 5.0
9.5% 10.0% 10.0% 11.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 9.5% 10.1% 10.6% 11.3% 12.0% 13.0% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
Total Responses 23 23 23 23 21 21 22 22 23 23 23 23
Weighted Average (%) 9.0% 9.6% 9.8% 10.4% 11.5% 12.1% 2.7% 4.4% 3.2% 4.0% 8.4 9.3
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical
issues
AUTUMN 1996 15
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICE SUMMARY OF WEIGHTED AVERAGE
- ------------------------------------------------------------------------------------------------------------------------------------
Urban/CBD 9.8% 10.3% 9.7% 10.3% 13.0% 13.5% 3.3% 4.6% 3.4% 3.9% 8.1 9.2
Class A - Leased Asset 9.2% 9.6% 9.2% 9.7% 11.7% 12.0% 3.3% 4.2% 3.4% 3.9% 8.5 9.5
Class B - Leased Asset 10.0% 10.4% 9.7% 10.3% 12.8% 13.1% 3.3% 4.7% 3.5% 4.0% 8.3 9.7
Class A - Value Added 9.4% 10.0% 9.6% 10.2% 12.8% 13.5% 3.5% 4.6% 3.5% 3.9 7.6 8.9
Class B - Value Added 10.7% 11.0% 10.5% 11.2% 14.6% 15.3% 3.2% 4.8% 3.3% 3.9% 8.0 8.8
Suburban 9.3% 9.8% 9.7% 10.1% 12.8% 13.4% 3.2% 4.4% 3.4% 3.7% 8.0 8.8
Class A - Leased Asset 8.8% 9.5% 9.3% 9.9% 11.2% 11.6% 3.5% 4.4% 3.6% 3.8% 8.9 9.7
Class B - Leased Asset 9.5% 10.0% 9.8% 10.2% 12.0% 12.5% 3.4% 4.5% 3.4% 3.7% 8.6 9.6
Class A - Value Added 9.1% 9.7% 9.5% 10.0% 13.4% 14.3% 3.1% 4.6% 3.4% 3.8% 7.2 8.0
Class B - Value Added 9.7% 10.0% 10.0% 10.5% 14.5% 15.2% 2.9% 4.3% 3.2% 3.6% 7.2 8.0
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL
- ------------------------------------------------------------------------------------------------------------------------------------
Warehouse/Distribution 9.5% 9.7% 10.2% 10.5% 11.6% 11.6% 2.6% 4.5% 3.2% 4.0% 9.6 10.2
Class A - Leased Asset 8.8% 9.2% 9.4% 9.8% 10.9% 11.0% 2.9% 4.0% 3.3% 3.8% 9.8 10.1
Class B - Leased Asset 9.3% 9.5% 10.0% 10.2% 11.2% 11.2% 2.8% 4.3% 3.2% 3.9% 9.7 10.1
Class A - Value Added 9.7% 9.9% 10.4% 10.8% 11.9% 11.9% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
Class 8 - Value Added 10.1% 10.4% 10.9% 11.3% 12.4% 12.4% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
Business Parks 9.4% 9.9% 10.0% 10.8% 12.3% 12.9% 3.4% 4.0% 3.2% 3.8% 8.3 9.6
Class A - Leased Asset 9.0% 9.5% 9.8% 10.5% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
Class B - Leased Asset 9.3% 9.8% 10.0% 10.8% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
Class A - Value Added 9.5% 10.2% 10.0% 10.8% 13.0% 14.3% 3.5% 4.0% 3.2% 3.7% 7.7 8.7
Class B - Value Added 9.7% 10.3% 10.2% 11.0% 13.0% 14.3% 3.5% 4.0% 3.2% 3.7% 7.7 8.7
0ther Industrial/
Manufacturing 9.2% 9.7% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.8 10.3
Class A - Leased Asset 8.8% 9.3% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.5 10.0
Class B - Leased Asset 9.3% 9.8% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.5 10.0
Class A - Value Added 9.3% 9.8% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
Class B - Value Added 9.5% 10.0% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
- ------------------------------------------------------------------------------------------------------------------------------------
RETAIL
- ------------------------------------------------------------------------------------------------------------------------------------
Neighborhood & Community
Centers 9.7% 10.2% 10.3% 10.9% 13.0% 13.5% 2.7% 3.9% 3.2% 4.0% 8.7 9.3
Class A - Leased Asset 9.3% 9.8% 10.0% 10.4% 11.9% 12.1% 2.9% 3.7% 3.4% 3.9% 8.9 9.4
Class B - Leased Asset 9.5% 10.0% 10.4% 11.1% 12.3% 12.3% 2.3% 3.8% 3.3% 4.2% 9.0 9.6
Class A - Value Added 9.7% 10.3% 10.1% 10.7% 13.8% 14.6% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
Class B - Value Added 10.3% 10.8% 10.8% 11.5% 14.2% 15.0% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
Power Center & "Big Box" 9.6% 9.9% 10.0% 10.5% 11.8% 11.9% 2.9% 3.5% 3.2% 3.7% 9.3 10.3
Class A - Leased Asset 9.4% 9.5% 9.7% 10.1% 11.5% 11.7% 3.3% 3.5% 3.4% 3.7% 9.1 10.1
Class B - Leased Asset 9.8% 10.1% 10.1% 10.6% 11.0% 11.3% 2.8% 3.7% 3.2% 3.7% 9.3 10.3
Class A - Value Added 9.6% 9.9% 10.1% 10.6% 12.0% 12.0% 2.8% 3.3% 3.2% 3.7% 9.3 10.3
Class B - Value Added 9.8% 10.3% 10.1% 10.9% 12.7% 12.7% 2.8% 3.3 3.2% 3.7% 9.3 10.3
Regional Malls 9.3% 9.6% 9.5% 10.0% 13.2% 13.6% 2.7% 3.5% 3.5% 3.8% 8.8 8.9
Class A - Leased Asset 7.9% 8.2% 8.2% 8.6% 11.4% 11.8% 3.0% 3.6% 3.5% 3.8% 9.1 9.6
Class B - Leased Asset 9.3% 9.6% 9.6% 10.0% 13.4% 13.9% 2.5% 3.4% 3.7% 4.0% 8.6 8.6
Class A - Value Added 9.3% 9.8% 9.8% 10.3% 13.4% 13.9% 2.6% 3.6% 3.4% 3.8% 9.2 9.2
Class B - Value Added 10.6% 11.0% 10.6% 11.0% 14.6% 15.0% 2.7% 3.5% 3.3% 3.7% 8.2 8.2
Specialty Retail 9.5% 10.5% 10.8% 11.5% 12.0% 12.6 1.9% 4.0% 3.3% 4.0% 10.0 10.5
Class A - Leased Asset 8.2% 9.0% 8.8% 9.7% 10.7% 11.3% 2.5% 4.0% 3.5% 4.0% 8.7 10.3
Class B - Leased Asset 9.3% 10.3% 10.8% 11.5% 11.5% 12.5% 1.8% 4.0% 3.3% 4.0% 10.5 10.5
Class A - Value Added 10.0% 11.0% 11.3% 12.0% 12.5% 13.0% 1.8% 4.0% 3.3% 4.0% 10.5 10.5
Class B - Value Added 10.8% 11.8% 12.3% 13.0% 13.5% 13.5% 1.8% 4.0% 3.3% 4.0% 10.5 10.5
- ------------------------------------------------------------------------------------------------------------------------------------
RESIDENTIAL
- ------------------------------------------------------------------------------------------------------------------------------------
Apartments 9.0% 9.6% 9.8% 10.4% 11.5% 12.1% 2.7% 4.4% 3.2% 4.0% 8.4 9.3
Class A - Leased Asset 8.6% 9.2% 9.0% 9.6% 11.2% 11.7% 2.9% 3.9% 3.3% 3.8% 8.4 8.9
Class B - Leased Asset 8.9% 9.7% 9.7% 10.3% 11.0% 11.8% 2.5% 4.2% 3.1% 4.0% 9.6 10.2
Class A - Value Added 8.9% 9.4% 9.8% 10.3% 11.6% 12.1% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
Class B - Value Added 9.5% 10.1% 10.6% 11.3% 12.0% 13.0% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
</TABLE>
16 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
Single-Tenant NNN Leased Properties
(Excludes "Bondable" Leases)
Minimum No. Going-In Cap Rate Internal Rate of Return
of Years Low High Low High
Investment Grade Tenant
- --------------------------------------------------------------------------------
4.0 9.0% 9.0% 10.0% 12.0%
----------------------------------------------------------
10.0 8.0 9.0 10.5 11.5
----------------------------------------------------------
5.0 10.5 10.5 13.0 13.0
----------------------------------------------------------
10.0 9.0 10.5 13.0 15.0
----------------------------------------------------------
10.0 8.5 9.0 10.5 12.0
----------------------------------------------------------
10.0 9.5 10.0 10.5 11.5
----------------------------------------------------------
10.0 8.5 11.0 10.8 12.0
----------------------------------------------------------
10.0 9.5 9.5 11.0 11.0
----------------------------------------------------------
20.0 9.0 9.0 N/A N/A
----------------------------------------------------------
10.0 8.0 10.0 N/A N/A
- --------------------------------------------------------------------------------
Responses 10.0 10.0 10.0 8.0 8.0
Average 9.9 9.0% 9.8% 11.2% 12.3%
Non-Investment Grade
Tenant
- --------------------------------------------------------------------------------
4.0 9.5% 9.5% 10.5% 13.0%
----------------------------------------------------------
10.0 9.0 10.0 11.5 12.5
----------------------------------------------------------
5.0 13.0 13.0 15.0 15.0
----------------------------------------------------------
10.0 10.0 12.0 17.0 20.0
----------------------------------------------------------
10.0 9.0 10.0 11.0 13.0
----------------------------------------------------------
10.0 11.0 12.0 13.0 15.0
----------------------------------------------------------
10.0 10.5 10.5 13.0 13.0
----------------------------------------------------------
20.0 11.0 11.0 N/A N/A
----------------------------------------------------------
10.0 10.0 12.5 N/A N/A
----------------------------------------------------------
Responses 9.0 9.0 9.0 7.0 7.0
Average 9.9 10.3% 11.2% 13.0% 14.5%
AUTUMN 1996 17
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES BLENDED INTERNAL EQUITY INTERNAL GROWTH RATES TYPICAL PROJECTION MANAGEMENT RESERVES FOR
GOING-IN TERMINAL RATE OF RETURN RATE OF RETURN INCOME EXPENSES PERIOD (YEARS) FEES* REPLACEMENT*
----------------------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
LUXURY
- ------------------------------------------------------------------------------------------------------------------------------------
8.0% 8.0% 10.0% 10.0% 18.0% 18.0% 25.0% 25.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 5.0% 5.0%
7.0% 7.0% 10.0% 10.0% 15.0% 15.0% 20.0% 20.0% 7.0% 7.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
6.0% 9.5% 10.0% 10.0% 12.0% 15.0% 15.0% 18.0% 3.0% 3.0% 3.0% 3.0% 5.0 5.0 2.0% 4.0% 4.0% 4.0%
8.0% 11.0% 8.5% 12.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
9.5% 9.5% 10.5% 10.5% 15.0% 15.0% 18.0% 18.0% 4.5% 4.5% 4.0% 4.0% 10.0 10.0 3.5% 3.5% 4.0% 4.0%
-- -- 11.0% 13.0% 15.0% 15.0% 18.0% 18.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0 3.0% 3.0% 4.0% 4.0%
6.0% 8.0% 10.0% 12.0% 13.0% 14.0% 20.0% 22.0% 3.0% 4.0% 3.0% 4.0% 5.0 5.0 2.0% 3.0% 4.0% 5.0%
8.0% 12.0% 8.0% 10.0% 15.0% 15.0% 20.0% 20.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0 3.0% 4.0% 4.0% 5.0%
Responses 7 7 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8
Average (%) 7.5% 9.3% 9.8% 10.9% 14.5% 15.3% 19.5% 20.1% 4.1% 4.3% 3.8% 3.9% 6.5 6.9 2.8% 3.3% 4.1% 4.4%
- ------------------------------------------------------------------------------------------------------------------------------------
FIRST CLASS
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 9.0% 11.0% 11.0% 12.0% 12.0% 20.0% 20.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
10.0% 10.0% 10.0% 10.0% -- -- 13.0% 13.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0 3.0% 3.0% 4.0% 5.0%
9.0% 9.0% 11.0% 11.0% 14.0% 14.0% 18.0% 18.0% 6.0% 6.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
9.5% 11.0% 11.0% 11.0% 15.0% 20.0% 18.0% 22.0% 3.0% 3.0% 2.0% 2.0% 5.0 5.0 2.0% 3.0% 4.0% 4.0%
10.0% 12.0% 10.5% 13.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
7.0% 9.0% 10.0% 11.0% 11.5% 12.0% 14.0% 16.0% 4.0% 5.0% 3.0% 4.0% 5.0 5.0 2.5% 2.5% 5.0% 5.0%
9.5% 9.5% 10.5% 10.5% 15.0% 15.0% 18.0% 18.0% 4.5% 4.5% 4.0% 4.0% 10.0 10.0 3.5% 3.5% 4.0% 4.0%
9.0% 9.0% 10.5% 10.5% 21.0% 21.0% 14.0% 14.0% 4.0% 4.0% 3.0% 3.0% 7.0 7.0 3.0% 3.0% 4.0% 4.0%
10.0% 12.0% 11.0% 11.0% -- -- -- -- 3.5% 3.5% 3.5% 3.5% 5.0 10.0 2.0% 3.0% 4.0% 4.0%
10.0% 10.0% 9.0% 9.5% 19.0% 19.0% 15.0% 15.0% 8.0% 8.0% 6.0% 6.0% -- -- 2.5% 2.5% 4.0% 4.0%
10.0% 13.0% 12.0% 13.0% 25.0% 25.0% 20.0% 20.0% 3.5% 4.0% 3.5% 4.0% 5.0 5.0 3.5% 3.5% 4.0% 4.0%
10.5% 10.5% 10.5% 10.5% 13.5% 13.5% -- -- 3.5% 3.5% 3.5% 3.5% 10.0 10.0 3.0% 3.0% 5.0% 5.0%
8.0% 12.0% 8.0% 10.0% 15.0% 15.0% 20.0% 20.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0 3.0% 4.0% 4.0% 5.0%
Responses 13 13 13 13 11 11 11 11 13 13 13 13 12 12 13 13 13 13
Average (%) 9.3% 10.5% 10.4% 10.9% 15.8% 16.5% 17.3% 17.8% 4.2% 4.3% 3.7% 3.8% 6.6 7.3 2.8% 3.1% 4.2% 4.3%
- ------------------------------------------------------------------------------------------------------------------------------------
MID-RATE
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 12.0% 12.0% 15.0% 15.0% 18.0% 18.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
11.0% 11.0% 11.0% 11.0% 13.0% 13.0% 17.0% 17.0% 6.0% 6.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
9.5% 11.0% 11.0% 11.0% 15.0% 18.0% 17.0% 20.0% 3.0% 3.0% 2.0% 2.0% 5.0 5.0 2.0% 3.0% 4.0% 4.0%
10.0% 12.0% 10.5% 13.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
9.5% 9.5% 10.5% 10.5% 15.0% 15.0% 18.0% 18.0% 4.5% 4.5% 4.0% 4.0% 10.0 10.0 3.5% 3.5% 4.0% 4.0%
Responses 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5
Average (%) 10.0% 10.7% 11.0% 11.5% 14.2% 15.2% 18.0% 18.6% 4.2% 4.2% 3.7% 3.7% 6.4 7.0 2.9% 3.1% 4.0% 4.0%
----------------------------------------------------------------------------------------------------------------------
Total
Responses 25 25 26 26 24 24 24 24 26 26 26 26 25 25 26 26 26 26
Weighted
Average (%) 8.9% 10.1% 10.4% 11.1% 14.8% 15.7% 18.3% 18.8% 4.2% 4.3% 3.7% 3.8% 6.5 7.0 2.9% 3.2% 4.1% 4.2%
----------------------------------------------------------------------------------------------------------------------
</TABLE>
*as percent of total revenues
18 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES BLENDED INTERNAL EQUITY INTERNAL GROWTH RATES TYPICAL PROJECTION MANAGEMENT RESERVES FOR
GOING-IN TERMINAL RATE OF RETURN RATE OF RETURN INCOME EXPENSES PERIOD (YEARS) FEES* REPLACEMENT*
----------------------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
MID-RATE HOTEL - LIMITED SERVICE
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 12.0% 12.0% 15.0% 15.0% 15.0% 15.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
12.0% 12.0% 12.0% 12.0% 13.0% 13.0% 17.0% 17.0% 3.0% 3.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
8.0% 10.0% 10.0% 10.0% 12.0% 15.0% 14.0% 16.0% 3.0% 3.0% 2.0% 2.0% 5.0 5.0 3.0% 4.0% 4.0% 5.0%
11.0% 13.0% 11.5% 14.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
11.0% 11.0% 11.8% 11.8% 16.0% 16.0% 19.0% 19.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0 4.0% 4.0% 4.5% 4.5%
10.0% 13.0% 12.0% 13.0% 25.0% 25.0% 20.0% 20.0% 3.5% 4.0% 3.5% 4.0% 5.0 5.0 4.0% 4.0% 5.0% 5.0%
Responses 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6
Average (%) 10.3% 11.5% 11.5% 12.1% 15.7% 16.5% 17.5% 17.8% 3.5% 3.6% 3.7% 3.8% 6.2 6.7 3.3% 3.5% 4.3% 4.4%
- ------------------------------------------------------------------------------------------------------------------------------------
ECONOMY
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 12.0% 12.0% 15.0% 15.0% 15.0% 15.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
13.0% 13.0% 13.0% 13.0% 13.0% 13.0% 17.0% 17.0% 3.0% 3.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
9.0% 11.0% 10.0% 10.0% 12.0% 15.0% 14.0% 16.0% 3.0% 3.0% 3.0% 3.0% 5.0 5.0 4.0% 5.0% 5.0% 5.0%
11.0% 13.0% 11.5% 14.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
11.0% 11.0% 11.8% 11.8% 16.0% 16.0% 19.0% 19.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0 4.0% 4.0% 4.5% 4.5%
Responses 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5
Average (%) 10.8% 11.6% 11.7% 12.2% 13.8% 14.8% 17.0% 17.4% 3.5% 3.5% 3.9% 3.9% 6.4 7.0 3.4% 3.6% 4.3% 4.3%
Total
Responses 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11
Weighted
Average(%) 10.6% 11.6% 11.6% 12.1% 14.7% 15.7% 17.3% 17.6% 3.5% 3.5% 3.8% 3.8% 6.3 6.8 3.4% 3.6% 4.3% 4.4%
</TABLE>
*as percent of total revenues
AUTUMN 1996 19
<PAGE>
QUALIFICATIONS OF MICHAEL A. LAGRECA
================================================================================
Professional Affiliations
Candidate, Appraisal Institute (MAI Candidate #M88-2569)
New Jersey Certified General Appraiser (Certificate #RG 01409)
Pennsylvania Certified General Appraiser (Certificate #GA-000218-L)
Pennsylvania Real Estate Broker (License #RB-047892-L)
Real Estate Experience
Senior Appraiser, Cushman & Wakefield Valuation Advisory Services,
specializing in commercial and industrial real estate appraisal and
investment counseling. Cushman & Wakefield is an international full
service real estate organization and a Rockefeller Group Company.
Self-employed, real estate appraiser and consultant preparing valuation
assignments on all types of real estate throughout the Delaware Valley
from June, 1991 to April, 1996.
Fee Appraiser, Louis A. Iatarola Realty Appraisal Group of Philadelphia,
Pennsylvania, a full service appraisal and consulting firm, specializing
in commercial and industrial appraisal assignments from August, 1985 to
June, 1991.
Fee Appraiser, Valentino H. Pasquarella Company of Fort Washington,
Pennsylvania, an appraisal firm specializing in commercial, industrial and
residential real estate valuations from June, 1985 to August, 1985.
Staff Appraiser, American Appraisal Associates of Princeton, New Jersey, a
national appraisal organization engaging in the valuation of industrial,
commercial and special purpose real estate from January, 1981 to June,
1985.
Formal Education
Temple University, Philadelphia, Pennsylvania
January, 1981, Bachelor of Science, Real Estate
Appraisal Institute, Chicago, Illinois
Real Estate Appraisal Principals - Course 1A-1
Basic Valuation Procedures - Course 1A-2
Capitalization Theory and Technique Part A - Course 1 B-A
Capitalization Theory and Technique Part B - Course 1 B-B
Case Studies in Real Estate Valuation - Course 2-1
Valuation Analysis and Report Writing - Course 2-2
Standards of Professional Practice - SPP-A
Standards of Professional Practice - SPP-B
<PAGE>
================================================================================
DISPLAY THIS CERTIFICATE PROMINENTLY. NOTIFY AGENCY WITHIN 10 DAYS OF ANY CHANGE
Commonwealth of Pennsylvania
Department of State
Bureau of Professional and Occupational Affairs
P.O. BOX 2649 Harrisburg PA 17105-2649
[SEAL OF BUREAU OF PROFESSIONAL AND OCCUPATIONAL AFFAIRS]
Certificate Number Certificate Date Issued Expires
GA-000218-L JUL 01 1991 JUN 15 1995 JUN 30 1997
Issued To:
/s/ Michael A. Lagreca
- -----------------------------------------------------
Signature MICHAEL ANTHONY LAGRECA
2060 ACORN PLACE
HUNTINGDON VLY PA 19006
/s/ Dorothy Childres
- -----------------------------------------------------
Commissioner of Professional and Occupational Affairs
ALTERATION OF THIS DOCUMENT IS A CRIMINAL OFFENSE UNDER 18 PA.C.S. Section 4911
================================================================================
<PAGE>
QUALIFICATIONS OF JOHN B. RUSH
================================================================================
Professional Affiliations
Member, Appraisal Institute (MAI Designation #7261)
Delaware Certified General Appraiser (Certificate #X1-0000051)
Maryland Certified General Appraiser (Certificate #10041)
New Jersey Certified General Appraiser (Certificate #RG 00808)
Pennsylvania Certified General Appraiser (Certificate #GA-000331-L)
Pennsylvania Real Estate Broker (License #AB043144A)
Affiliate, Tri-State Commercial & Industrial Association of Realtors
Associate, Urban Land Institute (Associate #164089)
Real Estate Experience
Director of Cushman & Wakefield of Pennsylvania, Inc. and Manager of its
Valuation Advisory Services Department in Philadelphia. Cushman &
Wakefield is a international full service real estate organization and a
Rockefeller Group Company.
Senior Appraiser, Cushman & Wakefield Appraisal Division, specializing in
commercial and industrial real estate appraisal and investment counseling
throughout the nation from January, 1980 to September, 1985.
Staff Appraiser, Boyle/Helbig Realty, Inc. of Philadelphia, Pennsylvania,
specializing in commercial and industrial real estate appraisal and
investment counseling throughout a wide geographic area from December,
1977 to December, 1979.
Associate, Michael Singer Real Estate Company of Philadelphia,
Pennsylvania, specializing in the investment, leasing and management of
local commercial and residential real estate from June, 1975 to December,
1977.
Formal Education
Drexel University, Philadelphia, Pennsylvania
Master of Business Administration - 1982
Saint Joseph's College, Philadelphia, Pennsylvania
Bachelor of Arts - 1975
Appraisal Institute, Chicago, Illinois
Required Courses of Study Leading to the MAI Designation
Various Lectures and Seminars for Continuing Education Credits
Board of Realtors, Philadelphia, Pennsylvania
Required Courses of Study for State Licensure
<PAGE>
Qualifications of John B. Rush
================================================================================
Qualified Expert Witness
United States Bankruptcy Court,
Eastern District of Pennsylvania
United States Bankruptcy Court,
Middle District of Pennsylvania
Court of Common Pleas
Dauphin County, Pennsylvania
Board of Assessment Appeals
Bucks County, Pennsylvania
Board of Revision of Taxes
City of Philadelphia
Board of Tax Review
City of Philadelphia
Board of Assessment Appeals
Dauphin County, Pennsylvania
<PAGE>
================================================================================
DISPLAY THIS CERTIFICATE PROMINENTLY. NOTIFY AGENCY WITHIN 10 DAYS OF ANY CHANGE
Commonwealth of Pennsylvania
Department of State
Bureau of Professional and Occupational Affairs
P.O. BOX 2649 Harrisburg PA 17105-2649
[SEAL OF BUREAU OF PROFESSIONAL AND OCCUPATIONAL AFFAIRS]
Certificate Number Certificate Date Issued Expires
GA-000331-L SEP 10 1991 MAY 15 1995 JUN 30 1997
Issued To:
/s/ John B. Rush
- -----------------------------------------------------
Signature JOHN BENJAMIN RUSH
325 POWDER HORN ROAD
FORT WASHINGTON PA 19034
/s/ Dorothy Childres
- -----------------------------------------------------
Commissioner of Professional and Occupational Affairs
ALTERATION OF THIS DOCUMENT IS A CRIMINAL OFFENSE UNDER 18 PA.C.S. Section 4911
================================================================================
This CD ROM contains an electronic version of appraisals for the Mortgaged
Properties in PDF format and forms part of the paper version of the Prospectus
Supplement. The information contained in this CD ROM does not appear elsewhere
in paper form in this Prospectus Supplement and must be considered as part of,
and together with, the information contained elsewhere in this Prospectus
Supplement and the Prospectus. The information contained in this CD ROM has
been filed by the Seller with the Securities and Exchange Commission as part
of a Current Report on Form 8-K, which is incorporated by reference in this
Prospectus Supplement, and is also available through the public reference
branch of the Securities and Exchange Commission. Defined terms used in this CD
ROM but not otherwise defined therein shall have the respective meanings
assigned to them in the paper portion of the Prospectus Supplement and the
Prospectus. All of the information contained in this CD ROM is subject to the
same limitations and qualifications contained in this Prospectus Supplement and
the Prospectus. Prospective investors are strongly urged to read the paper
portion of this Prospectus Supplement and the Prospectus in its entirety prior
to accessing this CD ROM. If this CD ROM was not received in a sealed package,
there can be no assurances that it remains in its original format and should
not be relied upon for any purpose. Prospective investors may contact J.
Theodore Borter of Goldman, Sachs Co. at (212)902-3857 to receive an original
copy of the CD ROM.
<PAGE>
========================================
COMPLETE APPRAISAL OF
REAL PROPERTY
Northpark Mall
Northside of East County Line Road
@ South Wheatley Street
City of Ridgeland, Madison County, Mississippi
========================================
IN A SELF-CONTAINED REPORT
As of June 1, 1996
Cadillac Fairview U.S. Inc.
20 Queen Street West, 4th Floor
Toronto, Ontario M5H 3R4
Cushman & Wakefield, Inc.
Valuation Advisory Services
51 West 52nd Street, 9th Floor
New York, New York 10019-6178
<PAGE>
Cushman & Wakefield, Inc.
51 West 52nd Street CUSHMAN &
New York, NY 10019-6178 WAKEFIELD(R)
(212) 841~-7500 Improving your place
in the world.
June 19, 1996
Mr. John Macdonald
Senior Vice President, Finance & Treasurer
Cadillac Fairview U.S., Inc.
20 Queen Street West, 4th Floor
Toronto, Ontario M511 3R4
Re: Complete Appraisal of Real Property
Northpark Mall
Northside of East County Line Road
@ South Wheatley Street
City of Ridgeland, Madison County, Mississippi
Dear Mr. Macdonald:
In fulfillment of our agreement as outlined in the Letter of Engagement, Cushman
& Wakefield, Inc. is pleased to transmit our Self-Contained appraisal report
estimating the market value of the leased fee estate in the above referenced
property. Subject improvements consist of a 309,675+/- square foot enclosed
regional mall which also features four anchor stores which are separately owned,
and not a part of this appraisal.
The value opinion reported herein is qualified by certain assumptions, limiting
conditions, certifications, and definitions, which are set forth in the report.
This report has been prepared for Cadillac Fairview U.S. Inc. ("Client") and is
intended only for its specified use. It may not be distributed to or relied upon
by other persons or entities without written permission of Cushman & Wakefield,
Inc.
The property was inspected by and the report was prepared by Robert S. Nardella.
Richard W. Latella, MAI has reviewed and approved the report, but did not
inspect the property.
Based on our complete appraisal as defined by the Uniform Standards of
Professional Appraisal Practice, we have formed an opinion that the market value
of the leased fee estate in the referenced property, subject to the assumptions,
limiting conditions, certifications, and definitions, as of June 1, 1996, was:
EIGHTY FIVE MILLION DOLLARS
$85,000,000
This report has been prepared in accordance with our interpretation of your
guidelines, and in compliance with the Uniform Standards of Professional
Appraisal Practice, including the Competency Provision.
<PAGE>
Cushman & Wakefield, Inc.
Mr. John Macdonald
Cadillac Fairview U.S., Inc.
June 19, 1996
Page 2
This letter is invalid as an opinion of value if detached from the report, which
contains the text, exhibits, and an Addenda.
Respectfully submitted,
Cushman & Wakefield, Inc.
/s/ Robert S. Nardella
- ----------------------
Robert S. Nardella
Director
Valuation Advisory Services
State of Mississippi
Temporary Privilege/Certification No. TG-297
/s/ Richard W. Latella
- ----------------------
Richard W. Latella, MAI
Senior Director
Retail Valuation Group
Reviewed and Approved
without physical inspection
RSN:RWL:do
<PAGE>
SUMMARY OF SALIENT FACTS AND CONCLUSIONS
================================================================================
Property Name: Northpark Mall
Property Type: Enclosed regional mall.
Location: The subject property is located on the north side of
East County Line Road, at South Wheatley Street in
the City of Ridgeland, Madison County, Mississippi.
Interest Appraised: Lease Fee Estate
Date of Value: June 1, 1996
Date(s) of Inspection: April 5,1996
Ownership: Ridgeland Associates; a partnership owned by C.F.
Jackson Associates (80%) and Profitt's Department
Stores (20%).
Land Area
Owned: 36.613+/- acres
Un-owned Anchors: 37.329+/- acres*
----------------
Total: 73.942+/- acres
* The anchor stores and land are separately owned.
Zoning: C-6; Regional Shopping Mall District..
Highest and Best Use
As If Vacant: Retail development built to maximum feasible F.A.R.
As Improved: Continued retail use as a super-regional mall.
Improvements: Two-level enclosed super-regional mall containing
309,675+/- square feet of gross leasable area.
The Mall is anchored by Dillards, McRae's, JC Penney
and Gayfer's.
Gross Leasable Area
Dillards*: 150,000+/- SF
McRae's*: 205,000+/- SF
JC Penney*: 136,449+/- SF
Gayfers*: 155,276+/- SF
Mall Shops: 309,675+/- SF
----------- -------
Total GLA: 956,400+/- SF
Total Owned GLA: 309,675+/- SF
* The anchors are separately owned.
<PAGE>
Summary of Salient Facts and Conclusions
================================================================================
Year Built: 1984
Summary of Income and Expense Information:
========================================================
Operating Summary
========================================================
Actual 1995 Budget 1996
========================================================
Minimum Rent $5,929,598 $6,375,407
--------------------------------------------------------
Overage Rent $ 489,009 $ 325,023
--------------------------------------------------------
Recoveries/Other $3,673,137 $4,449,074
--------------------------------------------------------
Total Expenses $3,700,057 $4,126,568
--------------------------------------------------------
Net Operating income $6,391,687 $7,022,936
========================================================
Income Approach Assumptions
Current Occupancy: 92.8%; this figure includes leases which have
recently been signed or are projected to commence
in 1996 prior to our date of valuation
Stabilized Occupancy: 95%
Sales Growth: 3.5% - 1996-2005
Rent Growth: 3.5% - 1996-2005
Expense Growth: 3.5% - 1996-2005
Tax Growth: 3.5% - 1996-2005
Tenant Alterations
New: $10.00/SF
Renewal: $ 2.00/SF
Renewal Probability: 70.0%
Going-in Cap Rate: 8.25 - 8.75%
Terminal Cap Rate: 8.75 - 9.25%
Discount Rate: 11.25 - 11.75%
Value Indicators
Cost Approach N/A
<PAGE>
Summary of Salient Facts and Conclusions
================================================================================
Sales Comparison Approach $83,000,000 to $86,000,000
Value Per Square Foot: $268.02 to $277.71
Income Approach
Discounted Cash Flow: $84,300,000
Direct Capitalization: $85,800,000
Value Conclusion: $85,000,000
Value Per Square Foot: $274.48 (GLA - 309,675 SF owned GLA)
Implicit Capitalization Rate (FY 1997): 8.32% (NOI - $7,072,211)
Exposure Time Implicit
In Market Value Estimate: 12+/- months
Special Assumptions Affecting Valuation:
1. Throughout this analysis we have relied on information provided by
ownership and management which we assume to be accurate. In this
regard, we have reviewed lease abstracts for all tenants, a current
rent roll, operating statements, and a 1996 budget for income and
expenses at the subject property.
2. Our cash flow analysis and valuation has recognized that all signed
leases and any pending leases with a high probability of being
consummated are implemented according to the terms presented to us by
management. Such leases are identified within the body of this report.
3. The forecasts of income, expenses, and absorption of vacant space are
not predictions of the future. Rather, they are our best estimates of
current market thinking on future income, expenses, and demand. We
make no warranty or representation that these forecasts will
materialize.
4. The Americans With Disabilities Act (ADA) was enacted in 1990,
requiring equal access to public places for disabled persons.
Virtually all landlords of commercial facilities and tenants engaged
in business that serve the public have compliance obligations under
the law. While we are not experts in this field, our understanding of
the law is that it is broad-based and that most existing commercial
facilities are not in full compliance because of construction prior to
enactment. We recommend a compliance study be performed by qualified
personnel to determine the extent of potential non-compliance at the
subject and any costs to cure.
5. Please refer to the complete list of assumptions and limiting
conditions included at the end of this report.
<PAGE>
PHOTOGRAPHS OF THE SUBJECT PROPERTY
================================================================================
[GRAPHIC OMITTED]
An exterior view of McRae's.
[GRAPHIC OMITTED]
An exterior view of the Gayfers and an upper level entrance way to the mall.
<PAGE>
Photographs of the Subject Property
================================================================================
[GRAPHIC OMITTED]
A view of JC Penney and an entrance way to the mail on the lower level.
[GRAPHIC OMITTED]
An exterior view of Dillards, JC Penney and an entrance way to the mall on the
upper level.
<PAGE>
Photographs of the Subject Property
================================================================================
[GRAPHIC OMITTED]
A view of the mall ring road and the Cinema on the right.
[GRAPHIC OMITTED]
A view of the common area outside Chic-Fil-A on the second floor.
<PAGE>
Photographs of the Subject Property
================================================================================
[GRAPHIC OMITTED]
[GRAPHIC OMITTED]
Typical views of the mall shop space.
<PAGE>
Photographs of the Subject Property
================================================================================
[GRAPHIC OMITTED]
[GRAPHIC OMITTED]
Views of the center court area.
<PAGE>
TABLE OF CONTENTS
================================================================================
Page
INTRODUCTION
Identification of Property ......................................... 1
Property Ownership and Recent History .............................. 1
Purpose and Intended Use of the Appraisal .......................... 1
Extent of the Appraisal Process .................................... 1
Date of Value and Property Inspection .............................. 2
Property Rights Appraised .......................................... 2
Definitions of Value, Interest Appraised, and Other Pertinent Terms 2
Legal Description .................................................. 3
REGIONAL ANALYSIS ........................................................ 5
NEIGHBORHOOD ANALYSIS .................................................... 14
RETAIL MARKET ANALYSIS ................................................... 16
PROPERTY DESCRIPTION ..................................................... 41
Site Description ................................................... 41
Improvements Description ........................................... 42
REAL PROPERTY TAXES AND ASSESSMENTS ...................................... 47
ZONING ................................................................... 48
HIGHEST AND BEST USE ..................................................... 49
A. Highest and Best Use of Site As Though Vacant ................... 49
B. Highest and Best Use of Property As Improved .................... 51
VALUATION PROCESS ........................................................ 54
SALES COMPARISON APPROACH ................................................ 55
INCOME APPROACH .......................................................... 70
RECONCILIATION AND FINAL VALUE ESTIMATE .................................. 101
ASSUMPTIONS AND LIMITING CONDITIONS ...................................... 104
CERTIFICATION OF APPRAISAL ............................................... 106
<PAGE>
Table of Contents
================================================================================
ADDENDA ................................................................ 103
NATIONAL RETAIL MARKET ANALYSIS
STATE OF MISSISSIPPI TEMPORARY PRIVILEGE CERTIFICATE
1994 & 1995 OPERATING STATEMENTS AND 1996 BUDGET
RENT ROLL
PRO-JECT+ LEASE ABSTRACT REPORT
PRO-JECT+ ASSUMPTIONS REPORT
PRO-JECT+ TENANT REGISTER REPORT
PRO-JECT+ LEASE EXPIRATION REPORT ENDS FULL DATA REPORTS
MALL SALES (1991-1994)
CUSHMAN & WAKEFIELD INVESTOR SURVEY
<PAGE>
INTRODUCTION
================================================================================
Identification of Property
The subject of this appraisal is Northpark Mall, a two-level super-regional
mail located in the City of Ridgeland, Mississippi. The subject consists of
309,675 square feet of mall shop space, with the mall also featuring four anchor
stores which are separately owned. The anchor stores consist of Dillards,
McRae's, JC Penney and Gayfers. The gross leaseable area of the mall, inclusive
of anchor space is 956,400+/- square feet. The total site area is 73.942+/-
acres, of which 36.613+/- and acres is owned and a part of the subject real
estate. The remaining 37.329+/- acres are separately owned by each of the
respected anchor stores.
The property is situated on the north side of East County Line road, at
South Wheatley Street in the City of Ridgeland, Madison County, Mississippi.
Property Ownership and Recent History
Title to the subject property is held by Ridgeland Associates. Ridgeland
Associates is owned by a partnership which consists of CF Jackson Associates
(80% interest) and Profitt's Departments Stores (20% interest). The partnership
reportedly purchased the property on November 2, 1987.
Purpose and Intended Use of the Appraisal
The purpose of this appraisal is to estimate the market value of a leased
fee estate in the property. The appraisal is to be used by Client in connection
with a mortgage financing.
Extent of the Appraisal Process
In the process of preparing this appraisal, we:
o Inspected the exterior of all buildings and site improvements and a
representative sample of shop spaces with Mike Hackstadt, the property
manager;
o Interviewed representatives of the property management company;
o Reviewed leasing policy, concessions, tenant build-out allowances, and
history of recent occupancy with the leasing manager;
o Reviewed a detailed history of income and expenses as well as a budget
forecast for 1996;
o Conducted market research of occupancies, asking rents, concessions
and operating expenses at competing shopping centers which involved
interviews with on-site managers and a review of our own data base
from previous appraisal files;
o Prepared an estimate of stabilized income and expenses (for
capitalization purposes);
o Prepared a detailed discounted cash flow (DCF) analysis using Pro-Ject
+plus software for the purpose of discounting the forecasted net
income stream into a present value of the leased fee estate for the
center;
================================================================================
-1-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Introduction
================================================================================
o Conducted market inquiries into recent sales of similar properties to
ascertain sale prices per square foot, effective gross income
multipliers and capitalization rates. This process involved telephone
interviews with sellers, buyers and/or participating brokers;
o Prepared Sales Comparison and Income Approaches to value;
o Reconciled the value indications and concluded a final value estimate
for the subject in its "as is" condition; and
o Prepared a Complete Appraisal of real property, with the results
conveyed in this Self-Contained Report.
Date of Value and Property Inspection
The date of value is June 1, 1996. On April 22, Robert S. Nardella
inspected the property and its environs. Richard W. Latella, MAI has reviewed
and approved the report but did not inspect the property.
Property Rights Appraised
Leased Fee Estate.
Definitions of Value, Interest Appraised, and Other Pertinent Terms
The definition of market value taken from the Uniform Standards of
Professional Appraisal Practice of the Appraisal Foundation, is as follows:
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 is the
consummation of a sale as of a specified date and the passing of title from
seller to buyer under conditions whereby:
1. Buyer and seller are typically motivated;
2. Both parties are well informed or well advised, and acting in what
they consider their own best interests;
3. A reasonable time is allowed for exposure in the open market;
4. Payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
5. 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.
================================================================================
-2-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Introduction
================================================================================
Exposure Time
Under Paragraph 3 of the Definition of Market Value, the value estimate
presumes that "A reasonable time is allowed for exposure in the open
market". Exposure time is defined as the estimated length of time the
property interest being appraised would have been offered on the market
prior to the hypothetical consummation of a sale at the market value on the
effective date of the appraisal. Exposure time is presumed to precede the
effective date of the appraisal.
The following definitions of pertinent terms are taken from the Dictionary
of Real Estate Appraisal, Third Edition (1993), published by the Appraisal
Institute.
Fee Simple Estate
Absolute ownership unencumbered by any other interest or estate, subject to
the limitations imposed by the governmental powers of taxation, eminent
domain, police power, and escheat.
Leased Fee Estate
An ownership interest held by a landlord with the rights of use and
occupancy conveyed by lease to others. The rights of the lessor (the leased
fee owner) and the leased fee are specified by contract terms contained
within the lease.
Market Rent
The rental income that a property would most probably command on the open
market, indicated by the current rents paid and asked for comparable space
as of the date of appraisal.
Cash Equivalent
A price expressed in terms of cash, as distinguished from a price expressed
totally or partly in terms of the face amounts of notes or other securities
that cannot be sold at their face amounts.
Market Value As Is on Appraisal Date
The value of specific ownership rights to an identified parcel of real
estate as of the effective date of the appraisal; related to what
physically exists and is legally permissible and excludes all assumptions
concerning hypothetical market conditions or possible rezoning.
Legal Description
We have not been provided with a complete legal description of the
property. Therefore, one has not been included in the report. A copy of a
composite site plan for the property has been included within the body of the
report.
================================================================================
-3-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
[GRAPHIC OMITTED]
ROAD MAP OF NORTHPARK MALL AREA
<PAGE>
REGIONAL ANALYSIS
================================================================================
The Regional Analysis provides an overview of the general demographic and
economic trends within the subject's metropolitan statistical area and defined
trade region. The subject property is located in the City of Ridgeland within
Madison County, in the central region of Mississippi. Jackson, the state
capital, is located in the southern region of the eastern United States. The
Jackson Metropolitan Statistical Area (MSA) is comprised of Hinds, Madison and
Rankin counties. According to Sales & Marketing Management 1995 Survey of Buying
Power, the Jackson MSA ranks 129th in the country in suburban population and
120th in total population.
Population
<TABLE>
<CAPTION>
===========================================================================================
POPULATION STATISTICS Compounded Average
Jackson MSA and the State of Mississippi Annual Change
===========================================================================================
1980 1990 1996 2001 1980-1996 1996-2001
- ----------------------- ----------- ---------- ---------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Jackson MSA 362,038 395,396 425,564 463,468 +1.02% +1.72
- ----------------------- ----------- ----------- ---------- ----------- --------- ----------
State of Mississippi 2,520,639 2,573,216 2,708,787 2,819,518 +.45% +. 80
- ----------------------- ----------- ----------- ---------- ----------- --------- ----------
United States(000) 226,546 248,710 265,038 277,157 +.99% +.90
===========================================================================================
Source: Equifax National Decision Systems
===========================================================================================
</TABLE>
The Jackson Metropolitan Statistical Area has experienced an increase in
population over the past decade. Equifax National Decision Systems estimates
that the population of the Jackson MSA is 425,564, indicating a 1.02 annual
increase over the 1980 census. During this time period, the rate of population
growth within the Jackson MSA has significantly exceeded the state as a whole,
and been generally consistent with the United States. Through 2001, the Jackson
MSA is anticipated to have an accelerated rate of population growth of 1.72
percent per annum, which exceeds that which is projected for the state and the
nation as a whole.
Provided on the following page is a graphic representation of the
forecasted population change in the Jackson MSA over the five year period
between 1996 and 2001. As can be seen, the subject is located amidst the
communities which are expected to experience the highest rate of growth in the
next five years.
Households
As will be discussed in greater detail within the retail market analysis, a
household consists of all the people which occupy a single housing unit. The
analysis of household formation is critical in formulating conclusions regarding
overall trends within the metropolitan area.
================================================================================
-5-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
[GRAPHIC OMITTED]
JACKSON, MS METROPOLITAN AREA
<PAGE>
Regional Analysis
================================================================================
The following chart illustrates the historical and projected household
trends within the Jackson MSA, State of Mississippi, and the United States as
reported by ENDS.
<TABLE>
<CAPTION>
==================================================================== =====================
HOUSEHOLD STATISTICS Compounded Average
Jackson MSA and the State of Mississippi Annual Change
===================== ============================================== =====================
1980 1990 1996 2001 1980-1996 1996-1996
- --------------------- ----------- ------------ ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Jackson MSA 120,354 140,157 159,185 175,718 +1.76% +2.00
- --------------------- ----------- ------------ ---------- ---------- ----------- ---------
State of Mississippi 827,169 911,374 983,540 1,033,746 +1.09% +1.00%
- --------------------- ----------- ------------ ---------- ---------- ----------- ---------
United States (000) 80,390 91,947 100,131 105,247 +1.38% +1.00%
==========================================================================================
Source: Equifax National Decision Systems
==========================================================================================
</TABLE>
Between 1980 and 1996, the Jackson MSA area added 38,831 households,
increasing by 1.76 percent per annum to 159,185 units. Between 1996 and 2001,
the number of households within the MSA is anticipated to grow by 2 percent per
annum to 175,718 households. While at a slower rate than the Jackson MSA, the
State of Mississippi is also expected to experience strong household growth in
the next 5 years.
Household formation within the MSA, and the State of Mississippi has
occurred at rates in excess of population growth. Household growth is expected
to increase at rates in excess of population growth over the next five years, as
demonstrated previously. As a result, the number of persons per household is
expected to decrease through the year 2001. Within the Jackson MSA, the number
of persons per household is forecast to decrease from 2.82 persons in 1990 to an
estimated 2.63 persons in the year 2001. A greater number of smaller households
with fewer children generally indicates more disposable income within the trade
area.
Income
According to Sales & Marketing Management's 1995 Survey of Buying Power,
the Jackson MSA's 1994 median household Effective Buying Income ((EBI)) of
$34,963 ranks 161st among the nation's largest 317 metropolitan statistical
areas. Additionally in terms of total effective buying income, the Jackson MSA
ranks 121st overall in the country. Jackson metropolitan area residents are more
affluent than those of the State of Mississippi. The median EBI for the State of
Mississippi in 1994 was $26,503 while the Jackson MSA's median EBI equated to
$34,963.
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<PAGE>
Regional Analysis
================================================================================
Equifax National Decision Systems provided 1995 income statistics for the
Jackson MSA and the State of Mississippi as illustrated below
================================================================================
1995 Income Statistics
Jackson MSA and the State of Mississippi
================================================================================
Average Household Median Household Per Capita
Income Income Income
================================================================================
Jackson MSA $47,658 $34,840 $18,252
- -------------------------- -------------------- ------------------- ------------
State of Mississippi $35,750 $24,926 $13,291
- -------------------------- -------------------- ------------------- ------------
Difference in Income $11,908 $ 9,914 $ 4,961
- --------------------------------------------------------------------------------
Source: Equifax National Decision Systems
================================================================================
Provided on the following page is a graphic representation of the
distribution of average income levels within the Jackson MSA. The map
illustrates that the subject property is surrounded by the more affluent
communities in the MSA.
Employment Characteristics
The greater Jackson area has a diversified economy that has contributed to
its growth and development. Metro Jackson is an economic center, leading the
region in finance, commerce, retailing, health care, transportation and
government. This diversity has protected the region from the ups and downs of a
single industry economy. As of December 1995, the Jackson metropolitan area had
a total civilian labor force of 274,300 persons and approximately 10,700 people
were unemployed indicating an unemployment rate of 3.9 percent.
Unemployment in metropolitan Jackson has historically been below the state
and United States unemployment rates. A history of unemployment statistics for
the Jackson MSA, the State of Mississippi and the United States is presented
below.
================================================================================
History of Unemployment Statistics
================================================================================
State of
Year Jackson MSA Mississippi United States
- ----------------- ----------------- --------------- ----------------------------
1990 5.3% 7.5% 5.5%
- ----------------- ----------------- --------------- ----------------------------
1991 6.1% 8.6% 6.7%
- ----------------- ----------------- --------------- ----------------------------
1992 5.8% 8.2% 7.4%
- ----------------- ----------------- --------------- ----------------------------
1993 4.7% 6.4% 6.8%
- ----------------- ----------------- --------------- ----------------------------
1994 4.5% 6.6% 6.1%
- ----------------- ----------------- --------------- ----------------------------
1995 3.9% 6.1% 5.6%
- --------------------------------------------------------------------------------
Source: State of Mississippi Employment Security Commission
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<PAGE>
JACKSON, MS METROPOLITAN AREA
[GRAPHIC OMITTED]
[MAP OF JACKSON, MS METROPOLITAN AREA SHOWING HH 96 BY INCOME]
<PAGE>
As exhibited on the previous chart, the unemployment rates for the MSA, the
State and the nation have all decreased annually since 1991 and 1992. The slowly
improving economy which the country has been experiencing has also affected the
Jackson MSA and the State of Mississippi.
As can be seen, the Jackson MSA has historically, and continues to enjoy a
more favorable unemployment rate than both the state and nation as a whole.
The entire metropolitan Jackson area has experienced diversification of its
economic base over the past five years. The distribution of employment by
industry from 1990 to 1995 and projected as of 2001 in non-agricultural
industries is shown below.
================================================================================
TOTAL NON-FARM EMPLOYMENT BY INDUSTRY
Jackson MSA
================================================================================
Employment 1990 % Of 1995 % of 2000 % of
Sector Total Total Total
================================================================================
Construction 10,400 4.57% 13,100 5.05% 13,500 4.90%
- --------------------------------------------------------------------------------
Manufacturing 22,400 9.83% 23,900 9.21% 25,500 9.30%
- --------------------------------------------------------------------------------
TCPU 13,900 6.10% 15,000 5.78% 16,400 5.98%
- --------------------------------------------------------------------------------
Trade 49,600 21.77% 58,200 22.44% 62,300 22.71%
- --------------------------------------------------------------------------------
F.I.R.E 20,600 9.04% 21,500 8.29% 22,600 8.24%
- --------------------------------------------------------------------------------
Services 57,900 25.42% 71,400 27,53% 76,700 27.96%
- --------------------------------------------------------------------------------
Government 46,500 20.41% 49,800 19.20% 51,000 18.59%
- --------------------------------------------------------------------------------
Other 6,500 2.84% 6,500 2.50% 6,300 2.30%
- --------------------------------------------------------------------------------
Total 227,800 100.0% 259,400 100.0% 274,300 100.0%
- --------------------------------------------------------------------------------
Source: Woods & Poole
================================================================================
The employment figures as of 1995 indicate that 9.21 percent of total
non-agricultural employment is in manufacturing of durable and non-durable goods
while 91.79 percent are employed in non-manufacturing employment. Of the
non-manufacturing industries, the service sector is the leader employing 27.53
percent while the trade industry and government account for 22.44 percent and
19.20 percent of total employment, respectfully in the Jackson MSA.
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<PAGE>
Regional Analysis
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Leading Employers
The top fifteen major employers within the Jackson MSA, are as follows:
================================================================================
No Employer/Company Name No. of Nature of Business
Employees
======================================= ==================== ===================
1 State of Mississippi 29,112 State Government
- --------------------------------------- -------------------- -------------------
2 University of Mississippi 5,493 Health Care
Medical Cent
- --------------------------------------- -------------------- -------------------
3 U.S. Government 5,200 Federal Government
- --------------------------------------- -------------------- -------------------
4 Jackson School District 4,187 Education
- --------------------------------------- -------------------- -------------------
5 MS Baptist Medical Center 2,780 Hospital
- --------------------------------------- -------------------- -------------------
6 City of Jackson 2,334 City Government
- --------------------------------------- -------------------- -------------------
7 Mississippi State Hospital 2,054 Hospital
- --------------------------------------- -------------------- -------------------
8 South Central Bell 3,312 Communications
- --------------------------------------- -------------------- -------------------
9 Jitney Jungle Stores 2,004 Grocery
- --------------------------------------- -------------------- -------------------
10 Kroger 1,800 Grocery Store
- --------------------------------------- -------------------- -------------------
11 Deposit Guaranty Bank 2,700 Banking
- --------------------------------------- -------------------- -------------------
12 United Parcel Service 1,134 Parcel Service
- --------------------------------------- -------------------- -------------------
13 Packard Electronics 1,500 Automotive Wiring
- --------------------------------------- -------------------- -------------------
14 McRae's, Inc. 1,383 Department Stores
- --------------------------------------- -------------------- -------------------
15 Trustmark National Bank 1,337 Banking
================================================================================
Source: Jackson Chamber of Commerce
================================================================================
The above chart indicates that many of the top ten employers are related to
either government or health care. However, as demonstrated previously, the
regions economy is well diversified with a wide assortment of private sector
corporations which entered beyond the above list.
Transportation
The Jackson metropolitan area is well serviced by full range of
transportation services. Three interstate highways meet in Metro Jackson,
providing convenient access to the city and major markets in the southern region
of the United States. Interstate 20, an east/west oriented highway beginning in
South Carolina to the east, and ending in Texas to the west, passes through the
Jackson metropolitan area. Interstate 55 travels in a north/south direction from
Baton Rouge Louisiana in the south, through Jackson, to major cities in the
north such as Memphis, Tennessee and St. Louis, Missouri. Highway 49 provides
direct access to Hattiesburg and Gulfport Mississippi which are located
approximately 90 miles and 160 miles to the southeast, respectively. The
metropolitan area is also well served by a number of U.S.
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Regional Analysis
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Highways, and state and local routes. Interstate 220 serves as a connecting
highway for Interstates 55 and 20. This roadway provides an additional means of
highway transportation with the MSA. Various interstates, state and local routes
combine for an efficient network of roadways in the metropolitan area.
Jackson International Airport, located immediately east of Downtown
Jackson, is one of the states busiest airports. Six commercial carriers service
this airport which include Continental Express, Delta, Northwest Air Link, US
Air Express and ValueJet. Rail service is provided by Amtrak with daily service
to Chicago New Orleans, with Greyhound - Trailways bus lines providing extensive
service through the City of Jackson.
Conclusion
In summary, the population is anticipated to increase at a rate in excess
of both the state and the nation as a whole. A similar trend is expected for
household formation within the Jackson MSA. The average and median household
income within MSA are significantly higher than the state totals which is
indicative of the more concentrated population and level of business activity as
compared to the more outlying rural locations in the state.
The MSA has a diverse economy which has posted an unemployment level which
has consistently been below the state and national levels. The unemployment rate
for Jackson MSA in 1995 was 3.9 percent. The long term prospects for the MSA are
favorable as its economic base continues to expand. We anticipate Jackson to
continue its preeminence as a business center within the state, with steady
growth projected for the foreseeable future.
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<PAGE>
[GRAPHIC OMITTED]
[MAP OF NORTHPARK MALL AREA]
<PAGE>
NEIGHBORHOOD ANALYSIS
================================================================================
Introduction
A neighborhood is defined as a grouping of complimentary land uses affected
by similar operations of the social economic, governmental and environmental
forces that influence property value. The area most closely surrounding the
subject, whether it contains residential property, commercial property or a
mixture of commercial and residential properties is called a neighborhood.
General Overview
The subject property is located within the City of Ridgeland, which is
situated immediately north of the City of Jackson. Specifically the property
lies on the north side of East County Line Road, between South Wheatley Street
and Pear Orchard Road. The Northpark Mall serves as the epicenter of retail
development for an area which has evolved into the primary retail location
within the MSA.
Access
Primary access to the subject neighborhood is provided via Interstate 55
which travels through the City of Jackson, and connects with most of the other
major roadways which service the region. East County Line Road, on which the
subject is located, intersects with Interstate 55 approximately one-half mile to
the west of the subject. Overall, regional accessibility to the subject is
excellent. However, the subject is not visible from Interstate 55.
Land Use Patterns
East County Line Road in the vicinity of the subject is completely built-up
with commercial uses. West of the subject property, commercial establishments
include Pier One Imports, the Ramada Hotel, Red Roof Inn and Cabot Lodge. The
most significant new construction in the area is The Junction. This development
is a 375,000+/- square foot power center which is located at Interstate 55 and
East County Line Road. This project is largely completed and is anchored by
Target, Home Depot, Office Depot and PetsMart.
Directly across from the subject along the East County Line Road is
Ridgewood Court and Purple Creek Plaza. Ridgewood Court is a 375,000+/- square
foot power center which is anchored by Home Quaters, Campo Appliances and Sam's
Club. Additional major tenants include Service Merchandise and T.J. Maxx. This
center includes 50,000n square feet of in-line space which is nearly 100
percent occupied.
Purple Creek Plaza is anchored by Toy 'R Us and also contains Michael's
Crafts, Haverty's Furniture, and Blockbuster Video. This center is also 100
percent occupied. Other commercial establishments along East County Line Road
include fast food restaurants, gas stations and miscellaneous free-standing
retail buildings which serve to provide retail infill in the area.
Town Line Square is located across from the subject along South Wheatley
Street. This center is anchored by Walmart, and is also 100 percent occupied
with other tenants including Discovery Zone, Original Shoes and McRae's Home
Festival.
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Neighborhood Analysis
================================================================================
Off of East County Line Road and the other major roadways servicing the
area, local neighborhoods are largely residential in nature. Residential
improvements generally consist of detached single family homes, with some
townhouse style development being interspersed throughout the area. The City of
Ridgeland benefits from having a good balance of commercial and residential
improvements. Both of these sectors benefit from having convenient access to the
major roadways which service the region as well as Downtown Jackson.
Conclusion
It is clearly evident that the subject's neighborhood has continued to
evolve into the retail hub within the Jackson MSA. Neighboring development has
served to increase the overall draw to the area on both a local and regional
basis. The subject's neighborhood should experience continued growth, with the
subject property being well positioned to capitalize on this overall positive
trend. As such, we foresee a period of increasing real estate values.
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<PAGE>
RETAIL MARKET ANALYSIS
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Trade Area Overview
A retail center's trade area contains people who are likely to patronize
that particular retail center. These customers are drawn by a given class of
goods and services from a particular tenant mix. A center's fundamental drawing
power comes from the strength of the anchor tenants as well as the regional and
local tenants which complement and support the anchors. A successful combination
of these elements creates a destination for customers seeking a variety of goods
and services while enjoying the comfort and convenience of an integrated
shopping environment.
The subject can be described as a super regional shopping center.
A super-regional center(1) provides for extensive variety in general
merchandise, apparel, furniture, home furnishings, as well as a variety of
services and recreational facilities. It is built around three or more
full-line department stores of generally not less than 100,000 square feet
each. In theory, the typical size of a super regional center is about
800,000 square feet of gross leasable area. In practice, the size ranges
from about 600,000 to more than 2,000,000 square feet.
In order to define and analyze the market potential for the Northpark Mall,
it is important to first establish the boundaries of the trade area from which
the subject will draw its customers. In some cases, defining the trade area may
be complicated by the existence of other retail facilities on main thoroughfares
within trade areas that are not clearly defined or whose trade areas overlap
with that of the subject.
The subject is the dominant regional mall within its trade area, exhibiting
a broader-base appeal than its only competitor, Metrocenter. Competition in the
immediate area is limited to traditional strip centers. These centers are
anchored by discount department stores, supermarkets and specialty/category
killer stores in the market. While some cross-shopping does occur, these stores
act more as a draw to the area, creating an image for the area as an established
prime shopping district and generating more retail traffic to the area than
would exist in their absence. We recognize and mention these stores and centers
to the extent that they provide a complete understanding of the area's retail
structure.
Once the trade area is defined, the area's demographics and economic
profile can be analyzed. This will provide key insight into the area's dynamics
as it relates to the subject. The sources of economic and demographic data for
the trade are analysis are as follows: Equifax National Decision Systems (ENDS),
Sales and Marketing Management's Survey of Buying Power, The Urban Land
Institute's Dollars and Cents of Shopping Centers (1995), CACI, The Sourcebook
of County Demographics, and The Census of Retail Trade - 1992. The subject's
primary and effective trade areas, profiled by Equifax Decision Systems, were
defined based on the results of a customer survey conducted by Urban Retail
Properties, Co., which included polling the mall's customers to determine the
zip code of the primary residence. While the survey is somewhat dated (late
1993/early 1994), in our opinion the trade areas as defined have remained
unchanged.
- ----------
(1) Urban Land Institute Dollars and Cents of Shopping Centers - 1995
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Retail Market Analysis
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Scope of Trade Area
Traditionally, a retail center's sales are principally generated from
within its primary trade area, which is typically within reasonably close
geographic proximity to the center itself. Generally, between 55 and 65 percent
of a center's sales are generated within its primary trade area. The secondary
trade area generally refers to more outlying areas which provide less frequent
customers to the center. Residents within the secondary trade area would be more
likely to shop closer to home due to time and travel constraints. Typically, an
additional 20 to 25 percent of a centers sales will be generated from within the
secondary area. The tertiary or peripheral trade area refers to more distant
areas from which occasional customers to the mall reside. These residents may be
drawn to the center by a particular service or store which is not found locally.
Industry experience shows that between 10 and 15 percent of a center's sales are
derived from customers residing outside of the trade area. This potential is
commonly referred to as inflow.
Before the trade area can be defined, it is necessary that we thoroughly
review the retail market and the competitive structure of the general
marketplace, with consideration given as to the subject's position therein.
Subsequent to our discussion of the area's retail structure, a profile of the
department stores which anchor the subject is presented in order to fully
acquaint the reader with its overall market position therein.
Retail Structure
In order to examine the subject property in its proper context, we must
first examine the nature of the competition. With respect to regional mall
competition, the subject is well-positioned. With the exception of the
Metrocenter Mall, a larger center battling image problems due to perceived
safety concerns, the subject is the only traditional viable regional mall within
the Jackson MSA. We note that the Jackson Mall, a 1970-built, 760,000+/- square
foot former regional center, is currently being renovated to a medical complex
use, and is not considered to be a competitive center.
Competition
The following table identifies the regional mall inventory of the Jackson
MSA, which is limited to the subject and Metrocenter Mall.
================================================================================
Competitive Retail Shopping Centers
================================================================================
Year
Map Opened/ Anchor Distance from
Key Center/Location Renovated Total GLA Stores Subject
===== ======================= ============ ============ ============ ===========
S Northpark Mall 1984/1987 958,183 Dillard's NA
1200 E. County Line Rd. Gayfer's
Ridgeland, Mississippi JC Penney
McRae's
- ----- ----------------------- ------------ ------------ ------------ -----------
1 Metrocenter 1978/1993 1,200,000 Dillard's 15 miles
3645 Hwy. 80 West Gayfer's
Jackson, Mississippi McRae's
Sears
===== ======================= ============ ============ ============ ===========
Total 2,158,183
================================================================================
Source: Directory of Major Malls- 1995
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Retail Market Analysis
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Subject Retail Center
Name: Northpark Mall
Location: 1200 E. County Line Rd.
Ridgeland, Mississippi
Owner The Cadillac Fairview Corporation
Distance and Time from Subject: NA
Year Opened: 1984
Year(s) Expanded/Renovated: 1987
Total GLA: 956,400+/- SF
Mall GLA: 309,675+/- SF
Mall Shop Ratio: 32%
Anchor Tenants: Dillard's 150,000 SF
Gayfer's 155,276 SF
JC Penney 136,449 SF
McRae's 205,000 SF
-------
Total Anchor GLA 646,725 SF
Number of Mall Shops: 131+/-
Occupancy (Mall GLA): 92n%
Average Market Rent (Mall GLA): $27+/- /SF
Land Area: 74+/- AC
Parking/Ratio
Existing: 4,947;4.9 spaces per 1,000 SF of GLA
Demographics: Effective Market Population: 265,100
Average Household Income: $51,905
Mall Shop Sales: $294/SF Total Reporting Mall Shop Sales
$323/SF Comparable Mall Shop Sales
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Retail Market Analysis
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Comments: Center is dominant regional mall within its effective trade area, and
is positioned as offering more upscale and unique merchandise choices as
compared to the Metrocenter Mall, the Jackson MSA's only other regional mall.
Mall tenants include upscale fashion tenants such as Ann Taylor, Banana Republic
and Abercrombie & Fitch.
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<PAGE>
Retail Market Analysis
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Competitive Retail Center No.1
Name: Metrocenter
Location: 3645 Hwy. 80 West
Jackson, Mississippi
Owner: Jim Wilson & Associates
Distance and Time from Subject: 15+/- miles south
(20+/- minute drive time)
Year Opened: 1978
Year(s) Expanded/Renovated: 1993
Total GLA: 1,200,000+/- SF
Mail GLA: 397,322+/- SF
Mall Shop Ratio: 33%
Anchor Tenants: Dillard's 173,565 SF
Gayfer's 176,863 SF
McRae's 228,114 SF
Sears 224,136 SF
-------
Total Anchor GLA: 802,678 SF
Number of Mall Shops: 145+/-
Occupancy (Mall GLA): 81%
Average Rent (Mall GLA): $18+/- /SF
Land Area: 55+/- AC
Parking/Ratio: 6,800+/- cars; 5.6 per 1,000+/- SF
Demographics: Primary Market Population: 417,000
Average Household Income: $41,000
Retail Sales: $240/SF (per Shopping Center Directory)
Comments: Metrocenter is the only other viable enclosed regional center in the
Jackson MSA. The mall is presently posting substantial mall shop vacancy.
According to the leasing agent as well as several market participants, this
centers more urban location and a perception of safety problems significantly
inhibit its market penetration, particularly for more suburban, affluent
shoppers.
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Retail Market Analysis
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The mall properties cited above (inclusive of the subject) comprise
approximately 2.2+/- million square feet of mall space. Together with the
Metrocenter Mall, the subject is one of two viable regional malls located within
the Jackson MSA.
Other Competition
As discussed, there is no other direct mall competition for the subject in
its immediate trade area. In addition to the facilities described, the balance
of the retail inventory consists of certain big box stores and specialty tenants
in neighborhood and community centers as well as free-standing retail
facilities. A brief description of the retail centers in the immediate area will
serve to portray the balance of the neighborhood retail alignment.
o Ridgewood Court is a 375,000+/- square foot power center constructed
in 1993, located at the southeast corner of County Line & Ridgewood
Roads. Anchor tenants include Home Quarters in 85,880 square feet,
Campo Appliances in 66,320 square feet, Sam's Club in 135,000 square
feet, Service Merchandise in 50,000 square feet and T.J. Maxx in
25,050 square feet. The center includes 50,000+/- square feet of small
shop tenant space, of which only one 1,280+/- square foot block is
currently available. The centers leasing agent reported that this
vacancy is being offered at $15 per square foot, triple net, while the
balance of the small shop leases were written between $12-$18 per
square foot, triple net. This property includes three outparcels which
were sold to national restaurant chains Ramano's, Macaroni Grill and
Cozumel's.
o Highland Village is a 140,000+/- square foot specialty center located
approximately 5 miles north of Northpark Mall. At the time of our
inspection, the center was approximately 50 percent occupied by mainly
locally and regionally owned specialty shops, as well as by
professional office/service uses. The centers leasing agent declined
to indicate the current asking rate for the vacant space.
o The Junction is a 375,000+/- square foot power center located at 1-55
at County Line Road. This new center is largely completed, with the
last tenants expected to open by July, 1996. Major tenants include
Target in 117,000+/- square feet; Home Depot in 130,000+/- square feet
(July 1996 opening); Office Depot in 31000+/- square feet; PetsMart in
26,000+/- square feet and Drugs for Less in 18,000+/- square feet.
This center also includes 32,000+/- square feet of small shop space,
which, together with Drugs for Less, will open in June, 1996. Small
shop space is currently 90 percent leased at an average lease rate of
$14 per square foot, triple net. This center will also include The
Olive Garden and Red Lobster in outparcel locations.
o Purple Creek Plaza is a 128,000+/- square foot, Toys 'R Us anchored
center located at 1189 E. County Line Road. Other tenants include
Michael's Crafts, Haverty's Furniture, and Blockbuster Video. This
center is 100% leased at an average lease rate of $10 per square
foot, triple net.
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Retail Market Analysis
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o Townline Square, located along East County Line Road at Wheatley
Street, consists of a 170,000+/- square foot Wal-mart together with
50,000+/- square feet leased to Discovery Zone, Original Shoes and a
McRae's Home Festival. This center is currently 100 percent occupied.
GLA per Capita
The data presented summarizes the extent of existing regional mall
development inside the trade area. According to the National Research Bureau,
the average GLA per capita for the United States and State of Mississippi were
5.5+/- and 2.1+/- square feet, respectively in 1995. This statistic pertains to
centers in excess of 400,000 square feet.
Together with the Metrocenter Mall, the subject is one of two viable
enclosed regional centers located within the Jackson MSA. With an estimated 1996
population of 425,564 for the Jackson MSA, this results in approximately 5.1+/-
square feet of regional mall GLA per person. The GLA per capita for the Jackson
MSA is below the national average, but above that of the state. The subject's
effective trade area, as defined by the results of the customer survey, result
in a much higher GLA per capita of 8.1+/- square feet for the effective trade
area's estimated population of 265,100. This GLA per capita is well above both
state and national averages. It is our opinion that given the subject's above
average sales performance and the relative scarcity of regional malls throughout
the state, the subject center benefits from regional and transient customer
bases not readily identified in the trade area survey. This observation is
supported by conversations with the mall manager, Mr. Mike Hackstadt.
Anchor Alignment
The anchor alignment of the subject also helps to define the potential
boundaries of the subject's trade area. The subject property is anchored by JC
Penney, Dillard's, Gayfer's and McRae's. The following is a profile of each of
these anchor tenants.
JC Penney, the fourth largest retailer in the United States (after
Wal-Mart, K-Mart and Sears), operates 1,233 JC Penney department stores and
526 drug stores (Thrift Drug and Treasury Drug) throughout all 50 states
and Puerto Rico. The $21 billion company has changed its historical image
as a discount dime store and has targeted upper-middle-class consumers by
adding brand-name soft goods and dropping hard goods from the in-store
product mix. Today the company's product mix centers on apparel, shoes,
jewelry, and home furnishings. In 1994, retail sales rose 7.4 percent to
$20.4 billion, surpassing the $20 billion mark for the first time. Net
income also exceeded $1 billion for the first time ever. Total revenues
were up 7.7 percent to $21.1 billion. The company has experienced a ten
year compound annual growth rate in retail sales (1984-1994) of about 4.2
percent. Overall, productivity among stores increased by 8.9 percent to
$159 per square foot from $146 per square foot in 1993, and $137 per square
foot in 1992. Catalog sales totaled $3.8 billion in 1994-95, accounting for
19 percent of total retail sales. Drug stores, under the Thrift Drug name,
totaled 526 units in 1994-95 and accounted for 7.6 percent of total sales
which achieved $243 per square foot. The company currently has
approximately 113 million square feet of store space. In February 1995, the
company acquired the 97 unit Kerr Drug Store chain. The company will
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Retail Market Analysis
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continue to expand its private brand lines. In addition, the catalog
operation is posed to continue to do well, coming off of its highest sales
in its 31 year history. The company did not fare as well in fiscal 1995
(year ending January 1996) with earnings falling by 20 percent and same
store sales declining by 2.5 percent in the fourth quarter and 1.4 percent
for the fiscal year. The company is planning a $700 capital expenditure
program over the next three years to help bolster store performance. Value
Line reports that the company's financial strength warrants an "B++"
rating. Standard & Poors has forecasted a continued modest rise in
comparable store sales. They rate the company "A-".
Dillard's is one of the largest department store chains with divisions
based out of Arkansas, Texas, Florida and Arizona. They have been one of
the most aggressive participants expanding from 158 stores in 1989 to 229
stores in 1994. In 1995, Dillard's plans to open 11 new stores and remodel
and expand 8 stores which will add a total of 1,989,000 square feet to the
company's selling space. Total sales for 1994 were $5.5 billion, an 8
percent increase over last years sales and comparable sales were up 5
percent over 1993. Overall, since 1985 sales have increased at nearly a 15
percent compound annual rate. Increases for the past five years were as
follows:
================================================================================
1994 1993 1992 1991 1990
================================== ======== ======= ======= ========= ==========
Total Sales Increase 8% 9% 17% 12% 20%
- ---------------------------------- -------- ------- ------- --------- ----------
Comparable Sales Increase 5% 3% 8% 6% 10%
================================================================================
The stores feature brand name goods in the middle to upper-middle price
range. Over 87 percent of sales came from apparel, cosmetics, accessories
and shoes. In 1994, sales per square foot significantly increased from $147
in 1993 to $157 in 1994 as shown below
<TABLE>
<CAPTION>
=====================================================================================
1994 1993 1992 1991 1990
================================== ============ ============ ============ ===========
<S> <C> <C> <C> <C> <C>
Total Sales $5,545,803 $5,130,648 $4,713,987 $4,036,392 $3,605,518
- ---------------------------------- ------------ ------------ ------------ -----------
Gross Square Footage 35,300 34,900 33,200 29,100 26,600
- ---------------------------------- ------------ ------------ ------------- ----------
Sales/Square Foot $157 $147 $142 $138 $136
=====================================================================================
</TABLE>
Dillard's strategy is to enter or further penetrate markets where it can
become the dominant conventional department store operator. Over the past
few years, much of their growth has been through acquisitions. Value Line
projects sales to climb 9 percent over the next fiscal year and rates its
financial strength A. Dillard's Private Label sales have increased to 20
percent of total sales. This strategy has allowed Dillard's to maintain a
highly desirable image position with national brands while offering Private
Brand pricing at savings of 25 percent or more. Standard & Poors ranks the
company "A+".
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Retail Market Analysis
================================================================================
Mercantile Stores Company, Inc. is a conventional department store retailer
which, at year-end, operated 103 stores under 13 different names in a total
of 17 states. The stores are located in 50 different markets within these
states and in the majority of these markets the company's units hold the
dominant general merchandise retailer position. A typical store is
approximately 170,000 square feet and offers a merchandise mix which
appeals to middle to upper-middle income consumers with an emphasis on
apparel, cosmetics, accessories, and home fashions. In addition to its
department store business, the company has a partnership interest in five
operating shopping centers, all of which contain a company retail unit.
The chain stores are Maison Blanche, Louisiana; McAlphin's, Cincinnati,
Ohio; Castner-Knott Dry Goods Co., Nashville, Tennessee; The Jones Store
Co., Kansas City, Missouri area; Joslins, Denver, Colorado; Gayfer's,
Mobile, Alabama; Lion stores in the Toledo, Ohio area; Bacons, Louisville,
Kentucky; and JB White, Augusta, Georgia. Others are in Fargo, North
Dakota; Duluth, Minnesota; and Billings, Montana. In February 1992, the
company acquired Maison Blanche, Inc., a family-owned chain of eight
department stores in the Gulf Coast region, for $40 million and the
assumption of $165 million in short- and long-term liabilities.
During 1994 the company opened four new stores and closed two units. Total
footage increased by 1.7 percent to 16,484,000 square feet. Each of the
company's five operating retail groups reported a sales increase. Total
sales were up 3.3 percent while comparable sales were up 1.7 percent on a
consolidated basis. Average sales per square foot for 1994 were
approximately $173 per square foot. The company reports that they were the
No. 1 department store in 36 of the 50 markets in which they operate. Late
last year the company was the subject of a take-over rumor involving May
Department Stores. Since that time, nothing has come about and May denies
that they are interested in a merger.
Provided below is a summary of selected financial data for the company.
<TABLE>
<CAPTION>
==========================================================================================================
Mercantile Stores Company
==========================================================================================================
1994 1993 1992 1991 1990 1985
==========================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Sales(1) $2,819,837 $2,729,928 $2,732,041 $2,442,425 $2,367,210 $1,880,039
- ----------------------------------------------------------------------------------------------------------
Stores Opened During the 4 3 1 2 3 2
Year
- ----------------------------------------------------------------------------------------------------------
Stores Acquired -- -- 16 -- -- --
- ----------------------------------------------------------------------------------------------------------
Stores Closed During the 2 1 1 1 1 --
Year
- ----------------------------------------------------------------------------------------------------------
Number of Stores 103 101 99 83 82 80
- ----------------------------------------------------------------------------------------------------------
Total Square Footage 16,484 16,212 15,820 13,145 12,683 10,676
- ----------------------------------------------------------------------------------------------------------
Sales Per Square Foot(2) $173 $169 $174 $188 $191 $178
==========================================================================================================
(1) Data in Thousands
(2) Based on stores opened for the entire year
==========================================================================================================
Source: Company Annual Reports, Value Line, Standard & Poor's
==========================================================================================================
</TABLE>
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<PAGE>
Retail Market Analysis
================================================================================
Overall, the company's financial strength is rated "A+" by Value Line.
Proffitt's Inc., headquartered in Alcoa, Tennessee, owns three department
store chains - McRae's, Proffitt's, and Younkers. With 28 McRae's stores
and 25 Proffitt's stores, Proffitt's Inc. almost doubled their size when
the acquired the 52 Younkers stores in February of 1996. The latest figures
from this over the counter traded company show sales of $617,363,000 and
employees of 8,910. The McRae's unit offers a broad base of high-quality
merchandise targeted toward a middle to upper middle customer base.
Trade Area Definition
Northpark Mall is strategically located along County Line Road just east of
the confluence of Interstates 220 and 55, with peripheral access also from Route
U.S. Highway 51. This location makes it one of the more accessible retail
locations within the area. The advantage of interstate proximity has the effect
of expanding the mail's trade area by virtue of reducing travel time for
residents in more distant locations. As such, the percentage of in-flow sales
tends to be greater for more dominant properties.
As discussed in the previous section, the location and accessibility of
competing centers also has direct bearing on the formation and make-up of a
mall's trade area. Its location in southern Madison County maximizes its
position as one of only two regional malls within the Jackson MSA, and as the
only regional mall in this quadrant of the MSA. With the fastest growing and
most affluent areas found in this general vicinity of the metro area, this
becomes even more significant. We note that shopping alternatives within at
least a 10 mile radius are marginal, allowing the subject to virtually dominate
its effective trade area. Further to the west and south, expanding outward to a
15 mile ring, competition is presented via the Metrocenter Mall and surrounding
strip center development. However, to the north, east and southeast, where the
population density and projected growth remain strong, there is literally no
competitive threat.
We believe that it is also important to note that key community centers and
free-standing "category killers" represent a force in the markets competitive
environment. However, their primary stores (groceries, discount department
stores, and drugs) are generally different from those which comprise Northpark
Mall. Certainly there is a place for both in most retail environments, including
the Interstate 55/County Line Road corridors. Several category killer operations
have entered the Jackson area in the office supply, electronics, clothing and
book segments. Those located proximate to Northpark Mall include Home Quarters,
Sam's Club, Service Merchandise, T.J. Maxx, Target and Home Depot. Collectively,
they help balance out the retail infill and act as a traffic generator that
increases the area's status as a destination retail hub.
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<PAGE>
Retail Market Analysis
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To summarize, the foundation of our analysis for delineation of the
subject's trade area may be summarized as follows:
1. Highway accessibility including area traffic patters, geographical
constraints and nodes of residential development.
2. The position and nature of the area retail structure including the
location of destination retail centers and the strength and
composition of the retail infill as discussed above.
3. The size, anchor tenancy and merchandising composition of the mall
tenants enhances its total market penetration.
4. Adequate cross shopping occurs with surrounding power and community
centers, whose primarily big box and category killer type tenants
compliment, rather than compete with the mall.
Urban Retail Properties, Co. conducted a survey of mall shoppers which
included determining the zip code of their primary residence. This survey shows
that the primary trade area of the mall has significant depth south and east of
the mall and minimal depth north and west of the mall. More specifically, the
primary trade area's boundaries are generally within 15n to 30+/- miles of the
mall to the east and south, while to the north and west, boundaries of the
primary trade area generally 5+/- to 12+/- miles from the subject.
After reviewing this report in conjunction with our independent analysis of
the trade area, we are in concurrence with its findings relative the subject's
position within the MSA. However, given the subject's above average sales
performance, it is our opinion that the subject benefits from both regional and
transient customer bases not readily identified by the customer survey.
Regardless, relative to the Jackson MSA, we have elected to rely on some of the
demographic results it has produced. An analysis of key demographic indicators
can then be performed based upon this defined trade area.
Population
Once the market area has been established, the focus of our analysis
centers on the trade area's population. Equifax National Decision Systems
provides historical, current and forecasted population estimates for the
effective trade area. Patterns of development density and migration are
reflected in the current levels of population estimates. Comparisons have been
made between the Jackson MSA, the State of Mississippi and the trade area
components to lend some perspective to the dynamics of the trade area. The chart
on the Facing Page compares these statistics.
Between 1990 and 1996, ENDS reports that the population within the primary
trade area increased by 16,985 to 135,895. This 14.3 percent increase (2.25
percent per annum) has outpaced that of the effective trade area growth rate of
10.4 percent. Expanding to the effective trade area, the current population
increases to 425,564. The current projection is for a continuation of this trend
with additional growth of 2.09 and 1.87 percent per annum for the primary and
effective trade areas respectively. We note with interest that population growth
within the majority of the subject's trade area has been, and is expected to
continue to be, the fastest growing quadrant in the effective trade area. This
is important for the subject since
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Retail Market Analysis
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residents living closest to the mall are more inclined to shop closer to home.
On balance, we note that population growth throughout the trade area has
outpaced that of the Jackson MSA as a whole, the country and the state.
Provided on the Following Pages are graphic representations of the current
population distribution and projected population growth. These graphics depict
that the subject's primary trade area is both densely developed and is projected
to experience significant growth over the next five years.
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<PAGE>
NORTHPARK MALL
EFFECTIVE TRADE AREA
[GRAPHIC OMITTED]
MAP
<PAGE>
NORTHPARK MALL
EFFECTIVE TRADE AREA
[GRAPHIC OMITTED]
MAP
<PAGE>
Retail Market Analysis
================================================================================
Households
A household consists of all the people occupying a single housing unit.
While individual members of a household purchase goods and services, these
purchases actually reflect household needs and decisions. Thus, the household is
a critical unit to be considered when reviewing market data and forming
conclusions about the trade area as it impacts the retail center.
National trends indicate that the number of households are increasing at a
faster rate than the growth of the population. Several noticeable changes in the
way households are being formed have caused the acceleration in this growth,
specifically:
o The population in general is living longer on average. This results in
an increase of single and two person households.
o The divorce rate increased dramatically during the last decade, again
resulting in an increase in single person households.
o Many individuals have postponed marriage, thus also resulting in more
single person households.
Between 1990 and 1996, the primary trade area added 9,447 households,
increasing by 20.9 percent to 54,758 units. This growth is equivalent to a
compound annual increase of 3.21 percent. Alternatively, the secondary trade
area added 5,334 households to 47,226, indicating a slower 2.02 percent annual
rate of growth. Combined, the effective trade area is currently estimated to
contain 101,984 households.
Between 1996 and 2001, the primary trade area is expected to grow by 13.8
percent (2.62 percent per annum) to 62,315 households. This rate of growth is
slightly greater than that for the secondary area which is expected to grow by
9.9 percent. Overall, the effective trade area is expected to grow by 12 percent
to 114,204 households.
Trade Area Income
A significant statistic for retailers is the income potential of a trade
area's population. Income levels, either on a per capita, per family or
household basis, indicate the economic level of the residents of the market area
and form an important component of this total analysis. More directly, average
household income, when combined with the number of households, is a major
determinant of an area's retail sales potential. The trade area income figures
support the profile of a broad-based middle to upper-middle income market.
According to ENDS, average household income within the primary trade area is
currently $59,358.
Available data shows an identifiable pattern of income levels throughout
the effective trade area as shown below along with comparisons to the state and
United States.
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Retail Market Analysis
================================================================================
================================================================================
Average Household Income
================================================================================
Area Average HH Income
================================================================================
Primary Trade Area $59,358
Secondary Trade Area $43,263
Effective Trade Area $51,905
Jackson MSA $47,658
State of Mississippi $35,750
United States $49,031
================================================================================
These statistics show that the primary trade area has an average household
income of $59,358, which decreases to $51,905 with the inclusion of the lower
income areas in the secondary market. The effective trade area's average
household income is above that of the MSA, state and country.
Provided on the Following Page is a graphic presentation of the household
income distribution throughout the effective trade area. As can be seen, the
subject lies near the middle of the upper income communities. Generally, the
highest concentrations of wealth (average incomes of $65,000 and higher) are
found immediately adjacent to the south of the center, and in Madison,
approximately 5 miles north of the center. The majority of the subject's primary
trade area posts average household incomes in excess of $50,000. We also see
that average household income throughout the effective trade area is forecasted
to increase at a compound annual rate of 6.39 percent.
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<PAGE>
NORTHPARK MALL
EFFECTIVE TRADE AREA
[GRAPHIC OMITTED]
[MAP]
CUSHMAN &
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<PAGE>
Retail Market Analysis
================================================================================
Effective Buying Income
Another measure of the ability of a trade area to support retail business
is the area's effective buying income (EBI). This data is not measured by
specific trade area, but rather by both the metropolitan statistical area (MSA),
as well as on a county basis as reported in Sales and Marketing Management's
Survey of Buying Power. At the onset of 1995, the Jackson MSA had an aggregate
EBI of $4.5 billion, while Madison County had an aggregate EBI of $1.0 billion.
A comparison can be made between Madison County and the Jackson
metropolitan area.
<TABLE>
<CAPTION>
====================================================================================================================================
Effective Buying Income
1990 1995 Compound Annual Change
Total EBI (billions) Med HHEBI Total EBI (billions) Med HHEBI Total EBI Med HHEBI
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Jackson MSA $4.5 $22,935 $6.4 $34,963 7.43% 8.80%
- ------------------------------------------------------------------------------------------------------------------------------------
Madison County $0.5 $18,665 $1.0 $33,621 13.92% 12.49%
====================================================================================================================================
Source: Sales and Marketing Management, survey of Buying Power
====================================================================================================================================
</TABLE>
The data above shows that the median household effective buying income for
Madison County is relatively consistent with that of the Jackson metropolitan
area. Madison County, however, has achieved significant increases in both total
EBI and its median household EBI over the last five years, reflecting a rapidly
increasing, affluent residential base. Since 1990, the total EBI has grown at a
compound annual rate of 13.92 percent while the median EBI has grown by 12.49
percent. Both of these measures have exceeded inflation over this period.
Retail Sales
Retail sales growth for the county were compared to the Jackson MSA. The
county has noticeably exceeded the Jackson MSA'S compound growth rate as shown
below.
<TABLE>
<CAPTION>
====================================================================================================================================
Retail Sales
1990 1995 Compound Annual Change
Total Retail Sales Retail Sales Total Retail Sales Retail Sales Total Retail Sales
(millions) Per Household (millions) Per Household Retail Sales Per Household
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Jackson MSA $2,878.7 $20,102 $3,685.8 $25,142 5.07% 4.58%
- ------------------------------------------------------------------------------------------------------------------------------------
Madison County $363.4 $19,228 $652.3 $27,641 12.41% 7.53%
====================================================================================================================================
Source: Sales and marketing Management, Survey of buying Power
====================================================================================================================================
</TABLE>
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<PAGE>
Retail Market Analysis
================================================================================
Mail Shop Sales
While retail sales trends within the MSA and region lend insight into the
underlying economic aspects of the market, it is the subject's sales history
that is most germane to our analysis.
We have been provided with a summary of comparable mall shop sales for the
years 1991 to 1995. Per square foot sales figures represent the weighted average
sales for the calendar year for small shop tenants in continuous occupancy of
the same suite for the previous twelve months. These results are summarized
below.
================================================================================
SUMMARY OF
COMPARABLE SALES
================================================================================
Comparable Percentage
Year PSF Sales Change
================================================================================
1991 $248 NA
1992 $278 12.10%
1993 $311 11.87%
1994 $321 3.22%
1995 $323 0.62%
================================================================================
As illustrated above, comparable sales have enjoyed dramatic growth between
1991 and 1995, increasing an aggregate of 30.24 percent.
Total reporting mall shop sales for 1995 were $81.4 million. Based on a
reporting GLA of 276,602 square feet, this results in mall shop sales of
$294.29. This measure shows reporting tenant performance only, since many
tenants do not report sales by lease agreement or fail to report sales for a
particular sales period. While the aggregate sales amount is reflective of the
total sales generated by the mall shops, it is important to recognize that this
includes all sales including sales from partial year tenants. Furthermore, since
the unit rate is based upon a full reporting year, it has the effect of
understating the mall shop sales performance on a unit rate basis.
By comparison, the Urban Land Institute's Dollar's and Cents of Shopping Centers
(1995) reports national and regional sales averages for regional and
super-regional shopping malls. Nationally, average sales at super-regional
centers is reported at $203.09 per square foot, down 1.4 percent from 1993. For
regional malls, average sales are reported to be $176.16, virtually even from
1993. A comparison of national and regional figures is shown on the following
chart.
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Retail Market Analysis
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<TABLE>
<CAPTION>
===================================================================================================
Regional/Super-Regional Centers
===================================================================================================
Area Average Median Lower Decile Upper Decile
===================================================================================================
<S> <C> <C> <C> <C>
United States $176.16/ $163.54/ $125.88/ $285.40/
$203.09 $198.93 $140.46 $305.23
- ---------------------------------------------------------------------------------------------------
East $204.96/ $183.05/ $126.07/ $323.74/
$220.64 $183.81 $130.46 $379.81
- ---------------------------------------------------------------------------------------------------
West $188.63/ $167.46/ $124.00/ $264.89/
$190.51 $187.64 $143.01 $258.68
- ---------------------------------------------------------------------------------------------------
South $156.27/ $154.18/ $129.631 $195.24/
$210.30 $207.99 $145.75 $293.70
- ---------------------------------------------------------------------------------------------------
Midwest $178.99/ $179.24/ $125.50/ $290.57/
$195.03 $192.42 $148.18 $261.09
===================================================================================================
Source: Urban Land Institute Dollars and Cents of Shopping Centers (1995)
===================================================================================================
</TABLE>
As a super regional mall in the southern part of the country, the subject's
1995 sales performance of $323 per square foot for all reporting tenants can be
compared to its peers as shown below.
================================================================================
Average Subject Variance
================================================================================
United States $203 $323 1.59%
- --------------------------------------------------------------------------------
South $210 $323 1.54%
================================================================================
On a relative basis, the subject is substantially outperforming its peer
group on average in terms of sales productivity, and ranks in the upper decile
of super regional malls on a national basis..
Anchor Store Sales
All of the anchor stores are owned by their occupants, and therefore none
are required to report sales to mall management. Our efforts to obtain specific
sales included interviewing the mall manager and individual store managers.
Anecdotally, all of the anchor stores report satisfactory performance. As noted
earlier in this report, JC Penney, Dillard's, Mercantile Stores Company and
Proffitt's represent some of the nation's leading department store companies.
While the specific individual anchor store sales of the subject are not
known, we provide the following department store sales information as provided
by Urban Land Institute, which tracks sales of owned and non-owned department
stores by selected affiliation and region. This information is summarized in the
following chart.
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Retail Market Analysis
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<TABLE>
<CAPTION>
==================================================================================================
Department Store Sales Data
==================================================================================================
Category/Region Average Sales PSF Top 10% PSF Top 2% PSF
==================================================================================================
<S> <C> <C> <C>
Super-Regional U.S.
Owned Dept. Stores $144.99 $247.99 $505.13
National Chain $146.89 $271.91 $532.63
Non-Owned Dept. Stores $154.34 $243.28 $367.33
National Chain $154.34 $243.28 $367.33
Eastern Region $152.35 -- --
Western Region $147.26 -- --
Midwestern Region $131.12 -- --
Southern Region $159.23 -- --
==================================================================================================
Average - All Super-Regional Centers $148.82 $251.62 $443.11
==================================================================================================
Regional Malls U.S.
Owned Dept. Stores $149.26 $245.53 $352.79
National Chain $149.03 $237.27 $343.94
Non-Owned Dept. Stores $162.14 $215.20 $266.01
National Chain $163.08 $215.32 $266.09
Eastern Region $174.78 -- --
Western Region $165.36 -- --
Midwestern Region $151.49 -- --
Southern Region $150.39 -- --
==================================================================================================
Average - All Regional Centers $158.19 $228.33 $307.21
==================================================================================================
Source: Urban Land Institute Dollars & Cents of Shopping Centers (19951
==================================================================================================
</TABLE>
Data from ULI shows that the mean sales level for department stores in
super-regional malls varies from $131.12 to $159.23 per square foot with an
overall average of $148.82 per square foot. Stores in the top 10 percent of
their peers average (unweighted) approximately $252 while the top 2 percent
average approximately $443 per square foot.
Data for department stores in regional malls shows that the mean ranges
from $149.03 to $174.78 per square foot with an overall average of $158.19 per
square foot. The unweighted average for the top 10 percent and 2 percent is
approximately $228 and $307 per square foot, respectively.
Summary
Within the shopping center industry, a trend toward specialization has
evolved so as to maximize sales per square foot by deliberately meeting customer
preferences rather than being all things to all people. This market segmentation
is implemented through the merchandising of the anchor stores and the tenant mix
of the mall stores. The subject property and the other shopping centers reflect
this trend toward market segmentation. With anchor tenants of JC Penney,
Dillard's, Gayfer's and McRae's, the subject property is clearly positioned
toward the broad center of the retail market. However, the mall shop tenant base
is well-represented by national retailers in new store formats, such as Ann
Taylor, Banana Republic, Nine West and Williams Sanoma, as well as The Gap and
Limited concepts. This mix brings a balance of retail uses to the market which
includes both familiar and first time tenants to the trade area. This positions
Northpark as more upscale and unique compared to its primary competitor, the
Metrocenter Mall. It should also be noted that several national
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retailers such as Warner Brothers and Abercrombie & Fitch have recently chosen
to enter the Mississippi market by locating exclusively at the Northpark Mail.
Conclusion
We have analyzed the retail trade history and profile of the Jackson MSA
and Madison County in order to make reasonable assumptions as to the continued
performance of the subject's trade area.
A metropolitan and locational overview was presented which highlighted
important points about the study area and demographic and economic data specific
to the trade area was presented. We included a brief discussion of some of the
competitive retail centers in the market area as well as a profile of the anchor
tenants at the mail. The trade area profile discussed encompassed an MSA and zip
code based survey for the subject. Marketing information relating to these
sectors was presented and analyzed in order to determine patterns of change and
growth as it impacts the subject. Given that none of the anchors of Northpark
Mail are required to report sales, we were unable to provide extensive mall
sales analysis. Anecdotally, the subject's anchors perform at levels considered
average to above average when compared to department store sales on a national
and regional basis. The data is useful in giving quantitative dimensions of the
total trade area, while our comments serve to provide qualitative insight into
this area. The following summarizes our key conclusions:
o The subject enjoys a visible and accessible location within the
growing Jackson MSA. Both the Jackson MSA and Madison County are
expected to maintain a solid growth pattern over the near to mid-term.
o Its location within the eastern quadrant of the Jackson MSA along the
Hinds/ Madison county line is considered superior to that of its one
true competitor, the Metrocenter Mall. The Metrocenter Mall is located
in a more urban location which suffers from perceptions of safety
problems. The subject is well positioned geographically to benefit
from the continued growth of this quadrant of the Jackson MSA.
Northpark Mall is clearly the most convenient mall for current and
future residents in these communities.
o The region's affluence as measured by average household income and
market expenditure potential has expanded substantially over the last
decade paralleling the population growth.
o Within its primary trade area, the subject competes mainly with
community and traditional strip centers for tenants. It is important
for ownership to continue to focus on aggressively leasing the vacant
space to national and regional retailers that are considered upscale
and unique to the market. The high percentage of national and regional
tenants is important to the extent that these merchants have the
benefit of stronger name recognition and are more familiar to shoppers
which typically results in high sales levels.
o Peripheral development around the mall is complimentary rather than
competitive. The relatively recent addition of big box and category
killer formats and other development including restaurants adds to the
area draw.
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Retail Market Analysis
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On balance, it is our opinion that with competent management and aggressive
marketing, The Northpark Mall will continue to be the dominant mall serving the
growing eastern quadrant of the Jackson MSA. Our outlook for the area continues
to be positive with moderate to good prospects for appreciating real estate
values.
Marketability and Marketing Period
In this subsection, we consider the potential market appeal, marketability
and demand for a center like the subject in light of the current real estate
investment market. As discussed elsewhere in this report, the subject involves
an enclosed, super-regional mail containing 311,458+/- square feet of mall shop
GLA anchored by four anchor stores for a combined mall GLA of 958,183+/-
square feet.
We have considered the potential market demand and investor risk in our
analysis and valuation of the subject property through our selection of
investment parameters, growth rates, and various assumptions employed. In our
analysis, we have attempted to reflect current market conditions and investor
criteria. Most of the shopping center properties which have been offered for
sale at a "reasonable" price, have sold within twelve months exposure to the
open market or less. Properties for which seller expectations of value exceed
the market's perception have required more extended marketing periods and have
generally sold at below the initial asking price, or have been pulled off the
market. A "reasonable" price is defined as that price which offers a sufficient
return to the investor relative to the demand for and the risk associated with
the property. These returns vary widely in the current market depending on the
particular investment, its occupancy level, the surrounding demographics, and
upside or downside of the income stream.
The subject is characterized as a well-maintained mall which dominates its
trade area and is positioned to benefit from strong growth within its effective
trade area. The subject's effective trade area has a current population of
approximately 265,100+/- people and is projected to experience substantial
population and household growth in the foreseeable future. We believe that if
the subject were offered for sale, it would represent an important investment
opportunity for a well positioned center with some upside through lease rollover
and continued efforts to upgrade the tenant mix. Based on the above, it is our
estimate that a market sale of the subject property should be realized within
twelve months exposure on the market.
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PROPERTY DESCRIPTION
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Site Description
Location: The subject property is located at the
northeast quadrant of East County Line
Road and South Wheatley Street in
Ridgeland, Mississippi.
Land Area
Owned: 36.613+/- acres
Un-owned Anchor: 37.329+/- acres*
Total: 73.942+/- acres
* The anchors own their own land and
buildings.
Zoning: C-6; Regional Shopping Mail District.
Frontage/Terrain: The property has minimal frontage along
the north East County Line Road, as
outparcel development occupies the
majority of the frontage along this
roadway. The property has additional
frontage along the east side of South
Wheatley Street.
Street Improvements: East County Line Road is a four-lane
arterial with left-hand turn lanes.
Typical street improvements include
sidewalks, curbing, landscaping, and
lighting.
Access: The property has good access by virtue of
its location at the corner of East County
Line Road and South Wheatley Street
Ingress/egress from East County Line Road
is provided by two entrances. There are
also two entrances from South Wheatley
Street and one from Pear Orchard Road.
Site Improvements: Site improvements include surface parking,
pole-mounted lighting, landscaping, and
water run-off retention ponds.
Soil Conditions: We did not receive nor review a soil
report. However, we assume that the soil's
load-bearing capacity is sufficient to
support the existing structures. We did
not observe any the property. The tract's
drainage appears to be adequate.
Utilities: All municipal utilities including water,
sewer, electric, gas and telephone are
available to the site.
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Property Description
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Land Use Restrictions: We were not given a title report to
review. We do not know of any easements,
encroachments, or restrictions that would
adversely affect the site's use. However,
we recommend a title search to determine
whether any adverse conditions exist.
Flood Hazard: According to Community Panel No. 28089C
032D, National Flood Insurance Rate Map,
effective April 15, 1994, the subject
property is not located in a designated
Flood Hazard Zone. Therefore, the property
does not require flood hazard insurance.
Wetlands: We were not given a wetlands survey. If
subsequent engineering data reveal the
presence of regulated wetlands, it could
materially affect property value. We
recommend a wetlands survey by a competent
engineering firm.
Seismic Hazard To the best of our knowledge, the site is
not located in a Special Study Zone.
Hazardous Substances: We observed no evidence of toxic or
hazardous substances during our inspection
of the site. However, we are not trained
to perform technical environmental
inspections and recommend the services of
a professional engineer for this purpose.
Comments: The total property is generally
rectangular and of sufficient size to
accommodate existing improvements. There
is good access and exposure to the site.
Overall, we believe the site is conducive
for its current use as a regional mail.
Improvements Description
The subject improvements consist of a two-level regional mall containing a
total leaseable area of 956,400+/- square feet, inclusive of unowned anchor
tenant space. The following description of the premises is based upon our
inspection of the property on April 22, 1996 and information provided by the
property manager, Mr. Michael Hackstadt.
General Description
Year Built: With the exception of the Gayfer's store,
the mall was opened in September 1994.
Gayfer's completed construction and opened
in 1995.
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Property Description
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Building Areas: Dillards* 150,000+/- SF
McRae's* 205,000+/- SF
JC Penney* 136,449+/- SF
Gayfer's* 155,276+/- SF
Mall Shops 309,675+/- SF
Total GLA 956,400+/- SF
Owned GLA 309,675+/- SF
* Each of the anchor stores are separately
owned.
Construction Detail
Foundations: Reinforced floating concrete slab.
Framing: Fire proof steel frame with reinforced
concrete slabs.
Ceiling Height: Ceiling heights are 15 to 18 feet in the
anchor tenant and common areas. Mall shop
space has ceiling heights which range
between 12 and 15 feet.
Floor System: Floor slab is reinforced with wire mesh.
Exterior Walls: Exterior walls consist of concrete block
which are finished with a textured
concrete facing.
Roof Structure: Structural steel truss system with metal
decking. Roof cover is built-up
composition, 3-ply roof cover which was
reported to be in overall average
condition. The mall manager indicated that
an engineer had recently inspected the
roof and reported that the current
maintenance program should successfully
continue to maintain the roof for the near
future.
Pedestrian Doors: The main entrance has recently been
improved with automated glass, in metal
frame sliding doors. The other three
entrances to the mall are standard
swinging doors which are also glass in
metal frame. The mall entrances are slated
to be completely upgraded as part of the
mall enhancement program.
Loading: There are two loading doors on each of the
lower and upper levels which service the
mall shop tenants. Each loading area leads
to a freight elevator which has a 5,000
pound capacity. A corridor accesses the
loading area and leads to the rear of each
tenant space.
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Property Description
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Mechanical Detail
Heating and Air Conditioning: There are fourteen roof top units which
supply 55 degree air, via a pneumatic
system, to the common areas and each of
the tenant spaces. Each unit has a 20 to
100 ton capacity and is either of McQuay
or Carrier manufacture. Each mail tenant
space has a separate thermostat and "VAV"
box which further regulates the air to the
space which is supplied by the mall.
Plumbing The plumbing is assumed to be to municipal
code. Each tenant space is not directly
metered for water. The charge for water
usage is included in the HVAC charge.
Electric: Similar to water usage, the charge for
electrical services in included in the
HVAC charge. Each tenant space is serviced
with 12 volt/12 amp per square foot
service via a 277/480, 3-phrase service
which is fed from Entergy. Distribution
wiring within each store is generally
cooper.
Lighting: Interior lighting is provided by a mixture
of recessed incandescent and florescent
lighting fixtures in the common areas. The
stores have a combination of recessed
florescent, and incandescent fixtures.
Life Safety: The building is fully sprinklered with a
wet system and is also equipped with a
fire standpipe system. The fire safety
system is centrally monitored and tied to
the local fire department. Emergency power
is provided by a diesel powered generator
for emergency lights, exit signs, smoke
exhaust fans and fire alarm systems.
Interior Detail
Layout: The mall building is slightly irregular in
shape, with anchor stores and in-line
space eminating to the north, south, east
and west from a central court area. This
2-level mall is uniformly configured on
each level. The center court area is
2-stories in height and benefits from
having ample natural light which is
provided by skylights located throughout
the mall. The center court has attractive
planters, and allows generally convenient
traffic flow within the central portion
mall. It such be noted, however, that a
complete renovation of the center court
area is planned as part of the mall
enhancement program.
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Property Description
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Transportation between floors is provided
by three escalators and one centrally
located elevator. There are also bridges
on the second floor which span from one
side of the mail to the other.
Floor Coverings: The mall is currently improved with a
brick pavers flooring. The current color
scheme of the floor as well as its overall
presentation is considered to be
out-dated. A complete removal and
replacement of the floor is projected as
part of the mall enhancement program.
Ceilings: Generally a mixture of interlocking
acoustical tile and painted sheetrock.
Store Fronts: The store fronts are generally a mix of
flush and "pop out" type. Almost all
reflect the most recent tenant design for
the respected chain as tenants have been
renovating and leases have been renewed.
Restrooms: The mall has one set of public restrooms
on the upper floor which have been
recently remodeled. Each tenant space has
their own toilet rooms.
Parking: There are 4,967 total service parking
spaces which equates to a ratio of 5.2
space per 1,000 square feet of gross
leaseable area.
Americans With Disabilities Act: The Americans With Disabilities Act (ADA)
became effective January 26, 1992. We have
not made, nor are we qualified by training
to make, a specific compliance survey and
analysis of this property to determine
whether or not it is in conformity with
the various detailed requirements of the
ADA. It is possible that a compliance
survey and a detailed analysis of the
requirements of the ADA could reveal that
the property is not in compliance with one
or more of the requirements of the Act. If
so, this fact could have a negative effect
upon the value of the property. Since we
have not been provided with the results of
a survey, we did not consider possible
non-compliance with the requirements of
ADA in estimating the value of the
property.
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Property Description
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Hazardous Substances: We are not aware of any potentially
hazardous materials (such as formaldehyde
foam insulation, asbestos insulation,
radon gas emitting materials, or other
potentially hazardous materials) which may
have been used in the construction of the
improvements. However, we are not
qualified to detect such materials and
urge the client to employ an expert in the
field to determine if such hazardous
materials are thought to exist.
Physical Condition: The mall was observed to be in overall
good condition.
Comments:
Despite the overall good condition of the subject property, ownership is
appropriately undertaking an enhancement program which will upgrade some of the
out-dated physical features of the mall. Some of the more significant items in
the enhancement program include, but are not limited to; an upgrade and redesign
of the mall entrances, replace and upgrade existing mall pylon signs, replace
and upgrade interior lighting, replace the lower and upper level floor with
ceramic tile, and upgrade the center court. As of this writing, the extent of
the enhancement program has not been finalized. However, based upon
conversations with the mall manager, Mr. Michael Hackstadt, it is likely that
the final approved program will total $4,000,000 in cost which will be expended
in 1997 and 1998. Further, as will be outlined in the Income Approach section
of the report, approximately $200,000 of this cost per annum will be passed
through to the tenants in common area maintenance charges.
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REAL PROPERTY TAXES AND ASSESSMENTS
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The subject property is assessed by Madison County for taxation purposes.
The subject's assessment was significantly increased in 1995 following a
reassessment of the property. Mr. Robert Busby of RRB Tax Consulting was
retained to determine the reasonableness of the increase and attempt to obtain a
reduction. The increase was found to be generally reasonable. However, due to
the significance of the increase in taxes, Mr. Busby was successful in
negotiating a phase-in of the increase over a two-year period.
In 1995, the tax rate for commercial property in Madison County was $9.924
per $100 of assessment. Following is an outline of the parcels which comprise
the subject property and the applicable tax information.
Assessed Indicated
Parcel No. Description Final Value Value Tax
---------- ----------- ----------- ----- ---
0721-31D-024 6.10 Ac. $797,130 $11,570 $11,866
0721-31D-001/01.05 1.763 Ac. 460,780 69,120 6,869
0721-31D-001/01.07 3.40 Ac. 50 10 1
0721-31D-001/01.10 .91 Ac. 317,120 47,568 4,720
0721-31D-001/03 .70 Ac. 1,000 150 15
0721-31D-001/05 19.5 Ac. 30,530,320 4,579,548 454,474
0821-31D-003/01 1.2 Ac. 1,000 150 15
0721-31D-004/01 1.54 Ac. 50 10 1
0721-31D-011/01 1.5 Ac. 196,020 29,400 2,917
------ ----------- ---------- --------
Totals 36.613 Ac $32,303,470 $4,845,526 $480,868
The indicated 1995 tax responsibility of $480,868 represents a phase-in of
the increased tax assessment.
Documents prepared by RRB Tax Consulting indicate that the full phase-in of
the increased tax assessment will result in an estimated tax responsibility for
the property in 1996 of $545,108. Based upon our review of public records, this
estimate is reasonable. As such, we have utilized a stabilized tax expense of
$545,000 for calendar year 1996 in our discounted cash flow analysis following.
We have assumed a 3.5 percent annual growth rate in the ensuing years of our
cash flow projection.
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ZONING
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The subject property is in a C-6, Regional Shopping Mall District as
promulgated by the City of Ridgeland. Permitted uses within district include
retail and related uses, as well as office development. According to the City of
Ridgeland Zoning Ordinance, the purpose of this District is to provide for the
preservation and perpetuation of retail and commercial enterprise and to provide
areas for the development of regional shopping malls of integrated design and
high density development of commercial businesses in certain areas adjacent to
major transportation arteries or thoroughfares within the City. For the purposes
of the Ordinance a regional shopping mall is any grouping of commercial
activities the structure of which exceeds 400,000 square feet in leasable floor
space.
There are no established dimensional building and site requirements per se.
Rather, a proposed site plan must be submitted to the zoning administrator, with
additional copies to be submitted to the City Engineer, Fire Chief and Building
Official. Upon eventual approval, the approved site plan shall become the zoning
requirements for the property involved. As such, though we are not experts in
the interpretation of the local zoning ordinance, it would appear that the
existing improvements are a legal and conforming use of the site.
We know of no deed restrictions, private or public, that further limit the
subject property's use. The research required to determine whether or not such
restrictions exist, however, is beyond the scope of this appraisal assignment.
Deed restrictions are a legal matter and only a title examination by an attorney
or title company can usually uncover such restrictive covenants. Thus, we
recommend a title search to determine if any such restrictions do exist.
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HIGHEST AND BEST USE
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Highest and Best Use Analysis
Highest and best use analysis evaluates existing land use for the subject
property and seeks to determine if alternative uses would prove more profitable.
The definition and analysis apply specifically to the land. The analysis further
examines whether the land value at its highest and best use exceeds the total
value of the property under its existing use or as improved. Highest and best
use identifies the most profitable, competitive use to which the property can be
put. Therefore, highest and best use is a market-driven concept.
Definition
Highest and best use is defined as follows:
The reasonably probable and legal use of vacant land or an improved
property, which is physically possible, appropriately supported,
financially feasible, and that results in the highest value. The four
criteria the highest and best use must meet are legal permissibility,
physical possibility, financial feasibility, and maximum profitability
(Dictionary of Real Estate Appraisal, Third Edition, 1993).
The definition indicates that there are two types of highest and best use
analysis required; the site as though vacant, and the site as currently
improved. In each case, the highest and best use must generally meet four
criteria. The use must be (1) physically possible, (2) legally permissible, (3)
financially feasible, and (4) maximally productive.
A. Highest and Best Use of Site As Though Vacant
According to the Dictionary of Real Estate Appraisal, Third Edition (1993),
a publication of the Appraisal Institute, the highest and best use of the site
as though vacant is defined as:
Among all reasonable, alternative uses, the use that yields the highest
present land value, after payments are made for labor, capital, and
coordination. The use of a property based on the assumption that the parcel
of land is vacant or can be made vacant by demolishing any improvements.
Physical Constraints
The first constraint imposed on the possible use of the site is dictated by
the physical aspects of the parcel itself. Physical factors influencing the use
of the site include location, size, shape, topography, soils, abutting uses, the
availability of utilities, and other characteristics.
The subject mall site contains 74+/- acres (including un-owned anchor
sites). The property is located at 'the northeast quadrant East County Line Road
and South Wheatley Street, offering good regional and local accessibility.
Topography is generally level, with good exposure to the site from both of these
roadways. East County Line Road has experienced steady commercial retail
development in recent years.
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Highest and Best Use
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All necessary utilities are available to the site, including public water,
gas, electricity, and telephone services. Physical characteristics--i.e. size,
shape, subsoil conditions, and location-- support various types of development,
including commercial, retail, office, and hotel uses. Abutting uses reflect a
mix of commercial development. As discussed, this quadrant of Ridgeland has
become a retail/commercial hub for an expanding trade area.
Physically, the site could accommodate a number of potential uses. The
general location of the property and its relation to the Metro Jackson area is
very good. Finally, there appear to be no physical constraints limiting
development of the subject property as though vacant. The site's size, location,
and configuration support a variety of possible uses, including retail, office
and hotel.
Legal Considerations
Legal factors influencing the highest and best use of the subject property
involve local land use guidelines, including comprehensive plans, zoning, and
building codes. The intensity of development may also be affected by surrounding
land uses, neighborhood concerns, and the local planning process.
The subject site is zoned C-6, Regional Shopping by the City of Ridgeland.
This zoning district allows for a variety of uses, including retail businesses,
eating and drinking establishments, banks, offices, food stores, furniture
sales, and hotel/motel. As discussed in the Zoning section of this report, all
development activity is subject to design review under the zoning review board.
Considering surrounding uses, it is clear that a large-scale retail use of
the site would be most appropriate. Parking would be necessary for both uses.
There are no other known land use regulations, easements, or encumbrances
which might impact development on the subject. Further, the site does not appear
to possess any significant natural, cultural, recreational, or scientific
attributes which may influence its use. Based upon this analysis, potential
legally permissible development of the subject site as though vacant would
include retail, office and hotel uses, assuming proper parking requirements are
met.
Financial Feasibility/Economic Considerations
After determining those uses which are physically possible and legally
permissible, the uses considered must be analyzed in light of their financial
feasibility. Based on the foregoing discussion, potential uses for the subject
site include retail, office and hotel/motel development. For a potential use to
be seriously considered, it must have the potential to provide a sufficient
return to attract investment capital over alternative forms of investment. A
positive net income or acceptable rate of return would indicate that a use is
financially feasible.
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Highest and Best Use
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As discussed in the various locational analyses sections of this report,
the Jackson MSA and the City of Ridgeland has experienced strong growth in
recent years, with good growth potential projected for the near-term.
Considering the site's size, location, and accessibility, we are of the opinion
that the property's highest and best use would be for a use that utilizes this
location and relies upon the draw of customers both regionally and locally. In
this sense, regional mail development would best suit the attributes of the
subject site. The overall success of the subject property supports this
conclusion.
Maximum Productivity
Finally, of the financially feasible, physically possible, and legally
permissible uses considered, the use that produces the highest price or value
consistent with the rate of return warranted by the market for that use is the
highest and best use. While this test of maximum productivity implies a
quantitative analysis, it is often most qualitative and sensitive to community,
social, political, and governmental concerns.
In the case of the subject, the site is located immediately east of
Interstate 55, with good accessibility and exposure. Surrounding land uses imply
a retail use for the subject site, while zoning has focused on retail
development. Convenient access and parking are also overriding issues for
potential development of the site. The subject's size and location lead us to
the conclusion that the highest and best use of the subject property, as though
vacant, is for regional mail development with surrounding outparcel uses. As
will be discussed in the highest and best use as improved, regional mall
development provides a sufficient return to the land.
A developer mindful of the prospective lot coverage, yet savvy as to the
market's potential for absorbing new product, would consider the site's feasible
potential. Parking is an overriding constraint that dictates the ultimate size
of a potential development. Accordingly, our premise assumes that parking would
be provided to a level sufficient for the total project.
Conclusion As Though Vacant
Based on the preceding analysis, the highest and best use of the subject
property, as though vacant, is for regional mall development built to the site's
maximum feasible F.A.R.
B. Highest and Best Use of Property As Improved
According to the Dictionary of Real Estate Appraisal, highest and best use
of the property as improved is defined as:
The use that should be made of a property as it exists. An existing
property should be renovated or retained as is so long as it continues to
contribute to the total market value of the property, or until the return
from a new improvement would more than offset the cost of demolishing the
existing building and constructing a new one.
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Highest and Best Use
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Physical Constraints
In considering the physical characteristics of the subject as improved, the
existing use must also meet criteria in order to maintain the property's highest
and best use. Existing improvements can be analyzed three ways: 1) they can be
retained as is; 2) they can be modified, altered, or rehabilitated; and 3) they
can be demolished in favor of an alternative use.
The subject site is currently improved with an enclosed regional mall, with
surface parking. Subject improvements are considered to be in good condition.
The layout and design are conducive for existing uses and site configuration
provides good access into the property.
There do not appear to be any other physical factors such as soil or
drainage conditions or other physical characteristics that adversely affect the
continued utility and/or existence of subject improvements. Thus, the subject
site as currently improved is a physically possible use.
Legal Considerations
The subject site as currently improved represents a legal, conforming use.
There do not appear to be any public or private use restrictions or covenants
which adversely affect the current use of the property. Although the subject
building could legally be modified or possibly demolished for an alternative
use, this would not be a logical progression since the subject does not suffer
from prohibitive functional or physical problems which inhibit its current use.
Furthermore, the leases and operating agreements in place dictate a retail use
for the property. Therefore, the subject site, as improved, is legally
permissible.
Financial Feasibility/Economic Considerations
As will be discussed in the Income Approach section of this report, the
subject property, as improved, is capable of producing a sufficient return to
the land. Moreover, analysis of the subject property as if vacant indicates that
the highest and best use of the site is for retail development. This
determination has been made by comparing alternative uses for the property and
establishing which use provides the greatest return to the land. Demolishing
existing improvements would not be financially feasible due to the cost involved
and the potential return an alternative use would bring. Thus, current
improvements to the subject provide the most financially feasible use of the
site.
Maximum Productivity
Based upon the foregoing analysis, the subject parcel, as currently
improved, represents the maximally productive use of the site. Although the site
could be developed with an alternative configuration by demolishing existing
improvements, this scenario would not be economically justifiable and, as a
result, fail the test of financial feasibility and maximum productivity. In our
opinion, no other use of the site would provide as great a return.
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Highest and Best Use
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Conclusion As Improved
The highest and best use of the subject property is therefore as currently
improved. The existing use is physically possible, legally permissible,
financially feasible, and maximally productive. Market conditions in the Jackson
MSA and the City of Ridgeland indicate demand for properties of the subject's
stature, with vacancy and rental rates which justify the financial feasibility
of existing improvements.
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VALUATION PROCESS
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Appraisers typically use three approaches in valuing real property: The
Cost Approach, the Income Approach and the Sales Comparison Approach. The type
and age of the property and the quantity and quality of data effect the
applicability in a specific appraisal situation.
The Cost Approach renders an estimate of value based upon the price of
obtaining a site and constructing improvements, both with equal desirability and
utility as the subject property. Historically, investors have not emphasized
cost analysis in purchasing investment grade properties such as regional malls.
The estimation of obsolescence for functional and economic conditions as well as
depreciation on improvements makes this approach difficult at best. Furthermore,
the Cost Approach fails to consider the value of department store commitments to
regional shopping centers and the difficulty of site assemblage for such
properties. As such, a complete Cost Approach will not be employed in this
analysis due to the fact that the marketplace does not rigidly trade leased
shopping centers on a cost/value basis.
The Sales Comparison Approach is based on an estimate of value derived from
the comparison of similar type properties which have recently been sold. Through
an analysis of these sales, efforts are made to discern the actions of buyers
and sellers active in the marketplace, as well as establish relative unit values
upon which to base comparisons with regard to the mail. This approach has a
direct application to the subject property. Furthermore, this approach has been
used to develop investment indices and parameters from which to judge the
reasonableness of our principal approach, the Income Approach.
By definition, the subject property is considered an income/investment
property. Properties of this type are historically bought and sold on the
ability to produce economic benefits, typically in the form of a yield to the
purchaser on investment capital. Therefore, the analysis of income capabilities
are particularly germane to this property since a prudent and knowledgeable
investor would follow this procedure in analyzing its investment qualities.
Therefore, the Income Approach has been emphasized as our primary methodology
for this valuation. This valuation concludes with a final estimate of the
subject's market value based upon the total analysis as presented herein.
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SALES COMPARISON APPROACH
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Methodology
The Sales Comparison Approach provides an estimate of market value by
comparing recent sales of similar properties in the surrounding or competing
area to the subject property. Inherent in this approach is the principle of
substitution, which holds that, when a property is replaceable in the market,
its value tends to be set at the cost of acquiring an equally desirable
substitute property, assuming that no costly delay is encountered in making the
substitution.
By analyzing sales that qualify as arms-length transactions between willing
and knowledgeable buyers and sellers, market value and price trends can be
identified. Comparability in physical, locational, and economic characteristics
is an important criterion when comparing sales to the subject property. The
basic steps involved in the application of this approach are as follows:
1. Research recent, relevant property sales and current offerings
throughout the competitive marketplace;
2. Select and analyze properties considered most similar to the subject,
giving consideration to the time of sale, change in economic
conditions which may have occurred since date of sale, and other
physical, functional, or locational factors;
3. Identify sales which include favorable financing and calculate the
cash equivalent price; and
4. Reduce the sale prices to a common unit of comparison, such as price
per square foot of gross leaseable area sold;
5. Make appropriate adjustments between the comparable properties and the
property appraised;
6. Interpret the adjusted sales data and draw a logical value conclusion.
The most widely-used, market-oriented units of comparison for retail
properties such as the subject are the sale price per square foot of gross
leaseable area (GLA) purchased, and the overall capitalization rate extracted
from the sale. This latter measure will be addressed in the Income Approach
which follows this methodology. An analysis of the inherent sales multiple also
lends additional support to the Sales Comparison Approach.
Market Overview
The typical purchaser of properties of the subject's caliber includes both
foreign and domestic insurance companies, large retail developers, pension
funds, and real estate investment trusts (REIT's). The large capital
requirements necessary to participate in this market and the expertise demanded
to successfully operate an investment of this type, both limit the number of
active participants and, at the same time, expand the geographic boundaries of
the marketplace to include the international arena. Due to the relatively small
number of market participants and the moderate amount of quality product
available in the current marketplace, strong demand exists for the nation's
quality retail developments.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Sales Comparison Approach
================================================================================
Most institutional grade retail properties are existing, seasoned centers
with good inflation protection. These centers offer stability in income and are
strongly positioned to the extent that they are formidable barriers to new
competition. They tend to be characterized as having three to five department
store anchors, most of which are dominant in the market. Mall shop sales are at
least $300 per square foot and the trade area offers good growth potential in
terms of population and income levels. Equally important are centers which offer
good upside potential after face-lifting, renovations, or expansion. With new
construction down substantially, owners have accelerated their renovation and
remerchandising programs. Little competition from over-building is likely in
most mature markets within which these centers are located. Environmental
concerns and "no-growth" mentalities in communities continue to be serious
impediments to new retail developments.
Over the past 18+/- months, we have seen real estate investment return to
favor as an important part of many institutional investors' diversified
portfolios. Banks are aggressively competing for business, trying to regain
market share lost to Wall Street, while the more secure life insurance companies
are also reentering the market. The re-emergence of real estate investment
trusts (REITs) has helped to provide liquidity within the real estate market,
pushing demand for well-tenanted, quality property, particularly regional malls.
Currently, REITs are one of the most active segments of the industry and are
particularly attractive to institutional investors due to their liquidity.
The market for dominant Class A institutional quality malls is tight, as
characterized by the limited amount of good quality product available. It is the
consensus that Class A property would trade in the 7.0 to 8.0 percent
capitalization rate range. Conversely, there are many second tier and lower
quality malls offered on the market at this time. With limited demand from a
much thinner market, cap rates for this class of malls are felt to be in the
much broader 8.5 to 15.0 percent range. Reportedly, there are 50+/- malls on the
market currently. Pessimism about the long term viability of many of these lower
quality malls has been fueled by the recent turmoil in the retail industry. It
is felt that the subject resides on the better quality end of this latter
category.
To better understand where investors stand in today's marketplace, we have
surveyed active participants in the retail investment market. Based upon our
survey, the following points summarize some of the more important " hot buttons
" concerning investors:
1. Occupancy Costs - This " health ratio " measure is of fundamental
concern today. Investors like to see ratios under 13.0 percent and
become quite concerned when they exceed 15.0 percent. This appears to
be by far the most important issue to an investor today. Investors are
looking for long term growth in cash flow and want to realize this
growth through real rent increases. High occupancy costs limit the
amount of upside through lease rollovers.
2. Market Dominance - The mall should truly be the dominant mall in the
market, affording it a strong barrier to entry. Some respondents feel
this is more important than the size of the trade area itself.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Sales Comparison Approach
================================================================================
3. Strong Anchor Alignment - Having at least three department stores, two
of which are dominant in that market. The importance of the
traditional department store as an anchor tenant has returned to favor
after several years of weak performance and confusion as to the
direction of the industry. As a general rule, most institutional
investors would not be attracted to a two-anchor mall.
4. Dense Marketplace - Several of the institutional investors favor
markets of 300,000 to 500,000 people (at least 150,000 households) or
greater within a 5 to 7 mile radius. Population growth in the trade
area is also very important. One advisor likes to see growth 50.0
percent better than the U.S. average. Another investor cited that they
will look at trade areas of 200,000+/- but that if there is no
population growth forecasted in the market, a 50+/- basis point
adjustment to the cap rate at the minimum is warranted.
5. Income Levels - Household incomes of $50,000+ which tends to be
limited in many cases to top 50 MSA locations.
6. Good Access - Interstate access with good visibility and a location
within or proximate to the growth path of the community.
7. Tenant Mix - A complimentary tenant mix is important. Mall shop ratios
of 35+/- percent of total GLA are considered average with 75.0 to
80.0 percent allocated to national tenants. Mall shop sales of at
least $250 per square foot with a demonstrated positive trend in sales
is also considered to be important.
8. Physical Condition - Malls that have good sight lines, an updated
interior appearance, and a physical plant in good shape are looked
upon more favorably. While several developers are interested in
turn-around situations, the risk associated with large capital
infusions can add at least 200 to 300 basis points onto a cap rate.
9. Environmental Issues - The impact of environmental problems cannot be
understated. There are several investors who won't even look at a deal
if there are any potential environmental issues no matter how
seemingly insignificant.
10. Operating Covenants - Some buyers indicated that they would not be
interested in buying a mall if the anchor store operating covenants
were to expire over the initial holding period. Others weigh each
situation on its own merit. If it is a dominant center with little
likelihood of someone coming into the market with a new mall, they are
not as concerned about the prospects of loosing a department store. If
there is a chance of loosing an anchor, the cost of keeping them must
be weighed against the benefit. In many of their malls they are
finding that traditional department stores are not always the optimum
tenant but that a category killer or other big box use would be a more
logical choice.
In the following section we will discuss trends which have become apparent
over the past several years involving sales of regional malls.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Sales Comparison Approach
================================================================================
Regional Mail Property Sales
Evidence has shown that mall property sales which include anchor stores
have lowered the square foot unit prices for some comparables, and have affected
investor perceptions. In our discussions with major shopping center owners and
investors, we learned that capitalization rates and underwriting criteria have
become more sensitive to the contemporary issues affecting department store
anchors. Traditionally, department stores have been an integral component of a
successful shopping center and, therefore, of similar investment quality if they
were performing satisfactorily.
During the 1980's a number of acquisitions, hostile takeovers and
restructuring occurred in the department store industry which changed the
playing field forever. Weighted down by intolerable debt, combined with a
slumping economy and a shift in shopping patterns, the end of the decade was
marked by a number of bankruptcy filings unsurpassed in the industry's history.
Evidence of further weakening continued into 1991-1992 with filings by such
major firms as Carter Hawley Hale, P.A. Bergner & Company, and Macy's. In early
1994, Woodward & Lothrop announced their bankruptcy involving two department
store divisions that dominate the Philadelphia and Washington D.C. markets.
Recently, most of the stores were acquired by the May Department Stores Company,
effectively ending the existence of the 134 year old Wanamaker name, the
nation's oldest department store company. More recently, however, department
stores have been reporting a return to profitability resulting from increased
operating economies and higher sales volumes. Sears, once marked by many for
extinction, has more recently won the praise of analysts. Federated Department
Stores has also been acclaimed as a text book example on how to successfully
emerge from bankruptcy. They have merged with Macy's and more recently acquired
the Broadway chain to form one of the nation's largest department store
companies.
With all this in mind, investors are looking more closely at the strength
of the anchors when evaluating an acquisition. Most of our survey respondents
were of the opinion that they were indifferent to acquiring a center that
included the anchors versus stores that were independently owned if they were
good performers. However, where an acquisition includes anchor stores, the
resulting cash flow is typically segregated with the income attributed to
anchors (base plus percentage rent) analyzed at a higher cap rate then that
produced by the mall shops.
However, more recent data suggests that investors are becoming more
troubled by the creditworthiness of the mall shops. With an increase in
bankruptcies, store closures and consolidations, we see investors looking more
closely at the strength and vulnerabilities of the in-line shops. As a result,
there has been a marked trend of increasing capitalization rates.
Cushman & Wakefield has extensively tracked regional mall transaction
activity for several years. In this analysis we will show sales trends since
1991. Summary charts for the older sales (1991-1993) are provided in the
Addenda. The more recent sales (1994/1995) are provided herein. These sales are
inclusive of good quality Class A or B+/- properties that are dominant in their
market. Also included are weaker properties in second tier cities that have a
narrower investment appeal. As such, the mall sales presented in this analysis
show a wide
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
<TABLE>
<CAPTION>
================================================================================================================================
REGIONAL MALL SALES 1995
1995 Transaction Chart
Cushman & Wakefield, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Sale Sale Year Total Sold Shop Shop Occu- Shop
No. Property/Location Date Built Sale Price GLA GLA GLA Ratio pancy Sales/sf
================================================================================================================================
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
95-1 Natick Mall Dec-95 1994 $265,000,000 1,160,733 646,733 436,733 37.6% 99.0% $416
Natick, MA (redeval)
- --------------------------------------------------------------------------------------------------------------------------------
95-2 Smith Haven Mall Dec-95 1969/ $221,000,000 1,351,913 813,786 505,626 37.4% 93.0% $420
Lake Grove, NY 86
- --------------------------------------------------------------------------------------------------------------------------------
95-3 Capitola Mall Dec-95 1977/ $52,500,000 577,396 577,396 197,396 34.2% 92.0% $262
(1) Capitola, CA 88
- --------------------------------------------------------------------------------------------------------------------------------
95-4 Centre at Salisbury Aug-95 1990 $78,000,000 884,825 744,825 278,915 31.5% 89.0% $257
Salisbury, MD
- --------------------------------------------------------------------------------------------------------------------------------
95-5 Piedmont Mall Jul-95 1983/ $39,000,000 534,135 409,135 188,049 35.2% -- $250
Danville, VA 84
- --------------------------------------------------------------------------------------------------------------------------------
95-6 River Oaks Center Jul-95 1978 $26,200,000 574,657 493,791 219,099 38.1% -- $200
Decatur, AL
- --------------------------------------------------------------------------------------------------------------------------------
95-7 Columbia Mall Jul-95 1998 $27,650,000 351,364 351,364 128,024 36.4% 96.0% $165
Bloomsberg, PA
- --------------------------------------------------------------------------------------------------------------------------------
95-8 Hot Springs Mall Jun-95 1962 $22,775,000 389,914 318,033 156,000 40.0% 83.0% $240
Hot Springs, AR
- --------------------------------------------------------------------------------------------------------------------------------
95-9 Westgate Mall May-95 1960/ $43,000,000 649,185 448,268 253,993 39.1% 77.9% $191
San Jose, CA 89
- --------------------------------------------------------------------------------------------------------------------------------
95-10 Silver City Galleria Apr-95 1992 $159,106,000 1,005,595 749,595 349,107 34.7% 96.0% $290
East Taunton, MA
- --------------------------------------------------------------------------------------------------------------------------------
95-11 Westgate Mall Apr-95 1975 $25,300,000 768,000 449,974 272,630 35.5% 85.0% $240
Spartanburg, SC
- --------------------------------------------------------------------------------------------------------------------------------
95-12 Hanover Mall Jan-95 1971/93 $38,000,000 649,130 649,130 298,531 46.0% 90.0% $204
Hanover, MA
- --------------------------------------------------------------------------------------------------------------------------------
95-13 Greenbrier Mall Jan-95 1981 $84,700,000 774,201 594,201 318,595 41.2% 96.0% $250
Chesapeake, VA
- --------------------------------------------------------------------------------------------------------------------------------
95-14 Galleria at Tyler Jan-95 1970/ $123,750,000 1,044,536 431,640 411,640 39.4% 86.0% $244
(2) Riverside, CA 91
================================================================================================================================
Survey Low: $22,775,000 351,364 318,033 128,024 31.5% 77.9% $165
Survey High: $265,000,000 1,351,913 813,786 505,626 46.0% 99.0% $420
- --------------------------------------------------------------------------------------------------------------------------------
Survey Mean: $86,141,500 765,399 548,410 286,738 37.6% 90.2% $259
- --------------------------------------------------------------------------------------------------------------------------------
================================================================================================================================
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Capitalization Unit Rate
Rates Comparison
------------------ --------------------
Sale Going-in Terminal Price/GLA Price/Mall Sales
No. Property/Location NOI NOI/sf OAR OAR IRR Purchased Shop GLA Multiple
===============================================================================================================
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C>
95-1 Natick Mall $21,311,000 $32.95 8.04% 8.00% 10.75% $410 $607 1.46
Natick, MA
- ---------------------------------------------------------------------------------------------------------------
95-2 Smith Haven Mall $16,500,000 $20.28 7.47% -- -- $272 $437 4.04
Lake Grove, NY
- ---------------------------------------------------------------------------------------------------------------
95-3 Capitola Mall $4,987,500 $8.64 9.50% -- -- $91 $266 1.02
(1) Capitola, CA
- ---------------------------------------------------------------------------------------------------------------
95-4 Centre at Salisbury $7,020,000 $9.43 9.00% -- -- $105 $280 1.09
Salisbury, MD
- ---------------------------------------------------------------------------------------------------------------
95-5 Piedmont Mall $3,600,000 $8.80 9.23% -- -- $95 $207 0.83
Danville, VA
- ---------------------------------------------------------------------------------------------------------------
95-6 River Oaks Center $2,908,200 $5.89 11.10% -- -- $53 $120 0.60
Decatur, AL
- ---------------------------------------------------------------------------------------------------------------
95-7 Columbia Mall $2,958,500 $8.42 10.70% -- -- $79 $216 1.31
Bloomsberg, PA
- ---------------------------------------------------------------------------------------------------------------
95-8 Hot Springs Mall $2,277,500 $7.16 10.00% -- -- $72 $146 0.61
Hot Springs, AR
- ---------------------------------------------------------------------------------------------------------------
95-9 Westgate Mall $4,096,457 $9.14 9.53% -- -- $96 $169 0.89
San Jose, CA
- ---------------------------------------------------------------------------------------------------------------
95-10 Silver City Galleria $13,219,000 $17.63 8.31% 8.00% 11.00% $212 $456 1.57
East Taunton, MA
- ---------------------------------------------------------------------------------------------------------------
95-11 Westgate Mall $2,403,500 $5.34 9.50% -- -- $56 $93 0.39
Spartanburg, SC
- ---------------------------------------------------------------------------------------------------------------
95-12 Hanover Mall $3,811,400 $5.67 10.03% -- -- $59 $127 0.62
Hanover, MA
- ---------------------------------------------------------------------------------------------------------------
95-13 Greenbrier Mall $6,600,000 $11.11 7.79% 8.00% 11.50% $143 $266 1.06
Chesapeake, VA
- ---------------------------------------------------------------------------------------------------------------
95-14 Galleria at Tyler $9,600,000 $22.24 7.76% 8.00% 10.50% $287 $301 1.23
(2) Riverside, CA
===============================================================================================================
Survey Low: $2,277,500 $5.34 7.47% 8.00% 10.50% $53 $93 0.39
Survey High: $21,311,000 $32.95 11.10% 8.00% 11.50% $410 $607 1.57
- ---------------------------------------------------------------------------------------------------------------
Survey Mean: $7,235,218 $12.35 9.14% 8.00% 10.94% $145 $264 0.98
- ---------------------------------------------------------------------------------------------------------------
===============================================================================================================
</TABLE>
- ----------
(1) Cash equivalent price
(2) Net of allocation for excess land. Sale includes cinema.
CUSHMAN &
WAKEFIELD
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VALUATION ADVISORY SERVICES
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<PAGE>
<TABLE>
<CAPTION>
================================================================================================================================
REGIONAL MALL SALES 1994
1994 Transaction Chart
Cushman & Wakefield, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Sale Sale Year Total Sold Shop Shop Occu- Shop
No. Property/Location Date Built Sale Price GLA GLA GLA Ratio pancy Sales/sf
================================================================================================================================
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
94-1 Independence Center Dec-94 1974/ $53,400,000 863,986 392,524 392,524 45.4% 84.0% $200
(1) Independence, MO 88
- --------------------------------------------------------------------------------------------------------------------------------
94-2 Biltmore Fashion Dec-94 1963/ $110,000,000 554,503 372,000 219,000 39.5% 97.0% $380
(2) Park 92
Phoenix, Arizona
- --------------------------------------------------------------------------------------------------------------------------------
94-3 Confidential Dec-94 1981/ $108,000,000 1,123,580 333,468 333,468 29.7% 95.0% $300
Major Southwest, MSA 83
- --------------------------------------------------------------------------------------------------------------------------------
94-4 CPI Portfolio Dec-94 $151,500,000 2,110,051 1,142,386 750,436 35.6% 90.0% $250
(3) 1) Orange Park Mall 1975/
Orange Park, 91
Florida
2) University Mall 1974/
Pensacola, Florida 90
3) Broadway Square 1975/
Mall 89
Tyler, Texas
- --------------------------------------------------------------------------------------------------------------------------------
94-5 Fashion Valley Center Nov-94 1969/ $128,500,000 1,370,262 518,900 373,725 27.3% 91.0% $325
San Diego, California 81/84
- --------------------------------------------------------------------------------------------------------------------------------
94-6 Mall of the Americas Oct-94 1970/ $76,200,000 678,000 678,000 225,000 33.2% 98.5% $325
Miami, Florida 93+
- --------------------------------------------------------------------------------------------------------------------------------
94-7 Corte Madera T.C. Sep-94 1958/ $70,500,000 425,572 425,572 237,453 55.8% 93.5% $325
Marin County, 85
California
- --------------------------------------------------------------------------------------------------------------------------------
94-8 Layton Hills Mall Sep-94 1980/ $51,375,000 710,030 620,030 399,001 56.2% 94.0% $226
Layton, Utah 91
- --------------------------------------------------------------------------------------------------------------------------------
94-9 North Shore Square Jul-94 1985 $34,150,000 624,000 358,709 178,326 28.6% 94.0% $218
Slidell, Louisiana
- --------------------------------------------------------------------------------------------------------------------------------
94-10 Chesterfield T.C. Jun-94 1966/ $93,600,000 605,161 605,161 291,744 48.2% 95.0% $290
(5) Richmond, Virginia 87/89
- --------------------------------------------------------------------------------------------------------------------------------
94-11 Waterside Shops Jun-94 1992 $65,500,000 250,000 250,000 173,930 69.6% 99.0% $400
Naples, Florida
- --------------------------------------------------------------------------------------------------------------------------------
94-12 Crossroads Mall Apr-94 1974 $51,500,000 1,114,720 378,704 378,704 34.0% 95.0% $189
Oklahoma City,
Oklahoma
- --------------------------------------------------------------------------------------------------------------------------------
94-13 Riverchase Galleria Feb-94 1966 $175,000,000 1,251,142 462,612 350,504 28.0% 95.0% $350
Hoover, Alabama
- --------------------------------------------------------------------------------------------------------------------------------
94-14 Stratford Square Mall Jan-94 1981/ $119,000,000 1,294,682 493,404 493,404 38.1% 98.5% $260
Bloomingdale, 88/91
Illinois
================================================================================================================================
Survey Low: $34,150,000 250,000 250,000 173,930 27.3% 84.0% $189
Survey High: $175,000,000 2,110,051 1,142,386 750,436 69.6% 99.0% $400
- --------------------------------------------------------------------------------------------------------------------------------
Survey Mean: $92,016,071 926,835 502,248 342,659 40.6% 94.3% $288
================================================================================================================================
================================================================================
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Capitalization Unit Rate
Rates Comparison
------------------ --------------------
Sale Going-in Terminal Price/GLA Price/Mall Sales
No. Property/Location NOI NOI/sf OAR OAR IRR Purchased Shop GLA Multiple
===============================================================================================================
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C>
94-1 Independence Center $4,592,000 $11.70 8.60% -- -- $136 $136 0.68
(1) Independence, MO
- ---------------------------------------------------------------------------------------------------------------
94-2 Biltmore Fashion $8,600,000 $23.12 7.82% -- -- $296 $502 1.32
(2) Park
Phoenix, Arizona
- ---------------------------------------------------------------------------------------------------------------
94-3 Confidential $7,538,400 $22.61 6.98% 7.25% 10.70% $324 $324 1.08
Major Southwest, MSA
- ---------------------------------------------------------------------------------------------------------------
94-4 CPI Portfolio $13,350,000 $11.69 8.81% -- -- $133 $202 0.81
(3) 1) Orange Park Mall
Orange Park,
Florida
2) University Mall
Pensacola, Florida
3) Broadway Square
Mall
Tyler, Texas
- ---------------------------------------------------------------------------------------------------------------
94-5 Fashion Valley Center $9,637,500 $18.57 7.50% 8.00% 11.00% $248 $344 1.06
San Diego, California
- ---------------------------------------------------------------------------------------------------------------
94-6 Mall of the Americas $6,706,000 $9.89 8.80% -- 11.80% $112 $339 1.04
Miami, Florida
- ---------------------------------------------------------------------------------------------------------------
94-7 Corte Madera T.C. $5,900,000 $13.86 8.37% 9.00% 11.00% $166 $297 0.91
Marin County,
California
- ---------------------------------------------------------------------------------------------------------------
94-8 Layton Hills Mall $4,730,500 $7.63 9.21% -- -- $83 $129 0.57
Layton, Utah
- ---------------------------------------------------------------------------------------------------------------
94-9 North Shore Square $3,073,000 $8.57 9.00% -- -- $95 $192 0.88
Slidell, Louisiana
- ---------------------------------------------------------------------------------------------------------------
94-10 Chesterfield T.C. $8,424,000 $13.92 9.00% -- -- $155 $321 1.11
(5) Richmond, Virginia
- ---------------------------------------------------------------------------------------------------------------
94-11 Waterside Shops $5,043,500 $20.17 7.70% -- -- $262 $377 0.94
Naples, Florida
- ---------------------------------------------------------------------------------------------------------------
94-12 Crossroads Mall $5,300,000 $14.00 10.29% -- -- $136 $136 0.72
Oklahoma City,
Oklahoma
- ---------------------------------------------------------------------------------------------------------------
94-13 Riverchase Galleria $13,295,000 $28.74 7.60% -- 11.50% $378 $499 1.43
Hoover, Alabama
- ---------------------------------------------------------------------------------------------------------------
94-14 Stratford Square Mall $8,962,500 $18.16 7.53% 8.25% 11.00% $241 $241 0.93
Bloomingdale,1
Illinois
===============================================================================================================
Survey Low: $3,073,000 $7.63 6.96% 7.25% 10.70% $83 $129 0.57
Survey High: $13,350,000 $28.74 10.29% 9.00% 11.80% $378 $502 1.43
- ---------------------------------------------------------------------------------------------------------------
Survey Mean: $7,510,850 $15.90 8.37% 8.13% 11.17% $197 $288 0.96
===============================================================================================================
</TABLE>
(1) Inclusive of $2.4 million held back for deferred maintenance.
(2) Inclusive of partnership units. (3) Net of allocation to excess land.
(4) Sales includes 75,712 square foot professional building.
(5) Adjusted to reflect 100% interest.
CUSHMAN &
WAKEFIELD
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VALUATION ADVISORY SERVICES
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<PAGE>
Sales Comparison Approach
================================================================================
variety of prices on a per unit basis, ranging from $59 per square foot up to
$556 per square foot of total GLA purchased. When expressed on the basis of mall
shop GLA acquired, the range is more broadly seen to be $93 to $647 per square
foot. Alternatively, the overall capitalization rates that can be extracted from
each transaction range from 5.60 percent to rates in excess of 11.0 percent.
One obvious explanation for the wide unit variation is the inclusion (or
exclusion) of anchor store square footage which has the tendency to distort unit
prices for some comparables. Other sales include only mall shop area where small
space tenants have higher rents and higher retail sales per square foot. A
shopping center sale without anchors, therefore, gains all the benefits of
anchor/small space synergy without the purchase of the anchor square footage.
This drives up unit prices to over $250 per square foot, with most sales over
$300 per square foot of salable area. A brief discussion of historical trends in
mall transactions follows.
o The fourteen sales included for 1991 show a mean average price per
square foot sold of $282. On the basis of mall shop GLA sold, these
sales present a mean of $357. Sales multiples range from .74 to 1.53
with a mean of 1.17. Capitalization rates range from 5.60 to 7.82
percent with an overall mean of 6.44 percent. The mean terminal
capitalization rate is approximately 100 basis points higher, or 7.33
percent. Yield rates range between 10.75 and 13.00 percent, with a
mean of 11.52 percent for those sales reporting IRR expectancies.
o In 1992, the eleven transactions display prices ranging from $136 to
$511 per square foot of GLA sold, with a mean of $259 per square foot.
For mall shop area sold, the 1992 sales suggest a mean price of $320
per square foot. Sales multiples range from .87 to 1.60 with a mean of
1.07. Capitalization rates range between 6.00 and 7.97 percent with
the mean cap rate calculated at 7.31 percent for 1992. For sales
reporting a going-out cap rate, the mean is shown to be 7.75 percent.
Yield rates range from 10.75 to around 12.00 percent with a mean of
11.56 percent.
o For 1993, a total of sixteen transactions have been tracked. These
sales show an overall average sale price of $242 per square foot based
upon total GLA sold and $363 per square foot based solely upon mall
GLA sold. Sales multiples range from .65 to 1.82 and average 1.15.
Capitalization rates continued to rise in 1993, showing a range
between 7.00 and 10.10 percent. The overall mean has been calculated
to be 7.92 percent. For sales reporting estimated terminal cap rates,
the mean is also equal to 7.92 percent. Yield rates for 1993 sales
range from 10.75 to 12.50 percent with a mean of 11.53 percent for
those sales reporting IRR expectancies. On balance, the year was
notable for the number of dominant Class A malls which transferred.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Sales Comparison Approach
================================================================================
o Sales data for 1994 shows fourteen confirmed transactions with an
average unit price per square foot of $197 per square foot of total
GLA sold and $288 per square foot of mall shop GLA. Sales multiples
range from .57 to 1.43 and average .96. The mean going-in
capitalization rate is shown to be 8.37 percent. The residual
capitalization rates average 8.13 percent. Yield rates range from
10.70 to 11.50 percent and average 11.17 percent. During 1994, many of
the closed transactions involved second and third tier malls. This
accounted for the significant drop in unit rates and corresponding
increase in cap rates. Probably the most significant sale involved the
Riverchase Galleria, a 1.2 million square foot center in Hoover,
Alabama. LaSalle Partners purchased the mall of behalf of the
Pennsylvania Public School Employment Retirement System for $175.0
million. The reported cap rate was approximately 7.4 percent.
o Cushman & Wakefield has researched 14 mall transactions for 1995. With
the exception of Sale No. 95-1 (Natick Mall) and 95-2 (Smith Haven
Mall), by and large the quality of malls sold are lower than what has
been shown for prior years. For example, the average transaction price
has been slipping. In 1993, the peak year, the average deal was nearly
$133.8 million. Currently, it is shown to be $90.7 million which is
even skewed upward by Sale Nos. 95-1 and 95-2. The average price per
square foot of total GLA is calculated to be $152 per square foot. The
range in values of mall GLA sold are $93 to $607 with an average of
$275 per square foot. Characteristic of these lesser quality malls
would be higher initial capitalization rates. The range for these
transactions is 7.47 to 11.1 percent with a mean of 9.14 percent, the
highest average over the past five years, Most market participants
feel that continued turmoil in the retail industry will force cap
rates to move higher over the ensuing year.
While these unit prices implicitly contain both the physical and economic
factors affecting the real estate, the statistics do not explicitly convey many
of the details surrounding a specific property. Thus, this single index to the
valuation of the subject property has limited direct application. The price per
square foot of mall shop GLA acquired yields one common form of comparison.
However, this can be distorted if anchor and/or other major tenants generate a
significant amount of income. The following chart summarizes the range and mean
for this unit of comparison by year of sale.
============================================================
Transaction Price/SF Price/SF Sales
Year Unit Rate Range * Mean Multiple
============================================================
1991 $203 - $556 $357 1.17
------------------------------------------------------------
1992 $226 - $511 $320 1.07
------------------------------------------------------------
1993 $173 - $647 $363 1.15
------------------------------------------------------------
1994 $129 - $502 $288 .96
------------------------------------------------------------
1995 $ 93 - $607 $264 .98
============================================================
* Includes all sales by each respective year.
============================================================
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Sales Comparison Approach
================================================================================
As discussed, one of the factors which may influence the unit rate is
whether or not anchor stores are included in the total GLA which is transferred.
Thus, a further refinement can be made between those malls which have
transferred with anchor space and those which have included only mail GLA. Chart
A, shown below makes this distinction.
============================================================================
CHART A
Regional Mall Sales
Involving Mall Shop Space Only
============================================================================
1991 1992 1993 1994
============================================================================
Sale Unit NOI Sale Unit NOI Sale Unit NOI Sale Unit NOI
No. Rate Per SF No. Rate Per SF No. Rate Per SF No. Rate Per SF
============================================================================
91- 1 $257 $15.93 92- 2 $348 $25.27 93- 1* $355 $23.42 94- 1 $136 $11.70
----------------------------------------------------------------------------
91- 2 $232 $17.65 92- 9 $511 $33.96 93- 4 $471 $32.95 94- 3 $324 $22.61
----------------------------------------------------------------------------
91- 5 $203 $15.89 92-11 $283 $19.79 93- 5 $396 $28.88 94-12 $136 $14.00
----------------------------------------------------------------------------
91- 6 $399 $24.23 93- 8 $265 $20.55 94-14 $241 $18.16
----------------------------------------------------------------------------
91- 7 $395 $24.28 93-16 $268 $19.18
----------------------------------------------------------------------------
91- 8 $320 $19.51
----------------------------------------------------------------------------
91-10 $556 $32.22
----------------------------------------------------------------------------
Mean $337 $21.39 Mean $381 $26.34 Mean $351 $25.00 Mean $209 $16.62
============================================================================
Sale included peripheral GLA.
============================================================================
From the above we see that the mean unit rate for sales involving mall shop
GLA only has ranged from approximately $209 to $381 per square foot. We
recognized that these averages may be skewed somewhat by the size of the sample.
There were no 1995 transactions involving only mall shop GLA.
Alternately, where anchor store GLA has been included in the sale, the unit
rate is shown to range widely from $53 to $410 per square foot of salable area,
indicating a mean of $227 per square foot in 1991, $213 per square foot in 1992,
$196 per square foot in 1993, $193 per square foot in 1994 and $145 per square
foot in 1995. Chart B following depicts this data.
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================================================================================
=================================================================
CHART B
Regional Mail Sales
Involving Mall Shops and Anchor GLA
=================================================================
1991 1992 1993
=================================================================
Sale Unit NOI Sale Unit NOI Sale Unit NOI
No. Rate Per SF No. Rate Per SF No. Rate Per SF
=================================================================
91- 3 $156 $11.30 92- 1 $258 $20.24 93- 2 $225 $17.15
-----------------------------------------------------------------
91- 4 $228 $16.50 92- 3 $197 $14.17 93- 3 $135 $11.14
-----------------------------------------------------------------
91- 9 $193 $12.33 92- 4 $385 $29.43 93- 6 $224 $16.39
-----------------------------------------------------------------
91-11 $234 $13.36 92- 5 $182 $14.22 93- 7 $ 73 $ 7.32
-----------------------------------------------------------------
91-12 $287 $17.83 92- 6 $203 $16.19 93- 9 $279 $20.66
-----------------------------------------------------------------
91-13 $242 $13.56 92- 7 $181 $13.60 93-10 $ 97 $ 9.13
-----------------------------------------------------------------
91-14 $248 $14.87 92- 8 $136 $ 8.18 93-11 $289 $24.64
-----------------------------------------------------------------
92-10 $161 $12.07 93-12 $194 $13.77
-----------------------------------------------------------------
93-13 $108 $ 9.75
-----------------------------------------------------------------
93-14 $322 $24.10
-----------------------------------------------------------------
93-15 $214 $16.57
-----------------------------------------------------------------
Mean $227 $14.25 Mean $213 $16.01 Mean $196 $15.51
=================================================================
===========================================
CHART B
Regional Mall Sales
Involving Mall Shops and Anchor GLA
===========================================
1994 1995
===========================================
Sale Unit N0I Sale Unit NOI
No. Rate Per SF No. Rate Per SF
===========================================
94- 2 $296 $23.12 95- 1 $410 $32.95
-------------------------------------------
94- 4 $133 $11.69 95- 2 $272 $20.28
-------------------------------------------
94- 5 $248 $18.57 95- 3 $ 91 $ 8.64
-------------------------------------------
94- 6 $112 $ 9.89 95- 4 $105 $ 9.43
-------------------------------------------
94- 7 $166 $13.86 95- 5 $ 95 $ 8.80
-------------------------------------------
94- 8 $ 83 $ 7.63 95- 6 $ 53 $ 5.89
-------------------------------------------
94- 9 $ 95 $ 8.57 95- 7 $ 79 $ 8.42
-------------------------------------------
94-10 $155 $13.92 95- 8 $ 72 $ 7.16
-------------------------------------------
94-11 $262 $20.17 95- 9 $ 96 $ 9.14
-------------------------------------------
94-13 $378 $28.74 95-10 $212 $17.63
-------------------------------------------
95-11 $ 56 $ 5.34
-------------------------------------------
95-12 $ 59 $ 5.87
-------------------------------------------
95-13 $143 $11.11
-------------------------------------------
95-14 $287 $22.24
-------------------------------------------
Mean $193 $15.62 Mean $145 $12.35
===========================================
* Sale included peripheral GLA.
===========================================
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Sales Comparison Approach
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Analysis of Sales
Within Charts A and B, we have presented a summary of recent transactions
(1991-1995) involving regional and super-regional-sized retail shopping malls
from which price trends may be identified for the extraction of value
parameters. These transactions have been segregated by year of acquisition so as
to lend additional perspective on our analysis. Comparability in both physical
and economic characteristics are the most important criteria for analyzing sales
in relation to the subject property. However, it is also important to recognize
the fact that regional shopping malls are distinct entities by virtue of age and
design, visibility and accessibility, the market segmentation created by anchor
stores and tenant mix, the size and purchasing power of the particular trade
area, and competency of management. Thus, the "Sales Comparison Approach", when
applied to a property such as the subject can, at best, only outline the
parameters in which the typical investor operates. The majority of these sales
transferred either on an all cash (100 percent equity) basis or its equivalent
utilizing market-based financing. Where necessary, we have adjusted the purchase
price to its cash equivalent basis for the purpose of comparison.
As suggested, sales which include anchors typically have lower square foot
unit prices. In our discussions with major shopping center owners and investors,
we learned that capitalization rates and underwriting criteria have become more
sensitive to the contemporary issues dealing with the department store anchors.
As such, investors are looking more closely than ever at the strength of the
anchors when evaluating an acquisition.
As the reader shall see, we have attempted to make comparisons of the
transactions to the subject primarily along economic lines. For the most part,
the transactions have involved dominant or strong Class A centers in top 50 MSA
locations which generally have solid, expanding trade areas and good income
profiles. Some of the other transactions are in decidedly inferior second tier
locations with limited growth potential and near term vacancy problems. These
sales tend to reflect lower unit rates and higher capitalization rates.
Because the subject is theoretically selling only mall shop GLA, we will
look at the recent sales in Chart A more closely. As a basis for comparison, we
will analyze the subject based upon projected NOI. The first year NOI has been
projected to be $22.81 per square foot (FY 1997), based upon 309,675+/- square
feet of owned GLA. Derivation of the subject's projected net operating income is
presented in the Income Approach section of this report as calculated by the
Pro-Ject model. With projected NOI of $22.81 per square foot, the subject falls
toward the mid-point of the range exhibited by the comparable sales.
Since the income that an asset will produce has direct bearing on the price
that a purchaser is willing to pay, it is obvious that a unit price which falls
toward the middle of the range indicated by the comparables would be applicable
to the subject. The subject's anticipated net income can be initially compared
to the composite mean of the annual transactions in order to place the subject
in a frame of reference. This is shown on the following chart.
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===========================================================
Sales Year Mean NOI Subject Forecast Subject Ratio
===========================================================
1991 $12.39 $22.81 184.1%
-----------------------------------------------------------
1992 $26.34 $22.81 86.6%
-----------------------------------------------------------
1993 $25.00 $22.81 91.2%
-----------------------------------------------------------
1994 $16.62 $22.81 137.2%
-----------------------------------------------------------
1995* $12.35 -- --
===========================================================
* All 1995 sales include anchor.
===========================================================
With first year NOI forecasted at approximately 86.6 to 184.1 percent of
the mean of these sales in each year, the unit price which the subject property
would command should be expected to fall within a relative range.
Net Income Multiplier Method - Retail Component
Many of the comparables were bought on expected income, not gross leasable
area, making unit prices a somewhat subjective reflection of investment behavior
regarding regional malls. In order to quantify the appropriate adjustments to
the indicated per square foot unit values, we have compared the subject's first
year pro forma net operating income to the pro forma income of the individual
sale properties. In our opinion, a buyer's criteria for the purchase of a retail
property is predicated primarily on the property's income characteristics. Thus,
we have identified a relationship between the net operating income and the sales
price of the property. Typically, a higher net operating income per square foot
corresponds to a higher sales price per square foot. Therefore, this adjustment
incorporates factors such as location, tenant mix, rent levels, operating
characteristics, and building quality.
Provided below, we have extracted the net income multiplier from each of
the improved sales. We have included only the recent sales data (1993-94). The
equation for the net income multiplier (NIM), which is the inverse of the
equation for the capitalization rate (OAR), is calculated as follows:
Sales Price
NIM = --------------------
Net Operating Income
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=========================================================
Net Income Multiplier Calculation
=========================================================
Net Income
Sale No. NOI/SF Price/SF Multiplier
=========================================================
93- 1 $23.42 $355 15.16
---------------------------------------------------------
93- 4 $32.95 $471 14.29
---------------------------------------------------------
93- 5 $28.88 $396 13.71
---------------------------------------------------------
93- 8 $20.55 $265 12.90
---------------------------------------------------------
93-16 $19.18 $268 13.97
---------------------------------------------------------
94- 1 $11.70 $136 11.62
---------------------------------------------------------
94- 3 $22.61 $324 14.33
---------------------------------------------------------
94-12 $14.00 $136 9.71
---------------------------------------------------------
94-14 $18.16 $241 13.27
---------------------------------------------------------
Mean $21.27 $288 13.22
=========================================================
Valuation of the subject property utilizing the net income multipliers
(NIMs) from the comparable properties accounts for the disparity of the net
operating incomes ($NOI's) per square foot between the comparables and the
subject. Within this technique, each of the adjusted NIMs are multiplied by the
$NOI per square foot of the subject, which produces an adjusted value indication
for the subject. The net operating income per square foot for the subject
property is calculated as the first year of the holding period, as detailed in
the Income Approach section of this report.
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=========================================================
Adjusted Unit Rate Summary
=========================================================
Subject Net Income Indicated Price
Sale No. NOI/SF Multiplier $/SF
=========================================================
93- 1 $22.84 15.16 $346
---------------------------------------------------------
93- 4 $22.84 14.29 $326
---------------------------------------------------------
93- 5 $22.84 13.71 $313
---------------------------------------------------------
93- 8 $22.84 12.90 $294
---------------------------------------------------------
93-16 $22.84 13.97 $319
---------------------------------------------------------
94- 1 $22.84 11.62 $265
---------------------------------------------------------
94- 3 $22.84 14.33 $327
---------------------------------------------------------
94-12 $22.84 9.71 $221
---------------------------------------------------------
94-14 $22.84 13.27 $303
---------------------------------------------------------
Mean $22.84 13.22 $302
=========================================================
From the process above, we see that the indicated net income multipliers
range from 9.71 to 15.16 with a mean of 13.22. The adjusted unit rates range
from $221 to $346 per square foot of owned GLA with a mean of $302 per square
foot.
We recognize that the sale price per square foot of gross leasable area,
including land, implicitly contains both the physical and economic factors of
the value of a shopping center Such statistics by themselves, however, do not
explicitly convey many of the details surrounding a specific income producing
property like the subject. Nonetheless, the process we have undertaken here is
an attempt to quantify the unit price based upon the subject's income producing
potential.
Considering the characteristics of the subject relative to the above, we
believe that a unit rate range of $260 to $270 per square foot is appropriate.
Applying this unit rate range to 309,675+/- square feet of owned GLA results in
a value of approximately $80.5 million to $83.6 million for the subject as
shown:
309,675 SF 309,675 SF
x $270 x $280
------------- -------------
$83,600,000 $86,700,000
Rounded Value Estimate - Market Sales Unit Rate Comparison
$83,600,000 to $86,700,000
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Sales Multiple Method
Arguably, it is the mall shop GLA sold and its intrinsic economic profile
that is of principal concern in the investment decision process. A myriad of
factors influence this rate, perhaps none of which is more important than the
sales performance of the mall shop tenants. Accordingly, the abstraction of a
sales multiple from each transaction lends additional perspective to this
analysis.
The sales multiple measure is often used as a relative indicator of the
reasonableness of the acquisition price. As a rule of thumb, investors will look
at a sales multiple of 1.0 as a benchmark, and will look to keep it within a
range of .75 to 1.25 times mall shop sales performance unless there are
compelling reasons why a particular property should deviate.
The sales multiple is defined as the sales price per square foot of mall
GLA divided by average mall shop sales per square foot. As this reasonableness
test is predicated upon the economics of the mall shops, technically, any income
(and hence value) attributed to anchors that are acquired with the mall as
tenants should be segregated from the transaction. As an income (or sales)
multiple has an inverse relationship with a capitalization rate, it is
consistent that, if a relatively low capitalization rate is selected for a
property, it follows that a correspondingly above-average sales (or income)
multiple be applied. In most instances, we are not privy to the anchor's
contributions to net income. As such, the sales multiples reported may be
slightly distorted to the extent that the imputed value of the anchor's
contribution to the purchase price has not been segregated.
Sales Multiple Summary
======================================
Sale Going-in Sales
No. OAR Multiple
======================================
93- 1 7.47% 0.92
--------------------------------------
93- 4 7.00% 1.16
--------------------------------------
93- 5 7.29% 1.16
--------------------------------------
93- 8 7.75% 0.88
--------------------------------------
93-16 7.16% 1.09
--------------------------------------
94- 1 8.60% 0.68
--------------------------------------
94- 3 6.98% 1.08
--------------------------------------
94-12 10.29% 0.72
--------------------------------------
94-14 7.53% 0.93
--------------------------------------
Mean 7.79% 0.96
======================================
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Sales Comparison Approach
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The sales that are being compared to the subject show sales multiples that
range from 0.68 to 1.16 with a mean of about 0.96. As is evidenced, the more
productive malls with higher sales volumes on a per square foot basis tend to
have higher sales multiples. Furthermore, the higher multiples tend to be in
evidence where an anchor(s) is included in the sale.
Based upon its 1995 performance, the subject is projected to produce
comparable sales of approximately $333 per square foot for all reporting mall
shop tenants based upon our forecasted growth rates.
By applying a ratio of say, 0.80 to 0.85 percent to the forecasted sales of
$333 per square foot, the following range in value is indicated.
Unit Sales Volume (Mall Shops) $333 $333
Sales Multiple x 0.80 x 0.85
------------- -------------
Adjusted Unit Rate $266 $283
Mall Shop GLA x 309,675 x 309,675
------------- -------------
Value Indication $82,400,000 $87,600,000
The analysis shows an adjusted value range of approximately $82.4 to $87.6
million. Inherent in this exercise are mall shop sales which are projections
based on our investigation into the market which might not fully measure
investors expectations. It is clearly difficult to project with any certainty
what the mall shops might achieve in the future. While we may minimize the
weight we place on this analysis, it does, nonetheless, offer a reasonableness
check against the other methodologies.
Giving consideration to all of the above, the following value range is
warranted for the subject property based upon the sales multiple analysis.
Estimated Value - Sales Multiple Method
Rounded to $82,400,000 to $87,600,000
Conclusion
We have considered all of the above relative to the physical and economic
characteristics of the subject. It is difficult to relate the subject to
comparables that are in such widely divergent markets with different cash flow
characteristics. The subject has good comparable sales levels compared to its
peers, with a typical anchor alignment and fair representation of national
tenants. Further, the subject is clearly the dominant super-regional mall in the
Jackson MSA.
After considering all of the available market data in conjunction with the
characteristics of the subject property, the indices of investment that
generated our value ranges are as follows:
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Sales Comparison Approach
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Unit Price Per Square Foot
Salable SF: 309,675+/-
Price Per SF of Salable Area: $270 to $280
Indicated Value Range: $83,600,000 to $86,700,000
Sales Multiple Analysis
Indicated Value Range $82,400,000 to $87,600,000
The parameters above show a value range of approximately $82.4 to $86.7
million for the subject.
Based on our total analysis, relative to the strengths and weaknesses of
each methodology, it would appear that the Sales Comparison Approach indicates a
market value within the more defined range of $83.0 to $86.0 million for the
subject as of June 1, 1996.
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INCOME APPROACH
================================================================================
Introduction
The Income Approach is based upon the economic principle that the value of
a property capable of producing income is the present worth of anticipated
future net benefits. The net income projected is translated into a present value
indication using the capitalization process. There are various methods of
capitalization that are based on inherent assumptions concerning the quality,
durability and pattern of the income projection. Where the pattern of income is
irregular due to existing leases that will terminate at staggered, future dates,
or to an absorption or stabilization requirement on a newer development,
discounted cash flow analysis is the most accurate.
Discounted Cash Flow Analysis (DCF) is a method of estimating the present
worth of future cash flow expectancies by individually discounting each
anticipated collection at an appropriate discount rate. The indicated market
value by this approach is the accumulation of the present worth of future
projected years' net income (before income taxes and depreciation) and the
present worth of the reversion (the estimated property value at the end of the
projection period). The estimated value of the reversion at the end of the
projection period is based upon capitalization of the next years projected net
operating income. This is the more appropriate method to use in this assignment,
given the step up in lease rates and the long term tenure of retail tenants.
A second method of valuation, using the Income Approach, is to directly
capitalize a stabilized net income based on rates extracted from the market or
built up through mortgage equity analysis. This is a valid method of estimating
the market value of the property as of the achievement of stabilized operations.
In the case of the subject, the capitalization process will be used for
valuation "at stabilization".
Discounted Cash Flow Analysis
The Discounted Cash Flow (DCF) produces an estimate of value through an
economic analysis of the subject property in which the net income generated by
the asset is converted into a capital sum at an appropriate rate. First, the
revenues which a fully informed investor can expect the subject to produce over
a specified time horizon are established through an analysis of the current rent
roll, as well as the rental market for similar properties. Second, the projected
expenses incurred in generating these gross revenues are deducted. Finally, the
residual net income is discounted into a capital sum at an appropriate rate
which is then indicative of the subject property's current value in the
marketplace.
In this Income Approach to the valuation of the subject, we have utilized a
10-year holding period for the investment with the cash flow analysis commencing
on June 1, 1996. Although an asset such as the subject has a much longer useful
life, investment analysis becomes more meaningful if limited to a time period
considerably less than the real estate's economic life, but of sufficient length
for an investor. A 10-year holding period for this investment is long enough to
model the asset's performance and benefit from its lease-up and performance, but
short enough to reasonably estimate the expected income and expenses of the real
estate. It is noted that discounting will be done fiscally as of June 1, 1996.
The revenues and expenses which an informed investor may expect to incur
from the subject property will vary, without a doubt, over the holding period.
Major investors active in
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Income Approach
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the market for this type of real estate establish certain parameters in the
computation of these cash flows and criteria for decision making which this
valuation analysis must include if it is to be truly market-oriented. These
current computational parameters are dependent upon market conditions in the
area of the subject property as well as the market parameters for this type of
real estate which we view as being national in scale.
By forecasting the anticipated income stream and discounting future value
at reversion into a current value, the capitalization process may be applied to
derive a value that an investor would pay to receive that particular income
stream. Typical investors price real estate on their expectations of the
magnitude of these benefits and their judgment of the risks involved. Our
valuation endeavors to reflect the most likely actions of typical buyers and
sellers of property interest similar to the subject. In this regard, we see the
subject as a long term investment opportunity for a competent owner/developer.
An analytical real estate computer model that simulates the behavioral
aspects of property and examines the results mathematically is employed for the
discounted cash flow analysis. In this instance, it is the PRO-JECT Plus+
computer model. Since investors are the basis of the marketplace in which the
subject property will be bought and sold, this type of analysis is particularly
germane to the appraisal problem at hand. On the Facing Page is a summary of the
expected annual cash flows from the operation of the subject over the stated
investment holding period. It is noted that the exhibited cash flow is presented
on a calendar year basis for ease of comparison to the historical operating
statements and budget for the subject property. A fiscal year cash flow
commencing June 1, 1996 is presented on the following facing page.
A general outline summary of the major steps involved may be listed as
follows:
1. Analysis of the income stream: establishment of an economic (market)
rent for tenant space; projection of future revenues annually based
upon existing and pending leases; probable renewals at market rentals;
and expected vacancy experience;
2. Estimation of a reasonable period of time to achieve stabilized
occupancy of the existing property and make all necessary improvements
for marketability;
3. Analysis of projected escalation recovery income based upon an
analysis of the property's history as well as the experiences of
reasonably similar properties;
4. Derivation of the most probable net operating income and pre-tax cash
flow (net income less reserves, tenant improvements, leasing
commissions and any extraordinary expenses to be generated by the
property) by subtracting all property expenses from the effective
gross income; and
5. Estimation of a reversionary sale price based upon capitalization of
the net operating income (before reserves, tenant improvements and
leasing commissions or other capital items) at the end of the
projection period.
Following is a detailed discussion of the components which form the basis
of this analysis.
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Income Approach
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Potential Gross Revenues
The total potential gross revenues generated by the subject property are
composed of a number of distinct elements: minimum rent determined by lease
agreement; additional overage rent based upon a percentage of retail sales;
reimbursement of certain expenses incurred in the ownership and operation of the
real estate; and other miscellaneous revenues.
The minimum base rent represents a legal contract establishing a return to
investors in the real estate, while the passing of certain expenses onto tenants
serves to maintain this return in an era of continually rising costs of
operation. Additional rent based upon a percentage of retail sales experienced
at the subject property serves to preserve the purchasing power of the residual
income to an equity investor over time. Finally, miscellaneous income adds an
additional source of revenue in the complete operation of the subject property.
In the initial year of the investment, fiscal year 1997, it is projected that
the subject property will generate approximately $11,694,359 in potential gross
revenues, equivalent to $37.76 per square foot of total appraised (owned) GLA of
309,675 +/- square feet. These forecasted revenues may be allocated to the
following components:
=====================================================================
Revenue Summary - Retail Component
Initial Year of Investment FY 1997
=====================================================================
Revenue Component Amount Unit Rate Income Ratio
=====================================================================
Minimum Rent $6,632,518 $21.41 56.7%
---------------------------------------------------------------------
Overage Rent $329,729 $1.06 2.7%
---------------------------------------------------------------------
Expense Recoveries $4,539,442 $14.66 38.8%
---------------------------------------------------------------------
Misc./Temp. Income $202,500 $.65 1.6%
---------------------------------------------------------------------
Total $11,704,189 $37.78 100.0%
=====================================================================
* Reflects total owned GLA of 309,675+/- square feet
=====================================================================
Minimum Rental Income
Minimum rent produced by the subject property is derived from that paid by
the various tenant types. The projection utilized in this analysis is based upon
the actual rent roll and our projected leasing schedule in place as of the date
of appraisal, together with our assumptions as to the absorption of the vacant
space, market rent growth, and renewal/turnover probability. We have also made
specific assumptions regarding deals that are in progress and have a strong
likelihood of coming to fruition. In this regard, we have worked with management
and leasing personnel to analyze each pending deal on a case by case basis. We
have incorporated all executed leases in our analysis as well as those leases
which are out-for-signature. These transactions represent a reasonable and
prudent assumption from an investors standpoint.
The rental income which an asset such as the subject property will generate
for an investor is analyzed as to its quality, quantity and durability. The
quality and probable duration of income will affect the amount of risk which an
informed investor may expect over the property's useful life. Segregation of the
income stream along these lines allows us to control the variables related to
the center's forecasted performance with greater accuracy. Each tenant type
lends itself to a specific weighting of these variables as the risk associated
with each varies.
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Income Approach
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The minimum rents forecasted at the subject property are essentially
derived from mall tenant revenues consisting of all in-line mall shops. In our
investigation and analysis of the marketplace, we have surveyed, and ascertained
where possible, rent levels being commanded by competing centers. However, it
should be recognized that large retail shopping centers are generally considered
to be separate entities by virtue of age and design, accessibility, visibility,
tenant mix, and the size and purchasing power of its trade area. Consequently,
the best measure of minimum rental income is its actual rent roll leasing
schedule.
As such, our a analysis of recently negotiated leases for new and
relocation tenants at the subject provides important insight into perceived
market rent levels for the mall. In so much as a tenant's ability to pay rent is
based upon expected sales achievement, the level of negotiated rents is directly
related to the individual tenant's perception of their expected performance at
the mall.
In-Line Shops
Our analysis of market rent levels for in-line shops has resolved itself to
a variety of influencing factors. Although it is typical that larger tenant
spaces are leased at lower per square foot rates and lower percentages, the type
of tenant as well as the variable of location within the mall can often distort
this size/rate relationship.
The following chart presents an analysis of in-line shop rents based upon
existing leases and leases out-for-signature on an annualized basis for 1996:
===================================================================
1996 Leases In-Place*
===================================================================
Size Category Annualized Rent Applicable GLA Rent/SF
===================================================================
< 750 SF $ 358,559 6,993 $51.27
-------------------------------------------------------------------
750 - 1,200 SF $ 566,222 17,643 $32.09
-------------------------------------------------------------------
1,201 - 2,000 SF $ 740,628 29,898 $24.77
-------------------------------------------------------------------
2,001 - 3,500 SF $ 834,506 40,444 $20.63
-------------------------------------------------------------------
3,501 - 5,000 SF $1,151,580 54,102 $21.29
-------------------------------------------------------------------
5,001 - 10,000 SF $2,419,308 109,667 $22.06
-------------------------------------------------------------------
> 10,000 SF $ 243,800 10,600 $23.00
-------------------------------------------------------------------
Total $6,314,603 269,347 $23.44
===================================================================
* Includes existing leases for calendar year 1996. Partial year
tenants have been annualized to reflect the full 12 months
===================================================================
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Income Approach
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As can be seen, lease rates generally have an inverse relationship with
suite size and show an overall average rent of $23.44 per square foot. The chart
of the Facing Page presents an overview of leases by size category, including
all signed leases and leases out-for-signature.
Category 1 (Tenants < 750 SF) - This category shows six total leases
ranging from $52.20 to $73.68 per square foot in rent. The overall weighted
average is $63.83 per square foot. The highest rent in this grouping has
been agreed to by Sunglass Hut International which is an existing,
successful tenant in the mall. The lower end of the range in this category
is formed by Claires Boutique and Sweet Factory. Each of these leases have
stipulated increases through their 10-year term.
Category 2 (Tenants 750 - 1,200 SF) - Tenants in this grouping show rents
from $29.22 to $55.92 per square foot in base rent. The highest rents in
this grouping have been jewelry tenants which generally have higher
expected sales. The remaining two leases form a range in rental rates of
from approximately $29 to $42 per square foot.
Category 3 (Tenants 1,201 - 2,000 SF) - There were four recent deals within
this category. The indicated range in rental rates is $26.34 per square
foot to $37.50 per square foot, with a weighted average of $31.57. Similar
to the other categories, the lower end of this range is formed by leases
which are scheduled to escalate through their term. Conversely, the upper
end of the range is formal by a lease signed by Nine West which is
scheduled to remain flat through its 10-year term.
Category 4 (Tenants 2,001 - 3,500 SF) - This category shows a weighted
average rent of $25.56 per square foot for the six leases presented. These
leases form a relatively tight range in rental rates of from $24.02 to
$27.00 per square foot. It should be noted that Underground will take
occupancy in July, 1996 and Cache will move in September, 1996.
Category 5 (Tenants 3,501 - 5,000 SF) - Three leases were represented
within this category which indicate a weighted average rental rate of
$22.35 per square foot. William Sonoma signed a 13-year lease in 1995 for
$20 per square foot, while Rack Room Shoes most recently singed a 10-year
deal for a base rental rate of $25 per square foot.
Category 6 (Tenants > 5,000 - 10,000 SF) - This category contains six
leases which were signed in 1995. These leases demonstrate a wide range in
rental rates of $16.00 to $40.00 per square foot, and indicate a weighted
average rent of $27.69 per square foot. This range is skewed upward by the
GAP lease which has a base rental rate of $40 per square foot. The
remaining leases form a tighter range in rental rates of approximately $16
to $29 per square foot.
Category 7 (Tenants > 10,000 SF) - Given the current configuration of space
within the mall, there is only one space in this category. One of the most
significant
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Income Approach
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new leases in the mall is the recently signed Abercrombie & Fitch deal
which will occupy 10,600 square feet on the lower level. This tenant is
anticipated to open in August 1996 at a stated base rental rate of $23.00
per square foot. The rent is scheduled to remain flat through its 12-year
term.
Overall, the average attained rent for all lease commitments and leases
out-for-signature is shown to be $28.57 per square foot. The highest attained
rents are from tenants in Category 1 (Tenants < 750 SF).
Market Comparisons - Occupancy Cost Ratios
In further support of developing a forecast for market rent levels, we have
undertaken a comparison of minimum rent to projected sales and total occupancy
costs to sales ratios. Generally, our research and experience with other
regional malls shows that the ratio of minimum rent to sales falls within the
7.0 to 10.0 percent range in the initial year of the lease, with 7.5 percent to
8.5 percent being most typical. By adding additional costs to the tenant, such
as real estate tax and common area maintenance recoveries, a total occupancy
cost may be derived. Expense recoveries and other tenant charges can add up to
100 percent of minimum rent and comprise the balance of total tenant costs.
The typical range for total occupancy cost-to-sales ratios falls between
11.0 and 15.0 percent. As a general rule, where sales exceed $250 to $275 per
square foot, 14.0 to 15.0 percent would be a reasonable cost of occupancy.
Experience and research show that most tenants will resist total occupancy costs
that exceed 15.0 to 18.0 percent of sales. However, ratios of upwards to 20.0
percent are not uncommon. Obviously, this comparison will vary from tenant to
tenant and property to property.
In higher end markets where tenants are able to generate sales above
industry averages, tenants can generally pay rents which fall toward the upper
end of the ratio range. Moreover, if tenants perceive that their sales will be
increasing at real rates that are in excess of inflation, they will typically be
more inclined to pay higher initial base rents. Obviously, the opposite would be
true for poorer performing centers in that tenants would be squeezed by the thin
margins related to below average sales. With fixed expenses accounting for a
significant portion of the tenants contractual obligation, there would be little
room left for base rent.
In this context, we have provided an occupancy cost analysis for several
regional malls with which we have had direct insight over the past year. This
information is provided on the Following Page. On average, these ratio
comparisons provide a realistic check against projected market rental rate
assumptions.
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<TABLE>
<CAPTION>
====================================================================================================================================
OCCUPANCY COST ANALYSIS/COMPARISON
Cushman & Wakefield, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Budget Year No. Total Shop Avg. Rec- Avg. Rent- Total
No. Area Location State Year Built Stories GLA GLA Rent overies Sales Sales Cost Location
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -- ULI-Super-Regional
Malls US 1995 - - 999,544 342,260 $16.30 $ 8.72 $203.09 8.0% 12.3% --
- ------------------------------------------------------------------------------------------------------------------------------------
- -- ULI-Regional Malls US 1995 - - 582,893 261,553 $12.05 $ 5.82 $176.16 6.8% 10.1% --
- ------------------------------------------------------------------------------------------------------------------------------------
- -- ISCS-All Enclosed
Malls US 1995 - - 582,893 261,553 $12.05 $ 5.82 $176.16 6.8% 10.1% --
- ------------------------------------------------------------------------------------------------------------------------------------
- -- ISCS-Malls >
1,000,000sf US 1995 - - 1,206,874 407,060 $20.01 $12.57 $271.64 7.4% 12.0% --
====================================================================================================================================
1 Saratoga County MSA NY 1995 1990/91/93 1 656,501 256,668 $15.79 $15.54 $194.00 8.1% 16.1% Surburban
- ------------------------------------------------------------------------------------------------------------------------------------
2 Syracuse MSA NY 1995 1954/96 2 1,035,525 410,818 $17.00 $12.90 $208.00 8.2% 14.4% Surburban
- ------------------------------------------------------------------------------------------------------------------------------------
3 Syracuse MSA NY 1995 1988/94 1 776,571 311,557 $17.00 $12.12 $198.00 8.6% 14.7% Surburban
- ------------------------------------------------------------------------------------------------------------------------------------
4 Rochester MSA NY 1995 1967/93 2 1,553,574 495,040 $18.00 $13.03 $247.00 7.3% 12.6% Surburban
- ------------------------------------------------------------------------------------------------------------------------------------
5 Jefferson County MSA NY 1995 1986/93 1 635,765 209,873 $21.96 $15.89 $231.00 9.5% 16.4% Surburban
- ------------------------------------------------------------------------------------------------------------------------------------
6 Buffalo MSA NY 1996 1985/89 1 753,105 285,771 $19.67 $14.83 $250.00 7.9% 13.8% Surburban
- ------------------------------------------------------------------------------------------------------------------------------------
7 White Plains MSA NY 1995 1980/93 4 882,689 326,774 $34.00 $25.31 $380.00 8.9% 15.6% Urban
- ------------------------------------------------------------------------------------------------------------------------------------
8 Fairfield County MSA CT 1995 1986/91 2 1,270,146 499,868 $32.00 $17.20 $425.00 7.5% 11.6% Surburban
- ------------------------------------------------------------------------------------------------------------------------------------
9 Meriden MSA CT 1994 1971/94 2 711,626 292,877 $27.00 $14.20 $333.00 8.1% 12.4% Surburban
- ------------------------------------------------------------------------------------------------------------------------------------
10 Worcester County MSA MA 1996 1971/87 1 445,875 182,372 $22.36 $14.93 $288.00 7.8% 12.9% Surburban
- ------------------------------------------------------------------------------------------------------------------------------------
11 Boston MSA MA 1995 1980/93 1 322,120 155,080 $18.50 $17.40 $208.00 8.9% 17.3% Urban
- ------------------------------------------------------------------------------------------------------------------------------------
12 Bristol County MSA MA 1995 1992 2 1,005,595 349,107 $21.50 $22.09 $280.00 7.7% 15.6% Suburban
- ------------------------------------------------------------------------------------------------------------------------------------
13 Bristol County MSA MA 1995 1987/89 2 967,363 374,630 $31.00 $21.71 $404.00 7.7% 13.0% Surburban
- ------------------------------------------------------------------------------------------------------------------------------------
14 Essex County MSA MA 1995 1993/94 2 853,344 329,065 $36.95 $11.27 $350.00 10.6% 13.8% Surburban
- ------------------------------------------------------------------------------------------------------------------------------------
15 Kingston MSA MA 1994 1989/92 1 771,007 295,562 $18.44 $14.32 $211.00 8.7% 15.5% Surburban
- ------------------------------------------------------------------------------------------------------------------------------------
16 Burlington MSA VT 1995 1979/89/92 1 490,424 185,398 $23.00 $ 9.51 $294.00 7.8% 11.1% Surburban
- ------------------------------------------------------------------------------------------------------------------------------------
17 Bucks County MSA PA 1995 1968/75 1 348,309 305,212 $19.35 $10.00 $239.00 8.1% 12.3% Surburban
- ------------------------------------------------------------------------------------------------------------------------------------
18 Monmouth County MSA NJ 1994 1990/91/94 2 1,153,396 525,741 $31.00 $15.70 $338.00 9.2% 13.8% Surburban
- ------------------------------------------------------------------------------------------------------------------------------------
19 Westminster MSA MD 1995 1987/94 1 524,964 193,557 $16.74 $17.93 $228.00 7.3% 15.2% Surburban
- ------------------------------------------------------------------------------------------------------------------------------------
20 Washington-Baltimore MD 1995 1979/93 2 661,639 245,217 $22.10 $19.86 $285.00 7.8% 14.7% Surburban
- ------------------------------------------------------------------------------------------------------------------------------------
21 Baltimore MSA MD 1995 1956/91 1 863,376 242,376 $19.87 $14.93 $214.00 9.3% 16.3% Surburban
- ------------------------------------------------------------------------------------------------------------------------------------
22 Prince William Cty.
MSA VA 1995 1972/96 1 716,796 278,494 $21.50 $15.11 $236.00 9.1% 15.5% Surburban
- ------------------------------------------------------------------------------------------------------------------------------------
23 Arlington MSA VA 1994 1986 4 491,057 222,800 $28.00 $12.98 $300.00 9.3% 13.7% Urban
- ------------------------------------------------------------------------------------------------------------------------------------
24 Bloomingdale MSA IL 1995 1981/88/91 2 1,292,186 427,609 $21.84 $10.37 $250.00 8.7% 12.9% Surburban
- ------------------------------------------------------------------------------------------------------------------------------------
25 Minneapolis MSA MN 1995 1962/94 1 982,228 201,561 $21.00 $22.51 $262.00 8.0% 16.6% Surburban
- ------------------------------------------------------------------------------------------------------------------------------------
26 Genesee County MSA MI 1995 1980/93 1 451,036 230,625 $16.00 $ 9.01 $219.00 7.3% 11.4% Surburban
- ------------------------------------------------------------------------------------------------------------------------------------
27 Indianapolis MSA IN 1995 1968/87 1 1,239,059 260,359 $22.43 $ 9.00 $235.00 9.5% 13.4% Surburban
- ------------------------------------------------------------------------------------------------------------------------------------
28 Tampa MSA FL 1995 1995 1 977,047 359,579 $27.00 $12.77 $300.00 9.3% 13.3% Surburban
- ------------------------------------------------------------------------------------------------------------------------------------
29 Plantation MSA FL 1995 1979/93 1 1,004,061 282,952 $28.22 $12.40 $314.00 9.0% 12.9% Surburban
- ------------------------------------------------------------------------------------------------------------------------------------
30 Miami MSA FL 1995 1982 1 1,120,827 290,385 $29.36 $16.55 $355.00 8.3% 12.9% Surburban
- ------------------------------------------------------------------------------------------------------------------------------------
31 Coral Springs MSA FL 1995 1984/96 1 1,171,127 293,183 $25.90 $11.55 $284.00 9.1% 13.2% Surburban
- ------------------------------------------------------------------------------------------------------------------------------------
32 North/Central Kansas KS 1995 1987/90 1 400,307 185,324 $14.97 $10.31 $212.00 7.1% 11.9% Surburban
- ------------------------------------------------------------------------------------------------------------------------------------
33 Amarillo MSA TX 1995 1982/86 1 889,508 316,190 $18.00 $ 7.53 $200.00 9.0% 12.8% Surburban
- ------------------------------------------------------------------------------------------------------------------------------------
34 Las Vegas MSA NV 1995 1992 1 241,580 241,580 $91.50 $22.04 $1,183.00 7.7% 9.6% Urban
- ------------------------------------------------------------------------------------------------------------------------------------
35 Las Vegas MSA NV 1994 1981/93 2 819,374 286,936 $35.00 $13.21 $405.00 8.6% 11.9% Urban
- ------------------------------------------------------------------------------------------------------------------------------------
36 Knoxville MSA TN 1995 1972/94 1 1,333,018 382,150 $23.80 $14.00 $333.00 7.1% 11.4% Surburban
- ------------------------------------------------------------------------------------------------------------------------------------
37 Nashville MSA TN 1995 1990 2 716,462 373,662 $15.25 $13.30 $180.00 8.5% 15.9% Surburban
- ------------------------------------------------------------------------------------------------------------------------------------
38 Riverside County MSA CA 1995 1970/91 1 1,044,536 411,640 $22.59 $17.00 $250.00 9.0% 15.8% Surburban
- ------------------------------------------------------------------------------------------------------------------------------------
39 Orange County MSA CA 1994 1975/94 1 810,470 273,970 $21.00 $10.28 $270.00 7.8% 11.6% Surburban
- ------------------------------------------------------------------------------------------------------------------------------------
40 Bellingham MSA WA 1994 1988 1 769,187 337,557 $20.85 $12.54 $283.00 7.4% 11.8% Surburban
- ------------------------------------------------------------------------------------------------------------------------------------
41 Seattle MSA WA 1995 1979/95 1 1,012,754 311,019 $27.35 $ 7.86 $325.00 8.4% 10.8% Surburban
====================================================================================================================================
Survey Mean: 833,950 304,724 $23.89 $13.86 $289.51 8.3% 13.4%
====================================================================================================================================
</TABLE>
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Income Approach
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From this analysis we see that the ratio of base rent to sales ranges from
7.1 to 10.6 percent, while the total occupancy cost ratios vary from 9.6 to
17.3 percent when all recoverable expenses are included. The surveyed mean for
the malls and industry standards analyzed is 8.3 percent and 13.4 percent,
respectively. Some of the higher ratios are found in older malls situated in
urban areas that have higher operating structures due to less efficient layout
and designs, older physical plants, and higher security costs, which in some
malls can add upwards of $2.00 per square foot to common area maintenance.
These relative measures can be compared with two well known publications,
The Score (1996) by the International Council of Shopping Centers and Dollars &
Cents of Shopping Centers (1995) by the Urban Land Institute. The most recent
publications indicate base rent-to-sales ratios of approximately 7.0 to 8.0
percent and total occupancy cost ratios of 10.1 and 12.3 percent, respectively.
In general, while the rental ranges and ratio of base rent to sales vary
substantially from mall to mall and tenant to tenant, they do provide general
support for the rental ranges and ratio which is projected for the subject
property.
Conclusion - Market Rent Estimate for In-Line Shops
Previously in the Retail Market Analysis section of this report, we
discussed the subject's sales potential. As discussed, Urban Shopping Centers
has projected average sales of over $264.00 per square foot for the subject
based upon their analysis of the trade area. In light of our total analysis, we
have forecasted average sales of $333 per square foot in 1996. Based upon a
ratio of 8.0 to 8.5 percent, an average rent for the subject between $26.64 and
$28.30 is indicated.
The following chart presents a comparison of existing lease commitments and
our projected market rental rates for each size category at the property.
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Rent Comparisons and Conclusions
================================================================================
Size Category Leases In-Place Recent Leases C&W Conclusion
================================================================================
< 750 SF $ 51.27 $ 63.83 $ 65.00
- --------------------------------------------------------------------------------
751 - 1,200 SF $ 32.09 $ 45.16 $ 45.00
- --------------------------------------------------------------------------------
1,201 - 2,000 SF $ 24.77 $ 31.57 $ 30.00
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2,001 - 3,500 SF $ 20.63 $ 25.20 $ 27.50
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3,501 - 5,000 SF $ 21.29 $ 22.35 $ 25.00
- --------------------------------------------------------------------------------
5,001 - 10,000 SF $ 22.06 $ 27.69 $ 22.50
- --------------------------------------------------------------------------------
> 10,000 SF $ 23.00 $ 23.00 $ 20.00
- --------------------------------------------------------------------------------
Average $ 23.44 $ 28.57 $ 27.28
================================================================================
After considering all of the above, we have developed a weighted average
rental rate of approximately $27.00 per square foot based upon a relative
weighting of tenant space by size. The average rent is a weighted average rent
for all in-line mall tenants only. This average market rent has been allocated
to space as shown on the Facing Page.
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Income Approach
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Occupancy Cost - Test of Reasonableness
Our weighted average rent can next be tested against total occupany based
upon the standard recoveries for new mall tenants. Our total occupancy cost
analyses can be found on the following chart.
================================================================================
Total Occupancy Cost Analysis - 1996
================================================================================
Tenant Cost Estimated Expenses/SF
================================================================================
Economic Base Rent $ 27.00
(Weighted Average)
- --------------------------------------------------------------------------------
Occupancy Costs (A)
Common Area Maintenance(1) $ 6.38
- --------------------------------------------------------------------------------
Real Estate Taxes(2) $ 2.41
- --------------------------------------------------------------------------------
HVAC/Utility(3) $ 5.50
- --------------------------------------------------------------------------------
Marketing(4) $ 1.50
- --------------------------------------------------------------------------------
Total Tenant Costs $ 42.79
- --------------------------------------------------------------------------------
Projected Average Sales(1996) $ 333.00
- --------------------------------------------------------------------------------
Rent to Sales Ratio 8.11%
- --------------------------------------------------------------------------------
Cost of Occupancy Ratio 12.85%
================================================================================
(A) Costs that are occupancy sensitive will decrease for new tenants on a unit
rate basis as lease-up occurs.
(1) CAM expense is based on gross occupied area (GLOA). Generally, the standard
lease clause provides for CAM to be passed through with a 15.0 percent
administrative fee less certain exclusions including anchor and restaurant
contributions. The standard denominator is based on occupied area. A
complete discussion of the standard recovery formula is presented later in
this report.
(2) Tax estimate is based upon gross occupied area (GLOA) which is the recovery
basis for taxes. the tax contribution made by restaurant tenants are
deducted prior to pass-through to in-line tenants.
(3) The HVAC charge for each tenant is determined by their projected utility
consumption. However, the most recurring HVAC/Utility charge equates to
$5.50 per square foot.
(4) This provides for advertising and marketing for the entire center.
================================================================================
================================================================================
Total costs, on average, are shown to be 12.85 percent of projected average
1996 retail sales which we feel is reasonable. It is noted that CAM and tax
recoveries are tied to occupancy and that these costs will be reduced with
increased occupancy.
Food Court
The subjects traditional food court area was closed in October 1994.
However, the subject has 19,083 square feet of restaurant space. This space is
occupied by five establishments which are located in mall shop space. As such, a
separate "Food Court" discussion is not required.
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Income Approach
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Concessions
Free rent is an inducement offered by developers to entice a tenant to
locate in their project over a competitors. This marketing tool has become
popular in the leasing of office space, particularly in view of the
over-building which has occurred in many markets. As a rule, most major retail
developers have been successful in negotiating leases without including free
rent. Our experience with regional malls shows that free rent is generally
limited to new projects in marginal locations without strong anchor tenants that
are having trouble leasing, as well as older centers that are losing tenants to
new malls in their trade area. Management reports that free rent has only been
given to very desirable national tenants as an added incentive to locate at the
mall. A review of the most recent leasing reveals that this effort has been
successful. Many national tenants have recently located their only store in the
State of Mississippi at the subject property. Despite this, management has been
successful in negotiating most of the new leases at the subject to exclude free
rent.
Accordingly, we do not believe that it will be necessary to offer free rent
to retail tenants at the subject. It is noted that, while we have not ascribed
any free rent to the retail tenants, we have, however, made rather liberal
allowances for tenant workletters which acts as a form of inducement to convince
a tenant to locate at the subject. These allowances are liberal to the extent
that ownership has been relatively successful in leasing space "as is" to
tenants in their other malls. We have made allowances of $10.00 per square foot
to new tenants/future turnover space. We have also ascribed a rate of $2.00 per
square foot to renewal space. This assumption offers further support for the
attainment of the rent levels previously cited.
Absorption
As of the date of analysis, the subject property had approximately
22,255+/- square feet vacant within eleven in-line spaces. It should be strongly
noted that suite no. 1801 contains 1,627 square fee and is currently being
utilized as a community room. The mall manager indicated that it is unlikely
that this space will ever be leased as mall shop space due to its somewhat weak
location in the mall. We feel this is a reasonable conclusion and, therefore,
have not considered this space as part of the gross leasable area of the mall.
In forecasting the scheduled absorption of the vacant space, we have
considered conversations with the property's general manager, as well as recent
leasing activity that has taken place over the past two years. We have projected
the lease-up of the property's vacant space over an approximate two year period
commencing in June 1996. The following chart details our lease-up projections.
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Income Approach
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================================================
Absorption Schedule
Northpark Mall
================================================
Projected
Suite Size (SF) Lease-up Date
------------------------------------------------
112 2,395 4/98
------------------------------------------------
214 3,369 6/96
------------------------------------------------
506 2,611 6/98
------------------------------------------------
612 600 10/96
------------------------------------------------
614 2,320 2/98
------------------------------------------------
826 3,289 11/97
------------------------------------------------
1,004 1,350 4/97
------------------------------------------------
1,010 820 11/96
------------------------------------------------
1,214 154 6/97
------------------------------------------------
1,328 2,088 8/97
------------------------------------------------
1,412 1,745 2/97
------------------------------------------------
Total 22,255
================================================
Anchor Tenants
Anchor tenants at the subject property will be separately owned and not
obligated to pay rent or report sales. Each has agreed to pay contributions for
common area maintenance expenses as will be discussed in a subsequent section.
Rent Growth Rates
Market rent will, over the life of a prescribed holding period, quite
obviously follow an erratic pattern. A review of investor's expectations
regarding income growth shows that projections generally range between 3.0 and
4.0 percent for retail centers. Cushman & Wakefield's Winter 1995 survey of
pension funds, REITs, bank and insurance companies, and institutional advisors
reveals that current income forecasts are utilizing average annual growth rates
between zero and 5.0 percent. The low and high mean is shown to be 2.8 and 3.9
percent, respectively. (see Addenda for survey results). The Peter F. Korpacz
Investor Survey (Fourth Quarter 1995) shows slightly more conservative results
with average annual rent growth of 3.16 percent.
It is not unusual in the current environment to see investors structuring
no growth or even negative growth in the short term. The Jackson metropolitan
area in general has faired well through the last recession. Sales at the subject
have consistently grown at the subject over the past five years. Demographics in
the subject's trade area are positive, with good potential for future growth.
The tenants' ability to pay rent is closely tied to its increases in sales.
However, rent growth can be more impacted by competition and management's desire
to attract and keep certain tenants that increase the mall's synergy and appeal.
As such, we have forecasted the following rent growth.
===========================================================
Market Rent Growth Rate Forecast
===========================================================
Period Annual Growth Rate*
===========================================================
1996 - Thereafter 3.5%
===========================================================
*Indicated growth rate over the previous year's rent
===========================================================
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Income Approach
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Releasing Assumption
The typical lease term for new in-line retail leases in centers such as the
subject generally ranges from five to twelve years. Market practice dictates
that it is not uncommon to get rent bumps throughout the lease terms either in
the form of fixed dollar amounts or a percentage increase based upon changes in
some index, usually the Consumer Price Index (CPI). Often the CPl clause will
carry a minimum annual increase and be capped at a higher maximum amount.
For new leases in the regional malls, ten year terms are most typical.
Essentially, the developer will deliver a "vanilla" suite with mechanical
services roughed in and minimal interior finish. This allows the retailer to
finish the suite in accordance with their individual specifications. Because of
the up-front costs incurred by the tenants, they require a ten year lease term
to adequately amortize these costs. In certain instances, the developer will
offer some contribution to the cost of finishing out a space over and above a
standard allowance. As is evidenced by the recent lease chart, most of the
newest leases have 10 year terms.
Upon lease expiration, it is our best estimate that there is a 70.0 percent
probability that an existing tenant will renew their lease while the remaining
30.0 percent will vacate their space at this time. An exception to this
assumption exists with respect to existing tenants who, at the expiration of
their lease, have sales that are substantially below the mall average and have
no chance to ever achieve percentage rent. In these instances, it is our
assumption that there is a 100 percent probability that the tenant will vacate
the property. This is consistent with ownership's philosophy of carefully and
selectively weeding out under-performers.
As stated above, it is not uncommon to get increases in base rent over the
life of a lease. Our global market assumptions for mall shop tenants may be
summarized as shown below.
================================================================================
Renewal Assumptions
================================================================================
Lease Free Tenant Lease
Tenant Type Term Rent Steps Rent Alterations Commissions
================================================================================
Mall Shops 10 yrs 10% in 5th year No Yes Yes
================================================================================
Upon lease rollover/turnover, space is forecasted to be released at the
higher of the last effective rent (defined as minimum rent plus overage rent if
any) and the ascribed market rent as detailed previously increasing by our
market rent growth rate assumption.
Conclusion - Minimum Rent
In the initial full year of the investment (FY 1997), it is projected that
the subject property will produce approximately $6,632,518 in minimum rental
income. This estimate of base rental income is equivalent to $21.41 per square
foot of total owned GLA. Alternatively, minimum rental income accounts for 56.7
percent of all potential gross revenues. Further analysis shows that over the
holding period (1997-2007), minimum rent advances at an average compound annual
rate of 4.84 percent. This increase is a synthesis of the mall's continued
lease-up, fixed rental increases, as well as market rents from rollover or
turnover of space.
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Income Approach
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Overage Rent
In addition to minimum base rent, many tenants at the subject property have
contracted to pay a percentage of their gross annual sales over a
pre-established base amount as overage rent. Many leases have a natural
breakpoint although a number have stipulated breakpoints. The average overage
percentage for small space retail tenants is in a range of 5.0 to 6.0 percent.
Traditionally, it takes a number of years for a retail center to mature and
gain acceptance before generating any sizeable percentage income. As a center
matures, the level of overage rents typically becomes a larger percentage of
total revenue. It is a major ingredient protecting the equity investor against
inflation.
In the Retail Market Analysis section of this report, we discussed the
forecasted sales levels for the mall tenants. It is difficult to predict with
accuracy what sales will be on an individual tenant level. Ownership has
projected a level of overage rent for the project based upon their analysis.
However, we have not assumed any percentage rent over the bulk of the holding
period. This assumption provides some conservatism to our analysis and leaves
some upside potential to an investor.
Sales Growth Rates - Retail Component
In the Retail Market Analysis section of this report, we discussed that
comparable retail store sales at the subject property have increased
dramatically between 1991 and 1993, while showing more stabilized growth in the
ensuing two years. There was a significant amount of remerchandising and leasing
in 1995 to national tenants. As such, we anticipate steady sales growth in 1996
and thereafter.
Retail sales in the Jackson MSA have been increasing at a compound annual
rate of 5.07 percent per annum since 1990, according to Sales and Marketing
Management. According to both the Cushman & Wakefield and Korpacz surveys, major
investors are looking at a range of growth rates of 0 percent initially to a
high of 5 percent in their computational parameters. Most typically, growth
rates of 3 percent to 4 percent are seen in these surveys.
Nationally, total retail sales have been increasing at a compound annual
rate of 6.2 percent since 1980 and 4.9 percent per annum since 1990. Between
1990 and 1994, GAFO sales have grown at a compound annual rate of 5.83 percent
per year. Through 2000, total retail sales are forecasted to increase by 4.12
percent per year nationally, while GAFO sales are projected to grow by 5.04
percent annually.
After considering all of the above, combined with our assessment of
competition in the subject market, we have forecasted sales growth based upon
the following schedule.
====================================
Sales Growth Rate Forecast
====================================
Period Annual Growth Rate
====================================
1996-Thereafter 3.50%
====================================
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Income Approach
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Expense Reimbursement/Miscellaneous Income
By lease agreement, tenants are required to reimburse the lessor for
certain operating expenses. Included among these operating items are real estate
taxes, common area maintenance (CAM), and HVAC/Utility recovery which accounts
for the tenants utility consumption. Miscellaneous income is essentially derived
from specialty leasing for temporary tenants, kiosks (Retail Merchandising Units
- - RMU's), and other charges. In the first full year of the investment, it is
projected that the subject property will generate approximately $4,539,442 in
reimbursements for these operating expenses and $202,500 in other miscellaneous
income.
Common Area Maintenance
Under the standard lease, mall tenants pay their pro-rata share of the
balance of the CAM expense after anchor and restaurant tenant contributions are
deducted and an administrative fee is added. Provided below is a summary of the
standard clause that exists for a new tenant at the mall.
================================================================================
Common Area Maintenance Recovery Calculation
================================================================================
CAM Expense Actual hard cost for year exclusive of interest and depreciation
- --------------------------------------------------------------------------------
Add Administrative Fee
- --------------------------------------------------------------------------------
Less Contributions from department stores and restaurants
- --------------------------------------------------------------------------------
Equals: Net pro-ratable CAM billable to mall tenants on the basis of
gross occupied area (GLOA).
- --------------------------------------------------------------------------------
As discussed, department stores will be obligated to pay contributions
toward common area maintenance costs. It should be noted that total major
contributions consist of a pro rata share of exterior CAM or a fixed CAM amount,
plus a charge for HVAC usage. The following chart presents a summary of their
payments.
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WAKEFIELD(R)
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Income Approach
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================================================================================
Anchor Contributions
================================================================================
Tenant Area Contribution Projected 1996
Amount
================================================================================
Dillard's 150,000 SF Pro rata share of exterior $146,918
CAM expense;
HVAC-$.25/SF increasing by
CPI after 5th anniversary
- --------------------------------------------------------------------------------
McRae's 205,000 SF Pro rata share of exterior $121,497
CAM expense:
HVAC - $.25/SF increasing
$.05/SF every 5th
anniversary
- --------------------------------------------------------------------------------
Gayfers 155,276 SF Pro rata share of exterior $193,788
CAM expense;
HVAC - $.45/SF increasing
by CPI after 3rd anniversary
- --------------------------------------------------------------------------------
JC Penney 136,449 SF Yrs 1 - 5 $0.15/SF $88,692
Yrs 6 - 10 $0.251SF
Yrs 11 - 20 $0.35/SF
Yrs 21 - 30 $0.45/SF
Thereafter $0.50/SF
HVAC - yrs 1-5 $0.25/SF
Thereafter $0.30/SF
================================================================================
Real Estate Taxes
Mall tenants pay real estate tax recoveries based upon a pro-rata share of
the expense, less restaurant tenant contributions. The pass-through is based
upon pro-rata share of gross occupied area (GLOA).
HVAC/Utilities
When a mall shop tenant initially signs their lease, an estimate is made
regarding their anticipated utility usage. This includes electricity, water and
HVAC. This amount can vary from tenant to tenant, but most typically amounts to
$5.50 per square foot. This amount is projected to increase at 2 percent per
annum which is consistent with the historically nominal increases in utility
rates.
Temporary Tenant/Miscellaneous Income
The final revenue categories consist of temporary leasing of in-line space,
revenue from push carts (RMU's), and miscellaneous income. Temporary leasing is
related to temporary tenants that occupy vacant in-line space. Other sources of
miscellaneous revenues include temporary seasonal kiosk rentals, forfeited
security deposits, phone revenues, and interest income. Our forecast for these
additional revenues is net of a provision for vacancy and credit loss. Overall,
it is our assumption that these other revenues will increase by 3.0 percent per
annum over the holding period.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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Income Approach
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Allowance for Vacancy and Credit Loss - Retail Component
The investor of an income producing property is primarily interested in the
cash revenues that an income-producing property is likely to produce annually
over a specified period of time rather than what it could produce if it were
always 100 percent occupied with all tenants paying rent in full and on time.
It is normally a prudent practice to expect some income loss, either in the form
of actual vacancy or in the form of turnover, non-payment or slow payment by
tenants. We have reflected a 5.0 percent stabilized contingency for both
stabilized and unforeseen vacancy and credit loss. Please note that this vacancy
and credit loss provision is applied to all mall tenants equally. We have phased
in the 5.0 percent factor as the mall leases up.
In this analysis we have also forecasted that there is a 70.0 percent
probability that an existing tenant will renew their lease. Upon turnover, we
have forecasted that rent loss equivalent to six months would be incurred to
account for the time and/or costs associated with bringing space back on line.
Thus, minimum rent as well as overage rent and certain other income has been
reduced by this forecasted probability.
We have calculated the effect of the total provision of vacancy and credit
loss on the in-line shops. Through the 10 years of this cash flow analysis, the
total allowance for vacancy and credit loss, including provisions for downtime,
ranges from a low of 5.32 percent of total potential gross revenues to a high of
14.58 percent (1996). On average, the total allowance for vacancy and credit
loss over the 11 year projection period averages 7.44 percent of these revenues.
================================================================================
Total Rent Loss Forecast
================================================================================
Year Physical Vacancy Global Vacancy Total Vacancy*
================================================================================
1996 11.58% 3.00% 14.58%
- --------------------------------------------------------------------------------
1997 4.60% 4.00% 8.60%
- --------------------------------------------------------------------------------
1998 1.60% 5.00% 6.60%
- --------------------------------------------------------------------------------
1999 0.32% 5.00% 5.32%
- --------------------------------------------------------------------------------
2000 1.29% 5.00% 6.29%
- --------------------------------------------------------------------------------
2001 0.61% 5.00% 5.61%
- --------------------------------------------------------------------------------
2002 0.74% 5.00% 5.74%
- --------------------------------------------------------------------------------
2003 0.89% 5.00% 5.89%
- --------------------------------------------------------------------------------
2004 2.26% 5.00% 7.26%
- --------------------------------------------------------------------------------
2005 2.31% 5.00% 7.31%
- --------------------------------------------------------------------------------
2006 3.87% 5.00% 8.87%
- --------------------------------------------------------------------------------
2007 2.22% 5.00% 7.22%
- --------------------------------------------------------------------------------
Avg. 2.69% 4.75% 7.44%
================================================================================
* Includes phased global vacancy provision for unseen vacancy and credit loss
as well as weighted downtime provision of lease turnover.
================================================================================
As discussed, if an existing mall tenant is a consistent under-performer
with sales substantially below the mall average, then the turnover probability
applied is 100 percent. This assumption, while adding a degree of conservatism
to our analysis, reflects the reality that management will continually strive to
replace under performers. On balance, the aggregate deductions of all gross
revenues reflected in this analysis are based upon overall long-term market
occupancy levels and are considered what a prudent investor would allow for
credit
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CUSHMAN &
WAKEFIELD(R)
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<PAGE>
Income Approach
================================================================================
loss. The remaining sum is effective gross income which an informed investor may
anticipate the subject property to produce. We believe this is reasonable in
light of overall vacancy in this subject's market area as well as the current
leasing structure at the subject.
Effective Gross Income - Retail Component
In the initial full year of the investment, FY 1997, effective gross
revenues ("Total Income" line on cash flow) are forecasted to amount to
approximately $11,329,573, equivalent to $36.59 per square foot of total owned
GLA.
================================================================================
Effective Gross Revenue Summary - Retail Component
Initial Year of Investment -Fiscal Year 1997
================================================================================
Aggregate Sum Unit Rate Income Ratio
================================================================================
Potential Gross Income $11,704,189 $37.80 100.0%
- --------------------------------------------------------------------------------
Less: Vacancy and Credit Loss ($374,616) ($1.21) 3.2%
- --------------------------------------------------------------------------------
Effective Gross Income $11,329,573 $36.59 96.85
================================================================================
Expenses
Total expenses incurred in the production of income from the subject
property are divided into two categories: reimbursable and non-reimbursable
items. The major expenses which are reimbursable include real estate taxes,
common area maintenance, and HVAC/utilities. Non-reimbursable expenses
associated with the subject property include certain general and administrative
expenses, ownership's contribution to the merchants association/ marketing fund,
management charges, and miscellaneous expenses. Other expenses include a reserve
for the replacement of short-lived capital components, alteration costs
associated with bringing space up to occupancy standards, leasing commissions,
and a provision for capital expenditures.
The various expenses incurred in the operation of the subject property have
been estimated from information provided by a number of sources. We have
reviewed the subject's component operating budget prepared by management. This
information is provided in the Addenda. We have compared this information to
published data which are available, as well as comparable expense information.
Finally, this information has been tempered by our experience with other
regional shopping centers.
Reimbursable Operating Expenses
We have analyzed each item of expense individually and attempted to project
what the typical investor in a property like the subject would consider
reasonable, based upon informed opinion, judgment and experience. The following
is a detailed summary and discussion of the reimbursable operating expenses
incurred in the operation of the subject property during the initial year of the
investment holding period.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Approach
================================================================================
Common Area Maintenance - This expense category includes the annual cost of
miscellaneous building maintenance contracts, recoverable labor and benefits,
security, insurance, landscaping, cleaning and janitorial, exterminating,
supplies, trash removal, exterior lighting, common area energy, gas and fuel,
equipment rental, interest and depreciation, and other miscellaneous charges. As
discussed, the standard lease agreement allows management to pass along the CAM
expense to tenants on the basis of occupied area with the addition of a 15.0
percent administrative fee.
Management has budgeted a stabilized common area maintenance expense of
$1,9928,323 in 1996, or $6.23 per square foot of mall GLA (309,675+/- square
feet). This cost is summarized as follows:
================================================================================
Per Sq. Ft. of
Budget Year CAM Expense Mall Shop GLA
================================================================================
1996 $1,928,323 $6.23
================================================================================
Provided on the Facing Page chart is a comparison of CAM expense rates at other
regional malls. As can be seen, common area maintenance costs range from $3.73
to $13.20 per square foot. The survey mean is $6.76. Other properties in the
south reflect CAM expenses between $4.74 and $6.46 per square foot.
Overall, we believe that CAM expense projections for the subject are reasonable.
For our analysis, we have utilized a CAM expense of $1,930,000 in 1996 and grown
this amount by 3.5 percent per annum in the ensuing years of the cash flow.
As will be further outlined, ownership is finalizing plans for a two-year mall
enhancement program. Earlier within the Income Approach it was determined that
average occupancy costs for a mall shop tenant equates to 12.85 percent of
sales. For a mall which is posting $300+/- per square foot in sales, this level
of occupancy cost is deemed to be quite reasonable. Therefore, after extensive
conversations with the mall manager, we have concluded that $400,000 of the
planned capital improvements would be passed through to the mall shop tenants as
part of CAM. However, we have not included a 15 percent administrative surcharge
as we feel it would be met with resistance by tenants. These monies are equally
passed through as $200,000 in 1997 and $200,000 in 1998.
Real Estate Taxes - The projected taxes to be incurred in 1996 are projected to
be $545,000. As discussed, the standard recovery for this expense is charged on
the basis of gross occupied area of non-anchor mall tenant GLA, less restaurant
tenant contributions. For a complete discussion of the subjects real estate
taxes, please refer to the Real Property Taxes and Assessment section of the
report.
Utilities - The cost for electricity and water are recovered as a per square
foot charge which is separately determined for each tenant. This method of
recovery results in a profit to ownership. Utility expense will fluctuate
somewhat with occupancy. Therefore, we have modeled our cash flow to increase
utility expense
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Approach
================================================================================
appropriately as occupancy increases. Based on utility costs, we have projected
electricity to equate to $3.57 per square foot of occupied area, and water and
sewer expense to equal $0.14 per square foot of occupied area in 1996. These
amounts are projected to increase 2 percent per annum.
Non-Reimbursable Expenses
Total non-reimbursable expenses at the subject property are projected from
accepted practices and industry standards. Again, we have analyzed each item of
expenditure in an attempt to project what the typical investor in a property
similar to the subject would consider reasonable, based upon actual operations,
informed opinion, and experience. The following is a detailed summary and
discussion of non-reimbursable expenses incurred in the operation of the subject
property for the initial year. Expenses are forecasted to increase 3.5 percent
per annum through the remainder of the holding period.
General and Administrative - Expenses related to the administrative
aspects of the mall include costs particular to operation of the mall,
including salaries, travel and entertainment, and dues and subscriptions.
A provision is also made for professional services (legal and accounting
fees and other professional consulting services). In 1996, we reflect
general and administrative expenses of $260,000, or $0.84 per square foot
of mall shop GLA.
Marketing - These costs relate to ownership's contribution to the
merchant association which is net of tenant contributions. Ownership is
obligated to contribute 25 percent of the amount collected from tenants
for marketing. In 1996, marketing costs are forecasted to amount to
$100,000, or $0.32 per square foot.
Miscellaneous - This catch-all category is provided for various
miscellaneous and sundry expenses that ownership will typically incur.
Such items as unrecovered repair costs, preparation of suites for
temporary tenants, certain non-recurring expenses, expenses associated
with maintaining vacant space, and bad debts in excess of our credit loss
provision would be included here. In 1996, these miscellaneous items are
forecasted to amount to $30,000.
Management - The annual cost of managing the subject property is
projected to be 3.0 percent of minimum and percentage rent. In the
initial year of our analysis, this amount is shown to be $208,572.
Alternatively, this amount is equivalent to approximately 1.8 percent of
effective gross income. Our estimate is reflective of a typical
management agreement with a firm in the business of providing
professional management services. This amount is considered typical for a
retail complex of this size. Our investigation into the market for this
property type indicates an overall range of fees of 3 to 5 percent. Since
we have reflected a structure where ownership separately charges leasing
commissions, we have used the lower end of the range as providing for
compensation for these services.
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WAKEFIELD(R)
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Income Approach
================================================================================
Alterations - The principal component of this expense is ownership's
estimated cost to prepare a vacant suite for tenant use. At the
expiration of a lease, we have made a provision for the likely
expenditure of some monies on ownership's part for tenant improvement
allowances. In this regard, we have forecasted a cost of $10.00 per
square foot for turnover space (initial cost growing at expense growth
rate) weighted by our turnover probability of 30.0 percent. We have
forecasted a rate of $2.00 per square foot for renewal (rollover)
tenants, based on a renewal probability of 70.0 percent. The blended
rate based on our 70/30 turnover probability is therefore $4.40 per
square foot. These costs are forecasted to increase at our implied
expense growth rate.
Leasing Commissions - Leasing services have been included as part of an
all inclusive management fees. However, within our analysis we have
provided for each of these services separately. A typical leasing
structure is $3.50 per square foot for new tenants and $1.50 per square
foot for renewal tenants. These rates are increased by $0.50 and $0.25
per square foot, respectively, every five years. This structure implies a
payout up front at the start of a lease. The cost is weighted by our
70/30 percent renewal/turnover probability. Thus, upon lease expiration,
a leasing commission charge of $2.10 per square foot would be incurred.
Replacement Reserves - It is customary and prudent to set aside an amount
annually for the replacement of short-lived capital items such as the
roof, parking lot and certain mechanical items. The repairs and
maintenance expense category has historically included some capital items
which have been passed through to the tenants. This appears to be a
fairly common practice among most malls. However, we feel that over a
holding period some repairs or replacements will be needed that will not
be passed on to the tenants. For purposes of this report, we have
estimated an expense of approximately $0.15 per square foot of owned GLA
during the first year ($46,451), thereafter increasing by our expense
growth rate. This estimate takes into account the mall enhancement
program which will be instituted in 1997 and 1998.
Capital Repairs - Ownership will be undertaking a mall enhancement
program in 1997 and 1998. This program will address such issue as: the
upgrade and redesigning of the mall entrances; replacement of the
existing mall floor cover with ceramic tile; the upgrade and redesigning
of the center court area to improve traffic flow; as well as other
interior upgrades or refurbishment's. As outlined in the property
description, this plan is expected to cost approximately $4,000,000.
These monies will be expended over a two year period in two equal
installment during 1997 and 1998. As previously stated, we believe
$400,000 of these cost will be passed through to the tenants as part of
CAM. Therefore, we have provided for capital expenditures of $1,800,00 in
each of 1997 and 1998.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Approach
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Expense Growth Rates
Expense growth rates are generally forecasted to be more consistent with
inflationary trends than with competitive market forces. The Winter 1995 Cushman
& Wakefield survey of regional malls found the low and high mean from each
respondent to be 3.75 percent. The Fourth Quarter 1995 Korpacz survey reports
that the range in expense growth rates runs from 3.0 percent to 5.0 percent with
an average of 3.98 percent, down 13 basis points from one year ago. Expenses are
forecasted to grow by 3.5 percent per annum over the remainder of the holding
period.
Net Income/Net Cash Flow
The total expenses of the subject property, including alterations,
commissions, capital expenditures, and reserves, are annually deducted from
total income, thereby leaving a residual net operating income or net cash flow
to the investors in each year of the holding period before debt service. In the
initial year of investment, the net operating income is forecasted to be equal
to approximately $7.07 million which is equivalent to 62.4 percent of effective
gross income. Deducting other expenses including capital items results in a net
cash flow before debt service of approximately $6.76 million.
==============================================================================
Operating Summary
Initial Year of Investment
==============================================================================
Aggregate Sum Unit Rate* Operating Ratio
==============================================================================
Effective Gross Income $11,329,573 $36.59 100.0%
- ------------------------------------------------------------------------------
Operating Expenses $4,257,362 $13.75 37.6%
- ------------------------------------------------------------------------------
Net Operating Income $7,072,211 $22.84 62.4%
- ------------------------------------------------------------------------------
Other Expenses $311,458 $1.01 2.8%
- ------------------------------------------------------------------------------
Cash Flow $6,760,753 $21.83 59.6%
==============================================================================
* Based on total owned GLA of 309,675 square feet.
==============================================================================
Investment Parameters
After projecting the income and expense components of the subject property,
investment parameters must be set in order to forecast property performance over
the holding period. These parameters include the selection of capitalization
rates (both initial and terminal) and application of the appropriate discount or
yield rate, also referred to as the internal rate of return (IRR).
Selection of Capitalization Rates
Overall Capitalization Rate
The overall capitalization rate bears a direct relationship between net
operating income generated by the real estate in the initial year of investment
(or initial stabilized year) and the value of the asset in the marketplace.
Overall rates are also affected by the existing leasing schedule of the
property, the strength or weakness of the local rental market, the property's
position relative to competing properties, and the risk/return characteristics
associated with competitive investments.
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WAKEFIELD(R)
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Income Approach
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For retail properties, the trend has been for rising capitalization rates.
We feel that much of this has to do with the quality of the product that has
been selling. Sellers of the better performing dominant Class A malls have been
unwilling to waver on their pricing. Many of the malls which have sold over the
past 18 to 24 months are found in less desirable second or third tier locations
or represent turnaround situations with properties that are posed for expansion
or remerchandising. With fewer buyers for the top performing assets, sales have
been somewhat limited.
==============================================================================
Overall Capitalization Rates
Regional Mail Sales
==============================================================================
Year Range Mean Basis Point Change
==============================================================================
1988 5.00% - 8.00% 6.16% -
- ------------------------------------------------------------------------------
1989 4.58% - 7.26% 6.05% -11
- ------------------------------------------------------------------------------
1990 5.06% - 9.11% 6.33% +28
- ------------------------------------------------------------------------------
1991 5.60% - 7.82% 6.44% +11
- ------------------------------------------------------------------------------
1992 6.00% - 7.97% 7.31% +87
- ------------------------------------------------------------------------------
1993 7.00% - 10.10% 7.92% +61
- ------------------------------------------------------------------------------
1994 6.98% - 10.29% 8.37% +45
- ------------------------------------------------------------------------------
1995 7.47% - 11.10% 9.14% +79
==============================================================================
The data above shows that, with the exception of 1989, the average cap rate
has shown a rising trend each year. Between 1988 and 1989, the average rate
declined by 11 basis points. This was partly a result of dramatically fewer
transactions in 1989 as well as the sale of Woodfield Mall at a reported cap
rate of 4.58 percent. In 1990, the average cap rate jumped 28 basis points to
6.33 percent. Among the 16 transactions we surveyed that year, there was a
marked shift of investment criteria upward, with additional basis point risk
added due to the deteriorating economic climate for commercial real estate.
Furthermore, the problems with department store anchors added to the perceived
investment risk.
Much of the buying over the past 18 to 24 months has been opportunistic
acquisitions involving properties selling near or below replacement cost. Many
of these properties have languished due to lack of management focus or
expertise, as well as a limited ability to make the necessary capital
commitments for growth. As these opportunities become harder to find, we believe
that investors will again begin to focus on the stable returns of the dominant
Class A product.
The Cushman & Wakefield's Winter 1995 survey reveals that going-in cap
rates for regional shopping centers range between 7.0 and 9.0 percent with a low
average of 7.47 and high average of 8.25 percent, respectively; a spread of 78
basis points. Generally, the change in average capitalization rates over the
Spring 1995 survey shows that the low average decreased by 3 basis points, while
the upper average increased by 15 points. Terminal, or going-out rates are now
averaging 8.17 and 8.83 percent, representing a decrease of 22 basis points and
23 basis points, from Spring 1995 averages.
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CUSHMAN &
WAKEFIELD(R)
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Income Approach
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<TABLE>
<CAPTION>
Cushman & Wakefield Valuation Advisory Services
National Investor Survey - Regional Malls(%)
==========================================================================================================================
Investment Winter 1994 Spring 1995 Winter 1995
Parameters Low High Low High Low High
==========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
OAR/Going-In 6.50 - 9.50 7.50 - 9.50 7.00 - 8.50 7.50 - 8.50 7.00 - 8.00 7.50 - 9.00
7.6 8.4 7.50 8.1 7.47 8.25
- --------------------------------------------------------------------------------------------------------------------------
OAR/Terminal 7.00 - 9.50 7.50 - 10.50 7.50 - 8.75 8.00 - 9.25 7.00 - 9.00 8.00 - 10.00
8.0 8.8 7.95 8.6 8.1 8.83
- --------------------------------------------------------------------------------------------------------------------------
IRR 10.00 - 11.50 10.00 - 13.00 10.00 - 11.50 11.00 - 12.00 10.00 - 11.50 10.50 - 12-00
10.5 11.5 10.70 11.4 10.72 11.33
==========================================================================================================================
</TABLE>
The Fourth Quarter 1995 Peter F. Korpacz survey finds that cap rates have
remained relatively stable. They recognize that there is extreme competition
for the few premier malls that are offered for sale which should exert
downward pressure on rates. However, most of the available product is B or C
quality which are not attractive to most institutional investors. The survey
did, however, note a dramatic change for the top tier investment category of
20 to 30 true "trophy" assets in that investors think it is unrealistic to
assume that cap rates could fall below 7.0 percent.
==============================================================================
NATIONAL REGIONAL MALL MARKET
FOURTH QUARTER 1995
==============================================================================
KEY INDICATORS CURRENT LAST
Free & Clear Equity IRR QUARTER QUARTER YEAR AGO
======================== =============== ============= ==============
RANGE 10.00%-14.00% 10.00%-14.00% 10.00%-14.00%
AVERAGE 11.55% 11.55% 11.60%
- ------------------------------------------------------------------------------
CHANGE (Basis Points) - 0 -5
- ------------------------------------------------------------------------------
Free & Clear Going-In Cap Rate
- ------------------------------------------------------------------------------
RANGE 6.25%-11.00% 6.25%-11.00% 6.25%-11.00%
AVERAGE 7.86% 7.84% 7.73%
- ------------------------------------------------------------------------------
CHANGE (Basis Points) - +2 +13
- ------------------------------------------------------------------------------
Residual Cap Rate
- ------------------------------------------------------------------------------
RANGE 7.00%-11.00% 7.00%-11.00% 7.00%-11.00%
- ------------------------------------------------------------------------------
AVERAGE 8.45% 8.45% 8.30%
- ------------------------------------------------------------------------------
CHANGE (Basis Points) - 0 +15
==============================================================================
Source: Peter Korpacz Associates, Inc. - Real Estate Investor Survey Fourth
Quarter - 1995
==============================================================================
As can be seen from the above, the average IRR has decreased by 5 basis
points to 11.55 percent from one year ago. However, it is noted that this
measure has been relatively stable over the past three months. The quarter's
average initial free and clear equity cap rate rose 13 basis points to 7.86
percent from a year earlier, while the residual cap rate increased 15 basis
points to 8.45 percent.'
Most retail properties that are considered institutional grade are
existing, seasoned centers with good inflation protection that offer stability
in income and are strongly positioned to the extent that they are formidable
barriers to new competition. Equally important are centers which offer good
upside potential after face-lifting, renovations, or expansion. With new
construction down substantially, owners have accelerated renovation and re-
merchandising programs. Little competition from over-building is likely in most
mature markets
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Income Approach
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within which these centers are located. Environmental concerns and "no-growth"
mentalities in communities are now serious impediments to new retail
development.
Finally, investors have recognized that the retail landscape has been
fundamentally altered by consumer lifestyles changes, industry consolidations
and bankruptcies. This trend was strongly in evidence as the economy enters
1996 in view of the wave of retail chains whose troublesome earnings are
forcing major restructures or even liquidations. (The reader is referred to
the National Retail Overview in the Addenda of this report). Trends toward
more casual dress at work and consumers growing pre-occupation with their
leisure and home lives have created the need for refocused leasing efforts to
bring those tenants to the mall that help differentiate them from the
competition. As such, entertainment, a loosely defined concept, is one of the
most common directions malls have taken. A trend toward bringing in larger
specialty and category tenants to the mall is also in evidence. The risk from
an owners standpoint is finding that mix which works the best.
Nonetheless, the cumulative effect of these changes has been a rise in
rates as investors find it necessary to adjust their risk premiums in their
underwriting.
Based upon this discussion, we are inclined to group and characterize
regional malls into the general categories following:
Cap Rate Range Category
7.0% to 7.5% Top 20 to 25+/- malls in the country.
7.5% to 8.5% Dominant Class A investment grade property, high
sales levels, relatively good health ratios,
excellent demographics (top 50 markets), and
considered to present a significant barrier to
entry within its trade area.
8.5% to 10.5% Somewhat broad characterization of investment
quality properties ranging from primary MSAs to
second tier cities. Properties at the higher end
of the scale are probably somewhat vulnerable to
new competition in their market.
10.5% to 12.0% Remaining product which has limited appeal or
significant risk which will attract only a
smaller, select group of investors.
Conclusion - Initial Capitalization Rate
Based upon our analysis of the subject property, we have developed a
going-in capitalization rate for the property. The following points summarize
some of our thinking:
o Northpark Mall is an existing good quality, investment grade mall
which is the dominant retail property in the Jackson Mississippi
region.
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Income Approach
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o Trade area demographics are stable, with good potential for growth in
population, households, and income.
o Continued remerchandising and a strong anchor mix will continue to
produce a strong customer draw to the property. The anchor alignment
is property positioned for the trade area.
On balance, we believe that a property with characteristics of the
subject would potentially trade at an overall rate between 8.00 and 8.50
percent based upon stabilized net operating income.
Terminal Capitalization Rate
The residual cash flows generated annually by the subject property
comprise only the first part of the return which an investor will receive. The
second component of this investment return is the pre-tax cash proceeds from
the resale of the property at the end of a projected investment holding
period. Typically, investors will structure a provision in their analyses in
the form of a rate differential over a going-in capitalization rate in
projecting a future disposition price. The view is that the improvement is
then older and the future is harder to visualize; hence a slightly higher rate
is warranted for added risks in forecasting. On average, our rate survey shows
a 38 basis point differential.
Therefore, to the range of stabilized overall capitalization rates, we
have added 50 basis points to arrive at a projected terminal capitalization
rate ranging from 8.50 to 9.00 percent. This provision is made for the risk of
maintaining a certain level of occupancy in the center, its level of revenue
collection, the prospects of future competition, as well as the uncertainty of
maintaining the forecasted growth rates over such a holding period. In our
opinion, this range of terminal rates would be appropriate for the subject.
Thus, this range of rates is applied to the following year's net operating
income before reserves, capital expenditures, leasing commissions and
alterations as it would be the first received by a new purchaser of the
subject property. Applying a rate of say 8.75 percent for disposition, a
current investor would dispose of the subject property at the end of the
investment holding period for an amount of approximately $120.9 million based
on fiscal year 2007 net income of approximately $10.2 million.
From the projected reversionary value to an investor in the subject
property, we have made a deduction to account for the various transaction
costs associated with the sale of an asset of this type. These costs consist
of 3.0 percent of the total disposition price of the subject property as an
allowance for transfer taxes, professional fees, and other miscellaneous
expenses including an allowance for alteration costs that the seller pays at
final closing. Deducting these transaction costs from the computed reversion
renders pre-tax the net proceeds of sale to be received by an investor in the
subject property at the end of the holding period.
<TABLE>
<CAPTION>
================================================================================================
Net Proceeds at Reversion
================================================================================================
Less Costs of Sale and
Net Income FY 2007 Gross Sale Price Miscellaneous Expenses @ 3.0% Net Proceeds
=================== ================== =============================== =============
<S> <C> <C> <C>
$10,584,488 $120,955,577 ($3,628,967) $117,336,610
================================================================================================
</TABLE>
==============================================================================
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WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
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<PAGE>
Income Approach
==============================================================================
Selection of Discount Rate
The discounted cash flow analysis makes several assumptions which reflect
typical investor requirements for yield on real property. These assumptions are
difficult to directly extract from any given market sale or by comparison to
other investment vehicles. Instead, investor surveys of major real estate
investment funds and trends in bond yield rates are often cited to support such
analysis.
A yield or discount rate differs from an income rate, such as
cash-on-cash (equity dividend rate), in that it takes into consideration all
equity benefits, including the equity reversion at the time of resale and
annual cash flow from the property. The internal rate of return is the
single-yield rate that is used to discount all future equity benefits (cash
flow and reversion) into the initial equity investment. Thus, a current
estimate of the subject's present value may be derived by discounting the
projected income stream and reversion year sale at the property's yield rate.
Yield rates on long term real estate investments range widely between
property types. As cited in Cushman & Wakefield's Winter 1995 survey,
investors in regional malls are currently looking at broad rates of return
between 10.0 and 12.00 percent, down slightly from our last two surveys. The
indicated low and high means are 10.72 and 11.33 percent, respectively. Peter
F. Korpacz reports an average internal rate of return of 11.55 percent for the
Fourth Quarter 1995, down 5 basis points from the year ago level.
The yield rate on a long term real estate investment can also be compared
with yield rates offered by alternative financial investments since real
estate must compete in the open market for capital. In developing an
appropriate risk rate for the subject, consideration has been given to a
number of different investment opportunities. The following is a list of rates
offered by other types of securities.
==============================================================================
Market Rates and Bond Yields (%) May, 1996
==============================================================================
Reserve Bank Discount Rate 5.00
- ------------------------------------------------------------------------------
Prime Rate (Monthly Average) 8.25
- ------------------------------------------------------------------------------
3-Month Treasury Bills 4.98
- ------------------------------------------------------------------------------
U.S. 1O-Year Notes 6.90
- ------------------------------------------------------------------------------
U.S. 30-Year Bonds 6.95
- ------------------------------------------------------------------------------
Telephone Bonds 8.09
- ------------------------------------------------------------------------------
Municipal Bonds 6.21
==============================================================================
Source: New York Times
==============================================================================
This compilation of yield rates from alternative investments reflects
varying degrees of risk as perceived by the market. Therefore, a riskless
level of investment might be seen in a three month treasury bill at 4.98
percent. A more risky investment, such as telephone bonds, would currently
yield a much higher rate of 8.09 percent. The prime rate is currently 8.25
percent, while the discount rate is 5.00 percent. Ten year treasury notes are
currently yielding around 6.90 percent, while 30-year bonds are at 6.95
percent.
==============================================================================
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Approach
==============================================================================
Real estate investment typically requires a higher rate of return (yield)
and is much influenced by the relative health of financial markets. A retail
center investment tends to incorporate a blend of risk and credit based on the
tenant mix, the anchors that are included (or excluded) in the transaction,
and the assumptions of growth incorporated within the cash flow analysis. An
appropriate discount rate selected for a retail center thus attempts to
consider the underlying credit and security of the income stream, and includes
an appropriate premium for liquidity issues relating to the asset.
There has historically been a consistent relationship between the spread
in rates of return for real estate and the "safe" rate available through
long-term treasuries or high-grade corporate bonds. A wider gap between return
requirements for real estate and alternative investments has been created in
recent years due to illiquidity issues, the absence of third party financing,
and the decline in property values.
Investors have suggested that the regional mail market has become
increasingly "tiered" over the past two years. The country's premier malls are
considered to have the strongest trade areas, excellent anchor alignments, and
significant barriers of entry to future competitive supply. These and other
"dominant" malls will have average mall shop sales above $300 per square foot
and be attractive investment vehicles in the current market. It is our opinion
that the subject would attract high interest from institutional investors if
offered for sale in the current marketplace. There is not an abundance of
regional mall assets of comparable quality currently available, and many
regional malls have been included within REITs, rather than offered on an
individual property basis. However, we must further temper our analysis due to
the fact that there remains some risk that the inherent assumptions employed
in our model come to full fruition.
Finally, application of these rate parameters to the subject should
entail some sensitivity to the rate at which leases will be expiring over the
projection period. A complete expiration report is included in the Addenda. We
would also note that much of the risk factored into such an analysis is
reflected in the assumptions employed within the cash flow model, including
rent and sales growth, turnover, reserves, and vacancy provisions.
We have briefly discussed the investment risks associated with the
subject. On balance, it is our opinion that an investor in the subject
property would require an internal rate of return between 11.25 and 11.75
percent.
Present Value Analysis
Analysis by the discounted cash flow method is examined over a holding
period that allows the investment to mature, the investor to recognize a
return commensurate with the risk taken, and a recapture of the original
investment. Typical holding periods usually range from 10 to 20 years and are
sufficient for the majority of institutional grade real estate such as the
subject to meet the criteria noted above. In the instance of the subject, we
have analyzed the cash flows anticipated over a ten year period commencing on
June 1, 1996.
A sale or reversion is deemed to occur at the end of the 10th year based
upon capitalization of the following year's net operating income. This is
based upon the premise that a purchaser in the 10th year is buying the
following year's net income. Therefore, our analysis reflects this situation
by capitalizing the first year of the next holding period.
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Approach
==============================================================================
The present value is formulated by discounting the property cash flows at
various yield rates. The yield rate utilized to discount the projected cash
flow and eventual property reversion has been based on an analysis of
anticipated yield rates of investors dealing in similar investments. The rates
reflect acceptable expectations of yield to be achieved by investors currently
in the marketplace shown in their current investment criteria and as extracted
from comparable property sales.
Cash Flow Assumptions
Our cash flows forecasted for the property have been presented. To
reiterate, the formulation of these cash flows incorporate the following
general assumptions in our computer model:
1. The pro forma is presented on a fiscal year basis commencing on
June 1, 1996. The present value analysis is based on a 10 year
holding period. This period reflects 9+/- years of stabilized
operations.
2. Existing lease terms and conditions remain unmodified until their
expiration. At expiration, it has been assumed that there is a 70.0
percent probability that existing retail tenants will renew their
lease. Executed and high probability pending leases have been
assumed to be signed in accordance with negotiated terms as of the
date of valuation.
3. 1996 base date market rental rates have been established according
to tenant size with consideration given to location, the specific
merchandise category, as well as projected sales. Upon renewal, it
is assumed that new leases are written for an average of 10 years
with a rent step of 10.0 percent in year 6.
4. Market rents have been established for 1996. Subsequently, it is our
assumption that market rental rates for mall tenants will increase
3.5 percent perannum.
5. Most retail tenants have percentage rent clauses providing for the
payment of overage rent. In our analysis, we have forecasted that
sales will grow by 3.5 percent through the holding period. Our
analysis does not forecast any significant amount of percentage
rent.
6. Expense recoveries are based upon terms specified in the various
lease contracts. The standard lease contract for real estate taxes
and common area maintenance billings for interior mall tenants is
generally based upon a tenants pro rata share of occupied area.
7. Income lost due to vacancy and non-payment of obligations has been
based upon our turnover probability assumption as well as a global
provision for credit loss of 5.0 percent.
8. Specialty leasing and miscellaneous income consists of several
categories. Specialty leasing is generated by the mall's temporary
in-line tenant program which fill in during periods of downtime
between permanent in-line tenants. Miscellaneous income is generated
by chargebacks for tenant work, forfeited
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Approach
==============================================================================
security deposits, telephones, etc. We have grown all miscellaneous
revenues by 3.0 percent per annum.
9. Operating expenses have been developed with management's budget from
which we have recast certain expense items. Expenses have also been
compared to industry standards as well as our general experience.
Operating expenses are forecasted to increase by 3.5 percent per
year except for management which is based upon a percentage of
income. Taxes are forecasted to grow at 3.5 percent per year.
Alteration costs are assumed to escalate at our forecasted expense
inflation rate.
10. A provision for initial capital reserves has been reflected. An
alteration charge of $10.00 per square foot has been utilized for
new mall tenants upon future rollover of space. Renewal tenants have
been given an allowance of $2.00 per square foot. Leasing
commissions reflect a rate structure of $3.50 per square foot for
new leases and $1.50 per square foot for renewal leases.
For a property such as the subject, it is our opinion that an investor
would require an all cash discount rate in the range of 11.25 to 11.75
percent. Accordingly, we have discounted the projected future pre-tax cash
flows to be received by an equity investor in the subject property to a
present value so as to yield 11.25 to 11.75 percent at 25 basis point
intervals on equity capital over the holding period. This range of rates
reflects the risks associated with the investment. Discounting these cash
flows over the range of yield and terminal rates now being required by
participants in the market for this type of real estate places additional
perspective upon our analysis. The holding period is deemed to run from June
1, 1996 through May 31, 2006. A valuation matrix for the subject appears on
the following table:
==============================================================================
Valuation Matrix (000)
==============================================================================
Terminal Cap Rate Discount Rate
- ----------------------------------------------------------------------
11.25% 11.60% 11.75%
======================================================================
8.50% $86,816 $85,382 $83,978
- ----------------------------------------------------------------------
8.75% $85,628 $84,220 $82,843
- ----------------------------------------------------------------------
9.00% $84,505 $83,123 $81,770
==============================================================================
Through such a sensitivity analysis, it can be seen that the value of the
subject property varies from approximately $81.8 to $86.8 million. Giving
consideration to all of the characteristics of the subject previously
discussed, we feel that a prudent investor would require a yield which falls
near the middle of the range outlined above for this property. Accordingly, we
believe that based upon all of the assumptions inherent in our cash flow
analysis, an investor would look toward as IRR around 11.50 percent and a
terminal rate around 8.75 percent as being most representative of the
subject's value in the market.
In view of the analysis presented here, it becomes our opinion that the
discounted cash flow analysis indicates a market value of $84.3 million for
the subject property as of June 1, 1996. The indices of investment generated
through this indicated value conclusion are shown on the following chart:
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Approach
==============================================================================
==============================================================================
Investment Indices
==============================================================================
Equity Yield(IRR) 11.49%
- ------------------------------------------------------------------------------
Overall Capitalization Rate* 8.39%
- ------------------------------------------------------------------------------
Price/SF of Owned GLA ** $272.22
==============================================================================
*Calculated fiscally by PROJECT +Plus ($7,072,21 1)
**Based upon 309,675+/- SF
==============================================================================
We note that the computed equity yield is not necessarily the true rate
of return on equity capital. This analysis has been performed on a pre-tax
basis. The tax benefits created by real estate investment will serve to
attract investors to a pre-tax yield which is not the full measure of the
return on capital.
Direct Capitalization
To further support our value conclusion derived via the discounted cash
flow analysis, we have also utilized the direct capitalization method. In
direct capitalization an overall rate is applied to the net operating income
of the subject property. In this case, we will again consider the indicated
overall rates from the comparable sales in the Sales Comparison Approach as
well as those rates established in our Investor Survey. The sales displayed in
our summary charts developed overall rates ranging from 7.47 to 11.10 percent
in 1995. The mean was 7.92 percent for 1993 transactions, 8.37 percent for
1994 sales, and 9.14 percent for 1995.
In view of all of the above, we would anticipate that the subject would
trade at an overall rate of between 8.00 and 8.50 percent. The selection of
this range in overall capitalization rates takes into account the current
dominance of Northpark Mail in the marketplace, the existing condition of the
property, as well as its potential growth in income in the foreseeable future.
Applying this rate to net operating income before reserves and alterations and
other expenses for the subject of $7,072,211 results in a value range of
$83,200,000 to $88,400,000 for the subject. Thus, we are inclined to conclude
at a stabilized value for the subject property via direct capitalization of
$85,800,000 as of June 1, 1996.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
RECONCILIATION AND FINAL VALUE ESTIMATE
==============================================================================
Application of the Sales Comparison, and Income Approaches used in the
valuation of the subject property has produced results which fall within a
reasonably acceptable range. Restated, these are:
==============================================================================
Methodology Market Value Conclusion
==============================================================================
Cost Approach N/A
-------------------------------------------------------
Sales Comparison Approach $83,000,000 - $86,000,000
-------------------------------------------------------
Income Approach
Discounted Cash Flow $84,300,000
Direct Capitalization $85,800,000
==============================================================================
Each approach is well supported by data extracted from the market. There
are, however, strengths and weaknesses in each of these approaches which
require reconciliation before a final conclusion of value can be rendered.
Cost Approach
The Cost Approach is based on the principle of substitution which
maintains that a prudent purchaser will not pay more for a property than the
cost to construct an equally desirable substitute property. It is best applied
to a property where improvements to the site are new or of a special design
and use. The estimation of replacement cost new and developers profit requires
judgment, based upon cost services and interviews. The land value estimate was
based on a subjective exercise that essentially equated the acquisition costs
of the site together with the expended physical costs with value. Some
limitations do exist with this approach when estimating a future value. The
cost approach was not employed in this analysis due to the difficulty in
estimating accrued depreciation, as well as the fact that properties such as
the subject are not traded on a cost/value basis.
Sales Comparison Approach
The Sales Comparison Approach arrived at a value indicted for the
property by analyzing historical arms-length transaction, reducing the
gathered information to common units of comparison, adjusting the sale data
for differences with the subject and interpreting the results to yield a
meaningful value conclusion. The basis of these conclusions was the
cash-on-cash return based on net income and the adjusted price per square foot
of gross leasable and net rentable area sold. An analysis of the subject on
the basis of its implicit sales multiple was also utilized.
The process of comparing historical sales data to assess what purchasers
have been paying for similar type properties is weak in estimating future
expectations. Although the unit sale price yields comparable conclusions, it
is not the primary tool by which the investor market for a property like the
subject operates. In addition, no two properties are alike with respect to
quality of construction, location, market segmentation and income profile. As
such, subjective judgment necessarily becomes a part of the comparative
process. The usefulness of this approach is that it interprets specific
investor parameters established in their analysis and ultimate purchase of a
property. In light of the above, the writers are of the opinion that this
methodology is best suited as support for the conclusions of the Income
Approach. It does provide useful market extracted rates of return such as
overall rates to simulate investor behavior in the Income Approach.
==============================================================================
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
RECONCILIATION AND FINAL VALUE ESTIMATE
==============================================================================
Income Approach
Discounted Cash Flow Analysis
The subject property is highly suited to analysis by the discounted cash
flow method as it will be bought and sold in investment circles. The focus on
property value in relation to anticipated income is well founded since the basis
for investment is profit in the form of return or yield on invested capital. The
subject property, as an investment vehicle, is sensitive to all changes in the
economic climate and the economic expectations of investors. The discounted cash
flow analysis may easily reflect changes in the economic climate of investor
expectations by adjusting the variables used to qualify the model. In the case
of the subject property, the Income Approach can analyze existing leases, the
probabilities of future rollovers and turnovers and reflect the expectations of
overage rents. Essentially, the Income Approach can model many of the dynamics
of a complex property. The writers have considered the results of the discounted
cash flow analysis because of the applicability of this method in accounting for
the particular characteristics of the property, as well as being the tool used
by many purchasers.
Capitalization
Direct capitalization has its basis in capitalization theory and uses the
premise that the relationship between income and sales price may be expressed
as a rate or its reciprocal, a multiplier. This process selects rates derived
from the marketplace, in much the same fashion as the Sales Comparison
Approach, and applies this to a projected net operating income to derive a
sale price. The weakness here is the idea of using one year of cash flow as
the basis for calculating a sale price. This is simplistic in its view of
expectations and may sometimes be misleading. If the year chosen for the
analysis of the sale price contains an income stream that is over or
understated, this error is compounded by the capitalization process. However,
Direct Capitalization is utilized by investors and, as such has been
considered in our selection of the market value for the subject.
Conclusions
We have briefly discussed the applicability of each of the methods
presented. Because of certain vulnerable characteristics in the Sales
Comparison Approach, it has been used as supporting evidence and as a final
check on the value conclusion indicated by the Income Approach methodology.
The value exhibited by the Income Approach is consistent with the leasing
profile of the property. Overall, it indicates complimentary results with the
Sales Comparison Approach, the conclusions being supportive of each method
employed, and neither range being extremely high or low in terms of the other.
As a result of our analysis, we have formed an opinion that the market
value of the fee simple estate in the referenced property, subject to the
assumptions, limiting conditions, certifications, and definitions, as of June
1, 1996, was:
EIGHTY FIVE MILLION DOLLARS
$85,000,000
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
ASSUMPTIONS AND LIMITING CONDITIONS
==============================================================================
"Appraisal" means the appraisal report and opinion of value stated therein; or
the letter opinion of value, to which these Assumptions and Limiting
Conditions are annexed.
"Property" means the subject of the Appraisal.
"C&W' means Cushman & Wakefield, Inc. or its subsidiary which issued the
Appraisal.
"Appraiser(s)" means the employee(s) of C&W who prepared and signed the
Appraisal.
This appraisal is made subject to the following assumptions and limiting
conditions:
1. 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 appraisers 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 and for the intended use stated
below. The appraiser is not responsible for unauthorized use of this
report. We are providing this report as an update to our last analysis
which was prepared as of January 1, 1995. As such, we have primarily
reported only changes to the property and its environs over the past
year.
2. No opinion is intended to be expressed and no responsibility is assumed
for the legal description or for any matters which are legal in nature or
require legal expertise or specialized knowledge beyond that of a real
estate appraiser. Title to the Property is assumed to be good and
marketable and the Property is assumed to be free and clear of all liens
unless otherwise stated. No survey of the Property was undertaken.
3. The information contained in the Appraisal or upon which the Appraisal is
based has been gathered from sources the Appraiser assumes to be reliable
and accurate. Some of such information may have been provided by the
owner of the Property. Neither the Appraiser nor C&W shall be responsible
for the accuracy or completeness of such information, including the
correctness of estimates, opinions, dimensions, sketches, exhibits and
factual matters.
4. The opinion of value is only as of the date stated in the Appraisal.
Changes since that date in external and market factors or in the Property
itself can significantly affect property value.
5. The Appraisal is to be used in whole and not in part. No part of the
Appraisal shall be used in conjunction with any other appraisal.
Publication of the Appraisal or any portion thereof without the prior
written consent of C&W is prhibited. Except as may be otherwise stated in
the letter of engagement, the Appraisal may not be used by any person
other than the party to whom it is addressed or for purposes other than
that for which it was prepared. No part of the Appraisal shall be
conveyed to the public through advertising, or used in any sales or
promotional material without C&W's prior written consent. Reference to
the Appraisal Institute or to the MAI designation is prohibited.
==============================================================================
-100-
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
ASSUMPTIONS AND LIMITING CONDITIONS
=========================================================================
6. Except as may be otherwise stated in the letter of engagement, the
Appraiser shall not be required to give testimony in any court or
administrative proceeding relating to the Property or the Appraisal.
7. The Appraisal assumes (a) responsible ownership and competent management
of the Property; (b) there are no hidden or unapparent conditions of the
Property, subsoil or structures that render the Property more or less
valuable (no responsibility is assumed for such conditions or for
arranging for engineering studies that may be required to discover them);
(c) full compliance with all applicable federal, state and local zoning
and environmental regulations and laws, unless noncompliance is stated,
defined and considered in the Appraisal; and (d) all required licenses,
certificates of occupancy and other governmental consents have been or
can be obtained and renewed for any use on which the value estimate
contained in the Appraisal is based.
8. The forecasted potential gross income referred to in the Appraisal may be
based on lease summaries provided by the owner or third parties. The
Appraiser assumes no responsibility for the authenticity or completeness
of lease information provided by others. C&W recommends that legal advice
be obtained regarding the interpretation of lease provisions and the
contractual rights of parties.
9. The forecasts of income and expenses are not predictions of the future.
Rather, they are the Appraiser's best estimates of current market
thinking on future income and expenses. The Appraiser and C&W make no
warranty or representation that these forecasts will materialize. The
real estate market is constantly fluctuating and changing. It is not the
Appraiser's task to predict or in any way warrant the conditions of a
future real estate market; the Appraiser can only reflect what the
investment community, as of the date of the Appraisal, envisages for the
future in terms of rental rates, expenses, supply and demand.
10. Unless otherwise stated in the Appraisal, the existence of potentially
hazardous or toxic materials which may have been used in the construction
or maintenance of the improvements or may be located at or about the
Property was not considered in arriving at the opinion of value. These
materials (such as formaldehyde foam insulation, asbestos insulation and
other potentially hazardous materials) may adversely affect the value of
the Property. The Appraisers are not qualified to detect such substances.
C&W recommends that an environmental expert be employed to determine the
impact of these matters on the opinion of value.
11. Unless otherwise stated in the Appraisal, compliance with the
requirements of the Americans With Disabilities Act of 1990 (ADA) has not
been considered in arriving at the opinion of value. Failure to comply
with the requirements of the ADA may adversely affect the value of the
property. C&W recommends that an expert in this field be employed.
==============================================================================
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WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
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<PAGE>
CERTIFICATION OF APPRAISAL
==============================================================================
We certify that, to the best of our knowledge and belief:
1 Robert S. Nardella inspected the property. Richard W. Latella has
reviewed and approved the report, but did not inspect the property.
2. The statements of fact contained in this report are true and correct.
3. The reported analyses, opinions, and conclusions are limited only by the
reported assumptions and limiting conditions, and are our personal,
unbiased professional analyses, opinions, and conclusions.
4. We have no present or prospective interest in the property that is the
subject of this report, and we have no personal interest or bias with
respect to the parties involved.
5. Our compensation is not contingent upon the reporting of a predetermined
value or direction in value that favors the cause of the client, the
amount of the value estimate, the attainment of a stipulated result, or
the occurrence of a subsequent event. The appraisal assignment was not
based on a requested minimum valuation, a specific valuation or the
approval of a loan.
6. No one provided significant professional assistance to the persons
signing this report.
7. Our analyses, opinions, and conclusions were developed, and this report
has been prepared, in conformity with the Uniform Standards of
Professional Appraisal Practice of the Appraisal Foundation and the Code
of Professional Ethics and the Standards of Professional Appraisal
Practice of the Appraisal Institute.
8. The use of this report is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives.
9. As of the date of this report, Richard W. Latella has completed the
requirements of the continuing education program of the Appraisal
Institute.
/S/ Robert S. Nardella /S/ Richard W. Latella
- ---------------------- ----------------------
Robert S. Nardella Richard W. Latella, MAI
Director Senior Director
Valuation Advisory Services Retail Valuation Group
State of Mississippi Reviewed and Approved
Temporary Privilege/Certification No. TG-297 without physical inspection
==============================================================================
-102-
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
ADDENDA
==============================================================================
NATIONAL RETAIL MARKET ANALYSIS
STATE OF MISSISSIPPI TEMPORARY PRIVILEGE CERTIFICATE
1994 & 1995 OPERATING STATEMENTS AND 1996 BUDGET
RENT ROLL
PRO-JECT+ LEASE ABSTRACT REPORT
PRO-JECT+ ASSUMPTIONS REPORT
PRO-JECT+ TENANT REGISTER REPORT
PRO-JECT+ LEASE EXPIRATION REPORT
ENDS FULL DATA REPORTS
MALL SALES (1991-1994)
CUSHMAN & WAKEFIELD INVESTOR SURVEY
APPRAISERS' QUALIFICATIONS
==============================================================================
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
=========================
CUSHMAN & WAKEFIELD, INC.
NATIONAL RETAIL OVERVIEW
=========================
Retail Valuation Group
Richard W. Latella, MAI
Senior Director
<PAGE>
NATIONAL RETAIL MARKET OVERVIEW
==============================================================================
Introduction
Shopping centers constitute the major form of retail activity in the
United States today. Approximately 55 percent of all non-automotive retail
sales occur in shopping centers. It is estimated that consumer spending
accounts for about two-thirds of all economic activity in the United States.
As such, retail sales patterns have become an important indicator of the
country's economic health.
During the period 1980 through 1995, total retail sales in the United
States increased at a compound annual rate of 6.16 percent. Data for the
period 1990 through 1995 shows that sales growth has slowed to an annual
average of 4.93 percent. This information is summarized on the following
chart. The Commerce Department reports that total retail sales fell three-
tenths of a percent in January 1996.
==============================================================================
Total U.S. Retail Sales1
==============================================================================
Year Amount (Billions) Annual Change
=========================== ================== ==================
1980 $ 957,400 N/A
- ------------------------------------------------------------------------------
1985 $1,375,027 N/A
- ------------------------------------------------------------------------------
1990 $1,844,611 N/A
- ------------------------------------------------------------------------------
1991 $1,855,937 .61%
- ------------------------------------------------------------------------------
1992 $1,951,589 5.15%
- ------------------------------------------------------------------------------
1993 $2,074,499 6.30%
- ------------------------------------------------------------------------------
1994 $2,236,966 7.83%
- ------------------------------------------------------------------------------
1995 $2,346,577 4.90%
- ------------------------------------------------------------------------------
Compound Annual Growth Rate
1980-1995 +6.16%
- ------------------------------------------------------------------------------
CAGR: 1990 - 1995 +4.93%
==============================================================================
1985 - 1995 data reflects recent revisions by the U.S. Department of Commerce:
Combined Annual and Revised Monthly Retail Trade.
==============================================================================
Source: Monthly Retail Trade Reports Business Division, Current Business
Reports, Bureau of the Census, U.S. Department of Commerce.
==============================================================================
The early part of the 1990s was a time of economic stagnation and
uncertainty in the country. The gradual recover ,y, which began as the nation
crept out of the last recession, has shown some signs of weakness as corporate
downsizing has accelerated. But as the recovery period reaches into its fifth
year and the retail environment remains volatile, speculation regarding the
nation's economic future remains. It is this uncertainty which has shaped
recent consumer spending patterns.
Personal Income and Consumer Spending Americans' personal income advanced
by six-tenths of a percent in December, which helped raise income for all of
1995 by 6.1 percent, the highest gain since 6.7 percent in 1990. This growth
far outpaced the 2.5 percent in 1994 and 4.7 percent in 1993. Reports for
February 1996 however, reported that income grew at an annual rate of
eight-tenths of a percent, the biggest gain in thirteen months, and
substantially above January's anemic growth rate of one-tenth of a percent.
==============================================================================
-1-
<PAGE>
National Retail Market Overview
==============================================================================
Consumer spending is another closely watched indicator of economic
activity. The importance of consumer spending is that it represents two-thirds
of the nation's economic activity. Total consumer spending rose by 4.8 percent
in 1995, slightly off of the 5.5 percent rise in 1994 and 5.8 percent in 1993.
These increases followed a significant lowering on unemployment and bolstered
consumer confidence. The Commerce Department reported that spending rose at a
1.1 percent annual pace, the largest gain in two years, in February 1996, led
by a sharp increase in automobile sales.
Unemployment Trends
The Clinton Administration touts that its economic policy has
dramatically increased the number of citizens who have jobs. Correspondingly,
the nation's unemployment rate continues to decrease from its recent peak in
1992. Selected statistics released by the Bureau of Labor Statistics are
summarized as follows:
==============================================================================
Selected Employment Statistics
============================================================================
Civilian Labor Force Employed
=============================================================
Total Workers Total Workers Unemployment
Year1 (000) % Change (000) % Change Rate
======= =============== =========== ============= ========== ===============
1990 124,787 .7 117,914 .5 5.5
- ------------------------------------------------------------------------------
1991 125,303 .4 116,877 -.9 6.7
- ------------------------------------------------------------------------------
1992 126,982 1.3 117,598 .6 7.4
- ------------------------------------------------------------------------------
1993 128,040 .8 119,306 1.5 16.8
- ------------------------------------------------------------------------------
1994 131,056 2.4 123,060 3.1 6.1
- ------------------------------------------------------------------------------
1995 132,337 .98 124,926 1.5 5.6
======================== ========== ============= ========== ===============
CAGR 1.18 1.16
1990 -1995
==============================================================================
(1) Year ending December 31
==============================================================================
Source: Bureau of Labor Statistics U.S. Department of Labor
==============================================================================
During 1995, the labor force increased by 1,281,000 or approximately 1.0
percent. Correspondingly, the level of employment increased by 1,866,000 or
1.5 percent. As such, the year end unemployment rate dropped by five-tenths of
a percent to 5.6 percent. For 1995, monthly job growth averaged 144,000. On
balance, over 8.0 million jobs have been created since the recovery began.
Evidence of continued strengthening continues into 1996 with first quarter job
growth averaging 206,000. At the end of March 1996 the nation's unemployment
rate stood at 5.6 percent.
Housing Trends
Housing starts were down in 1995 by 7 percent from 1994 with 1.35 million
units started. This compared with 1.46 million units in 1994 and 1.29 million
in 1993. Single-family starts totaled 1.07 million units in 1995, down 10
percent from 1994. Multi-family starts, however, reversed this trend with
their second consecutive yearly increase to 277,000 units.
==============================================================================
-2-
<PAGE>
National Retail Market Overview
==============================================================================
For 1995, sales of new homes slipped nine-tenths of a percent to 664,000
from 670,000 in 1994. This was the lowest level since 610,000 new homes were
sold in 1992. In a surprise to most analysts, new home sales rose by 4.2
percent in January 1996 to a seasonally adjusted annual rate of 693,000. The
381,000 homes for sale represented a supply of six to seven months, the
highest since 1980. The median new home price of new homes sold in the first
nine months of 1995 was $132,000. The median was $130,000 for all of 1994. The
Commerce Department reported that construction spending rose 2.9 percent in
October to an annual rate of $207.7 billion, compared to $217.9 billion in all
of 1994.
The home ownership rate seems to be rising, after remaining stagnant over
the last decade. For 1995, the share of households that own their homes was
64.8 percent, compared to 64.0 percent for a year earlier. Lower mortgage
rates are cited as a factor.
Gross Domestic Product
The report on the gross domestic product (GDP) showed that output for goods
and services expanded at an annual rate of just .9 percent in the fourth quarter
of 1995. Overall, the economy gained 2.0 percent in 1995, the weakest showing in
four years since the 1991 recession. The .5 percent rise in the fourth quarter
was much slower than the 1.7 percent expected by most analysts. The Fed sees the
U.S. economy expanding at a 2.0 to 2.25 percent pace during 1996 which is
in-line with White House forecasts.
The following chart cites the annual change in real GDP since 1990.
==============================================================================
Real GDP
==============================================================================
Year % Change
============================= =================================
1990 1.2
-------------------------------------------------------------------
1991 -.6
-------------------------------------------------------------------
1992 2.3
-------------------------------------------------------------------
1993 3.1
-------------------------------------------------------------------
1994 4.1
-------------------------------------------------------------------
1995* 2.0
==============================================================================
* Reflects new chain weighted system of
measurement. Comparable 1994 measure
would be 3.5 %
==============================================================================
Source: Bureau of Economic Analysis
==============================================================================
Consumer Prices
The Bureau of Labor Statistics has reported that consumer prices rose by
only 2.5 percent in 1995, the fifth consecutive year in which inflation was
under 3.0 percent. This was the lowest rate in nearly a decade when the
overall rate was 1.1 percent in 1986. All sectors were down substantially in
1995 including the volatile health care segment which recorded inflation of
only 3.9 percent, the lowest rate in 23 years.
==============================================================================
-3-
<PAGE>
National Retail Market Overview
==============================================================================
The following chart tracks the annual change in the CPI since 1990.
==============================================================================
Consumer Price Index(1)
==============================================================================
Year CPI % Change
=================== =================== ==================
1990 133.8 6.1
--------------------------------------------------------------
1991 137.9 3.0
--------------------------------------------------------------
1992 141.9 2.9
--------------------------------------------------------------
1993 145.8 2.7
--------------------------------------------------------------
1994 149.7 2.7
--------------------------------------------------------------
1995 153.5 2.5
==============================================================================
(1) All Urban Workers
==============================================================================
Source: Dept. of Labor, Bureau of Labor Statistics
==============================================================================
Other Indicators
The government's main economic forecasting gauge, the Index of Leading
Economic Indicators is intended to project economic growth over the next six
months. The Conference Board, an independent business group, reported that the
index soared 1.3 percent in February 1996, the biggest jump in 20 years. It
has become apparent that the Federal Reserve's conservative monetary policy
has had an effect on the economy and some economists are calling for a further
reduction in short term interest rates. In recent months, evidence has been
mounting that the economy is in the midst of a pick-up.
The Conference Board also reported that consumer confidence rebounded in
February 1996, following reports suggesting lower inflation. The board's index
of consumer confidence rose 9 points to 97 over January when consumers worried
about the government shutdown, the stalemate over the Federal budget and the
recent flurry of layoff announcements by big corporations.
In another sign of increasingly pinched household budgets, consumers
sharply curtailed new installment debt in September 1995, when installment
credit rose $5.4 billion, barely half as much as August. Credit card balances
increased by $2.8 billion, the slimmest rise of the year. For the twelve
months through September 1995, outstanding credit debt rose 13.9 percent, down
from a peak of 15.3 percent in May. Still, installment debt edged to a record
18.8 percent of disposable income, indicating that consumers may be reaching a
point of discomfort with new debt.
The employment cost index is a measure of overall compensation including
wages, salaries and benefits. In 1995 the index rose by only 2.9 percent, the
smallest increase since 1980. This was barely ahead of inflation and is a sign
of tighter consumer spending over the coming year. However, the productivity
of American workers grew 1.1 percent in 1995, the largest gain since a 3.2
percent advance in 1992. Productivity is a key element in measuring the
standard of living since increased efficiency allows businesses to increase
workers compensation without having to raise prices.
==============================================================================
-4-
<PAGE>
National Retail Market Overview
==============================================================================
Economic Outlook
The WEFA Group, an economic consulting company, opines that the current
state of the economy is a "central bankers" dream, with growth headed toward the
Fed's 2.5 percent target, accompanied by stable if not falling inflation. They
project that inflation will remain in the 2.5 to 3.0 percent range into the
foreseeable future. This will have a direct influence on consumption (consumer
expenditures) and overall inflation rates (CPI).
Potential GDP provides an indication of the expansion of output, real
incomes, real expenditures, and the general standard of living of the
population. WEFA estimates that real U.S. GDP will grow at an average annual
rate between 2.0 and 2.5 percent over the next year and at 2.3 percent through
2003 as the output gap is reduced between real GDP and potential GDP. After
2003, annual real GDP growth will moderate, tapering to 2.2 percent per annum.
Consumption expenditures are primarily predicated on the growth of real
permanent income, demographic influences, and changes in relative prices over
the long term. Changes in these key variables explain much of the consumer
spending patterns of the 1970s and mid- 1980s, a period during which baby
boomers were reaching the asset acquisition stages of their lives; purchasing
automobiles and other consumer and household durables. Increases in real
disposable income supported this spending spurt with an average annual
increase of 2.9 percent per year over the past twenty years. Real consumption
expenditures increased at an average annual rate of 3.1 percent during the
1970s and by an average of 4.0 percent from 1983 to 1988. WEFA projects that
consumption expenditure growth will slow to 2.0 percent per year by 2006 as a
result of slower population growth and aging. It is also projected that the
share of personal consumption expenditures relative to GDP will decline over
the next decade. Consumer spending as a share of GDP peaked in 1986 at 67.4
percent after averaging about 63.0 percent over much of the post-war period.
WEFA estimates that consumption's share of aggregate output will decline to
64.5 percent by 2003 and 62.7 percent by 2018.
Retail Sales
In their publication, NRB/Shopping Centers Today 1994 Shopping Center
Census, the National Research Bureau reports that overall retail conditions
continued to improve for the third consecutive year in 1994. Total shopping
center sales increased 5.5 percent to $851.3 billion in 1994, up from $806.6
billion in 1993. The comparable 1993 increase was 5.0 percent. Retail sales in
shopping centers (excluding automotive and gasoline service station sales) now
account for about 55.0 percent of total retail sales in the United States.
Total retail sales per square foot have shown positive increases over the
past three years, rising by 8.7 percent from approximately $161 per square
foot in 1990, to $175 per square foot in 1994. It is noted that the increase
in productivity has exceeded the increase in inventory which bodes well for
the industry in general. This data is summarized on the following table.
==============================================================================
-5-
<PAGE>
National Retail Market Overview
==============================================================================
<TABLE>
<CAPTION>
====================================================================================================================
Selected Shopping Center Statistics
1990-1994
====================================================================================================================
% Compound
Change Annual
1990 1991 1992 1993 1994 1990-93 Growth
==================================== =========== ========= ========== ========== ========= ========= =========
<S> <C> <C> <C> <C> <C> <C> <C>
Retail Sales in Shopping Centers* $706.40 $716.90 $768.20 $806.60 $851.30 20.5% 4.8%
- --------------------------------------------------------------------------------------------------------------------
Total Leasable Area** 4.4 4.6 4.7 4.8 4.9 11.4% 2.7%
- --------------------------------------------------------------------------------------------------------------------
Unit Rate $160.89 $157.09 $164.20 $169.08 $175.13 8.7% 2.1%
====================================================================================================================
* Billions of Dollars
** Billions of Square Feet
====================================================================================================================
Source: National Research Bureau
====================================================================================================================
</TABLE>
To put retail sales patterns into perspective, the following discussion
highlights key trends over the past few years.
As a whole, 1993 was a good year for most of the nation's major
retailers. Sales for the month of December were up for most,
however, the increase ranged dramatically from 1.1 percent at Kmart
to 13.3 percent at Sears for stores open at least a year. It is
noted that the Sears turnaround after years of slippage was
unpredicted by most forecasters.
With the reporting of December 1994 results, most retailers posted
same store gains between 2.0 and 6.0 percent. The Goldman Sachs
Retail Composite Comparable Store Sales Index, a weighted average of
monthly same store sales of 52 national retail companies rose 4.5
percent in December. The weakest sales were seen in women's apparel,
with the strongest sales reported for items such as jewelry and hard
goods. Most department store companies reported moderate increases
in same store sales, though largely as a result of aggressive
markdowns. Thus, profits were negatively impacted for many
companies.
For 1995, specialty apparel sales were lackluster at best, with only
.4 percent comparable sales growth. This is of concern to investors
since approximately 30.0 percent of a mall's small shop space is
typically devoted to apparel tenants. Traditional department stores
experienced 3.4 percent same store growth in 1995, led by Dillard's
5.0 percent increase. Mass merchants' year-to-year sales increased
by 6.7 percent in 1994, driven by Sears' 7.9 percent increase. Mass
merchants account for 35.0 to 55.0 percent of the anchors of
regional malls and their resurgence bodes well for increased traffic
at these centers.
==============================================================================
-6-
<PAGE>
National Retail Market Overview
==============================================================================
o Sales at the nation's largest retailer chains saw reasonably good
increases in March 1996, following the worst December sales figures
since the 1990-91 recession in 1995. Same store sales were generally
up due to the effects of Easter in almost all sectors, although some
specialty apparel retailers continue to experience problems. Some
chains were able to report increases in sales but this generally came
about through substantial discounting. As such, profits are going to
suffer and with many retailers being squeezed for cash, 1996 is
expected to be a period of continued consolidations and bankruptcy. In
March, discounters and off-price merchants like Target, Ross and TJX
Company did particularly well. The Goldman Sachs composite index of
same store sales grew by 4.2 percent in March 1996, compared to a .3
percent drop for March 1995.
Provided on the following chart is a summary of overall and same store
sales growth for selected national merchants for the most recent period.
==============================================================================
Same Store Sales for the Month of March 1996
==============================================================================
% Change From Previous Year
-----------------------------------------
Name Overall Same Store Basis
============================== ============== =================
Wal-Mart +16.0% +6.4%
- -----------------------------------------------------------------------------
Kmart - 1.0% -
- -----------------------------------------------------------------------------
Sears, Roebuck & Company +10.0% +6.8%
- -----------------------------------------------------------------------------
J.C. Penney + 1.0% -1.0%
- -----------------------------------------------------------------------------
Dayton Hudson Corporation +16.0% +8.7%
- -----------------------------------------------------------------------------
May Department Stores +17.0% +9.0%
- -----------------------------------------------------------------------------
Federated Department Stores +12.0% +6.1%
- -----------------------------------------------------------------------------
The Limited Inc. +16.0% +8.0%
- -----------------------------------------------------------------------------
Gap Inc. +32.0% +13.0%
- -----------------------------------------------------------------------------
Ann Taylor + 9.0% - 7.0%
==============================================================================
Source: New York Times
==============================================================================
The outlook for retail sales growth is one of cautious optimism. Some
analysts point to the fact that consumer confidence has resulted in increases
in personal debt which may be troublesome in the long run. Consumer loans by
banks rose 13.9 percent in the twelve months that ended on September 30, 1995.
But data gathered by the Federal Reserve on monthly payments suggest that debt
payments are not taking as big a bite out of income as in the late 1980s,
largely because of the record refinancings at lower interest rates in recent
years and the efforts by many Americans to repay debts.
GAFO and Shopping Center Inclined Sales
In a true understanding of shopping center dynamics, it is important to
focus on both GAFO sales or the broader category of Shopping Center Inclined
Sales. These types of goods comprise the overwhelming bulk of goods and
products carried in shopping centers and department stores and consist of the
following categories:
==============================================================================
-7-
<PAGE>
National Retail Market Overview
==============================================================================
o General merchandise stores including department and other stores;
o Apparel and accessory stores;
o Furniture and home furnishing stores; and
o Other miscellaneous shoppers goods stores.
Shopping Center Inclined Sales are somewhat broader and include such
classifications as home improvement and grocery stores.
Total retail sales grew by 7.8 percent in the United States in 1994 to
$2.237 trillion, an increase of $162 billion over 1993. This followed an
increase of $125 billion over 1992. Automobile dealers captured $69* billion
of total retail sales growth last year, while Shopping Center Inclined Sales
accounted for nearly 40.0 percent of the increase ($64 billion). GAFO sales
increased by $38.6 billion. This group was led by department stores which
posted an $18.0 billion increase in sales. The following chart summarizes the
performance for this most recent comparison period.
==============================================================================
Retail Sales by Major Store Type
1993-1994 ($MIL.)
==============================================================================
1993-1994
Store Type 1994 1993 % Change
======================= ============= ============= ===============
GAFO:
General Merchandise $ 282,541 $ 264,617 6.8%
Apparel & Accessories 109,603 107,184 2.3%
Furniture & Furnishings 119,626 105,728 13.1%
Other GAFO 80,533 76,118 5.8%
- -----------------------------------------------------------------------------
GAFO Subtotal $ 592,303 $ 553,647 7.0%
- -----------------------------------------------------------------------------
Convenience Stores:
Grocery $ 376,330 $ 365,725 2.9%
Other Food 21,470 19,661 9.2%
- -----------------------------------------------------------------------------
Subtotal $ 397,800 $ 385,386 3.2%
Drug 81,538 79,645 2.4%
- -----------------------------------------------------------------------------
Convenience Subtotal $ 479,338 $ 465,031 3.1%
- -----------------------------------------------------------------------------
Other:
Home Improvement &
Building Supplies Stores $ 122,533 $ 109,604 11.8%
Shopping Center-Inclined $ 1,194,174 $1,128,282 5.8%
Subtotal 526,319 456,890 15.2%
Automobile Dealers 142,193 138,299 2.8%
Gas Stations 228,351 213,663 6.9%
Eating and Drinking Places 145,929* 137,365* 6.2%
All Other
- -----------------------------------------------------------------------------
Total Retail Sales $ 2,236,966 $2,074,499 7.8%
==============================================================================
* Estimated sales
==============================================================================
Source: U.S. Department of
Commerce and Dougal M. Casey: Retail Sales Center Development Through
The Year 2000 (ICSC White Paper)
==============================================================================
==============================================================================
-8-
<PAGE>
National Retail Market Overview
==============================================================================
GAFO sales grew by 7.0 percent in 1994 to $592.3 billion, led by
furniture and furnishings which grew by 13.1 percent. From the above it can be
calculated that GAFO sales accounted for 26.5 percent of total retail sales
and nearly 50.0 percent of all shopping center-inclined sales.
The International Council of Shopping Centers (ICSC) publishes a Monthly
Mall Merchandise Index which tracks sales by store type for more than 400
regional shopping centers. The index shows that sales per square foot rose by
1.8 percent to $256 per square foot in 1994. The following chart identified
the most recent year-end results.
==============================================================================
-9-
<PAGE>
National Retail Market Overview
==============================================================================
==============================================================================
Index Sales per Square Foot
1993-1994 Percent Change
==============================================================================
Store Type 1994 1993 ICSC Index
==============================================================================
GAFO:
Apparel & Accessories:
Women's Ready-To-Wear $189 $196 -3.8%
Women's Accessories and Specialties 295 283 +4.2%
Men's and Boy's Apparel 231 239 - 3.3%
Children's Apparel 348 310 +12.2%
Family Apparel 294 292 + 0.4%
Women's Shoes 284 275 + 3.3%
Men's Shoes 330 318 + 3.8%
Family Shoes 257 252 + 1.9%
Shoes (Misc.) 340 348 - 2.2%
SUBTOTAL $238 $238 - 0.2%
- ------------------------------------------------------------------------------
Furniture & Furnishings:
Furniture & Furnishings $267 $255 + 4.5%
Home Entertainment & Electronics 330 337 -2.0%
Miscellaneous 291 282 + 3.3%
SUBTOTAL $309 $310 - 0.3%
- ------------------------------------------------------------------------------
Other GAFO:
Jewelry $581 $541 +74%
Other 258 246 + 4'9%
SUBTOTAL $317 $301 + 5.3%
TOTAL GAFO $265 $261 + 1.6%
- ------------------------------------------------------------------------------
NON-GAFO
FOOD:
Fast Food $365 $358 + 2.0%
Restaurants 250 245 + 2.2%
Other 300 301 - 0.4%
SUBTOTAL $304 $298 + 1.9%
- ------------------------------------------------------------------------------
OTHER NON-GAFO:
Supermarkets $236 $291 -18.9%
Drug/HBA 254 230 +10.3%
Personal Services 264 253 + 4.1%
Automotive 149 133 +12.2%
Home Improvement 133 127 + 4.8%
Mail Entertainment 79 77 + 3.2%
Other Non-GAFO Miscellaneous 296 280 +5.7%
SUBTOTAL $192 $188 + 2.4%
TOTAL NON-GAFO $233 $228 +2.5%
TOTAL $256 $252 + 1.8%
==============================================================================
Note: Sales per square foot numbers are rounded to whole dollars. Three
categories illustrated here have limited representation in the ICSC
sample: Automotive, +12.2%; Home Improvement, +4.8%; and Supermarkets,
- 18.9%. Source: U.S. Department of Commerce and Dougal M. Casey.
==============================================================================
GAFO sales have risen relative to household income. In 1990 these sales
represented 13.9 percent of average household income. By 1994 they rose to
14.4 percent. Projections through 2000 show a continuation of this trend to
14.7 percent. On average, total sales were equal to nearly 55.0 percent of
household income in 1994.
==============================================================================
-10-
<PAGE>
National Retail Market Overview
==============================================================================
==============================================================================
Determinants of Retail Sales Growth and U.S. Retail Sales by Key Store Type
==============================================================================
1990 1994 2000P
==============================================================================
Determinants
Population 248,700,000 260,000,000 276,200,000
Households 91,900,000 95,700,000 103,700,000
verage Household Income $37,400 $42,600 $51,600
Total Census Money income $3.4 Tril. $4.1 Tril. $5.4 Tril.
- ------------------------------------------------------------------------------
% Allocations of Income to Sales
GAFO Stores 13.9% 14.4% 14.7%
Convenience Stores 12.9% 11.7% 10.7%
Home Improvement Stores 2.8% 3.0% 3.3%
Total Shopping Center-inclined Stores 29.6% 29.1% 28.8%
Total Retail Sales 54.3% 54.6% 52.8%
- ------------------------------------------------------------------------------
Sales ($Billion)
GAFO Stores $472 $592 $795
Convenience Stores 439 479 580
Home Improvement Stores 95 123 180
Total Shopping Center-inclined Stores $1,005 $1,194 $1,555
TOTAL RETAIL SALES $1,845 $2,237 $2,850
==============================================================================
Note: Sales and income figures are for the full year; population and
household figures are as of April 1 in each respective year. P =
Projected.
==============================================================================
Source: U.S. Census of Population, 1990; U.S. Bureau of the Census Current
Population Reports: Consumer Income P6-168, 174, 180, 184 and 188;
Bema Miller with Linda Jacobsen, "Household Futures", American
Demographics, March 1995; Retail Trade sources already cited; and
Dougal M. Casey: ICSC White Paper
==============================================================================
GAFO sales have risen at a compound annual rate of approximately 6.8
percent since 1991 based on the following annual change in sales.
=================================
1990/91 2.9%
---------------------------------
1991/92 7.0%
---------------------------------
1992/93 6.6%
---------------------------------
1993/94 7.0%
=================================
According to a recent study by the ICSC, GAFO sales are expected to grow
by 5.0 percent per annum through the year 2000, which is well above the 4.1
percent growth for all retail sales. This information is presented in the
following chart.
==============================================================================
-11-
<PAGE>
National Retail Market Overview
==============================================================================
==============================================================================
Retail Sales in the United States, by Major Store Type
==============================================================================
1994 2000P Percent Change
- ------------------------------------------------------------------------------
Compound
Store Type ($ Billions) Billions) Total Annual
=========================== ============= =========== =========== ==========
GAFO:
General Merchandise $ 283 $ 370 30.7% 4.6%
Apparel & Accessories 110 135 22.7% 3.5%
Furniture/Home Furnishings 120 180 50.0% 7.0%
Other Shoppers Goods 81 110 35.8% 5.2%
- -------------------------------------------------------------------------------
GAFO Subtotal $ 592 $ 795 34.3% 5.0%
- -------------------------------------------------------------------------------
CONVENIENCE GOODS:
Food Stores $ 398 $ 480 20.6% 3.2%%
Drugstores 82 100 22.0% 3.4%
- -------------------------------------------------------------------------------
Convenience Subtotal $ 479 $ 580 21.1% 3.2%
- -------------------------------------------------------------------------------
Home Improvement 123 180 46.3% 6.6%
- -------------------------------------------------------------------------------
Shopping Center-inclined Subtotal $1,194 $1,555 30.2% 4.5%
- -------------------------------------------------------------------------------
All Other 1,043 1,295 24.2% 3.7%
- -------------------------------------------------------------------------------
Total $2,237 $2,850 27.4% 4.1%
==============================================================================
Note: P = Projected. Some figures rounded.
===============================================================================
Source: U.S. Department of Commerce, Bureau of the Census and Dougal M. Casey.
===============================================================================
In considering the six-year period January 1995 through December 2000, it
may help to look at the six-year period extending from January 1989 through
December 1994 and then compare the two time spans.
Between January 1989 and December 1994, shopping center-inclined sales in
the United States increased by $297 billion, a compound growth rate of 4.9
percent. These shopping center-inclined sales are projected to increase by $361
billion between January 1995 and December 2000, a compound annual growth rate of
4.5 percent. GAFO sales, however, are forecasted to increase by 34.3 percent or
5.0 percent per annum.
Industry Trends
According to the National Research Bureau, there were a total of 41,235
shopping centers in the United States at the end of 1995. During this year, 867
new centers opened, an 18.0 percent increase over the 735 that opened in 1994.
This followed a 10 percent increase in 1994. The greatest growth came in the
small center category (less than 100,000 square feet) where 551 centers were
constructed. In terms of GLA added, new construction in 1995 was up 2.2 percent
resulting in an addition of 106.2 million square feet of GLA from approximately
4.86 billion to 4.97 billion square feet. In other important trends, the
development of regional and super-regional malls hit a three year high in 1995
with the opening of eight centers, twice as many as in 1994. This boosted the
nation's total of regionals to 301 and super-regionals to 380. Power and
community center development in 1995 was up 17.9 percent in terms of the number
of centers opening. The following chart highlights trends over the period 1987
through 1995.
==============================================================================
-12-
<PAGE>
National Retail Market Overview
==============================================================================
<TABLE>
<CAPTION>
=========================================================================================================================
Census Data: 9-Year Trends
=========================================================================================================================
Total Average Average % Change % Increase
No. of Total Sales GLA per Sales per in Sales New In Total
Year enters GLA (Billions) Center Sq.Ft per Sq. Ft Centers Centers
======= ========= ============= ============== ========= ========== =========== ======== ===========
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1987 30,641 3,722,957,095 $602,294,426 121,502 $161.78 2.41% 2,145 7.53%
---------------------------------------------------------------------------------------------------------------
1988 32,563 3,947,025,194 $641,096,793 121,212 $162.43 0.40% 1,922 6.27%
---------------------------------------------------------------------------------------------------------------
1989 34,683 4,213,931,734 $682,752,628 121,498 $162.02 -0.25% 2,120 6.51%
---------------------------------------------------------------------------------------------------------------
1990 36,515 4,390,371,537 $706,380,618 120,235 $160.89 -0.70% 1,832 5,28%
---------------------------------------------------------------------------------------------------------------
1991 37,975 4,563,791,215 $716,913,157 120,179 $157.09 -2.37% 1,460 4.00%
---------------------------------------------------------------------------------------------------------------
1992 38,966 4,678,527,428 $768,220,248 120,067 $164.20 4.53% 991 2.61%
---------------------------------------------------------------------------------------------------------------
1993 39,633 4,770,760,559 $806,645,004 120,373 $169.08 2.97% 667 1.71%
---------------------------------------------------------------------------------------------------------------
1994 40,368 4,860,920,056 $851,282,088 120,415 $175.13 3.58% 735 1.85%
---------------------------------------------------------------------------------------------------------------
1995 41,235 4,967,160,331 $893,814,776 120,460 $179.94 -2.75% 867 2.15%
---------------------------------------------------------------------------------------------------------------
Compound
Annual
Growth +3.78% +3.67% +5.06% .11% +1.34% N/A N/A N/A
=========================================================================================================================
Source: National Research Bureau Shopping Center Database and Statistical Model
=========================================================================================================================
</TABLE>
From the chart we see that both total GLA and total number of centers have
increased at a compound annual rate of approximately 3.7 percent since 1987. New
construction was up 2.2 percent in 1995, a slight increase over 1994 but still
well below the peak year 1987 when new construction increased by 7.5 percent.
California was by far the most active state with 139 new centers opening,
followed by North Carolina (64) and Florida (53).
Among the 41,235 centers in 1995, the following breakdown by size can be
shown.
=============================================================================
U.S. Shopping Center Inventory, YE December 1995
=============================================================================
Number of Centers Square Feet (Millions)
-----------------------------------------------------
Size Range (SF) Amount Percent Amount Percent
============================================================================
Under 100,000 26,001 63.1% 1,266.9 25.5%
- ----------------------------------------------------------------------------
100,001- 200,000 9,974 24.2% 1,367.9 27.5%
- ----------------------------------------------------------------------------
200,001- 400,000 3,345 8.1% 886.2 17.8%
- ----------------------------------------------------------------------------
400,001- 800,000 1,234 3.0% 668.7 13.5%
- ----------------------------------------------------------------------------
800,001-1,000,000 301 .7% 271.0 5.5%
- ----------------------------------------------------------------------------
Over 1,000,000 380 .9% 486.4 9.8%
- ----------------------------------------------------------------------------
Total 41,235 100.0% 4,967.2 100.0%
============================================================================
Source: National Research Bureau (some numbers slightly rounded).
=============================================================================
According to the National Research Bureau, total sales in shopping
centers have grown at a compound rate of 5.06 percent since 1987. With sales
growth outpacing new construction, average sales per square foot have been
showing positive increases since the last recession. Aggregate sales were up
5.5 percent nationwide from $851.3 billion (1994) to $893.8 billion (1995). In
1995, average sales were $179.94 per square foot, up nearly 2.7 percent over
1994 and 1.34 percent (compound growth) over the past several years. The
biggest gain came in the super-regional category (more than 1.0 million square
feet) where sales were up 4.10 percent to $201.05 per square foot.
==============================================================================
-13-
<PAGE>
National Retail Market Overview
==============================================================================
The following chart tracks the change in average sales per square foot by
size category between 1993 and 1995.
<TABLE>
<CAPTION>
==============================================================================================
Sales Trends by Size Category
1993-1995
==============================================================================================
Average Sales Per Square Foot 0% Change
==============================================================
Category 1993 1994 1995 1994-95 1993-95
============================= =========== =========== ========= ========== =========
<S> <C> <C> <C> <C> <C>
Less than 100,000 SF $193.10 $199.70 $204.94 +2.6% +3.0%
- ----------------------------------------------------------------------------------------------
100,001 to 200,000 SF $156.18 $161.52 $166.00 +2.8% +3.1%
- ----------------------------------------------------------------------------------------------
200,001 to 400,000 SF $147.57 $151.27 153.96 +1.8% +2.1%
- ----------------------------------------------------------------------------------------------
400,001 to 800,000 SF $157.04 $163.43 $168.21 +2.9% +3.5%
- ----------------------------------------------------------------------------------------------
800,001 to 1,000,000 SF $194.06 $203.20 $210.40 +3.5% +4.1%
- ----------------------------------------------------------------------------------------------
More than 1,000,000 SF $183.90 $193.13 $201.05 +4.1% +4.6%
- ----------------------------------------------------------------------------------------------
Total $169.08 $175.13 $179.94 +2.75% +3.2%
==============================================================================================
* Compound Annual Change
==============================================================================================
Source: National Research Bureau
==============================================================================================
</TABLE>
Empirical data shows that the average GLA per capita is increasing. In
1995, the average for the nation was 18.9. This was up 17 percent from 16.1 in
1988 and more recently, 18.7 square feet per capita in 1994. Among states,
Arizona surpassed Florida and now has the highest GLA per capita with 28.1
square feet. South Dakota has the lowest at 9.08 square feet. Per capita GLA for
regional malls (defined as all centers in excess of 400,000 square feet) has
also been rising from 5.0 in 1988 to 5.5 in 1995. This information is presented
on the following chart.
========================================================
GLA per Capita
========================================================
Year All Centers Regional Malls
--------------------------------------------------------
1988 16.1 5.0
--------------------------------------------------------
1989 17.0 5.2
--------------------------------------------------------
1990 17.7 5.3
--------------------------------------------------------
1991 18.1 5.3
--------------------------------------------------------
1992 18.3 5.5
--------------------------------------------------------
1993 18.5 5.5
--------------------------------------------------------
1994 18.7 5.4
--------------------------------------------------------
1995 18.9 5.5
========================================================
Source: International Council of Shopping Center: The
Scope of The Shopping Center Industry and
National Research Bureau
========================================================
The Urban Land Institute, in the 1995 edition of Dollars and Cents of
Shopping Centers, reports that vacancy rates range from a low of 2.0 percent in
neighborhood centers to 14.0 percent for regional malls. Super-regional malls
reported a vacancy rate of 7.0 percent and community centers were 4.0 percent
based upon their latest survey.
==============================================================================
-14-
<PAGE>
National Retail Market Overview
==============================================================================
The retail industry's importance to the national economy can also be seen
in the level of direct employment. According to F.W. Dodge, the construction
information division of McGraw- Hill, new projects in 1994 generated $2.6
billion in construction contract awards and supported 41,600 jobs in
construction trade and related industries. This is nearly half of the
construction employment level of 95,360 for new shopping center development in
1990. It is estimated that 10.18 million people are now employed in shopping
centers, equal to about one of every nine non-farm workers in the country. This
is up 2.9 percent over 1991.
Market Shifts - Contemporary Trends in the Retail Industry
During the 1980s, the department store and specialty apparel store
industries competed in a tug of war for consumer dollars. Specialty stores
emerged largely victorious as department store sales steadily declined as a
percentage of total GAFO sales during the decade, slipping from 47.0 percent in
1979 to 44.0 percent in 1989. During this period, many anchor tenants teetered
from high debt levels incurred during speculative takeovers and leveraged
buyouts of the 1980s. Bankruptcies and restructuring, however, have forced major
chains to refocus on their customer and shed unproductive stores and product
lines. At year end 1994, department store sales, as a percentage of GAFO sales,
were approximately 37.5 percent.
The continued strengthening of some of the major department store chains,
including Sears, Federated/Macy's, May and Dayton Hudson, is in direct contrast
to the dire predictions made by analysts about the demise of the traditional
department store industry. This has undoubtedly been brought about by the
heightened level of merger and acquisition activity in the 1980s which produced
a burdensome debt structure among many of these entities. When coupled with
reduced sales and cash flow brought on by the recession, department stores were
unable to meet their debt service requirements.
Following a round of bankruptcies and restructurings, the industry has
responded with aggressive cost-cutting measures and a focused merchandising
program that is decidedly more responsive to consumer buying patterns. The
importance of department stores to mall properties is tantamount to a successful
project since the department store is still the principal attraction that brings
patrons to the center.
On balance, 1994/95 was a continued period of transition for the retail
industry. Major retailers achieved varying degrees of success in meeting the
demands of increasingly value conscious shoppers. Since the onset of the
national economic recession in mid-1990, the retail market has been
characterized by intense price competition and continued pressure on profit
margins. Many national and regional retail chains have consolidated operations,
closed underperforming stores, and/or scaled back on expansion plans due to the
uncertain spending patterns of consumers. Consolidations and mergers have
produced a more limited number of retail operators, which have responded to
changing spending patterns by aggressively repositioning themselves within this
evolving market. Much of the recent retail construction activity has involved
the conversion of existing older retail centers into power center formats,
either by retenanting or through expansion. An additional area of growth in the
retail sector is in the "supercenter" category, which consists of the combined
grocery and department stores being developed by such companies as Wal-Mart and
Kmart. These formats require approximately 150,000 to 180,000 square feet in
order to carry the depth of merchandise necessary for such economies of scale
and market penetration.
==============================================================================
-15-
<PAGE>
National Retail Market Overview
==============================================================================
Some of the important developments in the industry over the past year can
be summarized as follows:
o The discount department store industry emerged as arguably the most
volatile retail sector, lead by regional chains in the northeast.
Jamesway, Caldor and Bradlees each filed for Chapter 11 within six
months and Hills Stores is on the block. Jamesway is now in the
process of liquidating all of its stores. Filene's Basement was
granted relief from some covenant restrictions and its stock price
plummeted. Ames, based in Rocky Hill, Connecticut, will close 17 of
its 307 stores. Kmart continues to be of serious concern. Its debt has
been downgraded to junk bond status. Even Wal-Mart, accustomed to
double digit sales growth, has seen some meager comparable sales
increases. These trends are particularly troubling for strips since
these tenants are typical anchors.
o The attraction of regional malls as an investment has diminished in
view of the wave of consolidations and bankruptcies affecting in-line
tenants. Some of the larger restructurings include Melville with plans
to close up to 330 stores, sell Marshalls to TJX Companies, split into
three publicly traded companies, and sell Wilsons and This End Up;
Petrie Retail, which operates such chains as M.J. Carroll, G&G, Jean
Nicole, Marianne and Stuarts, has filed for bankruptcy protection;
Edison Brothers (Jeans West, J. Riggins, Oak Tree, 5-7-9 Shops, etc.)
announced plans to close up to 500 stores while in Chapter 11; J.
Baker intends to liquidate Fayva Shoe division (357 low-price family
footwear stores); The Limited announced a major restructuring,
including the sale of partial interests in certain divisions; Charming
Shoppes will close 290 Fashion Bug and Fashion Bug Plus stores; Trans
World Entertainment (Record Town) has closed 115 of its 600 mall shop
locations. Other chains having trouble include Rickel Home Centers
which filed Chapter 11; Today's Man, a 35 store Philadelphia based
discount menswear chain has filed; nine subsidiaries of Fretta,
including Dixon's, U.S. Holdings and Silo, filed Chapter 11; and
Clothestime, also in bankruptcy will close up to 140 of its 540
stores. Merry-Go-Round, a chain that operates 560 stores under the
names Merry-Go-Round, Dejaiz and Cignal is giving up since having
filed in January 1994 and will liquidate its assets. Toys "R" Us has
announced a global reorganization that will close 25 stores and cut
the number of items it carries to 11,000 from 15,000. Handy Andy, a
50 year old chain of 74 home improvement centers which had been in
Chapter 11, has decided to liquidate, laying off 2,500 people.
o Overall, analysts estimate that 4,000 stores closed in 1995 and as
many as 7,000 more will close in 1996. Mom-and-Pop stores, where 75
percent of U.S. retailers employ fewer than 10 people have been
declining for the past decade. Dun and Bradstreet reports that retail
failures are up 1.4 percent over Last year - most of them small stores
who don't have the financial flexibility to renegotiate payment
schedule.
==============================================================================
-16-
<PAGE>
National Retail Market Overview
==============================================================================
o With sales down, occupancy costs continue to be a major issue facing
many tenants. As such, expansion oriented retailers like The Limited,
Ann Taylor and The Gap, are increasingly shunning mall locations for
strip centers. This has put further pressure on mall operators to be
aggressive with their rent forecasts or in finding replacement
tenants.
o While the full service department store industry led by Sears has seen
a profound turnaround, further consolidation and restructuring
continues. Woodward & Lothrop was acquired by The May Department
Stores Company and JC Penney; Broadway Stores was acquired by
Federated Department Stores; Elder Beerman has filed Chapter 11 and
will close 102 stores; Steinbach Stores will be acquired by Crowley,
Milner & Co.; Younkers will merge with Proffitts; and Strawbridge and
Clothier has hired a financial advisor to explore strategic
alternatives for this Philadelphia based chain.
o Aside from the changes in the department store arena, the most notable
transaction in 1995 involved General Growth Properties' acquisition of
the Homart Development Company in a $1.85 billion year-end deal.
Included were 25 regional malls, two current projects and several
development sites. In November, General Growth arranged for the sale
of the community center division to Developers Diversified for
approximately $505 million. Another notable deal involved Rite Aid
Corporation's announcement that it will acquire Revco Drug Stores in a
$1.8 billion merger to form the nation's largest drug store company
with sales of $11 billion and 4,500+/- stores.
o As of January 1, 1995 there were 311 outlet centers with 44.4 million
square feet of space. Outlet GLA has grown at a compound annual rate
of 18.1 percent since 1989. Concerns of over-building, tenant
bankruptcies, and consolidations have now negatively impacted this
industry as evidenced by the hit the outlet REIT stocks have taken.
Outlet tenants have not been immune to the global troubles impacting
retail sales as comparable store sales were down 3.1 percent through
November 1995.
o Category Killers and discount retailers have continued to drive the
demand for additional space. In 1995, new contracts were awarded for
the construction or renovation of 260 million square feet of stores
and shopping centers, up from 173 million square feet in 1991
according to F.W. Dodge, matching the highest levels over the past two
decades. It is estimated that between 1992 and 1994, approximately
55.0 percent of new retail square footage was built by big box
retailers. In 1994, it is estimated that they accounted for 80.0
percent of all new stores. Most experts agree that the country is
over-stored. Ultimately, it will lead to higher vacancy rates and
place severe pressure on aging, capital intensive centers. Many
analysts predict that consolidation will occur soon in the office
products superstores category where three companies are battling for
market share - OfficeMax, Office Depot and Staples.
==============================================================================
-17-
<PAGE>
National Retail Market Overview
==============================================================================
o Entertainment is clearly the new operational requisite for property
owners and developers who are incorporating some form of entertainment
into their designs. With a myriad of concepts available, ranging from
mini-amusement parks to multiplex theater and restaurant themes, to
interactive high-tech applications, choosing the right formula is a
difficult task.
Investment Criteria and Institutional Investment Performance
Investment criteria for mall properties range widely. Many firms and
organizations survey individuals active in this industry segment in order to
gauge their current investment criteria. These criteria can be measured against
traditional units of comparison such as price (or value) per square foot of GLA
and overall capitalization rates.
The price that an investor is willing to pay represents the current or
present value of all the benefits of ownership. Of fundamental importance is
their expectation of increases in cash flow and the appreciation of the
investment. Investors have shown a shift in preference to initial return,
placing probably less emphasis on the discounted cash flow analysis (DCF). A DCF
is defined as a set of procedures in which the quantity, variability, timing,
and duration of periodic income, as well as the quantity and timing of
reversions, are specified and discounted to a present value at a specified yield
rate. Understandably, market thinking has evolved after a few hard years of
reality where optimistic cash flow projections did not materialize. The DCF is
still, in our opinion, a valid valuation technique that when properly supported,
can present a realistic forecast of a property's performance and its current
value in the marketplace.
Equitable Real Estate Investment Management, Inc. reports in their Emerging
Trends in Real Estate - 1996 that their respondents give retail investments
generally poor performance forecasts in their latest survey due to the
protracted merchant shakeout which will continue into 1996. While dominant,
Class A malls are still considered to be one of the best real estate investments
anywhere, only 13.0 percent of the respondents recommended buying malls. Rents
and values are expected to remain flat (in real terms) and no one disputes their
contention that 15 to 20 percent of the existing malls nationwide will be out of
business by the end of the decade. For those centers that will continue to
reposition themselves, entertainment will be an increasingly important part of
their mix.
Investors do cite that, after having been written off, department stores
have emerged from the shake-out period as powerful as ever. The larger chains
such as Federated, May and Dillard's, continue to acquire the troubled regional
chains who find it increasingly difficult to compete against the category
killers. Many of the nations largest chains are reporting impressive profit
levels, part of which has come about from their ability to halt the double digit
sales growth of the national discount chains. Mall department stores are
aggressively reacting to power and outlet centers to protect their market share.
Department stores are frequently meeting discounters on price.
While power centers are considered one retail property type currently in a
growth mode, most respondents feel that the country is over-stored and value
gains with these types of centers will lag other property types, including
malls, over five and ten year time frames.
==============================================================================
-18-
<PAGE>
National Retail Market Overview
==============================================================================
The following chart summarizes the results of their current survey.
<TABLE>
<CAPTION>
============================================================================================
Retail Property Rankings and Forecasts
============================================================================================
Investment Potential Predicted Value Gains
------------------------- -------------------------------
Property Type 1996
Rating(1) Ranking(2) Rent Increase 1 Yr. 5 Yrs. 10 Yrs.
=============== ============ =========== ============= ======== ======== ======
<S> <C> <C> <C> <C> <C> <C>
Regional Malls 4.9 8th 2.0% 2% 20% 40%
- --------------------------------------------------------------------------------------------
Power Centers 5.3 6th 2.3% 1 % 17% 32%
- --------------------------------------------------------------------------------------------
Community Centers 5.4 5th 2.4% 2% 17% 33%
============================================================================================
(1) Scale of 1 to 10
(2) Based on 9 property types
============================================================================================
</TABLE>
The NCREIF Property Index represents data collected from the Voting Members
of the National Council of Real Estate Investment Fiduciaries. As shown in the
following table, data through the third quarter of 1995 shows that the retail
index posted a positive 1.23 percent increase in total return. Increased
competition in the retail sector from new and expanding formats and changing
locational references has caused the retail index to trail all other property
types. As such, the -2.01 percent decline in value reported by the retail
subindex for the year .were in line with investors' expectations.
================================================================================
Retail Property Returns
NCREIF Index
Third Quarter 1995 (%)
=============================================================================
Period Income Appreciation Total Change in CPI
=============== ========= ============== ======== =================
3rd Qtr. 1995 1.95 -.72 1.23 .46
- -----------------------------------------------------------------------------
One Year 8.05 -2.01 5.92 2.55
- -----------------------------------------------------------------------------
Three Years 7.54 -3.02 4.35 2.73
- -----------------------------------------------------------------------------
Five Years 7.09 -4.61 2.23 2.92
- -----------------------------------------------------------------------------
Ten Years 6.95 .54 1 7.52 3.53
=============================================================================
Source: Real Estate Performance Report
National Council of Real Estate Investment Fiduciaries
=============================================================================
It is noted that the positive total return continues to be affected by
the capital return component which has been negative for the last five years.
However, as compared to the CPI, the total index has performed relatively
well.
Real Estate Investment Trust Market (REITs)
To date, the impact of REITs on the retail investment market has been
significant, although the majority of Initial Property Offerings (IPOs)
involving regional malls, shopping centers, and outlet centers did not enter
the market until the latter part of 1993 and early 1994. it is noted that
REITs have dominated the investment market for apartment properties and have
evolved into a major role for retail properties as well.
==============================================================================
-19-
<PAGE>
National Retail Market Overview
==============================================================================
As of November 30, 1995, there were 297 REITs in the United States, about
79.0 percent (236) which are publicly traded. The advantages provided by REITs,
in comparison to more traditional real estate investment opportunities, include
the diversification of property types and location, increased liquidity due to
shares being traded on major exchanges, and the exemption from corporate taxes
when 95.0 percent of taxable income is distributed.
There are essentially three kinds of REITs which can either be
"open-ended", or Finite-life (REITs) which have specified liquidation dates,
typically ranging from eight to fifteen years.
o Equity REITs, center around the ownership of properties where
ownership interests (shareholders) receive the benefit of returns from
the operating income as well as the anticipated appreciation of
property value. Equity REITs typically provide lower yields than other
types of REITs, although this lower yield is theoretically offset by
property appreciation.
o Mortgage REITs invest in real estate through loans. The return to
shareholders is related to the interest rate for mortgages placed by
the REIT.
o Hybrid REITs combine the investment strategies of both the equity and
mortgage REITs in order to diversify risk.
The influx of capital into REITs has provided property owners with an
significant alternative marketplace of investment capital and resulted in a
considerably more liquid market for real estate. A number of "non-traditional"
REIT buyers, such as utility funds and equity/income funds, established a major
presence in the market during 1993/94.
1995 was not viewed as a great year for REITs relative to the advances seen
in the broader market. Through the end of November, equity REITs posted a 9.3
percent total return according to the National Association of Real Estate
Investment Trusts (NAREIT). The best performer among equity REITs was the office
sector with a 29.4 percent total return. This was followed by self-storage
(27.3%), hotels (26.7%), triple-net lease (20.6%), and health care (18.8%). Two
equity REIT sectors were in the red - outlet centers and regional malls.
Retail REITs
As of November 30, 1995, there were a total of 47 REITs specializing in
retail, making up approximately 16 percent of the securities in the REIT market.
Depending upon the property type in which they specialize, retail REITs are
divided into three categories: shopping centers, regional malls, and outlet
centers. The REFIT performance indices chart shown as Table A on the following
page, shows a two-year summary of the total retail REIT market as well as the
performance of the three composite categories.
==============================================================================
-20-
<PAGE>
National Retail Market Overview
==============================================================================
==============================================================================
As of November 30,1995
==============================================================================
TOTAL RETAIL 0.49% 8.36% 47 $14,389.1
Strip Centers 2.87% 8.14% 29 $8,083.3
Regional Malls -2.47% 9.06% 11 $4,886.1
Outlet Centers -2.53% 9.24% 6 $1,108.7
==============================================================================
As of November 30,1995
==============================================================================
TOTAL RETAIL -3.29% 8.35% 46 $12,913.1
Strip Centers -4.36% 7.98% 28 $7,402.7
Regional Malls 2.84% 8.86% 11 $4,459.1
Outlet Centers -16.58% 8.74% 7 $1,051.4
==============================================================================
* Number reported in thousands.
Source: Realty Stock Review
==============================================================================
As can be seen, the 47 REIT securities have a market capitalization of
approximately $14.4 billion, up 11.5 percent from the previous year. Total
returns were positive through November 1995, reversing the negative return for
the comparable period 12 months earlier. It is noted that the positive return
was the result of the strength of the shopping center REITS which constitute
nearly 60 percent of the market capitalization. Total retail REITS dividend
yields have remained constant over the last year at approximately 8.36 percent.
Regional mall and shopping center REITS dominate the total market, making up
approximately 85 percent of the 47 retail REITS.
While many of the country's best quality malls and shopping centers have
recently been offered in the public market, this heavily capitalized marketplace
has provided sellers with an attractive alternative to the more traditional
market for large retail properties.
Regional Mall REITS
The accompanying exhibit Table B summarizes the basic characteristics of
eight REITS and one publicly traded real estate operating company (Rouse
Company) comprised exclusively or predominantly of regional mall properties.
Excluding the Rouse Company (ROUS), the IPOs have all been completed since
November 1992. The nine public offerings with available information have a total
of 281 regional or super regional malls with a combined leasable area of
approximately 229 million square feet. This figure represents more than 14.0
percent of the total national supply of this product type.
==============================================================================
-21-
<PAGE>
National Retail Market Overview
==============================================================================
The nine companies are among the largest and best capitalized domestic real
estate equity securities, and are considerably more liquid than more traditional
real estate related investments. Excluding the Rouse Company, however, these
companies have been publicly traded for only a short period, and there is not an
established track record. General Growth was the star performer in 1995 with a
15 percent increase in its stock price following the acquisition of the Homart
retail portfolio from Sears for $1.85 billion - the biggest real estate
acquisition of the decade.
<TABLE>
<CAPTION>
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Retail Centers 95 23 51 40 16 67 56 19 12
- Super Regional Centers* 5 1 28 14 4 27 21 16 7
- Regional Centers 11 22 23 25 10 27 35 3 2
- Community Centers 79 - 11 1 2 13 55 - 3
- Other - - - - - - 3 - -
Total Mall GLA** 17,129 12,686 44,460 28,881 10,620 44,922 39,329 22,031 8,895
Total Mall Shop GLA** 6,500 4.895 15,300 12,111 - 19,829 15,731 9,088 2,356
Avg. Total GLAD/Center** 180 552 872 722 664 670 702 1,160 741
Avg. Mall Shop GLA/Cente** 68 213 300 303 - 296 281 478 196
===================================================================================================================================
Reporting Year 1994 1994 1994 1994 1994 1994 1994 1994 1994
Avg.- Sales PSF of Mall GLA $226 $204 $260 $245 $262 $285 $259 $335 $348
Minimum Rent/Sales Ratio 8.6% 7.1% 8.3% - - - 6.8% 10.2% 8.1%
Total Occupancy Cost/Sales Ratio 2.2% 10.0% 12.4% - 11.2% - 10.2% 14.8% 11.7%
Mall Shop Occupancy Level 88.7% 84.0% 85.0% 87.0% 92.9% - 86.2% 86.6% 93.3%
===================================================================================================================================
IPO Date 10/27/93 8/9/93 6/30/94 4/8/93 3/9/94 1966 12/26/93 11/18/92 10/6/93
IPO Price $19.50 $17.25 $14.75 $22.00 $19.00 - $22.25 $11.00 $23.50
Current Price (12/15/95) $21.63 $7.38 $13.00 $19.13 $19.75 $19.63 $25.13 $9.75 $21.75
52 - Week High $22.00 $14.13 $15.13 $22.63 $21.88 $22.63 $26.00 $10.38 $22.50
52 - Week Low $17.38 $6.50 $12.00 $18.13 $19.25 $17.50 $22.50 $8.88 $18.75
===================================================================================================================================
Outstanding Shares*** 30.20 36.85 89.60 43.37 31.45 47.87 95.64 125.85 21.19
Market Capitalization*** $653 $272 $1,165 $830 $621 $940 $2,403 $1,227 $461
Annual Dividend $1.59 $0.80 $1.26 $1.72 $1.68 $0.80 $1.97 $0.88 $1.94
Dividend Yield (12/15/95) 7.35% 10.84% 9.69% 8.99% 8.51% 4.08% 7.84% 9.03% 8.9
FFO 1995**** $1.85 $1.50 $1.53 $1.96 $1.92 $1-92 $2.28 $0.91 $2.17
FFO Yield (12/15/95) 8.55% 20.33% 11.77% 10.25% 9.72% 9.78% 9.07% 9.33% 9.98%
===================================================================================================================================
Source Salomon Brothers and Realty Stock Review; Annual Reports
* Super Regional Center (>= 800,ODO Sq. Ft.).
** Numbers in thousands (000) includes malls only.
*** Numbers in millions.
**** Funds From Operations is defined as net income (loss) before depredation, amortization, other non-cash items,
extraordinary items, gains or losses on sales of assets and before minority interests in the Operating Partnership.
===================================================================================================================================
</TABLE>
==============================================================================
-22-
<PAGE>
National Retail Market Overview
==============================================================================
Shopping Center REITs
Shopping center REITs comprise the largest sector of the retail REIT market
accounting for 29 out of the total 47 securities. General characteristics of
eight of the largest shopping center REITs are summarized on Table C. The public
equity market capitalization of the eight companies totaled $6.1 billion as of
December 15, 1995. The two largest, Kimco Realty Corp. and New Plan Realty Trust
have a market capitalization equal to approximately 34.5 percent of the group
total.
While the regional mall and outlet center REIT markets struggled through
1995, shopping center REITs showed a positive November 30, 1995 year-to-date
return of 2.87%. Through 1995, transaction activity in the national shopping
center market has been moderate. Most of the action in this market is in the
power center segment. As an investment, power centers appeal to investors and
REITs because of the high current cash returns and long-term leases. However,
with their popularity, the potential for overbuilding is high. Also creating
skepticism within this market is the stability of several large discount
retailers such as Kmart, and other discount department stores which typically
anchor power centers. Shopping center REITs which hold numerous properties where
struggling retailers are located are currently keeping close watch over these
centers in the event of these anchor tenants vacating their space.
Similar to the regional mall REITs, shopping center REITs have been
publicly traded for only a short period and do not have a defined track record.
While the REITs have been in existence for a relatively short period, the growth
requirements of the companies should place upward pressure on values due to
continued demand for new product.
==============================================================================
-23-
<PAGE>
National Retail Market Overview
==============================================================================
<TABLE>
<CAPTION>
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Properties 111 53 84 46 193 123 65 161
Total Retail: Centers 104 53 84 40 193 102 56 141
Total Retail GLA* 23.600 11,200 12,300 6,895 26,001 14,500 9,501 13,293
Avg. Total GLA/Center* 227 211 146 172 135 142 170 94
===========================================================================================================================
Reporting Year - - 1994 - 1994 - - 1994
Total Rental Income - - $71,101 - $125,272 - - $112,233
Average Rent/Square Foot $6.04 - $5.78 - $4.82 - - $8.44
Total Operating Expenses - - $45.746 - $80,563 - - $76,771
Operating Expenses/Square Foot - - $3.72 - $3.10 - - $5.78
Operating Expense Ratio - - 64.3% - 64.3% - - 68.4%
Total Occupancy Level 96.6% 95.1% 96.3% 94.0% 94.7% 95.4% 54.0% 92.0%
===========================================================================================================================
IPO Date 1992 1993 1994 1994 1991 1973 1993 1985
IPO Price $19.50 $17.25 $14.75 $22.00 $19.00 - $22.25 -
Current Price (12/15/95) $29.88 $23.38 $17.75 $20.63 $42.25 $21.63 $36.13 $36.13
52 - Week High $32.00 $23.75 $22.38 $21.38 $42.25 $23.00 $38.13 $38.13
52 - Week Low $26.13 $19.75 $16.63 $17.38 $35.00 $18.75 $32.75 $32.75
===========================================================================================================================
Outstanding ShareS** 18.96 32.22 24.48 19.72 22.43 53.26 24.20 26.53
Market Capitalization** $567 $753 $435 $407 $948 $1,152 $874 $959
Annual Dividend $2.40 $1.64 $1.92 $1.68 $2.16 $1.39 $2.24 $2.40
Dividend Yield (12/15195) 8.03% 7.01% 10.82% 8,14% 5.11% 6.43% 6.20% 6.64%
FFO 1995*** $2.65 $1.78 $2.25 $1.83 $3.15 $1.44 $2.67 $2.80
FFO Yield (12/5/5) 8.87% 7.61% 12.68% 8.87% 7.46% 6.66% 7.39 7.75%
===========================================================================================================================
Source: Salomon Bothers and Realty Stock Review, Annual Reports
* Numbers in thousands(000) includes retail properties only.
** Numbers in millions.
*** Funds From Operations is defined as net income (loss) before depreciation, amortization, other non-cash items,
extraordinary items, gains or losses on sales of assets and before minority interests in the Operating Partnership.
===========================================================================================================================
</TABLE>
==============================================================================
-24-
<PAGE>
National Retail Market Overview
==============================================================================
Outlook
A review of various data sources reveals the intensity of the development
community's efforts to serve a U.S. retail market that is still growing,
shifting and evolving. It is estimated 25-30 power centers appear to be capable
of opening annually, generating more than 12 million square feet of new space
per year. That activity is fueled by the locational needs of key power center
tenants, 27 of which indicated in recent year-end reports to shareholders an
appetite for 900 new stores annually, an average of 30 new stores per firm.
With a per capita GLA figure of 19 square feet, most analysts are in
agreement that the country is already over-stored. As such, new centers will
become feasible through the following demand generators:
o The gradual obsolescence of some existing retail locations and retail
facilities;
o The evolution of the locational needs and format preferences of
various anchor tenants; and
o Rising retail sales generated by increasing population and household
levels.
By the year 2000, total retail sales are projected to rise from $2.237
trillion in 1994 to almost $2.9 trillion; shopping center-inclined sales are
projected to rise by $361 billion, from $1.194 trillion in 1994 to nearly $1.6
trillion in the year 2000. Those increases reflect annual compound growth rates
of 4.1 percent and 4.5 percent, respectively, for the six-year period.
On balance, we conclude that the outlook for the retail industry is one of
cautious optimism. Because of the importance of consumer spending to the
economy, the retail industry is one of the most studied and analyzed segments of
the economy. One obvious benefactor of the aggressive expansion and promotional
pricing which has characterized the industry is the consumer. There will
continue to be an increasing focus on choosing the right format and
merchandising mix to differentiate the product from the competition and meet the
needs of the consumer. Quite obviously, many of the nation's existing retail
developments will find it difficult if not impossible to compete. Tantamount to
the success of these older centers must be a proper merchandising or
repositioning strategy that adequately considers the feasibility of the capital
intensive needs of such an undertaking. Coincident with all of the change which
will continue to influence the industry is a general softening of investor
bullishness. This will lead to a realization that the collective interaction of
the fundamentals of risk and reward now require higher capitalization rates and
long term yield expectations in order to attract investment capital.
==============================================================================
-24-
<PAGE>
====================================================
State of Mississippi Temporary Privilege Certificate
====================================================
<PAGE>
MISSISSIPPI REAL ESTATE APPRAISER
LICENSING AND CERTIFICATION BOARD
1920 Dunbarton Drive
Jackson, Ms. 39216-5087
(601) 987-3969
Temporary licensing/certification privilege is granted to
Real Estate Appraiser:
ROBERT SCOTT NARDELLA
Who is licensed as
CERTIFIED GENERAL APPRAISER
Temporary privilege number:
TG-297
Valid period: 4/26/96-7/24/96
/s/John W. Neelley
- ------------------
John W. Neelley
Administrator & ExOfficio
Board Member
APPRAISER
Name: ROBERT SCOTT NARDELLA
Address: C/O CUSHMAN & WAKEFIELD, INC.
51 WEST 52ND ST.
NEW YORK, NY 10019
Licensing state: NEW YORK
License Number: 46000004620
/s/ROBERT SCOTT NARDELLA
- ------------------------
Signature of Appraiser
<PAGE>
1994 & 1995 Operating Statements and 1996 Budget
<PAGE>
FEB 9, 1995 15:33
(DATA AS OF FEB 9, 1995 15:44) PAGE 2
PROPERTY MANAGEMENT INFORMATION SYSTEM
CASH OPERATING STATEMENT - DEC, 94 (SCHEDULE 2)
9120: NORTHPARK MALL
DEC,94
==============================================
ACTUAL BUDGET VARIANCE DESCRIPTION
=============== ============== =============== =================================
INCOME:
483,031 452,364 30,667 RENTAL
49,544,137 112,852 63,308- PERCENTAGE RENT
137,252 147,148 9,896- COMMON AREA
0 3,819 3,819- FOOD COURT
27,581 30,617 3,036- REAL ESTATE TAX
129,381 143,408 14,027- UTILITY
13,012 0 13,012 OTHER TENANT
1,999 0 1,999 MISCELLANEOUS
- --------------- -------------- ---------------
841,801 890,208 48,407 TOTAL INCOME
- --------------- -------------- ---------------
EXPENSES:
141 170 29- ADVERTISING/PROMOTION
1,456- 6,335 7,791- ADMINISTRATIVE
23,975 25,303 1,328- JANITORIAL CLEANING
2,725 60 2,665 TENANT DECORATING
3,840 200 3,640 BUILDING RENOVATION
14,222 10,520 3,702 LAWN MAINTENANCE
8,793 20,000 11,207- SECURITY
3,590 4,000 410- RUBBISH REMOVAL
0 0 0 SNOW REMOVAL
4,904 2,975 1,929 PARKING LOT
22,907 21,135 1,772 BUILDING MAINTENANCE/REPAIR
60,765 38,747 22,018 PAYROLL SALARY/BONUS
16,546 7,750 8,796 PAYROLL TAX/INSURANCE
9,765 8,320 1,445 OTHER OPERATING
20,192 22,671 2,479- MANAGEMENT FEES
0 0 0 GENERAL INSURANCE
24,247 14,404 9,843 PROFESSIONAL SERVICES
96,402 122,112 25,710- UTILITY - ELECTRICE
0 0 0 -GAS/FUEL
2,502 4,750 2,248- -WATER/SEWER
0 0 0 REAL ESTATE TAXES
0 0 0 MISCELLANEOUS
- --------------- -------------- ---------------
314,060 309,452 4,608 TOTAL EXPENSES
- --------------- -------------- ---------------
527,740 580,756 53,016- NET OPERATING INCOME
325,802 325,802 0 MORTGAGE INTEREST
16,031 16,031 0- MORTGAGE PRINCIPAL
514,995 0 514,995 ADDITIONAL MORTGAGE INTEREST
0 0 0 LAND RENT
- --------------- -------------- ---------------
329,088- 238,923 568,011- SUB TOTAL - OPERATING CASH FLOW
0 0 0 NET MKT'G FUND
- --------------- -------------- ---------------
329,088- 238,923 568,011- OPERATING CASH FLOW
3,000 0 3,000 TENANT IMPROVEMENTS
0 0 0 CAPITAL ADDITIONS
0 0 0 LEASE COMMISSIONS
164,683 0 164,683 REDEVELOPMENT COSTS
- --------------- -------------- ---------------
496,771- 238,923 735,694- CASH FLOW
=============== ============== ===============
<TABLE>
<CAPTION>
JAN,94 - DEC,94
====================================================
DESCRIPTION ACTUAL BUDGET VARIANCE /SQ FT ANNUAL
BUDGET
================================ ============ ============ =============== ========== =============
<S> <C> <C> <C> <C> <C>
INCOME:
RENTAL 5,063,090 5,159,524 96,434- 16.71 5,159,524
PERCENTAGE RENT 669,588 642,954 26,634 2.21 642,954
COMMON AREA 1,577,615 1,783,606 205,991- 5.20 1,783,606
FOOD COURT 41,547 58,047 16,500- 0.13 58,047
REAL ESTATE TAX 319,093 363,920 44,827- 1.05 363,920
UTILITY 1,506,734 1,564,665 57,931- 4.97 1,564,665
OTHER TENANT 50,008 31,978 18,030 0.16 31,978
MISCELLANEOUS 17,941 0 17,941 0.05 0
------------ ------------ --------------- ---------- -------------
TOTAL INCOME 9,245,616 9,604,694 359,078- 30.53 9,604,694
------------ ------------ --------------- ---------- -------------
EXPENSES:
ADVERTISING/PROMOTION 5,174 5,130 44 0.01 5,130
ADMINISTRATIVE 45,532 55,796 10,264- 0.15 55,796
JANITORIAL CLEANING 287,265 291,236 3,971- 0.94 291,236
TENANT DECORATING 6,781 2,140 4,641 0.02 2,140
BUILDING RENOVATION 7,136 11,200 4,064- 0.02 11,200
LAWN MAINTENANCE 100,929 98,040 2,889 0.33 98,040
SECURITY 214,837 240,000 25,163- 0.70 240,000
RUBBISH REMOVAL 43,351 44,800 1,449- 0.14 44,800
SNOW REMOVAL 0 0 0 0.00 0
PARKING LOT 111,566 110,525 1,041 0.36 110,525
BUILDING MAINTENANCE/REPAIR 227,680 191,020 36,660 0.75 191,020
PAYROLL SALARY/BONUS 266,476 278,284 11,808- 0.87 278,284
PAYROLL TAX/INSURANCE 57,715 55,660 2,055 0.19 55,660
OTHER OPERATING 102,099 96,714 5,385 0.33 96,714
MANAGEMENT FEES 230,720 231,555 835- 0.76 231,555
GENERAL INSURANCE 71,323 108,471 37,148- 0.23 108,471
PROFESSIONAL SERVICES 180,496 174,850 5,646 0.59 174,850
UTILITY - ELECTRICE 1,233,161 1,371,970 138,809- 4.07 1,371,970
-GAS/FUEL 0 0 0 0.00 0
-WATER/SEWER 45,640 55,975 10,335- 0.15 55,975
REAL ESTATE TAXES 363,443 347,956 15,487 1.20 347,956
MISCELLANEOUS 0 0 0 0.00 0
------------ ------------ --------------- ---------- -------------
TOTAL EXPENSES 3,601,325 3,771,322 189,080- 11.89 3,771,322
------------ ------------ --------------- ---------- -------------
NET OPERATING INCOME 5,644,292 5,833,372 189,080- 18.63 5,833,372
MORTGAGE INTEREST 3,919,361 3,919,362 1- 12.94 3,919,362
MORTGAGE PRINCIPAL 182,639 182,639 0- 0.60 182,639
ADDITIONAL MORTGAGE INTEREST 2,026,610 125,000 1,901,610 6.69 125,000
LAND RENT 0 0 0 0.00 0
------------ ------------ --------------- ---------- -------------
SUB TOTAL - OPERATING CASH FLOW 484,318 1,606,371 2,090,6890 1.59- 1,606,371
NET MKT'G FUND 0 0 0 0.00 0
------------ ------------ --------------- ---------- -------------
OPERATING CASH FLOW 484,318- 1,606,371 2,090,689- 1.59- 1,606,371
TENANT IMPROVEMENTS 821,853 343,934 477,919 2.71 343,934
CAPITAL ADDITIONS 0 0 0 0.00 0
LEASE COMMISSIONS 0 0 0 0.00 0
REDEVELOPMENT COSTS 553,965 0 553,965 1.82 0
------------ ------------ --------------- ---------- -------------
CASH FLOW 1,860,137 1,262,437 3,122,574- 6.14- 1,262,437
============ ============ =============== ========== =============
</TABLE>
<PAGE>
?????, 1996 12:17
(DATA AS OF JAN 9, 1996 12:03) PAGE 2
PROPERTY MANAGEMENT INFORMATION SYSTEM
CASH OPERATING STATEMENT -- DEC, 95 (SCHEDULE 2)
9120: NORTHPARK MALL
DEC,95
==============================================
ACTUAL BUDGET VARIANCE DESCRIPTION
=============== ============== =============== =================================
INCOME:
454,001 569,932 115,931- RENTAL
67,112 51,948 15,164 PERCENTAGE RENT
149,016 161,470 12,454- COMMON AREA
0 0 0 FOOD COURT
33,032 32,977 55 REAL ESTATE TAX
138,284 158,960 20,676- UTILITY
0 0 0 OTHER TENANT
8,750 0 8,750 MISCELLANEOUS
- --------------- -------------- ---------------
850,195 975,287 125,092- TOTAL INCOME
- --------------- -------------- ---------------
EXPENSES:
0 670 670- ADVERTISING/PROMOTION
4,346 5,468 1,122- ADMINISTRATIVE
19,532 19,572 40- JANITORIAL CLEANING
108 0 108 TENANT DECORATING
57 275 218- BUILDING RENOVATION
15,015 10,775 4,240 LAWN MAINTENANCE
2,628 2,261 367 SECURITY
3,952 4,000 48- RUBBISH REMOVAL
0 0 0 SNOW REMOVAL
3,007 3,002 5 PARKING LOT
37,196 13,715 23,481 BUILDING MAINTENANCE/REPAIR
48,041 75,648 27,607- PAYROLL SALARY/BONUS
27,558 15,130 12,428 PAYROLL TAX/INSURANCE
14,898 9,341 5,57 OTHER OPERATING
24,702 24,794 92- MANAGEMENT FEES
3,525 0 3,325 GENERAL INSURANCE
21,607 19,020 2,587 PROFESSIONAL SERVICES
89,169 121,200 32,031 UTILITY - ELECTRIC
0 0 0 -GAS/FUEL
3,617 5,000 1,383 -WATER/SEWER
2,947 0 2,947 REAL ESTATE TAXES
0 0 0 MISCELLANEOUS
- --------------- -------------- ---------------
321,906 329,871 7,965- TOTAL EXPENSES
- --------------- -------------- ---------------
528,289 645,416 117,127- NET OPERATING INCOME
323,859 323,859 0- MORTGAGE INTEREST
17,975 17,975 0- MORTGAGE PRINCIPAL
0 0 0 ADDITIONAL MORTGAGE INTEREST
0 0 0 LAND RENT
- --------------- -------------- ---------------
186,456 303,582 117,126- SUB TOTAL - OPERATING CASH FLOW
0 0 0 NET MKT'G FUND
- --------------- -------------- ---------------
186,456 303,582 117,126- OPERATING CASH FLOW
100,000 140,000 40,000- TENANT IMPROVEMENTS
33,635- 0 33,635- CAPITAL ADDITIONS
0 0 0 LEASE COMMISSIONS
0 0 0 REDEVELOPMENT COSTS
- --------------- -------------- ---------------
120,091 163,582 43,491- CASH FLOW
=============== ============== ===============
<TABLE>
<CAPTION>
JAN,95 - DEC,95
====================================================
DESCRIPTION ACTUAL BUDGET VARIANCE /SQ FT ANNUAL
BUDGET
================================ ============ ============ =============== ========== =============
<S> <C> <C> <C> <C> <C>
INCOME:
RENTAL 5,929,598 5,798,367 131,231 19.58 5,798,367
PERCENTAGE RENT 489,009 310,694 178,315 1.61 310,694
COMMON AREA 1,639,257 1,774,351 135,094 5.41 1,774,351
FOOD COURT 419- 0 419- 0.00 0
REAL ESTATE TAX 387,835 384,315 3,520 1.28 384,315
UTILITY 1,553,073 1,616,342 63,269- 5.12 1,616,342
OTHER TENANT 46,648 34,216 12,432 0.15 34,216
MISCELLANEOUS 46,744 0 46,744 0.15 0
------------ ------------ --------------- ---------- -------------
TOTAL INCOME 10,091,744 9,918,285 173,459 33.32 9,918,285
------------ ------------ --------------- ---------- -------------
EXPENSES:
ADVERTISING/PROMOTION 6,370 5,230 1,140 0.02 5,230
ADMINISTRATIVE 44,386 5,704 11,318- 0.14 55,704
JANITORIAL CLEANING 218,913 222,464 3,551- 0.72 222,464
TENANT DECORATING 2,984 1,460 1,526 0.00 1,460
BUILDING RENOVATION 8,836 9,700 864- 0.02 9,700
LAWN MAINTENANCE 100,357 100,370 13- 0.33 100,370
SECURITY 37,701 30,017 7,684 0.12 30,017
RUBBISH REMOVAL 49,049 45,952 3,097 0.16 45,952
SNOW REMOVAL 0 0 0 0.00 0
PARKING LOT 131,379 124,687 6,692 0.43 124,687
BUILDING MAINTENANCE/REPAIR 273,863 225,740 48,123 0.90 225,740
PAYROLL SALARY/BONUS 435,819 451,306 15,487- 1.43 451,306
PAYROLL TAX/INSURANCE 139,853 90,252 49,601 0.46 90,252
OTHER OPERATING 102,319 106,074 3,755- 0.33 106,064
MANAGEMENT FEES 258,854 243,508 15,346 0.85 243,508
GENERAL INSURANCE 76,549 116,064 39,515- 0.25 116,064
PROFESSIONAL SERVICES 184,848 174,497 10,351 0.61 174,697
UTILITY - ELECTRICE 1,175,065 1,333,780 158,715- 3.88 1,333,780
- GAS/FUEL 0 0 0 0.00 0
- WATER/SEWER 50,059 49,702 357 0.16 49,702
REAL ESTATE TAXES 403,852 400,490 3,362 1.33 400,490
MISCELLANEOUS 1,000- 0 1,000- 0.00 0
------------ ------------ --------------- ---------- -------------
TOTAL EXPENSES 3,700,057 3,786,997 86,941- 12.21 3,786,997
------------ ------------ --------------- ---------- -------------
NET OPERATING INCOME 6,391,687 6,131,288 260,399 21.10 6,131,288
MORTGAGE INTEREST 3,897,215 3,897,215 0- 12.86 3,897,215
MORTGAGE PRINCIPAL 204,785 204,785 0 0.67 204,785
ADDITIONAL MORTGAGE INTEREST 0 299,515 299,515 0.00 299,515
LAND RENT 0 0 0 0.00 0
------------ ------------ --------------- ---------- -------------
SUB TOTAL - OPERATING CASH FLOW 2,289,687 1,729,773 559,916 7.56 1,729,773
NET MKT'G FUND 1,683 0 1,683- 0.00 0
------------ ------------ --------------- ---------- -------------
OPERATING CASH FLOW 2,288,004 1,729,773 558,231 7.55 1,729,773
TENANT IMPROVEMENTS 1,302,047 974,000 328,047 4.29 974,773
CAPITAL ADDITIONS 42,727 74,500 31,773- 0.14 74,500
LEASE COMMISSIONS 0 0 0 0.00 0
REDEVELOPMENT COSTS 158,292 0 158,292 0.52 0
------------ ------------ --------------- ---------- -------------
CASH FLOW 784,939 681,273 103,666 2.59 681,273
============ ============ =============== ========== =============
</TABLE>
<PAGE>
Property : NORTH PARK MALL DATE: 05-Sep-95
Company # : 9120 TIME: 10:17 AM
Square Feet : 311,458
URBAN RETAIL PROPERTIES CO.
1996 COMMERCIAL OPERATING BUDGET
"SUMMARY" BY MINOR CODE
<TABLE>
<CAPTION>
========================== ========= ========= ========== ========= ========== =========
Jan-96 Feb-96 Mar-96 Apr-96 May-96 Jun-96
========================== ========= ========= ========== ========= ========== =========
<S> <C> <C> <C> <C> <C> <C>
INCOME :
RENTAL INCOME 469,937 500,529 517,442 517,273 521,273 522,727
PERCENTAGE RENT 1,364 6,639 9,357 9,357 5,590 8,970
COMMON AREA 165,360 153,993 163,690 163,690 165,310 165,310
FOOD COURT 0 0 0 0 0 0
REAL ESTATE TAXES 47,043 47,239 48,719 48,719 109,463 109,463
UTILITY 139,336 139,336 142,435 142,435 154,005 154,005
OTHER TENANT 0 0 0 0 0 0
MISCELLANEOUS 0 0 0 0 0 0
- -------------------------- --------- --------- ---------- --------- ---------- ---------
TOTAL INCOME 850,040 839,767 881,643 881,643 945,615 960,483
========================== ========= ========= ========== ========= ========== =========
EXPENSES (BY MINOR CODE):
0 - ADMINISTRATVE 51,765 57,570 67,670 67,670 59,164 51,468
18 - CAM (OUTSIDE) 133,278 68,997 53,541 53,541 77,098 53,198
19 - MAM (INSIDE) 91,932 55,243 70,156 78,156 62,114 66,154
31 - CENTRAL PLANT 0 0 0 0 0 0
32 - CAM SPECIAL 0 0 0 0 0 0
33 - OPERATING (TENANT) 73,066 70,023 71,737 73,121 82,619 89,311
34 - OPERATING (MALL) 0 0 0 0 0 0
35 - FOOD COURT 0 0 0 0 0 0
REAL ESTATE TAXES 546,653 0 2,000 0 0 0
- -------------------------- --------- --------- ---------- --------- ---------- ---------
TOTAL EXPENSES 896,693 251,033 454,772 272,400 280,995 260,132
- -------------------------- --------- --------- ---------- --------- ---------- ---------
NET OPERATING INCOME (46,653) 587,934 392,701 609,155 664,620 700,351
- -------------------------- --------- --------- ---------- --------- ---------- ---------
MORTGAGE INTEREST 323,686 323,512 323,337 323,160 322,981 322,000
MORTGAGE PRINCIPAL 10,147 18,321 10,497 18,674 10,053 19,033
ADDT'L MORTGAGE INTEREST 0 0 0 333,010 0 0
LAND RENT 0 0 0 0 0 0
ADDT'L LAND RENT 0 0 0 0 0 0
OTHER INT EXPENSE 0 0 0 0 0 0
- -------------------------- --------- --------- ---------- --------- ---------- ---------
SUB-TOTAL
OPERATING C.F. (388,486) 246,101 50,867 (65,689) 322,786 358,518
- -------------------------- --------- --------- ---------- --------- ---------- ---------
55 - NET MKT'G FUND 0 0 0 0 0 0
NET MEDIA FUND 0 0 0 0 0 0
- -------------------------- --------- --------- ---------- --------- ---------- ---------
OPERATING CASH FLOW (388,486) 246,101 50,867 (65,689) 322,786 358,518
- -------------------------- --------- --------- ---------- --------- ---------- ---------
TENANT IMPROVEMENTS 2,300 0 0 33,400 0 0
CAPITAL IMPROVEMENTS 96,725 0 195,550 0 0 0
LEASE COMMISSIONS 0 0 0 0 0 0
- -------------------------- --------- --------- ---------- --------- ---------- ---------
CASH FLOW (487,511) 246,101 (144,683) (99,089) 322,786 358,518
========================== ========= ========= ========== ========= ========== =========
<CAPTION>
========================== ========= ========== ========= ========== ========= ========= ==========
Jul-96 Aug-96 Sep-96 Oct-96 Nov-96 Dec-96 TOTAL
========================== ========= ========== ========= ========== ========= ========= ==========
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME :
RENTAL INCOME 529,067 534,482 534,482 547,419 583,714 591,200 6,375,407
PERCENTAGE RENT 30,157 39,594 24,436 39,072 66,605 89,971 325,023
COMMON AREA 160,345 162,472 162,472 162,498 167,849 167,849 1,951,106
FOOD COURT 0 0 0 0 0 0 0
REAL ESTATE TAXES 49,382 50,169 50,169 50,212 52,194 52,194 713,290
UTILITY 143,979 145,813 145,813 145,918 150,533 160,703 1,750,958
OTHER TENANT 33,720 0 0 0 0 0 33,720
MISCELLANEOUS 0 0 0 0 0 0 0
- -------------------------- --------- ---------- --------- ---------- --------- --------- ----------
TOTAL INCOME 946,650 932,530 917,372 945,119 1,020,895 1,061,917 11,149,504
- -------------------------- --------- ---------- --------- ---------- --------- --------- ----------
EXPENSES (BY MINOR CODE):
0 - ADMINISTRATVE 54,150 55,955 53,576 69,739 61,217 50,936 701,206
18 - CAM (OUTSIDE) 63,755 58,027 53,044 54,248 78,591 52,095 885,501
19 - MAM (INSIDE) 117,540 64,112 63,565 60,748 60,841 62,007 973,354
31 - CENTRAL PLANT 0 0 0 0 0 0 0
32 - CAM SPECIAL 0 0 0 0 0 0 0
33 - OPERATING (TENANT) 123,322 91,664 91,553 84,428 89,885 77,045 1,017,774
34 - OPERATING (MALL) 0 0 0 0 0 0 0
35 - FOOD COURT 0 0 0 0 0 0 0
REAL ESTATE TAXES 0 0 0 0 0 0 548,653
- -------------------------- --------- ---------- --------- ---------- --------- --------- ----------
TOTAL EXPENSES 358,776 269,759 262,539 269,164 298,534 250,883 4,126,568
- -------------------------- --------- ---------- --------- ---------- --------- --------- ----------
NET OPERATING INCOME 587,874 662,771 654,033 675,955 722,361 811,034 7,022,936
- -------------------------- --------- ---------- --------- ---------- --------- --------- ----------
MORTGAGE INTEREST 322,618 322,433 322,247 322,060 321,070 321,679 3,072,383
MORTGAGE PRINCIPAL 19,216 19,400 19,586 19,774 19,963 20,154 229,618
ADDT'L MORTGAGE INTEREST 0 0 0 0 0 0 333,010
LAND RENT 0 0 0 0 0 0 0
ADDT'L LAND RENT 0 0 0 0 0 0 0
OTHER INT EXPENSE 0 0 0 0 0 0 0
- -------------------------- --------- ---------- --------- ---------- --------- --------- ----------
SUB-TOTAL
OPERATING C.F. 246,040 320,938 313,000 334,121 380,528 469,201 2,587,925
- -------------------------- --------- ---------- --------- ---------- --------- --------- ----------
55 - NET MKT'G FUND 0 0 0 0 0 0 0
NET MEDIA FUND 0 0 0 0 0 0 0
- -------------------------- --------- ---------- --------- ---------- --------- --------- ----------
OPERATING CASH FLOW 246,040 320,938 313,000 334,121 380,528 469,201 2,587,925
- -------------------------- --------- ---------- --------- ---------- --------- --------- ----------
TENANT IMPROVEMENTS 0 0 0 50,000 0 0 85,700
CAPITAL IMPROVEMENTS 0 0 0 0 0 0 292,275
LEASE COMMISSIONS 0 0 0 0 0 0 0
- -------------------------- --------- ---------- --------- ---------- --------- --------- ----------
CASH FLOW 246,040 320,938 313,000 284,121 380,528 469,201 2,209,950
========================== ========= ========== ========= ========== ========= ========= ==========
</TABLE>
<PAGE>
PAGE B-2 Co. # : 9120 DATE: 06-Sep-95
1996 COMMERCIAL OPERATING BUDGET Property : NORTHPARK MALL
Sg. Ft. : 311, 458 06:37 AM
<TABLE>
<CAPTION>
============================== ========= ========= ========= ========= ========= ========= ========= ==========
Jan-96 Feb-96 Mar-96 Apr-96 May-96 Jun-96 Jul-96 Aug-96
============================== ========= ========= ========= ========= ========= ========= ========= ==========
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME :
RENTAL INCOME 496,937 496,135 500,529 517,442 521,273 522,727 529,067 534,482
PERCENTAGE RENT 1,364 3,260 6,639 9,357 5,590 8,978 30,157 39,594
COMMON AREA INCOME 165,360 153,993 153,950 163,690 165,310 165,310 160,345 162,472
FOOD COURT INCOME 0 0 0 0 0 0 0 0
REAL ESTATE TAX INCOME 47,041 47,043 47,239 48,719 109,463 109,463 49,202 50,169
UTILITY INCOME 139,336 139,336 139,106 142,435 143,979 184,005 143,979 145,813
OTHER TENANT CHARGES 0 0 0 0 0 0 33,720 0
MISCELLANEOUS INCOME 0 0 0 0 0 0 0 0
- ------------------------------ --------- --------- --------- --------- --------- --------- --------- ----------
TOTAL INCOME 850,040 839,767 847,473 881,643 945,615 960,483 946,650 932,530
- ------------------------------ --------- --------- --------- --------- --------- --------- --------- ----------
EXPENSES:
Advertisting / Promotion 175 1,375 225 1,675 175 225 209 959
Administrative 4,512 3,190 3,991 3,619 7,065 4,241 1,619 3,565
Janitorial/Cleaning 10,087 10,087 19,232 10,087 18,087 18,087 18,087 10,087
Building Decorating 4,870 320 84,445 720 720 320 320 320
Lawn Maintenance 7,323 7,923 24,523 17,323 7,453 7,861 7,453 7,881
Security 6,680 2,705 2,540 2,455 3,395 2,455 2,545 2,705
Rubbish Removal 4,110 4,110 4,110 4,110 4,110 4,110 4,110 4,110
Snow Removal 0 0 0 0 0 0 0 0
Parking Lot reairs & Maint 83,781 7,661 3,161 3,161 9,161 3,161 13,311 3,161
building repairs & Maint 40,873 15,723 131,473 33,538 14,698 14,698 18,629 12,269
Payroll - Salary / Bonus 33,357 46,679 34,677 34,677 51,765 34,428 34,428 34,428
Payroll - Taxes / Insurance 6,671 9,336 6,935 6,935 10,353 6,006 6,886 6,886
Other Operating Expenses 9,340 8,765 8,741 9,707 8,961 8,836 11,039 10,405
Management Fees 19,932 19,976 20,287 21,072 21,075 21,260 22,369 22,963
General Insurance 0 0 0 0 0 0 81,010 5,121
Professional Services 11,360 11,360 11,360 26,360 11,360 11,360 11,360 11,360
Utiltiy - Electricity 94,305 91,291 92,771 94,987 108,240 116,425 116,570 119,939
- Gas/Fuel 0 0 0 0 0 0 0 0
- Water/Sewer 4,664 3,332 4,301 4,062 4,377 5,751 6,023 5,600
Real Estate Taxes (Include. 546,653 0 2,000 0 0 0 0 0
Consultant Fees)
- ------------------------------ --------- --------- --------- --------- --------- --------- --------- ----------
TOTAL EXPENSES 896,693 251,033 454,772 272,488 280,995 260,132 358,776 269,759
- ------------------------------ --------- --------- --------- --------- --------- --------- --------- ----------
NET OPERATING INCOME (46,653) 587,934 392,701 609,155 664,620 700,351 587,874 662,771
- ------------------------------ --------- --------- --------- --------- --------- --------- --------- ----------
Mortgage Interest 323,686 323,512 323,337 323,160 322,981 322,800 322,618 322,433
Mortgage Principal 10,147 10,321 10,497 18,674 10,053 19,033 19,216 19,400
Additional Mortgage Interest 0 0 0 333,010 0 0 0 0
Land Rent 0 0 0 0 0 0 0 0
Additional Rent 0 0 0 0 0 0 0 0
Other Intrest Expense 0 0 0 0 0 0 0 0
- ------------------------------ --------- --------- --------- --------- --------- --------- --------- ----------
SUB-TOTAL OPERATING (388,486) 246,101 50,067 (65,689) 322,786 358,518 246,040 320,938
CASH FLOW
- ------------------------------ --------- --------- --------- --------- --------- --------- --------- ----------
NET MARKETIG FUND (Rec/Disb) 0 0 0 0 0 0 0 0
NET MEDIA FUND (Rec/Disb)
- ------------------------------ --------- --------- --------- --------- --------- --------- --------- ----------
OPERATING CASH FLOW (388,486) 246,101 50,867 (65,689) 322,786 358,518 246,040 320,938
- ------------------------------ --------- --------- --------- --------- --------- --------- --------- ----------
Tenant Improvements 2,300 0 0 33,400 0 0 0 0
Capital Improvements 96,725 0 195,550 0 0 0 0 0
Lease Commissions 0 0 0 0 0 0 0 0
- ------------------------------ --------- --------- --------- --------- --------- --------- --------- ----------
CASH FLOW (487,511) 246,101 (144,683) (99,089) 322,786 358,518 246,040 320,938
============================== ========= ========= ========= ========= ========= ========= ========= ==========
<CAPTION>
============================== ========= ========= =========== =========== ============ =========== ==========
Sep-96 Oct-96 Nov-96 Dec-96 TOTAL 1995 1996
PROJ RECOV
============================== ========= ========= =========== =========== ============ =========== ==========
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME :
RENTAL INCOME 534,402 547,419 583,714 591,200 6,375,407 5,859,559
PERCENTAGE RENT 24,436 39,072 66,605 89,971 325,023 383,481
COMMON AREA INCOME 162,472 162,498 167,849 167,849 1,951,106 1,603,516
FOOD COURT INCOME 0 0 0 0 0 0
REAL ESTATE TAX INCOME 50,169 50,212 52,194 52,194 713,290 373,950
UTILITY INCOME 145,813 149,918 150,533 160,703 1,750,958 1,543,540
OTHER TENANT CHARGES 0 0 0 0 33,720 32,115
MISCELLANEOUS INCOME 0 0 0 0 0 0
- ------------------------------ --------- --------- ----------- ----------- ------------ ----------- ----------
TOTAL INCOME 917,372 945,119 1,020,895 1,061,917 11,149,504 9,796,177
- ------------------------------ --------- --------- ----------- ----------- ------------ ----------- ----------
EXPENSES:
Advertisting / Promotion 259 209 209 259 5,954 6,846 3,804
Administrative 4,241 3,369 3,190 4,366 40,968 50,806 13,752
Janitorial/Cleaning 19,232 18,087 19,587 19,587 222,234 221,852 222,334
Building Decorating 320 320 320 320 93,315 10,067 91,875
Lawn Maintenance 7,623 7,881 10,423 9,023 113,510 98,793 113,510
Security 2,500 3,325 3,350 2,455 37,110 30,085 37,110
Rubbish Removal 4,110 4,110 4,110 4,110 49,320 48,846 49,320
Snow Removal 0 0 0 0 0 0 0
Parking Lot reairs & Maint 3,161 3,161 10,661 3,161 146,702 124,594 146,702
building repairs & Maint 11,079 12,729 14,229 11,979 331,917 262,482 322,317
Payroll - Salary / Bonus 34,428 34,420 51,779 34,677 459,751 440,200 430,557
Payroll - Taxes / Insurance 6,006 6,886 10,356 6,935 91,951 88,040 86,111
Other Operating Expenses 9,606 9,630 9,951 9,951 114,940 100,627 899
Management Fees 22,356 23,460 26,013 27,246 268,017 249,722 0
General Insurance 0 0 0 0 86,939 82,798 86,939
Professional Services 11,360 26,360 11,360 11,360 166,320 177,139 0
Utiltiy - Electricity 119,059 110,586 110,360 99,591 1,282,124 1,226,100 1,282,124
- Gas/Fuel 0 0 0 0 0 0 0
-Water/Sewer 6,319 4,615 4,636 5,063 50,743 52,227 58,743
- ------------------------------ --------- --------- ----------- ----------- ------------ ----------- ----------
Real Estate Taxes (Include. 0 0 0 0 548,653 400,905 548,653
Consultant Fees)
- ------------------------------ --------- --------- ----------- ----------- ------------ ----------- ----------
TOTAL EXPENSES 262,539 269,164 298,534 250,883 4,126,568 3,672,129 3,494,750
- ------------------------------ --------- --------- ----------- ----------- ------------ ----------- ----------
NET OPERATING INCOME 654,033 675,955 722,361 811,034 7,022,936 6,124,048
- ------------------------------ --------- --------- --------- --------- --------- --------- --------- ----------
Mortgage Interest 322,247 322,060 321,070 321,679 3,072,383 3,897,215 0
Mortgage Principal 19,586 19,774 19,963 20,154 229,610 204,785 0
Additional Mortgage Interest 0 0 0 0 333,010 205,508 0
Land Rent 0 0 0 0 0 0 0
Additional Rent 0 0 0 0 0 0 0
Other Intrest Expense 0 0 0 0 0 0 0
- ------------------------------ --------- --------- ----------- ----------- ------------ ----------- ----------
SUB-TOTAL OPERATING 313,000 334,121 380,520 469,201 2,507,925 1,816,540
CASH FLOW
- ------------------------------ --------- --------- ----------- ----------- ------------ ----------- ----------
NET MARKETIG FUND (Rec/Disb) 0 0 0 0 0
NET MEDIA FUND (Rec/Disb) 0
- ------------------------------ --------- --------- ----------- ----------- ------------ ----------- ----------
OPERATING CASH FLOW 313,000 334,121 380,520 469,201 2,507,925 1,816,540
- ------------------------------ --------- --------- ----------- ----------- ------------ ----------- ----------
Tenant Improvements 0 50,000 0 0 85,700 1,292,306 0
Capital Improvements 0 0 0 0 292,275 74,500 0
Lease Commissions 0 0 0 0 0 0 0
- ------------------------------ --------- --------- ----------- ----------- ------------ ----------- ----------
CASH FLOW 313,000 284,121 380,520 469,201 2,209,950 449,734
============================== ========= ========= =========== =========== ============ =========== ==========
</TABLE>
<PAGE>
=========================================================
Rent Roll
=========================================================
<PAGE>
<TABLE>
<CAPTION>
MAR 11, 1996 10:34 PROPERTY MANAGEMENT INFORMATION SYSTEM PAGE 1
RENT ROLL FOR 9120 NORTHPARK MALL - 00
AS OF MAR 11, 96
CPI
% RENT Base Operating Pro- Base
Unit - Square Lease Annual Base Rent Brkpnt-$ Year Expense Rata Amount
Ten # Tenant Feet Term Amount Start PSF % (&Cat) & % Type Share Options
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
K1-06 TELECOMM SOUTH 0 NOV 01,95
OCT 31,95
K2 VACANT UNIT 0
K3-02 BIANCA BARE 0 JAN 01,95 CAM FIXED .0000
DEC 31,95 RET FIXED .0000
K4-05 CREATIONS UNLIMIT 0 APR 01,95 130,000 CAM FIXED .0000
MAR 31,96 10.00 RET FIXED .0000
K5 VACANT UNIT 0
K6 VACANT UNIT 0
K7 VACANT UNIT
K8 VACANT UNIT
K9 VACANT UNIT
K10 VACANT UNIT
K12 VACANT UNIT
K13-01 DEPOSIT GUARANTY AUG 01,94
JUL 31,95 CAM FIXED .0000
K14 VACANT UNIT RET FIXED .0000
K15 VACANT UNIT
K16 VACANT UNIT
K17 VACANT UNIT
K18 VACANT UNIT
K19-01 FISHER GUARANTY JUN 01,95 CAM FIXED .0000
MAY 31,96 RET FIXED .0000
K20 VACANT UNIT
K21 VACANT UNIT
0102-01 FISHER DEVELOPMENT
0102-01 EDDIE BAUER #318 5,792 MAY 01,93 136,459 MAY 01,93 23.56 2,729,190 CAM PR+15%NTM .022975
JAN 31,04 5.00 RET PR-80%CAP .022975
(STEP UP)
110 VACANT UNIT 0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MAR 11, 1996 10:34 PROPERTY MANAGEMENT INFORMATION SYSTEM PAGE 2
RENT ROLL FOR 9120 NORTHPARK MALL - 00
AS OF MAR 11, 96
CPI
% RENT Base Operating Pro- Base
Unit - Square Lease Annual Base Rent Brkpnt-$ Year Expense Rata Amount
Ten # Tenant Feet Term Amount Start PSF % (&Cat) & % Type Share Options
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0112 VACANT UNIT 2,395
0114-03 U S MALE 1,761 NOV 15,89 40,000 JAN 01,93 22.71 727,274 CAM FIXED .0000
DEC 31,99 42,000 JAN 01,97 23.85 5.50 RET PR-GLA .005815
(STEP-UP)
0202-02 CASUAL CORNER #45 3,670 SEP 26,94 84,410 SEP 01,94 23.00 1,688,200 CAM PR+15%NOM .014558
SEP 30,04 91,749 OCT 01,97 25.00 5.00 RET PR-NOR .014558
99,090 OCT 01,01 27.00 (STEP-UP)
0204-02 GAP, THE #5602 8,785 MAY 22,95 351,399 MAY 01,95 40.00 7,028,000 CAM PR+15%NOM P/R
MAY 31,03 6.00 RET PR-90%CAP P/R
(STEP-UP)
0210-02 ULMER'S STRIDE RI 1,100 OCT 01,94 45,000 OCT 01,94 40.91 750,000 CAM PR15%NOM .004721
SEP 30,04 49,999 OCT 01,99 45.45 6.00 RET PR .004721
(STEP-UP)
0212-02 AMERICAN EAGLE OU 3,830 APR 07,90 76,599 JUN 01,90 20.00 1,276,667 CAM PR+15%NTM .014969
JAN 31,01 6.00 RET PR-80%CAP .014969
(STEP-UP)
0214 VACANT UNIT 3,369
0216-02 DISNEY STORE, THE 3,716 OCT 12,93 81,752 OCT 01,93 22.00 2,043,800 CAM PR15%NOM .013634
OCT 31,03 89,184 NOV 01,98 24.00 4.00 RET PR-90%CAP .013634
(STEP-UP)
0226-02 LANE BRYANT 6,364 JUL 01,94 140,007 JUL 01,94 22.00 2,800,160 CAM PR15%NOM .023350
JUL 31,06 5.00 RET PR .210115
1,626,394
5.00
0228-02 EXPRESS 8,730 NOV 17,94 192,060 NOV 01,94 22.00 3,841,200 CAM PR15%NOM .032031
JAN 31,07 5.00 RET PR-GLA .028828
(STEP-UP)
0230-02 THINGS REMEMBERED 1,250 JUN 06,90 35,000 JUL 01,95 28.00 437,500 CAM PR15%NTM .004886
JUN 30,00 8.00 RET PR-75%CAP .004886
0232-05 FRIEDMAN'S 904 NOV 17,95 50,000 NOV 01,95 55.31 833,333
DEC 31,05 54,999 NOV 01,98 60.84 6.00
60,000 NOV 01,02 66.37 (STEP-UP)
0234-01 MOTHERHOOD 1,191 MAR 15,89 26,204 APR 01,89 22.00 436,700 CAM PR+15NTMJ .004655
MAR 31,99 6.00 RET PR-80%CAP .004655
0236-01 FOOTLOCKER #7644 3,451 NOV 01,91 90,000 NOV 01,91 26.08 1,500,000 CAM PR+15%NTM .013689
OCT 31,01 6.00 RET PR-80%CAP .013689
(STEP-UP)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MAR 11,1996 10:34 PROPERTY MANAGEMENT INFORMATION SYSTEM PAGE 3
RENT ROLL FOR 9120 NORTHPARK MALL - 00
AS OF MAR 11, 96
CPI
% RENT Base Operating Pro- Base
Unit - Square Lease Annual Base Rent Brkpnt-$ Year Expense Rata Amount
Ten # Tenant Feet Term Amount Start PSF % (&Cat) & % Type Share Options
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0238-01 RADIO SHACK 2,737 SEP 12,84 42,423 OCT 01,92 15.50 750,587 CAM PR+15%NTM .010633
SEP 30,96 3.00 RET PR .010633
G02
620,000
1.00
G07
0242-01 LENS CRAFTERS 6,500 FEB 15,88 78,000 MAR 01,95 12.00 1,950,000 CAM PR+15%NTM .025405
FEB 28,98 4.00 RET PR-75%CAP .025405
0302 VACANT UNIT 2,810
0304-02 MASTER CUTS FAMILY 1,095 MAR 01,95 32,000 MAR 01,95 29.22 533,333 CAM PR+15%NOM P/R
FEB 28,05 36,000 MAR 01,99 32.88 6.00 RET PR-70%CAP P/R
39,999 MAR 01,02 36.53 (STEP UP)
0306-01 PET CONNECTION 1,962 NOV 15,89 23,544 DEC 01,89 12.00 392,400 CAM PR+15%NTM .007668
DEC 31,99 6.00 RET PR .007668
(STEP UP)
0308-02 GENERAL NUTRITION 1,951 OCT 01,94 48,774 OCT 01,94 25.00 696,785 CAM PR+15%NOM .008373
SEP 30,04 52,677 OCT 01,97 27.00 7.00 RET PR-80%CAP .008373
56,579 OCT 01,01 29.00 (STEP UP)
0310-02 BLOCKBUSTER MUSIC 1,860 FEB 01,92 52,080 OCT 01,94 28.00 868,000 CAM PR+15%NOM .006825
MAR 16,00 6.00 RET PR-90%CAP .006825
(STEP-UP)
0314-01 CHICK-FIL-A 2,370 SEP 12,84 42,660 OCT 01,86 18.00 711,000 CAM PR+15%NTM .008238
SEP 30,99 47,400 OCT 01,97 20.00 6.00 RET PR-95%CAP .008238
(STEP-UP)
0316-02 GYMBOREE #198 1,200 OCT 16,94 47,000 OCT 01,94 39.17 940,000 CAM PR+15%NOM .004975
JAN 31,05 48,999 FEB 01,98 40.83 5.00 RET PR-85%CAP .004975
51,000 FEB 01,02 42.50 (STEP-UP)
0318-02 BODY SHOP, THE 675 JUN 01,94 36,006 JUN 01,94 53.34 720,000 CAM PR+15%NOM .002897
MAY 31,04 38,000 JUN 01,97 56.30 5.00 RET PR-80%CAP .002897
39,999 JUN 01,01 59.26 (STEP-UP)
0320-02 KIDS FOOTLOCKER # 1,701 FEB 01,92 50,000 FEB 01,92 29.39 833,334 CAM PR+15%NOM .006747
JAN 31,02 6.00 RET PR-80%CAP .006747
(STEP-UP)
0402-02 KIRKLAND'S 4,096 OCT 01,93 90,111 OCT 01,94 22.00 1,501,866 CAM PR+15%NOM .017578
JAN 31,03 6.00 RET PR-80%CAP .017578
(STEP-UP)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MAR 11,1996 10:34 PROPERTY MANAGEMENT INFORMATION SYSTEM PAGE 4
RENT ROLL FOR 9120 NORTHPARK MALL - 00
AS OF MAR 11, 96
CPI
% RENT Base Operating Pro- Base
Unit - Square Lease Annual Base Rent Brkpnt-$ Year Expense Rata Amount
Ten # Tenant Feet Term Amount Start PSF % (&Cat) & % Type Share Options
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0406-07 SPORTS AVE. 1,396 NOV 11,95 41,880 NOV 01,95 30.00 795,528
AUG 31,05 48,860 SEP 01,00 35.00 8.00
(STEP-UP)
0408-01 MERLE NORMAN 668 NOV 01,86 16,700 NOV 01,91 25.00 238,571 CAM PR+15%NTM .002611
OCT 31,96 7.00 RET PR .002611
0410-01 CALIFORNIA NAILS 562 SEP 22,94 15,022 SEP 01,94 26.73 150,222 CAM PR+15%NOM& .002412
OCT 31,97 10.00 RET PR .002412
0412-01 BENTLEY'S LUGGAGE 34,471 MAR 27,94 55,536 APR 01,94 16.00 1,110,720 CAM PR+15%NOM& .014896
DEC 31,03 62,478 APR 01,99 18.00 5.00 RET PR-70%CAP .014896
(STEP-UP)
0502-01 SHOE DEPT, THE 3,668 NOV 23,93 69,692 JUN 01,94 19.00 1,412,532 CAM PR+15%NTM& .015742
JAN 31,04 80,696 DEC 01,96 22.00 5.00 RET PR-70%CAP .015742
91,700 DEC 01,00 25.00 (STEP-UP)
0506-01 EVERYTHING'S A DO 2,611 JUL 31,88 46,998 AUG 01,88 18.00 939,960 CAM PR+15%NTM& .009580
JAN 31,99 5.00 RET PR-90%CAP .009580
(STEP-UP)
0508-01 PAYLESS SHOE SOURCE 2,924 NOV 19,87 49,707 DEC 01,87 17.00 828,466 CAM PR+15%NTM& .011360
NOV 30,97 6.00 RET PR-85%CAP .011360
(STEP-UP)
0510-01 AFTERTHOUGHTS 1,065 OCT 01,94 36,000 OCT 01,94 33.80 450,000 CAM PR+15%NOM& .004571
8.00 RET PR-80%CAP .004571
(STEP-UP)
0512-02 FAMILY BOOKSTORES 2,296 NOV 01,94 41,400 JAN 01,95 18.03 690,000 CAM PR+15%NOM .008974
DEC 31,06 46,000 JAN 01,97 20.03 6.00 RET PR-80%CAP .008974
50,600 JAN 01,99 22.04 (STEP-UP)
0602-04 STRUCTURE 5,337 OCT 01,93 106,740 OCT 01,95 20.00 2,134,800 CAM PR+15%NOM .019582
JAN 31,06 117,414 OCT 01,99 22.00 5.00 RET PR-GLA .017624
(STEP-UP)
0606-03 ELECTRONICS BOUTI 987 MAY 01,92 23,525 MAY 01,92 23.83 336,072 CAM PR+15%NOM .003915
APR 30,02 35,000 MAY 01,97 35.46 7.00 RET PR-75%CAP .003915
(STEP-UP)
0608-02 SUNGLASS HUT INT'L. 620 MAR 01,96 45,000 MAR 01,96 72.58
JAN 31,06
0610-02 BARNIES COFFEE & 551 DEC 01,88 25,000 JAN 01,93 45.37 357,144 CAM PR+15%NTM .002154
DEC 31,96 7.00 RET PR-80%CAP .002154
0612 VACANT UNIT 600
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MAR 11,1996 10:34 PROPERTY MANAGEMENT INFORMATION SYSTEM PAGE 5
RENT ROLL FOR 9120 NORTHPARK MALL - 00
AS OF MAR 11, 96
CPI
% RENT Base Operating Pro- Base
Unit - Square Lease Annual Base Rent Brkpnt-$ Year Expense Rata Amount
Ten # Tenant Feet Term Amount Start PSF % (&Cat) & % Type Share Options
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0614-02 SPACE PORT II #13 2,320 NOV 16,84 CAM PR+15%NTM .009067
NOV 30,95 RET PR-80%CAP .009067
0708-02 WARNER BROS. 7,414 APR 07,95 185,349 APR 01,95 25.00 3,707,000 CAM PR+15%NOM P/R
MAR 31,07 4.00 RET PR-80%CAP P/R
(STEP-UP)
0718-02 GAP KIDS/BABY GAP 5,093 MAR 30,95 149,123 MAR 01,95 29.28 2,982,460 CAM PR+15%NOM P/R
MAR 31,00 157,933 APR 01,99 31.01 6.00 RET PR-90%CAP P/R
(STEP-UP)
0724-02 BANANA REPUBLIC 5,112 MAR 30,95 132,912 MAR 01,95 26.00 2,658,240 CAM PR+15%NOM P/R
MAR 31,00 143,136 APR 01,99 28.00 6.00 RET PR-90%CAP P/R
(STEP-UP)
0732-02 BATH & BODY 2,527 MAR 25,95 68,229 APR 01,95 27.00 1,364,580 CAM PR+15%NOM P/R
MAR 31,05 5.00 RET PR-GLA P/R
(STEP-UP)
0736-01 J RIGGINS #1525 2,302 MAR 06,85 40,284 APR 01,93 17.50 805,700 CAM PR+15%NTM .008131
JAN 31,04 59,852 APR 01,97 26.00 5.00 RET PR-80%CAP .009131
64,455 APR 01,00 28.00 (STEP-UP)
69,060 APR 01,02 30.00
0738-02 VICTORIA'S SECRET 5,764 OCT 29,92 126,807 OCT 01,92 22.00 2,536,160 CAM PR90%NOM .021149
JAN 31,05 138,336 NOV 01,98 24.00 5.00 RET PR-GLA .019034
(STEP-UP)
0802-01 COOK AND LOVE 1,836 JUL 15,87 36,720 AUG 01,94 20.00 734,400 CAM PR+15%NTM .007176
JUL 31,97 6.00 RET PR-75%CAP .007176
0804-02 WICKS N STICKS 772 SEP 26,94 32,000 OCT 01,94 41.45 400,000 CAM PR15%NOM .003313
SEP 30,04 33,999 OCT 01,97 44.04 8.00 RET PR .003313
36,000 OCT 01,01 46.63 (STEP-UP)
0806 VACANT UNIT 1,514
0808-04 SOFTWARE, ETC. 1,106 APR 01,94 42,999 APR 01,94 38.88 860,000 CAM PR15%NOM .004747
MAR 31,04 45,000 APR 01,97 40.69 5.00 RET PR-80%CAP .004747
47,000 APR 01,01 42.50 (STEP-UP)
0810-02 TRADITIONAL JEWEL 1,037 JUL 01,92 38,000 JUN 01,94 36.64 633,333 CAM PR15%NOM .004114
MAY 31,97 6.00 RET PR-75%CAP .004114
(STEP-UP)
0812-03 WILLIAMS SONOMA 3,838 OCT 14,95 76,760 NOV 01,95 20.00 1,535,200
JAN 31,08 5.00
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MAR 11,1996 10:34 PROPERTY MANAGEMENT INFORMATION SYSTEM PAGE 6
RENT ROLL FOR 9120 NORTHPARK MALL - 00
AS OF MAR 11, 96
CPI
% RENT Base Operating Pro- Base
Unit - Square Lease Annual Base Rent Brkpnt-$ Year Expense Rata Amount
Ten # Tenant Feet Term Amount Start PSF % (&Cat) & % Type Share Options
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0814-02 LIMITED TOO #315 4,055 MAR 01,95 101,375 MAR 01,95 25.00 2,534,375 CAM NO LEASE
FEB 28,07 4.00 RET NO LEASE P/R
(STEP-UP) P/R
0816-02 LIMITED, THE 7,280 JUN 16,94 160,160 JUN 01,95 22.00 4,004,000 CAM PR15%NOM .026711
JUN 30,06 4.00 RET PR-GLA .024040
(STEP-UP)
0819-01 LAURA ASHLEY 1,882 APR 10,87 33,392 MAY 01,92 17.74 667,846 CAM PR15%NOM .007311
JAN 31,98 5.00 RET PR-85%CAP .007311
(STEP-UP)
0820-02 COUNTY SEAT #476 4,340 NOV 21,94 125,860 NOV 01,94 29.00 2,097,666 CAM PR15%NOM& .018626
OCT 31,06 134,540 DEC 01,97 31.00 6.00 RET PR-80%CAP .018626
143,220 DEC 01,01 33.00 (STEP-UP)
0822-02 BOMBAY COMPANY, T 4,655 NOV 11,94 111,720 NOV 01,94 24.00 1,862,000 CAM PR15%NOM& .019977
OCT 31,06 123,360 NOV 01,97 26.50 6.00 RET RP80%CAP .019977
134,994 NOV 01,01 29.00 (STEP-UP)
0824-01 PAUL HARRIS 4,082 MAR 14,85 61,230 APR 01,95 15.00 1,224,600 CAM PR+15%NTM .015954
MAR 31,97 5.00 RET PR .015954
0826-02 VACANT 3,289 225,600 CAM FIXED .000000
10.00 RET FIXED .000000
0828 VACANT UNIT 4,898
1002-01 MOLE HOLE, THE 2,442 SEP 01,87 39,072 SEP 01,95 16.00 651,200 CAM PR+15%NTM .009544
AUG 31,97 6.00 RET PR .009544
1004 VACANT UNIT 1,350
1008 SBARRO'S #164 1,569 OCT 17,94 39,999 NOV 01,94 25.49 500,000 CAM PR+15%NTM .006224
SEP 30,04 8.00 RET PR-80%CAP .006224
(STEP-UP)
1010-02 SOUTHPORT 820 OCT 01,95 39,375 CAM FIXED .0000
MAR 31,96 12.00 RET FIXED .0000
1012-01 RUBY TUESDAY 4,455 JUL 23,85 69,052 AUG 01,87 15.50 1,381,050 CAM PR+15%NTM .015486
JUL 31,00 73,507 AUG 01,98 16.50 5.00 RET PR-95%CAP .015486
(STEP-UP)
0102-03 ARBY'S 1,995 OCT 15,94 0 CAM PR+15%NTM .007914
DEC 31,04 6.00 RET PR-80%CAP .007914
0104-01 MORRISON CAFETERIA 8,694 SEP 12,84 73,899 SEP 01,84 8.50 1,477,980 CAM PR+15%NTM .030220
SEP 30,04 5.00 RET PR-95%CAP .030220
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MAR 11,1996 10:34 PROPERTY MANAGEMENT INFORMATION SYSTEM PAGE 7
RENT ROLL FOR 9120 NORTHPARK MALL - 00
AS OF MAR 11, 96
CPI
% RENT Base Operating Pro- Base
Unit - Square Lease Annual Base Rent Brkpnt-$ Year Expense Rata Amount
Ten # Tenant Feet Term Amount Start PSF % (&Cat) & % Type Share Options
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1106-02 TROPIC SUN FRUIT 397 DEC 01,91 20,000 JAN 01,95 50.38 200,000 CAM PR+15%NTM .001552
DEC 31,00 10.00 RET PR .001552
1108-02 REEDS JEWELERS 1,073 FEB 01,95 60,000 FEB 01,95 55.92 1,000,000 CAM PR15%NOM& .003937
JAN 31,95 6.00 RET PR-80%CAP .003937
(STEP-UP)
1110-02 PETITE SOPHISTICA 2,064 MAY 01,93 48,000 MAY 01,93 23.26 986,849 CAM PR+15%NTM .008187
APR 30,04 50,000 MAY 01,96 24.22 5.00 RET PR-80%CAP .008187
52,000 MAY 01,00 25.19 (STEP-UP)
1114-03 NINE WEST #7355 1,206 APR 12,95 45,225 MAY 01,95 37.50 753,750 CAM PR+15%NOM P/R
MAR 31,05 6.00 RET PR-80%CAP P/R
(STEP-UP)
1118-01 ANN TAYLOR 5,427 SEP 06,95 135,675 OCT 01,95 25.00 2,713,500 CAM PR+15%NOM P/R
JAN 31,06 5.00 RET PR-85%CAP P/R
(STEP-UP)
1120 VACANT UNIT 2,087
1122-03 LYNN'S HALLMARK S 2,724 JUL 01,93 51,756 JUL 01,93 19.00 822,516 CAM PR15%NOM& .01169
DEC 21,04 57,204 OCT 01,96 21.00 7.00 RET PR-80%CAP .01169
62,652 OCT 01,99 23.00 (STEP-UP)
67,500 OCT 01,02 24.78
1202-04 NATURE COMPANY 1,694 OCT 17,92 45,000 NOV 01,94 26.56 1,135,616 CAM PR15%NOM& .00727
JAN 31,05 50,000 DEC 01,96 29.52 4.00 RET PR80%CAP .00727
58,239 DEC 01,01 34.38 (STEP-UP)
1204-02 CRABTREE & EVELYN 1,015 NOV 19,94 39,999 NOV 01,94 39.41 666,667 CAM PR15%NOM& .004356
DEC 31,04 45,000 DEC 01,97 44.33 6.00 RET PR-80%CAP .004356
50,000 DEC 01,01 49.26 (STEP-UP)
1206-01 FREDERICK'S OF HOLLYWOOD 1,015 MAY 15,90 30,450 JUN 01,90 30.00 435,000 CAM PR+15%NTM .003967
JAN 31,99 7.00 RET PR-70%CAP .003967
1208-02 EASY SPIRIT #6211 1,040 JUL 28,95 43,680 AUG 01,95 42.00 728,000 CAM PR+15%NOM P/R
JAN 31,05 6.00 RET PR-80%CAP P/R
(STEP-UP)
1210-01 5 - 7 - 9 SHOP #232 1,363 SEP 12,84 23,171 SEP 01,84 17.00 386,183 CAM PR+15%NTM .004738
SEP 30,96 6.00 RET PR-95%CAP .004738
1212-01 JEANS WEST #60104 1,310 SEP 12,84 22,269 SEP 01,84 17.00 371,167 CAM PR+15%NTM .004554
SEP 30,96 6.00 RET PR-95%CAP .004554
1213-01 SUNGLASS HUT SPORT 570 JAN 26,96 42,000 JAN 01,96 73.68
JAN 31,06
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MAR 11,1996 10:34 PROPERTY MANAGEMENT INFORMATION SYSTEM PAGE 8
RENT ROLL FOR 9120 NORTHPARK MALL - 00
AS OF MAR 11, 96
CPI
% RENT Base Operating Pro- Base
Unit - Square Lease Annual Base Rent Brkpnt-$ Year Expense Rata Amount
Ten # Tenant Feet Term Amount Start PSF % (&Cat) & % Type Share Options
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1214 VACANT UNIT 154
1216-01 LERNER'S 5,354 FEB 27,86 91,017 MAR 01,96 17.00 1,820,360 CAM PR+15%NTM .019644
FEB 28,98 5.00 RET PR-90%CAP .019644
1220-01 FINISH LINE 6,255 NOV 15,95 100,080 NOV 01,95 16.00 1,668,000
OCT 31,05 112,590 NOV 01,98 18.00 6.00
125,100 NOV 02,02 20.00 (STEP-UP)
1304-01 CAMELOT MUSIC 4,799 JAN 01,85 95,242 JAN 01,95 19.85 1,587,366 CAM PR+15%NTM .017608
DEC 31,01 6.00 RET PR-90%CAP .017608
1306-03 TRADE SECRET 1,367 OCT 28,95 36,000 OCT 01,95 26.34 600,000
SEP 30,05 38,000 OCT 01,00 27.80 6.00
(STEP-UP)
1308 VACANT UNIT 1,929
1310 VACANT UNIT 958
1312-06 UNDERGROUND 2,211 SEP 01,95 CAM FIXED .0000
APR 30,96 RET FIXED .0000
1313-01 UPS N DOWNS 1,633 FEB 22,85 26,127 MAR 01,95 16.00 522,560 CAM PR+15%NTM .005676
FEB 28,97 5.00 RET PR-95%CAP .005676
1314-04 BATTER'S BOX 1,001 OCT 01,95 231,240 CAM FIXED .0000
SEP 30,96 10.00 RET FIXED .0000
1316 VACANT UNIT 1,680
1318-03 CAMOUFLAGE SHOPPE 2,255 FEB 01,96 37,600
MAR 31,96 10.00
1320-03 LADY FOOTLOCKER # 2,658 NOV 17,95 65,000 NOV 01,95 24.45 1,216,894
JUN 30,05 69,999 JUL 01,98 26.34 6.00
75,000 JUL 01,02 28.22 (STEP-UP)
1322-02 CLAIRE'S BOUTIQUE 728 JUL 21,95 38,000 AUG 01,95 52.20 475,000 CAM PR+15%NOM P/R
JUL 31,05 42,000 AUG 01,00 27.00 8.00 RET PR-70%CAP P/R
(STEP-UP)
1324-01 SUNCOAST MOTION P 2,421 OCT 09,89 60,525 NOV 01,91 25.00 1,210,500 CAM PR+15%NTM .009462
JAN 31,00 65,367 NOV 01,96 27.00 5.00 RET PR-80%CAP .009462
1326-01 KAY BEE TOYS & HO 3,104 SEP 12,84 62,079 SEP 01,84 20.00 1,000,000 CAM PR+15%NTM .011389
SEP 30,96 6.00 RET PR-90%CAP .011389
1328 VACANT UNIT 2,088
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MAR 11,1996 10:34 PROPERTY MANAGEMENT INFORMATION SYSTEM PAGE 9
RENT ROLL FOR 9120 NORTHPARK MALL - 00
AS OF MAR 11, 96
CPI
% RENT Base Operating Pro- Base
Unit - Square Lease Annual Base Rent Brkpnt-$ Year Expense Rata Amount
Ten # Tenant Feet Term Amount Start PSF % (&Cat) & % Type Share Options
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1404-02 GINGISS FORMALWEA 1,120 OCT 01,94 38,000 OCT 01,94 33.93 475,000 CAM PR15%NOM P/R
SEP 30,02 42,000 OCT 01,98 37.50 8.00 RET PR-75%CAP P/R
(STEP-UP)
1406-01 WOLF CAMERA 1,302 AUG 01,91 35,000 AUG 01,91 26.88 0 CAM PR+15%NTM .005089
JUL 31,01 45,000 AUG 01,96 34.56 0.00 RET PR .005089
M04
0
0.00
T13
1408 VACANT UNIT 974
1410 VACANT UNIT 1,055
1412-02 B DALTON BOOKSELLERS 6,660 APR 08,94 159,621 FEB 01,95 23.97 2,660,350 CAM PR15%NOM& .028582
JAN 31,06 190,025 FEB 01,98 28.53 6.00 RET PR75%CAP .028582
220,428 FEB 01,02 33.10 (STEP-UP)
1413&1414 VACANT UNIT 1,745
1416-01 NORTHPARK BARBER 810 JAN 01,88 17,010 JAN 01,91 21.00 170,100 CAM PR+15%NTM .003166
DEC 31,97 7.00 RET PR .003166
1418-02 TRUSTMARK NATIONAL 156 APR 01,95 CAM FIXED .0000
MAR 31,96 RET FIXED .0000
1602-02 PACIFIC SUN #0194 2,240 SEP 15,95 57,999 SEP 01,95 25.89 CAM PR15%NOM P/R
DEC 31,05 62,000 JAN 01,99 27.68 RET PR80%CAP P/R
66,000 JAN 01,03 29.46
1604-04 MR. BULKY TREATS 1,512 JUL 21,95 666,668 CAM FIXED .0000
APR 15,96 6.00 RET FIXED .0000
1606-02 DOLCIS 1,640 DEC 01,94 49,200 DEC 01,94 30.00 820,000 CAM PR15%NOM P/R
DEC 31,04 57,399 JAN 01,98 35.00 6.00 RET PR80%CAP P/R
65,600 JAN 01,02 40.00 (STEP-UP)
1608-04 LEE MICHAELS FINE 1,525 OCT 28,95 50,325 OCT 01,95 33.00 0
DEC 31,05 56,424 OCT 01,00 37.00 5.00
(STEP-UP)
1610-02 GREAT AMERICAN CO 604 OCT 01,94 42,000 OCT 01,94 69.54 420,000 CAM PR15%NOM& .025920
SEP 30,04 45,000 OCT 01,97 74.50 10.00 PR80%CAP .025920
48,000 OCT 01,01 79.47 (STEP-UP)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MAR 11,1996 10:34 PROPERTY MANAGEMENT INFORMATION SYSTEM PAGE 10
RENT ROLL FOR 9120 NORTHPARK MALL - 00
AS OF MAR 11, 96
CPI
% RENT Base Operating Pro- Base
Unit - Square Lease Annual Base Rent Brkpnt-$ Year Expense Rata Amount
Ten # Tenant Feet Term Amount Start PSF % (&Cat) & % Type Share Options
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1612-02 WE LOVE YOGURT 690 JAN 01,96 42,500 JAN 01,96 61.59 425,000
DEC 31,05 45,000 JAN 01,99 65.22 10.00
47,499 JAN 01,03 68.84 (STEP-UP)
1614-01 CHAMPS SPORTS #14 5,106 APR 01,92 100,000 APR 01,95 19.58 2,000,000 CAM PR+15%NTM& .020254
MAR 31,02 110,000 APR 01,99 21.54 5.00 RET PR-80%CAP .020254
(STEP-UP)
1801 VACANT UNIT 1,627
1807 VACANT UNIT 2,032
2001-01 AT&T PHONE CENTER 1,698 OCT 15,87 33,960 NOV 01,92 20.00 CAM PR+15%NTM .006736
OCT 31,98 RET PR-85%CAP .006736
2003-01 CPI PHOTO FINISH 1,323 OCT 01,94 33,075 OCT 01,94 25.00 472,500 CAM PR15%NOM .005678
SEP 30,99 7.00 RET PR .005678
(STEP-UP)
2005-01 EYEMASTERS 3,450 APR 09,94 62,100 MAY 01,94 18.00 1,242,000 CAM PR15%NOM& .014806
MAR 31,04 5.00 RET PR .014806
(STEP-UP)
9001-01 DILLARD'S 0 SEP 12,84 CAM FIXED AMT
SEP 30,99 RET PAY OWN T
9002-01 MCRAE'S 0 SEP 12,84 CAM FIXED AMT
SEP 30,14 RET PAY OWN T
9003-01 JC PENNEY 0 NOV 02,85 CAM FIXED AMT
DEC 31,10 RET PAY OWN T
9004-01 GAYFERS 0 FEB 08,87 CAM FIXED AMT
JAN 31,22 RET PAY OWN T
K002-01 SILVER SPOONS 0 JAN 01,96 150,400 CAM FIXED .0000
DEC 31,96 10.00 RET FIXED .0000
K003-01 BIANCA BARE 0 JAN 01,96 94,000 CAM FIXED .0000
DEC 31,96 12.00 RET FIXED .0000
K009 VACANT UNIT 0
K011-01 CANDY BOUQUET OF 0 FEB 01,96
FEB 29,96
K011-01 YOUR SIGNATURE IN 0 FEB 01,96 15,700
MAR 31,96 12.00
K014 VACANT UNIT 0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MAR 11,1996 10:34 PROPERTY MANAGEMENT INFORMATION SYSTEM PAGE 11
RENT ROLL FOR 9120 NORTHPARK MALL - 00
AS OF MAR 11, 96
CPI
% RENT Base Operating Pro- Base
Unit - Square Lease Annual Base Rent Brkpnt-$ Year Expense Rata Amount
Ten # Tenant Feet Term Amount Start PSF % (&Cat) & % Type Share Options
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
K018 VACANT UNIT 0
OP01-01 MAZZIO'S PIZZA 0 MAR 18,85 CAM FIXED .0000
APR 01,20 RET N/A .0000
OP04-01 DEPOSIT GUARANTY 0 JAN 02,85 CAM FIXED .0000
JAN 31,20 RET N/A .0000
OP05-01 MAGNOLIA FEDERAL 0 JAN 02,85 CAM FIXED .0000
JAN 31,20 RET N/A .0000
OP06-01 MCDONALD'S 0 OCT 01,84 CAM FIXED .0000
SEP 30,20 RET N/A .0000
OP11-01 UNITED ARTISTS #3 0 DEC 18,87 CAM FIXED .0000
NOV 30,20 RET N/A .0000
OP3A-01 BURGER KING 0 FEB 28,86 CAM FIXED .0000
MAR 01,20 RET N/A .0000
PN01-01 AGACI 0 MAY 01,94 CAM N/A N/A
JAN 01,98 RET N/A N/A
ROF1-01 TRIDOM, INC. 0 JAN 04,95 2,000 JAN 01,96 0.00 CAM N/A N/A
--------- OCT 31,99 3,000 JAN 01,98 0.00 RET N/A N/A
TOTAL SQUARE FEET 311,458 2,498 JAN 01,99 0.00
=========
</TABLE>
<PAGE>
================================================================================
PRO-Ject+ Lease Abstract Report
================================================================================
<PAGE>
NORTHPARK MALL
PROJECT DESIGNATOR: PARK
LEASE ABSTRACT REPORT
FOR ALL TENANTS
6/1/96 @ 10:21
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM COVERAGE CEILING BREAKPOINT
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) (000'S) RECOVERIES
- ---------------- --------- ------ ----- ----- ------ ------- ------- -------- ------- ---------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 1- SUITE 102 1 5,792 5/93 1/04 - 23.56 136,460 5.00 UNLIMITED NATURAL HVAC
EDDIE BAUER 6 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP
# 2-SUITE 112 1 2,395 4/98 3/08 - 27.50 65,863 6.00 UNLIMITED NATURAL CAM RECOVERY
VACANT LEASE-UP 4 5/03 30.25 72,449 MALL SHOP TAX RCEV
HVAC/UTIL. RECOV.
ADD'L CAM-CAP.EXP.
# 3-SUITE 114 1 1,761 11/89 12/99 - 22.71 39,992 5.50 UNLIMITED NATURAL HVAC
U.S. MALE 3 1/97 23.85 42,000 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP
# 4-SUITE 202 1 3,670 9/94 9/04 - 23.00 84,410 5.00 UNLIMITED NATURAL HVAC
CASUAL CORNER 5 10/97 25.00 91,750 CAM
10/01 27.00 99,090 BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP
# 5-SUITE 204 1 8,785 5/95 5/03 - 40.00 351,400 6.00 UNLIMITED 7,028 HVAC
THE GAP 6 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP
# 6-SUITE 210 1 -1,100 10/94 9/04 - 40.91 45,001 6.00 UNLIMITED NATURAL HVAC
STRIDE RITE 2 10/99 45.45 49,995 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP
# 7-SUITE 212 1 3,830 4/90 1/01 - 20.00 76,600 6.00 UNLIMITED NATURAL HVAC
AMERICAN EAGLE 5 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP
# 8-SUITE 214 1 3,369 6/96 5/06 - 27.50 92,648 6.00 UNLIMITED NATURAL CAM RECOVERY
VACANT LEASE-UP 4 7/01 30.25 101,912 MALL SHOP TAX RCEV
HVAC/UTIL. RECOV.
ADD'L CAM-CAP. EXP.
# 8-SUITE 214 1 3,716 10/93 10/03 - 22.00 81,752 4.00 UNLIMITED NATURAL HVAC
THE DISNEY STORE 5 11/98 24.00 89,184 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM COVERAGE CEILING BREAKPOINT
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) (000'S) RECOVERIES
- ---------------- --------- ------ ----- ----- ------ ------- ------- -------- ------- ---------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 10- SUITE 226 1 6,364 7/94 7/06 - 22.00 140,008 5.00 UNLIMITED 1,626 HVAC
LANE BRYANT 6 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP
# 11-SUITE 228 1 8,730 11/94 1/07 - 22.00 192,060 5.00 UNLIMITED NATURAL CAM RECOVERY
EXPRESS 6 MALL SHOP TAX RCEV
HVAC/UTIL. RECOV.
ADD'L CAM-CAP.EXP.
# 12-SUITE 230 1 1,250 6/90 6/00 - 28.00 35,000 8.00 UNLIMITED NATURAL HVAC
THINGS REMEMBERED 3 7 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP
# 13-SUITE 232 1 904 11/95 12/05 - 55.31 50,000 6.00 UNLIMITED NATURAL HVAC
FRIEDMANS 2 11/98 60.84 54,999 CAM
11/02 66.37 59,998 BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP
# 14-SUITE 234 1 1,191 3/89 3/99 - 22.00 26,202 6.00 UNLIMITED 7,028 HVAC
MOTHERHOOD 2 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP
# 15-SUITE 236 1 3,451 11/91 10/01 - 26.08 90,002 6.00 UNLIMITED NATURAL HVAC
FOOTLOCKER 4 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP
# 16-SUITE 238 1 2,737 9/84 9/96 - 15.50 42,424 3.00 UNLIMITED NATURAL HVAC
RADIO SHACK 4 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP
# 17-SUITE 242 1 6,500 2/88 2/98 - 12.00 78,000 4.00 UNLIMITED NATURAL HVAC
LENS CRAFTERS 6 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 18-SUITE 302 1 2,810 6/96 5/06 - 24.02 67,496 6.00 UNLIMITED NATURAL CAM RECOVERY
CYBERSTATION 4 MALL SHOP TAX RCEV
HVAC/UTIL. RECOV.
ADD'L CAM-CAP.EXP.
# 19-SUITE 304 1 1,095 3/95 2/05 - 29.22 31,996 6.00 UNLIMITED NATURAL HVAC
MASTER CUTS 2 3/99 32.88 36,004 CAM
3/02 36.53 40,000 BILL. TAX-95'SADJMT
ADD'L CAM-CAP.EXP.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM COVERAGE CEILING BREAKPOINT
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) (000'S) RECOVERIES
- ---------------- --------- ------ ----- ----- ------ ------- ------- -------- ------- ---------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 20-SUITE 306 1 1,962 11/89 12/99 - 12.00 23,544 6.00 UNLIMITED NATURAL HVAC
PET CONNECTION 3 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 21-SUITE 308 1 1,951 10/94 9/04 - 25.00 48,775 7.00 UNLIMITED NATURAL HVA
GENERAL 3 10/97 27.00 52,677 CAM
NUTRITION 10/01 29.00 56,579 BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 22-SUIT 310 1 1,860 2/92 3/00 - 28.00 52,080 6.00 UNLIMITED NATURAL HVAC
BLOCKBUSTER 3 CAM
MUSIC BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EX.
# 23-SUITE 314 1 2,370 9/84 9/99 - 18.00 42,660 6.00 UNLIMITED NATURAL HVAC
CHICK-FIL-A 4 10/97 20.00 CAM
TAXES
ADD'L CAM-CAP.EX.
# 24-SUITE 316 1 1,200 10/94 1/05 - 39.17 47,004 5.00 UNLIMITED NATURAL HVAC
GYMBOREE 2 2/98 40.83 48,996 CAM
2/02 42.50 51,000 BILL. TAX-95' ADJMT
ADD'L CAM-CAP.EX.
# 25-SUITE 318 1 675 6/94 5/04 - 53.34 36,005 5.00 UNLIMITED NATURAL HVAC
THE BODY SHOP 1 6/97 56.30 38,003 CAM
6/01 59.26 40,001 BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 26-SUITE 320 1 1,701 2/92 1/02 - 29.39 49,992 5.00 UNLIMITED NATURAL HVAC
KIDS FOOTLOCKER 3 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 27-SUIT 402 1 4,096 10/93 1/03 - 22.00 90,112 6.00 UNLIMITED NATURAL HVAC
KIRKLANDS 5 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 28-SUITE 406 1 1,396 11/95 8/05 - 30.00 41,880 8.00 UNLIMITED 796 HVAC
SPORTS AVE 3 9/00 35.00 48,860 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 29-SUITE 408 1 668 11/86 10/96 - 25.00 16,700 7.00 UNLIMITED NATURAL HVAC
MERLE NORMAN 1 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM COVERAGE CEILING BREAKPOINT
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) (000'S) RECOVERIES
- ---------------- --------- ------ ----- ----- ------ ------- ------- -------- ------- ---------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 30-SUITE 410 1 562 9/94 10/97 - 26.73 15,002 10.00 UNLIMITED NATURAL HVAC
CALIFORNIA NAILS 1 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EX.
# 31-SUITE 412 1 3,471 3/94 12/03 - 16.00 55,536 5.00 UNLIMITED NATURAL HVAC
BENTLEY'S 4 4/99 18.00 62,478 CAM
LUGGAGE BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 32-SUITE 502 1 3,668 11/93 1/04 - 19.00 69,692 5.00 UNLIMITED NATURAL HVAC
THE SHOE DEPT. 5 12/96 22.00 80,696 CAM
12/00 25.00 91,700 BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP
# 33-SUITE 506 1 2,611 6/98 5/08 - 27.50 71,803 6.00 UNLIMITED NATURAL CAN RECOVERY
VACANT LEASE-UP 4 7/03 30.25 78,983 MALL SHOP TAX RECV
HVAC/UTIL. RECOV.
ADD'L CAM-CAP.EXP
# 34-SUITE 508 1 2,924 11/87 11/97 - 17.00 49,708 6.00 UNLIMITED NATURAL HVAC
PAYLESS SHOES 4 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP
# 35-SUITE 510 1 1,065 10/94 9/04 - 33.80 35,997 8.00 UNLIMITED NATURAL HVAC
AFTERTHOUGHTS 2 CAM
BILL. TAX-95' ADJMT
ADD'L CAM-CAP.EXP
# 36-SUITE 512 1 2,296 11/94 11/00 - 18.03 41,397 6.00 UNLIMITED NATURAL HVAC
FAMILY 4 1/97 20.03 45,989 CAM
BOOKSTORES 1/99 22.04 50,604 BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP
# 37-SUITE 602 1 5,337 10/93 1/06 - 20.00 106,740 5.00 UNLIMITED NATURAL HVAC
STRUCTURE 6 10/99 22.00 117,414 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP
# 38-SUITE 606 1 987 5/92 4/02 - 23.83 23,520 7.00 UNLIMITED NATURAL HVAC
ELECTRONICS 2 5/97 35.46 34,999 CAM
BOUTIQUE BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP
# 39-SUITE 608 1 620 3/96 1/06 - 72.58 45,000 NATURAL CAM RECOVERY
SUNGLASS HUT 1 MALL SHOP TAX RECV
HVAC/UTIL. RECOV.
ADD'L CAM-CAP.EXP.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM COVERAGE CEILING BREAKPOINT
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) (000'S) RECOVERIES
- ---------------- --------- ------ ----- ----- ------ ------- ------- -------- ------- ---------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 40-SUITE 610 1 551 1/88 12/96 - 45.37 24,999 7.00 UNLIMITED NATURAL HVAC
BARNIE'S COFFEE 1 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 41-SUITE 612 1 600 10/96 9/06 - 60.00 36,000 6.00 UNLIMITED NATURAL HVAC
VACANT LEASE-UP 1 11/01 66.00 39,600 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 42-SUITE 614 1 2,320 2/98 1/08 - 27.50 63,800 6.00 UNLIMITED NATURAL CAM RECOVERY
VACANT LEASE-UP 4 3/03 30.25 70,180 MALL SHOP TAX RECOV
HVAC/UTIL RECOV
ADD'L CAM-CAP.EXP.
# 43-SUITE 708 1 7,414 4/95 3/07 - 25.00 185,350 4.00 UNLIMITED NATURAL HVAC
WARNER BROS. 6 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 44-SUITE 718 1 5,093 3/95 3/00 - 29.28 149,123 6.00 UNLIMITED 2,982 HVAC
GAP KIDS/BABY 6 4/99 31.01 157,934 CAM
GAP BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 45-SUITE 724 1 5,112 3/95 3/00 - 26.00 132,912 6.00 UNLIMITED 2,658 HVAC
BANANA REPUBLIC 6 4/99 28.00 143,136 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 46-SUITE 732 1 2,527 3/95 3/05 - 27.00 68,229 5.00 UNLIMITED NATURAL HVAC
BATH & BODY 4 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 47-SUITE 736 1 2,302 3/85 1/04 - 17.50 40,285 5.00 UNLIMITED NATURAL HVAC
J RIGGINS 4 4/97 26.00 59,852 CAM
2/00 28.00 64,456 BILL. TAX-95'ADJMT
2/02 30.00 69,060 ADD'L CAM-CAP.EXP.
# 48-SUITE 738 1 5,764 10/92 1/05 - 22.00 126,808 5.00 UNLIMITED NATURAL HVAC
VICTORIA SECRETS 6 11/98 24.00 138,336 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 49-SUITE 802 1 1,836 7/87 7/97 - 20.00 36,720 6.00 UNLIMITED 734 HVAC
COOK AND LOVE 3 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM COVERAGE CEILING BREAKPOINT
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) (000'S) RECOVERIES
- ---------------- --------- ------ ----- ----- ------ ------- ------- -------- ------- ---------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 50-SUITE 804 1 772 9/94 9/04 - 41.45 31,999 8.00 UNLIMITED NATURAL HVAC
WICKS N STICKS 1 10/97 44.04 33,999 CAM
10/01 46.63 35,998 BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 51-SUITE 806 1 1,514 6/96 5/06 - 32.00 48,448 6.00 UNLIMITED NATURAL CAM
GARDEN BOTANIKA 3 7/99 35.00 52,990 TAXES
6/03 38.00 57,532 HVAC
# 52-SUITE 808 1 1,106 4/94 3/04 - 38.88 43,001 5.00 UNLIMITED NATURAL HVAC
SOFTWARE, ETC 2 4/97 40.69 45,003 CAM
4/01 42.50 47,005 BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 53-SUITE 810 1 1,037 7/92 5/97 - 36.64 37,996 6.00 UNLIMITED NATURAL HVAC
TRADITIONAL JEWEL 2 7/03 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 54-SUITE 812 1 3,838 10/95 1/08 - 20.00 76,760 5.00 UNLIMITED NATURAL HVAC
WILLIAMS SONOMA 5 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 55-SUITE 814 1 4,055 3/95 2/07 - 25.00 101,375 4.00 UNLIMITED NATURAL HVAC
LIMITED TOO 5 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 56-SUITE 816 1 7,280 6/94 6/06 - 22.00 160,160 4.00 UNLIMITED NATURAL HVAC
THE LIMITED 6 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 57-SUITE 819 1 1,882 4/87 1/98 - 17.74 33,387 5.00 UNLIMITED NATURAL HVAC
LAURA ASHLEY 3 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 58-SUITE 820 1 4,340 11/94 1/05 - 29.00 125,860 6.00 UNLIMITED NATURAL HVAC
COUNTY SEAT 5 12/97 31.00 134,540 CAM
12/01 33.00 143,220 BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 59-SUITE 822 1 4,655 11/94 10/06 - 24.00 111,720 6.00 UNLIMITED NATURAL HVAC
THE BOMBAY COMPANY 5 11/97 26.50 123,358 CAM
11/01 29.00 134,995 BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM COVERAGE CEILING BREAKPOINT
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) (000'S) RECOVERIES
- ---------------- --------- ------ ----- ----- ------ ------- ------- -------- ------- ---------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 60-SUITE 824 1 4,082 3/85 3/97 - 15.00 61,230 5.00 UNLIMITED NATURAL HVAC
PAUL HARRIS 5 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 61-SUITE 826 1 3,289 11/97 10/07 - 27.50 90,448 6.00 UNLIMITED NATURAL CAM RECOVERY
VACANT LEASE-UP 4 12/02 30.25 99,492 MALL SHOP TAX RECV
HVAC/UTIL. RECOV.
ADD'L CAM-CAP.EXP.
# 62-SUITE 828 1 4,898 4/96 3/06 - 22.00 107,756 5.00 UNLIMITED NATURAL CAM RECOVERY
RACK ROOM SHOES 5 MALL SHOP TAX RECV
HVAC/UTIL. RECOV.
ADD'L CAM-CAP.EXP.
# 63-SUITE 1002 1 2,442 9/87 8/97 - 16.00 39,072 6.00 UNLIMITED NATURAL HVAC
THE MAN HOLE 4 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 64-SUITE 1004 1 1,350 4/97 3/07 - 30.00 40,500 6.00 UNLIMITED NATURAL CAM RECOVERY
VACANT LEASE-UP 3 5/02 33.00 44,550 MALL SHOP TAX RECV
HVAC/UTIL. RECOV.
ADD'L CAM-CAP.EXP.
# 65-SUITE 1008 1 1,569 10/94 9/04 - 25.49 39,994 8.00 UNLIMITED NATURAL HVAC
SBARRO'S 3 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 66-SUITE 1010 1 820 11/96 10/06 - 45.00 36,900 6.00 UNLIMITED NATURAL CAM RECOVERY
VACANT LEASE-UP 2 12/01 49.50 40,590 MALL SHOP TAX RECV
HVAC/UTIL. RECOV.
ADD'L CAM-CAP.EXP.
# 67-SUITE 1012 1 4,455 7/85 7/00 - 15.50 69,053 5.00 UNLIMITED NATURAL HVAC
RUBY TUESDAY 5 8/98 16.50 73,508 CAM
TAXES
# 68-SUITE 1102 1 1,995 10/94 12/04 - 0.00 0 6.00 UNLIMITED NATURAL HVAC
ARBY'S 3 CAM
TAXES
# 69-SUITE 1104 1 8,694 9/84 9/04 - 8.50 73,899 5.00 UNLIMITED NATURAL HVAC
MORRISONS CAFE 6 CAM
TAXES
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM COVERAGE CEILING BREAKPOINT
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) (000'S) RECOVERIES
- ---------------- --------- ------ ----- ----- ------ ------- ------- -------- ------- ---------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 70-SUITE 1106 1 397 12/91 12/00 - 50.38 20,001 10.00 UNLIMITED NATURAL HVAC
TROPIK SUN FRUIT 1 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 71-SUITE 1108 1 1,073 2/95 1/05 - 55.92 60,002 6.00 UNLIMITED NATURAL HVAC
REEDS JEWELRY 2 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 72-SUITE 1110 1 2,064 5/93 4/04 - 23.26 48,009 5.00 UNLIMITED NATURAL HVAC
PETITE SOPHISTICAT 4 5/96 24.22 49,990 CAM
5/00 25.19 51,992 BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 73 - SUITE 1114 1 1,206 4/95 3/05 - 37.50 45,225 6.00 UNLIMITED NATURAL HVAC
NINE WEST 3 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 74-SUITE 1118 1 5,427 9/95 1/06 - 25.00 135,675 5.00 UNLIMITED NATURAL HVAC
ANN TAYLOR 6 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 75-SUITE 1120 1 2,087 9/96 8/06 - 25.00 52,175 6.00 UNLIMITED NATURAL CAM RECOVERY
CACHE 4 MALL SHOP TAX RECV
HVAC/UTIL. RECOV.
ADD'L CAM-CAP.EXP.
# 76-SUITE 1122 1 2,724 7/93 12/04 - 19.00 51,756 7.00 UNLIMITED 823 HVAC
LYNNS HALLMARK 4 10/96 21.00 57,204 CAM
10/99 23.00 62,652 BILL. TAX-95'ADJMT
10/92 24.78 67,501 ADD'L CAM-CAP.EXP.
# 77-SUITE 1202 1 1,694 10/92 1/05 - 26.56 44,993 4.00 UNLIMITED NATURAL HVAC
NATURE COMPANY 3 12/96 9.52 50,007 CAM
12/00 34.38 58,240 BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 78-SUITE 1204 1 1,015 11/94 12/04 - 39.41 40,001 6.00 UNLIMITED NATURAL HVAC
CRABTREE & EVELYN 2 12/97 44.33 44,995 CAM
12/01 49.26 49,999 BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 79-SUITE 1206 1 1,015 5/90 1/99 - 30.00 30,450 7.00 UNLIMITED NATURAL HVAC
FREDERICKS 2 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM COVERAGE CEILING BREAKPOINT
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) (000'S) RECOVERIES
- ---------------- --------- ------ ----- ----- ------ ------- ------- -------- ------- ---------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 80-SUITE 1208 1 1,040 7/95 3/05 - 42.00 43,680 6.00 UNLIMITED NATURAL HVAC
EASY SPIRIT 2 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 81-SUITE 1210 1 1,363 9/84 9/96 - 17.00 23,171 6.00 UNLIMITED NATURAL HVAC
5-7-9 SHOP 3 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 82-SUITE 1212 1 1,310 9/84 9/96 - 17.00 22,270 6.00 UNLIMITED NATURAL HVAC
JEANS WEST 3 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 83-SUITE 1213 1 570 1/96 1/06 - 73.68 41,998 NATURAL HVAC
SUNGLASS HUT INT'L 1 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 84-SUITE 1214 1 154 6/97 5/07 - 60.00 9,240 NATURAL CAM RECOVERY
VACANT LEASE-UP 1 7/02 66.00 10,164 MALL SHOP TAX RECV
HVAC/UTIL. RECOV.
ADD'L CAM-CAP.EXP.
# 85-SUITE 1216 1 5,354 2/86 2/98 - 17.00 91,018 5.00 UNLIMITED NATURAL HVAC
LERNERS 6 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 86-SUITE 1220 1 6,255 11/95 10/05 - 16.00 100,080 6.00 UNLIMITED NATURAL HVAC
THE FINISH LINE 6 11/98 18.00 112,590 CAM
11/02 20.00 125,100 BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 87-SUITE 1304 1 4,799 1/85 12/01 - 19.85 95,260 6.00 UNLIMITED NATURAL HVAC
CAMELOT MUSIC 5 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 88-SUITE 1306 1 1,367 10/95 9/05 - 26.34 36,007 6.00 UNLIMITED NATURAL HVAC
TRADE SECRETS 3 10/00 27.80 38,003 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 89-SUITE 1308 1 10,600 8/96 7/08 - 23.00 243,800 5.00 UNLIMITED NATURAL REAL ESTATE TAXES
ABERCROMBE & FITCH 7 CAM
HVAC
ADD'L CAM-CAP.EXP.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM COVERAGE CEILING BREAKPOINT
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) (000'S) RECOVERIES
- ---------------- --------- ------ ----- ----- ------ ------- ------- -------- ------- ---------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 90-SUITE 1312 1 688 6/96 5/06 - 55.23 37,998 8.00 UNLIMITED NATURAL CAM
SWEET FACTORY 1 7/99 61.05 42,002 TAXES
7/03 66.86 46,000 HVAC
ADD'L CAM-CAP.EXP.
# 90-SUITE 1316 1 550 8/96 7/06 - 72.73 40,002 6.00 UNLIMITED NATURAL CAM RECOVERY
ANTIE ANNE PRETZEL 1 MALL SHOP TAX RECV
HVAC/UTIL. RECOV.
ADD'L CAM-CAP.EXP.
# 92-SUITE 1320 1 2,658 11/95 6/05 - 24.45 64,988 6.00 UNLIMITED NATURAL HVAC
LADY FOOTLOCKER 4 7/98 26.34 70,012 CAM
7/02 28.22 75,009 BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 93-SUITE 1322 1 728 7/95 7/05 - 52.20 38,002 8.00 UNLIMITED NATURAL HVAC
CLAIRES BOUTIQUE 1 8/00 57.69 41,998 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 94-SUITE 1324 1 2,421 10/89 1/00 - 25.00 60,525 5.00 UNLIMITED NATURAL HVAC
SUNCOAST MOTION 4 11/96 27.00 65,367 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 95-SUITE 1326 1 3,104 9/84 9/96 - 20.00 62,080 6.00 UNLIMITED NATURAL HVAC
KAY BEE TOYS 4 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 96-SUITE 1328 1 2,088 8/97 7/07 - 27.50 57,420 6.00 UNLIMITED NATURAL CAM RECOVERY
VACANT LEASE-UP 4 30.25 63,162 MALL SHOP TAX RECV
9/02 HVAC/UTIL. RECOV.
ADD'L CAM-CAP.EXP.
# 97-SUITE 1404 1 1,200 10/94 9/02 - 33.93 38,002 8.00 UNLIMITED NATURAL HVAC
GINGISS FORMALWEAR 2 10/98 37.50 42,000 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 98-SUITE 1406 1 1,302 8/91 7/01 - 26.88 34,998 NATURAL HVAC
WOLF CAMERA 3 8/96 34.56 44,997 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 99-SUITE 1410 1 2,029 10/96 9/06 - 22.50 45,653 6.00 UNLIMITED NATURAL CAM RECOVERY
STEAK ESCAPE 4 11/99 25.00 50,725 MALL SHOP TAX RECV
11/03 27.50 55,798 HVAC/UTIL. RECOV.
ADD'L CAM-CAP.EXP.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM COVERAGE CEILING BREAKPOINT
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) (000'S) RECOVERIES
- ---------------- --------- ------ ----- ----- ------ ------- ------- -------- ------- ---------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 100-SUITE 1412 1 6,660 4/94 1/06 - 23.97 159,640 6.00 UNLIMITED NATURAL HVAC
B. DALTON BOOKS 6 2/98 28.53 190,010 CAM
2/02 33.10 220,446 BILL. TAX-95'ADJMT
ADD'L CAM-CAP. EXP.
# 101-SUITE 1412 1 1,745 2./97 1/07 - 30.00 52,350 6.00 UNLIMITED NATURAL CAM RECOVERY
VACANT LEASE-UP 3 3/02 33.00 57,585 MALL SHOP TAX RECV
HVAC/UTIL. RECOV.
ADD'L CAM-CAP.EXP.
# 102-SUITE 1416 1 810 1/88 12/97 - 21.00 17,010 7.00 UNLIMITED 170 HVAC
NORTHPARK BARBER 2 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 103-SUITE 1418 1 156 10/95 9/00 - 76.92 12,000 NATURAL HVAC
TRUSTMARK NATIONAL 1
# 104-SUITE 1602 1 2,240 9/95 12/05 - 25.89 57,994 NATURAL HVAC
PACIFIC SUNWEAR 4 1/99 27.68 62,003 CAM
1/03 29.46 65,990 BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 105-SUITE 1604 1 2,267 10/96 9/06 - 27.50 62,343 6.00 UNLIMITED NATURAL CAM RECOVERY
UPS & DOWNS 4 MALL SHOP TAX RECV
HVAC/UTIL. RECOV.
ADD'L CAM-CAP.EXP.
# 106-SUITE 1606 1 1,640 12/94 12/04 - 30.00 49,200 6.00 UNLIMITED NATURAL HVAC
DOLCIS 3 1/98 35.00 57,400 CAM
1/02 40.00 65,600 BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 107-SUITE 1608 1 1,525 10.95 12/05 - 33.00 50,325 5.00 UNLIMITED NATURAL HVAC
LEE MICHEALS JEWL. 3 10/00 37.00 56,425 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 108-SUITE 1610 1 604 10/94 9/04 - 69.54 42,002 10.00 UNLIMITED NATURAL HVAC
GREAT AMERICAN CO. 1 10/97 74.50 44,998 CAM
10/01 79.47 48,000 BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 109-SUITE 1612 1 690 1/96 12/05 - 61.59 42,497 10.00 UNLIMITED NATURAL HVAC
WE LOVE YOGURT 1 1/99 65.22 45,002 CAM
1/03 68.84 47,500 BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM COVERAGE CEILING BREAKPOINT
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT % (000'S) (000'S) RECOVERIES
- ---------------- --------- ------ ----- ----- ------ ------- ------- -------- ------- ---------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# 110-SUITE 1614 1 5,106 4/92 3/02 - 19.58 99,975 5.00 UNLIMITED NATURAL HVAC
CHAMPS SPORTS 6 3/02 21.54 109,983 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 111-SUITE 1801 1 1 1/96 12/15 - 0.00 0 6.00 UNLIMITED NATURAL NONE
COMMUNITY ROOM
# 112-SUITE 1807 1 2,032 7/96 6/06 - 25.00 50,800 6.00 UNLIMITED NATURAL CAM RECOVERY
UNDERGROUND 4 MALL SHOP TAX RECV
HVAC/UTIL. RECOV.
ADD'L CAM-CAP.EXP.
# 113-SUITE 2001 1 1,698 10/87 4/96 - 20.00 33,960 NATURAL NONE
AT&T PHONE CENTER 3
# 114-SUITE 2003 1 1,323 10/94 9/99 - 25.00 33,075 7.00 UNLIMITED NATURAL HVAC
CPI PHOTO FINISH 3 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 115-SUITE 2005 1 3,450 4/94 3/04 - 18.00 62,100 5.00 UNLIMITED NATURAL HVAC
EYEMASTERS 4 CAM
BILL. TAX-95'ADJMT
ADD'L CAM-CAP.EXP.
# 116-SUITE 1 1,065 10/95 9/10 - 0.00 0
W.S. STORE STORAGE 2 NATURAL CAM RECOVERY
MALL SHOP TAX RECV
HVAC/UTIL. RECOV.
ADD'L CAM-CAP.EXP.
# 117 - 1 1/95 12/14 - 0.00 0 - - TOTAL MAJOR CONTR.
ANCHOR REFERENCE -
-------
309,677
=======
</TABLE>
<PAGE>
============================
Pro-Ject+ Assumptions Report
============================
<PAGE>
NORTHPARK MALL
PROJECT DESIGNATOR: NPRK
PROJECT ASSUMPTIONS REPORT
EXCLUDING TENANTS
BUILDING PROLOGUE
- -----------------
LEASEHOLD ANALYSIS OF NORTHPARK MALL BEGINNING 1/1995
FOR 15 YEARS ON A CALENDAR YEAR BASIS
AREA MEASURES
- -------------
SGLA
DESCRIBED AS GROSS LEASABLE AREA; MALL SHOP TENANTS
1995 VALUE - 309,675
THEREAFTER - CONSTANT
OGLA
DESCRIBED AS GROSS LEASABLE AREA; TOTAL OWNED GLA
1995 VALUE - 309,675
THEREAFTER - CONSTANT
OCCL1
DESCRIBED AS OCCUPIED MALL SHOP AREA
1995 VALUE 228,124
1996 VALUE 273,825
1997 VALUE 295,443
1998 VALUE 304,722
1999 VALUE 308,694
2000 VALUE 305,665
2001 VALUE 307,798
2002 VALUE 307,392
2003 VALUE 306,911
2004 VALUE 302,685
2005 VALUE 302,511
2006 VALUE 297,695
2007 VALUE 302,801
2008 VALUE 302,637
2009 VALUE 309,002
THEREAFTER CONSTANT
OCC2
DESCRIBED AS OCCUPIED MALL SHOP AREA, EXCLUSIVE OF RESTAURANT GLA;UTILIZED
FOR CAM AND TAX RECOVERIES
+100.0% OF OCCl-100.0% OF RGLA
RGLA
DESCRIBED AS TOTAL RESTAURANT GLA
1995 VALUE - 19,083
THEREAFTER - CONSTANT
<PAGE>
PAGE 2
GROWTH RATES
- ------------
SALG
DESCRIBED AS GROWTH RATE FACTOR; SALES GROWTH
1995 VALUE - 3.50
THEREAFTER - CONSTANT
RENG
DESCRIBED AS GROWTH RATE FACTOR; MARKET RENT GROWTH
1995 VALUE - 3.50
1996 VALUE - 3.50
THEREAFTER - CONSTANT
EXPG
DESCRIBED AS GROWTH RATE FACTOR; GENERAL EXPENSE GROWTH
1995 VALUE - 3.50
1996 VALUE - 3.50
THEREAFTER - CONSTANT
TAXG
DESCRIBED AS GROWTH RATE FACTOR; TAX EXPENSE GROWTH
1995 VALUE - 3.50
1996 VALUE - 3.50
THEREAFTER -CONSTANT
UTLG
DESCRIBED AS GROWTH RATE FACTOR; MISCELLANEOUS INCOME GROWTH
1995 VALUE 2.00
1996 VALUE 2.00
THEREAFTER CONSTANT
MISG
1995 VALUE 3.00
1996 VALUE 3.00
THEREAFTER CONSTANT
HVCG
1995 VALUE 2.00
THEREAFTER CONSTANT
MARKET RATES
- ------------
MKTI
DESCRIBED AS MARKET RENTAL RATE; TENANTS < 750 SQ/FT
1995 VALUE - 65.00
1996 VALUE - 65.00
THEREAFTER - GROWING AT GROWTH RATE RENG
MKT2
DESCRIBED AS MARKET RENTAL RATE; TENANTS 751-1200 SQ/FT
1995 VALUE - 45.00
<PAGE>
PAGE 3
1996 VALUE - 45.00
THEREAFTER - GROWING AT GROWTH RATE RENG
MKT3
DESCRIBED AS MARKET RENTAL RATE; TENANTS 1201-2000 SQ/FT
1995 VALUE - 30.00
1996 VALUE - 30.00
THEREAFTER - GROWING AT GROWTH RATE RENG
MKT4
DESCRIBED AS MARKET RENTAL RATE; TENANTS 2001-3500 SQ/FT
1995 VALUE - 27.50
1996 VALUE - 27.50
THEREAFTER - GROWING AT GROWTH RATE RENG
MKT5
DESCRIBED AS MARKET RENTAL RATE; TENANTS 3501-5000 SQ/FT
1995 VALUE - 25.00
1996 VALUE - 25.00
THEREAFTER - GROWING AT GROWTH RATE RENG
MKT6
DESCRIBED AS MARKET RENTAL RATE; TENANTS 5001-10000 SQ/FT
1995 VALUE - 22.50
1996 VALUE - 22.50
THEREAFTER - GROWING AT GROWTH RATE RENG
MKT7
DESCRIBED AS MARKET RENTAL RATE; TENANTS > 10000 SQ/FT
1995 VALUE - 20.00
1996 VALUE - 20.00
THEREAFTER - GROWING AT GROWTH RATE RENG
SALR
DESCRIBED AS COMPARABLE MALL SHOP SALES RATE
1995 VALUE - 323
THEREAFTER - GROWING AT GROWTH RATE SALG
ALTN
DESCRIBED AS ALTERATION RATE; NEW TENANTS
1995 VALUE - 10.00
1996 VALUE - 10.00
THEREAFTER - GROWING AT GROWTH RATE EXPG
ALTR
DESCRIBED AS ALTERATION RATE; RENEWAL TENANTS
1995 VALUE - 2.00
1996 VALUE - 2.00
THEREAFTER - GROWING AT GROWTH RATE EXPG
ALTB
DESCRIBED AS ALTERATION RATE; BLENDED RATE BASED ON RENEWAL PROBABILITY
+30.0% OF ALTN +70.0% OF ALTR
<PAGE>
PAGE 4
COMN
DESCRIBED AS COMMISSION RATE; NEW TENANTS
1995 VALUE - 3.50
1996 VALUE - 3.50
1997 VALUE - 3.50
1998 VALUE - 3.50
1999 VALUE - 3.50
2000 VALUE - 3.50
2001 VALUE - 4.00
2002 VALUE - 4.00
2003 VALUE - 4.00
2004 VALUE - 4.00
2005 VALUE - 4.00
2006 VALUE - 4.50
THEREAFTER - CONSTANT
COMR
DESCRIBED AS COMMISSION RATE; RENEWAL TENANTS
1995 VALUE - 1.50
1996 VALUE - 1.50
1997 VALUE - 1.50
1998 VALUE - 1.50
1999 VALUE - 1.50
2000 VALUE - 1.50
2001 VALUE - 1.75
2002 VALUE - 1.75
2003 VALUE - 1.75
2004 VALUE - 1.75
2005 VALUE - 1.75
2006 VALUE - 2.00
THEREAFTER - CONSTANT
COMB
DESCRIBED AS COMMISSION RATE; BLENDED RATE BASED ON RENEWAL PROBABILITY
+30.0% OF COMN +70.0% OF COMR
RESX
DESCRIBED AS EXPENSE RATE; RESERVES FOR REPLACEMENT
1995 VALUE - 0.15
1996 VALUE - 0.15
THEREAFTER - GROWING AT GROWTH RATE EXPG
UTLR
DESCRIBED AS EXPENSE RATE; MALL SHOP UTILITIES
1995 VALUE - 5.50
1996 VALUE - 5.50
THEREAFTER - GROWING AT GROWTH RATE UTLG
W/SR
DESCRIBED AS EXPENSE RATE; MALL SHOP WATER/SEWER
1995 VALUE - 0.13
1996 VALUE - 0.14
THEREAFTER - GROWING AT GROWTH RATE UTLG
<PAGE>
PAGE 5
UTXR
DESCRIBED AS UTILITY EXPENSE RATE
1995 VALUE - 3.45
1996 VALUE - 3.57
THEREAFTER - GROWING AT GROWTH RATE UTLG
MISCELLANEOUS INCOMES
- ---------------------
TEMP. TENANT/RMU'S
1995 VALUE - 256,695
1996 VALUE - 160,000
THEREAFTER - GROWING AT GROWTH RATE MISG
MISCELLANEOUS
1995 VALUE - 40,000
1996 VALUE - 40,000
THEREAFTER - GROWING AT GROWTH RATE MISG
EXPENSES
- --------
COMMON AREA MAINT., REFERRED TO AS CAMX
DESCRIBED AS COMMON AREA MAINTENANCE; GENERAL EXPENSE
CHARGED AGAINST NET OPERATING INCOME
1995 VALUE - 1,802,830
1996 VALUE - 1,930,000
THEREAFTER - GROWING AT GROWTH RATE EXPG
CAM W/15% MARK-UP , REFERRED TO AS CA15
DESCRIBED AS COMMON AREA MAINTENANCE WITH 15% ADMIN. FEE
AN INFORMATIONAL EXPENSE
+115.0% OF CAMX
CAM RECOVERY , REFERRED TO AS CAM*
DESCRIBED AS CAM PASS-THROUGH FOR MALL SHOP SPACE (INCLUDES 15% ADMIN. FEE,
LESS MAJOR TENANT AND RESTAURANT CONTRIBUTIONS)
AN INFORMATIONAL EXPENSE
+100.0% OF CA15-100.0% OF TMAJ
- -100.0% OF RSTC
INSIDE CAM EXPENSE, REFERRED TO AS ICAM
AN INFORMATIONAL EXPENSE
1995 VALUE - 1,370,000
1996 VALUE - 1,370,000
THEREAFTER - GROWING AT GROWTH RATE EXPG
OUTSIDE CAM , REFERRED TO AS OCAM
AN INFORMATIONAL EXPENSE
1995 VALUE - 560,000
1996 VALUE - 560,000
THEREAFTER - GROWING AT GROWTH RATE EXPG
<PAGE>
PAGE 6
REAL ESTATE TAXES, REFERRED TO AS TAXX
DESCRIBED AS REAL ESTATE TAXES; GENERAL EXPENSE
CHARGED AGAINST NET OPERATING INCOME
1995 VALUE - 480,870
1996 VALUE - 545,000
THEREAFTER - GROWING AT GROWTH RATE TAXG
MALL SHOP TAX RECV, REFERRED TO AS TAX*
DESCRIBED AS TAX PASS-THROUGH FOR MALL SHOP TENANTS(EXCLUDES RESTAURANT
TENANT TAX CONTRIBUTIONS)
AN INFORMATIONAL EXPENSE
+100.0% OF TAXX-100.0% OF RSTX
NON-CAM UTILITIES , REFERRED TO AS UTLX
DESCRIBED AS UTILITIES; GENERAL EXPENSE
CHARGED AGAINST NET OPERATING INCOME
1995 VALUE - 1,175,065
THEREAFTER - MARKET RATE UTXR MULTIPLIED BY AREA MEASURE OCC1
WATER & SEWER EXP., REFERRED TO AS W/SX
DESCRIBED AS WATER & SEWER; GENERAL EXPENSE
CHARGED AGAINST NET OPERATING INCOME
1995 VALUE - 50,059
THEREAFTER - MARKET RATE W/SR MULTIPLIED BY AREA MEASURE OCC1
BILL. TAX-95'ADJMT, REFERRED TO AS TX95
DESCRIBED AS BILLABLE TAX EXPENSE FOR TENANTS IN OCCUPANCY IN 1995 OR BEFORE.
AN INFORMATIONAL EXPENSE
+100.0% OF TAX*+100.0% OF T120
1995 TAX ADJUSTMNT, REFERRED TO AS T120
DESCRIBED AS 1995 TAX ADJUSTMENT
AN INFORMATIONAL EXPENSE
1995 VALUE - 0.00
1996 VALUE - 120,162
1997 VALUE - 0.00
THEREAFTER - CONSTANT
ADD'L CAM-CAP.EXP., REFERRED TO AS CAPC
DESCRIBED AS CAPITAL IMPROVEMENTS INCLUDED IN CAM
CHARGED AGAINST NET OPERATING INCOME
1995 VALUE - 0.00
1996 VALUE - 0.00
1997 VALUE - 200,000
1998 VALUE - 200,000
THEREAFTER - ZERO
GENERAL & ADMIN. , REFERRED TO AS G&AX
DESCRIBED AS NON-RECOVERABLE EXPENSE; GENERAL ADMINISTRATIVE
CHARGED AGAINST NET OPERATING INCOME
1995 VALUE - 260,000
1996 VALUE - 260,000
THEREAFTER - GROWING AT GROWTH RATE EXPG
<PAGE>
PAGE 7
MARKETING EXPENSE , REFERRED TO AS MKTX
DESCRIBED AS NON-RECOVERABLE EXPENSE; MARKETING
CHARGED AGAINST NET OPERATING INCOME
1995 VALUE 85,500
1996 VALUE 100,000
THEREAFTER GROWING AT GROWTH RATE EXPG
MISCELLANEOUS , REFERRED TO AS MISX
DESCRIBED AS NON-RECOVERABLE EXPENSE; MISCELLANEOUS
CHARGED AGAINST NET OPERATING INCOME
1995 VALUE - 30,000
1996 VALUE - 30,000
THEREAFTER - GROWING AT GROWTH RATE MISG
DILLARDS CAM , REFERRED TO AS DCAM
DESCRIBED AS DILLARDS CAM CONTRIBUTION
AN INFORMATIONAL EXPENSE
1995 VALUE - 87,950
THEREAFTER - GROWING AT GROWTH RATE EXPG
MCRAE'S CAM , REFERRED TO AS MCAM
DESCRIBED AS MCRAES CAM CONTRIBUTION
AN INFORMATIONAL EXPENSE
1995 VALUE - 48,065
THEREAFTER - GROWING AT GROWTH RATE EXPG
GAYFER'S CAM , REFERRED TO AS GCAM
DESCRIBED AS GAYFERS CAM CONTRIBUTION
AN INFORMATIONAL EXPENSE
1995 VALUE - 86,305
THEREAFTER - GROWING AT GROWTH RATE EXPG
JC PENNEY CAM , REFERRED TO AS JCAM
DESCRIBED AS JC PENNEY CAM CONTRIBUTION
AN INFORMATIONAL EXPENSE
1995 VALUE 34,112
1996 VALUE 47,757
1997 VALUE 47,757
1998 VALUE 47,757
1999 VALUE 47,757
2000 VALUE 47,757
2001 VALUE 61,402
2002 VALUE 61,402
2003 VALUE 61,402
2004 VALUE 61,402
2005 VALUE 61,402
2006 VALUE 68,225
THEREAFTER CONSTANT
TOTAL MAJORS CAM , REFERRED TO AS MAJC
DESCRIBED AS TOTAL MAJOR CAM CONTRIBUTI0N
AN INFORMATIONAL EXPENSE
+100.0% OF DCAM+100.0% OF MCAM
+100.0% OF GCAM+100-0% OF JCAM
<PAGE>
PAGE 8
RESTAURANT CAM , REFERRED TO AS RSTC
DESCRIBED AS TOTAL RESTAURANT CAM CONTRIBUTION
AN INFORMATIONAL EXPENSE
1995 VALUE - 96,460
1996 VALUE - 96,460
THEREAFTER - GROWING AT GROWTH RATE EXPG
RESTAURANT TAXES , REFERRED TO AS RSTX
DESCRIBED AS TOTAL RESTAURANT TAX CONTRIBUTION
AN INFORMATIONAL EXPENSE
1995 VALUE - 50,400
1996 VALUE - 50,400
THEREAFTER - GROWING AT GROWTH RATE TAXG
DILLARDS HVAC , REFERRED TO AS DHVC
DESCRIBED AS DILLARDS HVAC CONTRIBUTION
AN INFORMATIONAL EXPENSE
1995 VALUE - 54,000
THEREAFTER - GROWING AT GROWTH RATE EXPG
MCRAE'S HVAC I REFERRED TO AS MHVC
DESCRIBED AS MCRAE'S HVAC CONTRIBUTION
AN INFORMATIONAL EXPENSE
1995 VALUE - 71,750
1996 VALUE - 71,750
1997 VALUE - 71,750
1998 VALUE - 71,750
1999 VALUE - 71,75O
2000 VALUE - 82,000
2001 VALUE - 82,000
20O2 VALUE - 82,000
2003 VALUE - 82,000
2004 VALUE - 82,000
2005 VALUE - 92,250
THEREAFTER - CONSTANT
GAYFERS HVAC , REFERRED TO AS GHVC
DESCRIBED AS GAYFER'S HVAC CONTRIBUTION
AN INFORMATIONAL EXPENSE
1995 VALUE - 100,929
THEREAFTER - GROWING AT GROWTH RATE EXPG
JC PENNEY'S HVAC , REFERRED TO AS JHVC
DESCRIBED AS JC PENNEY HVAC CONTRIBUTION
AN INFORMATIONAL EXPENSE
1995 VALUE - 40,935
THEREAFTER - CONSTANT
MAJORS HVAC CONTR., REFERRED TO AS MJHV
DESCRIBED AS TOTAL MAJORS HVAC CONTRIBUTION
AN INFORMATIONAL EXPENSE
+100.0% OF DHVC+100.0% OF MHVC
+100.0% OF GHVC+100.0% OF JHVC
<PAGE>
PAGE 9
TOTAL MAJOR CONTR., REFERRED TO AS TMAJ
DESCRIBED AS TOTAL MAJOR CONTRIBUTIONS;INCLUDES CAM,HVAC AND "OTHER"
AN INFORMATIONAL EXPENSE
+100.0% OF MJHV+100.0% OF MAJC
+100.0% OF OMJC
OTHER MAJOR CONTR., REFERRED TO AS OMJC
DESCRIBED AS OTHER MAJORS CONTRIBUTION;INCLUDING RING ROAD CONTRIBUTION.
AN INFORMATIONAL EXPENSE
1995 VALUE - 29,000
THEREAFTER - GROWING AT GROWTH RATE EXPG
VACANCY ALLOWANCE
- -----------------
PERCENTAGE OF POTENTIAL GROSS INCOME
FOR ALL TENANTS SUBJECT TO VACANCY
1995 VALUE - 3.00
1996 VALUE - 3.00
1997 VALUE - 4.00
1998 VALUE - 5.00
THEREAFTER -CONSTANT
MANAGEMENT FEE
- --------------
PERCENTAGE OF MINIMUM AND PERCENTAGE RENTS ONLY
FOR ALL TENANTS
NOT PASSED THROUGH TO TENANTS
1995 VALUE - 3.00
1996 VALUE - 3.00
THEREAFTER - CONSTANT
COMMISSION CALCULATIONS
- -----------------------
STANDARD METHOD #1 - 5.000% OF TOTAL RENT
STANDARD METHOD #2 - 2.500% OF TOTAL RENT
STANDARD METHOD #3 - 3.250% OF TOTAL RENT
STANDARD METHOD #4 - 0.000% OF TOTAL RENT
STANDARD METHOD #5 - 0.000% OF TOTAL RENT
COMMISSION PAYOUTS
- ------------------
STANDARD METHOD #1 - CASHED OUT
<PAGE>
PAGE 10
STANDARD METHOD #2 - CASHED OUT
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
ALTERATION CALCULATION
- ----------------------
NONE
ALTERATION PAYOUTS
- ------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - CASHED OUT
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
COMMON AREA MAINTENANCE POOL
- ----------------------------
CONTRIBUTIONS CONTAINED IN EXPENSE /2
BASED ON RECOVERIES ASSIGNED TO COST CENTER 2 = ANCHOR CONTRIB.
FOR THOSE TENANTS WITH THE FOLLOWING PRIMARY CLASSIFICATION CODE(S):
4 - ANCHOR TENANTS
CAPITAL EXPENDITURES
- --------------------
REPL'MENT RESERVE
MARKET RATE RESX, MULTIPLIED BY AREA MEASURE OGLA
CAPITAL REPAIRS
1995 VALUE - 0.00
1996 VALUE - 0.00
1997 VALUE - 1,800,000
1998 VALUE - 1,800,000
THEREAFTER - ZERO
<PAGE>
PAGE 11
PRIMARY CLASSIFICATION CODES
- ----------------------------
1 - MALL SHOP TENANTS
2 - FOOD COURT TENANTS
3 - KIOSK TENANTS
4 - ANCHOR TENANTS
SECONDARY CLASSIFICATION CODES
- ------------------------------
1 TENANTS < 750
2 TENANTS 751-1200
3 TENANTS 1201-2000
4 TENANTS 2001-3600
5 TENANTS 3501-5000
6 TENANTS 5001-10000
7 TENANTS > 10000
8 FOOD COURT TENANTS
9 KIOSK TENANTS
10 ANCHOR TENANTS
COST CENTERS
- ------------
1 - CAM-MALL SHOPS
2 - ANCHOR CONTRIB.
3 - TAX-MALL SHOPS
4 - ADD'L CAM-CAP.EXP.
5 - UTL - UTILITY INCOME
6 - W&S-WATER & SEWER
7 - HVC-HVAC INCOME
8 - OTHER CHARGES
SALES VOLUME PROFILE
- --------------------
PERCENT OF RELATIVE
MONTH ANNUAL SALES VOLUME
- ----- ------------ --------
JAN 8.33% 1.00
FEB 8.33% 1.00
MAR 8.33% 1.00
APR 8.33% 1.00
MAY 8.33% 1.00
JUN 8.33% 1.00
JUL 8.33% 1.00
AUG 8.33% 1.00
SEP 8.33% 1.00
OCT 8.33% 1.00
NOV 8.33% 1.00
<PAGE>
PAGE 12
DEC 8.33% 1.00
------- -------
TOTALS 100.00% 12.00
GLOBAL RECOVERIES
- -----------------
CAM RECOVERY REFERRED TO AS CAM*
DESCRIBED AS CAM RECOVERY FOR NEW AND RENEWING TENANTS
ASSIGNED TO COST CENTER 1 - CAM-MALL SHOPS
PRO RATA SHARERECOVERY OF EXPENSE CAM*
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREAMEASURE OCC2
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
BILL. TAX-95, ADJMT, REFERRED TO AS TX95
DESCRIBED AS TAX RECOVERY FOR TENANTS IN OCCUPANCY IN 1995 OR BEFORE.
ASSIGNED TO COST CENTER 3 - TAX-MALL SHOPS
PRO RATA SHARE RECOVERY OF EXPENSE TX95
PRO RATED ON TENANT SQUARE FOOTAGE
OVER AREA MEASURE OCC2
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR
EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
MALL SHOP TAX RECV, REFERRED TO AS TAX*
DESCRIBED AS TAX RECOVERY FOR NEW AND RENEWING TENANTS
ASSIGNED TO COST CENTER 3 - TAX-MALL SHOPS
PRO RATA SHARE RECOVERY OF EXPENSE TAX'
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE OCC2
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
HVAC/UTIL. RECOV. , REFERRED TO AS UTL*
DESCRIBED AS UTILITY RECOVERY FOR NEW AND RENEWING TENANTS
ASSIGNED TO COST CENTER 7 - HVC-HVAC INCOME
RECOVERY OF AMOUNTS OR RATES GROWING AT A RATE
YEAR I VALUE - MARKET RATE UTLR
THEREAFTER - GROWING AT GROWTH RATE UTLG
CAP - NONE
ADD'L CAM-CAP.EXP., REFERRED TO AS CAPC
ASSIGNED TO COST CENTER 4 - ADD'L CAM-CAP.EXP.
PRO RATA SHARE RECOVERY OF EXPENSE CAPC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE OCC1
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
GLB1
DESCRIBED AS GLOBAL RECOVERY FOR NEW AND RENEWING TENANTS;INCLUDES CAM,TAXES,
AND UTILITY/HVAC.
<PAGE>
PAGE 13
GLOBAL GROUPING
GLOBAL RECOVERY CAM*
GLOBAL RECOVERY TAX*
GLOBAL RECOVERY UTL*
GLOBAL RECOVERY CAPC
TENANT PROLOGUE
- ---------------
MINIMUM RENTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
SALES VOLUMES AND BREAKPOINTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
RENEWAL RENTS ARE COMPOUNDED ANNUALLY
RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET
REFERENCE TENANTS
- -----------------
THERE ARE A TOTAL OF 9 REFERENCE TENANT(S):
- -------------------------------------------------------------------------------
# 1 - MKT1
BASE LEASE DATES: 1/1996 TO 12/2005
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 1 - TENANTS < 750
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - O/YEAR
THEREAFTER - GROWING AT 0.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
RECAPTURES: NONE
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
<PAGE>
PAGE 14
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT1
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLBI
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 2 - MKT2
BASE LEASE DATES: 1/1996 TO 12/2005
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE! 1
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 2 - TENANTS 751-1200
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 0/YEAR
THEREAFTER - GROWING AT 0.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
RECAPTURES: NONE
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
<PAGE>
PAGE 15
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT2
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 3 - MKT3
BASE LEASE DATES: 1/1996 TO 12/2005
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 3 - TENANTS 1201-2000
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT :
INITIAL RENT - 0.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 0/YEAR
THEREAFTER - GROWING AT 0.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
RECAPTURES: NONE
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
<PAGE>
PAGE 16
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT`3
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 4 - MKT4
BASE LEASE DATES: 1/1996 TO 12/2005
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 4 - TENANTS 2001-3500
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 0/YEAR
THEREAFTER - GROWING AT 0.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
RECAPTURES: NONE
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
<PAGE>
PAGE 17
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT4
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 5 - MKT5
BASE LEASE DATES: 1/1996 TO 12/2005
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 5 - TENANTS 3501-5000
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 0/YEAR
THEREAFTER - GROWING AT 0.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
RECAPTURES: NONE
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
<PAGE>
PAGE 18
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT5
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 6 - MKT6
BASE LEASE DATES: 1/1996 TO 12/2005
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 6 - TENANTS 5001-10000
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 0/YEAR
THEREAFTER - GROWING AT 0.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
RECAPTURES: NONE
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
<PAGE>
PAGE 19
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT6
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 7 - MXT7
BASE LEASE DATES: 1/1996 TO 12/2005
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1
PRIMARY CODE: 1 - MALL SHOP TENANTS
SECONDARY CODE: 7 - TENANTS > 10000
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 0/YEAR
THEREAFTER - GROWING AT 0.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
RECAPTURES: NONE
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
<PAGE>
PAGE 20
LENGTH VACANT SO FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE MKT7
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT-
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY GLB1
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 8 - MKT8-FOOD COURT
BASE LEASE DATES: 1/1996 TO 12/2005
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1
PRIMARY CODE: 2 - FOOD COURT TENANTS
SECONDARY CODE: 8 - FOOD COURT TENANTS
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 0/YEAR
THEREAFTER - GROWING AT 0.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
RECAPTURES: NONE
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
<PAGE>
PAGE 21
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 10.00 2 NONE NONE YES YES
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE SALR
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 60
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES: NONE
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE ALTB
RENEWAL PAYOUT: CASHED OUT
- ------------------- ----------------------------------------------------------
# 9 - MKT9-KIOSKS
BASE LEASE DATES: 1/1996 TO 12/2000
TYPE OF TENANT: RETAIL
SQUARE FOOTAGE: 1
PRIMARY CODE: 3 - KIOSK TENANTS
SECONDARY CODE: 9 - KIOSK TENANTS
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
PERCENTAGE RENT:
INITIAL SALES - 0/YEAR
THEREAFTER - GROWING AT 0.00%
WITH A NATURAL BREAKPOINT PLUS MINIMUM RENT
RECAPTURES: NONE
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
<PAGE>
PAGE 22
1 5.00 2 NONE NONE YES NO
2 5.00 2 NONE NONE YES NO
RENEWAL MINIMUM RENT:
100.00% OF HIGHER OF 100.00% OF FINAL EFFECTIVE RENT, MARKET RATE /7
MULTIPLIED BY 1.000, OR FINAL RENT GROWING AT 0.00%
FROM DATE OF ESTABLISHMENT
WITH PERCENTAGE STEPS OF
10.00 AFTER MONTH 36
FINAL EFFECTIVE RENT IS LAST MINIMUM PLUS OVERAGE
RENEWAL PERCENTAGE RENT:
SALES AND OVERAGE PERCENTAGE(S) WILL CONTINUE FROM BASE LEASE
RENEWAL RECOVERIES: NONE
RENEWAL COMMISSIONS: MARKET RATE COMB
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: NONE
<PAGE>
PRO-Ject+ Tenant Register Report
<PAGE>
NORTHPARK MALL
PROJECT DESIGNATOR: NPRK
TENANT REGISTER
6/1/96 @ 10:27
TENANT SQUARE FEET BEGIN DATE END DATE
- ------------------------------------- ----------- ---------- --------
# 1 - SUITE 102 EDDIE BAUER 5,792 5/1993 1/2004
# 2 - SUITE 112 VACANT LEASE-UP 2,395 4/1998 3/2008
# 3 - SUITE 114 U.S. MALE 1,761 11/1989 12/1999
# 4 - SUITE 202 CASUAL CORNER 3,670 9/1994 9/2004
# 5 - SUITE 204 THE GAP 8,785 5/1995 5/2003
# 6 - SUITE 210 STRIDE RITE 1,100 10/1994 9/2004
# 7 - SUITE 212 AMERICAN EAGLE 3,830 4/1990 1/2001
# 8 - SUITE 214 VACANT LEASE-UP 3,369 6/1996 5/2006
# 9 - SUITE 216 THE DISNEY STORE 3,716 10/1993 10/2003
# 10 - SUITE 226 LANE BRYANT 6,364 7/1994 7/2006
# 11 - SUITE 228 EXPRESS 8,730 11/1994 1/2007
# 12 - SUITE 230 THINGS REMEMBERED 1,250 6/1990 6/2000
# 13 - SUITE 232 FRIEDMANS 904 11/1995 12/2005
# 14 - SUITE 234 MOTHERHOOD 1,191 3/1989 3/1999
# 15 - SUITE 236 FOOTLOCKER 3,451 11/1991 10/2001
# 16 - SUITE 238 RADIO SHACK 2,737 9/1984 9/1996
# 17 - SUITE 242 LENS CRAFTERS 6,500 2/1988 2/1998
# 18 - SUITE 302 CYBERSTATION 2,810 6/1996 5/2006
# 19 - SUITE 304 MASTER CUTS 1,095 3/1995 2/2005
# 20 - SUITE 306 PET CONNECTION 1,962 11/1989 12/1999
# 21 - SUITE 308 GENERAL NUTRITION 1,951 10/1994 9/2004
# 22 - SUITE 310 BLOCKBUSTER MUSIC 1,860 2/1992 3/2000
# 23 - SUITE 314 CHICK-FIL-A 2,370 9/1984 9/1999
# 24 - SUITE 316 GYMBOREE 1,200 10/1994 1/2005
# 25 - SUITE 318 THE BODY SHOP 675 6/1994 5/2004
# 26 - SUITE 320 KIDS FOOTLOCKER 1,701 2/1992 1/2002
# 27 - SUITE 402 KIRKLANDS 4,096 10/1993 1/2003
# 28 - SUITE 406 SPORTS AVE 1,396 11/1995 8/2005
# 29 - SUITE 408 MERLE NORMAN 668 11/1986 10/1996
# 30 - SUITE 410 CALIFORNIA NAILS 562 9/1994 10/1997
# 31 - SUITE 412 BENTLEY'S LUGGAGE 3,471 3/1994 12/2003
# 32 - SUITE 502 THE SHOE DEPT. 3,668 11/1993 1/2004
# 33 - SUITE 506 VACANT LEASE-UP 2,611 6/1998 5/2008
# 34 - SUITE 508 PAYLESS SHOES 2,924 11/1987 11/1997
# 35 - SUITE 510 AFTERTHOUGHTS 1,065 10/1994 9/2004
# 36 - SUITE 512 FAMILY BOOKSTORES 2,296 11/1994 12/2000
# 37 - SUITE 602 STRUCTURE 5,337 10/1993 1/2006
# 38 - SUITE 606 ELECTRONICS BOUTIQ 987 5/1992 4/2002
# 39 - SUITE 608 SUNGLASS HUT 620 3/1996 1/2006
# 40 - SUITE 610 BARNIE'S COFFEE 551 1/1988 12/1996
# 41 - SUITE 612 VACANT LEASE-UP 600 10/1996 9/2006
# 42 - SUITE 614 VACANT LEASE-UP 2,320 2/1998 1/2008
# 43 - SUITE 708 WARNER BROS. 7,414 4/1995 3/2007
# 44 - SUITE 718 GAP KIDS/BABY GAP 5,093 3/1995 3/2000
# 45 - SUITE 724 BANANA REPUBLIC 5,112 3/1995 3/2000
# 46 - SUITE 732 BATH & BODY 2,527 3/1995 3/2005
# 47 - SUITE 736 J RIGGINS 2,302 3/1985 1/2004
# 48 - SUITE 738 VICTORIA SECRETS 5,764 10/1992 1/2005
# 49 - SUITE 802 COOK AND LOVE 1,836 7/1987 7/1997
<PAGE>
NORTHPARK MALL PAGE 2
TENANT SQUARE FEET BEGIN DATE END DATE
- ------------------------------------- ----------- ---------- --------
# 50 - SUITE 804 WICKS N STICKS 772 9/1994 9/2004
# 51 - SUITE 806 GARDEN BOTANIKA 1,514 6/1996 5/2006
# 52 - SUITE 808 SOFTWARE, ETC 1,106 4/1994 3/2004
# 53 - SUITE 810 TRADITIONAL JEWEL 1,037 7/1992 5/1997
# 54 - SUITE 812 WILLIAMS SONOMA 3,838 10/1995 1/2008
# 55 - SUITE 814 LIMITED TOO 4,055 3/1995 2/2007
# 56 - SUITE 816 THE LIMITED 7,280 6/1994 6/2006
# 57 - SUITE 819 LAURA ASHLEY 1,882 4/1987 1/1998
# 58 - SUITE 820 COUNTY SEAT 4,340 11/1994 1/2005
# 59 - SUITE 822 THE BOMBAY COMPANY 4,655 11/1994 10/2006
# 60 - SUITE 824 PAUL HARRIS 4,082 3/1985 3/1997
# 61 - SUITE 826 VACANT LEASE-UP 3,289 11/1997 10/2007
# 62 - SUITE 828 RACK ROOM SHOES 4,898 4/1996 3/2006
# 63 - SUITE 1002 THE MAN HOLE 2,442 9/1987 8/1997
# 64 - SUITE 1004 VACANT LEASE-UP 1,350 4/1997 3/2007
# 65 - SUITE 1008 SBARRO'S 1,569 10/1994 9/2004
# 66 - SUITE 1010 VACANT LEASE-UP 820 11/1996 10/2006
# 67 - SUITE 1012 RUBY TUESDAY 4,455 7/1985 7/2000
# 68 - SUITE 1102 ARBY'S 1,995 10/1994 12/2004
# 69 - SUITE 1104 MORRISONS CAFE 8,694 9/1984 9/2004
# 70 - SUITE 1106 TROPIK SUN FRUIT 397 12/1991 12/2000
# 71 - SUITE 1108 REEDS JEWELRY 1,073 2/1995 1/2005
# 72 - SUITE 1110 PETITE SOPHISTICAT 2,064 5/1993 4/2004
# 73 - SUITE 1114 NINE WEST 1,206 4/1995 3/2005
# 74 - SUITE 1118 ANN TAYLOR 5,427 9/1995 1/2006
# 75 - SUITE 1120 CACHE 2,087 9/1996 8/2006
# 76 - SUITE 1122 LYNNS HALLMARK 2,724 7/1993 12/2004
# 77 - SUITE 1202 NATURE COMPANY 1,694 10/1992 1/2005
# 78 - SUITE 1204 CRABTREE & EVELYN 1,015 11/1994 12/2004
# 79 - SUITE 1206 FREDERICKS 1,015 5/1990 1/1999
# 80 - SUITE 1208 EASY SPIRIT 1,040 7/1995 3/2005
# 81 - SUITE 1210 5-7-9 SHOP 1,363 9/1984 9/1996
# 82 - SUITE 1212 JEANS WEST 1,310 9/1984 9/1996
# 83 - SUITE 1213 SUNGLASS HUT INT'L 570 1/1996 1/2006
# 84 - SUITE 1214 VACANT LEASE-UP 154 6/1997 5/2007
# 85 - SUITE 1216 LERNERS 5,354 2/1986 2/1998
# 86 - SUITE 1220 THE FINISH LINE 6,255 11/1995 10/2005
# 87 - SUITE 1304 CAMELOT MUSIC 4,799 1/1985 12/2001
# 88 - SUITE 1306 TRADE SECRETS 1,367 10/1995 9/2005
# 89 - SUITE 1308 ABERCROMBE & FITCH 10,600 8/1996 7/2008
# 90 - SUITE 1312 SWEET FACTORY 688 6/1996 5/2006
# 91 - SUITE 1316 ANTIE ANNE PRETZEL 550 8/1996 7/2006
# 92 - SUITE 1320 LADY FOOTLOCKER 2,658 11/1995 6/2005
# 93 - SUITE 1322 CLAIRES BOUTIQUE 728 7/1995 7/2005
# 94 - SUITE 1324 SUNCOAST MOTION 2,421 10/1989 1/2000
# 95 - SUITE 1326 KAY BEE TOYS 3,104 9/1984 9/1996
# 96 - SUITE 1328 VACANT LEASE-UP 2,088 8/1997 7/2007
# 97 - SUITE 1404 GINGISS FORMALWEAR 1,120 10/1994 9/2002
# 98 - SUITE 1406 WOLF CAMERA 1,302 8/1991 7/2001
# 99 - SUITE 1410 STEAK ESCAPE 2,029 10/1996 9/2006
#100 - SUITE 1412 B. DALTON BOOKS 6,660 4/1994 1/2006
#101 - SUITE 1412 VACANT LEASE-UP 1,745 2/1997 1/2007
<PAGE>
NORTHPARK MALL PAGE 3
TENANT SQUARE FEET BEGIN DATE END DATE
- ------------------------------------- ----------- ---------- --------
#102 - SUITE 1416 NORTHPARK BARBER 810 1/1988 12/1997
#103 - SUITE 1418 TRUSTMARK NATIONAL 156 10/1995 9/2000
#104 - SUITE 1602 PACIFIC SUNWEAR 2,240 9/1995 12/2005
#105 - SUITE 1604 UPS & DOWNS 2,267 10/1996 9/2006
#106 - SUITE 1606 DOLCIS 1,640 12/1994 12/2004
#107 - SUITE 1608 LEE MICHEALS JEWL. 1,525 10/1995 12/2005
#108 - SUITE 1610 GREAT AMERICAN CO. 604 10/1994 9/2004
#109 - SUITE 1612 WE LOVE YOGURT 690 1/1996 12/2005
#110 - SUITE 1614 CHAMPS SPORTS 5,106 4/1992 3/2002
#111 - SUITE 1801 COMMUNITY ROOM 1 1/1996 12/2015
#112 - SUITE 1807 UNDERGROUND 2,032 7/1996 6/2006
#113 - SUITE 2001 AT&T PHONE CENTER 1,698 10/1987 4/1996
#114 - SUITE 2003 CPI PHOTO FINISH 1,323 10/1994 9/1999
#115 - SUITE 2005 EYEMASTERS 3,450 4/1994 3/2004
#116 - SUITE W.S.STORSTORAGE 1,065 10/1995 9/2010
#117 - ANCHOR REFERENCE 1 1/1995 12/2014
-----------
117 TENANTS 309,677
===========
<PAGE>
PRO-Ject+ Lease Expiration Report
<PAGE>
NORTHPARK MALL
PROJECT DESIGNATOR: NPRK
EXPIRATION REPORT
YEARS 1996 TO 2008, ALL TENANTS,
INCLUDING OPTIONS, INCLUDING RENEWALS,
EXCLUDING BASE LEASES AND PRIOR OPTIONS,
BASE RENTS INCLUDING CPI ADJUSTMENTS,
INCLUDING PERCENTAGE RENTS
6/ 1/96 @ 10:29
<TABLE>
<CAPTION>
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- ------------------- --------- --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
#113-SUITE 2001 INITIAL
AT&T PHONE CENTER 1,698 4/1996 20.00 0.00 20.00 30.00
--------- ------- ------- ------- -------
1 FY 96 EXPIRATIONS 1,698 20.00 0.00 20.00 30.00
# 81-SUITE 1210 INITIAL
5-7-9 SHOP 1,363 9/1996 17.00 13.05 30.05 30.00
# 82-SUITE 1212 INITIAL
JEANS WEST 1,310 9/1996 17.00 13.15 30.15 30.00
# 95-SUITE 1326 INITIAL
KAY BEE TOYS 3,104 9/1996 20.00 11.25 31.24 27.50
# 16-SUITE 238 INITIAL
RADIO SHACK 2,737 9/1996 15.50 11.86 27.36 27.50
# 29-SUITE 408 INITIAL
MERLE NORMAN 668 10/1996 26.43 14.32 40.74 65.00
# 40-SUITE 610 INITIAL
BARNIE'S COFFEE 551 12/1996 45.36 13.39 58.76 66.95
# 60-SUITE 824 INITIAL
PAUL HARRIS 4,082 3/1997 15.00 12.78 27.78 25.75
# 53-SUITE 810 INITIAL
TRADITIONAL JEWEL 1,037 5/1997 48.35 13.13 61.48 46.35
--------- ------- ------- ------- -------
8 FY 97 EXPIRATIONS 14,852 20.47 12.46 32.93 31.94
--------- ------- ------- ------- -------
9 CUMULATIVE EXPS 16,550 20.42 11.19 31.60 31.74
# 49-SUITE 802 INITIAL
COOK AND LOVE 1,836 7/1997 20.00 11.20 31.20 30.90
# 63-SUITE 1002 INITIAL
THE MAN HOLE 2,442 8/1997 16.00 11.11 27.11 28.32
</TABLE>
<PAGE>
PAGE 2
<TABLE>
<CAPTION>
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- ------------------- --------- --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
# 30-SUITE 410 INITIAL
CALIFORNIA NAILS 562 10/1997 46.83 14.75 61.58 66.95
# 34-SUITE 508 INITIAL
PAYLESS SHOES 2,924 11/1997 17.00 11.58 28.58 28.32
#102-SUITE 1416 INITIAL
NORTHPARK BARBER 810 12/1997 37.48 13.81 51.29 47.74
# 57-SUITE 819 INITIAL
LAURA ASHLEY 1,882 1/1998 17.74 13.68 31.42 31.83
# 85-SUITE 1216 INITIAL
LERNERS 5,354 2/1998 17.00 12.43 29.43 23.87
# 17-SUITE 242 INITIAL
LENS CRAFTERS 6,500 2/1998 12.00 12.37 24.37 23.87
------ ------- ------- ------- -------
8 FY 98 EXPIRATIONS 22,310 17.24 12.27 29.51 28.14
------ ------- ------- ------- -------
17 CUMULATIVE EXPS 38,860 18.59 11.81 30.40 29.67
# 79-SUITE 1206 INITIAL
FREDERICKS 1,015 1/1999 30.01 15.56 45.56 49.17
# 14-SUITE 234 INITIAL
MOTHERHOOD 1,191 3/1999 22.01 13.79 35.80 49.17
------ ------ ------- ------- -------
2 FY 99 EXPIRATIONS 2,206 25.69 14.61 40.29 49.17
------ ------ ------- ------- -------
19 CUMULATIVE EXPS 41,066 18.97 11.96 30.93 30.72
# 23-SUITE 314 INITIAL
CHICK-FIL-A 2,370 9/1999 42.09 13.75 55.84 30.05
#114-SUITE 2003 INITIAL
CPI PHOTO FINISH 1,323 9/1999 25.41 14.80 40.22 32.78
# 3-SUITE 114 INITIAL
U.S. MALE 1,761 12/1999 23.85 12.62 36.47 33.77
# 20-SUITE 306 INITIAL
PET CONNECTION 1,962 12/1999 15.30 13.54 28.84 33.77
# 94-SUITE 1324 INITIAL
SUNCOAST MOTION 2,421 1/2000 27.00 14.49 41.49 30.95
</TABLE>
<PAGE>
PAGE 3
<TABLE>
<CAPTION>
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- ------------------- --------- --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
# 45-SUITE 724 INITIAL
BANANA REPUBLIC 5,112 3/2000 28.00 13.78 41.78 25.32
# 22-SUITE 310 INITIAL
BLOCKBUSTER MUSIC 1,860 3/2000 28.00 14.13 42.13 33.77
# 44-SUITE 718 INITIAL
GAP KIDS/BABY GAP 5,093 3/2000 31.01 15.02 46.03 25.32
--------- ------- ------- ------- -------
8 FY100 EXPIRATIONS 21,902 28.49 14.12 42.61 29.06
--------- ------- ------- ------- -------
27 CUMULATIVE EXPS 62,968 22.28 12.71 34.99 30.14
# 12-SUITE 230 INITIAL
THINGS REMEMBERED 1,250 6/2000 28.00 12.90 40.91 33.77
# 67-SUITE 1012 INITIAL
RUBY TUESDAY 4,455 7/2000 22.79 13.82 36.61 28.14
#103-SUITE 1418 INITIAL
TRUSTMARK NATIONAL 156 9/2000 76.92 3.38 80.31 73.16
# 36-SUITE 512 INITIAL
FAMILY BOOKSTORES 2,296 12/2000 22.44 14.62 37.06 31.88
# 70-SUITE 1106 INITIAL
TROPIK SUN FRUIT 397 12/2000 74.84 17.86 92.71 75.35
# 7-SUITE 212 INITIAL
AMERICAN EAGLE 3,830 1/2001 26.84 12.95 39.79 28.98
--------- ------- ------- ------- -------
6 FY101 EXPIRATIONS 12,384 26.85 13.61 40.46 31.74
--------- ------- ------- ------- -------
33 CUMULATIVE EXPS 75,352 23.03 12.86 35.89 30.41
# 98-SUITE 1406 INITIAL
WOLF CAMERA 1,302 7/2001 34.56 14.28 48.84 34.78
# 15-SUITE 236 INITIAL
FOOTLOCKER 3,451 10/2001 42.05 15.68 57.74 31.88
# 87-SUITE 1304 INITIAL
CAMELOT MUSIC 4,799 12/2001 29.91 13.90 43.80 29.85
# 26-SUITE 320 INITIAL
KIDS FOOTLOCKER 1,701 1/2002 29.64 16.15 45.79 35.82
</TABLE>
<PAGE>
PAGE 4
<TABLE>
<CAPTION>
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- ------------------- --------- --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
#110-SUITE 1614 INITIAL
CHAMPS SPORTS 5,106 3/2002 23.15 13.61 36.76 26.87
# 38-SUITE 606 INITIAL
ELECTRONICS BOUTIQ 987 4/2002 77.71 13.43 91.15 53.73
--------- ------- ------- ------- -------
6 FY102 EXPIRATION 17,346 33.38 14.39 47.77 31.69
--------- ------- ------- ------- -------
39 CUMULATIVE EXPS 92,698 24.97 13.14 38.11 30.65
# 97-SUITE 1404 INITIAL
GINGISS FORMALWEAR 1,120 9/2002 38.85 16.69 55.54 53.73
# 27-SUITE 402 INITIAL
KIRKLANDS 4,096 1/2003 26.71 16.62 43.33 30.75
# 5-SUITE 204 INITIAL
THE GAP 8,785 5/2003 42.75 16.13 58.88 27.67
--------- ------- ------- ------- -------
3 FY103 EXPIRATIONS 14,001 37.75 16.32 54.06 30.66
--------- ------- ------- ------- -------
42 CUMULATIVE EXPS 106,699 26.65 13.56 40.21 30.65
# 9-SUITE 216 INITIAL
THE DISNEY STORE 3,716 10/2003 24.00 16.50 40.50 30.75
# 31-SUITE 412 INITIAL
BENTLEY'S LUGGAGE 3,471 12/2003 18.00 16.62 34.62 34.84
# 1-SUITE 102 INITIAL
EDDIE BAUER 5,792 1/2004 30.70 17.05 47.75 28.50
# 32-SUITE 502 INITIAL
THE SHOE DEPT. 3,668 1/2004 25.00 17.14 42.14 31.67
# 47-SUITE 736 INITIAL
J RIGGINS 2,302 1/2004 30.00 17.15 47.15 34.84
# 52-SUITE 808 INITIAL
SOFTWARE, ETC 1,106 3/2004 51.46 17.14 68.60 57.00
#115-SUITE 2005 INITIAL
EYEMASTERS 3,450 3/2004 18.00 17.14 35.14 34.84
# 72-SUITE 1110 INITIAL
PETITE SOPHISTICAT 2,064 4/2004 25.19 16.59 41.78 34.84
</TABLE>
<PAGE>
PAGE 5
<TABLE>
<CAPTION>
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- ------------------- --------- --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
# 25-SUITE 318 INITIAL
THE BODY SHOP 675 5/2004 59.25 18.90 78.15 82.34
--------- ------- ------- ------- -------
9 FY104 EXPIRATIONS 26,244 26.72 16.96 43.68 34.57
--------- ------- ------- ------- -------
51 CUMULATIVE EXPS 132,943 26.66 14.23 40.89 31.42
# 50-SUITE 804 INITIAL
WICKS N STICKS 772 9/2004 46.63 17.15 63.78 82.34
# 65-SUITE 1008 INITIAL
SBARRO'S 1,569 9/2004 35.79 17.51 53.31 38.00
# 35-SUITE 510 INITIAL
AFTERTHOUGHTS 1,065 9/2004 33.80 17.15 50.95 57.00
#108-SUITE 1610 INITIAL
GREAT AMERICAN CO. 604 9/2004 79.47 27.10 106.57 82.34
# 69-SUITE 1104 INITIAL
MORRISONS CAFE 8,694 9/2004 14.09 17.27 31.37 28.50
# 6-SUITE-210 INITIAL
STRIDE RITE 1,100 9/2004 50.24 17.15 67.39 57.00
# 21-SUITE 308 INITIAL
GENERAL NUTRITION 1,951 9/2004 29.00 15.09 44.09 38.00
# 4-SUITE 202 INITIAL
CASUAL CORNER 3,670 9/2004 27.00 17.75 44.75 31.67
# 68-SUITE 1102 INITIAL
ARBY'S 1,995 12/2004 20.88 20.74 41.62 39.14
# 76-SUITE 1122 INITIAL
LYNNS HALLMARK 2,724 12/2004 26.73 14.67 41.40 35.88
#106-SUITE 1606 INITIAL
DOLCIS 1,640 12/2004 40.00 15.89 55.90 39.14
# 78-SUITE 1204 INITIAL
CRABTREE & EVELYN 1,015 12/2004 49.27 17.14 66.41 58.71
# 58-SUITE 820 INITIAL
COUNTY SEAT 4,340 1/2005 33.00 16.23 49.23 32.62
# 77-SUITE 1202 INITIAL
NATURE COMPANY 1,694 1/2005 34.38 17.55 51.93 39.14
</TABLE>
<PAGE>
PAGE 6
<TABLE>
<CAPTION>
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- ------------------- --------- --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
# 48-SUITE 738 INITIAL
VICTORIA SECRETS 5,764 1/2005 28.83 15.27 44.10 29.36
# 71-SUITE 1108 INITIAL
REEDS JEWELRY 1,073 1/2005 60.21 23.58 83.79 58.71
# 24-SUITE 316 INITIAL
GYMBOREE 1,200 1/2005 44.13 17.64 61.77 58.71
# 19-SUITE 304 INITIAL
MASTER CUTS 1,095 2/2005 36.53 17.72 54.25 58.71
# 73-SUITE 1114 INITIAL
NINE WEST 1,206 3/2005 37.50 18.92 56.42 39.14
# 80-SUITE 1208 INITIAL
EASY SPIRIT 1,040 3/2005 42.00 11.10 53.10 58.71
# 46-SUITE 732 INITIAL
BATH & BODY 2,527 3/2005 27.00 16.86 43.86 35.88
--------- ------- ------- ------- -------
21 FY105 EXPIRATIONS 46,738 30.43 17.01 47.43 38.68
--------- ------- ------- ------- -------
72 CUMULATIVE EXPS 179,681 27.64 14.95 42.59 33.31
# 92-SUITE 1320 INITIAL
LADY FOOTLOCKER 2,658 6/2005 28.22 15.93 44.15 35.88
# 93-SUITE 1322 INITIAL
CLAIRES BOUTIQUE 728 7/2005 57.69 19.50 77.19 84.81
# 28-SUITE 406 INITIAL
SPORTS AVE 1,396 8/2005 35.00 16.72 51.72 39.14
# 88-SUITE 1306 INITIAL
TRADE SECRETS 1,367 9/2005 27.80 17.05 44.85 39.14
# 86-SUITE 1220 INITIAL
THE FINISH LINE 6,255 10/2005 20.00 20.12 40.12 29.36
# 13-SUITE 232 INITIAL
FRIEDMANS 904 12/2005 66.37 21.07 87.44 60.48
#107-SUITE 1608 INITIAL
LEE MICHEALS JEWL. 1,525 12/2005 37.00 19.68 56.68 40.32
#104-SUITE 1602 INITIAL
PACIFIC SUNWEAR 2,240 12/2005 29.46 16.84 46.30 36.96
</TABLE>
<PAGE>
PAGE 7
<TABLE>
<CAPTION>
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- ------------------- --------- --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
#109-SUITE 1612 INITIAL
WE LOVE YOGURT 690 12/2005 68.83 27.72 96.56 87.35
# 83-SUITE 1213 INITIAL
SUNGLASS HUT INT'L 570 1/2006 73.68 17.87 91.56 87.35
# 39-SUITE 608 INITIAL
SUNGLASS HUT 620 1/2006 72.58 17.09 89.67 87.35
# 74-SUITE 1118 INITIAL
ANN TAYLOR 5,427 1/2006 25.00 16.80 41.80 30.24
#100-SUITE 1412 INITIAL
B. DALTON BOOKS 6,660 1/2006 33.10 18.21 51.31 30.24
# 37-SUITE 602 INITIAL
STRUCTURE 5,337 1/2006 22.00 16.89 38.90 30.24
# 62-SUITE 828 INITIAL
RACK ROOM SHOES 4,898 3/2006 22.00 17.11 39.11 33.60
# 8-SUITE 214 INITIAL
VACANT LEASE-UP 3,369 5/2006 30.25 17.10 47.36 36.96
# 90-SUITE 1312 INITIAL
SWEET FACTORY 688 5/2006 66.85 23.70 90.56 87.35
# 18-SUITE 302 INITIAL
CYBERSTATION 2,810 5/2006 24.02 17.10 41.12 36.96
# 51-SUITE 806 INITIAL
GARDEN BOTANIKA 1,514 5/2006 38.00 16.86 54.86 40.32
--------- ------- ------- ------- -------
19 FY106 EXPIRATIONS 49,656 30.21 17.92 48.13 37.32
--------- ------- ------- ------- -------
91 CUMULATIVE EXPS 229,337 28.20 15.59 43.79 34.18
#113-SUITE 2001 RENEWAL 1
AT&T PHONE CENTER 1,698 6/2006 33.00 17.10 50.11 40.32
#112-SUITE 1807 INITIAL
UNDERGROUND 2,032 6/2006 25.00 17.10 42.10 36.96
# 56-SUITE 816 INITIAL
THE LIMITED 7,280 6/2006 22.00 16.15 38.15 30.24
# 10-SUITE 226 INITIAL
LANE BRYANT 6,364 7/2006 24.00 17.25 41.26 30.24
</TABLE>
<PAGE>
PAGE 8
<TABLE>
<CAPTION>
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- ------------------- --------- --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
# 91-SUITE 1316 INITIAL
ANTIE ANNE PRETZEL 550 7/2006 72.72 17.11 89.83 87.35
# 75-SUITE 1120 INITIAL
CACHE 2,087 8/2006 25.00 17.11 42.11 36.96
# 99-SUITE 1410 INITIAL
STEAK ESCAPE 2,029 9/2006 27.50 17.10 44.61 36.96
#105-SUITE 1604 INITIAL
UPS & DOWNS 2,267 9/2006 27.50 17.11 44.61 36.96
# 41-SUITE 612 INITIAL
VACANT LEASE-UP 600 9/2006 66.00 17.10 83.10 87.35
# 66-SUITE 1010 INITIAL
VACANT LEASE-UP 820 10/2006 49.51 17.11 66.61 60.48
# 59-SUITE 822 INITIAL
THE BOMBAY COMPANY 4,655 10/2006 29.00 18.21 47.21 33.60
# 16-SUITE 238 RENEWAL 1
RADIO SHACK 2,737 11/2006 30.25 17.10 47.36 36.96
# 95-SUITE-1326 RENEWAL 1
KAY BEE TOYS 3,104 11/2006 30.25 17.11 47.36 36.96
# 82-SUITE 1212 RENEWAL 1
JEANS WEST 1,310 11/2006 33.00 17.10 50.11 40.32
# 81-SUITE 1210 RENEWAL 1
5-7-9 SHOP 1,363 11/2006 33.00 17.11 50.10 40.32
# 29-SUITE 408 RENEWAL 1
MERLE NORMAN 668 12/2006 73.65 17.10 90.75 89.98
# 11-SUITE 228 INITIAL
EXPRESS 8,730 1/2007 22.00 17.92 39.92 31.15
#101-SUITE 1412 INITIAL
VACANT LEASE-UP 1,745 1/2007 33.00 17.43 50.43 41.53
# 40-SUITE 610 RENEWAL 1
BARNIE'S COFFEE 551 2/2007 73.66 17.44 91.10 89.98
# 55-SUITE 814 INITIAL
LIMITED TOO 4,055 2/2007 25.00 17.14 42.14 34.61
# 64-SUITE 1004 INITIAL
VACANT LEASE-UP 1,350 3/2007 33.00 17.43 50.44 41.53
</TABLE>
<PAGE>
PAGE 9
<TABLE>
<CAPTION>
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- ------------------- --------- --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
# 43-SUITE 708 INITIAL
WARNER BROS. 7,414 3/2007 25.00 18.90 43.91 31.15
# 60-SUITE 824 RENEWAL 1
PAUL HARRIS 4,082 5/2007 28.32 17.44 45.76 34.61
# 84-SUITE 1214 INITIAL
VACANT LEASE-UP 154 5/2007 66.00 17.45 83.45 89.98
--------- ------- ------- ------- -------
24 FY107 EXPIRATIONS 67,645 28.19 17.44 45.62 36.35
--------- ------- ------- ------- -------
115 CUMULATIVE EXPS 296,982 28.19 16.01 44.21 34.67
# 96-SUITE 1328 INITIAL
VACANT LEASE-UP 2,088 7/2007 30.25 17.44 47.69 38.07
# 53-SUITE 810 RENEWAL I
TRADITIONAL JEWEL 1,037 7/2007 64.98 17.44 82.41 62.29
# 49-SUITE 802 RENEWAL 1
COOK AND LOVE 1,836 9/2007 33.99 17.43 51.42 41.53
# 61-SUITE 826 INITIAL
VACANT LEASE-UP 3,289 10/2007 30.25 17.44 47.69 38.07
# 30-SUITE 410 RENEWAL 1
CALIFORNIA NAILS 562 12/2007 75.86 17.42 93.29 92.67
# 34-SUITE 508 RENEWAL 1
PAYLESS SHOES 2,924 1/2008 32.09 17.98 50.07 39.21
# 54-SUITE 812 INITIAL
WILLIAMS SONOMA 3,838 1/2008 20.00 19.38 39.38 35.64
# 42-SUITE 614 INITIAL
VACANT LEASE-UP 2,320 1/2008 30.25 17.98 48.23 39.21
#102-SUITE 1416 RENEWAL 1
NORTHPARK BARBER 810 2/2008 52.52 17.97 70.49 64.16
# 63-SUITE 1002 RENEWAL 1
THE MAN HOLE 2,442 2/2008 32.09 17.97 50.06 39.21
# 57-SUITE 819 RENEWAL I
LAURA ASHLEY 1,882 3/2008 35.01 17.97 52.99 42.77
# 2-SUITE 112 INITIAL
VACANT LEASE-UP 2,395 3/2008 30.25 17.97 48.22 39.21
</TABLE>
<PAGE>
PAGE 10
<TABLE>
<CAPTION>
TERM/ BASE TOTAL MARKET
TENANT SQUARE FT END DATE RENT/SF RECV/SF RENT/SF RENT/SF
- ------------------- --------- --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
# 85-SUITE 1216 RENEWAL I
LERNERS 5,354 4/2008 26.26 15.94 42.20 32.08
# 17-SUITE 242 RENEWAL 1
LENS CRAFTERS 6,500 4/2008 26.26 17.97 44.23 32.08
# 33-SUITE 506 INITIAL
VACANT LEASE-UP 2,611 5/2008 30.25 17.97 48.23 39.21
--------- ------- ------- ------- -------
15 FY108 EXPIRATIONS 39,888 30.72 17.72 48.44 38.73
--------- ------- ------- ------- -------
130 CUMULATIVE EXPS 336,870 28.49 16.22 44.71 35.15
</TABLE>
<PAGE>
ENDS Full Data Reports
<PAGE>
Wed Apr 17, 1996 Page 1
CUSTOM SUMMARY REPORT
(POP FACTS: FULL DATA REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6511
PREPARED FOR
CUSHMAN & WAKEFIELD
NORTHPARK MALL
PRIMARY TRADE AREA COORD: 00:00.00 00:00.00
- ------------------------------------------------------------------------------
DESCRIPTION TOTALS
- ------------------------------------------------------------------------------
POPULATION
2001 PROJECTION 150,718
1996 ESTIMATE 135,895
1990 CENSUS 118,910
1980 CENSUS 92,200
GROWTH 1980-1990 28.97%
HOUSEHOLDS
2001 PROJECTION 62,315
1996 ESTIMATE 54,758
1990 CENSUS 45,311
1980 CENSUS 32,056
GROWTH 1980-1990 41.35%
1996 ESTIMATED POPULATION BY RACE 135,895
WHITE 76.98%
BLACK 22.07%
ASIAN & PACIFIC ISLANDER 0.73%
OTHER RACES 0.21%
1996 ESTIMATED POPULATION 135,895
HISPANIC ORIGIN 0.64%
OCCUPIED UNITS 45,311
OWNER OCCUPIED 69.73%
RENTER OCCUPIED 30.27%
1990 AVERAGE PERSONS PER HH 2.59
1996 EST. HOUSEHOLDS BY INCOME 54,758
$150,000 OR MORE 6.90%
$100,000 TO $149,999 5.96%
$75,000 TO $ 99,999 8.52%
$50,000 TO $ 74,999 22.56%
$35,000 TO $ 49,999 17.85%
$25,000 TO $ 34,999 12.08%
$15,000 TO $ 24,999 12.54%
$ 5,000 TO $ 15,000 10.24%
UNDER $ 5,000 3.35%
1996 EST. AVERAGE HOUSEHOLD INCOME $59,358
1996 EST. MEDIAN HOUSEHOLD INCOME $44,904
1996 EST. PER CAPITA INCOME $24,227
<PAGE>
Wed Apr 17, 1996 Page 2
CUSTOM SUMMARY REPORT
(POP FACTS: FULL DATA REPORT)
BY EQUIFAX NATIONAL DECISION SYSTEMS 800-866-6511
PREPARED FOR
CUSHMAN & WAKEFIELD
NORTHPARK MALL
PRIMARY TRADE AREA COORD: 00:00.00 00:00.00
- ------------------------------------------------------------------------------
DESCRIPTION TOTALS
- ------------------------------------------------------------------------------
1996 ESTIMATED POPULATION BY SEX 135,895
MALE 47.80%
FEMALE 52.20%
MARITAL STATUS 92,619
SINGLE MALE 12.61%
SINGLE FEMALE 12.41%
MARRIED 59.07%
PREVIOUSLY MARRIED MALE 4.47%
PREVIOUSLY MARRIED FEMALE 11.44%
HOUSEHOLDS WITH CHILDREN 17,591
MARRIED COUPLE FAMILY 77.86%
OTHER FAMILY-MALE HEAD 3.34%
OTHER FAMILY-FEMALE HEAD 18.33%
NON FAMILY 0.47%
1996 ESTIMATED POPULATION BY AGE 135,895
UNDER 5 YEARS 6.90%
5 TO 9 YEARS 7.07%
10 TO 14 YEARS 7.30%
15 TO 17 YEARS 5.05%
18 TO 20 YEARS 3.55%
21 TO 24 YEARS 4.72%
25 TO 29 YEARS 7.97%
30 TO 34 YEARS 8.60%
35 TO 39 YEARS 9.61%
40 TO 49 YEARS 16.78%
50 TO 59 YEARS 9.02%
60 TO 64 YEARS 3.24%
65 TO 69 YEARS 3.31%
70 TO 74 YEARS 2.41%
75 + YEARS 4.48%
MEDIAN AGE 34.32
AVERAGE AGE 34.97
<PAGE>
- --------------------------------------------------------------------------------
Mall Sales (1991-1994)
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
REGIONAL SHOPPING CENTER SALES SUMMARY 1991
1991 Transactions Chart
Cushman & Wakefield, Inc.
<TABLE>
<CAPTION>
================================================================================================================================
Sale Sale Year Total GLA/ Mall Shop Shop Mall Shop NOI/
No. Property Name Date Built Price GLA Sold GLA Ratio Sales PSF NOI PSF
================================================================================================================================
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C>
91-1 Confidential 12/91 1988/90 $92,500,000 928,000 360,000 38.79% $275 $5,735,000
South Central MSA 360,000 $15.93
- --------------------------------------------------------------------------------------------------------------------------------
91-2 Sarasota Square Mall 12/91 1977/89 $72,000,000 903,000 310,000 34.33% $240 $5,472,000
Sarasota, FL 310,000 $17.65
- --------------------------------------------------------------------------------------------------------------------------------
91-3 Confidential 12/91 1971/83 $108,923,717 990,941 314,239 31.71% $300 $7,900,000
New England MSA * 698,977 $11.30
- --------------------------------------------------------------------------------------------------------------------------------
91-4 Confidential 12/91 1965 $102,559,402 1,024,084 360,000 35.15% $320 $7,425,000
Top 20 Eastern MSA 450,000 $16.50
- --------------------------------------------------------------------------------------------------------------------------------
91-5 Eastland Mall 12/91 1975 $75,115,000 1,024,425 369,575 38.08% $275 $5,874,000
Charlotte, NC 369,575 $15.89
- --------------------------------------------------------------------------------------------------------------------------------
91-6 Alderwood Mall 11/91 1979 $103,750,000 961,700 260,000 27.04% $310 $6,300,000
Lynnwood, WA 260,000 $24.23
- --------------------------------------------------------------------------------------------------------------------------------
91-7 Confidential 11/91 1967 $130,000,000 897,174 329,500 36.73% $300 $8,000,000
Western MSA esc. * 329,500 est. $24.28
- --------------------------------------------------------------------------------------------------------------------------------
91-8 The Oaks 10/91 1978/83 $115,000,000 1,084,575 359,000 33.10% $295 $7,000,000
Thousand Oaks, CA * 359,000 $19.50
- --------------------------------------------------------------------------------------------------------------------------------
91-9 Mayfair Mall 10/91 1958/86 $125,000,000 859,000 330,000 38.42% $287 $8,000,000
Wauwatosa, WI ** 649,000 $12.33
- --------------------------------------------------------------------------------------------------------------------------------
91-10 Valley Fair S.C. 7/91 1986 $197,900,000 1,064,190 356,243 33.48% $437 $11,478,000
Santa Clara, CA * 356,243 $32.22
- --------------------------------------------------------------------------------------------------------------------------------
91-11 Montclair Plaza 3/91 1968/85 $210,500,000 1,501,500 369,000 25.91% $363 $12,000,000
Montclair, CA 897,900 $13.36
- --------------------------------------------------------------------------------------------------------------------------------
91-12 Paradise Valley Mall 2/91 1979/91 $160,000,000 1,223,567 417,495 34.12% $250 $9,936,000
Phoenix, AZ * 557,347 *** $17.83
- --------------------------------------------------------------------------------------------------------------------------------
91-13 Mall of Victor Valley 1/91 1986 $102,857,143 579,076 296,501 51.20% $290 $5,760,000
Victorville, CA * 424,678 $13.56
- --------------------------------------------------------------------------------------------------------------------------------
91-14 Edison Mall 1/91 1986 $115,000,000 1,013,030 327,833 32.36% $310 $6,900,000
Ft. Meyers, FL 463,883 $14.87
================================================================================================================================
14 Survey Average $122,221,804 1,003,876 341,385 34.01% $304 $7,698,571
463,293 $15.62
Survey Mean: $17.82
================================================================================================================================
</TABLE>
* Adjusted to reflect 100%
interest.
** Allocated price.
*** As expended.
================================================================================
<TABLE>
<CAPTION>
=========================================================================================================
Capitalization Rates Unit Rate Comparison
-------------------- ---------------------
Sale Going-in Terminal Price/GLA Price/Mall Sales
No. Property Name OAR OAR IRR Purchased Shop GLA Multiple
=========================================================================================================
<C> <S> <C> <C> <C> <C> <C> <C>
91-1 Confidential 6.20% 7.50% 11.50% $257 $257 0.93
South Central MSA
- ---------------------------------------------------------------------------------------------------------
91-2 Sarasota Square Mall 7.60% 8.00% 12.00% $232 $232 0.97
Sarasota, FL
- ---------------------------------------------------------------------------------------------------------
91-3 Confidential 7.25% 8.00% 11.80% $156 $347 1.16
New England MSA
- ---------------------------------------------------------------------------------------------------------
91-4 Confidential 7.24% 7.50% 11.10% $228 $285 0.89
Top 20 Eastern MSA
- ---------------------------------------------------------------------------------------------------------
91-5 Eastland Mall 7.82% 7.50% 11.73% $203 $203 0.74
Charlotte, NC
- ---------------------------------------------------------------------------------------------------------
91-6 Alderwood Mall 6.07% 7.00% 11.80% $399 $399 1.29
Lynnwood, WA
- ---------------------------------------------------------------------------------------------------------
91-7 Confidential 6.15% N/a N/a $395 $395 1.32
Western MSA
- ---------------------------------------------------------------------------------------------------------
91-8 The Oaks 6.09% 7.50% 11.25% $320 $320 1.09
Thousand Oaks, CA
- ---------------------------------------------------------------------------------------------------------
91-9 Mayfair Mall 6.40% N/a 13.00% $193 $379 1.32
Wauwatosa, WI
- ---------------------------------------------------------------------------------------------------------
91-10 Valley Fair S.C. 5.80% 6.50% 11.20% $556 $556 1.27
Santa Clara, CA
- ---------------------------------------------------------------------------------------------------------
91-11 Montclair Plaza 5.70% N/a 11.00% $234 $541 1.49
Montclair, CA
- ---------------------------------------------------------------------------------------------------------
91-12 Paradise Valley Mall 6.21% 6.25% 10.75% $287 $383 1.53
Phoenix, AZ
- ---------------------------------------------------------------------------------------------------------
91-13 Mall of Victor Valley 5.60% N/a N/a $242 $347 1.20
Victorville, CA
- ---------------------------------------------------------------------------------------------------------
91-14 Edison Mall 6.00% 7.50% 11.10% $248 $351 1.13
Ft. Meyers, FL
=========================================================================================================
14 Survey Average -- -- -- $264 $358 1.18
Survey Mean: 8.44% 7.33% 11.52% $282 $357 1.17
=========================================================================================================
</TABLE>
<PAGE>
================================================================================
REGIONAL SHOPPING CENTER SALES SUMMARY 1992
1992 Transactions Chart
Cushman & Wakefield, Inc.
<TABLE>
<CAPTION>
================================================================================================================================
Sale Sale Year Total GLA/ Mail Shop Shop Mail Shop NOI/
No. Property Name Date Built Price GLA Sold GLA Ratio Sales PSF NOI PSF
================================================================================================================================
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C>
92-1 The Avenues 12/92 1990 $124,000,000 987,500 359,645 36.42% $215 $9,734,000
Jacksonville, FL * 480,853 $20.24
- --------------------------------------------------------------------------------------------------------------------------------
92-2 Confidential 12/92 1985 $115,000,000 898,000 330,000 36.76% $310 $8,337,600
Southern California 330,000 $25.27
- --------------------------------------------------------------------------------------------------------------------------------
92-3 West Oaks Mall 9/92 1984/90 $77,500,000 1,018,900 318,900 31.30% $270 $5,580,000
Houston, TX * 393,900 $14.17
- --------------------------------------------------------------------------------------------------------------------------------
92-4 Confidential 7/92 1990/92 $140,000,000 951,985 328,423 34.50% $352 $10,710,300
New England, MSA 363,985 $29.43
- --------------------------------------------------------------------------------------------------------------------------------
92-5 Oakview Mall 6/92 1991 $73,000,000 732,116 252,900 34.54% $275 $5,700,000
Omaha, NE 400,900 est. $14.22
- --------------------------------------------------------------------------------------------------------------------------------
92-6 Altamonte Mall 6/92 1973/74 $112,345,000 1,072,600 392,221 36.57% $300 $8,950,000
Altamonte Springs, FL * 552,708 $16.19
- --------------------------------------------------------------------------------------------------------------------------------
92-7 Monroeville Mall 5/92 1969 $150,000,000 1,302,237 476,928 36.62% $300 $11,250,000
Monroeville, PA 827,173 $13.60
- --------------------------------------------------------------------------------------------------------------------------------
92-8 Northshore S.C. 5/92 1958 $102,875,000 1,240,000 455,000 36.69% $270 $6,173,000
Peabody, MA 755,000 $8.18
- --------------------------------------------------------------------------------------------------------------------------------
92-9 T.C. at Boca Raton 4/92 1980/86 $202,500,000 1,326,400 396,000 29.86% $400 $13,450,000
Boca Raton, FL 396,000 $33.96
- --------------------------------------------------------------------------------------------------------------------------------
92-10 University Square 2/92 1974 $85,000,000 1,155,940 347,312 30.05% $280 $6,375,000
Mall 528,312 $12.07
Tampa, FL
- --------------------------------------------------------------------------------------------------------------------------------
92-11 Clackamas Town Ctr. 1/92 1979/81 $122,400,000 1,206,824 433,000 35.88% $302 $8,568,000
Portland, OR * 433,000 $19.79
================================================================================================================================
11 Survey Average $118,001,818 1,081,137 371,848 34.39% $288 $8,620,709
496,530 $17.36
Survey Mean: $18.68
================================================================================================================================
</TABLE>
* Adjusted to reflect 100%
interest.
================================================================================
<TABLE>
<CAPTION>
=========================================================================================================
Capitalization Rates Unit Rate Comparison
-------------------- ---------------------
Sale Going-in Terminal Price/GLA Price/Mall Sales
No. Property Name OAR OAR IRR Purchased Shop GLA Multiple
=========================================================================================================
<C> <S> <C> <C> <C> <C> <C> <C>
92-1 The Avenues 7.85% n/a 11.50% $258 $345 1.60
Jacksonville, FL
- ---------------------------------------------------------------------------------------------------------
92-2 Confidential 7.25% n/a $348 $348 1.12
Southern California 11.50-
12.00%
- ---------------------------------------------------------------------------------------------------------
92-3 West Oaks Mall 7.20% n/a 12.00% $197 $243 0.90
Houston, TX
- ---------------------------------------------------------------------------------------------------------
92-4 Confidential 7.65% 8.00% $385 $426 1.21
New England, MSA 11.50-
12.00%
- ---------------------------------------------------------------------------------------------------------
92-5 Oakview Mall 7.81% n/a 11.25% $182 $289 1.05
Omaha, NE
- ---------------------------------------------------------------------------------------------------------
92-6 Altamonte Mall 7.97% 8.50% 12.00% $203 $286 0.95
Altamonte Springs, FL
- ---------------------------------------------------------------------------------------------------------
92-7 Monroeville Mall 7.50% n/a 11.50% $181 $315 1.05
Monroeville, PA
- ---------------------------------------------------------------------------------------------------------
92-8 Northshore S.C. 6.00% n/a n/a $136 $226 0.84
Peabody, MA
- ---------------------------------------------------------------------------------------------------------
92-9 T.C. at Boca Raton 6.64% 7.00% 10.75% $511 $511 1.28
Boca Raton, FL
- ---------------------------------------------------------------------------------------------------------
92-10 University Square 7.50% 7.50% 11.50% $161 $245 0.87
Mall
Tampa, FL
- ---------------------------------------------------------------------------------------------------------
92-11 Clackamas Town Ctr. 7.00% n/a 11.60% $283 $283 0.94
Portland, OR
=========================================================================================================
11 Survey Average -- -- -- $239 $319 1.07
Survey Mean: 7.31% 7.75% 11.56% $269 $320 1.07
=========================================================================================================
</TABLE>
<PAGE>
================================================================================
REGIONAL SHOPPING CENTER SALES SUMMARY 1993
1993 Transactions Chart
Chushman & Wakefield, Inc.
<TABLE>
<CAPTION>
================================================================================================================================
Sale Sale Year Total GLA/ Mail Shop Shop Mail Shop NOI/
No. Property Name Date Built Price GLA Sold GLA Ratio Sales PSF NOI PSF
================================================================================================================================
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C>
93-1 The Galleria @ 12/93 1964/ $125,800,000 1,088,317 354,396 32.56% $384 $9,400,000
Ft. Lauderdale, FL 80/83 401,362 90.00% $23.42
- --------------------------------------------------------------------------------------------------------------------------------
93-2 Kenwood Towne Ctr. 12/93 1958/88 $194,000,000 1,076,337 424,045 39.40% $413 $14,800,000
Cincinnati, Ohio 862,936 97.00% $17.15
- --------------------------------------------------------------------------------------------------------------------------------
93-3 Westgate Mall 12/93 1982 $71,000,000 895,000 321,000 35.87% $230 $5,857,500
Amarillo, TX 528,000 89.00% $11.14
- --------------------------------------------------------------------------------------------------------------------------------
93-4 Arden Fair Mall 12/93 1957/81/ $192,400,000 1,065,000 408,700 38.38% $405 $13,468,000
Sacramento, CA 90/93 * 408,700 90.00% $32.95
- --------------------------------------------------------------------------------------------------------------------------------
93-5 Fiesta Mall 12/93 1979/ $124,000,000 1,036,743 313,187 30.21% $341 $9,045,200
Mesa, AZ 89/90 313,187 98.40% $28.88
- --------------------------------------------------------------------------------------------------------------------------------
93-6 Coronado Center 9/93 1964/84 $115,000,000 1,140,570 394,012 34.55% $250 $8,395,000
Albuquerque, NM 512,284 99.70% $16.39
- --------------------------------------------------------------------------------------------------------------------------------
93-7 Clackamas Town Ctr. 7/93 1979/ $114,827,000 1,206,824 433,000 35.88% $302 $8,899,100
Portland, OR 81/93 * 433,000 95.00% $20.55
- --------------------------------------------------------------------------------------------------------------------------------
93-8 Garden State Plaza 7/93 1957/82/ $380,000,000 1,361,000 587,400 43.16% $434 $28,120,000
Paramus, NJ 84/92 1,361,000 98.00% $20.66
- --------------------------------------------------------------------------------------------------------------------------------
93-9 Lakewood Center Mall 6/93 1975 $172,000,000 1,875,953 348,645 18.58% $300 $14,687,800
Lakewood, CA * 596,021 96.40% $24.64
- --------------------------------------------------------------------------------------------------------------------------------
93-10 Carolina Place 6/93 1991 $116,000,000 1,097,826 318,528 29.01% $200 $8,248,000
Charlotte, NC * 598,920 75.00% $13.77
- --------------------------------------------------------------------------------------------------------------------------------
93-11 Rivercenter 5/93 1988 $100,000,000 1,060,271 225,000 21.22% $350 $9,000,000
San Antonio, TX 922,656 92.00% $9.75
- --------------------------------------------------------------------------------------------------------------------------------
93-12 The Florida Mall 3/93 1986 $163,000,000 1,107,864 368,018 33.22% $447 $12,200,000
Orlando, FL 506,232 98.00% $24.10
- --------------------------------------------------------------------------------------------------------------------------------
93-13 North Riverdale Park 1/93 1975/89 $100,000,000 1,097,974 397,085 36.17% $240 $7,750,000
Riverside, IL * 467,813 92.40% $16.57
- --------------------------------------------------------------------------------------------------------------------------------
93-14 Sarasota Square Mall 1/93 1977/89 $84,000,000 894,061 313,511 35.07% $245 $6,012,000
Sarasota, FL 313,511 95.00% $19.18
================================================================================================================================
14 Survey Average $146,573,357 1,143,124 371,895 32.53% $331 $11,134,471
587,402 93.71% $18.96
Survey Mean: $19.04
================================================================================================================================
</TABLE>
- ----------
* Adjusted to reflect 100% interest.
** Allocated price.
*** As expended.
================================================================================
<TABLE>
<CAPTION>
=========================================================================================================
Capitalization Rates Unit Rate Comparison
-------------------- ---------------------
Sale Going-in Terminal Price/GLA Price/Mall Sales
No. Property Name OAR OAR IRR Purchased Shop GLA Multiple
=========================================================================================================
<C> <S> <C> <C> <C> <C> <C> <C>
93-1 The Galleria @ 7.47% n/a 11.50% $313 $355 0.92
Ft. Lauderdale, FL **
- ---------------------------------------------------------------------------------------------------------
93-2 Kenwood Towne Ctr. 7.63% 7.50% 11.00% $225 $457 1.11
Cincinnati, Ohio
- ---------------------------------------------------------------------------------------------------------
93-3 Westgate Mall 8.25% 8.50% 12.00% $135 $221 0.96
Amarillo, TX
- ---------------------------------------------------------------------------------------------------------
93-4 Arden Fair Mall 7.00% n/a n/a $471 $471 1.16
Sacramento, CA
- ---------------------------------------------------------------------------------------------------------
93-5 Fiesta Mall 7.29% 7.50% 11.50% $396 $396 1.16
Mesa, AZ
- ---------------------------------------------------------------------------------------------------------
93-6 Coronado Center 7.30% 7.25% 10.75% $224 $292 1.17
Albuquerque, NM
- ---------------------------------------------------------------------------------------------------------
93-7 Clackamas Town Ctr. 7.75% 8.00% 11.50% $265 $265 0.88
Portland, OR
- ---------------------------------------------------------------------------------------------------------
93-8 Garden State Plaza 7.40% 7.50- 11.50% $279 $647 1.49
Paramus, NJ 9.00%
- ---------------------------------------------------------------------------------------------------------
93-9 Lakewood Center Mall 8.54% n/a n/a $289 $493 1.64
Lakewood, CA ***
- ---------------------------------------------------------------------------------------------------------
93-10 Carolina Place 7.11% 7.00% 12.00% $194 $364 1.82
Charlotte, NC
- ---------------------------------------------------------------------------------------------------------
93-11 Rivercenter 9.00% n/a 12.50% $108 $444 1.27
San Antonio, TX
- ---------------------------------------------------------------------------------------------------------
93-12 The Florida Mall 7.48% n/a 11.00% $322 $443 0.99
Orlando, FL
- ---------------------------------------------------------------------------------------------------------
93-13 North Riverdale Park 7.75% n/a 11.10% $214 $252 1.05
Riverside, IL
- ---------------------------------------------------------------------------------------------------------
93-14 Sarasota Square Mall 7.16% n/a n/a $268 $268 1.09
Sarasota, FL
=========================================================================================================
14 Survey Average -- -- -- $250 $394 1.19
Survey Mean: 7.65% 7.78% 11.49% $265 $383 1.19
=========================================================================================================
</TABLE>
<PAGE>
================================================================================
REGIONAL SHOPPING CENTER SALES SUMMARY 1994
1994 Transactions Chart
Cushman & Wakefield, Inc.
<TABLE>
<CAPTION>
================================================================================================================================
Sale Sale Year Total GLA/ Mall Shop Shop Mall Shop NOI/
No. Property Name Date Built Price GLA Sold GLA Ratio Sales PSF NOI PSF
================================================================================================================================
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C>
94-1 Mall of The Americas 10/94 1970/ $76,200,000 678,000 225,000 33.19% $338 $6,706,000
Miami. FL 92/93 678,000 98.50% $9.89
- --------------------------------------------------------------------------------------------------------------------------------
94-2 Corte Madera T.C. 9/94 1958/85 $70,500,000 425,572 237,453 55.80% $325 $5,900,000
Marin County, CA 425,572 93.50% $13.66
- --------------------------------------------------------------------------------------------------------------------------------
94-3 North Shore square 7/94 1985 $34,150,000 624,000 178,326 28.58% $218 $3,073,000
Slidell, Louisiana 358,709 94.00% $8.57
- --------------------------------------------------------------------------------------------------------------------------------
94-4 Chesterfield Towne 6/94 1986/ $93,600,000 605,161 291,744 48.21% $290 $8,424,000
Ctr. 87/89 * 605,161 95.00% $13.92
Richmond, Virginia
- --------------------------------------------------------------------------------------------------------------------------------
94-5 Crossroads Mall 4/94 1974 $51,500,000 1,114,720 378,704 33.97% $189 $5,300,000
Oklahoma City, OK 378,704 95.00% $14.00
- --------------------------------------------------------------------------------------------------------------------------------
94-6 Riverchase Galleria 2/94 1986 $175,000,000 1,251,142 350,504 28.01% $305 $12,949,000
Hoover, Alabama 462,642 95.00% $27.99
- --------------------------------------------------------------------------------------------------------------------------------
94-7 Confidential 1/94 1981/ $119,000,000 1,294,682 493,404 38.11% $260 $8,962,500
Top Ten MSA 88/91 493,404 95.20% $18.16
================================================================================================================================
7 Survey Average $88,564,286 856,182 307,876 35.96% $271 $7,330,643
486,023 96.16% $16.08
Survey Mean: $16.20
================================================================================================================================
</TABLE>
- ----------
* Adjusted to reflect 100% interest.
** Allocated price.
*** As expended.
================================================================================
<TABLE>
<CAPTION>
=========================================================================================================
Capitalization Rates Unit Rate Comparison
-------------------- ---------------------
Sale Going-in Terminal Price/GLA Price/Mall Sales
No. Property Name OAR OAR IRR Purchased Shop GLA Multiple
=========================================================================================================
<C> <S> <C> <C> <C> <C> <C> <C>
94-1 Mall of The Americas 8.80% n/a 11.80% $112 $339 1.00
Miami. FL **
- ---------------------------------------------------------------------------------------------------------
94-2 Corte Madera T.C. 8.37% 9.00% 11.00% $166 $297 0.91
Marin County, CA ***
- ---------------------------------------------------------------------------------------------------------
94-3 North Shore square 9.00% n/a n/a $95 $192 0.88
Slidell, Louisiana
- ---------------------------------------------------------------------------------------------------------
94-4 Chesterfield Towne 9.00% n/a n/a $155 $321 1.11
Ctr.
Richmond, Virginia
- ---------------------------------------------------------------------------------------------------------
94-5 Crossroads Mall 10.29% n/a n/a $136 $136 0.72
Oklahoma City, OK
- ---------------------------------------------------------------------------------------------------------
94-6 Riverchase Galleria 7.40% n/a n/a $378 $499 1.84
Hoover, Alabama
- ---------------------------------------------------------------------------------------------------------
94-7 Confidential 7.53% 8.00- 11.00% $241 $241 0.93
Top Ten MSA 8.25%
=========================================================================================================
7 Survey Average -- -- -- $182 $288 1.06
Survey Mean: 8.63% 8.42% 11.27% $183 $289 1.03
=========================================================================================================
</TABLE>
<PAGE>
===================================
Cushman & Wakefield Investor Survey
===================================
<PAGE>
<TABLE>
<CAPTION>
OFFICES-URBAN, CLASS A
===================================================================================================================================
Low High Low High Low High Low High Low High Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10.00% l0.50% 10.00% 10.00% 12.00% 13.00% 3.00% 3.00% 4.00% 4.00% 10
9.50% 9.75% 9.75% 10.00% 11.75% 12.25% 3.00% 3.50% 3.50% 3.50% 10
9.00% 9.00% 9.00% 9.00% 12.00% 12.00% 0.00% 10.00% 4.00% 4.00% 10
8.00% 10.00% 9.00% 11.00% 10.00% 13.00% 0.00% 4.00% 4.00% 4.00% 10
8.00% 10.00% 9.00% 9.00% 11.00% 13.00% 4.00% 5.00% 4.00% 4.00% 10
7.50% 9.00% 8.00% 9.50% 10.50% 11.50% 2.00% 3.50% 3.50% 3.50% 10
9.00% 10.00% 10.00% 11.00% 11.00% 13.00% 4.00% 4.00% 4.00% 4.00% 10
9.50% 10.00% 10.00% 10.50% 11.40% 11.70% 3.00% 4.00% 3.50% 4.50% 10
12.00% 12.00% 10.00% 10.00% 15.00% 15.00% 3.00% 4.00% 2.00% 4.00% 5
12.00% 12.00% 12.00% 12.00% 14.00% 14.00% 3.00% 3.00% 3.00% 3.00% 10
8.50% 9.00% 9.00% 9.50% 12.00% 12.50% 2.00% 3.00% 2.00% 3.00% 10
9.50% 10.00% 10.00% 11.00% 12.00% 13.00% 3.00% 3.00% 3.00% 3.00% 1
8.00% 9.00%
10.00% 10.00% 10.00% 10.00% 12.50% 12.50% 2.00% 3.00% 3.00% 3.00% 10
7.00% 8.00% 9.00% 9.00%. 11.00% 11.00% 6.00% 6.00% 4.00% 4.00% 10
8.00% 9.00% 9.00% 10.00% 11.00% 12.00% 3.00% 3.00% 3.00% 3.00% 10
9.00% 9.25% 10.00% 10.25% 12.00% 12.00% 4.00% 4.00% 4.00% 4.00% 10
- -----------------------------------------------------------------------------------------------------------------------------------
No. of Responses 16 16 17 17 6 16 16 16 16 16
Average 9.16% 9.84% 9.51% 10.04% 11.82% 12.59% 2.81% 4.13% 3.41% 3.66%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OFFICES-SUBURBAN
====================================================================================================================================
Low High Low High Low High Low High Low High Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9.50% 1l.00% 9.00% 10.50 14.00% 14.00% 3.25% 3.25% 4.00% 4.00% 5
9.00% 9.00% 9.00% 9.50% 11.00% 11.00% 5.00% 5.00% 4.00% 4.00% 10
9.00% 10.00% 9.50% 10.00% 11.50% 12.50% 3.50% 3.50% 10
9.50% 9.75% 9.75% 10.00% 11.75% 12.25% 3.50% 4.00% 3.50% 3.50% 10
9.00% 9.00% 9.00% 9.00% 12.00% 12.00% 4.00% 15.00% 4.00% 4.00% 10
9.00% 11.00% 9.75% 12.00% 11.00% 14.00% 0.00% 4.00% 4.00% 4.00% 10
9.00% 10.50% 9.50% 11.00% 11.50% 12.00% 2.00% 3.50% 3.50% 3.50% 10
8.00% 9.50% 9.00% 10.50% 11.00% 12.00% 4.00% 4.00% 4.00% 4.00% 10
9.50% 9.75% 9.75% 10.50% 11.40% 11.70% 3.00% 4.00% 3.50% 4.50% 10
12.00% 12.00% 10.00% 10.00% 15.00% 15.00% 3.00% 4.00% 2.00% 4.00% 5
10.00% 10.00% 10.00% 10.00% 12.00% 12.00% 4.00% 4.00% 3.00% 3.00% 10
8.50% 9.00% 9.00% 9.50% 12.00% 12.50% 3.00% 5.00% 3.00% 4.00% 10
9.00% 10.00% 9.50% 10.50% 12.00% 12.50% 3.00% 3.00% 3.00% 3.00% 10
9.00% 9.00%
10.50% 10.50% 10.50% 10.50% 12.50% 12.50% 2.00% 3.00% 3.00% 3.00% 10
9.00% 10.00% 9.00% 9.00% 15.00% 15.50% 5.00% 5.00% 3.00% 3.00% 5-7
9.00% 9.00% 9.00% 9.00% 11.25% 11.25% 5.00% 5.00% 4.00% 4.00% 10
8.00% 9.00% 9.00% 10.00% 11.00% 12.00% 3.00% 3.00% 3.00% 3.00% 10
9.00% 9.25% 10.00% 10.25% 12.00% 12.00% 4.00% 4.00% 4.00% 4.00% 10
- -----------------------------------------------------------------------------------------------------------------------------------
No. of Responses 18 18 19 19 18 18 17 17 18 18
Average 9.25% 9.90% 9.43% 10.04% 12.11% 12.59% 3.34% 4.63% 3.44% 3.67%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INDUSTRIAL
====================================================================================================================================
Low High Low High Low High Low High Low High Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9.00% 9.00% 9.50% 9.50% 11.50% 11.50% 4.00% 4.00% 4.00% 4.00% 10
8.50% 10.00% 9.50% 10.00% 11.50% 12.50% 3.50% 3.50% 10
9.00% 9.25% 9.50% 9.75% 11.50% 11.75% 3.50% 4.00% 3.50% 3.50% 10
9.00% 9.00% 9.50% 9.50% 11.50% 11.50% 2.00% 8.00% 4.00% 4.00% 10
9.00% 10.00% 9.75% 12.00% 10.00% 13.00% 2.00% 4.00% 4.00% 4.00% 10
9.00% 10.00% 10.00% 11.00% 11.50% 12.50% 4.00% 4.00% 4.00% 4.00% 10
9.00% 9.50% 9.50% 9.75% 11.20% 11.50% 3.00% 3.50% 3.50% 4.00% 10
12.00% 12.00% 10.00% 10.00% 14.00% 14.00% 2.00% 3.00% 3
8.50% 8.50% 9.00% 9.50% 11.00% 11.50% 4.00% 4.00% 4.00% 4.00% 10
9.00% 9.50% 9.50% 10.00% 11.25% 11.75% 3.00% 3.00% 3.00% 3.00% 10
9.00% 10.00%
9.00% 9.00% 9.50% 9.50% 11.25% 11.25% 4.00% 4.50% 4.00% 4.00% 10
9.00% 9.25% 10.00% 10.25% 12.00% 12.00% 4.00% 4.00% 4.00% 4.00% 10
- ------------------------------------------------------------------------------------------------------------------------------------
No. of Responses 12 12 13 13 12 12 11 11 11 11
Average 9.17% 9.58% 9.56% 10.06% 11.52% 12.06% 3.23% 4.18% 3.77% 3.82%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RETAIL, COMMUNITY AND NEIGHBOHOOD CENTERS
===================================================================================================================================
Low High Low High Low High Low High Low High Years
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9.50% 11.00% 9.00% 10.50% 14.00% 14.00% 3.25% 3.25% 4.00% 4.00% 5
9.00% 10.00% 9.00% 10.00% 11.50% 12.50% 3.50% 3.50% 3.50% 3.50% 10
9.50% 9.75% 9.75% 10.00% 11.50% 11.75% 3.50% 4.00% 3.50% 3.50% 10
9.50% 9.50% 10.00% 10.00% 12.50% 12.50% 0.00% 4.00% 4.00% 4.00% 10
9.00% 10.50% 9.75% 11.50% 10.00% 14.00% 2.00% 4.00% 4.00% 4.00% 10
10.00% 10.00% 10.00% 10.00% 12.00% 12.00% 4.00% 4.00% 4.00% 4.00% 10
8.50% 9.50% 9.50% 10.50% 11.50% 12.00% 4.00% 4.00% 4.00% 4.00% 10
9.50% 9.75% 9.75% 10.00% 11.25% 11.50% 3.00% 4.00% 3.50% 4.50% 10
8.50% 9.00% 9.00% 9.50% 11.00% 12.00% 3.00% 3.00% 3.00% 3.00% 10
9.50% 10.00% 10.00% 10.50% 11.50% 12.50% 3.00% 3.00% 3.00% 3.00% 10
9.00% 10.00%
9.50% 9.50% 10.00% 10.00% 12.00% 12.00% 3.00% 3.00% 3.00% 3.00% 10
8.50% 9.50% 10.00% 11.00% 11.25% 12.50% 3.00% 3.00% 3.00% 3.00% 10
9.00% 9.25% 10.00% 10.25% 12.00% 12.00% 4.00% 4.00% 4.00% 4.00% 10
- ---------------------------------------------------------------------------------------------------------------------------====----
No. of Responses 13 13 14 14 13 13 13 13 13 13
Average 9.19% 9.79% 9.63% 10.27% 11.69% 12.44% 3.02% 3.60% 3.58% 3.65%
- ----------------------------------------------------------------------------------------------------------------------------====---
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RETAIL, POWER CENTERS AND "BIG BOX"
====================================================================================================================================
Low High Low High Low High Low High Low High Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9.25% 9.50% 9.50% 10.00% 11.50% 11.50% 3.00% 3.50% 4.00% 4.00% 10
9.50% 9.75% 9.75% 10.00% 10.50% 11.50% 3.50% 4.00% 3.50% 3.50% 10
10.00% 10.00% 10.00% 10.00% 12.00% 12.00% 0.00% 4.00% 4.00% 4.00% 10
9.00% 9.50% 9.50% 10.00% 11.00% 12.00% 2.00% 3.50% 3.50% 3.50% 10
8.00% 9.00% 9.00% 10.00% 11.00% 12.00% 4.00% 4.00% 4.00% 4.00% 10
9.75% 10.00% 9.75% 10.00% 11.20% 11.50% 3.00% 3.50% 3.50% 4.00% 10
9.00% 9.50% 10.00% 10.00% 10.50% 11.00% 2.50% 2.50% 2.50% 2.50% 10
9.50% 10.00% 10.00% 10.50% 11.50% 12.50% 3.00% 3.00% 3.00% 3.00% 10
8.50% 9.50%
9.00% 9.00% 9.50% 9.50% 11.50% 11.50% 3.00% 3.00% 3.00% 3.00% 10
9.50% 9.50% 9.75% 9.75% 11.25% 11.25% 4.00% 4.00% 4.00% 4.00% 10
9.00% 9.25% 10.00% 10.25% 12.00% 12.00% 4.00% 4.00% 4.00% 4.00% 10
- ------------------------------------------------------------------------------------------------------------------------------------
No.of Responses 11 11 12 12 11 11 11 11 11 11
Average 9.23% 9.55% 9.60% 9.96% 11.27% 11.70% 2.91% 3.55% 3.55% 3.59%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REGIONAL MALLS
====================================================================================================================================
Low High Low High Low High Low High Low High Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8.00% 8.50% 8.50% 9.00% 10.50 10.50% 3.00% 3.50% 4.00% 4.00% 10
7.75% 8.25% 8.50% 8.75% 11.00% 11.50% 3.50% 4.00% 3.50% 3.50% 10
7.50% 7.50% 8.00% 8.00% 11.50% 11.50% 0.00% 4.00% 4.00% 4.00% 10
7.50% 9.00% 8.00% 9.75% 10.00% 12.00% 2.00% 4.00% 4.00% 4.00% 10
7.00% 8.00% 7.00% 8.00% 11.00% 11.00% 4.00% 4.00% 4.00% 4.00% 10
7.50% 8.00% 7.50% 9.00% 10.50% 11.50% 2.00% 3.50% 3.50% 3.50% 10
7.00% 8.00% 9.00% 10.00% 10.50% 11.50% 4.00% 4.00% 4.00% 4.00% 10
7.50% 8.00% 8.50% 8.50% 10.00% 11.00% 3.00% 3.00% 3.00% 3.00% 10
7.50% 9.00% 8.50% 8.50% 11.50% 11.50% 4.00% 5.00% 10
- ------------------------------------------------------------------------------------------------------------------------------------
No. of Responses 9 9 9 9 9 9 9 9 8 8
Average 7.47% 8.25% 8.17% 8.83% 10.72% 11.33% 2.83% 3.89% 3.75% 3.75%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LODGING, FULL SERVICE
================================================================================================================
Low High Low High Low High Low High Low High
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Luxury 8.00% 9.00% 10.00% 10.00% 15.00% 20.00% 20.00% 25.00% 6.00% 6.00%
- --------------------- 5.00% 7.00% 10.50% 11.00% 12.50% 13.00% 4.00% 5.00%
11.00% 13.00% 11.00% 13.00% 15.00% 15.00% 20.00% 25.00% 4.00% 8.00%
10.50% 10.50% 10.00% 10.00%
11.00% 11.00% 13.00% 13.00% 5.00% 6.00%
9.00% 9.00% 10.00% 10.00% 13.00% 13.00% 16.00% 16.00% 4.00% 4.50%
11.00% 12.00% 10.00% 11.00% 12.00% 16.00% 19.00% 23.00% 3.00% 4.00%
8.00% 8.00% 10.00% 10.00% 12.00% 14.00% 15.00% 20.00% 8.00% 8.00%
6.00% 8.00% 8.00% 9.00% 20.00% 25.00% 5.00% 5.00%
8.50% 8.50% 9.00% 9.00% 5.00% 5.00%
8.00% 10.00% 15.00% 18.00% 18.00% 22.00%
- -----------------------------------------------------------------------------------------------------------------
No. of Responses l0 10 10 10 7 7 7 7 9 9
Average 8.80% 9.60% 9.95% 10.55% 13.50% 15.57% 18.29% 22.29% 4.89% 5.72%
- -----------------------------------------------------------------------------------------------------------------
First Class 11.00% 11.00% 11.00% 11.00% 15.00% 20.00% 20.00% 20.00% 4.00% 4.00%
- -------------------- 11.00% 11.00% 13.00% 13.00% 5.00% 6.00%
10.00% 10.00% 11.00% 11.00% 15.00% 15.00% 18.00% 18.00% 4.00% 4.50%
10.00% 10.00% 11.00% 11.00% 15.00% 18.00% 15.00% 20.00% 10.00% 10.00%
10.00% 10.00% 10.50% 10.50% 16.00% 16.00% 25.00% 25.00% 4.00% 4.00%
8.00% 9.00% 10.00% 10.00% 20.00% 25.00% 5.00% 5.00%
10.00% 10.00% 10.50% 10.50% 22.00% 22.00% 4.00% 4.00%
8.00% 10.00% 15.00% 18.00% 18.00% 22.00%
5.00% 5.00% 10.00% 11.00% 15.00% 15.00% 4.00% 4.00%
8.00% 8.00% 10.00% 10.00% 14.50% 14.50% 20.00% 20.00% 3.50% 3.50%
10.50% 10.50% 11.00% 11.00% 13.00% 13.00% 20.00% 23.00% 4.50% 4.50%
- -----------------------------------------------------------------------------------------------------------------
No. of Responses l0 l0 10 10 8 8 9 9 l0 l0
Average 9.35% 9.45% 10.55% 10.82% 14.81% 16.19% 19.78% 21.67% 4.80% 4.95%
- -----------------------------------------------------------------------------------------------------------------
================================================================================
Low High
- --------------------------------------------------------------------------------
Luxury 4.00% 4.00% 7 2.50% 4.00%
- --------------------- 3.00% 4.00% 10 3.50% 4.00%
4.00% 4.00% 5 4.00% 5.00%
3.50% 5.00% 10 4.50% 5.00%
3.00% 4.00% 5 3.00% 4.00%
3.00% 3.00% 10 2.50% 3.00%
4.00% 4.00% 5 3.00% 3.50%
6.00% 6.00% 10 4.50% 5.50%
3.00% 4.00% 5 4.00% 4.00%
4.00% 4.00% 5 3.00% 3.00%
4.00% 4.00% 5 3.50% 4.00%
- --------------------------------------------------------------------------------
No. of Responses 11 11 11 11 11
Average 3.77% 4.18% 7 3.45% 4.09%
- --------------------------------------------------------------------------------
First Class 4.00% 4.00% 7 2.50% 3.00%
- --------------------- 3.00% 4.00% 5 3.00% 4.00%
3.00% 3.00% 10 2.50% 3.00%
5.00% 5.00% 10 3.50% 4.50%
3.00% 3.00% 7 2.50% 4.00%
3.00% 4.00% 5 3.00% 4.00%
4.00% 4.00% 5 3.00% 4.00%
4.00% 4.00% 5 3.50% 4.00%
3.00% 3.00% 5 3.00% 4.50%
3.50% 3.50% 10 2.00% 4.00%
3.50% 3.50% 10 3.50% 4.00%
- --------------------------------------------------------------------------------
No. of Responses 11 11 11 11 11
Average 3.55% 3.73% 7 2.91% 3.91%
- --------------------------------------------------------------------------------
</TABLE>
The blended IRR is the composite return on debt and equity and the rate to be
applied to net operating income.
The equity return is rate of return on the equity component of the investment
only.
<PAGE>
<TABLE>
<CAPTION>
LODGING, LIMITED SERVICE
==============================================================================================================
Low High Low High Low High Low High Low High
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-Rate 10.00% 10.00% 12.00% 12.00% 20.00% 20.00% 4.00% 4.00%
- ------------------- 10.00% 12.00% 10.00% 12.00% 15.00% 15.00% 20.00% 25.00% 4.00% 8.00%
11.00% 11.00% 10.00% 10.00%
10.00% 13.00% 12.00% 14.00% 10.00% 12.00% 12.00% 14.00% 4.00% 4.00%
12.00% 12.00% 14.00% 14.00% 2.00% 3.00%
12.00% 12.00% 13.00% 13.00% 19.00% 19.00% 22.00% 22.00% 3.50% 4.00%
10.50% 10.50% 12.00% 12.00% 15.00% 20.00% 18.00% 20.00% 5.00% 5.00%
10.00% 11.00% 22.00% 22.00% 6.00% 6.00%
- --------------------------------------------------------------------------------------------------------------
Number of Resposses 7 7 8 8 4 4 5 6 7 7
Average 10.79% 11.50% 11.63% 12.25% 14.75% 16.50% 19.00% 20.50% 4.07% 4.86%
- --------------------------------------------------------------------------------------------------------------
Economy 10.00% 12.00% 12.00% 12.00% 18.00% 25.00% 4.00% 4.00%
- ------------------- 10.00% 13.00% 12.00% 14.00% 10.00% 12.00% 12.00% 14.00% 4.00% 4.00%
12.50% 12.50% 14.00% 14.00% 2.00% 3.00%
13.00% 13.00% 14.00% 14.00% 21.00% 21.00% 24.00% 24.00% 2.50% 4.00%
11.50% 11.50% 12.00% 12.00% 15.00% 20.00% 18.00% 20.00% 5.00% 5.00%
- --------------------------------------------------------------------------------------------------------------
No.of Responses 5 5 5 5 3 3 4 4 5 5
Average 11.40% 12.40% 12.80% 13.20% 15.33% 17.67% 18.00% 20.75% 3.50% 4.00%
- --------------------------------------------------------------------------------------------------------------
=========================================================
Low High
- ----------------------------------------------------------
Mid-Rate 4.00% 4.00% 7 2.50% 3.00%
- ------------------- 4.00% 4.00% 5 4.00% 4.50%
3.50% 5.00% 10 4.00% 5.00%
3.50% 3.50% 5 4.00% 4.50%
3.00% 4.00% 5 3.00% 6.00%
3.00% 3.00% 5 3.00% 3.00%
4.00% 4.00% 10 2.50% 4.00%
4.00% 4.00% 5 5.00% 4.00%
- ----------------------------------------------------------
Number of Resposses 8 8 8 8 8
Average 3.63% 3.94% 7 3.50% 4.25%
- ----------------------------------------------------------
Economy 4.00% 4.00% 7 2.50% 3.00%
- ------------------- 3.50% 3.50% 5 4.00% 4.50%
3.00% 4.00% 5 3.00% 6.00%
3.00% 3.00% 5 4.00% 3.00%
4.00% 4.00%1 0 2.50% 4.00%
- ----------------------------------------------------------
No.of Responses 5 5 5 5 5
Average 3.50% 3.70% 6 3.20% 4.10%
- ----------------------------------------------------------
</TABLE>
The blended-RR-is the composite return on debt and equity and the rate to be
applied to net operating income.
The equity return is rate of return on the equity component of the investment
only.
<PAGE>
<TABLE>
<CAPTION>
APARTMENTS
===============================================================================================================================
LOW High LOW High LOW High Low High LOW High Years
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8.50% 9.00% 9.50% 9.50% 11.0 11.00% 4.00% 4.00% 4.00% 4.00% 10
8.50% 9.00% 9.25% 9.50% 11.50% 12.00% 3.50% 4.00% 3.50% 3.50% 10
8.50% 9.25% 9.00% 10.00% 10.50% 12.00% 2.00% 6.00% 4.00% 4.00% 10
8.00% 9.00% 8.50% 9.50% 3.50% 3.50% 3.50% 3.50% 10
8.50% 8.50% 9.25% 9.25% 11.25% 11.25% 4.00% 4.00% 4.00% 4.00% 10
9.00% 9.25% 9.25% 9.50% 11.20% 11.50% 3.75% 4.25% 4.00% 4.50% 10
8.50% 9.50% 9.00% 10.00% 11.00% 12.00% 3.00% 4.00% 3.00% 4.00% 10
8.75% 9.25% 9.25% 9.75% 3.00% 3.00% 3.00% 3.00%
9.00% 9.00%
9.00% 9.00% 9.50% 9.50% 11.50% 11.50% 3.00% 4.00% 3.00% 3.00% 10
8.00% 9.00% 9.00% 10.00% 11.00% 12.50% 3.00% 3.00% 3.00% 3.00% 10
9.00% 9.25% 10.00% 10.25% 12.00% 12.00% 4.00% 4.00% 4.00% 4.00% 10
- -------------------------------------------------------------------------------------------------------------------------------
No. Of Responses 11 11 12 12 9 9 11 11 11 11
Average 8.57% 9.09% 9.21% 9.65% 11.22% 11.75% 3.34% 3.98% 3.55% 3.68%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SURVEY OF RECENT CLOSED TRANSACTIONS
Net Rentable Area Sales Price Per Sq. Ft. Going-in Cap Rate
--------------------------------------------------------------------------------------------
Property No. Sales No. Sales No.Sales
Type Reported Average Median Reported Average Median Reported Average Median
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Offices, Urban 16 498,859 440,929 16 $130.66 $116.76 12 9.68% 9.13%
Offices, Suburban 66 230,760 191,893 66 $83.39 $78.78 57 9.97% 10.00%
Industrial 57 150,787 118,400 57 $37.75 $37.87 28 10.80% 10.61%
Retail (Other Than Malls) 29 136,429 121,552 29 $95.99 $91.67 27 10.50% 10.00%
Malls 9 615,102 649,130 9 $124.68 $96.00 9 9.29% 9.53%
Number of Units Sales Price Per Unit Going-in Cap Rate
--- ----------------------------------------------------------------------------------------
No. Sales No. Sales No. Sales
Reported Average Median Reported Average Median Reported Average Median
-----------------------------------------------------------------------------------------
Apartments 50 201 190 50 $47,975 $46,458 41 9.19% 9.30%
Internal Rate of Return
-----------------------------
Property No. Sales
Type Reported Average Median
- -------------------------- ------------------------------
Offices, Urban 9 12.42% 12.75%
Offices, Suburban 11 13.20% 12.25%
Industrial (Sample Not Large Enough to Report)
Retail (Other Than Malls) 8 11.59% 11.33%
Malls (Sample Not Large Enough to Report)
</TABLE>
<PAGE>
==========================
Appraiser's Qualifications
==========================
<PAGE>
QUALIFICATIONS OF RICHARD W. LATELLA
================================================================================
Professional Affiliations
Member, American Institute of Real Estate Appraisers
(MAI Designation #8346)
New York State Certified General Real Estate Appraiser #46000003892
Pennsylvania State Certified General Real Estate Appraiser #GA-001053-R
State of Maryland Certified General Real Estate Appraiser #01462
Minnesota Certified General Real Estate Appraiser #20026517
Commonwealth of Virginia Certified General Real Estate Appraiser #4001-003348
State of Michigan Certified General Real Estate Appraiser #1201005216
New Jersey Real Estate Salesperson (License #NS-130101-A)
Certified Tax Assessor - State of New Jersey
Affiliate Member - International Council of Shopping Centers, ICSC
Real Estate Experience
Senior Director, Retail Valuation Group, Cushman & Wakefield Valuation Advisory
Services. Cushman & Wakefield is a national full service real estate
organization and a Rockefeller Group Company. While Mr. Latella's experience has
been in appraising a full array of property types, his principal focus is in the
appraisal and counseling for major retail properties and specialty centers on a
national basis. As Senior Director of Cushman & Wakefield's Retail Group his
responsibilities include the coordination of the firm's national group of
appraisers who specialize in the appraisal of regional malls, department stores
and other major retail property types. He has personally appraised and consulted
on in excess of 200 regional malls and specialty retail properties across the
country.
Senior Appraiser, Valuation Counselors, Princeton, New Jersey, specializing in
the appraisal of commercial and industrial real estate, condemnation analyses
and feasibility studies for both corporate and institutional clients from July
1980 to April 1983.
Supervisor, State of New Jersey, Division of Taxation, Local Property and Public
Utility Branch in Trenton, New Jersey, assisting and advising local municipal
and property tax assessors throughout the state from June 1977 to July 1980.
Associate, Warren W. Orpen & Associates, Trenton, New Jersey, assisting in the
preparation of appraisals of residential property and condemnation analyses
from July 1975 to April 1977.
Formal Education
Trenton State College, Trenton, New Jersey
Bachelor of Science, Business Administration - 1977
As of the date of this report, Richard W. Latella, MAI, has completed the
requirements under the continuing education program of the Appraisal Institute.
<PAGE>
QUALIFICATIONS OF ROBERT S. NARDELLA
================================================================================
Mr. Nardella was bom on April 14, 1965 and entered the real estate business
in February 1987. At this time he began employment with Cushman & Wakefield,
Inc. on a part-time basis while still attending college. He is a graduate of
Pace University's Lubin School of Business, class of 1987 with a Bachelor of
Business Administration in Finance.
Since joining Cushman & Wakefield, Inc. on a full-time basis in December
1987, Mr. Nardella has performed appraisal assignments of vacant land,
developable air rights, office buildings, proposed and existing regional malls,
shopping centers, industrial and residential complexes, condominiums and
investment properties throughout the United States. In March, 1993 Mr. Nardella
was named Director of Cushman & Wakefield, Inc.
Mr. Nardella has successfully completed the following real estate courses:
New York University, The School Real Estate Appraisal and of Continuing
Education: Valuation Principles
American Institute of Real Estate Appraisers: Appraisal Principles - 1A-1
American Institute of Real Estate Appraisers: Basic Valuation Procedures
1A-2
American Institute of Real Estate Appraisers: Capitalization Theory & Tech.
Part A - Exam 1 B-A
American Institute of Real Estate Appraisers: Capitalization Theory & Tech.
Part B - Exam 1 B-B
Appraisal Institute: Standards of Professional Practice - Parts A and B
Appraisal Institute: Case Studies in Real Estate Valuation
Affiliates
Cerfified Real Estate General Appraiser, New York State - No. 46000004620
Member, Real Estate Board of New York, Inc.
Candidate, Appraisal Institute
Salesperson, Real Estate Board of New York, Inc.
Candidate, Masters in Real Estate/New York University
This CD ROM contains an electronic version of appraisals for the Mortgaged
Properties in PDF format and forms part of the paper version of the Prospectus
Supplement. The information contained in this CD ROM does not appear elsewhere
in paper form in this Prospectus Supplement and must be considered as part of,
and together with, the information contained elsewhere in this Prospectus
Supplement and the Prospectus. The information contained in this CD ROM has
been filed by the Seller with the Securities and Exchange Commission as part
of a Current Report on Form 8-K, which is incorporated by reference in this
Prospectus Supplement, and is also available through the public reference
branch of the Securities and Exchange Commission. Defined terms used in this CD
ROM but not otherwise defined therein shall have the respective meanings
assigned to them in the paper portion of the Prospectus Supplement and the
Prospectus. All of the information contained in this CD ROM is subject to the
same limitations and qualifications contained in this Prospectus Supplement and
the Prospectus. Prospective investors are strongly urged to read the paper
portion of this Prospectus Supplement and the Prospectus in its entirety prior
to accessing this CD ROM. If this CD ROM was not received in a sealed package,
there can be no assurances that it remains in its original format and should
not be relied upon for any purpose. Prospective investors may contact J.
Theodore Borter of Goldman, Sachs Co. at (212)902-3857 to receive an original
copy of the CD ROM.
<PAGE>
COMPLETE APPRAISAL OF
REAL PROPERTY
North Ranch Plaza
Southwest Corner of Lindero Canyon Road
& Kanan Road
Thousand Oaks, Ventura County, California
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
------------------------------------------------
COMPLETE APPRAISAL OF
REAL PROPERTY
North Ranch Plaza
Southwest Corner of Lindero Canyon Road
& Kanan Road
Thousand Oaks, Ventura County, California
------------------------------------------------
IN A SUMMARY REPORT
As of July 27, 1996
Prepared For
GMAC Commercial Mortgage Corporation
650 Dresher Road
Horsham, PA 19044-8015
Prepared By:
Cushman & Wakefield of California, Inc.
Valuation Advisory Services
555 South Flower Street, Suite 4200
Los Angeles, California 90071
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Cushman & Wakefield of California, Inc.
555 South Flower Street, Suite 4200 CUSHMAN &
Los Angeles, CA 90071-2418 WAKEFIELD (R)
Tel: (213) 955-5100 A ROCKEFELLER GROUP COMPANY
Fax: (213) 627-4044
RECEIVED
AUG 12 1996
I.P.L. DEPARTMENT
August 9, 1996
Mr. Dan Kesich
GMAC MORTGAGE CORPORATION
650 Dresher Road
Horsham, PA 19044-8015
RE: Appraisal of Real Property
North Ranch Plaza
SWC Lindero Canyon Road &
Kanan Road
Thousand Oaks, Ventura County, California
Dear Mr. Kesich:
In fulfillment of our agreement as outlined in the Letter of Engagement,
Cushman & Wakefield of California, Inc. is pleased to transmit our summary
report estimating the market value of the referenced property.
Thank you for the opportunity to be of service.
Respectfully submitted,
CUSHMAN & WAKEFIELD (R) OF CALIFORNIA, INC.
/s/ Craig D. Tilson
----------------------
Craig D. Tilson, MAI
Associate Director
cc: Alana Heaton
<PAGE>
Cushman & Wakefield of California, Inc.
555 South Flower Street, Suite 4200 CUSHMAN &
Los Angeles, CA 90071-2418 WAKEFIELD (R)
Tel: (213) 955-5100 A ROCKEFELLER GROUP COMPANY
Fax: (213) 627-4044
August 2, 1996
Ms. Avis Tsuya
Senior Underwriter
GMAC COMMERCIAL MORTGAGE CORPORATION
650 Dresher Road
Horsham, PA 19044-8015
RE: Appraisal of Real Property
North Ranch Plaza
SWC Lindero Canyon Road &
Kanan Road
Thousand Oaks, Ventura County, California
Dear Ms. Tsuya:
In fulfillment of our agreement as outlined in the Letter of Engagement,
Cushman & Wakefield of California, Inc. is pleased to transmit our summary
report estimating the market value of the leased fee estate in the referenced
property.
As specified in the Letter of Engagement, the value opinion reported below
is qualified by certain assumptions, limiting conditions, certifications, and
definitions, which are set forth in the report. We specifically call your
attention to the following special assumptions:
1) Building areas were taken from a current rent roll and lease
abstracts. We were not provided with building plans or actual leases.
<PAGE>
Ms. Avis Tsuya
Page 2
August 2, 1996
This is a complete appraisal prepared in accordance with the Uniform
Standards of Professional Appraisal Practice of The Appraisal Foundation. The
results of the appraisal are being conveyed in a Summary report according to our
agreement. Because this is a summary report, the level of detail of presentation
is less than that found in a self-contained report.
This report was prepared for GMAC Commercial Mortgage Corporation and it is
intended only for the specified use of said Client. It may not be distributed to
or relied upon by other persons or entities without written permission of the
Appraiser.
The property was inspected by and the report was prepared by Craig D.
Tilson, MAI.
As a result of our analysis, we have formed an opinion that the market
value of the leased fee estate in the subject property, subject to the
assumptions, limiting conditions, certifications, and definitions, as of July
27, 1996 was:
TEN MILLION FIVE HUNDRED THOUSAND DOLLARS
$10,500,000
The preceding estimate of market value are based upon a forecasted
marketing period of approximately six to nine months, which we believe (through
a review of recent sale activity, as well as with conversations with local
investment brokers) is reasonably representative for this product type.
This letter is invalid as an opinion of value if detached from the report,
which contains the text, exhibits, and an Addenda.
Respectfully submitted,
CUSHMAN & WAKEFIELD (R) OF CALIFORNIA, INC.
/s/ Craig D. Tilson
----------------------
Craig D. Tilson, MAI
Associate Director
Valuation Advisory Services
Certification No. AGO03733
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
SUMMARY OF SALIENT FACTS AND CONCLUSIONS
================================================================================
Property Name: North Ranch Plaza
Location: The subject property is located at the
southwest corner of Lindero Canyon
Road and Kanan Road. The street
address is 1125 to 1165 Lindero Canyon
Road, Thousand Oaks, Ventura County,
California.
Ventura County Assessor's
Parcel Nos.: 689-470-03, 04, 05, 06 and 07
Interest Appraised: Leased fee estate
Date of Value: July 27, 1996
Date of Inspection: July 27, 1996
Ownership: J.E. Robert Company, or nominee
Land Area: 8.10 acres
1995-96 Property Assessment
Land: $ 4,418,738
Building: $ 6,208,357
-----------
Total: $10,627,095
1995-96 Ad Valorem Taxes: $111,346
Zoning: RPD 1.5, Residential (Specific Plan:
Commercial)
Highest and Best Use
If Vacant: Commercial retail development
As Improved: As developed, with a multi-tenant
shopping center
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Summary of Salient Facts and Conclusions
================================================================================
Improvements
Type: A one-story neighborhood shopping
center of concrete construction, plus
an adjacent surface parking lot and
related site improvements. The
exterior of the four buildings is
stucco and wood siding.
Year Built: 1991
Size
Gross Leasable Area: 62,982 square feet
Condition: Good
Operating Data and Forecasts
Current Occupancy: 96%
Forecasted Average Occupancy: 94%
Average Annual Rental Rate
Actual: $18.52 per square foot
Forecasted
In-line Space: $18.00 per square foot
Rear Space: $14.40 per square foot
End Space: $21.00 per square foot
Pad Space: $24.00 per square foot
Operating Expenses
Last Full Year (1995): $5.74 per square foot
Budget (1996): $5.42 per square foot
Forecasted (Fiscal 1997): $5.57 per square foot
Value Indicators
Sales Comparison Approach: $10,100,000 ($160.00 per square foot)
Income Approach: $10,700,000 ($169.89 per square foot)
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Summary of Salient Facts and Conclusions
================================================================================
Discounted Cash Flow Assumptions
Market Rental Growth Rate
1997: 2.0%
Thereafter 3.5%
Expense Growth Rates
Taxes: 2.0%
All others: 3.5%
Credit Loss Allowance: 2.0%
Projected Term of Future Leases: 5 years
Vacancy Between Tenants 7 months
Renewal Probability: 60%
Tenant Improvements
New Tenants: $2.00 per square foot
Renewal Tenants: None
Commission Expense (Weighted
Average): 3.5%
Terminal Capitalization Rate: 10.75%
Cost of Sale at Reversion: 3.0%
Discount Rate: 12.5%
Implicit Year 1 Overall
Capitalization Rate, 10.4%
Value Conclusion
As Is Value Estimate: $10,500,000
Resulting Indicators
Going-In Capitalization Rate
(Overall Capitalization Rate): 10.6%
Price Per Square Foot
(Rentable Area): $166.71
Estimated Marketing Time: 6 to 9 months
Special Assumption:
1) Building areas were obtained
from a current rent roll and lease
abstracts. We were not provided
with building plans or actual
leases.
2) Tenant retail sales levels were
requested but not provided.
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
TABLE OF CONTENTS
================================================================================
Page
PHOTOGRAPHS OF THE SUBJECT PROPERTY ....................................... 1
INTRODUCTION .............................................................. 4
Identification of Property .............................................. 4
Property Ownership and Recent History ................................... 4
Purpose and Function of the Appraisal ................................... 4
Extent of the Appraisal Process ......................................... 4
Date of Value and Property Inspection ................................... 5
Property Rights Appraised ............................................... 5
Definitions of Value, Interest Appraised, and Other Pertinent Terms ..... 5
Legal Description ....................................................... 6
NEIGHBORHOOD ANALYSIS ..................................................... 7
MARKET ANALYSIS ........................................................... 11
PROPERTY DESCRIPTION ...................................................... 16
Site Description ........................................................ 16
Improvements Description ................................................ 16
REAL PROPERTY TAXES AND ASSESSMENTS ....................................... 17
ZONING .................................................................... 18
HIGHEST AND BEST USE ...................................................... 19
VALUATION PROCESS ......................................................... 21
SALES COMPARISON APPROACH ................................................. 23
INCOME APPROACH ........................................................... 27
RECONCILIATION AND FINAL ESTIMATE OF VALUE ................................ 37
ASSUMPTIONS AND LIMITING CONDITIONS ....................................... 39
CERTIFICATION OF APPRAISAL ................................................ 41
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Table of Contents
================================================================================
ADDENDA ................................................................... 42
Cushman & Wakefield Investor Survey
Qualifications of Craig D. Tilson
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
INTRODUCTION
================================================================================
Identification of Property
The subject property, which is known as North Ranch Plaza, is a one-story,
neighborhood shopping center containing 62,982 square feet of gross leasable
area. The four buildings are situated on an 8.10-acre tract of land that is
located at the southwest corner of Lindero Canyon Road and Kanan Road. The
common address is 1125 through 1165 Lindero Canyon Road, Thousand Oaks, Ventura
County, California. The center was constructed in 1991 and is 96 percent
occupied by 24 tenants as of the appraisal date. Not included in this appraisal
are the Vons Pavilions anchor supermarket and a proposed World Savings pad site,
both of which are under separate ownership.
Property Ownership and Recent History
Ownership of the property was vested in El Paseo Associates, an affiliate
of IDM Development. In September 1987, El Paseo Associates acquired the
underlying subject site. Terms of the acquisition were not disclosed. El
Paseo/IDM subsequently developed the shopping center in 1991. In 1994, a notice
of Trustee's Sale was recorded. On February 26, 1996, a pad site (Parcel 2)
within the center containing 32,670 square feet was sold to World Savings Bank
for a reported $675,000 ($20.66 per square foot).
During July 1996, the subject was reportedly foreclosed upon by the J.E.
Robert Company or affiliate, although we were unable to document this transfer
through First American Title Company. To the best of our knowledge, the property
is not currently being offered for sale, nor have there have been any other open
market ownership transfers during the past three years.
Purpose and Function of the Appraisal
The purpose of the appraisal is to provide an estimate of market value of
the leased fee estate in the property. The function of this report is to assist
GMAC Commercial Mortgage Corporation in an evaluation of the property for loan
underwriting purposes.
Extent of the Appraisal Process
In the process of preparing this appraisal, we:
o Inspected the exterior of the building and site improvements and a
representative sample of tenant spaces;
o Reviewed the rent roll, lease abstracts, tenant build-out allowances
and history of recent rental rates and occupancy with the asset
manager;
o Reviewed a detailed history of the income and expenses and a budget
forecast for 1996;
o Conducted market research into occupancies, asking rents, and
operating expenses at competing buildings including interviews with
on-site managers and a review of our own data base from previous
appraisal files;
o Conducted market inquiries into recent sales of similar buildings to
ascertain the sales prices per square foot, net income multipliers and
capitalization
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Introduction
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rates. This process involved telephone interviews with sellers, buyers
and/or participating brokers; and
o Prepared Sales Comparison and Income Approaches to value. The Cost
Approach was not used.
Date of Value and Property Inspection
The date of value is July 27, 1996, with the date of our last inspection
being the same.
Property Rights Appraised
We valued the leased fee estate, which in a legal conveyance through sale
represents the fee simple title, subject to the existing encumbrances, i.e., the
tenant leases, in the improvements and corresponding land area.
Definitions of Value, Interest Appraised, and Other Pertinent Terms
The definition of market value taken from the Uniform Standards of
Professional Appraisal Practice, 1994 Edition, published by The Appraisal
Foundation, is as follows:
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 is the
consummation of a sale as of a specified date and the passing of title from
seller to buyer under conditions whereby:
(1) Buyer and seller are typically motivated;
(2) Both parties are well informed or well advised, and acting in what
they consider their own best interests;
(3) A reasonable time is allowed for exposure in the open market;
(4) Payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
(5) 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.
Exposure Time
Under Paragraph 3 of the Definition of Market Value, the value estimate
presumes that A reasonable time is allowed for exposure in the open market.
Exposure time is defined as the estimated length of time the property
interest being appraised would have been offered on the market prior to the
hypothetical consummation of a sale at the market value on the effective
date of the appraisal. Exposure time is presumed to precede the effective
date of the appraisal.
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Introduction
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Based upon the available sales data in the marketplace, as well as our
discussions with market participants, six to nine months would appear to
have been reasonably appropriate for the subject property as the date of
valuation.
Definitions of pertinent terms taken from the Dictionary of Real Estate
Appraisal, Third Edition (1993), published by The Appraisal Institute, are as
follows:
Fee Simple Estate
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.
Leased Fee Estate
An ownership interest held by a landlord with the rights of use and
occupancy conveyed by lease to others. The rights of the lessor (the leased
fee owner) and the leased fee are specified by contract terms contained
within the lease.
Market Rent
The rental income that a property would most probably command on the open
market; indicated by the current rents paid and asked for comparable space
as of the date of the appraisal.
Cash Equivalent
A price expressed in terms of cash, as distinguished from a price expressed
totally or partly in terms of the face amounts of notes or other securities
that cannot be sold at their face amounts.
Discounted Cash Flow (DCF) Analysis
The procedure in which a discount rate is applied to a set of projected
income streams and a reversion. The analyst specifies the quantity,
variability, timing, and duration of the income streams as well as the
quantity and timing of the reversion and discounts each to its present
value at a specified yield rate. DCF analysis can be applied with any yield
capitalization technique and may be performed on either a lease-by-lease or
aggregate basis.
Legal Description
The property, which contains 8.10 acres of land, has a legal description
which may be summarized as Parcels 3 through 6, inclusive, as shown on Parcel
Map LD-591, in the City Of Thousand Oaks, County of Ventura, State of
California, filed in Book 50, Pages 1 and 2 of Parcel Maps in the Office of the
County Recorder of said County;
and Lot 162 to Tract 3507-3, in the City of Thousand Oaks, as per Map
recorded in Book 96, Pages 77 through 85, inclusive, of maps, in the office of
the County Recorder of said County.
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NEIGHBORHOOD ANALYSIS
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Location
The City of Thousand Oaks is located in the easterly portion of Ventura
County, approximately 45 miles west of the Los Angeles Civic Center, 30 miles
east of the City of Ventura, 60 miles east of the City of Santa Barbara, ten
miles north of the Pacific Ocean, and nine miles south of Simi Valley.
The city is bordered on the north by Moorpark and unincorporated Ventura
County areas; on the south by Lake Sherwood and unincorporated Los Angeles
County areas; on the west by Camarillo and unincorporated areas; and on the east
by the Cities of Westlake Village, and Agoura Hills, and unincorporated Los
Angeles County districts.
The City of Thousand Oaks is located within the Conejo Valley, a geographic
area which includes portions of easterly Ventura County and westerly Los Angeles
County. Aside from Thousand Oaks, the Conejo Valley also encompasses the Cities
of Westlake Village and Agoura Hills, as well as the unincorporated districts of
Newbury Park, Hidden Valley and Lake Sherwood.
Background
Prior to the late 1950's, the entire area between the San Fernando Valley
on the east and the City of Oxnard on the west was primarily undeveloped. The
access characteristics of the area at the time were quite poor and, in addition
to undeveloped land, the area included a number of agricultural farms.
Development of the Conejo Valley began in the late 1950's in part as a
result of the opening of the Ventura Freeway (U.S. Highway 101) and in part due
to westerly growth pressures emanating from the San Fernando Valley. Initial
development of the area primarily included single-family residential districts,
but also included several pockets of supporting commercial development.
At the time of the initial development of the Conejo Valley, much of the
land was owned by the Janss family, pioneer Southern California developers who
master planned their 10,000- acre Conejo Ranch in an effort to create a complete
community. The initial master planning of the Conejo Ranch served as the basis
for development of the City of Thousand Oaks, as well as other portions of the
Conejo Valley.
Although much of the Cohejo Valley remains unincorporated to this day, the
City of Thousand Oaks was incorporated in 1964; Westlake Village was
incorporated in 1981; and Agoura Hills in November of 1982. Many of the
unincorporated Ventura County areas surrounding Thousand Oaks fall under the
planning and zoning jurisdiction of the city.
Population
According to 1995 figures, Thousand Oaks had a population of 112,600
persons, ranking the city second county-wide behind Oxnard. Thousand Oaks'
population grew by 34 percent during the 1980's.
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Neighborhood Analysis
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The following chart provides pertinent information relating to historical
population levels for Thousand Oaks and Ventura County since 1960.
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Population % Population %
Year Thousand Oaks Change* Ventura County Change
---- ------------- ------- -------------- ------
- --------------------------------------------------------------------------------
1960 N/A N/A 119,138 N/A
1970 36,334 N/A 376,400 12.2
1980 77,072 7.8 529,174 3.5
1985 94,160 4.1 589,500 2.2
1990 102,795 1.8 668,553 2.5
1995 112,600 1.8 720,500 1.5
* Compounded Annual Change
Given slow economic growth during the 1990's, it is anticipated that future
population growth will be continue to be moderate, but at a much lower rate than
that experienced during the 1960's and 1970's.
Employment
The employment base of the Conejo Valley is quite strong, including both
manufacturing and non-manufacturing employers. There are over 132 manufacturing
firms within the community, with the leading product lines being electronic
components and plastics products. Numerous other smaller employers are located
in attractive industrial and business parks located throughout the Conejo
Valley.
Transportation
Thousand Oaks and the Conejo Valley are reasonably well located, benefiting
from general proximity to metropolitan centers in the Southern California
region. The Ventura (U.S. 101) Freeway traverses the Conejo Valley in an
east/west direction, connecting it to the Los Angeles metropolitan area on the
east, and the Ventura/Oxnard area on the west. The Moorpark (State 23) Freeway
extends northerly from the Ventura Freeway connecting Thousand Oaks with the
communities of Moorpark, Fillmore and Simi Valley. Both of these freeways
interconnect with other highways to provide the Conejo Valley rapid access to
the entire Southern California market area.
Bus lines serving the area include Greyhound West, Commuter Bus Lines,
Thousand Oaks/Moorpark Express, and Great American Stageline, Inc. Rail
transportation is provided by Southern Pacific and Amtrak, both of which have
stops in nearby Oxnard. Overnight trucking is provided by six major truck lines
and numerous smaller independent truck lines. Commuter airline transportation is
provided by Wings West Airlines which operates out of Oxnard Airport. The
Ventura County Airport and Camarillo Airport are smaller facilities designed for
small craft
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Neighborhood Analysis
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operations. The nearest major airport facility is the Burbank/Pasadena/Glendale
Airport, located approximately 35 miles to the east, while Los Angeles
International Airport is located approximately 45 miles to the southeast.
Community Facilities
The City of Thousand Oaks operates under a council/manager form of
government with an elected part-time city council, and a full-time city manager.
The city operates its own building, planning, public works and parks and
recreation departments.
Police protection is provided by the Ventura County Sheriff's Department on
a contract basis. Seventy-one sworn officers are assigned to the City of
Thousand Oaks and provide such local services as patrol, investigation, traffic
enforcement, youth services, computer crime analysis, narcotics, and an active
crime prevention program.
Fire protection is provided by Battalion 3 of the Ventura County Fire
Department. The fire department maintains six stations within the Conejo Valley
and has a compliment of 66 regular firefighters, 40 reserve fire-fighters, and a
headquarters staff of four.
The Conejo Unified School District services Thousand Oaks and surrounding
unincorporated areas operating 18 elementary schools, four intermediate schools,
four public high schools, one special education school, and a junior college.
Additionally, the city includes three private high schools and California
Lutheran College, a private four-year institution.
Additional facilities serving the community include two libraries, 13
theaters, four golf courses, 31 parks, 64 churches, two daily newspapers, two
weekly newspapers, and two radio stations.
Surroundings
The subject is located at the southwest corner of Lindero Canyon Road and
Kanan Road, in the northeastern portion of the City of Thousand Oaks. This
location is within the newer Oak Park area of Thousand Oaks, which consists
largely of newer, above average single family residences.
The access characteristics of the property are considered good, via both
freeways and surface arterials. The Ventura (101) Freeway, located two and
one-half miles south of the property, is the major east/west freeway serving the
Conejo Valley and connecting it with the San Fernando Valley and Los Angeles to
the east, as well as Camarillo, Oxnard, Ventura and Santa Barbara to the west.
Lindero Canyon Road, which provides full on- and off- ramps at its intersection
with the Ventura Freeway, is a north/south arterial which extends from the
subject property, south of the Ventura Freeway to Agoura in Los Angeles County.
The intersection of Lindero Canyon Road and Kanan Road is signalized.
The east side of Lindero Canyon Road, directly across from the subject, is
improved with the Oak Park shopping center, including a Ralphs supermarket and
Thrifty drug store. Immediate surroundings are primarily newer single family
homes with some multiple residential dwellings.
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Neighborhood Analysis
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Conclusions
The subject enjoys locational characteristics within the vibrant Conejo
Valley. The property is located in a newer area, and is designed to serve the
local Oak Park and North Ranch neighborhoods of Thousand Oaks.
The Thousand Oaks/Conejo Valley area is a desirable Southern California
suburban district which provides attractive residential neighborhoods, ample
supporting commercial/retail facilities, a sound employment base, fine
recreational amenities, and adequate community services. Outlying areas within
the community are still in a developing stage of their life cycle.
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MARKET ANALYSIS
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Trade Area Market Potential
The drawing power of a retail center of the subject's size is fundamentally
related to the strength of the anchor tenants and the compatibility and type of
complimentary satellite tenancies, as well as the relative proximity of
competitive centers offering comparable goods and services.
In order to define and analyze the subject property's market potential, it
is important to first establish the boundaries of the primary and secondary
trade areas from which the subject draws its customers. As a neighborhood
center, the subject's competition comes in the form of other neighborhood and
community centers.
Traditionally, a neighborhood center's sales are primarily generated from
within its primary trade area which is typically within reasonably close
geographic proximity to the store itself. The secondary trade area generally
refers to more outlying areas which provide less frequent customers to the
center. Residents within the secondary trade area would be more likely to shop
closer to home due to time and travel constraints.
Once the trade area is defined, the area's demographics and economic
profile can be analyzed. With the assistance of data provided by National
Decision Systems, we analyzed the subject's market area. It is difficult to
quantify the precise extent of the subject's trade area, but based on the
subject's tenant mix, size, and availability of similar stores and services in
the surrounding areas, we consider a one- to three-mile trade area to be most
relevant for this analysis. The subject's primary anchor is Pavilions
supermarket. Additionally, there is a Lampost Pizza restaurant, Baskin Robbins
and Bank of America branch. Although some of these tenants can attract clientele
from a larger, secondary radius, the services are duplicated along other
commercial corridors within roughly one to three miles from the subject.
Population
According the data furnished by Equifax National Decision Systems (ENDS) on
the facing page, the total 1996 population within a three-mile radius of the
subject is 40,458. This data indicates that the population within this market
area has increased 15.6% since 1990. Further population growth is projected
through 2001.
The number of households in the subject market area is also an important
consideration. A household consists of all the people occupying a single housing
unit. While individual members of a household purchase goods and services, these
purchases actually reflect household needs and decisions. Thus the household is
a critical unit to be considered when reviewing market data and forming
conclusions about the trade areas as it impacts the retail center.
According to ENDS, the primary trade area added 1,988 households between
1990 and 1996, an increase of 16.9 percent to 13,785 units. This increase
represents a 2.6 percent compounded annual growth rate. While this increase is
more rapid than the general population growth, the growth rate has slowed since
the 1980's, due primarily to the recession occurring during the early 1990's.
Nevertheless, the number of households is expected to continue to increase by
2.1 percent compounded annually through 2001.
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Market Analysis
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Trade Area Income
The 1996 estimated median household income is a significant $81,714 for the
three-mile area surrounding the subject. As shown on the previous chart, median
household incomes cluster from $50,000 to over $150,000 within the immediate
subject neighborhood. In fact, over 50 percent of the households in the primary
trade area earn more than $75,000 per year. Thus, the data suggests that the
subject center is located in a growing, relatively affluent community. These
demographics suggest that the subject area has a high concentration of
purchasing power which should in turn have a positive impact on retail sales.
Retail Sales
In the analysis of a retail property, levels of income and purchasing power
must be compared with actual retail sales in order to clearly ascertain the
dynamics of the marketplace. The following table summarizes retail sales in
Ventura County and Thousand Oaks:
Trends in Retail Sales
(in thousands)
Year Ventura County Thousand Oaks
---- -------------- -------------
1989 3,934,995 953,735
1990 3,959,479 954,928
1991 3,835,101 962,522
1992 3,891,962 1,011,261
1993 3,913,054 1,034,418
1994 4,336,652 1,205,733
1995* 4,479,365 1,250,960
Compound Annual Growth 2.2% 4.6%
* Estimated
According to the above data, retail sales within Ventura County and
Thousand Oaks have grown since 1989 at compound annual rates of 2.2 percent and
4.6 percent, respectively. These figures were negatively impacted by the
recession which affected the area during the early 1990's. The rate of growth
in the county versus the city indicate that sales growth in Thousand Oaks is
ahead of that of the county. The figures for the past two years, in particular,
bode well for the subject market.
Subject Market Potential
Although the Conejo Valley was originally developed as a residential
suburb, it has matured to a level where it currently contains sufficient
commercial and retail facilities to satisfy the majority of its residents.
Included within the valley are older strip retail districts, numerous
neighborhood shopping centers, community centers, and a regional shopping
center.
The subject is currently configured for 26 tenants. The character of the
subject center is dictated to a large degree by the image of the major tenant
adjacent, Pavilions, an upscale
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Market Analysis
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supermarket. In addition to Pavilions, other national or regional credit tenants
include Bank of America, Baskin Robbins, Lampost Pizza and Prudential Realty.
World Savings plans to construct a branch office on its pad site within the
center. The subject center is one of the newest in the area, constructed in
1991. Many of the tenants within this center are oriented toward local
residents. Given current economic conditions and the strong appeal of the
subject anchor tenant, the current use of the subject property is a highly
appropriate use for the site.
Competitive Supply
The chart on the following page summarizes the primary existing competitive
shopping centers in Thousand Oaks within roughly three miles of the subject
property. The competitive centers (excluding the subject) have a combined
rentable area of 586,585 square feet, range in size from 57,822 to 184,476
square feet, and are 94 to 99 percent occupied. The centers are described below.
Item 1, Oak Park Shopping Center, is a neighborhood shopping center located
immediately across from the subject. The center is currently anchored by Ralphs
supermarket and Thrifty Drugs. Additional tenants include Blockbuster Video and
El Pollo Loco fast food restaurant. Its location is considered comparable to
that of the subject, as is the center's design. However, its tenant mix
generates higher traffic than the subject's. The center is in good condition and
is 95 percent occupied with rents approaching $27.00 per square foot annually.
Item 2 is located at Thousand Oaks Boulevard and Westlake Boulevard, near
the Ventura Freeway. General surroundings are more established than those of the
subject. This center is also in good condition and anchored by Ralphs, Thrifty,
as well as a Trader Joes specialty market. Asking rents for this premier center
range from $24.00 to $39.00, and this center is also 99 percent occupied.
Item 3, Northstar Plaza, is a recently renovated "village" unanchored
center included due to its nearby location on Thousand Oaks Boulevard. The
center currently enjoys high occupancy at 94 percent. Its location and condition
are generally comparable features of comparison, although its mix of retail and
office tenants is inferior.
Item 4 represents the Park Oaks shopping center. This center is older and
has not been renovated. Nevertheless this center enjoys 95 percent occupancy
currently, signifying a strong local retail market. We note that occupancy is
down from 98 percent over the past four years. This center is afforded major
tenants including Vons, Clothestime, and Melody Theaters. The center also
benefits from national tenants including Radio Shack and McDonald's on a front
pad. Its rent levels are near the low end of the range, from $12.00 to $16.68
per square foot.
Item 5, Oakbrook Plaza, has excellent freeway access off the Moorpark (23)
Freeway, but is located in an older area. This center was constructed in 1986
and is in good condition. Major tenants include Albertsons and Long's Drugs. Due
in part to the desirable condition of the center, occupancy is currently 99
percent. Its rent levels are at the low end of the range, from $12.00 to $15.60
per square foot.
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Market Analysis
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Retail Rental and Occupancy Survey
Thousand Oaks, California
(July 1996)
<TABLE>
<CAPTION>
====================================================================================================================================
Size Available Annual Rent Anchor Annual CAM
Item No. Name/Location Year Built (SF) Space (SF) Occupancy PSF (NNN) Tenant Charges PSF
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Oak Park Shopping Center 1990's 122,287 5,800 95% $27.00 Ralphs, Thrifty $4.20
SEC Lindero Canyon Road & Drugs,
Kanan Road Blockbuster
- ------------------------------------------------------------------------------------------------------------------------------------
2 North Ranch Mall 1980 184,476 1,200 99% $24.00-$39.00 Ralphs, Thrifty N/A
NWC Westlake Blvd. & Ren. 1990 Drugs, Trader
Thousand Oaks Blvd. Joes
- ------------------------------------------------------------------------------------------------------------------------------------
3 Northstar Plaza 1978 57,822 3,364 94% $12.60-$18.00 None $3.00
1321-1345 E. Thousand Oaks Ren. 1995
Boulevard
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4 Park Oaks Shopping Center 1960 117,000 5,480 95% $12.00-$16.68 Vons $1.92
NEC Moorpark Road & Janss Supermarket,
Road Melody
Theaters
- ------------------------------------------------------------------------------------------------------------------------------------
5 Oakbrook Plaza 1986 105,000 1,380 99% $12.00-$15.60 Albertsons $4.08
SEC Avenida de Los Arboles & Supermarket,
Moopark Freeway Longs Drugs
- ------------------------------------------------------------------------------------------------------------------------------------
Subtotal 586,585 17,224 97%
- ------------------------------------------------------------------------------------------------------------------------------------
Subject North Ranch Plaza 1991 62,982 2,439 96% Pavilions
SWC Lindero Canyon Road & Supermarket
Kanan Road (adjacent)
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Total 649,567 19,663 97%
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</TABLE>
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Market Analysis
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These centers represent the primary competitive supply for the subject
development. All are located in Thousand Oaks, north of the Ventura Freeway. As
set forth on the preceding summary of competitive supply, the current vacancy
level for the combined 649,567 square feet of total retail space, including the
subject, is only three percent.
Shopping Centers Planned or Under Construction
The recent recovery from the recession and the continued population growth
within Thousand Oaks point to new development within the market. The most
competitive of three new centers will be located on the east side of Lindero
Canyon Road, just south of the subject. The 100,000 square foot Costco Center is
currently under construction and is reportedly 100 percent pre-leased. In
addition to Costco/Price Club, anchor tenants will include Albertsons
supermarket and PetSmart.
Located approximately two and one-half miles southwest is the proposed
Promenade of Westlake Village. This proposed center is at the southeast corner
of Thousand Oaks Boulevard and Westlake Boulevard, across from the competing
North Ranch Mall. Ground breaking has commenced on this 175,000 square foot
center which will feature a Bristol Farms specialty market, Cost Plus, Mann 8
Theaters and Barnes & Noble Booksellers.
Also proposed for Westlake Boulevard near the Ventura Freeway is a home
furnishing center to feature Bed Bath & Beyond and Ethan Allen. Finally, we are
also aware of the current construction of an Orchard Supply Hardware store
adjacent to the Oakbrook Plaza on Avenida de Los Arboles.
The proposed Costco center on Lindero Canyon Road will provide the most
competition within the immediate subject neighborhood. However, the subject
Pavilions is an upscale supermarket that will continue to attract upper middle
income shoppers to North Ranch Plaza.
Conclusions
Our investigation uncovered two planned or under construction competitive
retail centers within the subjects identified trade area. While brokers and
other professionals within the local area indicate that the market slowed during
the early 1990's, the outlook over the foreseeable future is positive. Based on
the demographic analysis discussed previously and the continued population
growth projected by Equifax National Decision Systems, it is logical to assume
that the sales volumes and corresponding achievable rental levels for the
subject development will increase over the projected holding period.
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PROPERTY DESCRIPTION
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Site Description
The subject site is situated at the southwest corner of Lindero Canyon Road
and Kanan Road. The common street address is 1125 through 1165 Lindero Canyon
Road, Thousand Oaks, Ventura County, California. The site (in total) is
irregular in shape and contains 8.10 acres of land area. The topography consists
of a level pad area, sloping downward from north to south. We have assumed that
the soil's load-bearing capacity is sufficient to support the existing
structures. All essential utilities including electricity, water, sewer, and
telephone are currently serving the site.
According to Community Panel No. 060422 0020A, effective September 29,
1978, the subject property appears to be situated in Zone C, an area designated
as being outside of the floodplain.
Improvements Description
The North Ranch Plaza consists of four, one-story shopping center buildings
containing 62,982 gross leasable square feet. Not included in this figure is an
adjacent Pavilions supermarket of 50,970 square feet under separate ownership.
The property was constructed in 1991 and is currently 96 percent occupied by 24
tenants.
Construction is typical with steel-reinforced concrete and stucco with wood
siding exterior walls. Each tenancy is heated and cooled with roof-mounted HVAC
systems. Plumbing and electrical is assumed to meet required building codes. The
property has fire sprinklers.
The subject has ample asphalt surface parking, and concrete curbs and
sidewalks. The site is well landscaped with trees, ground cover, ornamental
shrubs and plants located along the street frontage, around the building and in
the parking lot.
We have specifically assumed that the property complies with the Americans
With Disabilities Act, and that potentially hazardous materials have not been
used in the construction or maintenance of the property. Overall, the
improvements are in good condition. No evidence of structural damage was
observed on our inspection of the improvements. Further, we are not aware of any
major items of deferred maintenance.
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REAL PROPERTY TAXES AND ASSESSMENTS
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The subject property is under the taxing jurisdictions of the City of
Thousand Oaks and Ventura County. Taxes are levied against all real property in
this locale for the purpose of providing funding for the various municipalities.
The amount of ad valorem taxes is determined by the current assessed value for
the property in conjunction with the total combined tax rates of the taxing
jurisdiction.
Tax Rates
The following is a chart displaying the 1995-96 tax rates levied by the
above noted taxing jurisdictions:
================================================================================
Tax Rates Per $100 of Assessed Value
================================================================================
1995-96
Tax Rate
- --------------------------------------------------------------------------------
Total $1.026381
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Tax Assessment
Under the provisions of Article XIIIA of the California Tax and Revenue
Code, properties are assessed at their market value as of March 1, 1975, the
base year lien date. This value may be increased only two percent per year until
the property is sold, substantial new construction occurs, or the property's use
changes significantly. In such cases, the property may be reassessed to its
market value.
The subject property's Assessor parcel identification numbers are
689-470-03, 04, 05, 06 and 07. Following is the subject's total current
assessment.
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Property Assessment Summary
================================================================================
1995-96
================================================================================
Land $ 4,418,738
Building $ 6,208,357
- --------------------------------------------------------------------------------
Total $10,627,095
================================================================================
Taxes $109,074
Direct Assessments $2,272
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Total Taxes $111,346
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Ad Valorem Tax Conclusions
If the property were sold, it would be reassessed according to the
Assessor's opinion of its market value, which is the sale price in most cases.
Based on the property's appraised value, taxes after sale would equal
approximately $107,770 net of direct assessments, as follows.
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Real Property Taxes and Assessments
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Estimated Tax Burden Upon Sale
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$10,500,000 X $1.026381 + 100 = $107,770
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Taking into consideration the potential for increases in the assessed value
per Proposition 13, we have projected that taxes for the subject property will
increase at 2.0 percent annually.
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ZONING
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The subject property is zoned RPD1.5, Residential, under the Zoning
Ordinance of the City of Thousand Oaks. However, the subject property's Specific
Plan designation is Commercial. The Commercial District was established to
provide for professional and service commercial needs. This classification
primarily permits retail and office uses. No industrial uses are allowed.
We were not provided an estimate of total parking spaces; however, based
upon our physical inspection and upon conversations with the City of Thousand
Oaks, the property appears to be in compliance with the current parking
requirements. We are not experts in the interpretation of complex zoning
ordinances, but the property appears to be a conforming use based on our review
of public information. However, the determination of compliance is beyond the
scope of a real estate appraisal.
We know of no deed restrictions, private or public, that further limit the
subject property's use. The research required to determine whether or not such
restrictions exist is beyond the scope of this appraisal assignment. Deed
restrictions are a legal matter, and only a title examination by an attorney or
title company can usually uncover such restrictive covenants. Thus, we recommend
a title search to determine if any such restrictions do exist.
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<PAGE>
HIGHEST AND BEST USE
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Highest and Best Use of Site As Though Vacant
The highest and best use must be (1) legally permissible, (2) physically
possible, (3) financially feasible, and (4) maximally productive. The size,
shape, and physical attributes of the site are considered sufficient to
accommodate most forms of development. Given the existing commercial Specific
Plan zoning designation and the surrounding development (which consists of a
retail at prominent intersections), some type of commercial use would be most
compatible with surrounding development. Further, as discussed in the Market
Analysis section of this report, the submarket has continued its recovery with a
current occupancy level of approximately 97 percent. Rental rates for this type
of space represent the highest rates in the Thousand Oaks area. Further, the
retail market is very active from an occupancy and rental rate perspective.
Therefore, it is our opinion the highest and best use of the site as vacant is
for commercial retail development.
Highest and Best Use, As Improved
As noted in the Property Description section of this report, the subject
site is improved with a 62,982 square foot neighborhood shopping center and
related site improvements. Constructed in 1991, the project is in good
condition. Further, the design and layout are considered to be functional for
its current use.
The retail submarket in which the subject competes is stable with
increasing occupancy levels and rental rates, as will be supported by the data
and analysis presented in the balance of this report. Therefore, it is our
opinion that the subject property, as improved, is capable of providing an
adequate return to the land over the foreseeable future. This conclusion is
supported by the data and analysis presented in the balance of this report. For
these reasons, it is our opinion that the highest and best use of this site, as
improved, is for continued use as a neighborhood shopping center.
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VALUATION PROCESS
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In this appraisal, we have used the Sales Comparison Approach and the
Income Approach to develop market value estimates for the subject property.
Because this is a summary report, the level of detail of presentation is less
than that found in a self-contained report.
We used two approaches in our valuation of the property. The Cost Approach
is not considered a relevant valuation method for the subject property. Buyers
and sellers within this market do not typically utilize the Cost Approach in
their purchase and sale decisions. Further, the age of the improvements requires
a large degree of judgment in estimating accrued depreciation, including
economic obsolescence. For these reasons, we have not utilized the Cost Approach
in this appraisal, as we do not believe it would provide a meaningful indication
of value and would not help to support the other approaches to value.
In the Sales Comparison Approach, we performed the following steps:
o Investigated the market for recent sales of similar properties.
o Analyzed those sales on the basis of the sales price per square foot;
and
o Correlated the value indications into a point value estimate from
within the range.
In developing the Income Approach we:
o Studied the rents in effect in this and competing properties to
estimate the potential rental income at market levels;
0 Studied the recent history of operating expenses at this and competing
properties to estimate an appropriate level of expenses and reserves
for replacement;
0 Estimated net operating income and cash flow by subtracting the
operating, fixed, and other expenses from the effective gross income;
and
0 Prepared a discounted cash flow analysis in which the cash flow and
property value at reversion are discounted to an estimate of current
market value at a market-derived discount rate. Potential gross
revenues are estimated based on a modeling of the actual rents and
recovery provisions in effect through the term of existing leases. As
the existing leases expire, the space is estimated to rent at the then
current market rental rate with appropriate allowances for downtime.
Spaces now vacant will be rented at market rates and at the time
intervals discussed in the Income Approach section of this report.
From potential gross revenues, we subtract vacancy and expenses
(operating, fixed, and other) to arrive at an estimate of cash flow
over an eleven-year forecast.
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Valuation Process
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The appraisal process is concluded by a review and re-examination of each
of the approaches to value that have been employed. Consideration is given to
the type and reliability of data used, and the applicability of each approach.
Finally, the approaches are reconciled and a final value conclusion is
estimated.
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SALES COMPARISON APPROACH
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Methodology
In the Sales Comparison Approach, we estimated the value by comparing this
property with similar, recently sold properties in the surrounding or competing
area. Inherent in this approach is the principle of substitution, which holds
that when a property is replaceable in the market, its value tends to be set at
the cost of acquiring an equally desirable substitute property, assuming that no
costly delay is encountered in making the substitution.
By analyzing sales which qualify as arms-length transactions between
willing, knowledgeable buyers and sellers, we can identify value and price
trends. The basic steps involved in the application of this approach are:
(1) researching recent, relevant property sales and current offerings
throughout the competitive area;
(2) selecting and analyzing those properties considered most similar to
the subject, considering changes in economic conditions that may have
occurred between the sale date and the date of value, and other
physical, functional, or locational factors;
(3) identifying sales which include favorable financing and calculate the
cash equivalent price;
(4) reducing the sale prices to common units of comparison, such as price
per square foot of building area;
(5) making appropriate comparative adjustments to the prices of the
comparable properties to relate them to the property appraised; and
(6) interpreting the adjusted sales data and draw a logical value
conclusion.
In analyzing the leased fee estate (or fee simple estate, subject to the
existing building tenant leases), the sale prices inherent in the comparables
were reduced to those common units of comparison used to analyze improved
properties that are similar to the subject. Of the available units of
comparison, the sales price per square foot of net rentable area (used by
buyers, sellers, and brokers), as well as the net income per square foot
analysis, are the most commonly used measurements to value shopping centers in
the marketplace.
From an appraiser's perspective, the net income per square foot analysis is
probably a more discernible indicator of value because it considers the income
characteristics which in turn dictate the price per square foot paid.
Regardless, both the sales price per square foot and net income per square foot
analyses have been used to analyze the subject property.
The comparable sales had occupancy levels ranging from 88 to 100 percent at
the time of sale. On the following page is a summary of recent market data
considered to be most indicative of the subject's current market value.
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[GRAPHIC OMITTED]
[STREET MAP]
Comparable Sales
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Sales Comparison Approach
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The comparable properties are generally similar from a physical standpoint
to the subject, but there are some differences in terms of location, occupancy,
and tenant draw. All of the properties have surface parking. Generally speaking,
the investment market for this type of product is fairly broad, including
national, regional and local investors.
Sales Price Per Square Foot Analysis
The comparables indicate sales prices ranging from $77.07 to $142.08 per
square foot of rentable area on a cash equivalent basis. The prices per square
foot are influenced by the differences in location, occupancy levels, character
of the tenancies and economics. Nevertheless, it is important to address each
property in terms of the conventional sequence of adjustments. Following are
those considerations which are relevant to the subject. The first three elements
must be considered in advance of applying any other compensating factors to
derive value conclusions via the sales price per square foot methodology.
Property Rights Conveyed
As shown in the summary table, all of the comparables are encumbered by
leases; therefore, the leased fee estate was conveyed in each of these cases. In
the final analysis, we have made no adjustments to the comparables for the
differences in property rights conveyed.
Seller Financing/Cash Equivalency
All of the comparables were sold on the basis of cash to the seller. Thus,
we have made no adjustments to the comparables for seller financing.
Conditions of Sale
We identified no special motivational conditions concerning the
comparables; therefore, no adjustments for conditions of sale were made.
Other
Because of the multiple differences inherent in properties with respect to
quality and design, location, and, in this case economics, not to mention the
quality of the tenant base, mathematical adjustments would be extremely
difficult to support.
In our opinion, Comparable 1-6 is the most similar to the subject in size
and net income potential. It is also the most recent sale occurring in May 1996,
and bests reflects current market conditions. Nevertheless, its location in Van
Nuys has inferior demographics to Thousand Oaks. This comparable sold for
$142.08 per square foot. Based upon all of the above data, we believe the value
of the subject would be in the range of $150.00 to $160.00 per square foot of
rentable area. Thus, our value range by the Sales Price Per Square Foot method
is as follows:
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Sales Comparison Approach
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Sales Price Per Square Foot Summary
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Rentable Area Sales Price Per Indicated
(SF) Square Foot Value
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62,982 X $150.00 = $9,447.300
Rounded To: $9,400,000
62,982 X $160.00 = $10,077,120
Rounded To: $10,100,000
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Comparing Properties Based on Net Operating Income per Square Foot
Another market measure compares the net operating income (NOI) per square
foot of the property being appraised with the NOI per square foot of the sales.
If the properties are truly comparable in terms of occupancy, operating expense
ratio and stability of income stream, then this can be an effective method of
analysis. It is, in effect, the same thing as comparing the capitalization rate
derived from the sales to the appropriate capitalization rate for the property
being appraised. The chart below illustrates this methodology.
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Comparing Property Based on NOI Per Square Foot
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Sale NOI/SF Unadjusted Adjusted Sales
No. Subject X Price/SF = Price/SF
-------
Comparable
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1 $17.67 X $79.05 = $180.93
------
$7.72
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3 $17.67 X $119.82 = $191.08
------
$11.08
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5 $17.67 X $77.07 = $160.59
------
$8.48
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6 $17.67 X $142.08 = $142.40
------
$17.63
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The unadjusted sale prices of the comparables range from a low of $77.07 to
a high of $142.08 per square foot, a relatively wide range. The adjusted sales
prices range from $142.40 to $191.08 per square foot which is a slightly
narrower range that exceeds the unadjusted range. As discussed previously,
Comparable 1-6, with an adjusted sale price of $142.40 per square foot, has the
most similar NOI per square foot. However, this property has increased risk
based on its inferior tenant mix, including the 99 Ranch Market. Consequently,
we have estimated the subjects value to be higher than this indicator.
Sales 1-1 and 1-5 are each located in Ventura County and best reflect the
subject's locational features. These adjusted indicators range from $160.59 to
$180.93. In the final analysis, we have concluded between $160.00 and $170.00
per square foot. Following are the calculations of the subject's total value.
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Sales Comparison Approach
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NOI Per Square Foot Ratio Analysis
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Subject's
Size Price Indicated
(GLA) Per SF Value
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62,982 X $160.00 = $10,077,120
62,982 X $170.00 = $10,706,940
Rounded To: = $10,100,000
to
$10,700,000
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The previous two methods of analysis result in the following conclusions.
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Low High
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Value Indicated on Basis of Price Per SF Analysis $9,400,000 $10,100,000
Value Indicated Based on Ratio of NOI to Sales Price $10,100,000 $10,700,000
Derived From Comparable Sales
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The price per square foot analysis resulted in a value indication ranging
from $9,400,000 to $10,100,000, while the value indicated by the ratio of NOI to
sales prices per square foot ranged from $10,100,000 to $10,700,000. Both
methods are excellent indicators of value for properties like the subject that
are encumbered by long-term net leases. Accordingly, we concluded a value
estimate toward the middle of the two indicated ranges.
Value Indicated by Sales Comparison Approach: $10,100,000
The above value equates to $160.36 per square foot of gross leasable area.
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INCOME APPROACH
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Methodology
The Income Approach is a method of converting the anticipated economic
benefits of owning property into a value estimate through capitalization. The
principle of anticipation underlying this approach is that investors recognize
the relationship between an asset's income and its value. In order to value the
anticipated economic benefits of a particular property, potential income and
expenses must be estimated and the most appropriate capitalization method must
be selected.
The two most common methods of converting net income into value are through
direct capitalization and a discounted cash flow analysis. In direct
capitalization, the net operating income is divided by an overall capitalization
rate extracted from market sales to indicate a value. In the discounted cash
flow method, anticipated future income streams and a reversionary value are
discounted to a net present value at a chosen yield rate (internal rate of
return).
The direct capitalization method is an effective technique when stable
conditions exist both in the marketplace and for the property. However, when
market conditions are either changing or likely to change in a fairly dramatic
manner over time, direct capitalization becomes a more difficult technique to
administer. Direct capitalization is further inhibited by the numerous variables
that exist with multi-tenant shopping centers, i.e., multiple leases, with
staggered lease terms and varying lease structures; the lease-up of vacant
space; and differing tenant finish allowances, depending upon whether the space
is in a shell or second generation state.
Given these numerous variables, coupled with our inquiries of participants
in the marketplace, we feel that the majority of investors for a property like
the subject would utilize the discounted cash flow method. Overall, market
conditions are still below normalized levels, although the subjects submarket
and direct competition are strengthening rapidly. Consequently, the discounted
cash flow method is the most pertinent method of reflecting investor
expectations as of the current period, and during the projected recovery. Also,
the discounted cash flow methodology can better quantify the impact of
multi-tenant leases with staggered lease terms and rental rates than the direct
capitalization technique. Therefore, it is our opinion that the discounted cash
flow method is the most appropriate method in the valuation of the subject
property. As such, the direct capitalization method will not be used in this
analysis. However, at the conclusion of the Income Approach, we will analyze the
resulting overall capitalization rate derived from the discounted cash flow
analysis as a check for reasonableness.
In the following sections, we will first analyze the subjects existing
leases and market rents before discussing the subject's operating expenses and
preparing the discounted cash flow analysis.
Summary of Existing Leases
As of the effective date of appraisal, there are 24 leased suites totaling
60,543 square feet of rentable area. In addition, Vons Pavilions owns the
supermarket building within the center, and World Savings plans to construct a
branch on its separately owned pad site. This figure equates to an occupancy
factor of 96 percent.
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Income Approach
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Current rent levels range from $5.35 to $30.48 per square foot, and average
$18.52 per square foot annually on a triple net basis. In addition to base rent,
tenants pay their share of property operating costs, plus a ten to 15 percent
CAM surcharge for management. A summary of existing leases is presented on the
facing page. A complete rent roll of the subject property abstracting the
existing leases is located in the Addenda.
Assumptions Regarding the Existing Leases
Our analysis specifically assumes the existing tenants will remain in the
property and continue paying rent under the terms of their leases. Information
provided by management indicates that only one tenant, Postal Club, is currently
in default of its lease, and is paying excess rent until current. Overall, the
tenants are typically local companies, but past leasing operations generally
appears to be stable.
Lease Expirations
As part of our risk analysis, we reviewed the tenant expiration dates (as
shown in the Addenda). With respect to the current leasing structure, there is
one tenant of 1,066 square feet with an expiration date in 1996, while 8,430
square feet or 13 percent of the rentable area is exposed during 1997. During
1998, two tenants of 2,094 square feet have lease expirations. Thus, over the
next three years (1996-1998), the percentage of space expiring is fairly
nominal (11,590 square feet, or 18 percent). However, most leases expire in
years 1999 through 2002. Overall, the lease expiration exposure is staggered
over the projected holding period.
None of the renewal options contained in the existing leases specify below
market rates. Therefore, at the expiration of those leases which contain renewal
options, we have assumed normal renewal probabilities.
Estimate of Current Market Rent
According to the leasing agent, the current quoted rental rates at the
subject property extend up to $21.60 per square foot, on a triple net basis. The
most recent actual signed lease to Toy Attic calls for rent of $18.60 annually.
Quoted tenant finish allowances range from zero to $5.00 per square foot.
Typically, tenant finish for second generation space is nominal. In order to
gauge the reasonableness of the quoted rent and form a conclusion as to the
current market rents for the subject property as of the appraisal date, we
conducted a survey of comparable shopping centers located in Thousand Oaks. On
the following page is a summary of properties utilized in our rent comparable
analysis. The chart is restated from the Market Analysis section.
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Income Approach
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Retail Rental and Occupancy Survey
Thousand Oaks, California
(July 1996)
<TABLE>
<CAPTION>
====================================================================================================================================
Size Available Annual Rent Anchor Annual CAM
Item No. Name/Location Year Built (SF) Space(SF) Occupancy PSF(NNN) Tenants Charges PSF
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
R-1 Oak Park Shopping Center 1990's 122,287 5,800 95% $27.00 Ralphs, Thrifty $4.20
SEC Lindero Canyon Road & Drugs,
Kanan Road Blockbuster
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R-2 North Ranch Mall 1980 184,476 1,200 99% $24.00-$39.00 Ralphs, Thrifty N/A
NWC Westlake Blvd. & Ren.1990 Drugs, Trader
Thousand Oaks Blvd. Joes
- ------------------------------------------------------------------------------------------------------------------------------------
R-3 Northstar Plaza 1978 57,822 3,364 94% $12.60-$18.00 None $3.00
1321-1345 E. Thousand Oaks Ren. 1995
Boulevard
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R-4 Park Oaks Shopping Center 1960 117,000 5,480 95% $12.00-$16.68 Vons $1.92
NEC Moorpark Road & Janss Supermarket,
Road Melody
Theaters
- ------------------------------------------------------------------------------------------------------------------------------------
R-5 Oakbrook Plaza 1986 105,000 1,380 99% $12.00-$15.60 Albertsons $4.08
SEC Avenida de Los Arboles & Supermarket,
Moopark Freeway Longs Drugs
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Subtotal 586,585 17,224 97%
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Subject North Ranch Plaza 1991 62,982 2,439 96% Pavilions
SWC Lindero Canyon Road & Supermarket
Kanan Road (adjacent)
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Total 649,567 19,663 97%
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</TABLE>
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Income Approach
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The rates summarized above indicate the quoted rental rate for the
comparable properties. In some cases, the actual effective rates being achieved
for recent leases was unavailable. In those instances where the leasing agent
indicated the effective rate, it was either the same as the quoted rate or
slightly lower.
We were able to obtain actual lease information on three of the subjects
competing buildings. The three comparable leases exhibited actual lease ranging
from $15.00 to $27.00 per square foot. The tenant improvement allowances were
typically zero.
The highest indicator was achieved at the Oak Park Shopping Center, located
across the street from the subject. While similar in age, location, quality and
condition, its tenant mix is considered superior to the subject's. We would
expect lower achievable rents at the subject center. The balance of the data
ranged from $15.00 to $16.80 per square foot. These two centers, Park Oaks and
Oakbrook Plaza, are older than the subject; the indicated lease rates require
upward adjustments.
The quoted rental rates are on a triple net basis, with the tenant
responsible for all operating costs.
In addition to the surveyed properties noted above, we have also taken into
consideration the recent leases which have been executed at the subject
property. The recent leases have rental rates between $16.80 and $19.20 per
square foot, on a triple net basis, plus a 15 percent CAM surcharge for
management. Tenant finish allowances range from $0.00 to $10.50 per square foot
for new tenants. The majority of the recent leases have terms of three to six
years. In general, the reasons for the range in base rental rates in the recent
leases include: (1) the size, location, and physical condition of the space
leased, and (2) the creditworthiness of the tenant. The length of the term can
be another contributing factor.
After considering the competitive properties, it is our opinion that the
following parameters are representative of a market lease for the subject
property as of the effective date of appraisal:
1) The market rental rates for the subject space are estimated below.
In-line Space: $18.00 per square foot
Rear Space: $14.40 per square foot
End Space: $21.00 per square foot
Pad Space: $24.00 per square foot
2) In future leases, a 15 percent CAM charge is applied to the triple net
leases.
3) Future leases are assumed to have a five-year lease term.
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Income Approach
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4) The tenant improvement allowance is projected to be $2.00 per square
foot for new tenants that lease second generation space, and zero for
tenant renewals.
Rental Rate Forecast
Several brokers indicated to us that the quoted rental rates for the
shopping centers are tightening. Our survey presented earlier in the Market
Analysis section supports this contention. Furthermore, it is our opinion that
the subject will likely experience moderate rental rate increases over the next
several years because of increasingly higher occupancy rates in the subject's
market area. However, rent increases will be kept in check by new construction
currently underway.
As such, we have forecasted a two percent increase in the market rental
rates for the subject property in 1997. Thereafter, a 3.5 percent annual
increase has been applied to the market rental rates, based in part on responses
indicated in the Cushman & Wakefield Investor Survey included in the Addenda.
Expense Recovery income
All of the existing leases have provisions for expense pass throughs on a
triple net basis. The allowable expenses included in the expense recoveries for
leases include all items of expense except the management fee, leasing and
promotion expenses, capital replacements, tenant improvements, and leasing
commissions. However, most tenants have a 15 percent CAM surcharge to cover
management expense. The recovery income reflected in our cash flow analysis is
based on the terms of the existing tenant leases, plus triple net lease terms
with a 15 percent surcharge applied to all future contracts.
Further, the two tenants under separate ownership, Pavilions and World
Savings, were modeled to contribute to CAM charges.
Percentage (Overage) Rent
Percentage rent clauses are associated with only six tenants. We recognize
that retail sales levels may fluctuate. Further, a new sales basis or break
point may be established upon releasing space.
While we were not provided with actual retail sales figures for the subject
tenants, we note that overage rent income was zero during the last seven months
of 1995, and was not budgeted for 1996. In the final analysis, we did not model
any percentage rent income.
Vacancy and Collection Loss
Both the investor and the appraiser are primarily interested in the cash
revenue that an income property is likely to produce annually over a specified
period time rather than what it could produce if it were always 100 percent
occupied and all the tenants were actually paying their rent in full and on
time. It is normally a prudent practice to expect some income loss, either in
the form of actual vacancy or in the form of turnover, non-payment, or slow
payment of rent. Regarding collection loss specifically, we have applied a two
percent loss factor throughout the holding period primarily as a contingency for
potential collection problems and tenant defaults. This collection loss factor
is applied to rental income from all tenants.
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Income Approach
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The subject's market area has a current vacancy level of just three
percent. The subject project is currently four percent vacant. However, several
new developments are planned or currently under construction within the
immediate area.
We have projected an approximate seven-month vacancy period at the
expiration of every five-year lease, weighted for a 60 percent renewal
probability. This conclusion equates to an approximate six percent vacancy and
collection loss factor.
The resulting physical (rollover/turnover) occupancy level for the property
within the cash flow is approximately 94 percent, and considers increased
competition from new developments over the projected holding period.
Operating and Fixed Expenses
On the facing page is our Summary of Income and Expenses for the subject
property. We based our estimated operating expenses on a review of the 1994 and
1995 actual itemized expenses for the subject property. In addition, we were
provided with the property's 1996 budget. Finally, this data was compared with
known operating statements of similar projects.
Total operating expenses were $5.95 per square foot in 1994, and $5.74 per
square foot during 1995. The 1996 budgeted amount is projected to be slightly
lower at $5.42 per square foot.
As illustrated in the preceding chart, those expenses considered to trend
in a reasonable manner over the period for which we have historical data include
insurance, utilities, common area maintenance and administrative. Our Year One
projections for these items can be found in preceding chart. The other expense
categories that were not as consistent from year to year have been examined more
thoroughly in the following paragraphs. Of the above mentioned expense
categories, the expenses are grown at three and one-half percent annually.
Operating Expenses
Real Estate Taxes
We estimated real estate taxes at $110,000, or $1.75 per square foot of
building area. Per California's Proposition 13, we multiplied the indicated
value in the Income Approach by the subject's current tax rate. This amount
differs slightly from that included in the Real Property Taxes and
Assessments section, due to the circular nature of calculating taxes.
Management -- Based upon discussions with Cushman & Wakefield's Asset
Services staff, this expense typically includes management, bookkeeping,
and general accounting costs associated with the operation of the property.
The operating statements we were provided indicate a management fee of 5.0
percent of effective gross income has historically been charged. Based on
the management fees for
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Income Approach
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similar buildings, we consider a management fee of 4.5 percent of effective
gross income to be appropriate.
Other Expenses:
Other operating expenses include Tenant Improvements and Leasing
Commissions. The probability of incurring future leasing commissions and tenant
alterations is based on a 60 percent probability of renewal, and a 40 percent
probability of turnover.
Tenant Improvements -- We have factored a $2.00 per square foot allowance
for new tenants, and an allowance of zero is projected for tenant renewals.
The weighted, average finish-out allowance for all tenants is therefore
equal to $0.80 per square foot.
Tenant improvement costs are projected to increase at a rate of 3.5 percent
per year through the projection period.
Leasing Commissions -- For the period under analysis, leasing commissions
for all new leases are estimated to be 5.0 percent. Renewal commissions are
projected at 2.5 percent.
As a result of these projections, the weighted average commission applied
to all expiring space is equal to 3.5 percent.
Capital Replacements/Reserves -- Reserves for replacements are or should be
set aside to accumulate an amount sufficient to replace and/or repair
certain major building components over time, i.e., roof, major parking lot
repairs, HVAC systems, etc. during the period under analysis. Based on the
expense behavior of other comparable properties and the age of the subject
property, we have estimated capital replacements/reserves at $0.10 per
rentable square foot, increasing by 3.5 percent per year throughout our
analysis.
Our projected expenses are predicated on the assumption that the property
will be prudently managed, while maintaining the improvements at a competitive
level to preserve value. The preceding cumulative annual operating expense
estimate for fiscal 1997 equates to $350,679 ($5.57 per square foot of rentable
area), excluding the capital replacements, tenant improvements and the leasing
commissions. Our total projected expenses appear reasonable when compared to the
historical experience and the 1996 budgeted amount.
Cash Flow Model
In the calculation of the cash flow forecasts and investment results
produced under these assumptions, projections and parameters, we employed the
Pro-Ject Plus+ computer program. The program has the flexibility to allow for a
tenant by tenant analysis of the subject as encumbered by the existing leases.
It also allows for a variety of assumptions regarding future income streams and
expenses. Our eleven-year discounted cash flow analysis can be found on the
following page.
================================================================================
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WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
NORTH RANCH PLAZA, THOUSAND OAKS
PROJECT DESIGNATOR: NORT
ANNUAL CASH FLOW REPORT
BEGINNING 8/1/96 FOR 11 YEARS
<TABLE>
<CAPTION>
FY1997 FY1998 FY1999 FY2000 FY2001 FY2002
<S> <C> <C> <C> <C> <C> <C>
{ILLEGIBLE] MUM RENT:
{ILLEGIBLE] RENTS 1,252,176 1,341,438 1,391,451 1,436,084 1,484,678 1,497,021
{ILLEGIBLE] VACANCY (10,873) (27,874) (30,780) (32,985) (18,024) (118,371)
---------- ---------- ---------- ---------- ---------- ----------
{ILLEGIBLE] MINIMUM RENT 1,241,303 1,313,564 1,3600,671 1,403,099 1,466,654 1,378,650
{ILLEGIBLE] VERIES:
{ILLEGIBLE] VERIES 251,203 260,162 267,905 277,544 287,933 275,997
---------- ---------- ---------- ---------- ---------- ----------
{ILLEGIBLE] RECOVERIES 251,203 260,162 267,905 277,544 287,933 275,997
---------- ---------- ---------- ---------- ---------- ----------
{ILLEGIBLE] RENTAL
{ILLEGIBLE] OME 1,492,506 1,573,726 1,628,576 1,680,643 1,754,587 1,654,647
{ILLEGIBLE] LOSS (28,661) (30,243) (31,297) (32,294) (33,727) (31,680)
---------- ---------- ---------- ---------- ---------- ----------
{ILLEGIBLE] INCOME 1,463,845 1,543,483 1,597,279 1,648,349 1,720,860 1,622,967
{ILLEGIBLE] EXPENSES
{ILLEGIBLE] REAL ESTATE TAXES 111,283 113,509 115,779 118,095 120,457 122,866
{ILLEGIBLE] ANCE 32,134 33,259 34,423 35,627 36,874 38,165
{ILLEGIBLE] AREA MAINT. 57,841 59,866 61,961 64,129 66,374 68,697
{ILLEGIBLE] ADMINISTRATIVE 32,134 33,259 34,423 35,627 36,874 38,165
{ILLEGIBLE] ITIES 51,414 53,214 55,076 57,004 58,999 61,064
{ILLEGIBLE] MANAGEMENT FEE 65,873 69,457 71,877 74,176 77,439 73,033
---------- ---------- ---------- ---------- ---------- ----------
{ILLEGIBLE] TOTAL EXPENSES 350,679 362,564 373,539 384,658 397,017 401,990
---------- ---------- ---------- ---------- ---------- ----------
{ILLEGIBLE] OPERATING
{ILLEGIBLE] INCOME 1,113,166 1,180,919 1,223,740 1,263,691 1,323,843 1,220,977
{ILLEGIBLE] RATIONS 22,141 6,063 6,149 5,013 3,251 14,455
{ILLEGIBLE] ISSIONS 19,040 21,111 23,107 24,712 13,532 59,342
{ILLEGIBLE] VES 6,298 6,519 6,747 6,983 7,227 7,480
---------- ---------- ---------- ---------- ---------- ----------
{ILLEGIBLE] FLOW 1,065,687 1,147,226 1,187,737 1,226,983 1,299,833 1,139,700
</TABLE>
<TABLE>
<CAPTION>
FY2003 FY2004 FY2005 FY2006 FY2007
<S> <C> <C> <C> <C> <C>
{ILLEGIBLE] MUM RENT:
{ILLEGIBLE] RENTS 1,484,321 1,545,029 1,639,350 1,695,020 1,748,589
{ILLEGIBLE] VACANCY (66,882) (114,607) (57,476) (7,136) (100,366)
---------- ---------- ---------- ---------- ----------
{ILLEGIBLE] MINIMUM RENT 1,417,439 1,430,422 1,581,874 1,687,884 1,648,223
{ILLEGIBLE] VERIES:
{ILLEGIBLE]
VERIES 293,561 296,937 316,645 335,972 325,384
{ILLEGIBLE] ---------- ---------- ---------- ---------- ----------
RECOVERIES 293,561 296,937 316,645 335,972 325,384
{ILLEGIBLE] ---------- ---------- ---------- ---------- ----------
{ILLEGIBLE] RENTAL
{ILLEGIBLE] OME 1,711,000 1,727,359 1,898,519 2,023,856 1,973,607
LOSS (32,758) (33,034) (36,404) (38,856) (37,794)
{ILLEGIBLE] ---------- ---------- ---------- ---------- ----------
INCOME 1,678,242 1,694,325 1,862,115 1,985,000 1,935,813
{ILLEGIBLE]
{ILLEGIBLE] EXPENSES
{ILLEGIBLE] REAL ESTATE TAXES 125,323 127,830 130,386 132,994 135,654
{ILLEGIBLE] ANCE 39,501 40,883 42,314 43,795 45,328
{ILLEGIBLE] AREA MAINT. 71,101 73,590 76,166 78,831 81,591
{ILLEGIBLE] ADMINISTRATIVE 39,501 40,883 42,314 43,795 45,328
{ILLEGIBLE] ITIES 63,201 65,413 67,703 70,072 72,525
MANAGEMENT FEE 75,521 76,245 83,795 89,325 87,112
{ILLEGIBLE] ---------- ---------- ---------- ---------- ----------
TOTAL EXPENSES 414,148 424,844 442,678 458,812 467,538
{ILLEGIBLE] ---------- ---------- ---------- ---------- ----------
{ILLEGIBLE] OPERATING
INCOME 1,264,094 1,269,481 1,419,437 1,526,188 1,468,275
{ILLEGIBLE] RATIONS 17,947 9,257 17,934 1,184 16,496
{ILLEGIBLE] ISSIONS 75,284 42,339 84,789 4,928 67,580
{ILLEGIBLE] VES 7,742 8,013 8,294 8,584 8,884
---------- ---------- ---------- ---------- ----------
{ILLEGIBLE] FLOW 1,163,12l 1,209,872 1,308,420 1,511,492 1,375,315
</TABLE>
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Approach
================================================================================
Terminal Capitalization Rate Selection
A terminal capitalization rate was used to estimate the market value of the
property at the end of the assumed investment holding period. The rate is
applied to the eleventh years estimate of net operating income before making
deductions for leasing commissions, tenant improvement allowances, or capital
reserves. We estimated an appropriate terminal rate based on the indicated
capitalization rates of the improved property sales in today's market, as
summarized below.
================================================================================
Summary of Capitalization Rates
================================================================================
Sale Capitalization
No. Rate
================================================================================
1-1 9.8%
1-2 N/A
1-3 9.3%
1-4 N/A
1-5 11.0%
1-6 12.4%
================================================================================
A premium is generally added to today's rate to allow for the risk of
unforeseen events or trends which might affect our estimate of net operating
income during the holding period, including possible changes in market
conditions for the property. Investors typically add 50 to 100 basis points to
the going-in rate to arrive at a terminal capitalization rate, according to
Cushman & Wakefield's periodic investor surveys. This survey indicates a range
of terminal capitalization rates from 9.0 to 11.5 percent, with most falling
between 9.6 and 10.3 percent.
We considered the survey results and compared the subject property to the
comparables included in the Sales Comparison Approach. Considering the subject's
smaller, non-credit tenants and future competitive supply, we are of the opinion
that, given a 10.25 percent going-in rate, a 10.75 percent terminal
capitalization rate is appropriate to apply to the subjects projected net
operating income in the eleventh year. This results in an estimated terminal
value (or sales price) for the property at the end of the tenth year of
$13,658,372 ($1,468,275/.1075).
From this projected sales price, the estimated costs of sale for such items
as real estate commissions, closing costs, legal fees, as well as others, must
be deducted. We have estimated these costs to be three percent, and the net
sales price in the tenth year is $13,248,621 ($13,658,372 - $409,751 =
$13,248,621).
Discount Rate Analysis
We estimated future cash flows, including property value at reversion, and
discounted that income stream at an internal rate of return (yield rates)
currently required by investors for similar-quality real property. The yield
rate (internal rate of return or IRR) is the single rate that discounts all
future equity benefits (cash flows and equity reversion) to an estimate of net
present value.
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Approach
================================================================================
Cushman & Wakefield Valuation Advisory Services periodically surveys
national real estate investors to determine their investment objectives.
Following is a brief review of internal rates of return, overall rates, and
income and expense growth rates considered acceptable by respondents.
================================================================================
CUSHMAN & WAKEFIELD (R) VALUATION ADVISORY SERVICES
WINTER 1995 NATIONAL INVESTOR SURVEY FOR RETAIL,
COMMUNITY AND NEIGHBORHOOD CENTERS
================================================================================
INCOME EXPENSE
GOING IN TERMINAL IRR GROWTH GROWTH
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
-------------------------------------------------------------------------
Range 8.5% 11.0% 9.0% 11.5% 10.0% 14.0% 0.0% 4.0% 3.0% 4.5%
- --------------------------------------------------------------------------------
Mean 9.2% 9.8% 9.6% 10.3% 11.7% 12.4% 3.0% 3.6% 3.6% 3.7%
================================================================================
This table summarizes the investment parameters of some of the most
prominent investors currently acquiring good quality office building properties
in the United States. The entire survey is included in the Addenda to this
report.
The investors internal rates of return cited above range from 10.0 to 14.0
percent, with most between 11.7 and 12.4 percent. We have selected a 12.5
percent discount rate for the subject property.
The internal rate of return and terminal capitalization rate selected for
this analysis were strongly influenced by our recent Investor Survey, but we
also relied very heavily on the anecdotal data from Cushman & Wakefield's
Financial Services Group. Furthermore, we realize that the survey reflects
target rates rather than transactional rates. Transactional rates are usually
difficult to obtain in the verification process and are actually only target
rates of the buyer at the time of sale. The property's performance will
ultimately determine the actual yield and capitalization rate at the time of
sale after a specific holding period. We have found that, in improving markets
or with above average properties, demand will be high and transactional rates
may be lower than target rates that are quoted in surveys. We have tried to
recognize this factor in our choice of rate for our cash flow model.
Discounted Cash Flow Chart
The discounted cash flow analysis can be found on the following page.
================================================================================
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
PURCHASE/SALE YIELD TABLE FOR NORTH RANCH PLAZA, THOUSAND OAKS
Purchase Price(000's)/Cap Going In as a function of IRR
All Cash analysis (Purchased August 1996 Sold July 2006)
Sale Price(000's)/Terminal Cap
13,895 13,564 13,249 12,948 12,660
IRR 10.25 10.50 10.75 11.00 11.25
- --------------------------------------------------------------------------------
11.50 11,605 11,493 11,387 11,286 11,189
9.59 9.69 9.78 9.86 9.95
12.00 11,253 11,147 11,045 10,948 10,856
9.89 9.99 10.08 10.17 10.25
12.50 10,917 10,815 10,718 10,625 10,536
10.20 10.29 10.39 10.48 10.57
13.00 10,594 10,496 10,403 10,315 10,230
10.51 10.61 10.70 10.79 10.88
13.50 10,284 10,191 10,102 10,017 9,936
10.82 10.92 11.02 11.11 11.20
================================================================================
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Approach
================================================================================
Conclusion Via the Income Approach
The resulting value estimate is $10,700,000, or $169.89 per rentable square
foot, which equates to a 10.4 percent going-in capitalization rate.
================================================================================
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
RECONCILIATION AND FINAL ESTIMATE OF VALUE
================================================================================
Value indications for the subject property by the Approaches to Value are
indicated as follows:
Sales Comparison Approach $10,100,000
Income Approach $10,700,000
The Sales Comparison Approach, is based on the principle of substitution
which implies that a prudent person will not pay more to buy or rent a property
than the cost to buy a comparable substitute property. In this approach, the
subject property was compared with six shopping center sales. We analyzed the
sales using the sales price per square foot and net income per square foot
methods. Although various dissimilarities between the sales and the subject were
noted, the general analysis is believed to provide reasonable support for our
value conclusion. As such, the Sales Comparison Approach is afforded appropriate
weight in the final conclusion.
The Income Approach is based upon investor expectations of the income
stream generated by an income producing property. After estimating gross income
and the absorption of vacant space, deductions were made for vacancy and
collection losses, and variable, fixed and other expenses. The resulting net
operating income was then converted into an indication of value by means of a
discounted cash flow model.
Since investment properties are generally bought and sold based upon their
income generating ability, all sources of pertinent data were carefully
researched. It is our opinion that the Income Approach is the most reliable
indicator of the value of the subject, since the intent of our analysis was to
mirror investor expectations.
Therefore, giving primary weight to the indication of value via the Income
Approach, as supported by the Sales Comparison Approach, we have formed an
opinion that the market value of the leased fee estate in the referenced
property, subject to the assumptions, limiting conditions, certifications, and
definitions, as of July 27, 1996, was:
TEN MILLION FIVE HUNDRED THOUSAND DOLLARS
$10,500,000
================================================================================
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Reconciliation and Final Estimate of Value
================================================================================
Marketing Time
Marketing time is an estimate of the time that might be required to sell a
real property interest at the appraised value. Marketing time is presumed to
start on the effective date of the appraisal. Marketing time is subsequent to
the effective date of the appraisal, and exposure time is presumed to precede
the effective date of appraisal.
The estimate of marketing time uses some of the same data analyzed in the
process of estimating the reasonable exposure time and is not intended to be a
prediction of a date of sale.
Our estimate of an appropriate marketing time for the subject relates to a
sale of the property in its As Is condition. Based on our discussions with
local brokers and buyer/sellers of office projects like the subject, as well as
our assessment of the local real estate market and economic forces in general,
we have concluded that the probable marketing period for the subject property in
today's environment would approximate six to nine months.
================================================================================
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
ASSUMPTIONS AND LIMITING CONDITIONS
================================================================================
Appraisal means the appraisal report and opinion of value stated therein; or the
letter opinion of value, to which these Assumptions and Limiting Conditions are
annexed.
Property means the subject of the Appraisal.
C&W means Cushman & Wakefield, Inc. or its subsidiary which issued the
Appraisal.
Appraiser(s) means the employee(s) of C&W who prepared and signed the Appraisal.
The Appraisal has been made subject to the following assumptions and limiting
conditions:
1) No opinion is intended to be expressed and no responsibility is assumed for
the legal description or for any matters which are legal in nature or
require legal expertise or specialized knowledge beyond that of a real
estate appraiser. Title to the Property is assumed to be good and
marketable and the Property is assumed to be free and clear of all liens
unless otherwise stated. No survey of the Property was undertaken.
2) The information contained in the Appraisal or upon which the Appraisal is
based has been gathered from sources the Appraiser assumes to be reliable
and accurate. Some of such information may have been provided by the owner
of the Property. Neither the Appraiser nor C&W shall be responsible for
the accuracy or completeness of such information, including the correctness
of estimates, opinions, dimensions, sketches, exhibits and factual matters.
3) The opinion of value is only as of the date stated in the Appraisal.
Changes since that date in external and market factors or in the Property
itself can significantly affect property value.
4) The Appraisal is to be used in whole and not in part. No part of the
Appraisal shall be used in conjunction with any other appraisal.
Publication of the Appraisal or any portion thereof without the prior
written consent of C&W is prohibited. Except as may be otherwise stated in
the letter of engagement, the Appraisal may not be used by any person other
than the party to whom it is addressed or for purposes other than that for
which it was prepared. No part of the Appraisal shall be conveyed to the
public through advertising, or used in any sales or promotional material
without C&W's prior written consent. Reference to the Appraisal Institute
or to the MAI designation is prohibited.
5) Except as may be otherwise stated in the letter of engagement, the
Appraiser shall not be required to give testimony in any court or
administrative proceeding relating to the Property or the Appraisal.
6) The Appraisal assumes (a) responsible ownership and competent management of
the Property; (b) there are no hidden or unapparent conditions of the
Property, subsoil or structures that render the Property more or less
valuable (no responsibility is assumed for such conditions or for arranging
for engineering studies that may be required to discover them); (c) full
compliance with all applicable federal, state and local zoning and
environmental regulations and laws, unless noncompliance is stated, defined
and
================================================================================
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Assumptions and Limiting Conditions
================================================================================
considered in the Appraisal; and (d) all required licenses, certificates of
occupancy and other governmental consents have been or can be obtained and
renewed for any use on which the value estimate contained in the Appraisal
is based.
7) The physical condition of the improvements considered by the Appraisal is
based on visual inspection by the Appraiser or other person identified in
the Appraisal. C&W assumes no responsibility for the soundness of
structural members nor for the condition of mechanical equipment, plumbing
or electrical components.
8) The forecasted potential gross income referred to in the Appraisal may be
based on lease summaries provided by the owner or third parties. The
Appraiser assumes no responsibility for the authenticity or completeness of
lease information provided by others. C&W recommends that legal advice be
obtained regarding the interpretation of lease provisions and the
contractual rights of parties.
9) The forecasts of income and expenses are not predictions of the future.
Rather, they are the Appraiser's best estimates of current market thinking
on future income and expenses. The Appraiser and C&W make no warranty or
representation that these forecasts will materialize. The real estate
market is constantly fluctuating and changing. It is not the Appraiser's
task to predict or in any way warrant the conditions of a future real
estate market; the Appraiser can only reflect what the investment
community, as of the date of the Appraisal, envisages for the future in
terms of rental rates, expenses, supply and demand.
10) Unless otherwise stated in the Appraisal, the existence of potentially
hazardous or toxic materials which may have been used in the construction
or maintenance of the improvements or may be located at or about the
Property was not considered in arriving at the opinion of value. These
materials (such as formaldehyde foam insulation, asbestos insulation and
other potentially hazardous materials) may adversely affect the value of
the Property. The Appraisers are not qualified to detect such substances.
C&W recommends that an environmental expert be employed to determine the
impact of these matters on the opinion of value.
11) Unless otherwise stated in the Appraisal, compliance with the requirements
of the Americans With Disabilities Act of 1990 (ADA) has not been
considered in arriving at the opinion of value. Failure to comply with the
requirements of the ADA may adversely affect the value of the Property. C&W
recommends that an expert in this field be employed.
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
CERTIFICATION OF APPRAISAL
================================================================================
We certify that, to the best of our knowledge and belief:
1) Craig D. Tilson, MAI has inspected the property.
2) The statements of fact contained in this report are true and correct.
3) The reported analyses, opinions, and conclusions are limited only by
the reported assumptions and limiting conditions, and are our
personal, unbiased professional analyses, opinions, and conclusions.
4) We have no present or prospective interest in the property that is the
subject of this report, and we have no personal interest or bias with
respect to the parties involved.
5) Our compensation is not contingent upon the reporting of a
predetermined value or direction in value that favors the cause of the
client, the amount of the value estimate, the attainment of a
stipulated result, or the occurrence of a subsequent event. The
appraisal assignment was not based on a requested minimum valuation, a
specific valuation or the approval of a loan.
6) No one provided significant professional assistance to the persons
signing this report.
7) Our analyses, opinions, and conclusions were developed, and this
report has been prepared, in conformity with the Uniform Standards of
Professional Appraisal Practice of the Appraisal Foundation and the
Code of Professional Ethics and the Standards of Professional
Appraisal Practice of the Appraisal Institute.
8) The use of this report is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives.
9) As of the date of this report, Craig D. Tilson, MAI, has completed the
requirements of the continuing education program of the Appraisal
Institute.
/s/ Craig D. Tilson
----------------------------
Craig D. Tilson, MAI
Associate Director
Valuation Advisory Services
Certification No. AGO03733
================================================================================
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
ADDENDA
================================================================================
================================================================================
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
NORTH RANCH PLAZA, THOUSAND OAKS
PROJECT DESIGNATOR: NORT
LEASE ABSTRACT REPORT
FOR ALL TENANTS
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT
------ --------- ------ ----- ----- ------ ---------------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
[ILLEGIBLE] SUITE Al -- 5,219 1/94 12/03 -- 5.35 27,922
[ILLEGIBLE] ovo -- 1/97 16.80 87,679
1/98 17.40 90,811
1/99 18.24 95,195
1/00 19.20 100,205
1/01 20.16 105,215
1/02 21.12 110,225
1/03 22.20 115,862
[ILLEGIBLE] SUITE A2 -- 1,526 6/93 5/03 -- 18.00 27,468
[ILLEGIBLE] RAME IT -- 6/98 18.72 28,567
6/99 19.44 29,665
6/00 20.28 30,947
6/01 21.00 32,046
6/02 21.84 33,328
[ILLEGIBLE] SUITE A3 -- 1,028 9/93 8/98 -- 17.40 17,887
[ILLEGIBLE] STORE --
[ILLEGIBLE] SUITE A4 -- 1,023 3/94 2/99 -- 14.40 14,731
[ILLEGIBLE] E FARM INSURAN -- 3/97 15.60 15,959
3/98 16.80 17,186
[ILLEGIBLE] SUITE A5 -- 1,512 4/93 3/99 -- 19.20 29,030
[ILLEGIBLE] NIE T. KENT --
[ILLEGIBLE] SUITE A6 -- 5,777 8/94 11/97 -- 13.71 79,203
[ILLEGIBLE] MAXIMILIAN -- 11/96 15.79 91,219
[ILLEGIBLE] SUITE A8 -- 1,066 2/92 12/98 -- 17.02 18,143
[ILLEGIBLE] AL CLUB -- 1/97 17.62 18,778
1/98 18.23 19,436
[ILLEGIBLE] SUITE A9 -- 1,066 9/91 11/96 -- 28.06 29,912
[ILLEGIBLE] FOR ONE PHOTO --
[ILLEGIBLE ]SUITE A10 -- 1,086 12/94 4/05 -- 15.00 16,290
[ILLEGIBLE] JIAN -- 12/00 18.00 19,548
[ILLEGIBLE] SUITE A11 -- 1,086 12/96 11/01 -- 14.40 15,638
-- 12/97 14.90 16,186
12/98 15.43 16,752
12/99 15.97 17,339
12/00 16.52 17,945
</TABLE>
<TABLE>
<CAPTION>
BREAK-
OVERAGE CEILING POINT PRO RATA % OF RENT
TENANT X (000's) (000's) RECOVERIES SHARE BASE SUBJ TO CPI
------ ------- ------- ------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
[ILLEGIBLE] SUITE Al -- -- -- RECOVERIES + 15% ZERO
[ILLEGIBLE] ovo
[ILLEGIBLE] SUITE A2 -- -- -- RECOVERIES + 15% ZERO
[ILLEGIBLE] RAME IT
[ILLEGIBLE] SUITE A3 -- -- -- RECOVERIES + 15% ZERO
[ILLEGIBLE] STORE
[ILLEGIBLE] SUITE A4 -- -- -- RECOVERIES + 15% ZERO
[ILLEGIBLE] E FARM INSURAN
[ILLEGIBLE] SUITE A5 -- -- -- RECOVERIES + 15% ZERO
[ILLEGIBLE] NIE T. KENT
[ILLEGIBLE] SUITE A6 -- -- -- RECOVERIES + 5% ZERO
[ILLEGIBLE] MAXIMILIAN
[ILLEGIBLE] SUITE A8 -- -- -- RECOVERIES + 15% ZERO
[ILLEGIBLE] AL CLUB
[ILLEGIBLE] SUITE A9 -- -- -- RECOVERIES + 15% ZERO
[ILLEGIBLE] FOR ONE PHOTO
[ILLEGIBLE ]SUITE A10 -- -- -- RECOVERIES + i5% ZERO
[ILLEGIBLE] JIAN
[ILLEGIBLE] SUITE A11 -- -- -- RECOVERIES + i5% ZERO
</TABLE>
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PAGE 2
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT
------ --------- ------ ----- ----- ------ ---------------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUITE B1 -- 1 7/91 6/21 -- %59300.00 59,300
PAVILIONS -- 7/97 %61375.50 61,375
7/98 %63523.64 63,524
7/99 %65746.96 65,747
7/00 %68048.10 68,048
7/01 %70429.78 70,430
7/02 %72894.82 72,895
7/03 %75446.13 75,446
7/04 %78086.74 78,087
7/05 %80819.77 80,820
7/06 %83648.46 83,648
7/07 %86576.16 86,576
7/08 %89606.32 89,606
7/09 %92742.54 92,743
7/10 %95988.52 95,989
7/11 %99348.12 99,348
7/12 %102825.30 102,825
7/13 %106424.18 106,424
7/14 %110149.02 110,149
7/15 %114004.23 114,004
7/16 %117994.38 117,994
7/17 %122124.17 122,124
7/18 %126398.52 126,399
7/19 %130822.46 130,822
7/20 %135401.25 135,401
SUITE Cl -- 3,040 9/96 8/01 -- 12.00 36,480
R POST -- 9/97 12.60 38,304
9/98 13.20 40,128
9/99 13.80 41,952
9/00 14.40 43,776
SUITE C2 -- 3,740 3/92 8/02 -- 19.47 72,818
L WAVE C2 -- 3/97 20.25 75,735
3/98 21.06 78,764
3/99 21.90 81,906
3/00 22.78 85,197
3/01 23.69 88,601
3/02 24.64 92,154
SUITE Dl -- 2,338 3/94 2/99 -- 13.20 30,862
A,910%&RATE --
</TABLE>
<TABLE>
<CAPTION>
BREAK-
OVERAGE CEILING POINT PRO RATA % OF RENT
TENANT X (000's) (000's) RECOVERIES SHARE BASE SUBJ TO CPI
------ ------- ------- ------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
SUITE B1 -- -- -- NONE
PAVILIONS
SUITE Cl -- -- -- RECOVERIES 15% ZERO
R POST
SUITE C2 -- -- -- RECOVERIES + 15% ZERO
L WAVE C2
SUITE Dl -- -- -- RECOVERIES + 15% ZERO
A,910%&RATE
</TABLE>
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 3
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT
------ --------- ------ ----- ----- ------ ---------------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUITE D2 -- 1,566 1/92 1/02 -- 30.10 47,137
HOUSE CLEANERS -- 2/97 31.15 48,786
2/98 32.24 50,494
2/99 33.37 52,261
2/00 34.54 54,090
2/01 35.75 55,983
SUITE D3 -- 1,353 4/97 3/02 -- 18.36 24,841
NT -- 4/98 19.00 25,711
4/99 19.67 26,610
4/00 20.36 27,542
4/01 21.07 28,506
SUITE D4 -- 1,343 7/96 7/97 -- 18.00 24,174
NDIPITY --
SUITE D5 -- 1,315 11/91 10/01 -- 19.16 25,195
IN ROBBINS -- 11/96 19.32 25,406
11/97 20.28 26,668
11/98 21.24 27,931
SUITE D6 -- 1,310 11/91 2/97 -- 24.66 32,305
IN A MILLION --
SUITE D7 -- 1,346 7/96 6/02 -- 18.60 25,036
ATTI --
SUITE D8 -- 2,090 1/92 12/99 -- 21.15 44,204
EIS --
SUITE D10 -- 3,422 3/92 3/01 -- 19.20 65,702
HAIR DESIGN --
SUITE D11 -- 1,746 1/92 12/01 -- 28.08 49,028
RANCH -- 1/97 29.06 50,744
1/98 30.08 52,520
1/99 31.13 54,358
1/00 32.22 56,260
1/01 33.35 58,229
SUITE D12 -- 3,630 12/91 11/01 -- 22.96 83,345
PIZZA -- 12/97 24.80 90,024
12/00 26.78 97,211
</TABLE>
<TABLE>
<CAPTION>
BREAK-
OVERAGE CEILING POINT PRO RATA % OF RENT
TENANT X (000's) (000's) RECOVERIES SHARE BASE SUBJ TO CPI
------ ------- ------- ------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
SUITE D2 -- -- -- RECOVERIES + 15% ZERO
HOUSE CLEANERS
SUITE D3 -- -- -- RECOVERIES + 15% ZERO
NT
SUITE D4 -- -- -- RECOVERIES + 15% ZERO
NDIPITY
SUITE D5 -- -- -- RECOVERIES + 15% ZERO
IN ROBBINS
SUITE D6 -- -- -- RECOVERIES + 10% ZERO
IN A MILLION
SUITE D7 -- -- -- RECOVERIES + 15% ZERO
ATTI
SUITE D8 -- -- -- RECOVERIES + 10% ZERO
EIS
SUITE D10 -- -- -- RECOVERIES + 15% ZERO
HAIR DESIGN
SUITE D11 -- -- -- RECOVERIES ZERO
RANCH
SUITE D12 -- -- -- RECOVERIES + 10% ZERO
PIZZA
</TABLE>
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 4
<TABLE>
<CAPTION>
PRIMARY/ ANNUAL
SECONDARY SQUARE LEASE LEASE OPTION MINIMUM MINIMUM
TENANT CODES FEET BEGIN END #/MOS RENT/SF RENT
------ --------- ------ ----- ----- ------ ---------------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUITE El -- 6,500 5/94 4/04 -- 18.12 117,780
R TIME -- 5/97 19.56 127,140
5/98 20.40 132,600
5/99 21.12 137,280
5/00 22.08 143,520
5/01 22.92 148,980
5/02 23.88 155,220
SUITE Fl -- 3,370 11/94 10/99 -- 22.26 75,016
ENTIAL REALTY -- 11/98 22.80 76,836
SUITE F2 -- 4,484 5/92 4/02 -- 30.48 136,672
OF AMERICA -- 5/97 34.29 153,756
5/98 38.58 172,993
SUITE GI -- 1 8/96 7/16 -- 6500.00 6,500
D SAVINGS -- 8/97 6727.50 6,728
8/98 6962.96 6,963
8/99 7206.67 7,207
8/00 7458.90 7,459
8/01 7719.96 7,720
8/02 7990.16 7,990
8/03 8269.81 8,270
8/04 8559.26 8,559
8/05 8858.83 8,859
8/06 9168.89 9,169
8/07 9489.80 9,490
8/08 9821.94 9,822
8/09 %10165.71 10,166
8/10 %10521.51 10,522
8/11 %10889.76 10,890
8/12 %11270.90 11,271
8/13 %11665.39 11,665
8/14 %12073.67 12,074
8/15 %12496.25 12,496
------
62,984
======
</TABLE>
<TABLE>
<CAPTION>
BREAK-
OVERAGE CEILING POINT PRO RATA % OF RENT
TENANT X (000's) (000's) RECOVERIES SHARE BASE SUBJ TO CPI
------ ------- ------- ------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
SUITE El -- -- -- RECOVERIES + 15% ZERO
R TIME
SUITE Fl -- -- -- RECOVERIES + 10% ZERO
ENTIAL REALTY
SUITE F2 -- -- -- RECOVERIES + 10% ZERO
OF AMERICA
SUITE G1 -- -- -- NONE
D SAVINGS
</TABLE>
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
NORTH RANCH PLAZA, THOUSAND OAKS
PROJECT DESIGNATOR: NORT
TENANT AGING REPORT
Expiry
# Suite Tenant Name Sq Feet Date Option(s)
- ----- ----------- ------- ---- ---------
8 A9 TWO FOR ONE PHOTO 1,066 Nov 1996
------
1996 Total 1,066
19 D6 ONE IN A MILLION 1,310 Feb 1997
17 D4 SERENDIPITY 1,343 Jul 1997
6 A6 ST. MAXIMILIAN 5,777 Nov 1997
------
1997 Total 8,430
3 A3 VIDEO STORE 1,028 Aug 1998
7 A8 POSTAL CLUB 1,066 Dec 1998
------
1998 Total 2,094
4 A4 STATE FARM INSURAN 1,023 Feb 1999
14 D1 LACOMBE KARATE 2,338 Feb 1999
5 A5 MELANIE T. KENT 1,512 Mar 1999
26 F1 PRUDENTIAL REALTY 3,370 Oct 1999
21 D8 ILENE'S 2,090 Dec 1999
------
1999 Total 10,333
22 D10 JAMIES HAIR DESIGN 3,422 Mar 2001
12 C1 PAPER POST 3,040 Aug 2001
18 D5 BASKIN ROBBINS 1,315 Oct 2001
24 D12 LAMPOST PIZZA 3,630 Nov 2001
10 All VACANT 1,086 Nov 2001
23 D11 THAI RANCH 1,746 Dec 2001
------
2001 Total 14,239
15 D2 CLUBHOUSE CLEANERS 1,566 Jan 2002
16 D3 VACANT 1,353 Mar 2002
27 F2 BANK OF AMERICA 4,484 Apr 2002
20 D7 TOY ATTIC 1,346 Jun 2002
13 C2 TIDAL WAVE C2 3,740 Aug 2002
------
2002 Total 12,489
2 A2 WE FRAME IT 1,526 May 2003
1 A1 RITROVO 5,219 Dec 2003
------
2003 Total 6,745
25 E1 TUTOR TIME 6,500 Apr 2004
------
2004 Total 6,500
9 A10 BALEJIAN 1,086 Apr 2005
------
2005 Total 1,O86
28 G1 WORLD SAVINGS 1 Jul 2016
------
2016 Total 1
11 Bl VONS PAVILIONS 1 Jun 2021
------
2021 Total 1
------
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
NORTH RANCH PLAZA, THOUSAND OAKS
PROJECT DESIGNATOR: NORT
PROJECT ASSUMPTIONS REPORT
EXCLUDING TENANTS
BUILDING PROLOGUE
- -----------------
LEASEHOLD ANALYSIS OF NORTH RANCH PLAZA, THOUSAND OAKS BEGINNING 8/1996 FOR 15
YEARS ON A FISCAL YEAR BASIS
AREA MEASURES
- -------------
GLA
DESCRIBED AS GROSS LEASABLE AREA
1996 VALUE - 62,982
THEREAFTER - CONSTANT
TOCA
DESCRIBED AS TOTAL OCCUPIED AREA
1996 VALUE - 57,175
1997 VALUE - 61,323
1998 VALUE - 61,764
1999 VALUE - 60,938
2000 VALUE - 62,181
2001 VALUE - 60,756
2002 VALUE - 57,712
2003 VALUE - 60,961
2004 VALUE - 58,398
2005 VALUE - 61,348
2006 VALUE - 61,875
2007 VALUE - 57,440
2008 VALUE - 60,199
2009 VALUE - 58,313
2010 VALUE - 61,348
THEREAFTER - CONSTANT
GROWTH RATES
- ------------
RNTG
DESCRIBED AS MARKET RENTAL GROWTH RATE
1996 VALUE - 2.00
1997 VALUE - 3.50
THEREAFTER - CONSTANT
EXPG
DESCRIBED AS EXPENSE GROWTH RATE
1996 VALUE - 3.50
THEREAFTER - CONSTANT
TAXG
DESCRIBED AS REAL ESTATE TAX EXPENSE GROWTH RATE
1996 VALUE - 2.00
THEREAFTER - CONSTANT
CPIG
DESCRIBED AS CONSUMER PRICE INDEX (INFLATION) GROWTH RATE
1996 VALUE - 3.50
THEREAFTER - CONSTANT
NCOM
DESCRIBED AS NEW TENANT LEASING COMMISSIONS
1996 VALUE - 5.00
THEREAFTER - CONSTANT
RCOM
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 2
DESCRIBED AS RENEWAL TENANT LEASING COMMISSIONS
1996 VALUE - 2.50
THEREAFTER - CONSTANT
BCOM
DESCRIBED AS BLENDED (WEIGHTED AVERAGE) LEASING COMMISSIONS FOR SPEC. RENEWAL
+40.0% OF NCOM +60.0% OF RCOM
MARKET RATES
- ------------
ENDR
DESCRIBED AS END SPACE MARKET RENTAL RATE PER SF
1996 VALUE - 21.00
THEREAFTER - GROWING AT GROWTH RATE RNTG
RETR
DESCRIBED AS RETAIL MARKET RENTAL RATE PSF
1996 VALUE - 18.00
THEREAFTER - GROWING AT GROWTH RATE RNTG
PADR
DESCRIBED AS PAD SPACE MARKET RENTAL RATE PER SF
1996 VALUE - 24.00
THEREAFTER - GROWING AT GROWTH RATE RNTG
LOWR
DESCRIBED AS LOW VISIBILITY SPACE MARKET RENT PER SF
1996 VALUE - 14.40
THEREAFTER - GROWING AT GROWTH RATE RNTG
INS
DESCRIBED AS ANNUAL INSURANCE EXPENSE PSF
1996 VALUE - 0.50
THEREAFTER - GROWING AT GROWTH RATE EXPG
CAM
DESCRIBED AS ANNUAL COMMON AREA MAINTENANCE EXPENSE PSF
1996 VALUE - 0.90
THEREAFTER - GROWING AT GROWTH RATE EXPG
ADMN
DESCRIBED AS ANNUAL ADMINISTRATIVE EXPENSE PSF
1996 VALUE - 0.50
THEREAFTER - GROWING AT GROWTH RATE EXPG
NTIR
DESCRIBED AS NEW TENANT IMPROVEMENT RATE
1996 VALUE - 2.00
THEREAFTER - GROWING AT GROWTH RATE CPIG
RTIR
DESCRIBED AS RENEWAL TENANT IMPROVEMENT RATE
ZERO
BTIR
DESCRIBED AS RENEWAL TENANT IMPROVEMENT RATE APPLIED TO SPECULATIVE RENEWALS
+40.0% OF NTIR +60.0% OF RTIR
RES
DESCRIBED AS ANNUAL CAPITAL RESERVES PSF
1996 VALUE - 0.10
THEREAFTER - GROWING AT GROWTH RATE CPIG
UTIL
DESCRIBED AS ANNUAL UTILITY EXPENSE PER SF
1996 VALUE - 0.80
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 3
THEREAFTER - GROWING AT GROWTH RATE EXPG
MISCELLANEOUS INCOMES
- ---------------------
NONE
EXPENSES
- --------
REAL ESTATE TAXES , REFERRED TO AS TAXE
DESCRIBED AS REAL ESTATE TAX EXPENSE
CHARGED AGAINST NET OPERATING INCOME
1996 VALUE - 110,000
THEREAFTER - GROWING AT GROWTH RATE TAXG
INSURANCE , REFERRED TO AS INSE
DESCRIBED AS INSURANCE EXPENSE
CHARGED AGAINST NET OPERATING INCOME
MARKET RATE INS MULTIPLIED BY AREA MEASURE GLA
COMMON AREA MAINT., REFERRED TO AS CAME
DESCRIBED AS COMMON AREA MAINTENANCE EXPENSE
CHARGED AGAINST NET OPERATING INCOME
MARKET RATE CAM MULTIPLIED BY AREA MEASURE GLA
ADMINISTRATIVE , REFERRED TO AS ADME
DESCRIBED AS ADMINISTRATIVE EXPENSE
CHARGED AGAINST NET OPERATING INCOME
MARKET RATE ADMN MULTIPLIED BY AREA MEASURE GLA
RECOVERIES , REFERRED TO AS RECI
DESCRIBED AS EXPENSE RECOVERY POOL FOR PASS-THROUGH PURPOSES ONLY
AN INFORMATIONAL EXPENSE
+100.0% OF TAXE+100.0% OF INSE
+100.0% OF CAME+100.0% OF UTLE
UTILITIES , REFERRED TO AS UTLE
DESCRIBED AS UTILITIES
CHARGED AGAINST NET OPERATING INCOME
MARKET RATE UTIL MULTIPLIED BY AREA MEASURE GLA
RECOVERIES + 10% , REFERRED TO AS R-10
AN INFORMATIONAL EXPENSE
+100.0% OF TAXE+100.0% OF INSE
+100.0% OF UTLE+110.0% OF CAME
RECOVERIES + 15% , REFERRED To AS R-15
AN INFORMATIONAL EXPENSE
+100.0% OF TAXE+100.0% OF INSE
+100.0% OF UTLE+11S.0% OF CAME
RECOVERIES + 5% , REFERRED TO AS R-5%
AN INFORMATIONAL EXPENSE
+100.0% OF TAXE+100.0% OF INSE
+100.0% OF UTLE+105.0% OF CAME
VACANCY ALLOWANCE
- -----------------
PERCENTAGE OF POTENTIAL GROSS INCOME
FOR ALL TENANTS SUBJECT TO VACANCY
1996 VALUE - 2.00
THEREAFTER - CONSTANT
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 4
MANAGEMENT FEE
- --------------
PERCENTAGE OF EFFECTIVE GROSS INCOME
FOR ALL TENANTS
NOT PASSED THROUGH TO TENANTS
1996 VALUE - 4.50
THEREAFTER - CONSTANT
COMMISSION CALCULATIONS
- -----------------------
STANDARD METHOD #1 - 5.000% OF TOTAL RENT
STANDARD METHOD #2 - 3.500% OF TOTAL RENT
STANDARD METHOD #3 - 0.000% OF TOTAL RENT
STANDARD METHOD #4 - 0.000% OF TOTAL RENT
STANDARD METHOD #5 - 0.000% OF TOTAL RENT
COMMISSION PAYOUTS
- ------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - CASHED OUT
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
ALTERATION CALCULATION
- ----------------------
NONE
ALTERATION PAYOUTS
- ------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - CASHED OUT
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
COMMON AREA MAINTENANCE POOL
- ----------------------------
NONE
CAPITAL EXPENDITURES
- --------------------
RESERVES
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 5
MARKET RATE RES MULTIPLIED BY AREA MEASURE GLA
PRIMARY CLASSIFICATION CODES
- ----------------------------
NONE
SECONDARY CLASSIFICATION CODES
- ------------------------------
NONE
COST CENTERS
- -------------
1 - RECOVERIES
SALES VOLUME PROFILE
- --------------------
PERCENT OF RELATIVE
MONTH ANNUAL SALES VOLUME
JAN 8.33% 1.00
FEB 8.33% 1.00
MAR 8.33% 1.00
APR 8.33% 1.00
MAY 8.33% 1.00
JUN 8.33% 1.00
JUL 8.33% 1.00
AUG 8.33% 1.00
SEP 8.33% 1.00
OCT 8.33% 1.00
NOV 8.33% 1.00
DEC 8.33% 1.00
------ -----
TOTALS 100.00% 12.00
GLOBAL RECOVERIES
- -----------------
RECOVERIES REFERRED TO AS GNET
ASSIGNED TO COST CENTER 1 - RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE RECI
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
RECOVERIES + 10% , REFERRED TO AS G10%
ASSIGNED TO COST CENTER 1 - RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE R-10
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
RECOVERIES + 15% , REFERRED TO AS G15%
ASSIGNED TO COST CENTER 1 - RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE R-15
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
CUSHMAN &
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---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 6
PRO RATA SHARE RECOVERY OF EXPENSE R-5%
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE GLA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
TENANT PROLOGUE
- ---------------
MINIMUM RENTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
SALES VOLUMES AND BREAKPOINTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
RENEWAL RENTS ARE COMPOUNDED ANNUALLY
RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET
REFERENCE TENANTS
- -----------------
NONE
TENANTS
- -------
THERE ARE A TOTAL OF 28 LEASEHOLD TENANT(S):
- ------------------------------------------------------------------
# 1 - SUITE A1 RITROVO
BASE LEASE DATES: 1/1994 TO 12/2003
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 5,219
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 5.35/SF/YR
CHANGING TO - 16.80/SF/YR ON 1/1997
CHANGING TO - 17.40/SF/YR ON 1/1998
CHANGING TO - 18.24/SF/YR ON 1/1999
CHANGING TO - 19.20/SF/YR ON 1/2000
CHANGING TO - 20.16/SF/YR ON 1/2001
CHANGING TO - 21.12/SF/YR ON 1/2002
CHANGING TO - 22.20/SF/YR ON 1/2003
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G15%
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 7
RENEWAL MINIMUM RENT:
MARKET RATE ENDR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPIG PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G15%
RENEWAL COMMISSIONS: GROWTH RATE ECOM
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE BTIR
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 2 - SUITE A2 WE FRAME IT
BASE LEASE DATES: 6/1993 TO 5/2003
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,526
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT 18.00/SF/YR
CHANGING TO 18.72/SF/YR ON 6/1998
CHANGING TO 19.44/SF/YR ON 6/1999
CHANGING TO 20.28/SF/YR ON 6/2000
CHANGING TO 21.00/SF/YR ON 6/2001
CHANGING TO 21.84/SF/YR ON 6/2002
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G15%
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
RENEWAL MINIWM RENT:
MARKET RATE RETR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPIG PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G15%
RENEWAL COMMISSIONS: GROWTH RATE BCOM
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE BTIR
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 3 - SUITE A3 VIDEO STORE
BASE LEASE DATES: 9/1993 TO 8/1998
TYPE OF TENANT: OFFICE
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 8
SQUARE FOOTAGE: 1,028
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 17.40/SF/YR
RECOVERIES:
GL0BAL GROUPING
GLOBAL RECOVERY G15%
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
7 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
3 5.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE RETR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPIG PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G15%
RENEWAL COMMISSIONS: GROWTH RATE BCOM
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE BTIR
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 4 - SUITE A STATE FARM INSURAN
BASE LEASE DATES: 3/1994 TO 2/1999
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,023
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 14.40/SF/YR
CHANGING TO - 15.60/SF/YR ON 3/1997
CHANGING TO - 16.80/SF/YR ON 3/1998
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G15%
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
CUSHMAN &
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<PAGE>
PAGE 9
5.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE LOWR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPIG PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G15%
RENEWAL COMMISSIONS: GROWTH RATE BCOM
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE BTIR
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 5 - SUITE A5 MELANIE T. KENT
BASE LEASE DATES: 4/1993 To 3/1999
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,512
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 4.80/SF/YR
CHANGING TO - 19.20/SF/YR ON 4/1996
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G15%
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
3 5.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE RETR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPIG PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G15%
RENEWAL COMMISSIONS: GROWTH RATE BCOM
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE BTIR
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 6 - SUITE A6 ST. MAXIMILIAN
BASE LEASE DATES: 8/1994 TO 11/1997
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 5,777
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 10
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 13.71/SF/YR
CHANGING TO - 15.79/SF/YR ON 11/1996
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G-5%
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
3 5.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE LOWR MULTIPLIED By 1.000
INCREASING AT GROWTH RATE CPIG PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G15%
RENEWAL COMMISSIONS: GROWTH RATE BCOM
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE BTIR
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 7 - SUITE A8 POSTAL CLUB
BASE LEASE DATES: 2/1992 TO 12/1998
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,066
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1997 VALUE - 17.02/SF/YR
THEREAFTER - GROWING AT GROWTH RATE CPIG
GLOBAL GROUPING
GLOBAL RECOVERY G15%
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
3 5.00 3 NONE NONE YES YES
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 11
RENEWAL MINIMUM RENT:
MARKET RATE RETR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPIG PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G15%
RENEWAL COMMISSIONS: GROWTH RATE BCOM
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE BTIR
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 8 - SUITE A9 TWO FOR ONE PHOTO
BASE LEASE DATES: 9/1991 TO 11/1996
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,066
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1997 VALUE - 28.06/SF/YR
THEREAFTER - GROWING AT GROWTH RATE CPIG
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G15%
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
3 5.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE RETR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPIG PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G15%
RENEWAL COMMISSIONS: GROWTH RATE BCOM
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE BTIR
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 9 - SUITE A10 BALEJIAN
BASE LEASE DATES: 12/1994 TO 4/2005
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,086
SUBJECT TO VACANCY ALLOWANCE
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 12
MINIMUM RENT:
INITIAL RENT - 15.00/SF/YR
CHANGING TO - 18.00/SF/YR ON 12/2000
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G15%
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE RETR MULTIPLIED By 1.000
INCREASING AT GROWTH RATE CPIG PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G15%
RENEWAL COMMISSIONS: GROWTH RATE BCOM
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE BTIR
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 10 - SUITE All VACANT
BASE LEASE DATES: 12/1996 TO 11/2001
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,086
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1997 VALUE - MARKET RATE LOWR
THEREAFTER - GROWING AT GROWTH RATE CPIG
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G15%
COMMISSIONS: GROWTH RATE NCOM
PAYOUT: CASHED OUT
ALTERATIONS: MARKET RATE NTIR
PAYOUT: CASHED OUT
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 13
MARKET RATE LOWR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPIG PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G15%
RENEWAL COMMISSIONS: GROWTH RATE BCOM
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE BTIR
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 11 - SUITE #1 VONS PAVILIONS
BASE LEASE DATES: 7/1991 TO 6/2021
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1
NOT SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1997 VALUE - %59300.00/SF/YR
THEREAFTER - GROWING AT GROWTH RATE CPIG
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS: NONE
- -------------------------------------------------------------------------------
# 12 - SUITE C1 PAPER POST
BASE LEASE DATES: 9/1996 TO 8/2001
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 3,040
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT 12.00/SF/YR
CHANGING TO 12.60/SF/YR ON 9/1997 (12 MONTHS)
CHANGING TO 13.20/SF/YR ON 9/1998 (24 MONTHS)
CHANGING TO 13.80/SF/YR ON 9/1999 (36 MONTHS)
CHANGING TO 14.40/SF/YR ON 9/2000 (48 MONTHS)
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G15%
COMMISSIONS: NONE
ALTERATIONS: 5.00/SF
PAYOUT : CASHED OUT
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 14
MARKET RATE LOWR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPIG PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G15%
RENEWAL COMMISSIONS: GROWTH RATE BCOM
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE BTIR
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 13 - SUITE C2 TIDAL WAVE C2
BASE LEASE DATES: 3/1992 TO 8/2002
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 3,740
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT- 19.47/SF/YR
CHANGING TO - 20.25/SF/YR ON 3/1997
CHANGING TO - 21.06/SF/YR ON 3/1998
CHANGING TO - 21.90/SF/YR ON 3/1999
CHANGING TO - 22.78/SF/YR ON 3/2000
CHANGING TO - 23.69/SF/YR ON 3/2001
CHANGING TO - 24.64/SF/YR ON 3/2002
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G15%
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE RETR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPIG PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G15%
RENEWAL COMMISSIONS: GROWTH RATE BCOM
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE BTIR
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 14 - SUITE D1 LACOMBE KARATE
BASE LEASE DATES: 3/1994 TO 2/1999
TYPE OF TENANT: OFFICE
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 15
SQUARE FOOTAGE: 2,338
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 13.20/SF/YR
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G15%
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
3 5.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE LOWR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPIG PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G15%
RENEWAL COMMISSIONS: GROWTH RATE BCOM
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE BTIR
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 15 - SUITE D2 CLUBHOUSE CLEANERS
BASE LEASE DATES: 1/1992 TO 1/2002
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,566
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1997 VALUE - 30.10/SF/YR
THEREAFTER - GROWING AT GROWTH RATE CPIG
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G15%
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 16
RENEWAL MINIMUM RENT:
MARKET RATE RETR MULTIPLIED By 1.000
INCREASING AT GROWTH RATE CPIG PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G15%
RENEWAL COMMISSIONS: GROWTH RATE BCOM
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE BTIR
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 16 - SUITE D3 VACANT
BASE LEASE DATES: 4/1997 TO 3/2002
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,353
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - MARKET RATE RETR
THEREAFTER - GROWING AT GROWTH RATE CPIG
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G15%
COMMISSIONS: GROWTH RATE NCOM
PAYOUT: CASHED OUT
ALTERATIONS: MARKET RATE NTIR
PAYOUT: CASHED OUT
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE RETR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPIG PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G15%
RENEWAL COMMISSIONS: GROWTH RATE BCOM
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE BTIR
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 17 - SUITE D4 SERENDIPITY
BASE LEASE DATES: 7/1996 TO 7/1997
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,343
SUBJECT TO VACANCY ALLOWANCE
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 17
MINIMUM RENT:
1997 VALUE - 18.00/SF/YR
THEREAFTER - GROWING AT GROWTH RATE CPIG
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G15%
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
3 5.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE RETR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPIG PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G15%
RENEWAL COMMISSIONS: GROWTH RATE BCOM
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE BTIR
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 18 - SUITE D5 BASKIN ROBBINS
BASE LEASE DATES: 11/1991 TO 10/2001
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,315
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 19.16/SF/YR
CHANGING TO - 19.32/SF/YR ON 11/1996
CHANGING TO - 20.28/SF/YR ON 11/1997
CHANGING T0 - 21.24/SF/YR ON 11/1998
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G15%
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 18
RENEWAL MINIMUM RENT:
MARKET RATE RETR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPIG PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G15%
RENEWAL COMMISSIONS: GROWTH RATE BCOM
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE BTIR
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 19 - SUITE D6 ONE IN A MILLION
BASE LEASE DATES: 11/1991 TO 2/1997
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,310
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1997 VALUE - 24.66/SF/YR
THEREAFTER - GROWING AT GROWTH RATE CPIG
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G10%
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
3 5.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE RETR MULTIPLIED By 1.000
INCREASING AT GROWTH RATE CPIG PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G15%
RENEWAL COMMISSIONS: GROWTH RATE BCOM
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE BTIR
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 20 - SUITE D7 TOY ATTIC
BASE LEASE DATES: 7/1996 TO 6/2002
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,346
SUBJECT TO VACANCY ALLOWANCE
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 19
MINIMUM RENT:
INITIAL RENT - 18.60/SF/YR
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G15%
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE RETR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPIG PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G15%
RENEWAL COMMISSIONS: GROWTH RATE BCOM
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE BTIR
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 21 - SUITE D8 ILENE'S
BASE LEASE DATES: 1/1992 TO 12/1999
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 2,090
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 21.15/SF/YR
RECOVERIES:
GLOBAL GROUPING
GL08AL RECOVERY G10%
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
3 5.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE RETR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPIG PER YEAR DURING EACH RENEWAL TERM
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 20
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G15%
RENEWAL COMMISSIONS: GROWTH RATE BCOM
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE BTIR
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 22 - SUITE D10 JAMIES HAIR DESIGN
BASE LEASE DATES: 3/1992 TO 3/2001
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 3,422
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 19.20/SF/YR
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G15%
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE RETR MULTIPLIED By 1.000
INCREASING AT GROWTH RATE CPIG PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G15%
RENEWAL COMMISSIONS: GROWTH RATE BCOM
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE BTIR
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 23 - SUITE D11 THAI RANCH
BASE LEASE DATES: 1/1992 TO 12/2001
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,746
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1997 VALUE - 28.08/SF/YR
THEREAFTER - GROWING AT GROWTH RATE CPIG
RECOVERIES:
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 21
GLOBAL GROUPING
GLOBAL RECOVERY GNET
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE RETR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPIG PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G15%
RENEWAL COMMISSIONS: GROWTH RATE BCOM
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE BTIR
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 24 - SUITE D12 LAMPOST PIZZA
BASE LEASE DATES: 12/1991 TO 11/2001
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 3,630
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 22.96/SF/YR
CHANGING TO - 24.80/SF/YR ON 12/1997
CHANGING TO - 26.78/SF/YR ON 12/2000
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G10%
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE ENDR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE CPIG PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G15%
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 22
RENEWAL COMMISSIONS: GROWTH RATE BCOM
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE BTIR
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 25 - SUITE E1 TUTOR TIME
BASE LEASE DATES: 5/1994 TO 4/2004
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 6,500
SUBJECT TO VACANCY ALLOWANCE
1NITIAL RENT:
INITIAL RENT - 17.40/SF/YR
CHANGING TO - 18.12/SF/YR ON 5/1996
CHANGING TO - 19.56/SF/YR ON 5/1997
CHANGING TO - 20.40/SF/YR ON 5/1998
CHANGING TO - 21.12/SF/YR ON 5/1999
CHANGING TO - 22.08/SF/YR ON 5/2000
CHANGING TO - 22-92/SF/YR ON 5/2001
CHANGING TO - 23.88/SF/YR ON 5/2002
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G15%
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE PADR MULTIPLIED BY 1.000
WITH PERCENTAGE STEPS OF
9.00 AFTER MONTH 30
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G15%
RENEWAL COMMISSIONS: GROWTH RATE BCOM
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE BTIR
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 26 - SUITE F1 PRUDENTIAL REALTY
BASE LEASE DATES: 11/1994 TO 10/1999
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 3,370
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 22.26/SF/YR
CHANGING TO - 22.80/SF/YR ON 11/1998
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 23
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G10%
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
3 5.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE PADR MULTIPLIED By 1.000
WITH PERCENTAGE STEPS OF
9.00 AFTER MONTH 30
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G15%
RENEWAL COMMISSIONS: GROWTH RATE BCOM
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE BTIR
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 27 - SUITE F2 BANK OF AMERICA
BASE LEASE DATES: 5/1992 TO 4/2002
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 4,484
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 30.48/SF/YR
CHANGING TO - 34.29/SF/YR ON 5/1997
CHANGING TO - 38.58/SF/YR ON 5/1998
RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOIVERY G10%
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 3 NONE NONE YES YES
2 5.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE PADR MULTIPLIED BY 1.000
WITH PERCENTAGE STEPS OF
9.00 AFTER MONTH 30
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 24
RENEWAL RECOVERIES:
GLOBAL GROUPING
GLOBAL RECOVERY G15%
RENEWAL COMMISSIONS: GROWTH RATE BCOM
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE BTIR
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 28 - SUITE G1 WORLD SAVINGS
BASE LEASE DATES: 8/1996 To 7/2016
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1997 VALUE - 6500.00/SF/YR
THEREAFTER - GROWING AT GROWTH RATE CPIG
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS: NONE
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD (R) VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY -- WINTER 1995
- ------------------------------------------------------------------------------------------------------------------------------------
GOING-IN TERMINAL IRR INCOME EXPENSE PROJECTION
CAP RATE CAP RATE GROWTH GROWTH PERIOD
- ------------------------------------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH YEARS
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICES -- URBAN, CLASS A
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10.00% 10.50% 10.00% 10.00% 12.00% 13.00% 3.00% 3.00% 4.00% 4.00% 10
9.50 9.75 9.75 10.00 11.75 12.25 3.00 3.50 3.50 3.50 10
9.00 9.00 9.00 9.00 12.00 12.00 0.00 10.00 4.00 4.00 10
8.00 10.00 9.00 11.00 10.00 13.00 0.00 4.00 4.00 4.00 10
8.00 10.00 9.00 9.00 11.00 13.00 4.00 5.00 4.00 4.00 10
7.50 9.00 8.00 9.50 10.50 11.50 2.00 3.50 3.50 3.50 10
9.00 10.00 10.00 11.00 11.00 13.00 4.00 4.00 4.00 4.00 10
9.50 10.00 10.00 10.50 11.40 11.70 3.00 4.00 3.50 4.50 10
12.00 12.00 10.00 10.00 15.00 15.00 3.00 4.00 2.00 4.00 10
12.00 12.00 12.00 12.00 14.00 14.00 3.00 3.00 3.00 3.00 10
8.50 9.00 9.00 9.50 12.00 12.50 2.00 3.00 2.00 3.00 10
9.50 10.00 10.00 11.00 12 .00 13.00 3.00 3.00 3.00 3.00 10
-- -- 8.00 9.00 -- -- -- -- -- -- --
10.00 10.00 10.00 10.00 12.50 12.50 2.00 3.00 3.00 3.00 10
7.00 8.00 9.00 9.00 11.00 11.00 6.00 6.00 4.00 4.00 10
8.00 9.00 9.00 10.00 11.00 12.00 3.00 3.00 3.00 3.00 10
9.00 9.25 10.00 10.25 12.00 12.00 4.00 4.00 4.00 4.00 10
Responses 16 16 17 17 16 16 15 15 15 16
Average (%) 9.16 9.84 9.51 10.04 11.82 12.59 2.81 4.13 3.41 3.66
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICES -- SUBURBAN
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9.50% 11.00% 9.00% 10.50% 14.00% 14.00% 3.25% 3.25% 4.00% 4.00% 5
9.00 9.00 9.00 9.50 11.00 11.00 5.00 5.00 4.00 4.00 10
9.00 10.00 9.50 10.00 11.50 12.50 -- -- 3.50 3.50 10
9.50 9.75 9.75 10.00 11.75 12.25 3.50 4.00 3.50 3.50 10
9.00 9.00 9.00 9.00 12.00 12.00 4.00 15.00 4.00 4.00 10
9.00 11.00 9.75 12.00 11 .00 14.00 0.00 4.00 4.00 4.00 10
9.00 10.50 9.50 11.00 11.50 12.00 2.00 3.50 3.50 3.50 10
8.00 9.50 9.00 10.50 11.00 12.00 4.00 4.00 4.00 4.00 10
9.50 9.75 9.75 10.50 11.40 11.70 3.00 4.00 3.50 4.50 10
12.00 12.00 10.00 10.00 15.00 15.00 3.00 4.00 2.00 4.00 5
10.00 10.00 10.00 10.00 12.00 12.00 4.00 4.00 3.00 3.00 10
8.50 9.00 9.00 9.50 12.00 12.50 3.00 5.00 3.00 4.00 10
9.00 10.00 9.50 10.50 12.00 12.50 3.00 3.00 3.00 3.00 10
-- -- 9.00 9.00 -- -- -- -- -- -- --
10.50 10.50 10.50 10.50 12.50 12.50 2.00 3.00 3.00 3.00 10
9.00 10.00 9.00 9.00 15.00 15.50 5.00 5.00 3.00 3.00 5-7
9.00 9.00 9.00 9.00 11.25 11.25 5.00 5.00 4.00 4.00 10
8.00 9.00 9.00 10.00 11.00 12.00 3.00 3.00 3.00 3.00 10
9.00 9.25 10.00 10.25 12.00 12.00 4.00 4.00 4.00 4.00 10
Responses 18 18 19 19 18 18 17 17 18 18
Average (%) 9.25 9.90 9.43 10.04 12.11 12.59 3.34 4.63 3.44 3.67
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD (R) VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY -- WINTER 1995
- ------------------------------------------------------------------------------------------------------------------------------------
GOING-IN TERMINAL IRR INCOME EXPENSE PROJECTION
CAP RATE CAP RATE GROWTH GROWTH PERIOD
- ------------------------------------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH YEARS
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9.00% 9.00% 9.50% 9.50% 11.50% 11.50% 4.00% 4.00% 4.00% 4.00% 10
8.50 10.00 9.50 10.00 11.50 12.50 -- -- 3.50 3.50 10
9.00 9.25 9.50 9.75 11.50 11.75 3.50 4.00 3.50 3.50 10
9.00 9.00 9.50 9.50 11.50 11.50 2.00 8.00 4.00 4.00 10
9.00 10.00 9.75 12.00 10.00 13.00 2.00 4.00 4.00 4.00 10
9.00 10.00 10.00 11.00 11.50 12.50 4.00 4.00 4.00 4.00 10
9.00 9.50 9.50 9.75 11.20 11.50 3.00 3.50 3.50 4.00 10
12.00 12.00 10.00 10.00 14.00 14.00 2.00 3.00 -- -- 3
8.50 8.50 9.00 9.50 11.00 11.50 4.00 4.00 4.00 4.00 10
9.00 9.50 9.50 10.00 11.25 11.75 3.00 3.00 3.00 3.00 10
-- -- 9.00 10.00 -- -- -- -- -- -- --
9.00 9.00 9.50 9.50 11.25 11.25 4.00 4.50 4.00 4.00 10
9.00 9.25 10.00 10.25 12.00 12.00 4.00 4.00 4.00 4.00 10
Responses 12 12 13 13 12 12 11 11 11 11
Average (%) 9.17 9.58 9.56 10.06 11.52 12.06 3.23 4.18 3.77 3.82
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
RETAIL, COMMUNITY, AND NEIGHBORHOOD CENTERS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9.50% 11.00% 9.00% 10.50% 14.00% 14.00% 3.25% 3.25% 4.00% 4.00% 5
9.00 10.00 9.00 10.00 11.50 12.50 3.50 3.50 3.50 3.50 10
9.50 9.75 9.75 10.00 11.50 11.75 3.50 4.00 3.50 3.50 10
9.50 9.50 10.00 10.00 12.50 12-50 0.00 4.00 4.00 4.00 10
9.00 10.50 9.75 11.50 10.00 14.00 2.00 4.00 4.00 4.00 10
10.00 10.00 10.00 10.00 12.00 12.00 4.00 4.00 4.00 4.00 10
8.50 9.50 9.50 10.50 11.50 12.50 4.00 4.00 4.00 4.00 10
9.50 9.75 9.75 10.00 11.25 11.50 3.00 4.00 3.50 4.50 10
8.50 9.00 9.00 9.50 11.00 12.00 3.00 3.00 3.00 3.00 10
9.50 10.00 10.00 10.50 11.50 12.50 3.00 3.00 3.00 3.00 10
-- -- 9.00 10.00 -- -- -- -- -- -- --
9.50 9.50 10.00 10.00 12.00 12.00 3.00 3.00 3.00 3.00 10
8.50 9.50 10.00 11.00 11.25 12.50 3.00 3.00 3.00 3.00 10
9.00 9.25 10.00 10.25 12.00 12.00 4.00 4.00 4.00 4.00 10
Responses 13 13 14 14 13 13 13 13 13 13
Average (%) 9.19 9.79 9.63 10.27 11.69 12.44 3.02 3.60 3.58 3.65
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD (R) VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY -- WINTER 1995
- ------------------------------------------------------------------------------------------------------------------------------------
GOING-IN TERMINAL IRR INCOME EXPENSE PROJECTION
CAP RATE CAP RATE GROWTH GROWTH PERIOD
- ------------------------------------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH YEARS
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RETAIL, POWER CENTERS, AND "BIG BOX"
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9.25% 9.50% 9.50% 10.00% 11.50% 11.50% 3.00% 3.50% 4.00% 4.00% 10
9.50 9.75 9.75 10.00 10.50 11.50 3.50 4.00 3.50 3.50 10
10.00 10.00 10.00 10.00 12.00 12.00 0.00 4.00 4.00 4.00 10
9.00 9.50 9.50 10.00 11.00 12.00 2.00 3.50 3.50 3.50 10
8.00 9.00 9.00 10.00 11.00 12.00 4.00 4.00 4.00 4.00 10
9.75 10.00 9.75 10.00 11.20 11.50 3.00 3.50 3.50 4.00 10
9.00 9.50 10.00 10.00 10.50 11.00 2.50 2.50 2.50 2.50 10
9.50 10.00 10.00 10.50 11.50 12.50 3.00 3.00 3.00 3.00 10
-- -- 8.50 9.50 -- -- -- -- -- -- --
9.00 9.00 9.50 9.50 11.50 11.50 3.00 3.00 3.00 3.00 10
9.50 9.50 9.75 9.75 11.25 11.25 4.00 4.00 4.00 4.00 10
9.00 9.25 10.00 10.25 12.00 12.00 4.00 4.00 4.00 4.00 10
Responses 11 11 12 12 11 11 11 11 11 11
Average (%) 9.23 9.55 9.50 9.96 11.27 11.70 2.91 3.55 3.55 3.59
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
REGIONAL MALLS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8.00% 8.50% 8.50% 9.00% 10.50% 10.50% 3.00% 3.50% 4.00% 4.00% 10
7.75 8.25 8.50 8.75 11.00 11.50 3.50 4.00 3.50 3.50 10
7.50 7.50 8.00 8.00 11.50 11.50 0.00 4.00 4.00 4.00 10
7.50 9.00 8.00 9.75 10.00 12.00 2.00 4.00 4.00 4.00 10
7.00 8.00 7.00 8.00 11.00 11.00 4.00 4.00 4.00 4.00 10
7.50 8.00 7.50 9.00 10.50 11.50 2.00 3.50 3.50 3.50 10
7.00 8.00 9.00 10.00 10.50 11.50 4.00 4.00 4.00 4.00 10
7.50 8.00 8.50 8.50 10.00 11.00 3.00 3.00 3.00 3.00 10
7.50 9.00 8.50 8.50 11.50 11.50 4.00 5.00 -- -- 10
Responses 9 9 9 9 9 9 9 9 8 8
Average (%) 7.47 8.25 8.17 8.83 10.72 11.33 2.83 3.89 3.75 3.75
</TABLE>
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD (R) VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY -- WINTER 1995
- -------------------------------------------------------------------------------------------------------------------------------
GOING-IN TERMINAL IRR IRR INCOME
CAP RATE CAP RATE (Blended) (Equity) GROWTH
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
LODGING, FULL SERVICE
- -------------------------------------------------------------------------------------------------------------------------------
LUXURY
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8.00% 9.00% 10.00% 10.00% 15.00% 20.00% 20.00% 25.00% 6.00% 6.00%
5.00 7.00 10.50 11.00 12.50 13.00 -- -- 4.00 5.00
11.00 13.00 11.00 13.00 15.00 15.00 20.00 25.00 4.00 8.00
10.50 10.50 10.00 10.00 -- -- -- -- -- --
11.00 11.00 13.00 13.00 -- -- -- -- 5.00 6.00
9.00 9.00 10.00 10.00 13.00 13.00 16.00 16.00 4.00 4.50
11.00 12.00 10.00 11.00 12.00 16.00 19.00 23.00 3.00 4.00
8.00 8.00 10.00 10.00 12.00 14.00 15.00 20.00 8.00 8.00
6.00 8.00 8.00 9.00 -- -- 20.00 25.00 5.00 5.00
8.50 8.50 9.00 9.00 -- -- -- -- 5.00 5.00
-- -- 8.00 10.00 15.00 18.00 18.00 22.00 -- --
Responses 10 10 11 11 7 7 7 7 9 9
Average(%) 8.80 9.60 9.95 10.55 13.50 15.57 18.29 22.29 4.89 5.72
FIRST CLASS
11.00% 11.00% 11.00% 11.00% 1 5.00 20.00% 20.00% 20.00% 4.00% 4.00%
11.00 11.00 13.00 13.00 -- -- -- -- 5.00 6.00
10.00 10.00 11.00 11.00 15.00 15.00 18.00 18.00 4.00 4.50
10.00 10.00 11.00 11.00 15.00 18.00 15.00 20.00 10.00 10.00
10.00 10.00 10.50 10.50 16.00 16.00 25.00 25.00 4.00 4.00
8.00 9.00 10.00 10.00 -- -- 20.00 25.00 5.00 5.00
10.00 10.00 10.50 10.50 -- -- 22.00 22.00 4.00 4.00
-- -- 8.00 10.00 15.00 18.00 18.00 22.00 -- --
5.00 5.00 10.00 11.00 15.00 15.00 -- -- 4.00 4.00
8.00 8.00 10.00 10.00 14.50 14.50 20.00 20.00 3.50 3.50
10.50 10.50 11.00 11.00 13.00 13.00 20.00 23.00 4.50 4.50
Responses 10 10 11 11 8 8 9 9 10 10
Average(%) 9.35 9.45 10.55 10.82 14.81 16.19 19.78 21.67 4.80 4.95
</TABLE>
<TABLE>
<CAPTION>
EXPENSE PROJECTION MANAGEMENT
GROWTH PERIOD FEE RESERVES
---------------
LOW HIGH YEARS % REVENUE % REVENUE
------------------------------------------------
- ---------------------------------------------------------------------
LODGING, FULL SERVICE
- ---------------------------------------------------------------------
LUXURY
<S> <C> <C> <C> <C> <C>
4.00% 4.00% 7 2.50% 4.00%
3.00 4.00 10 3.50 4.00
4.00 4.00 5 4.00 5.00
3.50 5.00 10 4.50 5.00
3.00 4.00 5 3.00 4.00
3.00 3.00 10 2.50 3.00
4.00 4.00 6 3.00 3.50
6.00 6.00 10 4.50 5.50
3.00 4.00 5 4.00 4.00
4.00 4.00 5 3.00 3.00
4.00 4.00 5 3.50 4.00
Responses 11 11 11 11 11
Average(%) 3.77 4.18 7 3.45 4.09
FIRST CLASS
4.00% 4.00% 7 2.50% 3.00
3.00 4.00 5 3.00 4.00
3.00 3.00 10 2.50 3.00
5.00 5.00 10 3.50 4.50
3.00 3.00 7 2.50 4.00
3.00 4.00 5 3.00 4.00
4.00 4.00 5 3.00 4.00
4.00 4.00 5 3.50 4.00
3.00 3.00 5 3.00 4.50
3.50 3.50 10 2.00 4.00
3.50 3.50 10 3.50 4.00
Responses 11 11 11 11 11
Average(%) 3.55 3.73 7 2.91 3.91
</TABLE>
The blended IRR is the composite return on debt and equity and the rate to
be applied to net operating income. The equity return is the rate of return
on the equity component of the investment only.
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD (R) VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY -- WINTER 1995
- -------------------------------------------------------------------------------------------------------------------------------
GOING-IN TERMINAL IRR IRR INCOME
CAP RATE CAP RATE (Blended) (Equity) GROWTH
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
LODGING, LIMITED SERVICE
- -------------------------------------------------------------------------------------------------------------------------------
MID-RATE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10.00% 10.00% 12.00% 12.00% -- -- 20.00% 20.00% 4.00% 4.00%
10.00 12.00 10.00 12.00 15.00 15.00 20.00 25.00 4.00 8.00
11.00 11.00 10.00 10.00 -- -- -- -- -- --
10.00 13.00 12.00 14.00 10.00 12.00 12.00 14.00 4.00 4.00
12.00 12.00 14.00 14.00 -- -- -- -- 2.00 3.00
12.00 12.00 13.00 13.00 19.00 19.00 22.00 22.00 3.50 4.00
10.50 10.50 12.00 12.00 15.00 20.00 18.00 20.00 5.00 5.00
-- -- 10.00 11.00 -- -- 22.00 22.00 6.00 6.00
Responses 7 7 8 8 4 4 6 6 7 7
Average (%) 10.79 11.50 11.63 12.25 14.75 15.50 19.00 20.50 4.07 4.86 3.63
ECONOMY
10.00% 12.00% 12.00% 12.00% -- -- 18.00% 25.00% 4.00% 4.00%
10.00 13.00 12.00 14.00 10.00 12.00 12.00 14.00 4.00 4.00
12.50 12.50 14.00 14.00 -- -- -- -- 2.00 3.00
13.00 13.00 14.00 14.00 21.00 21.00 24.00 24.00 2.50 4.00
11.50 11.50 12.00 12.00 15.00 20.00 18.00 20.00 5.00 5.00
Responses 5 5 5 5 3 3 4 4 5 5
Average (%) 1.40 12.40 12.80 13.20 15.33 17.67 18.00 20.75 3.50 4.00
</TABLE>
<TABLE>
<CAPTION>
EXPENSE PROJECTION MANAGEMENT
GROWTH PERIOD FEE RESERVES
---------------
LOW HIGH YEARS % REVENUE % REVENUE
------------------------------------------------
- ---------------------------------------------------------------------
LODGING, LIMITED SERVICE
- ---------------------------------------------------------------------
MID-RATE
<S> <C> <C> <C> <C> <C>
4.00% 4.00% 7 2.50% 3.00%
4.00 4.00 5 4.00 4.50
3.50 5.00 10 4.00 5.00
3.50 3.50 5 4.00 4.50
3.00 4.00 5 3.00 6.00
3.00 3.00 5 3.00 3.00
4.00 4.00 10 2.50 4.00
4.00 4.00 5 5.00 4.00
Responses 8 8 8 8 8
Average (%) 10.79 3.94 7 3.50 4.25
ECONOMY
4.00% 4.00% 7 2.50% 3.00%
3.50 3.50 5 4.00 4.50
3.00 4.00 5 3.00 6.00
3.00 3.00 5 4.00 3.00
4.00 4.00 10 2.50 4.00
Responses 5 5 5 5 5
Average (%) 3.50 3.70 6 3.20 4.10
</TABLE>
The blended IRR is the composite return on debt and equity and the rate to
be applied to net operating income. The equity return is the rate of return
on the equity component of the investment only.
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD (R) VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY -- WINTER 1995
- ------------------------------------------------------------------------------------------------------------------------------------
GOING-IN TERMINAL IRR INCOME EXPENSE PROJECTION
CAP RATE CAP RATE GROWTH GROWTH PERIOD
- ------------------------------------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH YEARS
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
APARTMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8.50% 9.00% 9.50% 9.50% 11.00% 11.00% 4.00% 4.00% 4.00% 4.00% 10
8.50% 9.00% 9.25% 9.50% 11.50% 12.00% 3.50% 4.00% 3.50% 3.50% 10
8.50% 9.25% 9.00% 10.00% 10.50% 12.00% 2.00% 6.00% 4.00% 4.00% 10
8.00% 9.00% 8.50% 9.50% -- -- 3.50% 3.50% 3.50% 3.50% 10
8.50% 8.50% 9.25% 9.25% 11.25% 11.25% 4.00% 4.00% 4.00% 4.00% 10
9.00% 9.25% 9.25% 9.50% 11.20% 11.50% 3.75% 4.25% 4.00% 4.50% 10
8.50% 9.50% 9.00% 10.00% 11.00% 12.00% 3.00% 4.00% 3.00% 4.00% 10
8.75% 9.25% 9.25% 9.75% -- -- 3.00% 3.00% 3.00% 3.00% --
-- -- 9.00% 9.00% -- -- -- -- -- -- --
9.00% 9.00% 9.50% 9.50% 11.50% 11.50% 3.00% 4.00% 3.00% 3.00% 10
8.00% 9.00% 9.00% 10.00% 11.00% 12.50% 3.00% 3.00% 3.00% 3.00% 10
9.00% 9.25% 10.00% 10.25% 12.00% 12.00% 4.00% 4.00% 4.00% 4.00% 10
Responses 11 11 12 12 9 9 11 11 11 11
Average (%) 8.57% 9.09% 9.21% 9.65% 11.22% 11.75% 3.34% 3.98% 3.55% 3.68%
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SURVEY OF RECENTLY CLOSED TRANSACTIONS
- ------------------------------------------------------------------------------------------------------------------------------------
PROPERTY NET RENTABLE SALES PRICE GOING-IN INTERNAL
TYPE AREA PER SQ. FT. CAPITALIZATION RATE RATE OF RETURN
----------------------------------------------------------------------------------------------------------------
NO. SALES NO. SALES NO. SALES NO. SALES
REPORTED AVERAGE MEDIAN REPORTED AVERAGE MEDIAN REPORTED AVERAGE MEDIAN REPORTED AVERAGE MEDIAN
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Offices, Urban 16 498,859 440,929 16 $130.66 $116.76 12 9.68% 9.13% 9 12.42% 12.75%
Offices, Suburban 66 230,760 191,893 66 83.39 78.78 57 9.97 10.00 11 13.2 12.25
Industrial 57 150,787 118,400 57 37.75 37.87 28 10.80 10.61 (Sample Not Large to Report)
Retail
(Other than Malls) 29 136,429 121,552 29 95.99 91.67 27 10.05 10.00 8 11.59 11.33
Malls 9 615,102 649,130 9 124.68 96.00 9 9.29 9.53 (Sample Not Large to Report)
</TABLE>
<TABLE>
<CAPTION>
GOING-IN
NUMBER OF UNITS SALES PRICE PER UNIT CAPITALIZATION RATE
----------------------------------------------------------------------------------------------------------------
NO. SALES NO. SALES NO. SALES
REPORTED AVERAGE MEDIAN REPORTED AVERAGE MEDIAN REPORTED AVERAGE MEDIAN
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Apartments 50 201 190 50 $47,975 $46,458 41 9.19% 9.30%
</TABLE>
The information tabulated here represents closed transactions and comes from the
files of 20 Cushman & Wakefield Valuation Advisory Services offices. The data
represents broad-based market trends and may not be relevant to the appraisal of
individual properties.
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
QUALIFICATIONS OF APPRAISER
- --------------------------------------------------------------------------------
Craig D. Tilson, MAI
Professional Affiliations
The Appraisal Institute, Designated Member (MAI Designation No. 11014)
State of California, Office of Real Estate Appraisers, Certified General
Real Estate Appraiser (No. AGO03733)
Real Estate Experience
Associate Director, Cushman & Wakefield of California, Inc., Valuation
Advisory Services, 1991 to present. A full service real estate organization
specializing in appraisal and consultation.
Senior Analyst, Lea Associates, Inc., 1983 to 1991.
Experience includes the appraisal of office buildings, shopping centers,
hotels, industrial facilities, residential income properties, residential
condominiums, residential tracts, vacant land, special purpose properties,
leasehold/leased fee interests, easements, partial takings including
severance damages and special benefits. Valuation techniques employed
include discounted cash flow and statistical analyses. Specialty services
include portfolio valuations.
Court Testimony
Qualified as an expert witness before the Los Angeles County Superior Court
in matters pertaining to the valuation of real estate.
Education
Master of Business Administration (Finance/Urban Land Economics), 1988
University of Southern California
Bachelor of Arts, 1983
University of California, Los Angeles
Appraisal Institute Courses:
Real Estate Appraisal Principles
Basic Valuation Procedures
Capitalization Theory and Techniques, Parts A and B
Case Studies in Real Estate Valuation
Valuation Analysis and Report Writing
Standards of Professional Practice, Parts A and B
CUSHMAN &
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This CD ROM contains an electronic version of appraisals for the Mortgaged
Properties in PDF format and forms part of the paper version of the Prospectus
Supplement. The information contained in this CD ROM does not appear elsewhere
in paper form in this Prospectus Supplement and must be considered as part of,
and together with, the information contained elsewhere in this Prospectus
Supplement and the Prospectus. The information contained in this CD ROM has
been filed by the Seller with the Securities and Exchange Commission as part
of a Current Report on Form 8-K, which is incorporated by reference in this
Prospectus Supplement, and is also available through the public reference
branch of the Securities and Exchange Commission. Defined terms used in this CD
ROM but not otherwise defined therein shall have the respective meanings
assigned to them in the paper portion of the Prospectus Supplement and the
Prospectus. All of the information contained in this CD ROM is subject to the
same limitations and qualifications contained in this Prospectus Supplement and
the Prospectus. Prospective investors are strongly urged to read the paper
portion of this Prospectus Supplement and the Prospectus in its entirety prior
to accessing this CD ROM. If this CD ROM was not received in a sealed package,
there can be no assurances that it remains in its original format and should
not be relied upon for any purpose. Prospective investors may contact J.
Theodore Borter of Goldman, Sachs Co. at (212)902-3857 to receive an original
copy of the CD ROM.
<PAGE>
============================================
COMPLETE APPRAISAL
OF REAL PROPERTY
Oakwood Center
11781 Lee Jackson Memorial Highway
Fairfax, Fairfax County, VA
============================================
IN A SELF-CONTAINED REPORT
As of July 1, 1997
Prepared For:
Goldman Sachs Mortgage Company
85 Broad Street
New York, New York 10004
Prepared By:
Cushman & Wakefield of Washington, D.C., Inc.
Valuation Advisory Services
1875 Eye Street, N.W., Suite 700
Washington, D.C. 20006
<PAGE>
Cushman & Wakefield of Washington, D.C., Inc.
1875 Eye Street, N.W., Suite 700
Washington, D.C. 20006
(202) 467-0600
Cushman &
Wakefield(R)
A ROCKEFELLER GROUP COMPANY
July 1, 1997
Mr. Sheridan Schechner
Managing Partner
Goldman Sachs Mortgage Company
85 Broad Street
New York, New York 10004
Re: Complete Appraisal of Real Property
Oakwood Center
11781 Lee Jackson Memorial Highway
Fairfax, Fairfax County, Virginia
Dear Mr. Schechner:
In fulfillment of our agreement as outlined in the Letter of Engagement,
Cushman & Wakefield, of Washington, D.C. Inc. is pleased to transmit our
self-contained appraisal report estimating the prospective market value of the
leased fee estate in the subject property.
The value opinion reported below is qualified by certain assumptions,
limiting conditions, certifications, and definitions, which are set forth in the
report. We particularly call to your attention to the following special
assumption.
1. Pursuant to your request, the date of value is July 1, 1997. We
specifically assumed that no value affecting changes occur between
the date of inspection, which was June 13, 1997, and the prospective
date of value.
This report was prepared for Goldman Sachs Mortgage Company and is
intended only for its specified use. It may not be distributed to or relied upon
by other persons or entities without written permission of Cushman & Wakefield,
Inc.
This appraisal report has been prepared in accordance with our
interpretation of your institution's guidelines, the regulations of OCC and the
Uniform Standards of Professional Appraisal Practice, including the Competency
Provision and The Financial Institutions Reform, Recovery and Enforcement Act
(FIRREA) and the guidelines of federal regulatory agencies.
The property was inspected by and the report was prepared by Steven A.
Studabaker, MAI, under the supervision of Donald R. Morris, MAI.
<PAGE>
Mr. Sheridan Schechner
Goldman Sachs Mortgage Company Page 2
Based on our complete appraisal as defined by the Uniform Standards of
Professional Appraisal Practice, we have formed an opinion that the prospective
market value of the leased fee estate in the referenced property, subject to the
assumptions, limiting conditions, certifications, and definitions, as of July 1,
1997, is:
THIRTEEN MILLION EIGHT HUNDRED THOUSAND DOLLARS
$13,800,000
This letter is invalid as an opinion of value if detached from the report,
which contains the text, exhibits, and an Addenda.
Respectfully submitted,
Cushman & Wakefield of Washington, D.C., Inc.
[SEAL]
COMMONWEALTH OF VIRGINIA
STEVEN A. STUDABAKER, MAI
[ILLEGIBLE]
Certified General
Real Estate
Appraiser
/s/ Steven A. Studabaker
Steven A. Studabaker, MAI
Associate Director
Virginia Commercial General Real Property Appraiser No. 4001-001111
[SEAL]
COMMONWEALTH OF VIRGINIA
Donald R. Morris
[ILLEGIBLE]
Certified General
Real Estate
Appraiser
/s/ Donald R. Morris
Donald R. Morris, MAI
Manager, Director
Valuation Advisory Services
Virginia Commercial General Real Property Appraiser No. 4001-002465
CUSHMAN &
WAKEFIELD(R)
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<PAGE>
SUMMARY OF SALIENT FACTS AND CONCLUSIONS
================================================================================
Property Name: Oakwood Center
Location: 11781 Lee Jackson Memorial Highway
General Overview: This is modem seven-story office
building built in 1982 on a 4.25
acre site. The building contains
128,383 rentable square feet of
building area. An adjacent
two-level parking deck provides
a portion of the parking spaces.
The building, with structural
steel frame and a facade of
precast masonry and glass
panels, is modern in appearance
and functional in design. On the
effective date of appraisal,
occupancy stood at 100 percent
including two leases due to
commence in July 1997.
Interest Appraised: Leased Fee
Date of Value: July 1, 1997
Date of Inspection: June 13, 1997
Ownership: RF&P Land No. 11, Inc.
Highest and Best Use:
If Vacant: For office development
As Improved: Continued use as an office building
Value Indicators
Sales Comparison Approach: $13,500,000 to $14,800,000
Value Per Square Foot: $105.18 to $115.30
Indicated Value: $13,500,000 to $14,800,000
Income Capitalization Approach
Estimated Market Rental Rate: $18.00/SF
Stabilized Vacancy Rate: 5.0%
Effective Gross Income: $15.11/SF(First Fiscal Year of Analysis)
Operating Expenses $4.94/SF(First Fiscal Year of Analysis)
Real Estate Taxes: $1.25/SF(First Fiscal Year of Analysis)
Net Operating Income: $8.72/SF (First Fiscal Year of Analysis)
Estimated Vacancy Between Tenants 9 months
Free Rent: 0 months
Probability of Renewal: 60%
Tenant Improvement Allowance
New Tenants in Previously
Occupied Space $8.00 per square foot
Renewal Tenants in Same Space: $4.00 per square foot
Estimated Market Rental Growth Rate 3.5%
Estimated Expense Growth Rate: 3.5%
CUSHMAN &
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<PAGE>
Summary of Salient Facts and Conclusions
================================================================================
Estimated Real Estate Tax Growth Rate: 3.5% after step in first year
Reversion Year Capitalization Rate 9.25%
Transaction Costs in Reversion Sale: 2.5%
Discount Rate: 11.50%
Indicated Value: $13,800,000
Value Conclusion: $13,800,000
Value Per Square Foot: $107.52 (Net Rentable Area)
Implicit Capitalization Rate: 8.1%
Marketing Time: 6 to 12 months
Special Assumptions Affecting Valuation:
1. Pursuant to your request, the date of value is July 1, 1997. We
specifically assumed that no value affecting changes occur between the
date of inspection, which was June 13, 1997, and the prospective date of
value.
2. Please refer to the complete list of assumptions and limiting conditions
included at the end of this report.
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
PHOTOGRAPHS OF SUBJECT PROPERTY
================================================================================
[GRAPHIC OMITTED]
[PHOTO]
View of Oakwood Center as seen looking north across the ring road
that circles Fairoaks Mall.
[GRAPHIC OMITTED]
[PHOTO]
View of the northern and western facades as seen looking east
from the adjacent parking deck.
CUSHMAN &
WAKEFIELD(R)
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<PAGE>
Photographs of Subject Property
================================================================================
[GRAPHIC OMITTED]
[PHOTO]
View of the main entry lobby as seen looking north from the entrance.
[GRAPHIC OMITTED]
[PHOTO]
Sample view of an upper level elevator lobby.
CUSHMAN &
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VALUATION ADVISORY SERVICES
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<PAGE>
Photographs of Subject Property
================================================================================
[GRAPHIC OMITTED]
[PHOTO]
View of the ring road and adjacent improvements as seen looking west from the
entrance to the property.
[GRAPHIC OMITTED]
[PHOTO]
View of the ring road and adjacent improvements as seen looking east from
the property.
CUSHMAN &
WAKEFIELD(R)
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<PAGE>
TABLE OF CONTENTS
================================================================================
Page
INTRODUCTION ................................................................ 1
Identification of Property .............................................. 1
Property Ownership and Recent History ................................... 1
Purpose and Intended Use of the Appraisal ............................... 1
Extent of the Appraisal Process ......................................... 1
Prospective Date of Value and Property Inspection ....................... 2
Property Rights Appraised ............................................... 2
Definitions of Value, Interest Appraised, and Other Pertinent Terms ..... 2
Legal Description ....................................................... 4
REGIONAL ANALYSIS ........................................................... 5
OFFICE MARKET ANALYSIS ......................................................21
PROPERTY DESCRIPTION ........................................................35
Site Description ........................................................35
Improvements Description ................................................36
REAL PROPERTY TAXES AND ASSESSMENTS .........................................39
ZONING ......................................................................41
HIGHEST AND BEST USE ........................................................43
VALUATION PROCESS ...........................................................45
SALES COMPARISON APPROACH ...................................................47
INCOME CAPITALIZATION APPROACH ..............................................53
RECONCILIATION AND FINAL VALUE ESTIMATE .....................................68
ASSUMPTIONS AND LIMITING CONDITIONS .........................................70
CERTIFICATION OF APPRAISAL ..................................................72
ADDENDA .....................................................................73
<PAGE>
INTRODUCTION
================================================================================
Identification of Property
This is a seven-story office building called Oakwood Center located in the
neighborhood of Fairfax, Fairfax County, Virginia. It is a competitive, Class B
office building located on the ring road surrounding Fairoaks Regional Mall,
near the interchange between U.S. Route 50 (Lee Jackson Memorial Highway) and
Interstate 66. The street address is 11781 Lee Jackson Memorial Highway,
Fairfax, Virginia.
This is a modern seven-story building built in 1982 and located on a 4.25
acre site. The building contains 128,353 net rentable square feet. An adjacent
two-level parking deck provides a portion of the on-site parking, most of which
is in a surface parking lot. The building is modern in appearance and functional
in design. On the effective date of appraisal, occupancy stood at 100 percent,
including two leases due to commence in July 1997.
Property Ownership and Recent History
The property was acquired by the present owner, RF&P Land No. II, Inc.,
from State of California Public Employees Retirement System in November 1995 for
a recorded price of $9,358,300. This was an all cash transaction after adequate
market exposure and one of two buildings acquired in a single acquisition,
therefore the recorded consideration is an allocation of the total price. Since
the acquisition, the market has improved significantly and more than was
projected at the time of sale. For example market rents were $14.50 per square
foot at the time of sale and were projected to increase to $15.40 per square
foot by 1997, or several dollars less than is currently being achieved.
Therefore, the estimated market value as concluded in this report reflects a
sharper picture of the market than was projected in 1995.
Additionally, we have reason to believe that the property may now be under
contract of sale. However, after discussing the matter with the owner, we have
been unable to obtain any details of the pending transaction. The present owner
considers this information to be confidential and was not willing to provide
details for our analysis.
Purpose and Intended Use of the Appraisal
The purpose of this appraisal is to estimate the prospective market value
of a leased fee estate on July 1, 1997. The appraisal is to be used to monitor
the performance of a portfolio asset.
Extent of the Appraisal Process
In the process of preparing this appraisal, we:
o Inspected the exterior of the building and the site improvements and
a representative sample of tenant spaces with Bernard Grace, the
manager.
o Interviewed Bernard Grace of the property management company, CB
Commercial.
o Reviewed leasing policy, concessions, tenant build-out allowances,
and history of recent rental rates and occupancy with the building
and leasing managers.
================================================================================
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<PAGE>
Introduction
================================================================================
o Reviewed a detailed history of income and expense and a budget
forecast for 1997.
o Conducted market research of occupancies, asking rents, concessions
and operating expenses at competing buildings which involved
interviews with on-site managers and a review of our own data base
from previous appraisal files.
o Prepared an estimate of stabilized income and expense (for
capitalization purposes).
o Conducted market inquiries into recent sales of similar buildings to
ascertain sales price per square foot, effective gross income
multipliers and capitalization rates. This process involved
telephone interviews with sellers, buyers and/or participating
brokers. (See detailed sales write-ups in Addenda for more complete
information on the verification process.)
o Prepared Sales Comparison and Income Capitalization Approaches to
value.
Prospective Date of Value and Property Inspection
The prospective date of value is July 1, 1997. We inspected the property
on June 13, 1997.
Property Rights Appraised
Leased fee estate.
Definitions of Value, Interest Appraised, and Other Pertinent Terms
The definition of market value taken from the Uniform Standards of
Professional Appraisal Practice of the Appraisal Foundation, is as follows:
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 is the
consummation of a sale as of a specified date and the passing of title
from seller to buyer under conditions whereby:
1. Buyer and seller are typically motivated;
2. Both parties are well informed or well advised, and acting in what
they consider their own best interests;
3. A reasonable time is allowed for exposure in the open market;
4. Payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
5. 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.
================================================================================
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<PAGE>
Introduction
================================================================================
Exposure Time
Under Paragraph 3 of the Definition of Market Value, the value estimate
presumes that "A reasonable time is allowed for exposure in the open
market". Exposure time is defined as the estimated length of time the
property interest being appraised would have been offered on the market
prior to the hypothetical consummation of a sale at the market value on
the effective date of the appraisal. Exposure time is presumed to precede
the effective date of the appraisal.
Based on an analysis of recent sales transactions in the market, exposure
time is estimated to have been between six and nine months.
The following definitions of pertinent terms are taken from the Dictionary
of Real Estate Appraisal, Third Edition (1993), published by the Appraisal
Institute.
Leased Fee Estate
An ownership interest held by a landlord with the rights of use and
occupancy conveyed by lease to others. The rights of the lessor (the
leased fee owner) and the leased fee are specified by contract terms
contained within the lease.
Value As Is
The value of specific ownership rights to an identified parcel of real
estate as of the effective date of the appraisal; relates to what
physically exists and is legally permissible and excludes all assumptions
concerning hypothetical market conditions or possible rezoning.
Market Rent
The rental income that a property would most probably command on the open
market; indicated by the current rents paid and asked for comparable space
as of the date of the appraisal.
Cash Equivalent
A price expressed in terms of cash, as distinguished from a price
expressed totally or partly in terms of the face amounts of notes or other
securities that cannot be sold at their face amounts.
Discounted Cash Flow (DCF) Analysis
The procedure in which a discount rate is applied to a set of projected
income streams and a reversion. The analyst specifies the quantity,
variability, timing, and duration of the income streams as well as the
quantity and timing of the reversion and discounts each to its present
value at a specified yield rate. DCF analysis can be applied with any
yield capitalization technique and may be performed on either a
lease-by-lease or aggregate basis.
================================================================================
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Introduction
================================================================================
Legal Description
The property is legally described by metes and bounds measures as recorded
among the land records of Fairfax County, Virginia. A copy of the legal
description is included in the Addenda to the report.
================================================================================
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WAKEFIELD(R)
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<PAGE>
REGIONAL ANALYSIS
================================================================================
Introduction
The real estate market is affected by a range of supply and demand
factors. As examples, the growth trends in population and the number of
households affect the general demand for housing, offices, shopping centers,
warehouses; the employment opportunities and unemployment levels influence the
ability or desire to buy or rent and the quality/cost of the facilities sought;
demographics influence the types of units demanded; and general economic
conditions affect the attitudes of the populace towards the future.
The following analysis will review each of the major factors affecting the
supply and demand for real estate in the metropolitan area. The discussion is
organized to provide the reader with an overview of the area's geographic scope
and facilities infrastructure, followed by discussions of the key economic
factors affecting supply and demand under the following headings:
o Background
o Area Definition
o Infrastructure
o Population
o Employment and The Economy
o Household Demographics
o Recent Trends
Background
Washington, D.C. is unique among American cities. As our nation's capital,
it serves as a focal point for our country both politically and economically. In
the role as host city for a major world power, it attracts people from all over
the world. Washington has been dubbed a "recession proof" city in that it is
insulated, as some have argued, from the full effects of economic ups and downs
by the stabilizing influence of the federal government as the area's biggest
employer. From the 1950s through the 1980s, the size of government continually
increased, which brought about an increase in government employment and
population in the Washington area.
Area Definition
The metropolitan Washington area is all of the Washington Metropolitan
Statistical Area (MSA) as defined by the U.S. Department of Commerce, Bureau of
the Census, as of June 1983. The Washington MSA includes: District of Columbia;
the Maryland Counties of Calvert, Charles, Frederick, Montgomery and Prince
George's; the Virginia Counties of Arlington, Fairfax, Loudoun, Prince William
and Stafford; and the Virginia independent Cities of Alexandria, Fairfax, Falls
Church, Manassas, and Manassas Park. Prior to the 1983 redefinition of the
Washington MSA, the Maryland counties of Calvert and Frederick and the Virginia
county of Stafford were excluded. The addition of these counties enlarged the
metropolitan area from approximately 2,800 square miles to 3,956 square miles.
Please refer to the Washington MSA map on the following page.
================================================================================
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<PAGE>
WASHINGTON METROPOLITAN STATISTICAL AREA
[GRAPHIC OMITTED]
[MAP]
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<PAGE>
Regional Analysis
================================================================================
Effective December 31, 1992, the Department of Commerce created a new
Washington-Baltimore-D.C.-MD-VA-WVa CMSA (consolidated metropolitan statistical
area) that includes the primary Washington, D.C. and Baltimore MSAs, plus a new
Hagerstown MSA and nine additional counties in Virginia and West Virginia. The
expanded market was created to reflect the area's household and employment
patterns and is highly touted by economic development agencies. The current
Washington, D.C. metropolitan area is the appropriate focus for this analysis,
however, since the pertinent market is more localized.
The population, housing and employment characteristics of the region are
best defined by starting at the area's central jurisdictions: the District of
Columbia, Arlington County, and the City of Alexandria; then moving outward to
the first suburban tier of counties: Fairfax County, City of Fairfax, City of
Falls Church, Prince George's County, and Montgomery County; and thence to the
outer tier of suburbs: Loudoun County, Prince William County, Manassas and
Manassas Park, Frederick County, Calvert County, Charles County, and Stafford
County.
Infrastructure
Transportation
The Capital Beltway (1-495) is one of the most important factors driving
development in the Washington area. It has tied the Maryland and Virginia
suburbs together and significantly influenced real estate investment patterns.
One of the primary results has been a steady rise in land prices in the vicinity
of the Beltway. Apartments, light industrial facilities, distribution
warehouses, and shopping centers have gone up wherever the Beltway crosses other
major highways. Interestingly, closer-in sites have often been by-passed in
favor of locations adjacent to the Beltway.
In addition to the Beltway, Washington is connected to 1-95, the major
north-south interstate highway that extends most of the length of the Atlantic
coast, and 1-66, an east-west highway that begins in Washington, D.C. and
connects westward to other interstate highways in Virginia and West Virginia.
The Washington Metropolitan Area Transit Authority (WMATA) provides
transit service in Maryland, the District of Columbia, and Virginia, including
both rapid rail and bus transportation. The rapid rail network, referred to as
Metrorail, will cover 103 miles with 86 stations in D.C., suburban Maryland and
Virginia when completed in the late 1990s. The construction of Metrorail has had
a major impact on land values around the stations and has spurred dramatic new
development, both in downtown Washington and in suburban areas. Major new office
and mixed use projects have been built around the Metro stops. In particular,
portions of downtown Washington and Arlington County have experienced an
economic revitalization due to the opening of Metrorail. Apartment projects
often market themselves as being close to Metrorail stations and typically
command rents at the high end of the market and achieve higher occupancies as a
result. The same could be said for various primary employment centers and major
retail facilities.
In terms of air transportation, the Washington area is served by three
major airports: Washington National, Baltimore/Washington International and
Washington Dulles International, Washington National, located in Arlington
County, is located four and one-half miles from the U.S. Capitol, and transports
over 16 million passengers per year. The airport was built in the
================================================================================
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Regional Analysis
================================================================================
1940s and is currently undergoing major renovations and expansion, which
primarily includes a new terminal building and improved parking.
Washington Dulles International Airport is bisected by the Loudoun County,
Fairfax County line and lies in the western part of the MSA. The Dulles Access
Road provides quick access to the airport, along with the Capital Beltway
(1-495) which connects Fairfax County to the Washington metropolitan area. The
Dulles Toll Road is a commuter road bordering the Dulles Access Road that is
being studied for expansion and extension to Leesburg (Route 15) and past Dulles
Airport.
Opened in 1962, Dulles Airport has been an important factor in the growth
of the regional economy of Northern Virginia. In 1985, it became the fastest
growing airport in the United States. Currently 19 airlines service the airport
with 500 daily departures serving 30,000 passengers. Three major airlines have
established regional hubs here including United Airlines, Continental, and Delta
Airlines. Further, international carriers including Air France, British Airways,
All Nippon Airways, TWA, Lufthansa and Swiss Air.
The Baltimore/Washington International Airport (BWI) is located in the
southern portion of the Baltimore MSA in Anne Arundel County, ten miles from
downtown Baltimore, and 30 miles from Washington, D.C. This airport hosts 18
passenger airlines that provide direct air service to 135 cities in the United
States and Canada. BWI also provides service to air-freight carriers with its
110,000 square foot air cargo complex. When compared with Dulles and Washington
National Airport, BWI services 28 percent of commercial passengers, 38 percent
of commercial operations and 57 percent of freight customers. BWI has spawned
the development of 15 new business parks and several hotels, has created nearly
10,000 jobs, and has generated a state-wide economic impact of $1.7 billion in
the form of business sales made, goods and services purchased, and wages and
taxes paid.
Government Services and Structures
The Washington, D.C. metropolitan area contains fourteen different
municipal jurisdictions, including the District of Columbia, ten counties and
three cities in two states. Local governments provide typical municipal services
found in a major metropolitan area, including welfare and social services,
refuse collection, emergency services, public education, and a variety of
regulatory functions. Each municipality has its own zoning ordinance and
governmental structure.
In addition to the local governments, the District of Columbia is the
headquarters for the federal government. Major federal agencies are located
throughout the District of Columbia and many of the surrounding suburbs. The
support functions for many agencies have been relocated to the less expensive
suburbs.
The area is also served by several cross-jurisdictional agencies. These
include the Maryland National-Capital Park and Planning Commission (MNCPPC)
which provides planning and zoning coordination to the Maryland suburbs. The
Washington Metropolitan Area Transit Authority (WMATA), which was referred to
earlier, is the regional public transit authority. The Metropolitan Washington
Council of Governments performs studies on metropolitan economic and business
issues and promotes the region to outsiders.
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Regional Analysis
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Public and Private Amenities
As the nation's capital, the District of Columbia houses many national
museums, monuments, and institutions that attract visitors to the area from
around the world. Washington, D.C. is one of the leading tourist destinations
for domestic travelers and foreign visitors to the United States.
In addition, the metropolitan area is a strong supporter of the performing
arts. The Kennedy Center is the area's main stage for plays, opera, and symphony
presentations, but there are indoor and outdoor stages and theaters in all of
the adjacent jurisdictions. Professional athletics are played at RFK Stadium
(football) in southeast Washington, D.C. and the U.S. Air Arena (basketball and
hockey) in Landover, Maryland. Baseball is played at Oriole Park at Camden Yard
in Baltimore.
The region also offers numerous private and public golf courses, municipal
parks, and bicycle and jogging trails. One unique feature of the region's
outdoor attractions is the C&O Canal. The canal is maintained as a national
park and follows the Maryland side of the Potomac River between Georgetown in
northwest Washington, D.C. and Cumberland, Maryland. The Potomac River is an
active recreational area for fishing and various kinds of boating.
The public and private primary schools in the region include many with
national standing. The school districts face the typical challenges encountered
in urban centers with mixes of high and low income neighborhoods and growing
immigrant populations without English language skills. On average, the suburban
school districts tend to be better funded than those in the District of
Columbia.
With respect to higher education, the region has a network of nationally
recognized universities and regional and community colleges, including George
Washington University, Georgetown University, American University, the
University of Maryland, Howard University, Gallaudet University, The University
of the District of Columbia, Catholic University, George Mason University, and
Trinity College.
In review, the metropolitan area has a well established infrastructure of
roadways, light rail and bus systems, airports, attractive business and
residential neighborhoods, and many quality of life features that continue to
make Washington, D.C. a desirable place to work and live. There are continuing
efforts by municipal agencies to improve public transportation, especially the
commuter rail system, so as to ease road congestion and lessen air pollution.
The District of Columbia and nearby suburban office concentrations remain the
area's primary business destinations. Thus, improvement of the public
transportation system to facilitate wider access to the District and, more
importantly, connecting the suburban business centers is essential for long-term
growth.
Population
This section will examine the population size and age trends for the
metropolitan area. Employment, income, and household related demographics will
be reviewed separately.
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Regional Analysis
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According to Market Statistics' 1995 Demographics USA, the Washington,
D.C. MSA ranks fifth in the nation in terms of total population. The Washington
area increased in population by 20.7 percent between 1980 and 1990, or an
average annual rate of 2.1 percent. The rate of growth has slowed somewhat with
the population change between 1990 and 1994 having decreased to 1.4 percent.
Nonetheless, population growth in the region during the 1980s far exceeded the
growth during the 1970s, when the region grew by an average of only 21,000
persons per year. During the 1980s, the region had an average growth of roughly
67,000 persons per year.
Interestingly, however, while there was an overall increase in population,
this increase was by no means uniform within the component jurisdictions of the
Washington MSA. The 1980s saw a shift in population from the inner-city and
close-in suburbs to the more remote suburban areas. The District of Columbia was
the big loser during this period with an average annual decline of 0.5 percent.
The annual rate of decline grew to 1.5 percent by 1994.
In contrast, the inner suburbs had an annual average growth rate of 2.5
percent during the 1980s, with both Fairfax County, Virginia, and Montgomery
County, Maryland having growth rates of 3.7 percent and 3.1 percent,
respectively. Both counties were the main suburban benefactors of commercial
office and retail development for this period and population increases were
primarily concentrated in the outer portions of the counties. The growth in
these areas has decreased in the 1990s to an annual growth rate of 1.8 percent.
The largest population increases occurred in the outer suburbs, the areas
beyond the first tier communities surrounding the District. The average annual
rate of increase in these areas was 4.4 percent. However, the rate of increase
has fallen off since 1990 to 3.2 percent, a phenomena concurrent with the slow
down in the economy. The chart on the next page presents population data and the
average growth rates for the various jurisdictions in the MSA:
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<TABLE>
<CAPTION>
=================================================================================================================
Population Changes
1990 Census Estimates Versus 1980 Census
=================================================================================================================
Annual Average
Jurisdiction Population (Thousands) Growth Rate (%)
========================================= =================================
1980 1990 1994 Est 1980-1990 1990-1994 Est
=================================================================================================================
<S> <C> <C> <C> <C> <C>
District of Columbia 638.3 606.9 570.2 -0.4919 -2.0157
- -----------------------------------------------------------------------------------------------------------------
Arlington County 152.6 170.9 171.4 1.1992 0.0975
- -----------------------------------------------------------------------------------------------------------------
City of Alexandria 103.2 111.2 114.3 0.7752 0.9293
=================================================================================================================
Central Jurisdictions 894.1 889 855.9 -0.0570 -1.2411
- -----------------------------------------------------------------------------------------------------------------
Fairfax County 596.9 818.6 910.1 3.7142 3.7259
- -----------------------------------------------------------------------------------------------------------------
City of Fairfax 19.4 19.6 19.6 0.1031 0.0000
- -----------------------------------------------------------------------------------------------------------------
City of Falls Church 9.5 9.6 9.6 0.1053 0.0000
- -----------------------------------------------------------------------------------------------------------------
Montgomery County 579.1 757 797.4 3.0720 1.7790
- -----------------------------------------------------------------------------------------------------------------
Prince George's County 665.1 729.3 764.7 0.9653 1.6180
=================================================================================================================
Inner Suburban Area 1870 2334.1 2501.4 2.4818 2.3892
=================================================================================================================
Loudoun County 57.4 86.1 96.1 5.0000 3.8715
- -----------------------------------------------------------------------------------------------------------------
Prince William County 144.7 215.7 246.3 4.9067 4.7288
- -----------------------------------------------------------------------------------------------------------------
Cities of Manassas/ 22 34.7 40.6 5.7727 5.6676
- -----------------------------------------------------------------------------------------------------------------
Manassas Park
Frederick County 114.8 150.2 164.2 3.0836 3.1070
- -----------------------------------------------------------------------------------------------------------------
Calvert County 34.6 51.4 60 4.8555 5.5772
- -----------------------------------------------------------------------------------------------------------------
Charles County 72.7 101.2 109.7 3.9202 2.7997
- -----------------------------------------------------------------------------------------------------------------
Stafford County 40.5 61.2 74.2 5.1111 7.0806
=================================================================================================================
Outer Suburban Area 486.7 700.5 791.1 4.3929 4.3112
=================================================================================================================
METRO AREA TOTAL 3250.8 3923.6 4148.4 2.0696 1.9098
=================================================================================================================
</TABLE>
Source: U. S. Census Data and 1994 Estimate Provided By Equifax
National Decision Systems, Inc.
Note: The list of municipalities corresponds to the DC-VA-MD MSA
prior to the December 31, 1992 expansion.
We noted earlier that the District of Columbia actually lost population
over the past ten years while the suburban areas actually grew. It is important
to note, however, that this phenomenon is being seen in most major metropolitan
areas in the United States. Nevertheless, in relative terms, the population
decreases in Washington, D.C. versus population increases in suburban areas are
significantly less than that seen in other parts of the country, thus attesting
to the continuing strength and viability, albeit somewhat lessened given the
more recent recessionary trends, of the metropolitan area's inner city.
Age Distribution
As can be seen in the following chart, the percentage of the region's
infant and elderly populations increased between 1980 and 1990. Interestingly,
however, the number of working aged residents increased the most in absolute
numbers. The number of youths and teenagers shrank. The table on the following
page displays the data.
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Regional Analysis
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==========================================================================
Population Trends By Age
(Council of Governments Members)
==========================================================================
1980 1990 % Change
==========================================================================
0 to 4 Years 192,372 262,578 +36.5%
--------------------------------------------------------------------------
5 to 17 Years 636,733 585,949 -7.2%
--------------------------------------------------------------------------
18 to 64 Years 2,020,989 2,509,056 +24.1%
--------------------------------------------------------------------------
Over 65 Years 235,875 317,538 +34.6%
==========================================================================
Source: 1980 and 1990 Census Data; Metropolitan Washington Council of
Governments: Where We Live: Housing and Household Characteristics
in the Washington Metropolitan Region, April, 1993.
The District of Columbia was the only major jurisdiction to lose working
age adults (down 1.9 percent). The largest gains among working age adults were
in the inner suburbs of Montgomery and Prince George's County in Maryland and
Arlington, Fairfax, and Loudoun Counties in Virginia. The increases in the
elderly population were spread across all municipalities.
As of the 1990 Census, the population was distributed with 21 percent
under 30 years, 39 percent between the ages of 30 and 49 years, and 12 percent
between 50 and 64 years of age. These are the key working age groupings.
Employment and The Economy
The employment picture has a very significant effect on the demand for
real estate. High unemployment rates and business downsizing, for example,
reduce the number of households able to buy homes. Similarly, a growth economy
creates increasing demand for goods and services. This section will review the
recent trends and the outlook for employment in the Washington, D.C. region.
Employment Characteristics
The table on the next page shows the area's total employment as a percent
of total employment for each industry group for the past eight years, and the
year-to-year growth rates in total employment.
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<TABLE>
<CAPTION>
======================================================================================================================
Non-Agricultural Employment
Percent Share of Total Employment(%)
======================================================================================================================
Industry 1988 1989 1990 1991 1992 1993 1994 1995 Annual
(Dec) Growth
======================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Manufacturing 4.1 4.0 3.9 3.8 3.6 4.0 3.9 4.9 2.4
- ----------------------------------------------------------------------------------------------------------------------
Construction 6.6 6.6 6.0 4.8 4.4 4.4 4.8 4.0 -4.9
- ----------------------------------------------------------------------------------------------------------------------
T.C.U.(1) 4.9 4.9 4.8 4.8 4.7 4.5 4.6 4.5 -1.0
- ----------------------------------------------------------------------------------------------------------------------
Wholesale Trade 3.6 3.5 3.5 3.4 3.3 3.3 3.3 3.2 -1.4
- ----------------------------------------------------------------------------------------------------------------------
Retail Trade 16.2 16.1 15.9 15.6 15.4 15.6 15.7 16.6 0.3
- ----------------------------------------------------------------------------------------------------------------------
F.I.R.E.(2) 5.9 5.8 5.9 5.9 5.8 5.7 5.9 5.5 -0.8
- ----------------------------------------------------------------------------------------------------------------------
Services 32.4 33.0 33.7 34.3 34.9 35.1 35.4 36.3 1.5
- ----------------------------------------------------------------------------------------------------------------------
State Government 3.7 3.6 3.6 3.6 3.6 3.7 3.6 3.4 -1.0
- ----------------------------------------------------------------------------------------------------------------------
Local Government 6.0 6.1 6.4 6.7 6.7 6.9 6.9 7.3 2.7
- ----------------------------------------------------------------------------------------------------------------------
Federal Government 16.6 16.4 16.3 17.1 17.5 16.8 15.9 14.4 -1.7
- ----------------------------------------------------------------------------------------------------------------------
Total Employment 2,167 2,226 2,242 2,190 2,186 2,317 2,373 2,425 1.5
(Thousands)
======================================================================================================================
Yr-to-Yr Growth(%) N/A +2.7 +0.7 -2.3 -0.2 +5.6 +2.4 +2.2 N/A
======================================================================================================================
</TABLE>
(1) Transportation, Communications, Utilities
(2) Finance, Insurance, Real Estate
Source: U.S. Department of Labor, Bureau of Labor Statistics, Wage and
Salary Employment, 1988-1993; Obtained From the District of
Columbia Department of Employment Services
The region enjoyed a period of unusual growth during the 1980s. The peak
year for job growth in the region was 1984, when growth reached 107,000 jobs.
The growth fell to 100,000 in 1985, and to 82,000 jobs in 1986. From 1986 to
1988, job growth settled at around 80,000 to 90,000 jobs per year, or in the
four percent range. Job growth dropped to 59,500 jobs (2.9 percent) in 1989, and
declined by another two percent to only 15,900 jobs in 1990. By this time, the
economy was being affected by the national recession with the area's total
employment declining by 52,100 jobs (minus 2.3 percent) in 1991 and remaining
relatively flat in 1992. From 1992 to 1993, however, the area experienced 5.6
percent growth. This growth was found in the suburban areas as opposed to the
District of Columbia and was evenly distributed through all industry types. The
average growth rate for the 1988 to 1995 period reflects a 1.5 percent per year
average.
During 1994, employment in Northern Virginia grew by a strong 3.5 percent
but in the Maryland suburbs, the figure was only 2.1 percent while for the
District of Columbia it was less than 1 percent. Job growth in the region fell
below the average for the nation of 2.5 percent.
Although the federal government has historically been the major employer
in the region, its share of employment has remained around 15 to 17 percent. The
aggregate federal employment grew at an average annual rate of 1.7 percent
between 1988 and 1995 and was 14.4 percent of total civilian employment in 1995.
The most dramatic change in employment in the Washington area has been in
the private sector, particularly the emergence of the service industry as the
fastest growing and now largest employment opportunity. In 1960, the services
industry employed 18 percent of all non-agricultural workers and has grown to
36.3 percent by 1995. Retail and wholesale trades have
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Regional Analysis
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maintained a steady portion of total employment, thus indicating that employment
in these sectors expands and contracts with the economy.
Construction employment fell dramatically in 1991. The construction boom
of the late 1980s came to an abrupt halt by late 1990, and the percent share of
employment held by the construction sector fell from 6.6 percent in 1988 and
1989 to 4.0 percent in 1995. The average annual rate of decline over the period
was 4.9 percent.
We noted earlier a growing diversification of the area's employment base.
The following list of major employers in the Washington area reflects the
growing diversity of the local economy, the continuing influence of educational
institutions, and the emergence of service-oriented firms.
=========================================================
Largest Private Employers
Ranked by Total Employees in Metro Area
=========================================================
Metro Area
Rank Company Name Employees
=========================================================
1 Inova Health Systems 9,500
2 Hechts 8,000
3 Medlantic Healthcare Group 6,000
4 Long & Foster Real Estate 5,300
5 Shoppers Food Warehouse 3,800
6 Booz Allen & Hamilton 3,100
7 Dyncorp 3,000
8 Holy Cross Hospital 2,300
9 Providence Hospital 2,000
10 Alexandria Hospital 1,742
=========================================================
Source: Washington Business Journal, November 17-23, 1995
If the federal government were included in the above list, the Department
of Defense would be the largest local employer, with over 86,000 employees. The
next closest is the Department of Health and Human Services with over 30,000
employees. The Treasury, Justice, Postal Service, and Commerce Departments all
have over 20,000 employees, and are larger individual employers than any other
local private firm.
The local governments are also major employers in the region. For example,
the City of Alexandria had over 5,100 employees between the city government,
Alexandria Hospital, and the public school system. Arlington, Fairfax, and
Loudoun Counties have, respectively, over 6,800, 25,500, and 3,900 employees for
the same functions. Montgomery County and Prince George's Counties are similarly
large local employers.
Unemployment Rates
According to the Census reports, the Washington region has one of the
highest labor force participation rates in the country, with more than 75
percent of the population between the ages of 16 and 65 being part of the labor
pool. This is ten percent higher than the national average.
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Regional Analysis
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For most of the 1980s, the demand for workers was increasing at a faster
rate than the number of workers in the area, causing a labor shortage. The 1991
through 1993 recession, however, halted job growth in the area and drove up
unemployment rates. The related statistics are summarized below.
<TABLE>
<CAPTION>
==================================================================================================
Unemployment Rates
==================================================================================================
Year 1988 1989 1990 1991 1992 1993 1994 1995
(Nov)
==================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Washington 2.9% 2.7% 3.4% 4.5% 5.0% 4.5% 4.1% 3.9%
MSA
- --------------------------------------------------------------------------------------------------
United 5.5% 5.3% 5.5% 6.7% 7.4% 6.8% 6.1% 5.3%
States
==================================================================================================
</TABLE>
Source: Metropolitan Council of Governments: Economic Trends in
Metropolitan Washington. 1988-1991 (The unemployment rates are not
seasonally adjusted.) Updated Figures including 1992 through
year-to-date 1995 obtained from the District of Columbia
Department of Employment Services.
The outlook for employment in the region continues to be strong despite
the recent recession. Obviously, federal and local government employment is a
major contributor to the region's stability. Most of the swings in employment
have been experienced in the construction trades and retail employment. These
last two sectors are expected to remain soft for the next few years with slow
gains made as the economy stabilizes and demand for new housing and commercial
construction increases.
Employment Outlook
The Greater Washington Research Center reported that growth in the
Washington area economy finally returned during the latter part of 1993 after
staggering through the previous six years. In early 1994, most of the nine
indicators that the research group uses to track the health of the economy and
to predict its direction were up, the only exception being the employment index
which showed the number of jobs increasing at a pace somewhat slower than the
seasonal norm. On the positive side, however, the number of jobs increased by
the largest margin since mid-1993. Job gains in the private sector seem to be
leading those in the government.
The indicators utilized by the Research Center seem to suggest that the
economy is continuing to gain strength. However, the level of improvement still
falls short of generating the number of jobs the Washington area produced during
the boom of the 1980s. The number of jobs in the area increased by 18,900 in
March but the total number of jobs so far this year is still short of
pre-recession peak employment.
Job gains have been concentrated in the government and service sector,
with employment in retailing and construction still relatively depressed. The
new jobs numbers may be understated because they don't include self-employment.
In addition to employment, other guideposts to the state of the region's
economic health - airport boardings, classified advertising lineage and the
national consumer confidence index - all improved in 1994.
Even though the recovery in the Washington area may be slow, the region is
strong economically. The office vacancy rate in the Washington area is below
that in most
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Regional Analysis
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metropolitan areas and unemployment is lower than the national average. The
indicators that the Greater Washington Research Center uses to forecast economic
growth six to nine months from now were up as well, albeit less strongly.
Increases in the sales of durable goods, in the number of business
telephone lines installed, in housing sales, in the Johnston, Lemon Index of
local stocks and in the national leading index, produced a modest gain of 0.09
percent in March.
Overall, the region's 1993 performance was described as a year of recovery
as evidenced by the net increase in wage and salary jobs, with the services and
government sectors adding the most positions. For 1994 through 1996, we
witnessed further employment gains for the region and a strengthening economy,
as the recovery broadened and deepened.
Household Demographics
One of the more important demographic factors influencing the demand for
goods and services is the household. The household is the basic consuming unit
in the housing market. It is defined by the U.S. Census as a person or group of
people who jointly occupy a dwelling unit and who constitute a single economic
unit for the purposes of meeting housing expenses. The household unit can be a
family, two or more individuals living together, or a single person.
The historical household growth patterns help define the region and are
shown in the following table. The forecasts were published by Equifax National
Decision Systems and were tabulated for them by an econometric modeling service
associated with a major university.
The figures show that the number of households in the region grew at an
average annual rate of 2.4 percent during the 1980s. The rate has slowed to
about 2.1 percent per year for 1990 through 1994, and is projected to slow to
about 1.5 percent for the next five years. As with the population figures
presented earlier, household formation has become negative in the District of
Columbia. However, the inner suburbs have showed continued growth with the
strongest counties being Fairfax and Prince George's. The outer suburbs had the
strongest 1980s and early 1990s growth rates, but are projected to slow to an
average annual rate of 2.6 percent.
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<TABLE>
<CAPTION>
==============================================================================================================================
Household Changes
1990 Census Estimates Versus 1980 Census
==============================================================================================================================
Households Annual Average
Jurisdiction (Thousands) Growth Rate (%)
============================================================================================
1990- 1993-1999
1980 1990 1994 1999 1980- 1994 Est. Fcst
Est. Fcst 1990
==============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
District of Columbia 253.1 249.6 240.8 231.1 -0.1 -0.9 -0.8
- ------------------------------------------------------------------------------------------------------------------------------
Arlington County 71.6 78.5 79.2 80.0 1.0 0.2 0.2
- ------------------------------------------------------------------------------------------------------------------------------
City of Alexandria 49.0 53.3 56.1 58.2 0.9 1.3 0.7
==============================================================================================================================
Central Jurisdictions 373.7 381.4 376.1 369.3 0.2 -0.3 -0.4
==============================================================================================================================
Fairfax County 205.2 292.3 331.3 373.7 4.3 3.3 2.6
- ------------------------------------------------------------------------------------------------------------------------------
City of Fairfax 6.9 7.4 7.8 8.1 0.7 1.4 0.8
- ------------------------------------------------------------------------------------------------------------------------------
City of Falls Church 4.3 4.2 4.3 4.4 -0.2 0.6 0.5
- ------------------------------------------------------------------------------------------------------------------------------
Montgomery County 207.2 282.2 304.6 326.5 3.6 2.0 1.4
- ------------------------------------------------------------------------------------------------------------------------------
Prince George's Cnty 224.8 258.0 281.7 308.1 1.5 2.3 1.9
==============================================================================================================================
Inner Suburban Area 648.4 844.1 929.7 1,020.8 3.0 2.5 2.0
==============================================================================================================================
Loudoun County 18.7 30.5 35.3 39.1 6.3 3.9 2.2
- ------------------------------------------------------------------------------------------------------------------------------
Prince William Cnty 43.8 69.7 81.7 93.8 5.9 4.3 2.9
- ------------------------------------------------------------------------------------------------------------------------------
Cities of Manassas/ 6.9 11.7 14.3 17.0 7.0 5.6 3.8
Manassas Park
- ------------------------------------------------------------------------------------------------------------------------------
Frederick County 37.5 52.6 59.8 66.0 4.0 3.4 2.1
- ------------------------------------------------------------------------------------------------------------------------------
Calvert County 10.7 17.0 20.6 23.4 5.9 5.3 2.7
- ------------------------------------------------------------------------------------------------------------------------------
Charles County 21.4 32.9 37.6 42.0 5.4 3.6 2.3
- ------------------------------------------------------------------------------------------------------------------------------
Stafford County 12.2 19.4 24.3 27.9 5.9 6.3 2.0
==============================================================================================================================
Outer Suburban Area 151.2 233.8 273.6 309.2 5.5 4.3 2.6
==============================================================================================================================
REGION TOTAL 1173.3 1459.3 1579.4 1699.3 2.4 2.1 1.5
==============================================================================================================================
</TABLE>
Source: U.S. Census Data Provided By National Decision Systems, Inc.
Note: The list of municipalities corresponds to the DC-VA-MD MSA prior to
the December 31, 1992 expansion.
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The key items relating to Household (HH) Income and Statistics relating to
persons per dwelling unit (DU) are summarized below.
<TABLE>
<CAPTION>
========================================================================================================
Selected Household Demographics for the Metropolitan Area
========================================================================================================
Category 1990 1995 2000 % Change % Change
Estimate Forecast 1990-1995 1995-2000
========================================================================================================
<S> <C> <C> <C> <C> <C>
Average HH Income $55,693 $67,747 $89,806 21.6% 32.6%
- --------------------------------------------------------------------------------------------------------
Median HH Income $46,196 $55,684 $68,889 20.5% 23.7%
========================================================================================================
Population by HH % Family HH 81.1% % Non- 16.4%
Type (1990) Family HH
========================================================================================================
No. Of Persons One Two Three Four Five or More
========================================================================================================
Persons Per DU 24.9% 30.8% 18.5% 15.3% 10.5%
(% of Total)
========================================================================================================
Characteristics: Single Male Single Married Other Family Non-Family
Female Couple Head Head
========================================================================================================
HH Type (% of 10.5% 14.4% 51.7% 15.4% 8.0%
Total)
========================================================================================================
</TABLE>
Source: U.S. Census Data and Projections Provided by Equifax National
Decision Systems, Inc.
Since 1980 there has been a drop in household size and, correspondingly, a
growth in the number of non-family households. Married couples continue to
represent over 50 percent of the total households. Single person households grew
at an annual rate of 2.5 percent and non-family households grew at an annual
rate of 6.1 percent during the last decade while single parent households grew
at an annual rate of 3.0 percent during the 1980s. The growth in the single
person and non-family household categories of households contributes to housing
demand, which generates demand across the economy.
Another important issue affecting the demand for real estate is household
income. The following table shows the percent distribution of income within the
different jurisdictions.
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<TABLE>
<CAPTION>
=====================================================================================================================
1994 Percent Distribution of Household Income
=====================================================================================================================
Jurisdiction Less Than $25- $35- $50- Over No. Of
$25K 34.9K 49.9K 74.9K $75K Household
=====================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
District of Columbia 33.4 13.3 15.6 16.5 21.2 240,777
- ---------------------------------------------------------------------------------------------------------------------
Arlington County 17.0 11.2 17.2 22.3 32.3 79,254
- ---------------------------------------------------------------------------------------------------------------------
City of Alexandria 17.4 13.4 21.0 22.0 26.3 56,113
=====================================================================================================================
Central Jurisdictions 27.9 12.8 16.7 18.4 24.2 378,144
=====================================================================================================================
Fairfax County 8.5 6.6 12.5 26.2 46.1 331,334
- ---------------------------------------------------------------------------------------------------------------------
City of Fairfax 13.4 10.2 15.3 30.7 30.4 7,775
- ---------------------------------------------------------------------------------------------------------------------
City of Falls Church 15.5 8.7 15.0 23.8 37.0 4,284
- ---------------------------------------------------------------------------------------------------------------------
Montgomery 13.0 8.7 14.6 22.8 40.9 304,627
- ---------------------------------------------------------------------------------------------------------------------
Prince George's 18.2 13.2 20.0 26.4 22.6 281,732
=====================================================================================================================
Inner Suburban Area 12.9 9.3 15.5 25.2 37.1 929,752
=====================================================================================================================
Loudoun County 10.8 8.0 17.0 32.6 31.5 35,267
- ---------------------------------------------------------------------------------------------------------------------
Prince William County 10.4 9.2 19.8 33.6 27.1 81,669
- ---------------------------------------------------------------------------------------------------------------------
Cities of Manassas/ 27.5 28.4 53.3 57.4 33.5 14,340
Manassas Park
- ---------------------------------------------------------------------------------------------------------------------
Frederick County 20.4 13.0 22.6 26.6 17.4 59,763
- ---------------------------------------------------------------------------------------------------------------------
Calvert County 15.7 10.5 18.4 29.3 26.2 20,596
- ---------------------------------------------------------------------------------------------------------------------
Charles County 17.0 9.9 20.1 28.5 24.4 37,600
- ---------------------------------------------------------------------------------------------------------------------
Stafford County 15.1 11.4 22.3 29.7 21.5 24,312
=====================================================================================================================
Outer Suburban Area 15.3 11.0 20.0 30.8 22.9 273,547
=====================================================================================================================
Totals 16.8 10.5 16.1 24.7 31.9 1,581,443
=====================================================================================================================
</TABLE>
Source: Equifax National Decision Systems, Inc.
The metropolitan area as a whole shows a heavy distribution of households
with incomes on the high end of the range. Over 55 percent of the households
have an annual income over $50,000 per year and the highest grouping is those at
$75,000 per year or higher (31.9 percent).
This relationship is not true of the central jurisdictions and the outer
suburban areas where the highest concentration of households is in the $50,000
to $75,000 per year range. The inner suburban areas, however have an
overwhelming percentage of households - 37.1 percent in the over $75,000 per
year range.
Summary
The long-term outlook for the metropolitan Washington area continues to be
good. The expanding population of the area indicates an increase in demand for
goods and services. The trend toward smaller household sizes provides additional
demand pressures for new housing. The major factors affecting real property
values are sound, and future trends appear to point toward continued economic
vitality for the region.
In the short term, the region has experienced the effects of the recent
recession. Total employment in the region declined during the recent recession.
However, unemployment levels were moderated by the influence of federal and
local government employment and contracts for
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<PAGE>
Regional Analysis
================================================================================
services. The Washington region continues to have one of the lowest unemployment
levels in the United States.
Overall, we believe that 1997 will be a period of continued moderate
growth and steady improvement in the underlying factors affecting the real
estate markets. More importantly, we do not anticipate any further downturn in
the local economy on the scale of what has occurred in other regions of the
country. Many local economists and developers are signaling their belief that
the real estate market is strengthening.
Real estate values are volatile in this climate, with some property values
on the increase while other areas remain stable. For the short-term, we expect
that real estate values will show improvement in value in certain sectors. For
the long-term, the market appears to be sound, with strong demographics and
reasonable prospects for increasing values in the future.
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<PAGE>
OFFICE MARKET ANALYSIS
================================================================================
Investment Market
The investment market in the metropolitan Washington area has been active
as 21 office buildings sold for more than $10 million in 1996 following 25
buildings during 1995. Within Washington, D.C. itself, seven buildings sold for
over $10 million at an average price of $202 per square foot. The composition of
investors in the metropolitan Washington area is largely institutional,
consisting mainly of insurance companies, pension funds and fund advisors. In
addition, the market has seen increased investment activity from offshore
capital sources and individual syndicates.
With a higher concentration of available capital, the metropolitan market
has experienced rising prices on average. For example, most recently, a true
trophy property developed by Copley and Prentiss Properties (1301 K Street) sold
for $306 per square foot. Another similar quality building built by Manulife
(1350 Eye Street) was purchased for almost $350 per square foot. In 1994, the
Government of Singapore Investment Corporation purchased the 242,000-square
foot office building at 901 E Street, NW, for $66 million, or $272 per square
foot. These sales provide evidence that the metropolitan Washington office
market continues to be among the more desirable markets in the nation for
institutional investment.
Metropolitan Office Market
Supply and Demand Factors
In order to report on the state of the office market and to project future
trends, we have collected information on the metropolitan Washington Office
Market, the relevant submarket and the office projects that compete directly
with the subject. Cushman & Wakefield of Washington, D.C., maintains a database
comprised of multi-tenant office buildings of at least 20,000 square feet. The
following categories of buildings are specifically not included in our survey:
medical and professional buildings, government buildings, owner-occupied
projects and office/ showroom/ warehouse complexes. Cushman & Wakefield also
produces a quarterly Office Market Survey entitled Metropolitan Washington, D.C.
Office Market Report. Additional information was obtained through conversations
with knowledgeable market participants.
The metropolitan Washington, D.C. office market includes the following
jurisdictions: the District of Columbia, Arlington and Fairfax Counties and the
City of Alexandria in Northern Virginia and Montgomery and Prince George's
Counties in Suburban Maryland. The market contains over 200 million square feet
of privately owned office space distributed among 31 submarkets within the seven
jurisdictions. The District of Columbia contains 39 percent of the metro area's
total square footage. The following table presents the geographic distribution
of the office inventory in the metropolitan area, along with other statistical
data:
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Office Market Analysis
================================================================================
<TABLE>
<CAPTION>
==================================================================================================
Geographic Distribution of Inventory
Metropolitan Washington Office Market
First Quarter 1997
==================================================================================================
Jurisdiction Inventory Overall SF Under Weighted Avg. Y-T-D Net
SF (000) Vacancy Construction Class A Absorption
Rental Rate
==================================================================================================
<S> <C> <C> <C> <C> <C>
Washington, D.C. 80,523 12.7% 1,983,260 $35.09 55,852
Arlington County 24,995 6.3% 153,000 $26.34 239,351
Alexandria 12,120 5.4% 0 $22.49 1,791
Fairfax County 48,090 6.4% 510,000 $23.15 512,052
Loudoun County 2,355 4.9% 73,500 $17.75 (3,120)
Montgomery County 32,140 10.2% 0 $19.80 512,059
Prince eorge's County 10,128 18.2% 0 $18.85 73,603
- --------------------------------------------------------------------------------------------------
Total 204,350 10.0% 1,983,260 $27.69 1,391,588
==================================================================================================
</TABLE>
As of the end of 1996, the overall vacancy rate stood at 10.8 percent,
reflecting both direct vacancies and sublet space, continuing a slow recovery
from the end of year 1992 vacancy of 14.7 percent. Although the Washington
region is now and has over the past experienced generally higher overall
occupancies levels than most major metropolitan areas in the United States, the
current statistics, as presented in this section, reflect recent trends which in
general, support only limited optimism for an overall improving market as a
whole. Specifically, the Class A market appears sound, but there are unsettling
currents affecting older buildings throughout the city.
Furthermore, build-to-suit activity on the part of the World Bank and the
International Monetary Fund (IMF) will likely prove problematic over the next
couple of years, particularly in the Class B and C properties in the city's
Central Business District office submarket (submarket boundaries will be defined
later in this section). Also, the issue of government downsizing, both locally
and nationally, cannot be dismissed lightly. The 1994 Congressional election
brought the first change in the control of both Houses of Congress in 40 years.
Thus, it is difficult to reliably predict the upshot. Accordingly, at the very
least, caution is in order as we are traveling uncharted territory. These issues
are discussed in greater detail later in this section.
As noted above, there are positives in the market. We do expect Class A
properties to fair well over the near term. As will be repeatedly indicated in
the following discussion, there appears to be a continuing shortage of Class A
office space and a plethora of Class B and C space.
The following table presents the historical vacancy, rental rate and
absorption data, showing a steadily declining vacancy rate and a possible
increase in rents:
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Office Market Analysis
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<TABLE>
<CAPTION>
================================================================================================
Historical Data
Metropolitan Washington Office Market
1992 - 1996
================================================================================================
Year Inventory SF (000) Vacancy SF Under Rental Rate Net Absorption SF
Construction
================================================================================================
<C> <C> <C> <C> <C> <C>
1992 204,427 14.7% 2,301,986 $22.80 2,833,422
1993 205,629 13.5% 874,631 $21.38 3,763,144
1994 206,337 12.7% 2,124,631 $21.44 2,319,175
1995 206,794 12.3% 1,004,272 $21.75 2,642,126
1996 212,389 10.8% 1,878,016 Class A 2,921,573
$27.35
================================================================================================
Annual Averages 1,636,707 2,895,888
================================================================================================
</TABLE>
The above table presents several important changes: the inventory
increased by the inclusion of Loudoun County in the first quarter 1996; the
square footage under construction jumped dramatically as new build to suits
commenced. As the economy continues to improve, we anticipate a slow return to
development.
Demand for Office Space
As shown above, the overall vacancy has been gradually declining. The
office market is demonstrating improvement, although it varies from market to
market. Northern Virginia and Fairfax County specifically continue to be the
strongest submarkets with low vacancies and strong absorption. In contrast,
Washington, D.C. has demonstrated weak absorption and stable vacancy rates.
Traditionally, the office market's vigorous leasing activity has been
supported by the growth of the white collar employment base. Additionally, one
of the major players in the local market is the federal government (largely the
General Services Administration or GSA) which leases just over 20 percent of the
office space in the metropolitan area. Government leasing has historically
accounted for about 40 percent of gross leasing activity, but dropped to the 25
percent range in 1993 before falling to less than ten percent in 1994 and 1995
and then rising above ten percent in 1996. Furthermore, due to the new political
climate in Washington and continuing efforts to cut the size of the federal
government, future absorption projections are uncertain.
In July 1996, GSA announced that government agencies will be allowed to
control their own leasing using outside third party vendors, if they prefer. It
is too early to tell what effect this will have on overall government leasing,
but the change in the status quo is worth noting.
Government activity notwithstanding, the primary influence on net office
absorption is job formation, in particular, white collar employment. An
historical summary of office type employment is shown in the following table,
encompassing the categories of Government, Finance, Insurance, Real Estate
(FIRE), Transportation, Communications, Utilities (TCU) and Services. The
compound annual growth rate from 1984 to 1994 was 3.0 percent. However, real
growth occurred only in the 1984 to 1989 time frame with 5.0 percent compound
growth rate while there was very modest compounded job growth of 1.6 percent
from 1989 to 1994. In
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Office Market Analysis
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contrast, the future job growth over the next ten years is expected to be 6.6
percent for the Service sector, 1.3 percent for the Finance, Insurance & Real
Estate sector and 1.4 percent for the Government sector. Obviously, the
projection for growth in the Government sector merits caution as previously
addressed.
================================================================================
Metropolitan Washington
Office Related Employment*
1987-2004
================================================================================
Year Total New Jobs Created Over Net Office
Employment Previous Period Absorption
(000s) (000s) (000s Square Feet)
================================================================================
1987 1,500.6 N/A N/A
1988 1,545.5 44.9 N/A
1989 1,604.3 58.8 N/A
1990 1,639.1 34.8 N/A
1991 1,641.0 1.9 3,317
1992 1,661.0 20.0 2,733
1993 1,686.5 25.5 3,753
1994 1,739.8 53.5 2,319
1995 1,812.6 72.8 2,642
1999 2,155.3 342.7 or 68.5/yr
2004 2,688.6 533.3 or 106.7/yr
================================================================================
Source: The WEFA Group - Regional Economic Service, Spring 1994; Net Absorption
data from C&W
* Service, FIRE, TCU and Government sectors
================================================================================
For the years for which data is available, the table also shows the
historical relationship between job formation and office absorption in the
metropolitan area. Coinciding with the depths of the recession, the 1991 job
growth of only 1,900 jobs corresponded with a healthy absorption of 3.3 million
square feet. We would typically expect lower absorption in years with little job
growth. Possibly the low absorption was due in part to the high level of job
growth in the immediate preceding years. In the following years, net absorption
fluctuated between 2,319,000 to 3,753,000 square feet against a steadily growing
job formation trend.
Perhaps having some effect on the data is the national and local pattern
of corporate down-sizing and consolidation, leaving less office space per
employee. As one observer recently put it, "historically, 250 square feet per
office employee was the standard rule-of-thumb ratio. Today, this ratio is
working itself down to 160 feet per employee." A recent market example of this
trend is AT&T's current target of 180 square feet of net rentable area per
employee, down from 200 square feet a few years ago. Also, the federal
government is now targeting less than 150 feet per employee.
Although the above statistics produce unclear trends, the relationship
between white collar job formation and net office space absorption, while not
always obvious, is a key component of the demand side of the office space
equation. With regular job growth, net absorption will occur and gradually draw
down the supply of vacant office space, albeit probably at a slower pace than
history would suggest.
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<PAGE>
Office Market Analysis
================================================================================
The number of years' supply of available space is one method of evaluating
the relative health of a market. If one defines market equilibrium to be
occupancy in the 95 percent range, then about 5.0 percent of the total inventory
needs to be absorbed in order to achieve equilibrium (or about 10.2 million
square feet). This is calculated by subtracting from the overall vacancy rate
the defined 5.0 percent stabilized vacancy. Assuming a future absorption rate
equal to the past five year average annual net absorption of 2.9 million square
feet, an approximate 3.5 year supply of vacant office space (all classes) is
indicated. This issue is discussed in greater detail once we look at the more
distinct Washington, D.C., market versus the metropolitan area as a whole.
Until recently, an exodus of businesses from the District to the suburbs
compounded the recent downward absorption cycle. The exodus was attributable to
the continuing cost cutting in large regional and national firms which fled the
higher rates of the downtown market. Even so, the overall strength of the
Washington area, based primarily on the influence of the federal government,
should not be ignored. In addition, as occupancies increase and asking rental
rates in the preferred close-in suburbs rose dramatically, the cost spread
between downtown and the suburbs narrowed and seemingly stanched the outflow of
major tenants.
Nevertheless, within the Central Business District Submarket (CBD) of the
downtown office district in Washington, D.C., an ominous cloud threatens
prospective leasing for the next several years. This is particularly true for
Class B and C buildings. As previously alluded to, the World Bank and IMF will
have new headquarters buildings operational by 1997 and 1998. As these and other
related tenants leave their CBD space, most of which is Class B, an additional
1.5 million square feet will become available, just within the next 12 months.
While this is not expected to severely impact Class A buildings, it will
definitely prove problematic for the Class B sector and likely disastrous for
Class C and D buildings, over the short term at least.
In the final analysis, we anticipate a return to equilibrium in the
metropolitan Washington office market only after the turn of the century. We
have defined this equilibrium in terms of occupancy and market rents with
stabilized occupancy in the 95 percent range, and market rents at sufficient
levels to support new construction. We expect the phenomena of free rent and
above standard concessions to generally disappear over the next several years
with market rents and the overall level of economic growth again achieving some
sort of parity prior to the turn of the century. The exception may be the older
Class C and D product, assuming it will rent at all.
Rental Rates
Based on Cushman & Wakefield's survey of market rents, the weighted
average asking rental rate drifted downward from 1991 to 1993 when it appears to
have reversed directions. The following chart demonstrates the trend in overall
rental rates since 1991. Note that Class A rates have been steadily rising as a
result of the shrinking inventory of available space.
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<PAGE>
Office Market Analysis
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===============================================
Overall Weighted Average Rental Rates
Washington Metropolitan Area Office Market
1991 - 1st Qtr 1997
===============================================
Year Class A Rental Overall Rental
Rates per SF Rates Per SF
===============================================
1991 N/A $23.34
1992 N/A $22.80
1993 $21.88 $21.38
1994 $23.25 $21.44
1995 $25.07 $21.75
1996 $27.35 $23.07
1997 $27.69 N/A
===============================================
Recent rental trends show signs of improvement in many submarkets,
particularly in Northern Virginia. Further, an increasing portion of the
remaining available Class A and B space is commonly referred to as back space,
including inferior back office space with poor or no window lines, encumbered
space, and less desirable configurations. The encumbered space includes Class A
premises that are encumbered by existing tenants through expansion options.
Overall, this back space is less desirable, has lower asking rates, and tends to
be the last areas leased, all of which tends to skew the average asking rents
downward. The reality is that the better Class A space is likely achieving
higher rates than the statistics indicate.
The lack of significant new construction, coupled with positive, albeit
slower absorption, has led to a shortage of large blocks of Class A office space
in the preferred submarkets. The emergence of back space is one indicator of
this trend as is the recently completed speculative building at 1900 K Street in
the CBD and other build to suits in the downtown area. Given the lack of overall
speculative development, coupled with overall positive absorption, we do not
anticipate any further decline in rental rates.
Regarding the issue of rent spikes, we have recently observed above
average rent jumps in some Northern Virginia submarkets and may be seeing the
start of a similar occurrence in portions of Montgomery County, Maryland.
Therefore, we believe real increases in market rental rates are likely over the
next two to three years in selective markets as existing office inventory is
absorbed and before funds for new speculative development become available and
new construction begins. Again, due to the tight supply in some submarkets,
there may be rent spikes for newer space within the next twelve month period.
However, in only some instances has it been clear that investors were willing to
pay for prospective rent spikes.
Summary of Metropolitan Office Market
Although some submarkets remain soft, the overall vacancy rate continues
to decline, and the remaining available space tends to be less desirable.
Northern Virginia, in particular, is leading the region in net absorption, and
has shown above average increases in rental rates. We believe that over the next
several years, the metropolitan office market should reach a more stabilized
position both from an occupancy and lease rate standpoint. Until equilibrium is
reached, however, overall rental rates for all classes of space will probably
not grow at a compound rate that exceeds the rate of inflation.
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Office Market Analysis
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In contrast, Class A space has demonstrated strength in the overall
market, absorbing clearly more than its fair share of the total market
absorption. While some Class B product may mirror the growth rates for Class A
space, the majority will most likely only experience marginal growth given the
excessive supply of Class B space compared to the demand for it. Finally, most
Class C and D buildings will have difficulty renting at any rate.
Northern Virginia
The subject property is located in the Fairfax/Oakton/Vienna submarket of
Fairfax County in Northern Virginia. According to the First Quarter 1997
Metropolitan Washington, D.C. Office Market Report, published by Cushman and
Wakefield, Northern Virginia has about 87.5 million square feet of privately
owned office space distributed in four large submarkets, stretching from
Arlington to Dulles International Airport in Fairfax and Loudoun counties. The
following table presents the historical vacancy, rental rate and absorption data
for the Northern Virginia segment of the region. It illustrates steadily
declining vacancy rates and a gradual increase decrease in asking rents over the
past three years despite a reduction in concessions.
<TABLE>
<CAPTION>
========================================================================================
Historical Data
Northern Virginia Office Market
1992 to 1st Quarter 1997
========================================================================================
Year Inventory Overall Class A Average Net
SF (000) Vacancy Asking Asking Absorption
Rental Rate Rental Rate SF
========================================================================================
<C> <C> <C> <C> <C> <C>
1992 82,082 15.6% $18.09 $17.48 480,448
1993 81,863 13.8% $17.81 $17.05 1,140,425
1994 81,944 11.0% $20.04 $17.27 1,877,617
1995 82,409 9.2% $21.32 $17.65 1,730,313
1996 87,251 7.5% $23.97 $20.68 1,882,407
1Q 1997 87,560 6.2% $24.64 $21.19 750,074
========================================================================================
</TABLE>
It should be noted that the significant increase in inventory in 1996 is
attributed to the inclusion of Loudoun County to the survey. Taken as a whole,
the Northern Virginia office market exhibited an overall vacancy rate of 6.2
percent as of the first quarter 1997. This is down 1.3 percentage points from
year end 1996 when the vacancy rate was 7.5 percent and represents a continued
decrease in vacancy as the amount of available and desirable office space
dwindles.
Within the various jurisdictions, Fairfax County has the highest vacancy
rate at 6.4 percent, a mere 20 basis points difference from Northern Virginia.
Loudoun County reports a 4.9 percent vacancy here, however, it should be noted
that they also have the lowest amount of inventory. Overall, each jurisdiction
is performing well and contributing to the area's strong performance.
Since 1994, average asking rental rates have been climbing and reached
$21.19 per square foot in the first quarter 1997, with Class A rents at $24.12
per square foot. Between 1994 and 1996, rents increased between $0.25 and $3.00
per square foot for the market as a whole, with the most significant rent spike
occurring between 1995 and 1996. Since year-end 1996, rents have increased an
additional $0.50 per square foot. Class A rents have spiked at a slightly higher
overall pace, with increases of $1.30 to $2.65 per square foot between 1994 and
1996. Again, the most significant increase occurred between 1995 and 1996. Since
year-end
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Office Market Analysis
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1996, Class A rents have increased an additional $0.70 per square foot. The
following table reiterates historical asking rents for the Northern Virginia
submarket.
================================================
Historical Data
Northern Virginia Office Market
1992 - First Quarter 1997
================================================
Year Class A Average
Asking Asking
Rental Rate Rental Rate
================================================
1992 $18.09 $17.48
1993 $17.81 $17.05
1994 $20.04 $17.27
1995 $21.32 $17.65
1996 $23.97 $20.68
*1997 $24.64 $21.19
================================================
The Fairfax/Oakton/Vienna office submarket is part of Fairfax County. The
county is the largest of the major market segments in Northern Virginia, with
48.1 million square feet of office space. Fairfax County represents 54.9 percent
of the Northern Virginia market.
Fairfax County has six submarkets: Springfield/Seven-Corners/Baileys, City
of Fairfax/Route 50, Fairfax/Oakton/Vienna, Tyson's Corner/McLean,
Reston/Herndon, and Route 28 Corridor/Dulles. Each of these submarkets competes
predominantly within its own boundaries. The following table presents the
geographic distribution of the office inventory in Fairfax County, along with
other statistical data.
<TABLE>
<CAPTION>
=================================================================================================================
Geographic Distribution of Inventory
Fairfax County Office Market
First Quarter 1997
=================================================================================================================
Submarket Inventory Direct Overall Under Y-T-D Net
Vacancy Vacancy Construction Absorption
=================================================================================================================
<S> <C> <C> <C> <C> <C>
Springfield/7 Corners/Baileys 3,446,524 14.8% 15.4% 0 42,568
Merrifield/Route 50 4,163,635 4.4% 4.8% 150,000 37,290
Fairfax/Oakton/Vienna 8,705,680 6.2% 6.3% 0 195,130
Tyson's Corner/McLean 17,964,618 4.3% 5.2% 20,140 -71,478
Reston/Herndon 9,999,213 6.1% 6.7% 102,874 70,381
Route 28 Corridor/Dulles 3,810,532 4.1% 5.5% 300,000 238,161
- -----------------------------------------------------------------------------------------------------------------
Total 48,090,202 5.8% 6.4% 573,014 512,052
=================================================================================================================
</TABLE>
The Route 28/Dulles and Fairfax/Oakton/Vienna submarkets experienced the
largest gain in net absorption due to the signing of several large lease deals.
MCI Communications leased 154,000 square feet aon Meadow Wood Lane in the Route
28/Dulles submarket, while Columbia Gas and Mantech leased 45,000 and 40,000
square feet, respectively, in the Fairfax/Oakton/Vienna submarket. There are
currently four office buildings which can accommodate a tenant looking for
100,000 square feet or greater in Fairfax County. These buildings are located in
Fairfax, Herndon, Falls Church, and Tysons Corner. Reportedly, many tenants are
already vying for these blocks of space and several large leases are out for
signature.
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<PAGE>
Office Market Analysis
================================================================================
The Fairfax/Oakton/Vienna submarket, with 8.7 million square feet of
space, has a 6.2 percent vacancy rate as of the first quarter 1997. This is
significantly below the level posted one year prior when the vacancy factor was
13.9 percent (first quarter 1996). Overall, the vacancy rate has been steadily
declining since the beginning of the decade. The submarket is typical of the
county as a whole and should remain competitive into the future.
The following chart presents historical vacancy, rental rates and
absorption data for the Fairfax/Oakton/Vienna submarket.
================================================================================
Historical Data
Fairfax/Oakton/Vienna Office Submarket
1990 - First Quarter 1997
================================================================================
Year Vacancy Overall Asking Rental Rate Net Absorption SF
================================================================================
1990 25.1% $22.66 239,663
1991 29.3% $19.28 (387,584)
1992 27.9% $15.66 (61,4532)
1993 20.3% $14.27 438,043
1994 19.0% $13.44 113,272
1995 13.8% $13.02 409,131
1996 9.1% $18.32 525,276
1Q-1997 6.3% $19.48 195,130
================================================================================
As noted, the Fairfax/Oakton/Vienna submarket is one of the medium-sized
submarkets in Northern Virginia. It has been stable compared to the larger
markets and its access to the County offices makes it very attractive.
As can be seen, there have been significant rent spikes over the last two
years that are directly the result of strong absorption and diminishing
availabilities. Rental rates have risen to the point in other parts of Fairfax
County (Tysons Corner and Reston) that speculative office construction has
begun. The lack of availabilities in this area is likely to be accompanied by
similar construction efforts. As a result, we do not expect to see a
continuation of material rent spikes above normal inflationary trends.
Current Construction Activity
With continued tenant demand for quality office space and the desire of
many tenants to locate to northern Virginia, this area has already experienced
some speculative development. Fore example, in the Dulles Corridor submarket,
there is currently one project slated for speculative development which s a six
story, 135,000 square foot building scheduled to break ground in September of
this year. This project is adjacent to BDM's build-to-suit located at Reston
Parkway and Sunset Hills Road which is also scheduled to start construction
during September.
Micro Market Analysis
The subject consists of a 15-year old, seven-story office building located
near the interchange of I-66 and U.S. Route 50 in central Fairfax County. It has
good accessibility to the rest of the county and is rated as a Class B property.
On the following page, we have listed eight buildings, exclusive of the
subject, containing a total of 1.5 million square feet that are deemed to
compete for tenants within the same
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Office Market Analysis
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submarket. The buildings were selected based on age and non-owner occupied
status. The available space represents only 6.1 percent of this sample. Asking
rents range from $11.00 to $21.00 per square foot, full service.
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<PAGE>
Competing Office Buildings
Micro Market Survey
<TABLE>
<CAPTION>
===================================================================================================================
Average
Rental Year Floor Quoted Rental Rates
No. Name/Address Size (SF) Built Occupancy Plate ($/SF, Full Service)
===================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
1. Fair Oaks Plaza 177,789 1986 95% 22,224 $18.00 - $18.00
11350 Random Hills Road
Fairfax, Virginia
2. Headquarters Building 81,000 1986 100% 16,200 $19.75 - $19.75
11351 Random Hills Road
Fairfax, Virginia
3 Fair Oaks Commerce Center 135,961 1988 100% 22,660 $20.00 - $20.00
11320 Random Hills Road
Fairfax, Virginia
4 One Monument Place 202,608 1990 91% 25,326 $10.00 - $21.00
12150 E. Monument Drive (LL)
Fairfax, Virginia
5 Crown Ridge Plaza 188,600 1989 100% 23,575 N/A - N/A
4305 Ridgetop Road
Fairfax, Virginia
6 Center Pointe I & II 201,505 1988 100% 18,319 $21.50 - $21.50
4000 & 4050 Legato Road 204,000 1990 100% 18,545 $21.50 - $21.50
Fairfax, Virginia
7 One Fair Oaks 205,000 1987 100% 16,000 $21.00 - $22.00
4114 Legato Road
Fairfax, Virginia
8 Fifty West Corporate Center I 203,440 1990 100% 40,688 $22.50 - $22.50
3975 Fair Ridge Drive
Fairfax, Virginia
10. Fair Lakes Court South 117,500 1988 100% 22,800 $17.50 - $17.50
4300 Fair Lakes Court
Fairfax, Virginia
9. Greenwood Plaza 150,961 1985 87% 18,870 $20.00 - $25.00
12150 Lee Jackson Hwy
Fairfax, Virginia
Subject Oakwood Centre 128,353 1982 100% 18,336 $20.00 - $20.00
11781 Lee Jackson Hwy
Fairfax, Virginia
--------- -----
Totals: 1,996,717 98%
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</TABLE>
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<PAGE>
Office Market Analysis
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Neighborhood Analysis
The subject property is situated at the western quadrant of I-66 and Route
50 (Lee Jackson Memorial Parkway) in an area of Fairfax County generally
referred to as Fair Oaks / Fair Lakes, after the Fair Oaks Regional Mall and the
Fair Lakes planned community. The office building is a part of the complex of
retail, office, hotel, and residential properties surrounding the Fair Oaks
Regional Mall. Oakwood Center is located on the north side of the mall on the
drive that circulates traffic around the mall. The subject's neighborhood can be
defined as an east/west corridor along U.S. Route 50, extending from I-495 to
the east and Centreville Road (Route 28) to the west and extends several miles
on each side of the corridor.
Access/Linkage
The subject neighborhood is part of a rapidly growing area near Fair Oaks
Regional Mall. Access to the area is most easily achieved from U.S. Route 50
(east/west) and Legato Road (north/south). Regional access is available via
Interstate 66, which has its interchange with U.S. Route 50 a short distance
east of the subject. The subject is visible from Route 50.
The primary traffic carriers in the area include Lee Jackson Memorial
Highway (Route 50), West Ox Road, Fairfax County Parkway (north/south), Lee
Highway (Route 29, east/west), and Waples Mill Road. Waples Mill Road is a four
lane road in the vicinity of the subject, linking the neighborhood with Braddock
Road to the south and the Reston/Herndon area to the north. U.S. Route 50 is a
four to six lane major arterial in the vicinity of the subject, running
east/west. It is one of the most heavily trafficked arterials in the Northern
Virginia area. West Ox Road is a six-lane divided arterial in the vicinity of
the subject.
Ingress and egress to the neighborhood is primarily via Route 50 and
Waples Mill Road, along with Routes 29 and the Fairfax County Parkway. All of
the major arteries are being or have been developed with major commercial
projects. The major collector artery in the subject neighborhood is I-66.
Surrounding Land Use Patterns
Predominant land uses in the subject neighborhood consist of a mixture of
commercial developments, including retail centers, office buildings, a regional
mall, single-family detached, single-family attached and multi-family
residential developments, the Fairfax County government center, and a wide
variety of highway commercial uses along the major roadways.
The Fair Oaks Regional Mall, until the reopening of Tysons Corner Center
after its expansion and renovation in 1990, was the largest (1.4 million square
feet) regional mall in the Washington Metropolitan area. It is a two level mall
that opened in 1981 and has anchor tenants Hecht's, Lord & Taylor, J.C. Penney
and Sears. There are an additional 179 specialty stores and 14 restaurants in
the mall. This project has been one of the primary stimuli for the development
in the Fair Oaks area.
The Mall has several outparcels which are occupied with office buildings.
Two office buildings were built in 1982 and were leased on a multi-tenanted
basis. These buildings include The Fair Oaks Building located along Route 50 and
Oakwood Center located at the intersection of Route 50 and I-66. In addition,
the Fair Oaks Holiday Inn, which is adjacent to Oakwood
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Office Market Analysis
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Center, was enlarged to contain 301 rooms in 1986. The third office building
constructed as an outparcel was Greenwood Plaza.
Across Legato Road and to the west of Fair Oaks Mall, the Evans Company
constructed One Fair Oaks in 1987, a twelve-story, 214,000 square foot office
building leased in its entirety to Mobil Oil. Just north of One Fair Oaks, at
the intersection of West Ox Road and Legato Road, is the Center Pointe project
by Richmarr Construction Company. The phased development is improved with twin
office buildings (Centerpointe I and II) totaling 424,143 square feet of GBA. In
addition, a 180,176 square foot, 12-story, 240 unit residential building is
planned for the site.
Fair Lakes is a mixed-use development about two miles west of the Fair
Oaks development and is the largest along the I-66 corridor with a total
potential office development of 4.5 million square feet of space. Buildings
already completed include the 126,000 square foot Fair Lakes I which was
delivered in July 1986; the 44,000 square foot AFCEA Building which was
delivered during the summer of 1986 and is 100 percent leased; the 230,000
square foot TRW Building which is 100 percent owner-occupied; the 65,000 square
foot NVBIA Building; the 186,000 square foot Fair Lakes II Building; the 63,000
square foot Mohasco Building which is 100 percent owner-occupied; the
approximately 65,000 square foot AAA building and the 75,000 square foot Datatel
Building. A new office project was recently delivered as a build-to-suit for
AMS.
Additional projects within Fair Lakes include The Pentlands, mirror image
six-story 115,000 square foot office buildings, a Hyatt Hotel and the adjacent
11-story, 275,000 square foot Hyatt Plaza Office Building which is leased to
Aetna. The residential component of Fair Lakes includes three apartment projects
and several townhouse / condominium projects. A small strip retail plaza
(tenants such as Mobil Oil, a dry cleaner, beauty salon, restaurant, branch
bank) is located within the park. The Galleria At Fair Lakes, an upscale,
three-level mall in Fair Lakes was proposed on the site. However, due to changes
in the local market and the economy, the site was developed with a major retail
project that includes BJ's Wholesale Club, Walmart, and Hechingers as anchors.
Several restaurants have also been constructed on pad sites at the center.
The Centennial Gateway Center, slated to total 1.8 million square feet of
space upon completion, is a mixed-use development including residential,
commercial and office space. The Gateway project is located at the intersection
of Route 50 and West Ox Road. The first office building within Gateway, One
Monument Place, a 9-story office building containing 194,000 square feet, was
completed in 1989.
FairField, a $90 million proposed project by NVCommercial, is located at
the intersection of West Ox Road and I-66, just west of Fair Oaks Mall. The
project will include four office buildings with a total of 437,000 square feet
of space. The buildings will range in size from two-to seven-stories in height
and will be built over the next three to four years. Kaiser Permanante has
purchased one of the sites and completed a build-to-suit office building. The
road construction of FairField now extends Fair Lakes Parkway from West Ox Road
to Monument Drive, thereby connecting Fair Oaks Mall to the Fairfax County
Parkway (formerly known as the Springfield Bypass).
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<PAGE>
Office Market Analysis
================================================================================
Located diagonally across the intersection of Route 50 and I-66 from the
Fair Oaks Mall is the Fairfax Executive Park, the oldest of the office parks in
the area. Some brokers refer to it as the "brickyard", due to the abundance of
low-rise red brick buildings erected there in the early 1980s. This park is
located at Waples Mill Road north of Route 50, and is the least controlled
environment of the parks in the area. E Systems is the largest tenant, with
around 200,000 square feet (E Systems plans on vacating this building in the
near future). The park has a total of around 1.45 million square feet. Because
these buildings are older and stabilized, the occupancy is relatively high.
There are about two or three first-class structures in this park.
Directly across Route 50 from Waples Mill Road are a few office
buildings along Random Hills Road. This area is not really connected to any
particular office park, although the completion of Random Hills Road to the new
Government Center Parkway ties the above Fairfax Executive Park with these area.
Due to the very large wooded tract separating the government center and those
buildings on Random Hills Road at Route 50, most persons do not consider them
one park, and indeed Random Hills Road was somewhat of an orphan subdivision
until the government center was built there this year. Prominent buildings in
this area are Fair Oaks Commerce Center, Fair Oaks Plaza, and Crown Ridge Plaza.
The primary retail facility in the area is Fair Oaks Regional Mall, and
development extends along all sides of the intersection of Routes 50 and 29.
Strip shopping centers are common in this area, and include centers such as
Price Club Plaza, Fairfax Court, Greenbriar Towne Center, Fair Lakes Center,
Fairfax Center, Jermantown Square, K-Mart Plaza, Kamp Washington Shopping
Center, and Sully Place.
Summary
The subject property benefits from its location at an easily accessible
intersection in central Fairfax County. Based on the improvements in office
occupancy and anticipated increases in rental rates, along with the area's good
accessibility, it is clearly capable of capturing a fair share of the demand of
office space as the Fairfax County economy grows. The neighborhood has good
regional drawing power by virtue of the roadway network serving it. The
anticipated trend for the subject neighborhood is for continued growth and
stabilization into the foreseeable future.
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<PAGE>
PROPERTY DESCRIPTION
================================================================================
Site Description
Location: 11781 Lee Jackson Memorial Highway (U.S.
Route 50) Fairfax, Fairfax County,
Virginia
North side of the ring road surrounding
Fairoaks Regional Mall
Shape: Irregular (See facing page)
Land Area: 4.25301 acres, 185,261 square feet
Frontage: 720 feet along ring road
570 feet along U.S. Route 50
Topography: Generally level and on-grade with the
ring road
Street Improvements: Curb and gutter, paved parking lot,
two-level parking deck; landscaping
Access: Access to the subject is direct via
Legato Road to the ring road, with West
Ox Road, U.S. Route 50 and I-66 being
primary collector arteries. Access to
the site is considered good.
Site Disclaimers
Soil Conditions: We did not receive nor review a soil
report. However, we assume that the
soil's load-bearing capacity is
sufficient to support the existing
structures. We did not observe any
evidence to the contrary during our
physical inspection of the property. The
tract's drainage appears to be adequate.
Land Use Restrictions: We were not given a title report to
review. We do not know of any easements,
encroachments, or restrictions that
would adversely affect the site's use.
However, we recommend a title search to
determine whether any adverse conditions
exist.
Flood Hazard: Drainage of the tract appears to be
adequate and ties into the overall Fair
Oaks Mall drainage system. According to
the Fairfax County Mapping Service, Base
Property Mapping Branch, Division of
Communications, the subject parcel does
not lie in floodplain, based on studies
done of the County by the U.S.
Geological Survey.
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<PAGE>
Property Description
================================================================================
Wetlands: We were not given a Wetlands survey. If
subsequent engineering data reveal the
presence of regulated wetlands, it could
materially affect property value. We
recommend a wetlands survey by a
competent engineering firm.
Hazardous Substances: We observed no evidence of toxic or
hazardous substances during our
inspection of the site. However, we are
not trained to perform technical
environmental inspections and recommend
the services of a professional engineer
for this purpose.
Improvements Description
The following description of improvements is based upon our physical
inspection of the improvements along with our discussions with the building
manager.
General Description
Year Built: 1982
Number of Floors: 7
Gross Building Area: 132,257 square feet
Net Rentable Area: 128,353 square feet
Typical Floor Plate: 18,340 square feet
Construction Detail:
Foundation: Reinforced concrete slab on grade over
polyethylene vapor barrier. Parking deck
is concrete slab.
Framing: Structural steel. Parking deck is
precast, prestressed concrete with
reinforced precast concrete parapet
panels.
Floors: Reinforced concrete on metal decking
Exterior Walls: Pre-cast concrete panels and grey
insulated glass
Roof Cover: Elastomeric flexible sheet roof system
with 2.5 rigid insulation. The membrane
is covered with gravel ballast.
Windows: Exterior windows have anodized black
metal frames with grey insulated glass.
Pedestrian Doors: Glass in metal frame
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<PAGE>
Property Description
================================================================================
Loading Doors Metal doors.
Mechanical Detail
Heating and Cooling: The building is heated and cooled by
electric heat pumps, boilers and heated
air curtains powered by supply air fans.
Elevator Service: 4 elevators, including one for freight
use
Fire Protection: Fully sprinklered, fire alarm system and
smoke control system
Security: Electronic control cards for after hours
access
Interior Detail
Layout: The core area includes four elevators,
one men's and women's restroom, one
telephone closet, two staircases and two
mechanical closets.
Floor Covering: Commercial grade carpet and/or vinyl
tiles. The lobby area has marble based
floors.
Walls: Drywall finished with paint or vinyl
wall coverings.
Ceilings: Acoustic ceiling tiles in suspended
metal grid
Lighting: Recessed florescent and incandescent
lighting
Restrooms: Ceramic tiled floors and vinyl covered
walls with Mylar counters around sinks.
Ceramic wall covering around the stalls.
Site Improvements
Parking: An asphalt paved and striped lot marked
for 300 vehicles and a two-level parking
deck for another 181 vehicles.
On-Site Landscaping: Perimeter heavily landscaped with trees,
shrubs and grass.
Improvements Disclaimers
Americans With Disabilities Act: The Americans With Disabilities Act
(ADA) became effective January 26, 1992.
We have not made, nor are we qualified
by training to make, a specific
compliance survey and analysis of this
property to determine whether or not it
is in conformity with the various
detailed requirements of the ADA. It is
possible that a compliance survey and a
detailed analysis of the requirements of
the
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<PAGE>
Property Description
================================================================================
ADA could reveal that the property is
not in compliance with one or more of
the requirements of the Act. If so, this
fact could have a negative effect upon
the value of the property. Since we have
not been provided with the results of a
survey, we did not consider possible
non-compliance with the requirements of
ADA in estimating the value of the
property.
Hazardous Substances: We are not aware of any potentially
hazardous materials (such as
formaldehyde foam insulation, asbestos
insulation, radon gas emitting
materials, or other potentially
hazardous materials) which may have been
used in the construction of the
improvements. However, we are not
qualified to detect such materials and
urge the client to employ an expert in
the field to determine if such hazardous
materials are thought to exist.
Design Features and Functionality: The building has a very functional floor
plate size and arrangement that
accommodates both single and multi-
tenant layouts.
Physical Condition: The premises appear to be in good
condition overall. The main lobby area
is attractively finished, though the
upper level elevator lobbies are small
compared to Class A buildings in the
neighborhood. Additionally, the exterior
appearance of the premises is dated.
We did not inspect the roof of the
building or make a detailed inspection
of the mechanical systems. The
appraisers, however, are not qualified
to render an opinion as to the adequacy
or condition of these components. The
client is urged to retain an expert in
this field if detailed information is
needed about the adequacy and condition
of mechanical systems.
Personal Property Included None
In Value Estimate
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WAKEFIELD(R)
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<PAGE>
REAL PROPERTY TAXES AND ASSESSMENTS
================================================================================
The subject property is in the taxable jurisdiction of Fairfax County,
which assesses real property at a ratio of 100 percent of ad valorem value on a
calendar year basis. The 1997 calendar year is the most recent year for which
assessed valuation and property tax information is available. The 1998
assessments and tax rates will be available in March or April of that year. For
tax assessment purposes, the subject property is identified as Tax Parcels
046-3-8-18D1, 046-4-9-18B1, and 046-4-9-18C1.
Tax Rates
The 1997 tax rate for Fairfax County, along with a five year prior
history, is presented in the following table.
================================================================================
Tax Rate Per $100 of Assessed Value
Taxing Authority 1993 1994 1995 1996 1997
- --------------------------------------------------------------------------------
Tax Rate Tax Rate Tax Rate Tax Rate Tax Rate
================================================================================
Fairfax County $1.1828 $1.1614 $1.1614 $1.2310 $1.2300
================================================================================
As can be seen, the tax rates were relatively flat through 1995. In 1996,
however, the rate increased by six percent over the 1995 rate, with little
change going into 1997.
It is difficult, at best to judge the likelihood of future tax rate
increases when viewing only a short history. Tax rates tend to increase or
decrease based upon the combined influences of changes in property values and
increasing governmental budgetary needs as the jurisdiction tries to maintain a
pace with inflationary pressures. Nonetheless, over the long term the county tax
rates show an upward trend and we would expect tax rates to increase in
incremental bumps.
Tax Assessment
The subject's current assessment is presented in the following table.
================================================================================
Oakwood Center: 1997 Assessments
- --------------------------------------------------------------------------------
Assessment 046-1-8-18D1 046-4-9-18B1 046-4-9-18Cl Total
- --------------------------------------------------------------------------------
Land $ 270,490 $ 942,640 $ 791,395 $ 2,004,525
Improvements $ -- $ -- $ 10,349,080 $10,349,080
------------------------------------------------------------
Total $ 270,490 $ 942,640 $ 11,140,475 $12,353,605
Tax Rate X 0.0123
-----------
Tax Liability $ 151,949
$/SF NRA $ 1.18
================================================================================
The current assessment of $12,353,605 is 11.7 percent below the value
conclusion reached in the report, though its increases have followed the upward
trend of office building selling prices in the market. With rental rates and
selling prices increasing in Fairfax County, it is likely that the Assessor's
Office will be seeking increases in assessments. Accordingly, we
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WAKEFIELD(R)
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<PAGE>
Real Property Taxes And Assessments
================================================================================
have assumed a step increase to $13.8 million (roughly the value conclusion) in
the first year of the analysis, followed by a general inflationary trend.
Ad Valorem Tax Conclusions
As discussed above, the current tax associated with the property is
$151,949 for the tax year ending December 31, 1997. The taxes are current.
Taking into consideration future tax rate increases as well as the potential
increases in the subject's assessed value, we have projected that taxes will
increase to $169,740 in 1998, and then increase at a rate consistent with
inflation, or 3.5 percent annually. We have assumed that most of the increase in
the tax liability can be "contractually" passed through to the tenants. There is
risk in this assumption, however, as some tenants may strenuously object, thus
ownership is required to make a "business decision", if you will, regarding the
passthrough. In other words, the landlord may waive part or all of the
passthrough in some cases to strengthen the chance of retaining particular
tenants. In our analysis, we have attempted to account for the increased risk in
the selection of rates. Overall, the increase is in keeping with historical
trends in Fairfax County, in general and the subject property, in particular.
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<PAGE>
ZONING
================================================================================
The governing agency for zoning is the Fairfax County Planning and Zoning
Commission. The zoning designation of the subject property is C-7, Regional
Retail Commercial District. The C-7 zoning category has been established to
provide locations for a full range of retail commercial and service uses which
are oriented to serve a regional market area containing 100,000 or more persons.
The district should be located adjacent to major transportation facilities and
development within the district should be encouraged in centers that are planned
as a unit. (Source: Fairfax County Zoning Ordinance Chapter 112, as of August,
1988, Article 4 Part 7 Section 4-701, Page 4-29.)
Uses permitted under the C-7 zoning include amusement arcades, churches,
drive-in banks, eating establishments, funeral homes, health clubs, hotels,
motels, offices, retail sales establishments, theatres, veterinary hospitals,
etc.
Uses permitted by a special permit include child care centers and nursery
schools with less than 100 students daily, commercial recreation uses limited to
billiard and pool halls, bowling alleys, commercial recreation parks, commercial
swimming pools, tennis courts, miniature golf courses, outdoor recreational uses
limited to baseball hitting and archery ranges and golf courses, etc. In
addition, there are also special exception uses which are permitted which are
further detailed in the zoning regulations.
Under the original C-7, Regional Retail zoning, the following restrictions
apply:
Minimum Lot Area: 40,000 s.f.
Minimum Lot Width: 200 feet
Building Height: 90 feet1
Front Setback: 45 degree angle
of bulk plane, not
less than 40'
Side Setbacks: None
Rear Setback: 20 feet
Maximum FAR: 0.802
Green Area: 15% of site
Parking: 4.5 spaces / 1000 SF NRA, or 577
spaces
----------------------------------------------------------------------
1. The maximum building height restriction is often waived during the
site plan approval process.
2. An increase to 1.00 FAR may be permitted by the Board
We are not experts in the interpretation of complex zoning ordinances.
Based on a gross building area of approximately 132,257 square feet, the
property is improved to about a 0.72 FAR density. As the building went through
the approval process at the time of construction, we assume that its height
variance was approved and that it is a legal, non-conforming structure. The
formal determination of compliance is beyond the scope of a real estate
appraisal.
To the best of our knowledge, there are no known deed restrictions
(private or public) which would further limit the use of the subject property.
This statement should not be taken as a guarantee or warranty that no such
restrictions exist. Deed restrictions are a legal matter and
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CUSHMAN &
WAKEFIELD(R)
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<PAGE>
Zoning
================================================================================
only a title examination by an attorney would normally uncover such restrictive
covenants. Thus, an examination by a title attorney is recommended on the
subject property if any questions regarding such restrictions arise.
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<PAGE>
HIGHEST AND BEST USE
================================================================================
Highest and Best Use of Site as Though Vacant
According to the Dictionary of Real Estate Appraisal, Third Edition
(1993), a publication of the Appraisal Institute, the highest and best use of
the site as though vacant is defined as:
Among all reasonable, alternative uses, the use that yields the highest
present land value, after payments are made for labor, capital, and
coordination. The use of a property based on the assumption that the
parcel of land is vacant or can be made vacant by demolishing any
improvements.
Legally Permissible
The subject's zoning classification permits development of office, retail,
and service related uses. Office uses with a ground level retail or service
components are consistent with the overall development of the area.
Physically Possible
The subject site contains approximately 4.25 acres of land, with frontage
along the ring road surrounding Fairoaks Regional Mall and visibility above the
tree lines to U.S. Route 50. The size and configuration of the site is felt to
provide a suitable land use and/or development potential for a wide variety of
possible and ordinary suburban land uses. Municipal utilities would adequately
provide for nearly all uses. Street improvements are also adequate.
Financially Feasible
Several features of the subject property indicate that office or hotel use
is the highest and best use of the subject property. First, while a retail use
is an obvious use given the proximity to the mall, retail uses are typically low
density, and would not, therefore, generate the greatest overall site value.
Second, a motel already exists adjacent to the subject and there is only
moderate demand for hotel space in the locale, suggesting that another hotel at
this site might be in advance of demand. Finally, the office markets have
returned to the point where rents are supporting new development, occupancies
are very high and new development is occurring or being discussed in many
locations in Fairfax County. Office uses are usually at a high density and would
create incremental value over lower density uses.
Based on the above, we have concluded that the highest and best use of the
subject, as vacant, is as an office building with surface and/or decked parking.
Highest and Best Use of Property as Improved
According to the Dictionary of Real Estate Appraisal, highest and best use
of the property as improved is defined as:
The use that should be made of a property as it exists. An existing
property should be renovated or retained so long as it continues to
contribute to the total market value of the property, or until the return
from a new improvement would more than offset the cost of demolishing the
existing building and constructing a new one.
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<PAGE>
Highest and Best Use
================================================================================
Unlike the previous analysis of the subject site as vacant, this analysis
considers the subject property as currently improved with an evaluation as to
the physical, legal, and financial appropriateness of the existing land use.
Legal Considerations The subject site, as presently improved, represents a
legal, conforming use.
Physical Considerations
The subject site has been improved with the existing structure and, based
upon our observation, there are no apparent physical factors such as soils,
drainage, or other site characteristics that would adversely affect the
continued utility and/or existence of the subject improvements.
Financially Feasible
The use of the subject improvements is considered to contribute in an
economic manner to the subject site. Occupancy levels at the subject property
are slightly consistent with competing buildings in the market.
Land sales for speculative office development have begun to occur in the
western portions of Fairfax County where land is most plentiful. Unit prices
have generally been between $18 and $25 per FAR foot. However, a brief test of
reasonableness tells us that redevelopment of the site is not likely. Given the
range of value indicators developed in this report, or generally in the $12.0 to
$13.0 million range, and assuming an office project could be built on the site
to the legally permissible density of 0.80 FAR, the land's value would have to
be in excess of $81 to $88 per FAR foot to justify buying the property,
demolishing the improvements, and beginning anew. Hence, given our final value
conclusion there is obviously sufficient value in the property, as improved, to
negate any possible redevelopment of the tract for the foreseeable future.
As a result, the subject is forecast to provide an adequate return to the
land, both on an intermediate and long-term basis. This conclusion is supported
by the data and analysis presented in the balance of this report. Our conclusion
is contingent upon property management maintaining a course of action which will
be conducive to maximizing value.
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<PAGE>
VALUATION PROCESS
================================================================================
In this appraisal, we have used the Sales Comparison Approach and the
Income Capitalization Approach to develop a market value estimate.
The Cost Approach has been omitted from this analysis for the following
reasons:
o First and foremost, the value being sought is the leased fee estate,
whereas the Cost Approach normally depicts the fee simple estate.
Therefore, the interest being appraised cannot be reflected by the
Cost Approach in its traditional form. The current average rent at
the subject property is $14.50 per square foot, where new
construction is being justified at full service rents at or above
the mid-$20s per square foot. Thus, the leased fee impact on the
subject's value is significant.
o Lastly, one of the most persuasive reasons for not using the Cost
Approach is the fact that market participants do not typically use
this approach as a determinant of value but rather as a
reasonableness test that they are paying less than replacement cost.
While not justification in itself to omit the approach, it does
underscore its overall lack of relevance in the market place.
Accordingly, while we have omitted a full Cost Approach analysis, we
have included a replacement cost estimate in the Addenda to the
report.
In the Sales Comparison Approach, we performed the following steps:
o Searched the market for recent office building sales within the
Northern Virginia market which contain similar physical and economic
characteristics to the subject property.
o Analyzed differences between those sales and the subject on the
basis of the sales price per square foot and extracted overall
capitalization rates.
o Correlated the various value indications into a point value estimate
from within the range.
In developing the Income Capitalization Approach, we:
o Studied rents in effect in the immediate and competing areas to
estimate potential rental income at market levels for office, and
industrial uses.
o Studied the recent history of operating expenses at the subject
property and competing properties to estimate an appropriate level
of stabilized expenses and reserves for replacement.
o Estimated net operating income by subtracting stabilized expenses
from potential gross income after deduction for vacancy and
collection loss.
o Prepared a discounted cash flow analysis in which the estimated
income and expenses over a projected holding period, and the
estimated property value at the time of reversion, are discounted at
an appropriate rate to estimate present market value.
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Valuation Process
================================================================================
In estimating the final value, we performed the following:
o Reviewed and re-examined each of the approaches to value which were
employed.
o Considered the type and reliability of the data used and
applicability of each approach.
o Reconciled the approaches to a final value conclusion.
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<PAGE>
SALES COMPARISON APPROACH
================================================================================
Methodology
In the Sales Comparison Approach, we estimated value by comparing this
property with similar, recently sold properties in the surrounding or competing
area. Inherent in this approach is the principle of substitution, which holds
that when a property is replaceable in the market, its value tends to be set at
the cost of acquiring an equally desirable substitute property, assuming that no
costly delay is encountered in making the substitution.
By analyzing sales that qualify as arms-length transactions between
willing and knowledgeable buyers and sellers, we can identify value and price
trends. The basic steps of this approach are:
1. research recent, relevant property sales and current offerings
throughout the competitive area;
2. select and analyze properties that are similar to the property
appraised, considering changes in economic conditions that may have
occurred between the sale date and the date of value, and other
physical, functional, or locational factors;
3. identify sales that include favorable financing and calculate the
cash equivalent price;
4. reduce the sale prices to a common unit of comparison such as price
per square foot of net rentable area, effective gross income
multiplier, and overall capitalization rate;
5. make appropriate comparative adjustments to the prices of the
comparable properties to relate them to the property being
appraised; and
6. interpret the adjusted sales data and draw a logical value
conclusion.
In this instance, the sale prices inherent in the comparables were reduced
to those common units of comparison used to analyze improved properties that are
similar to the subject. Of the available units of comparison, the sales price
per square foot of net rentable area (used by buyers, sellers, and brokers), as
well as the effective gross income multiplier (EGIM), employed predominately by
appraisers, are the most commonly used measurements to value office buildings in
the marketplace.
From an appraiser's perspective, the EGIM is probably a more discernible
indicator of value because it considers the income characteristics which in turn
dictate the price per square foot paid. Also, the selection of an EGIM is
generally less subjective than trying to correlate the sales price per square
foot methodology. However, given the limited number of recent data points, this
latter approach will not be applied and we will rely on the per square foot
analysis.
The comparable sales included herein were selected for their high
occupancy levels, ranging from 95 to 100 percent at the time of sale. On the
following page is a summary of recent market data considered to be most
indicative of the subject's current market value. Detail sheets describing these
sales can be found in the Addenda of this report.
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<PAGE>
Oakwood Center
Fairfax County, Virginia
Comparable Office Building Sales Summary
<TABLE>
<CAPTION>
====================================================================================================================================
Comp. Year Net Land Cash Sale Price
Sale Sale Built/ No. Rentable Area Percent Equivalent Per SF
No. Name/Location Date Renovated Stories Area (SF) (Acres) Occupied Sale Price NRA
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
I-1 Centrepointe I & II May-97 1988 11 408,111 17.00 100.0% $55,000,000 $134.77
4000 and 4050 Legato Road 1990
Fairfax, VA
I-2 8280 Greensboro Drive Apr-97 1985 9 205,341 2.64 97.0% $30,000,000 $146.10
McLean, VA (Estimate)
I-3 Tysons Office Center Apr-97 1981 9 142,000 2.58 100.0% $16,000,000 $112.68
8133 Leesburg Pike
Vienna, VA
I-4 Cameron Office Park I Oct-96 1991 6 143,707 4.28 95.0% $15,400,000 $107.16
3601 Eisenhower Avenue
Alexandria, VA
I-5 Nortel Building Aug-96 1989 10 252,315 6.61 100.0% $35,000,000 $138.72
2010 Corporate Ridge Road
McLean, VA
I-6 Reston Plaza I and II Jul-96 1985 3 126,557 4.72 100.0% $13,650,000 $107.86
12020 and 12030 Sunrise Valley Drive
Reston, VA
I-7 Executive Park III May-96 1985 6 104,620 5.31 100.0% $12,200,000 $116.61
1850 Centennial Park Drive
Reston, VA
====================================================================================================================================
Subject Oakwood Center
11781 Lee Jackson Memorial Hwy N/A 1982 7 128,353 2.25 99.4%
Fairfax, Fairfax County, VA
====================================================================================================================================
Low: 1980 104,620 2.58 95.00% $55,000,000 $107.16
Data Range: High: 1995 408,111 17.00 100.00% $55,000,000 $146.10
Mean: 1986 197,522 6.16 98.86% $25,321,429 $123.41
====================================================================================================================================
o Projected from first year of DCF Analysis
NRA Net Rentable Area
EGI Effective Gross Income
====================================================================================================================================
<CAPTION>
Comp. Expense Overall
Sale Ratio Capitalization
No. Name/Location EGIM (EGI) Rate
========================================================================================================
<S> <C> <C> <C> <C>
I-1 Centrepointe I & II N/A N/A N/A
4000 and 4050 Legato Road
Fairfax, VA
I-2 8280 Greensboro Drive N/A N/A 8.75%
McLean, VA
I-3 Tysons Office Center N/A N/A N/A
8133 Leesburg Pike
Vienna, VA
I-4 Cameron Office Park I 6.97 40.6% 8.52%
3601 Eisenhower Avenue
Alexandria, VA
I-5 Nortel Building N/A N/A 9.00%
2010 Corporate Ridge Road
McLean, VA
I-6 Reston Plaza I and II 6.86 49.2% 7.40%
12020 and 12030 Sunrise Valley Drive
Reston, VA
I-7 Executive Park III 6.89 40.2% 8.70%
1850 Centennial Park Drive
Reston, VA
========================================================================================================
Subject Oakwood Center
11781 Lee Jackson Memorial Hwy 42.3%
Fairfax, Fairfax County, VA
========================================================================================================
Low: N/A 40.2% 7.4%
Data Range: High: 6.97 49.2% 9.0%
Mean: 6.91 43.3% 8.5%
========================================================================================================
</TABLE>
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<PAGE>
Sales Comparison Approach
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Sales Price Per Square Foot Analysis
The seven comparables indicate sales prices ranging from $107.16 to
$146.10 per square foot of net rentable area on a cash equivalent basis. These
prices per square foot have been influenced by differences in construction
quality, condition of the premises, character of the tenancy, and location.
Nevertheless, it is important to address each property in terms of the
conventional sequence of adjustments. Following are those considerations which
are relevant to the subject. The first three elements must be considered in
advance of applying any other compensating factors to derive value conclusions
via the sales price per square foot methodology. These same three factors must
also be addressed before the selection of an effective gross income multiplier.
Property Rights Conveyed
As shown in the summary table, all of the comparables are encumbered by
existing leases; therefore, the leased fee estate was conveyed in each case. As
such, no adjustments are warranted for differences in property rights conveyed.
Seller Financing/Cash Equivalency
All of the comparables were sold on the basis of cash to the seller. Thus,
we have made no adjustments to the comparables for seller financing.
Conditions of Sale
We identified no special motivational conditions concerning the
comparables; therefore, no adjustments for conditions of sale were made.
Date of Sale
As shown in the summary table, the transactions occurred between May 1996
and May 1997, a period of one year. As mentioned in the preceding Office Market
Analysis, the overall office market in the Washington, D.C. metropolitan area
has strengthened over the past 12 to 24 months, with the Northern Virginia
markets being the most active and rapidly improving section of the metropolitan
area.
All of the comparables sold during a period of continuing improvement and
active investment. Sales prices appear to be showing an increasing trend, though
the short time period in which the transactions occurred as well as the various
physical and economic differences between them make a definitive analysis
difficult. Thus, while interviews with investors and our own analysis of the
data suggests values may have increased over this period, we have not
specifically made a market conditions adjustment. Rather we will conclude to the
upper end of the adjusted value indications.
Other
Most of the additional considerations for the comparables involve
locational issues, design and quality elements, and economic factors. Location
and economics are interrelated and the following chart provides pertinent
information about the various submarkets in which the subject and the
comparables are located. The data, which is as of First Quarter 1997, relates to
the overall markets. It is noted that the subject's average rental rate is
currently $14.50 per square foot but its most recent leases and its asking rent
are closer to the $18.00 per square foot level.
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Sales Comparison Approach
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==========================================================================
Occupancy and Rental Data by Submarket
==========================================================================
Submarket Occupancy Rate Average Class A Average Overall
Rental Rates Rental Rates
Per SF Per SF
==========================================================================
Fairfax/Oakton/Vienna 93.7% $21.96 $19.48
Merrifield/Route 50 95.2% $23.54 $17.65
Tysons Corner/McLean 94.8% $24.12 $22.46
Reston/Hemdon 93.3% $23.17 $20.02
Huntington/Eisenhower 96.3% $19.50 $21.16
==========================================================================
Analysis of Specific Comparables
Comparable I-1, Centrepointe I and II, are located a mile or two west of
the subject. The project consists of two, eleven story, Class A office buildings
that were 100 percent occupied, primarily by AMS. The tenant was expanding in
the second building. Rental rates were reported to be below market. They are
superior quality buildings with a better location, and are superior in that
respect. The buildings are very superior to the subject in terms of quality,
rent roll and somewhat superior in terms of location. Overall, a downward
adjustment is necessary to equate the comparable to the subject.
Comparable I-2, 8280 Greensboro Drive, is a Class A-, nine-story office
building in the Tysons Corner market. It was close to 100 percent occupied
according to the buyer, who would disclose only that their going in
capitalization rate was near 8.75 percent. The building is in a superior
location to the subject and is a superior quality. As perspective on the
differential, recent lease comparables for this quality building in Tysons
Corner have been in the mid-$20s per square foot. Overall, a downward
adjustment is necessary to equate the comparable to the subject.
Comparable I-3, Tysons Office Center, is a Class A-/B+, nine-story office
building located on Route 7 in the Tysons Corner submarket. While in a superior
market to the subject, it is of a similar vintage, though with a more appealing
exterior facade. The asking rents at the time of sale were $20 per square foot
compared to the subject's best recent leasing at $18 per square foot. While
superior in some respects, it is similar to the subject in that the comparable
also has a significant number of leases at below market rents which the
purchaser expects to roll to market over the next three years. Given the
locational superiority and the economic similarities, the building is rated as
being only slightly superior to the subject. Overall, a slight downward
adjustment is necessary to equate the comparable to the subject.
Comparable I-4, Cameron Office Park, Building 1, is a six story, Class A
office building constructed in 1991 and 95 percent occupied at the time of sale.
It has good access and visibility to the interstate highways. The tenancy was
very stable until 1999 and 2000 when 80 percent of the building rolls over. The
buyer did not perceive this as a problem, but as an opportunity to increase the
rents. The sale is considered similar to the subject in this respect,
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Sales Comparison Approach
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though the timing of being able to capture rent increases is somewhat different.
Overall, no adjustment is deemed necessary to equate the comparable to the
subject.
Comparable I-5, the Nortel Building on Corporate Ridge Road in McLean, is
a good quality, ten-story, office building constructed in 1989 that was 100
percent occupied at the time of sale. The seller occupied 57 percent of the
building and had signed itself to a market level lease prior to sale. There is
limited tenant turnover until 2001. From an economic standpoint, existing net
operating income at the comparable was $3.76 per square foot higher than the
subject. Downward adjustments are necessary, therefore, to equate the
comparable's superior rent levels and tenant stability to the subject.
Comparable I-6, Reston Plaza I and II, are two, three-story brick office
buildings on Sunrise Valley Drive in Reston, Virginia. They are physically
similar to the subject. They sold 100 percent occupied with average rents
several dollars below market, but with a net operating income about $0.74 per
square foot more than the subject. Thus, the purchaser acquired the property
recognizing that there was significant room for increasing income. Overall, the
project was similar to the subject in terms of existing income and value
appreciation potential. Overall, no adjustment is deemed necessary to equate the
comparable to the subject.
Comparable I-7, Executive Office Park III, also in Reston, was the sale of
a 100 percent occupied, six-story, brick office building constructed in 1985.
This building was also leased at below market rents, estimated by the seller to
be about $3.40 per square foot. Net operating income was roughly $1.42 per
square foot higher than the subject. Their estimate of market rent for the
building was also slightly above the subject's. Tenancy was stable for three
years then followed by 59 percent turnover in 1999 and 2000. Thus, the subject's
turnover risk makes it somewhat similar to comparable. Overall, a small downward
adjustment is necessary to equate the comparable to the subject.
The following chart summarizes how each sale compares to the subject
property from a physical, locational and economic (occupancy and rental rate)
standpoint.
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Sales Comparison Approach
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================================================================================
Improved Sales Comparison
================================================================================
Sales Overall Rating
Comp. Property Price Relative to
No. Per SF the Subject(l)
================================================================================
1-1 Centrepointe I & II $134.77 Very
Fairfax, VA Superior
1-2 8280 Greensboro Drive $146.10 Very
McLean, VA Superior
1-3 Tysons Office Center $112.68 Somewhat
Vienna, VA Superior
1-4 Cameron Office Park I $107.16 Overall
Alexandria, VA Similar
1-5 Nortel Building $138.72 Very
McLean, VA Superior
1-6 Reston Plaza I and II $107.66 Overall
Reston, VA Similar
1-7 Executive Park III $116.61 Somewhat
Reston, VA Superior
================================================================================
Note 1: Considers the effect of all adjustments.
================================================================================
Because of the multiple differences inherent in office properties with
respect to quality and design, location, and economics, not to mention the
quality of the tenant base, mathematical adjustments for the reasoning noted
above would be extremely difficult, at best. Overall, Comparables 1-3, 1-4, 1-6
and 1-7 are considered the most similar to the subject in terms of economics,
tenant stability and quality. They range in price from $107.16 to $116.61 per
net rentable square foot. Accordingly, we have concluded at a- value range for
the subject between $105 and $115 per net rentable square foot. When applied to
the net rentable area, our estimated value range by the Sales Price Per Square
Foot method is $13,600,000 to $15,000,000, rounded.
================================================================================
Sales Price Per Square Foot Unit Analysis
================================================================================
SF NRA X Unit Price ($/SF) = Value Estimate
================================================================================
128,353 x $105.00 = $13,477,065.00
128,353 x $115.00 = $14,760,595.00
- --------------------------------------------------------------------------------
Rounded: $13,500,000 to $14,800,000
or $105.18 to $115.30/SF
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<PAGE>
INCOME CAPITALIZATION APPROACH
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Methodology
The Income Capitalization Approach is a method of converting the
anticipated economic benefits of owning property into a value estimate through
capitalization. The principle of "anticipation" underlies this approach in that
investors recognize the relationship between an asset's income and its value. In
order to value the anticipated economic benefits of a particular property,
potential income and expenses must be estimated, and the most appropriate
capitalization method must be selected.
The two most common methods of converting net income into value are direct
capitalization and discounted cash flow analysis. In direct capitalization, net
operating income is divided by an overall rate extracted from market sales to
indicate a value. In the discounted cash flow method, anticipated future net
income streams and a reversionary value are discounted to an estimate of net
present value at a chosen yield rate (internal rate of return).
In our opinion the discounted cash flow method is appropriate. The
discounted cash flow analysis is generally thought to be the best method for
evaluating income producing properties purchased for investment. Forecasted
future patterns of income and expenses are modeled to reflect perceived investor
expectations.
Potential Gross Income
Generally, office tenants pay fixed gross rent on a rentable area basis
which is consistent with space measurement standards for buildings of similar
vintage, plus any increases in operating expenses and real estate taxes above
stipulated base year amounts.
Existing Leases
As of July 1997, and including several signed renewals and new leases for
tenants not yet in occupancy, the property is 99 percent leased by about 15
different tenants. The property contains 128,353 rentable square feet in total
with none of the space unleased as of the effective date of the appraisal. One
block of 784 square feet is permanently set aside as a conference room for
tenant use and one 828 square foot office space expires in June 1997. The
average rent in the first full year of the analysis is $14.50 per square foot.
The two major tenants in the property occupy 61 percent of the property.
Versatility occupies all of the 6th and 7th floors and portions of the first and
third floors for a total of 43,577 square feet, or 33.9 percent. Logicon
Geodynamic occupies all of the 4th and 5th floors as well as part of the first
floor, for a total of 35,247 square feet, or 2.7.5 percent. In our opinion, both
are good quality credits. It should be noted that Logicon has just renewed for
an additional seven years beginning at the end of its existing term in year 2000
through 2007. The rent at that time will be $18.85 per square foot. Logicon
continues to have termination options effective in 2002 and 2005 with some minor
penalties. We have not been provided with a lease or lease abstract for
Versatility and do not know of any termination options in its lease.
The balance of the building is occupied by a mixture of small firms. The
credit quality for the minor tenants is not specifically known. In conversations
with the property manager, we were informed that none of the tenants were
currently at risk of default.
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Income Capitalization Approach
================================================================================
Based upon the subject's current lease expiration schedule, 26 percent of
the property's rentable area is due to expire within the next three fiscal
years. Within years four through six, 44 percent of current leases are due to
expire. Within our projected 11 year holding period all of the leases currently
in place or projected to be signed will expire. An expiration summary is shown
in the following table.
================================================================================
Lease Expiration Schedule
================================================================================
Number of Total Percent of
Fiscal Tenants Expirations Total Net
Period Year Expiring (Square Feet) Rentable Area
================================================================================
1 1998 2 5,667 4.42%
2 1999 4 12,200 9.51%
3 2000 3 15,516 12.09%
4 2001 4 38,668 30.13%
5 2002 1 9,392 7.32%
6 2003 3 9,025 7.03%
7 2004 3 9,166 7.14%
8 2005 6 50,802 39.58%
9 2006 3 11,082 8.63%
10 2007 3 37,274 29.04%
11 2008 3 14,317 11.15%
12 2009 2 5.470 4.26%
----- -----
Totals 37 218,579 170.30%
Annual Average 3.1 18,215 14.19%
================================================================================
Based upon the lease expiration schedule, we have forecasted an eleven
year investment holding period, as both years 2005 and 2007 have high turnover
exposure. The 12th year is estimated to be the reversionary year. The property's
market is projected to have average lease terms of six years, implying that 16.7
percent of the space will turn over in any given year. As can be seen from the
foregoing schedule, the 10th year has high turnover with leasing expenses
associated with the reletting occurring in the 11th year. Thus, the 12th
calendar year, with a relatively stable occupancy, is considered a more
appropriate reversionary year (please refer to the fiscal year cash flow).
Market Rental Rate
Market rent for the property has been estimated by analyzing comparable
leases exhibited on the summary chart on the facing page.
Prior to adjustment, the comparables (excluding leases at Oakwood Center)
reflect a range in base rent of $16.20 to $21.75 per square foot, full service.
After adjustment for rent concessions, the range narrows to $16.20 to $21.75 per
square foot, full service. There are few concessions being granted in today's
market. Only three of the comparable leases included any free rent and none
included above standard tenant improvement allowances.
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Income Capitalization Approach
================================================================================
As shown in the Micro Market summary table presented in the Market
Analysis section of the report, asking rents at competing properties are in the
range of $17.50 to $25.00 per square foot. Actual lease rates are only slightly
below asking levels.
The subject's contract rents average $14.50 per square foot, full service,
in the first 12 months of the holding period. Most leases within the property
were signed in the 1994 to 1996 period when average rents were well below the
current market rents. Only a few recent leases have been signed at the property,
and they are shown at the top of the Comparable Office Rentals chart on the
preceding facing page. The most recent leases within the property have been in
the $16.00 to $18.85 per square foot range. The low end is represented by
renewal and expansion tenants. The upper range is for one new tenant and one
renewal option that takes effect in year 2000. On average, we believe the
contract rents within the building are well below market with the property
having significant upside potential for rent growth.
Additional rental income from these leases include operating expense
reimbursements for increases over base year amount. Expense stops for most
tenants are around $5.30 per square foot, or above the 1996 actual operating
expenses of $5.17 per square foot.
Recent leases within the market include few concessions, either in the
form of free rent or above standard tenant improvement allowances. Most brokers
interviewed were of the opinion that rental concessions were not being granted.
Several brokers indicated that the market has continued to improve over
the last six months, with rents increasing and concessions remaining almost
non-existent. In the view of many, the leasing market has generally reached
stabilization and the delivery of new office buildings to the market will be the
primary influence on rental rate and occupancy trends. In keeping with these
observations, we have assumed that market rent will increase at an average rate
of 3.5 percent per annum through the projection period. The recent rent spikes
are not anticipated to continue in the minds of market participants we spoke
with due primarily to the onset of new speculative construction. Investors are
reportedly taking a wait and see approach over the short term at least. It is
not too inconceivable that additional rent spikes will occur. However, we
believe the prudent approach at this stage is level rent growth. Finally, free
rent and tenant workletter concessions should remain consistent with current
levels.
The property's asking rental rate of $20.00 per square foot compares to
the average contract rent for new leases at the subject property of $18.00 per
square foot. In our opinion, market rents for space within the subject property
are solidly at $18.00 per square foot, recognizing that some leasing will be
done above and below this rate.
The above estimated market rents assume the following concession package.
================================================================================
Free Rent Tenant Improvements
================================================================================
New Leases 1997 0 months 1997 $8.00
Thereafter 0 months Growing Thereafter at 3.5%
- --------------------------------------------------------------------------------
Renewing Leases 1997 0 months 1997 $4.00
Thereafter 0 months Growing Thereafter at 3.5%
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Income Capitalization Approach
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Assumptions Regarding Existing and Proposed Leases
Our analysis specifically assumes that all of the existing tenants will
remain in the property and continue to pay rent under the terms of their leases.
Information provided by management indicates that none of the tenants are
currently in default. The tenant base appears to be stable and management has
indicated that defaults are not anticipated.
With regard to lease expirations, we have projected that 60 percent of
tenants will rollover (sign a new lease) and approximately 40 percent will
turnover (allow their lease to expire and vacate the property) upon expiration
of their primary lease term. This assumption is based in large part on
management's projection of a near term retention rate which is based on their
knowledge and expertise in the market. Furthermore, we believe that this level
of retention can be achieved over a long term holding period.
Typical leases are three to ten years in duration. An examination of the
comparable leases shows an average term of about six years given a typical mix
of lease terms. Accordingly, we have assumed six year terms for speculative
tenants.
Vacancy between leases includes the period of actual downtime and the
construction period to build-out tenant spaces. Consistent with our experience,
we have assumed a stabilized vacancy and construction period of nine months. We
acknowledge that current time between tenants may be shorter, though a long term
trend may reflect fluctuations. Vacancy between leases is weighted for the 40
renewal probability, resulting in an effective downtime of four months (rounded)
upon each lease expiration. On a six year average lease term, this equates to
5.3 percent average physical vacancy (downtime of four months divided by the
downtime plus the 72 month average lease term)
Miscellaneous Income
Sources of miscellaneous income for the property include additional
charges for overtime HVAC, interest on security deposits, roof rentals under a
lease due to expire in less than two years, and other income from additional
services to the tenants. Each of these sources of income are expected to
continue through the projection period except for roof rentals. Our estimate of
miscellaneous income is $14,000 for calendar years 1997 and 1998, then
stabilizing at $2,000 for calendar year 1999 and beyond. This figure was based
on actual miscellaneous historical income for the subject property and is
projected to grow in the future at 2.0 percent annually.
Reimbursable Expenses (Escalations)
Tenants are responsible for their pro-rata share of real estate taxes when
taxes exceed those incurred during the first full year of their occupancy. This
type of escalation is typically also applied to operating expenses in the
majority of office buildings. The majority of current leases in the subject
property include an operating expense escalation, which calculation may be
summarized as follows:
Billing Year Operating Expenses
Less: Base Year Operating Expenses
Equals: Increase in Operating Expenses
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Income Capitalization Approach
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Multiplied by: Tenant's Pro Rata Share
We have assumed that future leases in the subject property will be on a
full service basis. Tenants will be responsible for the increase in operating
expenses and real estate taxes over the base calendar year amount.
Vacancy and Collection Loss
Our cash flow projection assumes a tenant vacancy of nine months upon each
lease expiration set against our probability of renewal estimated at 60 percent,
in addition to a global credit loss provision applied to the gross rental
income. The global credit loss provision is applied to the gross rental income
from all tenants and is estimated at 2.0 percent throughout the holding period.
There is one 828 square foot vacant space within the property with the
prior tenant's lease expiring in June 1997. We have applied a normal downtime
between tenants to this space. As the property is above stabilized levels, the
lease-up of this vacancy has little impact on the value of the property.
Based on the subject's weighted average downtime between leases, as well
as the preceding absorption schedule for the subject property, the overall
average occupancy rate of the subject property over the 11 year holding period
is 95.6 percent. Including our overall credit loss allowance estimated at 2.0
percent, the implied overall vacancy and credit loss factor for the subject
property is 93.6 percent.
Operating Expenses
We have analyzed the reported operating expenses for 1996 and budgeted
expenses for 1997. The total expenses for 1995 were not available due to the
transfer of the property between owners in that year. We forecasted the
property's operating expenses after reviewing operating expenses of similar
buildings and after consulting local building managers and agents, including
Cushman & Wakefield property management personnel, etc. We also examined
industry norms as reported by the BOMA Experience Exchange Report published by
the Building Owners and Managers Association International, a nationally
recognized publication.
On the facing page is the income and expense analysis for the property.
The following analysis attempts to utilize the subject's historical operating
expense data supported by the comparable expense data. The age and unique
physical features of the subject warrant consideration of the subject's
historical expenses in estimating market operating expenses.
Following are the projected operating, recoverable and non-recoverable
expenses we have used in our cash flow analysis. We have analyzed each item of
expense individually and attempted to project what the typical informed investor
would consider reasonable. Although every expense category is addressed herein,
only those requiring explanation of variations will be discussed in great
detail.
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
The forecast of projected growth rates in all categories of expense
reflect typical investor expectations as noted in the Cushman & Wakefield
Investor Survey, which has been placed in the Addenda of this report. Except
where noted, our projected growth rates for the various types of expense
categories generally do not attempt to reflect growth rates for any individual
year, but rather the long term trend over the period of analysis. Based on the
historical CPI trends, we concluded that our selected growth rate of 3.5 percent
would fairly reflect an overall inflationary rate over the long term.
Recoverable Expenses
Real Estate Taxes
We discussed real estate taxes in a prior section. We used the current tax
amount and tax rate for 1997, stepped the total tax liability in 1998 for
potential increases in assessments, and have it growing at 3.5 percent
annually thereafter to keep pace with overall property value increases in
the market.
Operating Expenses
Operating expenses consist of property insurance, utilities, janitorial
services, repairs and maintenance, contract services for items such as
trash removal, landscaping, snow removal, elevator and HVAC maintenance,
etc. The total operating expenses were $3.24 per square foot in 1996 and
were projected in the 1997 budget at $4.35 per square foot. The 1997
budget reflected significant steps for general maintenance expenses
(+$0.64), utilities (+$0.22) and janitorial services (+$0.25), though data
from comparable properties in the area do not show such significant
increases. Comparables show operating expenses in the $3.50 to $3.80 per
square foot range for similar quality facilities, and the BOMA experience
report shows average costs of $4.12 per square foot and a low mid range
point of $3.72 per square foot. We have stabilized operating expenses at a
level consistent with the comparables, or $3.70 per square foot. This is
$0.46 per square foot above the 1996 actual and $0.65 below the 1997
budget. The estimate is considered reasonable for stabilized operations.
Administrative and Other Operating Expenses
This fee includes recoverable administrative costs for administrative and
on-site maintenance personnel, rent collection, property supervision, and
budget preparation, as well as miscellaneous items such as accounting and
general office expenses (less the management fee). The expense has been
stable at $0.71 to $0.72 per square foot. Based on data from comparable
properties, we stabilized the 1997 cost at $0.75 per square foot.
Management Fees
This fee includes rent collection, property supervision, and budget
preparation. The current management agreement includes a fee of 2.5
percent of effective gross income. In conversations with local real estate
professionals, we have determined the management fees for multi-tenant
buildings are most commonly at the 2.5 to 3.5 percent level. We have
modeled the management fee at 3.0 percent of effective gross income.
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
Non-Recoverable Expenses
Non-Recoverable Administrative Expenses
This expense category typically covers miscellaneous non-recoverable
expense items such as legal and advertising expenses, and totaled $0.15
per square foot in 1996, with non projected in the 1997 budget. The BOMA
experience reports for this locale show an average of $0.25 per square
foot. Based on our experience with other such properties, we stabilized
the 1997 cost at $0.20 per square foot.
Our projected expenses are predicated on the assumption that the property
will be prudently managed, while maintaining the improvements at a competitive
level to preserve value: The preceding cumulative annual operating expense
estimate for fiscal year 1997/98 equates to $819,772 ($6.39 per square foot of
net rentable area), excluding capital replacements, tenant alterations and
leasing commissions. This projection is up $1.07 per square foot from the 1996
actual expenses due primarily to the increase in real estate taxes ($0.39) and
general operating expenses ($0.49).
Other Expenses
Other operating expenses include Tenant Improvements, Leasing Commissions
and Reserves for Replacements. The probability of incurring future leasing
commissions and tenant improvements/finish is based on the following:
o 40 percent probability of turnover (an existing tenant vacates a
space and the space is released to a new tenant) and 60 percent
probability of rollover (an existing tenant relets his space).
Tenant Improvements/Finish - As previously noted, we have forecasted a
tenant finish allowance of $8.00 per square foot for new tenants in second
generation space, and $4.00 per square foot for renewals. Therefore, upon
the expiration of all leases, a weighted tenant improvements allowances is
applied to tenants upon expiration. Application of the renewal
probabilities results in a weighted average tenant improvement allowance
of $5.60 per square foot. Tenant improvements/finish costs are projected
to increase at the rate of 3.5 percent per year through the projection
period.
Leasing Commissions - For the period under analysis, average leasing
commissions for all new leases are estimated to be 5.0 percent and 2.0
percent for renewals. The new lease commission rate reflects the fact that
a landlord will typically be charged a commission of 3.0 to 4.0 percent by
the tenant's agent and 2.0 to 3.0 percent by the landlord's agent. Upon
renewal, landlords resist paying leasing commissions but typically pay a
portion of the full commission rate or a partial fee to the management
company for its assistance in working with the tenant. Application of the
renewal probabilities results in a weighted average commission rate of
3.20 percent. The weighted average commissions are applied to all expiring
space and are not passed through to tenants.
Capital Replacements/Reserves - Reserves for replacements should be
(though as a practical matter, they may not be) set aside to accumulate an
amount sufficient to replace and/or repair certain major building
components, i.e., roof, HVAC system, etc. during the period under
analysis. Based on our inspection and conversations with the
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<PAGE>
Income Capitalization Approach
================================================================================
property manager, the subject property appears to be in good condition
overall. We have estimated capital reserves of $0.15 per net rentable
square foot for 1997, increasing by 3.5 percent per year throughout our
analysis.
The expense growth rates incorporated in our projections result in a 3.3
percent annual compound growth rate over the holding period. This reflects a
partial year increase for the remainder of 1997, but significant increases in
management fees over time due to improvements in rental income. Management fees
are tied to revenues, which are projected to improve over the next several
years.
Discounted Cash Flow Analysis
In the discounted cash flow analysis, we employed the PRO-JECT+ plus
software which allowed us to simulate the operating characteristics of the
property and to make a variety of operating assumptions. We attempted to reflect
the most likely investment assumptions of typical buyers and sellers in this
particular market segment.
Discounted Cash Flow Assumptions
We used the following figures and assumptions in the computer model.
Years in Forecast: 12
Holding Period: 11
Starting Date: July 1, 1997
Market Rental Rate (Year 1) $18.00/sf
Annual Escalations: 3.0%
Miscellaneous Income: $14,000 per annum for two years; $2,000
thereafter
Growth in Market Rental Rate: 3.5% per annum
Expense and Tax Pass-Throughs: Gross leases - tenants pay pro-rata share of
real estate tax and operating cost increases
over a base year amount.
Expense Growth Rate: 1.75% at the end of 1997, 3.5% thereafter
Consumer Price Index: 3.5% per annum
Free Rent (All leases) None
Lease Term (Typical): 6 years
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<PAGE>
Income Capitalization Approach
================================================================================
Renewal Probability: 60%
Tenant Improvements - New Leases $8.00/SF
Tenant Improvements - Renewing Leases $4.00/SF
Leasing Commissions:
New Leases 5.0%
Renewal Leases 2.0%
Weighted Average 3.2%
Vacancy Between Leases: 9 months (prior to renewal probability of
60%; effective vacancy is 4 months
Credit Loss: 2.0% (average; applies to all tenants).
Reversion Year: 2009 (12th fiscal year).
Reversion Cap Rate: 9.25% (applied to net operating income).
Reversion Selling Expenses: 2.5% (includes brokerage, legal fees and
estimated transfer taxes).
Discount Rate (IRR): 11.5% (see Discount Rate Analysis).
Cash Flow Projection
On the following page is our 12 year cash flow projections which include
our 11 year holding period and 12th year reversion. The cash flow reflects the
results of the PRO-JECT+ plus projection.
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VALUATION ADVISORY SERVICES
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<PAGE>
Oakwood Center
Fairfax County, Virginia
Discounted Cash Flow Analysis
<PAGE>
Oakwood Center
Fairfax County, Virginia
Discounted Cash Flow Analysis
<TABLE>
<CAPTION>
==================================================================================================================================
Begin July 1, 1997: 1998 1999 2000 2001 2002 2003 2004 2005
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income
Base Rental Income $1,860,561 $1,920,491 $2,027,045 $2,221,753 $2,394,847 $2,375,905 $2,529,813 $2,355,259
Expense Recoveries $104,595 $127,534 $144,642 $115,278 $131,647 $143,804 $163,180 $124,541
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Gross Rental Income $1,965,156 $2,048,025 $2,171,687 $2,337,031 $2,526,494 $2,519,709 $2,692,993 $2,479,800
Other Income $14,000 $8,000 $2,020 $2,060 $2,102 $2,144 $2,187 $2,230
Less: Vacancy & Credit Lo (39,303) (40,960) (43,434) (46,741) (50,530) (50,394) (53,860) (49,596)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Effective Gross Income $1,939,853 $2,015,065 $2,130,273 $2,292,350 $2,478,066 $2,471,459 $2,641,320 $2,432,434
Expenses
Real Estate Taxes $160,230 $171,459 $177,460 $183,671 $190,100 $196,753 $203,639 $210,767
Operating Expenses $479,055 $491,667 $508,875 $526,686 $545,120 $564,199 $583,946 $604,384
General & Administrative $97,143 $99,700 $103,190 $106,801 $110,539 $114,408 $118,412 $122,557
Management Fee $58,196 $60,452 $63,908 $68,771 $74,342 $74,144 $79,240 $72,973
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Recoverable $794,624 $823,278 $853,433 $885,929 $920,101 $949,504 $985,237 $1,010,681
Non-Recoverable Expense $25,925 $26,607 $27,539 $28,502 $29,500 $30,533 $31,601 $32,707
TOTAL EXPENSES $820,549 $849,885 $880,972 $914,431 $949,601 $980,037 $1,016,838 $1,043,388
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Operating Income $1,119,304 $1,165,180 $1,249,301 $1,377,919 $1,528,465 $1,491,422 $1,624,482 $1,389,046
Capital Reserves 19,253 19,590 20,276 20,985 21,720 22,480 23,267 24,081
Tenant Improvements 68,935 36,947 35,001 279,749 12,806 89,670 48,014 380,641
Leasing Commissions 47,304 20,176 19,114 155,024 6,993 48,968 26,220 207,862
-----------------------------------------------------------------------------------------------------
Cash Flow $983,812 $1,088,467 $1,174,910 $922,161 $1,486,946 $1,330,304 $1,526,981 $776,462
==================================================================================================================================
</TABLE>
==============================================================================
Begin July 1, 1997: 2006 2007 2008 2009
==============================================================================
Income
Base Rental Income $2,783,506 $2,991,567 $2,775,599 $3,196,916
Expense Recoveries $85,768 $114,945 $75,106 $100,093
---------- ---------- ---------- ----------
Gross Rental Income $2,869,274 $3,106,512 $2,850,705 $3,297,009
Other Income $2,275 $2,320 $2,367 $2,414
Less: Vacancy & Credit Lo (57,385) (62,130) (57,014) (65,940)
---------- ---------- ---------- ----------
Effective Gross Income $2,814,164 $3,046,702 $2,796,058 $3,233,483
Expenses
Real Estate Taxes $218,144 $225,779 $233,681 $241,860
Operating Expenses $625,538 $647,431 $670,092 $693,545
General & Administrative $126,846 $131,286 $135,881 $140,637
Management Fee $84,425 $91,401 $83,882 $97,005
---------- ---------- ---------- ----------
Total Recoverable $1,054,953 $1,095,897 $1,123,536 $1,173,047
Non-Recoverable Expense $33,852 $35,037 $36,263 $37,532
TOTAL EXPENSES $1,088,805 $1,130,934 $1,159,799 $1,210,579
---------- ---------- ---------- ----------
Net Operating Income $1,725,359 $1,915,768 $1,636,259 $2,022,904
Capital Reserves 24,924 25,796 26,699 27,633
Tenant Improvements 125,399 15,741 349,210 80,348
Leasing Commissions 68,479 8,596 190,697 43,877
------------------------------------------------
Cash Flow $1,506,557 $1,865,635 $1,069,653 $1,871,046
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
Terminal Capitalization Rate Selection
A terminal capitalization rate was used to estimate the market value of
the property at the end of the assumed investment holding period. We estimated
an appropriate terminal rate based on indicated rates in today's market.
======================================
Summary of Capitalization Rates
======================================
Sale Capitalization
No. Rate
======================================
1 N/A
2 8.75%
3 N/A
4 8.52%
5 9.00%
6 7.40%
7 8.70%
======================================
The OARs for the comparable sales from which we were able to derive
capitalization rates ranged from 7.4 to 9.0 percent, with a median of 8.7
percent. Sales 2 and 4 had little projected turnover over the holding period and
are most typical of multi-tenant buildings in the market, like the subject would
be at the end of the holding period.
Cushman and Wakefield has surveyed national real estate investors for
their investment objectives as of the Winter of 1996. This information includes
parameters relative to going-in cap rates, terminal capitalization rates, and
IRRs for specific property types. A copy of this survey can be found in the
Addenda.
================================================================================
Cushman & Wakefield Investor Survey
Autumn 1996
Offices-Suburban/Non-CBD, Class-B -- Leased Asset
================================================================================
Going-in Terminal Income Expense
Cap Rate Cap Rate IRR Growth Growth
================================================================================
Overall Range 8.0-12.0% 9.0-11.0% 10.5 - 18.0% 0.0-8.0% 2.0-5.0%
Average Low/
Average High 9.5 / 10.0% 9.8 / 10.2% 12.0 / 12.5% 3.4 / 4.5% 3.4 / 3.7%
================================================================================
The preceding table summarizes the investment parameters of some of the
most prominent investors currently acquiring investment-grade suburban, non-CBD
office properties in the United States. Generally speaking, our survey reveals
terminal capitalization rates of 8.0 to 12.0 percent with the average low and
high responses of 9.5 and 10.0 percent for investment grade Class B - Leased
offices in non-CBD suburban locations.
We also considered the Korpacz Real Estate Investor Survey for the First
Quarter 1997 for the National Suburban Office Market. It showed terminal cap
rates ranging from 8.25 to 11.0 with an average of 9.6 percent. The average was
down eight basis points compared to a year ago.
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Income Capitalization Approach
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A premium was added to today's rate to allow for the risk of unforeseen
events or trends which might affect our estimate of net operating income during
the holding period, including a possible deterioration in market conditions for
the property. Investors typically add 50 to 100 basis points to the "going-in"
rate to arrive at a terminal capitalization rate, according to Cushman &
Wakefield's periodic investor surveys. Based on the subject's age, condition,
and competitiveness at the end of the holding period, as well as the high demand
for office product in the Northern Virginia market, we would conclude to a 9.0
to 9.5 percent reversionary capitalization rate, or say 9.25 percent.
Discount Rate Analysis
We estimated future cash flows, including property value at reversion, and
discounted that income stream at an internal rate of return (yield rates)
currently required by investors for similar-quality real property. The yield
rate (internal rate of return or IRR) is the single rate that discounts all
future equity benefits (cash flows and equity reversion) to an estimate of net
present value.
Cushman & Wakefield Valuation Advisory Services periodically surveys
national real estate investors to determine their investment objectives.
Following is a brief review of internal rates of return, overall rates, and
income and expense growth rates considered acceptable by respondents.
================================================================================
Autumn 1996 Investor Survey
For Suburban Office Buildings
================================================================================
Going-In Terminal Irr
- --------------------------------------------------------------------------------
Low High Low High Low High
================================================================================
Mean 8.80% 9.50% 9.30% 9.90% 11.2% 11.6%
Range 8.00% 11.0% 8.00% 11.0% 10.0% 13.0%
================================================================================
This table summarizes the investment parameters of some of the most
prominent investors currently acquiring good quality suburban office properties
in the United States. The entire survey is included in the Addenda to this
report, with a further breakdown of yield rates shown earlier.
The wide range of investment parameters indicates that property risk and
yield are assessed to a particular investment property based on a variety of
variables. Risk is the primary determinant, and the risk variables include
whether current contract rents are significantly above or below current market
rents" the amount and timing of tenant roll-overs; the risk to lease-up the
property and the strength of the market during the lease-up period; the
durability of the cash flow, and its ability to increase with inflation along
with the creditworthiness of the existing tenancy, investor demand for the
property type; the diversification of the metropolitan area- the property's
location within the local market and the supply and demand for the property type
within the market; and the effective age of the property.
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Income Capitalization Approach
================================================================================
The investors' internal rates of return cited above range from 10.0 to
13.0 percent. In our analysis of this office building, we discounted the cash
flows at 11.5 percent.
The internal rate of return and terminal capitalization rate selected for
this analysis were strongly influenced by our recent Investor Survey. We realize
that this type of survey reflects target rather than transactional rates.
Transactional rates are usually difficult to obtain in the verification process
and are actually only target rates of the buyer at the time of sale. The
property's performance will ultimately determine the actual yield and
capitalization rate at the time of sale after a specific holding period. We have
found that, in improving markets or with above average properties, demand will
be high and transactional rates may be lower than target rates that are quoted
in surveys. We have tried to recognize this factor in our choice of these two
rates for our cash flow model.
Eleven-Year Cash Flow Analysis
Based on the discount rate selected above, we estimate property value at
$13,800,000, rounded. The valuation table is presented on the following page.
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Oakwood Center
Fairfax, Virginia
Discounted Cash Flow Analysis
<PAGE>
Oakwood Center
Fairfax, Virginia
Discounted Cash Flow Analysis
<TABLE>
<CAPTION>
========================================================================================
DISCOUNT
FISCAL NET FACTOR @ PRESENT VALUE COMPOSITION CASH ON CASH
YEAR CASH FLOW 11.50% OF CASH FLOWS OF YIELD RETURN
========================================================================================
<S> <C> <C> <C> <C> <C>
1998 $ 983,812 x 0.896861 = $882,343 6.42% 7.15%
1999 $ 1,088,467 x 0.804360 = $875,519 6.37% 7.92%
2000 $ 1,174,910 x 0.721399 = $847,579 6.16% 8.54%
2001 $ 922,161 x 0.646994 = $596,633 4.34% 6.71%
2002 $ 1,486,946 x 0.580264 = $862,821 6.27% 10.81%
2003 $ 1,330,304 x 0.520416 = $692,312 5.03% 9.67%
2004 $ 1,526,981 x 0.466741 = $712,705 5.18% 11.10%
2005 $ 776,462 x 0.418602 = $325,028 2.36% 5.65%
2006 $ 1,506,557 x 0.375428 = $565,603 4.11% 10.96%
2007 $ 1,865,635 x 0.336706 = $628,171 4.57% 13.57%
2008 $ 1,069,653 x 0.301979 = $323,013 2.35% 7.78%
Total Present Value of Cash Flows $7,311,726 53.17% 9.08%
Average
Reversion:
2009 * $2,022,904 / 9.25% = $21,869,232
Less: Cost of Sale @ 2.50% = ($546,731)
-----------
Net Reversion = $21,322,502
X Discount Factor = 0.301979
-----------
* Net Operating Income
Total Present Value of Reversion $ 6,438,944 46.83%
------
Total Present Value $13,750,669 100.00%
ROUNDED: $13,800,000
-----------
--------------------------------------------------------
Net Leasable Area (S.F.): 128,353
Per Square Foot of Net Rentable Area $107.52
Implicit Going-in Capitalization Rate:
Year One NOI (12 Months) $1,119,304
NOI Annualized $1,119,304
Going-In Cap Rate 8.11%
--------------------------------------------------------
========================================================================================
</TABLE>
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Capitalization Approach
================================================================================
Reconciliation Within Income Capitalization Approach
Using the above indicated rates of return, our cash flow model indicated a
value of $13,800,000, rounded, or $107.52 per square foot, as shown on the
preceding page. This value estimate produces a very high implied going-in
capitalization rate of 8.1 percent, which falls at the low end of the range
generally required by investors as noted in the Cushman & Wakefield Investor
Survey. As discussed earlier, going-in rates derived from the comparable sales
were mostly between 8.5 and 9.0 percent. The primary factor impacting the low
going-in rate is that the property's current tenancy includes many tenants
paying rent that is $2 to $4 per square foot less than market, with an average
rent for the occupied space of $14.50 per square foot compared to a current
market rent of $18.00 per square foot. Upon rollover, we are assuming that new
leases will be executed at market levels. Given these items, an implied going-in
rate below those of the sales is logical, as it reflects the property's near
term upside potential.
Regarding the composition of the yield, as analyzed in the Discounted Cash
Flow Analysis chart, 53 percent of the subject's ultimate yield is derived from
the cash flow of the property with the balance attributable to the reversion or
resale of the property at the conclusion of the holding period. Typical investor
requirements dictate that a substantial amount of the value be derived from the
cash flow. Greater risk would be evident when the reversion provides a larger
percentage of the overall return than the cash flows. In this instance, the
relationship is consistent with investor expectations.
Thus, it is our opinion that the prospective market value of the property,
as of July 1, 1997, by the Income Capitalization Approach, is $13,800,000 which
equates to $107.52 per square foot of net rentable building area.
Value Indicated by Discounted Cash Flow Analysis: $13,800,000
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VALUATION ADVISORY SERVICES
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<PAGE>
RECONCILIATION AND FINAL VALUE ESTIMATE
================================================================================
We have considered all of the traditional approaches to estimating market
value of commercial Teal estate in our analysis. Two of the three traditional
approaches were utilized, indicating the following values for the subject
property.
Sales Comparison Approach $13,500,000 to $14,800,000
Income Capitalization Approach $13,800,000
The three traditional methods of estimating the market value of commercial
real estate are not mutually exclusive approaches to deriving an estimate of
most probable selling price, but are inter-dependent methodologies, each relying
on components from at least one of the other approaches. Hence, the Cost
Approach requires extensive market data to derive estimates of depreciation and
to determine the value of land as if vacant. This approach may also require
income data in order to make adjustments for functional and economic
obsolescence. The Sales Comparison Approach requires application of methods from
the Income Capitalization Approach in order to make adjustments for differences
in income that have influenced the sale price. Consideration of market data is
also required for the Income Capitalization Approach in the selection and
application of equity, capitalization and discount rates, and estimation of
income and expenses. Consequently, it is our opinion that purchasers and
sellers, at least intuitively, consider components of all three approaches in
the process of negotiating an acceptable price for a particular property.
It is the Income Capitalization Approach, however, that is logically
considered the most appropriate technique for estimating the value of
income-producing property. Not only does this approach represent the most direct
and accurate simulation of market behavior, it is the method explicitly employed
by buyers and sellers in acquisition and disposition decisions. Therefore,
following the implied dictum of the market, we have used an approach based
primarily on projected income as the foundation for our valuation of the subject
property.
There are several additional reasons why the Sales Comparison Approach
does not form the primary basis of our value estimate for the subject property.
The quantity and quality of market information inhibits the use of the Sales
Comparison Approach. Inadequacy of information regarding gross and net Income,
lease details and expenses of comparable sales often deters accurate and
relevant adjustments of unit price indicators. Comparison at a dollar per square
foot level precludes the analysis of those key factors which form the basis for
projections on which the purchase decision was made.
In light of the above, we are of the opinion that the prospective market
value of the leased fee estate in the property, as of July 1, 1997, is:
THIRTEEN MILLION EIGHT HUNDRED THOUSAND DOLLARS
$13,800,000
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<PAGE>
Reconciliation and Final Value Estimate
================================================================================
Marketing Time
Marketing time is an estimate of the time that might be required to sell a
real property interest at the appraised value. Marketing time is presumed to
start on the effective date of the appraisal. (Marketing time is subsequent to
the effective date of the appraisal and exposure time is presumed to precede the
effective date of the appraisal.) The estimate of marketing time uses some of
the same data analyzed in the process of estimating reasonable exposure time and
it is not intended to be a prediction of a date of sale.
We believe, based on the assumptions employed in our analysis, as well as
our selection of investment parameters for the subject, that our value
conclusions represent a price achievable within one year's marketing time on the
open market.
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<PAGE>
ASSUMPTIONS AND LIMITING CONDITIONS
================================================================================
"Appraisal" means the appraisal report and opinion of value stated therein; or
the letter opinion of value, to which these Assumptions and Limiting Conditions
are annexed.
"Property" means the subject of the Appraisal.
"C&W" means Cushman & Wakefield, Inc. or its subsidiary which issued the
Appraisal.
"Appraiser(s)" means the employee(s) of C&W who prepared and signed the
Appraisal.
This appraisal is made subject to the following assumptions and limiting
conditions:
1. No opinion is intended to be expressed and no responsibility is assumed
for the legal description or for any matters which are legal in nature or
require legal expertise or specialized knowledge beyond that of a real
estate appraiser. Title to the Property is assumed to be good and
marketable and the Property is assumed to be free and clear of all liens
unless otherwise stated. No survey of the Property was undertaken.
2. The information contained in the Appraisal or upon which the Appraisal is
based has been gathered from sources the Appraiser assumes to be reliable
and accurate. Some of such information may have been provided by the owner
of the Property. Neither the Appraiser nor C&W shall be responsible for
the accuracy or completeness of such information, including the
correctness of estimates, opinions, dimensions, sketches, exhibits and
factual matters.
3. The opinion of value is only as of the date stated in the Appraisal.
Changes since that date in external and market factors or in the Property
itself can significantly affect property value.
4. The Appraisal is to be used in whole and not in part. No part of the
Appraisal shall be used in conjunction with any other appraisal.
Publication of the Appraisal or any portion thereof without the prior
written consent of C&W is prohibited. Except as may be otherwise stated in
the letter of engagement, the Appraisal may not be used by any person
other than the party to whom it is addressed or for purposes other than
that for which it was prepared. No part of the Appraisal shall be conveyed
to the public through advertising, or used in any sales or promotional
material without C&W`s prior written consent. Reference to the Appraisal
Institute or to the MAI designation is prohibited.
5. Except as may be otherwise stated in the letter of engagement, the
Appraiser shall not be required to give testimony in any court or
administrative proceeding relating to the Property or the Appraisal.
================================================================================
-70-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Assumptions and Limiting Conditions
================================================================================
6. The Appraisal assumes (a) responsible ownership and competent management
of the Property; (b) there are no hidden or unapparent conditions of the
Property, subsoil or structures that render the Property more or less
valuable (no responsibility is assumed for such conditions or for
arranging for engineering studies that may be required to discover them);
(c) full compliance with all applicable federal, state and local zoning
and environmental regulations and laws, unless noncompliance is stated,
defined and considered in the Appraisal; and (d) all required licenses,
certificates of occupancy and other governmental consents have been or can
be obtained and renewed for any use on which the value estimate contained
in the Appraisal is based.
7. The physical condition of the improvements considered by the Appraisal is
based on visual inspection by the Appraiser or other person identified in
the Appraisal. C&W assumes no responsibility for the soundness of
structural members nor for the condition of mechanical equipment, plumbing
or electrical components.
8. The forecasted potential gross income referred to in the Appraisal may be
based on lease summaries provided by the owner or third parties. The
Appraiser has not reviewed lease documents and assumes no responsibility
for the authenticity or completeness of lease information provided by
others. C&W recommends that legal advice be obtained regarding the
interpretation of lease provisions and the contractual rights of parties.
9. The forecasts of income and expenses are not predictions of the future.
Rather, they are the Appraiser's best estimates of current market thinking
on future income and expenses. The Appraiser and C&W make no warranty or
representation that these forecasts will materialize. The real estate
Market is constantly fluctuating and changing. It is not the Appraiser's
task to predict or in any way warrant the conditions of a future real
estate market; the Appraiser can only reflect what the investment
community, as of the date of the Appraisal, envisages for the future in
terms of rental rates, expenses, supply and demand.
10. Unless otherwise stated in the Appraisal, the existence of potentially
hazardous or toxic materials which may have been used in the construction
or maintenance of the improvements or may be located at or about the
Property was not considered in arriving at the opinion of value. These
materials (such as formaldehyde foam insulation, asbestos insulation and
other potentially hazardous materials) may adversely affect the value of
the Property. The Appraisers are not qualified to detect such substances.
C&W recommends that an environmental expert be employed to determine the
impact of these matters on the opinion of value.
11. Unless otherwise stated in the Appraisal, compliance with the requirements
of the Americans With Disabilities Act of 1990 (ADA) has not been
considered in arriving at the opinion of value. Failure to comply with the
requirements of the ADA may adversely affect the value of the property.
C&W recommends that an expert in this field be employed.
================================================================================
-71-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
CERTIFICATION OF APPRAISAL
================================================================================
We certify that, to the best of our knowledge and belief:
1. Steven A. Studabaker, MAI, inspected the property and wrote the report.
Donald R. Morris, MAI, Manager, Cushman & Wakefield of Washington D.C.,
Valuation Advisory Services, also inspected the property and has reviewed
and approved the report.
2. The statements of fact contained in this report are true and correct.
3. The reported analyses, opinions, and conclusions are limited only by the
reported assumptions and limiting conditions, and are our personal,
unbiased professional analyses, opinions, and conclusions.
4. We have no present or prospective interest in the property that is the
subject of this report, and we have no personal interest or bias with
respect to the parties involved.
5. Our compensation is not contingent upon the reporting of a predetermined
value or direction in value that favors the cause of the client, the
amount of the value estimate, the attainment of a stipulated result, or
the occurrence of a subsequent event. The appraisal assignment was not
based on a requested minimum valuation, a specific valuation or the
approval of a loan.
6. No one provided significant professional assistance to the persons signing
this report.
7. Our analyses, opinions and conclusions were developed, and this report has
been prepared, in conformity with the Uniform Standards of Professional
Appraisal Practice of the Appraisal Foundation and the Code of
Professional Ethics and the Standards of Professional Appraisal Practice
of the Appraisal Institute.
8. The use of this report is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives.
9. As of the date of this report, Steven A. Studabaker, MAI, and Donald R.
Morris, MAI, have completed the requirements of the continuing education
program of the Appraisal Institute.
10. It is our opinion that the estimated prospective market value of the
subject property, in as-is condition, as of the effective date of the
appraisal, July 1, 1997, was $13,800,000.
/s/ Steven A. Studabaker
- ----------------------------------------------------
Steven A. Studabaker, MAI
Virginia Certified General Appraiser No. 4001-001111
[SEAL]
COMMONWEALTH OF VIRGINIA
STEVEN A. STUDABAKER, MAI
No. 4001-001111
Certified General
Real Estate
Appraiser
/s/ Donald R. Morris
- ----------------------------------------------------
Donald R. Morris, MAI
Virginia Certified General Appraiser No. 4001-002465
[SEAL]
COMMONWEALTH OF VIRGINIA
Donald R. Morris
No. 4001-002465
Certified General
Real Estate
Appraiser
================================================================================
-72-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
ADDENDA
================================================================================
================================================================================
-73-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Addenda
================================================================================
Legal Description
================================================================================
<PAGE>
[GRAPHIC OMITTED]
[MAP]
Legal Description
<PAGE>
================================================================================
LEGAL DESCRIPTION - PARCEL 2
BEGINNING AT A POINT in the northwesterly line of the ramp from flyover West
bound lane of U.S. Route 50, said point being the most southerly corner of
PARCEL 18-A-1, RESUBDIVISION OF PARCELS 18-A, 18-S, 18-C and 18-D of THE
PROPERTY OF FAIRFAX ASSOCIATES:
THENCE running with the northwesterly line of said ramp the following courses
and distances:
WITH the are of a curve to the left whose radius is 609.00 feet, chord is 102.49
feet, chord hearing is S 41 degrees 32' 30" W, for a distance of 102.61 feet to
a point; THENCE S 36 degrees 42' 53" W, 378.46 feet to a point; WITH the are of
a curve to the right whose radius is 299.00 feet, chord is 149.01 feet, chord
bearing is S 51 degrees 06' 37" W, for a distance of 150.59 feet to a point;
WITH the arc of a curve to the right whose radius is 99.00 feet, chord is
104.38 feet, chord bearing is N 82 degrees 36' 51" W, for a distance of 109.94
feet to a point; THENCE N 50 degrees 48' 03" W, 35.58 feet to a point; WITH
the arc of a curve to the right whose radius is 34.00 feet, chord in 46.27 feet,
chord bearing is N 07 degrees 55' 04" W, for a distance of 50.89 feet to a
point in the easterly line of a road, designated RING ROAD;
THENCE departing the northwesterly line of said ramp and running with the
easterly line of RING ROAD the following courses and distances:
WITH the arc of a curve to the left whose radius in 623.00 feet, chord is 453.18
feet, chord bearing is N 13 degrees 38' 16" E, a distance of 463.61 feet to a
point; WITH the arc of a curve to the left whose radius is 395.00 feet, chord is
193.65 feet, chord bearing is N 22 degrees 01' 46" W, a distance of 197.71 feet
to a point, said point being a southerly corner of Parcel 18-A-1 of the
aforementioned resubdivision of the property of Fairfax Associates;
THENCE departing the easterly line of RING ROAD and running with the southerly
line of said Parcel 18-A-1, S 65 degrees 54' 36" E, 563.31 feet to the point of
beginning and containing 4.2530 acres, more or less.
PREPARED BY: Harold A. Logan Associates, P.C.
October 17, 1993
================================================================================
Legal Description
<PAGE>
Addenda
================================================================================
Rent Roll Supplied by Management
================================================================================
<PAGE>
[LOGO] CB ======================================================================
COMMERCIAL
================================================================================
Oakwood Center 06/08/97
Rent Roll
May, 1997 PAGE TWO
<TABLE>
<CAPTION>
====================================================================================================================================
PUBTRADED
BASE CHANGE EXPENSE RENT CONTACT SUBSIDIARY MARKET
TENANT SUITE NRSF COMMENCE EXPIRES RENT DATE STOP ESCALATION NUMBER PARENT CO. SYMBOL
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NO
JOSHUA MUSS & ASSOC. 320 1,577 11/01/96 10/31/97 $16.00 11/01/97 5.71 N/A Marvin Dennen NO N/A
591-1881 N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
YES
VERSATILITY, INC. 330 2,409 11/01/95 12/31/04 $15.20 11/01/97 $5.30 3% per annum Barbara Thompson NO NASDAQ
591-2900 N/A VERS
- ------------------------------------------------------------------------------------------------------------------------------------
NO
SPICER INSURANCE 340 1,394 10/01/95 09/30/00 $14.50 10/01/97 TBD 3% per annum Frank Spicer NO N/A
385-5100 N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
NO
MCGHEE AND ASSOCIATES 360 828 07/01/96 06/30/97 $16.00 N/A $5.30 N/A Kathryn Kelley NO N/A
691-2257 N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
06/09/94 06/30/97 $15.91 N/A YES
-------------------------- --------
ASSOCIATED COMMERCIAL 370 1,887 07/01/97 06/30/00 $16.00 07/01/97 TBD 3% per annum Craig Sebner YES NYSE
359-9016 Ford Motor AFS
Co. 80%
- ------------------------------------------------------------------------------------------------------------------------------------
AEROSPACE CORP 380 4,100 12/16/95 12/15/97 $16.64 N/A N/A 4% per annum Craig Mott
934-1651
- ------------------------------------------------------------------------------------------------------------------------------------
NO
MOTOROLA 410 5,828 08/01/96 02/29/00 $13.11 03/01/98 $5.30 3% per annum Barbie Newton NO N/A
293-3800 N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
see see see
LOGICON GEODYNAMICS 400 13,143 07/01/95 09/30/00 $13.53 09/01/97 $5.30 3% per annum suite 100 suite 100 suite 100
500 18,947 09/26/94 09/30/00
--------
Total 32,090
- ------------------------------------------------------------------------------------------------------------------------------------
see see see
VERSATILITY, INC. 600 18,947 10/01/94 12/31/04 $14.32 10/01/97 $5.30 3% per annum suite 330 suite 330 suite 330
- ------------------------------------------------------------------------------------------------------------------------------------
see see see
VERSATILITY, INC. 700 18,947 04/01/96 12/31/04 $15.50 06/01/97 $5.30 3% per annum suite 330 suite 330 suite 330
- ------------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------
Total Net Rentable Area 127,669 (PER LEASE)
- ---------------------------------------------
STORAGE AND OTHERS
- ----------------------
2 $13,860
ARDIS roof antennas 09/04/95 09/03/98 per year 09/01/97 N/A 5% per annum
- ------------------------------------------------------------------------------------------------------------------------------------
CONFERENCE 135 784
- ------------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------- ---------------------------------------------
Total Storage Area 784 Occupied 127,669 99.39%
- --------------------------------------------- ---------------------------------------------
Vacant 784 0.81%
- --------------------------------------------- ---------------------------------------------
Gross Leasable Area 128,363 Total 128,363 100.00%
- --------------------------------------------- ---------------------------------------------
</TABLE>
<PAGE>
Addenda
================================================================================
Improved Sales Comparables
================================================================================
<PAGE>
OFFICE BUILDING OFFERING
================================================================================
I-1 Sale
Building Name: Centerpointe I and 11
Location: 4000 and 4050 Legato Road
Fairfax, Fairfax County, VA
Grantor: Joshua Realty Corporation
(GE Investments)
Grantee: Beacon Properties
Date of Offering: June 1996
Recording Data: Deed Book 9986, Page 825
Recording Date: 05/01/97
Physical Description:
Land Area: 17.00 Acres
Net Rentable Area: 408,111 Square Feet
Year Built: Circa 1988
Occupancy at Sale: 100%
Parking: Structured; 3.6/1000
Quality: Excellent
Construction: Masonry and Glass
Stories: 11
Sale Price: $55,000,000
Terms of Sale: All Cash to Seller
Purchaser is a REIT
Sale Price/Square Foot (RSF): $134.77
Centerpointe I: 203,630 SF NRA, Yr Built: 1988
Centerpointe II: 204,481 SF NRA, Yr Built: 1990
COMMENTS:
This is the sale of two, Class A suburban office buildings located at the
intersection of West Ox Road and Legato Road, just south of US Route 50.
The buildings are 100 percent occupied by American Management Systems
(203,630 and 69,585 SF), QSI (28,359 SF), Fujitsu (20,336 SF) and others.
Lease rollover exposure occurs in 1997, 1999 and
<PAGE>
OFFICE BUILDING OFFERING
================================================================================
1-1 Continued
2007. The price is based on IRRs in the 11.0 to 11.5 percent range.
Asking rents in the market are between $18.00 and $20.00 per square foot.
The contract price is $8,000,000 below the initial asking, or a 13%
discount.
<PAGE>
OFFICE BUILDING SALE
================================================================================
I-2 Sale
Building Name: 8280 Greensboro Drive
Location: 8280 Greensboro Drive
McLean, Fairfax County, VA
Parcel Number: 029-3-15-001O-A
Grantor: Tysons Corner Limited Partner-
ship (Balcor)
Grantee: Gateway Costal Properties, Inc
(RREEF)
Date of Sale: 04/23/97
Recording Data: Deed Book 9978, Page 446
Recording Date: 04/23/97
Physical Description:
Land Area: 115,140 Square Feet
2.64 Acres
Net Rentable Area: 205,341 Square Feet
Year Built: 1985
Parking: 547 spaces
Construction: Steel frame; reflective glass
Zoning: C4, Fairfax county
Stories: 9
Sale Price: $30,000,000
Terms of Sale: Cash to Seller
Appraisal Indicators:
Overall Rate (OAR): 8.75%
Sale Price/Square Foot (RSF): $146.10
Number of Tenants: 24; largest = Deltek Systems (25%)
Legal Description: Lot 10A, Section 4, Leasco Office Park
COMMENTS:
This is the sale of a 9-story, Class A-, reflective glass office building
built in 1985 and located in one of the
<PAGE>
OFFICE BUILDING SALE
================================================================================
1-2 Continued
prime office neighborhoods in Tysons Corner, Virginia. The buyer would not
divulge any detailed financial information on the property outside of the
following data:
The price equated to a going-in capitalization rate of about 8.75 percent.
The purchaser's target yields (IRRs) for this market are between 10.75%
for Class A, top of the market buildings with long term, stable income,
and 12.0% for Class A-/B+ buildings with below market existing rents. They
are no longer assuming any major spikes in rent growth due to the
anticipated new construction that will be delivered in the next 9 to 12
months.
They do examine replacement costs as a test of reasonableness regarding
the spread between their acquisition relative to new product delivered at
market rent levels.
<PAGE>
OFFICE BUILDING SALE
================================================================================
1-3 Sale
Building Name: Tysons Office Center
Location: 8133 Leesburg Pike
Vienna, Fairfax County, VA
Parcel Number: 039-2-02-0041,0042
Grantor: Tysons Office Center Limited
Partnership (VIB Management)
Grantee: Tysons Office Center, Inc.
(Invesco)
Date of Sale: 04/16/97
Recording Data: Deed Book 9973, Page 1212
Recording Date: 04/16/97
Physical Description:
Land Area: 112,398 Square Feet
2.58 Acres
Net Rentable Area: 142,000 Square Feet
Year Built: 1981
Occupancy at Sale: 100%
Parking: 358 spaces
Construction: Steel frame, reflective glass
Zoning: C3, Fairfax County
Stories: 9
Sale Price: $16,000,000
Terms of Sale: Cash to Seller
Appraisal Indicators:
Overall Rate (OAR): 8.4%
Discount Rate (IRR): 12.0%
Sale Price/Square Foot (RSF): $112.68
Parking Ratio: 2.5 per 1,000 SF
Tenant Turnover: 60-65% in 3 Years
Average Rents: $3.00 to $3.50/SF Below Market
<PAGE>
OFFICE BUILDING SALE
================================================================================
1-3 Continued
Rent Growth: 5%, 5%, 3.5% thereafter
COMMENTS:
This is the sale of a Class B office building built in 1981 and located in
the popular Tysons Corner submarket. The property was in good condition at
the time of sale. The sellers recently spent about $3.OM on renovating the
lobbies, restrooms, and on a new roof and mechanical upgrades.
The buyers indicated that the building was 100 percent occupied at the
time of sale but was subject to 60 to 65% tenant turnover in the first
three years of ownership. These tenants had rents averaging around
$16.50/SF compared to $20/SF for market rents. Hence, the buyer saw this
as an opportunity to roll up a lot of below market leases, move them to
market rents, and sell the property in four to seven years at a price that
would still be attractive to the next owner. Because there is risk
associated with this type of effort, and particularly because there is new
construction being planned for competing markets, the buyer used a
slightly higher IRR of 12.0 percent, compared to IRRs closer to 11.0% for
their acquisition of Class A properties. The buyer also reported expenses
of approx $7.00/SF.
<PAGE>
OFFICE BUILDING SALE
================================================================================
1-4 Sale
Building Name: Camron Office Park-Building I
Location: 3601 Eisenhower Avenue
Alexandria, VA
Parcel Number: 070.00-01-07
Grantor: #1 Radnor Camron Run L.P.
Robert Buchanan-Buchanan Assoc
Grantee: Camron Run L.L.C.
Robert E. Dewitt
Date of Sale: 10/14/96
Recording Data: Deed Book 1584, Page 726
Recording Date: 10/14/96
Physical Description:
Land Area: 186,437 Square Feet
4.28 Acres
Gross Building Area: 151,442 Square Feet
Net Rentable Area: 143,707 Square Feet
Year Built: 1991
Occupancy at Sale: 95%
Parking: 2.4 per 1000 SF
Quality: Good
Construction: Concrete and steel frame
Zoning: OCM100, Alexandria
Stories: 6
Sale Price: $15,400,000
Terms of Sale: Financing provided by MetLife
for $10,500,000 at market
terms
Economic Indicators:
Effective Gross Income: $2,210,171 Buyer's Proforma
Less: Operating Expenses: $898,168 Buyer's Proforma
Net Operating Income: $1,312,003 Buyer's Proforma
Appraisal Indicators:
Effective Gross Inc. Mult.: 6.97
Overall Rate (OAR): 8.52%
<PAGE>
OFFICE BUILDING SALE
================================================================================
1-4 Continued
Sale Price/Square Foot (GSF): $101.69
Sale Price/Square Foot (RSF): $107.16
Operating Expense Ratio 40.6%
COMMENTS:
This is the sale of an office building situated in the
Hungtington/Eisenhower submarket in Alexandria. The property fronts the
north side of Eisenhower Avenue and has good access and some visibility to
Interstate 95/395 (Beltway).
The building was 95 percent leased to 12 tenants. There was one tenant who
occupied 10 percent of the building which is scheduled to rollover in the
first year of the holding period, however, this tenant has recently
renewed. There is siginifcant rollover risk in 1999 and 2000 when 35 and
48 percent of the leases expire. According to the buyer, this was not
viewed as substantially troublesome because of the current and anticipated
strength of the submarket.
The property was listed for $15,500,000 and was on the market for less
than six months.
<PAGE>
OFFICE BUILDING SALE
================================================================================
1-5 Sale
Building Name: The Nortel Building
Location: 2010 Corporate Ridge
McLean, Fairfax County, VA
Parcel Number: 39-2-1-62A
Grantor: Northern Telecom, Inc.
Grantee: Acquiport Corporate Ridge, Inc
(Equitable Real Estate)
Date of Sale: 08/01/96
Recording Data: Book 9776 Page 126
Recording Date: 08/07/96
Physical Description:
Land Area: 288,090 Square Feet
6.61 Acres
Net Rentable Area: 252,315 Square Feet
Year Built: 1989
Occupancy at Sale: 100%
Parking: 4.0 per 1,000
Quality: Good
Construction: Limestone and glass
Zoning: PDC, Planned Dev. Commercial
Stories: 10
Sale Price: $35,000,000
Terms of Sale: All Cash to Seller
Cash Equivalent
Economic Indicators:
Effective Gross Income: $5,261,200 Buyer's Proforma
Less: Operating Expenses: $1,766,200 Buyer's Proforma
Net Operating Income: $3,495,000 Buyer's Proforma
Appraisal Indicators:
Effective Gross Inc. Mult.: 6.65
Overall Rate (OAR): 10.01 %
Discount Rate ORR): 11.75%
Sale Price/Square Foot (RSF): $138.72
<PAGE>
OFFICE BUILDING SALE
================================================================================
1-5 Continued
Lease Expirations: 7% 1996, 11% 1998, 14% 1999, 11% 2001
Rent Growth: 6% 1996, 1997, 1998
Major Tenant: Nortel: 144,879 SF, $19.65/SF, $3/SF Yr6
Estimated Market Rent At Sale: $20.00/SF
COMMENTS:
This is the sale of a Class A building in the Tysons Corner submarket. The
seller occupies 144,879 square feet (57 percent) of the building at a
lease rate of $19.65 per square foot, full service, with an a rent step of
$3.00 per square foot in year 6. There are no commissions or tenant
improvements paid on the new lease. The balance of the building is leased
to five credit-worthy tenants. The building features a cafeteria and
fitness center. The income durability is good, with limited rollover
through the year 2001. The stabilized capitalization rate of 10.01 percent
is derived from the buyer's proforma. Their' indicated cash-on-cash return
was 9.1 percent. The buyer indicated that they were not the highest bidder
on this sale-leaseback transaction, but were finally selected based on
their ability to manage the building. Thus the transaction price per
square foot is considered somewhat low, and the return and yield rates
high. The listing broker reported an exposure time of less than three
months.
The purchaser reported rent growth of 6% in years 1996 through 1998, and
4% thereafter, and basing the acquisition on an 11.75% IRR.
<PAGE>
OFFICE BUILDING SALE
================================================================================
1-6 Sale
Building Name: Reston Plaza I & II
Location: 12020 and 12030 Sunrise Valley
Drive
Reston, Fairfax County, VA
Parcel Number: 017-3-08-0003-B1 and B2
Grantor: Aetna Life Insurance Company
Grantee: Reston Plaza Office LLC
(LaSalle Advisors)
Date of Sale: 07/25/96
Recording Data: Deed Book 9762, Page 1986
Recording Date: 07/25/96
Physical Description:
Land Area: 205,795 Square Feet
4.72 Acres
Net Rentable Area: 126,557 Square Feet
Year Built: 1985
Occupancy at Sale: 100%
Parking: 2.9/1,000 SF, Surface
Quality: Average
Construction: Concrete and Steel
Zoning: 14, Fairfax County
Stories: 3
Sale Price: $13,650,000
Terms of Sale: All Cash to Seller
Considered Cash Equivalent
Economic Indicators:
Effective Gross Income: $1,990,000 Actual
Less: Operating Expenses: $980,000 Estimate
Net Operating Income: $1,010,000 Estimate
Appraisal Indicators:
Effective Gross Inc. Mult.: 6.86
Overall Rate (OAR): 7.4%
Sale Price/Square Foot (RSF): $107.86
<PAGE>
OFFICE BUILDING SALE
================================================================================
1-6 Continued
Operating Expense Ratio: 49.2%
COMMENTS:
This is the sale of two, 100 percent occupied, good quality, office
buildings situated at the northeast quadrant of Sunrise Valley Drive and
Edmund Halley Drive in Reston. At the time of sale, there was about 1,700
square feet of space available. The average lease rate was reported at
$15.20/SF in Building I and $16.00/SF in Building 11, full service.
Contract rents were well below market at the time of sale. There was some
other income from parking and expense recoveries were projected by the
seller at $80,000 in 1996, dropping to $20,000 in 1997 due to
non-recurring circumstances. Thus, we have estimated the net operating
income at mid-year 1996 to be about $1,010,000.
The seller reported included proforma rent escalations of 6%, 5%, 4% and
3% thereafter for 1996 on. Their internal valuations applied a 12.0% IRR,
but this was acknowledged to be conservative compared to today's market.
<PAGE>
OFFICE BUILDING SALE
================================================================================
1-7 Sale
Building Name: Executive Park III
Location: 1850 Centennial Park Drive
Reston, Fairfax County, VA
Parcel Number: Tax Map 017-4-12-0011-134
Grantor: AETNA Life Insurance Company
Grantee: Massachusetts Mutual Life
Insurance Company
Date of Sale: 05/31/96
Recording Data: Deed Book 9716 Page 484
Recording Date: 05/31/96
Physical Description:
Land Area: 231,270 Square Feet
5.31 Acres
Gross Building Area: 104,620 Square Feet
Net Rentable Area: 104,620 Square Feet
Year Built: 1985
Occupancy at Sale: 100%
Parking: 322 spaces or 3.1 per 1,000 SF
Quality: Excellent
Construction: Brick
Zoning: 13, Fairfax County
Stories: 6
Sale Price: $12,200,000
Terms of Sale: Cash to Seller; no major
capital repairs needed.
Economic Indicators:
Effective Gross Income: $1,771,400 Actual
Less: Operating Expenses: $711,400 Actual
Net Operating Income: $1,060,000 Actual
Appraisal Indicators:
Effective Gross Inc. Mult.: 6.89
Overall Rate (OAR): 8.7 %
Sale Price/Square Foot (GSF): $116.61
<PAGE>
OFFICE BUILDING SALE
================================================================================
1-7 Continued
Sale Price/Square Foot (RSF): $116.61
Average Rents at Sale: $15.10/SF
Seller's Market Rent Estimate: $18.50/SF
Tenant Turnover (1996-2000): 2%, 9%, 6%, 26%, 33%
Rent Spikes 1996-1999 (Seller) 6%, 5%, 4%, 3% Thereafter
COMMENTS:
This is the sale of an attractive, six-story, Class A office building,
known as Executive Park III, in Reston, Fairfax County, Virginia. The
building was 100 percent occupied in March of 1996. The largest tenant is
PHP. Average rent in the building is $15.10 per square foot; this is
below the seller's estimate of market rent of $18.50 per square foot.
Operating expenses are estimated to be $6.80 per square foot.
There is an underground storage tank that was tested and did not leak. No
impact on value.
<PAGE>
Addenda
================================================================================
Pro-Ject +plus Assumptions Reports
================================================================================
<PAGE>
OAKWOOD CENTER (7111)
PROJECT DESIGNATOR: 7111
REVISION: 6/19/97 @ 12:11
TENANT REGISTER
TENANT SQUARE FEET BEGIN DATE END DATE
- ---------------------------------------- ----------- ---------- --------
# 1 - MUTUAL OF NY 3,173 7/1992 6/1997
# 2 - SUITE I CONFERENCE ROOM 784 6/1997 5/2017
# 3 - SUITE 100 LOGICON GEODYNAMIC 3,157 7/1996 9/2000
# 4 - SUITE 160 BYER'S ENGINEERING 7,801 7/1995 6/2000
# 5 - SUITE 180 CENTRAL FIDELITY B 3,348 12/1982 12/2002
# 6 - SUITE 190 VERSATILITY 1,637 6/1997 12/2004
# 7 - SUITE 200 CMCI 9,392 7/1997 6/2002
# 8 - SUITE 210 PREMIERE SYSTEMS 2,901 3/1994 2/1999
# 9 - SUITE 220 FRANEY PARR MUHA 3,034 6/1994 6/1999
# 10 - SUITE 260 COBRO CORP 2,027 6/1996 5/2001
# 11 - SUITE 270 FAIRFAX FAMILY 1,370 9/1995 8/1998
# 12 - SUITE 300 WALKER TITLE 4,895 1/1994 12/1998
# 13 - SUITE 320 JOSHUA MUSS ASSOC 1,577 11/1996 10/1997
# 14 - SUITE 330 VERSATILITY 2,409 11/1995 12/2004
# 15 - SUITE 340 SPICER INSURANCE 1,394 10/1995 9/2000
# 16 - SUITE 360 MCGHEE ASSOCIATES 828 7/1996 6/1997
# 17 - SUITE 370 ASSOCIATED COMMERC 1,887 7/1997 6/2000
# 18 - SUITE 380 AEROSPACE CORP 4,100 12/1995 12/1997
# 19 - SUITE 400/500 LOGICON GEODYNAMIC 32,090 6/1994 9/2000
# 20 - SUITE 410 MOTOROLA 5,828 8/1996 2/2000
# 21 - SUITE 600 VERSATILITY 18,947 10/1994 12/2004
# 22 - SUITE 700 VERSATILITY 18,947 4/1996 12/2004
-----------
22 TENANTS 131,526
===========
<PAGE>
OAKWOOD CENTER (7111)
PROJECT DESIGNATOR: 7111
REVISION: 6/19/97 @ 12:11
MNEMONIC REFERENCE TABLE
AREA MEASURES
- -------------
NRA
OCCU
GROWTH RATES
- ------------
MKTG
EXPG
INC3
INC4
INC2
CP25
C275
30%M
MARKET RATES
- ------------
MKT1
TIRN
TINW
TIWA
RESR
IND3
EXPENSES
- --------
TAX
OPEX
ADME
MGTI
OPEI
NONE
GLOBAL RECOVERIES
- -----------------
BYES
<PAGE>
OAKWOOD CENTER (7111)
PROJECT DESIGNATOR: 7111
REVISION: 6/24/97 @ 15:24
PROJECT ASSUMPTIONS REPORT
EXCLUDING TENANTS
BUILDING PROLOGUE
- -----------------
LEASEHOLD ANALYSIS OF OAKWOOD CENTER (7111) BEGINNING 7/1997
FOR 15 YEARS ON A FISCAL YEAR BASIS
AREA MEASURES
- -------------
NRA
1997 VALUE - 128,353
THEREAFTER - CONSTANT
1997: 128,353 1998: 128,353 1999: 128,353 2000: 128,353
2001: 128,353 2002: 128,353 2003: 128,353 2004: 128,353
2005: 128,353 2006: 128,353 2007: 128,353 2008: 128,353
2009: 128,353 2010: 128,353 2011: 128,353
OCCU
1997 VALUE - 122,752
1998 VALUE - 126,267
1999 VALUE - 124,743
2000 VALUE - 122,833
2001 VALUE - 127,561
2002 VALUE - 125,084
2003 VALUE - 125,207
2004 VALUE - 124,792
2005 VALUE - 110,310
2006 VALUE - 125,767
2007 VALUE - 114,870
2008 VALUE - 123,503
2009 VALUE - 125,781
2010 VALUE - 111,907
2011 VALUE - 123,688
THEREAFTER - CONSTANT
1997: 122,752 1998: 126,267 1999: 124,743 2000: 122,833
2001: 127,561 2002: 125,084 2003: 125,207 2004: 124,792
2005: 110,310 2006: 125,767 2007: 114,870 2008: 123,503
2009: 125,781 2010: 111,907 2011: 123,688
GROWTH RATES
- ------------
MKTG
1997 VALUE - 1.75
1998 VALUE - 3.50
THEREAFTER - CONSTANT
1997: 1.7500 1998: 3.5000 1999: 3.5000 2000: 3.5000
2001: 3.5000 2002: 3.5000 2003: 3.5000 2004: 3.5000
2005: 3.5000 2006: 3.5000 2007: 3.5000 2008: 3.5000
2009: 3.5000 2010: 3.5000 2011: 3.5000
EXPG
1997 VALUE 1.75
1998 VALUE 3.50
THEREAFTER - CONSTANT
<PAGE>
PAGE 2
1997: 1.7500 1998: 3.5000 1999: 3.5000 2000: 3.5000
2001: 3.5000 2002: 3.5000 2003: 3.5000 2004: 3.5000
2005: 3.5000 2006: 3.5000 2007: 3.5000 2008: 3.5000
2009: 3.5000 2010: 3.5000 2011: 3.5000
INC3
1997 VALUE - 3.00
1998 VALUE - 3.00
THEREAFTER - CONSTANT
1997: 3.0000 1998: 3.0000 1999: 3.0000 2000: 3.0000
2001: 3.0000 2002: 3.0000 2003: 3.0000 2004: 3.0000
2005: 3.0000 2006: 3.0000 2007: 3.0000 2008: 3.0000
2009: 3.0000 2010: 3.0000 2011: 3.0000
INC4
1997 VALUE - 4.00
1998 VALUE - 4.00
THEREAFTER - CONSTANT
1997: 4.0000 1998: 4.0000 1999: 4.0000 2000: 4.0000
2001: 4.0000 2002: 4.0000 2003: 4.0000 2004: 4.0000
2005: 4.0000 2006: 4.0000 2007: 4.0000 2008: 4.0000
2009: 4.0000 2010: 4.0000 2011: 4.0000
INC2
1997 VALUE - 2.00
1998 VALUE - 2.00
THEREAFTER - CONSTANT
1997: 2.0000 1998: 2.0000 1999: 2.0000 2000: 2.0000
2001: 2.0000 2002: 2.OOO0 2003: 2.0000 2004: 2.0000
2005: 2.0000 2006: 2.0000 2007: 2.0000 2008: 2.0000
2009: 2.0000 2010: 2.0000 2011: 2.0000
CP25
1997 VALUE - 2.50
1998 VALUE - 2.50
THEREAFTER - CONSTANT
1997: 2.5000 1998: 2.5000 1999: 2.5000 2000: 2.5000
2001: 2.5000 2002: 2.5000 2003: 2.5000 2004: 2.5000
2005: 2.5000 2006: 2.5000 2007: 2.5000 2008: 2.5000
2009: 2.5000 2010: 2.5000 2011: 2.5000
C275
1997 VALUE - 2.75
1998 VALUE - 2.75
THEREAFTER - CONSTANT
1997: 2.7500 1998: 2.7500 1999: 2.7500 2000: 2.7500
2001: 2.7500 2002: 2.7500 2003: 2.7500 2004: 2.7500
2005: 2.7500 2006: 2.7500 2007: 2.7500 2008: 2.7500
2009: 2.7500 2010: 2.7500 2011: 2.7500
30%M
+30.0% OF MKTG
1997: 0.5250 1998: 1.0500 1999: 1.0500 2000: 1.0500
2001: 1.0500 2002: 1.0500 2003: 1.0500 2004: 1.0500
2005: 1.0500 2006: 1.0500 2007: 1.0500 2008: 1.0500
2009: 1.0500 2010: 1.0500 2011: 1.0500
<PAGE>
PAGE 3
MARKET RATES
------------
MKT1
1997 VALUE - 18.00
THEREAFTER - GROWING AT GROWTH RATE MKTG
1997: 18.0000 1998: 18.3150 1999: 18.9560 2000: 19.6195
2001: 20.3062 2002: 21.0169 2003: 21.7525 2004: 22.5138
2005: 23.3018 2006: 24.1173 2007: 24.9615 2008: 25.8351
2009: 26.7393 2010: 27.6752 2011: 28.6438
TIRN
1997 VALUE - 4.00
THEREAFTER - GROWING AT GROWTH RATE EXPG
1997: 4.0000 1998: 4.0700 1999: 4.2125 2000: 4.3599
2001: 4.5125 2002: 4.6704 2003: 4.8339 2004: 5.0031
2005: 5.1782 2006: 5.3594 2007: 5.5470 2008: 5.7411
2009: 5.9421 2010: 6.1500 2011: 6.3653
TINW
1997 VALUE - 8.00
THEREAFTER - GROWING AT GROWTH RATE EXPG
1997: 8.0000 1998: 8.1400 1999: 8.4249 2000: 8.7198
2001: 9.0250 2002: 9.3408 2003: 9.6678 2004: 10.0061
2005: 10.3564 2006: 10.7188 2007: 11.0940 2008: 11.4823
2009: 11.8841 2010: 12.3001 2011: 12.7306
TIWA
+60.0% OF TIRN +40.0% OF TINW
1997: 5.6000 1998: 5.6980 1999: 5.8974 2000: 6.1038
2001: 6.3175 2002: 6.5386 2003: 6.7674 2004: 7.0043
2005: 7.2494 2006: 7.5O32 2007: 7.7658 2008: 8.0376
2009: 8.3189 2010: 8.6101 2011: 8.9114
RESR
1997 VALUE - 0.15
THEREAFTER - GROWING AT GROWTH RATE EXPG
1997: 0.1500 1998: 0.1526 1999: 0.1580 2000: 0.1635
2001: 0.1692 2002: 0.1751 2003: 0.1813 2004: 0.1876
2005: 0.1942 2006: 0.2010 2007: 0.2080 2008: 0.2153
2009: 0.2228 2010: 0.2306 2011: 0.2387
IND3
1997 VALUE - 100
THEREAFTER - GROWING AT GROWTH RATE INC3
1997: 100.0000 1998: 103.0000 1999: 106.0900 2000: 109.2727
2001: 112.5509 2002: 115.9274 2003: 119.4O52 2004: 122.9874
2005: 126.6770 2006: 130.4773 2007: 134.3916 2008: 138.4234
2009: 142.5761 2010: 146.8533 2011: 151.2589
MISCELLANEOUS INCOMES
---------------------
<PAGE>
PAGE 4
ROOF RENTS/OTHER
1997 VALUE - 14,000
1998 VALUE - 14,000
1999 VALUE - 2,000
THEREAFTER - GROWING AT GROWTH RATE INC2
1997: 14,000 1998: 14,000 1999: 2,000 2000: 2,040
2001: 2,081 2002: 2,122 2003: 2,165 2004: 2,208
2005: 2,252 2006: 2,297 2007: 2,343 2008: 2,390
2009: 2,438 2010: 2,487 2011: 2,536
EXPENSES
- --------
PROPERTY TAXES , REFERRED TO AS TAX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 151,949
1998 VALUE - 168,510
THEREAFTER - GROWING AT GROWTH RATE EXPG
1997: 151,949 1998: 168,510 1999: 174,408 2000: 180,512
2001: 186,830 2002: 193,369 2003: 200,137 2004: 207,142
2005: 214,392 2006: 221,895 2007: 229,662 2008: 237,700
2009: 246,019 2010: 254,630 2011: 263,542
OPERATING EXPENSES, REFERRED TO AS OPEX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 474,900
THEREAFTER - GROWING AT GROWTH RATE EXPG
1997: 474,900 1998: 483,211 1999: 500,123 2000: 517,627
2001: 535,744 2002: 554,495 2003: 573,903 2004: 593,989
2005: 614,779 2006: 636,296 2007: 658,567 2008: 681,616
2009: 705,473 2010: 730,164 2011: 755,720
ADMIN/PAYROLL , REFERRED TO AS ADME
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 96,300
THEREAFTER - GROWING AT GROWTH RATE EXPG
1997: 96,300 1998: 97,985 1999: 101,415 2000: 104,964
2001: 108,638 2002: 112,440 2003: 116,376 2004: 120,449
20O5: 124,665 2006: 129,028 2007: 133,544 2008: 138,218
2009: 143,055 2010: 148,062 2011: 153,245
MANAGEMENT FEES , REFERRED TO AS MGTI
AN INFORMATIONAL EXPENSE
1997 VALUE - 57,803
1998 VALUE - 59,538
1999 VALUE - 61,861
2000 VALUE - 64,907
2001 VALUE - 72,685
2002 VALUE - 74,229
2003 VALUE - 77,016
2004 VALUE - 79,660
2005 VALUE - 74,430
2006 VALUE - 88,370
2007 VALUE - 83,671
2008 VALUE - 93,456
2009 VALUE - 98,966
2010 VALUE - 90,559
2011 VALUE - 103,569
THEREAFTER - CONSTANT
<PAGE>
PAGE 5
1997: 57,803 1998: 59,538 1999: 61,861 2000: 64,907
2001: 72,685 2002: 74,229 2003: 77,016 2004: 79,660
2005: 74,430 2006: 88,370 2007: 83,671 2008: 93,456
2009: 98,966 2010: 90,559 2011: 103,569
OPERATING EXPENSES, REFERRED TO AS OPE1
AN INFORMATIONAL EXPENSE
+100.0% OF TAX +100.0% OF OPEX
+100.0% OF ADME+100.0% OF MGTI
1997: 780,952 1998: 809,244 1999: 837,807 2000: 868,011
2001: 903,897 2002: 934,534 2003: 967,432 2004: 1,001,240
2005: 1,028,265 2006: 1,075,590 2007: 1,105,443 2008: 1,150,990
2009: 1,193,514 2010: 1,223,416 2011: 1,276,076
NON-RECOVERABLE , REFERRED TO AS NONE
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 25,700
THEREAFTER - GROWING AT GROWTH RATE EXPG
1997: 25,700 1998: 26,150 1999: 27,065 2000: 28,012
2001: 28,993 2002: 30,007 2003: 31,058 2004: 32,145
2005: 33,270 2006: 34,434 2007: 35,639 2008: 36,887
2009: 38,178 2010: 39,514 2011: 40,897
VACANCY ALLOWANCE
- -----------------
PERCENTAGE OF POTENTIAL GROSS INCOME
FOR ALL TENANTS SUBJECT TO VACANCY
1997 VALUE - 2.00
THEREAFTER - CONSTANT
MANAGEMENT FEE
- --------------
PERCENTAGE OF EFFECTIVE GROSS INCOME
FOR ALL TENANTS
PASSED THROUGH TO TENANTS USING EXPENSE MGTI
1997 VALUE - 3.00
THEREAFTER - CONSTANT
COMMISSION CALCULATIONS
- -----------------------
STANDARD METHOD #1 - 5.000% OF TOTAL RENT
STANDARD METHOD #2 - 2.000% OF TOTAL RENT
STANDARD METHOD #3 - 3.200% OF TOTAL RENT
STANDARD METHOD #4 - 0.000% OF TOTAL RENT
STANDARD METHOD #5 - 0.000% OF TOTAL RENT
COMMISSION PAYOUTS
- ------------------
STANDARD METHOD #1 - CASHED OUT
<PAGE>
PAGE 6
STANDARD METHOD #2 - CASHED OUT
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
ALTERATION CALCULATION
- ----------------------
1997 VALUE - 0.00
1998 VALUE - 0.00
1999 VALUE - 0.00
20OO VALUE - 0.00
2001 VALUE - 0.00
2002 VALUE - 0.00
2003 VALUE - 0.00
2004 VALUE - 0.00
2005 VALUE - 0.00
2006 VALUE - 0.00
2007 VALUE - 0.00
2008 VALUE - 0.00
2009 VALUE - 0.00
2010 VALUE - 0.00
2011 VALUE - 0.00
THEREAFTER - CONSTANT
ALTERATION PAYOUTS
- ------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - CASHED OUT
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
COMMON AREA MAINTENANCE POOL
- ----------------------------
NONE
CAPITAL EXPENDITURES
- --------------------
RESERVES
MARKET RATE RESR MULTIPLIED BY AREA MEASURE NRA
1997: 19,253 1998: 19,590 1999: 20,276 2000: 20,985
2001: 21,720 2002: 22,480 2003: 23,267 2004: 24,081
2005: 24,924 2006: 25,796 2007: 26,699 2008: 27,633
2009: 28,601 2010: 29,602 2011: 30,638
PRIMARY CLASSIFICATION CODES
- ----------------------------
NONE
<PAGE>
PAGE 7
SECONDARY CLASSIFICATION CODES
------------------------------
NONE
COST CENTERS
------------
NONE
SALES VOLUME PROFILE
--------------------
PERCENT OF RELATIVE
MONTH ANNUAL SALES VOLUME
------------ --------
JAN 8.33% 1.00
FEB 8.33% 1.00
MAR 8.33% 1.00
APR 8.33% 1.00
MAY 8.33% 1.00
JUN 8.33% 1.00
JUL 8.33% 1.00
AUG 8.33% 1.00
SEP 8.33% 1.00
OCT 8.33% 1.00
NOV 8.33% 1.00
DEC 8.33% 1.00
------- -------
TOTALS 100.00% 12.00
GLOBAL RECOVERIES
-----------------
OPERATING EXPENSES, REFERRED TO AS BYES
PRO RATA SHARE RECOVERY OF EXPENSE OPE1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
TENANT PROLOGUE
---------------
MINIMUM RENTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
SALES VOLUMES AND BREAKPOINTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
RENEWAL RENTS ARE COMPOUNDED ANNUALLY
RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET
REFERENCE TENANTS
----------------
NONE
<PAGE>
OAKWOOD CENTER (7111)
PROJECT DESIGNATOR: 7111
REVISION: 6/19/97 @ 12:11
PROJECT ASSUMPTIONS REPORT
FOR TENANTS ONLY
INCLUDING ALL TENANTS
TENANTS
- -------
THERE ARE A TOTAL OF 22 LEASEHOLD TENANT(S):
- -------------------------------------------------------------------------------
# 1 - MUTUAL OF NY
BASE LEASE DATES: 7/1992 TO 6/1997
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 3,173
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 13.23/SF/YR
THEREAFTER - GROWING AT GROWTH RATE INC3
RECOVERIES:
OPERATING EXPENSES
PRO RATA SHARE RECOVERY OF EXPENSE OPE1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP
AND A BASE OF 6.50/SF MULTIPLIED BY AREA MEASURE NRA
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS: NONE
- -------------------------------------------------------------------------------
# 2 - SUITE 1 , CONFERENCE ROOM
BASE LEASE DATES: 6/1997 TO 5/2017
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 784
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS: NONE
- -------------------------------------------------------------------------------
# 3 - SUITE 100 , LOGICON GEODYNAMIC
BASE LEASE DATES: 7/1996 TO 9/2000
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 3,lS7
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 15.50/SF/YR
THEREAFTER - GROWING AT 3.00%
<PAGE>
PAGE 2
RECOVERIES:
OPERATING EXPENSES
PRO RATA SHARE RECOVERY OF EXPENSE OPE1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP
AND A BASE OF 5.34/SF MULTIPLIED BY AREA MEASURE NRA
COMMISSIONS: NONE
ALTERATIONS: NONE
OPTION 1 DATES: 10/2000 TO 6/2007
SQUARE FOOTAGE: 3,157
MINIMUM RENT:
2001 VALUE - 18.85/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
OPERATING EXPENSES
PRO RATA SHARE RECOVERY OF EXPENSE OPE1 PRO RATED ON TENANT SQUARE
FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A
CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF THE EXPENSE VALUE IN
THE OCCUPANCY YEAR
COMMISSIONS: STANDARD METHOD #2
PAYOUT: CASHED OUT
ALTERATIONS: 5.00/SF
PAYOUT: CASHED OUT
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 5.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH PATE INC3 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
OPERATING EXPENSES
PRO RATA SHARE RECOVERY OF EXPENSE OPE1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
-------------------------------------------------------------------------------
# 4 - SUITE 160 BYER'S ENGINEERING
BASE LEASE DATES: 7/1995 TO 6/2000
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 7,801
<PAGE>
PAGE 3
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 14.19/SF/YR
THEREAFTER - GROWING AT 2.00%
RECOVERIES:
OPERATING EXPENSES
PRO RATA SHARE RECOVERY OF EXPENSE OPE1 PRO RATED ON TENANT SQUARE
FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN ACCRUAL BASIS WITH A
CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF 4.87/SF MULTIPLIED
BY AREA MEASURE NRA
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 5.00 4 NONE NONE YES YES
2 5.00 4 NONE NONE YES YES
3 5.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE INC3 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
OPERATING EXPENSES
PRO RATA SHARE RECOVERY OF EXPENSE OPE1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
------------------------------------------------------------------------------
# 5 - SUITE 180 CENTRAL FIDELITY B
BASE LEASE DATES: 12/1982 TO 12/2002
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 3,348
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 20.05/SF/YR
THEREAFTER - GROWING AT GROWTH RATE 30%M
RECOVERIES:
OPERATING EXPENSES
PRO RATA SHARE RECOVERY OF EXPENSE OPE1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP
AND A BASE OF 4.00/SF MULTIPLIED BY AREA MEASURE NRA
<PAGE>
PAGE 4
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 5.00 4 NONE NONE YES YES
2 5.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE INC3 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
OPERATING EXPENSES
PRO RATA SHARE RECOVERY OF EXPENSE OPE1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
-------------------------------------------------------------------------------
# 6 - SUITE 190 VERSATILITY
BASE LEASE DATES: 6/1997 TO 12/2004
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,637
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE 18.00/SF/YR
1999 VALUE 18.54/SF/YR
2000 VALUE 19.10/SF/YR
2001 VALUE 19.67/SF/YR
2002 VALUE 20.26/SF/YR
2003 VALUE 20.87/SF/YR
2004 VALUE 21.76/SF/YR
THEREAFTER GROWING AT 3.00%
RECOVERIES:
BYES
GLOBAL GROUPING
GLOBAL RECOVERY BYES
COMMISSIONS: 3.00%
PAYOUT: CASHED OUT
ALTERATIONS: 10.00/SF
PAYOUT: CASHED OUT
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 5.00 4 NONE NONE YES YES
2 5.00 4 NONE NONE YES YES
<PAGE>
PAGE 5
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE INC3 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
OPERATING EXPENSES
PRO RATA SHARE RECOVERY OF EXPENSE OPE1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
-------------------------------------------------------------------------------
# 7 - SUITE 200 , CMCI
BASE LEASE DATES: 7/1997 TO 6/2002
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 9,392
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 16.25/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
OPERATING EXPENSES
PRO RATA SHARE RECOVERY OF EXPENSE OPE1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
COMMISSIONS: 3.00%
PAYOUT: CASHED OUT
ALTERATIONS: 3.00/SF
PAYOUT: CASHED OUT
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 5.00 4 NONE NONE YES YES
2 5.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE INC3 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
OPERATING EXPENSES
PRO RATA SHARE RECOVERY OF EXPENSE OPE1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #3
<PAGE>
PAGE 6
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
-------------------------------------------------------------------------------
# 8 - SUITE 210 PREMIERE SYSTEMS
BASE LEASE DATES: 3/1994 TO 2/1999
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 2,901
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 12.57/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
OPERATING EXPENSES
PRO RATA SHARE RECOVERY OF EXPENSE OPE1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP
AND A BASE OF 5.30/SF MULTIPLIED BY AREA MEASURE NRA
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 5.00 4 NONE NONE YES YES
2 5.00 4 NONE NONE YES YES
3 5.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE INC3 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
OPERATING EXPENSES
PRO RATA SPARE RECOVERY OF EXPENSE OPE1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
-------------------------------------------------------------------------------
# 9 - SUITE 220 , FRANEY PARR MUHA
BASE LEASE DATES: 6/1994 TO 6/1999
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 3,034
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 12.74/SF/YR
<PAGE>
PAGE 7
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
OPERATING EXPENSES
PRO RATA SHARE RECOVERY OF EXPENSE OPE1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF 5.30/SF MULTIPLIED BY AREA MEASURE NRA
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 5.00 4 NONE NONE YES YES
2 5.00 4 NONE NONE YES YES
3 5.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE INC3 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
OPERATING EXPENSES
PRO RATA SHARE RECOVERY OF EXPENSE OPE1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 10 - SUITE 260 , COBRO CORP
BASE LEASE DATES: 6/1996 TO 5/2001
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 2,027
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 15.50/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
OPERATING EXPENSES
PRO RATA SHARE RECOVERY OF EXPENSE OPE1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF 5.34/SF MULTIPLIED BY AREA MEASURE NRA
COMMISSIONS: STANDARD METHOD #1
PAYOUT: CASHED OUT
ALTERATIONS: MARKET RATE TINW
<PAGE>
PAGE 8
PAYOUT: CASHED OUT
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
I 5.00 4 NONE NONE YES YES
2 5.00 4 NONE NONE YES YES
3 5.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AZ GROWTH RATE INC3 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
OPERATING EXPENSES
PRO RATA SHARE RECOVERY OF EXPENSE OPE1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
-------------------------------------------------------------------------------
# 11 - SUITE 270 FAIRFAX FAMILY
BASE LEASE DATES: 9/1995 TO B/1998
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,370
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 14.68/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
OPERATING EXPENSES
PRO RATA SHARE RECOVERY OF EXPENSE OPE1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF 6.50/SF MULTIPLIED BY AREA MEASURE NRA
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 5.00 4 NONE NONE YES YES
2 5.00 4 NONE NONE YES YES
3 5.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE INC3 PER YEAR DURING EACH RENEWAL TERM
<PAGE>
PAGE 9
RENEWAL RECOVERIES:
OPERATING EXPENSES
PRO RATA SHARE RECOVERY OF EXPENSE OPE1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
------------------------------------------------------------------------------
# 12 - SUITE 300 WALKER TITLE
BASE LEASE DATES: 1/1994 TO 12/1998
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 4,89S
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 13.12/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
OPERATING EXPENSES
PRO RATA SHARE RECOVERY OF EXPENSE OPE1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF 5.30/SF MULTIPLIED BY AREA MEASURE NRA
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 5.00 4 NONE NONE YES YES
2 5.00 4 NONE NONE YES YES
3 5.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE INC3 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
OPERATING EXPENSES
PRO RATA SHARE RECOVERY OF EXPENSE OPE1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
<PAGE>
PAGE 10
-------------------------------------------------------------------------------
# 13 - SUITE 320 JOSHUA MUSS ASSOC
BASE LEASE DATES: 11/1996 TO 10/1997
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,577
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE 16.00/SF/YR
THEREAFTER GROWING AT 0.00%
RECOVERIES:
OPERATING EXPENSES
PRO RATA SHARE RECOVERY OF EXPENSE OPE1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF 5.71/SF MULTIPLIED BY AREA MEASURE NRA
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 5.00 4 NONE NONE YES YES
2 5.00 4 NONE NONE YES YES
3 5.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE INC3 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
BYES
GLOBAL GROUPING
GLOBAL RECOVERY BYES
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET PATE TIWA
RENEWAL PAYOUT: CASHED OUT
-------------------------------------------------------------------------------
4 14 - SUITE 330 VERSATILITY
BASE LEASE DATES: 11/1995 TO 12/2004
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 2,409
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 15.20/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
OPERATING EXPENSES
PRO RATA SHARE RECOVERY OF EXPENSE OPE1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
<PAGE>
PAGE 11
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF 5.30/SF MULTIPLIED BY AREA MEASURE NRA
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 5.00 4 NONE NONE YES YES
2 5.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE INC3 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
OPERATING EXPENSES
PRO RATA SHARE RECOVERY OF EXPENSE OPE1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
-------------------------------------------------------------------------------
# 15 SUITE 340 , SPICER INSURANCE
BASE LEASE DATES: 10/1995 TO 9/2000
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,394
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 14.50/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
OPERATING EXPENSES
PRO RATA SHARE RECOVERY OF EXPENSE OPE1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF 5.40/SF MULTIPLIED BY AREA MEASURE NRA
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 5.00 4 NONE NONE YES YES
2 S.00 4 NONE NONE YES YES
3 5.00 4 NONE NONE YES YES
<PAGE>
PAGE 12
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE INC3 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
OPERATING EXPENSES
PRO RATA SHARE RECOVERY OF EXPENSE OPE1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
-------------------------------------------------------------------------------
# 16 - SUITE 360 MCGHEE ASSOCIATES
BASE LEASE DATES: 7/1996 TO 6/1997
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 828
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT: 16.00/SF/YR
RECOVERIES:
OPERATING EXPENSES
PRO RATA SHARE RECOVERY OF EXPENSE OPE1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NPA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF 4.97/SP MULTIPLIED BY AREA MEASURE NRA
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 5.00 4 NONE NONE YES YES
2 5.00 4 NONE NONE YES YES
3 5.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE INC3 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
OPERATING EXPENSES
PRO RATA SHARE RECOVERY OF EXPENSE OPE1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
<PAGE>
PAGE 13
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 17 - SUITE 370 ASSOCIATED COMMERC
BASE LEASE DATES: 7/1997 TO 6/2000
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,887
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 16.00/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
OPERATING EXPENSES
PRO RATA SHARE RECOVERY OF EXPENSE OPE1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
COMMISSIONS: 3.00%
PAYOUT: CASHED OUT
ALTERATIONS: 2.00/SF
PAYOUT: CASHED OUT
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 5.00 4 NONE NONE YES YES
2 5.00 4 NONE NONE YES YES
3 5.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE INC3 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
OPERATING EXPENSES
PRO RATA SHARE RECOVERY OF EXPENSE OPE1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 18 - SUITE 380 , AEROSPACE CORP
BASE LEASE DATES: 12/1995 TO 12/1997
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 4,100
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 16.64/SF/YR
<PAGE>
PAGE 14
THEREAFTER - GROWING AT 4.00%
RECOVERIES:
BYES
GLOBAL GROUPING
GLOBAL RECOVERY BYES
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 5.00 4 NONE NONE YES YES
2 5.00 4 NONE NONE YES YES
3 5.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE INC3 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
BYES
GLOBAL GROUPING
GLOBAL RECOVERY BYES
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
-----------------------------------------------------------------------------
# 19 - SUITE 400/500 , LOGICON GEODYNAMIC
BASE LEASE DATES: 6/1994 TO 9/2000
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 32,090
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 13.53/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
OPERATING EXPENSES
PRO RATA SHARE RECOVERY OF EXPENSE OPE1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF 5.30/SF MULTIPLIED BY AREA MEASURE NRA
COMMISSIONS: NONE
ALTERATIONS: NONE
OPTION 1 DATES: 10/2000 TO 6/2007
SQUARE FOOTAGE: 32,090
MINIMUM RENT:
2001 VALUE - 18.85/SF/YR
<PAGE>
PAGE 15
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
OPERATING EXPENSES
PRO RATA SHARE RECOVERY OF EXPENSE OPE1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
COMMISSIONS: STANDARD METHOD #2
PAYOUT: CASHED OUT
ALTERATIONS: 5.00/SF
PAYOUT: CASHED OUT
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 5.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE INC3 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
OPERATING EXPENSES
PRO RATA SHARE RECOVERY OF EXPENSE OPE1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
-------------------------------------------------------------------------------
# 20 - SUITE 410 , MOTOROLA
BASE LEASE DATES: 8/1996 TO 2/2000
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 5,828
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1996 VALUE - 13.11/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
OPERATING EXPENSES
PRO RATA SHARE RECOVERY OF EXPENSE OPE1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF 5.30/SF MULTIPLIED BY AREA MEASURE NRA
COMMISSIONS: NONE
ALTERATIONS: NONE
<PAGE>
PAGE 16
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 5.00 4 NONE NONE YES YES
2 5.00 4 NONE NONE YES YES
3 5.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE INC3 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
OPERATING EXPENSES
PRO RATA SHARE RECOVERY OF EXPENSE OPE1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 21 - SUITE 600 , VERSATILITY
BASE LEASE DATES: 10/1994 TO 12/2004
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 18,947
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 14.32/SF/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
OPERATING EXPENSES
PRO RATA SHARE RECOVERY OF EXPENSE OPE1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF 5.30/SF MULTIPLIED BY AREA MEASURE NRA
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 5.00 4 NONE NONE YES YES
2 5.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE INC3 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
OPERATING EXPENSES
<PAGE>
PAGE 17
PRO RATA SHARE RECOVERY OF EXPENSE OPE1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 22 - SUITE 700 VERSATILITY
BASE LEASE DATES: 4/1996 TO 12/2004
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 18,947
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 15.50/SP/YR
THEREAFTER - GROWING AT 3.00%
RECOVERIES:
OPERATING EXPENSES
PRO RATA SHARE RECOVERY OF EXPENSE OPE1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF 5.30/SF MULTIPLIED BY AREA MEASURE NRA
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
---- ------------ ------ -------- --------- ----------- -----------
1 5.00 4 NONE NONE YES YES
2 5.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE INC3 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
OPERATING EXPENSES
PRO RATA SHARE RECOVERY OF EXPENSE OPE1
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
<PAGE>
Addenda
================================================================================
Investor Survey
================================================================================
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET OFFICE MARKET - URBAN/CBD
- ------------------------------------------------------------------------------------------------------------------------------------
9.5% 10.0% 10.0% 10.0% 11.5% 11.5% 3.0% 3.0% 3.0% 4.0% 10.0 10.0
9.5% 10.0% 10.0% 10.5% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
8.0% 9.0% 8.5% 8.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
13.0% 13.0% -- -- 14.0% 14.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
8.0% 8.0% 8.5% 8.5% 10.5% 10.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.3% 9.3% 10.3% 10.3% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 9.0% 8.5% 9.0% 10.5% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
10.0% 10.0% 10.0% 10.0% 12.5% 12.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
9.0% 9.0% 9.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.0% 9.0% 8.0% 9.0% 10.0% 12.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
Responses 11 11 10 10 11 11 11 11 11 11 11 11
Average (%) 9.2% 9.6% 9.2% 9.7% 11.7% 12.0% 3.3% 4.2% 3.4% 3.9% 8.5 9.5
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 9.0% 9.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 12.0% 12.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.5% 9.5% 10.5% 10.5% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 10.0% 10.0% 11.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
15.0% 15.0% -- -- 20.0% 20.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
9.0% 10.0% -- -- -- -- -- -- -- -- -- --
9.0% 10.0% 9.0% 10.0% 12.0% 13.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
Responses 8 8 6 6 7 7 7 7 7 7 7 7
Average (%) 10.0% 10.4% 9.7% 10.3% 12.8% 13.1% 3.3% 4.7% 3.5% 4.0% 8.3 9.7
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
8.0% 9.0% 9.5% 10.0% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
8.0% 10.0% 8.5% 9.0% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0 10.0 10.0
10.0% 10.0% 10.0% 10.0% 13.0% 13.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.5% 9.5% 10.5% 10.5% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
12.0% 12.0% -- -- 13.0% 13.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
-- -- -- -- 12.0% 13.0% 4.0% 4.0% 4.0% 4.0 5.0 10.0
Responses 8 8 7 7 9 9 9 9 9 9 9 9
Average (%) 9.4% 10.0% 9.6% 10.2% 12.8% 13.5% 3.5% 4.6% 3.5% 3.9% 7.6 8.9
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
12.0% 12.0% 12.0% 12.0% 15.0% 15.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.8% 9.8% 10.8% 10.8% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
14.0% 14.0% -- -- 20.0% 20.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 11.0% 14.0% 14.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 6 6 5 5 6 6 6 6 6 6 6 6
Average (%) 10.7% 11.0% 10.5% 11.2% 14.6% 15.3% 3.2% 4.8% 3.3% 3.9% 8.0 8.8
--------------------------------------------------------------------------------------------------------
Total Responses 33 33 28 28 33 33 33 33 33 33 33 33
Weighted Average (%) 9.8% 10.3% 9.7% 10.3% 13.0% 13.5% 3.3% 4.6% 3.4% 3.9% 8.1 9.2
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
8 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET OFFICE MARKET - SUBURBAN/NON - CBD
- ------------------------------------------------------------------------------------------------------------------------------------
9.5% 9.5% 10.5% 10.5% 10.5% 10.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.5% 8.5% 9.3% 9.3% 11.3% 11.3% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
11.0% 11.0% -- -- 12.0% 12.0% 5.0% 3.0% 3.0% 3.0% 5.0 7.0
8.5% 10.0% 9.0% 10.5% 11.0% 12.5% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
8.0% 10.0% 9.5% 10.0% 11.5% 12.0% 4.0% 6.0% 4.0% 4.0% 10.0 10.0
l0.0% 11.0% 10.5% 11.0% 12.0% 12.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.0% 9.0% 8.5% 8.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
8.0% 8.0% 8.5% 8.5% 10.5% 10.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.1% 9.1% 10.1% l0.1% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 10.0% 9.0% 10.5% 11.0% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
9.0% 9.0% 10.0% 10.0% 11.5% 11.5% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.0% 9.0% 9.0% 9.0% 12.0% 13.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.0% 10.0% -- -- -- -- -- -- -- -- --
8.0% 9.0% 8.0% 9.0% 10.0% 12.0% 5.0% 5.0% 4.0% 4.0% 5.0 10.0
Responses 16 16 14 14 15 15 15 15 15 15 15 15
Average (%) 8.8% 9.5% 9.3% 9.9% 11.2% 11.6% 3.5% 4.4% 3.6% 3.8% 8.9 9.7
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
9.5% 9.5% 10.5% 10.5% 10.5% 10.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.8% 8.8% 9.5% 9.5% 11.8% 11.8% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
12.0% 12.0% -- -- 18.0% 18.0% 5.0% 3.0% 3.0% 3.0% 5.0 7.0
10.5% 10.5% 10.0% 10.0% 11.0% 13.0% 2.0% 2.0% 2.0% 2.0% 10.0 10.0
8.0% 10.0% 9.5% 10.0% 11.0% 12.0% 4.0% 6.0% 4.0% 4.0% 10.0 10.0
9.0% 10.0% 9.0% 9.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.0% 11.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.4% 9.4% 10.4% 10.4% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 10.0% 14.0% 15.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
10.0% 11.0% -- -- -- -- -- -- -- -- -- --
10.0% 11.0% 10.0% 11.0% 12.0% 13.0% 5.0% 5.0% 4.0% 4.0% 5.0 10.0
Responses 13 13 11 11 12 12 12 12 12 12 12 12
Average (%) 9.5% 10.0% 9.8% 10.2% 12.0% 12.5% 3.4% 4.5% 3.4% 3.7% 8.6 9.6
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% -- -- 13.0% 13.0% 3.0% 3.0% 3.0% 3.0% 5.0 7.0
8.0% 10.0% 8.5% 9.0% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
10.0% 10.0% 10.0% 10.0% 12.5% 12.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.4% 9.4% 10.4% 10.4% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
6.0% 6.0% 9.0% 9.0% 17.0% 20.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.0% 10.0% -- -- -- -- -- -- -- -- -- --
12.0% 12.0% 10.0% 10.0% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 2.0 2.0
Responses 10 10 8 8 9 9 9 9 9 9 9 9
Average (%) 9.1% 9.7% 9.5% 10.0% 13.4% 14.3% 3.1% 4.6% 3.4% 3.8% 7.2 8.0
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% -- -- 18.0% 18.0% 3.0% 3.0% 3.0% 3.0% 5.0 7.0
10.5% 10.5% 10.0% 10.0% 11.0% 13.0% 2.0% 2.0% 2.0% 2.0% 10.0 10.0
11.0% 11.0% 11.0% 11.0% 14.0% 14.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.6% 9.6% 10.6% 10.6% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
6.0% 6.0% 10.0% 10.0% 20.0% 20.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.0% 10.0% -- -- -- -- -- -- -- -- -- --
12.0% 12.0% 10.0% 10.0% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 2.0 2.0
Responses 10 10 8 8 9 9 9 9 9 9 9 9
Average (%) 9.7% 10.0% 10.0% 10.5% 14.5% 15.2% 2.9% 4.3% 3.2% 3.6% 7.2 8.0
--------------------------------------------------------------------------------------------------------
Total Responses 49 49 41 41 45 45 45 45 45 45 45 45
Weighted Average (%) 9.3% 9.8% 9.7% 10.1% 12.8% 13.4% 3.2% 4.4% 3.4% 3.7% 8.0 8.8
--------------------------------------------------------------------------------------------------------
</TABLE>
AUTUMN 1996 9
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET INDUSTRIAL MARKET - WAREHOUSE DISTRIBUTION
- ------------------------------------------------------------------------------------------------------------------------------------
9.2% 9.2% 9.5% 9.5% 10.0% 10.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.5% 8.5% 9.3% 9.3% 11.0% 11.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
8.5% 10.0% 9.5% 10.0% 11.0% 12.0% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
9.0% 9.0% 9.5% 9.5% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
8.0% 8.0% 8.5% 8.5% 10.5% 10.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 10.0% 9.0% 10.5% 11.0% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
9.0% 9.0% 10.0% 10.0% 11.0% 11.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
9.0% 9.0% 9.5% 9.5% 10.5% 10.5% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 10 10 10 10 10 10 10 10 10 10 10 10
Average (%) 8.8% 9.2% 9.4% 9.8% 10.9% 11.0% 2.9% 4.0% 3.3% 3.8% 9.8 10.1
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
9.2% 9.2% 9.5% 9.5% 10.0% 10.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.8% 8.8% 9.5% 9.5% 11.3% 11.3% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.5% 11.5% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
10.0% 10.0% 11.0% 11.0% 12.0% 12.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.8% 9.8% 10.3% 10.3% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 7 7 7 7 7 7 7 7 7 7 7 7
Average (%) 9.3% 9.5% 10.0% 10.2% 11.2% 11.2% 2.8% 4.3% 3.2% 3.9% 9.7 10.1
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 12.0% 12.0% 13.0% 13.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.8% 9.8% 10.3% 10.3% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 9.7% 9.9% 10.4% 10.8% 11.9% 11.9% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
12.0% 12.0% 13.0% 13.0% 14.0% 14.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 10.0% 10.5% 10.5% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.5% 10.5% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 10.1% 10.4% 10.9% 11.3% 12.4% 12.4% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
--------------------------------------------------------------------------------------------------------
Total Responses 25 25 25 25 25 25 25 25 25 25 25 25
Weighted Average (%) 9.5% 9.7% 10.2% 10.5% 11.6% 11.6% 2.6% 4.5% 3.2% 4.0% 9.6 10.2
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
10 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET INDUSTRIAL MARKET - BUSINESS PARKS, OTHER INDUSTRIAL & MANUFACTURING
- ------------------------------------------------------------------------------------------------------------------------------------
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 10.0 10.0
9.0% 9.0% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 3 3 4 4 4 4 4 4 4 4
Average (%) 8.9% 9.4% 9.7% 10.7% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.8 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.5% 10.5% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 10.0 10.0
10.0% 10.0% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 3 3 4 4 4 4 4 4 4 4
Average (%) 9.3% 9.8% 9.8% 10.8% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.8 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.5% 10.5% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 5 5 4 4 5 5 5 5 5 5 5 5
Average (%) 9.4% 10.0% 9.9% 10.9% 12.4% 13.2% 3.4% 4.0% 3.2% 3.8% 8.2 9.4
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.5% 10.5% 11.0% 11.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.5% 10.5% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 5 5 4 4 5 5 5 5 5 5 5 5
Average (%) 9.6% 10.2% 10.0% 11.0% 12.4% 13.2% 3.4% 4.0% 3.2% 3.8% 8.2 9.4
--------------------------------------------------------------------------------------------------------
Total Responses 18 18 14 14 18 18 18 18 18 18 18 18
Weighted Average(%) 9.3% 9.8% 9.8% 10.8% 12.0% 12.4% 3.3% 4.0% 3.2% 3.9% 8.5 9.8
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
AUTUMN 1996 11
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET RETAIL MARKET - NEIGHBORHOOD & COMMUNITY CENTERS
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 10.5% 9.5% 10.5% 11.0% 12.5% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
9.5% 10.0% 10.0% 10.0% 12.5% 12.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
10.0% 10.0% 10.5% 10.5% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
10.3% 10.3% 10.8% 10.8% 13.0% 13.0% 2.0% 2.0% 4.0% 4.0% 7.0 7.0
9.0% 9.0% 10.0% 10.0% 10.0% 10.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
9.8% 9.8% 10.3% 10.3% 11.5% 11.5% 3.8% 4.0% 4.0% 4.0% 10.0 10.0
9.0% 10.0% -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
9.0% 9.0% 9.5% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
Responses 9 9 8 8 8 8 9 9 9 9 9 9
Average (%) 9.3% 9.8% 10.0% 10.4% 11.9% 12.1% 2.9% 3.7% 3.4% 3.9% 8.9 9.4
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
10.8% 10.8% 11.3% 11.3% 14.0% 14.0% 2.0% 2.0% 4.0% 4.0% 7.0 7.0
10.0% 10.0% 11.0% 11.0% 12.0% 12.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
9.0% 10.0% -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 11.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.5% 10.5% -- -- -- -- -- -- -- -- -- --
Responses 6 6 4 4 4 4 5 5 5 5 5 5
Average (%) 9.5% 10.0% 10.4% 11.1% 12.3% 12.3% 2.3% 3.8% 3.3% 4.2% 9.0 9.6
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 12.0% 12.0% 13.0% 13.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 10.0 10.0
9.0% 10.0% -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 9.5% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.0% 10.0% -- -- -- -- -- -- -- --
11.0% 11.0% 9.5% 9.5% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 3.0 3.0
Responses 7 7 5 5 5 5 6 6 6 6 6 6
Average (%) 9.7% 10.3% 10.1% 10.7% 13.8% 14.6% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
13.0% 13.0% 14.0% 14.0% 14.0% 14.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 10.0 10.0
9.0% 10.0% -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 11.0% 14.0% 14.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
11.0% 11.0% 10.5% 10.5% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 3.0 3.0
Responses 6 6 5 5 5 5 6 6 6 6 6 6
Average (%) 10.3% 10.8% 10.8% 11.5% 14.2% 15.0% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
--------------------------------------------------------------------------------------------------------
Total Responses 28 28 22 22 22 22 26 26 26 26 26 26
Weighted Average (%) 9.7% 10.2% 10.3% 10.9% 13.0% 13.5% 2.7% 3.9% 3.2% 4.0% 8.7 9.3
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
12 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET RETAIL MARKET - POWER CENTERS & "BIG BOX"
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 9.0% 9.5% 9.5% 11.0% 11.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
10.0% 10.0% 9.5% 9.5% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
10.5% 10.5% 10.5% 10.5% 11.0% 12.0% 2.0% 2.0% 3.0% 3.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.4% 11.4% 3.8% 3.8% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 9.5% 10.0% 11.0% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
9.3% 9.3% 9.5% 10.0% 10.5% 10.5% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.0% 9.0% -- -- -- -- -- -- -- -- --
9.0% 9.5% 9.5% 10.0% 11.0% 11.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
Responses 9 9 8 8 8 8 8 8 8 8 8 8
Average (%) 9.4% 9.5% 9.7% 10.1% 11.5% 11.7% 3.3% 3.5% 3.4% 3.7% 9.1 10.1
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
10.8% 10.8% 10.8% 10.8% 11.0% 12.0% 2.0% 3.0% 3.0% 3.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 3 3 3 3 3 3 3 3 3 3 3 3
Average (%) 9.8% 10.1% 10.1% 10.6% 11.0% 11.3% 2.8% 3.7% 3.2% 3.7% 9.3 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.8% 10.8% 10.8% 10.8% 12.0% 12.0% 2.0% 2.0% 3.0% 3.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 3 3 3 3 3 3 3 3 3 3 3 3
Average (%) 9.6% 9.9% 10.1% 10.6% 12.0% 12.0% 2.8% 3.3% 3.2% 3.7% 9.3 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 10.8% 10.8% 12.0% 12.0% 2.0% 2.0% 3.0% 3.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
-- -- -- -- 15.0% 15.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 2 2 2 2 3 3 3 3 3 3 3 3
Average (%) 9.8% 10.3% 10.1% 10.9% 12.7% 12.7% 2.8% 3.3% 3.2% 3.7% 9.3 10.3
--------------------------------------------------------------------------------------------------------
Total Responses 17 17 16 16 17 17 17 17 17 17 17 17
Weighted Average (%) 9.6% 9.9% 10.0% 10.5% 11.8% 11.9% 2.9% 3.5% 3.2% 3.7% 9.3 10.3
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
AUTUMN 1996 13
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET RETAIL MARKET - REGIONAL MALLS
- ------------------------------------------------------------------------------------------------------------------------------------
7.5% 7.5% 8.0% 8.0% 11.3% 11.3% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.0% 9.0% 9.0% 9.0% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
7.5% 7.5% 7.8% 7.8% 12.0% 12.0% 1.5% 2.0% 3.0% 3.0% 10.0 10.0
7.0% 8.0% 8.0% 8.0% 10.5% 11.5% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
9.0% -- -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.0% 8.0% 9.0% 10.5% 11.0% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
8.0% 8.0% 8.5% 8.5% 11.0% 11.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
7.8% 8.0% 8.3% 8.5% 11.0% 12.0% 2.5% 3.0% 2.5% 3.0% 10.0 10.0
7.0% 8.0% 7.0% 8.0% 10.0% 11.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
Responses 10 9 9 9 9 9 10 10 10 10 10 10
Average (%) 7.9% 8.2% 8.2% 8.6% 11.4% 11.8% 3.0% 3.6% 3.5% 3.8% 9.1 9.6
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 10.0% 10.0% 17.0% 17.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
9.0% 9.0% 9.0% 9.0% 13.5% 13.5% 2.0% 2.0% 4.0% 4.0% 7.0 7.0
9.0% 10.0% 10.0% 10.0% 12.0% 14.0% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
10.0% -- -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
Responses 5 4 4 4 4 4 5 5 5 5 5 5
Average (%) 9.3% 9.6% 9.6% 10.0% 13.4% 13.9% 2.5% 3.4% 3.7% 4.0% 8.6 8.6
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 10.0% 10.0% 18.0% 18.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
11.0% 11.0% 11.0% 11.0% 13.0% 14.0% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
9.0% -- -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.5% 8.5% 9.0% 11.5% 12.5% 2.5% 3.0% 2.5% 3.0% 10.0 10.0
Responses 5 4 4 4 4 4 5 5 5 5 5 5
Average (%) 9.3% 9.8% 9.8% 10.3% 13.4% 13.9% 2.6% 3.6% 3.4% 3.8% 9.2 9.2
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 11.0% 11.0% 20.0% 20.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
12.5% 12.5% 12.0% 12.0% 14.0% 15.0% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
10.0% -- -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 9.0% 9.3% 9.8% 12.0% 13.0% 2.5% 3.0% 2.5% 3.0% 10.0 10.0
13.0% 13.0% 11.0% 11.0% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 3.0 3.0
Responses 6 5 5 5 5 5 6 6 6 6 6 6
Average (%) 10.6% 11.0% 10.6% 11.0% 14.6% 15.0% 2.7% 3.5% 3.3% 3.7% 8.2 8.2
--------------------------------------------------------------------------------------------------------
Total Responses 26 22 22 22 22 22 26 26 26 26 26 26
Weighted Average (%) 9.3% 9.6% 9.5% 10.0% 13.2% 13.6% 2.7% 3.5% 3.5% 3.8% 8.8 8.9
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
14 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET RESIDENTIAL - APARTMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
8.5% 10.0% 9.0% 10.5% -- -- -- -- 3.5% 3.5% 1.0 1.0
8.5% 9.0% 9.0% 9.0% 11.0% 11.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
9.8% 9.8% 10.0% 10.0% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
8.3% 9.0% 9.0% 9.5% 10.5% 11.5% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
7.5% 8.5% 8.0% 9.0% 10.0% 11.0% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.8% 8.8% 9.0% 9.0% 11.3% 11.3% 3.8% 4.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 9.0% 9.0% 9.5% 10.0% 11.5% 3.0% 4.0% 3.0% 3.0% 10.0 10.0
8.5% 9.0% 8.5% 9.0% -- -- 3.0% 3.5% 3.0% 3.5% 10.0 10.0
8.8% 9.0% 9.0% 9.5% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 10 10 10 10 8 8 9 9 10 l0 l0 10
Average (%) 8.6% 9.2% 9.0% 9.6% 11.2% 11.7% 2.9% 3.9% 3.3% 3.8% 8.4 8.9
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 9.5% 9.5% 10.0% 11.0% 12.0% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
9.0% 10.0% 10.0% 10.0% 11.0% 12.5% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.0% 10.0% 10.0% 10.5% 10.5% 12.0% 3.0% 4.0% 3.0% 3.0% 10.0 10.0
9.0% 9.5% 9.5% 10.0% 11.5% 11.5% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 5 5 5 5 5 5 5 5 5 5 5 5
Average (%) 8.9% 9.7% 9.7% 10.3% 11.0% 11.8% 2.5% 4.2% 3.1% 4.0% 9.6 10.2
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 11.0% 11.0% 11.0% 12.5% 13.5% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.0% 9.0% 9.0% 11.0% 12.0% 4.0% 6.0% 3.0% 3.0% 3.0 5.0
9.0% 9.0% 9.5% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 8.9% 9.4% 9.8% 10.3% 11.6% 12.1% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
12.0% 13.0% 13.0% 13.0% 13.0% 15.0% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.0% 10.0% 10.0% 11.0% 13.0% 4.0% 6.0% 3.0% 3.0% 3.0 5.0
9.5% 10.0% 10.0% 11.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 9.5% 10.1% 10.6% 11.3% 12.0% 13.0% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
Total Responses 23 23 23 23 21 21 22 22 23 23 23 23
Weighted Average (%) 9.0% 9.6% 9.8% 10.4% 11.5% 12.1% 2.7% 4.4% 3.2% 4.0% 8.4 9.3
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical
issues
AUTUMN 1996 15
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICE SUMMARY OF WEIGHTED AVERAGE
- ------------------------------------------------------------------------------------------------------------------------------------
Urban/CBD 9.8% 10.3% 9.7% 10.3% 13.0% 13.5% 3.3% 4.6% 3.4% 3.9% 8.1 9.2
Class A - Leased Asset 9.2% 9.6% 9.2% 9.7% 11.7% 12.0% 3.3% 4.2% 3.4% 3.9% 8.5 9.5
Class B - Leased Asset 10.0% 10.4% 9.7% 10.3% 12.8% 13.1% 3.3% 4.7% 3.5% 4.0% 8.3 9.7
Class A - Value Added 9.4% 10.0% 9.6% 10.2% 12.8% 13.5% 3.5% 4.6% 3.5% 3.9 7.6 8.9
Class B - Value Added 10.7% 11.0% 10.5% 11.2% 14.6% 15.3% 3.2% 4.8% 3.3% 3.9% 8.0 8.8
Suburban 9.3% 9.8% 9.7% 10.1% 12.8% 13.4% 3.2% 4.4% 3.4% 3.7% 8.0 8.8
Class A - Leased Asset 8.8% 9.5% 9.3% 9.9% 11.2% 11.6% 3.5% 4.4% 3.6% 3.8% 8.9 9.7
Class B - Leased Asset 9.5% 10.0% 9.8% 10.2% 12.0% 12.5% 3.4% 4.5% 3.4% 3.7% 8.6 9.6
Class A - Value Added 9.1% 9.7% 9.5% 10.0% 13.4% 14.3% 3.1% 4.6% 3.4% 3.8% 7.2 8.0
Class B - Value Added 9.7% 10.0% 10.0% 10.5% 14.5% 15.2% 2.9% 4.3% 3.2% 3.6% 7.2 8.0
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL
- ------------------------------------------------------------------------------------------------------------------------------------
Warehouse/Distribution 9.5% 9.7% 10.2% 10.5% 11.6% 11.6% 2.6% 4.5% 3.2% 4.0% 9.6 10.2
Class A - Leased Asset 8.8% 9.2% 9.4% 9.8% 10.9% 11.0% 2.9% 4.0% 3.3% 3.8% 9.8 10.1
Class B - Leased Asset 9.3% 9.5% 10.0% 10.2% 11.2% 11.2% 2.8% 4.3% 3.2% 3.9% 9.7 10.1
Class A - Value Added 9.7% 9.9% 10.4% 10.8% 11.9% 11.9% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
Class 8 - Value Added 10.1% 10.4% 10.9% 11.3% 12.4% 12.4% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
Business Parks 9.4% 9.9% 10.0% 10.8% 12.3% 12.9% 3.4% 4.0% 3.2% 3.8% 8.3 9.6
Class A - Leased Asset 9.0% 9.5% 9.8% 10.5% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
Class B - Leased Asset 9.3% 9.8% 10.0% 10.8% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
Class A - Value Added 9.5% 10.2% 10.0% 10.8% 13.0% 14.3% 3.5% 4.0% 3.2% 3.7% 7.7 8.7
Class B - Value Added 9.7% 10.3% 10.2% 11.0% 13.0% 14.3% 3.5% 4.0% 3.2% 3.7% 7.7 8.7
0ther Industrial/
Manufacturing 9.2% 9.7% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.8 10.3
Class A - Leased Asset 8.8% 9.3% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.5 10.0
Class B - Leased Asset 9.3% 9.8% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.5 10.0
Class A - Value Added 9.3% 9.8% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
Class B - Value Added 9.5% 10.0% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
- ------------------------------------------------------------------------------------------------------------------------------------
RETAIL
- ------------------------------------------------------------------------------------------------------------------------------------
Neighborhood & Community
Centers 9.7% 10.2% 10.3% 10.9% 13.0% 13.5% 2.7% 3.9% 3.2% 4.0% 8.7 9.3
Class A - Leased Asset 9.3% 9.8% 10.0% 10.4% 11.9% 12.1% 2.9% 3.7% 3.4% 3.9% 8.9 9.4
Class B - Leased Asset 9.5% 10.0% 10.4% 11.1% 12.3% 12.3% 2.3% 3.8% 3.3% 4.2% 9.0 9.6
Class A - Value Added 9.7% 10.3% 10.1% 10.7% 13.8% 14.6% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
Class B - Value Added 10.3% 10.8% 10.8% 11.5% 14.2% 15.0% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
Power Center & "Big Box" 9.6% 9.9% 10.0% 10.5% 11.8% 11.9% 2.9% 3.5% 3.2% 3.7% 9.3 10.3
Class A - Leased Asset 9.4% 9.5% 9.7% 10.1% 11.5% 11.7% 3.3% 3.5% 3.4% 3.7% 9.1 10.1
Class B - Leased Asset 9.8% 10.1% 10.1% 10.6% 11.0% 11.3% 2.8% 3.7% 3.2% 3.7% 9.3 10.3
Class A - Value Added 9.6% 9.9% 10.1% 10.6% 12.0% 12.0% 2.8% 3.3% 3.2% 3.7% 9.3 10.3
Class B - Value Added 9.8% 10.3% 10.1% 10.9% 12.7% 12.7% 2.8% 3.3 3.2% 3.7% 9.3 10.3
Regional Malls 9.3% 9.6% 9.5% 10.0% 13.2% 13.6% 2.7% 3.5% 3.5% 3.8% 8.8 8.9
Class A - Leased Asset 7.9% 8.2% 8.2% 8.6% 11.4% 11.8% 3.0% 3.6% 3.5% 3.8% 9.1 9.6
Class B - Leased Asset 9.3% 9.6% 9.6% 10.0% 13.4% 13.9% 2.5% 3.4% 3.7% 4.0% 8.6 8.6
Class A - Value Added 9.3% 9.8% 9.8% 10.3% 13.4% 13.9% 2.6% 3.6% 3.4% 3.8% 9.2 9.2
Class B - Value Added 10.6% 11.0% 10.6% 11.0% 14.6% 15.0% 2.7% 3.5% 3.3% 3.7% 8.2 8.2
Specialty Retail 9.5% 10.5% 10.8% 11.5% 12.0% 12.6 1.9% 4.0% 3.3% 4.0% 10.0 10.5
Class A - Leased Asset 8.2% 9.0% 8.8% 9.7% 10.7% 11.3% 2.5% 4.0% 3.5% 4.0% 8.7 10.3
Class B - Leased Asset 9.3% 10.3% 10.8% 11.5% 11.5% 12.5% 1.8% 4.0% 3.3% 4.0% 10.5 10.5
Class A - Value Added 10.0% 11.0% 11.3% 12.0% 12.5% 13.0% 1.8% 4.0% 3.3% 4.0% 10.5 10.5
Class B - Value Added 10.8% 11.8% 12.3% 13.0% 13.5% 13.5% 1.8% 4.0% 3.3% 4.0% 10.5 10.5
- ------------------------------------------------------------------------------------------------------------------------------------
RESIDENTIAL
- ------------------------------------------------------------------------------------------------------------------------------------
Apartments 9.0% 9.6% 9.8% 10.4% 11.5% 12.1% 2.7% 4.4% 3.2% 4.0% 8.4 9.3
Class A - Leased Asset 8.6% 9.2% 9.0% 9.6% 11.2% 11.7% 2.9% 3.9% 3.3% 3.8% 8.4 8.9
Class B - Leased Asset 8.9% 9.7% 9.7% 10.3% 11.0% 11.8% 2.5% 4.2% 3.1% 4.0% 9.6 10.2
Class A - Value Added 8.9% 9.4% 9.8% 10.3% 11.6% 12.1% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
Class B - Value Added 9.5% 10.1% 10.6% 11.3% 12.0% 13.0% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
</TABLE>
16 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
Single-Tenant NNIN Leased Properties
(Excludes "Bondable" Leases)
Minimum No. Going-In Cap Rate Internal Rate of Return
of Years Low High Low High
Investment Grade Tenant
- --------------------------------------------------------------------------------
4.0 9.0% 9.0% 10.0% 12.0%
----------------------------------------------------------
10.0 8.0 9.0 10.5 11.5
----------------------------------------------------------
5.0 10.5 10.5 13.0 13.0
----------------------------------------------------------
10.0 9.0 10.5 13.0 15.0
----------------------------------------------------------
10.0 8.5 9.0 10.5 12.0
----------------------------------------------------------
10.0 9.5 10.0 10.5 11.5
----------------------------------------------------------
10.0 8.5 11.0 10.8 12.0
----------------------------------------------------------
10.0 9.5 9.5 11.0 11.0
----------------------------------------------------------
20.0 9.0 9.0 N/A N/A
----------------------------------------------------------
10.0 8.0 10.0 N/A N/A
- --------------------------------------------------------------------------------
Responses 10.0 10.0 10.0 8.0 8.0
Average 9.9 9.0% 9.8% 11.2% 12.3%
Non-Investment Grade
Tenant
- --------------------------------------------------------------------------------
4.0 9.5% 9.5% 10.5% 13.0%
----------------------------------------------------------
10.0 9.0 10.0 11.5 12.5
----------------------------------------------------------
5.0 13.0 13.0 15.0 15.0
----------------------------------------------------------
10.0 10.0 12.0 17.0 20.0
----------------------------------------------------------
10.0 9.0 10.0 11.0 13.0
----------------------------------------------------------
10.0 11.0 12.0 13.0 15.0
----------------------------------------------------------
10.0 10.5 10.5 13.0 13.0
----------------------------------------------------------
20.0 11.0 11.0 N/A N/A
----------------------------------------------------------
10.0 10.0 12.5 N/A N/A
----------------------------------------------------------
Responses 9.0 9.0 9.0 7.0 7.0
Average 9.9 10.3% 11.2% 13.0% 14.5%
AUTUMN 1996 17
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES BLENDED INTERNAL EQUITY INTERNAL GROWTH RATES TYPICAL PROJECTION MANAGEMENT RESERVES FOR
GOING-IN TERMINAL RATE OF RETURN RATE OF RETURN INCOME EXPENSES PERIOD (YEARS) FEES* REPLACEMENT*
----------------------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
LUXURY
- ------------------------------------------------------------------------------------------------------------------------------------
8.0% 8.0% 10.0% 10.0% 18.0% 18.0% 25.0% 25.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 5.0% 5.0%
7.0% 7.0% 10.0% 10.0% 15.0% 15.0% 20.0% 20.0% 7.0% 7.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
6.0% 9.5% 10.0% 10.0% 12.0% 15.0% 15.0% 18.0% 3.0% 3.0% 3.0% 3.0% 5.0 5.0 2.0% 4.0% 4.0% 4.0%
8.0% 11.0% 8.5% 12.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
9.5% 9.5% 10.5% 10.5% 15.0% 15.0% 18.0% 18.0% 4.5% 4.5% 4.0% 4.0% 10.0 10.0 3.5% 3.5% 4.0% 4.0%
-- -- 11.0% 13.0% 15.0% 15.0% 18.0% 18.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0 3.0% 3.0% 4.0% 4.0%
6.0% 8.0% 10.0% 12.0% 13.0% 14.0% 20.0% 22.0% 3.0% 4.0% 3.0% 4.0% 5.0 5.0 2.0% 3.0% 4.0% 5.0%
8.0% 12.0% 8.0% 10.0% 15.0% 15.0% 20.0% 20.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0 3.0% 4.0% 4.0% 5.0%
Responses 7 7 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8
Average (%) 7.5% 9.3% 9.8% 10.9% 14.5% 15.3% 19.5% 20.1% 4.1% 4.3% 3.8% 3.9% 6.5 6.9 2.8% 3.3% 4.1% 4.4%
- ------------------------------------------------------------------------------------------------------------------------------------
FIRST CLASS
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 9.0% 11.0% 11.0% 12.0% 12.0% 20.0% 20.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
10.0% 10.0% 10.0% 10.0% -- -- 13.0% 13.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0 3.0% 3.0% 4.0% 5.0%
9.0% 9.0% 11.0% 11.0% 14.0% 14.0% 18.0% 18.0% 6.0% 6.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
9.5% 11.0% 11.0% 11.0% 15.0% 20.0% 18.0% 22.0% 3.0% 3.0% 2.0% 2.0% 5.0 5.0 2.0% 3.0% 4.0% 4.0%
10.0% 12.0% 10.5% 13.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
7.0% 9.0% 10.0% 11.0% 11.5% 12.0% 14.0% 16.0% 4.0% 5.0% 3.0% 4.0% 5.0 5.0 2.5% 2.5% 5.0% 5.0%
9.5% 9.5% 10.5% 10.5% 15.0% 15.0% 18.0% 18.0% 4.5% 4.5% 4.0% 4.0% 10.0 10.0 3.5% 3.5% 4.0% 4.0%
9.0% 9.0% 10.5% 10.5% 21.0% 21.0% 14.0% 14.0% 4.0% 4.0% 3.0% 3.0% 7.0 7.0 3.0% 3.0% 4.0% 4.0%
10.0% 12.0% 11.0% 11.0% -- -- -- -- 3.5% 3.5% 3.5% 3.5% 5.0 10.0 2.0% 3.0% 4.0% 4.0%
10.0% 10.0% 9.0% 9.5% 19.0% 19.0% 15.0% 15.0% 8.0% 8.0% 6.0% 6.0% -- -- 2.5% 2.5% 4.0% 4.0%
10.0% 13.0% 12.0% 13.0% 25.0% 25.0% 20.0% 20.0% 3.5% 4.0% 3.5% 4.0% 5.0 5.0 3.5% 3.5% 4.0% 4.0%
10.5% 10.5% 10.5% 10.5% 13.5% 13.5% -- -- 3.5% 3.5% 3.5% 3.5% 10.0 10.0 3.0% 3.0% 5.0% 5.0%
8.0% 12.0% 8.0% 10.0% 15.0% 15.0% 20.0% 20.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0 3.0% 4.0% 4.0% 5.0%
Responses 13 13 13 13 11 11 11 11 13 13 13 13 12 12 13 13 13 13
Average (%) 9.3% 10.5% 10.4% 10.9% 15.8% 16.5% 17.3% 17.8% 4.2% 4.3% 3.7% 3.8% 6.6 7.3 2.8% 3.1% 4.2% 4.3%
- ------------------------------------------------------------------------------------------------------------------------------------
MID-RATE
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 12.0% 12.0% 15.0% 15.0% 18.0% 18.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
11.0% 11.0% 11.0% 11.0% 13.0% 13.0% 17.0% 17.0% 6.0% 6.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
9.5% 11.0% 11.0% 11.0% 15.0% 18.0% 17.0% 20.0% 3.0% 3.0% 2.0% 2.0% 5.0 5.0 2.0% 3.0% 4.0% 4.0%
10.0% 12.0% 10.5% 13.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
9.5% 9.5% 10.5% 10.5% 15.0% 15.0% 18.0% 18.0% 4.5% 4.5% 4.0% 4.0% 10.0 10.0 3.5% 3.5% 4.0% 4.0%
Responses 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5
Average (%) 10.0% 10.7% 11.0% 11.5% 14.2% 15.2% 18.0% 18.6% 4.2% 4.2% 3.7% 3.7% 6.4 7.0 2.9% 3.1% 4.0% 4.0%
----------------------------------------------------------------------------------------------------------------------
Total
Responses 25 25 26 26 24 24 24 24 26 26 26 26 25 25 26 26 26 26
Weighted
Average (%) 8.9% 10.1% 10.4% 11.1% 14.8% 15.7% 18.3% 18.8% 4.2% 4.3% 3.7% 3.8% 6.5 7.0 2.9% 3.2% 4.1% 4.2%
----------------------------------------------------------------------------------------------------------------------
</TABLE>
*as percent of total revenues
18 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES BLENDED INTERNAL EQUITY INTERNAL GROWTH RATES TYPICAL PROJECTION MANAGEMENT RESERVES FOR
GOING-IN TERMINAL RATE OF RETURN RATE OF RETURN INCOME EXPENSES PERIOD (YEARS) FEES* REPLACEMENT*
----------------------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
MID-RATE HOTEL - LIMITED SERVICE
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 12.0% 12.0% 15.0% 15.0% 15.0% 15.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
12.0% 12.0% 12.0% 12.0% 13.0% 13.0% 17.0% 17.0% 3.0% 3.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
8.0% 10.0% 10.0% 10.0% 12.0% 15.0% 14.0% 16.0% 3.0% 3.0% 2.0% 2.0% 5.0 5.0 3.0% 4.0% 4.0% 5.0%
11.0% 13.0% 11.5% 14.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
11.0% 11.0% 11.8% 11.8% 16.0% 16.0% 19.0% 19.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0 4.0% 4.0% 4.5% 4.5%
10.0% 13.0% 12.0% 13.0% 25.0% 25.0% 20.0% 20.0% 3.5% 4.0% 3.5% 4.0% 5.0 5.0 4.0% 4.0% 5.0% 5.0%
Responses 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 5 5
Average (%) 10.3% 11.5% 11.5% 12.1% 15.7% 16.5% 17.5% 17.8% 3.5% 3.6% 3.7% 3.8% 6.2 6.7 3.3% 3.5% 4.3% 4.4%
- ------------------------------------------------------------------------------------------------------------------------------------
ECONOMY
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 12.0% 12.0% 15.0% 15.0% 15.0% 15.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
13.0% 13.0% 13.0% 13.0% 13.0% 13.0% 17.0% 17.0% 3.0% 3.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
9.0% 11.0% 10.0% 10.0% 12.0% 15.0% 14.0% 16.0% 3.0% 3.0% 3.0% 3.0% 5.0 5.0 4.0% 5.0% 5.0% 5.0%
11.0% 13.0% 11.5% 14.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
11.0% 11.0% 11.8% 11.8% 16.0% 16.0% 19.0% 19.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0 4.0% 4.0% 4.5% 4.5%
Responses 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5
Average (%) 10.8% 11.6% 11.7% 12.2% 13.8% 14.8% 17.0% 17.4% 3.5% 3.5% 3.9% 3.9% 6.4 7.0 3.4% 3.6% 4.3% 4.3%
Total
Responses 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11
Weighted
Average(%) 10.6% 11.6% 11.6% 12.1% 14.7% 15.7% 17.3% 17.6% 3.5% 3.5% 3.8% 3.8% 6.3 6.8 3.4% 3.6% 4.3% 4.4%
</TABLE>
*as percent of total revenues
AUTUMN 1996 19
<PAGE>
Addenda
================================================================================
Qualifications of Appraisers
================================================================================
<PAGE>
QUALIFICATIONS
================================================================================
Donald R. Morris, MAI
Professional Affiliations:
Member of the Appraisal Institute (MAI Designations #9812)
District of Columbia Certified General Real Estate Appraiser (#GAOOO10267)
Commonwealth of Virginia Certified General Real Estate Appraiser
(#4001002465)
State of Maryland Certified General Real Estate Appraiser (#7220)
State of West Virginia Certified General Real Estate Appraiser (#237)
Appraisal/Real Estate Experience:
Director/Manager, Cushman & Wakefield of Washington, D.C. and Assistant
Manager, Cushman & Wakefield of Texas, Inc., Dallas, Texas, Valuation
Advisory Services, a full service real estate organization specializing in
appraisal and consultation. April 1990 to present.
Associate Appraiser, Joseph A. Dengel & Company, Dallas, Texas, May 1977
to April 1990.
Other real estate experience includes work as a residential listing and
selling agent preparing market analyses and origination contracts.
Experience includes appraisal of the following types of property:
Office Buildings Medical Office Buildings
Regional Malls Power Centers
Outlet Centers Community & Neighborhood Shopping Centers
Department Stores Industrial Buildings
Residential Subdivisions Single Family Residences
Multi-Family Properties Condominiums/Duplexes
Subdivision Analysis Farm/Ranch
Mixed Use Properties Golf Courses
Grape Vineyards Special Purpose Facilities
Commercial Land Hotel/Motel
Ad Valorem Tax Appeals
Appraisal and consulting services used for mortgage loans, relocations,
gift and estate tax, condemnation and litigation purposes.
Qualified as an expert witness in state and federal real estate court
cases.
Education:
Bachelor of Arts (Political Science), 1981
University of Texas at Arlington, Arlington, Texas.
<PAGE>
QUALIFICATIONS
================================================================================
Donald R. Morris, MAI
Appraisal Institute Courses:
#1A1 - Real Estate Appraisal Principles
#1A2 - Basic Valuation Procedures
#1B1 - Capitalization Theory & Techniques, Part A
#1B2 - Capitalization Theory & Techniques, Part B
#410 - Standards of Professional Appraisal Practice, Part A (USPAP)
#420 - Standards of Professional Appraisal Practice, Part B (Al)
#21 - Case Studies in Real Estate Valuation
#22 - Report Writing and Valuation Analysis
#82 - Residential Valuation Procedures
Additional Accredited Real Estate Courses:
Real Estate Appraisal
Principles of Real Estate
Real Estate Marketing
Real Estate Finance
Property Management
Federal National Mortgage Corporation (Fannie Mae) - Appraisal Training
Certified in the Appraisal's Institute's voluntary program of continuing
education for its designated members.
<PAGE>
QUALIFICATIONS
================================================================================
STEVEN A. STUDABAKER, MAI
Professional Affiliations:
Member of the Appraisal Institute (MAI Designations #10241)
Certified General Real Estate Appraiser District of Columbia -
(#GAOOO10046)
Certified General Real Estate Appraiser Commonwealth of Virginia -
(#4001001111)
Certified General Real Estate Appraiser State of Maryland - (#10057)
Board of Directors, Washington, D.C. Chapter of the Appraisal
Institute, 1995 & 1996
Appraisal/Real Estate Experience:
Associate Director, Cushman & Wakefield of Washington, D.C., Valuation
Advisory Services, a full service real estate organization specializing in
appraisal and consultation. Member of National Retail Valuation Group.
January, 1987 to present.
Office Buildings Medical Office Buildings
Biomedical Buildings Industrial Buildings
Regional Malls Power Centers
Outlet Centers Community & Neighborhood Shopping Centers
Department Stores Subdivision Development Analysis
Residential Subdivisions Bulk Single Family Lots
Multi-Family Properties Mixed Use Properties
Commercial Land Hotel
Fractional Interest Valuations Leasehold/Leased Fee Valuations
Ad Valorem Tax Appeals
Education:
Bachelor of Arts (International Affairs & Economics), 1975
University of Colorado, Boulder, Colorado
Masters in Business Administration (Finance), 1980
University of Southern California, Los Angeles, California
Additional Accredited Real Estate Courses:
Real Estate Investment Analysis
Subdivision Analysis
Comprehensive Appraisal Workshop
Appraisal Reporting of Complex Residential Properties
Continuing education for state licensing
This CD ROM contains an electronic version of appraisals for the Mortgaged
Properties in PDF format and forms part of the paper version of the Prospectus
Supplement. The information contained in this CD ROM does not appear elsewhere
in paper form in this Prospectus Supplement and must be considered as part of,
and together with, the information contained elsewhere in this Prospectus
Supplement and the Prospectus. The information contained in this CD ROM has
been filed by the Seller with the Securities and Exchange Commission as part
of a Current Report on Form 8-K, which is incorporated by reference in this
Prospectus Supplement, and is also available through the public reference
branch of the Securities and Exchange Commission. Defined terms used in this CD
ROM but not otherwise defined therein shall have the respective meanings
assigned to them in the paper portion of the Prospectus Supplement and the
Prospectus. All of the information contained in this CD ROM is subject to the
same limitations and qualifications contained in this Prospectus Supplement and
the Prospectus. Prospective investors are strongly urged to read the paper
portion of this Prospectus Supplement and the Prospectus in its entirety prior
to accessing this CD ROM. If this CD ROM was not received in a sealed package,
there can be no assurances that it remains in its original format and should
not be relied upon for any purpose. Prospective investors may contact J.
Theodore Borter of Goldman, Sachs Co. at (212)902-3857 to receive an original
copy of the CD ROM.
<PAGE>
COMPLETE APPRAISAL OF
REAL PROPERTY
One Northwest Centre
13831 Northwest Freeway
Houston, Harris County, Texas
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
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COMPLETE APPRAISAL OF
REAL PROPERTY
One Northwest Centre
13831 Northwest Freeway
Houston, Harris County, Texas
----------------------------------------------------------------------
IN A SUMMARY REPORT
As of July 25, 1996
Prepared For:
GMAC Commercial Mortgage Corporation
650 Dresher Road
Horsham, PA 19044-8015
Prepared By:
Cushman & Wakefield of Texas, Inc.
Valuation Advisory Services
1400 Three Lincoln Centre
5430 LBJ Freeway, LB 20
Dallas,Texas 75240
<PAGE>
Cushman & Wakefield of Texas, Inc. CUSHMAN &
Three Lincoln Centre WAKEFIELD(R)
5430 LBJ Freeway, Suite 1400/LB20
Dallas, TX 75240
(214)770-2500 Improving your place
in the world.
August 5, 1996
Ms. Avis Tsuya
Senior Underwriter
GMAC COMMERCIAL MORTGAGE CORPORATION
650 Dresher Road
Horsham, PA 19044-8015
RE: Appraisal of Real Property
One Northwest Centre
13831 Northwest Freeway
Houston, Harris County, Texas
Dear Ms. Tsuya:
In fulfillment of our agreement as outlined in the Letter of Engagement,
Cushman & Wakefield of Texas, Inc. is pleased to transmit our summary report
estimating the market value of the leased fee estate in the referenced property.
As specified in the Letter of Engagement, the value opinion reported below
is qualified by certain assumptions, limiting conditions, certifications, and
definitions, which are set forth in the report. We specifically call your
attention to the following special assumption:
1) A detailed set of the subject's building plans were not available.
Therefore, our estimates of the gross building and net rentable areas
were obtained from the rent roll and from information provided by the
management company. Any deviation from these building areas could
impact our value conclusion.
This is a complete appraisal prepared in accordance with the Uniform
Standards of Professional Appraisal Practice of The Appraisal Foundation. The
results of the appraisal are being conveyed in a Summary report according to our
agreement. Because this is a summary report, the level of detail of presentation
is less than that found in a self-contained report.
This report was prepared for GMAC Commercial Mortgage Corporation and it is
intended only for the specified use of said Client. It may not be distributed to
or relied upon by other persons or entities without written permission of the
Appraiser.
The property was inspected by and the report was prepared by David Heath,
MAI. Ronald W. Potts, MAI has reviewed the report and is in concurrence with the
findings herein.
<PAGE>
Ms. Avis Tsuya
August 5, 1996
Page 2
As a result of our analysis, we have formed an opinion that the market
value of the leased fee estate in the subject property, subject to the
assumptions, limiting conditions, certifications, and definitions, as of July
25, 1996 was:
SIX MILLION ONE HUNDRED THOUSAND DOLLARS
$6,100,000
The preceding estimate of market value is based upon a forecasted marketing
period of approximately 12 months, which we believe (through a review of recent
office building sale activity, as well as with conversations with local
office/investment brokers) is reasonably representative for this product type.
This letter is invalid as an opinion of value if detached from the report,
which contains the text, exhibits, and an Addenda.
Respectfully submitted,
CUSHMAN & WAKEFIELD OF TEXAS, INC.
/s/ David Heath
- ---------------
David Heath, MAI
Dallas Valuation Advisory Services
Certification No. TX-1323243-G
/s/ Ronald W. Potts
- -------------------
Ronald W. Potts, MAI
Director/Manager
Dallas Valuation Advisory Services
Certification No. TX-1321575-G
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
SUMMARY OF SALIENT FACTS AND CONCLUSIONS
================================================================================
Property Name: One Northwest Centre
Location: The subject property is located at the
southwest corner of Northwest Freeway (SH
290) and W. Tidwell Road. The street
address is 13831 Northwest Freeway,
Houston, Harris County, Texas.
Harris County Appraisal
District Tax I.D. No.: 038-290-003-0027
Interest Appraised: Leased fee estate
Date of Value: July 25, 1996
Date of Inspection: July 25, 1996
Ownership: SKW 11 Real Estate LTD Partnership
Land Area: 2.725 acres or 118,701 square feet
1996 Property Assessment
Land: $ 949,610
Building: $2,550,390
----------
Total: $3,500,000
1996 Estimated Ad Valorem Taxes: $110,110
Zoning: None; the city of Houston does not have
zoning.
Highest and Best Use
If Vacant: Commercial development, such as a single-
tenant or multi-tenant office building;
however, current market conditions are not
conducive to speculative, multi-tenant office
development at the present time, thus a
holding period would be required before
development of this type would likely occur.
As Improved: As developed, with a multi-tenant, office
building
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Summary of Salient Facts and Conclusions
=============================================================================
Improvements
Type: A six-story, Class B office building of steel
frame, plus a four-level parking garage and
related site improvements. The exterior of
the building is reflective glass.
Year Built: 1983
Size
Gross Building Area: 154,324 square feet
Net Rentable Office Area: 150,465 square feet
Net Useable Area: 130,317 square feet
Common Area Factor: 13.4 percent
Condition: Good
Operating Data and Forecasts
Current Occupancy: 85.1%
Forecasted First Year Occupancy
(Calendar Year 1997): 90.3%
Forecasted Average Occupancy: 93.0%
Average Annual Rental Rate
Actual: $10.83 per square foot
Forecasted: $11.50 per square foot
Operating Expenses
Last Full Year (1995): $5.48 per net rentable square foot
Budget (1996): $5.64 per net rentable square foot
Forecasted (1996): $5.55 per net rentable square foot
Value Indicators
Land Value: $500,000 ($4.21 per square foot of land
area)
Sales Comparison Approach: $6,200,000 ($41.21 per square foot of net
rentable area)
Income Approach: $6,100,000 ($40.54 per square foot of net
rentable area)
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Summary of Salient Facts and Conclusions
================================================================================
Discounted Cash Flow Assumptions
Market Rental Growth Rate
1997: $0.25 per square foot or 2.2 percent
1998: $0.25 per square foot or 2.1 percent
1999: $0.50 per square foot or 4.2 percent
2000: $0.50 per square foot or 4.0 percent
2001: $0.75 per square foot or 5.8 percent
2002: $0.75 per square foot or 5.5 percent
2003: $1.00 per square foot or 6.9 percent
2004: $1.00 per square foot or 6.5 percent
2005: $1.00 per square foot or 6.1 percent
Thereafter: 3.5%
Average Compound
Growth Rate: 4.5%
Expense Growth Rates
Utilities: 4.0%
Repairs & Maintenance: 4.0%
All others: 3.5%
Credit Loss Allowance: 2.0%
Projected Term of
Future Leases: 4 years
Vacancy Between Tenants 3 months
Renewal Probability: 67.0%
Tenant Improvements
Shell Space: $14.00 per square foot
New Tenants: $ 7.50 per square foot
Renewal Tenants: $ 2.50 per square foot
Commission Expense
(Weighted Average): 4.5%
Terminal Capitalization
Rate: 10.5%
Cost of Sale at
Reversion: 4.0%
Discount Rate: 12.0%
Implicit Year 1 Overall
Capitalization Rate: 11.38%
Value Conclusion
As Is Value Estimate: $6,100,000
Resulting Indicators
Going-In Capitalization Rate
(Overall Capitalization
Rate): 11.12%
Price Per Square Foot
(Net Rentable Area): $40.54
Estimated Marketing Time: 12 months
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Summary of Salient Facts and Conclusions
================================================================================
Special Assumption: 1) A detailed set of the subject's building
plans were not available. Therefore, our
estimates of the gross building and net
rentable areas were obtained from the rent
roll and from information provided by the
management company. Any deviation from
these building areas could impact our value
conclusion.
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
TABLE OF CONTENTS
================================================================================
Page
PHOTOGRAPHS OF THE SUBJECT PROPERTY ...........................................1
INTRODUCTION ..................................................................5
Identification of Property ...............................................5
Property Ownership and Recent History ....................................5
Purpose and Function of the Appraisal ....................................5
Extent of the Appraisal Process ..........................................5
Date of Value and Property Inspection ....................................6
Property Rights Appraised ................................................6
Definitions of Value, Interest Appraised, and Other Pertinent Terms ......6
Legal Description ........................................................7
NEIGHBORHOOD ANALYSIS .........................................................8
OFFICE MARKET ANALYSIS ........................................................9
PROPERTY DESCRIPTION .........................................................13
Site Description ........................................................13
Improvements Description ................................................13
REAL PROPERTY TAXES AND ASSESSMENTS ..........................................14
ZONING .......................................................................16
HIGHEST AND BEST USE .........................................................17
VALUATION PROCESS ............................................................18
LAND VALUE ESTIMATE ..........................................................20
SALES COMPARISON APPROACH ....................................................24
INCOME APPROACH ..............................................................30
RECONCILIATION AND FINAL ESTIMATE OF VALUE ...................................48
ASSUMPTIONS AND LIMITING CONDITIONS ..........................................50
CERTIFICATION OF APPRAISAL ...................................................52
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Table of Contents
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ADDENDA ..................................................................... 53
Recent Lease Analysis
Legal Description
Copy of Floor Plans
Site Plan
Flood Plain Map
Project Assumptions and Analysis
Cushman & Wakefield Investor Survey
Qualifications of Ronald W. Potts
Qualifications of David Heath
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
PHOTOGRAPHS OF THE SUBJECT PROPERTY
================================================================================
[PHOTO]
[GRAPHIC OMITTED]
Front view of the subject property looking west.
[PHOTO]
[GRAPHIC OMITTED]
Front view of the subject property looking south.
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<PAGE>
Photographs of the Subject Property
================================================================================
[PHOTO]
[GRAPHIC OMITTED]
View of the subject's south side.
[PHOTO]
[GRAPHIC OMITTED]
View of the subject's west side
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<PAGE>
Photographs of the Subject Property
================================================================================
[PHOTO]
[GRAPHIC OMITTED]
View of the subject's parking garage.
[PHOTO]
[GRAPHIC OMITTED]
View looking northwest along Northwest Freeway
The subject property is on the left
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<PAGE>
Photographs of the Subject Property
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[PHOTO]
[GRAPHIC OMITTED]
View looking southeast along Northwest Freeway.
The subject property is on the right.
================================================================================
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<PAGE>
INTRODUCTION
================================================================================
Identification of Property
The subject property, which is known as One Northwest Centre, is a
six-story, Class B reflective glass office building containing approximately
150,465 square feet of net rentable area. The building is situated on a 2.725
acre tract of land that is located at the northwest comer of Northwest Freeway
(SH 290) and W. Tidwell Road. The common address is 13831 Northwest Freeway,
Houston, Harris County Texas. The building was constructed in 1983 and was 85.1
percent occupied by 28 tenants as of the appraisal date.
Property Ownership and Recent History
Ownership of the property is currently vested in SKW 11 Real Estate LTD
Partnership. The property was acquired in a multi-property portfolio purchase in
March 1994. A separate price allocated to the subject was not available. To the
best of our knowledge, the property is not currently being offered for sale, nor
have there been any subsequent ownership transfers.
Purpose and Function of the Appraisal
The purpose of the appraisal is to provide an estimate of market value of
the leased fee estate in the property. The function of this report is to assist
GMAC Commercial Mortgage Corporation in an evaluation of the property for loan
underwriting purposes.
Extent of the Appraisal Process
In the process of preparing this appraisal, we:
o Inspected the exterior of the building and site improvements and a
representative sample of tenant spaces with Daniel Wood, the manager;
o Reviewed the leasing policy, tenant build-out allowances and history
of recent rental rates and occupancy with the building manager;
o Reviewed a detailed history of the income and expenses and a budget
forecast for 1996, including the budget for planned capital
expenditures and repairs;
o Conducted market research into occupancies, asking rents, and
operating expenses at competing buildings including interviews with
on-site managers and a review of our own data base;
o Conducted market inquiries into recent sales of similar buildings to
ascertain the sales prices per square foot, effective gross income
multipliers and capitalization rates. This process involved telephone
interviews with sellers, buyers and/or participating brokers;
o Conducted market inquiries into recent sales of vacant land to
ascertain the value of the subject site, as if vacant; and
o Prepared Sales Comparison and Income Approaches to value. The Cost
Approach was not used.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Introduction
================================================================================
Date of Value and Property Inspection
The date of value is July 25, 1996, with the date of our last inspection
being the same.
Property Rights Appraised
We valued the leased fee estate, which in a legal conveyance through sale
representing the fee simple title, subject to the existing encumbrances, i.e.,
the tenant leases, etc., in the improvements and corresponding land area.
Definitions of Value, Interest Appraised, and Other Pertinent Terms
The definition of market value taken from the Uniform Standards of
Professional Appraisal Practice, 1994 Edition, published by The Appraisal
Foundation, is as follows:
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 is the
consummation of a sale as of a specified date and the passing of title from
seller to buyer under conditions whereby:
(1) Buyer and seller are typically motivated;
(2) Both parties are well informed or well advised, and acting in what
they consider their own best interests;
(3) A reasonable time is allowed for exposure in the open market;
(4) Payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
(5) 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.
Exposure Time
Under Paragraph 3 of the Definition of Market Value, the value estimate
presumes that A reasonable time is allowed for exposure in the open market.
Exposure time is defined as the estimated length of time the property
interest being appraised would have been offered on the market prior to the
hypothetical consummation of a sale at the market value on the effective
date of the appraisal. Exposure time is presumed to precede the effective
date of the appraisal.
Based upon the available sales data in the marketplace, as well as our
discussions six to nine months would appear to have been reasonably
appropriate for the subject property as the date of valuation.
Definitions of pertinent terms taken from the Dictionary of Real Estate
Appraisal, Third Edition (1993), published by The Appraisal Institute, are
as follows:
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Introduction
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Fee Simple Estate
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.
Leased Fee Estate
An ownership interest held by a landlord with the rights of use and
occupancy conveyed by lease to others. The rights of the lessor (the leased
fee owner) and the leased fee are specified by contract terms contained
within the lease.
Market Rent
The rental income that a property would most probably command on the open
market; indicated by the current rents paid and asked for comparable space
as of the date of the appraisal.
Cash Equivalent
A price expressed in terms of cash, as distinguished from a price expressed
totally or partly in terms of the face amounts of notes or other securities
that cannot be sold at their face amounts.
Discounted Cash Flow (DCF) Analysis
The procedure in which a discount rate is applied to a set of projected
income streams and a reversion. The analyst specifies the quantity,
variability, timing, and duration of the income streams as well as the
quantity and timing of the reversion and discounts each to its present
value at a specified yield rate. DCF analysis can be applied with any yield
capitalization technique and may be performed on either a lease-by-lease or
aggregate basis.
Legal Description
The property is described legally as a 2.725 acre tract of land out of the
Richard Rowles Survey, Abstract 670, Harris County, Texas, being out of Lots 1
and 2, Block "D" and Lot 27, Block "C" of Hahl's Suburban Farms Subdivision "G",
as recorded in Volume 334, Page 134 of the Harris County deed records. A metes
and bounds description is located in the Addenda section of this report.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
================================================================================
[GRAPHIC OMITTED]
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NEIGHBORHOOD MAP
<PAGE>
NEIGHBORHOOD ANALYSIS
================================================================================
The subject property is located at the northwest corner of Northwest
Freeway (SH 290) and W. Tidwell Road in northwest Houston, approximately 15
miles northwest of the Houston Central Business District.
The subject neighborhood is located within the city limits of Houston in an
area along the north and south sides of Northwest Freeway between Loop 610 to
the southeast and the Sam Houston Tollway (Beltway 8) to the northwest. These
boundaries represent either barriers to access or natural boundaries, or tend to
define the most homogenous development patterns.
The subject neighborhood is easily accessible via Northwest Freeway (SH
290). Northwest Freeway is a northwest/southeast thoroughfare that provides the
primary access to the subject neighborhood from the Central Business District.
This arterial is a multi-lane, concrete-paved freeway which extends from Loop
610 northwesterly through the subject's neighborhood. The Sam Houston Tollway is
a north/south thoroughfare that provides the primary north/south access to the
subject neighborhood. This arterial is a multi-lane, concrete paved tollway,
which extends from the Southwest Freeway north past the subject's neighborhood,
where it then turns east and continues to the Houston Intercontinental Airport.
Loop 610 is the inner peripheral loop around the city of Houston and provides
access to other freeways that traverse the Harris County area. As evidenced,
primary access to the neighborhood is considered very good.
In the subject's immediate area, Northwest Freeway intersects with W.
Tidwell, Pinemont, W. 43rd, and W. 34th Streets. All of these thoroughfares
provide access in an east/west direction. In addition, Hempstead Road provides
access in a northwest/southeast direction and runs parallel to the southwest of
Northwest Freeway.
Land uses within the area are predominantly single-family, with commercial
development being concentrated along the previously described primary
thoroughfares. Overall, the neighborhood is approximately 70 percent built-out.
The predominance of major office development is concentrated along Northwest
Freeway with single and multi-family uses within the interior. The majority of
development in the neighborhood occurred during the 1970's and early 1980's.
Adjacent uses to the subject include vacant land to the south and southeast and
a small two-story office building to the northwest.
Given the historical growth trends of northwest Houston as a whole, it is
our opinion that there should be continued demand for single- and multi-family
housing in the immediate subject area over the long term. The accessible
location with several major roads connecting the nearby freeways is an extremely
positive factor for the area. Retail and recreational facilities are considered
to be above average and all of these favorable neighborhood characteristics
should help to maintain the areas desirability. The neighborhood is in the
growth stage of the its life cycle, albeit new development is currently at a
minimum. While current real estate values remain below the levels of the mid-
1980's, the overall outlook is favorable.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
OFFICE MARKET ANALYSIS
================================================================================
Following is a discussion of the current and forecasted office market
conditions in the Houston office market, along with the particular submarket and
specific competitive office projects that significantly impact the subject
property. The data was predominantly compiled from the database of Cushman and
Wakefield. Additional information was obtained through conversations with
several knowledgeable market participants.
The Houston office market consists of 138.7 million square feet in 18
submarkets. The bulk of the most recent office construction in Houston occurred
during the 1970's to mid-1980s. The overall occupancy level in Houston was 79.1
percent as of the Mid-Year 1996, compared to the Mid-Year 1995 level of 78.7
percent. The overall occupancy level for Mid-Year 1994 was 78.0 percent. As
evidenced, demand for office space in Houston has been low over the past 2.5
years increasing only 1.1 percentage points.
Absorption for the first six months of 1996 was a positive 933,488 square
feet. This followed a loss of 207,939 square feet for 1995 and a loss of
1,067,471 square feet for 1994. These rather anemic levels illustrate the lack
of demand for office space in the Houston area. The Houston area's current
weighted average rent of $11.62 per square foot is up slightly from $11.44 per
square foot as of Year End 1995, representing an increase of approximately 1.6
percent over a six month period. The Year-End average for 1994 was $11.25 per
square foot, resulting in an increase of approximately 1.3 percent per year
since Year-End 1994. As of Mid-Year 1996, the Galleria/West Loop submarket
posted the highest weighted average rental rate ($12.91 per square foot). The
lowest weighted average rental rate was $9.29 per square foot in the
Richmond/Fountainview sector. The subject property's sector had a rate of $10.55
per square foot.
In summary, softness still exists in the marketplace resulting from the
excesses of the 1980s and the sluggish economy of the early 1990s. With an
overall occupancy rate of 79.1 percent, stabilization of the office market is
not expected until after the turn of the century. However, the most recent (6
months 1996) trends in the office market have been positive, with notable
increases in absorption and average rental rates. Further, the Houston economy
continues to experience positive growth, albeit at a slower pace than the Austin
or Dallas/Ft. Worth metropolitan areas. In any event, rental rates are not
expected to substantially increase until the late 1990's and are anticipated to
remain well below levels that are necessary to support new construction.
Northwest Submarket
As defined by the Cushman and Wakefield Market Survey, the subject is
located in the Northwest submarket. As of Mid-Year 1996, this submarket included
in excess of 7.18 million square feet of office space. The break-down includes
592,067 square feet of Class A space, 5,613,149 square feet of Class B space and
974,250 square feet of Class C space. No new multi-tenant buildings are
presently under construction, nor has there been any new speculative
construction since the overbuilding that occurred in the office market during
the early 1980s. The following charts illustrate the historical occupancy and
rent levels for the Northwest submarket by building Class.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Office Market Analysis
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=====================================
Historical Occupancy and Rental Rates
Northwest Submarket - Class A
=====================================
Year Ending Occupancy Rental
Rates Rate
=====================================
1990 93.1% $14.50
1991 85.3% $15.00
1992 77.5% $15.00
1993 82.9% $14.00
1994 85.9% $14.13
1995 86.0% $14.13
Mid - 1996 83.8% $14.13
=====================================
As of Mid-Year 1996, the occupancy for Class A space in the Northwest
submarket was 83.8 percent. A closer look at the historical levels reveals that
the occupancy for Class A space has been trending downward within the Northwest
submarket. The recent high occurred in 1993 when the occupancy for Class A space
was 93.1 percent. Since then, the occupancy for the top tier space has fallen to
83.8 percent as of Mid-Year 1996. In fact, the recent mid-year level is down
from the Year-End 1995 occupancy of 85.9 percent. The chart also illustrates
that historically, rental rates for Class A properties in the Northwest
submarket have changed very little over the past six years. During this time,
rental rates increased slightly, but then fell below the 1990 level.
=====================================
Historical Occupancy and Rental Rates
Northwest Submarket - Class B
=====================================
Occupancy Rental
Year Ending Rates Rate
=====================================
1990 70.7% $ 9.71
1991 71.8% $10.08
1992 77.5% $10.23
1993 78.7% $10.31
1994 81.4% $10.33
1995 80.9% $10.41
Mid - 1996 83.9% $10.51
=====================================
Contrary to the Class A properties, the average occupancy rate for Class B
space has been slowly trending upward with a low of 70.7 percent recorded at
Year-End 1990. Since then, the average occupancy for Class B space has increased
at an average compound rate of 3.1 percent per year. In addition, rental rates
for Class B properties have also improved though the increases have been slight.
As of Year-End 1990, the average rental rate for Class B space was $9.71 per
square foot. Rental rates have increased slightly each of the following years
through mid-year 1996. However, the average compound growth rate has only been
approximately 1.4 percent per year.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Office Market Analysis
================================================================================
Though not shown, the increase in occupancy for Class C space has been
somewhat erratic increasing from a low of 56.5 percent as of Year-End 1990 to a
Mid-Year 1996 high of 74.5 percent. The change in rental rates has also been
somewhat erratic, but generally on an increasing trend ranging from a low of
$8.26 per square foot as of Year-End 1990, to a high of $9.33 per square foot as
of Mid-Year 1996.
The combined historical trends for all building classes in the Northwest
submarket demonstrates that the subject's market area is slowly recovering from
overbuilding that occurred during the early 1980's. The trend for all classes is
shown as follows:
=====================================
Historical Occupancy and Rental Rates
Northwest Submarket - All Classes
=====================================
Occupancy Rental
Year Ending Rates Rate
=====================================
1990 70.4% $10.82
1991 72.4% $11.25
1992 76.4% $11.31
1993 76.7% $11.15
1994 80.0% $11.25
1995 79.7% $11.22
Mid - 1996 82.7% $11.32
=====================================
Class B space in the Northwest submarket comprises the largest segment of
the market, with over 78.2 percent of the available space. Resultingly, the
historical chart illustrates that occupancy and rental levels for all classes of
space have generally tracked the trends of the Class B space. If the occupancy
levels for all classes of space increase at the same rate as the past five and
one-half years (an average of 2.24 percent per year), occupancy levels will
approach 93% by the year 2000.
Overall, we expect rental rates to increase gradually over the next few
years, followed thereafter by more significant increases as the market begins to
tighten. This is expected to occur around the turn of the century. As a result,
the need for new speculative office product in this submarket will probably not
occur for at least five years (after occupancies stabilize) because rental rates
will still have to recover to a point to produce economic viability.
Direct Competition
In order to gain a better understanding of the market conditions specific
to the subject property, we conducted a survey concentrating on those buildings
considered most competitive to the subject. Thus, we concentrated our research
on six nearby office buildings containing a total of 1,042,373 square feet of
net rentable office space. These projects are Class B buildings that compete
directly with the subject property because of their location and physical
characteristics.
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Office Market Analysis
================================================================================
The age of the buildings ranges from 13 to 18 years, with the sizes ranging
from 77,000 to 310,368 net rentable square feet. The comparables are all
multi-story buildings that are generally similar with regard to construction
quality and type.
Based on our survey results, the six office buildings revealed occupancy
levels ranging from 65.0 to 100.0 percent. The average occupancy level of the
surveyed properties is 86.6 percent, which is above the submarket average of
82.7 percent. In comparison, the subject is 85.1 percent occupied.
The quoted effective rental rates for the comparables ranged from $10.50 to
$14.00 per square foot on a gross basis. The projected 1996 expense stops found
in the six comparable buildings ranged from $4.98 to $6.95 per square foot. A
more detailed discussion of these buildings and their rental rates can be found
in the Income Approach section of this report.
In summary, in terms of percentage leased, our survey group of Class B
properties is performing above that of the overall submarket and the Houston
market as a whole. On the other hand, the rental rates generally trend within
the submarket and the overall market ranges. The current occupancy trends of the
subjects direct competition suggest that the competitive set of properties
should perform at least as well as the submarket and overall market as a whole.
However, the current data does not lead us to conclude that the survey group
will outperform the market.
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PROPERTY DESCRIPTION
================================================================================
Site Description
The subject site is situated at the northwest corner of Northwest Freeway
(SH 290) and W. Tidwell Road. The common street address is 13831 Northwest
Freeway, Houston, Harris County, Texas. The site (in total) is irregular in
shape and contains 2.725 acres or 118,701 square feet of land area. The
topography is generally level. We have assumed that the soil's load-bearing
capacity is sufficient to support the existing structures. All essential
utilities including electricity, water, sewer, and telephone are currently
serving the site.
According to Community Panel No. 48201C 0180 G, effective September 28,
1990, the subject property appears to be situated in an area designated as being
outside of the floodplain.
Improvements Description
One Northwest Centre consists of a six-story office facility containing a
gross building area of 154,324 square feet. The total net rentable area equates
to 150,465 square feet. The property was constructed in 1983 and is 85.1 percent
occupied. It should be noted that 9,055 square feet of the subject's rentable
area is shell space.
Construction is typical of a commercial office structure with
steel-reinforced, poured-in-place concrete foundation, structural steel and
concrete frame, concrete slab, and tinted glass curtain exterior walls. The
project is heated and cooled with a roof-mounted HVAC system. Plumbing and
electrical is assumed to meet required building codes. The property has three
passenger elevators, one of which doubles as a freight elevator. The property
has zoned smoke and fire alarm systems, and a monitored security system with
card access that restricts non-business hour access.
Parking is provided by a four-story parking garage with 574 spaces and 22
open concrete paved visitor spaces for a total of 596 parking spaces. In
addition, the subject has concrete curbs and sidewalks and is landscaped with
trees, ornamental shrubs and plants located around the building and parking lot.
Reportedly, the majority of the property complies with the Americans With
Disabilities Act (ADA). However, it was brought to our attention that ADA
upgrades and repairs are still needed for the parking garage and the building's
restrooms. The subject's property manager has estimated these costs at
approximately $45,900 and has budgeted them in increments of $15,900 for 1996,
$15,000 for 1997 and $15,000 for 1998. In addition, the 1996 budget includes
$26,500 in deferred maintenance for the parking garage and $31,150 for elevator
up-grades and maintenance. In addition, $5,000 has been allocated for capital
expenditures during 1997 for the parking lot and walkways, and in 1998, $5,000
and $25,000 has been allocated for the roof and for structural repairs,
respectively.
We have also assumed that potentially hazardous materials have not been
used in the construction or maintenance of the property. Overall, the
improvements are in good condition. No evidence of structural damage was
observed on our inspection of the improvements. Further, other than the
expenditures noted above, we are not aware of any major items of deferred
maintenance.
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<PAGE>
REAL PROPERTY TAXES AND ASSESSMENTS
================================================================================
The subject property is under the taxing jurisdictions of the City of
Houston, Harris County, and the Cypress-Fairbanks Independent School District.
Taxes are levied against all real property in this locale for the purpose of
providing funding for the various municipalities. The amount of ad valorem taxes
is determined by the current assessed value for the property in conjunction with
the total combined tax rates of the taxing jurisdiction.
Tax Rates
The 1996 tax rates have not been determined by the various municipalities
at this time. The following is a chart displaying the 1995 tax rates levied by
the above noted taxing jurisdictions:
====================================
Tax Rates Per $100 of Assessed Value
=====================================
Taxing Authority 1995
Tax Rate
====================================
Harris County $0.62462
City of Houston $0.66500
Cypress-Fairbanks I.S.D. $1.75000
-------------------------------------
Total $3.03962
====================================
Tax rates affecting the subject property have increased at a compounded
annual rate of approximately 3.0 percent over the past five years. Although not
shown in the chart, the subject's applicable combined tax rates were virtually
unchanged from 1994 to 1995.
Tax Assessment
The Harris County Appraisal District establishes the assessed value on real
property for all of the previously noted taxing jurisdictions. By state law, the
appraisal district is required to re-evaluate all real property every three
years. The subject property's parcel identification number is 038-290-003-0027.
Following is the subject's 1996 assessment.
============================
Property Assessment Summary-
============================
1996
============================
Land $ 949,610
Building $ 2,550,390
----------------------------
Total $ 3,500,000
============================
Although not shown, the subject's aggregate assessment remained unchanged
from 1995 to 1996. The market value for the subject, as concluded in this report
is $6,100,000 and thus, the subject is favorably assessed. Based on our
conclusions as found in this report, we have projected an increase in the
assessed value to $5,500,000 beginning in 1997. This will bring the projected
assessment to within 90 percent of our value conclusion.
Ad Valorem Tax Conclusions
Applying the aggregate 1996 assessment for the subject, to the total
estimated 1996 tax rate (the 1995 tax rate grown at 3.5 percent) results in a
combined tax burden of $160,700, as follows:
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Real Property Taxes and Assessments
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======================================
1996 Estimated Tax Burden
======================================
$3,500,000 X $3.14601 / 100 = $110,110
======================================
As previously stated, the 1997 tax assessment is projected to increase to
$5,500,000. Additionally, the tax rate is projected to increase by another 3.5
percent, to $3.25612 per $100. The projected tax burden for 1997 is calculated
as follows:
====================================
1997 Estimated Tax Burden
====================================
$3.2612/$100 X $5,500,000 = $179,086
====================================
Subsequent to the 1997 tax estimate, we are forecasting future tax
increases to be 3.5 percent per annum throughout the cash flow found in the
Income Approach. This projection is to account for periodic increases in the
assessment, along with tax rate increases. It should also be noted that,
according to the various taxing entities, the 1995 taxes have been paid.
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ZONING
================================================================================
The city of Houston does not have zoning and therefore, there is no zoning
designation or restrictions for the subject site. In addition, we know of no
deed restrictions, private or public, that further limit the subject property's
use. The research required to determine whether or not such restrictions exist,
however, is beyond the scope of this appraisal assignment. Deed restrictions are
a legal matter and only a title examination by an attorney or title company can
usually uncover such restrictive covenants. Thus, we recommend a title search to
determine if any such restrictions do exist.
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HIGHEST AND BEST USE
================================================================================
Highest and Best Use of Site As Though Vacant
The highest and best use must be (1) legally permissible, (2) physically
possible, (3) financially feasible, and (4) maximally productive. The size,
shape, and physical attributes of the site are considered sufficient to
accommodate most forms of development. Given the freeway frontage and the
surrounding development (which consists of a relatively equal mixture of office,
retail, single and multi-family, and vacant land), it is our opinion that some
type of commercial use would be most compatible with surrounding development.
Further, as discussed in the Office Market Analysis section of this report, the
Northwest office submarket has continued to slowly recover with a Mid-Year 1996
occupancy level of approximately 82.7 percent. Rental rates for this type of
space averaged $11.32 per square foot (including all classes of space). However,
the Houston office market as a whole, including the subject's Northwest
submarket, continues to recover at a rather sluggish pace both in terms of
occupancy and rental rates. Therefore, current market conditions are not
conducive to speculative, multi-tenant office development at the present time,
thus a holding period would be required before development of this type would
likely occur.
Highest and Best Use, As Improved
As noted in the Property Description section of this report, the subject
site is improved with a six-story, 150,465 square foot (NRA) office building and
related site improvements. Constructed in 1983, the project is in good
condition. Further, the design and layout are considered to be very functional
for its current use.
The office submarket in which the subject competes continues to slowly
improve. However, increases in occupancy levels and rental rates have been
sluggish. Still, it is our opinion that the subject property, as improved, is
capable of providing an adequate return to the land over the foreseeable future.
This conclusion is supported by the data and analysis presented in the balance
of this report. For these reasons, it is our opinion that the highest and best
use of this site, as improved, is for continued use as a low-rise office
building.
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VALUATION PROCESS
================================================================================
In this appraisal, we have only used the Sales Comparison Approach and the
Income Approach to develop a market value estimate.
The Cost Approach has been omitted from this analysis for the following
reasons:
o First and foremost, the value being sought is the leased fee estate,
whereas the Cost Approach normally depicts the fee simple estate.
Therefore, the interest being appraised cannot be reflected by the
Cost Approach in its traditional form;
o Secondly, the office market is below stabilized levels, which means
new construction is not feasible at the present time. Consequently,
some external/economic obsolescence is inherent in the
reproduction/replacement cost new of the subject improvements.
Classically, external/economic obsolescence is viewed as incurable and
is so from the perspective of the property owner. However, it will
eventually be cured because it is purely a function of current market
conditions. Quantifying this form of obsolescence within the context
of the Cost Approach is highly subjective and very theoretical. As a
result, the reliability of this approach becomes very suspect under
these circumstances; and
o Lastly, one of the most persuasive reasons for not using the Cost
Approach is the fact that market participants do not typically use
this approach as a determinant of value especially when market
conditions are below an optimal level as they are currently.
We have included an estimate of the land value (set forth in the following
section) to demonstrate the improvements are capable of providing an adequate
return to the land over the foreseeable future.
In the Sales Comparison Approach, we performed the following steps:
o Investigated the market for recent sales of similar office properties.
o Analyzed those sales on the basis of the sales price per square foot
and an effective gross income multiplier; and
o Correlated the value indications into a point value estimate from
within the range.
In developing the Income Approach we:
o Studied the rents in effect in this and competing properties to
estimate the potential rental income at market levels;
o Studied the recent history of operating expenses at this and competing
properties to estimate an appropriate level of expenses and reserves
for replacement;
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Valuation Process
================================================================================
o Estimated net operating income and cash flow by subtracting the
operating, fixed, and other expenses from the effective gross income;
and
o Prepared a discounted cash flow analysis in which the cash flow and
property value at reversion are discounted to an estimate of current
market value at a market-derived discount rate. Potential gross
revenues are estimated based on a modeling of the actual rents and
recovery provisions in effect through the term of existing leases. As
the existing leases expire, the space is estimated to rent at the then
current market rental rate with appropriate allowances for downtime.
Spaces now vacant will be rented at market rates and at the time
intervals discussed in the Income Approach section of this report.
From potential gross revenues, we subtract vacancy and expenses
(operating, fixed, and other) to arrive at an estimate of cash flow
over an 1 1 year forecast.
The appraisal process is concluded by a review and re-examination of each
of the approaches to value that have been employed. Consideration is given to
the type and reliability of data used, and the applicability of each approach.
Finally, the approaches are reconciled and a final value conclusion is
estimated.
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<PAGE>
LAND VALUE ESTIMATE
================================================================================
Methodology
Depending upon the specific appraisal assignment and/or the value being
sought, any one of several methods may be used to value land that is vacant or
considered to be unimproved or vacant.
o The first method is the Sales Comparison Approach, which is the
process of analyzing sales of reasonably similar, recently sold sites
in order to derive an indication of the most reasonable and probable
market value of the land being appraised;
o The second method is the Land Residual Approach which is a valuation
technique based upon the premise that income can be divided between
land and improvements and that the residual income to the land can
then be capitalized into a value;
o A third procedure, the Subdivision Development Method, may sometimes
be used to estimate the value of vacant, usually unsubdivided land,
through a process of analyzing the cost to development (including
profit) and interest carry relative to the anticipated gross income
from the retail sales of individual lots or tracts;
o The fourth and fifth methods, the Allocation and Extraction Methods,
which are two techniques that permit the distribution of the total
value or sales price of a property between land and building; and
o The last procedure is the Ground Rent Capitalization Method where
ground rents can be capitalized at an appropriate rate to indicate the
market value of a site.
Under the right circumstances, any of the preceding methods may be useful
in forming the basis of a valid estimate of land value. Even though recent
office land sales activity has been limited, due to the overbuilt Houston
market, there is still sufficient data from which to estimate the land value.
Therefore, the Sales Comparison Approach is considered to be the best approach
to value the subject site. In making comparisons, we adjusted the sale prices
for the differences between the subject site and the comparable sites.
On the following page is a summary of pertinent sales that we compared with
the subject, and a map showing their locations.
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================================================================================
[MAP]
[GRAPHIC OMITTED]
================================================================================
LAND SALES MAP
<PAGE>
One Northwest Centre
13831 Northwest Freeway
Houston, Texas
Land Sales Summary
<TABLE>
<CAPTION>
====================================================================================================================================
Cash
Comp. Size Size Equivalent
No. Name/Location Sale Date Acres SF Zoning Sale Price
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
L-1 Northeast side of Northwest Freeway, 750 01/01/95 1.54 67,082 None $ 450,000
feet norhtwest of Northwest Central
Houston, Texas
L-2 Northeast side of Northwest Freeway, 415 12/12/94 1.14 49,658 None $ 224,000
feet southeast of Retton, Houston, Texas
L-3 Southeast corner of Northwest Freeway 03/28/94 8.62 375,487 None $2,200,000
and 34th Street, Houston, Texas
L-4 West corner of Norhtwest Freeway and 09/01/93 4.66 203,042 None $ 800,000
West Tidwell Road, Houston, Texas
L-5 Southeast corner of Northwest Freeway 06/04/93 2.88 125,627 None $ 520,000
and Rothway, Houston. Texas
====================================================================================================================================
Subject Northwest corner of Northwest Freeway N/A 2.73 118,701 None N/A
and West Tidwell Road, Houston, Texas
====================================================================================================================================
Low 1.14 49,658 $224,000
Data Range: High 8.62 375,487 $2,200,000
Median 3.77 164,076 $958,000
====================================================================================================================================
<CAPTION>
===============================================================================================
Price
Comp. per SF Existing or
No. Name/Location (Land Area) Intended Use
===============================================================================================
<S> <C> <C> <C>
L-1 Northeast side of Northwest Freeway, 750 $ 6.71 Fuddruckers
feet norhtwest of Northwest Central Restaurant
Houston, Texas
L-2 Northeast side of Northwest Freeway, 415 $ 4.51 Motel Inn
feet southeast of Retton, Houston, Texas
L-3 Southeast corner of Northwest Freeway $ 5.86 Retail Center
and 34th Street, Houston, Texas
L-4 West corner of Norhtwest Freeway and $ 3.94 Shoney's Restaurant
West Tidwell Road, Houston, Texas and motel
L-5 Southeast corner of Northwest Freeway $ 4.14 Homestead Village
and Rothway, Houston. Texas Motel
===============================================================================================
Subject Northwest corner of Northwest Freeway N/A Office Building
and West Tidwell Road, Houston, Texas
===============================================================================================
$ 4.51
Data Range: $ 6.71
$ 5.69
===============================================================================================
</TABLE>
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<PAGE>
Land Value Estimate
================================================================================
Analysis of Sales and Estimate of Site Value
The subject property is located at the northwest corner of Northwest
Freeway and W. Tidwell Road. We have concluded that some form of commercial
development is the highest and best use of the subject; accordingly, a search
was conducted for comparable land sales conducive to commercial development
along Northwest Freeway within the subject neighborhood.
Specifically, we have relied upon five sales in the immediate area of the
subject. The transactions range in size from 1.14 to 8.62 acres and occurred
over the past three years. Overall, we believe these transactions provide a good
indication of the subject's value.
The comparables will be analyzed on a price per square foot basis, which is
the unit of comparison commonly utilized by investors, developers, and brokers
for this particular property type in this locale. We have not attempted to
quantifiably adjust the sales to the subject, rather we have applied general
comparisons to the subject after discussing the various aspects of the sales.
The following comparisons are intended to reflect our thought processes in
comparing one site with another.
Property Rights Conveyed
All of the comparable sales involved parcels of land unencumbered by any
leases. Therefore, all of the sales set forth herein represent the transfer of
the fee simple estate. Consequently, no adjustments are warranted for the
differences in property rights conveyed.
Cash Equivalency
All of the sales were purchased on an all cash basis and are considered to
be cash equivalent. Therefore, a cash equivalency adjustment is not required for
any of the sales.
Conditions of Sale
Sometimes sales involve certain elements which motivate the buyer or seller
to pay or accept more or less than would be a typical market price for the
property. When such influences differ from more normal market conditions,
adjustments are required. All of the comparables were subject to normal (or
typical) conditions of sale. Therefore, no adjustments are required for
conditions of sale.
Other
In comparing the comparables to each other, there is no clear trend to
suggest that a change in market pricing has occurred since mid 1993. Market
participants including brokers, developers, and appraisers indicated that land
prices remained relatively static over the past three years, therefore,
adjustments were not considered necessary.
All of the comparables included in this analysis are located proximal to
the subject property. However, differences in location do exist. Among the
sales, comparables L-2, L-4 and L-5 are considered relatively similar in
location to the subject. However, comparables L-1 and L-3 are considered
superior to the subject and will require a downward adjustment. Comparable L-1
is located along the northeast side of Northwest Freeway, just northwest of
Pinemont where there is a major interchange with the freeway. This interchange
provides superior access to this site. Comparable L-3 is located at the
southeast corner of Northwest Freeway and 34th Street which is
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Land Value Estimate
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also a primary intersection, providing this site with superior access. As a
result, appropriate downward adjustments have been applied to both comparables.
The subject property's shape, depth, topography, and utility availability
do not adversely affect its use. Accordingly, each of the comparables is
considered to be similar with respect to these attributes. In addition, none of
the comparables, like the subject, has a zoning designation, nor any known deed
restrictions which restrict their use. As noted within our Zoning Analysis, the
city of Houston does not have zoning.
A small downward adjustment should be applied to Comparables L-1 (1.54
acres) and L-2 (1.14 acres) and an upward adjustment is necessary to Comparables
L-3 (8.62 acres) and L-4 (4.66 acres) because of their size differences.
Comparable L-5 is relatively similar in size to the subject and does not require
an adjustment.
After analyzing the various attributes of the comparables in comparison to
the subject, we have estimated the value of the subject's land at $4.25 per
square foot, calculated as follows,
=============================================
Land Value Calculation - Office Building Site
=============================================
118,701 SF X $4.25 per square foot = $504,479
=============================================
Rounded: $500,000
=============================================
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SALES COMPARISON APPROACH
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Methodology
In the Sales Comparison Approach, we estimated the value by comparing this
property with similar, recently sold properties in the surrounding or competing
area. Inherent in this approach is the principle of substitution, which holds
that when a property is replaceable in the market, its value tends to be set at
the cost of acquiring an equally desirable substitute property, assuming that no
costly delay is encountered in making the substitution.
By analyzing sales which qualify as arms-length transactions between
willing, knowledgeable buyers and sellers, we can identify value and price
trends. The basic steps involved in the application of this approach are:
(1) researching recent, relevant property sales and current offerings
throughout the competitive area;
(2) selecting and analyzing those properties considered most similar to
the subject, considering changes in economic conditions that may have
occurred between the sale date and the date of value, and other
physical, functional, or locational factors;
(3) identifying sales which include favorable financing and calculate the
cash equivalent price;
(4) reducing the sale prices to common units of comparison, such as price
per square foot of building area (in this case net rentable area) and
effective gross income multiplier;
(5) making appropriate comparative adjustments to the prices of the
comparable properties to relate them to the property appraised; and
(6) interpreting the adjusted sales data and draw a logical value
conclusion.
In analyzing the leased fee estate (or fee simple estate, subject to the
existing building tenant leases), the sale prices of the comparables were
reduced to those common units of comparison used to analyze improved properties
that are similar to the subject. Of the available units of comparison, the sales
price per square foot of net rentable area (used by buyers, sellers, and
brokers), as well as the effective gross income multiplier (EGIM), employed
predominately by appraisers, are the most commonly used measurements to value
office buildings in the marketplace.
From an appraiser's perspective, the EGIM is usually a more discernible
indicator of value because it considers the income characteristics which in turn
dictate the price per square foot paid. Also, the selection of an EGIM is
generally less subjective than trying to correlate the sales price per square
foot methodology. Regardless, both the sales price per square foot and effective
gross income multiplier analyses have been used to analyze the subject property.
The comparable sales had occupancy levels ranging from 72 to 100 percent at
the time of sale. For properties which are relatively well-occupied and have
similar operating performances,
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Sales Comparison Approach
================================================================================
the EGIM is probably the more reliable indicator of value. Consequently, we
placed most weight on the EGIM analysis. On the following page is a summary of
recent market data considered to be most indicative of the subject's current
market value.
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<PAGE>
IMPROVED SALES MAP
================================================================================
[MAP]
[GRAPHIC OMITTED]
================================================================================
<PAGE>
One Northwest Center
13831 Northwest Freeway
Houston, Texas
Summary of Office Building Sales
<TABLE>
<CAPTION>
====================================================================================================================================
Comp. Year Net Land
Sale Sale Built/ Number Rentable Area Percent
No. Name/Location Date Renovated of Stories Area(SF) (Acres) Occupied
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
1-1 400 North Belt Office Centre 04/96 1982 12 223,105 3.07 90.0%
400 Sam Houston Parkway
Houston, Texas
1-2 Penn Woodbranch 04/96 1983 6 109,950 3.72 90.0%
12012 Wickchester
Houston, Texas
1-3 One Park Ten Plaza 03/96 1982 8 164,676 3.27 86.0%
16225 Park Ten Place
Houston, Texas
1-4 520 Post Oak 02/96 1976 8 154,967 2.12 72.0%
520 Post Oak Boulevard
Houston, Texas
1-5 Cowperwood Corporate Center I 01/96 1983 8 158,160 6.24 100%
15415 Katy Freeway
Houston, Texas
1-6 1235 North Loop 06/95 1981 12 219,799 3.41 80.0%
1235 North Loop West
Houston, Texas
====================================================================================================================================
Subject One Northwest Center N/A 1983 8 160,466 2.73 85.1%
13831 Northwest Freeway
Houston, Taxes
====================================================================================================================================
Low: 1976 6 109,950 2.12 72.0%
Data Range: High: 1983 12 223,105 6.24 100%
Mean: 1981 9 171,776 3.64 86.3%
====================================================================================================================================
<CAPTION>
====================================================================================================================================
Sale
Comp. Cash Price Expense Overall
Sale Equivalent Per SF Ratio Capitalization
No. Name/Location Sale Price (NRA) (EGI) EGIM Rate
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
1-1 400 North Belt Office Centre $9,445.000 $42.33 3.92 57.9% 10.8%
400 Sam Houston Parkway
Houston, Texas
1-2 Penn Woodbranch $4,650.000 $42.29 3.92 57.4% 10.8%
12012 Wickchester
Houston, Texas
1-3 One Park Ten Plaza $6,700.000 $40.69 3.80 58.6% 10.9%
16225 Park Ten Place
Houston, Texas
1-4 520 Post Oak $6,325,000 $40.82 4.52 66.4% 7.4%
520 Post Oak Boulevard
Houston, Texas
1-5 Cowperwood Corporate Center I $8,250,000 $52.16 3.60 53.4% 12.5%
15415 Katy Freeway
Houston, Texas
1-6 1235 North Loop $7,200,000 $32.76 3.72 59.0% 11.0%
1235 North Loop West
Houston, Texas
====================================================================================================================================
Subject One Northwest Center N/A N/A N/A 54.2% N/A
13831 Northwest Freeway
Houston, Taxes
====================================================================================================================================
$4,650,000 $32.76 3.60 53.4% 7.4%
Data Range: $9,445,000 $52.16 4.52 66.4% 12.5%
$7,095,000 $41.84 3.91 58.8% 10.6%
NRA - Not Rentable Area
EGIM - Effective Gross Income Multiplier
EGI - Effective Gross Income
====================================================================================================================================
</TABLE>
-26-
<PAGE>
Sales Comparison Approach
================================================================================
The comparable properties are generally similar from a physical standpoint
to the subject, but there are some differences in terms of construction quality
and design. Generally speaking, the investment market for this type of product
is fairly broad, including foreign, national, and local investors.
Sales Price Per Square Foot Analysis
The six comparables indicate sales prices ranging from $32.76 to $52.16 per
square foot of net rentable area on a cash equivalent basis. The prices per
square foot are influenced by the differences in construction quality, occupancy
levels, character of the tenancy, economics, and location. Nevertheless, it is
important to address each property in terms of the conventional sequence of
adjustments. Following are those considerations which are relevant to the
subject. The first three elements must be considered in advance of applying any
other compensating factors to derive value conclusions via the sales price per
square foot methodology. These same three factors must also be addressed before
the selection of an effective gross income multiplier.
Property Rights Conveyed
As shown in the summary table, all of the comparables are encumbered by
leases, therefore, the leased fee estate was conveyed in each of these cases.
Therefore, we have made no adjustments to the comparables for the differences in
property rights conveyed.
Seller Financing/Cash Equivalency
All of the comparables were sold on the basis of cash to the seller. Thus,
we have made no adjustments to the comparables for seller financing.
Conditions of Sale
We identified no special motivational conditions concerning the
comparables; therefore, no adjustments for conditions of sale were made.
Other
Because of the multiple differences inherent in office properties with
respect to quality and design, location, and, in this case economics, not to
mention the quality of the tenant base, mathematical adjustments for the
reasoning noted above would be extremely difficult, at best.
In our opinion, all of the comparables are fairly similar to the subject
with Comparables 1-1 through 1-3 being most similar in that they are 86 to 90
percent occupied and achieving similar rents. These three comparables sold for
$40.69 and $42.33 per square foot. Based upon all of the above data, we believe
the value of the subject would be in the range of $40.00 to $42.00 per square
foot of net rentable area. Thus, our value range by the Sales Price Per Square
Foot method is as follows:
================================================================================
-27-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Sales Comparison Approach
================================================================================
===================================================================
Sales Price Per Square Foot Summary
===================================================================
Net Rentable Area Sales Price Per Indicated
(SF) Square Foot Value
===================================================================
150,465 X $40.00 $6,018,600
Rounded To: $6,000,000
150,465 X $42.00 $6,319,530
Rounded To: $6,300,000
===================================================================
Effective Gross Income Multiplier Analysis
The effective gross income multiplier (EGIM) is calculated in the sales
transactions by dividing the sales price by the effective gross income at time
of sale. The EGIM expresses the relationship between a sales price and the
property's effective gross income. All other things being equal, the lower the
income, the lower the sales price. However, there are other variables that
affect the income/price relationship such as the condition of the property, the
vacancy at time of sale, the stability of the income stream and the likelihood
of near term change (up or down), and the ratio of expenses to effective gross
income.
The expense ratios of the comparable properties have been calculated by
dividing the estimated expenses by the indicated effective gross annual income.
The expense ratios and EGIMs calculated for this analysis are based on actual
occupancy levels at the time of sale rather than proforma occupancy levels.
The comparables exhibit EGIMs between 3.60 and 4.52. Comparing the relative
relationship of the occupancy and expense ratios, we note that the anticipated
pattern of the relationships discussed earlier is not perfectly evident,
possibly for reasons such as tenancy and economics. The subject's expense ratio
is within the range when compared to the comparables. Thus, by comparison to the
EGIMs of the comparables, the subject's EGIM should be within the range
exhibited by the comparables. In this case, we believe the selection of an EGIM
range should be toward the upper end of the range in an attempt to recognize the
pricing movement that is occurring in the marketplace in anticipation of higher
revenues. As a result, the future operating expense ratio should decline. Thus,
we have selected a range of EGIMs to apply to the subject's Year One effective
gross income of 4.0 to 4.25 as follows:
==============================================================
EGIM Analysis Summary
==============================================================
1996 Effective EGIM Indicated
Gross Income Value
==============================================================
$1,512,941 X 4.00 $6,051 764
Rounded To: $6,050,000
$1,512,941 X 4.25 $6,429,999
Rounded To: $6,400,000
==============================================================
In conclusion, the two analyses resulted in the following value ranges:
$6,000,000 to $6,300,000 based on the sales price per square foot methodology
and $6,050,000 to $6,400,000 based on the effective gross income multiplier
(EGIM) technique. In the final analysis, we have given primary weight to the
EGIM Approach. Resultingly, our estimate of value for the subject via
================================================================================
-28-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Sales Comparison Approach
================================================================================
the Sales Comparison Approach is $6,200,000, which equates to $41.21 per square
foot of net rentable area.
================================================================================
-29-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
INCOME APPROACH
================================================================================
Methodology
The Income Approach is a method of converting the anticipated economic
benefits of owning property into a value estimate through capitalization. The
principle of anticipation underlying this approach is that investors recognize
the relationship between an asset's income and its value. In order to value the
anticipated economic benefits of a particular property, potential income and
expenses must be estimated and the most appropriate capitalization method must
be selected.
The two most common methods of converting net income into value are through
direct capitalization and a discounted cash flow analysis. In direct
capitalization, the net operating income is divided by an overall capitalization
rate extracted from market sales to indicate a value. In the discounted cash
flow method, anticipated future income streams and a reversionary value are
discounted to a net present value at a chosen yield rate (internal rate of
return).
The direct capitalization method is an effective technique when stable
conditions exist both in the marketplace and for the property. However, when
market conditions are either changing or likely to change in a fairly dramatic
manner over time, direct capitalization becomes a more difficult technique to
administer. Direct capitalization is further inhibited by the numerous variables
that exist with multi-tenant office buildings, i.e., multiple leases, with
staggered lease terms and varying lease structures; the lease-up of vacant
space; and differing tenant finish allowances, depending upon whether the space
is in a shell or second generation state.
Given these numerous variables, coupled with our inquiries of participants
in the marketplace, we feel that the majority of investors for a property like
the subject would utilize the discounted cash flow method, in an attempt to
mirror the expectations relative to those variables. Overall, office market
conditions are still below normalized levels. Consequently, the discounted cash
flow method affords the most realistic method of reflecting investor
expectations of the current period, as well as the projected recovery (primarily
rental rates in the subject's case). Also, the discounted cash flow methodology
can better quantify the impact of multi-tenant leases, with staggered lease
terms and varying rental rate structures than the direct capitalization
technique. Therefore, it is our opinion that the discounted cash flow method is
the most appropriate method in the valuation of the subject property. As such,
the direct capitalization method will not be used in this analysis. However, at
the conclusion of the Income Approach, we will analyze the resulting overall
capitalization rate derived from the discounted cash flow analysis as a check
for reasonableness.
In the following sections, we will first analyze the subject's existing
leases and market rents before discussing the subject's operating expenses and
preparing the discounted cash flow analysis.
Summary of Existing Leases
As of the effective date of appraisal, there are 28 leased suites totaling
124,448 square feet of net rentable area. In addition, four spaces designated as
the fitness center (1,140 square feet), the conference room (313 square feet),
building storage (454 square feet), and the management office (1,765 square
feet) are considered occupied space. We have included this space in our analysis
for occupancy purposes, but have not assigned a rent in the future. Therefore,
the total
================================================================================
-30-
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Approach
================================================================================
occupied area is 128,120 square feet, with 22,345 square feet vacant. This
equates to an occupancy factor of 85.1 percent.
A rent roll of the subject property abstracting the existing leases is
located on the following pages.
================================================================================
-31-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
One Northwest Center
13831 Northwest Freeway
Houston ,Texas
Rent Roll Analysis
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Lease Term
---------- Average
Annual Annual
Square Lease Lease Term Monthly Annual Rent Rent Lease
Suite Tenant Feet Commencement Termination (Yrs) Months Rent Total Per SF Rate PSF
- -------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
100 Nagesh & Carter, CPA 2,495 Feb-92 Feb-94 5.00 24 Months @ $2,131.15 $25,574 $10.25 $10.49
Feb-94 Feb-96 24 Months @ $2,193.52 $26,322 $10.55
Feb-96 Feb-97 12 Months @ $2,255.90 $27,071 $10.85
102 Data General Corp 2,647 May-94 May-97 5.00 36 Months @ $2,260.96 $27,132 $10.25 $10.35
May-97 May-99 24 Months @ $2,316.13 $27,794 $10.50
110 Biluminous Casualty 611 Jan-95 Dec-97 3.00 36 Months @ $590.63 $7,088 $11.60 $11.60
151 Southern States 651 Apr-95 Mar-00 5.00 60 Months @ $596.75 $7,161 $11.00 $11.00
155 Miglicco, Botschen 2,122 Aug-96 Aug-97 2.00 12 Months @ $1,900.96 $22,812 $10.75 $10.88
& Williams Aug-97 Aug-98 12 Months @ $1,945.17 $23,342 $11.00
165 Fitness Center 1,140 No Lease
167 Conference Room 313 No Lease
169 Building Storage 454 No Lease
180 Pegasus Design 6,242 Jan-94 Dec-99 10.00 60 Months @ $6,111.96 $73,344 $11.75 $12.00
Jan-99 Dec-03 60 Months @ $6,372.04 $76,465 $12.25
200 Durey Equipment 1,091 Apr-95 Mar-98 3.00 36 Months @ $954.63 $11,458 $10.50 $10.50
205 Xergraphic Systems 1,029 Jan-95 Dec-97 3.00 36 Months @ $900.38 $10,805 $10.50 $10.50
210 Masada Security 1,223 Aug-96 Jul-99 3.00 36 Months @ $1,223.00 $14,676 $12.00 $12.00
212 Marley Cooling Tower 2,922 Dec-93 Nov-96 5.00 36 Months @ $2,435.00 $29,220 $10.00 $10.20
Dec-96 Nov-98 24 Months @ $2,556.75 $30,681 $10.50
235 Madison Guaranty 5,301 Jul-96 Jul-97 3.00 12 Months @ $4,307.06 $51,685 $9.75 $10.92
Jul-97 Jul-99 24 Months @ $5,080.13 $60,962 $11.50
245 Gulfwide Services 815 Jun-95 May-96 3.00 12 Months @ $679.17 $8,150 $10.00 $10.33
Jun-96 May-98 24 Months @ $713.13 $8,558 $10.50
250 Barone Design Group 4,496 Feb-95 Feb-00 5.00 60 Months @ $3,935.75 $47,229 $10.50 $10.50
300 Ogre Partners, Ltd 2,515 Jul-96 Jul-97 3.00 12 Months @ $2,305.42 $27,665 $11.00 $11.25
Jul-97 Jul-98 12 Months @ $2,357.81 $28,294 $11.25
Jul-98 Jul-99 12 Months @ $2,410.21 $28,923 $11.50
310 Wilco Insurance 2,145 Aug-95 Jul-97 5.00 24 Months @ $1,876.66 $22,523 $10.50 $11.00
Company Aug-97 Jul-98 12 Months @ $1,968.25 $23,595 $11.00
Aug-98 Jul-00 24 Months @ $2,055.63 $24,668 $11.50
312 The Lehman Company 2,068 Aug-95 Sep-95 5.00 1 Month @ $0.0 $0 $0.00 $10.08
Sep-95 Sep-00 60 Months @ $1,768.42 $21,197 $10.25
314 Medical Dental Mgt 2,242 Feb-93 Jan-96 5.00 36 Months @ $1,821.63 $21,660 $9.75 $9.85
Feb-96 Jan-98 24 Months @ $1,868.33 $22,420 $10.00
316 Racal-Milgo Info 1,642 Jan-95 Jan-96 5.00 12 Months @ $1,334.13 $16,010 $9.75 $10.25
Jan-96 Jan-97 12 Months @ $1,368.33 $16,420 $10.00
Jan-97 Jan-98 12 Months @ $1,402.54 $16,831 $10.25
Jan-98 Jan-99 12 Months @ $1,436.75 $17,241 $10.50
Jan-99 Jan-00 12 Months @ $1,470.96 $17,652 $10.75
330 Rolf Jensen & Assoc 6,158 Feb-92 Jan-97 60 Months @ $5,834.71 $70,016 $11.37 $11.37
335 Management Office 1,765 No Lease
<CAPTION>
- ---------------------------------------------------------------------------------------------
Expense Finish Out
Stop Allowance
Suite Tenant Per SF Per SF Comments
- ---------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
100 Nagesh & Carter, CPA $5.00 N/A Tenant's recoveries are not grossed-up
102 Data General Corp $6.15 N/A Tenant's recoveries are grossed-up to 95%
110 Biluminous Casualtiy $5.88 N/A Tenant's recoveries are not grossed-up
151 Southern States $5.74 N/A Tenant's recoveries are grossed-up to 95%
155 Miglicco, Botschen 1996 N/A Tenant's recoveries are grossed-up to 95%
& Williams Base Yr.
165 Fitness Center This is a building amenity
167 Conference This is a building amenity
169 Building Storage None
180 Pegasus Design $6.15 "As Is" Tenant's recoveries are grossed-up to 95%
200 Durey Equipment $5.25 N/A Tenant's recoveries are not grossed-up
205 Xergraphic Systems $5.74 N/A Tenant's recoveries are grossed-up to 95%
210 Masada Security 1996 $6.50 Tenant's recoveries are grossed-up to 95%
Base Yr.
212 Marley Cooling Tower $5.85 N/A Tenant's recoveries are grossed-up to 95%
235 Madison Guaranty 1996 $1.00 Tenant's recoveries are grossed-up to 95%
Base Yr.
245 Gulfwide Services $5.72 N/A Tenant's recoveries are grossed-up to 95%. The tenant
has vacated their space, but continues to pay rent.
250 Barone Design Groups $5.51 $8.00 Tenant's recoveries are grossed-up to 95%
300 Ogre Partners, Ltd 1996 N/A Tenant's recoveries are grossed-up.
Base Yr.
310 Wilco Insurance $5.74 N/A Tenant's recoveries are grossed-up to 95%
Company
312 The Lehman Company $5.74 N/A Tenant's recoveries are grossed-up to 95%
314 Medical Dental Mgt $5.82 N/A Tenant's recoveries are not grossed-up
316 Racal-Milgo Info $4.75 N/A Tenant's recoveries are not grossed-up
330 Rolf Jensen & Assoc $5.25 N/A Tenant's recoveries are not grossed-up
335 Management Office N/A None
</TABLE>
-32-
<PAGE>
<TABLE>
<CAPTION>
One Northwest Center
13831 Northwest Freeway
Houston ,Texas
Rent Roll Analysis
- -------------------------------------------------------------------------------------------------------------------------------
Lease Term
---------- Average
Annual Annual
Square Lease Lease Term Monthly Annual Rent Rent Lease
Suite Tenant Feet Commencement Termination (Yrs) Months Rent Total Per SF Rate PSF
- -------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C>
340 Integration Services 1,026 Mar-95 Mar-98 3.00 36 Months @ $897.75 $10,773 $10.50 $10.50
350 George McElroy & 1,596 Mar-95 Feb-00 5.00 60 Months @ $1,429.75 $17,157 $10.75 $10.75
Assoc.
355 Hydrocarbon Data 1,426 Jan-94 Dec-96 3.00 36 Months @ $1,158.03 $13,904 $9.75 $9.75
365 Norvell Electronics 2,133 Jun-96 May-01 5.00 60 Months @ $1,910.81 $22,930 $10.75 $10.75
400/500 Law Companies 40,183 Mar-91 Mar-96 10.00 60 Months @ $28,462.96 $341,556 $8.50 $11.13
Mar-96 Mar-01 60 Months @ $46,043.02 $552,516 $13.75
400A Provident Life And 5,947 May-95 Apr-00 5.00 60 Months @ $5,451.42 $65,417 $11.00 $11.00
Accident Ins.
500 Circle K 13,435 Feb-94 May-97 3.33 40 Months @ $11,475.73 $137,709 $10.25 $10.25
630 Procter & Gamble 5,381 Aug-94 Aug-99 5.00 60 Months @ $6,802.48 $81,630 $15.17 $15.17
650 OOCL (USA) Inc 4,904 Dec-95 Dec-00 5.00 60 Months @ $5,312.87 $63,752 $13.00 $13.00
<CAPTION>
- ----------------------------------------------------------------------------------------------
Expense Finish Out
Stop Allowance
Suite Tenant Per SF Per SF Comments
- ----------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
340 Integration Services $5.88 N/A Tenant's recoveries are grossed-up to 95%
350 George McElroy & $5.88 N/A Tenant's recoveries are grossed-up to 95%
Assoc.
355 Hydrocarbon Date $8.15 N/A Tenant's recoveries are grossed-up to 95%
365 Norvell Electronics 1996 N/A Tenant's recoveries are grossed-up to 95%
Base Yr
400/500 Law Companies $4.50 N/A Tenant's recoveries are not grossed-up.
This tenant has vacated their space, but
continues to pay rent. The tenant has sub-
leased most of their 5th floor space and
keeps a small skeleton crew on the 4th floor
400A Provident Life And $5.88 N/A Tenant's recoveries are grossed-up to 95%
Accident Ins.
500 Circle K $5.88 N/A Tenant's recoveries are grossed-up to 95%
630 Proctor & Gamble $8.15 $22.00 Tenant's recoveries are not grossed-up
650 OOCL (USA) Inc 1996 $16.50 None
Base Yr
</TABLE>
-33-
<PAGE>
One Northwest Center
13831 Northwest Freeway
Houston, Texas
Rent Roll Summary
<TABLE>
<CAPTION>
=====================================================================================================
Overall Property - Including X-Factor
<S> <C> <C> <C>
Net Rentable Area 150,465 SF 100.0% Number of Leases 32
Occupied Area 128,120 SF 85.1% Average Tenant Size 4,004 SF
Vacant Leaseable Area 22,345 SF 14.9% Average Rental Rate $10.83 /SF
(Weighted)
=====================================================================================================
</TABLE>
-34-
<PAGE>
Income Approach
================================================================================
It should be noted that AM International Inc., which has a lease for suite 120,
is not shown on our rent roll. This is due to the fact that they have vacated
their space and have not paid their rent for the past several months. Therefore,
we have assumed this space is vacant. In addition, a new tenant, Masada
Security, is projected to occupy suite 210 and is shown on the rent roll with a
lease commencement in August of 1996. These two assumptions are based on
conversations with the property management and leasing personnel for the subject
property.
Further, two large tenant spaces are largely unoccupied although the tenants are
paying rent, the Law Companies and Circle K. With an expiration in March 2001,
the Law Companies has a lease for 40,183 square feet of space which is
equivalent to 26.7 percent of the subject's net rentable area. Their space is
divided into 13,778 square feet on the fourth floor and 26,405 square feet on
the fifth floor, and they have successfully sub-leased most of the space on the
fifth floor. The Law Companies keeps a small skeleton crew on the fourth floor.
The terms of the sub-leases were not available and it is our understanding that
the sub-tenants pay their rent to the Law Companies. It is anticipated that the
Law Companies will continue to pay rent through the end of their lease term.
Circle K leases 13,435 square feet of space on the sixth floor. It is our
understanding that they continue to pay their rent and it is anticipated that
they will continue to do so until the expiration of their lease in May, 1997.
Their space has not been sub-let.
Assumptions Regarding the Existing Leases
With the exception of the AM International lease, our analysis specifically
assumes the existing tenants will remain in the property and continue paying
rent under the terms of their leases. Information provided by management
indicates that no other tenants are currently in default of their lease.
Considering the fact that the Law Companies and Circle K do not occupy their
space will result in upward pressure being placed on our selection of a discount
rate for the property.
Lease Expirations
As part of our risk analysis, we reviewed the tenant expiration dates (as
shown on the facing page). With respect to the current leasing structure, there
is one tenant whose lease expires during 1996, which comprises less than one
percent of the total net rentable area. There are five tenants comprising 15.4
percent of net rentable area with expiration dates in 1997, while 6.79 percent
of the rentable area is exposed during 1998. Thus, over the next three years
(1996 - 1998), the percentage of space expiring is fairly nominal (just over 22
percent). The most significant turnover occurs in 2001 when the Law Companies
lease expires. Fortunately, that is five years away, thus, over the near to
intermediate term, the leasing exposure is fairly nominal and evenly spread from
a risk perspective. Furthermore, given the sub-leasing that has occurred in the
Law Companies space, part of the leasing risk may be mitigrated.
None of the renewal options contained in the existing leases specify below
market rates, therefore, at the expiration of those leases which contain renewal
options, we have assumed normal renewal probabilities.
================================================================================
-35-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Income Approach
================================================================================
Estimate of Current Market Rent
According to the subject's leasing agent, a rent of $12.00 per square foot,
on a full service basis, is currently being quoted for the subject's vacant
space. Quoted tenant finish allowances range from $10.00 to $14.00 per square
foot. Typically, tenant finish for second generation space is $3.00 to $5.00 per
square foot. In order to gauge the reasonableness of the quoted rent and form a
conclusion as to the current market rent for the subject property as of the
appraisal date, we conducted a survey of six office buildings totaling 1,042,373
square feet of net rentable area located along Northwest Freeway which is in the
Northwest submarket. All of these comparables are considered to be generally
similar with respect to location and amenities by comparison to the subject
property. On the following page is a summary of properties utilized in our rent
comparable analysis.
================================================================================
-36-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
[GRAPHIC OMITTED]
RENT COMPARABLE MAP
<PAGE>
One Northwest Center
13831 Northwest Freeway
Houston, Texas
Summary of Office Building Rent Comparables
<TABLE>
<CAPTION>
===========================================================================================================================
Net Add-On
Rent Number of Rentable (Common Percent
No. Name/Location Class Year Built Stories Area (SF) Area)Factor Leased
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
R-1 Northwest One B 1982 6 121,821 15.0% 65.0%
13100 Northwest Freeway
Houston, Texas
R-2 13101 Northwest Freeway B 1979 3 77,000 16.0% 69.0%
13101 Northwest Freeway
Houston, Texas
R-3 Northwest Crossing III B 1983 12 310,368 15.0% 87.5%
13105 Northwest Freeway
Houston. Taxes
R-4 Transworld Financial Center B 1981 6 157,000 18.0% 100.0%
13111 Northwest Freeway
Houston, Texas
R-5 First Interstate Bank Building B 1978 8 133,959 15.0% 100.0%
13201 Northwest Freeway
Houston. Texas
R-6 Unisys Tower B 1902 12 242.225 14.0% 97.9%
13430 Northwest Freeway
Houston, Texas
===========================================================================================================================
Subject One Northwest Centre B 1985 4 130,455 13.0% 85.1%
13851 Northwest Freeway
Houston, Texas
===========================================================================================================================
Low 1978 3 77,000 14.0% 65.0%
Date Range, High 1983 12 310,368 18.0% 100.0%
Mean 1991 8 173,729 15.5% 86.6%
===========================================================================================================================
<CAPTION>
====================================================================================================================================
Tenant Improvement Cost
Quoted Rental Rate Per Square Foot
Per Square Foot Lease -----------------------------
Rent ------------------ Term Expenses First Second
No. Name/Location Low High (Years) Stop (SF) Generation Generation
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
R-1 Northwest One $11.50 $12.00 3-5 Base Year N/A Negotiable
13100 Northwest Freeway Stop ($6.00/SF)
Houston, Texas
R-2 13101 Northwest Freeway $10.50 $11,50 3-5 Base Year N/A Negotiable
13101 Northwest Freeway Stop ($5.27/SF)
Houston, Texas
R-3 Northwest Crossing III $11.50 $12.50 3-5 Base Year N/A $3.00 to $11.00
13105 Northwest Freeway Stop ($4.98/SF)
Houston. Taxes
R-4 Transworld Financial Center $10.50 $10.50 3-5 Base Year N/A Negotiable
13111 Northwest Freeway Stop ($5.60 SF)
Houston, Texas
R-5 First Interstate Bank Building $10.50 $11.00 3-5 Base Year N/A Negotiable
13201 Northwest Freeway Stop ($6.95/SF)
Houston. Texas
R-6 Unisys Tower $14.00 $14.00 3-5 Base Year N/A $8.00
13430 Northwest Freeway Stop
Houston, Texas
====================================================================================================================================
Subject One Northwest Center $12.00 $12.00 3-5 Base Year N/A $10.00
13351 Northwest Freeway Stop to
Houston, Texas $14.00
====================================================================================================================================
Low $10.50 $10.50 3-5 N/A N/A $8.00
Date Range, High $14.00 $14.00 3-5 N/A N/A $8.00
Mean $11.42 $11.92 3-5 N/A N/A $8.00
====================================================================================================================================
</TABLE>
-37-
<PAGE>
Income Approach
================================================================================
The rates summarized in the chart indicate the quoted rental rate for the
comparable properties. The comparables illustrate rents which range from $10.50
to $14.00 per square foot, with an average of $11.42 to $11.92 per square foot.
All of the lease rates are full service with a base year operating expense stop
(including electricity). Quoted tenant improvement allowances range from $3.00
to $11.00 per square foot, however, the majority of tenant finish is quoted as
being "negotiable." All of the comparables have garage parking, as well as
uncovered surface parking. None of the comparables charge for covered parking at
the present time.
In addition to the comparison with the surveyed properties noted above, we
have also taken into consideration the recent leases which have been executed at
the subject property. Most of the recent leases have average rental rates
between $10.00 and $12.00 per square foot, on a full-service basis. Tenant
finish allowances range from $6.50 to $22.00 per square foot for new tenants and
from $0.00 to $8.00 per square foot for renewing tenants. The majority of the
recent leases have terms of three to five years, and all reflect base year
expense stops or a stated dollar expense stop. In general, the reasons for the
range in base rental rates in the recent leases include: (1) the size, location,
and physical condition of the space leased, (2) the amount of the tenant
improvement allowance provided by the landlord, and (3) the creditworthiness of
the tenant. The length of the term can be another contributing factor.
After considering the competitive properties, it is our opinion that the
following parameters are representative of a market lease for the subject
property as of the effective date of appraisal:
1) The market rental rate for the subject is estimated to equate to
$11.50 per square foot of net rentable area, full service (including
electricity). This is $0.50 per square foot less than the leasing
agent is quoting.
2) A base year expense stop is tied to the projected year a lease
commences.
3) Future leases are assumed to have a four year lease term, which
attempts to recognize that the majority of the tenants will execute
leases between three and five years.
4) The tenant improvement allowance is projected to be $7.50 per square
foot for new tenants that lease second generation space and $2.50 per
square foot for tenant renewal of second generation space.
Rental Rate Forecast
Several brokers indicated to us that there has been little movement in
rental rates for the office buildings that compete with the subject property.
Our historical survey presented earlier in the Market Analysis section supports
this contention. Furthermore, it is our opinion that the subject will likely
experience minimal rental rate increases over the next few years because of the
high amount of vacant space still available in the subject's submarket, as well
as the overall Houston area.
Occupancy in the Northwest submarket has improved by approximately six
percentage points since 1993, and it now has the sixth lowest vacancy level
(17.3 percent) among the 18 submarkets included in the Cushman & Wakefield
survey. However, this level of vacancy is still
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Income Approach
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considered rather high and there has been very little change, only 2.7
percentage points, since 1994. The weighted average rental rate in the Northwest
submarket has only increased 1.5 percent since year end 1993, or $0.17 per
square foot.
As such, we have forecasted a $0.25 per square foot increase in the market
rental rate for the subject property in 1997 and 1998, a $0.50 per square foot
increase in both 1999 and 2000, $0.75 per square foot in 2001 and 2002, and a
$1.00 per square foot increase in 2003, 2004 and 2005. Thereafter, a 3.5 percent
annual increase has been applied to the market rental rate. Consequently, the
annual compound growth rate over the entire 11 year period under analysis is 4.5
percent.
Expense Recovery Income
Most of the existing leases have provisions for expense pass throughs above
a base year or stated expense stop. The allowable expenses included in the
expense recoveries for leases include all items of expense except capital
replacements, tenant improvements, and leasing commissions. The recovery income
reflected in our cash flow analysis is based on the terms of the existing tenant
leases, plus a base year expense stop applied to all future contracts.
Miscellaneous (Other) Income
Historically, the subject property has generated nominal miscellaneous
income from a variety of sources. Primarily, this income is attributable to
storage charges and charges to tenants for keys, lock changes, and security
cards. The amount of miscellaneous income has ranged from a low of zero dollars
in 1995 to a high of $1,003 in 1994. The 1996 budget forecasts $25,603, however,
this reflects the income from the early buy-out of an existing lease. Given
primary weight to the figures prior to the buy-out, we have projected that there
will be no significant miscellaneous income for the subject property.
Vacancy and Collection Loss
Both the investor and the appraiser are primarily interested in the cash
revenue that an income property is likely to produce annually over a specified
period of time rather than what it could produce if it were always 100 percent
occupied and all the tenants were actually paying their rent in full and on
time. It is normally a prudent practice to expect some income loss, either in
the form of actual vacancy or in the form of turnover, non-payment, or slow
payment of rent. Regarding collection loss specifically, we have applied a two
percent loss factor throughout the holding period primarily as a contingency for
potential collection problems and tenant defaults. This collection loss factor
is applied to rental income from all tenants.
As of the date of appraisal, the subject property was 85.1 percent
occupied, which equates to a 14.9 percent vacancy factor. As previously
discussed, the average occupancy level in the Northwest submarket is 82.7
percent. From a micro-market perspective, we surveyed 1,042,373 square feet of
Class B office buildings that compete directly with the subject. The reported
occupancy levels of these buildings ranged from 65.0 to 100 percent, with the
weighted average occupancy being 86.6 percent. These statistics indicate that
the buildings contained in our micro-market survey are performing similar to the
overall submarket.
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Income Approach
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The subject is currently 85.1 percent occupied, with 22,345 square feet
vacant. We have forecasted absorption of the 22,345 square feet of vacant space
to take place over the next 18 months after our date of value. Please refer to
the prior facing page for our lease up projections.
We have projected an approximate three month vacancy period at the
expiration of every lease with an average lease term of four years. This equates
to a 5.9 percent vacancy factor (three months divided by 51 months including the
three months vacancy). Our analysis includes a 67 percent probability of
rollover (existing tenants re-leasing their space) and a 33 percent probability
of turnover (existing tenants vacating the premises and new tenants leasing the
vacated space). According to the property manager, this is lower than the
property's actual experience over the past years, but in our opinion, it is
considered realistic when viewing a longer period of time.
The resulting physical (rollover/turnover) occupancy level for the property
within the cash flow is 93.0 percent. Additionally, a collection loss factor of
2.0 percent is being projected for all tenants.
In addition to the previous lease-up projections we have also estimated
lease-up scenarios for the suites leased by Circle K and the Law Companies. As
noted, both tenants have vacated their space, but continue to pay their rent.
Therefore, their leases are projected to extend through the end of their term.
However, at the end of each lease, each tenant is assumed to vacate their space.
Given the extended lead time to work on releasing these spaces, it is our
opinion that they can be absorbed in a rather short period. Our scenario assumes
the Circle K suite has been projected to be subdivided into two suites with the
first half being immediately released upon expiration (June 1997) and the second
half being released the beginning of October 1997. The fourth floor space
occupied by the Law Companies (13,778 square feet) will also be immediately
released upon expiration (April 2001). However, the 26,405 square feet leased by
Law Companies on the fifth floor will be subdivided into four suites which
average approximately 6,600 square feet. The first will be absorbed upon
expiration (April 2001) with the remaining space being absorbed on a rolling two
month period until the last is absorbed the beginning of October 2001.
Operating and Fixed Expenses
On the facing page is our Income and Expense Summary for the subject
property. We based our estimated operating expenses on a review of the 1993,
1994, and 1995 actual itemized expenses for the property. In addition, we were
provided with the property's 1996 budget. Finally, this data was compared with
known operating statements of similar office projects, and consultations with
the local property management personnel, as well as Cushman & Wakefield's
Management staff.
Total operating expenses were $5.70 per square foot in 1993, $4.79 per
square foot in 1994, and $5.48 per square foot in 1995. The 1996 budgeted
amount is projected to be slightly higher at $5.64 per square foot.
As illustrated in the preceding chart, those expenses considered to trend
in a reasonable manner over the period for which we have historical data include
administrative, payroll, janitorial,
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Income Approach
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building services, repairs and maintenance, security, utilities and advertising.
Our Year One projections for these items can be found in the preceding chart.
The other expense categories that were not as consistent from year to year have
been examined more thoroughly in the following paragraphs. Of the above
mentioned expense categories, the utility and repairs and maintenance expenses
are grown at four percent, and all others have been grown at three and one-half
percent. Also note that the janitorial expense has been made of function of the
subject's average occupied square footage.
Operating Expenses
Real Estate Taxes - As noted within the tax discussion, the subject's taxes
for 1996 have been estimated at $110,110. This estimate reflects a
projected increase in the subject's 1996 tax rate of approximately 3.5
percent. Subsequent to 1996, our 1997 tax estimate is $179,086 which is an
increase in excess of 60 percent. This rather large increase is due to the
fact that the subject's current assessment ($3,500,000) is somewhat below
our estimate of market value ($6,100,000). Therefore, we have increased the
tax expense for 1997 to better reflect our estimate of market value.
Insurance - We were not provided a separate insurance expense for 1993. The
information provided for 1993 was compiled by a different company than the
current management. Neither the current manager, nor the person who
presently handles insurance matters for the subject, could explain why no
amount was shown for insurance during the year in question. One possibility
might be that the property was part of a blanket policy and the prior owner
did not allocate an expense for the property. In any event, the additional
years for which we have information suggest an expense of $0.13 to $0.17
per square foot. The budget for 1996 illustrates a rate of $0.13 per square
foot, which appears reasonable and will be used in our analysis.
Management - Based upon discussions with Cushman & Wakefield's Management
Services staff, this expense typically includes management, bookkeeping,
and general accounting costs associated with the operation of the property.
The operating statements we were provided indicate a management fee of 2.75
percent of effective gross income has historically been charged. Based on
the management fees for similar buildings, we consider a management fee of
3.0 percent of effective gross income to be more appropriate.
Other Expenses:
Other operating expenses include Tenant Improvements and Leasing
Commissions. The probability of incurring future leasing commissions and tenant
alterations is based on a 67 percent probability of turnover (an existing tenant
vacates a space and the space is released to a new tenant) and a 33 percent
probability of rollover (an existing tenant relets his space).
Tenant Improvements - We have factored a $7.50 per square foot allowance
for second generation space and an allowance of $2.50 per square foot is
projected for tenant renewals. The weighted average finish-out allowance
for all tenants is therefore
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Income Approach
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equals to $4.10 per square foot. In addition, we will utilize an estimate
of $14.00 per square foot for the subject's shell space.
Tenant improvement costs are projected to increase at a rate of 3.5 percent
per year through the projection period.
Leasing Commissions - For the period under analysis, leasing commissions
for all new leases are estimated to be 6.5 percent when outside brokers are
involved and 4.5 percent for in-house leases. Renewal commissions are also
projected at 6.5 percent involving outside brokers, but reduced to 2.0
percent when handled totally in-house. Based on the experience of similar
properties in the immediate area, we have projected a 90 percent
probability that an outside broker will be involved in a lease to a new
tenant.
As a result of these projections, the weighted average commission applied
to all expiring space is equal to 4.63 percent, which we have rounded to
4.5 percent.
Capital Replacements/Reserves - Reserves for replacements are or should be
set aside to accumulate an amount sufficient to replace and/or repair
certain major building components over time, i.e., roof, major parking lot
repairs, HVAC systems, etc. during the period under analysis. Planned
capital expenditures for the subject include $73,550 for the remainder of
1996 to cover expenses associated with ADA improvements and repairs to the
parking garage, elevators and restrooms. In addition, another $20,000 is
scheduled for 1997 to cover parking lot and walkway repairs and additional
ADA improvements. Scheduled repairs for 1998 include $45,000 for roof
repairs, structural repairs and the last of the ADA repairs and up-grades.
We have relied upon these estimates in the first 3 years of our cash flow.
Thereafter, based on the expense behavior of other comparable properties
and the age of the subject property, we have estimated capital
replacements/reserves at $0.10 per net rentable square foot (in 1996
dollars), increasing by 3.5 percent per year throughout the remainder of
our analysis.
Our projected expenses are predicated on the assumption that the property
will be prudently managed, while maintaining the improvements at a competitive
level to preserve value. The preceding cumulative annual operating expense
estimate for 1996 equates to $834,631 ($5.55 per square foot of net rentable
area), excluding the capital replacements, tenant improvements and the leasing
commissions. Our total projected expenses appear reasonable when compared to the
historical experience and the 1996 budgeted amount.
Cash Flow Model
In the calculation of the cash flow forecasts and investment results
produced under these assumptions, projections and parameters, we employed the
Pro-Ject Plus+ computer program. The program has the flexibility to allow for a
tenant by tenant analysis of the subject as encumbered by the existing leases.
It also allows for a variety of assumptions regarding future income streams and
expenses. Our ten-year and five month discounted cash flow analysis can be found
on the following page.
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One Northwest Center
13831 Northwest Freeway
Houston, Texas
Cash Flow Analysis
<TABLE>
<CAPTION>
====================================================================================================================================
Calendar Calendar Calendar Calendar Calendar Calendar
Year Year Year Year Year Year
1996 1997 1998 1999 2000 2001
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Revenue From Operations
Rental Income $627,584 $1,607,836 $1,773,763 $1,755,392 $1,767,813 $1,627,708
Operating Expense Recoveries $15,673 $90,661 $128,074 $147,753 $156,357 $50,796
--------------------------------------------------------------------------------------
Total Rent, Recoveries, & Other Income $643,257 $1,698,497 $1,901,837 $1,903,145 $1,024,170 $1,678,504
Collection Loss ($12,865) ($33,970) ($38,037) ($38,063) ($38,403) ($33,570)
Effective Gross Income $830,392 $1,664,527 $1,863,800 $1,865,082 $1,885,687 $1,644,934
Operating Expenses
Variable Operating Expenses
Administrative $6,269 $15,573 $10,118 $16,682 $17,268 $17,871
Payroll $43,888 $109,012 $112,827 $116,776 $120,863 $125,094
Janitorial $35,958 $98,435 $110,970 $113,087 $116,271 $107,596
Building Services $11,285 $28,032 $29,013 $30,028 $31,079 $32,167
Repairs & Maintenance $47,020 $117,363 $122,057 $126,939 $132,017 $137,298
Security $33,228 $82,538 $85,426 $88,416 $91,511 $94,714
Utilities $94,041 $234,725 $244,114 $253,879 $264,034 $274,596
Advertising $3,135 $7,787 $8,059 $8,341 $8,633 $8,935
Management Fees $18,912 $49,936 $55,914 $55,952 $56,570 $49,348
--------------------------------------------------------------------------------------
Total Variable Expenses $293,734 $743,401 $784,498 $810,100 $838,244 $847,619
Fixed Operating Expenses
Real Estate Taxes $45,879 $179,086 $185,354 $191,841 $198,556 $205,505
Insurance $8,150 $20,245 $20,954 $21,687 $22,448 $23,232
--------------------------------------------------------------------------------------
Total Fixed Expenses $54,029 $199,331 $206,308 $213,528 $221,002 $228,737
Total Expenses $347,763 $942,732 $990,806 $1,023,628 $1,059,246 $1,076,356
======================================================================================
Net Operating Income $282,629 $721,795 $872,994 $841,454 $826,441 $568,578
======================================================================================
Capital Expenditures & Reserves $73,550 $20,000 $45,000 $16,682 $17,266 $17,871
Tenant Improvements $20,138 $312,022 $102,205 $90,866 $77,531 $565,750
Leasing Commissions $7,781 $106,880 $31,998 $44,976 $38,560 $244,858
--------------------------------------------------------------------------------------
Total Capital Expenditures $101,469 $438,902 $179,203 $152,524 $133,357 $828,479
Net Cash Flow $181,160 $282,893 $693,791 $688,930 $693,084 ($250,001)
<CAPTION>
====================================================================================================================================
Calendar Calendar Calendar Calendar Calendar Compound
Year Year Year Year Year Growth
2002 2003 2004 2005 2006 Rate
====================================================================================================================================
Revenue From Operations
Rental Income $1,931,463 $1,937,849 $2,019,929 $1,964,226 $2,430,617 4.90%
Operating Expense Recoveries $69,226 $95,280 $98,747 $61,110 $74,147 7.02%
-----------------------------------------------------------------------
Total Rent, Recoveries, & Other Income $2,000,689 $2,033,129 $2,118,676 $2,025,336 $2,504,764 4.96%
Collection Loss ($40,014) ($40,662) ($42,373) ($40,507) ($50,095) N/A
Effective Gross Income $1,960,675 $1,992,467 $2,076,303 $1,984,829 $2,454,669 4.96%
Operating Expenses
Variable Operating Expenses
Administrative $18,496 $19,143 $19,813 $20,507 $21,225 3.50%
Payroll $129,472 $134,003 $138,694 $143,548 $148,572 3.50%
Janitorial $126,798 $129,885 $133,115 $123,614 $143,991 5.25%
Building Services $33,293 $34,458 $35,664 $36,912 $38,204 3.50%
Repairs & Maintenance $142,790 $148,501 $154,441 $160,619 $167,044 4.00%
Security $98,029 $101,460 $105,011 $108,686 $112,490 3.50%
Utilities $285,579 $297,003 $308,883 $321,238 $334,087 4.00%
Advertising $9,248 $9,572 $9,907 $10,253 $10,612 3.50%
Management Fees $58,820 $59,774 $62,289 $59,545 $73,640 4.96%
-----------------------------------------------------------------------
Total Variable Expenses $902,525 $933,799 $967,817 $984,922 $1,049,865 4.06%
Fixed Operating Expenses
Real Estate Taxes $212,696 $220,142 $227,847 $235,822 $244,076 8.29%
Insurance $24,045 $24,886 $25,757 $26,659 $27,592 3.50%
-----------------------------------------------------------------------
Total Fixed Expenses $236,743 $245,028 $253,604 $262,481 $271,668 7.68%
Total Expenses $1,139,268 $1,178,827 $1,221,421 $1,247,403 $1,321,533 4.70%
=======================================================================
Net Operating Income $821,407 $813,640 $854,882 $737,426 $1,133,136 5.27%
=======================================================================
Capital Expenditures & Reserves $18,496 $19,143 $19,813 $20,507 $21,225 -19.09%
Tenant Improvements $96,269 $40,119 $188,941 $438,089 $137,647 11.03%
Leasing Commissions $49,855 $21,457 $103,939 $246,961 $77,594 15.31%
-----------------------------------------------------------------------
Total Capital Expenditures $164,620 $80,719 $312,693 $705,557 $236,466 -0.29%
Net Cash Flow $656,787 $732,021 $542,189 $31,869 $896,670 7.51%
</TABLE>
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Income Approach
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Terminal Capitalization Rate Selection
A terminal capitalization rate was used to estimate the market value of the
property at the end of the assumed investment holding period. The rate is
applied to the eleventh year estimate of net operating income before making
deductions for leasing commissions, tenant improvement allowances, or capital
reserves. We estimated an appropriate terminal rate based on the indicated
capitalization rates of the improved property sales in today's market, as
summarized below.
================================================================================
Summary of Capitalization Rates
================================================================================
Sale Capitalization.
No. Rate
================================================================================
1 10.8%
2 10.8%
3 10.9%
4 7.4%
5 12.5%
6 11.0%
================================================================================
A premium is generally added to today's rate to allow for the risk of
unforeseen events or trends which might affect our estimate of net operating
income during the holding period, including possible changes in market
conditions for the property. Investors typically add 50 to 100 basis points to
the going-in rate to arrive at a terminal capitalization rate, according to
Cushman & Wakefield's periodic investor surveys.
Considering the survey results and comparing the subject property to the
comparables included in the Sales Comparison Approach, but also tempered by the
fact that capitalization rates are falling, we are of the opinion that a 10.5
percent terminal capitalization rate is appropriate to apply to the subject's
projected net operating income in the eleventh year. This results in an
estimated terminal value (or sales price) for the property at the end of the
10th year of $10,791,771 ($1,133,136/.105).
From this projected sales price, the estimated costs of sale for such items
as real estate commissions, closing costs, legal fees, as well as others, must
be deducted. We have estimated these costs to be four percent of the sales price
resulting in cash flow from the sale of the property in the tenth year of
$10,360,101 ($10,791,771 - $431,671 = $10,360,101).
Discount Rate Analysis
We estimated future cash flows, including property value at reversion, and
discounted that income stream at an internal rate of return (yield rates)
currently required by investors for similar-quality real property. The yield
rate (internal rate of return or IRR) is the single rate that discounts all
future equity benefits (cash flows and equity reversion) to an estimate of net
present value.
Cushman & Wakefield Valuation Advisory Services periodically surveys
national real estate investors to determine their investment objectives.
Following is a brief review of internal rates of
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Income Approach
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return, overall rates, and income and expense growth rates considered acceptable
by respondents.
<TABLE>
<CAPTION>
=======================================================================================================
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES
WINTER 1995 NATIONAL INVESTOR SURVEY FOR SUBURBAN OFFICE BUILDINGS
=======================================================================================================
INCOME EXPENSE
GOING IN TERMINAL IRR GROWTH GROWTH
----------- ---------- ----------- ----------- ----------- Projection
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH Period
=======================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mean 9.3 9.9 9.4 10.0 12.1 12.6 13.3 4.6 3.4 3.7 10
- -------------------------------------------------------------------------------------------------------
Range 8.0 12.0 9.0 12.0 11.0 15.5 10.0 15.0 0.0 4.5 --
- -------------------------------------------------------------------------------------------------------
No. of Responses: 18
=======================================================================================================
</TABLE>
This table summarizes the investment parameters of some of the most
prominent investors currently acquiring good quality office building properties
in the United States. The entire survey is included in the Addenda to this
report.
The investor's internal rates of return cited above range from 11.0 to
15.5 percent. We have selected a 12.0 percent discount rate for the subject
property.
The internal rate of return and terminal capitalization rate selected for
this analysis were strongly influenced by our recent Investor Survey, but we
also relied very heavily on the anecdotal data from Cushman & Wakefield's
Financial Services Group. Furthermore, we realize that the survey reflects
target rates rather than transactional rates. Transactional rates are usually
difficult to obtain in the verification process and are actually only target
rates of the buyer at the time of sale. The property's performance will
ultimately determine the actual yield and capitalization rate at the time of
sale after a specific holding period. We have found that, in improving markets
or with above average properties, demand will be high and transactional rates
may be lower than target rates that are quoted in surveys. We have tried to
recognize this factor in our choice of rate for our cash flow model.
Discounted Cash Flow Chart
The discounted cash flow analysis can be found on the following page.
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<TABLE>
<CAPTION>
One Northwest Center
13831 Northwest Freeway
Houston, Texas
====================================================================================================================================
Discounted Cash Flow Analysis
====================================================================================================================================
NET DISCOUNT PRESENT ANNUAL
CALENDAR CASH FACTOR@ VALUE OF COMPOSITION CASH ON CASH
YEAR FLOW 12.00% (1) CASH FLOWS OF YIELD RETURN
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
1996 $181,160 X 0.95388 = $172,804 2.83% (2) 2.97% (2)
1997 $282,893 X 0.85168 = $240,933 3.95% 4.64%
1998 $693,791 X 0.76043 = $527,576 8.64% 11.37%
1999 $688,930 X 0.67895 = $467.750 7.66% 11.29%
2000 $693,084 X 0.60621 = $420,152 6.88% 11.36%
2001 ($259,901) X 0.54126 = ($140,673) -2.30% -4.26%
2002 $656,787 X 0.48326 = $317,401 5.20% 10.77%
2003 $732,921 X 0.43149 = $316,245 5.18% 12.02%
2004 $542,189 X 0.38526 = $208,881 3.42% 8.89%
2005 $31,869 X 0.34398 = $10,962 0.18% 0.52%
----------- -------- ------
Total Present Value of Cash Flows $2,542,032 41.63% 6.96%
Average
Reversion:
2006 $1,133,136 (3) 10.50% = $10,791,771
Less- Cost of Sale@ 4.00% = $431,671
-----------
Net Reversion $10,360,101
X Discount Factor 0.34398
-----------
Total Present Value of Reversion $3,563,644 58.37%
Total Present Value of Cash Flow $6,105,676 100.00%
ROUNDED: $6,100,000
-----------
Net Rentable Area (S.F.): 150.465
Per Square Foot of Net Rentable Area: $40.54
Year One NOI 5 ) Months $282,629
NOI Annualized $678,310
Implicit Going-In Capitalization Rate 11.12%
Note: (1) The discount factors reflect partial year discounting because of Year One (5 months).
(2) Discounted at a safe rate of 5.5%
(3) Net Operating Income
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</TABLE>
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Income Approach
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Conclusions Via the Income Approach
The resulting value estimate is $6,100,000, or $40.54 per net rentable
square foot, which translates in an 11.12 percent going-in capitalization rate.
This rate is considered reasonable and is in-line with the going-in rates
reflected by our comparable sales.
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RECONCILIATION AND FINAL ESTIMATE OF VALUE
================================================================================
Value indications for the subject property by the Approaches to Value are
indicated as follows:
Land Value $ 500,000
Sales Comparison Approach $6,200,000
Income Approach $6,100,000
In the reconciliation, each approach to value is considered in order to
determine the reliability of the data in each and to weigh which approach best
represents the actions of typical users and investors in the market.
As previously noted, we concluded that the Cost Approach was not
appropriate in our analysis because of the interest being appraised, and the
problems associated with accurately reflecting accrued depreciation,
particularly external/economic obsolescence. Moreover, investors rarely rely on
this approach in purchase decisions.
The Sales Comparison Approach, is based on the principle of substitution
which implies that a prudent person will not pay more to buy or rent a property
than it would cost to buy a comparable substitute property. In this approach,
the subject property was compared with five office building sales. We analyzed
the sales using the sales price per square foot and effective gross income
multiplier (EGIM) methods. Although various dissimilarities between the sales
and the subject were noted, the general analysis is believed to provide
reasonable support for our value conclusion. As such, the Sales Comparison
Approach is afforded appropriate weight in the final conclusion.
The Income Approach is based upon investor expectations of the income
stream generated by an income producing property. After estimating gross income
and the absorption of the vacant space, deductions were made for vacancy and
collection losses, and variable, fixed and other expenses. The resulting net
operating income was then converted into an indication of value by means of
discounted cash flow model.
Since investment properties are generally bought and sold based upon their
income generating ability, all sources of pertinent data were carefully
researched. It is our opinion that the Income Approach is the most reliable
indicator of the value of the subject since the intent of our analysis was to
mirror investor expectations.
Therefore, giving primary weight to the indication of value via the Income
Approach, as supported by the Sales Comparison Approach, we have formed an
opinion that the market value of the leased fee estate in the referenced
property, subject to the assumptions, limiting conditions, certifications, and
definitions, as of July 25, 1996, was:
SIX MILLION ONE HUNDRED THOUSAND DOLLARS
$6,100,000
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Reconciliation and Final Estimate of Value
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Marketing Time
Marketing time is an estimate of the time that might be required to sell a
real property interest at the appraised value. Marketing time is presumed to
start on the effective date of the appraisal. Marketing time is subsequent to
the effective date of the appraisal, and exposure time is presumed to precede
the effective date of appraisal.
The estimate of marketing time uses some of the same data analyzed in the
process of estimating the reasonable exposure time and is not intended to be a
prediction of a date of sale.
Our estimate of an appropriate marketing time for the subject relates to a
sale of the property in its As Is condition. Based on our discussions with local
brokers and buyer/sellers of office projects like the subject, as well as our
assessment of the local real estate market and economic forces in general, we
have concluded that the probable marketing period for the subject property in
today's environment would approximate six to nine months.
================================================================================
-49-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
ASSUMPTIONS AND LIMITING CONDITIONS
================================================================================
Appraisal means the appraisal report and opinion of value stated therein; or the
letter opinion of value, to which these Assumptions and Limiting Conditions are
annexed.
Property means the subject of the Appraisal.
C&W means Cushman & Wakefield, Inc. or its subsidiary which issued the
Appraisal.
Appraiser(s) means the employee(s) of C&W who prepared and signed the Appraisal.
The Appraisal has been made subject to the following assumptions and limiting
conditions:
1) No opinion is intended to be expressed and no responsibility is
assumed for the legal description or for any matters which are legal
in nature or require legal expertise or specialized knowledge beyond
that of a real estate appraiser. Title to the Property is assumed to
be good and marketable and the Property is assumed to be free and
clear of all liens unless otherwise stated. No survey of the Property
was undertaken.
2) The information contained in the Appraisal or upon which the Appraisal
is based has been gathered from sources the Appraiser assumes to be
reliable and accurate. Some of such information may have been provided
by the owner of the Property. Neither the Appraiser nor C&W shall be
responsible for the accuracy or completeness of such information,
including the correctness of estimates, opinions, dimensions,
sketches, exhibits and factual matters.
3) The opinion of value is only as of the date stated in the Appraisal.
Changes since that date in external and market factors or in the
Property itself can significantly affect property value.
4) The Appraisal is to be used in whole and not in part. No part of the
Appraisal shall be used in conjunction with any other appraisal.
Publication of the Appraisal or any portion thereof without the prior
written consent of C&W is prohibited. Except as may be otherwise
stated in the letter of engagement, the Appraisal may not be used by
any person other than the party to whom it is addressed or for
purposes other than that for which it was prepared. No part of the
Appraisal shall be conveyed to the public through advertising, or used
in any sales or promotional material without C&W's prior written
consent. Reference to the Appraisal Institute or to the MAI
designation is prohibited.
5) Except as may be otherwise stated in the letter of engagement, the
Appraiser shall not be required to give testimony in any court or
administrative proceeding relating to the Property or the Appraisal.
6) The Appraisal assumes (a) responsible ownership and competent
management of the Property; (b) there are no hidden or unapparent
conditions of the Property, subsoil or structures that render the
Property more or less valuable (no responsibility is assumed for such
conditions or for arranging for engineering studies that may be
required to discover them); (c) full compliance with all applicable
federal, state and local zoning and environmental regulations and
laws, unless noncompliance is stated, defined and considered in the
Appraisal; and (d) all required licenses, certificates of occupancy
and other governmental
================================================================================
-50-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Assumptions and Limiting Conditions
================================================================================
consents have been or can be obtained and renewed for any use on which
the value estimate contained in the Appraisal is based.
7) The physical condition of the improvements considered by the Appraisal
is based on visual inspection by the Appraiser or other person
identified in the Appraisal. C&W assumes no responsibility for the
soundness of structural members nor for the condition of mechanical
equipment, plumbing or electrical components.
8) The forecasted potential gross income referred to in the Appraisal may
be based on lease summaries provided by the owner or third parties.
The Appraiser assumes no responsibility for the authenticity or
completeness of lease information provided by others. C&W recommends
that legal advice be obtained regarding the interpretation of lease
provisions and the contractual rights of parties.
9) The forecasts of income and expenses are not predictions of the
future. Rather, they are the Appraiser's best estimates of current
market thinking on future income and expenses. The Appraiser and C&W
make no warranty or representation that these forecasts will
materialize. The real estate market is constantly fluctuating and
changing. It is not the Appraiser's task to predict or in any way
warrant the conditions of a future real estate market; the Appraiser
can only reflect what the investment community, as of the date of the
Appraisal, envisages for the future in terms of rental rates,
expenses, supply and demand.
1O) Unless otherwise stated in the Appraisal, the existence of potentially
hazardous or toxic materials which may have been used in the
construction or maintenance of the improvements or may be located at
or about the Property was not considered in arriving at the opinion of
value. These materials (such as formaldehyde foam insulation, asbestos
insulation and other potentially hazardous materials) may adversely
affect the value of the Property. The Appraisers are not qualified to
detect such substances. C&W recommends that an environmental expert be
employed to determine the impact of these matters on the opinion of
value.
11) Unless otherwise stated in the Appraisal, compliance with the
requirements of the Americans With Disabilities Act of 1990 (ADA) has
not been considered in arriving at the opinion of value. Failure to
comply with the requirements of the ADA may adversely affect the value
of the Property. C&W recommends that an expert in this field be
employed.
================================================================================
-51-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
CERTIFICATION OF APPRAISAL
================================================================================
We certify that, to the best of our knowledge and belief:
1) I, David Heath, MAI, have inspected the property, and I, Ronald W.
Potts, MAI, have reviewed the report and concur with the findings
contained herein.
2) The statements of fact contained in this report are true and correct.
3) The reported analyses, opinions, and conclusions are limited only by
the reported assumptions and limiting conditions, and are our
personal, unbiased professional analyses, opinions, and conclusions.
4) We have no present or prospective interest in the property that is the
subject of this report, and we have no personal interest or bias with
respect to the parties involved.,
5) Our compensation is not contingent upon the reporting of a
predetermined value or direction in value that favors the cause of the
client, the amount of the value estimate, the attainment of a
stipulated result, or the occurrence of a subsequent event. The
appraisal assignment was not based on a requested minimum valuation, a
specific valuation or the approval of a loan.
6) No one provided significant professional assistance to the persons
signing this report.
7) Our analyses, opinions, and conclusions were developed, and this
report has been prepared, in conformity with the Uniform Standards of
Professional Appraisal Practice of the Appraisal Foundation and the
Code of Professional Ethics and the Standards of Professional
Appraisal Practice of the Appraisal Institute.
8) The use of this report is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives.
9) As of the date of this report, David Heath, MAI and Ronald W. Potts,
MAI, have completed the requirements of the continuing education
program of the Appraisal Institute.
/S/ David Heath
- -------------------------------------
David Heath, MAI
Dallas Valuation Advisory Services
Certification No. TX-1323243-G
/S/ Ronald W. Potts
- -------------------------------------
Ronald W. Potts, MAI
Director/Manager
Dallas Valuation Advisory Services
Certification No. TX-1321575-G
================================================================================
-52-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
ADDENDA
================================================================================
================================================================================
-53-
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
One Northwest Center
13831 Northwest Freeway
Houston, Texas
Recent Lease Analysis
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Lease Term
----------------------------
Square Lease Lease Term Monthly
Suite Tenant Feet Commencement Termination (Yrs) Months Rent
- --------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C>
1996
155 Milglicco, Botschen & 2,122 Aug 96 Aug 97 2.00 12 Months@ $1,900.96
Williams Aug 97 Aug 98 12 Months@ $1,945.17
210 Mesada Security 1,223 Aug 96 Jul 99 3.00 36 Months@ $1,223.00
235 Madison Guaranty 5,301 Jul 96 Jul 97 3.00 12 Months@ $4,307.06
Jul 97 Jul 96 24 Months@ $5,080.13
300 Ogre Partners, Ltd. 2,515 Jul 96 Jul 97 3.00 12 Months@ $2,305.42
Jul 97 Jul 98 12 Months@ $2,357.81
Jul 98 Jul 99 12 Months@ $2,410.21
365 Norvell Electronics 2,133 Jun 96 May 01 5.00 60 Months@ $1,910.81
1995
110 Bituminous Casualty 611 Jan 95 Dec 97 3.00 36 Months@ $590.63
151 Southern States 651 Apr 95 Mar 00 5.00 60 Months@ $596.75
200 Duray Equipment 1,091 Apr 95 Mar 98 3.00 36 Months@ $954.63
205 Xergraphic Systems 1,029 Jan 95 Dec 97 3.00 36 Months@ $900.38
245 Gulfwide Securities 815 Jun 95 May 96 3.00 12 Months@ $679.17
Jun 96 May 98 24 Months@ $713.13
250 Barons Design Group 4,498 Feb 95 Feb 00 5.00 60 Months@ $3,935.75
310 Wilco Insurance Company 2,145 Aug 95 Jul 97 5.00 24 Months@ $1,876.88
Aug 97 Jul 98 12 Months@ $1,966.25
Aug 98 Jul 00 24 Months@ $2,055.63
312 The Lehman Company 2,068 Aug 95 Sep 95 5.00 1 Month@ $0.00
Sep 95 Sep 00 60 Months@ $1,766.42
316 Recal-Milgo Info. 1,642 Jan 95 Jan 96 5.00 12 Months@ $1,334.13
Jan 96 Jan 97 12 Months@ $1,368.33
Jan 97 Jan 98 12 Months@ $1,402.54
Jan 98 Jan 99 12 Months@ $1,436.75
Jan 99 Jan 00 12 Months@ $1,470.96
340 Integration Services 1,026 Mar 95 Mar 98 3.00 36 Months@ $897.75
350 George McElroy & Assoc. 1,596 Mar 95 Feb 00 5.00 60 Months@ $1,429.75
400A President Life and Accident 5,947 May 95 Apr 00 5.00 60 Months@ $5,451.42
650 OCCL (USA) Inc. 4,904 Dec 95 Dec 00 5.00 60 Months@ $5,312.67
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Average
Annual Annual Expense Finish Out
Annual Rent Rent Lease Stop Allowance
Suite Tenant Total Per SF Rate Per SF Per SF Per SF Comments
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C>
155 Milglicco, Botschen & $22,812 $10.75 $10.88 1996 N/A This represents a renewal.
Williams $23,342 $11.00 Base Year
210 Mesada Security $14,676 $12.00 $12.00 1998 $6.50 None.
Base Year
235 Madison Guaranty $51,685 $9.75 $10.92 1996 $1.00 This represents the tenant's move to a
larger space and an extension of their
original lease by one year.
$80,962 $11.50 Base Year
300 Ogre Partners, Ltd. $27,665 $11.00 $11.25 1996 N/A This represents a renewal.
$28,294 $11.25 Base Year
$28,923 $11.50
365 Norvell Electronics $22,930 $10.75 $10.75 1996 N/A This represents a renewal.
Base Year
110 Bituminous Casualty $7,088 $11.60 $11.60 $5.88 N/A Tenant's recoveries are not grossed-up.
151 Southern States $7,161 $11.00 $11.00 $5.74 N/A None.
200 Duray Equipment $11,456 $10.50 $10.50 $5.25 N/A Tenant's recoveries are not grossed-up.
This lease represents a renewal.
205 Xergraphic Systems $10,805 $10.50 $10.50 $5.74 N/A None.
245 Gulfwide Securities $8,150 $10.00 $10.33 $5.72 N/A This tenant has vacated their space,
but continues to pay rent. This
represents a renewal.
$8,558 $10.50
250 Barons Design Group $47,229 $10.50 $10.50 $5.51 $8.00 Tenant's recoveries are not grossed-up
This lease represents a renewal.
310 Wilco Insurance Company $22,523 $10.50 $11.00 $5.74 N/A None.
$23,595 $11.00
$24,668 $11.50
312 The Lehman Company $0 $0.00 $10.08 $5.74 N/A None.
$21,197 $10.25
316 Recal-Milgo Info. $16,010 $9.75 $10.25 $4.75 N/A Tenant's recoveries are not grossed-up.
$16,420 $10.00
$16,831 $10.25
$17,241 $10.50
$17,652 $10.75
340 Integration Services $10,773 $10.50 $10.50 $5.88 N/A None.
350 George McElroy & Assoc $17,157 $10.75 $10.75 $5.88 N/A None.
400A President Life
and Accident $65,417 $11.00 $11.00 $5.88 N/A None.
650 OCCL (USA) Inc. $63,752 $13.00 $13.00 1996 $16.50 None.
Base Year
</TABLE>
<PAGE>
One Northwest Center
13831 Northwest Freeway
Houston, Texas
Recent Lease Analysis
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Lease Term
--------------------------- Annual
Square Lease Lease Term Monthly Annual Rent Rent
Suite Tenant Feet Commencement Termination (Yrs) Months Rent Total Per SF
- ----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C>
102 Data General 2,647 May 94 May 97 5.00 36 Months $2,260.98 $27,132 $10.25
May 97 May 99 24 Months $2,316.13 $27,794 $10.50
180 Pegasus Design 6,242 Jan 94 Dec 98 10.00 60 Months $6,111.96 $73,344 $11.75
Jan 99 Dec 03 60 Months $6,372.04 $76,465 $12.25
355 Hydrocarbon Data 1,426 Jan 94 Dec 96 3.00 36 Months $1,158.63 $13,904 $9.75
600 Circle K 13,435 Feb 94 May 97 3.33 40 Months $11,475.73 $137,709 $10.25
650 Procter & Gamble 5,381 Aug 94 Aug 99 5.00 60 Months $6,802.48 $81,630 $15.17
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Average
Annual Expense Finish Out
Lease Stop Allowance
Suite Tenant Rate PSF Per SF Per SF Comments
- -------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
102 Data General $10.35 $6.15 N/A None.
180 Pegasus Design $12.00 $8.15 "As Is" None.
355 Hydrocarbon Data $9.75 $6.15 N/A None.
600 Circle K $10.25 $5.88 N/A This tenant has vacated their space,
but continues to pay their rent.
650 Procter & Gamble $15.17 $6.15 $22.00 None.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
SURVEYOR'S CERTIFICATE
2/28/94
The undersigned, being a duly and qualified surveyor in and for the State of
Texas, does hereby certify to:
WHT Real Estate Limited Partnership, a Delaware limited partnership,
Commercial Title Group, Ltd., a Virginia corporation
Chicago Title Insurance Company,
that this survey print is a true and accurate survey based on a inspection of
the following described real estate (the "Premises"):
2.725 ACRES OUT OF THE RICHARD ROWLES SURVEY, ABSTRACT 670, HARRIS COUNTY.
TEXAS, BEING OUT OF LOTS 1 AND 2, BLOCK "D" AND LOT 27, BLOCK "C" OF HAHL'S
SUBURBAN FARMS SUBDIVISION "G", AS RECORDED IN VOLUME 334, PAGE 134 OF THE
HARRIS COUNTY DEED RECORDS, THE SUBJECT 2.725 ACRES BEING MORE PARTICULARLY
DESCRIBED BY METES AND BOUNDS AS FOLLOWS;
BEGINNING AT A 5/8 INCH IRON ROD FOUND IN THE SOUTHWEST RIGHT OF WAY LINE OF
U.S. HIGHWAY NO. 290 (NORTHWEST FREEWAY) (300 FEET WIDE) AND BEING THE MOST
NORTHERLY NORTHEAST CORNER OF THAT CERTAIN 0.2704 ACRE TRACT (WIDENING OF GUHN
ROAD) AS RECORDED IN DEED UNDER FILM CODE NO. 016-00-1217 AND COUNTY CLERKS FILE
NO. H-486749 IN THE OFFICIAL PUBLIC RECORDS OF REAL PROPERTY OF HARRIS COUNTY,
TEXAS;
THENCE, SOUTH 56 DEGREES 27 MINUTES 41 SECONDS EAST, WITH THE SOUTHWEST LINE OF
SAID U.S. HIGHWAY NO. 290, A DISTANCE OF 476.61 FEET TO A 5/8 INCH IRON ROD
FOUND FOR THE MOST EASTERLY CORNER OF THE HEREIN DESCRIBED TRACT;
THENCE, SOUTH 33 DEGREES 32 MINUTES 19 SECONDS WEST, A DISTANCE OF 90.00 FEET TO
A 5/8 INCH IRON ROD FOUND FOR CORNER;
THENCE, NORTH 56 DEGREES 27 MINUTES 41 SECONDS WEST, A DISTANCE OF 30.00 FEET TO
A 5/8 INCH ROD FOUND FOR CORNER;
THENCE, NORTH 89 DEGREES 57 MINUTES 20 SECONDS WEST, A DISTANCE OF 119.98 FEET
TO A 5/8 INCH IRON ROD FOUND FOR CORNER;
THENCE, NORTH 56 DEGREES 27 MINUTES 41 SECONDS WEST, A DISTANCE OF 41.63 FEET TO
AN "X" IN CONCRETE FOUND FOR CORNER;
THENCE, SOUTH 33 DEGREES 32 MINUTES 19 SECONDS WEST, A DISTANCE OF 51.63 FEET TO
5/8 INCH IRON ROD FOUND FOR CORNER;
THENCE, NORTH 89 DEGREES 57 MINUTES 20 SECONDS WEST, A DISTANCE OF 26.44 FEET TO
AN "X" IN CONCRETE FOUND FOR CORNER;
THENCE, SOUTH 00 DEGREES 02 MINUTES 40 SECONDS WEST, A DISTANCE OF 258.50 FEET
TO A 1/2 INCH IRON ROD FOUND IN THE EASTERLY LINE OF SAID 0.2704 ACRE TRACT;
THENCE, NORTH 89 DEGREES 57 MINUTES 20 SECONDS WEST, A DISTANCE OF 134.00 FEET
TO AN 5/8 INCH IRON ROD FOUND (CALLED "X" IN CONCRETE BY PRIOR DEEDS) FOR
CORNER;
THENCE, NORTH 00 DEGREES 02 MINUTES 40 SECONDS EAST, WITH THE EAST LINE OF SAID
0.2704 ACRE TRACT, A DISTANCE OF 588.90 FEET TO A 5/8 INCH IRON ROD FOUND IN THE
SOUTHEASTERLY LINE OF SAID 0.2704 ACRE TRACT;
THENCE, NORTH 61 DEGREES 47 MINUTES 30 SECONDS EAST, WITH THE SOUTHEASTERLY LINE
OF SAID 0.2704 ACRE TRACT, A DISTANCE OF 23.67 FEET TO THE POINT OF BEGINNING
AND CONTAINING 2.725 ACRES OF LAND MORE OR LESS.
- --------------------------------------------------------------------------------
<PAGE>
[GRAPHIC OMITTED]
[FLOOR PLAN] One Northwest Center, Houston, TX
<PAGE>
[GRAPHIC OMITTED]
[FLOOR PLAN] One Northwest Center, Houston, TX
<PAGE>
[GRAPHIC OMITTED]
[FLOOR PLAN] One Northwest Center, Houston, TX
<PAGE>
[GRAPHIC OMITTED]
[FLOOR PLAN] One Northwest Center, Houston, TX
<PAGE>
[GRAPHIC OMITTED]
[FLOOR PLAN] One Northwest Center, Houston, TX
<PAGE>
[GRAPHIC OMITTED]
[FLOOR PLAN] One Northwest Center, Houston, TX
<PAGE>
[GRAPHIC OMITTED]
[SITE PLAN] One Northwest Center, Houston, TX
<PAGE>
[GRAPHIC OMITTED]
[FLOOD PLAIN MAP] One Northwest Center, Houston, TX
<PAGE>
One Northwest Center
PROJECT DESIGNATOR: 171A
REVISION: 8/13/96 @ 16:37
AVERAGE OCCUPANCY REPORT
FOR ALL TENANTS
8/13/96 @ 16:38
<TABLE>
<CAPTION>
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
------- ------- ------- ------- ------- ------- ------- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
JANUARY 117,924 135,100 148,825 147,543 148,823 139,840 146,267 148,343 137,619 143,567 142,376 149,650
FEBRUARY 117,924 126,447 146,583 147,543 144,325 139,840 146,267 150,465 144,223 145,712 142,376 147,528
MARCH 117,924 126,447 145,557 150,465 142,729 104,561 146,267 147,543 144,223 140,808 142,376 148,343
APRIL 117,924 121,118 146,106 150,465 143,720 122,554 148,825 147,543 148,823 119,462 146,267 148,343
MAY 117,924 129,771 148,348 147,818 142,271 113,9C1 146,583 147,543 144,325 119,462 146,267 150,465
JUNE 117,924 138,178 148,559 147,818 143,867 109,961 145,557 150,465 142,729 117,766 146,267 147,543
JULY 123,225 138,176 149,650 140,002 144,518 118,067 146,106 150,465 143,720 135,759 148,825 147,543
AUGUST 128,120 138,178 147,528 136,045 148,320 133,320 148,348 147,818 142,271 120,506 146,583 147,543
SEPTEMBER 128,120 138,178 148,343 136,045 148,320 143,860 148,559 147,818 143,867 116,566 145,557 150,465
OCTOBER 130,805 146,267 148,343 143,861 143,567 142,36 149,650 140,002 144,518 118,067 146,106 150,465
NOVEMBER 130,805 146,267 150,465 150,465 145,712 142,376 147,528 136,045 148,320 133,320 148,348 147,818
DECEMBER 130,805 146,267 147,543 150,465 140,808 142,376 148,343 136,045 148,320 143,860 148,559 147,818
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
AVERAGE SF
OCCUPIED-AOSF 123,285 135,866 147,988 145,711 144,748 129,419 147,358 145,841 144,413 129,571 145,826 148,627
TOTAL SF-NRA 150,465 150,465 150,465 15O,465 150,465 150,465 150,465 150,465 150,465 150,465 150,465 150,465
------- ------- ------- ------- ------- ------- ------- ------ ------- ------- ------- -------
OCCUPANCY 81.94 90.30 98.35 96.84 96.20 86.01 97.94 96.93 95.98 86.11 96.92 98.78
======= ======= ======= ======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
<PAGE>
One Northwest Center
PROJECT DESIGNATOR: 171A
REVISION: 8/13/96 3 16:38
PROJECT ASSUMPTIONS REFORT
INCLUDING ALL TENANTS
8/13/96 @ 16:38
BUILDING PROLOGUE
- -----------------
LEASEHOLD ANALYSIS OF One Northwest Center BEGINNING 8/1996
FOR 12 YEARS ON A CALENDAR YEAR BASIS
AREA MEASURES
- -------------
NRA
1996 VALUE - 150,465
THEREAFTER - CONSTANT
AOSF
1996 VALUE - 123,285
1997 VALUE - 135,866
1998 VALUE - 147,988
1999 VALUE - 145,711
2000 VALUE - 144,748
2001 VALUE - 129,419
2002 VALUE - 147,358
2003 VALUE - 145,841
2004 VALUE - 144,413
2005 VALUE: - 129,571
2006 VALUE - 145,826
2007 VALUE - 148,627
THEREAFTER - CONSTANT
GROWTH RATES
- ------------
RENT
1996 VALUE - 3.50
THEREAFTER - CONSTANT
EXP1
1996 VALUE - 3.50
THEREAFTER - CONSTANT
EXP2
1996 VALUE - 4.00
THEREAFTER - CONSTANT
MARKET RATES
- ------------
MKT1
1996 VALUE - 11.50
1997 VALUE - 11.75
1998 VALUE - 12.00
1999 VALUE - 12.50
2000 VALUE - 13.00
2001 VALUE - 13.75
2002 VALUE - 14.50
2003 VALUE - 15.50
2004 VALUE - 16.50
2005 VALUE - 17.50
THEREAFTER -
GROWING AT GROWTH RATE EXPl
ADM
<PAGE>
PAGE 2
1996 VALUE - 0.10
THEREAFTER - GROWING AT GROWTH RATE EXP1
PAY
1996 VALUE - 0.70
THEREAFTER - GROWING AT GROWTH RATE EXPI
JAN
1996 VALUE - 0.70
THEREAFTER - GROWING AT GROWTH RATE EXP1
R&M
1996 VALUE - 0.75
THEREAFTER - GROWING AT GROWTH RATE EXP2
SEC
1996 VALUE - 0.53
THEREAFTER - GROWING AT GROWTH RATE EXP1
UTIL
1996 VALUE - 1.50
THEREAFTER - GROWING AT GROWTH RATE EXP2
ADV
1996 VALUE - 0.06
THIEREAFTER - GROWING AT GROWTH, RATE EXP1
INS
1996 VALUE - 0.13
THEREAFTER - GROWING AT GROWTH RATE EXP1
RES
1996 VALUEE- ~- 0.10
TFEREAFTER - GROWING AT GROWTH RATE EXPI
MGT
ZERO
NTI
1996 VALUE - 7.50
THEREAFTER - GROWING AT GROWTH RATE EXPI
STI
1996 VALUE - 14.00
THEREAFTER - GROWING AT GROWTH RATE EXP1
SERV
1996 VALUE - 0.18
THEREAFTER - GROWING AT GROWTH RATE EXP1
MISCELLANEOUS INCOMES
- ---------------------
NONE
EXPENSES
ADMINISTRATION , REFERRED TO AS ADMN
CHARGED AGAINST NET OPERATING INCOME
MARKET RATE ADM MULTIPLIED BY AREA MEASURE NRA
PAYROLL , REFERRED TO AS PAY
CHARGED AGAINST NET OPERATING INCOME
MARKET RATE PAY MULTIPLIED BY AREA MEASURE NRA
<PAGE>
PAGE 3
CLEANING , REFERRED TO AS JAN
CHARGED AGAINST NET OPERATING INCOME
MARKET RATE JAN MULTIPLIED BY AREA MEASURE AOSF
REPAIRS & MAINT , REFERRED TO AS R&M
CHARGED AGAINST NET OPERATING INCOME
MARKET RATE R&M MULTIPLIED BY AREA MEASURE NRA
SECURITY , REFERRED TO AS SEC
CHARGED AGAINST NET OPERATING INCOME
MARKET RATE SEC MULTIPLIED BY AREA MEASURE NRA
UTILITIES , REFERRED TO AS UTIL
CHARGED AGAINST NET OPERATING INCOME
MARKET RATE UTIL MULTIPLIED BY AREA MEASURE NRA
ADVERTISING , REFERRED TO AS ADV
CHARGED AGAINST NET OPERATING INCOME
MARKET RATE ADV MULTIPLIED BY AREA MEASURE NRA
REAL ESTATE TAXES , REFERRED TO AS TAX
CHARGED AGAINST NET OPERATING INCCMEE
1996 VALUE - 110,110
1997 VALUE - 179,086
THEREAFTER -GROWING AT GROWTH RATE EXP1
INSURANCE , REFERRED TO AS INS
CHARGED AGAINST NET OPERATING INCOME
MARKET RATE INS MULTIPLIED BY AREA MEASURE NRA
MANAGEMENT , REFERRED TO AS MGT
AN INFORMATIONAL EXPENSE
1996 VALUE - 45,388
1997 VALUE - 49,936
1998 VALUE - 55,914
1999 VALUE - 55,952
2000 VALUE - 56,570
2001 VALUE - 49,348
2002 VALUE - 58,820
2003 VALUE - 59,774
2004 VALUE - 62,289
2005 VALUE - 59,545
2006 VALUE - 73,640
2007 VALUE - 77,211
THEREAFTER - CONSTANT
RECOVERIES , REFERRED TO AS REC
AN INFORMATIONAL EXPENSE
+100.0% OF ADMN +100.0% OF PAY
+100.0% OF JAN +100.0% OF R&M
+100.0% OF SEC +100.0% OF UTIL
+100.0% OF ADV +100.0% OF TAX
+100.0% OF INS +100.0% OF MGT
BUILDING SERVICES , REFERRED TO AS SERV
CHARGED AGAINST NET OPERATING INCOME
MARKET RATE SERV MULTIPLIED BY AREA MEASURE NRA
VACANCY ALLOWANCE
- -----------------
PERCENTAGE OF POTENTIAL GROSS INCOME
FOR ALL TENANTS SUBJECT TO VACANCY
1996 VALUE - 2.00
THEREAFTER - CONSTANT
<PAGE>
PAGE 4
MANAGEMENT FEE
- --------------
PERCENTAGE OF EFFECTIVE GROSS INCOME
FOR ALL TENANTS
PASSED THROUGH TO TENANTS USING EXPENSE MGT
1996 VALUE - 3.00
THEREAFTER - CONSTANT
COMMISSION CALCULATIONS
- -----------------------
STANDARD METHOD #1 - 6.300% OF TOTAL RENT
STANDARD METHOD #2 - 4.500% OF TOTAL RENT
STANDARD METHOD #3 - 0.000% OF TOTAL RENT
STANDARD METHOD #4 - 0.000% OF TOTAL RENT
STANDARD METHOD #5 - 0.000% OF TOTAL RENT
COMMISSION PAYOUTS
- ------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - CASHED OUT
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
ALTERATION CALCULATION
- ----------------------
1996 VALUE - 4.10
THEREAFTER - GROWING AT GROWTH RATE EXP1
ALTERATION PAYOUTS
- ------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - CASHED OUT
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
COMMON AREA MAINTENANCE POOL
- ----------------------------
NONE
CAPITAL EXPENDITURES
- --------------------
<PAGE>
PAGE 5
RESERVES
ZERO
Capital Expenditure
1996 VALUE - 73,550
1997 VALUE - 20,000
1998 VALUE - 45,000
THEREAFTER - MARKET RATE RES MULTIPLIED BY AREA MEASURE NRA
PRIMARY CLASSIFICATION CODES
- ----------------------------
NONE
SECONDARY CLASSIFICATION CODES
- -------------------------------
NONE
COST CENTERS
- ------------
NONE
SALES VOLUME PROFILE
- --------------------
PERCENT OF RELATIVE
MONTH ANNUAL SALES VOLUME
- ----- ------------ --------
JAN 8.33% 1.00
FEB 8.33% 1.00
MAR 8.33% 1.00
APR 8.33% 1.00
MAY 8.33% 1.co
JUN 8.33% 1.00
JUL 8.33% 1.00
AUG 8.33% 1.00
SEP 8.33% 1.00
OCT 8.33% 1.00
NOV 8.33% 1.00
DEC 8.33% 1.00
------- -------
TOTALS 100.00% 12.00
GLOBAL RECOVERIES
- -----------------
NONE
TENANT PROLOGUE
- ---------------
MINIMUM RENTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
MARKET RATES INTERPRETED As AMOUNTS/SQUARE FOOT/YEAR
SALES VOLUMES AND BREAKPOINTS:
SPECIFIED AMOUNTS INTERPRED AS AMOUNTS/SQUARE FOOT/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
RENEWAL RENTS ARE COMPOUNDED ANNUALLY
<PAGE>
PAGE 6
RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET
REFERENCE TENANTS
- -----------------
NONE
TENANTS
- -------
THERE ARE A TOTAL OF 46 LEASEHOLD TENANTS
- --------------------------------------------------------------------------------
# 1 - SUITE 100 , Nagesh & Carter
BASE LEASE DATES: 2/1992 TO 1/1997
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 2,495
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 10.25/SF/YR
CHANGING TO - 10.55/SF/YR ON 1/1994
CHANGING TO - 10.85/SF/YR ON 1/1996
RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF 5.00/SF MULTIPLIED BY AREA MEASURE NRA
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ. FT. MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 4.00 3 NONE NONE YES YES
2 4.00 3 NONE NONE YES YES
3 4.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTI MULTIPLIED BY 1.000
RENEWAL RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #2
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
<PAGE>
PAGE 7
- --------------------------------------------------------------------------------
# 2 - SUITE 102 , Data General
BASE LEASE DATES: 5/1994 TO 4/1999
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 2,647
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 10.25/SF/YR
CHANGING TO - 10.50/SF/YR ON 5/1997
RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE MULTIPLIED BY AREA MEASURE NRA
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ. FT. MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 4.00 3 NONE NONE YES YES
2 4.00 3 NONE NONE YES YES
3 4.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
RENEWAL RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #2
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 3 - SUITE 110 , Bituminous Casualty
BASE LEASE DATES: 1/1995 TO 12/1997
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 611
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 11.60/SF/YR
RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
<PAGE>
PAGE 8
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASIME NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF 5.88/SF MULTIPLIED BY AREA MEASURE NRA
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ. FT. MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 4.00 3 NONE NONE YES YES
2 4.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
RENEWAL RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #2
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 4 - SUITE 151 , Southern States
BASE LEASE DATES: 4/1995 TO 3/2000
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 651
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 11.00/SF/YR
RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF 5.74/SF MULTIPLIED BY AREA MEASURE NRA
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ. FT. MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 4.00 3 NONE NONE YES YES
2 4.00 3 NONE NONE YES YES
3 4.00 3 NONE NONE YES YES
<PAGE>
PAGE 9
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
RENEWAL RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #2
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 5 - SUITE 155 , Miglicco, Botschen
BASE LEASE DATES: 1/1996 TO 7/1998
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 2,122
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 10.75/SF/YR
CHANGING TO - 11.00/SF/YR ON 6/1997
RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ. FT. MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 4.00 3 NONE NONE YES YES
2 4.00 3 NONE NONE YES YES
3 4.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTI MULTIPLIED BY 1.000
RENEWAL RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #2
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
<PAGE>
PAGE 10
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 6 - SUITE 165 , Fitness Center
BASE LEASE DATES: 8/1996 TO 7/2010
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,140
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS: NONE
- --------------------------------------------------------------------------------
# 7 - SUITE 167 Conference Room
BASE LEASE DATES: 6/1996 To 7/2010
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 313
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT 0.00/SF/YR
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS: NONE
- --------------------------------------------------------------------------------
# 8 - SUITE 169 Building Storage
BASE LEASE DATES- 8/1996 To 7/2010
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 454
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS: NONE
- --------------------------------------------------------------------------------
# 9 - SUITE 180 , Pegasus Design
BASE LEASE DATES: 1/1994 TO 12/2003
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 6,242
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
<PAGE>
PAGE 11
INITIAL RENT - 11.75/SF/YR
CHANGING TO - 12.25/SF/YR ON 1/1994
RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF 6.15/SF MULTIPLIED BY AREA MEASURE NRA
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
SPECULATIVE RENEWALS:
LENGTH VACANT SQ. FT. MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 4.00 3 NONE NONE YES YES
2 4.00 3 NONE NONE YES YES
3 4.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
RENEWAL RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #2
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 10 - SUITE 200 , Durey Equipment
BASE LEASE DATES: 4/1995 To 3/1998
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,091
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 10.50/SF/YR
RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF 5.25/SF MULTIPLIED BY AREA MEASURE NRA
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
<PAGE>
PAGE 12
LENGTH VACANT SQ. FT. MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 4.00 3 NONE NONE YES YES
2 4.00 3 NONE NONE YES YES
3 4.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
RENEWAL RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #2
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
#11 - SUITE 205 , Xergraphic Systems
BASE LEASE DATES: 1/1995 TO 12/1997
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,029
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT l0.50/SF/YR
RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF 5.74/SF MULTIPLIED BY AREA MEASURE NRA
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ. FT. MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 4.00 3 NONE NONE YES YES
2 4.00 3 NONE NONE YES YES
3 4.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTI MULTIPLIED BY 1.000
RENEWAL RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
<PAGE>
PAGE 13
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #2
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 12 - SUITE 210 , Masada Security
BASE LEASE DATES: 8/1996 TO 7/1999
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,223
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 12.00/SF/YR
RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITHA CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ. FT. MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 4.00 3 NONE NONE YES YES
2 4.00 3 NONE NONE YES YES
3 4.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
RENEWAL RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITHA CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #2
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 13 - SUITE 212 , Marley Cooling
BASE LEASE DATES: 12/1993 TO 11/1998
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 2,922
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
<PAGE>
PAGE 14
INITIAL RENT - 10.00/SF/YR
CHANGING TO - 10.50/SF/YR ON 12/1996
RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF 5.85/SF MULTIPLIED BY AREA MEASURE NRA
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ. FT. MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 4.00 3 NONE NONE YES YES
2 4.00 3 NONE NONE YES YES
3 4.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
RENEWAL RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #2
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
#14 - SUITE 235 , Madison Guaranty
BASE LEASE DATES: 7/1996 TO 6/1999
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 5,301
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 9.75/SF/YR
CHANGING TO - 11.50/SF/YR ON 6/1997
RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
CCMMISSIONS: NONE
ALTERATIONS: NONE
<PAGE>
PAGE 15
SPECULATIVE RENEWALS:
LENGTH VACANT SQ. FT. MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 4.00 3 NONE NONE YES YES
2 4.00 3 NONE NONE YES YES
3 4.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTI MULTIPLIED BY 1.000
RENEWAL RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #2
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 15 - SUITE 245 , Gulfwide Services
BASE LEASE DATES: 6/1995 TO 5/1998
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 815
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT
INITIAL RENT - 10.00/SF/YR
CHANGING TO - 10.50/ SF/YR ON 5/1996
RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF 5.72/SF MULTIPLIED BY AREA MEASURE NRA
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ. FT. MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 4.00 3 NONE NONE YES YES
2 4.00 3 NONE NONE YES YES
3 4.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
<PAGE>
PAGE 16
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #2
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 16 - SUITE 250 , Barone Design Group
BASE LEASE DATES: 2/1995 TO 1/2000
TYPE OF TENANT OFFICE
SQUARE FOOTAGE: 4,498
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 10.50/SF/YR
RECOVERIES:
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF 5.5l/SF MULTIPLIED BY AREA MEASURE NRA
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ. FT. MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 4.00 3 NONE NONE YES YES
2 4.00 3 NONE NONE YES YES
3 4.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
RENEWAL RECOVERIES:
RECOVERIES
PRO RATA SHAPE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #2
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 17 - SUITE 300 , Ogre Partners
BASE LEASE DATES: 1/1996 TO 6/1999
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 2,515
SUBJECT TO VACANCY ALLOWANCE
<PAGE>
PAGE 17
MINIMUM RENT:
INITIAL RENT - 11.00/SF/YR
CHANGING TO - 11.25/SF/YR ON 6/1997
CHANGING TO - 11.50/SF/YR ON 6/1998
RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS with A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ. FT. MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 4.00 3 NONE NONE YES YES
2 4.00 3 NONE NONE YES YES
3 4.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
RENEWAL RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #2
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 18 - SUITE 310 , Wilco Insurance
BASE LEASE DATES: 8/1995 -10 7/2000
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 2,145
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 10.50/SF/Y.R
CHANGING TO - 11.00/SF/YR ON 8/1997
CHANGING TO - 11.50/SF/YR ON 8/1998
RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF 5.74/SF MULTIPLIED BY AREA MEASURE NRA
COMMISSIONS: NONE
<PAGE>
PAGE 18
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ. FT. MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 4.00 3 NONE NONE YES YES
2 4.00 3 NONE NONE YES YES
3 4.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
RENEWAL RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #2
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
#19 - SUITE 312 , The Lehman Co.
BASE LEASE DATES: 8/1995 TO 9/2000
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 2,068
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
CHANGING TO - 10.25/SF/YR ON 8/1995
RECOVERIES:
RENEWAL RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF 5.74/SF MULTIPLIED BY AREA MEASURE NRA
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ. FT. MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 4.00 3 NONE NONE YES YES
2 4.00 3 NONE NONE YES YES
3 4.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTI MULTIPLIED BY 1.000
RENEWAL RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
<PAGE>
PAGE 19
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #2
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
#20 - SUITE 314 , Medical Dental
BASE LEASE DATES: 2/1993 TO 1/1998
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 2,242
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 9.75/SF/YR
CHANGING TO - 10.00/SF/YR ON 1/1996
ECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF 5.82/SF MULTIPLIED BY AREA MEASURE NRA
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ. FT. MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 4.00 3 NONE NONE YES YES
2 4.00 3 NONE NONE YES YES
3 4.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
RENEWAL RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #2
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 21 - SUITE 316 , Racal-Milgo
BASE LEASE DATES: 1/1995 To 12/1999
TYPE OF TENANT: OFFICE
<PAGE>
PAGE 20
SQUARE FOOTAGE: 1,642
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 9.75/SF/YR
CHANGING TO - 10.00/SF/YR ON 1/1996
CHANGING TO - 10.25/SF/YR ON 1/1997
CHANGING TO - 10.50/SF/YR ON 1/1998
CHANGING TO - 10.75/SF/YR ON 1/1999
RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF 4.75/SF MULTIPLIED BY AREA MEASURE NRA
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ. FT. MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 4.00 3 NONE NONE YES YES
2 4.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
RENEWAL RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #2
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 22 - SUITE 330 , Rolf Jensen
BASE LEASE DATES: 2/1992 TO 1/1997
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 6,158
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 11.37/SF/YR
RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
AND A BASE OF 5.25/SF MULTIPLIED BY AREA MEASURE NRA
<PAGE>
PAGE 21
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ. FT. MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 4.00 3 NONE NONE YES YES
2 4.00 3 NONE NONE YES YES
3 4.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
RENEWAL RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #2
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 23 - SUITE 335 , Management office
BASE LEASE DATES: 8/1996 TO 7/2010
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,765
SUBJEC7 TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.00/SF/YR
RECOVERIES: NONE
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS: NONE
- --------------------------------------------------------------------------------
# 24 - SUITE 340 , Integration Service
BASE LEASE DATES: 2/1995 TO 2/1998
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,026
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 10.50/SF/YR
RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO-RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITIA A CALENDAR YEAR EXPENSE
WITH NO CAP
<PAGE>
PAGE 22
AND A BASE OF 5.88/SF MULTIPLIED BY AREA MEASURE NRA
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ. FT. MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 4.00 3 NONE NONE YES YES
2 4.00 3 NONE NONE YES YES
3 4.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTI MULTIPLIED BY 1.000
RENEWAL RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #2
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 25 - SUITE 350 , George McElroy
BASE LEASE DATES: 3/1995 TO 2/2000
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,596
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 10.75/SF/YR
RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF 5.88/SF MULTIPLIED BY AREA MEASURE NRA
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ. FT. MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 4.00 3 NONE NONE YES YES
2 4.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET PATE MKT1 MULTIPLIED BY 1.000
<PAGE>
PAGE 23
RENEWAL RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #2
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
#26 - SUITE 355 , Hydrocarbon Data
BASE LEASE DATES: 1/1994 TO 12/1996
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,426
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 9.75/SF/Y.R
RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF 6.15/SF MULTIPLIED BY AREA MEASURE NRA
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ. FT. MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 4.00 3 NONE NONE YES YES
2 4.00 3 NONE NONE YES YES
3 4.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
RENEWAL RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #2
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
<PAGE>
PAGE 24
- --------------------------------------------------------------------------------
# 27 - Norvell Electronic
BASE LEASE DATES: 1/1996 TO 5/2001
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 2,133
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 10.75/SF/YR
RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ. FT. MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 4.00 3 NONE NONE YES YES
2 4.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
RENEWAL RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #2
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 28 - SUITE 400 , Law Companies
BASE LEASE DATES: 3/1991 TO 2/2001
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 40,183
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 8.50/SF/YR
CHANGING TO - 13.75/SF/YR ON 2/1996
RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
<PAGE>
PAGE 25
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF 4.50/SF MULTIPLIED BY AREA MEASURE NRA
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS: NONE
- --------------------------------------------------------------------------------
# 29 - SUITE 400A , Provident Life
BASE LEASE DATES: 5/1995 TO 4/2000
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 5,947
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT;
INITIAL RENT - 11.00/SF/YR
RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF 5.88/SF MULTIPLIED BY AREA MEASURE NRA
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ. FT. MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 4.00 3 NONE NONE YES YES
2 4.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
RENEWAL RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #2
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 30 - SUITE 600 , Circle K
BASE LEASE DATES: 2/1994 TO 3/1997
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 13,43S
SUBJECT TO VACANCY ALLOWANCE
<PAGE>
PAGE 26
MINIMUM RENT:
INITIAL RENT - 10.25/SF/YR
RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF 5.88/SF MULTIFPLIED BY AREA MEASURE NRA
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS: NONE
- --------------------------------------------------------------------------------
# 31 - SUITE 630 , Proctor & Gamble
BASE LEASE DATES: 8/1994 TO 7/1999
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 5,381
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 15.17/SF/YR
RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF 6.15/SF MULTIPLIED BY AREA MEASURE NRA
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ. FT. MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 4.00 3 NONE NONE YES YES
2 4.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
RENEWAL RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #2
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
<PAGE>
PAGE 27
- --------------------------------------------------------------------------------
# 32 - SUITE 650 , OOCL (USA) Inc.
BASE LEASE DATES: 12/1995 TO 11/2000
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 4,904
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 13.00/SF/YR
RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ. FT. MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 4.00 3 NONE NONE YES YES
2 4.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
RENEWAL RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #2
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 33 - SUITE 215 , SPEC TEN 1
BASE LEASE DATES: 1/1998 TO 12/2001
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 4,198
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - MARKET RATE MKT1
RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASUREE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
<PAGE>
PAGE 28
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
COMMISSIONS: STANDARD METHOD #1
PAYOUT: CASHED OUT
ALTERATIONS: MARKET RATE NTI
PAYOUT: CASHED OUT
SPECULATIVE RENEWALS:
LENGTH VACANT SQ. FT. MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 4.00 3 NONE NONE YES YES
2 4.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
RENEWAL RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #2
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 34 - SUITE 660 , SPEC TEN 2
BASE LEASE DATES: 10/1996 TO 9/2000
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 2,685
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - MARKET RATE MKT1
RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
COMMISSIONS: STANDARD METHOD #1
PAYOUT: CASHED OUT
ALTERATIONS: MARKET RATE NTI
PAYOUT: CASHED OUT
SPECULATIVE RENEWALS:
LENGTH VACANT SQ. FT. MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 4.00 3 NONE NONE YES YES
2 4.00 3 NONE NONE YES YES
<PAGE>
PAGE 29
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
RENEWAL RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #2
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 35 - SUITE 175 , SPEC TEN 3
BASE LEASE DATES: 1/1997 TO 12/2000
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 4,159
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT-
INITIAL RENT - MARKET RATE NTl
RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
COMMISSIONS: STANDARD METHOD #1
PAYOUT: CASHED OUT
ALTERATIONS: MARKET RATE NTI
PAYOUT: CASHED OUT
SPECULATIVE RENEWALS:
LENGTH VACANT SQ. FT. MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 4.00 3 NONE NONE YES YES
2 4.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
RENEWAL RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #2
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
<PAGE>
Page 30
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 36 - SUITE 230 , SPEC TEN 4
BASE LEASE DATES: 1/1997 TO 12/2000
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,562
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - MARKET RATE MKT1
RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
COMMISSIONS: STANDARD METHOD #1
PAYOUT: CASHED OUT
ALTERATIONS: MARKET RATE NTI
PAYOUT: CASHED OUT
SPECULATIVE RENEWALS:
LENGTH VACANT SQ. FT. MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 4.00 3 NONE NONE YES YES
2 4.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1000
RENEWAL RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #2
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 37 - SUITE 499 , SPEC TEN 5
BASE LEASE DATES: 4/1997 TO 3/2001
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 6,680
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - MARKET RATE MKTI
RECOVERIES:
RECOVERIES
<PAGE>
PAGE 31
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
COMMISSIONS: STANDARD METHOD #1
PAYOUT: CASHED OUT
ALTERATIONS: MARKET RATE STI
PAYOUT: CASHED OUT
SPECULATIVE RENEWALS:
LENGTH VACANT SQ. FT. MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 4.00 3 NONE NONE YES YES
2 4.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
RENEWAL RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #2
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 38 - SUITE 120 , SPEC TEN 6
BASE LEASE DATES: 10/1997 TO 9/2001
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,372
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - MARKET RATE MKT1
RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
COMMISSIONS: STANDARD METHOD #1
PAYOUT: CASHED OUT
ALTERATIONS: MARKET RATE NTI
PAYOUT: CASHED OUT
SPECULATIVE RENEWALS:
<PAGE>
PAGE 32
LENGTH VACANT SQ. FT. MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 4.00 3 NONE NONE YES YES
2 4.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
RENEWAL RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #2
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 39 - SUITE 360 , SPEC TEN 7
BASE LEASE DATES: 6/1997 TO 5/2001
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 1,689
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - MARKET RATE MKT1
RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OFTHE EXPENSE VALUE IN THE OCCUPANCY YEAR
COMMISSIONS: STANDARD METHOD #1
PAYOUT: CASHED OUT
ALTERATIONS: MARKET RATE NTI
PAYOUT: CASHED OUT
SPECULATIVE RENEWALS:
LENGTH VACANT SQ. FT. MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 4.00 3 NONE NONE YES YES
2 4.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
RENEWAL RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
<PAGE>
PAGE 33
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #2
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 40 - SUITE 600A , CIRCLE K SPEC 1
BASE LEASE DATES: 6/199~7 TO 5/2001
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 6,718
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - MARKET RATE MKTl
RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
COMMISSIONS: STANDARD METHOD
PAYOUT: CASHED OUT
ALTERATIONS: MARKET RATE NTI
PAYOUT: CASHED 0UT
SPECULATIVE RENEWALS:
LENGTH VACANT SQ. FT. MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 4.00 3 NONE NONE YES YES
2 4.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
RENEWAL RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #2
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 41 - SUITE 600B , CIRCLE K SPEC 2
BASE LEASE DATES: 10/1997 TO 9/2001
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 6,717
SUBJECT TO VACANCY ALLOWANCE
<PAGE>
PAGE 34
MINIMUM RENT:
INITIAL RENT MARKET RATE MKT1
RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
COMMISSIONS: STANDARD METHOD #1
PAYOUT: CASHED OUT
ALTERATIONS: MARKET RATE NTI
PAYOUT: CASHED OUT
SPECULATIVE RENEWALS:
LENGTH VACANT SQ. FT. MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 4.00 3 NONE NONE YES YES
2 4.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
RENEWAL RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #2
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 42 - SUITE 400 , LAW CCMP SPEC 1
BASE LEASE DATES: 4/2001 TO 3/2005
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 13,778
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - MARKET RATE MKTI
RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
COMMISSIONS: STANDARD METHOD #1
PAYOUT: CASHED OUT
ALTERATIONS: MARKET RATE NTI
<PAGE>
PAGE 35
PAYOUT: CASHED OUT
SSPECULATIVE RENEWALS:
LENGTH VACANT SQ. FT. MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 4.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
RENEWAL RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #2
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 43 - SUITE 500A LAW COMP SPEC 2
BASE LEASE DATES: 4/2001 TO 3/2005
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 6,600
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - MARKET RATE MKT1
RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
COMMISSIONS: STANDARD METHOD #1
PAYOUT: CASHED OUT
ALTERATIONS: MARKET RATE NTI
PAYOUT: CASHED OUT
SPECULATIVE RENEWALS:
LENGTH VACANT SQ. FT. MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 4.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTI MULTIPLIED BY 1.000
RENEWAL RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
<PAGE>
PAGE 36
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #2
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 44 - SUITE 5OOD , LAW SPEC 3
BASE LEASE DATES: 6/2001 TO S/2005
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 6,600
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - MARKET RATE MKTI
RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
COMMISSIONS: STANDARD METHOD #1
PAYOUT: CASHED OUT
ALTERATIONS: MARKET RATE NTI
PAYOUT: CASHED OUT
SPECULATIVE RENEWALS:
LENGTH VACANT SQ. FT. MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 4.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
RENEWAL RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #2
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 45 - SUITE 5OOC , LAW SPEC 4
BASE LEASE DATES: 8/2001 TO 7/2005
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 6,600
SUBJECT TO VACANCY ALLOWANCE
<PAGE>
PAGE 37
MINIMUM RENT:
INITIAL RENT - MARKET RATE MKT1
RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
COMMISSIONS: STANDARD METHOD #1
PAYOUT: CASHED OUT
ALTERATIONS: MARKET RATE NTI
PAYOUT: CASHED OUT
SPECULATIVE RENEWALS:
LENGTH VACANT SQ. FT. MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 4.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
RENEWAL RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #2
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
- --------------------------------------------------------------------------------
# 46 - SUITE 500D , LAW SPEC 5
BASE LEASE DATES: 10/2001 TO 9/2005
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 6,605
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - MARKET RATE MKTI
RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
COMMISSIONS: STANDARD METHOD #1
PAYOUT: CASHED OUT
ALTERATIONS: MARKET RATE ~NTI
PAYOUT: CASHED OUT
<PAGE>
PAGE 38
SPECULATIVE RENEWALS:
LENGTH VACANT SQ. FT. MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 4.00 3 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
RENEWAL RECOVERIES:
RECOVERIES
PRO RATA SHARE RECOVERY OF EXPENSE REC
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #2
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: STANDARD
RENEWAL PAYOUT: CASHED OUT
<PAGE>
================================================================================
Cushman & Wakefield Appraisal Services National Investor Survey - Winter 1995
================================================================================
<TABLE>
<CAPTION>
Going In Terminal IRR Income Expense Projection
Growth Growth Period
Low High Low High Low High Low High Low High
- --------------------------------------------------------------------------------------------------------
========================================================================================================
OFFICES-SUBURBAN
========================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9.50 11.00 9.00 10.50 14.00 14.00 3.25 3.25 4.00 4.00 5
9.00 9.00 9.00 9.50 11.00 11.00 5.00 5.00 4.00 4.00 10
9.00 10.00 9.50 10.00 11.50 12.50 -- -- 3.50 3.50 10
9.50 9.75 9.75 10.00 11.75 12.25 3.50 4.00 3.50 3.50 10
9.00 9.00 9.00 9.00 12.00 12.00 4.00 15.00 4.00 4.00 10
9.00 11.00 9.75 12.00 11.00 14.00 0.00 4.00 4.00 4.00 10
9.00 10.50 9.50 11.00 11.50 12.00 2.00 3.50 3.50 3.50 10
8.00 9.50 9.00 10.50 11.00 12.00 4.00 4.00 4.00 4.00 10
9.50 9.75 9.75 10.50 11.40 11.70 3.00 4.00 3.50 4.50 10
12.00 12.00 10.00 10.00 15.00 15.00 3.00 4.00 2.00 4.00 5
10.00 10.00 10.00 10.00 12.00 12.00 4.00 4.00 3.00 3.00 10
8.50 9.00 9.00 9.50 12.00 12.50 3.00 5.00 3.00 4.00 10
9.00 10.00 9.50 10.50 12.00 12.50 3.00 3.00 3.00 3.00 10
-- -- 9.00 9.00 -- -- -- -- -- -- --
10.50 10.50 10.50 10.50 12.50 12.50 2.00 3.00 3.00 3.00 10
9.00 10.00 9.00 9.00 15.00 15.50 5.00 5.00 3.00 3.00 5-7
9.00 9.00 9.00 9.00 11.25 11.25 5.00 5.00 4.00 4.00 10
8.00 9.00 9.00 10.00 11.00 12.00 3.00 3.00 3.00 3.00 10
9.00 9.25 10.00 10.25 12.00 12.00 4.00 4.00 4.00 4.00 10
Responses 18 18 19 19 18 18 17 17 18 18 --
Average (%) 9.25 9.90 9.43 10.04 12.11 12.59 3.34 4.63 3.44 3.67 --
</TABLE>
<PAGE>
QUALIFICATIONS OF RONALD W. POTTS
================================================================================
PROFESSIONAL DESIGNATION
MAI (Member, Appraisal Institute - Certificate 7747) - The Appraisal Institute
PROFESSIONAL AFFILIATIONS
Greater Dallas Board of Realtors
Licensed Real Estate Broker in the State of Texas
State Certified Appraiser (Certification Number TX-1321575-G)
EDUCATION
Master of Business Administration (Real Estate)
Southern Methodist University, August, 1976
Bachelor of Business Administration (Management and Real Estate)
Baylor University, May, 1971
TECHNICAL TRAINING, THE APPRAISAL INSTITUTE
Real Estate Appraisal Course 1A
Real Estate Appraisal Course 1B
Real Estate Appraisal Course II
R-2 Examination and Narrative
Report Writing Seminar
Real Estate Appraisal Course VI
Various Real Estate Seminars
EMPLOYMENT BACKGROUND
Mr. Potts has been with Cushman & Wakefield since January, 1987, and effective
January 1, 1989 became Branch Manager, Appraisal Services. As of January 1, 1991
he was named Director, Manager, Appraisal Services in Dallas, Texas. Prior to
his affiliation with Cushman & Wakefield, Mr. Potts was associated with a major
downtown Dallas bank for six years, spending the last two and one-half years as
Senior Vice President and manager of the real estate department. Mr. Potts
previously worked in the Commercial Lending division of a mortgage banking firm
and a major southwest life insurance company.
EXPERIENCE
Appraisal assignments have been completed on most types of improved property
(residential, income-producing and special purpose) and land. Property types
upon which assignments have been completed include industrial buildings, low and
high-rise office complexes, motels, apartments, restaurants, strip and
neighborhood shopping centers, residential property (single-family, duplexes,
townhomes, and condominiums), and special purpose properties such as gasoline
service stations, hospitals, and churches. Previously, administered and managed
a commercial real estate department with total loans in excess of $400 million.
CUSHMAN &
WAKEFIELD(R)
--------------------------
VALUATION ADVISORY SERVICE
--------------------------
<PAGE>
QUALIFICATIONS OF DAVID HEATH
================================================================================
PROFESSIONAL DESIGNATIONS
MAI (Member, Appraisal Institute - Certificate No. 9815) - The Appraisal
Institute
PROFESSIONAL AFFILIATIONS
State of Texas Certified General Real Estate Appraiser, License No.
TX-1323243-G Licensed Real Estate Salesman, State of Texas, No. 388243
EDUCATION
Bachelor of Business Administration - Real Estate
Baylor University - 1987
TECHNICAL TRAINING - APPRAISAL INSTITUTE
1A1 - Real Estate Appraisal Principles
1A2 - Basic Valuation Procedure
SPP - Standards of Professional Practice
IBA - Capitalization Theory & Techniques, Part A
1BB - Capitalization Theory & Techniques, Part B
2-1 - Case Studies in Real Estate Valuation
2-2 - Report Writing and Valuation Analysis
Mr. Heath has attended various seminars for purpose of continuing education and
the re-certification of the MAI designation and state licensing.
EMPLOYMENT BACKGROUND
Commercial Appraiser with Cushman & Wakefield of Texas, Inc.
March, 1996 to Present
Commercial Appraiser with Miller Consulting, Dallas, Texas
January, 1996 to February, 1996
Commercial Appraiser (Vice President) with L.R. Denton & Co., Dallas, Texas
March, 1988 to December, 1995
EXPERIENCE
Mr. Heath's experience encompasses an assortment of appraisal and consulting
assignments on virtually all types of commercial property including downtown,
suburban, Class A/B/C office buildings; community, neighborhood and strip
shopping centers; national and local hotel/motel properties; apartments;
manufacturing, distribution and high-tech industrial properties; vacant suburban
and rural land; and special use properties, e.g. single-family subdivisions,
restaurants, mini-warehouses, and various others.
CUSHMAN &
WAKEFIELD(R)
--------------------------
VALUATION ADVISORY SERVICE
--------------------------
This CD ROM contains an electronic version of appraisals for the Mortgaged
Properties in PDF format and forms part of the paper version of the Prospectus
Supplement. The information contained in this CD ROM does not appear elsewhere
in paper form in this Prospectus Supplement and must be considered as part of,
and together with, the information contained elsewhere in this Prospectus
Supplement and the Prospectus. The information contained in this CD ROM has
been filed by the Seller with the Securities and Exchange Commission as part
of a Current Report on Form 8-K, which is incorporated by reference in this
Prospectus Supplement, and is also available through the public reference
branch of the Securities and Exchange Commission. Defined terms used in this CD
ROM but not otherwise defined therein shall have the respective meanings
assigned to them in the paper portion of the Prospectus Supplement and the
Prospectus. All of the information contained in this CD ROM is subject to the
same limitations and qualifications contained in this Prospectus Supplement and
the Prospectus. Prospective investors are strongly urged to read the paper
portion of this Prospectus Supplement and the Prospectus in its entirety prior
to accessing this CD ROM. If this CD ROM was not received in a sealed package,
there can be no assurances that it remains in its original format and should
not be relied upon for any purpose. Prospective investors may contact J.
Theodore Borter of Goldman, Sachs Co. at (212)902-3857 to receive an original
copy of the CD ROM.
<PAGE>
================================================================================
COMPLETE APPRAISAL
OF REAL PROPERTY
Plaza 1900
1900 Gallows Road
McLean, Fairfax County, Virginia
================================================================================
IN A SELF-CONTAINED REPORT
As of July 1, 1997
Prepared For:
Goldman Sachs Mortgage Company
85 Broad Street
New York, New York 10004
Prepared By:
Cushman & Wakefield of Washington, D.C., Inc.
Valuation Advisory Services
1875 Eye Street, NW
Suite 700
Washington, D.C. 20006
<PAGE>
Cushman & Wakefield of Washington, D.C., Inc.
1875 Eye Street, N.W., Suite 700
Washington, D.C. 20006 [CUSHMAN & WAKEFIELD LOGO]
(202) 467-0600 A ROCKEFELLER GROUP COMPANY
June 18, 1997
Mr. Sheridan Schechner
Managing Partner
Goldman Sachs Mortgage Company
85 Broad Street
New York, New York 10004
RE: Complete Appraisal of Real Property
Plaza 1900
1900 Gallows Road
McLean, Fairfax County, Virginia
Dear Mr. Schechner:
In fulfillment of our agreement as outlined in the Letter of Engagement,
Cushman & Wakefield of Washington, D.C., Inc. is pleased to transmit our
appraisal report estimating the market value of the leased fee estate in the
referenced real property.
As specified in the Letter of Engagement, the value opinion reported below
is qualified by certain assumptions, limiting conditions, certifications, and
definitions, which are set forth in the report. We particularly call to your
attention to the following special assumption.
1. Pursuant to your request, the date of value is July 1, 1997. We
specifically assumed that no value affecting changes occur between the
date of inspection, which was June 12, 1997, and the prospective date
of value.
2. The land is owned by an entity that this separate from, but related
to, the ownership of the improvements. We have been asked to appraise
the entire property assuming it is owned in fee by one entity. Under
this assumption, we have not considered the ground lease, and assume
there are no conditions of the lease that may impact the leased fee
value estimate.
This report was prepared for Goldman Sachs Mortgage Company and is
intended only for the specified use of the Client. It may not be distributed to
or relied upon by other persons or entities without the written permission of
the Cushman & Wakefield of Washington, D.C., Inc.
This appraisal report has been prepared in accordance with our
interpretation of your institution's guidelines, the regulations of OCC and the
Uniform Standards of Professional Appraisal Practice, including the Competency
Provision and The Financial Institutions Reform, Recovery and Enforcement Act
(FIRREA) and the guidelines of federal regulatory agencies.
The property was inspected and the report prepared by John H. Trowbridge
under the supervision of Donald R. Morris, MAI.
<PAGE>
Mr. Sheridan Schechner
June 18, 1997 Page 2
As a result of our analysis, we estimate the prospective market value of
the leased fee estate in the referenced property and subject to the assumptions,
limiting conditions, certifications and definitions set forth herein, as of July
1, 1997, to be:
THIRTY TWO MILLION FIVE HUNDRED THOUSAND DOLLARS
$32,500,000
This letter is invalid as an opinion of value if detached from the report,
which contains the text, exhibits, and an Addenda.
Respectfully submitted,
CUSHMAN & WAKEFIELD OF WASHINGTON, D.C. INC.
COMMONWEALTH OF VIRGINIA
JOHN H. TROWBRIDGE
No. 4001-004035
Certified General
Real Estate
Appraiser
/s/ John H. Trowbridge
John H. Trowbridge
Valuation Advisory Service
State of Virginia Certified General Appraiser No. 4001-004035
COMMONWEALTH OF VIRGINIA
Donald R. Morris
No. 4001-002465
Certified General
Real Estate
Appraiser
/s/ Donald R. Morris
Donald R. Morris, MAI
Valuation Advisory Service
State of Virginia Certified General Appraiser No. 4001-004035
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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SUMMARY OF SALIENT FACTS AND CONCLUSIONS
================================================================================
Property Name: Plaza 1900
Location: 1900 Gallows Road
General Overview: The project comprises of an
eight-story office building
containing a total of 202,684
square feet of net rentable area.
The building was constructed in
1989. The improvements are situated
on a 4.1 acre site and there is
structured and surface parking for
705 vehicles. On the effective date
of appraisal, the building was 100
percent occupied by two tenants.
Interest Appraised: Leased fee estate
Date of Value: July 1, 1997
Date of Inspection: June 15, 1997
Ownership: R, F & P Land II, Inc.
Highest and Best Use: Office development
Value Indicators
Sales Comparison Approach: $33,000,000
Value Per Square Foot: $163
Income Capitalization Approach
Estimated Market Rental Rate: $23.50 SF, Full Service
Stabilized Vacancy Rate: 5.0%
Effective Gross Income: $4,760,301
Operating Expenses $1,341,785
Real Estate Taxes: $366,629
Net Operating Income: $3,418,516
Estimated Vacancy Between Tenants 6 months
Free Rent: None
Probability of Renewal: 60%
Tenant Improvement Allowance
Shell Space: N/A
New Tenants in Previously
Occupied Space $15.00 per square foot
Renewal Tenants in Same Space: $7.50 per square foot
Estimated Market Rental Growth Rate 3.5%
Estimated Expense Growth Rate: 3.5%
Estimated Real Estate Tax Growth Rate: 3.5%
Reversion Year Capitalization Rate 9.5%
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Summary Of Salient Facts And Conclusions
================================================================================
Transaction Costs in Reversion Sale: 3.0%
Discount Rate: 11.0%
Indicated Value: $32,500,000
Value Conclusion: $32,500,000
Value Per Square Foot: $160.35 (Net Rentable Area)
Implicit Capitalization Rate: 10.5%
Special Assumptions Affecting Valuation:
1. Pursuant to your request, the date of value is July 1, 1997. We
specifically assumed that no value affecting changes occur between the
date of inspection, which was June 12, 1997, and the prospective date
of value.
2. The land is owned by an entity that this separate from, but related to,
the ownership of the improvements. We have been asked to appraise the
entire property assuming it is owned in fee by one entity. Under this
assumption, we have not considered the ground lease, and assume there
are no conditions of the lease that may impact the leased fee value
estimate.
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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PHOTOGRAPHS OF SUBJECT PROPERTY
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[GRAPHIC OMITTED]
[PHOTO]
Front View of the Subject looking across Gallows Road
[GRAPHIC OMITTED]
[PHOTO]
View of Subject looking south from Boone Boulevard
<PAGE>
Photographs of Subject Property
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[GRAPHIC OMITTED]
[PHOTO]
View of parking structure
[GRAPHIC OMITTED]
[PHOTO]
Interior View of Lobby
<PAGE>
Photographs of Subject Property
================================================================================
[GRAPHIC OMITTED]
[PHOTO]
Rooftop view
[GRAPHIC OMITTED]
[PHOTO]
Loading area located at south side of building
<PAGE>
Photographs of Subject Property
================================================================================
[GRAPHIC OMITTED]
[PHOTO]
Gallows Road looking south with subject at right
[GRAPHIC OMITTED]
[PHOTO]
Gallows Road looking north past Boone Boulevard with subject on left
<PAGE>
Photographs of Subject Property
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[GRAPHIC OMITTED]
[PHOTO]
Boone Boulevard looking west with subject on left
[GRAPHIC OMITTED]
[PHOTO]
Same road looking east with subject on right
<PAGE>
TABLE OF CONTENTS
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Page
INTRODUCTION ..................................................................1
Identification of Property ................................................1
Property Ownership and Recent History .....................................1
Purpose and Function of Appraisal .........................................1
Extent of the Appraisal Process ...........................................1
Date of Value and Property Inspection .....................................1
Property Rights Appraised .................................................1
Definitions of Value, Interest Appraised, and Other Pertinent Terms .......2
Legal Description .........................................................3
REGIONAL ANALYSIS ............................................................ 4
NEIGHBORHOOD ANALYSIS ........................................................19
OFFICE MARKET ANALYSIS .......................................................24
PROPERTY DESCRIPTION .........................................................35
Site Description .........................................................35
Improvements Description .................................................36
REAL ESTATE TAXES AND ASSESSMENTS ............................................39
ZONING .......................................................................41
HIGHEST AND BEST USE ANALYSIS ................................................43
VALUATION PROCESS ............................................................45
SALES COMPARISON APPROACH ....................................................46
INCOME APPROACH ..............................................................51
RECONCILIATION AND FINAL VALUE ESTIMATE ......................................64
ASSUMPTIONS AND LIMITING CONDITIONS ..........................................66
CERTIFICATION OF APPRAISAL ...................................................68
ADDENDA ......................................................................69
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<PAGE>
Introduction
================================================================================
Identification of Property
The subject property comprises of an eight-story office building known as
Plaza 1900, which is located at 1900 Gallows Road in McLean, Fairfax County,
Virginia. The improvements are situated on a 4.115 acre parcel. The building is
modem in appearance and functional in design. As of the date of inspection, the
property was 100 percent leased to two tenants, GRC, International and National
Captioning Institute, Inc..
Property Ownership and Recent History
The property is owned by RF&P Land 11, Inc., who acquired the property in
December 1992 for $22,600,000. The difference between the price paid for the
property and our value conclusion is attributable to improving market conditions
(as presented in the Office Market Analysis) and leasing of the vacant space.
We have reason to believe that the property may now be under contract of
sale; however, after discussing the matter with the owner, we have been unable
to obtain any details of the pending transaction. The present owner considers
this information to be confidential and was not willing to provide details for
our analysis.
Purpose and Function of Appraisal
The purpose of the appraisal is to estimate the market value of the leased
fee estate. The appraisal is to be used to monitor the performance of a
portfolio asset.
Extent of the Appraisal Process
In the process of preparing this appraisal, we:
o Inspected the exterior of the building and the site improvements and a
representative sample of tenant spaces with the building engineer.
o Reviewed leasing policy, concessions, tenant build-out allowances, and
occupancy with the building manager.
o Reviewed a detailed history of income and expense and a budget forecast
for 1997.
o Conducted market research of occupancies, asking rents, concessions and
operating expenses at competing buildings which involved interviews
with on-site managers and a review of our own data base from previous
appraisal files.
o Prepared an estimate of stabilized income and expense (for
capitalization purposes).
o Conducted Market inquiries into recent sales of similar buildings to
ascertain sales price per square foot, effective gross income
multipliers and capitalization rates. This process involved telephone
interviews with sellers, buyers and/or participating brokers. (See
detailed sales write-ups in Addenda for more complete information on
the verification process.)
o prepared the Sales Comparison and Income Approaches to value.
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Introduction
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Date of Value and Property Inspection
The date of value is July 1, 1997. We inspected the property on June 12,
1997.
Property Rights Appraised
The rights being valued are the leased fee estate.
Definitions of Value, Interest Appraised, and Other Pertinent Terms
The definition of market value taken from the Uniform Standards of
Professional Appraisal Practice, 1994 Edition, published by The Appraisal
Foundation, is as follows:
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 is the
consummation of a sale as of a specified date and the passing of title
from seller to buyer under conditions whereby:
(1) Buyer and seller are typically motivated;
(2) Both parties are well informed or well advised, and acting in what
they consider their own best interests;
(3) A reasonable time is allowed for exposure in the open market;
(4) Payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
(5) 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.
Exposure Time
Under Paragraph 3 of the Definition of Market Value, the value estimate
presumes that "A reasonable time is allowed for exposure in the open
market." Exposure time is defined as the estimated length of time the
property interest being appraised would have been offered on the market
prior to the hypothetical consummation of a sale at the market value on
the effective date of the appraisal. Exposure time is presumed to precede
the effective date of the appraisal.
Based on the improved sales data presented in this document, coupled with
our conversations with local property owners, brokers and management
firms, we have estimated the appropriate exposure time would have been 12
months for the property.
Marketing Time
Marketing time is an estimate of the time that might be required to sell a
real property interest at the appraised value. Marketing time is presumed
to start on the effective date of the appraisal. Marketing time is
subsequent to the effective date of the appraisal and exposure time is
presumed to precede the effective date of the appraisal. The estimate of
marketing time uses some of the same data analyzed in the process of
estimating reasonable exposure time and it is not intended to be a
prediction of a date of sale. We estimated marketing time to be
approximately 12 months.
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Introduction
================================================================================
Definitions of pertinent terms taken from the Dictionary of Real Estate
Appraisal, Third Edition (1993), published by The Appraisal Institute, are as
follows:
Leased Fee Estate
An ownership interest held by a landlord with the right of use and
occupancy conveyed by lease to others. The rights of the lessor (the
leased fee owner) and the leased fee are specified by contract terms
contained within the lease.
Leasehold Estate
The right to use and occupy real estate for a stated term and under
certain conditions; conveyed by a lease.
Market Rent
The rental income that a property would most probably command on the open
market" indicated by the current rents paid and asked for comparable space
as of the date of the appraisal.
Cash Equivalent
A price expressed in terms of cash, as distinguished from a price
expressed totally or partly in terms of the face amounts of notes or other
securities that cannot be sold at their face amounts.
Discounted Cash Flow (DCF) Analysis
The procedure in which a discount rate is applied to a set of projected
income streams and. a reversion. The analyst specifies the quantity,
variability, timing and duration of the income streams as well as the
quantity and timing of the reversion and discounts each to its present
values at a specified yield rate. DCF analysis can be applied with any
yield capitalization rate and may be performed on either a lease-by-lease
or aggregate basis.
Legal Description
The subject is identified as parcel 039-1-06-081A and 081B among the land
records of Fairfax County, Virginia. We were not provided with a metes and
bounds description of the site.
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REGIONAL ANALYSIS
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Introduction
The real estate market is affected by a range of supply and demand
factors. As examples, the growth trends in population and the number of
households affect the general demand for housing, offices, shopping centers,
warehouses; the employment opportunities and unemployment levels influence the
ability or desire to buy or rent and the quality/cost of the facilities sought;
demographics influence the types of units demanded; and general economic
conditions affect the attitudes of the populace towards the future.
The following analysis will review each of the major factors affecting the
supply and demand for real estate in the metropolitan area. The discussion is
organized to provide the reader with an overview of the area's geographic scope
and facilities infrastructure, followed by discussions of the key economic
factors affecting supply and demand under the following headings:
o Background
o Area Definition
o Infrastructure
o Population
o Employment and The Economy
o Household Demographics
o Recent Trends
Background
Washington, D.C. is unique among American cities. As our nation's capital,
it serves as a focal point for our country both politically and economically. In
the role as host city for a major world power, it attracts people from all over
the world. Washington had been dubbed a "recession proof" city in that it was
insulated, as some argued, from the full effects of economic ups and downs by
the stabilizing influence of the federal government as the area's biggest
employer. From the 1950s through the 1980s, the size of government continually
increased, which brought about an increase in government employment and
population in the Washington area. However, as the recession of the early 1990s
took hold, affecting the entire east coast, this impression faded significantly.
Further, as will be discussed later, the latest government downsizing demanded
by the Republican controlled Congress is expected to add further negative
pressure to the area's statistics.
Area Definition
The metropolitan Washington area is all of the Washington Metropolitan
Statistical Area (MSA) as defined by the U.S. Department of Commerce, Bureau of
the Census, as of June 1983. The Washington MSA includes: District of Columbia;
the Maryland Counties of Calvert, Charles, Frederick, Montgomery and Prince
George's; the Virginia Counties of Arlington, Fairfax, Loudoun, Prince William
and Stafford; and the Virginia independent Cities of Alexandria, Fairfax, Falls
Church, Manassas, and Manassas Park. Prior to the 1983 redefinition of the
Washington MSA, the Maryland counties of Calvert and Frederick and the Virginia
county of Stafford were excluded. The addition of these counties enlarged the
metropolitan area from approximately 2,800 square miles to 3,956 square miles.
Please refer to the Washington MSA map on the following page.
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[GRAPHIC OMITTED]
[REGIONAL MAP]
Regional Map
CUSHMAN &
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Regional Analysis
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Effective December 31, 1992, the Department of Commerce created a new
Washington-Baltimore-D.C.-MD-VA-WVa CMSA (consolidated metropolitan statistical
area) that includes the primary Washington, D.C. and Baltimore MSAs, plus a new
Hagerstown MSA and nine additional counties in Virginia and West Virginia. The
expanded market was created to reflect the area's household and employment
patterns and is highly touted by economic development agencies. The current
Washington, D.C. metropolitan area is the appropriate focus for this analysis,
however, since the pertinent market is more localized.
The population, housing and employment characteristics of the region are
best defined by starting at the area's central jurisdictions: the District of
Columbia, Arlington County, and the City of Alexandria; then moving outward to
the first suburban tier of counties: Fairfax County, City of Fairfax, City of
Falls Church, Prince George's County, and Montgomery County; and thence to the
outer tier of suburbs-Loudoun County, Prince William County, Manassas and
Manassas Park, Frederick County, Calvert County, Charles County, and Stafford
County.
Infrastructure
Transportation
The Capital Beltway (1-495) is one of the most important factors driving
development in the Washington area. It has tied the Maryland and Virginia
suburbs together and significantly influenced real estate investment patterns.
One of the primary results has been a steady rise in land prices in the vicinity
of the Beltway. Apartments, light industrial facilities, distribution
warehouses, and shopping centers have gone up wherever the Beltway crosses other
major highways. Interestingly, closer-in sites have often been by-passed in
favor of locations adjacent to the Beltway.
In addition to the Beltway, the Washington region is bisected to 1-95, the
major north-south interstate highway that extends most of the length of the
Atlantic coast, and 1-66, an east-west highway that begins in Washington, D.C.
and connects westward to other interstate highways in Virginia and West
Virginia.
The Washington Metropolitan Area Transit Authority (WMATA) provides
transit service in Maryland, the District of Columbia, and Virginia, including
both rapid rail and bus transportation. The rapid rail network, referred to as
MetroRail, will cover 103 miles with 86 stations in D.C., suburban Maryland and
Virginia when completed in the late 1990s. The construction of MetroRail has had
a major impact on land values around the stations and has spurred dramatic new
development, both in downtown Washington and in suburban areas. Major new office
and mixed use projects have been built around the Metro stops. In particular,
portions of downtown Washington and Arlington County have experienced an
economic revitalization due to the opening of MetroRail. Apartment projects
often market themselves as being close to MetroRail stations and typically
command rents at the high end of the market and achieve higher occupancies as a
result. The same could be said for various primary employment centers and major
retail facilities.
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Regional Analysis
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In terms of air transportation, the Washington area is served by three
major airports: Washington National, Baltimore/Washington International and
Washington Dulles International. Washington National, located in Arlington
County, is located four and one-half miles from the U.S. Capitol, and transports
over 16 million passengers per year. The airport was built in the 1940s and is
currently undergoing major renovations and expansion, which primarily includes a
new terminal building and improved parking.
Opened in 1962, Dulles Airport has been an important factor in the growth
of the regional economy of Northern Virginia. In 1985, it became the fastest
growing airport in the United States. Currently 19 airlines service the airport
with 500 daily departures serving 30,000 passengers. Three major airlines have
established regional hubs here including United Airlines, Continental, and Delta
Airlines. Further, international carriers including Air France, British Airways,
All Nippon Airways, TWA, Lufthansa and Swiss Air.
The Baltimore/Washington International Airport (BWI) is located in the
southern portion of the Baltimore MSA in Anne Arundel County, ten miles from
downtown Baltimore, and 30 miles from Washington, D.C. This airport hosts 18
passenger airlines that provide direct air service to 135 cities in the United
States and Canada. BWI also provides service to air-freight carriers with its
110,000 square foot air cargo complex. When compared with Dulles and Washington
National Airport, BWI services 28 percent of commercial passengers, 38 percent
of commercial operations and 57 percent of freight customers. BWI has spawned
the development of 15 new business parks and several hotels, has created nearly
10,000 jobs, and has generated a state-wide economic impact of $1.7 billion in
the form of business sales made, goods and services purchased, and wages and
taxes paid.
Government Services and Structures
The Washington, D.C. metropolitan area contains fourteen different
municipal jurisdictions, including the District of Columbia, ten counties and
three cities in two states. Local governments provide typical municipal services
found in a major metropolitan area, including welfare and social services,
refuse collection, emergency services, public education, and a variety of
regulatory functions. Each municipality has its own zoning ordinance and
governmental structure.
In addition to the local governments, the District of Columbia is the
headquarters for the federal government. Major federal agencies are located
throughout the District of Columbia and many of the surrounding suburbs. The
support functions for many agencies have been relocated to the less expensive
suburbs.
The area is also served by several cross-jurisdictional agencies. These
include the Maryland National-Capital Park and Planning Commission (MNCPPC)
which provides planning and zoning coordination to the Maryland suburbs. The
Washington Metropolitan Area Transit Authority (WMATA), which was referred to
earlier, is the regional public transit authority. The Metropolitan Washington
Council of Governments performs studies on metropolitan economic and business
issues and promotes the region to outsiders.
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Regional Analysis
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Public and Private Amenities
As the nation's capital, the District of Columbia houses many national
museums, monuments, and institutions that attract visitors to the area from
around the world. Washington, D.C. is one of the leading tourist destinations
for domestic travelers and foreign visitors to the United States.
In addition, the metropolitan area is a strong supporter of the performing
arts. The Kennedy Center is the area's main stage for plays, opera, and symphony
presentations, but there are indoor and outdoor stages and theaters in all of
the adjacent jurisdictions. Professional athletics are played at RFK Stadium
(football) in southeast Washington, D.C. and the U.S. Air Arena (basketball and
hockey) in Landover, Maryland. Baseball is played at Oriole Park at Camden Yard
in Baltimore. A new downtown sports arena is under construction with events
expected to start in early 1997.
The region also offers numerous private and public golf courses, municipal
parks, and bicycle and jogging trails. One unique feature of the region's
outdoor attractions is the C&O Canal. The canal is maintained as a national park
and follows the Maryland side of the Potomac River between Georgetown in
northwest Washington, D.C. and Cumberland, Maryland. The Potomac River is an
active recreational area for fishing and various kinds of boating.
The public and private primary schools in the region include many with
national standing. The school districts face the typical challenges encountered
in urban centers with mixes of high and low income neighborhoods and growing
immigrant populations without English language skills. On average, the suburban
school districts tend to be better funded than those in the District of
Columbia.
With respect to higher education, the region has a network of nationally
recognized universities and regional and community colleges, including George
Washington University, Georgetown University, American University, the
University of Maryland, Howard University, Gallaudet University, The University
of the District of Columbia, Catholic University, George Mason University, and
Trinity College.
Population
This section will examine the population size and age trends for the
metropolitan area. Employment, income, and household related demographics will
be reviewed separately.
According to Market Statistics' 1995 Demographics USA, the Washington,
D.C. MSA ranks fifth in the nation in terms of total population. The Washington
area increased in population by 20.7 percent between 1980 and 1990, or an
average annual rate of 2.1 percent. The rate of growth has slowed somewhat with
the population change between 1990 and 1995 having increased at an annual
average of 1.2 percent. Nonetheless, population growth in the region during the
1980s far exceeded the growth during the 1970s, when the region grew by an
average of only 21,000 persons per year. During the 1980s, the region had an
average growth of roughly 67,000 persons per year.
Interestingly, however, while there was an overall increase in population,
this increase was by no means uniform within the component jurisdictions of the
Washington MSA. The 1980s saw a shift in population from the inner-city and
close-in suburbs to the more remote suburban areas. The District of Columbia was
the big loser during this period with an average annual decline of 0.5 percent.
The annual rate of decline grew to 1.4 percent by 1995.
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Regional Analysis
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In contrast, the inner suburbs had an annual average growth rate of 2.5
percent during the 1980s, with both Fairfax County, Virginia, and Montgomery
County, Maryland having growth rates of 3.7 percent and 3.1 percent,
respectively. Both counties were the main suburban benefactors of commercial
office and retail development for this period and population increases were
primarily concentrated in the outer portions of the counties. The growth in
these areas has decreased in the 1990s to an annual growth rate of 1.7 and 1.3
percent, respectively.
The largest population increases occurred in the outer suburbs, the areas
beyond the first tier communities surrounding the District. The average annual
rate of increase in these areas-was 4.4 percent between 1980 and 1990. However,
the rate of increase has fallen off since 1990 to 3.2 percent, a phenomena
concurrent with the slow down in the economy. The following chart presents
population data and the average growth rates for the various jurisdictions in
the MSA:
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Population Changes
1990 Census Estimates Versus 1980 Census
================================================================================
Population Annual Average
Jurisdiction (Thousands) Growth Rate (%)
======================================================
1980 1990 1995 1980-1990 1990-1995
================================================================================
District of Columbia 638.3 606.9 565.7 -0.4919 -1.3577
- --------------------------------------------------------------------------------
Arlington County 152.6 170.9 175.4 1.1992 0.5266
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City of Alexandria 103.2 111.2 113.3 0.7752 0.3777
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Central Jurisdictions 894.1 889 854.4 -0.0570 -0.7784
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Fairfax County 596.9 818.6 889.2 3.7142 1.7249
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City of Fairfax 19.4 19.6 20.6 0.1031 1.0204
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City of Falls Church 9.5 9.6 9.6 0.1053 0.0000
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Montgomery County 579.1 757.0 807.9 3.0720 1.3448
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Prince George's County 665.1 729.3 768.2 0.9653 1.0668
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Inner Suburban Area 1870 2334.1 2495.5 2.4818 1.3830
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Loudoun County 57.4 86.1 111.7 5,0000 5.9466
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Prince William County 144.7 215.7 242.2 4.9067 2.4571
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Cities of Manassas/ 22 34.7 39.0 5.7727 2.4784
Manassas Park
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Frederick County 114.8 150.2 174.0 3.0836 3.1691
- --------------------------------------------------------------------------------
Calvert County 34.6 51.4 63.4 4.8555 4.6693
- --------------------------------------------------------------------------------
Charles County 72.7 101.2 110.2 3.9202 1.7787
- --------------------------------------------------------------------------------
Stafford County 40.5 61.2 78.0 5.1111 5.4902
================================================================================
Outer Suburban Area 486.7 700.5 811.6 4.3929 3.1720
================================================================================
METRO AREA TOTAL 3250.8 3923.6 4161.5 2.0696 1.2127
================================================================================
Source: U.S. Census Data and 1995 estimate Provided By Market Statistics 1995
Demographics USA
Note: The list of municipalities corresponds to the DC-VA-MD MSA prior to
the December 31, 1992 expansion.
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<PAGE>
Regional Analysis
================================================================================
We noted earlier that the District of Columbia actually lost population
over the past ten years while the suburban areas grew. It is important to note,
however, that this phenomenon is being seen in most major metropolitan areas in
the United States. Nevertheless, in relative terms, the population decreases in
Washington, D.C. versus population increases in suburban areas are significantly
less than that seen in other parts of the country, thus attesting to the
continuing strength and viability, albeit somewhat lessened given the more
recent recessionary trends, of the metropolitan area's inner city.
Age Distribution
As can be seen in the following chart, the percentage of the region's
infant and elderly populations increased between 1980 and 1990. Interestingly,
however, the number of working aged-residents increased the most in absolute
numbers. The number of youths and teenagers shrank. The following table displays
the data.
================================================================================
Population Trends By Age
(Council of Governments Members)
================================================================================
1980 1990 % Change
================================================================================
0 to 4 Years 192,372 262,578 +36.5%
- --------------------------------------------------------------------------------
5 to 17 Years 636,733 585,949 -7.2%
- --------------------------------------------------------------------------------
18 to 64 Years 2,020,989 2,509,056 +24.1%
- --------------------------------------------------------------------------------
Over 65 Years 235,875 317,538 +34.6%
================================================================================
Source: 1980 and 1990 Census Data; Metropolitan Washington Council of
Governments: Where We Live: Housing and Household Characteristics in
the Washington Metropolitan Region, April, 1993.
The District of Columbia was the only major jurisdiction to lose working
age adults (down 1.9 percent). The largest gains among working age adults were
in the inner suburbs of Montgomery and Prince George's County in Maryland and
Arlington, Fairfax, and Loudoun Counties in Virginia. The increases in the
elderly population were spread across all municipalities.
As of the 1990 Census, the population was distributed with 21 percent
under 30 years, 39 percent between the ages of 30 and 49 years, and 12 percent
between 50 and 64 years of age. These are the key working age groupings.
Employment and The Economy
The employment picture has a very significant effect on the demand for
real estate. High unemployment rates and business downsizing, for example,
reduce the number of households able to buy homes. Similarly, a growth economy
creates increasing demand for goods and services. This section will review the
recent trends and the outlook for employment in the Washington, D.C. region.
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VALUATION ADVISORY SERVICES
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<PAGE>
Regional Analysis
================================================================================
Employment Characteristics
The following table shows the area's total employment as a percent of
total employment for each industry group for the past eight years.
<TABLE>
<CAPTION>
=================================================================================================================================
Non-Agricultural Employment
Percent Share of Total Employment
=================================================================================================================================
Annual
Industry 1988 1989 1990 1991 1992 1993 1994 1995 Growth
%
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Manufacturing 4.1 4.0 3.9 3.8 3.6 4.0 3.9 4.9 2.4
- ---------------------------------------------------------------------------------------------------------------------------------
Construction 6.6 6.6 6.0 4.8 4.4 4.4 4.8 4.0 -4.9
- ---------------------------------------------------------------------------------------------------------------------------------
T.C.U.(1) 4.9 4.9 4.8 4.8 4.7 4.5 4.6 4.5 -1.0
- ---------------------------------------------------------------------------------------------------------------------------------
Wholesale Trade 3.6 3.5 3.5 3.4 3.3 3.3 3.3 3.2 -1.4
- ---------------------------------------------------------------------------------------------------------------------------------
Retail Trade 16.2 16.1 15.9 15.6 15.4 15.6 15.7 16.6 0.3
- ---------------------------------------------------------------------------------------------------------------------------------
F.I.R.E.(2) 5.9 5.8 5.9 5.9 5.8 5.7 5.9 5.5 -0.8
- ---------------------------------------------------------------------------------------------------------------------------------
Services 32.4 33.0 33.7 34.3 34.9 35.1 35.4 36.3 1.5
- ---------------------------------------------------------------------------------------------------------------------------------
State Government 3.7 3.6 3.6 3.6 3.6 3.7 3.6 3.4 -1.0
- ---------------------------------------------------------------------------------------------------------------------------------
Local Government 6.0 6.1 6.4 6.7 6.7 6.9 6.9 7.3 2.7
- ---------------------------------------------------------------------------------------------------------------------------------
Federal 16.6 16.4 16.3 17.1 17.5 16.8 15.9 14.4 -1.7
Government
=================================================================================================================================
Total Employment 2,167.2 2,226.7 2,242.6 2,190.5 2,186.8 2,317.1 2,373.1 2,425.2 1.5
(Thousands)
=================================================================================================================================
Yr-to-Yr Growth N/A +2.7 +0.7 -2.3 -0.2 +5.6 +2.4 +2.2 N/A
(%)
=================================================================================================================================
</TABLE>
(1) Transportation, Communications, Utilities
(2) Finance, Insurance, Real Estate
Source: U.S. Department of Labor, Bureau of Labor Statistics, Wage and Salary
Employment, 1988-1995; Obtained From the District of Columbia
Department of Employment Services
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<PAGE>
Regional Analysis
================================================================================
The region enjoyed a period of unusual job expansion during the 1980s. The
peak year for growth was 1984, when growth reached 107,000 jobs. The growth fell
to 100,000 in 1985, and to 82,000 jobs in 1986. From 1986 to 1988, job growth
settled at around 80,000 to 90,000 jobs per year, or in the four percent range.
Job growth dropped to 59,500 jobs (2.9 percent) in 1989, and declined by
another two percent to only 15,900 jobs in 1990. By this time, the economy was
being affected by the national recession with the area's total employment
declining by 52,100 jobs (minus 2.3 percent) in 1991 and remaining relatively
flat in 1992. Since 1992, however, the area experienced positive growth of 2.2
to 5.6 percent. This growth was found in the suburban areas as opposed to the
District of Columbia and was evenly distributed through all industry types. The
average growth rate for the 1988 to 1995 period reflects a 1.5 percent per year
average, which is below the national average of about 2.5 percent per year.
Although the federal government has historically been the major employer
in the region, its share of employment has decreased slightly from about 17 to
15 percent over the past two to three years. The aggregate federal employment
grew at an average annual rate of 1.4 percent between 1988 and 1992. Since 1992,
federal employment has decreased steadily from 17.5 percent to 14.4 percent and
is expected to further decline in light of the downsizing issue.
The most dramatic change in employment in the Washington area has been in
the private sector, particularly the emergence of the service industry as the
fastest growing and now largest employment opportunity. In 1960, the services
industry employed 18 percent of all non-agricultural workers and has grown to
36.3 percent by 1995. Retail and wholesale trades have maintained a steady
portion of total employment, thus indicating that employment in these sectors
expands and contracts with the economy.
Construction employment fell dramatically in 1991. The construction boom
of the late 1980s came to an abrupt halt by late 1990, and the percent share of
employment held by the construction sector fell from 6.6 percent in 1988 and
1989 to 4.0 percent in 1995. The average annual rate of decline over the period
was 4.9 percent.
We noted earlier a growing diversification of the area's employment base.
The following list of major employers in the Washington area reflects the
growing diversity of the local economy, the continuing influence of educational
institutions, and the emergence of service-oriented firms.
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<PAGE>
Regional Analysis
================================================================================
Largest Private Employers
Ranked by Total Employees in Metro Area
================================================================================
Metro Area
Rank Company Name Employees
================================================================================
1 Inova Health Systems 9,500
- --------------------------------------------------------------------------------
2 Hechts 8,000
- --------------------------------------------------------------------------------
3 Medlantic Healthcare Group 6,000
- --------------------------------------------------------------------------------
4 Long & Foster Real Estate 5,300
- --------------------------------------------------------------------------------
5 Shoppers Food Warehouse 3,800
- --------------------------------------------------------------------------------
6 Booz Allen & Hamilton 3,100
- --------------------------------------------------------------------------------
7 Dyncorp 3,000
- --------------------------------------------------------------------------------
8 Holy Cross Hospital 2,300
- --------------------------------------------------------------------------------
9 Providence Hospital 2,000
- --------------------------------------------------------------------------------
10 Alexandria Hospital 1,742
================================================================================
Source: Washington Business Journal, November 17-23, 1995
If the federal government were included in the above list, the Department
of Defense would be the largest local employer, with over 86,000 employees. The
next closest is the Department of Health and Human Services with over 30,000
employees. The Treasury, Justice, Postal Service, and Commerce Departments all
have over 20,000 employees, and are larger individual employers than any other
local private firm.
The local governments are also major employers in the region. For example,
the City of Alexandria had over 5,100 employees between the city government,
Alexandria Hospital, and the public school system. Arlington, Fairfax, and
Loudoun Counties have, respectively, over 6,800, 25,500, and 3,900 employees for
the same functions. Montgomery County and Prince George's Counties are similarly
large local employers.
Unemployment Rates
According to the Census reports, the Washington region has one of the
highest labor force participation rates in the country, with more than 75
percent of the population between the ages of 16 and 65 being part of the labor
pool. This is ten percent higher than the national average.
For most of the 1980s, the demand for workers was increasing at a faster
rate than the number of workers in the area, causing a labor shortage. The 1991
through 1993 recession, however, halted job growth in the area and drove up
unemployment rates. The related statistics are summarized below.
================================================================================
Unemployment Rates
================================================================================
Year 1988 1989 1990 1991 1992 1993 1994 1995
================================================================================
Washington MSA 2.9% 2.7% 3.4% 4.5% 5.0% 4.5% 4.1% 3.9%
- --------------------------------------------------------------------------------
United States 5.5% 5.3% 5.5% 6.7% 7.4% 6.8% 6.1% 5.3%
================================================================================
Source: Metropolitan Council of Governments: Economic Trends in Metropolitan
Washington, 1988-1991 (The unemployment rates are not seasonally
adjusted.) Updated figures including 1992 through 1995 obtained from
the District of Columbia Department of Employment Services.
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<PAGE>
Regional Analysis
================================================================================
The outlook for employment in the region continues to be strong despite
the recent recession. Obviously, federal and local government employment is a
major contributor to the region's stability. Fortunately, as government jobs (as
a sector of the whole) has decreased, private sector job growth seems to be
picking up the slack. Most of the swings in employment have been experienced in
the construction trades and retail employment. These last two sectors are
expected to remain soft for the next few years with slow gains made as the
economy stabilizes and demand for new housing and commercial construction
increases.
Federal Procurement
The federal government continues to be the region's major contractor for
services. Thus, the level of federal spending directly impacts local employment
in the services and other sectors of the economy. There was a large surge in
employment during the 1980s, for example, that was fueled primarily by federal
spending and an effort by the Reagan Administration effort to "privatize"
government functions. The following table shows the recent history for federal
procurement by defense and non-defense awards.
================================================================================
Federal Spending in the Washington, D.C. Area
(Millions)
================================================================================
Fiscal Year 1988 1989 1990 1991 1992 1993 1994
================================================================================
Percent Defense 33.9% 33.1% 31.2% 30.1% 29.9% 29.3% N/A
- --------------------------------------------------------------------------------
Percent
Non-Defense 66.1% 66.9% 68.8% 69.9% 70.1% 70.7% N/A
- --------------------------------------------------------------------------------
Total $37.6 $39.1 $42.6 $47.2 $49.6 $51.9 $56.1
================================================================================
Percent to DC 41.5% 42.1% 43.1% 41.6% 41.0% 39.9% 39.5%
- --------------------------------------------------------------------------------
Percent to MD 27.5% 28.1% 26.6% 26.4% 27.4% 27.2% 27.7%
- --------------------------------------------------------------------------------
Percent to VA 31.0% 29.8% 30.2% 32.0% 31.6% 32.9% 32.8%
================================================================================
Source: Greater Washington Research Center Federal Spending in Metropolitan
Washington, April 1995.
The bulk of the purchases are for services, constituting almost 67 percent
of the dollar value of transactions in 1994. Also, important to note is the fact
that both products acquisitions and research and development contracts remained
relatively constant as a percentage of total spending over the 1992 through 1994
period at 17 and 15 percent, respectively. The ratio of expenditures between the
three parts of the region have remained mostly stable, with Fairfax, Arlington
and Alexandria capturing most of the Northern Virginia dollars and Montgomery
and Prince George's Counties capturing the lion's share of the Maryland
allocation.
Employment Outlook
The Greater Washington Research Center reported that growth in the
Washington area economy finally returned during the latter part of 1993 after
staggering through the previous six years. In early 1995 (April), most of the
nine indicators that the research group uses to track the health of the economy
and to predict its direction were up, the only exception being the employment
index which showed the number of jobs increasing at a pace somewhat slower than
the seasonal norm. On the positive side, however, the number of jobs increased
by the largest margin since mid-1993. Job gains in the private sector seem to be
leading those in the government.
The indicators utilized by the Research Center seem to suggest that the
economy is continuing to gain strength. However, the level of improvement still
falls short of generating the number of jobs the Washington area produced during
the boom of the 1980s. Although
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<PAGE>
Regional Analysis
================================================================================
the number of jobs in the area increased in 1995, the total number of jobs is
still short of prerecession peak employment.
Job gains have been concentrated in the local government and service
sectors, with employment in retailing and construction still relatively
depressed. The new jobs numbers may be understated because they don't include
self-employment. In addition to employment, other guideposts to the state of the
region's economic health - airport boardings, classified advertising lineage and
the national consumer confidence index - have all improved.
Even though the recovery in the Washington area may be slow, the region is
strong economically. Christine Chmura, corporate economist for Crestar Bank in
Richmond, noted that the office vacancy rate in the Washington area is below
that in most metropolitan areas and that unemployment is lower than it is
nationally. The indicators that the Greater Washington Research Center uses to
forecast economic growth six to nine months from now were up as well, albeit
less strongly.
Increases in the sales of durable goods, in the number of business
telephone lines installed, in housing sales, in the Johnston, Lemon Index of
local stocks and in the national leading index, produced a modest gain of 0.09
percent in March.
Overall, the region's performance was described as a year of recovery, as
evidenced by the net increase in wage and salary jobs, with the services and
government sectors adding the most positions. For 1995, we witnessed further
employment gains for the region and a strengthening economy, as the recovery
broadened and deepened.
Household Demographics
One of the more important demographic factors influencing the demand for
goods and services is the household. The household is the basic consuming unit
in the housing market. It is defined by the U.S. Census as a person or group of
people who jointly occupy a dwelling unit and who constitute a single economic
unit for the purposes of meeting housing expenses. The household unit can be a
family, two or more individuals living together, or a single person.
The historical household growth patterns help define the region and are
shown in the following table. The forecasts were published by Equifax National
Decision Systems and were tabulated for them by an econometric modeling service
associated with a major university.
The figures show that the number of households in the region grew at an
average annual rate of 2.4 percent during the 1980s. The rate has slowed to
about 1.1 percent per year for 1990 through 1995, and is projected to remain
relatively constant at 1.1 percent for the next five years. As with the
population figures presented earlier, household formation has become negative in
the District of Columbia. However, the inner suburbs have showed continued
growth with the strongest counties being Fairfax and Montgomery. The outer
suburbs had the strongest 1980s and early 1990s growth rates, but are projected
to slow to an average annual rate of 3.0 percent.
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<PAGE>
Regional Analysis
================================================================================
<TABLE>
<CAPTION>
====================================================================================================
Household Changes
1990 Census Estimates Versus 1980 Census
====================================================================================================
(Thousands) Growth Rate
Households Annual Average
======================================================================
Jurisdiction 2000 1995-
1980 1990 1995 Fcst 1980-1990 1990-1995 2000
Fcst
====================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
District of Columbia 253.1 249.6 232.4 218.4 -0.1 -1.4 -1.2
- ----------------------------------------------------------------------------------------------------
Arlington County 71.6 78.5 79.5 81.8 1.0 0.3 0.6
- ----------------------------------------------------------------------------------------------------
City of Alexandria 49.0 53.3 54.0 53.6 0.9 0.3 -0.2
====================================================================================================
Central Jurisdictions 373.7 381.4 365.9 353.8 0.2 -0.8 -0.7
====================================================================================================
Fairfax County 205.2 292.3 314.8 337.5 4.3 1.5 1.4
- ----------------------------------------------------------------------------------------------------
City of Fairfax 6.9 7.4 7.6 7.6 0.7 0.5 0.0
- ----------------------------------------------------------------------------------------------------
City of Falls Church 4.3 4.2 4.2 4.2 -0.2 0.0 0.0
- ----------------------------------------------------------------------------------------------------
Montgomery County 207.2 282.2 300.6 320.9 3.6 1.3 1.4
- ----------------------------------------------------------------------------------------------------
Prince George's Cnty 224.8 258.0 269.7 280.7 1.5 0.9 0.8
====================================================================================================
Inner Suburban Area 648.4 844.1 896.9 950.9 3.0 1.3 1.2
====================================================================================================
Loudoun County 18.7 30.5 39.5 49.1 6.3 5.9 4.9
- ----------------------------------------------------------------------------------------------------
Prince William Cnty 43.8 69.7 77.9 86.8 5.9 2.4 2.3
- ----------------------------------------------------------------------------------------------------
Cities of Manassas/ 6.9 11.7 12.9 14.1 7.0 2.1 1.9
Manassas Park
- ----------------------------------------------------------------------------------------------------
Frederick County 37.5 52.6 61.3 71.7 4.0 3.3 3.4
- ----------------------------------------------------------------------------------------------------
Calvert County 10.7 17.0 20.9 24.7 5.9 4.6 3.6
- ----------------------------------------------------------------------------------------------------
Charles County 21.4 32.9 36.1 39.4 5.4 1.9 1.8
- ----------------------------------------------------------------------------------------------------
Stafford County 12.2 19.4 24.7 29.1 5.9 5.5 3.6
====================================================================================================
Outer Suburban Area 151.2 233.8 273.3 314.9 5.5 3.4 3.0
====================================================================================================
REGION TOTAL 1173.3 1459.3 1536.1 1619.6 2.4 1.1 1.1
====================================================================================================
</TABLE>
Source: U. S. Census Data Provided By National Decision Systems, Inc. and
Market Statistics 1995 Demographics USA
Note: The list of municipalities corresponds to the DC-VA-MD MSA prior to
the December 31, 1992 expansion.
The key items relating to Household (HH) Income and Statistics relating to
persons per dwelling unit (DU) are summarized below.
<TABLE>
<CAPTION>
====================================================================================================
Selected Household Demographics for the Metropolitan Area
====================================================================================================
Category 2000 % Change % Change
1990 1995 Forecast 1990-1995 1995-2000
====================================================================================================
<S> <C> <C> <C> <C> <C>
Average HH Income $55,693 $67,747 $89,806 21.6% 32.6%
- ----------------------------------------------------------------------------------------------------
Median HH Income $46,196 $55,684 $68,889 20.5% 23.7%
====================================================================================================
Population by HH Type (1990) % Family % Non-Family
HH 81.1% HH 16.4%
====================================================================================================
No. Of Persons One Two Three Four Five or More
====================================================================================================
Persons Per DU (% of Total) 24.9% 30.8% 18.5% 15.3% 10.5%
====================================================================================================
Characteristics Single Male Single Married Couple Other Family Non-Family
Female Head Head
====================================================================================================
HH Type (% of Total) 10.5% 14.4% 51.7% 15.4% 8.0%
====================================================================================================
</TABLE>
Source: U.S. Census Data and Projections Provided by Equifax National Decision
Systems, Inc.
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<PAGE>
Regional Analysis
================================================================================
Since 1980 there has been a drop in household size and, correspondingly, a
growth in the number of non-family households. Married couples continue to
represent over 50 percent of the total households. Single person households grew
at an annual rate of 2.5 percent and non-family households grew at an annual
rate of 6.1 percent during the last decade, while single parent households grew
at an annual rate of 3.0 percent during the 1980s. The growth in the single
person and non-family household categories of households contributes to housing
demand, which generates demand across the economy.
Another important issue affecting the demand for real estate is household
income. The following table shows the percent distribution of income within the
different jurisdictions.
================================================================================
1995 Percent Distribution of Household Income
================================================================================
Less Than $25- $50.0- $75.0- Over No. of
Jurisdiction $25K 49.9K 74.9K 99.9K $100K Household
(Thousands)
================================================================================
District of Columbia 31.2 30.8 18.3 9.4 10.3 232.4
- --------------------------------------------------------------------------------
Arlington County 17.8 31.1 25.1 13.5 12.5 79.5
- --------------------------------------------------------------------------------
City of Alexandria 15.3 32.3 26.7 12.7 13.0 54.0
- --------------------------------------------------------------------------------
Fairfax County 7.4 18.5 25.9 21.6 26.6 314.8
- --------------------------------------------------------------------------------
City of Fairfax 15.3 33.2 31.5 13.8 6.2 7.6
- --------------------------------------------------------------------------------
City of Falls Church 13.4 22.6 27.5 17.0 19.5 4.2
- --------------------------------------------------------------------------------
Montgomery County 12.6 25.8 27.2 16.6 17.8 300.6
- --------------------------------------------------------------------------------
Prince George's County 17.4 35.0 28.8 12.6 6.2 269.7
- --------------------------------------------------------------------------------
Loudoun County 11.9 27.6 33.8 16.3 10.4 39.5
- --------------------------------------------------------------------------------
Prince William County 10.8 31.9 34.9 15.1 7.3 77.9
- --------------------------------------------------------------------------------
Cities of Manassas/ 11.5 33.3 33.2 14.0 8.0 12.9
Manassas Park
- --------------------------------------------------------------------------------
Frederick County 21.4 36.9 28.2 9.0 4.5 61.3
- --------------------------------------------------------------------------------
Calvert County 13.6 23.3 28.1 20.9 14.1 20.9
- --------------------------------------------------------------------------------
Charles County 17.8 32.8 31.4 12.8 5.2 36.1
- --------------------------------------------------------------------------------
Stafford County 16.1 35.7 31.0 11.9 5.3 24.7
================================================================================
Washington MSA 16.8 29.0 26.4 14.4 13.4 1536.1
================================================================================
Source: Market Statistics 1995 Demographics USA.
The metropolitan area as a whole shows a heavy distribution of households
with incomes on the high end of the range. Approximately 55 percent of the
households have an annual income over $50,000 per year, with 26+- percent in the
$50,000 to $75,000 per year range and 28+- percent in the $75,000+ range.
This relationship is not true of the inner suburban areas, which have an
overwhelming percentage of households (60 percent) in the under $25,000 and
$25,000 to $50,000+- per year categories.
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<PAGE>
Regional Analysis
================================================================================
Summary
The long-term outlook for the metropolitan Washington area continues to be
good. The expanding population of the area indicates an increase in demand for
goods and services. The trend toward smaller household sizes provides additional
demand pressures for new housing. The major factors affecting real property
values are sound, and future trends appear to point toward continued economic
vitality for the region.
In the short term, the region has experienced the effects of the recent
recession. Total employment in the region declined during the recent recession.
However, unemployment levels were moderated by the influence of federal and
local government employment and contracts for services. The Washington region
continues to have one of the lowest unemployment levels in the United States.
Overall, we believe that 1996 will be a period of slow growth and steady
improvement in the underlying factors affecting the real estate markets. More
importantly, we do not anticipate any further downturn in the local economy on
the scale of what has occurred in other regions of the country. Many local
economists and developers are signaling their belief that the real estate market
is strengthening.
Real estate values are volatile in this climate, with some property values
on the increase while other areas remain stable. For the short-term, we expect
that real estate values will show improvement in value in certain sectors. For
the long-term, the market appears to be sound, with strong demographics and
reasonable prospects for increasing values in the future.
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<PAGE>
OFFICE MARKET ANALYSIS
================================================================================
Investment Market
The investment market in the metropolitan Washington area has been active
as 21 office buildings sold for more than $10 million in 1996 following 25
buildings during 1995. Within Washington, D.C. itself, seven buildings sold for
over $10 million at an average price of $202 per square foot. The composition of
investors in the metropolitan Washington area is largely institutional,
consisting mainly of insurance companies, pension funds and fund advisors. In
addition, the market has seen increased investment activity from offshore
capital sources and individual syndicates.
With a higher concentration of available capital, the metropolitan market
has experienced rising prices on average. For example, most recently, a true
trophy property developed by Copley and Prentiss Properties (1301 K Street) sold
for $306 per square foot. Another similar quality building built by Manulife
(1350 Eye Street) was purchased for almost $350 per square foot. In 1994, the
Government of Singapore Investment Corporation purchased the 242,000-square foot
office building at 901 E Street, NW, for $66 million, or $272 per square foot.
These sales provide evidence that the metropolitan Washington office market
continues to be among the more desirable markets in the nation for institutional
investment.
Metropolitan Office Market
Supply and Demand Factors
In order to report on the state of the office market and to project future
trends, we have collected information on the metropolitan Washington Office
Market, the relevant submarket and the office projects that compete directly
with the subject. Cushman & Wakefield of Washington, D.C., maintains a database
comprised of multi-tenant office buildings of at least 20,000 square feet. The
following categories of buildings are specifically not included in our survey:
medical and professional buildings, government buildings, owner-occupied
projects and office/ showroom/ warehouse complexes. Cushman & Wakefield also
produces a quarterly Office Market Survey entitled Metropolitan Washington, D.C.
Office Market Report. Additional information was obtained through conversations
with knowledgeable market participants.
The metropolitan Washington, D.C. office market includes the following
jurisdictions: the District of Columbia, Arlington and Fairfax Counties and the
City of Alexandria in Northern Virginia and Montgomery and Prince George's
Counties in Suburban Maryland. The market contains over 200 million square feet
of privately owned office space distributed among 31 submarkets within the seven
jurisdictions. The District of Columbia contains 39 percent of the metro area's
total square footage. The following table presents the geographic distribution
of the office inventory in the metropolitan area, along with other statistical
data:
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<PAGE>
Office Market Analysis
================================================================================
<TABLE>
<CAPTION>
==========================================================================================
Geographic Distribution of Inventory
Metropolitan Washington Office Market
First Quarter 1997
==========================================================================================
Jurisdiction Inventory Overall SF Under Weighted Avg. Y-T-D Net
SF (000) Vacancy Construction Class A Absorption
Rental Rate
==========================================================================================
<S> <C> <C> <C> <C> <C>
Washington, D.C. 80,523 12.7% 1,983,260 $35.09 55,852
- -------------------------------------------------------------------------------------------
Arlington County 24,995 6.3% 153,000 $26.34 239,351
- -------------------------------------------------------------------------------------------
Alexandria 12,120 5.4% 0 $22.49 1,791
- -------------------------------------------------------------------------------------------
Fairfax County 48,090 6.4% 510,000 $23.15 512.052
- -------------------------------------------------------------------------------------------
Loudoun County 2,355 4.9% 73,500 $17.75 (3,120)
- -------------------------------------------------------------------------------------------
Montgomery County 32,140 10.2% 0 $19.80 512,059
- -------------------------------------------------------------------------------------------
Prince George's County 10,128 18.2% 0 $18.85 73,603
- -------------------------------------------------------------------------------------------
Total 210,350 9.9% 2,033,016 $28.00 1,391,588
==========================================================================================
</TABLE>
As of the end of 1996, the overall vacancy rate stood at 9.9 percent,
reflecting both direct vacancies and sublet space, continuing a slow recovery
from the end of year 1992 vacancy of 14.7 percent. Although the Washington
region is now and has over the past experienced generally higher overall
occupancies levels than most major metropolitan areas in the United States, the
current statistics, as presented in this section, reflect recent trends which in
general, support only limited optimism for an overall improving market as a
whole. Specifically, the Class A market appears sound, but there are unsettling
currents affecting older buildings throughout the city.
Furthermore, build-to-suit activity on the part of the World Bank and the
International Monetary Fund (IMF) will likely prove problematic over the next
couple of years, particularly in the Class B and C properties in the city's
Central Business District office submarket (submarket boundaries will be defined
later in this section). Also, the issue of government downsizing, both locally
and nationally, cannot be dismissed lightly. The 1994 Congressional election
brought the first change in the control of both Houses of Congress in 40 years.
Thus, it is difficult to reliably predict the upshot. Accordingly, at the very
least, caution is in order as we are traveling uncharted territory. These issues
are discussed in greater detail later in this section.
As noted above, there are positives in the market. We do expect Class A
properties to fair well over the near term. Further, the suburban market,
starting with Northern Virginia, are showing considerable strengthening with
occupancies improving dramatically and rent spikes occurring in most submarkets.
We also see similar trends in portions of suburban Maryland, particularly
Montgomery County. As will be repeatedly indicated in the following discussion,
there appears to be a continuing shortage of Class A office space in all
submarkets throughout the region, but a plethora of Class B and C space, in at
least some areas, namely the District.
The following table presents the historical vacancy, rental rate and
absorption data, showing a steadily declining vacancy rate and a possible
increase in rents:
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<TABLE>
<CAPTION>
=====================================================================================
Historical Data
Metropolitan Washington Office Market
1992 - 1996
=====================================================================================
Year Inventory SF (000) Vacancy SF Under Rental Rate Net Absorption SF
Construction
=====================================================================================
<C> <C> <C> <C> <C> <C>
1992 204,427 14.7% 2,301,986 $22.80 2,833,422
1993 205,629 13.5% 874,631 $21.38 3,763,144
1994 206,337 12.7% 2,124,631 $21.44 2,319,175
1995 206,794 12.3% 1,004,272 $21.75 2,642,126
1996 212,389 10.8% 1,878,016 Class A 2,921,573
$27.35
=====================================================================================
Annual Averages 1,636,707 2,895,888
=====================================================================================
</TABLE>
The above table presents several important changes: the inventory
increased by the inclusion of Loudoun County in the first quarter 1996; the
square footage under construction jumped dramatically as new build to suits
commenced. As the economy continues to improve, we anticipate a slow return to
development.
Demand for Office Space
As shown above, the overall vacancy has been gradually declining. The
office market is demonstrating improvement, although it varies from market to
market. Northern Virginia and Fairfax County specifically continue to be the
strongest submarkets with low vacancies and strong absorption. In contrast,
Washington, D.C. has demonstrated weak absorption and stable vacancy rates.
Traditionally, the office market's vigorous leasing activity has been
supported by the growth of the white collar employment base. Additionally, one
of the major players in the local market is the federal government (largely the
General Services Administration or GSA) which leases just over 20 percent of the
office space in the metropolitan area. Government leasing has historically
accounted for about 40 percent of gross leasing activity, but dropped to the 25
percent range in 1993 before falling to less than ten percent in 1994 and 1995
and then rising above ten percent in 1996. Furthermore, due to the new political
climate in Washington and continuing efforts to cut the size of the federal
government, future absorption projections are uncertain.
In July 1996, GSA announced that government agencies will be allowed to
control their own leasing using outside third party vendors, if they prefer. It
is too early to tell what effect this will have on overall government leasing,
but the change in the status quo is worth noting.
Government activity notwithstanding, the primary influence on net office
absorption is job formation, in particular, white collar employment. An
historical summary of office type employment is shown in the following table,
encompassing the categories of Government, Finance, Insurance, Real Estate
(FIRE), Transportation, Communications, Utilities (TCU) and Services. The
compound annual growth rate from 1984 to 1994 was 3.0 percent. However, real
growth occurred only in the 1984 to 1989 time frame with 5.0 percent compound
growth rate while there was very modest compounded job growth of 1.6 percent
from 1989 to 1994. In contrast, the future job growth over the next ten years is
expected to be 6.6 percent for the Service sector, 1.3 percent for the Finance,
Insurance & Real Estate sector and 1.4 percent for
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Office Market Analysis
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the Government sector. Obviously, the projection for growth in the Government
sector merits caution as previously addressed.
================================================================================
Metropolitan Washington
Office Related Employment*
1987-2004
================================================================================
Year Total New Jobs Created Over Net Office
Employment Previous Period Absorption
(000s) (000s) (000s Square Feet)
================================================================================
1987 1,500.6 N/A N/A
1988 1,545.5 44.9 N/A
1989 1,604.3 58.8 N/A
1990 1,639.1 34.8 N/A
1991 1,641.0 1.9 3,317
1992 1,661.0 20.0 2,733
1993 1,686.5 25.5 3,753
1994 1,739.8 53.5 2,319
1995 1,812.6 72.8 2,642
1999 2,155.3 342.7 or 68.5/yr
2004 2,688.6 533.3 or 106.7/yr
================================================================================
Source: The WEFA Group - Regional Economic Service, Spring 1994; - Net
Absorption data from C&W
* Service, FIRE, TCU and Government sectors
================================================================================
For the years for which data is available, the table also shows the
historical relationship between job formation and office absorption in the
metropolitan area. Coinciding with the depths of the recession, the 1991 job
growth of only 1,900 jobs corresponded with a healthy absorption of 3.3 million
square feet. We would typically expect lower absorption in years with little job
growth. Possibly the low absorption was due in part to the high level of job
growth in the immediate preceding years.
In the following years, net absorption fluctuated between 2,319,000 to
3,753,000 square feet against a steadily growing job formation trend. Perhaps
having some effect on the data is the national and local pattern of corporate
down-sizing and consolidation, leaving less office space per employee. As one
observer recently put it, "historically, 250 square feet per office employee was
the standard rule-of-thumb ratio. Today, this ratio is working itself down to
160 feet per employee." A recent market example of this trend is AT&T's current
target of 180 square feet of net rentable area per employee, down from 200
square feet a few years ago. Also, the federal government is now targeting less
than 150 feet per employee.
Although the above statistics produce unclear trends, the relationship
between white collar job formation and net office space absorption, while not
always obvious, is a key component of the demand side of the office space
equation. With regular job growth, net absorption will occur and gradually draw
down the supply of vacant office space, albeit probably at a slower pace than
history would suggest.
The number of years' supply of available space is one method of evaluating
the relative health of a market. If one defines market equilibrium to be
occupancy in the 95 percent range, then about 5.0 percent of the total inventory
needs to be absorbed in order to achieve equilibrium (or about 10.2 million
square feet). This is calculated by subtracting from the
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overall vacancy rate the defined 5.0 percent stabilized vacancy. Assuming a
future absorption rate equal to the past five year average annual net absorption
of 2.9 million square feet, an approximate 3.5 year supply of vacant office
space (all classes) is indicated. This issue is discussed in greater detail once
we look at the more distinct Washington, D.C., market versus the metropolitan
area as a whole.
Until recently, an exodus of businesses from the District to the suburbs
compounded the recent downward absorption cycle. The exodus was attributable to
the continuing cost cutting in large regional and national firms which fled the
higher rates of the downtown market. Even so, the overall strength of the
Washington area, based primarily on the influence of the federal government,
should not be ignored. In addition, as occupancies increase and asking rental
rates in the preferred close-in suburbs rose dramatically, the cost spread
between downtown and the suburbs narrowed and seemingly stanched the outflow of
major tenants.
Nevertheless, within the Central Business District Submarket (CBD) of the
downtown office district in Washington, D.C., an ominous cloud threatens
prospective leasing for the next several years. This is particularly true for
Class B and C buildings. As previously alluded to, the World Bank and IMF will
have new headquarters buildings operational by 1997 and 1998. As these and other
related tenants leave their CBD space, most of which is Class B, an additional
1.5 million square feet will become available, just within the next 12 months.
While this is not expected to severely impact Class A buildings, it will
definitely prove problematic for the Class B sector and likely disastrous for
Class C and D buildings, over the short term at least.
In the final analysis, we anticipate a return to equilibrium in the
metropolitan Washington office market only after the turn of the century. We
have defined this equilibrium in terms of occupancy and market rents with
stabilized occupancy in the 95 percent range, and market rents at sufficient
levels to support new construction. We expect the phenomena of free rent and
above standard concessions to generally disappear over the next several years
with market rents and the overall level of economic growth again achieving some
sort of parity prior to the turn of the century. The exception may be the older
Class C and D product, assuming it will rent at all.
Rental Rates
Based on Cushman & Wakefield's survey of market rents, the weighted
average asking rental rate drifted downward from 1991 to 1993 when it appears to
have reversed directions. The following chart demonstrates the trend in overall
rental rates since 1991. Note that Class A rates have been steadily rising as a
result of the shrinking inventory of available space.
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=================================================
Overall Weighted Average Rental Rates
Washington Metropolitan Area Office Market
1991 - 1997
=================================================
Year Class A Rental Overall Rental
Rates per SF Rates Per SF
=================================================
1991 N/A $23.34
1992 N/A $22.80
1993 $21.88 $21.38
1994 $23.25 $21.44
1995 $25.07 $21.75
1996 $27.35 $23.07
1997Q1 $28.00 $23.89
=================================================
Recent rental trends show signs of improvement in many submarkets,
particularly in Northern Virginia. Further, an increasing portion of the
remaining available Class A and B space is commonly referred to as back space,
including inferior back office space with poor or no window lines, encumbered
space, and less desirable configurations. The encumbered space includes Class A
premises that are encumbered by existing tenants through expansion options.
Overall, this back space is less desirable, has lower asking rates, and tends to
be the last areas leased, all of which tends to skew the average asking rents
downward. The reality is that the better Class A space is likely achieving
higher rates than the statistics indicate.
The lack of significant new construction, coupled with positive, albeit
slower absorption, has led to a shortage of large blocks of Class A office space
in the preferred submarkets. The emergence of back space is one indicator of
this trend as is the recently completed speculative building at 1900 K Street in
the CBD and other build to suits in the downtown area. Given the lack of overall
speculative development, coupled with overall positive absorption, we do not
anticipate any further decline in rental rates.
Regarding the issue of rent spikes, we have recently observed above
average rent jumps in some Northern Virginia submarkets and may be seeing the
start of a similar occurrence in portions of Montgomery County, Maryland.
Therefore, we believe real increases in market rental rates are likely over the
next two to three years in selective markets as existing office inventory is
absorbed and before funds for new speculative development become available and
new construction begins. Again, due to the tight supply in some submarkets,
there may be rent spikes for newer space within the next twelve month period.
However, in only some instances has it been clear that investors were willing to
pay for prospective rent spikes.
Land Values
With the decrease in effective rents in the early 1990s, before the
apparent turn-around noted above, land values had been depressed dramatically.
Reportedly, values for downtown commercial land had decreased up to 25 percent
or more since 1990. Secondary parcels have probably dropped even more
precipitously. Nevertheless, we believe that this downward trend in vacant land
prices has stopped and that it will reverse itself in the next few years,
provided the economy continues to improve, the financial institutions resume
lending, and the overall market psychology and investor expectations improve.
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Office Market Analysis
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The most recent office land sale in downtown Washington was a 23,218
square foot site at the southwest corner of 13th and G Streets in the East End
which sold in March 1996 at approximately $76 per FAR foot. Since this sale was
subject to the buyer lining up the lead tenant and obtaining all necessary
approvals, the price is probably higher than a pure speculative purchase would
have been. General market indications point to a range of $40 to $70 for typical
downtown development sites.
Summary of Metropolitan Office Market
Although some submarkets remain soft, the overall vacancy rate continues
to decline, and the remaining available space tends to be less desirable.
Northern Virginia, in particular, is leading the region in net absorption, and
has shown above average increases in rental rates. We believe that over the next
several years, the metropolitan office market should reach a more stabilized
position both from an occupancy and lease rate standpoint. Until equilibrium is
reached, however, overall rental rates for all classes of space will probably
not grow at a compound rate that exceeds the rate of inflation.
In contrast, Class A space has demonstrated strength in the overall
market, absorbing clearly more than its fair share of the total market
absorption. While some Class B product may mirror the growth rates for Class A
space, the majority will most likely only experience marginal growth given the
excessive supply of Class B space compared to the demand for it. Finally, most
Class C and D buildings will have difficulty renting at any rate.
Northern Virginia and Tyson's Corner/McLean Office Market
The subject property is located in the Tyson's Corner/McLean submarket of
Fairfax County in Northern Virginia. According to the first quarter Metropolitan
Washington, D.C. Office Market Report, published by Cushman and Wakefield,
Northern Virginia had about 87.5 million square feet of privately owned office
space distributed in four large submarkets, stretching from Arlington to Dulles
International Airport. The following table presents the historical vacancy,
rental rate and absorption data for the Northern Virginia segment of the region.
It illustrates steadily declining vacancy rates and rising asking rents over the
past five years.
================================================================================
Historical Data
Northern Virginia Office Market
1992 - First Quarter 1997
================================================================================
Year Inventory Overall Class A Average Net
SF (000) Vacancy Asking Asking Absorption
Rental Rate Rental Rate SF
================================================================================
1992 82,082 15.6% $18.09 $17.48 480,448
1993 81,863 13.8% $17.81 $17.05 1,140,425
1994 81,944 11.0% $20.04 $17.27 1,877,617
1995 82,409 9.2% $21.32 $17.65 1,730,313
1996 87,251 7.5% $23.97 $20.68 1,882,407
*1997 87,560 6.2% $24.64 $21.19 750,074
================================================================================
It should be noted that the significant increase in inventory as of 1996
is attributed to the inclusion of Loudoun County to the survey. Taken as a
whole, the Northern Virginia office market exhibited an overall vacancy rate of
6.2 percent as of first quarter 1997. This is down
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1.3 percentage points from year end 1996 when the vacancy rate was 7.5 percent
and represents a continued decrease in vacancy as the amount of available and
desirable office space dwindles.
Within the various jurisdictions, Fairfax County has the highest vacancy
rate at 6.4 percent, a mere 10 basis points higher than Arlington, which
experienced a climb in vacancies in 1996 The best performing County (in terms of
vacancy) is Loudoun County with a vacancy factor of 4.9 percent; however, it
should be noted that they also have the lowest amount of inventory. Overall,
each jurisdiction is performing well and contributing to the area's strong
performance.
Since 1994, average asking rental rates have been climbing and reached
$21.19 per square foot in the first quarter 1997, with Class A rents at $24.12
per square foot. Between 1994 and 1996, rents increased between $0.25 and $3.00
per square foot for the market as a whole, with the most significant rent spike
occurring between 1995 and 1996. Since year-end 1996, rents have increased an
additional $0.50 per square foot. Class A rents have spiked at a slightly
higher overall pace, with increases of $1.30 to $2.65 per square foot between
1994 and 1996. Again, the most significant increase occurred between 1995 and
1996. Since year-end 1996, Class A rents have increased an additional $0.70 per
square foot. The following table reiterates historical asking rents for the
Northern Virginia submarket.
=============================================
Historical Data
Northern Virginia Office Market
1992 - First Quarter 1997
=============================================
Year Class A Average
Asking Asking
Rental Rate Rental Rate
=============================================
1992 $18.09 $17.48
1993 $17.81 $17.05
1994 $20.04 $17.27
1995 $21.32 $17.65
1996 $23.97 $20.68
*1997 $24.64 $21.19
=============================================
The Tyson's Corner/McLean office submarket, where the subject is located,
is part of Fairfax County. Fairfax County is the largest of the major market
segments in Northern Virginia, with 48.1 million square feet of office space as
of the first quarter of 1997, which has increased from 47.6 million as of
year-end 1996. Fairfax County represents 54.9 percent of the Northern Virginia
market.
Fairfax County has six submarkets: Springfield/Seven-Corners/Baileys,
Merrifield/Route 50, Fairfax/Oakton/Vienna, Tyson's Corner/McLean,
Reston/Herndon, and Route 28 Corridor/Dulles. Each of these submarkets competes
predominantly within its own boundaries. The following table presents the
geographic distribution of the office inventory in the county, along with other
statistical data as of the first quarter 1997.
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<TABLE>
<CAPTION>
==============================================================================================
Geographic Distribution of Inventory
Fairfax County Office Market
First Quarter 1997
==============================================================================================
Submarket Inventory Direct Overall Under Y-T-D Net
Vacancy vacancy Construction Absorption
==============================================================================================
<S> <C> <C> <C> <C> <C>
Springfield/7 Corners/Baileys 3,446,524 14.8% 15.4% 0 42,568
Merrifield/Route 50 4,163,635 4.4% 4.8% 150,000 37,290
Fairfax/Oakton/Vienna 8,705,680 6.2% 6.3% 0 195,130
Tyson's Corner/McLean 17,964,618 4.3% 5.2% 0 (71,478)
Reston/Herndon 9,999,213 6.1% 6.7% 0 70,381
Route 28 Corridor/Dulles 3,810,532 4.1% 5.5% 360,000 238,161
Total 48,090,202 5.8% 6.4% 818,493 512,052
==============================================================================================
</TABLE>
The Route 28/Dulles and Fairfax/Oakton/Vienna submarkets experienced the
largest gain in net absorption due to the signing of several large lease deals.
MCI Communications leased 154,000 square feet on Meadow Wood Lane in the Route
28/Dulles submarket, while Columbia Gas and Mantech leased 45,000 and 40,000
square feet, respectively, in the Fairfax/Oakton/Vienna submarket. There are
currently four office buildings which can accommodate a tenant looking for
100,000 square feet or greater in Fairfax County. These buildings are located in
Fairfax, Herndon, Falls Church, and Tysons Corner. Reportedly, many tenants are
already vying for these blocks of space and several large leases are out for
signature.
The subject's Tysons Corner/McLean submarket, with over 17.9 million
square feet of space, has a 5.2 percent overall vacancy rate as of first quarter
1997 This is barely above the level posted one year prior when the vacancy
factor was 5.1 percent as of year end 1996. Overall, the vacancy rate has been
steadily declining since the beginning of the decade. The following chart
presents historical vacancy, rental rates and absorption data for the submarket.
================================================================================
Historical Data
Tyson's Corner / McLean Office Submarket
1992 - First Quarter 1997
================================================================================
Year Vacancy Overall Class A Net Absorption SF
Asking Rental Asking Rental
Rate Rate
================================================================================
1992 17.7% $17.70 $19.50 (94,926)
1993 19.8% $17.57 $19.01 (532,676)
1994 13.7% $17.26 $19.66 735,766
1995 11.7% $18.27 $20.90 419,723
1996 5.1% $20.56 $23.77 1,295,971
1st Qtr 1997 5.2% $22.46 $24.12 (71,478)
================================================================================
As noted, the submarket is the second largest submarket in Northern
Virginia, after Arlington County, and the largest in Fairfax County. . It was
the most active market in Northern Virginia in 1996, with total leasing activity
of 1,295,971 square feet. Some of the large transactions in Tyson's Corner
during 1996 included LCC (155,000 SF), Peat Marwick (140,000 SF), America
On-line (Sublease of 117,000 SF), and Nextel Communications (80,403 SF).
As can be seen, the forces of supply and demand have pushed the Tyson's
Corner area toward a landlord's market with a shortage of supply as evidenced by
the declining vacancy
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factor and increasing rental rates. For Class A office, rental rates are back up
to 1990 levels. Market participants expect rents to continue to increase and
reach a level which will justify speculative development in the near term.
This submarket experienced negative absorption during the first quarter
1997; however, a breakdown by class indicated positive absorption for Class A
space, as Class B and C tenants continue to move to better spaces.
Current Construction Activity
While the speculative construction of the late-1980s has not returned to
all Northern Virginia submarkets, there is currently 736,500 square feet under
construction in selected submarkets. The majority of this space is
substantially committed. The 153,000-square foot Time Life building in
Alexandria is nearing completion. The Computer Science Corporation's (CSC)
project in Merrifield should be finished in the second quarter of 1997. The
first Analytic Science Corporation (TASC) building (in a two-building project)
broke ground at the end of August and should deliver 150,000 square feet in June
1997. The second phase, a 90,000-square foot building, has begun construction.
The Aerospace Corporation's 150,000-square foot building, of which 56,000 square
feet is currently available, should be ready for occupancy during the third
quarter of 1997.
With the continued tenant demand for quality office space and the desire
of many tenants to locate to Northern Virginia, the area is experiencing some
speculative development in the Route 28/Dulles submarket. There are currently
two projects slated for speculative development. One is a six-story 135,000
square foot building scheduled to break ground in September of this year. This
project is adjacent to BDM's build-to-suit located at Reston Parkway and Sunset
Hills Road, which is also scheduled to start construction during September. The
other is a 160,000 square foot six-story building located at McLearen Road and
Route 28, which will break ground in August of this year and deliver in
September 1998. This will be phase one of a four phase project developed by the
Peter Lawrence Company. The total project will contain 600,000 square feet.
There are no speculative office buildings currently planned or under
construction in the subject's Tysons Corner submarket.
Rental Rate Trends
Based on Cushman & Wakefield's survey of market rents, the average asking
rental rate in Tyson's Corner declined from $21.47 at the end of 1990 to average
rents between $17.26 and $17.70 during the 1992 to 1994 period. With the rapid
pace of absorption during late 1995 and 1996, overall rental rates have been
climbing and reached $22.46 in the first quarter 1997, with Class A asking rents
at $24.12 per square foot. Since 1994, rents have spiked between $1.00 and $2.00
per square foot. With the lack of new speculative construction, this trend is
expected to continue into the near future. The following chart depicts
historical rents in the Tysons Corner/McLean submarket.
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Historical Rental Rates
Tysons Corner / McLean
==========================================================
Year Overall Asking Class A
Rental Rate Asking Rental Rate
==========================================================
1992 $17.70 $19.50
1993 $17.57 $19.01
1994 $17.26 $19.66
1995 $18.27 $20.90
1996 $20.56 $23.77
1st Qtr 1997 $22.46 $24.12
==========================================================
Landlords recognize the increasingly limited amount of quality space
available, and have been raising their asking rates. Effective rental rates,
inclusive of concessions such as free rent and above standard tenant
improvements, used to be 15 to 25 percent below those figures, but most recent
leasing activity has shown no free rent concessions, average tenant improvement
allowances of $5.00 to $25.00 per square foot and only occasional other
concessions. Based on our interviews of brokers active in this submarket, rents
have firmed and increases in base rents and effective rents continue to be
anticipated; however, not at the levels incurred over the past three years.
Market participants are leery of new speculative construction and are taking a
wait and see approach over the short term at least.
Our overall market expectation is that rents will continue to increase as
the market vacancy levels decline further. Concessions will be very modest. Our
scenario calls for a return to equilibrium between construction costs and rents
by the end of this decade. There are already significant build-to-suit and
speculative construction situations being addressed by the market in the face of
limited availabilities.
Micro Market Survey
We conducted a micro-market analysis, concentrating on competing office
buildings, containing a total of 3.3 million square feet. These projects,
presented on the table on the following page, are more indicative of the
subject's competition than the entire suburban market as previously examined.
The competition for the subject comes from other Class A and good quality Class
B office buildings in the McLean area. These buildings are generally mid or
high-rise suburban office buildings, built in the late 1980s, with surface or
structured parking in similar settings.
A discussion involving market rental rates and other economic factors
relative to the subject and its micro-market is presented in the Income
Capitalization Approach. However, the information is summarized below.
The buildings in the micro-market range in size from 120,00 to 478,000
square feet. Asking rental rates range from $18.00 per square foot to $24.50 per
square foot, full service, for conventional office space. Many of the asking
rates appear to have been increased by $1.00 to $1.50 per square foot over the
mid-year quotes. The overall occupancy among the surveyed buildings is 92
percent, with the 23 percent occupancy at 1595 Spring Hill West bringing the
average down somewhat. Excluding this building, the overall occupancy is 96
percent.
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Office Market Analysis
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Relative to its competition, the subject is in the upper half of the range
of buildings in terms of quality. It is typical in terms of age, condition, and
finishes for most of the competitive buildings. It is considered to be Class A
building in this market.
Summary
The Fairfax County and Northern Virginia office markets are continuing
their strong absorption and rental rate growth trends. Investment activity in
the office market has also continued to be active. Over the past few years the
lack of speculative construction reflected the cautious posture taken by many
traditional real estate investors, developers and financiers. However, as the
market is rapidly changing, speculative construction in select locales is
emerging and warranted, especially in light of the data presented.
Build-to-suits are also commonplace.
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Competing Office Buildings
Micro Market Survey
<TABLE>
<CAPTION>
========================================================================================================
Average
Rental Bldg Size Year Floor Quoted Rental Rates
No. Name/Address Class (SF) Built Occupancy Plate ($/SF, Full Service)
========================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 First Union Building A 417,363 1976/89 99.0% 15,000 N/A -- N/A
1751 Pinnacle Drive
McLean, Virginia
2 8300 Greensboro Drive A 311,584 1981 100.0% 22,256 N/A -- N/A
McLean, Virginia
3 Randolph Building A 170,000 1984 91.1% 15,455 $22.00 -- $22.00
8251 Greensboro Drive
McLean, Virginia
4 8280 Greensboro Drive A 197,000 1985 100.0% 21,889 N/A -- N/A
McLean, Virginia
5 The John Marshall Building A 253,264 1984 100.0% 23,024 N/A -- N/A
8283 Greensboro Drive
McLean, Virginia
6 1577 Spring Hill Road A 120,000 1983 100.0% 20,000 N/A -- N~/A
McLean, Virginia
7 Tysons Dulles Plaza I A 160,000 1986 85.7% 26,667 $22.00 -- $24.00
1420 Spring Hill Road
McLean, Virginia
8 Tysons Dulles Plaza 11 A 156,407 1986 100.0% 26,068 N/A -- N/A
1430 Spring Hill Road
McLean, Virginia
9 Tysons Dulles Plaza III A 158,000 1990 92.7% 26,333 $22.50 -- $22.50
1410 Spring Hill Road
McLean, Virginia
10 Tysons Space Center A 478,000 1987 100.0% 36,769 N/A -- N/A
7900 Westpark Drive
McLean, Virginia
11 Warren Building South A 140,000 1985 84.7% 23,333 $19.75 -- $21.75
8000 Westpark Drive
McLean, Virginia
12 The Concourse East A 175,000 1987 72.6% 25,000 $23.00 -- $24.00
1593 Spring Hill Road
McLean, Virginia
13 The Concourse West A 175,000 1987 22.9% 25,000 $23.00 -- $24.00
1595 Spring Hill West
Vienna, Virginia
14 Greensboro Park A 229,862 1988 100.0% 20,897 N/A -- N/A
8180 Greensboro Drive
McLean, Virginia
15 8201 Greensboro Drive A 335,000 1985 97.6% 27,917 $18.00 -- $24.50
McLean, Virginia
========================================================================================================
Totals 3,476,480 92% $18.00 -- $24.50
========================================================================================================
</TABLE>
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Office Market Analysis
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Neighborhood Definition
The subject is located at the southwest comer of Gallows Road and Boone
Boulevard, approximately one block south of Leesburg Pike (Route 7). The street
address is 1900 Gallows Road, McLean, Virginia. The area is more commonly
referred to as Tyson's Corner and Northern Virginia's Central Business District.
The Tyson's Corner submarket, which delineates the subject neighborhood, is
generally bound by the Dulles Access Road on the northeast, Old Court House Road
on the southwest and Magarity Road (Route 650) on the southeast. The major
arteries in this submarket are the Capital Beltway (I-495), Leesburg Pike
(Route 7), Chain Bridge Road (Route 123) and the Dulles Access Road.
The subject's office market neighborhood can be defined as having a
northern border along Lewinsville Road, an eastern border located about one half
mile east of Interstate 495, a southern boundary near Idylwood Road and a
western boundary mid-way between Route 123 and the Vienna municipal boundary.
The larger neighborhood includes the competing markets in Fairfax County,
Arlington County and the City of Alexandria.
Access/Linkage
The subject neighborhood is located in eastern Fairfax County in the well
established and still growing area adjacent to the two Tyson's Corner regional
malls. Access to the area is most easily achieved from VA Routes 123 (Chain
Bridge Road) and 7 (Leesburg Pike). Regional access is available via Interstate
495, located approximately 0.5 miles to the east, with interchanges for both of
the forgoing commercial corridors.
The primary traffic carriers include Chain Bridge Road (Route 7,
northeast/southwest), Leesburg Pike (Route 7, southeast/northwest), the Dulles
Access and Toll Road (Route 267, east/west), and Gallows Road (north/south).
Both Routes 7 and 123 are heavily traveled arterials, and are generally four to
six lanes, plus turn lanes with median trips, traffic signals and access roads
for local traffic. The Dulles Toll Road is easily accessed from Spring Hill Road
and Route 7.
Ingress and egress to the neighborhood is primarily via Routes 7, and 123,
International Drive, Gallows Road, and Greensboro Drive. All five of these major
arteries have been developed with major office projects. The major arterial
expressways in the neighborhood are the Capital Beltway (1-495) (encircling the
District of Columbia and intersecting all major roadways in the Washington
metropolitan area), the Dulles Access Toll Road, and Interstate 66. MetroRail
access is provided by the Dunn Loring station on the Orange Line, approximately
two miles south. However, the area is served directly by MetroBus. While still
in the planning stages, there are on-going discussions among the regional
transit authority to extend MetroRail to Dulles Airport. The proposed line would
spur from the West Fall Church Station, bisecting Tyson's Corner and then extend
along Dulles Tollway. If these plans are approved, completion would occur
sometime beyond the year 2000.
Surrounding Land Use Patterns
Predominant land uses in the subject neighborhood consist of a mixture of
commercial developments, including retail centers, office buildings, two
regional malls, single-family detached, single-family attached and multi-family
residential developments, and a wide variety of highway commercial uses along
the major roadways.
As will be detailed in the following section, the Tyson's Corner submarket
contains about 17.9 million square feet of office space. Although substantially
built out, the neighborhood has
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Office Market Analysis
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many building sites on which future office buildings could be and have been
planned to be built. Given the lack of financing, new construction has been
extremely limited for several years. Rents have declined from heights of the
late 1980s, but have risen rapidly over the last two years from their lows
during the recession. Occupancy levels have improved dramatically and demand
continues to be strong, resulting in rent spikes of $1.00 to $2.00 per square
foot between 1994 and first quarter 1997.
The combination of the above factors provides for strong positive
influence on the subject neighborhood, particularly for the long term. With
rental rates increasing and vacancy declining, the likelihood of speculative
development in the near term is discernible.
As noted, the area contains many office buildings, hotels, residential
developments, shopping centers, regional malls, gas stations, restaurants, and
other stand-alone highway commercial uses. These uses typically produce only
minimal pollution. There are no flood zones in the vicinity of the property. We
observed no other detrimental influences in the neighborhood, such as land
fills, noisy or air polluting industrial plants, or chemical factories.
Conclusion
The subject property benefits from its location at an easily accessible
intersection in eastern Fairfax County. Based on the improvements in office
occupancy levels and increases in rental rates, along with the area's good
accessibility, it is clearly capable of capturing a fair share of the demand of
office space as the Fairfax County economy recovers and grows. The neighborhood
has good regional drawing power by virtue of the roadway network serving it. The
anticipated trend for the subject neighborhood is for continued growth and
stabilization into the foreseeable future.
Based on the characteristics of the neighborhood, we believe continued
investment in stabilized properties is warranted. The neighborhood appears
stable and improving. We project that growth will continue to be positive, given
the low vacancy levels and increasing rents.
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PROPERTY DESCRIPTION
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Site Description
Location: Southwest corner of Gallows Road and Boone
Boulevard. The street address is 1900
Gallows Road, McLean, Fairfax County,
Virginia.
Shape: Basically rectangular
Area: 4.115 acres (179,260 square feet)
Frontage: The site has frontage along the west side of
Gallows Road and the south side of Boone
Boulevard.
Topography/Terrain: Basically level and at street grade.
Street Improvements
Pinnacle Drive: Two lane in each direction, asphalt paved,
concrete curbs and sidewalks, street
lighting and storm drains
Soil Conditions: We not receive or review a soil report.
However, we assume that the soil's
load-bearing capacity is sufficient to
support the existing structures. We did not
observe any evidence to the contrary during
our physical inspection of the property. The
tract's drainage appears to be adequate.
Utilities
Water & Sewer: Fairfax County Water Authority
Electricity: Virginia Power Company
Gas: Washington Gas
Telephone: Bell Atlantic Telephone
Access: Two curb cuts off Boone Boulevard and one to
the main entrance from Gallows Road
Land Use Restrictions: We were not given a current title report to
review. We do not know of any easements,
encroachments, or restrictions that would
adversely affect the site's use. However, we
recommend a title search to determine
whether any adverse conditions exist.
Flood Hazard: According to FEMA, March 5, 1990, Community
Panel No. 515525C 0050 D, National Flood
Insurance Rate Map, the subject property
appears to be in Zone C, an area outside the
500 year flood plain where flood insurance
is not required.
Wetlands: We were not given a Wetlands survey. If a
subsequent engineering survey reveals the
presence of regulated
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Property Description
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Wetlands areas, we reserve the right to
amend this valuation.
Site Improvements: Concrete curbs and sidewalks and structural
and surface parking for 705 vehicles
Hazardous Substances: We were not given a Wetlands survey. If
subsequent engineering data reveal the
presence of regulated wetlands, it could
materially affect property value. We
recommend a wetlands survey by a competent
engineering firm
Comments: Good site for office development due to
location, size and exposure.
Improvements Description
The site is improved with an eight-story office building and attached four
level garage. The complex, known as Plaza 1900, has a street address of 1900
Gallows Road, McLean, Virginia. According to the client, the buidling has a
gross building area of 225,861 square feet and a net rentable area of 203,084
square feet. However, the leases cite a total of 202,684 square feet and there
is no vacant space in the building. For this analysis, we will use the space as
noted by the leaes.
We were not provided with any plans or construction specifications for
this property. Further, for security reasons, our inspection was limited to the
roof, basement and ground floor of the building interior. The following
description is based on our visual inspection and discussions with the building
engineer. We noted the finish to be good quality and in good condition, in those
areas. Following are the construction details for the subject improvements based
on our inspection of the property.
General Data
Year Built: 1989
Building Area
Net Rentable Area (NRA): 202,684 square feet
Number of Stories: 8
Construction Detail
Foundations: Concrete slab
Framing: Steel
Floors: Concrete slab
Exterior Walls: Aggregate panels with ribbon window lines
Roof Structure: Metal deck on metal joists
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Property Description
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Roof Cover: Insulated membrane roofing
Windows: Metal frame, insulated double glaze
Pedestrian Doors: Double set of double glass in metal
frame doors
Mechanical Detail
Heating and Cooling: VAV system with independent units
Electrical Service: Assumed to meet code
Elevator Service: Adequate.
Fire Protection: Sprinklered
Interior Detail
Layout: Each floor has a central elevator lobby with
offices along the perimeter
Floor Covering: Primarily carpet in the office areas and
ceramic tile in the restrooms. The main
lobby has marble flooring.
Walls: Painted drywall.
Ceilings: Ceilings in office and hall areas are
suspended acoustical tile.
Lighting: Recessed fluorescent
Rest Rooms: Each floor has a set of men's and women's
rest rooms.
Americans with
Disabilities Act (ADA): The Americans With Disabilities Act (ADA)
became effective January 26, 1992. We have
not made, nor are we qualified by training
to make, a specific compliance survey and
analysis of this property to determine
whether or not it is in conformity with the
various detailed requirements of the ADA. It
is possible that a compliance survey and a
detailed analysis of the requirements of the
ADA could reveal that the property is not in
compliance with one or more of the
requirements of the Act. If so, this fact
could have a negative effect upon the value
of the property.
Hazardous Substances: We are not aware of any potentially
hazardous materials (such as formaldehyde
foam insulation, asbestos insulation, radon
gas emitting materials, or other
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Property Description
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potentially hazardous materials) which may
be used in the construction of the
improvements. If concerns exist in this
area, we recommend that a professional
engineer be engaged.
Other Site Improvements
On-Site Parking: 705 structured and surface parking spaces,
or 3.47 spaces per 1,000 square feet of
gross building area
Landscaping: Good, mature trees, shrubbery around the
building and parking lot perimeter
Comments: The quality of the subject improvements is
rated good. The layout and functional plan
are considered good. No deferred maintenance
was encountered. The normal life expectancy
of a building of this type is 55 years. We
consider the effective age to be equal to 7
years leaving an estimated remaining
economic life of 48 years, respectively.
We did not inspect the tenant spaces or all
the mechanical systems. The appraisers,
however, are not qualified to render an
opinion as to the adequacy or condition of
these components. The client is urged to
retain an expert in this field if detailed
information is needed about the adequacy and
condition of mechanical systems
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REAL ESTATE TAXES AND ASSESSMENTS
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The subject property is identified for real estate assessment and taxation
purposes by Fairfax County, Virginia as parcel 39-1-06-081 A and 081 B. The
Fairfax County tax year extends from January 1st through December 31st and
properties are reassessed annually. The assessment ratio is 100 percent of
estimated market value for reai estate tax purposes.
Tax Rates
The 1997 tax rate for Fairfax County is $1.29 per $100 of assessed value.
The following chart depicts a four-year prior history:
================================================================================
Tax Rate Per $100 of Assessed Value
================================================================================
Taxing Authority 1993 1994 1995 1996 1997
Tax Rate Tax Rate Tax Rate Tax Rate Tax Rate
================================================================================
Fairfax County $1.1828 $1.1614 $1.1614 $1.2310 $1.2300
================================================================================
As can be seen, the tax rates were relatively flat through 1995. In 1996,
however, the rate increased by six percent over the 1995 rate, with little
change going into 1997. It is difficult, at best to judge the likelihood of
future tax rate increases when viewing only a short history. Tax rates tend to
increase or decrease based upon the combined influences of changes in property
values and increasing governmental budgetary needs as the jurisdiction tries to
maintain a pace with inflationary pressures. Nonetheless, over the long term the
county tax rates show an upward trend and we would expect tax rates to increase
in incremental bumps.
Tax Assessment
The subject's 1997 full cash value and subsequent assessment is outlined
in the following table.
=====================================================
Plaza 1900
Full Cash Value and Assessment
=====================================================
Land Value $3,699,925
Improvement Value $25,549,625
-----------
Total Assessment $29,294,550
Tax Rate x .0123
----------
Taxes Due $366,323
=====================================================
Ad Valorem Tax Conclusions
As developed above, the net tax associated with the subject property is
$366,323, or $1.81 per square foot. The assessment of $29,294,550 for the land
and improvements is with in 10 percent of our value. This margin is reasonable
and not likely to result in any sudden tax increases. However we do assume that
future tax increases are possible and have projected that taxes for the subject
property to increase 3.5 percent annually.
In an effort to evaluate the fairness of the subject's current assessed
value and future prospects for a change in the assessment, we have compared the
assessment to the
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Real Estate Taxes and Assessments
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market value estimate concluded in this report, and considered the potential for
future changes in the assessed value of the subject brought about by changing
market conditions.
The full cash value for the subject property is only slightly below our
value conclusion. Thus, we are projecting growth in real estate taxes consistent
with inflationary expectations, or about 3.5 percent per year from the first
year of our analysis.
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ZONING
================================================================================
The subject property is zoned C-3, Office District, Fairfax County,
Virginia. The purpose of the C-3 district is to provide areas where
predominantly non-retail commercial uses may be located such as offices and
financial institutions. (Fairfax County Zoning Ordinance, Chapter 112, Part 3,
Sections 4-301 through 309).
The permitted uses in the C-3 district include, places of worship,
financial institutions, funeral homes, nursery schools and child care centers,
offices, private schools, public uses and telecommunication exchanges. General
and medical offices are also allowed.
A brief synopsis of the pertinent data within this zoning classification
as it applies to non-residential development is as follows:
Minimum Lot Area: 20,000 square feet
Minimum Lot Width: 100 feet
Maximum Height: 90
Minimum Front Yard: Controlled by a 25 (degree) angle of bulk
plane, but not less than 40 feet
Minimum Side Yard: No requirement
Minimum Rear Yard: Controlled by a 20 (degree) angle of bulk
plane, but not less than 25 feet
Minimum Green Area: 15 percent
Maximum Floor Area Ratio (FAR): 1.00
Off-street Parking: Parking for office use is based on five
parking spaces for every 1,000 square
feet of gross floor area. This equates to
129 spaces required for the subject.
We are not experts in the interpretation of complex zoning ordinances,
but the building appears to conform to current zoning requirements, including
parking. We were not provided with building plans indicating the amount of above
ground area contained in the developed floor area. As the building went through
the approval process at the time of construction, however, we assume that its
height variance was approved and that it is a legally conforming structure. The
formal determination of compliance is beyond the scope of a real estate
appraisal.
To the best of our knowledge, there are no known deed restrictions
(private or public) which would further limit the use of the subject property.
This statement should not be taken as a guarantee or warranty that no such
restrictions exist. Deed restrictions are a legal matter and only a title
examination by an attorney would normally uncover such restrictive covenants.
Thus, an examination by a title attorney is recommended on the subject property
if any questions regarding such restrictions arise.
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<PAGE>
HIGHEST AND BEST USE
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According to the Dicionary of Real Estate Appraisal, Third Edition (1993),
a publication of the Appraisal Institute, the highest and best use of real
property is defined as:
The reasonably probable and legal use of vacant land or an improved
property, which is physically possible, appropriately supported,
financially feasible, and that results in the highest value. The four
criteria the highest and best use must meet are legal permissibility,
physical possibility, financial feasibility, and maximum profitability.
We evaluated the sites' highest and best use as if vacant. In this case,
the highest and best use must meet the aforementioned criteria. The use must be
(1) legally permissible, (2) physically possible, (3) financially feasible, and
(4) maximally productive.
Highest and Best Use, As If Vacant
The first test concerns permitted uses. According to our understanding of
the zoning ordinance noted earlier in this report, the site could be developed
with general office and financial institutions uses. Residential, retail and
industrial uses are not permitted.
The second test is what is physically possible. As discussed in the
Property Description section, the site's shape, soil, available utilities,
topography, etc. do not physically limit its use given its suburban location.
Additionally, we know of no easements which adversely impact the property. Thus,
the site has no physical limiting conditions, other than size, to restrict its
development.
The third and fourth tests are, respectively, what is feasible and what
will produce the highest net return. After determining those uses which are
physically possible and legally permissible, the remaining uses must be analyzed
in light of their financial feasibility. That is, for a potential use to be
seriously considered, it must have the potential to provide a sufficient return
to attract investment capital from alternative forms of investments.
The subject lies in the midst of high rise office development. Additional
office use would be logical and consistent with surrounding uses. Other
successful office developments have been developed in the area, leading to the
conclusion that another similar use may also succeed. With the site's exposure
and good access, prospective tenants would likely be interested in this
location. Accordingly, we conclude that the highest and best use of the subject
would be to develop an office building.
As Improved
According to the Dictionary of Real Estate Appraisal, highest and best use
of the property as improved is defined as:
The use that should be made of a property as it exists. An existing
property should be renovated or retained as is so long as it continues to
contribute to the total market value of the property, or until the return
from a new improvement would more than offset the cost of demolishing the
existing building and constructing a new one.
The highest and best use "as vacant" and "as improved" must be compatible.
If the site value as though vacant is greater than the property as improved
(less demolition cost), then
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Highest and Best Use
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existing improvements have no value. Sometimes, however, existing improvements
have interim use value. If the highest and best use of the site as though vacant
is holding for future development, then the improvements might make a short term
contribution to property value.
As noted in the Property Description section of this report, the subject
site is improved with an eight-story building totaling 202,684 net rentable
square feet. Completed in 1989, the improvements are functional in design and
are of very good quality when compared to suburban office developments in
Fairfax County. The building is currently 100 percent occupied by two tenants.
The data within the Office Market Analysis section revealed that the
submarket in which the subject competes has a vacancy rate of about five percent
and steadily increasing rents. As improved, the subject is capable of providing
an adequate return to the land both on an intermediate and long-term basis. This
conclusion is supported by the data and analysis presented in the balance of
this report. This premise is obviously contingent upon property management
utilizing a course of action which will be conducive to maximizing occupancy and
rent levels. For these reasons, it is our opinion that the highest and best use
of this site, as improved, is for continued use as a multi-tenant office
project.
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VALUATION PROCESS
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Appraisers typically use three approaches in valuing improved property.
These include the Cost Approach, the Sales Comparison Approach and the Income
Approach. The type and age of the property and the quantity and quality of data
affect the applicability of each approach in a specific appraisal situation. The
strengths and weaknesses of each approach utilized are weighed in the final
analysis with the approach or approaches offering the greatest quantity and
quality of supporting data given most consideration in the final analysis. In
this appraisal, we have used the Sales Comparison Approach and the Income
Capitalization Approach to develop a market value estimate. In addition, we have
provided a replacement cost estimate in the Addenda.
The Cost Approach was not performed for the following reasons:
o This approach is more relevant for new construction or where
sufficient information is available to reasonably estimate the
replacement cost new of the improvements and land.
o The investment marketplace does not typically trade buildings such
as the subject on a cost/value basis.
o The subjectivity of accurately estimating accrued depreciation of
the existing improvements significantly limits the reliability of
this approach.
o The value being sought is the leased fee estate, whereas the Cost
Approach normally depicts the fee simple estate. Therefore, the
interest being appraised cannot be reflected by the Cost Approach in
its traditional form.
o Market participants do not typically use this approach as a
determinant of value but rather as a reasonableness test that they
are paying less than replacement cost. While not justification in
itself to omit the approach, it does underscore its overall lack of
relevance in the market place.
In the Sales Comparison Approach, we performed the following steps:
o Searched the market for recent office building sales;
o Analyzed those sales on the basis of the sales price per square foot
(net rentable area); and
o Correlated the various value indications into a point value estimate
from within the range.
In developing the Income Capitalization Approach, we:
o Studied rents in effect in the immediate and competing areas to
estimate potential rental income at market levels for office, and
industrial uses.
o Studied the recent history of operating expenses at the subject
property and competing properties to estimate an appropriate level
of stabilized expenses and reserves for replacement.
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Valuation Process
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o Estimated net operating income by subtracting stabilized expenses
from potential gross income after deduction for vacancy and
collection loss.
o Prepared a discounted cash flow analysis in which the estimated
income and expenses over a projected holding period, and the
estimated property value at the time of reversion, are discounted at
an appropriate rate to estimate present market value.
In estimating the final value, we performed the following:
o Reviewed and re-examined each of the approaches to value which were
employed.
o Considered the type and reliability of the data used and
applicability of each approach.
o Reconciled the approaches to a final value conclusion.
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<PAGE>
SALES COMPARISON APPROACH
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Methodology
Inherent in the Sales Comparison Approach is the principle of
substitution, which holds that when a property is replaceable in the market, its
value tends to be set at the cost of acquiring an equally desirable substitute
property, assuming that no costly delay is encountered in making the
substitution. We have compared the subject property to several relevant property
sales.
By analyzing sales which qualify as arms-length transactions between
willing and knowledgeable buyers and sellers, we can identify value and price
trends. Comparability in physical, locational and economic characteristics are
important criteria when selecting the sales for comparison with the subject
property. The basic steps involved in the application of this approach are as
follows:
(1) researching recent, relevant property sales and current offerings
throughout the competitive area'
(2) selecting and analyzing those properties considered most similar to
the subject, considering changes in economic conditions that may
have occurred between the sale date and the date of value, and other
physical, functional or locational factors;
(3) identifying the sales which include favorable financing and
calculate the cash equivalent price;
(4) reducing the sale prices to common units of comparison, such as
price per square foot of building area (in this net rentable area);
(5) making appropriate adjustment between the comparable properties and
the property appraised; and
(6) interpreting the adjusted results and drawing a logical value
conclusion.
In this instance, the sale prices inherent in the comparables were reduced
to those common units of comparison that can be used to analyze improved
properties that are similar to the subject. Considering the available units of
comparison, one of the most important benchmarks used by buyers and sellers of
office building is price per square foot of net rentable area (NRA).
The following summary chart includes recent transactions of suburban
office buildings from which price trends can be identified for the extraction of
value parameters. The complete survey results on each property appear in detain
in the Addenda of the report.
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Sales Comparison Approach
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<TABLE>
<CAPTION>
Plaza 1900
1900 Gallows Road
McLean, Virginia
Summary of Building Sales
===================================================================================================================================
Net Cash Sale Price Overall
Sale Year Built Rentable Percent Equivalent Per SP Rate
No. Name/Location Sale Date Renovated Area (SF) Occupied Sale Price (NRA)
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
1 Centerpointe I and II May 1997 1988 408,111 100% $55,000,000 $134.77 N/A
4000 & 4050 Legato Road
Fairfax, Virginia
- -----------------------------------------------------------------------------------------------------------------------------------
2 Tysons Office Center April 1997 1981 142,000 100% $16,000,000 $112.68 8.40%
8133 Leesburg Pike
Vienna, Virginia
- -----------------------------------------------------------------------------------------------------------------------------------
3 8280 Greensboro Drive April 1997 1985 205,341 100% $30,000,000 $146.10 8.75%
McLean, Virginia
- -----------------------------------------------------------------------------------------------------------------------------------
4 The Nortel Building August 1996 1989 252,315 98% $35,000,000 $138.72 10.01%
2010 Corporate Ridge
McLean, Virginia
- -----------------------------------------------------------------------------------------------------------------------------------
Subj Plaza 1900 1989 202,684 100% -- -- --
McLean, Virginia
===================================================================================================================================
</TABLE>
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Sales Comparison Approach
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Sales Price Per Square Foot Analysis
The four comparables indicate sales prices ranging from $112.68 to $146.10
per square foot of net rentable area. The prices per square foot have been
influenced by differences in construction quality, condition of the premises,
character of the tenancy, and location. Nevertheless, it is important to address
each property in terms of the conventional sequence of adjustments. Following
are those considerations which are relevant to the subject. The first three
elements must be considered in advance of applying any other compensating
factors to derive value conclusions via the sales price per square foot
methodology. These same three factors must also be addressed before the
selection of an effective gross income multiplier.
Property Rights Conveyed
As shown in the summary table, all of the comparables are encumbered by
existing leases; therefore, the leased fee estate was conveyed in each case.
Consequently, no adjustments are warranted for differences in property rights
conveyed.
Seller Financing/Cash Equivalency
All of the comparables were sold on the basis of cash to the seller or
cash equivalent financing. Thus, we have made no adjustments to the comparables
for seller financing.
Conditions of Sale
We identified no special motivational conditions concerning the
comparables; with an exception. Sale 1-4, which was a sale-leaseback, was
reported to be sold slightly below market because the seller (who occupies 57
percent of the building) selected the purchaser based on their ability to manage
the property. We have adjusted this sale slightly upward for conditions of sale.
Date of Sale
As shown in the summary table, the transactions occurred between August
1996 and May 1997. Given that these sales occurred within the last nine months,
no adjustments were deemed necessary for date of sale.
Other
Most of the additional considerations for the comparabies involve
locational issues, design and quality elements, and economic factors. It is
noted that the subject property is 100 percent leased to two tenants at rental
rates ranging from $14.69 to $23.83 per square foot, full service, with a
weighted average rental rate of $22.30 per square foot. The property has no
rollover until the year 2005, when the small tenant's (NCI) lease expires. The
second, GRC International, occupies 82 percent of the building and its lease
extends about 12 years from the date of this appraisal.
Comparable I-1, Centerpointe I and II, is located at 4000 and 4050 Legato
Road several miles southwest of the subject in the Fair Oaks area of Fairfax
County. This locale is considered inferior to the subject's due to its further
distance from Washington D.C. and the Capital Beltway. The buildings were
constructed in 1988 and is similar to the subject in both age and condition. The
largest tenant is American Management Systems (AMS), who occupies all of
Centerpointe I, comprising 203,630 square feet, or about 50 percent of the
entire project. At the time of sale, this tenant was paying $15.00 +- per square
foot (full service) in rent, with annual escalators of 3.85 percent. The
property had limited rollover until the year
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Sales Comparison Approach
================================================================================
2007, when 74 percent of existing leases expire. At the time of sale, the
property was 99.8 percent leased, with one 515 square foot vacant unit. Existing
leases range from $15.00 to $29.00 per square foot, with a weighted average
rental rate of $16.80 per square foot full service. This property is relatively
similar to the subject in all respects except location, thus an overall upward
adjustment is warranted.
Comparable I-2, Tysons Office Center, is located at 8133 Leesburg Pike in
close proximity to the subject on Leesburg Pike. Constructed in 1981, the
building is considered slightly inferior to the subject from a physical
standpoint. Also, the property had significant rollover (60 to 65 percent) in
the first three years subsequent to the sale. This sale is considered similar to
the subject from a locational standpoint, but inferior from a physical and
economic standpoint.
Comparable I-3, located at 8280 Greensboro Drive is also in the subject's
neighborhood and is considered slightly superior in terms of location. The
building was constructed in 1985 and is considered basically equivalent to the
subject from a physical standpoint. At the time of sale, the property was 100
percent leased to multi-tenants. We were unable to obtain detailed financial
information on this sale; however, based on the reported capitalization rate,
the net operating income was about $12.80 per square foot at the time of sale,
which is lower than the subject's net operating income of $17.26 per square
foot. This property is considered similar to the subject from a locational and
physical standpoint, but inferior from an economic standpoint due its lower net
operating income.
Comparable I-4, 2010 Corporate Ridge, is located east of the subject off
of Route 7 inside the Beltway. Although this property is located in the Tysons
Corner submarket, its location inside the Beltway is considered slightly
inferior. The building was constructed in 1989 and is similar age/condition than
the subject. The largest tenant is Nortel, who occupies 144,879 square feet at a
rental rate of $19.65 per square foot, full service. Nortel entered into a ten
year sale/leaseback with the purchaser; thus, at least 57 percent of the
property will turnover in year 2006. At the time of sale, the property was 98
percent leased. According to the buyer, most rents were in the low $20.00 per
square foot range, full service. This property is considered inferior to the
subject from a locational standpoint, and similar from a physical standpoint.
The largest tenant is paying a lower overall rental rate than GRC, and a similar
percentage of the building expires in the tenth year of the holding period.
Thus, this sale is considered inferior (rent) from an economic standpoint.
Overall, we have labeled the sale of this building as inferior to the subject
given its inferior location, economic status, and market conditions adjustment
noted earlier.
The following chart summarizes how each sale compares to the subject
property from a physical, locational and economic standpoint.
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Sales Comparison Approach
================================================================================
======================================================
Improved Sales Comparison
======================================================
Overall Rating
Sale Price Relative to
No. Per SF the Subject
======================================================
I-1 $134.77 Inferior
I-2 $112.68 Substantially Inferior
I-3 $146.10 Inferior
I-4 $138.72 Inferior
======================================================
Because of the multiple differences inherent in office properties with
respect to quality and design, location, and economics, not to mention the
quality of the tenant base, mathematical adjustments for the reasoning noted
above would be extremely difficult, at best.
Each of the sales are considered inferior to the subject. Sale I-2 is
substantially inferior, particularly for the location and economic
characteristics. The most similar is I-3, thus, the subject's value should most
likely fall above the range of all the comparables.
Based on the information presented, we have concluded at a value range for
the subject of $160 to $165 per net rentable square foot. When applied to the
net rentable area, our estimated value range by the sales price per square foot
method is presented as follows:
================================================================================
Sales Price Per Square Foot Unit Analysis
================================================================================
202,684 SF X $160/SF = $32,429,440
202,684 SF X $165/SF = $33,442,860
================================================================================
Concluded to: $33,000,000
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INCOME APPROACH
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Methodology
The income approach is a method of converting the anticipated economic
benefits of owning property into a value estimate through capitalization. The
principle of anticipation underlies this approach in that investors recognize
the relationship between an asset's income and its value. In order to value the
anticipated economic benefits of a particular property, potential income and
expenses must be estimated, and the most appropriate capitalization method must
be selected.
The two most common methods of converting net income into value are direct
capitalization and discounted cash flow analysis. In direct capitalization, net
operating income is divided by an overall rate extracted from market sales to
indicate a value. In the discounted cash flow method, anticipated future net
income streams and a reversionary value are discounted to an estimate of net
present value at a chosen yield rate (internal rate of return).
The direct capitalization method is an effective technique when stable
conditions exist both in the marketplace and for the property; however, when
market conditions are either changing or likely to change in a fairly dramatic
manner over time, direct capitalization becomes a difficult technique to
administer.
Approximately 82 percent of the subject property is leased to GRC
International through the year 2009. The remainder of the building is leased to
National Captioning Institute through the year 2004. Thus, the property has the
potential to experience substantial rollover near the end of the holding period.
It is our opinion that the majority of investors for a property like the subject
would utilize the discounted cash flow method, in an attempt to mirror this
potential rollover. In addition, the office market in which the subject is
located is continuing to strengthen. Consequently, the discounted cash flow
method affords the most realistic method of reflecting investor expectations of
the current period, as well as the projected continued recovery. For this
reason, it is our opinion that the discounted cash flow method is the most
appropriate method in the valuation of the subject property. As such, the direct
capitalization method will not be used in this analysis but at the conclusion of
the income approach, we will analyze the resulting overall capitalization rate
derived from the discounted cash flow analysis as a check for reasonableness.
Following is an analysis of the current market rental rates, existing
leases in place, other revenue, vacancy and collection loss projections, and
historical/future operating and fixed expenses for the subject property.
Potential Gross Income
Summary of Existing Leases
The object of this appraisal is to estimate the value of the leased fee
estate in the subject property. Accordingly, consideration must be given to the
leases in place at the time of appraised valuation. The actual leases for the
subject's tenants are incorporated in the following discounted cash flow
analysis. We utilize Pro-Ject +plus, a software program designed to analysis
multi-tenant properties, in this analysis and several of the computer generated
reports are included in the Addenda.
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Income Approach
================================================================================
The subject is 100 percent leased to two tenants. The NCI rent is $14.69
and the GRC rent is $23.83 per square foot, full service. The NCI lease
increases annually to $20.12 in the last year of the lease. The average rate of
increase is about four percent per year.
The GRC lease fluctuates over its term with an average rental rate for the
duration of the term of $22.09 per square foot. Noting that the average is below
the current rent of $23.83 per square foot, the overall term of the lease is
below market levels (as will be discussed further in this section).
Assumptions Regarding the Existing Leases
Information provided by management indicates that the tenant is not in
default of their lease. We assume that the existing tenant will continue to pay
rent under the terms of their lease obligations. We address renewal probability
in the Vacancy and Collection Loss section.
Lease Expirations
In our analysis, consideration is also given to lease expiration schedule.
The timing of lease expiration is an important element and a prospective buyer
would attempt to assess the risk relative to upcoming turnover. For example, a
large lease expiring in the near future would indicate the possibility of a
significant drop in income and consequently a higher risk factor might be
appropriate. The following chart summarizes the property's annual lease
expirations.
==================================
Expiration Report
==================================
Year % of NRA
==================================
1998 0%
1999 0%
2000 0%
2001 0%
2002 0%
2003 0%
2004 18.0%
2005 0%
2006 0%
2007 0%
==================================
The risk associated with lease expirations in the subject property is not
significant until fiscal year 2004, when NCI's lease expires. Based on the
foregoing, expirations are not considered to be a significant factor in the
analysis of the subject.
Market Rental Rate
Market rent for the property has been estimated by analyzing comparable
leases exhibited on the summary chart on the following page.
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<TABLE>
<CAPTION>
====================================================================================================================================
COMPARABLE OFFICE RENTALS
====================================================================================================================================
Tenant
Minimum Effective Expense Improvement
Comp. Lease Size Rent Rent Term Stop Annual Allowance
No. Building Name/Address Date (SF) ($/SF) ($/SF) (Yrs) ($/SF) Escalations Concessions (SF)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1945 Old Gallows Road May-97 139,155 $23.75 N/A 10 Base Year 5% + $1.50 bump Yr 0% rent thru $17.00
Tysons Corner, Virginia construction
2 1595 Spring Hill Road Feb-97 26,085 $23.30 $23.30 5 Base Year 3.0% None $16.50
Tysons Corner, Virginia
3 8201 Greensboro Drive Feb-97 28,780 $23.00 $23.00 10 Base Year 5% + $1.25 bump Yr None $18.50
Tysons Corner, Virginia Dec-96 2,414 $23.00 $23.00 5 Base Year 2.5% None $10.00
Dec-96 5,318 $23.50 $23.50 5 Base Year 3.0% None $10.00
4 8300 Boone Boulevard Dec-96 4,766 $22.75 $22.75 5 Base Year 3.0% None $6.00
Tysons Corner, Virginia
5 2000 Corporate Ridge Dec-96 6,500 $24.00 $24.00 10 Base Year 0% + $1.50 bump Yr None $3.00
Tysons Corner, Virginia
- ------------------------------------------------------------------------------------------------------------------------------------
Totals 213,018 $23.33 7 Base Year 2.5% - 3.0% None $3.00 - $18.50
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
</TABLE>
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Income Approach
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Prior to adjustment, the comparables reflect a relatively tight rental
range of $22.75 to $24.00 per square foot, full service. After adjustment for
rent concessions, the range was $21.45 to $27.72. There are few concessions
being granted in today's market. Only one of the comparable leases included any
free rent; however, this was a build-to-suit and the tenant was granted some
rent concession during the construction period. The rentals included tenant
improvement allowances of $3.00 to $18.50 per square. Annual rent escalations
were generally 2.5 to 3.0 percent per year. Leases which had lower escalators
typically had a $1.00 to $1.50 bump in the sixth lease year. Lease terms ranged
from five to ten years. All of the comparables are located within the Tysons
Corner submarket and represent mid-1980s vintage buildings. Thus, all are
considered good indicators of market rent for the subject property.
As shown in the Micro Market summary table presented in the Market
Analysis section of the report, asking rents at competing properties are in the
range of $18.00 to $24.50 per square foot. Thus, it appears that actual lease
rates are within the range of asking levels.
Again, recent leases within the market include few concessions, either in
the form of free rent or above standard tenant improvement allowances. Most
brokers interviewed were of the opinion that rental concessions were not being
granted.
Several brokers indicated that the market has continued to improve over
the last six months, with rents increasing and concessions remaining almost
non-existent. Our own research supports this. However, in the view of many
investors and brokers, the leasing market has generally reached stabilization
and that delivery of new office buildings to the market will be the primary
influence on rental rate and occupancy trends. In keeping with these
observations, we have assumed that market rent will increase at an average rate
of 3.5 percent per annum through the projection period. The recent rent spikes
are not anticipated to continue in the minds of market participants we have
spoken with due primarily to the onset of new speculative construction.
Investors are reportedly taking a wait and see approach over the short term at
least. It is not inconceivable that additional rent spikes will occur; however,
we believe the prudent approach at this stage is level rent growth. Finally,
free rent and tenant workletter concessions will remain consistent with current
levels. Based on the above, the market rent for the subject is $23.50 per square
foot, full service,
The above estimated market rents assume the following concession package.
================================================================================
Free Rent Tenant Improvements
================================================================================
New Leases 1997 0 months 1997 $15.00
Thereafter 0 months Growing Thereafter at 3.5%
- --------------------------------------------------------------------------------
Renewing Leases 1997 0 months 1997 $7.50
Thereafter 0 months Growing Thereafter at 3.5%
================================================================================
Assumptions Regarding Existing and Proposed Leases
Our analysis specifically assumes that all of the existing tenants will
remain in the property and continue to pay rent under the terms of their leases.
Information provided by management indicates that none of the tenants are
currently in default. The tenant base appears to be stable and management has
indicated that defaults are not anticipated.
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<PAGE>
Income Approach
================================================================================
With regard to lease expirations, we have projected that 60 percent of
tenants will rollover (sign a new lease) and approximately 40 percent will
turnover (allow their lease to expire and vacate the property) upon expiration
of their primary lease term. This assumption is based on the limited amount of
space available in the Tysons Corner submarket and discussions with property
management regarding recent leasing activity.
An examination of the comparable leases shows typical lease terms of five
to ten years. We have assumed five year terms for speculative tenants, which is
at the mid-point of the indicated range.
Reimbursable Expenses (Escalations)
Tenants are responsible for their pro-rata share of operating expenses
(including real estate taxes) when they exceed those incurred during the first
full year of their occupancy. GRC pays increases in expenses over $4.87 per
square foot (their base year). NCI pays for increases in operating expenses
over $5.00 per square foot.
Vacancy and Collection Loss
Our cash flow projection assumes a tenant vacancy of six months upon each
lease expiration set against our probability of renewal estimated at 60 percent,
in addition to a global credit loss provision applied to the gross rental
income. The global credit loss provision is applied to the gross rental income
from all tenants and is estimated at one percent throughout the holding period.
Vacancy between leases includes the period of actual downtime and the
construction period to build-out tenant spaces. Consistent with our experience,
we have assumed a stabilized vacancy and construction period of nine months. We
acknowledge that current time between tenants may be shorter, though a long term
trend may reflect fluctuations. Vacancy between leases is weighted for the 40
renewal probability, resulting in an effective downtime of 2.4 months upon each
lease expiration. On a five year average lease term, this equates to 3.8 percent
average physical vacancy (downtime of 2.4 months divided by the downtime plus
the 60 month average lease term)
Based on the subject's weighted average downtime between leases, as well
as the preceding absorption schedule for the subject property, the overall
average occupancy rate of the subject property over the 10 year holding period
is 96.2 percent. Including our overall credit loss allowance estimated at 1.0
percent, the implied overall vacancy and credit loss factor for the subject
property is 95.2 percent.
Operating Expenses
We based our estimate of operating expenses for the subject on a review of
the actual 1994 through 1996 expenses, as well as the 1997 budget. This data was
compared with expense comparables at similar suburban office buildings as well
as industry studies. In addition, we have consulted Cushman & Wakefield's
Management Services staff for further support. The Historical and Budget
Operating Statements for the subject property provided by property management
can be found in the Addenda.
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<PAGE>
Income Approach
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We have analyzed each item of expense individually and attempted to
project what the typical investor would consider reasonable. Increases in the
expenses during subsequent years are projected at 3.5 percent per annum. Based
on historical CPI trends, we conclude that our selected growth rate reflects an
overall inflationary rate over the long term. The forecast of growth rates in
all categories of expenses reflect typical investor expectations as noted in the
Cushman & Wakefield Investor Survey, a copy of which is in the Addenda. Except
where noted, our forecasted growth rate for the various expense categories
generally does not attempt to reflect growth rates for any individual year, but
rather the long term trend over the projected holding period.
Real Estate Taxes
Real estate taxes are based on the actual assessment and tax rate reported
in the Real Estate Taxes and Assessment section. The Year One real estate
taxes are equal to $366,629, or $1.81 per square foot of net rentable
area. As previously discussed, the subject's current assessment is
substantially below our final value conclusion. We anticipate that the
subject will experience a sizeable tax increase during the next
reassesment cycle in January 1998 based on our estimated value conclusion.
Operating Expenses
Operating expenses include utilities, repairs and maintenance, janitorial
and service contracts, insurance, etc. The building's actual costs have
increased from $3.33 in 1994 to $3.43 per square foot in 1996. The 1997
budgeted expense is $3.75 per square foot which is in-line with the
expense comparables at $3.11 to $4.15 per square foot, with most at $3.11
to $3.78 per square foot.
General & Administrative
These expenses are directly connected to the administration of the
building, including office payroll, general office expense, advertising
and other miscellaneous expenses. The building's actual costs have ranged
from $0.49 to $0.60 per square foot. The 1997 budgeted expense is in-line
with the subject's history at $0.58 per square foot and the expense
comparables at $0.70 to $1.58 per square foot. With the consistent
history in a tight range, we will continue with the subject's budget.
Management Fees
This expense represents the fee for management responsibilities, whether
provided by an outside company or ownership. This includes rent
collection, property supervision and budget preparation. Cushman &
Wakefield Property Management personnel reported that typical management
agreements range from 2.5 to 3.0 percent of effective gross income. The
management fee charged at the subject is 3.0 percent of effective gross
income. It is our opinion that this rate is reflective of market
parameters and as such, a management fee equal to 3.0 percent of effective
gross income is estimated for the subject.
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<PAGE>
Plaza 1900
1900 Gallows Road
McLean, Fairfax County, Virginia
Operating Expense Comparables
<TABLE>
<CAPTION>
======================================================
1 2 3 4
Rosslyn Rosslyn Courthouse Tysons Corner
130,500 SF 149,620 SF 98,000 SF 335,000 SF
Actual Actual Actual Actual
$/SF $/SF $/SF $/SF
===========================================================================================
<S> <C> <C> <C> <C>
EXPENSES
Real Estate Taxes $1.20 $1.06 $1.36 $1.11
Operating Expenses:
Insurance $0.07 $0.06 $0.13 $0.16
Janitorial/Contract Services $1.49 $1.29 $1.60 $0.90
Repairs & Maintenance $0.80 $0.63 $0.45 $0.37
Utilities $1.42 $1.34 $1.97 $1.68
----- ----- ----- -----
Total Operating Expenses $3.78 $3.32 $4.15 $3.11
General & Administrative $1.58 $1.45 $1.28 $0.70
Management $0.70 $0.52 $0.37 $0.66
TOTAL EXPENSES $7.26 $6.35 $7.16 $5.58
Total Expenses Excluding R.E. $6.06 $5.29 $5.80 $4.47
===========================================================================================
</TABLE>
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<PAGE>
Income Approach
================================================================================
Leasing Commissions
New leases will require a leasing commission equivalent to 4.0 percent of
total rental income and 2.0 percent on renewal leases. The new lease
commission rate reflects the fact that a landlord will typically be
charged a commission of 3.0 to 4.0 percent by the tenant's agent and 2.0
to 3.0 percent by the landlord's agent. Upon renewal, landlords resist
paying leasing commissions, but typically pay a portion of the full
commission rate or a partial fee to the management company for its
assistance in working with the tenant. This expense item is not passed
through to the tenant. The probability factor is used for speculative
renewals.
Tenant Improvements/Finish
The tenant improvement allowance was previously discussed and is projected
to be $15.00 per square foot for new tenants and $7.50 per square foot for
renewals. This expense is also not passed through to the tenants. The
probability factor applies to speculative renewals. Tenant
improvements/finish costs are projected to increase at the rate of 3.5
percent per year through the projection period.
Capital Replacements/Reserves
Reserves for replacements should be (though as a practical matter, they
may not be) set aside to accumulate an amount sufficient to replace and/or
repair certain major building components, i.e., roof, HVAC system, etc.
during the period under analysis. Taking into consideration the subject's
age, we have estimated capital reserves of $0.20 per net rentable square
foot for Year One, increasing by 3.5 percent per year throughout our
analysis.
Our projected expenses are predicated on the assumption that the property
will be prudently managed, while maintaining the improvements at a competitive
level to preserve value. The preceding cumulative annual operating expense
estimate for fiscal year 1998 equates to $1,341,785 or $6.62 per square foot of
gross leasable area, excluding capital replacements, tenant alterations and
leasing commissions. These expenses are in line with the expense comparables.
The growth rates incorporated in our projections result in a 3.4 percent annual
compound growth rate over the holding period, which is lower than our estimate
due to the characteristics of GRC lease.
Discounted Cash Flow Analysis
In the discounted cash flow analysis, we employed the PRO-JECT+ plus
software which allowed us to simulate the operating characteristics of the
property and to make a variety of operating assumptions. We attempted to reflect
the most likely investment assumptions of typical buyers and sellers in this
particular market segment. We used the following figures and assumptions in the
computer model.
Years in Forecast: 12
Holding Period: 11
Starting Date: July 1, 1997
Market Rental Rate (Year 1) $23.50 per SF, Full Service
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Income Approach
================================================================================
Miscellaneous Income: N/A
Growth in Market Rental Rate: 3.5%
Expense and Tax Pass-Throughs: Tenants pay increases over base
year of occupancy.
Expense Growth Rate: 3.5% per annum
Consumer Price Index: 3.5% per annum
Free Rent: None
Lease Term (Typical): 5 years
Renewal Probability: 60%
Tenant Improvements - New Leases $15.00 per SF
Tenant Improvements - Renewing Leases $7.50 per SF
Leasing Commissions: 4% new leases; 2% for renewals.
All payable at the beginning of
each lease term.
Vacancy Between Leases: 6 months (prior to renewal
probability of 60%; effective
vacancy is 2.4 months
Credit Loss: 1.0%
Reversion Cap Rate: 9.5% (applied to net operating
income).
Reversion Selling Expenses: 3% (includes brokerage, legal fees
and estimated transfer taxes).
Discount Rate (IRR): 11.0% (see Discount Rate
Analysis).
Cash Flow Projection
On the following page is our 12 year cash flow projections which include
our 11 year holding period and 12th year reversion. This term was selected,
rather than the normal 10 years, to adequately treat the full impact of the GRC
lease which reaches its term in the 10th and 11th year. The 12th year reflects
full market conditions. The cash flow reflects the results of the PRO-JECT+ plus
projection.
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Plaza 1900
1900 Gallows Road
McLean, Fairfax County, Virginia
Cash Flow Analysis
<TABLE>
<CAPTION>
====================================================================================================================================
Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year
1998 1999 2000 2001 2002 2003 2004
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUE FROM OPERATIONS
Rental Income $4,536,984 $4,401,002 $4,248,579 $4,284,999 $4,163,395 $4,231,657 $4,631,658
Total Recoveries $370,543 $411,876 $455,676 $503,317 $550,668 $603,170 $661,918
Less: Credit Loss ($147,226) ($144,386) ($141,128) ($143,649) ($141,422) ($145,045) ($158,807)
-----------------------------------------------------------------------------------------------------
Effective Gross Income $4,760,301 $4,668,492 $4,563,127 $4,644,667 $4,572,641 $4,689,782 $5,134,769
EXPENSES
Real Estate Taxes $366,629 $379,461 $392,742 $406,488 $420,715 $435,440 $450,680
Operating Expenses $759,803 $786,396 $813,920 $842,407 $871,891 $902,408 $933,992
General & Administrative $120,147 $124,353 $128,705 $133,210 $137,872 $142,697 $147,692
Management $95,206 $93,370 $91,263 $92,893 $91,453 $93,796 $102,695
------------------------------------------------------------------------------------------------------
TOTAL EXPENSES $1,341,785 $1,383,580 $1,426,630 $1,474,998 $1,521,931 $1,574,341 $1.635,059
=====================================================================================================
Net Operating Inco $3,418,516 $3,284,912 $3,136,497 $3,169,669 $3,050,710 $3,115,4l $3,499,710
=====================================================================================================
Commissions $0 $0 $0 $0 $0 $0 $0
Capital Reserves $40,537 $41,956 $43,424 $44,944 $46,517 $48,145 $49,830
Alterations $0 $0 $0 $0 $0 $0 $0
------------------------------------------------------------------------------------------------------
$3,377,979 $3,242,956 $3,093,073 $3,124,725 $3,004,193 $3,067,296 $3,449,880
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
==========================================================================================================================
Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year
2005 2006 2007 2008 2009 2010
==========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
REVENUE FROM OPERATIONS
Rental Income $4,450,653 $4,675,088 $4,658,307 $4,536,969 $3,094,149 $6,381,611
Total Recoveries $608,963 $624,758 $685,148 $743,195 $470,083 $82,497
Less: Credit Loss ($151,788) ($158,995) ($160,304) ($158,405) ($106,927) ($193,923)
-----------------------------------------------------------------------------------------
Effective Gross Income $4,907,828 $5,140,851 $5,183,151 $5,121,759 $3,457,305 $6,270,185
EXPENSES
Real Estate Taxes $466,454 $482,780 $499,677 $517,166 $535,267 $554,001
Operating Expenses $966,682 $1,000,515 $1,035,533 $1,071,777 $1,109,289 $1,148,115
General & Administrative $152,861 $158,211 $163,749 $169,480 $175,412 $181,551
Management $98,157 $102,817 $103,663 $102,435 $69,146 $125,404
-----------------------------------------------------------------------------------------
TOTAL EXPENSES $1,684,154 $1,744,323 $1,802,622 $1,860,858 $1,889,114 $2,009,071
========================================================================================
Net Operating Inco $3,223,674 $3,396,528 $3,380,529 $3,260,901 $1,568,191 $4,261,114
========================================================================================
Commissions $174,376 $0 $0 $0 $0 $911,448
Capital Reserves $51,574 $53,379 $55,247 $57,181 $59,183 $61,254
Alterations $504,487 $0 $0 $0 $0 $2,636,918
-----------------------------------------------------------------------------------------
$2,493,237 $3,343,149 $3,325,282 $3,203,720 $1,509,008 $651,494
==========================================================================================================================
</TABLE>
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Approach
================================================================================
Derivation of Terminal Value
A terminal capitalization rate was used to estimate the market value of
the property at the end of the assumed investment holding period. We estimated
an appropriate terminal rate based on indicated rates in today's market.
=============================================
Summary of Capitalization Rates
=============================================
Sale Capitalization
No. Rate
=============================================
1 N/A
2 8.40%
3 8.75%
4 10.01%
=============================================
The OARs for the comparable sales from which we were able to derive
capitalization rates ranged from 8.40 to 10.01 percent. A premium was added to
today's rate to allow for the risk of unforeseen events or trends which might
affect our estimate of net operating income during the holding period, including
a possible deterioration in market conditions for the property. Investors
typically add 50 to 100 basis points to the "going-in" rate to arrive at a
terminal capitalization rate, according to Cushman & Wakefield's periodic
investor surveys.
Discount Rate Analysis
We estimated future cash flows, including property value at reversion, and
discounted that income stream at an internal rate of return (yield rates)
currently required by investors for similar-quality real property. The yield
rate (internal rate of return or IRR) is the single rate that discounts all
future equity benefits (cash flows and equity reversion) to an estimate of net
present value.
Cushman & Wakefield Valuation Advisory Services periodically surveys
national real estate investors to determine their investment objectives.
Following is a brief review of internal rates of return, overall rates, and
income and expense growth rates considered acceptable by respondents.
==============================================================
Autumn 1996 Investor Survey
Suburban Office Building
==============================================================
Going-in Terminal IRR
Low High Low High Low High
==============================================================
Mean 8.80% 9.50% 9.30% 9.90% 11.2% 11.6%
Range 8.00% 11.0% 8.00% 11.0% 10.0% 13.0%
==============================================================
The preceding table summarizes the investment parameters of some of the
most prominent investors currently acquiring high-grade investment properties in
the United States. Generally speaking, our survey reveals terminal
capitalization rates of 8.0 to 11.0 percent with the average low and high
responses of 9.3 and 9.9 percent for investment grade offices in non-CBD
suburban locations.
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Approach
================================================================================
The wide range of investment parameters indicates that property risk and
yield are assessed to a particular investment property based on a variety of
variables. Risk is the primary determinant, and the risk variables include
whether current contract rents are significantly above or below current market
rents; the amount and timing of tenant rollovers; the risk to lease-up the
property and the strength of the market during the lease-up period; the
durability of the cash flow, and its ability to increase with inflation along
with the creditworthiness of the existing tenancy; investor demand for the
property type; the diversification of the metropolitan area; the property's
location within the local market and the supply and demand for the property type
within the market; and the effective age of the property.
The internal rate of return and terminal capitalization rate selected for
this analysis were strongly influenced by our recent Investor Survey. We realize
that this type of survey reflects target rather than transactional rates.
Transactional rates are usually difficult to obtain in the verification process
and are actually only target rates of the buyer at the time of sale. The
property's performance will ultimately determine the actual yield and
capitalization rate at the time of sale after a specific holding period. We have
found that, in improving markets or with above average properties, demand will
be high and transactional rates may be lower than target rates that are quoted
in surveys. We have tried to recognize this factor in our choice of these two
rates for our cash flow model.
The Washington, D.C. area has been consistently cited as one of the top
office investment markets in the country. With the strength of the office demand
created by the federal government and the national and international entities
that must locate in close proximity to the seat of government, this market is
highly regarded among investors. With the persistent questions about future
federal employment, and hence office space demand, some caution is warranted.
Even so, the capitalization rates and yield rates required by investors for
quality properties in the metropolitan area are consistently among the lowest in
the nation.
In our DCF model, we selected a terminal capitalization rate that
accounted for the anticipated holding period and reflected the subject's
tenancy, quality and location. This rate also reflected the risk involved in our
DCF analysis based on the income and expense projections that were modeled, as
well as the approximate age of the property at the end of the holding period.
The rate we selected reflects the low rollover risk over the holding period, the
upside potential of the property due to GRCs below market lease, as well as the
strength of the Tysons Comer office market. Our discount rate is well supported
by the comparable rsales presented in the Sales Comparison Approach, with
details included in the Addenda.
Conclusion
Using a 9.5 percent terminal rate and an 11.0 percent discount rate, our
cash flow model indicated a value of $32,500,000 or $160.35 per square foot, as
shown on the following page. This value estimate produces an implied going-in
capitalization rate of 10.5 percent, which is above the range generally
required by investors as noted in the Cushman & Wakefield Investor Survey. We
deem this reasonable because of the property's significant upside potential due
to GRC's lease terms that affect 82 percent of the project, as well as
improving market conditions.
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Income Approach
================================================================================
Regarding the composition of the yield, as analyzed in the Discounted Cash
Flow Analysis chart, 62 percent of the subjects ultimate yield is derived from
the cash flow of the property with the balance attributable to the reversion or
resale of the property at the conclusion of the holding period. Typical investor
requirements dictate that a substantial amount of the value be derived from the
cash flow. Greater risk is evident when the reversion provides a larger
percentage of the overall return than the cash flows. The average cash on cash
return is 9.3 percent, based on this value conclusion. This rate would generate
investor interest because the yields are appropriate relative to the risks
involved.
Thus, it is our opinion that the market value of the property by the
Income Approach, is $32,500,000.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Plaza 1900
1900 Gallows Road
McLean, Fairfax County, Virginia
Discounted Cash Flow Analysis
<TABLE>
<CAPTION>
================================================================================================================
NET DISCOUNT PRESENT ANNUAL
CALENDAR CASH FACTOR @ VALUE OF COMPOSITION CASH ON CASH
YEAR FLOW 11.00% CASH FLOWS OF YIELD RETURN
================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
1998 $3,377,979 X 0.90090 $3,043,224 9.36% 10.39%
1999 $3,242,956 X 0.81162 $2,632,056 8.09% 9.98%
2000 $3,093,073 X 0.73119 $2,261,628 6.95% 9.52%
2001 $3,124,725 X 0.65873 $2,058,353 6.33% 9.61%
2002 $3,004,193 X 0.59345 $1,782,842 5.48% 9.24%
2003 $3,067,296 X 0.53464 $1,639,902 5.04% 9.44%
2004 $3,449,880 X 0.48166 $1,661,664 5.11% 10.62%
2005 $2,493,237 X 0.43393 $1,081,882 3.33% 7.67%
2006 $3,343,149 X 0.39092 $1,306,920 4.02% 10.29%
2007 $3,325,282 X 0.35218 $1,171,113 3.60% 10.23%
2008 $3,203,720 X 0.31728 $1,016,487 3.13% 9.86%
2009 $1,509,008 X 0.28584 $431,336 1.33% 4.64%
--------
Total Present Value of Cash Flows $20,087,406 61.76% 9.29%
Average
Reversion:
2010 $4,261,114 (1) / 9.50% $44,853,832
Less: Cost of Sale @ 3.00% $1,345,615
-----------
Net Reversion $43,508,217
X Discount Factor 0.28584
-------
Total Present Value of Reversion $12,436,424 38.24%
Total Present Value of Cash Flow $32,523,831 100.00%
ROUNDED: $32,500,000
===========
------------------------------------------------------
Gross Leasable Area (S.F.): 202,684
Per Square Foot of Gross Leasable Area: $160.35
Implicit Going-In Capitalization Rate:
Year One NOI $3,418,516
Going-in Capitalization Rate: 10.5%
------------------------------------------------------
Note: (1) Net Operating Income
================================================================================================================
</TABLE>
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
RECONCILIATION AND FINAL VALUE ESTIMATE
================================================================================
We employed all three approaches to value in our analysis. The indicated
values are shown below:
Sales Comparison Approach $33,000,000
Income Approach $32,500,000
The three traditional methods of estimating the market value of commercial
real estate are not mutually exclusive approaches to deriving an estimate of
most probable selling price, but are interdependent methodologies, each relying
on components from at least one of the other approaches. Hence, the Cost
Approach requires extensive market data to derive estimates of depreciation and
to determine the value of land as if vacant. This approach may also require
income data in order to make adjustments for functional and economic
obsolescence. The Sales Comparison Approach requires application of methods from
the Income Capitalization Approach in order to make adjustments for differences
in income that have influenced the sale price. Consideration of market data is
also required for the Income Capitalization Approach in the selection and
application of equity, capitalization and discount rates, and estimation of
income and expenses. Consequently, it is our opinion that purchasers and
sellers, at least intuitively, consider components of all three approaches in
the process of negotiating an acceptable price for a particular property.
It is the Income Capitalization Approach, however, that is logically
considered the most appropriate technique for estimating the value of
income-producing property. Not only does this approach represent the most direct
and accurate simulation of market behavior, it is the method explicitly employed
by buyers and sellers in acquisition and disposition decisions. Therefore,
following the implied dictum of the market, we have used an approach based
primarily on projected income as the foundation for our valuation of the subject
property.
There are several additional reasons why the Sales Comparison Approach
does not form the basis of our value estimate for the subject property. The
quantity and quality of market information inhibits the use of the Sales
Comparison Approach. Inadequacy of information regarding gross and net income,
lease details and expenses of comparable sales often deters accurate and
relevant adjustments of unit price indicators. Comparison at a dollar per square
foot level precludes the analysis of those key factors which form the basis for
projections on which the purchase decision was made.
Based on the above discussion, we have formed an opinion that the
prospective market value of the leased fee estate in the subject property,
subject to the assumptions, limiting conditions, certifications and definitions
as of July 1, 1997, was:
THIRTY TWO MILLION FIVE HUNDRED THOUSAND DOLLARS
$32,500,000
Marketing Time
Marketing time is an estimate of the time that might be required to sell a
real property interest at the appraised value. Marketing time is presumed to
start on the effective date of the appraisal, whereas exposure time is presumed
to precede the effective date of appraisal. The estimate of marketing time uses
some of the same data analyzed in the process of estimating the reasonable
exposure time and is not intended to be a prediction of a date of sale.
================================================================================
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Reconciliation and Final Value Conclusion
================================================================================
Our estimate of an appropriate marketing time for the subject relates to a
sale of the property in its As Is condition. Based on our discussions with local
brokers and buyer/sellers of office projects like the subject, as well as our
assessment of the local real estate market and economic forces in general, we
have concluded that the probable marketing period for the subject property in
today's environment would be about 12 months.
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
ASSUMPTIONS AND LIMITING CONDITIONS
================================================================================
"Appraisal" means the appraisal report and opinion of value stated therein; or
the letter opinion of value, to which these Assumptions and Limiting Conditions
are annexed.
"Property" means the subject of the Appraisal.
"C&W" means Cushman & Wakefield, Inc. or its subsidiary which issued the
Appraisal.
"Appraiser(s)" means the employee(s) of C&W who prepared and signed the
Appraisal.
This appraisal is made subject to the following assumptions and limiting
conditions:
1. No opinion is intended to be expressed and no responsibility is assumed
for the legal description or for any matters which are legal in nature or
require legal expertise or specialized knowledge beyond that of a real
estate appraiser. Title to the Property is assumed to be good and
marketable and the Property is assumed to be free and clear of all liens
unless otherwise stated. No survey of the Property was undertaken.
2. The information contained in the Appraisal or upon which the Appraisal is
based has been gathered from sources the Appraiser assumes to be reliable
and accurate. Some of such information may have been provided by the owner
of the Property. Neither the Appraiser nor C&W shall be responsible for
the accuracy or completeness of such information, including the
correctness of estimates, opinions, dimensions, sketches, exhibits and
factual matters.
3. The opinion of value is only as of the date stated in the Appraisal.
Changes since that date in external and market factors or in the Property
itself can significantly affect property value.
4. The Appraisal is to be used in whole and not in part. No part of the
Appraisal shall be used in conjunction with any other appraisal.
Publication of the Appraisal or any portion thereof without the prior
written consent of C&W is prohibited. Except as may be otherwise stated in
the letter of engagement, the Appraisal may not be used by any person
other than the party to whom it is addressed or for purposes other than
that for which it was prepared. No part of the Appraisal shall be conveyed
to the public through advertising, or used in any sales or promotional
material without C&W's prior written consent. Reference to the Appraisal
Institute or to the MAI designation is prohibited.
5. Except as may be otherwise stated in the letter of engagement, the
Appraiser shall not be required to give testimony in any court or
administrative proceeding relating to the Property or the Appraisal.
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Assumptions and Limiting Conditions
================================================================================
6. The Appraisal assumes (a) responsible ownership and competent management
of the Property; (b) there are no hidden or unapparent conditions of the
Property, subsoil or structures that render the Property more or less
valuable (no responsibility is assumed for such conditions or for
arranging for engineering studies that may be required to discover them)";
(c) full compliance with all applicable federal, state and local zoning
and environmental regulations and laws, unless noncompliance is stated,
defined and considered in the Appraisal; and (d) all required licenses,
certificates of occupancy and other governmental consents have been or can
be obtained and renewed for any use on which the value estimate contained
in the Appraisal is based.
7. The physical condition of the improvements considered by the Appraisal is
based on visual inspection by the Appraiser or other person identified in
the Appraisal. C&W assumes no responsibility for the soundness of
structural members nor for the condition of mechanical equipment, plumbing
or electrical components.
8. In preparing this appraisal, we have relied on the rent roll and the
history of income and expenses furnished by the owner or the management
company representing the owner. We have not reviewed actual tenant leases.
9. The forecasts of income and expenses are not predictions of the future.
Rather, they are the Appraiser's best estimates of current market thinking
on future income and expenses. The Appraiser and C&W make no warranty or
representation that these forecasts will materialize. The real estate
market is constantly fluctuating and changing. It is not the Appraiser's
task to predict or in any way warrant the conditions of a future real
estate market; the Appraiser can only reflect what the investment
community, as of the date of the Appraisal, envisages for the future in
terms of rental rates, expenses, supply and demand.
10. Unless otherwise stated in the Appraisal, the existence of potentially
hazardous or toxic materials which may have been used in the construction
or maintenance of the improvements or may be located at or about the
Property was not considered in arriving at the opinion of value. These
materials (such as formaldehyde foam insulation, asbestos insulation and
other potentially hazardous materials) may adversely affect the value of
the Property. The Appraisers are not qualified to detect such substances.
C&W recommends that an environmental expert be employed to determine the
impact of these matters on the opinion of value.
11. Unless otherwise stated in the Appraisal, compliance with the requirements
of the Americans With Disabilities Act of 1990 (ADA) has not been
considered in arriving at the opinion of value. Failure to comply with the
requirements of the ADA may adversely affect the value of the property.
C&W recommends that an expert in this field be employed.
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
CERTIFICATION OF APPRAISAL
================================================================================
We certify that, to the best of our knowledge and belief:
1. John H. Trowbridge inspected the property and prepared the report, and
Donald R. Morris, MAI, Manager, Cushman & Wakefield of Washington D.C.,
Valuation Advisory Services, reviewed and approved the report.
2. The statements of fact contained in this report are true and correct.
3. The reported analyses, opinions, and conclusions are limited only by the
reported assumptions and limiting conditions, and are our personal,
unbiased professional analyses, opinions, and conclusions.
4. We have no present or prospective interest in the property that is the
subject of this report, and we have no personal interest or bias with
respect to the parties involved.
5. Our compensation is not contingent upon the reporting of a predetermined
value or direction in value that favors the cause of the client, the
amount of the value estimate, the attainment of a stipulated result, or
the occurrence of a subsequent event. The appraisal assignment was not
based on a requested minimum valuation, a specific valuation or the
approval of a loan.
6. No one provided significant professional assistance to the persons signing
this report.
7. Our analyses, opinions and conclusions were developed, and this report has
been prepared, in conformity with the Uniform Standards of Professional
Appraisal Practice of the Appraisal Foundation and the Code of
Professional Ethics and the Standards of Professional Appraisal Practice
of the Appraisal Institute.
8. The use of this report is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives.
9. As of the date of this report, Donald R. Morris, MAI, has completed the
requirements of the continuing education program of the Appraisal
Institute.
10. We estimate that the prospective market value of the leased fee estate in
the existing office building, subject to the assumptions, limiting
conditions, certifications and definitions as of July 1, 1997 is
$32,500,000.
COMMONWEALTH OF VIRGINIA COMMONWEALTH OF VIRGINIA
JOHN H. TROWBRIDGE Donald R. Morris
No. 4001-004035 No. 4001-002465
Certified General Certified General
Real Estate Real Estate
Appraiser Appraiser
/s/ John H. Trowbridge /s/ Donald R. Morris
John H. Trowbridge Donald R. Morris, MAI
Valuation Advisory Service Valuation Advisory Service
Virginia Certified General Virginia Certified General
Appraiser No. 4001-004035 Appraiser No. 4001-004035
================================================================================
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
ADDENDA
================================================================================
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WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Addenda
================================================================================
Improved Sales Comparables
<PAGE>
OFFICE BUILDING OFFERING
================================================================================
[GRAPHIC OMITTED]
[PHOTO]
I-1 Sale
Building Name: Centerpointe I and II
Location: 4000 and 4050 Legato Road
Fairfax, Fairfax County, VA
Grantor: Joshua Realty Corporation
(GE Investments)
Grantee: Beacon Properties
Date of Offering: August 96
Recording Data: Deed Book 9986, Page 825
Recording Date: 05/01 /97
Physical Description:
Land Area: 17.00 Acres
Net Rentable Area: 408,111 Square Feet
<PAGE>
OFFICE BUILDING OFFERING
================================================================================
I-1 Continued
Year Built: Circa 1988
Occupancy at Sale: 100 %
Parking: Structured; 3.6/1 000
Quality: Excellent
Construction: Masonry and Glass
Stories: 11
Sale Price: $55,000,000
Terms of Sale: All Cash to Seller
Purchaser is a REIT
Sale Price/Square Foot (RSF): $134.77
Centerpointe I: 203,630 SF NRA, Yr Built: 1988
Centerpointe II: 204,481 SF NRA, Yr Built: 1990
COMMENTS:
This is the sale of two, Class A suburban office buildings located at the
intersection of West Ox Road and Legato Road, just south of US Route 50.
The buildings are 100 percent occupied. The largest tenant is American
Management Systems, who occupies all of Centerpointe I, containing 203,630
square feet, or 50 percent of the project. AMS is currently paying about
$15.00 per square foot in rent. Rollover is minimal until the year 2007,
when the building incurrs a 74 percent turnover. The price is based on
IRRs in the 11.0 to 11.5 percent range. Actual rents at the time of
sale ranged from $15.00 to $29.00 per square foot, with an average rent
of $16.80 per square foot. The contract price is $8,000,000 below the
initial asking, or a 13% discount.
DCA4-2581
<PAGE>
OFFICE BUILDING SALE
================================================================================
[GRAPHIC OMITTED]
[PHOTO]
I-2 Sale
Building Name: Tysons Office Center
Location: 8133 Leesburg Pike
Vienna, Fairfax County, VA
Parcel Number: 039-2-02-0041,0042
Grantor: Tysons Office Center Limited
Partnership (VIB Management)
Grantee: Tysons Office Center, Inc.
(Invesco)
Date of Sale: 04/16/97
Recording Data: Deed Book 9973, Page 1212
Recording Date: 04/16/97
Physical Description:
Land Area: 112,398 Square Feet
<PAGE>
OFFICE BUILDING SALE
================================================================================
I-2 Continued
2.58 Acres
Net Rentable Area: 142,000 Square Feet
Year Built: 1981
Occupancy at Sale: 100 %
Parking: 358 spaces
Construction: Steel frame, reflective glass
Zoning: C3, Fairfax County
Stories: 9
Sale Price: $16,000,000
Terms of Sale: Cash to Seller
Appraisal Indicators:
Overall Rate (OAR): 8.4%
Discount Rate (IRR): 12.0%
Sale Price/Square Foot (RSF): $112.68
Parking Ratio: 2.5 per 1,000 SF
Tenant Turnover: 60-65% in 3 Years
Average Rents: $3.00 to $3.50/SF Below Market
Rent Growth: 5%, 5%, 3.5% thereafter
COMMENTS:
This is the sale of a Class B office building built in 1981 and located
in the popular Tysons Corner submarket. The property was in good condition
at the time of sale. The sellers recently spent about $3.OM on renovating
the lobbies, restrooms, and on a new roof and mechanical upgrades.
The buyers indicated that the building was 100 percent occupied at the
time of sale but was subject to 60 to 65% tenant turnover in the first
three years of ownership. These tenants had rents averaging around
$16.50/SF compared to $20/SF for market rents. Hence, the buyer saw this
as an opportunity to roll up a lot of below market leases, move them to
market rents, and sell the property in four to seven years at a price that
would still be attractive to the next owner. Because there is risk
associated with this type of effort, and particularly because there is new
construction being planned for competing markets; the buyer used a
slightly higher IRR
<PAGE>
OFFICE BUILDING SALE
================================================================================
1-2 Contiinued
of 12.0 percent, compared to IRRs closer to 11.0% for their acquisition
of Class A properties. The buyer also reported expenses of approx
$7.00/SF.
DCA4-4286
<PAGE>
OFFICE BUILDING SALE
================================================================================
[GRAPHIC OMITTED]
[PHOTO]
I-3 Sale
Building Name: 8280 Greensboro Drive
Location: 8280 Greensboro Drive
McLean, Fairfax County, VA
Parcel Number: 029-3-15-001O-A
Grantor: Tysons Corner Limited Partner-
ship (Balcor)
Grantee: Gateway Costal Properties, Inc
(RREEF)
Date of Sale: 04/23/97
Recording Data: Deed Book 9978, Page 446
Recording Date: 04/23/97
Physical Description:
Land Area: 115,140 Square Feet
<PAGE>
OFFICE BUILDING SALE
================================================================================
I-3 Continued
2.64 Acres
Net Rentable Area: 205,341 Square Feet
Year Built: 1 985
Occupancy at Sale: 100%
Parking: 547 spaces
Construction: Steel frame; reflective glass
Zoning: C4, Fairfax county
Stories: 9
Sale Price: $30,000,000
Terms of Sale: Cash to Seller
Economic Indicators:
Net Operating Income: $2,625,000 Buyer's Proforma
Appraisal Indicators:
Overall Rate (OAR): 8.75%
Sale Price/Square Foot (RSF): $146.10
Number of Tenants: 24; largest = Deltek Systems
(25%)
Legal Description: Lot 1OA, Section 4,
Leasco Office Park
COMMENTS:
This is the sale of a 9-story, Class A-, reflective glass office building
loccated in Tysons Corner. The buyer would not divulge any detailed
financial information on the property outside of the following data:
The price equated to a going-in capitalization rate of about 8.75%.
The purchaser's target yields (IRRs) for this market are between 10.75%
for Class A, top of the market buildings with long term, stable income,
and 12.0% for Class A-/B + buildings with below market existing rents.
They are no longer assuming any major spikes in rent growth due to the
anticipated new construction that will be delivered in the next 9 to 12
months.
They do examine replacement costs as a test of reasonableness regarding
the spread between their acquisition relative to new product delivered at
market rent levels.
DCA4-4284
<PAGE>
OFFICE BUILDING SALE
================================================================================
[GRAPHIC OMITTED]
[PHOTO]
I-4 Sale
Building Name: The Nortel Building
Location: 2010 Corporate Ridge
McLean, Fairfax County, VA
Parcel Number: 39-2-1-62A
Grantor: Northern Telecom, Inc.
Grantee: Acquiport Corporate Ridge, Inc
(Equitable Real Estate)
Date of Sale: 08/01/96
Recording Data: Book 9776 Page 126
Recording Date: 08/07/96
Physical Description:
Land Area: 288,090 Square Feet
<PAGE>
OFFICE BUILDING SALE
================================================================================
I-4 Continued
6.61 Acres
Net Rentable Area: 252,315 Square Feet
Year Built: 1989
Occupancy at Sale: 98 %
Parking: 4.0 per 1,000
Quality: Good
Construction: Limestone and glass
Zoning: PDC, Planned Dev. Commercial
Stories: 10
Sale Price: $35,000,000
Terms of Sale: All Cash to Seller
Cash Equivalent
Economic Indicators:
Effective Gross Income: $5,261,200 Buyer's Proforma
Less: Operating Expenses: $1,766,200 Buyer's Proforma
Net Operating Income: $3,495,000 Buyer's Proforma
Appraisal Indicators:
Effective Gross Inc. Mult.: 6.65
Overall Rate (OAR): 10.01%
Discount Rate (IRR): 11.75%
Sale Price/Square Foot (RSF): $138.72
Lease Expirations: 7% 1996, 11% 1998,
14% 1999, 11% 2001
Rent Growth: 6% 1996, 1997, 1998
Major Tenant: Nortel: 144,879 SF, $19.65/SF,
$3/SF Yr6
Estimated Market Rent At Sale: $20.00/SF
COMMENTS:
This is the sale of a Class A building in the Tysons Corner submarket. The
seller entered into a sale/leaseback agreement with the buyer and occupies
144,879 square feet (57 percent) of the building at a lease rate of $19.65
per square foot, full service, for a ten year term, with a rent step of
$3.00 per square foot in year 6. There are no commissions or tenant
improvements paid on the new lease. The balance of the building is leased
to five credit-worthy tenants. The building features a cafeteria and
fitness center.
<PAGE>
OFFICE BUILDING SALE
================================================================================
I-4 Continued
The income durability is good, with limited rollover through the year
2001. The stabilized capitalization rate of 10.01 percent is derived from
the buyer's proforma. Their indicated cash-on-cash return was 9.1 percent.
The buyer indicated that they were not the highest bidder on this
sale-leaseback transaction, but were finally selected based on their
ability to manage the building. Thus the transaction price per square foot
is considered somewhat low, and the return and yield rates high. The
listing broker reported an exposure time of less than three months.
The purchaser reported rent growth of 6% in years 1996 through 1998, and
4% thereafter, and basing the acquisition on an 11.75% IRR.
DCA4-4023
<PAGE>
Addenda
================================================================================
Income and Expense Statements
<PAGE>
6/05/97 RFP2 - COMMONWEALTH ATLANTIC PROP - FRO270-D PAGE 8
16:49:44 TWODOGSS1 V950623 AWHITE
ACCOUNT LEUEL CASH FLOW WITH COST CODES
Report CASHFL10 Plaza 1900 - Land CONSOL 100 %
Number 003 December 31, 1994 C12 94 (01..12)
<TABLE>
<CAPTION>
------------ Current Month------------ ------------ Year to Date -------------
ACTUAL Variance ACTUAL Variance
- --------------------------------------------- ------------ --------- ------------- ------------ ------------- -------------
Revenue
<C> <C> <C> <C> <C> <C> <C> <C>
400-00 Land Rent 40,500.00 0.00 40,500.00 475,690.06 0.00 475,690.06
419-99 Mgmt Fee Income - Inside 97,385.44- 0.00 97,395.44- 0.00 0.00 0.00
- --------------------------------------------- ------------- --------- ------------- ------------ ------------- -------------
TOTAL Revenue 56,885.44- 0.00 56,885.44- 475,690.06 0.00 475,690.06
Operating Expenses
500-05 Property Tax-Developed Prop. 2,905.07- 0.00 2,905.07 48,342.28- 0.00 48,342.28-
- --------------------------------------------- ------------- --------- ------------- ------------ ------------- -------------
TOTAL Operating Expenses 2,905.07- 0.00 2,905.07- 48,342.28- 0.00 48,342.28-
- --------------------------------------------- ------------- --------- ------------- ------------ ------------ -------------
Net Operating Income 59,790.51- 0.00 59,790.5l- 427,347.78 0.00 427,347.78
Other Operating Sources (Uses)
205-00 Accrued Real Estate Taxes 35,497.30 0.00 35,497.30 50,000.00 0.00 50,000.00
- --------------------------------------------- ------------- --------- ------------- ------------ ------------- -------------
TOTAL Other Operating Sources (Uses) 35,497.30 0.00 35,497.30 50,000.00 0.00 5O,000.00
- --------------------------------------------- ------------- --------- ------------- ------------ ------------- -------------
Cash Flow From Operations 24,293.21- 0.00 24,293.21- 477,347.78 0.00 477,347.78
Investment in Property and Partnerships
- --------------------------------------------- ------------- --------- ------------- ------------ ------------- -------------
TOTAL Investment in Property and Partnerships 0.00 0.00 0.00 0.00 0.00 0.00
Other Sources (Uses)
305-00 Retained Earnings 587,532.37- 0.00 587,532.37- 587,532.37- 0.00 587,532.37-
- --------------------------------------------- ------------- --------- ------------- ------------ ------------- -------------
TOTAL Other Sources (Uses) 587,532.37- 0.00 587,532.37- 587,532.37- 0.00 587,532.37-
============================================= ============= ========= ============= ============ ============= =============
Cash Flow (Deficit) 611,825.58- 0.00 611,825.58- 110,184.59- 0.00 11O,184.59-
</TABLE>
<PAGE>
6/05/97 RFP2 - COMMUNMEALTH ATLANTIC PROP - FRO270-D PAGE 9
16:49:44 TWOD0GSS1 U950623 AWHITE
ACCOUNT LEVEL CASH FLOM MITH COST CODES
Report CASHFL10 Plaza 1700 - Land CONSUL 100 %
Number 003 December 31, 1994 C12 94 (01..12)
<TABLE>
<CAPTION>
------------- Current Month -------------- ------------ Year to Date -----------
ACTUAL Variance ACTUAL Variance
- --------------------------------------------- ------------- ---------- -------------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Plaza 1900 - Land 611,825.58 0.00 611,825.58- 110,184.59 0.00 10,184.59-
</TABLE>
<PAGE>
6/05/97 RFP2 - COMMONWEALTH ATLANTIC PROP FRO270-D PAGE 10
16:19:44 TWODOGSS1 V950623 AWHITE
ACCOUNT LEVEL CASH FLOW WITH COST CODES
Report CASHFL10 Plaza 1900 - Building CONSUL 100 %
Number 003 December 31, 1994 C12 94 (01..12)
<TABLE>
<CAPTION>
------------- Current Month ------------- -------------- Year to Date -------------
ACTUAL Variance ACTUAL Variance
- ------------------------------------------ ------------- ------------- ------------- -------------- ------------- -------------
Revenue
<C> <C> <C> <C> <C> <C> <C>
120-00 Accounts Receivable Control 0.00 0.00 0.00 440.13- 0.00 440.13-
400-10 Base Rent 359,611.01 0.00 359,611.01 4,327,451.46 0.00 4,327,451.46
403-00 Operating Expense Reimbursmnts 106,201.11 0.00 106,201.11 302,954.89 0.00 302,954.89
434-00 Miscellaneous Income 0.00 0.00 0.00 1,075.00 0.00 1,075.00
- ------------------------------------------ ------------ ------------- ------------- -------------- ------------ ------------
TOTAL Revenue 465,812.12 0.00 465,812.12 4,631,041.22 0.00 4,631,041.22
Operating Expenses
500-05 Property Tax-Developed Prop. 24,225.67- 0.00 24,225.67- 215,362.00- 0.00 215,362.00-
520-00 Utilities - Water & Sewer 243.23- 0.00 243.23- 16,705.76- 0.00 16,705.76-
520-05 Utilities - Electricity 31,593.91- 0.00 31,593.91- 347,779.32- 0.00 347,779.32-
530-00 Janitorial - Building Contract 38,480.55- 0.00 38,480.55- 168,349.46- 0.00 168,349.46-
531-00 Trash Removal - Contract 1,099.55- 0.00 1,099.55- 17,046.05- 0.00 17,046.05-
532-05 Landscape - Exterior 2,373.88- 0.00 2,373.88- 44,659.57- 0.00 44,659.57-
532-10 Landscape - Interior 491.15- 0.00 491.15- 2,748.35- 0.00 2,748.35-
533-20 Electrical - Repairs 1,617.96- 0.00 1,617.96- 4,513.75- 0.00 4,513.75-
535-10 HUAC - Repairs 129.82- 0.00 129.82- 29,518.72- O.0O 29,518.72-
536-10 Parking - Striping & Repairs 0.00 0.00 0.00 128.50- 0.00 128.50-
537-02 Elevator - Repairs/Maintenince 2,389.34- 0.00 2,389.34- 14,159.92- 0.00 14,159.92-
537-10 Plumbing - Supplies & Repairs 0.00 0.00 0.00 76.66- 0.00 76.66-
537-15 Painting & Decorating 83.57- 0.00 83.57- 1,197.39- 0.00 1,197.39-
537-20 Communication Systems 9.95- 0.00 9.95- 1,765.93- 0.00 1,765.93-
537-21 Fire Alarm/Control Systems 223.20- 0.00 223.20- 7,809.61- 0.00 7,809.61-
537-26 Pest Control 92.00- 0.00 92.00- 598.00- 0.00 598.00-
537-31 Locks and keys 0.00 0.00 0.00 73.99- 0.00 73.99-
537-32 Uniforms 485.59- 0.00 485.59- 1,804.43- 0.00 1,804.43-
537-33 Signage 0.00 0.00 0.00 1,783.90 0.00 1,783.90
537-50 Other Repairs & Maintenance 3,455.46- 0.00 3,455.46- 13,573.82- 0.00 13,573.82-
541-05 Business Tax/License 0.00 0.00 0.00 24,701.57- 0.00 24,701.57-
648-00 Management Fees Exp - Outside 5,833.33- 0.00 5,833.33- 69,999.96- 0.00 69,999.96-
- ------------------------------------------ ------------ ------------- ------------- ------------- ------------ ------------
TOTAL Operating Expenses 112,828.16- 0.00 112,828.16- 980,788.86- 0.00 980,788.86-
</TABLE>
<PAGE>
6/05/97 RFP2 - COMMONWEALTH ATLANTIC PROP - FR0270-D PAGE 11
16:49:44 TWODOGSS1 V950623 AWHITE
ACCOUNT LEVEL CASH FLOW WITH COST CODES
Report CASHFL10 Plaza 1900 - Building CONSOL 100 %
Number 003 December 31, 1994 C12 94 (01..12)
<TABLE>
<CAPTION>
---------------- Current Month ------------
ACTUAL Variance
- -------------------------------------------- ---------------- ------------ -----------
<S> <C> <C> <C> <C>
General & Administrative Expenses
600-20 Prop. Mgmt & Maint. Salaries 6,740.95- 0.00 6,740.85-
600-22 PM & Maint. Group Insurance 0.00 0.00 0.00
620-00 Legal Fees 0.00 0.00 0.00
630-00 Advertising/Marketing Costs 0.00 0.00 0.00
630-50 Other Leasing Expense 0.00 0.00 0.00
640-04 G&A - Training 0.00 0.00 0.00
640-21 Office Equip. Purchase/Repair 0.00 0.00 0.00
640-24 Telephone Expenses 202.77- 0.00 202.77-
640-30 Freight, Postage and Delivery 0.00 0.00 0.00
640-50 Other G&A Expenses 549.63- 0.00 549.63-
648-99 Management Fees Exp - Inside 12,799.15- 0.00 12,799.15-
660-20 Interest Exp - Permanent Loan 110,000.00- 0.00 110,000.00-
661-05 Land Lease Expense 40,500.00- 0.00 40,500.00-
- -------------------------------------------- ---------------- ------------ -----------
TOTAL General & Administrative Expenses 170,792.40- 0.00 170,792.40-
- -------------------------------------------- ---------------- ------------ -----------
Net Operating Income 182,191.56 0.00 182,191.56
Other Operating Sources (Uses)
205-00 Accrued Real Estate Taxes 64,608.61- 0.00 64,608.61-
163-00 Prepaid Expenses 150,500.00- 0.00 150,500.00-
- -------------------------------------------- ---------------- ------------ -----------
TOTAL Other Operating Sources (Uses) 215,108.61- 0.00 215,108.61-
- -------------------------------------------- ---------------- ------------ -----------
Cash Flow From Operations 32,917.05- 0.00 32,917.05-
Investment in Property and Partnerships
133-50 Land Imports-Depreciating Bal. 450,048.00- 0.00 450,048.00-
140-00 Construction Work In Process 122,923.00- 0.00 122,923.00-
<CAPTION>
----------- Year to Date ------------
ACTUAL Variance
- -------------------------------------------- ----------- ----------- ------------
General & Administrative Expenses
<S> <C> <C> <C> <C>
600-20 Prop. Mgmt & Maint. Salaries 74,193.08- 0.00 74,193.08- A
600-22 PM & Maint. Group Insurance 126.00- 0.00 126.00- A
620-00 Legal Fees 1,293.80- 0.00 1,293.80- A
630-00 Advertising/Marketing Costs 9,714.58- 0.00 9,714.58- A
630-50 Other Leasing Expense 21.07- 0.00 21.07- A
640-04 G&A - Training 500.00- 0.00 500.00- A
640-21 Office Equip. Purchase/Repair 271.70- 0.00 271.70- A
640-24 Telephone Expenses 2,559.86- 0.00 2,559.86- A
640-30 Freight, Postage and Delivery 2,795.38- 0.00 2,795.38- A
640-50 Other G&A Expenses 4,631.31- 0.00 4,631.31- A
648-99 Management Fees Exp - Inside 110,184.59- 0.00 110,184.59- Fu
660-20 Interest Exp - Permanent Loan 1,320,000.00- 0.00 1,320,000.00- A
661-05 Land Lease Expense 486,000.00- 0.00 496,000.00- X
- -------------------------------------------- ----------- ----------- ----------
TOTAL General & Administrative Expenses 2,012,291.37- 0.00 2,012,291.37-
- -------------------------------------------- ----------- ----------- ----------
Net Operating Income 1,637,960.99 0.00 1,637,960.99
Other Operating Sources (Uses)
205-00 Accrued Real Estate Taxes 0.06- 0.00 0.06-
163-00 Prepaid Expenses 150,500.00- 0.00 150,500.00-
- -------------------------------------------- ----------- ----------- ----------
TOTAL Other Operating Sources (Uses) 150,500.06- 0.00 150,500.06-
- -------------------------------------------- ----------- ----------- ----------
Cash Flow From Operations 1,487,460.93 0.00 1,487,460.93
Investment in Property and Partnerships
133-50 Land Imports-Depreciating Bal. 450,048.00- 0.00 450,048.00-
140-00 Construction Work In Process 299,680.37- 0.00 299,680.37-
</TABLE>
<PAGE>
6/05/97 RFP2 - COMMONWEALTH ATLANTIC PROP - FR0270-D PAGE 12
16:49:44 TWODOGSS1 V950623 AWHITE
ACCOUNT LEVEL CASH FLOW WITH COST CODES
Report CASHFL10 Plaza 1900 - Building CONSOL 100 %
Number 003 December 31, 1994 C12 94 (01..12)
<TABLE>
<CAPTION>
---------- Current Month --------- ----------- Year to Date ------------
ACTUAL Variance ACTUAL Variance
- ------------------------------------------- -------------- ------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
140-50 Bldg & Inprvmts-Deprec Balance 2,624,481.00 0.00 2,624,481.00 2,624,481.00 0.00 2,624,481.00
145-00 Building Furniture & Fixtures 1,019.00- 0.00 1,019.00- 1,019.00- 0.00 1,019.00-
145-50 Bldg F&F - Depreciating Bal. 2,176,322.25- 0.00 2,176,322.25- 2,176,322.25- 0.00 2,176,322.25-
152-00 Equipment Adds-Current Year 1,019.00 0.00 1,019.00 0.00 0 00 0.00
152-50 Conputers/Equip Deprec Balance 1,889.25 0.00 1,889.25 1,889.25 0 00 1,889.25
160-50 Ppd Leasing-Amortizing Balance 2,814.40- 0.00 2,841.40- 2,841.40- 0.00 2,841.40-
170-00 Utility Deposit/Surety Bond 0.00 0.00 0.00 1,100.00- 0 00 1,100.00-
171-10 Deferred Charges 100,000.00 0.00 100,000.00 0.00 0 00 0.00
- ------------------------------------------- -------------- ------ ----------- ----------- ----------- ------------
TOTAL Investment in Property and Partnerships 25,764.40- 0.00 25,764.40- 304,640.77- 0.00 304,640.77-
Other Sources (Uses)
120-30 Other Trade Receivable 0.00 0.00 0.00 2,358.00- 0.00 2,358.00-
305-00 Retained Earnings 1,330,962.16- 0.00 1,330,962.16- 1,330,962.16- 0.00 1,330,962.16-
- ------------------------------------------- -------------- ------ ----------- ----------- ----------- ------------
TOTAL Other Sources (Uses) 1,330,962.16- 0.00 1,330,962.16- 1,333,320.16- 0.00 1,333,320.16-
=========================================== ============== ====== =========== =========== =========== =============
Cash Floss (Deficit) 1,389,643.61- 0.00 1,389,643.61- 150,500.00- 0.00 150,500.00-
=========================================== ============== ====== =========== =========== =========== =============
Plaza 1900 - Building 1,389,643.61 0.00 1,389,643.61- 150,500.00 0.00 150,500.00-
</TABLE>
<PAGE>
6/05/97 RFP2 - COMMONWEALTH ATLANTIC PROP - FR0270-D PAGE 12
16:47:53 TWODOGSS1 V950623 AWHITE
ACCOUNT LEVEL CASH FLOW WITH COST CODES
Report CASHFL10 Plaza 1900 - Building CONSOL 100 %
Number 003 December 31, 1995 C12 95 (01..12)
<TABLE>
<CAPTION>
-------------- Current Month ----------- ----------- Year to Date ------------
ACTUAL BUDGET Variance ACTUAL BUDGET Variance
- ------------------------------------------- -------------- ---------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue
400-00 Land Rent 40,500.00 41,500.00 1,000.00- 486,000.00 498,000.00 12,000.00-
- ------------------------------------------- -------------- ---------- ----------- ----------- ----------- ------------
TOTAL Revenue 10,500.00 41,500.00 1,000.00- 486,000.00 498,000.00 12,000.00-
Operating Expenses
500-05 Property Tax-Developed Prop. 0.00 0.00 0.00 48,342.29- 0.00 48,342.29-
- ------------------------------------------- -------------- ---------- ----------- ----------- ----------- ------------
TOTAL Operating Expenses 0.00 0.00 0.00 48,342.29- 0.00 48,342.29-
General & Administrative Expenses
620-00 538-043 Leasing Legal 0.00 0.00 0.00 556.50- 0.00 556.50-
620-00 Legal Fees 0.00 0.00 0.00 556.50- 0.00 556.50-
640-30 Freight, Postage and Delivery 0.00 0.00 0.00 16.00- 0.00 16.00-
- ------------------------------------------- -------------- ---------- ----------- ----------- ----------- ------------
TOTAL General & Administrative Expenses 0.00 0.00 0.00 572.50- 0.00 572.50-
- ------------------------------------------- -------------- ---------- ----------- ----------- ----------- ------------
Net Operating Incone 40,500.00 41,500.00 1,000.00- 437,085.21 498,000.00 60,914.79-
Other Operating Sources (Uses)
- ------------------------------------------- -------------- ---------- ----------- ----------- ----------- ------------
TOTAL Other Operating Sources (Uses) 0.00 0.00 0.00 0.00 0.00 0.00
- ------------------------------------------- -------------- ---------- ----------- ----------- ----------- ------------
Cash Flow From Operations 40,500.00 41,500.00 1,000.00- 437,085.21 498,000.00 60,914.79-
Investment in Property and Partnerships
- ------------------------------------------- -------------- ---------- ----------- ----------- ----------- ------------
TOTAL Investment in Property and Partnerships 0.00 0.00 0.00 0.00 0.00 0.00
Other Sources (Uses)
</TABLE>
<PAGE>
6/05/97 RFP2 - COMMONWEALTH ATLANTIC PROP - FR0270-D PAGE 13
16:47:53 TWODOGSS1 V950623 AWHITE
ACCOUNT LEVEL CASH FLOW WITH COST CODES
Report CASHFL10 Plaza 1900 - Land CONSOL 100 %
Number 003 December 31, 1995 C12 95 (01..12)
<TABLE>
<CAPTION>
---------------- Current Month ----------------
ACTUAL BUDGET Variance
- ---------------------------------------------------- ---------------- ---------------- ----------------
- ---------------------------------------------------- ---------------- ---------------- ----------------
<S> <C> <C> <C>
TOTAL Other Sources (Uses) 0.00 0.00 0.00
==================================================== ================ ================ ================
Cash Flow (Deficit) 40,500.00 41,500.00 1,000.00-
==================================================== ================ ================ ================
Plaza 1900 - Land 40,500.00- 41,500.00- 1,000.00-
<CAPTION>
---------------- Year to Date ---------------
ACTUAL BUDGET Variance
- ---------------------------------------------------- ---------------- ---------------- ----------------
- ---------------------------------------------------- ---------------- ---------------- ----------------
<S> <C> <C> <C>
TOTAL Other Sources (Uses) 0.00 0.00 0.00
==================================================== ================ ================ ================
Cash Flow (Deficit) 437,085.21 498,000.00 60,914.79-
==================================================== ================ ================ ================
Plaza 1900 - Land 437,085.21- 498,000.00- 60,914.79-
</TABLE>
<PAGE>
6/05/97 RFP2 - COMMONWEALTH ATLANTIC PROP - FR0270-D PAGE 14
16:47:53 TWODOGSS1 V950623 AWHITE
ACCOUNT LEVEL CASH FLOW WITH COST CODES
Report CASHFL10 Plaza 1900 - Building CONSOL 100 %
Number 003 December 31, 1995 C12 95 (01..12)
<TABLE>
<CAPTION>
-------------- Current Month ----------- ----------- Year to Date ------------
ACTUAL BUDGET Variance ACTUAL BUDGET Variance
- ------------------------------------------- -------------- ---------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue
400-10 Base Rent 364,962.17 364,963.00 0.83- 4,369,968.18 4,369,974.00 5.82-
403-00 Operating Expense Reinbursnnts 0.00 426.00 426.00- 0.00 5,112.00 5,112.00-
403-04 Exp Reirib Electricity/Gas 26,796.96 29,730.00 2,933.04- 324,117.55 365,433.00 41,315.45-
403-06 Exp Reinb - Miscellaneous 0.00 0.00 0.00 487.26 0.00 487.26
405-05 Tenant Direct Bulback Incone 0.00 0.00 0o00 1,075.70 0.00 1,075.70
434-00 Miscellaneous Incone 0.00 0.00 0.00 500.00 0.00 500.00
- ------------------------------------------- -------------- ---------- ----------- ------------ ------------ ------------
TOTAL Revenue 391,759.13 395,119.00 3,359.87- 4,696,148.69 4,740,519.00 44,370.31-
Operating Expenses
500-05 Property Tax-Developed Prop. 0.06- 22,597.36- 22,597.30 220,511.18- 271,168.32- 50,657.14
500-50 Property Tax-Other 0.00 0.00 0.00 0.00 11,267.00- 11,267.00
510-00 Insurance - Unbrella 0.00 0.00 0.00 0.00 2,500.00- 2,500.00
510-10 Insurance - Property Package 12,070.64- 0.00 12,070.64- 12,070.64- 0.00 12,070.64-
510-20 Insurance - Fire/Extended Cvge 0.00 0.00 0.00 0.00 12,316.00- 12,316.00
510-30 Insurance - Boiler 0.00 0.00 0.00 0.00 1,678.00- 1,678.00
520-00 Utilities - Water & Sewer 0.00 0.00 0.00 15,933.16- 14,520.00- 1,413.16
520-05 Utilities - Electricity 30,281.13- 29,686.00- 595.13- 359,876.80- 363,810.00- 3,933.20
520-10 Utilities - Gas 0.00 0.00 0.00 175.83- 0.00 175.83-
520-15 Utilities - Fuel Oil 0.00 0.00 0.00 .00 400.00- 400.00
520-50 Utilities - Other 0.00 135.00- 135.00 750.00- 1,620.00- 870.00
530-00 Janitorial - Building Contract 31,383.88- 12,961.00- 18,422.88- 150,315.69- 154,332.00- 4,016.31
530-10 Janitorial - Window Washing 0.00 0.00 0.00 7,600.00- 3,960.00- 3,640.00
530-20 Janitorial - Carpet Cleaning 0.00 600.00- 600.00 397.76- 7,200.00- 6,802.24
530-30 Janitorial - Supplies 0.00 10.00- 10.00 0.00 120.00- 120.00
531-00 Trash Removal - Contract 1,173.38- 693.00- 480.38- 15,662.99- 8,196.00- 7,466.99-
531-50 Trash Removal - Other 0.00 0.00 0.00 660.00- 0.00 660.00-
532-00 Landscape - Park Maintenance 0.00 0.00 0.00 306.19- 0.00 306.19-
532-05 Landscape - Exterior 1,476.66- 1,426.00- 50.66- 16,988.03- 18,919.00- 2,029.97
532-10 Landscape - Interior 177.65- 1,678.00- 1,500.35 2,471.15- 3,636.00- 1,164.85
532-15 Landscape - Irrigation 0.00 0.00 0.00 843.78- 1,600.00- 756.22
</TABLE>
<PAGE>
6/05/97 RFP2 - COMMONWEALTH ATLANTIC PROP - FR0270-D PAGE 15
16:47:53 TWODOGSS1 V950623 AWHITE
ACCOUNT LEVEL CASH FLOW WITH COST CODES
Report CASHFL10 Plaza 1900 - Building CONSOL 100 %
Number 003 December 31, 1995 C12 95 (01..12)
<TABLE>
<CAPTION>
-------------- Current Month ------------ ------------- Year to Date ------------
ACTUAL BUDGET Variance ACTUAL BUDGET Variance
- -------------------------------------- -------------- ------------- ------------ ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
532-20 Landscape - Seasonal Color-Ext 0.00 800.00- 800.00 652.00- 7,800.00- 7,148.00
532-25 Landscape - Seasonal Color-Int 313.50- 0.00 313.50- 313.50- 0.00 313.50-
532-50 Landscape - Other 300.00- 700.00- 400.00 5,658.88- 6,900.00- 1,241.12
533-00 Electrical - Supplies 0.00 0.00 0.00 480.28- 0.00 480.28-
533-20 Electrical - Repairs 185.50- 100.00- 85.50- 1,174.50- 5,813.00- 4,638.50
533-50 Electrical - Other 0.00 0.00 0.00 1,350.00- 0.00 1,350.00-
534-00 Lighting - Supplies 180.26- 400.00- 219.74 4,694.29- 4,800.00- 105.71
534-10 Lighting - Repairs 0.00 0.00 0.00 7,032.43- 0.00 7,032.43-
535-00 HVAC - Supplies 90.92- 100.00- 9.08 4,361.93- 8,860.00- 4,498.07
535-05 HVAC - Contract 0.00 243.00- 243.00 8,163.50- 9,336.00- 1,172.50
535-10 HVAC - Repairs 281.11- 1,000.00- 718.89 4,988.09- 12,000.00- 7,011.91
535-20 HVAC - Chillers 243.23- 0.00 243.23- 2,407.12- 0.00 2,407.12-
535-50 HVAC - Other 0.00 0.00 0.00 2,943.17- 0.00 2,943.17-
536-00 Parking - Sweeping 0.00 0.00 0.00 1,350.00- 1,500.00- 150.00
536-10 Parking - Striping & Repairs 0.00 100.00- 100.00 3,620.00- 1,200.00- 2,420.00-
536-50 Parking - Other 0.00 0.00 0.00 0.00 1,500.00- 1,500.00
537-02 Elevator - Repairs/Maintenance 120.00- 50.00- 70.0- 5,177.10- 7,300.00- 2,122.90
537-03 Elevator - Contract 996.88- 959.00- 37.88- 10,813.36- 11,396.00- 582.61
537-05 Elevator - Other 2,895.00- 0.00 2,895.00- 4,382.00- 1,487.00- 2,895.00-
537-10 Plumbing - Supplies & Repairs 68.23- 175.00- 106.77 1,803.50- 2,100.00- 296.50
537-11 Restroom Supplies 0.00 0.00 0.00 705.75- 0.00 705.75-
537-15 Painting & Decorating 0.00 50.00- 50.00 1,803.87- 1,000.00- 803.87-
537-16 Walk-off Mats 196.14- 0.00 196.14- 1,698.78- 0.00 1,698.78-
537-17 Carpets/Floors-Repairs & Maint 0.00 50.00- 50.00 3,448.72- 3,600.00- 151.28
537-20 Communication Systems 21.90- 30.00- 8.10 234.95- 360.00- 125.05
537-21 Fire Alarm/Control Systems 770.33- 0.00 770.33- 4,268.73- 5,640.00- 1,371.27
537-22 Energy Management Systems 150.00- 0.00 150.00- 2,925.25- 7,668.00 4,742.75
537-25 Snow Removal 1,536.56- 650.00- 886.56- 8,830.66- 4,550.00- 4,280.66-
537-26 Pest Control 46.00- 45.00- 1.00- 506.00- 540.00- 34.00
537-30 Supplies and Tools 153.05- 125.00- 28.05- 1,380.81- 1,500.00- 119.19
537-31 Locks and Keys 0.00 50.00- 50.00 268.64- 600.00- 331.36
537-32 Uniforms 324.75- 136.00- 188.75- 1,680.68- 1,632.00- 48.68-
</TABLE>
<PAGE>
6/05/97 RFP2 - COMMONWEALTH ATLANTIC PROP - FR0270-D PAGE 16
16:47:53 TWODOGSS1 V950623 AWHITE
ACCOUNT LEVEL CASH FLOW WITH COST CODES
Report CASHFL10 Plaza 1900 - Building CONSOL 100 %
Number 003 December 31, 1995 C12 95 (01..12)
<TABLE>
<CAPTION>
------------ Current Month ----------- ------------- Year to Date -----------
ACTUAL BUDGET Variance ACTUAL BUDGET Variance
- --------------------------------------- ------------ ------------- ----------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
537-33 Signage 2,358.00- 0.00 2,358.00- 4,716.00- 2,200.00- 2,516.00-
537-35 Roof Repairs & Maintenance 0.00 0.00 0.00 1,450.00- 0.00 1,450.00-
537-40 Tenant Direct Billback Expense 95.00- 0.00 95.00- 1,478.10- 4,000.00- 2,521.60
537-50 Other Repairs & Maintenance 4,252.00- 465.00- 3,787.00- 7,674.36- 15,191.00- 7,516.64
541-05 Business Tax/License 0.00 0.00 0.00 12,037.91- 0.00 12,037.91-
648-00 Managenent Fees Exp - Outside 6,666.67- 6,667.00- 0.33 80,000.04- 80,004.00- 3.96
- --------------------------------------- ------------ ------------- ----------- ------------- ------------- -----------
TOTAL Operating Expenses 99,808.43- 82,681.36- 16,127.07- 1,010,939.10- 1,087,719.32- 76,779.92
General & Administrative Expenses
600-20 Prop. Mgmt & Maint. Salaries 5,027.81- 5,925.00- 897.19 63,112.10- 71,100.00- 7,987.60
600-21 PM & Maint. Payroll Taxes 358.18- 445.00- 86.52 4,370.19- 5,340.00- 969.51
600-22 PM & Maint. Group Insurance 275.83- 377.00- 101.17 3,344.01- 4,524.00- 1,179.96
600-23 PM & Maint. Workers' Comp. 0.00 0.00 0.00 3,498.00- 2,766.00- 732.00-
609-15 Employee Education Expenses 23.71- 805.00- 781.29 115.11- 1,710.00- 1,594.89
620-00 538-043 Leasing Legal 0.00 0.00 0.00 330.00- 0.00 330.00-
620-00 Legal Fees 0.00 0.00 0.00 330.00- 0.00 330.00-
630-16 Leasing-Meals & Entertainment 0.00 0.00 0.00 0.00 300.00- 300.00
630-18 Project Promotional Expense 1,433.99- 2,000.00- 566.01 10,834.35- 10,000.00- 834.35-
640-02 G&A - Mileage Reimbursement 234.91- 30.00- 204.91- 827.98- 360.00- 467.98-
640-03 G&A - Meals & Entertainment 0.00 0.00 0.00 50.79- 0.00 50.79-
640-20 Stationery and Office Supplies 0.00 50.00- 50.00 224.14- 600.00- 375.86
640-24 Telephone Expenses 192.83- 190.00- 2.83- 2,458.40- 2,280.00- 178.40-
640-30 Freight, Postage and Delivery 21.75- 0.00 21.75- 479.25- 0.00 479.25-
648-99 Management Fees Exp - Inside 3,795.45 9,138.00- 12,933.45 107,845.91- 409,613.00- 1,767.09
660-20 Interest Exp - Permanent Loan 110,000.00- 110,000.00- 0.00 1,320,000.00- 1,320,000 00- 0.00
661-05 Land Lease Expense 40,500.00- 41,500.00- 1,000.00 486,000.00- 498,000.00- 12,000.00
661-15 Casualty (Loss) Income 0.00 0.00 0.00 5,600.00- 0.00 5,600.00-
- --------------------------------------- ------------ ------------- ----------- ------------- ------------- -----------
TOTAL General & Administrative Expenses 154,273.89- 170,460.00- 16,186.11 2,009,090.86- 2,026,593.00- 17,502.14
- --------------------------------------- ------------ ------------- ----------- ------------- ------------- -----------
Net Operating Income 138,676.81 141,977.64 3,300.83- 1,676,118.43 1,626,206.68 49,911.75
</TABLE>
<PAGE>
6/05/97 RFP2 - COMMONWEALTH ATLANTIC PROP - FR0270-D PAGE 17
16:47:53 TWODOGSS1 V950623 AWHITE
ACCOUNT LEVEL CASH FLOW WITH COST CODES
Report CASHFL10 Plaza 1900 - Building CONSOL 100 %
Number 003 December 31, 1995 C12 95 (01..12)
<TABLE>
<CAPTION>
------------- Current Month ------------- ------------- Year to Date -------------
ACTUAL BUDGET Variance ACTUAL BUDGET Variance
- -------------------------------------- ------------- ------------- ------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Other Operating Sources (Uses)
205-00 Accrued Real Estate Taxes 0.06 120,915.41- 120,915.70 0.06 15,857.68- 15,857.74
220-00 Interest Payable 110,000.00- 0.00 110,000.00- 110,000.00- 0.00 110,000.00-
163-00 Prepaid Expenses 0.00 0.00 0.00 150,500.00 0.00 150,500.00
- -------------------------------------- ------------- ------------- ------------- ------------- ------------ -------------
TOTAL Other Operating Sources (Uses) 109,999.94- 120,915.64- 10,915.70 40,500.06 15,857.68- 56,357.74
- -------------------------------------- ------------- ------------- ------------- ------------- ------------ -------------
Cash Flow From Operations 28,676.87 21,062.00 7,614.87 1,716,618.49 1,610,349.00 106,269.49
Investment in Property and
Partnerships
140-00 226-007 Shell Work 0.00 0.00 0.00 31,782.00- 0.00 31,782.00-
140-00 234-011 Special Finishes -
ADA Imprv 28,134.00- 0.00 28,134.00- 43,493.53- 0.00 43,493.53-
140-00 Construction Work In Process 20,541,746.45- 0.00 20,541,746.45- 20,588,887.98- 102,605.00- 20,486,282.98-
140-50 Bldg & Imprvmts-Deprec Balance 20,513,612.45 0.00 20,513,612.45 20,513,612.45 0.00 20,513,612.45
145-00 430-019 Doors & Hardware 49,950.00- 0.00 49,950.00- 49,950.00- 0.00 49,950.00-
115-00 Building Furniture & Fixtures 49,950.00- 0.00 49,950.00- 49,950.00- 0.00 49,950.00-
171-20 Inventory 49,950.00 0.00 49,950.00 49,950.00 0.00 49,950.00
- -------------------------------------- ------------- ------------- ------------- ------------- ------------ -------------
TOTAL Investment in Property
and Partnerships 28,134.00- 0.00 28,134.00- 75,275.53- 102,605.00- 27,329.47
Other Sources (Uses)
120-30 Other Trade Receivable 2,358.00 0.00 2,358.00 2,358.00 0.00 2,358.00
200-00 Accounts Payable Control 133,357.65 0.00 133,357.65 133,357.65 0.00 133,357.65
- -------------------------------------- ------------- ------------- ------------- ------------- ------------ -------------
TOTAL Other Sources (Uses) 135,715.65 0.00 135,715.65 135,715.65 0.00 135,715.65
- -------------------------------------- ------------- ------------- ------------- ------------- ------------ -------------
Cash Flow (Deficit) 136,258.52 21,062.00 115,196.52 1,777,058.61 1,507,744.00 269,314.61
- -------------------------------------- ------------- ------------- ------------- ------------- ------------ -------------
Plaza 1900 - Building 136,258.52- 21,062.00- 115,196.52 1,777,058.61- 1,507,744.00- 269,314.61
</TABLE>
<PAGE>
6/05/97 RFP2 - COMMONWEALTH ATLANTIC PROP - FR0270-D PAGE 21
16:45:09 TWODOGSS1 V950623 AWHITE
ACCOUNT LEVEL CASH FLOW WITH COST CODES
Report CASHFL10 Plaza 1900 - Land CONSOL 100 %
Number 003 December 31, i996 C12 96 (01..12)
<TABLE>
<CAPTION>
------------------- Current Month ----------------
ACTUAL BUDGET Variance
- ----------------------------------------------------- ------------------- ---------------- ----------------
<C> <C> <C> <C>
Revenue
400-00 Land Rent 40,500.00 40,500.00 0.00
- ----------------------------------------------------- ------------------- ---------------- ----------------
TOTAL Revenue 40,500.00 40,500.00 0.00
Operating Expenses
- ----------------------------------------------------- ------------------- ---------------- ----------------
TOTAL Operating Expenses 0.00 0.00 0.00
General & Administrative Expenses
- ----------------------------------------------------- ------------------- ---------------- ----------------
TOTAL General & Administrative Expenses 0.00 0.00 0.00
- ----------------------------------------------------- ------------------- ---------------- ----------------
Net Operating Income 40,500.00 40,500.00 0.00
Other Operating Sources (Uses)
- ----------------------------------------------------- ------------------- ---------------- ----------------
TOTAL Other Operating Sources (Uses) 0.00 0.00 0.00
- ----------------------------------------------------- ------------------- ---------------- ----------------
Cash Flow From Operations 40,500.00 40,500.00 0.00
Investment in Property and Partnerships
- ----------------------------------------------------- ------------------- ---------------- ----------------
TOTAL Investment in Property and Partnerships 0.00 0.00 0.00
Other Sources (Uses)
- ----------------------------------------------------- ------------------- ---------------- ----------------
TOTAL Other Sources (Uses) 0.00 0.00 0.00
===================================================== =================== ================ ================
Cash Flow (Deficit) 40,500.00 40,500.00 0.00
===================================================== =================== ================ ================
<CAPTION>
---------------- Year to Date ----------------
ACTUAL BUDGET Variance
- ----------------------------------------------------- ---------------- ---------------- ----------------
<C> <C> <C> <C>
Revenue
400-00 Land Rent 486,000.00 486,000.00 0.00
- ----------------------------------------------------- ---------------- ---------------- ----------------
TOTAL Revenue 486,000.00 486,000.00 0.00
Operating Expenses
- ----------------------------------------------------- ---------------- ---------------- ----------------
TOTAL Operating Expenses 0.00 0.00 0.00
General & Administrative Expenses
- ----------------------------------------------------- ---------------- ---------------- ----------------
TOTAL General & Administrative Expenses 0.00 0.00 0.00
- ----------------------------------------------------- ---------------- ---------------- ----------------
Net Operating Income 486,000.00 486,000.00 0.00
Other Operating Sources (Uses)
- ----------------------------------------------------- ---------------- ---------------- ----------------
TOTAL Other Operating Sources (Uses) 0.00 0.00 0.00
- ----------------------------------------------------- ---------------- ---------------- ----------------
Cash Flow From Operations 486,000.00 486,000.00 0.00
Investment in Property and Partnerships
- ----------------------------------------------------- ---------------- ---------------- ----------------
TOTAL Investment in Property and Partnerships 0.00 0.00 0.00
Other Sources (Uses)
- ----------------------------------------------------- ---------------- ---------------- ----------------
TOTAL Other Sources (Uses) 0.00 0.00 0.00
===================================================== ================ ================ ================
Cash Flow (Deficit) 486,000.00 486,000.00 0.00
===================================================== ================ ================ ================
</TABLE>
<PAGE>
6/05/97 RFP2 - COMMONWEALTH ATLANTIC PROP - FR0270-D PAGE 22
16:45:09 TWODOGSS1 V950623 AWHITE
ACCOUNT LEVEL CASH FLOW WITH COST CODES
Report CASHFL10 Plaza 1900 - Land CONSOL 100 %
Number 003 December 31, 1996 C12 96 (01..12)
<TABLE>
<CAPTION>
---------------- Current Month ----------------
ACTUAL BUDGET Variance
-------------------------------------------- ---------------- ---------------- ----------------
<S> <C> <C> <C>
Plaza 1900 - Land 40,500.00- 40,500.00- 0.00
<CAPTION>
---------------- Year to Date ----------------
ACTUAL BUDGET Variance
-------------------------------------------- ---------------- ---------------- ----------------
<S> <C> <C> <C>
Plaza 1900 - Land 486,000.00- 486,000.00- 0.00
</TABLE>
<PAGE>
6/05/97 RFP2 - COMMONWEALTH ATLANTIC PROP - FR0270-D PAGE 23
16:45:09 TWODOGSS1 V950623 AWHITE
ACCOUNT LEVEL CASH FLOW WITH COST CODES
Report CASHFL10 Plaza 1900 - Building CONSOL 100 %
Number 003 December 31, 1996 C12 96 (01..12)
<TABLE>
<CAPTION>
----------- Current Month ------------- -------------- Year to Date -----------
ACTUAL BUDGET Variance ACTUAL BUDGET Variance
- -------------------------------------- ----------- ------------- ------------- -------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue
120-00 Accounts Receivable Control 0.00 0.00 0.00 92.67- 0.00 92.67-
400-10 Base Rent 370,604.66 367,563.00 3,041.66 4,437,390.72 4,400,892.00 36,498.72
403-00 Operating Expense Reimbursmnts 0.00 1,047.00 1,047.00- 0.00 12,564.00 12,564.00-
403-04 Exp Reimb - Electricity/Gas 24,481.30 27,777.00 3,295.70- 250,514.18 358,323.00 101,808.82-
403-06 Exp Reimb - Miscellaneous 0.00 0.00 0.00 30.66 0.00 30.66
405-05 Tenant Direct Billback Income 936.39 0.00 936.39 7,854.09 8,000.00 115.91-
434-00 Miscellaneous Income 150.00 150.00 0.00 1,575.00 1,800.00 225.00-
- -------------------------------------- ----------- ------------- ------------- -------------- ------------- -----------
TOTAL Revenue 396,172.35 396,537.00 364.65- 4,697,271.98 4,781,579.00 84,307.02-
Operating Expenses
500-05 Property Tax-Developed Prop. 27,010.48- 137,503.00- 110,492.52 324,125.81- 275,006.00- 49,119.81-
510-10 Insurance - Property Package 0.00 0.00 0.00 14,595.02- 12,327.46- 2,267.56-
520-00 Utilities - Water & Sewer 0.00 2,879.00- 2,879.00 17,653.12- 12,120.00- 5,533.12-
520-05 Utilities - Electricity 30,779.44- 27,777.00- 3,002.44- 351,980.33- 358,323.00- 6,342.67
520-15 Utilities - Fuel Oil 0.00 0.00 0.00 0.00 400.00- 400.00
520-50 Utilities - Other 300.00- 150.00- 150.00- 1,650.00- 1,800.00- 150.00
530-00 Janitorial - Building Contract 13,364.82- 13,504.00- 139.18 155,133.69- 162,048.00- 6,914.31
530-10 Janitorial - Window Washing 0.00 0.00 0.00 3,915.30- 4,740.00- 824.70
530-20 Janitorial - Carpet Cleaning 0.00 600.00- 600.00 0.00 7,200.00- 7,200.00
530-30 Janitorial - Supplies 0.00 10.00- 10.00 0.00 120.00- 120.00
531-00 Trash Removal - Contract 2,058.00- 1,220.00- 838.00- 13,069.90- 14,405.00- 1,335.10
532-05 Landscape - Exterior 1,525.83- 1,426.00- 99.83- 18,380.79- 14,260.00- 4,120.79-
532-10 Landscape - Interior 877.80- 1,678.00- 800.20 2,654.30- 3,636.00- 981.70
532-15 Landscape - Irrigation 0.00 0.00 0.00 870.38- 1,600.00- 729.62
532-20 Landscape - Seasonal Color-Ext 0.00 800.00- 800.00 3,459.00- 7,800.00- 4,341.00
532-50 Landscape - Other 300.00- 300.00- 0.00 3,600.00- 3,600.00- 0.00-
533-00 Electrical - Supplies 0.00 0.00 0.00 116.88- 0.00 116.88-
533-20 Electrical - Repairs 0.00 100.00- 100.00 0.00 1,200.00- 1,200.00
534-00 Lighting - Supplies 513.36- 600.00- 86.64 4,486.81- 7,200.00- 2,713.19
535-00 HVAC - Supplies 0.00 100.00- 100.00 7,387.34- 10,260.00- 2,872.66
</TABLE>
<PAGE>
6/05/97 RFP2 - COMMONWEALTH ATLANTIC PROP - FR0270-D PAGE 24
16:45:09 TWODOGSS1 V950623 AWHITE
ACCOUNT LEVEL CASH FLOW WITH COST CODES
Report CASHFL10 Plaza 1900 - Building CONSOL 100 %
Number 003 December 31, 1996 C12 96 (01..12)
<TABLE>
<CAPTION>
----------- Current Month ------------ -------------- Year to Date -------------
ACTUAL BUDGET Variance ACTUAL BUDGET Variance
- -------------------------------------- ----------- ------------- ------------ -------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
535-05 HVAC - Contract 510.78- 256.00- 254.78- 10,786.95- 9,658.00- 1,128.95-
535-10 HVAC - Repairs 256.70- 0.00 256.70- 8,662.93- 0.00 8,662.93-
535-20 HVAC - Chillers 0.00 0.00 0.00 1,627.40- 0.00 1,627.40-
535-50 HVAC - Other 0.00 0.00 0.00 80.55- 0.00 80.55-
536-00 Parking - Sweeping 0.00 0.00 0.00 950.00- 3,500.00- 2,550.00
536-10 Parking - Striping & Repairs 500.00- 100.00- 400.00- 500.00- 3,600.00- 3,100.00
536-20 Parking - Lighting 0.00 0.00 0.00 356.90- 0.00 356.90-
536-50 Parking - Other 0.00 0.00 0.00 0.00 4,000.00- 4,000.00
537-01 Elevator - Supplies 0.00 0.00 0.00 51.66- 0.00 51.66-
537-02 Elevator - Repairs/Maintenance 48.75- 50.00- 1.25 99.75- 2,600.00- 2,500.25
537-03 Elevator - Contract 1,830.00- 997.00- 833.00- 12,779.48- 11,964.00- 815.48-
537-05 Elevator - Other 0.00 0.00 0.00 426.27- 1,487.00- 1,060.73
537-10 Plumbing - Supplies & Repairs 136.95- 175.00- 38.05 2,708.43- 2,700.00- 8.43-
537-11 Restroom Supplies 0.00 0.00 0.00 1,777.23- 0.00 1,777.23-
537-15 Painting & Decorating 228.83- 50.00- 178.83- 228.83- 1,000.00- 771.17
537-16 Walk-off Mats 130.76- 265.00- 134.24 1,634.50- 3,180.00- 1,545.50
537-17 Carpets/Floors-Repairs & Maint 0.00 50.00- 50.00 0.00 3,600.00- 3,600.00
537-20 Communication Systems 22.95- 33.00- 10.05 260.30- 396.00- 135.70
537-21 Fire Alarm/Control Systems 196.00- 0.00 196.00- 4,983.71- 5,835.00- 851.29
537-22 Energy Management Systems 0.00 0.00 0.00 10,126.25- 8,100.00- 2,026.25-
537-25 Snow Removal 988.16- 1,050.00- 61.84 20,401.46- 7,450.00- 12,951.46-
537-26 Pest Control 92.00- 46.00- 46.00- 556.00- 552.00- 4.00-
537-30 Supplies and Tools 399.06- 125.00- 274.06- 3,662.38- 3,500.00- 162.38-
537-31 Locks and keys 0.00 50.00- 50.00 149.90- 600.00- 450.10
537-32 Uniforms 99.80- 136.00- 36.20 1,467.15- 1,632.00- 164.85
537-35 Roof Repairs & Maintenance 1,815.00- 0.00 1,815.00- 2,665.00- 1,500.00- 1,165.00-
537-36 Structural Repairs 0.00 0.00 0.00 3,552.50- 0.00 3,552.50-
537-40 Tenant Direct Billback Expense 1,455.80- 0.00 1,455.80- 4,954.18- 8,000.00- 3,045.82
537-50 Other Repairs & Maintenance 140.81- 500.00- 359.19 12,281.63- 8,000.00- 4,281.63-
541-05 Business Tax/License 0.00 0.00 0.00 12,216.55- 12,411.00- 194.45
541-15 Fines/Penalties 0.00 0.00 0.00 1,444.74- 0.00 1,444.74-
648-00 Management Fees Exp - Outside 0.00 6,667.00- 6,667.00 82,000.01- 80,004.00- 1,996.01-
</TABLE>
<PAGE>
6/05/97 RFP2 - COMMONWEALTH ATLANTIC PROP - FR0270-D PAGE 25
16:45:09 TWODOGSS1 V950623 AWHITE
ACCOUNT LEVEL CASH FLOW WITH COST CODES
Report CASHFL10 Plaza 1900 - Building CONSOL 100 %
Number 003 December 31, 1996 C12 96 (01..12)
<TABLE>
<CAPTION>
------------ Current Month ---------- ------------- Year to Date ------------
ACTUAL BUDGET Variance ACTUAL BUDGET Variance
- --------------------------------------- ------------ ------------- ---------- ------------- -------------- ------------
- --------------------------------------- ------------ ------------- ---------- ------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
TOTAL Operating Expenses 85,582.08- 199,197.00- 113,614.92 1,126,471.31- 1,083,314.46- 43,156.85-
General & Administrative Expenses
600-20 Prop. Mgmt & Maint. Salaries 0.00 5,925.00- 5,925.00 60,159.75- 71,100.00- 10,940.25
600-21 PM & Maint. Payroll Taxes 0.00 445.00- 445.00 4,444.80- 5,340.00- 895.20
600-22 PM & Maint. Group Insurance 0.00 315.00- 315.00 3,434.88- 3,780.00- 345.12
600-23 PM & Maint. Workers' Comp. 0.00 0.00 0.00 1,711.00- 2,766.00- 1,055.00
609-15 Employee Education Expenses 0.00 400.00- 400.00 111.21- 2,025.00- 1,913.79
620-00 538-043 Leasing Legal 0.00 0.00 0.00 903.00- 0.00 903.00-
620-00 Legal Fees 0.00 0.00 0.00 903.00- 0.00 903.00-
620-50 Other Professional Fees 1,031.00- 0.00 1,031.00- 2,086.80- 0.00 2,086.80-
630-16 Leasing-Meals & Entertainment 0.00 50.00- 50.00 0.00 300.00- 300.00
630-18 Project Promotional Expense 0.00 2,000.00- 2,000.00 10,640.99- 10,000.00- 640.99-
640-02 G&A - Mileage Reimbursement 0.00 40.00- 40.00 837.56- 480.00- 357.56-
640-03 G&A - Meals & Entertainment 0.00 0.00 0.00 18.35- 0.00 18.35-
640-20 Stationery and Office Supplies 0.00 50.00- 50.00 299.85- 600.00- 300.15
640-24 Telephone Expenses 198.93- 205.00- 6.07 2,451.57- 2,460.00- 8.43
640-30 Freight, Postage and Delivery 0.00 30.00- 30.00 75.60- 360.00- 284.40
648-99 Management Fees Exp - Inside 15,846.89- 9,245.00- 6,601.89- 105,890.87- 110,940.00- 5,049.13
660-20 Interest Exp - Permanent Loan 128,333.33- 128,333.00- 0.33- 1,539,999.96- 1,539,996.00- 3.96-
661-05 Land Lease Expense 40,500.00- 40,500.00- 0.00 486,000.00- 486,000.00- 0.00
- --------------------------------------- ------------ -------------- ---------- ------------- -------------- ------------
TOTAL General & Administrative Expenses 185,910.15- 187,538.00- 1,627.85 2,219,066.19- 2,236,147.00- 17,080.81
- --------------------------------------- ------------ -------------- ---------- ------------- -------------- ------------
Net Operating Incone 124,680.12 9,802.00 114,878.12 1,351,734.48 1,462,117.54 110,383.06-
Other Operating Sources (Uses)
220-00 Interest Payable 0.00 0.00 0.00 128,333.33 0.00 128,333.33
163-00 Prepaid Expenses 27,010.48 0.00 27,010.48 0.00 0.00 0.00
- --------------------------------------- ------------ -------------- ---------- ------------- -------------- ------------
TOTAL Other Operating Sources (Uses) 27,010.18 0.00 27,010.48 128,333.33 0.00 128,333.33
</TABLE>
<PAGE>
6/05/97 RFP2 - COMMONWEALTH ATLANTIC PROP - FR0270-D PAGE 26
16:45:09 TWODOGSS1 V950623 AWHITE
ACCOUNT LEVEL CASH FLOW WITH COST CODES
Report CASHFL10 Plaza 1900 - Building CONSOL 100 %
Number 003 December 31, 1996 C12 96 (01..12)
<TABLE>
<CAPTION>
---------- Current Month -------------- ------------- Year to Date -------------
ACTUAL BUDGET Variance ACTUAL BUDGET Variance
- -------------------------------------- ---------- -------------- -------------- ------------- -------------- -------------
- -------------------------------------- ---------- -------------- -------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash Flow From Operations 151,690.60 9,802.00 141,888.60 1,480,067.81 1,462,117.54 17,950.27
Investment in Property and Partnerships
133-00 120-015 Landscape - Plant
Material 0.00 0.00 0.00 4,397.00- 0.00 4,397.00-
133-00 Land Improvements-Current Year 0.00 0.00 0.00 454,445.00- 0.00 454,445.00-
133-50 Land Impvmts-Depreciating Bal. 0.00 0.00 0.00 450,048.00 0.00 450,048.00
140-00 120-015 Landscape - Plant
Material 0.00 0.00 0.00 0.00 3,500.00- 3,500.00
140-00 210-003 Architect Fees - Base 0.00 0.00 0.00 1,055.80- 0.00 1,055.80-
140-00 226-027 Parking Deck/Concrete 0.00 0.00 0.00 31,029.00- 0.00 31,029.00-
140-00 230-003 HVAC & Plumbing 0.00 0.00 0.00 0.00 13,600.00- 13,600.00
140-00 234-011 Special Finishes -
ADA Imprv 0.00 0.00 0.00 33,102.00- 0.00 33,102.00-
140-00 Construction Work In Process 0.00 0.00 0.00 65,186.80- 17,100.00- 48,086.80-
145-00 Building Furniture & Fixtures 0.00 0.00 0.00 1,965,643.00- 0.00 1,965,643.00-
145-05 Building Computers & Equipment 0.00 0.00 0.00 210,679.25- 0.00 210,679.25-
145-50 Bldg F&F - Depreciating Bal. 0.00 0.00 0.00 2,176,322.25 0.00 2,176,322.25
160-00 Prepaid Leasing Costs-Curr Yr 0.00 0.00 0.00 2,841.40- 0.00 2,841.40-
160-50 Ppd Leasing-Amortizing Balance 0.00 0.00 0.00 2,841.40 0.00 2,841.40
170-00 Utility Deposit/Surety Bond 0.00 0.00 0.00 1,100.00 0.00 1,100.00
170-50 Other Deposits 0.00 0.00 0.00 1,100.00 0.00 1,100.00
- -------------------------------------- ---------- -------------- -------------- ------------- -------------- -------------
TOTAL Investment in Property and
Partnerships 0.00 0.00 0.00 67,383.80- 17,100.00- 50,283.80-
Other Sources (Uses)
200-00 Accounts Payable Control 0.00 0.00 0.00 133,357.65- 0.00 133,357.65-
- -------------------------------------- ---------- -------------- -------------- ------------- -------------- -------------
TOTAL Other Sources (Uses) 0.00 0.00 0.00 133,357.65- 0.00 133,357.65-
====================================== ========== ============== ============== ============= ============== =============
Cash Flow (Deficit) 151,690.60 9,802.00 141,888.60 1,279,326.36 1,445,017.54 165,691.18-
====================================== ========== ============== ============== ============= ============== =============
</TABLE>
<PAGE>
6/05/97 RFP2 - COMMONWEALTH ATLANTIC PROP - FR0270-D PAGE 27
16:45:09 TWODOGSS1 V950623 AWHITE
ACCOUNT LEVEL CASH FLOW WITH COST CODES
Report CASHFL10 Plaza 1900 - Building CONSOL 100 %
Number 003 December 31, 1996 C12 96 (01..12)
<TABLE>
<CAPTION>
----------------- Current Month ----------------
ACTUAL BUDGET Variance
- ---------------------------------------------------- ----------------- ----------------- ----------------
<S> <C> <C> <C>
Plaza 1900 - Building 151,690.60- 9,802.00- 141,888.60
<CAPTION>
---------------- Year to Date ----------------
ACTUAL BUDGET Variance
- ---------------------------------------------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Plaza 1900 - Building 1,279,326.36- 1,445,017.54- 165,691.18-
</TABLE>
<PAGE>
6/05/97 RFP2 - COMMONWEALTH ATLANTIC PROP - FR0280-B PAGE 14
16:51:34 TWODOGSS1 V930806 AWHITE
PROJECT BUDGET A/C & COST CODE (800)
Report BUDCFL01 PLZ591 Plaza 1900 - Land ($) CONSOL 100%
Number 004 Twelve Months Ended December 31, 1997 C12 97 (01..12)
<TABLE>
<CAPTION>
Description Jan 97 Feb 97 Mar 97 Apr 97 May 97 Jun 97 Jul 97 Aug 97 Sep 97 Oct 97 Nov 97 Dec 97 Total
- --------------------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue
400-00 Land Rent 40500 40500 40500 40500 40500 40500 40500 40500 40500 40500 40500 40500 486000
- --------------------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL Revenue 40500 10500 40500 40500 40500 40500 40500 40500 10500 40500 40500 40500 486000
- --------------------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Operating Income 40500 40500 40500 40500 40500 40500 40500 40500 40500 40500 40500 10500 486000
- --------------------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Cash Flow From Operations 40500 40500 40500 40500 40500 40500 40500 40500 40500 40500 40500 40500 486000
- --------------------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Cash Flow (Deficit) 40500 40500 40500 40500 40500 40500 40500 40500 40500 40500 40500 40500 486000
=========================== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
PLZ591-00 Plaza 1900 - Land 40500 40500 40500 40500 40500 40500 40500 40500 40500 40500 40500 40500 486000
</TABLE>
<PAGE>
6/05/97 RFP2 - COMMONWEALTH ATLANTIC PROP - FR0280-B PAGE 15
16:51:34 TWODOGSS1 V930806 AWHITE
PROJECT BUDGET A/C & COST CODE (800)
Report BUDCFL01 PLZ591-01 Plaza 1900 - Building ($) CONSOL 100%
Number 004 Twelve Months Ended December 31, 1997 C12 97 (01..12)
<TABLE>
<CAPTION>
Description Jan 97 Feb 97 Mar 97 Apr 97 May 97 Jun 97 Jul 97 Aug 97 Sep 97
- ----------------------------------------- ------- ------- ------- ------- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue
400-10 Base Rent 374668 374668 374668 374668 374668 374668 376298 376298 376298
403-00 Operating Expense Reimbursmnts 5049 5049 5049 5049 5049 5049 5049 5049 5049
403-04 Exp Reimb- Electricity/Gas 28545 31017 27263 27263 28978 31317 29465 30419 32209
403-06 Exp Reimb- Miscellaneous 150 150 150 150 150 150 150 150 150
405-05 Tenant Direct Billback Income 583 583 583 583 583 583 583 583 583
- ----------------------------------------- ------- ------- ------- ------- ------ ------- ------- ------- -------
TOTAL Revenue 408995 411467 407713 407713 409428 411767 411545 412499 414289
Operating Expenses
500-05 Property Tax-Developed Prop. 0 0 0 0 0 169964- 0 0 0
510-10 Insurance - Property Package 0 12100- 0 0 0 0 0 0 0
520-00 Utilities - Water & Sewer 0 3023- 0 0 3340- 0 0 5240- 0
520-05 Utilities - Electricity 28545- 31017- 27263- 27263- 28978- 31317- 29465- 30419- 32209-
520-15 Utilities - Fuel Oil 0 0 0 0 0 0 0 0 0
520-50 Utilities - Other 150- 150- 150- 150- 150- 150- 150- 150- 150-
530-00 Janitorial - Building Contract 13302- 13302- 13302- 13302- 13302- 13302- 13604- 13604- 13604-
530-10 Janitorial - Window Washing 750- 0 0 1620- 0 0 0 0 0
530-20 Janitorial - Carpet Cleaning 600- 600- 600- 600- 600- 600- 600- 600- 600-
530-30 Janitorial - Supplies 10- 10- 10- 10- 10- 10- 10- 10- 10-
531-00 Trash Removal - Contract 1029- 1029- 1029- 1029- 1029- 1029- 1220- 1220- 1220-
532-05 Landscape - Exterior 1572- 1572- 1572- 1572- 1572- 1572- 1572- 1572- 1572-
532-10 Landscape - Interior 178- 178- 178- 178- 178- 178- 178- 178- 178-
532-15 Landscape - Irrigation 0 0 0 0 550- 250- 125- 125- 0
532-20 Landscape - Seasonal Color-Ext 1500- 0 0 0 3000- 0 0 0 0
532-50 Landscape - Other 300- 300- 300- 1800- 1800- 300- 300- 300- 300-
533-20 Electrical - Repairs 100- 100- 100- 100- 100- 100- 100- 100- 100-
534-00 Lighting - Supplies 600- 600- 600- 600- 600- 600- 600- 600- 600-
535-00 HVAC - Supplies 640- 125- 125- 4140- 125- 125- 640- 125- 125-
535-05 HVAC - Contract 1715- 268- 1118- 1715- 268- 268- 1715- 268- 268-
535-10 HVAC - Repairs 0 4050- 0 0 3000- 0 0 0 0
536-00 Parking - Sweeping 0 500- 0 0 2000- 0 0 500- 0
536-10 Parking - Striping & Repairs 100- 100- 100- 100- 2500- 100- 100- 100- 100-
</TABLE>
Description Oct 97 Nov 97 Dec 97 Total
- ----------------------------------------- ------ ------- ------- -------
Revenue
400-10 Base Rent 376298 376298 376298 4505796
403-00 Operating Expense Reimbursmnts 5049 5049 5049 60588
403-04 Exp Reimb- Electricity/Gas 28926 28682 30281 354365
403-06 Exp Reimb- Miscellaneous 150 150 150 1800
405-05 Tenant Direct Billback Income 583 583 583 6996
- ----------------------------------------- ------ ------- ------- -------
TOTAL Revenue 411006 410762 412361 4929545
Operating Expenses
500-05 Property Tax-Developed Prop. 0 169964- 0 339928-
510-10 Insurance - Property Package 0 0 0 12100-
520-00 Utilities - Water & Sewer 0 5223- 0 16826-
520-05 Utilities - Electricity 28926- 28682- 30281- 354365-
520-15 Utilities - Fuel Oil 400- 0 0 400-
520-50 Utilities - Other 150- 150- 150- 1800-
530-00 Janitorial - Building Contract 13604- 13604- 13604- 161436-
530-10 Janitorial - Window Washing 1620- 0 0 3990-
530-20 Janitorial - Carpet Cleaning 600- 600- 600- 7200-
530-30 Janitorial - Supplies 10- 10- 10- 120-
531-00 Trash Removal - Contract 1220- 1220- 1220- 13494-
532-05 Landscape - Exterior 1572- 1572- 1572- 18864-
532-10 Landscape - Interior 178- 178- 1678- 3636-
532-15 Landscape - Irrigation 0 550- 0 1600-
532-20 Landscape - Seasonal Color-Ext 1500- 0 1800- 7800-
532-50 Landscape - Other 1800- 1800- 300- 9600-
533-20 Electrical - Repairs 100- 100- 100- 1200-
534-00 Lighting - Supplies 600- 600- 600- 7200-
535-00 HVAC - Supplies 4140- 125- 125- 10560-
535-05 HVAC - Contract 1715- 268- 268- 9854-
535-10 HVAC - Repairs 3000- 0 0 10050-
536-00 Parking - Sweeping 0 500- 0 3500-
536-10 Parking - Striping & Repairs 100- 100- 100- 3600-
<PAGE>
6/05/97 RFP2 - COMMONWEALTH ATLANTIC PROP - FR0280-B PAGE 16
16:51:34 TWODOGSS1 V930806 AWHITE
PROJECT BUDGET A/C & COST CODE (800)
Report BUDCFL01 PLZ591-01 Plaza 1900 - Building ($) CONSOL 100%
Number 004 Twelve Months Ended December 31, 1997 C12 97 (01..12)
<TABLE>
<CAPTION>
Description Jan 97 Feb 97 Mar 97 Apr 97 May 97 Jun 97 Jul 97 Aug 97 Sep 97
- ----------------------------------------- -------- ------- ------- ------- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
536-50 Parking - Other 0 0 0 0 4000- 0 0 0 0
537-02 Elevator - Repairs/Maintenance 50- 450- 50- 450- 50- 450- 50- 450- 50-
537-03 Elevator - Contract 915- 915- 915- 915- 915- 915- 915- 915- 915-
537-05 Elevator - Other 1487- 0 0 0 0 0 0 0 0
537-10 Plumbing - Supplies & Repairs 125- 125- 125- 725- 125- 125- 125- 125- 125-
537-11 Restroom Supplies 75- 75- 75- 75- 75- 75- 75- 75- 75-
537-15 Painting & Decorating 50- 50- 250- 50- 50- 50- 50- 250- 50-
537-16 Walk-off Mats 265- 265- 265- 265- 265- 265- 265- 265- 265-
537-17 Carpets/Floors-Repairs & Maint 50- 50- 50- 50- 50- 50- 50- 50- 3050-
537-20 Communication Systems 23- 23- 23- 23- 23- 23- 23- 23- 23-
537-21 Fire Alarm/Control Systems 0 0 1485- 0 0 2900- 1450- 0 0
537-22 Energy Management Systems 2025- 0 0 2025- 0 0 2025- 0 0
537-25 Snow Removal 2450- 2050- 650- 0 0 0 0 500- 0
537-26 Pest Control 46- 46- 46- 46- 46- 46- 46- 46- 46-
537-30 Supplies and Tools 120- 2820- 120- 120- 120- 120- 120- 120- 120-
537-31 Locks and Keys 50- 50- 50- 50- 50- 50- 50- 50- 50-
537-32 Uniforms 170- 170- 170- 170- 170- 170- 170- 170- 170-
537-35 Roof Repairs & Maintenance 0 0 0 1500- 0 0 0 0 0
537-36 Structural Repairs 0 0 0 0 10000- 0 0 0 0
537-40 Tenant Direct Billback Expense 0 1000- 0 2000- 1000- 0 0 1000- 2000-
537-50 Other Repairs & Maintenance 600- 1600- 600- 600- 600- 1600- 600- 600- 600-
541-05 Business Tax/License 0 0 0 12659- 0 0 0 0 0
648-00 Management Fees Exp - Outside 7000- 7000- 7000- 7000- 7000- 7000- 7000- 7000- 7000-
- ----------------------------------------- -------- ------- ------- ------- ------ ------- ------- ------- -------
TOTAL Operating Expenses 66592- 85713- 58321- 82902- 87641- 233704- 63393- 66750- 65575-
General & Administrative Expenses
600-20 Prop. Mgmt & Maint. Salaries 5776- 5776- 5776- 5776- 5776- 5776- 5776- 5776- 5776-
600-21 PM & Maint. Payroll Taxes 456- 456- 456- 456- 456- 456- 456- 456- 456-
600-22 PM & Maint. Group Insurance 651- 651- 651- 651- 651- 651- 651- 651- 651-
600-23 PM & Maint. Workers' Comp. 0 2696- 0 0 0 0 0 0 0
609-15 Employee Education Expenses 0 25- 0 25- 0 25- 0 425- 0
630-16 Leasing-Meals & Entertainment 30- 30- 30- 30- 30- 30- 30- 30- 30-
</TABLE>
Description Oct 97 Nov 97 Dec 97 Total
- ---------------------------------------- ------- ------- ------- -------
536-50 Parking - Other 0 0 0 4000-
537-02 Elevator - Repairs/Maintenance 450- 50- 50- 2600-
537-03 Elevator - Contract 915- 915- 915- 10980-
537-05 Elevator - Other 0 0 0 1487-
537-10 Plumbing - Supplies & Repairs 125- 125- 125- 2100-
537-11 Restroom Supplies 75- 75- 75- 900-
537-15 Painting & Decorating 50- 50- 50- 1000-
537-16 Walk-off Mats 265- 265- 265- 3180-
537-17 Carpets/Floors-Repairs & Maint 50- 50- 50- 3600-
537-20 Communication Systems 23- 23- 23- 276-
537-21 Fire Alarm/Control Systems 0 0 0 5835-
537-22 Energy Management Systems 2025- 0 0 8100-
537-25 Snow Removal 0 650- 1150- 7450-
537-26 Pest Control 46- 46- 46- 552-
537-30 Supplies and Tools 120- 120- 120- 4140-
537-31 Locks and Keys 50- 50- 50- 600-
537-32 Uniforms 170- 170- 170- 2040-
537-35 Roof Repairs & Maintenance 0 0 0 1500-
537-36 Structural Repairs 0 0 0 10000-
537-40 Tenant Direct Billback Expense 0 1000- 0 8000-
537-50 Other Repairs & Maintenance 600- 600- 600- 9200-
541-05 Business Tax/License 0 0 0 12659-
648-00 Management Fees Exp - Outside 7000- 7000- 7000- 84000-
- ---------------------------------------- ------- ------- ------- -------
TOTAL Operating Expenses 73199- 236435- 63097- 1183322-
General & Administrative Expenses
600-20 Prop. Mgmt & Maint. Salaries 5776- 5776- 5776- 69312-
600-21 PM & Maint. Payroll Taxes 456- 456- 456- 5472-
600-22 PM & Maint. Group Insurance 651- 651- 651- 7812-
600-23 PM & Maint. Workers' Comp. 0 0 0 2696-
609-15 Employee Education Expenses 25- 0 425- 950-
630-16 Leasing-Meals & Entertainnent 30- 30- 30- 360-
<PAGE>
6/05/97 RFP2 - COMMONWEALTH ATLANTIC PROP - FR0280-B PAGE 16
16:51:34 TWODOGSS1 V930806 AWHITE
PROJECT BUDGET A/C & COST CODE (800)
Report BUDCFL01 PLZ591-01 Plaza 1900 - Building ($) CONSOL 100%
Number 004 Twelve Months Ended December 31, 1997 C12 97 (01..12)
<TABLE>
<CAPTION>
Description Jan 97 Feb 97 Mar 97 Apr 97 May 97 Jun 97 Jul 97 Aug 97 Sep 97
- ----------------------------------------- ------- ------- ------- ------- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
630-18 Project Promotional Expense 0 0 0 0 0 6000- 5000- 0 0
640-02 G&A - Mileage Reimbursement 60- 60- 60- 60- 60- 60- 60- 60- 60-
640-20 Stationery and Office Supplies 50- 50- 50- 50- 50- 50- 50- 50- 50-
640-24 Telephone Expenses 220- 220- 220- 220- 220- 220- 220- 220- 220-
640-30 Freight, Postage and Delivery 30- 30- 30- 30- 30- 30- 30- 30- 30-
648-99 Management Fees Exp - Inside 9360- 9459- 9309- 9309- 9377- 9471- 9462- 9500- 9572-
660-20 Interest Exp - Permanent Loan 128333- 128333- 128333- 128333- 128333- 128333- 128333- 128333- 128333-
661-05 Land Lease Expense 40500- 40500- 40500- 40500- 40500- 40500- 4050- 40500- 40500-
- ----------------------------------------- ------- ------- ------- ------- ------ ------- ------- ------- -------
TOTAL General & Administrative Expenses 185466- 188286- 185415- 185440- 185483- 191602- 190568- 186031- 185678-
- ----------------------------------------- ------- ------- ------- ------- ------ ------- ------- ------- -------
Net Operating Income 156937 137468 163977 139371 136304 13539- 157584 159718 163036
- ----------------------------------------- ------- ------- ------- ------- ------ ------- ------- ------- -------
Cash Flow From Operations 156937 137468 163977 139371 136304 13539- 157584 159718 163036
Investment in Property and Partnerships
226-027 Parking Deck/Concrete 1116- 0 0 0 0 0 0 0 0
140-00 Construction Work In Process 1116- 0 0 0 0 0 0 0 0
- ----------------------------------------- ------- ------- ------- ------- ------ ------- ------- ------- -------
TOTAL Investment in Property and Partnershi 1116- 0 0 0 0 0 0 0 0
- ----------------------------------------- ------- ------- ------- ------- ------ ------- ------- ------- -------
Cash Flow (Deficit) 155821 137468 163977 139371 136304 13539- 157584 159718 163036
========================================= ======= ======= ======= ======= ====== ======= ======= ======= =======
PLZ591-01 Plaza 1900 - Building 155821 137468 163977 139371 136304 13539- 157584 159718 163036
</TABLE>
Description Oct 97 Nov 97 Dec 97 Total
- ----------------------------------------- ------ ------ ------ -------
630-18 Project Promotional Expense 0 0 2500- 13500-
640-02 G&A - Mileage Reimbursement 60- 60- 60- 720-
640-20 Stationery and Office Supplies 50- 50- 50- 600-
640-24 Telephone Expenses 220- 220- 220- 2640-
640-30 Freight, Postage and Delivery 30- 30- 30- 360-
648-99 Management Fees Exp - Inside 9440- 9430- 9494- 113183-
660-20 Interest Exp - Permanent Loan 128333- 128333- 128333- 1539996-
661-05 Land Lease Expense 40500- 40500- 40500- 486000-
- ----------------------------------------- ------ ------ ------ -------
TOTAL General & Administrative Expenses 185571- 185536- 188525- 2243601-
- ----------------------------------------- ------ ------ ------ -------
Net Operating Income 152236 11209- 160739 1502622
- ----------------------------------------- ------ ------ ------ -------
Cash Flow From Operations 152236 11209- 160739 1502622
Investment in Property and Partnerships
226-027 Parking Deck/Concrete 0 0 0 1116-
140-00 Construction Work In Process 0 0 0 1116-
- ----------------------------------------- ------ ------ ------ -------
TOTAL Investment in Property and Partnershi 0 0 0 1116-
- ----------------------------------------- ------ ------ ------ -------
Cash Flow (Deficit) 152236 11209- 160739 1501506
========================================= ====== ====== ====== =======
PLZ591-01 Plaza 1900 - Building 152236 11209- 160739 1501506
<PAGE>
Addenda
================================================================================
Pro-ject Reports
<PAGE>
PLAZA 1900
PROJECT DESIGNATOR: PLAZ
REVISION: 6/27/97 @ 14:10
PROJECT ASSUMPTIONS REPORT
INCLUDING ALL TENANTS
7/ 1/97 @ 11:27
BUILDING PROLOGUE
- -----------------
LEASEHOLD ANALYSIS OF PLAZA 1900 BEGINNING 7/1997
FOR 15 YEARS ON A FISCAL YEAR BASIS
AREA MEASURES
- -------------
NRA
1997 VALUE - 202,684
THEREAFTER -CONSTANT
OCCA
1997 VALUE - 202,684
1998 VALUE - 202,684
1999 VALUE - 202,684
2000 VALUE - 202,684
2001 VALUE - 202,684
2002 VALUE - 202,684
2003 VALUE - 202,684
2004 VALUE - 193,562
2005 VALUE - 193,562
2006 VALUE - 202,684
2007 VALUE - 202,684
2008 VALUE - 202,684
2009 VALUE - 119,586
2010 VALUE - 184,441
2011 VALUE - 202,684
THEREAFTER -CONSTANT
GROWTH RATES
- ------------
INC1
1997 VALUE - 3.50
THEREAFTER - CONSTANT
EXP
1997 VALUE - 3.50
THEREAFTER - CONSTANT
MARKET RATES
- ------------
MKT1
1997 VALUE 23.50
THEREAFTER GROWING AT GROWTH RATE INC1
TINW
1997 VALUE 15.00
THEREAFTER GROWING AT GROWTH RATE EXP
TIRN
1997 VALUE 7.50
THEREAFTER GROWING AT GROWTH RATE EXP
TIWA
+40.0% OF TINW +60.0% OF TIRN
<PAGE>
PAGE 2
RESR
1997 VALUE - 0.20
THEREAFTER - GROWING AT GROWTH RATE EXP
MISCELLANEOUS INCOMES
- ---------------------
NONE
EXPENSES
PROPERTY TAXES , REFERRED TO AS TAX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 366,629
THEREAFTER - GROWING AT GROWTH RATE EXP
OPERATING EXPENSES, REFERRED TO AS OPEX
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 759,803
THEREAFTER - GROWING AT GROWTH RATE EXP
G&A EXPENSES , REFERRED TO AS G&A
CHARGED AGAINST NET OPERATING INCOME
1997 VALUE - 120,147
THEREAFTER - GROWING AT GROWTH RATE EXP
MANAGEMENT FEES , REFERRED TO AS MGTI
AN INFORMATIONAL EXPENSE
1997 VALUE - 94,806
1998 VALUE - 96,749
1999 VALUE - 90,241
2000 VALUE - 94,067
2001 VALUE - 92,078
2002 VALUE - 92,054
2003 VALUE - 96,986
2004 VALUE - 105,922
200S VALUE - 98,620
2006 VALUE - 103,758
2007 VALUE - 104,534
2006 VALUE - 100,965
2009 VALUE - 79,778
2010 VALUE - 131,113
2011 VALUE - 150,027
THEREAFTER - CONSTANT
REIMBURSABLE EXP , REFERRED TO AS REIM
AN INFORMATIONAL EXPENSE
+100.0% OF TAX +100.0% OF OPEX
+100.0% OF G&A +100.O% OF MGTI
Base Year Expense , REFERRED TO AS Base
AN INFORMATIONAL EXPENSE
+100.0% OF TAX +100.0% OF OPEX
+100.0% OF G&A +100.0% OF MGTI
VACANCY ALLOWANCE
- -----------------
PERCENTAGE OF POTENTIAL GROSS INCOME
FOR ALL TENANTS SUBJECT TO VACANCY
1997 VALUE - 3.00
THEREAFTER - CONSTANT
<PAGE>
PAGE 3
MANAGEMENT FEE
- --------------
PERCENTAGE OF EFFECTIVE GROSS INCOME
FOR ALL TENANTS
PASSED THROUGH TO TENANTS USING EXPENSE MGTI
1997 VALUE - 2.00
THEREAFTER - CONSTANT
COMMISSION CALCULATIONS
- -----------------------
STANDARD METHOD #1 - 5.000% OF TOTAL RENT
STANDARD METHOD #2 - 2.500% OF TOTAL RENT
STANDARD METHOD #3 - 2.880% OF TOTAL RENT
STANDARD METHOD #4 - 0.000% OF TOTAL RENT
STANDARD METHOD #5 - 0.000% OF TOTAL RENT
COMMISSION PAYOUTS
- ------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - CASHED OUT
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
ALTERATION CALCULATION
- ----------------------
1997 VALUE - 0.00
1998 VALUE - 0.00
1999 VALUE - 0.00
2000 VALUE - 0.00
2001 VALUE - 0.00
2002 VALUE - 0.00
2003 VALUE - 0.00
2004 VALUE - 0.00
2005 VALUE - 0.00
2006 VALUE - 0.00
2007 VALUE - 0.00
2008 VALUE - 0.00
2009 VALUE - 0.00
2010 VALUE - 0.00
2011 VALUE - 0.00
THEREAFTER - CONSTANT
ALTERATION PAYOUTS
- ------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - CASHED OUT
STANDARD METHOD #3 - CASHED OUT
<PAGE>
PAGE 4
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
COMMON AREA MAINTENANCE POOL
- ----------------------------
NONE
CAPITAL EXPENDITURES
- --------------------
RESERVES
MARKET RATE RESR MULTIPLIED BY AREA MEASURE NRA
PRIMARY CLASSIFICATION CODES
- ----------------------------
NONE
SECONDARY CLASSIFICATION CODES
- ------------------------------
NONE
COST CENTERS
- ------------
NONE
SALES VOLUME PROFILE
- --------------------
PERCENT OF RELATIVE
MONTH ANNUAL SALES VOLUME
- ----- ------------ --------
JAN 8.33% 1.00
FEB 8.33% 1.00
MAR 8.33% 1.00
APR 8.33% 1.00
MAY 8.33% 1.00
JUN 8.33% 1.00
JUL 8.33% 1.00
AUG 8.33% 1.00
SEP 8.33% 1.00
OCT 8.33% 1.00
NOV 8.33% 1.00
DEC 8.33% 1.00
------- -------
TOTALS 100.00% 12.00
GLOBAL RECOVERIES
- -----------------
Base Year Expense , REFERRED TO AS BYES
PRO RATA SHARE RECOVERY OF EXPENSE Base
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
<PAGE>
PAGE 5
TENANT PROLOGUE
- ---------------
MINIMUM RENTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
SALES VOLUMES AND BREAKPOINTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
RENEWAL RENTS ARE COMPOUNDED ANNUALLY
RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET
REFERENCE TENANTS
- -----------------
NONE
TENANTS
- -------
THERE ARE A TOTAL OF 2 LEASEHOLD TENANT(S):
- -------------------------------------------------------------------------------
# 1 - GRC INTERNATIONAL
BASE LEASE DATES: 1/1990 TO 1/2009
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 166,197
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
1998 VALUE - 23.83/SF/YR
1999 VALUE - 24.12/SF/YR
2000 VALUE - 21.45/SF/YR
2001 VALUE - 22.46/SF/YR
2002 VALUE - 21.24/SF/YR
2003 VALUE - 20.86/SF/YR
2004 VALUE - 22.03/SF/YR
2005 VALUE - 25.81/SF/YR
2006 VALUE - 21.41/SF/YR
2007 VALUE - 21.09/SF/YR
2008 VALUE - 20.72/SF/YR
2009 VALUE - 18.89/SF/YR
THEREAFTER - GROWING AT GROWTH RATE INC1
RECOVERIES:
REIMBURSABLE EXP
PRO RATA SHARE RECOVERY OF EXPENSE REIM PRO RATED ON TENANT
SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN
ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND
A BASE OF 4.87/SF MULTIPLIED BY AREA MEASURE NRA
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- ----------
1 5.00 6 NONE NONE YES YES
<PAGE>
PAGE 6
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE INC1 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP
PRO RATA SHARE RECOVERY OF EXPENSE REIM PRO RATED ON TENANT
SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN
ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A
BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
- -------------------------------------------------------------------------------
# 2 - NTL CAPTIONING
BASE LEASE DATES: 6/1994 TO 9/2004
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 36,487
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 14.69/SF/YR
CHANGING TO - 14.69/SF/YR ON 6/1996
CHANGING TO - 15.25/SF/YR ON 6/1997
CHANGING TO - 15.82/SF/YR ON 6/1998
CHANGING TO - 16.82/SF/YR ON 6/1999
CHANGING TO - 17.45/SF/YR ON 6/2000
CHANGING TO - 18.O8/SF/YR ON 6/2001
CHANGING TO - 18.74/SF/YR ON 6/2002
CHANGING TO - 19.42/SF/YR ON 6/2003
CHANGING TO - 20.12/SF/YR ON 6/2004
RECOVERIES:
REIMBURSABLE EXP
PRO RATA SHARE RECOVERY OF EXPENSE REIM PRO RATED ON TENANT
SQUARE FOOTAGE OVER AREA MEASURE NRA CALCULATED ON AN
ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE WITH NO CAP AND A
BASE OF 4.44/SF MULTIPLIED BY AREA MEASURE NRA
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 6 NONE NONE YES YES
2 5.00 6 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKT1 MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE INC1 PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP
PRO RATA SHARE RECOVERY OF EXPENSE REIM
<PAGE>
PAGE 7
PRO RATED ON TENANT SQUARE FOOTAGE OVER AREA MEASURE NRA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF THE EXPENSE VALUE IN THE OCCUPANCY YEAR
RENEWAL COMMISSIONS: STANDARD METHOD #3
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIWA
RENEWAL PAYOUT: CASHED OUT
<PAGE>
Addenda
================================================================================
Investor Survey
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET OFFICE MARKET - URBAN/CBD
- ------------------------------------------------------------------------------------------------------------------------------------
9.5% 10.0% 10.0% 10.0% 11.5% 11.5% 3.0% 3.0% 3.0% 4.0% 10.0 10.0
9.5% 10.0% 10.0% 10.5% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
8.0% 9.0% 8.5% 8.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
13.0% 13.0% -- -- 14.0% 14.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
8.0% 8.0% 8.5% 8.5% 10.5% 10.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.3% 9.3% 10.3% 10.3% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 9.0% 8.5% 9.0% 10.5% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
10.0% 10.0% 10.0% 10.0% 12.5% 12.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
9.0% 9.0% 9.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.0% 9.0% 8.0% 9.0% 10.0% 12.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
Responses 11 11 10 10 11 11 11 11 11 11 11 11
Average (%) 9.2% 9.6% 9.2% 9.7% 11.7% 12.0% 3.3% 4.2% 3.4% 3.9% 8.5 9.5
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 9.0% 9.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 12.0% 12.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.5% 9.5% 10.5% 10.5% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 10.0% 10.0% 11.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
15.0% 15.0% -- -- 20.0% 20.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
9.0% 10.0% -- -- -- -- -- -- -- -- -- --
9.0% 10.0% 9.0% 10.0% 12.0% 13.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
Responses 8 8 6 6 7 7 7 7 7 7 7 7
Average (%) 10.0% 10.4% 9.7% 10.3% 12.8% 13.1% 3.3% 4.7% 3.5% 4.0% 8.3 9.7
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
8.0% 9.0% 9.5% 10.0% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
8.0% 10.0% 8.5% 9.0% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0 10.0 10.0
10.0% 10.0% 10.0% 10.0% 13.0% 13.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.5% 9.5% 10.5% 10.5% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
12.0% 12.0% -- -- 13.0% 13.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
-- -- -- -- 12.0% 13.0% 4.0% 4.0% 4.0% 4.0 5.0 10.0
Responses 8 8 7 7 9 9 9 9 9 9 9 9
Average (%) 9.4% 10.0% 9.6% 10.2% 12.8% 13.5% 3.5% 4.6% 3.5% 3.9% 7.6 8.9
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
12.0% 12.0% 12.0% 12.0% 15.0% 15.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.8% 9.8% 10.8% 10.8% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
14.0% 14.0% -- -- 20.0% 20.0% 5.0% 5.0% 3.0% 3.0% 5.0 7.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 11.0% 14.0% 14.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 6 6 5 5 6 6 6 6 6 6 6 6
Average (%) 10.7% 11.0% 10.5% 11.2% 14.6% 15.3% 3.2% 4.6% 3.3% 3.9% 8.0 8.8
--------------------------------------------------------------------------------------------------------
Total Responses 33 33 28 28 33 33 33 33 33 33 33 33
Weighted Average (%) 9.8% 10.3% 9.7% 10.3% 13.0% 13.5% 3.3% 4.6% 3.4% 3.9% 8.1 9.2
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
8 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET OFFICE MARKET - SUBURBAN/NON - CBD
- ------------------------------------------------------------------------------------------------------------------------------------
9.5% 9.5% 10.5% 10.5% 10.5% 10.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.5% 8.5% 9.3% 9.3% 11.3% 11.3% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
11.0% 11.0% -- -- 12.0% 12.0% 5.0% 3.0% 3.0% 3.0% 5.0 7.0
8.5% 10.0% 9.0% 10.5% 11.0% 12.5% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
8.0% 10.0% 9.5% 10.0% 11.5% 12.0% 4.0% 6.0% 4.0% 4.0% 10.0 10.0
l0.0% 11.0% 10.5% 11.0% 12.0% 12.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.0% 9.0% 8.5% 8.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
8.0% 8.0% 8.5% 8.5% 10.5% 10.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.1% 9.1% 10.1% l0.1% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 10.0% 9.0% 10.5% 11.0% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
9.0% 9.0% 10.0% 10.0% 11.5% 11.5% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.0% 9.0% 9.0% 9.0% 12.0% 13.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.0% 10.0% -- -- -- -- -- -- -- -- --
8.0% 9.0% 8.0% 9.0% 10.0% 12.0% 5.0% 5.0% 4.0% 4.0% 5.0 10.0
Responses 16 16 14 14 15 15 15 15 15 15 15 15
Average (%) 8.8% 9.5% 9.3% 9.9% 11.2% 11.6% 3.5% 4.4% 3.6% 3.8% 8.9 9.7
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
9.5% 9.5% 10.5% 10.5% 10.5% 10.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.8% 8.8% 9.5% 9.5% 11.8% 11.8% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
12.0% 12.0% -- -- 18.0% 18.0% 5.0% 3.0% 3.0% 3.0% 5.0 7.0
10.5% 10.5% 10.0% 10.0% 11.0% 13.0% 2.0% 2.0% 2.0% 2.0% 10.0 10.0
8.0% 10.0% 9.5% 10.0% 11.0% 12.0% 4.0% 6.0% 4.0% 4.0% 10.0 10.0
9.0% 10.0% 9.0% 9.5% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.0% 11.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.4% 9.4% 10.4% 10.4% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 10.0% 14.0% 15.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
10.0% 11.0% -- -- -- -- -- -- -- -- -- --
10.0% 11.0% 10.0% 11.0% 12.0% 13.0% 5.0% 5.0% 4.0% 4.0% 5.0 10.0
Responses 13 13 11 11 12 12 12 12 12 12 12 12
Average (%) 9.5% 10.0% 9.8% 10.2% 12.0% 12.5% 3.4% 4.5% 3.4% 3.7% 8.6 9.6
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% -- -- 13.0% 13.0% 3.0% 3.0% 3.0% 3.0% 5.0 7.0
8.0% 10.0% 8.5% 9.0% 11.0% 12.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
10.0% 10.0% 10.0% 10.0% 12.5% 12.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.4% 9.4% 10.4% 10.4% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
6.0% 6.0% 9.0% 9.0% 17.0% 20.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.0% 10.0% -- -- -- -- -- -- -- -- -- --
12.0% 12.0% 10.0% 10.0% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 2.0 2.0
Responses 10 10 8 8 9 9 9 9 9 9 9 9
Average (%) 9.1% 9.7% 9.5% 10.0% 13.4% 14.3% 3.1% 4.6% 3.4% 3.8% 7.2 8.0
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% -- -- 18.0% 18.0% 3.0% 3.0% 3.0% 3.0% 5.0 7.0
10.5% 10.5% 10.0% 10.0% 11.0% 13.0% 2.0% 2.0% 2.0% 2.0% 10.0 10.0
11.0% 11.0% 11.0% 11.0% 14.0% 14.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
9.6% 9.6% 10.6% 10.6% 11.5% 11.5% 3.8% 4.0% 4.3% 4.3% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
6.0% 6.0% 10.0% 10.0% 20.0% 20.0% 4.0% 7.0% 4.0% 4.0% 5.0 7.0
9.0% 9.0% 9.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.0% 10.0% -- -- -- -- -- -- -- -- -- --
12.0% 12.0% 10.0% 10.0% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 2.0 2.0
Responses 10 10 8 8 9 9 9 9 9 9 9 9
Average (%) 9.7% 10.0% 10.0% 10.5% 14.5% 15.2% 2.9% 4.3% 3.2% 3.6% 7.2 8.0
--------------------------------------------------------------------------------------------------------
Total Responses 49 49 41 41 45 45 45 45 45 45 45 45
Weighted Average (%) 9.3% 9.8% 9.7% 10.1% 12.8% 13.4% 3.2% 4.4% 3.4% 3.7% 8.0 8.8
--------------------------------------------------------------------------------------------------------
</TABLE>
AUTUMN 1996 9
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET INDUSTRIAL MARKET - WAREHOUSE/DISTRIBUTION
- ------------------------------------------------------------------------------------------------------------------------------------
9.2% 9.2% 9.5% 9.5% 10.0% 10.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.5% 8.5% 9.3% 9.3% 11.0% 11.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
8.5% 10.0% 9.5% 10.0% 11.0% 12.0% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
9.0% 9.0% 9.5% 9.5% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
8.0% 8.0% 8.5% 8.5% 10.5% 10.5% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 10.0% 9.0% 10.5% 11.0% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
9.0% 9.0% 10.0% 10.0% 11.0% 11.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
9.0% 9.0% 9.5% 9.5% 10.5% 10.5% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 10 10 10 10 10 10 10 10 10 10 10 10
Average (%) 8.8% 9.2% 9.4% 9.8% 10.9% 11.0% 2.9% 4.0% 3.3% 3.8% 9.8 10.1
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
9.2% 9.2% 9.5% 9.5% 10.0% 10.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
8.8% 8.8% 9.5% 9.5% 11.3% 11.3% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.5% 11.5% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
10.0% 10.0% 11.0% 11.0% 12.0% 12.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.8% 9.8% 10.3% 10.3% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 7 7 7 7 7 7 7 7 7 7 7 7
Average (%) 9.3% 9.5% 10.0% 10.2% 11.2% 11.2% 2.8% 4.3% 3.2% 3.9% 9.7 10.1
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 12.0% 12.0% 13.0% 13.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
9.8% 9.8% 10.3% 10.3% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 9.7% 9.9% 10.4% 10.8% 11.9% 11.9% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
12.0% 12.0% 13.0% 13.0% 14.0% 14.0% 0.0% 8.0% 3.0% 5.0% 10.0 10.0
10.0% 10.0% 10.5% 10.5% 11.5% 11.5% 3.3% 3.3% 3.5% 3.5% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.5% 10.5% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 10.1% 10.4% 10.9% 11.3% 12.4% 12.4% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
--------------------------------------------------------------------------------------------------------
Total Responses 25 25 25 25 25 25 25 25 25 25 25 25
Weighted Average (%) 9.5% 9.7% 10.2% 10.5% 11.6% 11.6% 2.6% 4.5% 3.2% 4.0% 9.6 10.2
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
10 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET INDUSTRIAL MARKET - BUSINESS PARKS, OTHER INDUSTRIAL & MANUFACTURING
- ------------------------------------------------------------------------------------------------------------------------------------
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 10.0 10.0
9.0% 9.0% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 3 3 4 4 4 4 4 4 4 4
Average (%) 8.9% 9.4% 9.7% 10.7% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.8 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.5% 10.5% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 10.0 10.0
10.0% 10.0% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 3 3 4 4 4 4 4 4 4 4
Average (%) 9.3% 9.8% 9.8% 10.8% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.8 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.5% 10.5% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 5 5 4 4 5 5 5 5 5 5 5 5
Average (%) 9.4% 10.0% 9.9% 10.9% 12.4% 13.2% 3.4% 4.0% 3.2% 3.8% 8.2 9.4
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.5% 10.5% 11.0% 11.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.5% 10.5% -- -- 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 5 5 4 4 5 5 5 5 5 5 5 5
Average (%) 9.6% 10.2% 10.0% 11.0% 12.4% 13.2% 3.4% 4.0% 3.2% 3.8% 8.2 9.4
--------------------------------------------------------------------------------------------------------
Total Responses 18 18 14 14 18 18 18 18 18 18 18 18
Weighted Average(%) 9.3% 9.8% 9.8% 10.8% 12.0% 12.4% 3.3% 4.0% 3.2% 3.9% 8.5 9.8
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
AUTUMN 1996 11
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET RETAIL MARKET - NEIGHBORHOOD & COMMUNITY CENTERS
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 10.5% 9.5% 10.5% 11.0% 12.5% 3.5% 3.5% 3.5% 3.5% 10.0 10.0
9.5% 10.0% 10.0% 10.0% 12.5% 12.5% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
10.0% 10.0% 10.5% 10.5% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
10.3% 10.3% 10.8% 10.8% 13.0% 13.0% 2.0% 2.0% 4.0% 4.0% 7.0 7.0
9.0% 9.0% 10.0% 10.0% 10.0% 10.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
9.8% 9.8% 10.3% 10.3% 11.5% 11.5% 3.8% 4.0% 4.0% 4.0% 10.0 10.0
9.0% 10.0% -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
9.0% 9.0% 9.5% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
Responses 9 9 8 8 8 8 9 9 9 9 9 9
Average (%) 9.3% 9.8% 10.0% 10.4% 11.9% 12.1% 2.9% 3.7% 3.4% 3.9% 8.9 9.4
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
10.8% 10.8% 11.3% 11.3% 14.0% 14.0% 2.0% 2.0% 4.0% 4.0% 7.0 7.0
10.0% 10.0% 11.0% 11.0% 12.0% 12.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
9.0% 10.0% -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 11.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.5% 10.5% -- -- -- -- -- -- -- -- -- --
Responses 6 6 4 4 4 4 5 5 5 5 5 5
Average (%) 9.5% 10.0% 10.4% 11.1% 12.3% 12.3% 2.3% 3.8% 3.3% 4.2% 9.0 9.6
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 12.0% 12.0% 13.0% 13.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 10.0 10.0
9.0% 10.0% -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 9.5% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.0% 10.0% -- -- -- -- -- -- -- --
11.0% 11.0% 9.5% 9.5% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 3.0 3.0
Responses 7 7 5 5 5 5 6 6 6 6 6 6
Average (%) 9.7% 10.3% 10.1% 10.7% 13.8% 14.6% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
13.0% 13.0% 14.0% 14.0% 14.0% 14.0% 0.0% 6.0% 2.0% 5.0% 10.0 10.0
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 10.0 10.0
9.0% 10.0% -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 11.0% 14.0% 14.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
11.0% 11.0% 10.5% 10.5% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 3.0 3.0
Responses 6 6 5 5 5 5 6 6 6 6 6 6
Average (%) 10.3% 10.8% 10.8% 11.5% 14.2% 15.0% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
--------------------------------------------------------------------------------------------------------
Total Responses 28 28 22 22 22 22 26 26 26 26 26 26
Weighted Average (%) 9.7% 10.2% 10.3% 10.9% 13.0% 13.5% 2.7% 3.9% 3.2% 4.0% 8.7 9.3
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
12 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET RETAIL MARKET - POWER CENTERS & "BIG BOX"
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 9.0% 9.5% 9.5% 11.0% 11.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
10.0% 10.0% 9.5% 9.5% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
10.5% 10.5% 10.5% 10.5% 11.0% 12.0% 2.0% 2.0% 3.0% 3.0% 10.0 10.0
9.5% 9.5% 10.0% 10.0% 11.4% 11.4% 3.8% 3.8% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 9.5% 10.0% 11.0% 11.5% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
9.3% 9.3% 9.5% 10.0% 10.5% 10.5% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
9.0% 9.0% -- -- -- -- -- -- -- -- -- --
9.0% 9.5% 9.5% 10.0% 11.0% 11.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
Responses 9 9 8 8 8 8 8 8 8 8 8 8
Average (%) 9.4% 9.5% 9.7% 10.1% 11.5% 11.7% 3.3% 3.5% 3.4% 3.7% 9.1 10.1
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
10.8% 10.8% 10.8% 10.8% 11.0% 12.0% 2.0% 3.0% 3.0% 3.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.0% 10.0% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 3 3 3 3 3 3 3 3 3 3 3 3
Average (%) 9.8% 10.1% 10.1% 10.6% 11.0% 11.3% 2.8% 3.7% 3.2% 3.7% 9.3 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.8% 10.8% 10.8% 10.8% 12.0% 12.0% 2.0% 2.0% 3.0% 3.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 3 3 3 3 3 3 3 3 3 3 3 3
Average (%) 9.6% 9.9% 10.1% 10.6% 12.0% 12.0% 2.8% 3.3% 3.2% 3.7% 9.3 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 10.8% 10.8% 12.0% 12.0% 2.0% 2.0% 3.0% 3.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
-- -- -- -- 15.0% 15.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 2 2 2 2 3 3 3 3 3 3 3 3
Average (%) 9.8% 10.3% 10.1% 10.9% 12.7% 12.7% 2.8% 3.3% 3.2% 3.7% 9.3 10.3
--------------------------------------------------------------------------------------------------------
Total Responses 17 17 16 16 17 17 17 17 17 17 17 17
Weighted Average (%) 9.6% 9.9% 10.0% 10.5% 11.8% 11.9% 2.9% 3.5% 3.2% 3.7% 9.3 10.3
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
AUTUMN 1996 13
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET RETAIL MARKET - REGIONAL MALLS
- ------------------------------------------------------------------------------------------------------------------------------------
7.5% 7.5% 8.0% 8.0% 11.3% 11.3% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
9.0% 9.0% 9.0% 9.0% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
7.5% 7.5% 7.8% 7.8% 12.0% 12.0% 1.5% 2.0% 3.0% 3.0% 10.0 10.0
7.0% 8.0% 8.0% 8.0% 10.5% 11.5% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
9.0% -- -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.0% 8.0% 9.0% 10.5% 11.0% 3.0% 3.5% 3.0% 3.5% 10.0 10.0
8.0% 8.0% 8.5% 8.5% 11.0% 11.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0
7.8% 8.0% 8.3% 8.5% 11.0% 12.0% 2.5% 3.0% 2.5% 3.0% 10.0 10.0
7.0% 8.0% 7.0% 8.0% 10.0% 11.0% 4.0% 4.0% 4.0% 4.0% 5.0 10.0
Responses 10 9 9 9 9 9 10 10 10 10 10 10
Average (%) 7.9% 8.2% 8.2% 8.6% 11.4% 11.8% 3.0% 3.6% 3.5% 3.8% 9.1 9.6
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 10.0% 10.0% 17.0% 17.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
9.0% 9.0% 9.0% 9.0% 13.5% 13.5% 2.0% 2.0% 4.0% 4.0% 7.0 7.0
9.0% 10.0% 10.0% 10.0% 12.0% 14.0% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
10.0% -- -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
Responses 5 4 4 4 4 4 5 5 5 5 5 5
Average (%) 9.3% 9.6% 9.6% 10.0% 13.4% 13.9% 2.5% 3.4% 3.7% 4.0% 8.6 8.6
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 10.0% 10.0% 18.0% 18.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
11.0% 11.0% 11.0% 11.0% 13.0% 14.0% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
9.0% -- -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.5% 8.5% 9.0% 11.5% 12.5% 2.5% 3.0% 2.5% 3.0% 10.0 10.0
Responses 5 4 4 4 4 4 5 5 5 5 5 5
Average (%) 9.3% 9.8% 9.8% 10.3% 13.4% 13.9% 2.6% 3.6% 3.4% 3.8% 9.2 9.2
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
11.0% 11.0% 11.0% 11.0% 20.0% 20.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0
12.5% 12.5% 12.0% 12.0% 14.0% 15.0% 0.0% 4.0% 3.0% 4.0% 10.0 10.0
10.0% -- -- -- -- -- 3.0% 3.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 9.0% 9.3% 9.8% 12.0% 13.0% 2.5% 3.0% 2.5% 3.0% 10.0 10.0
13.0% 13.0% 11.0% 11.0% 16.0% 16.0% 3.0% 3.0% 3.0% 3.0% 3.0 3.0
Responses 6 5 5 5 5 5 6 6 6 6 6 6
Average (%) 10.6% 11.0% 10.6% 11.0% 14.6% 15.0% 2.7% 3.5% 3.3% 3.7% 8.2 8.2
--------------------------------------------------------------------------------------------------------
Total Responses 26 22 22 22 22 22 26 26 26 26 26 26
Weighted Average (%) 9.3% 9.6% 9.5% 10.0% 13.2% 13.6% 2.7% 3.5% 3.5% 3.8% 8.8 8.9
--------------------------------------------------------------------------------------------------------
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical issues
14 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - LEASED ASSET RESIDENTIAL - APARTMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
8.5% 10.0% 9.0% 10.5% -- -- -- -- 3.5% 3.5% 1.0 1.0
8.5% 9.0% 9.0% 9.0% 11.0% 11.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0
9.8% 9.8% 10.0% 10.0% 15.0% 15.0% 4.0% 4.0% 4.0% 4.0% 5.0 7.0
8.3% 9.0% 9.0% 9.5% 10.5% 11.5% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
7.5% 8.5% 8.0% 9.0% 10.0% 11.0% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.8% 8.8% 9.0% 9.0% 11.3% 11.3% 3.8% 4.0% 4.0% 4.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.5% 9.0% 9.0% 9.5% 10.0% 11.5% 3.0% 4.0% 3.0% 3.0% 10.0 10.0
8.5% 9.0% 8.5% 9.0% -- -- 3.0% 3.5% 3.0% 3.5% 10.0 10.0
8.8% 9.0% 9.0% 9.5% 11.0% 11.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 10 10 10 10 8 8 9 9 10 l0 l0 10
Average (%) 8.6% 9.2% 9.0% 9.6% 11.2% 11.7% 2.9% 3.9% 3.3% 3.8% 8.4 8.9
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - LEASED ASSET
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 9.5% 9.5% 10.0% 11.0% 12.0% 3.0% 4.0% 3.0% 4.0% 10.0 10.0
9.0% 10.0% 10.0% 10.0% 11.0% 12.5% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.0% 10.0% 10.0% 10.5% 10.5% 12.0% 3.0% 4.0% 3.0% 3.0% 10.0 10.0
9.0% 9.5% 9.5% 10.0% 11.5% 11.5% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 5 5 5 5 5 5 5 5 5 5 5 5
Average (%) 8.9% 9.7% 9.7% 10.3% 11.0% 11.8% 2.5% 4.2% 3.1% 4.0% 9.6 10.2
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 11.0% 11.0% 11.0% 12.5% 13.5% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.0% 9.0% 9.0% 11.0% 12.0% 4.0% 6.0% 3.0% 3.0% 3.0 5.0
9.0% 9.0% 9.5% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 8.9% 9.4% 9.8% 10.3% 11.6% 12.1% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - VALUE ADDED
- ------------------------------------------------------------------------------------------------------------------------------------
12.0% 13.0% 13.0% 13.0% 13.0% 15.0% 0.0% 5.0% 3.0% 5.0% 10.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
8.0% 8.0% 10.0% 10.0% 11.0% 13.0% 4.0% 6.0% 3.0% 3.0% 3.0 5.0
9.5% 10.0% 10.0% 11.0% 13.0% 13.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
Responses 4 4 4 4 4 4 4 4 4 4 4 4
Average (%) 9.5% 10.1% 10.6% 11.3% 12.0% 13.0% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
Total Responses 23 23 23 23 21 21 22 22 23 23 23 23
Weighted Average (%) 9.0% 9.6% 9.8% 10.4% 11.5% 12.1% 2.7% 4.4% 3.2% 4.0% 8.4 9.3
</TABLE>
"Leased Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management due
to leasing issues and/or additional capital investment for physical
issues
AUTUMN 1996 15
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES INTERNAL GROWTH RATES TYPICAL PROJECTION
GOING-IN TERMINAL RATE OF RETURN INCOME EXPENSES PERIOD (YEARS)
----------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICE SUMMARY OF WEIGHTED AVERAGE
- ------------------------------------------------------------------------------------------------------------------------------------
Urban/CBD 9.8% 10.3% 9.7% 10.3% 13.0% 13.5% 3.3% 4.6% 3.4% 3.9% 8.1 9.2
Class A - Leased Asset 9.2% 9.6% 9.2% 9.7% 11.7% 12.0% 3.3% 4.2% 3.4% 3.9% 8.5 9.5
Class B - Leased Asset 10.0% 10.4% 9.7% 10.3% 12.8% 13.1% 3.3% 4.7% 3.5% 4.0% 8.3 9.7
Class A - Value Added 9.4% 10.0% 9.6% 10.2% 12.8% 13.5% 3.5% 4.6% 3.5% 3.9 7.6 8.9
Class B - Value Added 10.7% 11.0% 10.5% 11.2% 14.6% 15.3% 3.2% 4.8% 3.3% 3.9% 8.0 8.8
Suburban 9.3% 9.8% 9.7% 10.1% 12.8% 13.4% 3.2% 4.4% 3.4% 3.7% 8.0 8.8
Class A - Leased Asset 8.8% 9.5% 9.3% 9.9% 11.2% 11.6% 3.5% 4.4% 3.6% 3.8% 8.9 9.7
Class B - Leased Asset 9.5% 10.0% 9.8% 10.2% 12.0% 12.5% 3.4% 4.5% 3.4% 3.7% 8.6 9.6
Class A - Value Added 9.1% 9.7% 9.5% 10.0% 13.4% 14.3% 3.1% 4.6% 3.4% 3.8% 7.2 8.0
Class B - Value Added 9.7% 10.0% 10.0% 10.5% 14.5% 15.2% 2.9% 4.3% 3.2% 3.6% 7.2 8.0
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL
- ------------------------------------------------------------------------------------------------------------------------------------
Warehouse/Distribution 9.5% 9.7% 10.2% 10.5% 11.6% 11.6% 2.6% 4.5% 3.2% 4.0% 9.6 10.2
Class A - Leased Asset 8.8% 9.2% 9.4% 9.8% 10.9% 11.0% 2.9% 4.0% 3.3% 3.8% 9.8 10.1
Class B - Leased Asset 9.3% 9.5% 10.0% 10.2% 11.2% 11.2% 2.8% 4.3% 3.2% 3.9% 9.7 10.1
Class A - Value Added 9.7% 9.9% 10.4% 10.8% 11.9% 11.9% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
Class 8 - Value Added 10.1% 10.4% 10.9% 11.3% 12.4% 12.4% 2.4% 4.8% 3.3% 4.1% 9.5 10.3
Business Parks 9.4% 9.9% 10.0% 10.8% 12.3% 12.9% 3.4% 4.0% 3.2% 3.8% 8.3 9.6
Class A - Leased Asset 9.0% 9.5% 9.8% 10.5% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
Class B - Leased Asset 9.3% 9.8% 10.0% 10.8% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
Class A - Value Added 9.5% 10.2% 10.0% 10.8% 13.0% 14.3% 3.5% 4.0% 3.2% 3.7% 7.7 8.7
Class B - Value Added 9.7% 10.3% 10.2% 11.0% 13.0% 14.3% 3.5% 4.0% 3.2% 3.7% 7.7 8.7
0ther Industrial/
Manufacturing 9.2% 9.7% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.8 10.3
Class A - Leased Asset 8.8% 9.3% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.5 10.0
Class B - Leased Asset 9.3% 9.8% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.5 10.0
Class A - Value Added 9.3% 9.8% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
Class B - Value Added 9.5% 10.0% 9.5% 11.0% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 9.0 10.5
- ------------------------------------------------------------------------------------------------------------------------------------
RETAIL
- ------------------------------------------------------------------------------------------------------------------------------------
Neighborhood & Community
Centers 9.7% 10.2% 10.3% 10.9% 13.0% 13.5% 2.7% 3.9% 3.2% 4.0% 8.7 9.3
Class A - Leased Asset 9.3% 9.8% 10.0% 10.4% 11.9% 12.1% 2.9% 3.7% 3.4% 3.9% 8.9 9.4
Class B - Leased Asset 9.5% 10.0% 10.4% 11.1% 12.3% 12.3% 2.3% 3.8% 3.3% 4.2% 9.0 9.6
Class A - Value Added 9.7% 10.3% 10.1% 10.7% 13.8% 14.6% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
Class B - Value Added 10.3% 10.8% 10.8% 11.5% 14.2% 15.0% 2.8% 4.0% 3.1% 3.8% 8.5 9.0
Power Center & "Big Box" 9.6% 9.9% 10.0% 10.5% 11.8% 11.9% 2.9% 3.5% 3.2% 3.7% 9.3 10.3
Class A - Leased Asset 9.4% 9.5% 9.7% 10.1% 11.5% 11.7% 3.3% 3.5% 3.4% 3.7% 9.1 10.1
Class B - Leased Asset 9.8% 10.1% 10.1% 10.6% 11.0% 11.3% 2.8% 3.7% 3.2% 3.7% 9.3 10.3
Class A - Value Added 9.6% 9.9% 10.1% 10.6% 12.0% 12.0% 2.8% 3.3% 3.2% 3.7% 9.3 10.3
Class B - Value Added 9.8% 10.3% 10.1% 10.9% 12.7% 12.7% 2.8% 3.3 3.2% 3.7% 9.3 10.3
Regional Malls 9.3% 9.6% 9.5% 10.0% 13.2% 13.6% 2.7% 3.5% 3.5% 3.8% 8.8 8.9
Class A - Leased Asset 7.9% 8.2% 8.2% 8.6% 11.4% 11.8% 3.0% 3.6% 3.5% 3.8% 9.1 9.6
Class B - Leased Asset 9.3% 9.6% 9.6% 10.0% 13.4% 13.9% 2.5% 3.4% 3.7% 4.0% 8.6 8.6
Class A - Value Added 9.3% 9.8% 9.8% 10.3% 13.4% 13.9% 2.6% 3.6% 3.4% 3.8% 9.2 9.2
Class B - Value Added 10.6% 11.0% 10.6% 11.0% 14.6% 15.0% 2.7% 3.5% 3.3% 3.7% 8.2 8.2
Specialty Retail 9.5% 10.5% 10.8% 11.5% 12.0% 12.6 1.9% 4.0% 3.3% 4.0% 10.0 10.5
Class A - Leased Asset 8.2% 9.0% 8.8% 9.7% 10.7% 11.3% 2.5% 4.0% 3.5% 4.0% 8.7 10.3
Class B - Leased Asset 9.3% 10.3% 10.8% 11.5% 11.5% 12.5% 1.8% 4.0% 3.3% 4.0% 10.5 10.5
Class A - Value Added 10.0% 11.0% 11.3% 12.0% 12.5% 13.0% 1.8% 4.0% 3.3% 4.0% 10.5 10.5
Class B - Value Added 10.8% 11.8% 12.3% 13.0% 13.5% 13.5% 1.8% 4.0% 3.3% 4.0% 10.5 10.5
- ------------------------------------------------------------------------------------------------------------------------------------
RESIDENTIAL
- ------------------------------------------------------------------------------------------------------------------------------------
Apartments 9.0% 9.6% 9.8% 10.4% 11.5% 12.1% 2.7% 4.4% 3.2% 4.0% 8.4 9.3
Class A - Leased Asset 8.6% 9.2% 9.0% 9.6% 11.2% 11.7% 2.9% 3.9% 3.3% 3.8% 8.4 8.9
Class B - Leased Asset 8.9% 9.7% 9.7% 10.3% 11.0% 11.8% 2.5% 4.2% 3.1% 4.0% 9.6 10.2
Class A - Value Added 8.9% 9.4% 9.8% 10.3% 11.6% 12.1% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
Class B - Value Added 9.5% 10.1% 10.6% 11.3% 12.0% 13.0% 2.6% 4.8% 3.1% 4.0% 7.8 9.0
</TABLE>
16 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
Single-Tenant NNN Leased Properties
(Excludes "Bondable" Leases)
Minimum No. Going-In Cap Rate Internal Rate of Return
of Years Low High Low High
Investment Grade Tenant
- --------------------------------------------------------------------------------
4.0 9.0% 9.0% 10.0% 12.0%
----------------------------------------------------------
10.0 8.0 9.0 10.5 11.5
----------------------------------------------------------
5.0 10.5 10.5 13.0 13.0
----------------------------------------------------------
10.0 9.0 10.5 13.0 15.0
----------------------------------------------------------
10.0 8.5 9.0 10.5 12.0
----------------------------------------------------------
10.0 9.5 10.0 10.5 11.5
----------------------------------------------------------
10.0 8.5 11.0 10.8 12.0
----------------------------------------------------------
10.0 9.5 9.5 11.0 11.0
----------------------------------------------------------
20.0 9.0 9.0 N/A N/A
----------------------------------------------------------
10.0 8.0 10.0 N/A N/A
- --------------------------------------------------------------------------------
Responses 10.0 10.0 10.0 8.0 8.0
Average 9.9 9.0% 9.8% 11.2% 12.3%
Non-Investment Grade
Tenant
- --------------------------------------------------------------------------------
4.0 9.5% 9.5% 10.5% 13.0%
----------------------------------------------------------
10.0 9.0 10.0 11.5 12.5
----------------------------------------------------------
5.0 13.0 13.0 15.0 15.0
----------------------------------------------------------
10.0 10.0 12.0 17.0 20.0
----------------------------------------------------------
10.0 9.0 10.0 11.0 13.0
----------------------------------------------------------
10.0 11.0 12.0 13.0 15.0
----------------------------------------------------------
10.0 10.5 10.5 13.0 13.0
----------------------------------------------------------
20.0 11.0 11.0 N/A N/A
----------------------------------------------------------
10.0 10.0 12.5 N/A N/A
----------------------------------------------------------
Responses 9.0 9.0 9.0 7.0 7.0
Average 9.9 10.3% 11.2% 13.0% 14.5%
AUTUMN 1996 17
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES BLENDED INTERNAL EQUITY INTERNAL GROWTH RATES TYPICAL PROJECTION MANAGEMENT RESERVES FOR
GOING-IN TERMINAL RATE OF RETURN RATE OF RETURN INCOME EXPENSES PERIOD (YEARS) FEES* REPLACEMENT*
----------------------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
LUXURY
- ------------------------------------------------------------------------------------------------------------------------------------
8.0% 8.0% 10.0% 10.0% 18.0% 18.0% 25.0% 25.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 5.0% 5.0%
7.0% 7.0% 10.0% 10.0% 15.0% 15.0% 20.0% 20.0% 7.0% 7.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
6.0% 9.5% 10.0% 10.0% 12.0% 15.0% 15.0% 18.0% 3.0% 3.0% 3.0% 3.0% 5.0 5.0 2.0% 4.0% 4.0% 4.0%
8.0% 11.0% 8.5% 12.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
9.5% 9.5% 10.5% 10.5% 15.0% 15.0% 18.0% 18.0% 4.5% 4.5% 4.0% 4.0% 10.0 10.0 3.5% 3.5% 4.0% 4.0%
-- -- 11.0% 13.0% 15.0% 15.0% 18.0% 18.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0 3.0% 3.0% 4.0% 4.0%
6.0% 8.0% 10.0% 12.0% 13.0% 14.0% 20.0% 22.0% 3.0% 4.0% 3.0% 4.0% 5.0 5.0 2.0% 3.0% 4.0% 5.0%
8.0% 12.0% 8.0% 10.0% 15.0% 15.0% 20.0% 20.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0 3.0% 4.0% 4.0% 5.0%
Responses 7 7 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8
Average (%) 7.5% 9.3% 9.8% 10.9% 14.5% 15.3% 19.5% 20.1% 4.1% 4.3% 3.8% 3.9% 6.5 6.9 2.8% 3.3% 4.1% 4.4%
- ------------------------------------------------------------------------------------------------------------------------------------
FIRST CLASS
- ------------------------------------------------------------------------------------------------------------------------------------
9.0% 9.0% 11.0% 11.0% 12.0% 12.0% 20.0% 20.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
10.0% 10.0% 10.0% 10.0% -- -- 13.0% 13.0% 3.0% 3.0% 3.0% 3.0% 10.0 10.0 3.0% 3.0% 4.0% 5.0%
9.0% 9.0% 11.0% 11.0% 14.0% 14.0% 18.0% 18.0% 6.0% 6.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
9.5% 11.0% 11.0% 11.0% 15.0% 20.0% 18.0% 22.0% 3.0% 3.0% 2.0% 2.0% 5.0 5.0 2.0% 3.0% 4.0% 4.0%
10.0% 12.0% 10.5% 13.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
7.0% 9.0% 10.0% 11.0% 11.5% 12.0% 14.0% 16.0% 4.0% 5.0% 3.0% 4.0% 5.0 5.0 2.5% 2.5% 5.0% 5.0%
9.5% 9.5% 10.5% 10.5% 15.0% 15.0% 18.0% 18.0% 4.5% 4.5% 4.0% 4.0% 10.0 10.0 3.5% 3.5% 4.0% 4.0%
9.0% 9.0% 10.5% 10.5% 21.0% 21.0% 14.0% 14.0% 4.0% 4.0% 3.0% 3.0% 7.0 7.0 3.0% 3.0% 4.0% 4.0%
10.0% 12.0% 11.0% 11.0% -- -- -- -- 3.5% 3.5% 3.5% 3.5% 5.0 10.0 2.0% 3.0% 4.0% 4.0%
10.0% 10.0% 9.0% 9.5% 19.0% 19.0% 15.0% 15.0% 8.0% 8.0% 6.0% 6.0% -- -- 2.5% 2.5% 4.0% 4.0%
10.0% 13.0% 12.0% 13.0% 25.0% 25.0% 20.0% 20.0% 3.5% 4.0% 3.5% 4.0% 5.0 5.0 3.5% 3.5% 4.0% 4.0%
10.5% 10.5% 10.5% 10.5% 13.5% 13.5% -- -- 3.5% 3.5% 3.5% 3.5% 10.0 10.0 3.0% 3.0% 5.0% 5.0%
8.0% 12.0% 8.0% 10.0% 15.0% 15.0% 20.0% 20.0% 4.0% 4.0% 4.0% 4.0% 5.0 5.0 3.0% 4.0% 4.0% 5.0%
Responses 13 13 13 13 11 11 11 11 13 13 13 13 12 12 13 13 13 13
Average (%) 9.3% 10.5% 10.4% 10.9% 15.8% 16.5% 17.3% 17.8% 4.2% 4.3% 3.7% 3.8% 6.6 7.3 2.8% 3.1% 4.2% 4.3%
- ------------------------------------------------------------------------------------------------------------------------------------
MID-RATE
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 12.0% 12.0% 15.0% 15.0% 18.0% 18.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
11.0% 11.0% 11.0% 11.0% 13.0% 13.0% 17.0% 17.0% 6.0% 6.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
9.5% 11.0% 11.0% 11.0% 15.0% 18.0% 17.0% 20.0% 3.0% 3.0% 2.0% 2.0% 5.0 5.0 2.0% 3.0% 4.0% 4.0%
10.0% 12.0% 10.5% 13.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
9.5% 9.5% 10.5% 10.5% 15.0% 15.0% 18.0% 18.0% 4.5% 4.5% 4.0% 4.0% 10.0 10.0 3.5% 3.5% 4.0% 4.0%
Responses 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5
Average (%) 10.0% 10.7% 11.0% 11.5% 14.2% 15.2% 18.0% 18.6% 4.2% 4.2% 3.7% 3.7% 6.4 7.0 2.9% 3.1% 4.0% 4.0%
----------------------------------------------------------------------------------------------------------------------
Total
Responses 25 25 26 26 24 24 24 24 26 26 26 26 25 25 26 26 26 26
Weighted
Average (%) 8.9% 10.1% 10.4% 11.1% 14.8% 15.7% 18.3% 18.8% 4.2% 4.3% 3.7% 3.8% 6.5 7.0 2.9% 3.2% 4.1% 4.2%
----------------------------------------------------------------------------------------------------------------------
</TABLE>
*as percent of total revenues
18 REAL ESTATE OUTLOOK
<PAGE>
- --------------------------------------------------------------------------------
CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES NATIONAL INVESTOR SURVEY
- AUTUMN 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITALIZATION RATES BLENDED INTERNAL EQUITY INTERNAL GROWTH RATES TYPICAL PROJECTION MANAGEMENT RESERVES FOR
GOING-IN TERMINAL RATE OF RETURN RATE OF RETURN INCOME EXPENSES PERIOD (YEARS) FEES* REPLACEMENT*
----------------------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
MID-RATE HOTEL - LIMITED SERVICE
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 12.0% 12.0% 15.0% 15.0% 15.0% 15.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
12.0% 12.0% 12.0% 12.0% 13.0% 13.0% 17.0% 17.0% 3.0% 3.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
8.0% 10.0% 10.0% 10.0% 12.0% 15.0% 14.0% 16.0% 3.0% 3.0% 2.0% 2.0% 5.0 5.0 3.0% 4.0% 4.0% 5.0%
11.0% 13.0% 11.5% 14.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
11.0% 11.0% 11.8% 11.8% 16.0% 16.0% 19.0% 19.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0 4.0% 4.0% 4.5% 4.5%
10.0% 13.0% 12.0% 13.0% 25.0% 25.0% 20.0% 20.0% 3.5% 4.0% 3.5% 4.0% 5.0 5.0 4.0% 4.0% 5.0% 5.0%
Responses 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6
Average (%) 10.3% 11.5% 11.5% 12.1% 15.7% 16.5% 17.5% 17.8% 3.5% 3.6% 3.7% 3.8% 6.2 6.7 3.3% 3.5% 4.3% 4.4%
- ------------------------------------------------------------------------------------------------------------------------------------
ECONOMY
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 10.0% 12.0% 12.0% 15.0% 15.0% 15.0% 15.0% 4.0% 4.0% 5.0% 5.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
13.0% 13.0% 13.0% 13.0% 13.0% 13.0% 17.0% 17.0% 3.0% 3.0% 4.0% 4.0% 5.0 5.0 3.0% 3.0% 4.0% 4.0%
9.0% 11.0% 10.0% 10.0% 12.0% 15.0% 14.0% 16.0% 3.0% 3.0% 3.0% 3.0% 5.0 5.0 4.0% 5.0% 5.0% 5.0%
11.0% 13.0% 11.5% 14.0% 13.0% 15.0% 20.0% 20.0% 3.5% 3.5% 3.5% 3.5% 7.0 10.0 3.0% 3.0% 4.0% 4.0%
11.0% 11.0% 11.8% 11.8% 16.0% 16.0% 19.0% 19.0% 4.0% 4.0% 4.0% 4.0% 10.0 10.0 4.0% 4.0% 4.5% 4.5%
Responses 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5
Average (%) 10.8% 11.6% 11.7% 12.2% 13.8% 14.8% 17.0% 17.4% 3.5% 3.5% 3.9% 3.9% 6.4 7.0 3.4% 3.6% 4.3% 4.3%
Total
Responses 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11
Weighted
Average(%) 10.6% 11.6% 11.6% 12.1% 14.7% 15.7% 17.3% 17.6% 3.5% 3.5% 3.8% 3.8% 6.3 6.8 3.4% 3.6% 4.3% 4.4%
</TABLE>
*as percent of total revenues
AUTUMN 1996 19
<PAGE>
Addenda
================================================================================
Appraiser Qualifications
<PAGE>
QUALIFICATIONS
================================================================================
Donald R. Morris, MAI
Professional Affiliations:
Member of the Appraisal Institute (MAI Designations #9812)
District of Columbia Certified General Real Estate Appraiser (#GA00010267)
Commonwealth of Virginia Certified General Real Estate Appraiser
(#4001002465)
State of Maryland Certified General Real Estate Appraiser (#7220)
State of West Virginia Certified General Real Estate Appraiser (#237)
Appraisal/Real Estate Experience:
Director/Manager, Cushman & Wakefield of Washington, D.C. and Assistant
Manager, Cushman & Wakefield of Texas, Inc., Dallas, Texas, Valuation
Advisory Services, a full service real estate organization specializing in
appraisal and consultation. April 1990 to present.
Associate Appraiser, Joseph A. Dengel & Company, Dallas, Texas, May 1977
to April 1990.
Other real estate experience includes work as a residential listing and
selling agent preparing market analyses and origination contracts.
Experience includes appraisal of the following types of property:
Office Buildings Medical Office Buildings
Regional Malls Power Centers
Outlet Centers Community & Neighborhood Shopping Centers
Department Stores Industrial Buildings
Residential Subdivisions Single Family Residences
Multi-Family Properties Condominiums/Duplexes
Subdivision Analysis Farm/Ranch
Mixed Use Properties Golf Courses
Grape Vineyards Special Purpose Facilities
Commercial Land Hotel/Motel
Ad Valorem Tax Appeals
Appraisal and consulting services used for mortgage loans, relocations,
gift and estate tax, condemnation and litigation purposes.
Qualified as an expert witness in state and federal real estate court
cases.
Education:
Bachelor of Arts (Political Science), 1981
University of Texas at Arlington, Arlington, Texas.
<PAGE>
QUALIFICATIONS
================================================================================
Donald R. Morris, MAI
Appraisal Institute Courses:
#1A1 - Real Estate Appraisal Principles
#1A2 - Basic Valuation Procedures
#1B1 - Capitalization Theory & Techniques, Part A
#1B2 - Capitalization Theory & Techniques, Part B
#410 - Standards of Professional Appraisal Practice, Part A (USPAP)
#420 - Standards of Professional Appraisal Practice, Part B (AI)
#21 - Case Studies in Real Estate Valuation
#22 - Report Writing and Valuation Analysis
#82 - Residential Valuation Procedures
Additional Accredited Real Estate Courses:
Real Estate Appraisal
Principles of Real Estate
Real Estate Marketing
Real Estate Finance
Property Management
Federal National Mortgage Corporation (Fannie Mae) - Appraisal
Training
Certified in the Appraisal's Institute's voluntary program of continuing
education for its designated members.
<PAGE>
QUALIFICATIONS
================================================================================
John H. Trowbridge
Professional Affiliations:
Candidate Member of the Appraisal Institute
District of Columbia Certified General Appraiser (#GA00010061)
State of Maryland Certified General Appraiser (#10749)
Commonwealth of Virginia Certified General Appraiser (#4001 004035)
Member, District of Columbia Appraiser Board
Appraisal/Real Estate Experience:
Appraiser, Cushman & Wakefield of Washington, D.C., Inc., Valuation
Advisory Services, a full service real estate organization specializing in
appraisal and consultation. September, 1995 to present.
Senior Associate Appraiser, Sapperstein & Associates, Inc., Rockville,
Maryland, April, 1989 to September, 1995.
Assistant Vice President, C.B. Commercial, Washington, D.C., September,
1985 to April, 1989.
Appraiser, Jackson Cross Company, Washington, D.C. September 1981 to
August 1985
Experience includes appraisal of the following types of property-
Office Buildings Shopping Centers
Subdivision Development Analyses Industrial Facilities
Commercial Land Multi-Family Properties
Single Family Residences Leasehold/Leased Fee Interests
Hotel Special Purpose Facilities
Retail Income Properties Regional Malls
Golf Courses Historic Landmarks
Marinas Shipyards
Broadcast Facilities
Extensive experience in fractional interest valuations of limited
partnerships and valuations of multiple purpose properties in Canada and
throughout the United States.
Education:
Bachelor of Arts (Finance), 1976
University of Connecticut, Storrs, Connecticut
<PAGE>
QUALIFICATIONS
================================================================================
John H. Trowbridge
Appraisal Institute Courses:
#1A1 - Real Estate Appraisal Principles
#1A2 - Basic Valuation Procedures
#1B1 - Capitalization Theory & Techniques, Part A
#1B2 - Capitalization Theory & Techniques, Part B
#410 - Standards of Professional Appraisal Practice, Part A (USPAP)
#420 - Standards of Professional Appraisal Practice, Part B (AI)
#610 - Report Writing and Valuation Analysis
This CD ROM contains an electronic version of appraisals for the Mortgaged
Properties in PDF format and forms part of the paper version of the Prospectus
Supplement. The information contained in this CD ROM does not appear elsewhere
in paper form in this Prospectus Supplement and must be considered as part of,
and together with, the information contained elsewhere in this Prospectus
Supplement and the Prospectus. The information contained in this CD ROM has
been filed by the Seller with the Securities and Exchange Commission as part
of a Current Report on Form 8-K, which is incorporated by reference in this
Prospectus Supplement, and is also available through the public reference
branch of the Securities and Exchange Commission. Defined terms used in this CD
ROM but not otherwise defined therein shall have the respective meanings
assigned to them in the paper portion of the Prospectus Supplement and the
Prospectus. All of the information contained in this CD ROM is subject to the
same limitations and qualifications contained in this Prospectus Supplement and
the Prospectus. Prospective investors are strongly urged to read the paper
portion of this Prospectus Supplement and the Prospectus in its entirety prior
to accessing this CD ROM. If this CD ROM was not received in a sealed package,
there can be no assurances that it remains in its original format and should
not be relied upon for any purpose. Prospective investors may contact J.
Theodore Borter of Goldman, Sachs Co. at (212)902-3857 to receive an original
copy of the CD ROM.
<PAGE>
COMPLETE APPRAISAL OF
REAL PROPERTY
San Valente Building
3200 Patrick Henry Drive
Santa Clara, Santa Clara County, California
CUSHMAN &
WAKEFIELD(R)
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A ROCKEFELLER COMPANY
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VALUATION ADVISORY SERVICES
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<PAGE>
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COMPLETE APPRAISAL OF
REAL PROPERTY
San Valente Building
3200 Patrick Henry Drive
Santa Clara, Santa Clara County, California
-------------------------------------------------
IN A SUMMARY REPORT
As of July 29, 1996
Prepared For:
GMAC Commercial Mortgage Corporation
650 Dresher Road
Horsham, PA 19044-8015
Prepared By:
Cushman & Wakefield of California, Inc.
Valuation Advisory Services
2055 Gateway Place, Suite 550
San Jose, California 95110
<PAGE>
Cushman & Wakefield of California, Inc. CUSHMAN &
2055 Gateway Place, Suite 550 WAKEFIELD(R)
San Jose, CA 95110-1068
Tel: (408) 436-5500
Fax: (408) 437-9129
August 5, 1996
Ms. Avis Tsuya
Senior Underwriter
GMAC COMMERCIAL MORTGAGE CORPORATION
650 Dresher Road
Horsham, PA 19044-8015
RE: Appraisal of Real Property
San Valente Building
3200 Patrick Henry Drive
Santa Clara, Santa Clara County, California
Dear Ms. Tsuya:
In fulfillment of our agreement as outlined in the Letter of Engagement,
Cushman & Wakefield of California, Inc. is pleased to transmit our summary
report estimating the market value of the leased fee estate in the referenced
property.
As specified in the Letter of Engagement, the value opinion reported below
is qualified by certain assumptions, limiting conditions, certifications, and
definitions, which are set forth in the report. We specifically call your
attention to the following special assumptions:
This is a complete appraisal prepared in accordance with the Uniform
Standards of Professional Appraisal Practice of The Appraisal Foundation. The
results of the appraisal are being conveyed in a Summary report according to our
agreement. Because this is a summary report, the level of detail of presentation
is less than that found in a self-contained report.
This report was prepared for GMAC Commercial Mortgage Corporation and it is
intended only for the specified use of said Client. It may not be distributed to
or relied upon by other persons or entities without written permission of the
Appraiser.
The property was inspected by and the report was prepared by Rob D.
Perrino. Kenneth E. Matlin, MAI has reviewed the report and is in concurrence
with the findings herein.
As a result of our analysis, we have formed an opinion that the market
value of the leased fee estate in the subject property, subject to the
assumptions, limiting conditions, certifications, and definitions, as of July
29, 1996 was:
<PAGE>
Ms. Avis Tsuya
August 5, 1996
Page 2
NINE MILLION SEVEN HUNDRED THOUSAND DOLLARS
$9,700,000
The preceding estimate of market value are based upon a forecasted
marketing period of approximately 6 to 12 months, which we believe (through a
review of recent office/research and development building sale activity, as well
as with conversations with local investment brokers) is reasonably
representative for this product type.
This letter is invalid as an opinion of value if detached from the report,
which contains the text, exhibits, and an Addenda.
Respectfully submitted,
CUSHMAN & WAKEFIELD OF TEXAS, INC.
/s/ Rob D. Perrino
Rob D. Perrino
Appraiser
Northern California Valuation Advisory Services
Certification No. CA-AGO02595
/s/ Kenneth E. Matlin
Kenneth E. Matlin, MAI
Manager and Director
Northern California Valuation Advisory Services
Certification No. CA-AGO02022
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
SUMMARY OF SALIENT FACTS AND CONCLUSIONS
================================================================================
Property Name: San Valente Building
Location: The subject property is located
along the southwesterly side of Patrick
Henry Drive, between Old Ironside Drive
and Democracy Way within the Marriott
Business Park. The street address is 3200
Patrick Henry Drive, Santa Clara, Santa
Clara County, California.
Assessor's Parcel Number: 104-04-089 and 124I
Interest Appraised: Leased fee estate
Date of Value: July 29, 1996
Date of Inspection: July 29, 1996
Ownership: WHC-Six Real Estate Limited Partnership
Land Area: 5.96 acres or 259,616 square feet
1995-96 Property Assessment
Land: $ 3,263,000
Building: $ 2,737,000
-----------
Total: $ 6,000,000
1995-96 Ad Valorem Taxes: $72,655.30
Zoning: ML, Light Industrial
Highest and Best Use
If Vacant: Office/research and development building
As Improved: Office/research and development building
(existing use)
Improvements
Type: A partial two-story, concrete with stucco,
office/research and development building.
Year Built: 1979, renovated in 1992
Size
Gross Building Area: 104,540 square feet
Net Rentable Office Area: 104,540 square feet
Net Useable Area: 104,540 square feet
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Summary of Salient Facts and Conclusions
================================================================================
Condition: Average to Good
Operating Data and Forecasts
Current Occupancy: 100.0%
Forecasted First Year Occupancy
(Fiscal Year 1997): 100.0%
Forecasted Average Occupancy: 95.0%
Average Monthly Rental Rate
Actual: $0.62 per square foot, triple-net
Forecasted: $0.90 per square foot, triple-net
Operating Expenses
Last Full Year (1995): $1.46 per net rentable square foot
Budget (1996): $1.60 per net rentable square foot
Forecasted (Fiscal Year 1997): $1.47 per net rentable square foot
Value Indicators
Sales Comparison Approach: $9,780,000 ($93.55 per square foot
of net rentable area)
Income Approach: $9,660,000 ($92.40 per square foot
of net rentable area)
Discounted Cash Flow Assumptions
Market Rental Growth Rate: 3.5% per annum
Expense Growth Rates: 3.5% per annum
Credit Loss Allowance: 2.0%
Projected Term of Future Leases: 5 years
Vacancy Between Tenants 4 months
Renewal Probability: 50.0%
Tenant Improvements
New Tenants: $10.00 per square foot
Renewal Tenants: $3.50 per square foot
Commission Expense (Weighted
Average): 4.6%
Terminal Capitalization Rate: 10.0%
Cost of Sale at Reversion: 3.0%
Discount Rate: 12.5%
Implicit Year 1 Overall
Capitalization Rate: 7.9%
Value Conclusion
As Is Value Estimate: $9,700,000
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Summary of Salient Facts and Conclusions
================================================================================
Resulting Indicator
Going-In Capitalization Rate
(Overall Capitalization Rate): 7.9%
Price Per Square Foot
(Net Rentable Area): $92.79
Estimated Marketing Time: 6 to 12 months
Special Assumption:
1) Please refer to the complete list of
assumptions and limiting conditions
included at the end of this report.
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
TABLE OF CONTENTS
================================================================================
Page
PHOTOGRAPHS OF THE SUBJECT PROPERTY ....................................... 1
INTRODUCTION .............................................................. 2
Identification of Property ............................................. 2
Property Ownership and Recent History .................................. 2
Purpose and Function of the Appraisal .................................. 2
Extent of the Appraisal Process ....................................... 2
Date of Value and Property Inspection ................................. 3
Property Rights Appraised .............................................. 3
Definitions of Value, Interest Appraised, and Other Pertinent Terms .... 3
Legal Description ...................................................... 4
NEIGHBORHOOD ANALYSIS ..................................................... 5
Market Overview ........................................................ 7
Marketing and Exposure Time ............................................ 9
PROPERTY DESCRIPTION ...................................................... 11
Site Description ....................................................... 11
Improvements Description ............................................... 11
REAL PROPERTY TAXES AND ASSESSMENTS ....................................... 12
ZONING .................................................................... 13
HIGHEST AND BEST USE ...................................................... 14
VALUATION PROCESS ......................................................... 15
SALES COMPARISON APPROACH ................................................. 16
"As Is" Valuation ...................................................... 20
INCOME APPROACH ........................................................... 21
RECONCILIATION AND FINAL ESTIMATE OF VALUE ................................ 30
ASSUMPTIONS AND LIMITING CONDITIONS ....................................... 32
CERTIFICATION OF APPRAISAL ................................................ 34
ADDENDA ................................................................... 35
Legal Description
Copy of Floor Plans
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Table of Contents
================================================================================
Alta Survey
Flood Plain Map
Site Plan
Project Assumptions and Analysis
Cushman & Wakefield Investor Survey
Qualifications of Rob D. Perrino
Qualifications of Kenneth E. Matlin
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
PHOTOGRAPHS OF THE SUBJECT PROPERTY
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[PHOTO]
[GRAPHIC OMITTED]
View of Subject from Patrick Henry Drive facing Southwest
[PHOTO]
[GRAPHIC OMITTED]
View of the South Elevation
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VALUATION ADVISORY SERVICES
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<PAGE>
INTRODUCTION
================================================================================
Identification of Property
The subject property is a partial two-story, concrete with stucco,
office/research and development building containing 104,504 square feet of net
rentable area. The building is situated along the southwesterly side of Patrick
Henry Drive, between Old Ironside Drive and Democracy Way within the Marriott
Business Park. The improvements are situated on two contiguous parcels of land
collectively consisting 5.96 acres or 259,616 square feet. The common address is
3200 Patrick Henry Drive, Santa Clara, Santa Clara County, California. The Santa
Clara County Assessor has designated the subject site at as parcel numbers
104-04-089 and 124. The building was constructed in 1979, but renovated in 1992
and is 100 percent occupied by one tenant as of the appraisal date.
Property Ownership and Recent History
Ownership of the property is currently vested in WHC-Six Real Estate
Limited Partnership. According to the most recent grant deed, the subject
property was acquired in August, 1994, from Prudential Insurance Company as part
of a bulk purchase of properties, for an undisclosed amount.
The subject property is 100% occupied by Communications & Power Industries
(CPI) through December, 1998. The tenant's contract rent is significantly
below-market. The impact of the property's below-market rent will be addressed
later on in the Income Approach of this report. Presently, the tenant is
marketing the space for sublease at an asking rental rate of $0.90 per square
foot per month on a triple-net basis. CPI is relocating its operation to Palo
Alto in January, 1997. Thus, the space is not deliverable until January, 1997,
which has been a detriment to marketing efforts. According to the listing
brokers, Messrs. Duffy Angelo and Steve Gibson with Colliers Parrish, there has
been a lot of interest in the property, however, tenants want the space today.
To the best of our knowledge, the property is not currently being offered
for sale, nor have there have been any subsequent ownership transfers.
Purpose and Function of the Appraisal
The purpose of the appraisal is to provide an estimate of market value of
the leased fee estate in the property. The function of this report is to assist
GMAC Commercial Mortgage Corporation in an evaluation of the property for loan
underwriting purposes.
Extent of the Appraisal Process
In the process of preparing this appraisal, we:
o Inspected the exterior and interior of the building and site
improvements.;
o Reviewed the leasing policy, tenant build-out allowances and history
of recent rental rates and occupancy with the building manager;
o Reviewed a detailed history of the income and expenses and a budget
forecast for 1996, including the budget for planned capital
expenditures and repairs;
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<PAGE>
Introduction
================================================================================
o Conducted market research into occupancies, asking rents, and
operating expenses at competing buildings including interviews with
on-site managers and a review of our own data base from previous
appraisal files;
o Conducted market inquiries into recent sales of similar buildings to
ascertain the sales prices per square foot and overall capitalization
rates. This process involved telephone interviews with sellers, buyers
and/or participating brokers; and
o Prepared Sales Comparison and Income Approaches to value. The Cost
Approach was not used.
Date of Value and Property Inspection
The date of value is July 29, 1996, with our date of our last inspection
being the same.
Property Rights Appraised
Leased fee estate
Definitions of Value, Interest Appraised, and Other Pertinent Terms
The definition of market value taken from the Uniform Standards of
Professional Appraisal Practice, 1994 Edition, published by The Appraisal
Foundation, is as follows:
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 is the
consummation of a sale as of a specified date and the passing of title from
seller to buyer under conditions whereby:
(1) Buyer and seller are typically motivated;
(2) Both parties are well. informed or well advised, and acting in what
they consider their own best interests;
(3) A reasonable time is allowed for exposure in the open market;
(4) Payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
(5) 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.
Exposure Time
Under Paragraph 3 of the Definition of Market Value, the value estimate
presumes that A reasonable time is allowed for exposure in the open market
Exposure time is defined as the estimated length of time the property
interest being appraised would have been offered on the market prior to the
hypothetical consummation of a sale at the market
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CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
Introduction
================================================================================
value on the effective date of the appraisal. Exposure time is presumed to
precede the effective date of the appraisal.
Based upon the available sales data in the marketplace, as well as our
discussions six to twelve months would appear to have been reasonably
appropriate for the subject property as the date of valuation.
Definitions of pertinent terms taken from the Dictionary of Real Estate
Appraisal, Third Edition (1993), published by The Appraisal Institute, are as
follows:
Leased Fee Estate
An ownership interest held by a landlord with the rights of use and
occupancy conveyed by lease to others. The fights of the lessor (the leased
fee owner) and the leased fee are specified by contract terms contained
within the lease.
Market Rent
The rental income that a property would most probably command on the open
market; indicated by the current rents paid and asked for comparable space
as of the date of the appraisal.
Cash Equivalent
A price expressed in terms of cash, as distinguished from a price expressed
totally or partly in terms of the face amounts of notes or other securities
that cannot be sold at their face amounts.
Discounted Cash Flow (DCF) Analysis
The procedure in which a discount rate is applied to a set of projected
income streams and a reversion. The analyst specifies the quantity,
variability, timing, and duration of the income streams as well as the
quantity and timing of the reversion and discounts each to its present
value at a specified yield rate. DCF analysis can be applied with any yield
capitalization technique and may be performed on either a lease-by-lease or
aggregate basis.
Legal Description
We were provided with an ALTA/ACSM Land Title Survey, dated July 7, 1994,
prepared by International Land Surveying of Norman, Oklahoma. A copy of this
survey is included in the Addenda. We also reviewed the subject's most recent
grant deed for reference to its legal description. A copy of the grant deed is
included in the Addenda.
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WAKEFIELD(R)
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<PAGE>
Sunnyvale o Santa Clara
North San Jose
Commercial Real Estate Map
[GRAPHIC OMITTED]
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Sunnyvale o Santa Clara
North San Jose
Commercial Real Estate Map (continued)
[GRAPHIC OMITTED]
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Sunnyvale o Santa Clara
North San Jose
Commercial Real Estate Map (continued)
[GRAPHIC OMITTED]
<PAGE>
Sunnyvale o Santa Clara
North San Jose
Commercial Real Estate Map (continued)
[GRAPHIC OMITTED]
<PAGE>
Sunnyvale o Santa Clara
North San Jose
Commercial Real Estate Map (continued)
[GRAPHIC OMITTED]
<PAGE>
Sunnyvale o Santa Clara
North San Jose
Commercial Real Estate Map (continued)
[GRAPHIC OMITTED]
<PAGE>
NEIGHBORHOOD ANALYSIS
================================================================================
The subject property is located in the Marriott Business Park, in northern Santa
Clara. The neighborhood boundaries are defined below:
North - State Route 237
South - U.S. Highway 101
East - Lafayette Street
West - San Tomas Aquino Creek
The Marriott Business Park is considered one of the most prestigious parks
in the Santa Clara Valley. It was developed by the Marriott Corporation in 1975
and it includes a total of 475 acres. The total existing inventory of industrial
and office space in the Park is estimated at approximately 5,080,000 square
feet. The Park is quite unique in that it is anchored by both the 300-room
Marriott Hotel and the Great America Amusement Park, now owned by Paramount. The
area also includes the 240,000 square foot Santa Clara Convention Center,
TechMart, and the 500-room Westin Hotel, as well as the Days Inn Hotel and
numerous restaurants.
The business park evolved into the pacesetter for architectural styles
prevalent in the "Silicon Valley" today. It has expanded on ideas originally
initiated in older parks such as Oakmead and Moffett both located in neighboring
Sunnyvale. Marriott features a high percentage of owner occupied buildings. It
serves as the headquarters for Rolm. During 1989 and 1990, Vintage Properties
completed construction of Phase I of a build-to-suit for 3-Com Corporation.
This development is located on the north side of Old Mountain View-Alviso Road
at Betsy Ross Drive. This facility consists of two, five-story buildings and
two, two-story buildings with an aggregate building area of 442,826 square feet.
Phase II is under construction and will contain two, two-story buildings. Xerox,
Lam Research Corporation, Rolm, Control Data, Claris, AT&T, Xidex, and Hitachi
also pride themselves as being major tenants in the Marriott Business Park.
Currently, the park has very little privately owned land available for
development.
The most notable developments in the subject neighborhood include: Regency
Plaza, a 13- story, class "A" structure located on the south side of Mission
College Boulevard; and McCandless Towers, which consists of an 11-story, class
"A" structure located just north of U.S. Highway 101. Other large, office
facilities located within and proximate to the subject neighborhood include: the
Lakeside Atrium, a three-story, steel frame office building located along
Lakeside Drive; Parkway Towers, a five-story office structure containing
approximately 80,000 square feet located north of the subject property along
Great America Parkway; and Parkway Plaza, a four-building, office complex
containing a total of approximately 200,000 square feet, located north of the
subject site along Old Ironsides Drive.
The neighborhood enjoys good access. U.S. Highway 101, the Bayshore
Freeway, forms the southern neighborhood boundary, and provides access from San
Jose to the south and from the San Francisco Peninsula cities to the north.
State Route 237 is located along the subject neighborhood's northerly boundary.
State Route 237 runs east/west and thus provides a direct route to Interstates
880 and 680 which provide access to East Bay communities. Also, due to Measure
"A", State Route 237 is scheduled to be improved. Improvements will include the
elevation of some segments of the highway and the construction of several
off-ramps. These
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WAKEFIELD(R)
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<PAGE>
Neighborhood Analysis
================================================================================
future improvements will greatly ease traffic congestion during commute hours
and greatly enhance access into the subject neighborhood.
Great America Parkway is the main arterial serving the subject
neighborhood. It runs north/south and intersects both U.S. Highway 101 and State
Route 237. This six-lane thoroughfare becomes Bowers Avenue immediately south of
U.S. Highway 101.
The Santa Clara Light Rail Transit system provides access from downtown and
San Jose to the subject neighborhood. This 20-mile system currently provides
access from south San Jose to Downtown San Jose. The rail line terminates near
the corner of Tasman Drive and Great America Parkway, approximately 1/2 mile
north of the subject site.
Utilities are all immediately available within the neighborhood. The City
of Santa Clara provides not only water and sanitary sewer service but also
electrical power. Pacific Gas & Electric Company supplies only natural gas. It
should be noted that since the City of Santa Clara's electrical rates are less
than those offered by Pacific Gas & Electric, there are considerable savings for
major electrical users. This gives properties within the City of Santa Clara
somewhat of a competitive edge over other areas. Pacific Bell supplied telephone
service to the neighborhood.
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<PAGE>
MARKET ANALYSIS
================================================================================
Market Overview
The electronics slump in the Silicon Valley, which began in late-1984 and
early-1985, and the concurrent over-building of the real estate market, caused
the industrial market in Santa Clara to decline between 1984 and 1986. The
slowed pace of new construction in neighboring areas and the gradual
revitalization of the high technology industry caused the market to improve from
1987 to 1988. However, this trend slowed in 1989 and 1990. The market
significantly declined in 1991 due to the Middle East War during the first
quarter of 1991, the recession in California, defense budget cuts, and the
resulting drop in demand for electronics products. The market overall remained
suppressed through 1993. However, the end of the recession in 1994 and the
strong increase in electronic goods demand resulted in a significant market
upturn throughout Silicon Valley which remains today.
Leasing Activity
The following chart illustrates research and development space absorption
for both the subject market and Silicon Valley as a whole from 1991 through the
second quarter of 1996. Silicon Valley includes all of Santa Clara County and
the Cities of Fremont and Newark, in southernmost Alameda County.
================================================================================
RESEARCH AND DEVELOPMENT SPACE GROSS ABSORPTION - SILICON VALLEY
================================================================================
2nd. Qtr.
1991 1992 1993 1994 1995 1996
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6,034,000 7,617,000 8,626,000 11,697,000 14,905,000 6,900,000
================================================================================
Absorption in Silicon Valley from 1991 to present experienced similar
patterns much like the subject market. Absorption of research and development
space went from 6,034,000 in 1991 to 7,617,000 in 1992 indicating an increase of
26%. However, the market witnessed a slowdown in 1993 with a 13% increase in
absorption from the previous year. However, absorption in Silicon Valley
increased significantly by 36% in 1994 with 11,697,000 square feet being
absorbed. This trend continued into 1995 with 14,905,000 square feet being
absorbed. As of the end of the second quarter of 1996, the overall market is off
to a steady start with professionals expecting absorption to stabilize from 1995
levels.
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RESEARCH AND DEVELOPMENT SPACE GROSS ABSORPTION - SANTA CLARA
================================================================================
2nd. Qtr.
1991 1992 1993 1994 1995 1996
- --------------------------------------------------------------------------------
800,000 825,000 1,442,000 2,097,000 2,610,000 785,000
================================================================================
Total gross absorption for research and development space in the subject
market increase by 25,000 square feet or by 3% from 1991 to 1992. The market
significantly rebounded between 1992 and 1993 with an increase from 825,000
square feet to 1,442,000 square feet in absorption, or by an unprecedented 75%.
The market continued to improve in 1994 with an increase in absorption by 45% or
655,000 square feet. This trend continued into 1995 with an increase in
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WAKEFIELD(R)
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Market Analysis
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absorption by 25%. In comparison to 1995, the second quarter of 1996 was off to
a slower start, however, market activity is anticipated to remain stable from
the previous year.
Availabilities
The reader's attention is directed to the following historical industrial
space availability charts. The charts include statistics for all industrial
product types pertaining to both the overall Silicon Valley market and Santa
Clara Market.
<TABLE>
<CAPTION>
==============================================================================================
INDUSTRIAL SPACE AVAILABLE - SILICON VALLEY
==============================================================================================
2nd. Qtr.
1991 1992 1993 1994 1995 1996
==============================================================================================
<S> <C> <C> <C> <C> <C> <C>
High Technology 17,560,000 16,380,000 15,645,000 13,017,000 9,401,000 6,122,000
- ----------------------------------------------------------------------------------------------
Manufacturing 3,130,000 2,410,000 4,914,000 4,013,000 2,488,000 1,903,000
- ----------------------------------------------------------------------------------------------
Warehouse 3,590,000 5,400,000 3,704,000 3,270,000 2,433,000 2,505,000
- ----------------------------------------------------------------------------------------------
Total 24,280,000 24,190,000 24,263,000 20,300,000 14,322,000 10,530,000
==============================================================================================
</TABLE>
Due to a sluggish economy, total available industrial space was relatively
flat from 1991 through 1993, between approximately 24,200,000 to 24,300,000
square feet. This was attributable to many factors. Electronic companies were
downsizing their spaces to reduce costs or consolidating operations to larger
facilities. Some companies moved manufacturing operations out of California to
locations where labor and facility costs were lower. The recession and resulting
decrease in demand for electronics products forced many companies to layoff
workers, thus reducing their space requirements.
However, the easing of the recession in 1994 resulted in renewed
electronics demand. Consequently, total available industrial space in Silicon
Valley decreased from the end of 1993 to the end of 1994 by 16%. This trend
continued through 1995 with the amount of available space declining by 29%. As
of the second quarter of 1996, the overall market continued to experience a
decrease in the amount of available industrial space.
<TABLE>
<CAPTION>
==============================================================================================
INDUSTRIAL SPACE AVAILABLE - SILICON VALLEY
==============================================================================================
2nd. Qtr.
1991 1992 1993 1994 1995 1996
==============================================================================================
<S> <C> <C> <C> <C> <C> <C>
High Technology 3,830,000 3,334,000 2,652,000 2,277,000 998,000 860,000
- ----------------------------------------------------------------------------------------------
Manufacturing 1,040,000 633,000 535,000 523,000 543,000 562,000
- ----------------------------------------------------------------------------------------------
Warehouse 62,000 331,000 609,000 365,000 385,000 151,000
- ----------------------------------------------------------------------------------------------
Total 4,932,000 4,298,000 3,796,000 3,165,000 1,926,000 1,573,000
==============================================================================================
</TABLE>
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<PAGE>
Market Analysis
================================================================================
The amount of available space in the subject market has continuously
decreased between 1991 and the second quarter of 1996. The largest decline in
the amount of available space occurred between 1994 and 1995. The amount of
available space decreased by 39%. As of the second quarter of 1996, the amount
of available space continues to decline.
Vacancy Rate
Cushman & Wakefield estimates the total industrial inventory in Silicon
Valley at 200 million square feet. Thus, the overall vacancy rate for Silicon
Valley industrial market, as of the end of the second quarter of 1996, was
approximately 5.3%. According to Colliers Parrish International market
statistics, as of June 1, 1996, the subject research and development market has
a vacancy rate of approximately 0.3%.
Rental Rates
We surveyed signed leases for existing, research and development space in
the subject market. Coupon rental rates for single-tenant facilities generally
range from $0.75 to $1.10 per square foot per month, triple-net, depending on
their physical and locational characteristics and the amount of tenant
improvement dollars given. Based on the low vacancy in Santa Clara, specifically
the Marriott Business Park, rental rates are anticipated to increase through
1996.
Cushman & Wakefield's Financial Services Group reports that the market
environment for investment sales and financing has changed dramatically over the
past 18 months. The national investment sales market is turning from a buyer's
market to a seller's market. The availability of both debt and equity capital
have turned the market around. Real estate as an asset class is again acceptable
to pension funds.
Summary and Conclusions
In summary, the Silicon Valley economy has significantly improved over the
past 18 months. As a result, the supply of good-quality, industrial space in
Silicon Valley is diminishing. Most brokers and owners interviewed feel that
this trend will continue over the next few years. The subject area remains one
of the most desirable locations in Silicon Valley and is expected to continue
low vacancy along with increasing rental rates.
Marketing and Exposure Time
Based on the office/research and development facility sales used in this
analysis, our conversations with brokers active in the subject market, and the
subject's size and location, it is our opinion that the subject property would
sell within a six to twelve-month period if actively marketed for sale.
The Appraisal Standards Board of the Appraisal Foundation defines exposure
time as, "the estimated length of time that the property interest being
appraised would have been offered on the market prior to the hypothetical
consummation of a sale at market value on the effective date of the appraisal; a
retrospective estimate based upon an analysis of past events assuming a
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<PAGE>
Market Analysis
================================================================================
competitive and open market." Based on historical market conditions and the
sales analyzed in this report, we estimated the exposure time for the subject
properties to be roughly equal to the marketing time previously stated at six to
twelve months.
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WAKEFIELD(R)
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<PAGE>
PROPERTY DESCRIPTION
================================================================================
Site Description
The subject site is situated along the southwesterly side of Patrick Henry
Drive, between Old Ironside Drive and Democracy Way within the Marriott Business
ark. The common street address is 3200 Patrick Henry Drive, Santa Clara, Santa
Clara County, California. The site (in total) is irregular in shape and contains
5.96 acres or 259,616 square feet of land area. The topography is level and at
street grade. We have assumed that the soil's load-bearing capacity is
sufficient to support the existing and any future structures. All essential
utilities including electricity, water, sewer, and telephone are currently
serving the site.
According to Community Panel No. 060350-0001C, effective July 16, 1980, the
subject property is situated in Zone "B", an area designated as being outside of
the floodplain.,
Improvements Description
The subject improvements comprise a partial two-story, concrete and stucco,
office/research and development building. The building has a net rentable area
of 104,540 square feet. The first floor is 80,540 square feet and the second
floor is 24,000 square feet. The improvements are built-out with 50% of drop
ceiling office and lab space with the balance of the space attributable to
manufacturing/warehouse space. The property was constructed in 1979 and
renovated in 1992. Presently, the improvements are 100% occupied by one tenant.
Construction is typical of office/research and development structures with
concrete panels, poured-in-place concrete foundation, and concrete slab. The
project is heated and cooled with a multi-zoned system with roof-mounted HVAC
systems. Plumbing and electrical is assumed to meet required building codes. The
property has one passenger elevator. In addition, there are three, interior
stairways providing access to the second floor. The property has zoned smoke and
fire alarm systems, and a monitored security system with card access that
restricts non-business hour access.
The subject has concrete surface parking for 353 vehicles which equates to
a parking ratio of 3.4 spaces per 1,000 square feet of net rentable area.
Patrick Henry Drive is improved with concrete sidewalks, curbs, and gutters. The
site is landscaped with trees, ornamental shrubs and plants located around the
building's perimeter and parking lot.
We have specifically assumed that the property complies with the Americans
With Disabilities Act, and that potentially hazardous materials have not been
used in the construction or maintenance of the property. Overall, the
improvements are in average to good condition. No evidence of structural damage
was observed on our physical inspection of the improvements. Further, we are not
aware of any major items of deferred maintenance at this time.
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<PAGE>
REAL PROPERTY TAXES AND ASSESSMENTS
================================================================================
The subject property is located in the City of Santa Clara, County of Santa
Clara, and as such, is taxed by these governing bodies. The subject property is
located in tax rate areas 07-095 and 07-117. The 1995-96 tax rate for these
areas is $1.0436 per $100.00 of the property's assessed valuation. Under the
provisions of Article XIIIA of the California Tax and Revenue Code, properties
are assessed based on their market value as of March 1, 1975. This valuation
may increase only 2% per year until such time as the property is sold,
substantial new construction takes place, or the use of the property is changed.
Under the foregoing circumstances, the properties may be reassessed to their
market value.
The 1995-96 fiscal year is the most recent year for which assessed
valuation and property tax information is available. The assessed value and
taxes for the property, are as follows:
<TABLE>
<CAPTION>
============================================================================================
ASSESSED VALUES AND REAL ESTATE
============================================================================================
Improvement
A.P.N. Land Value Value Total Taxes
============================================================================================
<S> <C> <C> <C> <C>
104-04-089 $613,000 $0 $613,000 $6,567.88
- --------------------------------------------------------------------------------------------
104-04-124 2,650,000 2,737,000 5,387,000 66,087.42
- --------------------------------------------------------------------------------------------
Total $3,263,000.00 $2,737,000.00 $6,000,000.00 $72,655.30
============================================================================================
</TABLE>
The total real estate taxes and assessments also include vector control,
flood control, and open space assessments. These assessments are reportedly paid
into perpetuity.
If the property was sold, it would be reassessed according to the
Assessor's opinion of its market value, which is the sale price in most cases.
Based on our estimated value conclusion of $9,700,000, real estate taxes and
assessments after sale would be approximately $105,000.
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<PAGE>
ZONING
================================================================================
The City of Santa Clara maintains a Planning Department which has
jurisdiction over all development within the city limits. The City Planning
Department has zoned the subject property ML, or Light Industrial. The general
plan for the site is Industrial/Office/Research and Development. Uses allowed
under these designations include research and development, light manufacturing,
and office uses. Some of the other building requirements under this designation
are as follows:
Maximum Building Height: 70 feet
Minimum Setbacks: 25 feet from the front and street side; 10
feet from the non-street side; and 15 feet
from the rear.
Coverage Ratio: 75%, provided setback requirements are met.
Parking Requirement: One space for every 300 square feet of office
space and one space for every 450 square feet
of industrial (manufacturing/assembly) space.
Based upon our understanding of the existing zoning ordinance, it appears
the improvements are conforming to current zoning and general plan.
We are not experts in the interpretation of complex zoning ordinances but
the property appears to be a conforming development. We know of no additional
deed restrictions, private or public, that further limit the subject property's
use beyond those described in the site description.
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HIGHEST AND BEST USE
================================================================================
Highest and Best Use of Site As Though Vacant
The highest and best use must be (1) legally permissible, (2) physically
possible, (3) financially feasible, and (4) maximally productive. The size,
shape, and physical attributes of the site are considered sufficient to
accommodate most forms of development. Given the existing industrial zoning and
the surrounding office/research and development facilities, it appears this use
is supported. Furthermore, as previously discussed in the Market Analysis
section of this report, the subject research and development market has a
vacancy rate of 3.6%. Rental rates for this type of space are continuing to
increase at an unprecedented rate. Therefore, it is our opinion the highest and
best use of the site is for an office/research and development use.
Highest and Best Use, As Improved
As previously noted in the Property Description section of this report, the
subject site is improved with a partial two-story, 104,540 square foot,
office/research and development building and related site improvements.
Constructed in 1979 and renovated in 1992, the project is in average to good
condition. Further, the design and layout are considered to be very functional
for its current use.
The subject property is 100 percent occupied by one tenant through
December, 1998. Thus, the improvements are providing a return to the site.
Furthermore, as previously indicated, the subject market's vacancy rate is
declining with rental rates increasing. Therefore, it is our opinion that the
highest and best use of this site, as improved, is for continued use as an
office/research and development building.
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<PAGE>
VALUATION PROCESS
================================================================================
In this appraisal, we have used the Sales Comparison Approach and Income
Approach to develop a market value estimate for the subject property. Because
this is a summary report, the level of detail of presentation is less than that
found in a self-contained report.
In our opinion , the Cost Approach is not relevant to this assignment.
Although the subject improvements are approximately 17 years old and of a
conforming type of construction for this market, estimating construction costs
and accrued depreciation for the improvements would be very subjective at best.
Additionally, depreciated replacement cost is not that important to the typical
investor. However, we have made the determination that the building improvements
do not contribute to the overall property value.
In the Sales Comparison Approach, we performed the following steps:
o Investigated the market for recent sales of similar office/research
and development properties.
o Analyzed those sales on the basis of the sales price per square foot;
and
o Correlated the value indications into a point value estimate from
within the range.
In developing the Income Approach we:
o Studied the rents in effect in this and competing properties to
estimate the potential rental income at market levels;
o Studied the recent history of operating expenses at this and competing
properties to estimate an appropriate level of expenses and reserves
for replacement;
o Estimated net operating income and cash flow by subtracting the
operating, fixed, and other expenses from the effective gross income;
and
o Prepared a discounted cash flow analysis in which the cash flow and
property value at reversion are discounted to an estimate of current
market value at a market-derived discount rate. Potential gross
revenues are estimated based on a modeling of the actual rents and
recovery provisions in effect through the term of existing leases. As
the existing leases expire, the space is estimated to rent at the then
current market rental rate with appropriate allowances for downtime.
From potential gross revenues, we subtract vacancy and expenses
(operating, fixed, and other) to arrive at an estimate of cash flow
over an 11 year forecast.
The appraisal process is concluded by a review and re-examination of each
of the approaches to value that have been employed. Consideration is given to
the type and reliability of data used, and the applicability of each approach.
Finally, the approaches are reconciled and a final value conclusion is
estimated.
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<PAGE>
SALES COMPARISON APPROACH
================================================================================
Methodology
In the Sales Comparison Approach, we estimated the value by comparing this
property with similar, recently sold properties in the surrounding or competing
area. Inherent in this approach is the principle of substitution, which holds
that when a property is replaceable in the market, its value tends to be set at
the cost of acquiring an equally desirable substitute property, assuming that no
costly delay is encountered in making the substitution.
By analyzing sales which qualify as arms-length transactions between
willing, knowledgeable buyers and sellers, we can identify value and price
trends. The basic steps involved in the application of this approach are:
(1) researching recent, relevant property sales and current offerings
throughout the competitive area;
(2) selecting and analyzing those properties considered most similar to
the subject, considering changes in economic conditions that may have
occurred between the sale date and the date of value, and other
physical, functional, or locational factors;
(3) identifying sales which include favorable financing and calculate the
cash equivalent price;
(4) reducing the sale prices to a common unit of comparison, such as
price per square foot of building area (in this case net rentable
area);
(5) making appropriate comparative adjustments to the prices of the
comparable properties to relate them to the property appraised; and
(6) interpreting the adjusted sales data and draw a logical value
conclusion.
In analyzing the leased fee estate of the subject property, the sale prices
inherent in the comparables were reduced to a price per square foot used to
analyze improved properties that are similar to the subject. The price square
foot of net rentable area is the most commonly used measurement to value
office/research and development buildings in the marketplace.
On the following page is a summary of recent market data considered to be
most indicative of the subject's current market value. A map of the sale
locations is on the following opposing page. A discussion of each comparable
follows.
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<PAGE>
San Valente Building
3200 Patrick Henry Drive
Santa Clara County, California
Office/ Research and Development Building Sales Company
<TABLE>
<CAPTION>
====================================================================================================
Net Ceiling Land
Comp. Year Rentable Height Area %
No. Location Sale Date Built Area (Feet) (Acres) Office
====================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
I-1 1210 California Circle May-96 1984 120,576 9' to 16' 9.45 100.0%
Milpitas, California
I-2 45757 Northport Loop Apr-96 1983 103,060 9' to 16' 6.50 68.0%
Fremont, California
I-3
3939-4001 North First Mar-96 1984 134,500 9' to 16' 9.33 100.0%
Street
San Jose, California
I-4 3939-4001 North First Apr-96 1985 249,408 9' to 16' 18.05 70.0%
Street
San Jose, California
I-5 2100-2101 Logic Drive Apr-95 1982 221,960 9' to 16' 11.56 80.0%
San Jose, California
====================================================================================================
Subj. San Valente Building Jul-96 1979 104,540 9' to 16' 5.96 50.0%
3200 Patrick Henry (ren. 1992)
Drive
Santa Clara, California
====================================================================================================
Low 9' to 16' 6.50 68.0%
Data Range High 9' to 16' 18.05 100.0%
Mean 9' to 16' 10.98 83.6%
<CAPTION>
====================================================================================================
% Occ. Cash Sale Overall
Comp. on Date Equivalent Price NOI/ Capitalization
No. Location of Sale Sale Price Per SF SF Rate
====================================================================================================
<S> <C> <C> <C> <C> <C> <C>
I-1 1210 California Circle 100.0% $12,670,000 $105.08 $10.05 9.6%
Milpitas, California
I-2 45757 Northport Loop 100.0% $9,278,000 $90.03 $8.1 9.0%
Fremont, California
I-3
3939-4001 North First 100.0% $18,199,317 $135.31 N/A N/A
Street
San Jose, California
I-4 3939-4001 North First 100.0% $32,000,000 $128.30 N/A N/A
Street
San Jose, California
I-5 2100-2101 Logic Drive 100.0% $26,000,000 $117.14 $10.48 8.9%
San Jose, California
====================================================================================================
Subj. San Valente Building 100.0% N/A N/A $10.19 * N/A
3200 Patrick Henry
Drive
Santa Clara, California
====================================================================================================
100.0% $9,278,000 $90.03 $8.11 8.9%
Data Range 100.0% $32,000,000 $135.31 $10.48 9.6%
100.0% $19,629,463 $115.17 $9.55 9.2%
*Note: The subject's NOI per square foot is based on the income forecasted based
on current market rent in the income Approach of this report.
====================================================================================================
</TABLE>
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<PAGE>
SALES COMPARISON APPROACH
================================================================================
Comparable I-1 is a mid-1996 sale of a good-quality, office/research and
development building located adjacent just east of Interstate 880 in Milpitas,
just south of the Fremont city border. The property was fully leased to Lam
Research at sale. Reportedly, the rental rate at the time of sale was
approximately $0.90 per square foot per month, triple-net. Reportedly, ten years
remained on the lease at sale.
Comparable I-2 is the April, 1996 sale of a single-tenant, one-story,
office/research and development building. At the time of sale, the building was
in good condition. The building is fully occupied by Lam Research at a rental of
$0.73 per square foot per month, triple-net, with nine and one-half years
remaining on the lease.
Comparable I-3 is the sale of two contiguous buildings previously leased to
the buyer. 3939 North First Street contains 62,500 square feet of net rentable
area and 4001 North First Street contains 72,000 square feet of net rentable
area. Cypress Semiconductor occupied 4001 North First Street at sale.
Reportedly, Cypress vacated 3939 North First Street in 1994. Consequently, is
was vacant at sale. Cypress Semiconductor entered into a sales agreement to
purchase both properties on March 15, 1996. The total sales price for both
properties is $15,500,000. However, Cypress Semiconductor planned to
substantially renovate and reconfigure both buildings for its own occupancy.
Cypress Semiconductor will incur $2,146,280 to upgrade the interior of 3939
North First Street prior to occupancy. The upgrades will include the
reconfiguration of the lobby and offices, upgrade of the mechanical systems,
lighting, plumbing, restrooms to ADA standards. Cypress Semiconductor was to
incur $553,017 to upgrade the interior of 4001 North First Street prior to
occupancy. The upgrades include the reconfiguration of the lobby and offices,
new carpet and paint, and upgrade the restrooms to ADA standards. Consequently,
the total consideration to the buyer was $18,199,317, or $135.31 per square
foot.
Comparable I-4 is an early-1996 sale of a the McCandless Business Park,
consisting of five, one-story, research and development buildings located in the
subject neighborhood. The property was purchased by the majority tenant,
Novellus Systems, who leased three of the buildings and a portion of a fourth,
approximately 70% of the entire property, at the time of sale. Novellus'
contract rental rates ranged from $0.60 to $0.85 per square foot per month,
triple-net. At the time of sale, LTX leased 3930 North First Street through June
20, 1999. The monthly rental rate through lease termination is $0.68 per square
foot, triple-net. Sony leases 3960 North First Street. The lease commenced May
1, 1994 and expires April 30, 1999. The monthly rental rate at sale was also
$0.68 per square foot, triple-net. Novellus planned to occupy the building
leased to Sony shortly after the sale and plans to occupy the building leased to
LTX following its lease expiration in June 1999. One of the buildings occupied
by Novellus, 3950 North First Street, includes 18,000 square feet of class 100
to 1,000 clean rooms and demonstration rooms. These specialized improvements
were constructed by Novellus between 1992 and late-1995.
Comparable I-5 is the mid-1995 sale of two, two-story buildings, located
proximate to Los Gatos. The buildings contain 141,960 and 80,000 square feet of
net rentable area, and are connected by a breezeway. Collectively, the buildings
include 80% office area and 20% lab area.
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<PAGE>
Sales Comparison Approach
================================================================================
The buildings were in good condition at sale. At the time of sale, Xilinx
Corporation leased the property from Berg & Berg Development at approximately
$0.95 per square foot per month, triple-net. The rental rate increases to $0.99
per square foot in January 1997. The lease expires on December 31, 1999. The
lease rate at sale was considered at market.
Sales Price Per Square Foot Analysis
The five comparables indicate sales prices ranging from $90.03 to $135.31
per square foot of net rentable area on a cash equivalent basis. The prices per
square foot are influenced by the differences in construction quality and
condition, occupancy levels, character of the tenancy, economics, and location.
Nevertheless, it is important to address each property in terms of the
conventional sequence of adjustments. Following are those considerations which
are relevant to the subject. The first three elements must be considered in
advance of applying any other compensating factors to derive value conclusions
Via the sales price per square foot methodology.
Property Rights Conveyed
As shown in the summary table, all of the comparables are encumbered by
leases, therefore, the leased fee estate was conveyed in each of these cases.
Thus, no adjustments were made to the comparables for this variable.
Seller Financing/Cash Equivalency
All of the comparables were sold on the basis of cash to the seller. Thus,
no adjustments were made to the comparables for financing.
Conditions of Sale
We identified no special motivational conditions concerning the
comparables; therefore, no adjustments for conditions of sale were made.
Other
Because of the multiple differences inherent in office/research and
development properties with respect to quality, condition, design, location,
and, in this case economics, not to mention the quality of the tenant base,
mathematical adjustments for the reasoning noted above would be extremely
difficult, at best.
In our opinion, Comparables I-1 and I-2 are most similar to the subject in
terms of their physical and income attributes. These two comparables sold for
$90.03 and $105.08 per square foot. Based upon all of the above data, we believe
the a unit value of $100.00 per square foot of the net rentable area would be
reasonable and supportable for the subject. Thus, our value range by the Sales
Price Per Square Foot method is as follows:
================================================================================
Sales Price Per Square Foot Summary
================================================================================
Net Rentable Area Sales Price Per. Indicated
(SF) Square Foot Value
================================================================================
104,540 X $100.00 = $10,454,000
Rounded To: $10,450,000
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<PAGE>
Sales Comparison Approach
================================================================================
"As Is" Valuation
In order to estimate the market value of the leased fee estate on an "as
is" basis," we will deduct the impact of the subject's under market rent from
the stabilized value. A further discussion of the below-market rent is presented
in the Income Approach. Therefore, the value of the leased fee estate on an "as
is" basis is calculated and concluded as follows.
================================================================================
SALES COMPARISON APPROACH - "As Is"
================================================================================
Stabilized Value $10,450,000
- --------------------------------------------------------------------------------
Less: PV of Below-Market Rent $670,000
- --------------------------------------------------------------------------------
"As-Is" Value $9,780,000
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<PAGE>
INCOME APPROACH
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Methodology
The Income Approach is a method of converting the anticipated economic
benefits of owning property into a value estimate through capitalization. The
principle of anticipation underlying this approach is that investors recognize
the relationship between an asset's income and its value. In order to value the
anticipated economic benefits of a particular property, potential income and
expenses must be estimated and the most appropriate capitalization method must
be selected.
The two most common methods of converting net income into value are through
direct capitalization and a discounted cash flow analysis. In direct
capitalization, the net operating income is divided by an overall capitalization
rate extracted from market sales to indicate a value. In the discounted cash
flow method, anticipated future income streams and a reversionary value are
discounted to a net present value at a chosen yield rate (internal rate of
return).
The direct capitalization method is an effective technique when stable
conditions exist both in the marketplace and for the property. However, when
market conditions are either changing or likely to change in a fairly dramatic
manner over time, direct capitalization becomes a more difficult technique to
administer. Direct capitalization is further inhibited by the numerous variables
that exist with multi-tenant properties, i.e., multiple leases, with staggered
lease terms and varying lease structures; the lease-up of vacant space; and
differing tenant finish allowances, depending upon whether the space is in a
shell or second generation state.
Given these numerous variables, coupled with our inquiries of participants
in the marketplace, we feel that the majority of investors for a property like
the subject would utilize the discounted cash flow method, in an attempt to
mirror the expectations relative to those variables. Consequently, the
discounted cash flow method affords the most realistic method of reflecting
investor expectations of the current period, as well as the projected recovery
(primarily rental rates in the subject's case). Also, the discounted cash flow
methodology can better quantify the impact of the subject's below market rent
and lease-up costs during tenant turnover. Therefore, it is our opinion that the
discounted cash flow method is the most appropriate method in the valuation of
the subject property. As such, the direct capitalization method will not be used
in this analysis. However, at the conclusion of the Income Approach, we will
analyze the resulting overall capitalization rate derived from the discounted
cash flow analysis as a check for reasonableness.
In the following sections, we will first analyze the subject's existing
lease and market rents before discussing the subject's operating expenses and
preparing the discounted cash flow analysis.
Summary of Existing Leases
As of the effective date of appraisal, the subject property is 100%
occupied by Communications & Power Industries (CPI) December, 1998. The tenant's
contract rent at $0.62 per square foot per month on a triple-net basis is
significantly below-market. The impact of the property's below-market rent will
be addressed later, on in the Income Approach of this report. Presently, the
tenant is marketing the space for sublease at an asking rental rate of $0.90 per
square foot per month, triple-net. CPI is relocating its operation to Palo Alto
in January, 1997. Thus, the space is not deliverable until January, 1997, which
is hindering marketing efforts. According to the listing brokers, Messrs. Duffy
Angelo and Steve Gibson with Colliers Parrish,
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<PAGE>
Income Approach
================================================================================
there has been a lot of interest in the property, however, tenants want the
space today. A rent roll of the subject property abstracting the existing lease
is located in the Addenda.
Lease Expiration
As part of our risk analysis, we considered the tenant's lease expiration
in approximately two and one-half years. Thus, over the near term, the leasing
exposure is significant. However, market conditions are forecasted to remain
strong into the foreseeable future. Thus, the subject is well positioned to
benefit from strong market conditions (i.e. increasing rental rates).
Estimate of Current Market Rent
According to the listing brokers, the current quoted rental rate at the
subject property is $0.90 per square foot per month on at triple-net basis.
Tenant finish allowances range from an 'as is' basis to $10.00 per square foot.
In order to gauge the reasonableness of the quoted rent and form a conclusion as
to the current market rent for the subject property as of the appraisal date, we
conducted a survey of the competing area. All of these comparables are
considered to be generally similar to the subject with respect to location,
quality, and functionality. On the following page is a summary of properties
utilized in our rent comparable analysis. A map of the comparable locations is
included on the following opposing page.
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<TABLE>
<CAPTION>
San Valente Building
3200 Patrick Henry Drive
Santa Clara, Santa Clara County, California
Office/Research and Development Building Rental Summary
====================================================================================================================================
Net Ceiling Building Overall
Comp. Date of Year Rentable Height Area Percent Percent
No. Location Lease Built Area (Feet) Leased(SF) Office Leased
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
R-1 150 River Oaks Parkway Apr-96 1986 100,024 16 100,024 30.0% 100.0%
Santa Clara, California
R-2 2260 & 2280 Agnew Avenue Mar-96 1985 100,600 16 100,600 35.0% 100.0%
Santa Clara, California
R-3 2805 Bowers Avenue Mar-96 1975 104,000 16 104,000 60.0% 100.0%
Santa Clara, California ren. 1996
R-4 4800 Patrick Henry Drive Feb-96 1979 62,964 16 62,964 80.0% 100.0%
Santa Clara, California
R-5 4600 Old Ironsides Drive Jan-96 1978 82,800 16 82,800 50.0% 100.0%
Santa Clara, California
====================================================================================================================================
Subject San Valente Building Jul-96 1979 104,540 16 104,540 50.0% 100.0%
3200 Patrick Henry Drive ren. 1992
Santa Clara, California
====================================================================================================================================
Low 1975 62,964 16 62,964 30.0% 100.0%
Data Range: High 1986 104,000 16 104,000 80.0% 100.0%
Mean 1981 90,078 16 90,078 51.0% 100.0%
====================================================================================================================================
<CAPTION>
===============================================================================================
Actual
Coupon Lease Tenant
Comp. Lease Term Expense Improvement
No. Location Rate(SF) (Yrs.) Provision Allowance
===============================================================================================
<S> <C> <C> <C> <C> <C>
R-1 150 River Oaks Parkway $0.75 10 Net $12.00
Santa Clara, California
R-2 2260 & 2280 Agnew Avenue $0.79 5 Net $0.00
Santa Clara, California
R-3 2805 Bowers Avenue $1.00 5 Net $15.00
Santa Clara, California
R-4 4800 Patrick Henry Drive $1.06 1 Net $0.00
Santa Clara, California
R-5 4600 Old Ironsides Drive $0.95 5 Net $20.00
Santa Clara, California
===============================================================================================
Subject San Valente Building $0.90 5 Net $5.00
3200 Patrick Henry Drive
Santa Clara, California
===============================================================================================
$0.75 1 $ 0.00
Data Range: $1.06 10 $20.00
$0.91 5 $ 9.40
===============================================================================================
</TABLE>
CUSHMAN &
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INCOME APPROACH
================================================================================
The rental rates summarized indicate the actual coupon rental rate for the
comparable properties. The comparable properties are deemed to be similar to the
subject in many respects. The coupon rental rates of the comparables range from
$0.75 to $1.06 per square foot per month on a triple-net basis. The tenant
improvement allowance range from an "as is" basis to $20.00 per square foot.
In summary, less emphasis was placed on comparables R-1 through R-3 since
they are situated outside of the Marriott Business Park. Comparables R-4 and
R-5 are most similar to the subject primarily for their location, age, quality,
and condition of improvements. The rental rates of these comparables range from
$0.95 to $1.06 per square foot per month on a triple-net basis.
The subject property is being marketed for lease at an asking rental rate
of $0.90 per square foot per month with a negotiable tenant improvement ranging
between $2.00 to $5.00 per square foot. The space is receiving a lot of
activity.
After considering the competitive properties, it is our opinion that the
following parameters are representative of a market lease for the subject
property as of the effective date of appraisal:
1) The market rental rate for the subject is estimated to equate to $0.90
per square foot per month of net rentable area, triple-net.
2) Future leases are assumed to have a five-year lease term.
3) The tenant improvement allowance is projected to be $10.00 per square
foot for new tenants that lease second generation space and $3.50 per
square foot for tenant renewals of second generation space.
4) Rental rate growth rate of 3.5% per annum.
Impact of Below-Market Rent
The subject property is currently leased by one tenant at a rental rate of
$0.62 per square foot per month on a triple-net basis. As previously mentioned,
we estimated a current coupon market rental rate for the subject at $0.90 per
square foot per month on a triple-net basis. Consequently, the subject's
contract rent is below-market.
It is our opinion that it would not be prudent to capitalize the net
operating income based on a property which includes space leased below market.
Therefore, we first estimated the potential gross rental income for the subject
using a current market rental rate of $0.90 per square foot per month on a
triple-net basis, and assuming stabilized occupancy. We will discount the
difference between the contract rental income and the market rental income over
the remaining lease term by a discount rate of 7.0%. Our selection of a 7.0%
discount rate is based on current yields of alternative investments in the
investment marketplace. Presently, AA corporate bonds are yielding approximately
7.6%, long-term treasury bonds are yielding 7.0%, and municipal bonds are
yielding 6.0%. Rental rates in the subject market are increasing, thus, in the
event of a default by an existing tenant there is a strong likelihood that a
leasehold advantage exists. Therefore, the landlord's risk is minimal. As a
result, we selected a safe rate of 7.0% to discount the below-
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Income Approach
================================================================================
market rent. The discounted value is $670,000. This calculation is presented on
the opposing page. This discounted value will be deducted from our stabilized
value conclusion in the Sales Comparison Approach.
Expense Recovery Income
Leases for office/research and development space in the subject market are
written on a triple-net basis whereby the tenant pays their pro-rata share of
operating expenses, except for reserves for structural replacements, leasing
commissions, and tenant alterations.
Vacancy and Collection Loss
Both the investor and the appraiser are primarily interested in the cash
revenue that an income property is likely to produce annually over 2 specified
period time rather than what it could produce if it were always 100 percent
occupied and all the tenants were actually paying their rent in full and on
time. It is normally a prudent practice to expect some income loss, either in
the form of actual vacancy or in the form of turnover, non-payment, or slow
payment of rent. Regarding collection loss specifically, we have applied a two
percent loss factor throughout the holding period primarily as a contingency for
potential collection problems and tenant defaults. This collection loss factor
is applied to rental income from all tenants.
We have projected an approximate four month vacancy period at the
expiration of every lease with an average lease term of five years. This equates
to a 6.7 percent vacancy factor (four months divided by 60 months). Our analysis
includes a 50 percent probability of rollover (existing tenants re-leasing their
space) and a 50 percent probability of turnover (existing tenants vacating the
premises and new tenants leasing the vacated space).
The resulting physical (rollover/turnover) occupancy level for the property
within the cash flow is 97.0 percent. In addition to this physical occupancy, we
have projected a 2.0 percent economic vacancy factor, as previously noted.
Therefore, the overall average occupancy factor over the projection term is 95.0
percent.
The average occupancy level of the subject property's submarket is 0.3
percent. The overall research and development vacancy rate for Silicon Valley is
5.3%. The projected occupancy for the subject is considered reasonable these
figures.
Operating Expenses
On the facing page is our Historical and Estimated Expense Summary for the
subject property. We based our estimated operating expenses on a review of the
1995 actual itemized expenses for the subject property. In addition, we were
provided with the property's 1996 budget. Finally, we consulted with the subject
property manager and Cushman & Wakefield's Asset Management Group.
Total operating expenses were $1.48 per square foot in 1995. The 1996
budgeted amount is projected to be higher at $1.55 per square foot. Our fiscal
year 1997 estimate of $1.46 per square foot appears reasonable.
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Income Approach
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Other Expenses:
Other operating expenses include Tenant Improvements and Leasing
Commissions. The probability of incurring future leasing commissions and tenant
alterations is based on a 50 percent probability of turnover (an existing tenant
vacates a space and the space is released to a new tenant) and a 50 percent
probability of rollover (an existing tenant relets his space).
Tenant Improvements - We have factored a $10.00 per square foot allowance
for second generation space and an allowance of $3.50 per square foot is
projected for tenant renewals. The weighted average finish-out allowance
for all tenants is therefore equal to $6.75 per square foot.
Tenant improvement costs are projected to increase at a rate of 3.5% per
year through the projection period.
Leasing Commissions - For the period under analysis, leasing commissions
for all new leases are estimated at 23% and 11.5% for renewals. As a result
of these projections, the weighted average commission applied to all
expiring space is equal to 4.6%, which we have rounded to 2.3%.
Capital Replacements/Reserves - Reserves for replacements are or should be
set aside to accumulate an amount sufficient to replace and/or repair
certain major building components over time, i.e., roof, major parking lot
repairs, HVAC systems, etc. during the period under analysis. Based on the
expense behavior of other comparable properties and the age of the subject
property, we have estimated capital replacements/reserves at $0.10 per net
rentable square foot, increasing by 4% per year throughout our analysis.
Our projected expenses are predicated on the assumption that the property
will be prudently managed, while maintaining the improvements at a competitive
level to preserve value.
Cash Flow Model
In the calculation of the cash flow forecasts and investment results
produced under these assumptions, projections and parameters, we employed the
Pro-Ject Pius+ computer program. The program has the flexibility to allow for a
tenant by tenant analysis of the subject as encumbered by the existing leases.
It also allows for a variety of assumptions regarding future income streams and
expenses. Our eleven-year discounted cash flow analysis can be found on the
following opposing page.
Terminal Capitalization Rate Selection
A terminal capitalization rate was used to estimate the market value of the
property at the end of the assumed investment holding period. The rate is
applied to the eleventh year estimate of net operating income before making
deductions for leasing commissions, tenant improvement allowances, or capital
reserves. We estimated an appropriate terminal rate based on the indicated
capitalization rates of the improved property sales in today's market, as
summarized below.
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Income Approach
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================================================================================
Summary of Capitalization Rates
================================================================================
Sale Capitalization
No. Rate
- --------------------------------------------------------------------------------
I-1 9.6%
I-2 9.0%
I-3 N/A
I-4 N/A
I-5 8.9%
================================================================================
A premium is generally added to today's rate to allow for the risk of
unforeseen events or trends which might affect our estimate of net operating
income during the holding period, including possible changes in market
conditions for the property. Investors typically add 50 to 100 basis points to
the going-in rate to arrive at a terminal capitalization rate, according to
Cushman & Wakefield's periodic investor surveys.
Considering the survey results and comparing the subject property to the
comparables included in the Sales Comparison Approach, but also tempered by the
fact that capitalization rates are falling (which is not reflected in the
sales), we are of the opinion that a 10.0 percent terminal capitalization rate
is appropriate to apply to the subject's projected net operating income in the
eleventh year. This results in an estimated terminal value (or sales price) for
the property at the end of the 10th year of $15,522,080 ($1,552,208/.10).
From this projected sales price, the estimated costs of sale for such items
as real estate commissions, closing costs, legal fees, as well as others, must
be deducted. We have estimated these cost to be three percent of the sales price
resulting in cash flow from the sale of the property in the tenth year of
$15,056,418 ($15,522,080 - $465,662 = $15,056,418).
Discount Rate Analysis
We estimated future cash flows, including property value at reversion, and
discounted that income stream at an internal rate of return (yield rates)
currently required by investors for similar-quality real property. The yield
rate (internal rate of return or IRR) is the single rate that discounts all
future equity benefits (cash flows and equity reversion) to an estimate of net
present value.
Cushman & Wakefield Valuation Advisory Services periodically surveys
national real estate investors to determine their investment objectives.
Following is a brief review of internal rates of return, overall rates, and
income and expense growth rates considered acceptable by respondents.
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Income Approach
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CUSHMAN & WAKEFIELD VALUATION ADVISORY SERVICES
SUMMER 1996 NATIONAL INVESTOR SURVEY FOR INDUSTRIAL BUILDINGS
<TABLE>
<CAPTION>
===========================================================================================================================
INCOME EXPENSE
GOING IN TERMINAL IRR GROWTH GROWTH
-------------- ------------- ------------- ------------ -------------- Projection
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH Period
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mean 9.3 9.8 9.8 10.8 12.0 12.4 3.3 4.0 3.2 3.9 8.5-9.8
- ---------------------------------------------------------------------------------------------------------------------------
Range 8.5 11.0 9.5 11.0 11.0 20.0 3.0 4.0 3.0 4.0 5-11
- ---------------------------------------------------------------------------------------------------------------------------
No. of Responses: 10
===========================================================================================================================
</TABLE>
This table summarizes the investment parameters of some of the most
prominent investors currently acquiring good quality industrial properties in
the United States. The entire survey is included in the Addenda..
The investors internal rates of return cited above range from 10.0 to 14.0
percent. We have selected a 12.5 percent discount rate for the subject property.
The internal rate of return and terminal capitalization rate selected for
this analysis were strongly influenced by our recent Investor Survey, but we
also relied very heavily on the anecdotal data from Cushman & Wakefield's
Financial Services Group. Furthermore, we realize that the survey reflects
target rates rather than transactional rates. Transactional rates are usually
difficult to obtain in the verification process and are actually only target
rates of the buyer at the time of sale. The property's performance will
ultimately determine the actual yield and capitalization rate at the time of
sale after a specific holding period. We have found that, in improving markets
or with above average properties, demand will be high and transactional rates
may be lower than target rates that are quoted in surveys. We have tried to
recognize this factor in our choice of rate for our cash flow model.
Discounted Cash Flow Chart
The discounted cash flow matrix can be found on the following page.
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Income Approach
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PURCHASE/SALE YIELD TABLE FOR SAN VALENTE BLDG., SANTA CLARA, CA
Purchase Price(000's)/Cap Going In as a function of IRR
All Cash analysis (Purchased August 1996 Sold July 2006)
Sale Price(000's)/Terminal Cap
16,729 15,849 15,057 14,340 13,688 13,093 12,547
IRR 9.00 9.50 10.00 10.50 11.00 11.50 12.00
- -------------------------------------------------------------------------------
11.00 11,284 10,974 10,695 10,442 10,213 10,003 9,811
6.73 6.92 7.10 7.27 7.43 7.59 7.74
11.50 10,899 10,602 10,335 10,094 9,874 9,674 9,490
6.97 7.16 7.34 7.52 7.69 7.85 8.00
12.00 10,530 10,246 9,991 9,760 9,551 9,359 9,183
7.21 7.41 7.60 7.78 7.95 8.11 8.27
12.50 10,177 9,906 9,662 9,441 9,241 9,057 8,889
---------------------------------------------------------------------------
7.46 7.66 7.86 8.04 8.21 8.38 8.54
13.00 9,840 9,580 9,347 9,136 8,944 8,768 8,608
7.71 7.92 8.12 8.31 8.49 8.66 8.82
13.50 9,517 9,269 9,045 8,843 8,659 8,492 8,338
7.98 8.19 8.39 6.58 8.77 8.94 9.10
Conclusions Via the Income Approach
The resulting value estimate is $9,660,000, (rounded) or $92.40 per net
rentable square foot, which translates in a 7.6 percent going-in capitalization
rate. This capitalization rate is significantly lower than the comparable
improved sales utilized in the Sales Comparison Approach reflecting the
subject's "upside" potential with its below-market rent.
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RECONCILIATION AND FINAL ESTIMATE OF VALUE
================================================================================
Value indications for the subject property by the Approaches to Value are
indicated as follows:
Sales Comparison Approach $9,780,000
Income Approach $9,660,000
In the reconciliation, each approach to value is considered in order to
determine the reliability of the data in each and to weigh which approach best
represents the actions of typical users and investors in the market.
The Sales Comparison Approach, is based on the principle of substitution
which implies that a prudent person will not pay more to buy or rent a property
than it would cost to buy a comparable substitute property. In this approach,
the subject property was compared with five office/research and development
building sales. We analyzed the sales using the sales price per square foot
method. Although various dissimilarities between the sales and the subject were
noted, the general analysis is believed to provide reasonable support for our
value conclusion. As such, the Sales Comparison Approach is afforded appropriate
weight in the final conclusion.
The Income Approach is based upon investor expectations for the income
stream generated by an income producing property. After estimating gross income
and the absorption of the vacant space, deductions were made for vacancy and
collection losses, and variable, fixed and other expenses. The resulting net
operating income was then converted into an indication of value by means of
discounted cash flow model.
Since investment properties are generally bought and sold based upon their
income generating ability, all sources of pertinent data were carefully
researched. It is our opinion that the Income Approach is the most reliable
indicator of the value of the subject since the intent of our analysis was to
mirror investor expectations.
Therefore, giving primary weight to the indication of value via the Income
Approach, as supported by the Sales Comparison Approach, we have formed an
opinion that the market value of the leased fee estate in the referenced
property, subject to the assumptions, limiting conditions, certifications, and
definitions, as of July 29, 1996, was:
NINE MILLION SEVEN HUNDRED THOUSAND DOLLARS
$9,700,000
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Reconciliation and Final Estimate of Value
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Marketing Time
Marketing time is an estimate of the time that might be required to sell a
real property interest at the appraised value. Marketing time is presumed to
start on the effective date of the appraisal. Marketing time is subsequent to
the effective date of the appraisal, and exposure time is presumed to precede
the effective date of appraisal.
The estimate of marketing time uses some of the same data analyzed in the
process of estimating the reasonable exposure time and is not intended to be a
prediction of a date of sale.
Our estimate of an appropriate marketing time for the subject relates to a
sale of the property in its As Is condition. Based on our discussions with local
brokers and buyer/sellers of office projects like the subject, as well as our
assessment of the local real estate market and economic forces in general, we
have concluded that the probable marketing period for the subject property in
today's environment would approximate six to twelve months.
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ASSUMPTIONS AND LIMITING CONDITIONS
================================================================================
Appraisal means the appraisal report and opinion of value stated therein; or the
letter opinion of value, to which these Assumptions and Limiting Conditions are
annexed.
Property means the subject of the Appraisal.
C&W means Cushman & Wakefield, Inc. or its subsidiary which issued the
Appraisal.
Appraiser(s) means the employee(s) of C&W who prepared and signed the Appraisal.
The Appraisal has been made subject to the following assumptions and limiting
conditions:
1) No opinion is intended to be expressed and no responsibility is
assumed for the legal description or for any matters which are legal
in nature or require legal expertise or specialized knowledge beyond
that of a real estate appraiser. Title to the Property is assumed to
be good and marketable and the Property is assumed to be free and
clear of all liens unless otherwise stated. No survey of the Property
was undertaken.
2) The information contained in the Appraisal or upon which the Appraisal
is based has been gathered from sources the Appraiser assumes to be
reliable and accurate. Some of such information may have been provided
by the owner of the Property. Neither the Appraiser nor C&W shall be
responsible for the accuracy or completeness of such information,
including the correctness of estimates, opinions, dimensions,
sketches, exhibits and factual matters.
3) The opinion of value is only as of the date stated in the Appraisal.
Changes since that date in external and market factors or in the
Property itself can significantly affect property value.
4) The Appraisal is to be used in whole and not in part. No part of the
Appraisal shall be used in conjunction with any other appraisal.
Publication of the Appraisal or any portion thereof without the prior
written consent of C&W is prohibited. Except as may be otherwise
stated in the letter of engagement, the Appraisal may not be used by
any person other than the party to whom it is addressed or for
purposes other than that for which it was prepared. No part of the
Appraisal shall be conveyed to the public through advertising, or used
in any sales or promotional material without C&Ws prior written
consent. Reference to the Appraisal Institute or to the MAI
designation is prohibited.
5) Except as may be otherwise stated in the letter of engagement, the
Appraiser shall not be required to give testimony in any court or
administrative proceeding relating to the Property or the Appraisal.
6) The Appraisal assumes (a) responsible ownership and competent
management of the Property; (b) there are no hidden or unapparent
conditions of the Property, subsoil or structures that render the
Property more or less valuable (no responsibility is assumed for such
conditions or for arranging for engineering studies that may be
required to discover them); (c) full compliance with all applicable
federal, state and local zoning and environmental regulations and
laws, unless noncompliance is stated, defined and considered in the
Appraisal; and (d) all required licenses, certificates of occupancy
and other governmental
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Assumptions and Limiting Conditions
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consents have been or can be obtained and renewed for any use on which
the value estimate contained in the Appraisal is based.
7) The physical condition of the improvements considered by the Appraisal
is based on visual inspection by the Appraiser or other person
identified in the Appraisal. C&W assumes no responsibility for the
soundness of structural members nor for the condition of mechanical
equipment, plumbing or electrical components.
8) The forecasted potential gross income referred to in the Appraisal may
be based on lease summaries provided by the owner or third parties.
The Appraiser assumes no responsibility for the authenticity or
completeness of lease information provided by others. C&W recommends
that legal advice be obtained regarding the interpretation of lease
provisions and the contractual rights of parties.
9) The forecasts of income and expenses are not predictions of the
future. Rather, they are the Appraiser's best estimates of current
market thinking on future income and expenses. The Appraiser and C&W
make no warranty or representation that these forecasts will
materialize. The real estate market is constantly fluctuating and
changing. It is not the Appraiser's task to predict or in any way
warrant the conditions of a future real estate market; the Appraiser
can only reflect what the investment community, as of the date of the
Appraisal, envisages for the future in terms of rental rates,
expenses, supply and demand.
10) Unless otherwise stated in the Appraisal, the existence of potentially
hazardous or toxic materials which may have been used in the
construction or maintenance of the improvements or may be located at
or about the Property was not considered in arriving at the opinion of
value. These materials (such as formaldehyde foam insulation, asbestos
insulation and other potentially hazardous materials) may adversely
affect the value of the Property. The Appraisers are not qualified to
detect such substances. C&W recommends that an environmental expert be
employed to determine the impact of these matters on the opinion of
value.
11) Unless otherwise stated in the Appraisal, compliance with the
requirements of the Americans With Disabilities Act of 1990 (ADA) has
not been considered in arriving at the opinion of value. Failure to
comply with the requirements of the ADA may adversely affect the value
of the Property. C&W recommends that an expert in this field be
employed.
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CERTIFICATION OF APPRAISAL
================================================================================
We certify that, to the best of our knowledge and belief:
1) Rob D. Perrino inspected the property, and Kenneth E. Matlin , MAI,
has reviewed the report and concurs with the findings contained
herein.
2) The statements of fact contained in this report are true and correct.
3) The reported analyses, opinions, and conclusions are limited only by
the reported assumptions and limiting conditions, and are our
personal, unbiased professional analyses, opinions, and conclusions.
4) We have no present or prospective interest in the property that is the
subject of this report, and we have no personal interest or bias with
respect to the parties involved.
5) Our compensation is not contingent upon the reporting of a
predetermined value or direction in value that favors the cause of the
client, the amount of the value estimate, the attainment of a
stipulated result, or the occurrence of a subsequent event. The
appraisal assignment was not based on a requested minimum valuation, a
specific valuation or the approval of a loan.
6) No one provided significant professional assistance to the persons
signing this report.
7) Our analyses, opinions, and conclusions were developed, and this
report has been prepared, in conformity with the Uniform Standards of
Professional Appraisal Practice of the Appraisal Foundation and the
Code of Professional Ethics and the Standards of Professional
Appraisal Practice of the Appraisal Institute.
8) The use of this report is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives.
9) As of the date of this report, Kenneth E. Matlin, MAI, has completed
the requirements of the continuing education program of the Appraisal
Institute.
/s/ Rob D. Perrino
- -----------------------------------------------
Rob D. Perrino
Appraiser
Northern California Valuation Advisory Services
Certification No. AGO02595
/s/ Kenneth E. Matlin
- -----------------------------------------------
Kenneth E. Matlin, MAI
Manager and Director
Northern California Valuation Advisory Services
Certification No. AG2022
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ADDENDA
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<PAGE>
104-16-27.01, 18.01.01 104-4-21.04
C/I - 735794
INSURED
12605751
Recorded at the request of
Chicago Title Insurance
Company
Aug 04, 1994
Property San Valerno Building
Control No:0041
RECORDING REQUESTED BY AND WHEN
RECORDED TO MAIL TO:
David A. Hymann, Esq.
Agent For Klatner Plotkin & Kahn
1050 Connecticut Avenue, N.W.
Washington, D.C. 20006-5229
MAIL TAX STATEMENTS TO:
J.E. Robert Companies
600 E. Los Collens Blvd.
Suite 1500
Irving, Texas 75099
Attn: Mr. Larry Corman
SPECIAL WARRANTY DEED
Parcel No. 104-04-089 and 104-04-124
Documentary transfer tax is not a matter of public record.
THIS SPECIAL WARRANTY DEED is made as of the 29th day of July, 1994, by The
Prudential Insurance Company of America, a New Jersey 07102, as GRANTOR, to
WHC-SIX Real Estate Limited Partnership, a Delaware limited partnership, whose
address is 11 Center Plaza, Suite 200, Alexandria, VA 22314, as GRANTEE.
Witness that Grantor, for good and valuable consideration, receipt of which
is acknowledged, grants to Grantee all the real property located in the City of
Santa Clara, Unincorporated Area _______, in the County of Santa Clara, in the
State of California more particularly described in Exhibit A attached hereto,
together with all tenements, hereditaments and appurtenances thereto, subject to
current real property taxes and other assessments, zoning, environmental,
municipal building and other governmental restrictions, laws, rules permits,
approvals, regulations, ordinances, codes, restrictions or legal requirements
and all covenants, conditions, restrictions, easements, rights-of-way and other
matters of record.
Grantor hereby covenants with Grantee that Grantor will forever defend
Grantee against claims of all persons claiming by, through or under Grantor. No
other covenants or warranties, express or implied, are given by this Deed.
-1-
<PAGE>
IN WITNESS WHEREOF, Grantor has set his hand as of the day and year first
above written.
ATTEST: GRANTOR:
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
/s/ Lisa Vahelnt /s/ Ray Giordano
- ------------------------------ -------------------------------
[SEAL]
NAME: Lisa Vahelnt Name: Ray Giordano
Title Assistant Secretary Title: Vice President
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On the 29th day of July 1994, before me personally came Ray Giordano to me
known, who, being by me duly sworn, did depose and say that he resides in
Convent Station, New Jersey, that he is the Vice President of The Prudential
Insurance Company of America, a New Jersey mutual insurance company described in
and which executed the above instrument and that he signed his name thereto by
authority of the board of directors of said company.
/s/ Lorraine Michaels
--------------------------
Notary Public
LORRAINE MICHAELS
Notary Public, State of New York
No. 82-4830738
Certified in Suffolk County
Commission Expires 2-28-96
-2-
<PAGE>
EXHIBIT A
All that certain real property in the City of Santa Clara, County of Santa
Clara, described as follows:
All of Parcel 13, as shown upon that certain map entitled, Parcel map being a
resubdivision of Parcels 1, 3, 4, 5 & 9 and Areas 5 to 9 as shown on Parcel
Map____ recorded in Deed 365 of Map at pages 24 & 27 Santa Clara County
records, which Map was filed for Record in the office of the Recorder of the
County of Santa Clara, State of California, November 29, 1976 in Deed ___ of
Maps, as pages 4 and 5.
-3-
<PAGE>
[GRAPHIC OMITTED]
MAP OF
3200 Patrick Henry Drive, Santa Clara
EXHIBIT A
<PAGE>
[GRAPHIC OMITTED]
SURVEYOR'S CERTIFICATE
<PAGE>
[GRAPHIC OMITTED]
MAP OF
ZONE B
<PAGE>
SAN VALENTE BLDG., SANTA CLARA, CA
PROJECT ASSUMPTIONS REPORT
INCLUDING ALL TENANTS
BUILDING PROLOGUE
- -----------------
LEASEHOLD ANALYSIS OF SAN VALENTE BLDG., SANTA CLARA, CA BEGINNING 8/1996
FOR 15 YEARS ON A FISCAL YEAR BASIS
AREA MEASURES
- -------------
BLDA
1996 VALUE - 104,540
THEREAFTER - CONSTANT
GROWTH RATES
- ------------
CPIG
1996 VALUE - 3.50
THEREAFTER - CONSTANT
MKTG
1996 VALUE - 3.50
THEREAFTER - CONSTANT
TAXG
1996 VALUE - 2.00
THEREAFTER - CONSTANT
MARKET RATES
- ------------
MKTR
1996 VALUE - 0.90
THEREAFTER - GROWING AT GROWTH RATE MKTG
TIAN
1996 VALUE - 10.00
THEREAFTER - GROWING AT GROWTH RATE CPIG
TIAR
1996 VALUE - 3.50
THEREAFTER - GROWING AT GROWTH RATE CPIG
MISCELLANEOUS INCOMES
- ---------------------
NONE
EXPENSES
- --------
CHARGED AGAINST NET OPERATING INCOME
1996 VALUE - 0.00
THEREAFTER - GROWING AT GROWTH RATE CPIG
COMMON AREA MAIN. , REFERRED TO AS CAMM
CHARGED AGAINST NET OPERATING INCOME
1996 VALUE - 10,000
THEREAFTER - GROWING AT GROWTH RATE CPIG
REAL ESTATE TAXES , REFERRED TO AS RETX
CHARGED AGAINST NET OPERATING INCOME
1996 VALUE - 105,000
THEREAFTER - GROWING AT GROWTH RATE TAXG
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
INSURANCE REFERRED TO AS INSU
CHARGED AGAINST NET OPERATING INCOME
1996 VALUE - 20,000
THEREAFTER - GROWING AT GROWTH RATE CPIG
CUSHMAN &
WAKEFIELD(R)
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VALUATION ADVISORY SERVICES
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<PAGE>
PAGE 2
MANAGEMENT , REFERRED TO AS MGMT
AN INFORMATIONAL EXPENSE
1996 VALUE - 18,248
1997 VALUE - 18,311
1998 VALUE - 18,376
1999 VALUE - 18,489
2000 VALUE - 28,570
2001 VALUE - 29,536
2002 VALUE - 30,535
2003 VALUE - 31,568
2004 VALUE - 21,503
2005 VALUE - 33,395
2006 VALUE - 34,526
2007 VALUE - 35,696
2008 VALUE - 36,907
2009 VALUE - 26,007
2010 VALUE - 40,277
THEREAFTER - CONSTANT
REIMBURSABLE EXP. , REFERRED TO AS REIM
AN INFORMATIONAL EXPENSE
+100.0% OF +100.0% OF CAMM
+100.0% OF RETX +100.0% OF INSU
+100.0% OF MGMT
VACANCY- ALLOWANCE
- ------------------
PERCENTAGE OF POTENTIAL GROSS INCOME
FOR ALL TENANTS SUBJECT TO VACANCY
1996 VALUE - 2.00
THEREAFTER - CONSTANT
MANAGEMENT FEE
- --------------
PERCENTAGE OF EFFECTIVE GROSS INCOME
FOR ALL TENANTS
PASSED THROUGH TO TENANTS USING EXPENSE MGMT
1996 VALUE - 2.00
THEREAFTER - CONSTANT
COMMISSION CALCULATIONS
- -----------------------
STANDARD METHOD #1 - PERCENT OF EACH YEAR'S RENT:
YEAR 1 - 6.000%
YEAR 2 - 5.000%
YEAR 3 - 5.000%
YEAR 4 - 4.000%
YEAR 5 - 3.000%
STANDARD METHOD #2 - PERCENT OF EACH YEAR'S RENT:
YEAR 1 - 3.000%
YEAR 2 - 2.500%
YEAR 3 - 2.500%
YEAR 4 - 2.000%
YEAR 5 - 1.500%
STANDARD METHOD #3 - 0.000% OF TOTAL RENT
STANDARD METHOD #4 - 0.000% OF TOTAL RENT
STANDARD METHOD #5 - 0.000% OF TOTAL RENT
COMMISSION PAYOUTS
- ------------------
STANDARD METHOD #1 - CASHED OUT
<PAGE>
STANDARD METHOD #2 - CASHED OUT
STANDARD METHOD #3 - CASHED OUT
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 3
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
ALTERATION CALCULATION
- ----------------------
NONE
ALTERATION PAYOUTS
- ------------------
STANDARD METHOD #1 - CASHED OUT
STANDARD METHOD #2 - CASHED OUT
STANDARD METHOD #3 - CASHED OUT
STANDARD METHOD #4 - CASHED OUT
STANDARD METHOD #5 - CASHED OUT
COMMON AREA MAINTENANCE POOL
- ----------------------------
NONE
CAPITAL EXPENDITURES
- --------------------
RESERVES
1996 VALUE - 10,500
THEREAFTER - GROWING AT GROWTH RATE CPIG
PRIMARY CLASSIFICATION CODES
- ----------------------------
NONE
SECONDARY CLASSIFICATION CODES
- ------------------------------
NONE
COST CENTERS
- ------------
NONE
SALES VOLUME PROFILE
- --------------------
PERCENT OF RELATIVE
MONTH ANNUAL SALES VOLUME
- ----- ------------ --------
JAN 8.33% 1.00
FEB 8.33% 1.00
MAR 8.33% 1.00
APR 8.33% 1.00
MAY 8.33% 1.00
JUN 8.33% 1.00
JUL 8.33% 1.00
AUG 8.33% 1.00
SEP 8.33% 1.00
OCT 8.33% 1.00
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
NOV 8.33% 1.00
DEC 8.33% 1.00
------- -------
TOTALS 100.00% 12.00
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
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<PAGE>
PAGE 4
GLOBAL RECOVERIES
- -----------------
NONE
TENANT PROLOGUE
- ---------------
MINIMUM RENTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/SQUARE FOOT/MONTH
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/MONTH
SALES VOLUMES AND BREAKPOINTS:
SPECIFIED AMOUNTS INTERPRETED AS AMOUNTS/YEAR
MARKET RATES INTERPRETED AS AMOUNTS/SQUARE FOOT/YEAR
RENEWAL RENTS ARE COMPOUNDED ANNUALLY
RELETTING DOWNTIME AND EXPENSES ARE NOT CONDITIONAL ON GOING TO MARKET
REFERENCE TENANTS
- -----------------
NONE
TENANTS
- -------
THERE ARE A TOTAL OF 1 LEASEHOLD TENANT(S):
- -------------------------------------------------------------------------------
# 1 - SUITE A COMMUNICATIONS
BASE LEASE DATES: 1/1993 TO 12/1998
TYPE OF TENANT: OFFICE
SQUARE FOOTAGE: 104,540
SUBJECT TO VACANCY ALLOWANCE
MINIMUM RENT:
INITIAL RENT - 0.62/SF/MO
RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM PRO RATED ON TENANT SQUARE
FOOTAGE OVER AREA MEASURE BLDA CALCULATED ON AN ACCRUAL BASIS WITH A
CALENDAR YEAR EXPENSE WITH NO CAP AND A BASE OF ZERO FOR A COMPLETE
PASSTHROUGH
COMMISSIONS: NONE
ALTERATIONS: NONE
SPECULATIVE RENEWALS:
LENGTH VACANT SQ FT MONTHS OF
TERM YEARS.MONTHS MONTHS INCREASE FREE RENT COMMISSIONS ALTERATIONS
- ---- ------------ ------ -------- --------- ----------- -----------
1 5.00 4 NONE NONE YES YES
2 5.00 4 NONE NONE YES YES
3 5.00 4 NONE NONE YES YES
RENEWAL MINIMUM RENT:
MARKET RATE MKTR MULTIPLIED BY 1.000
INCREASING AT GROWTH RATE MKTG PER YEAR DURING EACH RENEWAL TERM
RENEWAL RECOVERIES:
REIMBURSABLE EXP.
PRO RATA SHARE RECOVERY OF EXPENSE REIM
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PRO RATED ON TENANT SqUARE FOOTAGE OVER AREA MEASURE BLDA
CALCULATED ON AN ACCRUAL BASIS WITH A CALENDAR YEAR EXPENSE
WITH NO CAP
AND A BASE OF ZERO FOR A COMPLETE PASSTHROUGH
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
PAGE 5
RENEWAL COMMISSIONS: STANDARD METHOD #2
RENEWAL PAYOUT: CASHED OUT
RENEWAL ALTERATIONS: MARKET RATE TIAR
RENEWAL PAYOUT: CASHED OUT
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Industrial Market
Business Parks, Other Industrial and Manufacturing
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Capitalization Rates Growth Rate
--------------------------- Internal -------------------------------- Typical Projection
Going-in Terminal Rate of Return Income Expenses Period (Years)
Low High Low High Low High Low High Low High Low High
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A-Leased Asset
- ------------------------------------------------------------------------------------------------------------------------------------
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
9.5% 9.5% 10.0% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 10.0 10.0
9.0% 9.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
- ------------------------------------------------------------------------------------------------------------------------------------
Responses 4 4 3 3 4 4 4 4 4 4 4 4
Average (%) 8.9% 9.4% 9.7% 10.7% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.8 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
Class B-Leased Asset
- ------------------------------------------------------------------------------------------------------------------------------------
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.5% 10.5% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 10.0 10.0
10.0% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
- ------------------------------------------------------------------------------------------------------------------------------------
Responses 4 4 3 3 4 4 4 4 4 4 4 4
Average (%) 9.3% 9.8% 9.8% 10.8% 11.5% 11.5% 3.3% 4.0% 3.3% 4.0% 8.8 10.3
- ------------------------------------------------------------------------------------------------------------------------------------
Class A-Value Added
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 10.5% 10.5% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.0% 10.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
- ------------------------------------------------------------------------------------------------------------------------------------
Responses 5 5 4 4 5 5 5 5 5 5 5 5
Average (%) 9.4% 10.0% 9.9% 10.9% 12.4% 13.2% 3.4% 4.0% 3.2% 3.8% 8.2 9.4
- ------------------------------------------------------------------------------------------------------------------------------------
Class B-Value Added
- ------------------------------------------------------------------------------------------------------------------------------------
10.0% 11.0% 10.0% 11.0% 16.0% 20.0% 4.0% 4.0% 3.0% 3.0% 5.0 5.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.5% 10.5% 11.0% 11.0% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
8.5% 9.5% 9.5% 11.0% 11.0% 11.0% 3.5% 4.0% 3.5% 4.0% 11.0 11.0
10.5% 10.5% 12.0% 12.0% 3.0% 4.0% 3.0% 4.0% 7.0 10.0
- ------------------------------------------------------------------------------------------------------------------------------------
Responses 5 5 4 4 5 5 5 5 5 5 5 5
Average (%) 9.6% 10.2% 10.0% 11.0% 12.4% 13.2% 3.4% 4.0% 3.2% 3.8% 8.2 9.4
- ------------------------------------------------------------------------------------------------------------------------------------
Total Responses 18 18 14 14 18 18 18 18 18 18 18 18
Average (%) 9.3% 9.8% 9.8% 10.8% 12.0% 12.4% 3.3% 4.0% 3.2% 3.9% 8.5 9.8
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
"Lessed Asset" refers to predominantly "passive" investments involving
substantially leased Properties
"Value Added" denotes properties which require more active management
involvement due to leasing issues and/or additional capital investment for
physical issues
-----------------------------------------------
Cushman & Wakefield Valuation Advisory Services
National Investor Survey-Summer 1996
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
QUALIFICATIONS OF APPRAISER
================================================================================
Rob D. Perrino
Professional Affiliations
Certified General Real Estate Appraiser, State of California, #AGO02595
MAI Candidate, Appraisal Institute, #M90-1530
Broker License, State of California, #01034857
Real Estate E
Appraiser, Cushman & Wakefield Valuation Advisory Services, San Jose,
California
Division is responsible for the appraisal and consulting function of
Cushman & Wakefield of California, Inc., a national full service real
estate organization.
Education
University of Southern California, Los Angeles, CA
Bachelor of Science in Economics
Completed Appraisal Institute Coursework:
No. 1A-1 - Real Estate Appraisal Principles
No. 1A-2 - Basic Valuation Procedures
No. 1B-A - Capitalization Theory & Techniques, Part A
No. 1B-B - Capitalization Theory & Techniques, Part B
No. 2-1 - Case Studies
No. 2-2 - Valuation Analysis and Report Writing
No. 2-3 - Standards of Professional Practices
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
QUALIFICATIONS OF APPRAISER
================================================================================
Kenneth E Matlin, MAI
Association Membership
Member Appraisal institute (MAI No. 8397) Senior Residential Appraiser
Senior Member, American Society of Real Estate Appraisers - Past President
of San Jose Chapter
Brokers License - State of California
Certified - General, Certificate Number AGO02022
Kenneth E. Matlin has completed the requirements of the continuing
education programs of the Appraisal Institute and the American Society of
Appraisers
Real Estate Experience
Director and Manager, Cushman & Wakefield Valuation Advisory Services, San
Jose and San Francisco Divisions. San Jose and San Francisco Divisions are
responsible for the appraisal and consulting function of Cushman &
Wakefield of California, Inc., a national full service real estate
organization.
Regional Chief Appraiser, California First Bank, San Jose, California,
between 1974 and 1983.
Education
California State University of San Diego, California
Bachelor of Science Degree - Major: Real Estate, Minor: Political
Science (1973)
American Institute of Real Estate Appraisers:
No. 1-Al - Real Estate Appraisal Principles (6-86)
No. 1-A2 - Basic Valuation Procedures (3-87)
No. 1-BA - Capitalization Theory & Techniques, Part A (9-87)
No. 1-BB - Capitalization Theory & Techniques, Part B (9-87)
No. 2-1 - Case Studies (3-87)
No. 2-2 - Valuation Analysis and Reporting Writing (10-86)
No. 2-3 - Standard of Professional Practice (6-86)
No. 410 - USPAP
No. 420 - Standards of Professional Practice (11-93)
No. 510 - Advanced Capitalization Theory (7-93)
Society of Real Estate Appraisers:
No. 101 - Introduction to Appraising Real Property (8-76)
No. 201 - Principles of Income Property Appraising (6-75)
No. 202 - Case Problems (6-83)
No. R-2 - Single Family Report Exam (2-77)
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Qualification of Appraiser
================================================================================
Kenneth E. Matlin, MAI
Litigation Experience
Qualified as expert witness Santa Clara County Superior Court
Qualified as expert witness Alameda County Superior Court
Qualified as expert witness Federal Bankruptcy Court
================================================================================
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
This CD ROM contains an electronic version of appraisals for the Mortgaged
Properties in PDF format and forms part of the paper version of the Prospectus
Supplement. The information contained in this CD ROM does not appear elsewhere
in paper form in this Prospectus Supplement and must be considered as part of,
and together with, the information contained elsewhere in this Prospectus
Supplement and the Prospectus. The information contained in this CD ROM has
been filed by the Seller with the Securities and Exchange Commission as part
of a Current Report on Form 8-K, which is incorporated by reference in this
Prospectus Supplement, and is also available through the public reference
branch of the Securities and Exchange Commission. Defined terms used in this CD
ROM but not otherwise defined therein shall have the respective meanings
assigned to them in the paper portion of the Prospectus Supplement and the
Prospectus. All of the information contained in this CD ROM is subject to the
same limitations and qualifications contained in this Prospectus Supplement and
the Prospectus. Prospective investors are strongly urged to read the paper
portion of this Prospectus Supplement and the Prospectus in its entirety prior
to accessing this CD ROM. If this CD ROM was not received in a sealed package,
there can be no assurances that it remains in its original format and should
not be relied upon for any purpose. Prospective investors may contact J.
Theodore Borter of Goldman, Sachs Co. at (212)902-3857 to receive an original
copy of the CD ROM.
<PAGE>
COMPLETE APPRAISAL OF
REAL PROPERTY
Existing Office/Research and Development Building
19925 Stevens Creek Boulevard
Cupertino, Santa Clara County, California
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
------------------------------------------------------------
COMPLETE APPRAISAL OF
REAL PROPERTY
Existing Office/Research and Development Building
19925 Stevens Creek Boulevard
Cupertino, Santa Clara County, California
IN A SUMMARY REPORT
As of July 26, 1996
Prepared For:
GMAC Commercial Mortgage Corporation
650 Dresher Road
Horsham, PA 19044~8015
Prepared By:
Cushman & Wakefield of California, Inc.
Valuation Advisory Services
2055 Gateway Place
Suite 550
San Jose, California 95070
<PAGE>
Cushman & Wakefield of California, Inc.
2055 Gatewav Place, Suite 550 CUSHMAN &
San Jose, CA 95110-1068 WAKEFIELD(R)
Tel: (408) 436-5500
Fax: (408) 437~9129
August 2, 1996
Ms. Avis Tsuya
Senior Underwriter
GMAC COMMERCIAL MORTGAGE CORPORATION
650 Dresher Road
Horsham, PA 19044-8015
RE: Appraisal of Real Property
Existing Office/Research and Development Building
19925 Stevens Creek Boulevard
Cupertino, Santa Clara County, California
Dear Ms. Tsuya:
In fulfillment of our agreement as outlined in the Letter of Engagement,
Cushman & Wakefield of California, Inc. is pleased to transmit our summary
report estimating the market value of the leased fee estate in the referenced
property.
As specified in the Letter of Engagement, the value opinion reported below
is qualified by certain assumptions, limiting conditions, certifications, and
definitions, which are set forth in the report. We specifically call your
attention to the following special assumptions:
1) We were provided with the leases and a rent roll which stated the net
rentable area of the building. However, building plans were not
provided. Further, the leases and rent roll were not consistent with
one another. Therefore, the net rentable area was obtained from the
most recent rent roll. As a result, any deviation from the stated
building size (rent roll) could impact the value conclusions contained
herein.
This is a complete appraisal prepared in accordance with the Uniform
Standards of Professional Appraisal Practice of The Appraisal Foundation. The
results of the appraisal are being conveyed in a Summary Report format according
to our agreement. Because this is a summary report, the level of detail of
presentation is less than that found in a self-contained report.
This report was prepared for GMAC Mortgage Corporation and it is intended
only for the specified use of said Client. It may not be distributed to or
relied upon by other persons or entities without written permission of the
Appraiser.
<PAGE>
Ms. Tsuya
Page 2
August 2, 1996
The property was inspected by and the report was prepared by George J.
Geranios. Kenneth E. Matlin, MAI has reviewed the report and is in concurrence
with the findings herein.
As a result of our analysis, we have formed an opinion that the market
value of the leased fee estate in the subject property, subject to the
assumptions, limiting conditions, certifications, and definitions, as of July
26, 1996 was:
TWELVE MILLION EIGHT HUNDRED THOUSAND DOLLARS
$12,800,000
The preceding estimate of market value is based upon a forecasted marketing
period of approximately six to nine months, which we believe (through a review
of recent investment building sale activity, as well as with conversations with
local industrial/investment brokers) is reasonably representative for this
product type.
This letter is invalid as an opinion of value if detached from the report,
which contains the text, exhibits, and an Addenda.
Respectfully submitted,
CUSHMAN & WAKEFIELD OF CALIFORNIA, INC.
/s/ George J. Geranios
---------------------------
George J. Geranios
Valuation Advisory Services
Certification No. AG011942
/s/ Kenneth E. Marlin
---------------------------
Kenneth E. Marlin, MAI
Managing Director
Valuation Advisory Services
Certification No. AGO02022
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
SUMMARY OF SALIENT FACTS AND CONCLUSIONS
================================================================================
Property Name: Existing Office/Research and
Development Building
Location: The subject property is located on an
interior parcel along the northerly
side of Stevens Creek Boulevard in
Cupertino, California. The building's
street address is 19925 Stevens Creek
Boulevard, Cupertino, Santa Clara
County, California.
Assessor's Parcel Number: 316-21-089
Interest Appraised: Leased fee estate
Date of Value: July 26, 1996
Date of Inspection: July 26, 1996
Ownership: WHC-One Investors LP
Land Area: 4.485 acres or 195,370 square feet
1995 96 Property Assessment
Land: $ 4,000,000
Building: $ 3,480,000
-----------
Total: $ 7,480,000
Zoning: P, Planned Development-Commercial,
Residential-Office)
Highest and Best Use
If Vacant: Office/Research and Development
building for single- or multi-tenant
use. A holding period would, however,
be required before speculative
development of this type would likely
occur.
As Improved: As developed, with one,
office/research and development
building.
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Summary of Salient Facts and Conclusions
================================================================================
Improvements
Type: One, two-story office/research and
development building of concrete
tilt-up construction, plus parking and
landscaped areas
Year Built: 1984-85
Net Rentable Area: 76,047 square feet
Condition: Average to Good
Operating Data and Forecasts
Current Occupancy: 100.0%
Forecasted First Year Occupancy
(Calendar Year 1997): 100.0%
Forecasted Average Occupancy: 93.5%
Average Annual Rental Rate
Actual: $20.00 per square foot
Forecasted: $22.80 per square foot
Operating Expenses
Last Full Year (1995): $3.97 per square foot
Budget (1996): $5.00 per square foot
Forecasted (1996): $5.88 per square foot
Value Indicators
Sales Comparison Approach: $12,550,000 ($165.10/net square foot)
Income Approach: $12,875,000 ($169.30/net square foot)
CUSHMAN &
WAKEFIELD(R)
---------------------------
VALUATION ADVISORY SERVICES
---------------------------
<PAGE>
Summary of Salient Facts and Conclusions
================================================================================
Discounted Cash Flow Assumptions
Market Rental Growth Rate 3.5% per annum
Expense Growth Rates
Property Taxes: 2.0%
All others: 3.5%
Credit Loss Allowance: 1.0%
Projected Term of Future Leases: 5 years
Vacancy Between Tenants 4 months
Renewal Probability: 50.0%
Tenant Improvements
Weighted Average: $5.00 per square foot
Commission Expense
(Weighted Average): Yr. 1 at 3.0%; Yrs. 2 and 3 at 2.5%;
Yr. 4 at 2.0%; and, Yr. 5 at 1.5%
Terminal Capitalization Rate: 10.0%
Cost of Sale at Reversion: 3.0%
Discount Rate: 12.0%
Implicit Year 1 Overall
Capitalization Rate:
Value Conclusion
Value Estimate: $12,800,000
Resulting Indicators
Going-In Capitalization Rate
(Overall Capitalization Rate): 9.2%
Price Per Square Foot
(Net Rentable Area): $168.32
Estimated Marketing Time: six to nine months
Special Assumption: 1) We were provided with the leases
and a rent roll which stated the
net rentable area of the
building. However, building
plans were not provided.
Further, the leases and roll
were not consistent with one
another. Therefore, the net
rentable area was obtained from
the most recent rent roll. As a
result, any deviation from the
stated building size (rent roll)
could impact the value
conclusions contained herein.
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TABLE OF CONTENTS
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Page
PHOTOGRAPHS OF THE SUBJECT PROPERTY ....................................... 1
INTRODUCTION .............................................................. 3
Identification of Property .............................................. 3
Property Ownership and Recent History ................................... 3
Purpose and Function of the Appraisal ................................... 3
Extent of the Appraisal Process ......................................... 3
Date of Value and Property Inspection ................................... 3
Property Rights Appraised ............................................... 3
Definitions of Value, Interest Appraised, and Other Pertinent Terms ..... 4
Legal Description ....................................................... 5
NEIGHBORHOOD ANALYSIS ..................................................... 6
Summary and Conclusions ................................................. 8
OFFICE MARKET ANALYSIS .................................................... 9
Research and Development Absorption ..................................... 9
Available Research and Development Space ................................ 10
Research and Development Vacancy Rates/Demand/Lease Rates ............... 11
Land Values ............................................................. 11
Investment Sales ........................................................ 11
Cupertino Office Market ................................................. 12
Office Demand/Lease Rates/Concessions ................................... 13
Marketing and Exposure Time ............................................. 13
PROPERTY DESCRIPTION ...................................................... 14
Site Description ........................................................ 14
Improvements Description ................................................ 14
REAL PROPERTY TAXES AND ASSESSMENTS ....................................... 15
ZONING .................................................................... 16
HIGHEST AND BEST USE ...................................................... 17
VALUATION PROCESS ......................................................... 18
SALES COMPARISON APPROACH ................................................. 19
INCOME APPROACH ........................................................... 24
RECONCILIATION AND FINAL ESTIMATE OF VALUE ................................ 36
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Table of Contents
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ASSUMPTIONS AND LIMITING CONDITIONS ....................................... 38
CERTIFICATION OF APPRAISAL ................................................ 40
ADDENDA ................................................................... 41
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PHOTOGRAPHS OF THE SUBJECT PROPERTY
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Entry to American Executive Center
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Photographs of the Subject Property
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Stevens Creek Boulevard Facing Westerly
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INTRODUCTION
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Identification of Property
The subject property, consists of one, two-story office/research and
development building comprising a net rentable area of approximately 76,047
square feet. The building is situated on a interior 4.485 acre tract of land
that is located along the northerly side of Stevens Creek Boulevard in
Cupertino, California. The common address is 19925 Stevens Creek Boulevard,
Cupertino, Santa Clara County, California. The building was constructed in
1984-85 and is 100.0 percent occupied by three tenants as of the appraisal date.
Property Ownership and Recent History
Ownership of the property is currently vested in WHC-One Investors, LP. In
August 1994, WHC-One Investors, LP acquired the subject property as a result of
a foreclosure. Details were not provided. As a result, we cannot comment further
on this transfer.
To the best of our knowledge, the property is not currently being offered
for sale, nor have there have been any subsequent ownership transfers.
Purpose and Function of the Appraisal
The purpose of the appraisal is to provide an estimate of market value of
the leased fee estate in the property. The function of this report is to assist
GMAC Mortgage Corporation in an evaluation of the property for loan underwriting
purposes.
Extent of the Appraisal Process
In the process of preparing this appraisal, we:
o Inspected the building and site improvements with the tenant's
representatives;
o Reviewed the leases and rent roll as provided by the client;
o Reviewed a detailed history of the income and expenses (1994 to 1995
and year-to-date 1996) and a budget forecast for 1996 through 2001;
o Conducted market research into occupancies, asking rents, and
operating expenses at competing buildings including interviews with
market participants and a review of our own data base from previous
appraisal files;
o Conducted market inquiries into recent sales of similar buildings to
ascertain the sales prices per square foot and capitalization rates.
This process involved telephone interviews with sellers, buyers and/or
participating brokers; and
o Prepared Sales Comparison and Income Approaches to value. The Cost
Approach was not used.
Date of Value and Property Inspection
The date of value is July 26, 1996, being our last inspection of the
buildings.
Property Rights Appraised
We valued the leased fee estate.
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Introduction
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Definitions of Value, Interest Appraised, and Other Pertinent Terms
The definition of market value taken from the Uniform Standards of
Professional Appraisal Practice, 1994 Edition, published by The Appraisal
Foundation, is as follows:
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 is the
consummation of a sale as of a specified date and the passing of title from
seller to buyer under conditions whereby:
(1) Buyer and seller are typically motivated;
(2) Both parties are well informed or well advised, and acting in what
they consider their own best interests;
(3) A reasonable time is allowed for exposure in the open market;
(4) Payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
(5) 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.
Exposure Time
Under Paragraph 3 of the Definition of Market Value, the value estimate
presumes that A reasonable time is allowed for exposure in the open market.
Exposure time is defined as the estimated length of time the property
interest being appraised would have been offered on the market prior to the
hypothetical consummation of a sale at the market value on the effective
date of the appraisal. Exposure time is presumed to precede the effective
date of the appraisal.
Based upon the available sales data in the marketplace, as well as our
discussions six to nine months would appear to have been reasonably
appropriate for the subject property as the date of valuation.
Definitions of pertinent terms taken from the Dictionary of Real Estate
Appraisal, Third Edition (1993), published by The Appraisal Institute, are as
follows:
Fee Simple Estate
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.
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Introduction
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Leased Fee Estate
An ownership interest held by a landlord with the rights of use and
occupancy conveyed by lease to others. The rights of the lessor (the leased
fee owner) and the leased fee are specified by contract terms contained
within the lease.
Market Rent
The rental income that a property would most probably command on the open
market; indicated by the current rents paid and asked for comparable space
as of the date of the appraisal.
Cash Equivalent
A price expressed in terms of cash, as distinguished from a price expressed
totally or partly in terms of the face amounts of notes or other securities
that cannot be sold at their face amounts.
Discounted Cash Flow (DCF) Analysis
The procedure in which a discount rate is applied to a set of projected
income streams and a reversion. The analyst specifies the quantity,
variability, timing, and duration of the income streams as well as the
quantity and timing of the reversion and discounts each to its present
value at a specified yield rate. DCF analysis can be applied with any yield
capitalization technique and may be performed on either a lease-by-lease or
aggregate basis.
Legal Description
The property contains approximately 4.485 acres of land. A copy of the
legal description as contained in the Surveyor's Certificate (June 1, 1994
Marvin D. Kirkeby) is included in the Addenda.
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Cupertino o Campbell
Los Gatos
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NEIGHBORHOOD ANALYSIS
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The subject property is located along the northerly side of Stevens Creek
Boulevard in the City of Cupertino, County of Santa Clara, State of California.
The neighborhood boundaries are defined below:
North -- Homestead Road
South -- Stevens Creek Boulevard
East -- Lawrence Expressway
West -- North De Anza Boulevard
The subject is bounded by commercial, office, and research and development
uses. The subject neighborhood is currently 95% developed. During the 1980's the
area experienced dramatic changes from a neighborhood featuring older strip
commercial uses along the major arterials and agricultural processing plants to
residential tracts and the development of research and development as well as
office buildings.
Class "A" office complexes are located along De Anza and Stevens Creek
Boulevards. Apple Computer has constructed a major corporate campus along DeAnza
Boulevard and Interstate 280. It comprises 865,000 square feet.
Many smaller Class "B" buildings are interspersed along North and South De
Anza Boulevards, Stevens Creek Boulevard, Wolfe Road, Lawrence Expressway, and
other interior streets.
Industrial uses in the neighborhood are primarily research and development
oriented. Cupertino industrial facilities are located in the Valley Green
Industrial Park, Bubb Road area, and Valico Park.
Apple Computer is the dominant neighborhood occupant. Apple has constructed
and is occupying the 865,000 square foot corporate headquarters complex located
on a 32 acre site at the southeast intersection of North De Anza Boulevard and
Interstate 280.
Further, Apple Computer had occupied approximately 1.8 million square feet
of office/research and development space in 38 buildings in the Cupertino
market. Their space commitments range from wood frame single-story 10,000 square
foot buildings to steel frame eight-story mid-rise office buildings of 300,000
square feet.
In October of 1993, Apple put approximately 200,000 square feet of space on
the market for sublease. This space was located in eight local buildings. By
1994 all of this space was leased. According to Marilyn Lones-Brandt of Apple's
Corporate Real Estate Department, Apple leased for their own use some of these
buildings to accommodate new corporate growth.
Hewlett Packard Company (HP) owns and occupies a 90 acre campus in
Cupertino consisting of approximately 1.9 million square feet of space. In 1989,
they completed a 180,000 square foot three-story office building on their
campus. HP recently leased approximately 105,000 square feet on Pruneridge
Avenue in Cupertino (September, 1995).
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Neighborhood Analysis
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Tandem Computers is headquartered in Cupertino. Most of the buildings it
occupies are company owned. Tandem's headquarters' campus consists of
approximately 86 acres of land. Most of this land is located within the Vallco
Park area.
Most vacant land is controlled by major developers and corporate users in
the area.
Measurex owns and occupies approximately 400,000 square feet on a 30 acre
campus in Cupertino. Within the past five years, they have completed a 140,000
square foot administrative headquarters building on their campus.
Other significant commercial uses include:
o The Cupertino Inn is located at the northwest corner of the Interstate 280
and North De Anza Boulevard Intersection. It offers 125 rooms with meeting
facilities.
o At the northwesterly intersection of Wolfe Road and Interstate 280 is a
Marriott Hotel with 149 rooms with dining and meeting facilities. The
Marriott Corporation owns the improvements and leases the land from the
Marchese family. There are approximately 31 years left on the ground lease
with one, 35-year renewal option.
o The Woodcrest Inn located along the northerly side of Stevens Creek
Boulevard is a 60-room motor inn with limited food and meeting facilities.
Cupertino offers executive and moderately priced housing with top rated
schools. This attracts high level employees to the area for work and housing
needs.
Cupertino schools are consistently rated in the top 90 percentile in the
State of California. This is considered to be a significant positive influence
for middle and upper end management personnel locating their businesses as well
as their residences to this community.
On the westerly portion of the neighborhood is De Anza Junior College and
the Flint Center, a theater featuring live stage performances and informative
lectures from noted national and international speakers.
At the northwest corner of Stevens Creek Boulevard and Wolfe Road is Vallco
Fashion Park; a quality regional shopping mall anchored by Sears and J.C.
Penney.
Access to the subject neighborhood is very good. Interstate 280 courses in
a north/south direction providing access northward through the San Francisco
Peninsula terminating in San Francisco. It courses southward through San Jose
and becomes Interstate 680 offering northbound access to Alameda and Contra
Costa Counties. Interstate 280 courses in an easterly/westerly direction through
the neighborhood.
There are four Interstate 280 interchanges within the neighborhood. The
interchanges are located at North De Anza Boulevard, Wolfe Road, Lawrence
Expressway and proximate to the western border of the neighborhood is another
interchange located at Stevens Creek Boulevard and Highway 85, easterly of Bubb
Road.
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Neighborhood Analysis
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Highway 85 opened in October of 1994. Highway 85 courses through Mountain
View and Los Altos beginning at U.S. 101 (the Bayshore Freeway) and terminates
at US 101 near South San Jose. Access to the highway is via Stevens Creek
Boulevard, east of Bubb Road and at Saratoga-Sunnyvale Road, south of Rainbow in
Cupertino.
Stevens Creek Boulevard and Homestead Road are the major east/west
thoroughfares. Other major streets serving the subject neighborhood include
Stelling Road, North De Anza Boulevard, Blaney Avenue, Wolfe Road, Tantau Road
and Lawrence Expressway coursing in a north/south direction.
El Camino Real is located one to two miles north of the subject site. It
offers additional commercial, retail and lodging services.
All utilities are currently supplied to the subject neighborhood. Pacific
Gas & Electric Company provides the major utilities, Pacific Bell provides
telephone service, and the City of Cupertino supplies sanitary, sewer, and
garbage service.
Summary and Conclusions
The neighborhood contains all of the necessary transportation, utilities,
and other amenities which combined have created an attractive environment for
office, research and development, and lodging uses. It is a well-maintained area
located with very little room for further development. Any additional commercial
or industrial expansion would be within the Vallco Park area. The long term
outlook for the neighborhood is positive.
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MARKET ANALYSIS
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The subject property is located in the Cupertino office and industrial
submarkets. These submarkets are a portion of Silicon Valley's overall
commercial and industrial markets. Silicon Valley's industrial market comprises
over 200 million square feet. Much of this space is office/research and
development space. The Valley's total inventory of office space is significantly
smaller at approximately 28.5 million square feet, or less than 15% of the
entire industrial market.
The subject site is zoned P (Planned Development,-Commercial, Residential,
Office). If vacant, it could be improved to accommodate office and high end,
office/research and development uses. Therefore, we will analyze the industrial
market in connection with the subject property.
Research and Development Absorption
The first chart illustrates industrial real estate leasing activity within
Silicon Valley by industrial classification from 1989 through 1995. These
industrial classifications include high technology (R&D), manufacturing, and
warehousing. The subject is assumed to be best suited for a high technology
(R&D) use. Thus, we will focus this discussion on absorption within the high
technology sector of the market.
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SILICON VALLEY INDUSTRIAL SPACE ABSORPTION
- --------------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994 1995
================================================================================
High Technology 8,280 8,880 6,035 7,617 8,626 11,697 14,905
Manufacturing 1,770 1,585 875 1,439 1,099 2,867 3,567
Warehouse 3,785 3,540 2,170 2,156 3,600 5,160 5,182
Total 13,835 14,055 9,080 11,212 13,325 19,724 23,654
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in Thousands
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The market survey shows that gross absorption during 1989 was approximately
8.3 million square feet (msf). From 1989 to 1990, absorption increased to
approximately 8.9 msf. In 1991, absorption declined sharply to slightly over 6.0
msf. In 1992, the market's absorption increased to over 7.6 msf. In 1993, the
market experienced significant absorption taking it to over 8.6 msf. 1994 proved
to be a banner year with approximately 11.7 msf of absorption. In 1995,
absorption set a new record level with approximately 14.9 msf of space absorbed.
Through the second quarter of 1996, high technology absorption in Silicon
Valley stands at approximately 6.9 million square feet which is approximately
one-half of 1995's total high technology absorption.
The next chart illustrates the absorption of high technology (R&D) space in
the Cupertino market from 1991 through 1995.
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RESEARCH AND DEVELOPMENT SPACE ABSORPTION CUPERTINO
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1991 1992 1993 1994 1995
High Technology 34,450 45,550 63,980 127,064 371,965
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Market Analysis
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From 1991 through 1993, absorption within the Cupertino high technology
market ranged from 34,450 to 63,980 square feet. Absorption of high technology
space has been increasing each year. However, in 1994, absorption nearly doubled
from the 1993 level. This significant upward trend continued through 1995 with
approximately 372,000 square feet of high technology absorption.
Through the second quarter of 1996, Cupertino's leasing activity has slowed
due to the limited amount of large blocks of space which were at one time
available.
Available Research and Development Space
We surveyed the amount of available research and development space for the
last six years in Silicon Valley. Very little new construction has occurred in
the past six years. Most newer research and development projects were completed
on a build-to-suit basis rather than as speculative developments as lenders were
reluctant to loan on speculative projects.
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SILICON VALLEY INDUSTRIAL SPACE AVAILABLE
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1989 1990 1991 1992 1993 1994 1996
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High Technology 12,060 13,840 13,710 18,260 15,646 13,002 9,401
Manufacturing 2,135 2,540 2,870 3,780 3,705 4,028 2,488
Warehouse 3,625 3,640 3,460 4,375 4,914 3,286 2,433
Total 17,820 20,020 20,040 26,415 24,265 20,317 14,322
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In Thousands
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In 1989, there was 12.1 million square feet (msf) of available
high-technology space. There was an increase in 1990, to 13.8 msf. Available
space decreased modestly to 13.7 msf in 1991. However, the amount of available
space increased dramatically in 1992 to 18.3 msf. In 1993, available space in
Santa Clara County decreased to approximately 15.6 msf. This downward trend
continued through 1994 with 1994 showing only 13.0 msf available. By 1995,
available space decreased to approximately 9.4 million square feet.
Through the second quarter of 1996, available high technology space stands
at approximately 6.1 million square feet which is over 35% less than the 1995
year end total of 9.4 million square feet.
The final chart illustrates the amount of available research and
development space in the Cupertino market.
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RESEARCH AND DEVELOPMENT SPACE AVAILABLE CUPERTINO
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1991 1992 1993 1994 1995
High Technology 236,180 194,753 292,048 345,015 161,776
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From 1991 through 1994, the amount of available research and development
space in the Cupertino market ranged between approximately 200,000 to 350,000
square feet. Apple and Tandem both placed large blocks of space onto the market
in late-1993 and early-1994 to consolidate their occupied space. Consequently,
there is a significant increase in Cupertino's
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Market Analysis
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vacancy over historical levels in 1994. However, by the fourth quarter of 1995,
record absorption reduced the amount of available space to approximately 162,000
square feet.
Through the second quarter of 1996, Cupertino's available research and
development space stands at less than 30,000 square feet, according to Cushman &
Wakefield's Research Services Department.
Research and Development Vacancy Rates/Demand/Lease Rates
There are many sources estimating research and development vacancy levels
within Silicon Valley. The base inventory is estimated to over 200 million
square feet. This indicates that the overall industrial vacancy within Silicon
Valley is 5.6% through the second quarter of 1996. Colliers Parrish estimates
Cupertino's R & D vacancy rate at zero% as of June 1, 1996. In June, 1995, they
estimated Cupertino's R&D vacancy rate at approximately 10.6%.
Discussions with commercial and industrial brokers state that many leases
are now being written with CPI increases or stepped increases. They are also
quick to point out that lease transactions are built around effective rates.
Market rental rates for research and development space, within the
Cupertino market, generally ranges from $13.80 to $18.60 per square foot per
month on a triple-net basis. The higher rents reflect well-located buildings on
De Anza and Stevens Creek Boulevards. The lower rents reflect older buildings on
Bubb Road. For the most part, rents in the Vallco Park area range from
approximately $12.00 to $16.20 per square foot.
Landlord concessions are considered to be minimal. In the mid to
late-1980's, tenants were often given up to two years of free rent for a five
year transaction. However, today, we find that free rent is not a major factor
in the market. Rarely, one month of free rent for each lease year may be
granted.
Landlords are providing fewer dollars for tenant improvement allowances on
previously improved spaces. Our experience, shows that most lease transactions
do provide a minimal tenant improvement allowance; usually under $5.00 per
square foot. In some cases when buildings are outdated for many electronic
company uses, we find tenant improvements approaching the $20.00 per square foot
range.
Land Values
Land prices range from approximately $15.00 to $30.00 per square foot.
Sales activity of vacant land is improving as the amount of available space
continues to decrease. Buyers are either owner/users or developers of
build-to-suit projects rather than speculative builders, at this time. Land
values are anticipated to increase at a moderate rate into the foreseeable
future as the amount of well located industrial land diminishes. Commercial land
primarily consists of in-fill parcels.
Investment Sales
Cushman & Wakefield's Financial Services Group reports that the market
environment for investment sales and financing has changed dramatically over the
past year. The national
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Market Analysis
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investment sales market is turning from a buyers market to a modest sellers
market. The availability of both debt and equity capital have turned the market
around. Real estate as an asset class is again acceptable to pension funds.
Cupertino Office Market
The following is a discussion of Cupertino's office market. We will discuss
vacancy rate trends, available space, and leasing activity from 1989.
<TABLE>
<CAPTION>
==================================================================================================
Cupertino Office 1989 1990 1991 1992 1993 1994 1995
Market
<S> <C> <C> <C> <C> <C> <C> <C>
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Vacancy Rate 5.2% 12.6% 13.1% 11.6% 10.3% 15.4% 3.9%
- --------------------------------------------------------------------------------------------------
Available Space (sf) 127,152 193,025 381,618 340,174 304,431 467,735 117,333
- --------------------------------------------------------------------------------------------------
Leasing Activity (sf) 320,867 146,724 145,899 206,312 298,354 429,694 277,932
==================================================================================================
</TABLE>
The Cupertino office vacancy rate has experienced wide fluctuations between
1989 and 1995. In 1989 the vacancy rate was 5.2% as a result of the significant
leasing activity occurring in that year. In 1990, the vacancy rate increased to
12.6% and again increased slightly to 13.1% in 1991. In 1992 the vacancy rate
declined slightly to 11.6%. By 1993 the vacancy rate dipped to 10.3%. However
when Apple and Tandem put large blocks of space on the market, the vacancy
increased to 15.4% in 1994. Due to record leasing activity, Cupertino's office
vacancy declined to 3.9% in 1995. As of the second quarter of 1996, the vacancy
rate is 1.2%.
In 1989, the Cupertino office market had 127,152 square feet available. In
1990, the amount of available space increased to 193,025 square feet or by
51.8%. In 1991, the amount of space available increased significantly to 381,618
square feet. At the same time, the base inventory in Cushman & Wakefield's
Market Research database increased, also. The base inventory in 1990 was
slightly over 1,525,000 square feet and by 1991 the base inventory increased to
2,919,755 square feet. This increase in the base inventory includes the addition
of the newly constructed Apple corporate headquarters and the reclassification
of other buildings. By 1992, the amount of space available declined slightly to
just over 340,000 square feet. By year-end 1993, the amount of space available
further decreased to 304,000 square feet. In 1994, available space was
approximately 468,000 square feet due to a space restructuring by major
companies including Apple and Tandem. By year end 1995, available office space
in Cupertino stood at approximately 117,000 square feet due to significant
leasing activity within the market. Through the second quarter of 1996, only
36,633 square feet are available.
Leasing activity (includes the leasing of sublease space) was particularly
high in 1989 as projects experienced pre-leasing activity. This includes Apple's
space requirements which were still strong. During the period prior to 1990,
many buildings were still being constructed and experienced pre-leasing and as a
result did not enter into the overall vacancy rate reflected in the 1989 vacancy
level above. Leasing activity in 1990 and 1991 was stable at approximately
147,000 and 146,000 square feet, respectively. However, this is a significant
decrease from 1989 levels. The decline was approximately 54.3% between 1989 and
1990. Leasing activity
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Market Analysis
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increased in 1992 by approximately 60,400 square feet or 41.4% from 1991.
Leasing activity was approximately 300,000 square feet in 1993 reflecting an
increase in activity of 45% over 1992 levels. By 1994, leasing activity
increased to almost 430,000 square feet. In 1995, leasing activity remained
strong with approximately 278,000 square feet leased. Although this may appear
to be a decline, the decline is due to the limited amount of inventory available
rather than a decrease in demand. Through the second quarter of 1996, leasing
activity was slightly less than 78,000 square feet, again due to the diminishing
supply of available space.
Office Demand/Lease Rates/Concessions
We surveyed several office buildings within the city limits of Cupertino.
These buildings are primarily located on North De Anza and Stevens Creek
Boulevards.
Coupon rental rates for class "A" space range from $21.00 to $30.60 per
square foot, fully- serviced. Most monthly coupon, or starting, rental rates for
class "B" facilities range from approximately $13.20 to $24.00 per square foot,
on fully-serviced terms.
Under fully-serviced terms the landlord is responsible for real estate
taxes, insurance, utilities, janitorial, structural maintenance, and management
costs. However, these leases typically include base year expenses where the
tenants are responsible for increases in the operating expenses beginning in the
second lease year. Operating expenses included in the rent generally ranges from
$6.00 to $9.60 per square foot. Little free rent, if any, is currently being
given. Typical, effective monthly rental rates, calculated by taking the entire
rent paid over the term divided by the number of months in the term, also range
from $16.20 to $28.20 per square foot, fully-serviced. For the most part, leases
generally run from two to seven-years. Tenant improvement allowances for
pre-improved space are provided up to approximately $20.00 per square foot.
Tenant improvement allowances are quoted on the usable area as most office
buildings in the subject market quote load factors near or at 12%.
Marketing and Exposure Time
Based on research and development facility sales discussed in detail in the
Sales Comparison Approach, and our conversations with brokers active in the
market, it is our opinion that the subject property would sell within a six to
nine-month period if actively marketed for sale.
The Appraisal Standards Board of the Appraisal Foundation defines exposure
time as the estimated length of time that the property interest being appraised
would have been offered on the market prior to the hypothetical consummation of
a sale at market value on the effective date of the appraisal; a retrospective
estimate based upon an analysis of past events assuming a competitive and open
market." Based on historical market conditions and the sales analyzed in this
report, the exposure time for the subject property is estimated to be roughly
equal to the marketing time stated at six to nine months.
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PROPERTY DESCRIPTION
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Site Description
The subject site comprises one assessor's parcel, on an interior lot, which
is located along the northerly side of Stevens Creek Boulevard in Cupertino,
California. The site rectangular in shape and contains 4.485 acres or 195,370
square feet of land area. The topography is level. We have assumed that the
soil's load-bearing capacity is sufficient to support the existing structures.
All essential utilities including electricity, water, sewer, and telephone are
currently serving the site.
According to Community Panel No. 060339-0004C, effective May 1, 1980, the
subject property appears to be situated in Zone B, an area designated as not
being within the floodplain. It is our understanding that flood insurance is not
required for B zoned sites for lending purposes.
The site is not located in a Special Study Zone as established by the
Alquist-Priolo Geological Hazards Act, but is located east of the Monte Vista
Fault.
The building's parking capacity is 280 parking spaces which results in a
parking ratio of 3.7 parking spaces for every 1,000 square feet of building
area. Parking capacity is considered adequate for the market.
Improvements Description
The subject is a two-story, concrete tilt-up building wrapped in glass on
all four sides. It comprises approximately 76,047 square feet of net rentable
area. It was constructed in 1984-85. The interior improvements are currently
built out as 100% HVAC office space. The individual floor plans vary in design.
American Executive Center is a full service executive suite business. As
such, it is heavily partitioned with many private offices. Seagate Computers and
Matsushita Semiconductor (Panasonic) lease the balance of the building. Their
floor plans consist of open office landscaping and private office areas.
As previously mentioned, the subject has concrete surface parking for
approximately 280 vehicles, and concrete curbs, and sidewalks. The site is
landscaped with trees, ornamental shrubs and plants located around the buildings
and parking lot.
We have specifically assumed that the property complies with the Americans
With Disabilities Act, and that potentially hazardous materials have not been
used in the construction or maintenance of the property. Overall, the
improvements are in average to good condition. No evidence of structural damage
was observed on our inspection of the improvements. Further, we are not aware of
any major items of deferred maintenance.
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CUSHMAN &
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REAL PROPERTY TAXES AND ASSESSMENTS
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The building is subject to the taxing jurisdiction of the City of Cupertino
and the County of Santa Clara. The assessor's parcel identification number is
316-21-089.
The assessor's parcel is located in tax rate area 13-003. The 1995-96 tax
rate for this area is $1.0642 per $100.00 of the property's assessed valuation.
Under a provision of Article XIIIA of the California Tax and Revenue Code,
properties are assessed based on their market value as of March 1, 1975. This
valuation may increase only 2% per year until such time as the property is sold,
substantial new construction takes place, or the use of the property is changed.
Under the foregoing circumstances, the properties may be reassessed to their
market value.
The 1995-96 fiscal year is the most recent year for which assessed
valuation and property tax information is available. The assessed value and
taxes for the property follows:
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Assessed Totals
Values
Land $ 4,000,000
Improvements $ 3,480,000
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Total Market $ 7,480,000
Value
Tax Rate/$100 of Assessed Value 1.0642
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Total Taxes $79,602.16
Direct
Assessments $ 2,477.94
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Total Taxes & Assessments $82,080.10
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The direct assessments include vector control, library fees, environmental
storm, flood control, and Cupertino sanitary sewer district. These assessments
are perpetual.
Within the discounted cash flow (DCF) analysis, which is presented later in
this report, we estimated real estate taxes based on the appraised value. For
DCF purposes, real estate taxes are estimated at $140,000.
If the subject were sold, it would be reassessed at market value by the
County Assessor. The County Assessor commonly bases the market value of a
property on its sale price.
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ZONING
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The subject site is located in the City of Cupertino, and thus comes under
the jurisdiction of the Cupertino City Planning Department. The site is zoned P
- - Planned Development- Commercial, Residential, Office. The City's general plan
and the zoning conform to one another.
P zoning requires that a specific development plan be approved by the City
Planning Department. The subject is used for office space and was constructed
under an approved master plan.
Parking is dictated by use. Parking requirements are: one space for each
285 square feet of building area for office, research and development and
prototype manufacturing uses. The subject offers one space for every 272 square
feet of net rentable area (76,047 sf/280). The actual gross building area is
larger; perhaps, 79,861 square feet, as stated by the property manager. In
either case, the subject conforms or exceeds the City's parking requirement.
Further, the current parking is adequate for the market.
The existing subject improvements appear to conform to the existing zoning
regulations. We know of no other deed restrictions, private or public, that
further limit the subject property's use. We cannot guarantee that no such
restrictions exist. Deed restrictions are a legal matter and only title
examination by an attorney or title company can usually uncover such restrictive
covenants. Thus, we recommend a title search to determine if any such
restrictions do exist.
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WAKEFIELD(R)
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HIGHEST AND BEST USE
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Highest and Best Use of Site As Though Vacant
The highest and best use must be (1) legally permissible, (2) physically
possible, (3) financially feasible, and (4) maximally productive. The size,
shape, and physical attributes of the site are considered sufficient to
accommodate most forms of development. Given the existing master planned zoning
office/research and development uses would be most compatible with surrounding
development. Further, as discussed in the Market Analysis section of this
report, the market has continued its recovery with an (June 1996) occupancy
level of approximately 96.2 percent in the office sector and 100 percent in the
R&D sector. Rental rates for office space in the Cupertino area are at $21.00 to
$28.20 per square foot, full service and for R&D space at $13.80 to $18.60,
triple-net. Further, the market is very active from an occupancy and rental rate
perspective. Therefore, it is our opinion the highest and best use of the site
is for some type of office or office/research and development building.
Highest and Best Use, As Improved
As noted in the Property Description section of this report, the subject
site is improved with one, two-story, 76,047 square foot (net rentable area)
office/research and development building and related site improvements.
Constructed in 1984-85, the project is in average to good condition. Further,
the design and layout are considered to be functional for its current use.
The market in which the subject competes is stable with increasing
occupancy levels and rental rates. Therefore, it is our opinion that the subject
property, as improved, is capable of providing an adequate return to the land
over the foreseeable future. This conclusion is supported by the data and
analysis presented in the balance of this report. For these reasons, it is our
opinion that the highest and best use of this site, as improved, is for
continued use as office/research and development building.
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VALUATION PROCESS
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In this appraisal, we have used the Sales Comparison and the Income
Approach to develop market value estimates for the subject property. Because
this is a summary report, the level of detail of presentation is less than that
found in a self-contained report.
The Cost Approach, was not performed, due to:
O the age of the improvements which make estimates of physical
depreciation subjective, at best, and
O the relatively little amount of reliance placed on this approach by
market participants including investors and brokers.
In the Sales Comparison Approach, we performed the following steps:
o Investigated the market for recent sales of similar industrial
properties.
o Analyzed those sales on the basis of the sales price per square foot;
and
o Correlated the value indications into a point value estimate from
within the range.
In developing the Income Approach we:
O Studied the rents in effect in this and competing properties to
estimate the potential rental income at market levels;
o Studied the recent history of operating expenses at this and competing
properties to estimate an appropriate level of expenses and reserves
for replacement;
o Estimated net operating income and cash flow by subtracting the
operating, fixed, and other expenses from the effective gross income;
and
o Prepared a discounted cash flow analysis in which the cash flow and
property value at reversion are discounted to an estimate of current
market value at a market-derived discount rate. Potential gross
revenues are estimated based on a modeling of the actual rents and
recovery provisions in effect through the term of existing leases. As
the existing leases expire, the buildings are estimated to rent at the
then current market rental rate with appropriate allowances for
downtime. From potential gross revenues, we subtract vacancy and
expenses (operating, fixed, and other) to arrive at an estimate of
cash flow over an 11 year forecast.
The appraisal process is concluded by a review and re-examination of each
of the approaches to value that have been employed. Consideration is given to
the type and reliability of data used, and the applicability of each approach.
Finally, the approaches are reconciled and a final value conclusion is
estimated.
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